marc berg: contracting value: shifting paradigms

Contracting Value:

Shifting

Paradigms

Nuffield Trust European Health Summit

24 January 2012

Marc Berg

1 This document is CONFIDENTIAL and its circulation and use are RESTRICTED. © 2011 KPMG LLP, a UK limited liability partnership, is a

subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG Internat ional

Cooperative, a Swiss entity. All rights reserved. Printed in the United Kingdom.

Challenges health care policy makers: same the world over

Ageing

demographics Healthcare

cost inflation

Technology

advances

Rising patient

expectations

The economic

downturn

Health

inequalities

Unhealthy

lifestyles

Rising chronic

diseases

How do we achieve better

outcomes and control the

cost curve?




Major opportunity: bending cost curve through better outcomes

The safety, patient centeredness and effectiveness our health care systems deliver is

highly variable:

• Care is too often too little, too much or sometimes just wrong

• From the perspective of the patient, our care systems are highly fragmented and poorly

coordinated

In a fascinating reversal of common

sense economics, improving health

care quality more often than not

makes the delivery of health care

less rather than more expensive.

Cost

Quality




Example: Acute Stroke Care

Saving more lives saves significant money as well...

Total cost of care (all health care costs, incl. home care, long term care, excl. informal care)

Percentage of patients

living at home 365 days

after stroke




Why do healthcare systems not deliver high value care efficiently?

Because we pay providers to do so...

We get exactly the results we ask for (Paul Batalden)

Producing high quality health care efficiently is not rewarded by higher

revenues for providers. There are often substantial perverse incentives:

• We pay for individual activities, or for the existence of a building or an

organization...

• We pay whether things go right or wrong; we often actually pay extra when

things go wrong...

We do not pay for the integration of all these individual activities, nor do we pay

for the results that all this work delivers

We pay for disjointed and non-coordinated inputs, not for integrated

outcomes




The Quest for the Holy Payment Grail: a Payment System that Produces

High Value

= ↑ Value

Right Volume of care delivered

↓ Price of care delivered (per unit)

↑ Quality outcomes of care

delivered




Payment systems: the early classics we can live without…

FFS

block grant

Payment system Desirable

incentive

Perverse

incentive

Macro effect

Fee for Service Productivity Overproduction, lack

of integration

Escalating costs,

fragmentation care

delivery

Block grant

budgets

Cost control Reduced innovation,

reduced productivity

Waiting lists

Creeping costs

escalation due to lack

of disruptive

innovation and

creative destruction




The first rudimentary step to redesign payment systems towards delivering ‘value’ but

still ultimately input based

Payment systems.. next steps

FFS

block grant

Cap. GP

DRG

Payment system Desirable

incentive

Perverse

incentive

Macro effect

Fee for Service Productivity Overproduction, lack

of integration

Escalating costs,

fragmentation

Block grant

budgets

Cost control Reduced innovation,

reduced productivity

Waiting lists &

Creeping costs

escalation

DRG – like

systems

Stimulate innovation,

productivity and

efficiency along the

patiënt’s path within

the hospital

Volume incentive

Negative quality

creep through cost-

cutting within DRG

Possible volume

explosion

Possible cost shifting

Capitated payment

for general

practitioners

Population- and

prevention-oriented

focus

Stimulus for efficiency

Underuse

Negative quality

creep

Cost shifting

(referring difficult

patients)




Payment systems: P4P

• Explicitly link the quality of care delivered to the payment of the provider.

• Payment is no longer solely tied to ‘input’, and undoing the negative effects of

fragmentation can actually be rewarded.

FFS

block grant

Cap. GP

DRG P4P

0% 10% 20% 30% 40% 50%

AMI (heart attack)

Coronary artery bypass graft

Heart failure

Pneumonia

Hip and knee replacement

Composite Quality Score (CQS) increase

1.1 2.0 2.0 2.2 3.2 2.2 0

1

2

3

4

5

ACQ Non-ACQ

Optim

al quality

Chronic Care Management Quality

2007

2008

2009

CMS: Premier Hospital Quality

Incentive Demonstration project

Blue Cross Blue Shield

Massachusetts (BCBSM) Alternative

Quality Contract (AQC)




Payment systems: P4P

Is often merely a sweet topping on a sour base...

• P4P initiatives run into severe limitations, because the underlying payment structures

remain unchanged

• The institutional boundaries that all too often hamper overall quality rather than

strengthen it remain untouched

• Mostly based on process and structure measures – working to rule often does not

improve outcome yet improves income...

FFS

block grant

Cap. GP

DRG P4P




Payment systems: Contracting Value

What would contracting value look like?

What should be done differently?

FFS

block grant

Cap. GP

DRG P4P

Contracting Value




Contracting Value: the building blocks that make it work

Three principles that are much more within our reach than we tend to think:

1. Define integrated care ‘services’ or ‘products’

2. Define meaningful and measurable outcomes for these services

3. Contract these outcomes with provider or prime contractor





No longer see the historically grown institutions as the default…:

these boundaries only sometimes coincide with entities of care relevant to the patient

Primary care

GP

s

Physio

thera

py

Die

tary

care

Denta

l care

Hom

e c

are

Hospital care

Dis

able

d c

are

Pharm

aceu

tical c

are

Nurs

ing

hom

e c

are

Revalid

ation

Specialty care

13 This document is CONFIDENTIAL and its circulation and use are RESTRICTED. © 2011 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Printed in the United Kingdom.


The unit of care to be contracted should be an integrated care product or service

Elective care

Care for people with a handicap

Maternity care (pregnancy & delivery)

Basic medical care &

gatekeeper function

Acute cardiovascular care

‘Primary care’ ‘Tertiary care’

Acute trauma care

‘Secondary care’

Multimorbidity / frail elderly care

Oncological care

Chronic care

Dental care

Mental health care

Continuous: focus on integrated, pro-active care; on

secondary prevention; the focus on lifestyle, and so forth

Non-continuous: focus on patient-centered, rapid care

delivery, active patient decision making





Measuring quality is seen as an almost unsolvable problem…

… yet the complexity of the problem evaporates largely when we look at

health care through the lens of these services

The question is: What matters most to the patient?

‘Value’ is produced when these goals are met – and this will vary per

domain of care

15 This document is CONFIDENTIAL and its circulation and use are RESTRICTED. © 2011 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Printed in the United Kingdom.


The unit of care to be contracted should be an integrated care product or service

Elective care

Care for people with a handicap

Maternity care (pregnancy & delivery)

Basic medical care &

gatekeeper function

Acute cardiovascular care

‘Primary care’ ‘Tertiary care’

Acute trauma care

‘Secondary care’

Multimorbidity / frail elderly care

Oncological care

Chronic care

Dental care

Mental health care

• Healthy mother, healthy baby • High patient satisfaction • High rescue rates

• Low 3 months mortality • Low 3 months morbidity

• High patient satisfaction • High quality referrals • Optimal coordination role

• Many high-quality life years • No exacerbations, no complications • High patient satisfaction • Patient-empowerment, self management

• Quality of Life • Low (re-)admissions rate • Patient empowerment, self management





Data at our hands

Billing data Clinical

registries

Patient Questionnaires

Provider Questionnaires




2. E.g. acute cardiovascular care: Stroke – 1 yr outcome




2. E.g. acute cardiovascular care: Stroke – value of care

Total cost of care (all health care costs, incl. home care, long term care, excl. informal care)

Percentage of patients

living at home 365 days

after stroke




2. E.g.: elective care - total hip replacement

% s

ignific

ant im

pro

vem

ent

PR

OM

s e

ffect score

Practice variation score

Provider delivering higher

value

Provider delivering lower

value




3. Contracting these outcomes - there is not one answer

Per case

Per year of

care

Per year of

care

(population-

based)




3. Contract outcomes in the right way

The potential reductions in cost are enormous:

- avoiding non-value added care (‘waste’)

- increased efficiency in the delivery of value-added care

marc berg: contracting value: shifting paradigms

Health & Medicine