session 94 panel discussion: the emergence of acos in u.s ... · represents projection of 9% of...
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Session 94 PD, The Emergence of ACOs in U.S. and International Health Markets: An Examination of Converging Health Systems
Moderator/Presenter:
Chris Pallot, MSc, BA, DipM, DipHSM
Presenters: Alison L. Pool, ASA, MAAA
Jeremiah D. Reuter, ASA, MAAA
Chris PallotDirector of Strategy & Partnerships
Northampton General Hospital NHS Trust
The NHS• Established on 5 July 1948
• Founded by the post-war Labour government
• Funded through general taxation
• Free at the point of delivery
• Since then, charges for prescriptions and some dental treatment commenced
• Primary care physician and all hospital treatment is free
Northampton General Hospital
• Founded in 1744
• On present site since 1793
• 700 beds
• Serves population of 400,000 (700,000 for specialist services)
• 4,700 staff
• Income £244m (c$360m) in 2015/16
The Standard Acute Contract
• Nationally mandated
• Some elements varied locally
• Payment activity generated mainly for outpatients, diagnostic and admissions
• Elective and Non-Elective patients are coded to Health Resource Groups (HRGs)
• Each HRG attracts a set level of income for the hospital (the “tariff”)
• Demand increasing 3-10% per year
• Set nationally, no negotiation, deflated by 3% annually
• Example tariff prices
‒ Carpal tunnel surgery - £849 ($1275) – $1252
‒ Cataract surgery - £762 ($1143) - $2146
‒ C-section delivery - £3,250 ($4712) - $9,000
‒ Varicose vein surgery - £1083 ($1624) - $3660
The National Tariff
N.B. U.S. values derived from Medicare FFS reimbursement
Extremely Challenging Times
A Focus on Urgent CareAccident and Emergency Attendances -England
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
15,000,000
16,000,000
17,000,000
18,000,000
19,000,000
20,000,000
21,000,000
22,000,000
23,000,000
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
Atte
ndan
ces
Total attendances Growth Year on year
Source: Unify data submissions
Emergency Admissions Growth - England
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
5,000,000
5,500,000
6,000,000
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
Adm
issi
ons
Total NEL Admissions Growth Year on year
Source: Unify data submissions
AE Attendance Growth - NGH
7,500
8,000
8,500
9,000
9,500
10,000
10,500
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
Atte
ndan
ces
2013-14 2014-15 2015-16
Source: Unify data submissions
Proportion of Patients Spending 4 Hours or Less in AE
Source: Dept of Health
Focus on Finance
World-Wide GDP Percentage Spend (2013)
NHS Trust End-of-Year Financial Results
But Despite This, the NHS is Efficient….“Gross Value Added Per Hours Worked”
Ref: Centre for Health Economics; ONS
The Challenges Will Only Increase
Ref: Growing Old Together, NHS Confederation
Increase in Dementia
Ref: Growing Old Together, NHS Confederation
Public Health Projections
What is the NHS Doing About This?
NHS-Wide Initiatives
Lord Carter Report – February 2015
Source: Dept of Health
New Models of Care
Source: Dept of Health
NHS Learning from ACOs in the US
• Focus on the small numbers of patients who consume the most healthcare
• Introduce standardised care management and care co-ordination
• Sustained increase in IT investment
• Support patients to self-care
Ref: Stephen Shortell, Rachael Addicott, Nicola Walsh, Chris Ham. Kings Fund 2014
Enablers for Integrated Care
• Align payment systems and incentives
• System-wide improvement measures and targets
• Networks and alliances replace competition with strong clinical leadership
• Commissioners using leverage to support the emerge of ICOs via contracts
Ref: Stephen Shortell, Rachael Addicott, Nicola Walsh, Chris Ham. Kings Fund 2014
The Future
• £22bn of recurrent savings required
• Growing demand and expectation
• Pressure on the funding mechanism
• Structural change is inevitable
• Sustainability and Transformation Plans
Alison Pool, ASA, MAAA
Senior Consulting Actuary
Wakely Consulting Group
727-507-9858, ext. 7469
Converging Health Systems – an Overview16 June 2016
Health Systems Around The World
2
3
“Global spending is expected to increase from US$7.83 trillion in 2013 to $18.28 trillion” in 2040 [adjusted dollars]….” *
Implies annual medical trend of approximately 5%
Represents projection of 9% of global GDP by 2040.
*http://www.healthdata.org/news-release/global-spending-health-expected-increase-1828-trillion-worldwide-2040-many-countries
Health Systems Around The World
4
Health Systems Around The World
Health Systems – Financial Flow
5
Insurer / Government: Collector of premium or
taxes, payer to seller
Sellers of services; Providers –
Professionals / Hospitals, etc.
Users of services & payers of premiums or taxes: Consumer
/ Patient
Who is paying?
Patients
Insurers
Central Government
6
Health Systems – Financial Flow
Who are the sellers?
Hospitals
Acute/Inpatient
Emergency Care
Professionals
Primary Care
Specialty Care
Mental Health
7
Health Systems – Financial Flow
8
Who wants the services?
Citizens
Patients
Health Systems – Financial Flow
Health Systems – Financial Flow
9
Health expenditures as a percentage of GDP 2010*
*http://www.euro.who.int/en/about-us/partners/observatory/publications/health-system-reviews-hits/full-list-of-country-hits
9.6%11.4% 11.6% 12%
17.6%
UnitedKingdom -
England
Switzerland Germany Netherlands UnitedStates
10
Health Systems – Financial FlowGovernment Health expenditures as a percentage of total
national health expenditures - 2010
48.2%
United States
65.2%
Switzerland
76.8%
Germany83.2%
United Kingdom -England
85.5%
Netherlands
11
Insurer / Government: Collector of premium or
taxes, payer to seller
Health Systems – Financial Flow
Health Systems – Financial Flow
12
United States Germany Switzerland Netherlands
United Kingdom -
England
Medicare (Public)
Statutory Health
Insurance (SHI) – 85% of the population
Mandatory Health
Insurance (MHI)
SHI - Social Health
Insurance -"Basic Health
Insurance"Health services predominantly publicly funded
via Primary Care Trusts (PCTs)
Medicaid (Public)
Private Health Insurance (PHI)
- 11% of the population Complementary
VHI - voluntary health insurance
Voluntary Health
Insurance (VHI) 7.2%
Private health insurance –
90% of PH is Employer Sponsored
Sector specific schemes (e.g. military) - 4%
Basic Funding Mechanisms (Health Insurance) by Country
Select Health Systems - Public
13
Overview of the Publicly Funded Insurances
United States Germany Switzerland Netherlands
United Kingdom -
EnglandMedicare & Medicare
Advantage
Statutory Health Insurance (SHI)
Mandatory Health Insurance (MHI)
SHI - Social Health Insurance -
Long term Care
Health services predominantly
publicly funded via Primary Care Trusts (PCTs)
FFS, Medicare Fee Schedule
Resources distributed to 132
sickness funds according to a
morbidity-based risk adjustment
scheme.
Premiums are collected by MHI companies and
reallocated among MHI companies
Health Insurance Fund and Risk adjustment are
administered by the Health Care Insurance Board Allocation among insurers is based on health risks profile of their
insured population.
Risk Adjusted Payments to MA
Plans
Select Health Systems - Private
14
Overview of the Privately Funded Insurances
United States Germany Switzerland Netherlands
United Kingdom -
EnglandMedicare & Medicare
Advantage
Statutory Health Insurance (SHI)
Mandatory Health Insurance (MHI)
SHI - Social Health Insurance - Long term
Care (AWBZ)
Health services predominantly
publicly funded.Only private
component is voluntary health
insurance –provides access to
elective care.
FFS, Medicare Fee Schedule
Resources distributed to 132
sickness funds according to a
morbidity-based risk adjustment
scheme. –Shortfalls are made up by
charging premium. Competition
between sickness funds is
encouraged.
Premiums are collected by MHI companies and
reallocated between MHI
companies. HealthInsurance is
purchased from competing MHI companies. In 2014 61 private
insurance companies offered
MHI policies.
Health Insurance Fund and Risk adjustment are administered by
the Health Care Insurance Board (CVZ)
Allocation among insurers is based on
health risks profile of their insured
population. As of 2006, managed
competition has been the driver of the health
care system.
US Government contracts with
Private Insurers to provide coverage through Medicare Advantage plans -
Risk Adjusted Payments to MA
Plans
15
Select Health SystemsRisk Adjusting for funding – Common factor
USRisk
AdjustingMedicare
Advantageand ACA
premiums
GermanySHI
contributions redistributed
using Risk Adjustment
Scheme
Switzerland Premiums reallocated
between MHI companies
based on risk equalization mechanism
NetherlandsIncome
dependent premium
reallocated to health insurers
using a risk adjustment
system
United Kingdom
Allocation of resources to
PCT includes a health
inequalities component
16
Sellers of services; Providers –
Professionals / Hospitals, etc.
Health Systems – Financial Flow
17
Who decides how much to pay for services?
Traditional supply and demand rules do not apply
Health Systems – Financial Flow
18
Health Systems – Financial Flow
Methods of Reimbursing
Providers
Fee for Services
DRG
Per Diems
Capitation
Negotiated Fees
Cost Sharing
How is the Seller Compensated?
19
Health Systems – Financial Flow
Provider Payments -Hospital
United States Germany Switzerland Netherlands
United Kingdom -
England
DRG(*) (*)
FFS
Per Diems
Notes
(*) G-DRG-----------------
Normalized budgets then risk adjusted
(*) Diagnosis Treatment
Combinations
Payment by Results (PbR)
Hospital Payment System.
20
How is the seller compensated? (continued)
Provider Payments -Professional US Germany Switzerland Netherlands UK-England
FFS
Capitation (*)B
Fee Schedules (*) (**)
Negotiated
Morbidity based / Risk Adjusted
(*)
Preventive Identified Separately
Notes
(*) For SHI services -
with a ceiling
Nationally Uniform FFS
system
(*) Consultation Fees
(*) Basic Services
(**) Quality & Outcomes
Framework
Health Systems – Financial Flow
21
Users of services & payers of premiums or taxes: Consumer
/ Patient
22
Health Systems Around The World
Mandatory Health
InsuranceCenters for Medicare
& Medicaid Services
National Health Service
Social Health
Insurance
Statutory Health
Insurance
23
Converging Health Systems
ACA European systems
Converging Health Systems
24
% confidence of ability to afford necessary care if individualsbecome seriously ill
Source: 2013, Rice et al. United States Health System in Review. Health Systems in Transition Volume 15 No 3 2013
90%
78%
70%
81%
58%
UnitedKingdom
Switzerland Germany Netherlands United States
Converging Health Systems
25
Challenges: Quality and Accessibility
United States Germany Switzerland Netherlands
United Kingdom -
England
Costs, AccessQuality considered average among the
EU countries
Facing rising costs to citizens
Managed Competition
Rising costs - need for increased
efficiencyChanging individual and provider
behaviors
Burdon on lower income
Measuring to verify the
presumption of increased
efficiency and quality
Increasing OOP costs
Access to care
Converging Health Systems
26
Quality
Controlling Costs
Managing Care
Accessibility
Thank You
27
Alison Pool, ASA, MAAA
Senior Consulting Actuary
Wakely Consulting Group
727-507-9858, ext. 7469
The changing and converging health systems in the United States and United KingdomJune 16, 2016
The Changing Landscape of Healthcare
2
• Current state of health care• Stakeholder Incentives• The Future: ACOs?
Topics of Discussion
3
Healthcare Expenditures as a Percent of GDP
Source: The World Bank
0%2%4%6%8%
10%12%14%16%18%
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Argentina AustraliaAustria BelgiumBulgaria Bosnia and HerzegovinaBelarus BrazilCanada SwitzerlandChile ChinaCzech Republic GermanyDenmark SpainFinland FranceGreece CroatiaHungary IndiaIreland IcelandIsrael ItalyJapan Korea, Rep.Luxembourg MexicoNetherlands NorwayNew Zealand PhilippinesPoland PortugalRussian Federation Saudi ArabiaSerbia SloveniaSweden ThailandTurkey UkraineUnited States South AfricaUnited Kingdom
4
Healthcare Crisis in the United Kingdom
5
The figures highlight a sharp rise of 25% in the number of people waiting to be discharged from hospital compared to this time last year. While this reflects a significant increase in the number of patients waiting for social care support, the majority of delays are caused by NHS related problems. As the National Audit Office reported last week delayed discharges are costing the NHS in excess of £800 million a
year but more importantly impose a significant human cost on patients and their families.
A&E departments continue to breach the maximum four hour wait. And though the number of patients waiting over 4 hours to be admitted to hospital from emergency departments (so-called ‘trolley waits’) has fallen compared to March (as expected at this time of year), this year’s April figure is 38 per cent
higher than a year ago. There are also 3.8 million people waiting for an operation, the highest since 2007, the key cancer target – 62 days from GP referral to first treatment – continues to be missed and the proportion of patients still waiting for a planned hospital admission after 18 weeks also
remains above target.
Healthcare Crisis in the United Kingdom
Source: King’s Fund; June 9, 2016
6
In 2006, U.S. health spending exceeded two trillion dollars, with three-fourths of that spending directed at treating chronic diseases. Almost two-thirds of the growth in spending is attributable to Americans’ worsening health habits, particularly the epidemic rise in obesity. The U.S. care delivery system favors paying for treatment of chronic diseases rather than preventing them in the first
place. For the United States to continue to be an economic leader worldwide, supported by a healthy and productive workforce, more attention needs to be directed toward health promotion and disease
prevention. Prevention is a key element of a comprehensive health reform strategy aimed at improving the health of Americans and reducing the social and financial burdens imposed by preventable illnesses.
United States Approach to Healthcare
Source: R. Goetzel, “Do Prevention Or Treatment Services Save Money? The Wrong Debate,”Health Affairs 28 no. 1 (2009).
7
Misaligned Stakeholder Incentives (UK)
Providers, payers and patients have not historically shared aligned incentives:
• Regulators – Focus on implementing government policy and integrated care models
• Commissioners - worried about limited budgets with escalating medical expenses
• Providers – Payment by results incentivises outputs rather than outcomes. Innovations which achieve better outcomes while also increasing efficiency are disincentivised.
• Patients - typically do not make decisions on affordability as care is free at the point of use
8
Stakeholder Incentives (UK)Overview of Funds Flow
9
Misaligned Stakeholder Incentives (US)
Providers, payers and patients have not historically shared aligned incentives:
• Private payers - worried about ACA, Health Benefit Exchanges, MLR requirements, etc. and impacts to PMPMs and bottom-line
• Government payers - worried about limited budgets with escalating medical expenses & expanding covered populations (baby boomers, Medicaid)
• Providers - worried about market share, medical care (as opposed to health care) and payment reform
• Patients - typically worried about affordability and “make me better…fast” rather than staying healthy
10
NHS Five Year Forward View
11
Patient Protection and Affordable Care Act
12
“We need clinical commissioning groups to become accountable care organisations”
-Jeremy Hunt, Secretary of State for Health (UK)
The Future
13
Triple Aim
Triple AimBetter care
for individuals
Better health for
populations
Slower growth in
costs
14
CMS Definition: Accountable Care Organizations (ACOs) are groups of doctors, hospitals, and other health care providers, who come together voluntarily to give
coordinated high quality care to the Medicare patients they serve. Coordinated care helps ensure that patients, especially the chronically ill, get the right care at the right time, with the goal of avoiding unnecessary duplication of services and preventing medical errors. When an ACO succeeds in both delivering high-quality care and spending health care dollars more wisely, it will share in the savings it achieves for the Medicare program.
What is an Accountable Care Organization?
Source: CMS.gov
15
Generically, what is an ACO?
An ACO is a provider organization that accepts accountability for the cost and quality of health care services for a defined population (i.e. value-based contract)
An ACO establishes a benchmark based on expected spending and quality metrics; if ACO meets quality targets while slowing spending growth, providers share in savings
There is no single ACO model….if you have seen one ACO, then you have seen one ACO
ACOs currently do not change underlying insurance coverage; organized around provider capacity to improve outcomes and quality and manage costs
ACA Federal/Medicare ACO (MSSP, Pioneer, variations thereof)
Non-CMS ACO models adapt CMS principles to commercial, Medicaid, self-insured employer populations (e.g. CALPERS, Hill Physicians, Blue Shield, UHC, Aetna, Boeing)
16
ACO Organizational Structure
PCP Group
Hospital
Multi-Specialty Group Practice
Hospital Affiliated PCP Group
Post-Acute Care
ProvidersAffiliated Specialist
Group
Employed PCPs
ACO Model 1 ACO Model 2
ACO Model 3ACO Model 4
PCP Group
17
ACO Models
• Adapted Integrated Delivery System
‒ Organized around existing integrated delivery systems that feature either a single entity that acts as Payer and provider or an association of providers with multiple care settings and employed physicians already affiliated with an external Payer
• Virtually Integrated ACOs
‒ Composed of multiple providers organizing in association with a Payer, who contributes the financial incentives that support collective accountability for patient health outcomes and the technological infrastructure used to connect the disparate providers
‒ Two variations:
• Primary care-focused
• Full spectrum
• Provider-Led ACOs
‒ Composed of physicians, with or without hospital participation, and often they substitute Payers with third parties that provide support functions, such as middle office operations and claims
18
Basic Business Model - Gross Shared Savings
$8,500
$9,000
$9,500
$10,000
$10,500
$11,000
BY1 BY2 BY3 PY1 PY2 PY3
Annual Per Capita Benchmarks, Targets, and Actual Expenditures
ACO Beneficiary Expenditures
(projected/actual)
19
• Kent– 20 GPs and almost 150 staff operate from three modern sites providing many of the tests,
investigations, minor injuries and minor surgery usually provided in hospital. It shows what can be done when general practice operates at scale. Better results, better care, a better experience for patients and significant savings
• Airedale– nursing and residential homes are linked by secure video to the hospital allowing consultations with
nurses and consultants both in 17 and out of normal hours – for everything from cuts and bumps to diabetes management to the onset of confusion. Emergency admissions from these homes have been reduced by 35% and A&E attendances by 53%. Residents rate the service highly.
• Cornwall– trained volunteers and health and social care professionals work side-by-side to support patients
with long term conditions to meet their own health and life goals.
Examples of New Models of Care in the UK
Source: NHS England
20
• Rotherham– GPs and community matrons work with advisors who know what voluntary services are available for
patients with long term conditions. This “social prescribing service” has cut the need for visits to accident and emergency, out-patient appointments and hospital admissions.
• London– integrated care pioneers that combine NHS, GP and social care services have improved services
for patients, with fewer people moving permanently into nursing care homes. They have also shown early promise in reducing emergency admissions. Greenwich has saved nearly £1m for the local authority and over 5% of community health expenditure.
Examples of New Models of Care in the UK
Source: NHS England
21
ACO Prevalence and Geographic Distribution (US)
600 Total ACOs 400 Medicare ACOs 20 million covered lives 50 million patients served under ACO providers
7 million covered lives
22
• NHS (UK)– Quality and Outcomes Framework (QOF)
• The Quality and Outcomes Framework (QOF) is the annual reward and incentive programme detailing GP practice achievement results.
• It rewards practices for the provision of quality care and helps standardise improvement in the delivery of primary medical services.
– Commissioning for Quality and Innovation (CQUIN)• Rewards excellence by linking a proportion of English healthcare providers' income to the achievement of local quality improvement goals
• Medicare ACOs– 34 quality metrics
• Patient / caregiver experience, care coordination / patient safety, preventive health, at-risk population
• Medicare Advantage– STARS
• Medicare FFS– Value Based Purchasing, Readmission Penalties, Hospital Acquired Conditions
Reimbursement for Quality
23
Future of ACOs
• ACOs look more and more like payers
‒ Accumulating assets to control value-chain‒ Absorb more financial “risks”
‒ Take on more administrative health plan capabilities‒ Increased solvency regulations
• Continued growth in number of ACOs, then consolidation
• Will likely see some catastrophic provider enterprise failures directly from
‒ Hospital-sponsored ACOs risk and growth strategy‒ Market characteristics
• Look-alike staff model delivery systems/health plan
• Medicare ACOs will become substantial competitors to Medicare Advantage plans
• Introduction of other Innovation Center initiatives interact with ACOs
‒ ACO receives target price for any episodes that trigger a bundle under BPCI. However, BPCI program receives any savings beyond the 2% or 3% discount.
How can ACOs impact the value chain of services and
thus dollars associated with these services?
Contact information
Jeremiah Reuter, ASA, MAAADirector, Provider Risk [email protected]
Thank you
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