© 2011 Blue Cross and Blue Shield of Minnesota. All rights reserved.

The Role of Payment Reform in the Transformation of the HealthCare System

Jim EppelChief Operating OfficerBlue Cross and Blue Shield of Minnesota

MN Health Action Group Community DialogueNovember 29, 2012

• Increasing desire to pay for value, not volume• Need to decrease waste, duplication, inefficiency• Provider/Payer/Purchaser “exhaustion” with the

old model• Desire of Integrated Delivery Systems to evolve

into “Accountable Care Organizations” (ACO)• The “Fear Factor” associated with “Reform”• Increasing transparency

FACTORS DRIVING THE CASE FOR CHANGE

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• What are purchasers/consumers regulators etc., asking for ?

•They are asking for the “HealthCare System” to truly behave like a system

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A universal recognition of the need for change has led to higher level of collaboration between providers of care and health plans than has previously existed.

An example … Blue Cross Blue Shield’s “Aligned Incentive” relationship model:

Past Current/Future

Short term contractsDominated by negotiation of unit payment

Multi-year contractsFocused on building relationships which lower cost and improve quality

Fee-for-serviceDiscount off charge as a measure of success

“Value” derived paymentsTotal cost of care and outcomes as measures of success

Treating chronic and acute illness

Preventing illness and maintaining “wellness”

Limited transparency Full transparency and sharing of claims and encounter data

Negotiation “drives” the relationship

Relationship “drives” the negotiation

EVOLVING RELATIONSHIP MODEL

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HistoricalContract

Aligned Incentive Contract

Year 1 Year 1 Year 2 Year 3

QualityProvider At Risk

Total Cost of Care Provider At Risk

Quality

Fee for ServiceGuaranteed

Increase

Fee for Fee for ServiceService

Guaranteed Guaranteed IncreaseIncrease

ALIGNING INCENTIVES AROUND VALUE

$TBD based on performance to cost of care target$TBD based on performance to cost of care target

Savings are sharedSavings are shared

$ pool based on outcomes improvement $ pool based on outcomes improvement

Annual increase is ceiling for cost of care targetAnnual increase is ceiling for cost of care target

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ALIGNED INCENTIVE CONTRACTING MODEL

Member attribution

• Assigned to care system based on majority of

E&M visits by a PCP

• Retrospective

• Passive

PMPM calculation

• Aggregate attributed member payments

• TCOC aggregates price, type and volume of

services, regardless of setting, into PMPM cost,

• Providers share in savings from lowering the cost

trend below an aggressive target.

Quality incentives

• Payment “at risk” based on 17 quality metrics in

5 categories: chronic illness, prevention &

wellness, care integration, safety and utilization

Risk adjustment

• Adjust cost to reflect different illness burden

and complexity of the patient population

QUALITY IMPROVEMENTCHRONIC ILLNESS • Optimal diabetic care (composite measure)

• Optimal vascular care (composite measure)• Hypertension control

PREVENTION & WELLNESS

• Breast cancer screening• Colorectal cancer screening• Body mass index (measurement and referral)• Tobacco cessation (measurement and referral)

PATIENT CARE INTEGRATION

• Depression remission rate

SAFETY • Reduction of elective deliveries < 39 weeks• Reduction in elective c-sections• Hospital-associated deep vein thrombosis/

pulmonary embolus• Pulmonary embolism for knee and hip replacement

UTILIZATION • Potentially preventable events: admissions, readmissions, complications

• Low back pain (MRI, CT, X-ray utilization)• Advanced care directives

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CARE SYSTEMS ON ALIGNED INCENTIVE CONTRACT

10 care systems = 33% of Blue Cross’ total statewide volume 65% of metro volume

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Enable provider competition based upon performance via products which feature providers with low total cost of care and transparency tools for members.

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Establish payment incentives tied to lowering thetotal cost of care and improving quality with appropriateshared risk and reward.

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Provide actionable data, analytics, and tools to assistproviders in lowering the total cost of care.

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Generate provider buy-in on details of total cost of caremeasurement and quality outcomes.

PROVIDER ENABLEMENT

EARLY RETURNS ON ALIGNED INCENTIVE CONTRACTS

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Total cost of care

• First year preliminary data projects 75 percent of the aligned incentive

care systems will receive shared savings payouts by bending their

historical cost trends

• Successful care systems include both metro and non-metro health

systems

Quality

• Several care systems have made significant improvements in

outcomes measured from 2010 to 2011

* Missed target

CARE SYSTEM 2010-2011 measures

Care System A•Diabetes care•Vascular care•Controlling hypertension

36.7% - 38.9%

40.0% - 44.5%

68.0% - 77.3%

Care System B•Breast cancer screening•Colorectal cancer screening•Reduction of elective deliveries•Vascular care

74.9% - 80.8%

45.3% - 61.0%

10.3% - 3.0%

57.6% - 47.4%*

Care System C•Breast cancer screening•Colorectal cancer screening•Diabetes care•Vascular care•Controlling high blood pressure

83.0% - 87.1%

49.0% - 70.4%

27.0% - 32.2%

41.0% - 32.8%*

78.0% - 76.7%*

QUALITY IMPROVEMENTEARLY RETURNS, 2010-11

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~600 additional BCBSMN members whose blood pressure is controlled

~5,000 additional BCBSMN members screened for colon

cancer

~300 avoided elective deliveries for BCBSMN

members

Across 9 care systems,2,000 additional BCBSMN members reached

treatment goals for diabetes,vascular disease, and hypertension

Across 9 care systems, quality payments for 2011 were approximately $32.7M (allocated $35.6M)

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Questions ?