Pay for Performance Intro

Headline Space Here Insert Headline Here P4P: IMPLICATIONS FOR YOUR ORGANIZATION AND WHAT YOU NEED TO DO TO PREPARE

P4P: IMPLICATIONS FOR YOUR ORGANIZATION AND WHAT YOU NEED TO DO TO PREPARE June 2008 Presented to the HFMA ANI DeMarco and Associates

William J. De Marco William J. DeMarco, MA, CMC, has worked in the health care industry since 1974 when he was hired as an executive for the SHARE health plan, a non profit, community based provider driven HMO in St Paul, Minnesota. Assisted in design of Minnesota’s first Medicaid plan and supported the Medicare product line. Former Director for the Minneapolis District of Blue Cross Blue Shield’s HMO Minnesota plan. Development of a physician driven and owned health plan in Rockford, Illinois. Sponsored by Rockford Clinic. Ltd. Based upon this experience DeMarco and Associates began as an independent consulting firm working with medical groups, hospitals, and health systems to create new economic relationships with managed care as well as work with employers and select managed care companies in optimizing relationships with providers. The firm’s focus on new plan startups and expansion of physician/employer relationships led to the acquisition of Warren Surveys, a research and publishing company collecting compensation and organizational data on the health plan industry. Bill’s understanding of the multifaceted health plan industry with focus on data and quality improvement helped create Pendulum HealthCare Development Corporation, an independent health data analysis and care plan measurement company. PHDC continues to assist employer and provider sponsored health plans in focusing resources and building infrastructures to better manage the shift from discounted fee schedules to performance based contracting. Bill holds degrees in behavioral science, a Master’s in organizational development from DePaul University, and is a doctoral candidate in human and organizational systems development. DeMarco and Associates has received multiple awards from MGMA and HFMA for educational programs and advisory work for members of the association. Author of over 7 books and contributor or author to several hundred articles, Bill conducts private workshops for clients as well as conducts consulting projects for large and small organizations on a local and regional basis.

Agenda Why are we here? What is Pay for Performance? What is performance based contracting Value Based Purchasing? How does this integrate with physicians and hospitals structures? Are employers really using performance information? Can you show me some private payer strategies that are working? Can you show me how employers and health plans are using this performance data?

Why Now? Quality Chasm calling for system redesign Overpayment and fraud cases at an all time high (auditors hard at it) Current program under-funded due to demographics New technologies more prevalent (TPA, drug eluded stints) Rising charges (60% overall increase over 5 years) Unnecessary care (Hospitalizations and ER that could have been avoided or better handled through physician visits/hospice/home health) Social and economic barriers to preventive care that produce expensive admissions

Institute Of Medicine Findings “ Serious and widespread quality problems exist in American medicine… [They] occur in small and large communities alike, in parts of the country and with approximately equal frequency in managed care and fee-for-service systems of care. Very large numbers of Americans are harmed as a result (Chassin and Galvin 1998:1000) .” The IOM Studies Report to the National Business Roundtable on Quality Health Care Says:

Institute Of Medicine Findings Examples cited include: Fewer than half adults aged 50 and over were found to have received recommended screening tests for colorectal cancer (centers for Disease Control and Prevention 2001, Leatherman and McCarty 2002) Inadequate care after a heart attack results in 18,000 unnecessary deaths per year (Chassin 1997) In a survey, 17 million people reported being told by their pharmacists that the drugs they were prescribed could cause an interaction (Harris Interactive 2001)

Government spending on healthcare to double

Medicare’s Goals CMS is pursuing a vision to improve the quality of care by expanding the health information available through direct incentives to reward the delivery of superior care.

Performance On Medicare Quality Indicators: 2000-2001 Source: S.F. Jencks, E.D. Huff, and T. Cuerdon, “Change in the Quality of Care Delivered to Medicare Beneficiaries, 1998-1999 to 2000-2001, “ Journal of the American Medical Association, 289(3):305-12, Jan. 15, 2003. All Medicare beneficiaries have health coverage, yet the quality of care they receive differs significantly from state to state. Note: State ranking based on 22 Medicare performance measures First Third Fourth Second Quartile Rank DC

Value Based Demonstrations and Pilots Premier Hospital Quality Demonstration Project Physicians Group practice Demonstration Medicare Care Management Performance Demonstration Nursing Home value Demonstration Project Home Health Pay for Performance Demonstration ESRD bundled payment Demonstration ESRD Disease Management Demonstration Medicare Health Support Pilots Care management for high cost beneficiaries Demonstrations Medicare healthcare Quality Demonstrations Gain-Sharing Demonstrations

Four Cornerstones The Executive Order is intended to ensure that health care programs administered or sponsored by the federal government build on collaborative efforts to promote four cornerstones for health care improvement: Interoperable Health Information Technology : Interoperable health information technology has the potential to create greater efficiency in health care delivery. Significant progress has been made to develop standards that enable health information systems to communicate and exchange data quickly and securely to protect patient privacy. Additional standards must be developed and all health care systems and products should meet these standards as they are acquired or upgraded. Measure and Publish Quality Information : To make confident decisions about their health care providers and treatment options, consumers need quality of care information. Similarly, this information is important to providers who are interested in improving the quality of care they deliver. Quality measurement should be based on measures that are developed through consensus-based processes involving all stakeholders, such as the processes used by the AQA (multi-stakeholder group focused on physician quality measurement) and the Hospital Quality Alliance.

Four Cornerstones Measure and Publish Price Information : To make confident decisions about their health care providers and treatment options, consumers also need price information. Efforts are underway to develop uniform approaches to measuring and reporting price information for the benefit of consumers. In addition, strategies are being developed to measure the overall cost of services for common episodes of care and the treatment of common chronic diseases. Promote Quality and Efficiency of Care : All parties - providers, patients, insurance plans, and payers - should participate in arrangements that reward both those who offer and those who purchase high-quality, competitively-priced health care. Such arrangements may include implementation of pay-for-performance methods of reimbursement for providers or the offering of consumer-directed health plan products, such as account-based plans for enrollees in employer-sponsored health benefit plans. Last revised: February 28, 2007 Value Driven HealthCare website

Looking Ahead To The Consumer Era Fee-For Service Medicine Attributes Physicians on Top Leaders of American medicine Focus on personal status and reputation of physician Era of Great Medicine Hundred year run of clinical advances Highest quality medicine known anywhere, anytime Little Physician Accountability Unlimited discretion over clinical decisions Little accountability for costs Little accountability for patient service quality Result Unfettered consumer choice of physicians and hospitals Failure to produce consumer good Unlimited choice of hospitals Winning Physician Loyalty 1900-1982 Focus on Insurer Contracting Unlimited choice of physicians Degree of Consumer Choice of Physicians and Hospitals

Looking Ahead To The Consumer Era Shadow of the Insurer Attributes Insurers on Top Broad authority over care decisions Power to channel and deselect Era of Greater Accountability Reversal of upward spiral in cost Monitoring of clinical and service quality Little Consumer Choice Employer channeling to HMOs HMOs channeling to providers Lockouts become a regular occurrence as employers switch plans and panels Result Painful loss of freedom for providers Breaking into contracts the top priority 1983-1998 Lockout Focus on Insurer Contracting Employer channeling to HMOs Employer channeling to Physicians Deselection Employer channeling to HMOs Employer channeling to Physicians Deselection Lockout Zone of Maximum Channeling Degree of Consumer Choice of Physicians and Hospitals Winning Physician Loyalty Wholesale Marketing

Looking Ahead To The Consumer Era Ascendant Consumer Enterprise Attributes Consumers on Top Resurgence of consumer choice Physicians and insurers in service to consumers Era of Consumer Good Improved access and convenience Improved service quality Retreat from traditional channeling Broad consumer choice of multiple health plans Broad plan choice of providers Breakdown of exclusive contracting Result Competition shifts from plans to providers Imperative to create consumer enterprise Moving from wholesale to retail strategies Providers Marketing Directly to Consumers 1998 to 21st Century Emergence of new structures/technologies Growth of IRAs and HSAs Rise of smaller panel provider driven health plans Employer Coalitions Wholesale Marketing

Three Health System Imperatives Broad Physician Foundation Challenge For hospitals, the biggest threat of lockout comes from physicians, not insurers; physicians in evolving markets are increasingly concentrating their inpatient business with fewer hospitals. With capitation, physicians’ single greatest concern is to secure hospital cooperation in cost reduction efforts. Even without capitation pay form performance demands less hospital relationships. Implication No hospital task is more urgent than replacing traditional ‘feel good’ physician bonding with true economic partnerships. Farsighted hospitals will secure physician loyalty by investing in aggressive efforts to jointly re-engineer care and to align hospital and physician financial incentives, build high performance panels and gain from cost reduction efforts through direct contracting with employers. New Retail Franchise Challenge With the return of broad physician and hospital panels, provider choice will increasingly devolve from insurers back to consumers. As a result, inclusion in HMO panels will become secondary to providers’ ability to meet consumer demand for superior quality, service and access Implication The best health systems will invest in the creation of a retail franchise. Key priority is renewed emphasis on consumer marketing - appealing directly to enrollees through concerted efforts at consumer enrollment, consumer retention and elevation of the provider as a brand. Burden of Breaking In Challenge Particularly in early managed care markets, providers faced a very real threat of exclusion from key managed care contracts. While the danger of contract lockout is lessening over time, it will never disappear altogether, even broad-panel plans are unlikely to include every hospital and physician. Smaller networks within networks are working in several markets. Implication Concerted effort to ensure inclusion in major contracts is a major priority for providers to avoid losing access to lives and revenues as managed care penetration increases. However, in a world of broadening panels and panels within panels, effective contracting alone is no guarantee of health system success.

Approaches Tried by Hospitals & Health Systems Attempts to “make it easy” by creating standards and reporting doctors who do not meet these standards to health plans Misunderstanding about the value of this data Genuine disregard for physician individual differences in treatment and experience

The Hope of Pay for Performance Is That It Will Change the System From Bottom up Emotional response by the patient when expectations are not met becomes the motivator of change by physicians. Underlying enabler in this process is the data the consumer has available that sets this expectation. The current gap between consumers and physicians can be filled by offering AUTHORITATIVE data from the health system or the employer’s health plan. These elements represent a dramatic change that has been going on in the market for 10 years. A change from wholesale to retail selection and purchase of health services.

Who Sets the Standards United, Humana and others have attempted to create standards and set them upon physicians in Missouri, Washington, Tennessee, and California The compromised version incorporates leading physicians representing all specialties, and there is an ability to request your data and there is an appeal process if you think you are being unfairly treated Of course, there is always litigation Continuity of care could be interrupted by standards

Insurers probed about physician-ranking programs Physician-ranking programs by Aetna and Cigna Healthcare may confuse or deceive consumers because of how they are designed, New York Attorney General Andrew Cuomo has warned in letters to the two insurers. Cuomo requested full justification for the programs, which recommend certain primary-care physicians and specialists to consumers. His office wrote that Aetna Aexcel and the Cigna Care Network may be flawed because the insurers rely on claims data, which may exclude key information and have too small a sample size to yield useful data. The insurers did not disclose ranking data, according to the letters. “ The goal of transparency is defeated if the information provided is itself inaccurate or misleading, or based on flawed data,” wrote Linda Lacewell, counsel for economic and social justice at the attorney general’s office, in the letters. Inaccurate physician rankings could cause financial harm to consumers because some employers steer workers to preferred doctors by lowering copayments, according to the attorney general's office. So workers who choose not to see preferred doctors could pay more. Insurers have a profit motive to steer consumers to cheaper doctors, not those who are most-qualified, Lacewell wrote.

Performance Models CMS Approach . Pay is based on a capped share of savings achieved by several types of measures such as a reduction in harmful procedures. Points Earned Approach . Health plan pays for HEDIS type measures but on a tiered basis, .i.e. participating physicians are stratified and paid on a points earned basis. Outcomes based . Pay is linked to evidence based process and achievement related outcomes above a predetermined benchmark.

Defining “Success” in a P4P World

P4P Programs Integrated Healthcare Association (IHA) Leapfrog Group Bridges to Excellence CMS/Premier Hospital Quality Incentive Demonstration CMS/Physician Group Practice Demonstration (PGP)

California based purchasers – health plan medical directors, physician group directors Formed in 2000 P4P announced in 2002 Clinical measures – mammograms, pap smears, immunizations, asthma, diabetes, coronary artery disease Other measures – patient satisfaction, prevention, chronic care management, IT NCQA is intermediary to aggregate data $54 million in bonuses paid in 2004 …$64 in 2006 P4P Programs Integrated Healthcare Association (IHA)

Formed in 2000 after IOM report U.S. corporations formed to improve safety, quality, value, affordability Four ‘leaps’ computer based order entry evidence based hospital referrals ICU staffing by specialists NQF safe practices Hospital Rewards Program – launched in 2005 to monitor five clinical areas (patterned after the CMS Premier Demo) P4P Programs Leapfrog Group

Multi-state, multi-employer coalition IOM concepts (SEEETP) Three principles reengineer care processes to reduce mistakes reduce defects to reduce waste provide performance data Three programs Physician Office Link Diabetes Care Link Cardiac Care Link Rewards for IT P4P Programs Bridges to Excellence

Resources www.hfma.org . Executive roundtable on P4P 2005 www.ahqr.org Quality measures and projects in place. Especially Transforming health systems leadership design and incentives October 18 2004 and Leading Practices Redesign December 15 2004 www.cato.org Pay for Performance is Medicare a good candidate? Michael Cannon July 31 2006 Cms.hhs.gov/HospitalQualityInits/35_HospitalPremier.asp Top performers in demo projects 2006 www.iha.org Integrated Healthcare Association annual report February 2007

Resources: What employers are being told www.ahrq.gov Strategies to support quality based purchasing, a review of the evidence www.ahrq.gov Pay for performance: a decision guide for purchasers www.comonwealthfund.org Excellent website of P4P and Performance based medicine as part of the total reform occurring in Health Care

Resources for Finance Directors who want to understand the basis of these formulas Medicare Risk Adjusted Capitation Payments: from research to implementation , Greenwald, Health Care Financing Review, Spring 2000. Risk Adjustment of Medicare Capitation Payments using CMS HCC Model , G Pope Health Care Financing Review, Summer 2004.

Current Status of P4P Over 100 programs 1/3 targeted to hospitals Programs in infancy Great variation in organization, metrics, rewards CMS will be major market driver Increasing demands for quality, value, efficiency Movement from process to outcomes Enhanced IT essential

What’s next Employers and their consultants are molding the new P4P Health Plans have the opportunity to get ahead and stay ahead of this curve Hospitals have an opportunity to work with health plans and share data that ultimately creates a cost differential in the market Physicians can lead much of this change if there is a willingness to better organize themselves into new types of organization platforms Hospitals can help build the platform to support this “ exchange “ between plans, employers, and physicians but first, the understanding of where P4P is going needs to be clear.

The Future: Performance Based Contracting A new direction and opportunity for providers and Health Plans to collaborate

Performance Based Contracting (PBC) Medical Management Managed Care Private Payer Needs Informatics Disease Management Quality Improvement P4P Consumer

Requires multiple disciplines within a health system to work together Integrates external with environmental changes Creates an opportunity for growth in private pay markets to balance public pay reductions Should be a core strategy to your organization, not just an agenda item in a management meeting Performance Based Contracting (PBC)

Pay For Performance Driving Technology A pay-for-performance program in upstate New York hopes to tap into bonuses offered by Bridges to Excellence as well. That, however, would be icing on the cake for participating doctors who came together to get a health information technology network up and running, in part, to garner P4P bonuses from individual health plans. "Many health plans are prepared to pay for performance," John Blair, CEO of Taconic Health Information Network and Community, tells the New York Times. "The rub is that you have to have the technology in place to garner those incentives. You need to automate the reporting capability." .

CDHP Accelerates Organizational Change CDHP Driving P4P New Product Driving Org Change Health Plans Driving CDHP P4P Driving New Infotech New Infotech Driving New Product

The Changed Environment 1975: General Motors was the largest single non-government employer in the USA - 2.2 million employees, and every one of them had full womb-to-tomb health care paid 100% by GM. 1985: AT&T was the largest employer - 1.8 million employees, all with 100% employer-paid coverage. 2005: Wal-Mart is the nation's largest employer, with 1.5 million US employees - less than 400,000 have health care and it costs them from $120-190/month for a high deductible limited coverage plan. Source: Jeanne Scott, Chief of Health-Politics.com.

CDH Accounts Reach 10 Million In January 2008 Combined enrollment in health insurance linked to HSAs or HRAs exceeded 10 million covered lives in January, Consumer Driven Market Report has found. HSAs alone have over 6 million Americans enrolled while HRAs have over 4 million. The HSA number is verified by reports from the biggest HSA custodians polled privately. The 12 largest custodians enjoy steady HSA adoption, and seven will be over 100,000 HSA accounts by 2009. OptumHealth Bank has the most, but Mellon ACS, JPMorgan Chase, and HSA Bank are on its heels. Bancorp Bank, Bank of America, and Wells Fargo are duking it out the middle.

What employers are doing with this data Tiering hospital and physician services just like they did pharmacy services

Physician Performance Low Quality High Low Efficiency High

Estimated Savings From Redirection

Develop Tiered Networks Compare Risk Adjusted Cost PHDC Population Profiling System Provider Ranking - Total Dollars Redirect Patients Include Provider in Select Network

Tiered Network Example Tiers Participating Physicians Regular 100% Premium 75% Ultra 50%

Risk Adjustment In Action Two male patients with the same principal diagnosis (congestive heart failure) are admitted to different emergency rooms. Though medical intervention does its best for both patients, the reality is that advanced age and serious secondary diagnoses put the 90 year old at a much higher risk of death. It would be unfair to compare mortality outcomes of the two without risk adjustment. Therefore, risk adjustment provides a better comparison. Source: Pendulum, Copyright © 2002 Learning and Knowledge Resources. This patient’s expected mortality is 8.0 times the expected mortality for the 65 year old Congestive Heart Failure with Diabetes Mellitus with Hypertension Congestive Heart Failure with COPD with Mitral Valve Insuffic with Aortic Valve Stenosis

Visualizing An Annual >>2.5% Gain In Cost Efficiency Source: Mercer US Health Care, Dr. Arnold Milstein, 2006.  2.5%/year 2.5%/year 50 th %ile 50 th %ile MD Quality Index (outcomes of % adherence to Q rules)  Lower Higher  Lower Longit. Efficiency/ Higher Total Cost Higher Longit. Efficiency/ Lower Total Cost Low Longit. Efficiency Low Quality (Worst) High Longit. Efficiency High Quality (Best) High Longit. Efficiency Low Quality Total Cost of Care Index for Seattle MDs (total cost per case mix-adjusted treatment episode) Low Longit. Efficiency High Quality

New Insights for Physicians and Hospitals Once employers and managed care understand that they can differentiate providers on quality, product, technology and price the market, as we once knew it, shifts and providers will need to look at risk differently

The system does not behave the way employers or patients want it to behave The system actually rewards providers who let patients get sicker. The more complex the patient the more the providers can charge. When hospitals become more efficient and more effective they lower costs, save lives but also lower revenue projections. Right now the more efficient and effective the hospital is, the more money the insurance company makes. The only way to harvest these savings from improvements is to share risk in carefully constructed performance driven agreements.

CAP Protocol Compliance Source: Intermountain Healthcare, Dr. Brent James, 2006. Proportion Compliant Baseline Implementation Month Relative to CPM Implementation Implementation Group – Loose Abx Compliance

CAP: Cost Vs. Reimbursement Source: Intermountain Healthcare, Dr. Brent James, 2006. Actual vs. Expected Reimbursement ($) Expected Cost projected from risk-adjusted history, controls Actual Cost as complication rate fell Actual Reimbursement Month Relative to Protocol Introduction

Impact On Net Income Source: Intermountain Healthcare, Dr. Brent James, 2006. (15%)    (0%)    (40%) (45%) Decrease # of Cases     Per Diem  Decrease LOS (# nursing hours)  Decrease other units per case  Decrease # Units per Case    Decrease Cost per Unit Shared Risk Per Case Discounted FFS Improvement to Cost Structure

Impact On Net Income Source: Intermountain Healthcare, Dr. Brent James, 2006. (15%) (0%) (40%) (45%)     Decrease # of Cases    Per Diem Payment Mechanism    Decrease LOS (# nursing hours)    Decrease other units per case Decrease # Units per Case    Decrease Cost per Unit Shared Risk Per Case Discounted FFS Improvement to Cost Structure

Failure to understand this fundamental construct The leading source of frustration for CFOs and Administrators has been they make no money on Provider Sponsored plans because they thought risk was all about insurance. They did not understand that to manage risk well requires the delivery system to change. The failure of most hospitals to integrate with medical staff and benefit from the efficiencies of this process was a misunderstanding that true integration required a change in delivery system process and outcome not just written contracts and information systems that makes it look like we are integrated.

Identifying Profitable Service Lines Source: Health Leaders, March 2003. Tot Pay Avg Tot Cost Avg Tot Pay Avg Tot Cost Avg Tot Pay Avg Tot Cost Avg None Single CoC Multiple CoCs Cardio/Vascular/Thoracic Surgery Orthopedics General Surgery

Predicting Future Cost PHDC Population Profiling System Employer Ranking Risk - Adjusted Total Dollars Retrospective and Prospective ERG ™ s

So Far… We have: addressed the basic structures of P4P and PBC. discussed the forces in the marketplace that are expanding the performance measurement opportunities for providers and health plans to better collaborate presented several insights into where technology is acting as the great equalizer to propel small plans into a leadership role by offering a healthcare 2.0 vision of the member. introduced you to hard evidence that risk can be profitable if you are able to measure your panel on a disease specific basis and help your providers to focus on product line management. And now let’s put this all together into a VBP strategy.

Objectives Gain insight into the current nature of P4P models. Identify examples of successful P4P business models that integrate both hospital and physician issues. Outline corporate strategy issues that impact private payer contracting issues.

Trouble to avoid This is not a program or an isolated academic project. Do not turn this over to the revenue cycle management people alone as their goals are maximum billing not quality improvement. This strategy has winners and losers. Losers are the ones who cannot produce reasonable evidence as to their quality and will lose market share and trust in the marketplace. Employers and third parties, including Medicare, are very concerned that as consumer driven exposes patients to large out of pocket risks that the care is done right the first time. Otherwise it comes out of the payer’s side of the bank, not the consumers. Hospitals and physicians will spend more money trying to reestablish themselves as a quality facility than they will taking a leadership role RIGHT NOW in positioning themselves for the future as the ally to the employer and consumer.

What these collaboratives may look like Developing an exchange process of data elements for market-share as long as it meets specifications. Creating a sales relationship as a “source” for all things medical. Developing Direct contracts between employer and provider. Developing benchmarking consortiums between multiple employers and multiple providers. Building your own shared risk model.

Corporate Health Department Most health systems and physicians do not know how many patients come from which employer in their service area. Insurers and TPAs control payment to providers. Most health systems have someone selling Occupational Medicine, Wellness programs, Fitness programs, some on site screening programs etc.. Most departments cannot link volume of visits or admissions to this activity so budgets are sparse. Combining these programs with a central core strategy of PBC, offers a new dimension to partner directly with employers as they move their employees to the role of a consumer. Employers, when asked which doctor does the best job for a particular illness, do not know the answer and will buy outside data services to get the answer. You know the answer and should charge for it.

Direct Contracting Health plan takes the lead to approach select employers with de-identified patient data to suggest problem areas where hospital and physicians can help lower cost and improve quality. The employer has never seen all of their work comp, disability management, disease management, claims cost, network access fees, ancillary costs, and productivity costs in one database. Your strategy is looking for ways to improve productivity and holding yourself accountable to the employer and the consumer to reform the delivery system and share in the savings. The more employers save money the more employers they will sell on the idea that your organization is a good partner

Direct Contracting Model Provider/Payer Model Hospital Mfgr School District City County Union trust Health Plan Physicians Integrated System

Benchmarking Consortium Collaborative between large employers, hospitals, physicians. Mission is to collect and share data for the purpose of improving quality and cost through understanding capabilities and limitations. Everyone pays into the confederation to support it. End user is the consumer, and success is a combination of satisfaction, affordability and quality outcomes. This can be a new revenue stream to pay for ongoing data initiatives. Any new health plan visits with the employer will need to use your “high performance panel” as long as you can continue to improve quality ( something the insurer cannot).

Benchmarking Consortium Confederation model Data Source TPAs/ vendors Hospital Physician Network Employers Union trust

Population Profiling System PMPM Average Dollars Specialty: Family Practice

Population Profiling System Provider Case Load By Complexity Level Specialty: Endocrinology Visits Services

Masked Employer Report Population Profiling System - Employer Ranking Total Dollars Paid for Covered Individuals

What these approaches have in common Requires a better understanding of employers’ needs and makes PBC a vital payer strategy with an ROI Requires a sincere effort to bring physicians into the future shift in the insurance and delivery system business Builds confidence in the community as local leadership is in charge of the process Allows the health system or physician network to get prepared for Value Based Purchasing and to leverage that knowledge into a new revenue stream by helping employers meet their employees needs

MedPAC 2008 Recommending that physician and hospital payments be bundled together for all future Medicare payments. Recommending Medicare Advantage. Recommending 2% to 5% of all DRGs be set aside in a performance pool for hospitals to earn if certain benchmarks are met. Promoting the development of a VBP dataset for hospitals. http://www.medpac.gov/transcripts/03050306Medpac%20final.pdf

Case Studies Provider Profiling June 2008 William J. DeMarco, MA, CMC

Case Study Union Managed Benefits Plan Union offered PPO for 175,000 lives in 20 states. 608,000 visits to 1,800 physicians. Diverse population not using preventive care. Average cost per patient for acute bronchitis is $89 to $771 and urinary infections are $81 to $778. No discernable value in higher cost episodes.

Union Managed Benefits Plan Methods Goals: reduce cost variation of necessary services and increase use of preventive care. Analyze 10 years of data using a modified ETG grouper. Restructured network using ‘market basket’ approach by specialty. Using combinations of HEDIS and AQA indicators and a threshold of those providers with 35 plus episodes, 50 unique patients and $10,000 in claims over 2 years providers were scored.

Union Managed Benefits Plan Results The plan used a 10% over and above salaries pool to fund initial performance payments. Average of $1300.00 Profiles discussed with advisors, then with providers receiving bonuses. 50 providers were culled from the network leaving 155 providers (66 groups). Gold Star program was initiated with the top 50% of each specialty receiving a gold star rating.

Union Managed Benefits Plan Gold Star providers saw a 30% increase in their visits. Overall visits increased 14%. Adherence to quality measures improved 14%. Plan reduced its premium cost. It had budgeted 13% increases, but instead saw a $69 million savings over 2 years.

Children’s Health Plan HMO for Children sponsored by Metro Area Children’s Hospital 12,000 children accessing: 780 pediatricians 1,300 pediatric specialists 60 in network hospitals 21,000 admissions: 190,900 clinic visits 79,319 ED 19,785 surgeries

Children’s Health Plan Methods Goals were to integrate financial and clinical reporting capabilities to make good decisions as to how best to manage the plans medical loss ratio Extracted data had many holes: Misaligned fields for lines of business Claim adjustment errors Reconfigured reports to be useable by departments and management

Children’s Health Plan Results Aligned financial and clinic reports into 30 summaries Reporting by line of business, specific drugs, service codes, and disease condition by provider Adopted cost per patient per 1,000 and PMPM by service Plan is now implementing HEDIS measures and other custom quality measures for operational improvement and compliance

Case Study: Detecting Visit Upcoding Providers offset lower reimbursement by increasing complexity of office visit level Focusing on a single procedure Otitis Media for 62,000 Medicaid patients and 400,000 Commercial patients, we found over-reliance on level 4 and 5 office visits 0.3% 3.3% 5 3.6% 30.0% 4 58.8% 59.9% 3 35.0% 6.5% 2 2.3% 0.3% 1 % Commercial Claims % Medicaid Claims Office Visit Level

Detecting Visit Upcoding Variances between Commercial and Medicaid is not clinically justified The financial impact of reducing office payments by 21% is substantial Drill down reports allowed us to look at the practice mix compared to specialty averages for each condition We were able to identify the providers who billed 90% or greater of their visits at level 5 and show them where they stand next to their peers Plan can use this data to curb abuses or fraud and help physicians to improve quality and safety while reducing overall costs

4 ways to create revenue Reorganize networks into tiers with high performance doctors and hospitals sharing in the savings and designing benefits to channel patients to top providers. Change patient behavior. Incentivize the use of prevention to promote early detection of large claims reducing risk and reinsurance costs. Change the behavior of patients and physicians. Identify those physicians with documentation, up-coding and down-coding problems. Correct this situation and you change the behavior of physicians and their expectations of you as a health plan. Sell the data to employers AND CONSUMERS, reinforce behavior change.

Summary Large employers and regional health plans are in a hurry to manage benchmarks not just benefits. Building benchmarks creates new interest in the minds of buyers to tier providers and design benefits to incent use of top providers. The governments pay for performance demo projects and initial success with risk adjusters is a driving force that is not going away. These changes create new opportunities for providers to collaborate and harvest savings through performance arrangements. Technology is changing in favor of supporting these more sophisticated models of care improvement and reimbursement improvement.

Implementing these strategies What are you going to publish? What are your employers ready for? What limits do you have in terms of collecting data? Is your organizational structure set in place to do this? Do you have managers accountable to form, refine and carry out this strategy? Do we buy or build a data retrieval system? Participating providers and timely data, how will this fit?

Getting started with providers Performance based contracting preparedness Inventory of current process improvement tasks Physician issues of quality measures, ETGs, ERGs, AVGs Information gaps in being able to collect and analyze (RCA) Performance Based Contracting ( PBC) feasibility Employers interest Health plan requirements Internal assessment of management AND STAFF Understanding the difference between management and leadership.

Provider implementation Sending a report card, think again Provider involvement on EVIDENCE BASED guidelines Provider involvement on pay “80% of goal equals?” Early ramp up to gather and inform providers of intent and willingness to work in a collaborative manner Data should be clear (do not paper them, doctors REALLY hate this) Hotlines for doctors and consumers for individual questions Third party objective and trusted source for this data

Employer selling Tiered network MUST be tied to benefit gains. Results of the tiered versus un-tiered network must be reported. Employee meetings to sell the smaller network at better VALUE. Large self funded groups are not the only market segment. Retirees could be a market segment if you have an MA license. Reaffirm on website the VALUE – Pricing is not as important as VALUE. These are value added but can create a revenue stream for panel rental and reports, wellness etc..

Conclusion Employers, Hospitals and Physicians have a new opportunity to not only take unnecessary costs out of the system but also improve the quality of necessary services while being paid a success fee to improve. This is not a social engineering project but rather a business proposition that starts with making the case for quality from all stakeholder perspectives. Do not let the complexity of informatics be the failure of your plan. Sometimes starting out with standard reports of what you ARE doing will lead to employers saying what they are looking for. We have just shown you a way to be paid well for being the leader of care reform as a health plan provider in your community.

For more information contact DeMarcoHealthcare.com

For more information PendulumHealth.com

Pay for Performance Intro

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