Total Cost of Care

Gail RusinProgram Manager, Pay for Performance –

EfficiencyIntegrated Healthcare Association

March 19, 2012

Agenda

BackgroundIHA – Who We Are CA P4P Program EvolutionMotivation for Resource Use Measures

Transition to Value Based P4PP4P Program Goals and Objectives

Total Cost of Care (TCC) MeasureDescription and Results

Appropriate Resource Use (ARU) MeasuresIllustrations of Quality, Cost, and UtilizationValue Based P4P

Role of TCC and ARU in P4P

Value Based P4P Preliminary Design

Organization: California multi‐sector healthcare leadership group

Mission: Improve quality and lower costs of healthcare

Approach: Multi‐stakeholder collaboration incorporating performance measurement & incentive alignment

Projects: Pay‐for‐performance, medical technology, clinical data sharing, new payment methods (bundled payment), efficiency measurement, and administrative simplification

California P4P Program Evolution Timeline

Program ParticipantsEight CA Health Plans:

Medical Groups and IPAs:

Over 200 Physician Organizations35,000 Physicians 10 million commercial HMO/POS members

AetnaAnthem Blue CrossBlue Shield of CACigna

Health NetKaiser Permanente*UnitedHealthcareWestern Health Advantage

* Kaiser Permanente medical groups participate in public reporting only, starting 2005

Motivation for Resource Use Measures

P4P has been successful in improving quality and accelerating IT adoption, but…

Systemwide performance breakthrough remains elusive

Costs continue to escalate

HMO membership declines as premiums rise

HMO premiums up 142% since 2000 and exceed PPO premiums in several CA marketsEnrollment covered by P4P decreases 3‐4% every year since program inception

Motivation for Resource Use Measures

As a result of high costs and declining membership…

Health plans question the ROI of P4P and demand that cost be included in the equation

Purchasers demand value from their premiums

COST & QUALITY = VALUE

2011‐2012

Maintain existing P4P Quality incentive program and Appropriate Resource Use (ARU) shared savings

Measure Total Cost of Care

2013‐2015

Merge quality/cost/utilization measurement into a single incentive program that fosters quality while working towards bending the cost curve▪

ARU/utilization establishes base amount of incentive▪

Total Cost of Care trend is a threshold “gate”▪

Quality performance is a threshold “gate”

and payment adjustor

Transition to Value Based P4P

P4P Program Goals and Objectives for 2011‐2015

Goal #1: Continue to achieve meaningful quality improvement

Goal #2: Bend the cost trend

Objectives:Reorder priorities to emphasize cost control (affordability) Continue to promote qualityStandardize health plan efficiency measures and payment methodologyIncrease funding to the incentive program using a shared savings model

Total Cost of Care (TCC) and Appropriate Resource Use (ARU) Overview

TCC and ARU are complementary

Both calculated using Health Plan data submitted to Thomson ReutersTotal Cost of Care

High‐level, all services▪

Cost = Price x Utilization

Appropriate Resource Use▪

Actionable, key services▪

Focus on utilization

Total amount paid to any provider (including facilities) to care for all members of a PO for a year

Risk adjusted for age, gender, and health status

Geographic pricing differences accounted for

PO results reported for each contracted health plan, and aggregated across all contracted health plans

Specifications developed by P4P Technical Efficiency Committee

Total Cost of Care Measure

All capitation and FFS amounts

Professional, facility (inpatient and outpatient), pharmacy, and other costs (e.g., DME)

Other payments and adjustmentsShared risk payments, stop loss payments, etc.

Member co‐pays, co‐insurance, deductibles

Assume member paid appropriate amount

Total Cost of Care – Data Inclusions

Mental health, chemical dependency, dental, vision, chiropractic, acupuncture

P4P quality incentive payments

Costs above $100,000 per member per PO truncatedRetain all eligible members and their costs up to $100,000, but truncate costs at $100,000 per member per year per PO

Total Cost of Care – Data Exclusions

Total Cost of Care –

Risk Adjustment

Purpose: Makes comparisons across Physician Organizations (PO) fair by accounting for differences in member health status, age, and gender

Verisk Relative Risk Score (RRS)

Member health status identified through diagnosis codes on claims and encounters

Members’ RRS scores combined to calculate PO‐level and plan‐level RRS scores, used to determine expected costs

RRS is normalized across POs and health plans

TCC Year‐over‐Year Change

CA Market No. of

2008 Avg

TCC PMPY

2009 Avg

TCC PMPY

2010 Avg

TCC PMPY

2008‐2009

2009‐2010

Bay Area +

Sacramento

31 $3,153 $3,661 $4,130 14.2% 12.8%

Central

Valley +

Central

Coast +

20 $2,697 $3,159 $3,436 16.9% 8.9%

Orange

County +

San Diego

35 $2,604 $2,864 $3,145 11.3% 10.8%

Inland

Empire

24 $2,410 $2,711 $2,848 12.7% 5.8%

Los Angeles 62 $2,364 $2,691 $2,912 14.2% 8.7%

Statewide 172 $2,594 $2,961 $3,231 13.7% 9.5%

TCC Regional Variation

TCC Correlation with Quality

Appropriate Resource Use (ARU)

TCC provides a high level picture of costs, but doesn’t give much guidance as to what is driving the costs.

Appropriate Resource Use (ARU) measures provide more granular detail and can be used to:

Provide underlying key indicators to inform POs about their performance relative to peers in specific aspects of care

Formulate actionable plans to improve efficiencies

ARU Measures

Inpatient Utilization – Acute Care Discharges

Inpatient Utilization – Bed Days

Inpatient Readmissions Within 30 Days

Emergency Department Visits

Outpatient Procedures Utilization – Percentage Done in a Preferred Facility

Generic Prescribing

Frequency of Selected Procedures (FSP) being tested for measurement year 2011

TCC Correlation with Inpatient Utilization

Regional Variation in Quality: Comparison

TCC Correlation with Quality: Comparison

Regional Variation in Utilization: Comparison

Role of TCC and ARU in P4P

Value Based P4PDeveloped in collaboration with P4P stakeholders

Introduces a shared savings incentive model that incorporates quality, cost, and utilization

Shared savings based on improvement on ARU measures

Quality used as threshold and payment adjustor

TCC trend used as threshold

In alignment with national move towards Accountable Care Organizations

Value Based P4P Preliminary Design

Calculate Base Incentive Amount

Appropriate Resource Use (ARU) Measures

# units of utilization below target x unit cost

per units of utilization x 50%

Apply ARU Attainment

Adjustment to Base Incentive

Amount (optional)

Apply ARU Improvement

Adjustment to Base Incentive

Amount (optional)

Value Based P4PSHARED SAVINGS INCENTIVE

Total Cost of Care Gate:Is TCC BELOW Trend

Threshold?

Quality Gate:Is Quality Composite Score

ABOVE Threshold?

PO does NOT qualify

for Value

Based P4P incentive

PO does NOT qualify

for Value

Based P4P incentive

Apply Quality Adjustment

Base Incentive Amount

QUESTIONS?

Total Cost of Care

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