CREATING A PHYSICIAN-LED HEALTHCARE FUTURE Better Care … · CREATING A PHYSICIAN-LED HEALTHCARE...
Transcript of CREATING A PHYSICIAN-LED HEALTHCARE FUTURE Better Care … · CREATING A PHYSICIAN-LED HEALTHCARE...
CREATING A PHYSICIAN-LEDHEALTHCARE FUTUREBetter Care for Patients,
Lower Healthcare Spending,& Financially Viable Physician Practices
Harold D. MillerPresident and CEO
Center for Healthcare Quality and Payment Reform
www.CHQPR.org
2© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Goals of Today’s Presentation
• How to Eliminate the Federal Deficit
• How to Increase Physicians’ Pay (While Reducing Healthcare Spending)
• How to Improve Care for Patients and Lower Their Insurance Premiums
• How to Get Rid of Health Insurance Companies(or Make Them Work for Doctors, Rather Than the Other Way Around)
3© Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
About the U.S. Economy
4© Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
About the U.S. Economy
QUESTION #1:Which U.S. industry
told its employees every yearfor the past decade that
their pay would be cut by 15-30%regardless of how well
they performed?
5© Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
About the U.S. Economy
QUESTION #1:Which U.S. industry
told its employees every yearfor the past decade that
their pay would be cut by 15-30%regardless of how well
they performed?
ANSWER:Health Care
6© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Medicare SGR Is Now Gone, But
Physician Pay Is Behind Inflation
28% LowerThan
Inflation
If SGR Cut
Had Been Made
7© Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
About the U.S. Economy
QUESTION #2:In which U.S. industry
can one set of employeesonly get a raise if other
employees take a pay cut,even when the business is
performing well?
8© Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
About the U.S. Economy
QUESTION #2:In which U.S. industry
can one set of employeesonly get a raise if other
employees take a pay cut,even when the business is
performing well?
ANSWER:Health Care
9© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Even Without the SGR, Physician
Pay Must Be “Budget-Neutral”
Paymentsfor
PCPs
Paymentsfor
Specialists
Paymentsfor
PCPs
Paymentsfor
Specialists
Physician Payment Budget Neutrality
10© Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
About the U.S. Economy
QUESTION #3:In which U.S. industries
are businessesonly able to sell
their products and servicesto consumers
through an intermediary who demands large discounts andincreases prices by 18-25%?
11© Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
About the U.S. Economy
QUESTION #3:In which U.S. industries
are businessesonly able to sell
their products and servicesto consumers
through an intermediary who demands large discounts andincreases prices by 18-25%?
ANSWER:Health Care
12© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Health Plans Spend As Much on
Administration/Profit as on Drugs
Admin: $110 billion
Drugs: $117 billion
Physicians
Hospitals
13© Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Lot of a Physician’s Pay Goes To
Costs of Dealing with Health Plans
Admin: $110 billion
Drugs: $117 billion
Admin: $30 billion
Physicians
Hospitals
14© Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
About the U.S. Economy
QUESTION #4:Who is to blame forthe way physicians
are paid andmicromanaged?
15© Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Short Quiz
About the U.S. Economy
QUESTION #4:Who is to blame forthe way physicians
are paid andmicromanaged?
ANSWER:Physicians
16© Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Blame Rests With Physicians
• Physicians haven’t defined solutions to control healthcare costs without rationing
• Physicians have allowed themselves to be seen as the causes of higher spending
• Physicians don’t collaborate to manage and deliver high-value population health care to purchasers and patients
• Physicians haven’t defined payment models that will support lower-cost, higher-quality care and maintain financial viability for physician practices
17© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Healthcare Spending Is the
Biggest Driver of Federal Deficits
Source:
CBO
Budget Outlook
August 2012
46% of
Spending
Growth is
Healthcare
18© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Three Paths to the Future:
Which Door Will Doctors Choose?
SGR
RepealFUTURE #2
FUTURE #3
FUTURE #1
19© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Door #1:
Pay for Performance (P4P)
PAY FOR PERFORMANCE
SGR
Repeal
20© Center for Healthcare Quality and Payment Reform www.CHQPR.org
P4P Assumes Providers Need
“Incentives” for Higher Value Care
Bonus
$
Feefor
Service
Penalty
Pay forPerformance
(“P4P”)Based on
Qualityand CostMeasures
21© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Hospital Value-Based Payment
• Hospital Readmission Penalties
• Hospital-Acquired Condition Penalties
• Hospital Value-Based Purchasing
22© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Hospital Readmission Penalties
Revenuefrom
Admissions
Revenue from High
Readmit Rate
Current Payment& High Readmit Rate$
Paymentsfor All
AdmissionsWill Be Cut
ReduceReadmissions
OR
23© Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Hope: Hospitals Will Reduce
Readmissions to Avoid Penalties
Revenuefrom
Admissions
Revenue from High
Readmit Rate
Revenuefrom
Admissionsw/ no
Change inPayment Rate
Current Payment& High Readmit Rate$
Lower Readmits& No Payment Cut
Revenue from Average
Readmit Rate
24© Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Myth: Hospitals Control All of
the Reasons for Readmissions
Revenuefrom
Admissions
Revenue from High
Readmit Rate
Revenuefrom
Admissionsw/ no
Change inPayment Rate
Current Payment& High Readmit Rate$
Lower Readmits& No Payment Cut
Revenue from Average
Readmit Rate
•Poor Access to Primary Care
•Low Quality of Post-Acute Care
•Patients w/o Capacity for Self-Care orInadequate Home Support
25© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Hospitals May Be Penalized for
Having Patients With Higher Needs
JAMA Intern Med. Published online September 14, 2015. doi:10.1001/jamainternmed.2015.4660
26© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Under Current Pmt System, Fewer
Readmissions = Lower Margins
Revenuefrom
Admissions
Revenue from High
Readmit Rate
Revenuefrom
Admissionsw/ no
Change inPayment Rate
Current Payment& High Readmit Rate$
Lower Readmits& No Payment Cut
HospitalCosts
(Don’tDecrease
inProportion
toRevenues)
LossesRevenue from
AverageReadmit Rate
HospitalCosts
Margin
27© Center for Healthcare Quality and Payment Reform www.CHQPR.org
So Hospitals Are Hurt Financially
One Way or the Other
ReducedRevenue
fromAdmissions
Due toReadmission
Penalties
Revenue from High
Readmit Rate
Revenuefrom
Admissionsw/ no
Change inPayment Rate
Current Payment& High Readmit Rate$
Lower Readmits& No Payment Cut
HospitalCosts
(Don’tDecrease
inProportion
toRevenues)
LossesRevenue from
AverageReadmit Rate
HospitalCosts
Losses
28© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Pay for Performance Started as
Small Quality Bonuses for Docs
FFS
P4P+
$
QUALITYMEASURES
• Mammograms• Colon Cancer Screening
• HbA1c Control• LDL
29© Center for Healthcare Quality and Payment Reform www.CHQPR.org
P4P Hasn’t Worked Well Because
It Doesn’t Fix FFS Problems
FFS
P4P+
LOSSES/UNPAIDSVCS
$
QUALITYMEASURES
• Mammograms• Colon Cancer Screening
• HbA1c Control• LDL
• A small bonus may not be enough to pay for the added costs of improving quality
• A small bonus may not be enough to offset loss of fee-for-service revenuefrom healthier patients or lower utilization
• A small bonus may not be enough to offset the costs of collecting and reporting the quality data
30© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Over-Emphasis on Narrow Quality
Measures Can Harm Patients
Hypoglycemia
1 Yr Mortality: 19.9%
30 Day Readmits: 16.3%
Hyperglycemia
1 Yr Mortality: 17.1%
30 Day Readmits: 15.3%
Source: National Trends in US Hospital Admissions for Hyperglycemia and HypoglycemiaAmong Medicare Beneficiaries, 1999 to 2011 JAMA Internal Medicine May 17, 2014
31© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Solution? Add More Measures
FFS
P4P+
$
QUALITYMEASURES
• Mammograms• Colon Cancer Screening
• HbA1c Control• LDL
FFS
P4P+
QUALITYMEASURES
• Mammograms• Colon Cancer Screening
• Flu Vaccine• Tobacco Counseling
• Hypertension Control
• HbA1c Control• LDL• Eye Exams• Aspirin Use
LOSSES/UNPAIDSVCS
LOSSES/UNPAIDSVCS
32© Center for Healthcare Quality and Payment Reform www.CHQPR.org
When That Didn’t Work, Bonuses
Were Converted Into Penalties
FFS
P4P+
$
QUALITYMEASURES
• Mammograms• Colon Cancer Screening
• HbA1c Control• LDL
QUALITYMEASURES
• Mammograms• Colon Cancer Screening
• Flu Vaccine• BMI Screens• Tobacco Counseling
• Fall Risk Assessment
• Hypertension Control
• HbA1c Control• LDL• Eye Exams• Aspirin Use
FFS
P4P+
FFS
P4P-
QUALITYMEASURES
• Mammograms• Colon Cancer Screening
• Flu Vaccine• Tobacco Counseling
• Hypertension Control
• HbA1c Control• LDL• Eye Exams• Aspirin Use
LOSSES/UNPAIDSVCS
LOSSES/UNPAIDSVCS
LOSSES/UNPAIDSVCS
33© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Medicare P4P Will First Hit
Small Practices (<10) Next Year
FFS
$
-4.5%
+x%
FFS
-6%
+x%
FFS
-9%
+x%
FFS
-10%
+x%
2015 2016 2017 2018
2015 2016 2017 2018
100+Docs
100+Docs
10-99Docs
100+Docs
10-99Docs
1-9Docs
100+Docs
10-99Docs
1-9Docs
Chart Not Drawn to Scale
2017Value-Based Modifier: 4% Penalties or Bonuses
Meaningful Use: 3% Penalties
Physician Quality Reporting (PQRS): 2% Penalties
TOTAL Potential Penalties: 9% Penalty
2018Value-Based Modifier: 4+% Penalties or Bonuses
Meaningful Use: 4% Penalties
Physician Quality Reporting (PQRS): 2% Penalties
TOTAL Potential Penalties: 10+% Penalty
Small
Practices
Start 2017
NPs,PAs
34© Center for Healthcare Quality and Payment Reform www.CHQPR.org
The End of Collaboration?
• In the CMS Value-Based Payment Modifier, bonuses are only
paid to physicians who have above average quality if penalties
are assessed on other physicians with below average quality
• To maintain budget neutrality, the size of bonuses depends on
the size of penalties
• Under this system, why would high-performing physicians
want to help under-performing physicians to improve?
35© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Merit-Based Incentive Payment
System (MIPS) is P4P on Steroids
FFS
$
-4.5%
+x%
FFS
-6%
+x%
FFS
-9%
+x%
FFS
-10%
+x%
FFS
-4%
+4x%
FFS
-5%
+5x%
FFS
-9%
+9x%
FFS
-9%
+9x%
FFS
-9%
+9x%
FFS
-7%
+7x%
FFS
-9%
+9x%
FFS
-9%
+9x%
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
+10% +10% +10% +10% +10% +10%
TODAY• Meaningful Use (MU)
• Quality Reporting (PQRS)
• Value Modifier (VM)
MIPS• “Advancing Care Information” (EHR Use)
• Quality Performance Program
• Resource Use
• Clinical Practice Improvement
36© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physicians Will Be Increasingly
Penalized for High Resource Use
Quality
Resource Use
“Clinical Practice Improvement
Activities”
“Advancing Care
Information”
(EHR Use)
50%
10%
25%
15%
Quality
Resource Use
“Clinical Practice Improvement
Activities”
“Advancing Care
Information”
(EHR Use)
30%
30%
25%
15%
2020 2021+
37© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Resource Use
Performance Measures• Average of all applicable resource use measures
– Total Per Capita Costs (total spending per patient per year)• Dropped condition-specific groups currently used in Value Modifier
– Medicare Spending Per Beneficiary (spending in hospital + 30 days)
– Episode measures, e.g.,• Spending during and after admission for exacerbation of heart failure
• Spending during surgery and rehabilitation for knee replacement
• Spending during treatment and rehabilitation for stroke
• Measures are calculated from claims data, attributed to physicians based on measure-specific attribution formulas, and used for MIPS if there are a minimum number of cases– Total Per Capita Costs attributed to PCP with most office visits
– Medicare Spending Per Beneficiary (MSPB) attributed to hospital physician with most physician billings during hospital stay
– Episodes attributed based on physician who billed for trigger event
38© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Door #1: Accountability Without
Resources or Flexibility
PAY FOR PERFORMANCE
(MIPS)
• Accountability for:• Quality Measures• Spending on Patients• “Meaningful Use”• “Practice Improvement”
• No Change in the Services Physicians are Paid For or the Adequacy of Payment
SGR
Repeal
39© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Door #2:
Alternative Payment Models
ALTERNATIVE PAYMENT MODELS
(APMs)
PAY FOR PERFORMANCE
(MIPS)
SGR
Repeal
40© Center for Healthcare Quality and Payment Reform www.CHQPR.org
MACRA Encourages
Use of APMs Instead of MIPS
• Physicians who participate in approved Alternative Payment Models (APMs) at more than a minimum level:– are exempt from MIPS
– receive a 5% lump sum bonus
– receive a higher annual update (increase) in their FFS revenues
– receive the benefits of participating in the APM
41© Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Need for
“Alternative Payment Models”
PROBLEM
Barriers infee-for-service
prevent physicians from delivering
higher-quality careat lower total cost
42© Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Need for
“Alternative Payment Models”
PROBLEM
Barriers infee-for-service
prevent physicians from delivering
higher-quality careat lower total cost
BARRIER #1No payment or inadequate paymentfor many high-value services, e.g.,• Responding to patient phone calls
that can avoid office or ER visits• Calls among physicians to determine
a diagnosis or coordinate care delivery• Hiring nurses to help chronic disease
patient avoid exacerbations• Providing palliative care, not just hospice
43© Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Need for
“Alternative Payment Models”
PROBLEM
Barriers infee-for-service
prevent physicians from delivering
higher-quality careat lower total cost
BARRIER #1No payment or inadequate paymentfor many high-value services, e.g.,• Responding to patient phone calls
that can avoid office or ER visits• Calls among physicians to determine
a diagnosis or coordinate care delivery• Hiring nurses to help chronic disease
patient avoid exacerbations• Providing palliative care, not just hospice
BARRIER #2Loss of revenue when patients stayhealthy and don’t need procedures
44© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Alternative Payment Models
Being Implemented by MedicareTYPE OF PROVIDER CMS PROGRAM PAYMENT STRUCTURE
Health Systems,Multi-Specialty Groups,
PHOs, and IPAs
Accountable Care Organizations
(MSSP & Pioneer)
FFS+
Shared Savings on Attributed Total Spending
Primary Care ComprehensivePrimary Care Initiative
FFS +
PMPM $ for Attributed Patients+
Shared Savings onAttributed Total Spending
(for State or Region)
Specialty Care Oncology Care Model
FFS+
PMPM $ for Attributed Patients+
Shared Savings on Attributed Total Spending
(for 6-month window)
Hospitals and Post-Acute Care
Comprehensive Carefor Joint Replacement
FFS+
Bonuses/Penalties on Attributed Total Spending
45© Center for Healthcare Quality and Payment Reform www.CHQPR.org
CMS “Alternative Payment Models”
Don’t Change Current PaymentsTYPE OF PROVIDER CMS PROGRAM PAYMENT STRUCTURE
Health Systems,Multi-Specialty Groups,
PHOs, and IPAs
Accountable Care Organizations
(MSSP & Pioneer)
FFS+
Shared Savings on Attributed Total Spending
Primary Care ComprehensivePrimary Care Initiative
FFS+
PMPM $ for Attributed Patients+
Shared Savings onAttributed Total Spending
(for State or Region)
Specialty Care Oncology Care Model
FFS+
PMPM $ for Attributed Patients+
Shared Savings on Attributed Total Spending
(for 6-month window)
Hospitals and Post-Acute Care
Comprehensive Carefor Joint Replacement
FFS+
Hospital Bonuses/Penalties for Attributed Total Spending
46© Center for Healthcare Quality and Payment Reform www.CHQPR.org
…Most Only Provide More $
After Other Spending is ReducedTYPE OF PROVIDER CMS PROGRAM PAYMENT STRUCTURE
Health Systems,Multi-Specialty Groups,
PHOs, and IPAs
Accountable Care Organizations
(MSSP & Pioneer)
FFS+
Shared Savings on Attributed Total Spending
Primary Care ComprehensivePrimary Care Initiative
FFS+
PMPM $ for Attributed Patients+
Shared Savings onAttributed Total Spending
(for State or Region)
Specialty Care Oncology Care Model
FFS+
PMPM $ for Attributed Patients+
Shared Savings on Attributed Total Spending
(for 6-month window)
Hospitals and Post-Acute Care
Comprehensive Carefor Joint Replacement
FFS+
Hospital Bonuses/Penalties forAttributed Total Spending
47© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Problems With “Shared Savings”
• Physicians receive no upfront resources to improve care management for patients
• Conservative physicians receive little or no additionalrevenue and may be forced out of business
• Physicians who have been practicing inefficiently or inappropriately can receive bonuses to practice more appropriately
• Physicians could be paid more for denying needed care
• Physicians are placed at risk for costs they cannot control
• Shared savings bonuses are temporary and “re-benchmarking” leaves physicians with inadequate payment to deliver necessary services
48© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Medicare ACOs Aren’t Succeeding
Due to Flaws in Shared Savings2013 Results for Medicare Shared Savings ACOs• 46% of ACOs (102/220) increased Medicare spending
• Only 24% (52/220) received shared savings payments
• After making shared savings payments, Medicare spent more than it saved
• Net loss to Medicare: $78 million
2014 Results for Medicare Shared Savings ACOs• 45% of ACOs (152/333) increased Medicare spending
• Only 26% (86/333) received shared savings payments
• After making shared savings payments, Medicare spent more than it saved
• Net loss to Medicare: $50 million
2015 Results for Medicare Shared Savings ACOs
• 48% of ACOs (189/392) increased Medicare spending
• Only 30% (119/392) received shared savings payments
• After making shared savings payments, Medicare spent more than it saved
• Net loss to Medicare: $216 million
49© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Private Shared Savings ACOs
Are Also Floundering
50© Center for Healthcare Quality and Payment Reform www.CHQPR.org
MEDICARE
Primary
Care
ACO
Neurosurgery OB/GYN
Why?? No Change in the Way
Physicians or Hospitals Are Paid
Fee-for-ServicePayment
Cardiology
Heart
Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Radiology,
Endocrinology
51© Center for Healthcare Quality and Payment Reform www.CHQPR.org
MEDICARE
Primary
Care
ACO
Neurosurgery OB/GYN
Most ACOs Spend a Lot on IT
and Nurse Care Managers
Fee-for-ServicePayment
Expensive IT Systems
Cardiology
Nurse Care Managers
Heart
Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Radiology,
Endocrinology
52© Center for Healthcare Quality and Payment Reform www.CHQPR.org
MEDICARE
Primary
Care
ACO
Neurosurgery OB/GYN
Possible Future “Shared Savings”
Doesn’t Support Better Care Today
Fee-for-ServicePayment
Expensive IT Systems
Cardiology
Nurse Care Managers
Shared SavingsPayment???
Share ofShared SavingsPayment??
Heart
Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Radiology,
Endocrinology
53© Center for Healthcare Quality and Payment Reform www.CHQPR.org
MEDICARE
Shared SavingsPayment???
Primary
Care
ACO
Neurosurgery OB/GYN
Most ACOs Today Aren’t Truly
Redesigning Care
Fee-for-ServicePayment
Expensive IT Systems
Cardiology
Nurse Care Managers
Share ofShared SavingsPayment??
Heart
Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Radiology,
Endocrinology
54© Center for Healthcare Quality and Payment Reform www.CHQPR.org
MEDICARE
Shared SavingsPayment???
Primary
Care
ACO~HEALTH PLAN
Neurosurgery OB/GYN
ACOs Try to “Manage Care” Like
Health Plans Do & It Works As Badly
Fee-for-ServicePayment
Expensive IT Systems
Cardiology
Nurse Care Managers
Heart
Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Radiology,
Endocrinology
55© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Are Bundled Payments
Better Than ACOs?
56© Center for Healthcare Quality and Payment Reform www.CHQPR.org
CMS “Comprehensive
Care for Joint Replacement”
PATIENTHospital Costs
for SurgeryPost-Acute Care(IRF, SNF, HH)Readmits
EPISODE PAYMENT FOR SURGERIES
57© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Principal Goal of CMS Proposal
Is Reducing Post-Acute Care Cost
PATIENTHospital Costs
for SurgeryPost-Acute Care(IRF, SNF, HH)Readmits
Hospital Costsfor Surgery
Post-Acute CareReadmits SAVINGS
EPISODE PAYMENT FOR SURGERIES
58© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Proposed Structure Encourages
Lower Spending, Not Better Care
PATIENTHospital Costs
for SurgeryPost-Acute Care(IRF, SNF, HH)Readmits
Hospital Costsfor Surgery
Post-Acute CareReadmits SAVINGS
EPISODE PAYMENT FOR SURGERIES
• No risk adjustment – target spending amount is the same for high-risk, poor functional status patients as low-risk patients
• No flexibility to deliver different types of post-acute care orto be paid differently – no change in current payment systems
59© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Hospitals at Risk for Total Cost
With Everyone Still Paid the Same
PATIENTHospital Costs
for SurgeryPost-Acute Care(IRF, SNF, HH)Readmits
CMS
Hospital
Providersand
Post-AcuteCare
Hospital Costsfor Surgery
Post-Acute CareReadmits SAVINGS
EPISODE PAYMENT FOR SURGERIES
• No risk adjustment – target spending amount is the same for high-risk, poor functional status patients as low-risk patients
• No flexibility to deliver different types of post-acute care orto be paid differently – no change in current payment systems
• Hospital is at risk for higher post-acute care spending
60© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Over Time, CMS Keeps More of
the Savings, If There Are Any
PATIENTHospital Costs
for SurgeryPost-Acute Care(IRF, SNF, HH)Readmits
Hospital Costsfor Surgery
Post-Acute CareReadmits SAVINGS
EPISODE PAYMENT FOR SURGERIES
CMS
Hospital
• No risk adjustment – target spending amount is the same for high-risk, poor functional status patients as low-risk patients
• No flexibility to deliver different types of post-acute care orto be paid differently – no change in current payment systems
• Hospital is at risk for higher post-acute care spending
• Target spending is reduced every year to match lower FFS spending, even if “savings” were being used to pay forservices not supported by FFS
Providersand
Post-AcuteCare
61© Center for Healthcare Quality and Payment Reform www.CHQPR.org
If There Are Fewer Surgeries,
CMS Keeps ALL of the Savings
PATIENTHospital Costs
for SurgeryPost-Acute Care(IRF, SNF, HH)Readmits
Hospital Costsfor Surgery
Post-Acute CareReadmits SAVINGS
EPISODE PAYMENT FOR SURGERIES
CMS
Hospital
Non-Surg.Treatment SAVINGS
Providersand
Post-AcuteCare
62© Center for Healthcare Quality and Payment Reform www.CHQPR.org
CMS Proposing Same Approach for
AMI, CABG, and Hip Fracture
63© Center for Healthcare Quality and Payment Reform www.CHQPR.org
How Will the Future Unfold?
CMSAPMs
CurrentFFS
System
64© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Starting with Hip & Knee Surgery,
CABG, and AMI…
CurrentFFS
System
HospitalAt-Risk for
Total Cost of Joint Care
65© Center for Healthcare Quality and Payment Reform www.CHQPR.org
…CMS Could Put Hospitals “In
Charge” of All Inpatient Procedures
HospitalAt-Risk for
Total Cost of Joint Care
HospitalSuper-DRG
For AllHospital
Admissions
CurrentFFS
System
66© Center for Healthcare Quality and Payment Reform www.CHQPR.org
CMS Puts Physicians at Risk for
Total Cost of Outpatient Services
PhysicianP4P Based
on TotalEpisode
Spending
PhysicianAt-Riskfor Total Cost of
Outpatient Services
(SGR Redux)
HospitalAt-Risk for
Total Cost of Joint Care
HospitalSuper-DRG
For AllHospital
Admissions
CurrentFFS
System
67© Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Likely Result: Everyone Will
Need to Work for a Health System
PhysicianP4P Based
on TotalEpisode
Spending
HospitalAt-Risk for
Total Cost of Joint Care
HospitalSuper-DRG
For AllHospital
Admissions
CurrentFFS
SystemPhysicianAt-Riskfor Total Cost of
Outpatient Services
(SGR Redux)
Physicians,Small
Hospitals,and OtherProviders Have NoChoiceBut to
Be Part ofLargeHealth
Systems
68© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Big Health Systems Are Much
Easier for CMS to Control
PhysicianP4P Based
on TotalEpisode
Spending
SimpleSystem
ForMedicare
toRegulate
HospitalAt-Risk for
Total Cost of Joint Care
HospitalSuper-DRG
For AllHospital
Admissions
CurrentFFS
SystemPhysicianAt-Riskfor Total Cost of
Outpatient Services
(SGR Redux)
Physicians,Small
Hospitals,and OtherProviders Have NoChoiceBut to
Be Part ofLargeHealth
Systems
69© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Result: Lack of Choice and
High Prices For Everyone Else
PhysicianP4P Based
on TotalEpisode
Spending
Physicians,Small
Hospitals,and OtherProviders Have NoChoiceBut to
Be Part ofLargeHealth
Systems
SimpleSystem
ForMedicare
toRegulate
Few/NoChoices
forPatients orPhysicians,
HigherPrivate
Spending
HospitalAt-Risk for
Total Cost of Joint Care
HospitalSuper-DRG
For AllHospital
Admissions
CurrentFFS
SystemPhysicianAt-Riskfor Total Cost of
Outpatient Services
(SGR Redux)
70© Center for Healthcare Quality and Payment Reform www.CHQPR.org
What’s Behind Door #3?
ALTERNATIVE PAYMENT MODELS
(APMs)
PAY FOR PERFORMANCE
(MIPS)
DOOR #3
SGR
Repeal
71© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Door #1 and Door #2 are
Payer-Designed Payment Systems
HOW PAYMENT REFORMS ARE DESIGNED TODAY
Medicare and
Health Plans
Define
Payment Systems
Physicians Have
To Change Care
to Align With
Payment Systems
Patients and
Physicians
May Not
Come Out Ahead
72© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physicians Need to Design
Payments to Support Good Care
Medicare and
Health Plans
Define
Payment Systems
Physicians Have
To Change Care
to Align With
Payment Systems
Patients and
Physicians
May Not
Come Out Ahead
Physicians
Redesign Care
and Identify
Payment Barriers
Payers Change
Payment to
Support
Redesigned Care
Patients Get
Better Care and
Physicians Stay
Financially Viable
THE RIGHT WAY TO DESIGN PAYMENT REFORMS
HOW PAYMENT REFORMS ARE DESIGNED TODAY
73© Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Third Door Under MACRA
ALTERNATIVE PAYMENT MODELS
(APMs)
PAY FOR PERFORMANCE
(MIPS)
PHYSICIAN-FOCUSEDPAYMENT MODELS
SGR
Repeal
74© Center for Healthcare Quality and Payment Reform www.CHQPR.org
MACRA Requires Development
of Physician-Focused APMs
• Physician-Focused Payment Model Technical Advisory Committee (PTAC) created by Congress to solicit and review proposals from physician groups, medical specialty societies, and others for “physician-focused payment models” and to make recommendations to CMS as to which models to implement
• Under MACRA, CMS must respond to PTAC recommendations, but is not required to implement them. (However, there will considerable pressure on CMS, from Congress and others, to implement the recommendations.)
What HappensWhen Physicians
Redesign Patient Careand Receive
Adequate Payments to Support It?
76© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Better Care at Lower Cost for
Total Joint ReplacementPHYSICIAN LEADER: Stephen J. Zabinski, MD
Director, Division of Orthopaedic Surgery, Shore Medical Ctr
77© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Better Care at Lower Cost for
Total Joint Replacement
OPPORTUNITIESTO IMPROVE CARE AND LOWER COSTS
• Reduce surgical complications by reducing patient risk factors prior to surgery
• Obtain lower prices for implants from vendors
• Match implants to patient needs
• Return patients home as quickly as possible
• Use lower cost settings for surgery and rehabilitation
PHYSICIAN LEADER: Stephen J. Zabinski, MDDirector, Division of Orthopaedic Surgery, Shore Medical Ctr
78© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Better Care at Lower Cost for
Total Joint Replacement
OPPORTUNITIESTO IMPROVE CARE AND LOWER COSTS
BARRIERS IN THE CURRENT
PAYMENT SYSTEM
• Reduce surgical complications by reducing patient risk factors prior to surgery
• Obtain lower prices for implants from vendors
• Match implants to patient needs
• Return patients home as quickly as possible
• Use lower cost settings for surgery and rehabilitation
• No payment for pre-operative patient risk reduction programs
• No payment for care coordination throughout surgical episode
• Separate payments to hospital and physician
• No data on costs of facilities
PHYSICIAN LEADER: Stephen J. Zabinski, MDDirector, Division of Orthopaedic Surgery, Shore Medical Ctr
79© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Better Care at Lower Cost for
Total Joint Replacement
OPPORTUNITIESTO IMPROVE CARE AND LOWER COSTS
BARRIERS IN THE CURRENT
PAYMENT SYSTEM
RESULTS WITHADEQUATE PAYMENTFOR BETTER CARE
• Reduce surgical complications by reducing patient risk factors prior to surgery
• Obtain lower prices for implants from vendors
• Match implants to patient needs
• Return patients home as quickly as possible
• Use lower cost settings for surgery and rehabilitation
• No payment for pre-operative patient risk reduction programs
• No payment for care coordination throughout surgical episode
• Separate payments to hospital and physician
• No data on costs of facilities
• Average length of stayTKR: 3.3 1.8 daysTHR: 2.9 1.6 days
• Average device cost$6,301 $4,242
• Discharges to home34% 78%
• Readmission rate3.2% 2.7%
• Total Episode SpendingTKR: $25,365 $19,597THR: $26,580 $20,636
PHYSICIAN LEADER: Stephen J. Zabinski, MDDirector, Division of Orthopaedic Surgery, Shore Medical Ctr
80© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Better Care at Lower Cost for
Crohn’s DiseasePHYSICIAN LEADER: Lawrence R. Kosinski, MD
Managing Partner, Illinois Gastroenterology Group
81© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Better Care at Lower Cost for
Crohn’s Disease
OPPORTUNITIESTO IMPROVE CARE AND LOWER COSTS
• Health plan spends $11,000/year/patienton patients with Crohn’s
• >50% of expenses arefor hospital care, mostdue to complications
• <33% of patients seen by physician in 30 days prior to hospitalization
• 10% of expenses for biologics, many administered in hospitals
• 3.5% of spending goes to gastroenterologists
PHYSICIAN LEADER: Lawrence R. Kosinski, MDManaging Partner, Illinois Gastroenterology Group
82© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Better Care at Lower Cost for
Crohn’s Disease
OPPORTUNITIESTO IMPROVE CARE AND LOWER COSTS
BARRIERS IN THE CURRENT
PAYMENT SYSTEM
• Health plan spends $11,000/year/patienton patients with Crohn’s
• >50% of expenses arefor hospital care, mostdue to complications
• <33% of patients seen by physician in 30 days prior to hospitalization
• 10% of expenses for biologics, many administered in hospitals
• 3.5% of spending goes to gastroenterologists
• No payment to support“medical home” services in gastroenterology practice:
No payment for nurse care manager
No payment for clinical decision support tools to ensure evidence-based care
No payment for proactive telephone contact with patients
PHYSICIAN LEADER: Lawrence R. Kosinski, MDManaging Partner, Illinois Gastroenterology Group
83© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Better Care at Lower Cost for
Crohn’s Disease
OPPORTUNITIESTO IMPROVE CARE AND LOWER COSTS
BARRIERS IN THE CURRENT
PAYMENT SYSTEM
RESULTS WITHADEQUATE PAYMENTFOR BETTER CARE
• Health plan spends $11,000/year/patienton patients with Crohn’s
• >50% of expenses arefor hospital care, mostdue to complications
• <33% of patients seen by physician in 30 days prior to hospitalization
• 10% of expenses for biologics, many administered in hospitals
• 3.5% of spending goes to gastroenterologists
• No payment to support“medical home” services in gastroenterology practice:
No payment for nurse care manager
No payment for clinical decision support tools to ensure evidence-based care
No payment for proactive telephone contact with patients
• Hospitalization rate cut by more than 50%
• Total spending reduced by 10% even with higher payments to the physician practice
• Improved patient satisfaction due to fewer complications and lower out-of-pocket costs
PHYSICIAN LEADER: Lawrence R. Kosinski, MDManaging Partner, Illinois Gastroenterology Group
www.SonarMD.com
84© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Better Care at Lower Cost for
CancerPHYSICIAN LEADER: Barbara McAneny, MD
CEO, New Mexico Cancer Center
85© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Better Care at Lower Cost for
Cancer
OPPORTUNITIESTO IMPROVE CARE AND LOWER COSTS
• 40-50% of patients receiving chemotherapyare hospitalized for complications of treatment
PHYSICIAN LEADER: Barbara McAneny, MDCEO, New Mexico Cancer Center
86© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Better Care at Lower Cost for
Cancer
OPPORTUNITIESTO IMPROVE CARE AND LOWER COSTS
BARRIERS IN THE CURRENT
PAYMENT SYSTEM
• 40-50% of patients receiving chemotherapyare hospitalized for complications of treatment
• No payment for triage services to enable rapid response to patient complications
• No payment for patient and family education about complications and how to respond
• Inadequate payment to reserve capacity for IV hydration of patientsexperiencing problems
PHYSICIAN LEADER: Barbara McAneny, MDCEO, New Mexico Cancer Center
87© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Better Care at Lower Cost for
Cancer
OPPORTUNITIESTO IMPROVE CARE AND LOWER COSTS
BARRIERS IN THE CURRENT
PAYMENT SYSTEM
RESULTS WITHADEQUATE PAYMENTFOR BETTER CARE
• 40-50% of patients receiving chemotherapyare hospitalized for complications of treatment
• No payment for triage services to enable rapid response to patient complications
• No payment for patient and family education about complications and how to respond
• Inadequate payment to reserve capacity for IV hydration of patientsexperiencing problems
• 36% fewer ED visits
• 43% fewer admissions
• 22% reduction in total cost of care ($4,784 over six months)
PHYSICIAN LEADER: Barbara McAneny, MDCEO, New Mexico Cancer Center
88© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Better Care at Lower Cost for
PregnancyPHYSICIAN LEADER: Steve Calvin, MD
Medical Director, Minnesota Birth Center
89© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Better Care at Lower Cost for
Pregnancy
OPPORTUNITIESTO IMPROVE CARE AND LOWER COSTS
• 33% C-section rate, 2x recommended rate
• 25% of mothers want to deliver in a birth center,<2% actually do
• Significantly lower costs for delivery in birth centers than hospitals
PHYSICIAN LEADER: Steve Calvin, MDMedical Director, Minnesota Birth Center
90© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Better Care at Lower Cost for
Pregnancy
OPPORTUNITIESTO IMPROVE CARE AND LOWER COSTS
BARRIERS IN THE CURRENT
PAYMENT SYSTEM
• 33% C-section rate, 2x recommended rate
• 25% of mothers want to deliver in a birth center,<2% actually do
• Significantly lower costs for delivery in birth centers than hospitals
• Inadequate payment or no payment at all for deliveries in birth centers
• Higher payments to hospitals for C-sections, higher $/hour to physicians for C-sections
• Impossible to determine or compare total cost of delivery with separate payments for facility, OB/Gyn, pediatrician, and others and separate payments for mother and baby
PHYSICIAN LEADER: Steve Calvin, MDMedical Director, Minnesota Birth Center
91© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Better Care at Lower Cost for
Pregnancy
OPPORTUNITIESTO IMPROVE CARE AND LOWER COSTS
BARRIERS IN THE CURRENT
PAYMENT SYSTEM
RESULTS WITHADEQUATE PAYMENTFOR BETTER CARE
• 33% C-section rate, 2x recommended rate
• 25% of mothers want to deliver in a birth center,<2% actually do
• Significantly lower costs for delivery in birth centers than hospitals
• Inadequate payment or no payment at all for deliveries in birth centers
• Higher payments to hospitals for C-sections, higher $/hour to physicians for C-sections
• Impossible to determine or compare total cost of delivery with separate payments for facility, OB/Gyn, pediatrician, and others and separate payments for mother and baby
• 68% of deliveries in birth center
• 9% C-section rate
• 28% reduction in cost of maternity care
PHYSICIAN LEADER: Steve Calvin, MDMedical Director, Minnesota Birth Center
92© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Better Care at Lower Cost for
Emergency Room PatientsPHYSICIAN LEADER: Jennifer L. Wiler, MD
Assoc. Prof. of Emergency Medicine, University of Colorado
93© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Better Care at Lower Cost for
Emergency Room Patients
OPPORTUNITIESTO IMPROVE CARE AND LOWER COSTS
• Many individuals have 3+ Emergency Department visits per year
• Many frequent ED users have no insurance or inability to afford copays,behavioral health problems, and no PCP
PHYSICIAN LEADER: Jennifer L. Wiler, MDAssoc. Prof. of Emergency Medicine, University of Colorado
94© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Better Care at Lower Cost for
Emergency Room Patients
OPPORTUNITIESTO IMPROVE CARE AND LOWER COSTS
BARRIERS IN THE CURRENT
PAYMENT SYSTEM
• Many individuals have 3+ Emergency Department visits per year
• Many frequent ED users have no insurance or inability to afford copays,behavioral health problems, and no PCP
• No payment for patient education and care coordination in the ED
• No payment for home visits to help patients after discharge
• No funding to address non-medical needs such as lack of transportation
PHYSICIAN LEADER: Jennifer L. Wiler, MDAssoc. Prof. of Emergency Medicine, University of Colorado
95© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Better Care at Lower Cost for
Emergency Room Patients
OPPORTUNITIESTO IMPROVE CARE AND LOWER COSTS
BARRIERS IN THE CURRENT
PAYMENT SYSTEM
RESULTS WITHADEQUATE PAYMENTFOR BETTER CARE
• Many individuals have 3+ Emergency Department visits per year
• Many frequent ED users have no insurance or inability to afford copays,behavioral health problems, and no PCP
• No payment for patient education and care coordination in the ED
• No payment for home visits to help patients after discharge
• No funding to address non-medical needs such as lack of transportation
• 41% fewer ED visits
• 49% fewer admissions
• 80% now have a primary care provider
• 50% lower total spending including cost of program
PHYSICIAN LEADER: Jennifer L. Wiler, MDAssoc. Prof. of Emergency Medicine, University of Colorado
How Do You Define
a Good Alternative Payment Model
That Supports High Quality
Physician-Directed Patient Care?
97© Center for Healthcare Quality and Payment Reform www.CHQPR.org
FFSPayments to
PhysicianPractice
OPPORTUNITIES TO REDUCE SPENDING
WITHOUT HARMING PATIENTS
• Reduce Avoidable Hospital Admissions• Reduce Unnecessary Tests and Treatments• Use Lower-Cost Tests and Treatments• Deliver Services More Efficiently• Use Lower-Cost Sites of Service• Reduce Preventable Complications• Prevent Serious Conditions From Occurring
$
PhysicianPracticeRevenue
Avoidable Spending
Payments toOther
Providersfor
RelatedServices
Step 1: Identify Opportunities to
Reduce Avoidable SpendingFee-for-ServicePayment (FFS)
TotalSpendingRelevant
to thePhysician’s
Services
98© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Unpaid Services
FFSPayments to
PhysicianPractice
BARRIERS IN CURRENT FFS SYSTEM• No Payment for Many High-Value Services
• Insufficient Revenue to Cover Costs WhenUsing Fewer or Lower-Cost Services
$
PhysicianPracticeRevenue
Avoidable Spending
Payments toOther
Providersfor
RelatedServices
Step 2: Identify Barriers in Current
Payments That Need to Be FixedFee-for-ServicePayment (FFS)
TotalSpendingRelevant
to thePhysician’s
Services
OPPORTUNITIES TO REDUCE SPENDING
WITHOUT HARMING PATIENTS
• Reduce Avoidable Hospital Admissions• Reduce Unnecessary Tests and Treatments• Use Lower-Cost Tests and Treatments• Deliver Services More Efficiently• Use Lower-Cost Sites of Service• Reduce Preventable Complications• Prevent Serious Conditions From Occurring
99© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Fee-for-ServicePayment (FFS)
Physician-FocusedAlternative
Payment Model
Flexible,Adequate
Payment forPhysician’s
Services
$
PhysicianPracticeRevenue
Step 3: Design an APM That
Removes the Payment Barriers
Unpaid Services
FFSPayments to
PhysicianPractice
Avoidable Spending
Payments toOther
Providersfor
RelatedServices
TotalSpendingRelevant
to thePhysician’s
Services
100© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Fee-for-ServicePayment (FFS)
Physician-FocusedAlternative
Payment Model
Flexible,Adequate
Payment forPhysician’s
Services
$
PhysicianPracticeRevenue
Step 3: Design an APM That
Removes the Payment Barriers
Unpaid Services
FFSPayments to
PhysicianPractice
Avoidable Spending
Payments toOther
Providersfor
RelatedServices
TotalSpendingRelevant
to thePhysician’s
Services
• Paying more for time needed for adequate diagnosis and treatment planning, particularlyfor complex patients
• Paying for time spent on phone calls & emails withpatients & other physicians
• Paying for nurses to help patients with self-management
• Eliminating time spent on unnecessary documentationand battles with health plans
101© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Fee-for-ServicePayment (FFS)
Physician-FocusedAlternative
Payment Model
Savings
Flexible,Adequate
Payment forPhysician’s
Services
AvoidableSpending
Payments toOther
Providersfor
RelatedServices
Accountabilityfor
ControllingAvoidableSpending
$
PhysicianPracticeRevenue
Step 4: Include Provisions to
Assure Control of Cost & Quality
Unpaid Services
FFSPayments to
PhysicianPractice
Avoidable Spending
Payments toOther
Providersfor
RelatedServices
TotalSpendingRelevant
to thePhysician’s
Services
How Can
Well-Designed
Alternative Payment Models
Help Physicians Financially?
103© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Most of the Money in Healthcare
Doesn’t Go to Physicians
Physicians:16%
104© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Most of the $ for Diabetes Care is
For Complications, Not Doctors
Source:
“Economic
Costs of
Diabetes
in the U.S.
in 2012,”
Diabetes
Care
(Volume 36)
April 2013
HospitalAdmissions
(43%)
Physicians (9%)
105© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Could We Afford to Spend More
on Better Diabetes Management?
HospitalAdmits
PhysiciansBetter Pay for
Physicians
106© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Yes, If We Can Prevent
Expensive Complications
HospitalAdmits
PhysiciansBetter Pay for
Physicians
AvoidedHospitalAdmits
107© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Example: 20% More Care Mgt $ +
6% Fewer Admits = Lower Total $
HospitalAdmits
Physicians +20%
-6%-1%
108© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Fee-for-ServicePayment (FFS)
Physician-FocusedAlternative
Payment Model
Savings
Flexible,Adequate
Payment forPhysician’s
Services
AvoidableSpending
Payments toOther
Providersfor
RelatedServices
$
PhysicianPracticeRevenue
“Alternative Payment Models”
Can Be Win-Win-Wins
Unpaid Services
FFSPayments to
PhysicianPractice
Avoidable Spending
Payments toOther
Providersfor
RelatedServices
TotalSpendingRelevant
to thePhysician’s
Services
Win for Payer:
Lower Total Spending
Win for Patient:
Better Care Without
Unnecessary Services
Win for Physician: Adequate
Payment forHigh-Value Services
109© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Example: Reducing Avoidable
Surgeries for Knee Osteoarthritis
110© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Example: Reducing Avoidable
Surgeries for Knee OsteoarthritisCURRENT
$/Patient # Pts Total $
Primary Care
Evaluations $100 100 $10,000
Treatment ofKnee
Osteoarthritis• 100 patients with knee
pain visit PCP forevaluation
111© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Example: Reducing Avoidable
Surgeries for Knee OsteoarthritisCURRENT
$/Patient # Pts Total $
Primary Care
Evaluations $100 100 $10,000
Non-Surg.Tx
Management $200 20 $4,000
Phys. Therapy $500 20 $10,000
Subtotal $14,000
Treatment ofKnee
Osteoarthritis• 100 patients with knee
pain visit PCP forevaluation
• Physical therapy usedby 20% of patients
112© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Example: Reducing Avoidable
Surgeries for Knee OsteoarthritisCURRENT
$/Patient # Pts Total $
Primary Care
Evaluations $100 100 $10,000
Non-Surg.Tx
Management $200 20 $4,000
Phys. Therapy $500 20 $10,000
Subtotal $14,000
Surgeon $1,400 80 $112,000
Hospital Pmt
Surgeries $12,000 80 $960,000
Treatment ofKnee
Osteoarthritis• 100 patients with knee
pain visit PCP forevaluation
• Physical therapy usedby 20% of patients
• Surgery performedprocedure on 80% ofevaluated patients
113© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Example: Reducing Avoidable
Surgeries for Knee OsteoarthritisCURRENT
$/Patient # Pts Total $
Primary Care
Evaluations $100 100 $10,000
Non-Surg.Tx
Management $200 20 $4,000
Phys. Therapy $500 20 $10,000
Subtotal $14,000
Surgeon $1,400 80 $112,000
Hospital Pmt
Surgeries $12,000 80 $960,000
Total Pmt/Cost 100 $1,096,000
Treatment ofKnee
Osteoarthritis• 100 patients with knee
pain visit PCP forevaluation
• Physical therapy usedby 20% of patients
• Surgery performedprocedure on 80% ofevaluated patients
114© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Example: Reducing Avoidable
Surgeries for Knee OsteoarthritisCURRENT
$/Patient # Pts Total $
Primary Care
Evaluations $100 100 $10,000
Non-Surg.Tx
Management $200 20 $4,000
Phys. Therapy $500 20 $10,000
Subtotal $14,000
Surgeon $1,400 80 $112,000
Hospital Pmt
Surgeries $12,000 80 $960,000
Total Pmt/Cost 100 $1,096,000
Treatment ofKnee
Osteoarthritis• 100 patients with knee
pain visit PCP forevaluation
• Physical therapy usedby 20% of patients
• Surgery performedprocedure on 80% ofevaluated patients
• 25% of surgeriesavoidable with betteroutpatient management
115© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Under FFS, Low Payment for
Diagnosis & Treatment PlanningCURRENT
$/Patient # Pts Total $
Primary Care
Evaluations $100 100 $10,000
Non-Surg.Tx
Management $200 20 $4,000
Phys. Therapy $500 20 $10,000
Subtotal $14,000
Surgeon $1,400 80 $112,000
Hospital Pmt
Surgeries $12,000 80 $960,000
Total Pmt/Cost 100 $1,096,000
116© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Under FFS, Low Payment for
Non-Surgical OptionsCURRENT
$/Patient # Pts Total $
Primary Care
Evaluations $100 100 $10,000
Non-Surg.Tx
Management $200 20 $4,000
Phys. Therapy $500 20 $10,000
Subtotal $14,000
Surgeon $1,400 80 $112,000
Hospital Pmt
Surgeries $12,000 80 $960,000
Total Pmt/Cost 100 $1,096,000
117© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Under FFS, Fewer Surgeries =
Losses for Providers & HospitalsCURRENT FUTURE
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Primary Care
Evaluations $100 100 $10,000
Non-Surg.Tx
Management $200 20 $4,000
Phys. Therapy $500 20 $10,000
Subtotal $14,000
Surgeon $1,400 80 $112,000 $1,400 60 $84,000 -25%
Hospital Pmt
Surgeries $12,000 80 $960,000 $12,000 60 $720,000 -25%
Total Pmt/Cost 100 $1,096,000
118© Center for Healthcare Quality and Payment Reform www.CHQPR.org
A P4P/MIPS Bonus to the Surgeon
Doesn’t Offset Loss of RevenueCURRENT FUTURE
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Primary Care
Evaluations $100 100 $10,000
Non-Surg.Tx
Management $200 20 $4,000
Phys. Therapy $500 20 $10,000
Subtotal $14,000
Surgeon $1,400 80 $112,000 $1,456 60 $87,360 -22%
Hospital Pmt
Surgeries $12,000 80 $960,000
Total Pmt/Cost 100 $1,096,000
+4%
119© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Is There a Better Way?
CURRENT FUTURE
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Primary Care
Evaluations $100 100 $10,000 ?
Non-Surg.Tx
Management $200 20 $4,000 ?
Phys. Therapy $500 20 $10,000 ?
Subtotal $14,000
Surgeon $1,400 80 $112,000 ?
Hospital Pmt
Surgeries $12,000 80 $960,000 ?
Total Pmt/Cost 100 $1,096,000
120© Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Better Way: Pay PCPs for Good
Diagnosis & Treatment PlanningCURRENT FUTURE
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Primary Care
Evaluations $100 100 $10,000 $200
Non-Surg.Tx
Management $200 20 $4,000
Phys. Therapy $500 20 $10,000
Subtotal $14,000
Surgeon $1,400 80 $112,000
Hospital Pmt
Surgeries $12,000 80 $960,000
Total Pmt/Cost 100 $1,096,000
Better Payment for Condition Management• PCP paid adequately to help patient decide on treatment options
121© Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Better Way: Pay Adequately
for Non-Surgical ManagementCURRENT FUTURE
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Primary Care
Evaluations $100 100 $10,000 $200
Non-Surg.Tx
Management $200 20 $4,000 $500
Phys. Therapy $500 20 $10,000 $750
Subtotal $14,000
Surgeon $1,400 80 $112,000
Hospital Pmt
Surgeries $12,000 80 $960,000
Total Pmt/Cost 100 $1,096,000
Better Payment for Condition Management• PCP paid adequately to help patient decide on treatment options• Physiatrists & physical therapists paid to deliver effective non-surgical care
122© Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Better Way: Pay Adequately
For the Necessary SurgeriesCURRENT FUTURE
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Primary Care
Evaluations $100 100 $10,000 $200
Non-Surg.Tx
Management $200 20 $4,000 $500
Phys. Therapy $500 20 $10,000 $750
Subtotal $14,000
Surgeon $1,400 80 $112,000 $2,100
Hospital Pmt
Surgeries $12,000 80 $960,000
Total Pmt/Cost 100 $1,096,000
Better Payment for Condition Management• PCP paid adequately to help patient decide on treatment options• Physiatrists & physical therapists paid to deliver effective non-surgical care• Surgeon paid more per surgery for patients who need surgery
123© Center for Healthcare Quality and Payment Reform www.CHQPR.org
If That Results in
25% Fewer Surgeries…CURRENT FUTURE
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Primary Care
Evaluations $100 100 $10,000 $200 100
Non-Surg.Tx
Management $200 20 $4,000 $500 40
Phys. Therapy $500 20 $10,000 $750 40
Subtotal $14,000
Surgeon $1,400 80 $112,000 $2,100 60
Hospital Pmt
Surgeries $12,000 80 $960,000 $12,000 60
Total Pmt/Cost 100 $1,096,000
124© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physicians Could Be Paid More…
CURRENT FUTURE
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Primary Care
Evaluations $100 100 $10,000 $200 100 $20,000 100%
Non-Surg.Tx
Management $200 20 $4,000 $500 40 $20,000 400%
Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%
Subtotal $14,000 $50,000 257%
Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%
Hospital Pmt
Surgeries $12,000 80 $960,000
Total Pmt/Cost 100 $1,096,000
125© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physicians Could Be Paid More…
….While Still Reducing Total $CURRENT FUTURE
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Primary Care
Evaluations $100 100 $10,000 $200 100 $20,000 100%
Non-Surg.Tx
Management $200 20 $4,000 $500 40 $20,000 400%
Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%
Subtotal $14,000 $50,000 257%
Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%
Hospital Pmt
Surgeries $12,000 80 $960,000 $12,000 60 $720,000 -25%
Total Pmt/Cost 100 $1,096,000 100 $916,000 -16%
126© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Win-Win-Win for
Providers, Payers, & PatientsCURRENT FUTURE
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Primary Care
Evaluations $100 100 $10,000 $200 100 $20,000 100%
Non-Surg.Tx
Management $200 20 $4,000 $500 40 $20,000 400%
Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%
Subtotal $14,000 $50,000 257%
Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%
Hospital Pmt
Surgeries $12,000 80 $960,000 $12,000 60 $720,000 -25%
Total Pmt/Cost 100 $1,096,000 100 $916,000 -16%
Physicians Win Payer WinsPatients Win
127© Center for Healthcare Quality and Payment Reform www.CHQPR.org
What About the Hospital?
CURRENT FUTURE
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Primary Care
Evaluations $100 100 $10,000 $200 100 $20,000 100%
Non-Surg.Tx
Management $200 20 $4,000 $500 40 $20,000 400%
Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%
Subtotal $14,000 $50,000 257%
Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%
Hospital Pmt
Surgeries $12,000 80 $960,000 $12,000 60 $720,000 -25%
Total Pmt/Cost 100 $1,096,000 100 $916,000 -16%
Hospital Loses
128© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Do Hospitals Have to Lose In Order
for Providers & Payers To Win?CURRENT FUTURE
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Primary Care
Evaluations $100 100 $10,000 $200 100 $20,000 100%
Non-Surg.Tx
Management $200 20 $4,000 $500 40 $20,000 400%
Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%
Subtotal $14,000 $50,000 257%
Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%
Hospital Pmt
Surgeries $12,000 80 $960,000 $12,000 60 $720,000 -25%
Total Pmt/Cost 100 $1,096,000 100 $916,000 -16%
Physicians Win Payer WinsHospital Loses
129© Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Should Matter to Hospitals is
Margin, Not Revenues (Volume)
130© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Hospital Costs Are Not
Proportional to Utilization
$800$820$840$860$880$900$920$940$960$980$1,000
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$0
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#Patients
Cost & Revenue Changes With Fewer Patients
.
Costs
20% reduction in volume
7% reduction
in cost
131© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Reductions in Utilization Reduce
Revenues More Than Costs
$800$820$840$860$880$900$920$940$960$980$1,000
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#Patients
Cost & Revenue Changes With Fewer Patients
Revenues
Costs
20% reduction in volume
7% reduction
in cost
20% reduction
in revenue
132© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Causing Negative Margins
for Hospitals
$800$820$840$860$880$900$920$940$960$980$1,000
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#Patients
Cost & Revenue Changes With Fewer Patients
Revenues
Costs
Payers Will Be
Underpaying For
Care If
Surgeries,
Readmissions, Etc.
Are Reduced
133© Center for Healthcare Quality and Payment Reform www.CHQPR.org
But Spending Can Be Reduced
Without Bankrupting Hospitals
$800$820$840$860$880$900$920$940$960$980$1,000
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Cost & Revenue Changes With Fewer Patients
Revenues
Costs
Payers Can
Still Save $
Without Causing
Negative Margins
for Hospital
134© Center for Healthcare Quality and Payment Reform www.CHQPR.org
We Need to Understand the
Hospital’s Cost StructureCURRENT FUTURE
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Primary Care
Evaluations $100 100 $10,000 $200 100 $20,000 100%
Non-Surg.Tx
Management $200 20 $4,000 $500 40 $20,000 400%
Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%
Subtotal $14,000 $50,000 257%
Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%
Hospital Pmt
Surgeries $12,000 80 $960,000 $12,000 60 $720,000 -25%
Total Pmt/Cost 100 $1,096,000 100 $916,000 -16%
135© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Adequacy of Payment Depends
On Fixed/Variable Costs & MarginsCURRENT FUTURE
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Primary Care
Evaluations $100 100 $10,000 $200 100 $20,000 100%
Non-Surg.Tx
Management $200 20 $4,000 $500 40 $20,000 400%
Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%
Subtotal $14,000 $50,000 257%
Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%
Hospital Pmt
Fixed Costs $6,000 50% $480,000
Variable Costs $5,400 45% $432,000
Margin $600 5% $48,000
Subtotal $12,000 80 $960,000
Total Pmt/Cost 100 $1,096,000
136© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Now, if the Number of
Procedures is Reduced…CURRENT FUTURE
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Primary Care
Evaluations $100 100 $10,000 $200 100 $20,000 100%
Non-Surg.Tx
Management $200 20 $4,000 $500 40 $20,000 400%
Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%
Subtotal $14,000 $50,000 257%
Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%
Hospital Pmt
Fixed Costs $6,000 50% $480,000
Variable Costs $5,400 45% $432,000
Margin $600 5% $48,000
Subtotal $12,000 80 $960,000 60
Total Pmt/Cost 100 $1,096,000
137© Center for Healthcare Quality and Payment Reform www.CHQPR.org
…Fixed Costs Will Remain the
Same (in the Short Run)…CURRENT FUTURE
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Primary Care
Evaluations $100 100 $10,000 $200 100 $20,000 100%
Non-Surg.Tx
Management $200 20 $4,000 $500 40 $20,000 400%
Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%
Subtotal $14,000 $50,000 257%
Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%
Hospital Pmt
Fixed Costs $6,000 50% $480,000 $480,000 0%
Variable Costs $5,400 45% $432,000
Margin $600 5% $48,000
Subtotal $12,000 80 $960,000 60
Total Pmt/Cost 100 $1,096,000
138© Center for Healthcare Quality and Payment Reform www.CHQPR.org
…Variable Costs Will Go Down in
Proportion to Procedures…CURRENT FUTURE
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Primary Care
Evaluations $100 100 $10,000 $200 100 $20,000 100%
Non-Surg.Tx
Management $200 20 $4,000 $500 40 $20,000 400%
Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%
Subtotal $14,000 $50,000 257%
Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%
Hospital Pmt
Fixed Costs $6,000 50% $480,000 $480,000 0%
Variable Costs $5,400 45% $432,000 $5,400 $324,000 -25%
Margin $600 5% $48,000
Subtotal $12,000 80 $960,000 60
Total Pmt/Cost 100 $1,096,000
139© Center for Healthcare Quality and Payment Reform www.CHQPR.org
…And Even With a Higher Margin
for the Hospital…CURRENT FUTURE
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Primary Care
Evaluations $100 100 $10,000 $200 100 $20,000 100%
Non-Surg.Tx
Management $200 20 $4,000 $500 40 $20,000 400%
Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%
Subtotal $14,000 $50,000 257%
Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%
Hospital Pmt
Fixed Costs $6,000 50% $480,000 $480,000 0%
Variable Costs $5,400 45% $432,000 $5,400 $324,000 -25%
Margin $600 5% $48,000 $52,800 +10%
Subtotal $12,000 80 $960,000 60
Total Pmt/Cost 100 $1,096,000
140© Center for Healthcare Quality and Payment Reform www.CHQPR.org
…The Hospital Gets Less Total
Revenue But Higher MarginCURRENT FUTURE
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Primary Care
Evaluations $100 100 $10,000 $200 100 $20,000 100%
Non-Surg.Tx
Management $200 20 $4,000 $500 40 $20,000 400%
Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%
Subtotal $14,000 $50,000 257%
Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%
Hospital Pmt
Fixed Costs $6,000 50% $480,000 $480,000 0%
Variable Costs $5,400 45% $432,000 $5,400 $324,000 -25%
Margin $600 5% $48,000 $52,800 +10%
Subtotal $12,000 80 $960,000 60 $856,800 -11%
Total Pmt/Cost 100 $1,096,000
141© Center for Healthcare Quality and Payment Reform www.CHQPR.org
…And The Payer
Still Saves MoneyCURRENT FUTURE
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Primary Care
Evaluations $100 100 $10,000 $200 100 $20,000 100%
Non-Surg.Tx
Management $200 20 $4,000 $500 40 $20,000 400%
Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%
Subtotal $14,000 $50,000 257%
Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%
Hospital Pmt
Fixed Costs $6,000 50% $480,000 $480,000 0%
Variable Costs $5,400 45% $432,000 $5,400 $324,000 -25%
Margin $600 5% $48,000 $52,800 +10%
Subtotal $12,000 80 $960,000 60 $856,800 -11%
Total Pmt/Cost 100 $1,096,000 100 $1,052,800 -4%
142© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Win-Win-Win-Win for Patients
Providers, Hospital, and PayerCURRENT FUTURE
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Primary Care
Evaluations $100 100 $10,000 $200 100 $20,000 100%
Non-Surg.Tx
Management $200 20 $4,000 $500 40 $20,000 400%
Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%
Subtotal $14,000 $50,000 257%
Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%
Hospital Pmt
Fixed Costs $6,000 50% $480,000 $480,000 0%
Variable Costs $5,400 45% $432,000 $5,400 $324,000 -25%
Margin $600 5% $48,000 $52,800 +10%
Subtotal $12,000 80 $960,000 60 $856,800 -11%
Total Pmt/Cost 100 $1,096,000 100 $1,052,800 -4%
Payer Wins
Hospital Wins
Providers Win
143© Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Payment Model Supports
This Win-Win-Win Approach?CURRENT FUTURE
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Primary Care
Evaluations $100 100 $10,000 $200 100 $20,000 100%
Non-Surg.Tx
Management $200 20 $4,000 $500 40 $20,000 400%
Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%
Subtotal $14,000 $50,000 257%
Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%
Hospital Pmt
Fixed Costs $6,000 50% $480,000 $480,000 0%
Variable Costs $5,400 45% $432,000 $5,400 $324,000 -25%
Margin $600 5% $48,000 $52,800 +10%
Subtotal $12,000 80 $960,000 60 $856,800 -11%
Total Pmt/Cost 100 $1,096,000 100 $1,052,800 -4%
144© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Renegotiating Individual Fees
is Impractical…CURRENT FUTURE
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Primary Care
Evaluations $100 100 $10,000 $200 100 $20,000 100%
Non-Surg.Tx
Management $200 20 $4,000 $500 40 $20,000 400%
Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%
Subtotal $14,000 $50,000 257%
Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%
Hospital Pmt
Fixed Costs $6,000 50% $480,000 $480,000 0%
Variable Costs $5,400 45% $432,000 $5,400 $324,000 -25%
Margin $600 5% $48,000 $52,800 +10%
Subtotal $12,000 80 $960,000 $14,280 60 $856,800 -11%
Total Pmt/Cost 100 $1,096,000 100 $1,052,800 -4%
145© Center for Healthcare Quality and Payment Reform www.CHQPR.org
…What Assures The Payer That
There Will Be Fewer Procedures?CURRENT FUTURE
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Primary Care
Evaluations $100 100 $10,000 $200 100 $20,000 100%
Non-Surg.Tx
Management $200 20 $4,000 $500 40 $20,000 400%
Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%
Subtotal $14,000 $50,000 257%
Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%
Hospital Pmt
Fixed Costs $6,000 50% $480,000 $480,000 0%
Variable Costs $5,400 45% $432,000 $5,400 $324,000 -25%
Margin $600 5% $48,000 $52,800 +10%
Subtotal $12,000 80 $960,000 $14,280 60 $856,800 -11%
Total Pmt/Cost 100 $1,096,000 100 $1,052,800 -4%
?
146© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Solution:Pay Based on the Patient’s
Condition, Not on the ProceduresCURRENT FUTURE
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Primary Care
Evaluations $100 100 $10,000
Non-Surg.Tx
Management $200 20 $4,000
Phys. Therapy $500 20 $10,000
Subtotal $14,000
Surgeon $1,400 80 $112,000
Hospital Pmt
Fixed Costs $6,000 50% $480,000
Variable Costs $5,400 45% $432,000
Margin $600 5% $48,000
Subtotal $12,000 80 $960,000
Total Pmt/Cost $10,960 100 $1,096,000
147© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Plan to Offer Care of the Condition
at a Lower Cost Per PatientCURRENT FUTURE
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Primary Care
Evaluations $100 100 $10,000
Non-Surg.Tx
Management $200 20 $4,000
Phys. Therapy $500 20 $10,000
Subtotal $14,000
Surgeon $1,400 80 $112,000
Hospital Pmt
Fixed Costs $6,000 50% $480,000
Variable Costs $5,400 45% $432,000
Margin $600 5% $48,000
Subtotal $12,000 80 $960,000
Total Pmt/Cost $10,960 100 $1,096,000 $10,528 100 -4%
148© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Use the Payment as a Budget to
Redesign Care…CURRENT FUTURE
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Primary Care
Evaluations $100 100 $10,000 100 $20,000 100%
Non-Surg.Tx
Management $200 20 $4,000
Phys. Therapy $500 20 $10,000
Subtotal $14,000 $50,000 257%
Surgeon $1,400 80 $112,000 60 $126,000 +13%
Hospital Pmt
Fixed Costs $6,000 50% $480,000 $480,000
Variable Costs $5,400 45% $432,000 $324,000
Margin $600 5% $48,000 $52,800
Subtotal $12,000 80 $960,000 60 $856,800
Total Pmt/Cost $10,960 100 $1,096,000 $10,528 100 $1,052,800 -4%
149© Center for Healthcare Quality and Payment Reform www.CHQPR.org
…And Let Providers & Hospitals
Decide How They Should Be PaidCURRENT FUTURE
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Primary Care
Evaluations $100 100 $10,000 $200 100 $20,000 100%
Non-Surg.Tx
Management $200 20 $4,000 $500
Phys. Therapy $500 20 $10,000 $750
Subtotal $14,000 $50,000 257%
Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%
Hospital Pmt
Fixed Costs $6,000 50% $480,000 $480,000
Variable Costs $5,400 45% $432,000 $324,000
Margin $600 5% $48,000 $52,800
Subtotal $12,000 80 $960,000 60 $856,800
Total Pmt/Cost $10,960 100 $1,096,000 $10,528 100 $1,052,800 -4%
150© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Condition-Based Payment Allows
True Win-Win-Win SolutionsCURRENT FUTURE
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Primary Care
Evaluations $100 100 $10,000 $200 100 $20,000 100%
Non-Surg.Tx
Management $200 20 $4,000 $500 40 $20,000 400%
Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%
Subtotal $14,000 $50,000 257%
Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%
Hospital Pmt $200
Fixed Costs $6,000 50% $480,000 $480,000 0%
Variable Costs $5,400 45% $432,000 $324,000 -25%
Margin $600 5% $48,000 $52,800 +10%
Subtotal $12,000 80 $960,000 60 $856,800 -11%
Condition Pmt. $10,960 100 $1,096,000 $10,528 100 $1,052,800 -4%
Payer Wins
Hospital Wins
Physicians Win
151© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Condition-Based Payment Requires
a Team Approach to Care DeliveryCURRENT FUTURE
$/Patient # Pts Total $ $/Patient # Pts Total $ Chg
Primary Care
$100 100 $10,000 $200 100 $20,000 100%
$200 20 $4,000 $500 40 $20,000 400%
Phys. Therapy $500 20 $10,000 $750 40 $30,000 200%
$14,000 $50,000 257%
Surgeon $1,400 80 $112,000 $2,100 60 $126,000 +13%
Hospital Pmt
Fixed Costs $6,000 50% $480,000 $480,000 0%
Variable Costs $5,400 45% $432,000 $324,000 -25%
Margin $600 5% $48,000 $52,800 +10%
Subtotal $12,000 80 $960,000 60 $856,800 -11%
Condition Pmt. $10,960 100 $1,096,000 $10,528 100 $1,052,800 -4%
ConditionMgt Team
Payer Wins
Hospital Wins
Physicians Win
152© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Tie Payment to Outcomes to
Prevent Undertreatment
• Patient return to functionality
• Lack of pain
• Avoiding infections for surgery
153© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Patients Differ in Their Need for
Surgery vs. Physical TherapyLOWER-RISK PATIENTS HIGHER-RISK PATIENTS
# Pts # Pts
Primary Care
Evaluations 50 50
Non-Surg.Tx
Management 30 10
Phys. Therapy 30 10
Surgery 20 40
40% Need Surgery 80% Need Surgery
154© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Condition-Based Payment Amount
Must Be Stratified on Patient NeedsLOWER-RISK PATIENTS HIGHER-RISK PATIENTS
$/Patient # Pts Total $ $/Patient # Pts Total $
Primary Care
Evaluations $200 50 $10,000 $200 50 $10,000
Non-Surg.Tx
Management $500 30 $15,000 $500 10 $5,000
Phys. Therapy $750 30 $22,500 $750 10 $7,500
Subtotal $37,500 $12,500
Surgeon $2,100 20 $42,000 $2,100 40 $84,000
Hospital Pmt
Fixed Costs $192,000 $288,000
Variable Costs $5,400 $108,000 $5,400 $216,000
Margin $21,120 $31,680
Subtotal 20 $321,120 40 $535,680
Total Pmt/Cost $8,212 50 $410,620 $12,844 50 $642,180
155© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Opportunities for Lower-Cost Care
for Many Conditions• Knee Osteoarthritis
– Home-based rehab instead of facility-based rehab
– Physical therapy instead of surgery
• Maternity Care– Vaginal delivery instead of C-Section
– Term delivery instead of early elective delivery
– Delivery in birth center instead of hospital
• Chest Pain– Non-invasive imaging instead of invasive imaging
– Medical management instead of invasive treatment
• Chronic Disease Management– Improved education and self-management support
– Avoiding hospitalizations for exacerbations
156© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Opportunities for Lower-Cost Care
for Many Conditions• Knee Osteoarthritis
– Home-based rehab instead of facility-based rehab
– Physical therapy instead of surgery
• Maternity Care– Vaginal delivery instead of C-Section
– Term delivery instead of early elective delivery
– Delivery in birth center instead of hospital
• Chest Pain– Non-invasive imaging instead of invasive imaging
– Medical management instead of invasive treatment
• Chronic Disease Management– Improved education and self-management support
– Avoiding hospitalizations for exacerbations
Savingsfor Payers
=Lower
Marginsfor
Hospitals
TODAY
157© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Opportunities for Lower-Cost Care
for Many Conditions• Knee Osteoarthritis
– Home-based rehab instead of facility-based rehab
– Physical therapy instead of surgery
• Maternity Care– Vaginal delivery instead of C-Section
– Term delivery instead of early elective delivery
– Delivery in birth center instead of hospital
• Chest Pain– Non-invasive imaging instead of invasive imaging
– Medical management instead of invasive treatment
• Chronic Disease Management– Improved education and self-management support
– Avoiding hospitalizations for exacerbations
Savingsfor Payers
=Lower
Marginsfor
Hospitals
Savingsfor Payers
=Higher
Marginsfor
Hospitals
CONDITION-BASEDPAYMENT
TODAY
What if We Paid for Carsthe Way We Paid for Care?
What if We Paid for Carsthe Way We Paid for Care?
How Would You ControlSpending on Cars
If Insurance Was Paying?
160© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Should the Government
Set Fees for Each Car Part?
HCPCS Codes(Hierarchical
Car PartsCompensation
System)
161© Center for Healthcare Quality and Payment Reform www.CHQPR.org
And Pay Auto Workers Based On
How Many Parts They Installed?
HCPCS Codes(Hierarchical
Car PartsCompensation
System)AMA
Automobile ManufacturingAssociation
CPT System(Car Parts Tokens)
162© Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Result for Drivers If We Paid
That Way…
163© Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Result for Drivers If We Paid
That Way…
Cars would get many unnecessary parts
164© Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Result for Drivers If We Paid
That Way…
Cars would be readmitted to the factory
frequentlyto correct malfunctions
Cars would get many unnecessary parts
The Way We Actually
Pay for Cars Is Much Better
166© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Pay for Complete Cars With
Warranties, Not Parts & Repairs
167© Center for Healthcare Quality and Payment Reform www.CHQPR.org
People Aren’t Forced to Buy Cars
But Have Choices of Transportation
$
168© Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Happens to ACOs with
Physician-Focused APMs?
169© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Patients Have Many
Healthcare Needs
Heart
Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
170© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Each Patient Should Choose &
Use a Primary Care Practice…
Heart
Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Primary Care
Practice
171© Center for Healthcare Quality and Payment Reform www.CHQPR.org
MEDICARE, MEDICAID
HEALTH PLAN
…Which Takes Accountability for
What PCPs Can Control/Influence
Heart
Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Primary Care
Practice
AccountableMedical
Home Accountability for:• Avoidable ER Visits
•Avoidable Hospitalizations
•Unnecessary Tests
•Unnecessary Referrals
172© Center for Healthcare Quality and Payment Reform www.CHQPR.org
MEDICARE, MEDICAID
HEALTH PLAN
…With a Medical Neighborhood
to Consult With on Complex Cases
Heart
Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Primary Care
Practice
AccountableMedical
Home
Endocrinology,
Cardiology,
Radiology
AccountableMedicalNeighborhood
Accountability for:
•Unnecessary Tests
•Unnecessary Referrals
•Co-Managed Outcomes
173© Center for Healthcare Quality and Payment Reform www.CHQPR.org
MEDICARE, MEDICAID
HEALTH PLAN
..And Specialists Accountable for
the Conditions They Manage
Heart
Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Primary Care
Practice
Neurosurg.
PMR Group
OB/GYN
Group
Cardiology
GroupHeart Episode/Condition Pmt
Back SurgeryEpisode Pmt
PregnancyCondition Pmt
AccountableMedical
Home
AccountableMedicalNeighborhood
Accountability for:
•Unnecessary Tests
•Unnecessary Procedures
•Infections, Complications
Endocrinology,
Cardiology,
Radiology
174© Center for Healthcare Quality and Payment Reform www.CHQPR.org
MEDICARE, MEDICAID
HEALTH PLAN
That’s Building the ACO
from the Bottom Up
Heart
Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Primary Care
Practice
Cardiology
GroupHeart Episode/Condition Pmt
AccountableMedical
Home
AccountableMedicalNeighborhood
ACO
Accountable PaymentModels
OB/GYN
GroupPregnancyCondition Pmt
Endocrinology,
Cardiology,
Radiology
Neurosurg.
PMR GroupBack SurgeryEpisode Pmt
175© Center for Healthcare Quality and Payment Reform www.CHQPR.org
MEDICARE, MEDICAID
HEALTH PLAN, EMPLOYER
A True ACO/CIN Can Take a
Global Payment And Make It Work
Heart
Disease
Diabetes
Back Pain
PATIENTS
Pregnancy
Primary Care
Practice
ACO/CINCardiology
GroupHeart Episode/Condition Pmt
AccountableMedical
Home
Risk-AdjustedGlobal Payment
AccountableMedicalNeighborhood
OB/GYN
GroupPregnancyCondition Pmt
Endocrinology,
Cardiology,
Physiatry
Neurosurg.
PMR GroupBack SurgeryEpisode Pmt
176© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Isn’t This Capitation?
177© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Providers Lose Money On Unusually
Expensive Cases
Providers Are Paid Regardless of the
Quality of Care
No Additional Revenuefor Taking Sicker
Patients
CAPITATION (WORST VERSIONS)
Isn’t This Capitation?
178© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Payment Levels Adjusted Based on Patient Conditions
Providers Lose Money On Unusually
Expensive Cases
Limits on Total RiskProviders Accept for
Unpredictable Events
Providers Are Paid Regardless of the
Quality of Care
Bonuses/PenaltiesBased on Quality
Measurement
No Additional Revenuefor Taking Sicker
Patients
CAPITATION (WORST VERSIONS)
RISK-ADJUSTEDGLOBAL PMT
Isn’t This Capitation?
No – It’s Different
179© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Payment Levels Adjusted Based on Patient Conditions
Providers Lose Money On Unusually
Expensive Cases
Limits on Total RiskProviders Accept for
Unpredictable Events
Providers Are Paid Regardless of the
Quality of Care
Bonuses/PenaltiesBased on Quality
Measurement
Provider Makes More Money If
Patients Stay Well
Provider Makes More Money If
Patients Stay Well
Flexibility to DeliverHighest-Value
Services
Flexibility to DeliverHighest-Value
Services
No Additional Revenuefor Taking Sicker
Patients
CAPITATION (WORST VERSIONS)
RISK-ADJUSTEDGLOBAL PMT
Isn’t This Capitation?
No – It’s Different
180© Center for Healthcare Quality and Payment Reform www.CHQPR.org
You Don’t Need a Big Health
System to Manage Global Payment
• Independent PCPs & Specialists Managing Global Payments
– North Texas Specialty Physicians, a 600 physician multi-specialty IPA in Fort
Worth, set up its own Medicare Advantage PPO plan and uses revenues from
the health plan and capitation contracts to pay its PCPs 250% of Medicare
rates and provides high quality, coordinated care to patients. www.ntsp.com
• Joint Contracting by MDs & Hospitals for Global Payments– The Mount Auburn Cambridge IPA (MACIPA) and Mount Auburn Hospital
jointly contract with three major Boston-area health plans for full-risk capitation.
The IPA is independent of the hospital; they coordinate care with each other
without any formal legal structure. www.macipa.com
181© Center for Healthcare Quality and Payment Reform www.CHQPR.org
What’s the Patient’s
Role and Accountability?
ProviderPatient
Payment
System
Ability and
Incentives to:
• Keep patients well
• Avoid unneeded services
• Deliver services efficiently
• Coordinate services with other
providers
182© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Benefit Design Changes Are
Also Critical to Success
ProviderPatient
Payment
System
Benefit
Design
Ability and
Incentives to:
• Keep patients well
• Avoid unneeded services
• Deliver services efficiently
• Coordinate services with other
providers
Ability and
Incentives to:
• Improve health
• Take prescribed medications
• Allow a provider to coordinate care
• Choose the highest-value providers and
services
183© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Barriers In Current
Benefit Designs
• Co-pays, co-insurance, and high deductibles discourage or
prevent patients from using primary care, preventive
treatments, and chronic disease maintenance medications
184© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Example: No Coordination of
Pharmacy & Medical Benefits
Hospital
Costs
Physician
Costs
Other
Services
Medical Benefits
Drug
Costs
Pharmacy Benefits
Single-minded focus on
reducing costs here...
...often results in higher
spending on hospitalizations
• High copays for brand-names
when no generic exists
• Doughnut holes & deductibles
Principal treatment for mostchronic diseases involves regular use
of maintenance medication
185© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Barriers In Current
Benefit Designs
• Co-pays, co-insurance, and high deductibles discourage or
prevent patients from using primary care, preventive
treatments, and chronic disease maintenance medications
• Co-pays, co-insurance, and high deductibles provide little or
no incentive for patients to choose the highest-value providers
for expensive services
186© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Airfare Choices
from Boston to ClevelandBoston Cleveland
?
USAirways
1-Stop
Coach
$622
United
Non-Stop
Coach
$1,107
United
Non-Stop
First Class
$1,355
Airfares for July 6-7, 2011 as of 6/26/11
187© Center for Healthcare Quality and Payment Reform www.CHQPR.org
What If We Paid for Travel
the Way We Pay for Healthcare?Boston Cleveland
?
Consumer Share
of Travel Cost
USAirways
1-Stop
Coach
$622
United
Non-Stop
Coach
$1,107
United
Non-Stop
First Class
$1,355
Airfares for July 6-7, 2011 as of 6/26/11
188© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Flat Copayments:
First Class Fare WinsBoston Cleveland
?
Consumer Share
of Travel Cost
USAirways
1-Stop
Coach
$622
United
Non-Stop
Coach
$1,107
United
Non-Stop
First Class
$1,355
$100 Copayment: $100 $100 $100
Airfares for July 6-7, 2011 as of 6/26/11
189© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Coinsurance:
First Class Fare Probably WinsBoston Cleveland
?
Consumer Share
of Travel Cost
USAirways
1-Stop
Coach
$622
United
Non-Stop
Coach
$1,107
United
Non-Stop
First Class
$1,355
$100 Copayment: $100 $100 $100
10% Coinsurance: $62 $111 $136
Airfares for July 6-7, 2011 as of 6/26/11
190© Center for Healthcare Quality and Payment Reform www.CHQPR.org
High Deductible:
First Class Fare WinsBoston Cleveland
?
Consumer Share
of Travel Cost
USAirways
1-Stop
Coach
$622
United
Non-Stop
Coach
$1,107
United
Non-Stop
First Class
$1,355
$100 Copayment: $100 $100 $100
10% Coinsurance: $62 $111 $136
$500 Deductible: $500 $500 $500
Airfares for July 6-7, 2011 as of 6/26/11
191© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Price Difference:
Lowest Coach Fare WinsBoston Cleveland
?
Consumer Share
of Travel Cost
USAirways
1-Stop
Coach
$622
United
Non-Stop
Coach
$1,107
United
Non-Stop
First Class
$1,355
$100 Copayment: $100 $100 $100
10% Coinsurance: $62 $111 $136
$500 Deductible: $500 $500 $500
Lowest Coach Fare: $0 $485 $733
Airfares for July 6-7, 2011 as of 6/26/11
192© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Where Will You Get
Your Knee Replaced?
Consumer Share
of Surgery CostPrice #1
$20,000
Price #2
$25,000
Price #3
$30,000
Knee Joint
Replacement
193© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Where Will You Get
Your Knee Replaced?
Consumer Share
of Surgery CostPrice #1
$20,000
Price #2
$25,000
Price #3
$30,000
$1,000 Copayment: $1,000 $1,000 $1,000
10% Coinsurance
w/$2,000 OOP Max:
$2,000 $2,000 $2,000
$5,000 Deductible: $5,000 $5,000 $5,000
Knee Joint
Replacement
194© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Where Will You Get
Your Knee Replaced?
Consumer Share
of Surgery CostPrice #1
$20,000
Price #2
$25,000
Price #3
$30,000
$1,000 Copayment: $1,000 $1,000 $1,000
10% Coinsurance
w/$2,000 OOP Max:
$2,000 $2,000 $2,000
$5,000 Deductible: $5,000 $5,000 $5,000
Highest-Value: $0 $5,000 $10,000
Knee Joint
Replacement
195© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Flying to Pittsburgh vs. Cleveland
Boston Cleveland
Boston Pittsburgh
Airfares for July 6-7, 2011 as of 6/26/11
Cleveland
196© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Why Is It So Much Cheaper to Fly
to Pittsburgh Than Cleveland?Boston Cleveland
Boston Pittsburgh
One-Stop Coach Fare: $662
Non-Stop Coach Fare: $1,107
Non-Stop Coach Fare: $188
Airfares for July 6-7, 2011 as of 6/26/11
197© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Is It The Shorter Distance?
Boston Cleveland
?
Boston Pittsburgh
?
Non-Stop Coach Fare: $188
551 Air Miles
Airfares for July 6-7, 2011 as of 6/26/11
483 Air Miles
One-Stop Coach Fare: $662
Non-Stop Coach Fare: $1,107
198© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Or Greater Competition?
Boston Cleveland
?
Boston Pittsburgh
?
Choice: United Non-Stop: $1,107
(No other non-stop choice)
Choice #3: USAirways Non-Stop: $238
Choice #2: JetBlue Non-Stop: $188
Choice #1: Delta Non-Stop: $188
NON-
COMPETITIVE
MARKET
COMPETITIVE
MARKET
Airfares for July 6-7, 2011 as of 6/26/11
199© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Choice & Competition
Encourages Efficiency
Consumer Share
of Surgery CostPrice #1
$20,000
Price #2
$25,000
Price #3
$30,000
Highest-Value: $0 $5,000 $10,000
Knee Joint
Replacement
200© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Loss of Choice & Competition
Will Lead to Higher Costs
Consumer Share
of Surgery CostPrice #1
$20,000
Price #2
$25,000
Price #3
$30,000
Highest-Value: $0 $5,000 $10,000
Knee Joint
Replacement
201© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Which Is More Likely to Generate
True Price Competition?
DO MD DOMD
DO MD DO MD
DO MD DO MD
DO MD DOMD
DO MD DO MD
DO MD DOMD
DO MD DO MD
DO MD DO MD
ONE BIG
ACO
DO MD DOMD
DO MD DO MD
DO MD DOMD
DO MD DOMD
DO MD DO MD
DO MD DOMD
DO MD DO MD
DO MD DO MD
Hospital ACO/CIN
VS
Physician Group ACO/CIN
IPA ACO/CINHOSPITAL
HOSPITAL
HOSPITAL
HOSPITAL
HOSPITAL
This All Sounds Really Hard
Can’t We Just Keep Doing
What We’re Doing Today
Until We Retire?
This All Sounds Really Hard
204© Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Opportunities to Reduce Costs
Without Rationing Are Widely Known
Helping Patients with Chronic
Disease Stay Out of Hospital
Reducing Hospital
Readmissions
Reducing Overutilization of
Outpatient Services
Shifting Preference-Sensitive
Care to Lower-Cost Options
Reducing the Cost of
Expensive Inpatient Care
205© Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Question is: How Will
Payers Get The Savings?
Helping Patients with Chronic
Disease Stay Out of Hospital
Reducing Hospital
Readmissions
Reducing Overutilization of
Outpatient Services
Shifting Preference-Sensitive
Care to Lower-Cost Options
Reducing the Cost of
Expensive Inpatient Care
PAYER
?
206© Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Payer-Driven Approach
to Achieving Savings
Helping Patients with Chronic
Disease Stay Out of Hospital
Reducing Hospital
Readmissions
Reducing Overutilization of
Outpatient Services
Shifting Preference-Sensitive
Care to Lower-Cost Options
Reducing the Cost of
Expensive Inpatient Care
PAYER
Physician
P4P/VBM
High
Deductibles
Narrow
Networks
Prior
Authorization
Tiering on
Cost
Readmission
Penalty
Managed Fee-for-Service
207© Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Physician-Driven Approach
to Achieving Savings
Helping Patients with Chronic
Disease Stay Out of Hospital
Reducing Hospital
Readmissions
Reducing Overutilization of
Outpatient Services
Shifting Preference-Sensitive
Care to Lower-Cost Options
Reducing the Cost of
Expensive Inpatient Care
PAYER/PURCHASER
Clinically
Integrated
Network
(CIN)
or
Accountable
Care
Organization
(ACO)
Global Pmt/Budget
208© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Very Different Models…
Helping Patients with Chronic
Disease Stay Out of Hospital
Reducing Hospital
Readmissions
Reducing Overutilization of
Outpatient Services
Shifting Preference-Sensitive
Care to Lower-Cost Options
Reducing the Cost of
Expensive Inpatient Care
PAYER/PURCHASER
Clinically
Integrated
Network
(CIN)
or
Accountable
Care
Organization
(ACO)
Physician
P4P/VBM
High
Deductibles
Narrow
Networks
Prior
Authorization
Tiering on
Cost
Readmission
Penalty
Managed Fee-for-Service Global Pmt/Budget
209© Center for Healthcare Quality and Payment Reform www.CHQPR.org
…And Very Different Impacts
on Physicians
PAYER/PURCHASERManaged Fee-for-Service
1. Payer defines how care
should be redesigned
2. Payer obtains all savings
from lower utilization
3. Payer decides how much
savings to share with
physicians, if any
1. Physicians determine how
care should be redesigned
2. Physicians
and Purchaser/Payer
agree on adequate price
for quality care and amount
of savings for payer
3. Physicians get to keep any
additional savings and to
determine how to divide it
Global Pmt/Budget
210© Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Different “Triple Aim”
• Better Care for Patients
– Physicians having the flexibility to design care that matches patient
needs
• Lower Spending for Payers
– Physicians able to use the best combination of services for patients
without worrying about which service generates more profits
• Financially Viable Physician Practices (and Hospitals)
– Physicians paid adequately to deliver high-quality care
– Physicians able to remain independent if they want to
– Hospitals paid adequately to cover their standby costs
– Hospitals able to thrive without acquiring physician practices
211© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Still to Come
• How to design an Alternative Payment Model that works for your patients in your practice
• How to make health plans work for you, rather than being forced to work for them
• What you need to do now to create a physician-led healthcare payment & delivery system
PART 2:
Designing an
Alternative Payment Model
213© Center for Healthcare Quality and Payment Reform www.CHQPR.org
FFSPayments to
PhysicianPractice
OPPORTUNITIES TO REDUCE SPENDING
WITHOUT HARMING PATIENTS
• Reduce Avoidable Hospital Admissions• Reduce Unnecessary Tests and Treatments• Use Lower-Cost Tests and Treatments• Deliver Services More Efficiently• Use Lower-Cost Sites of Service• Reduce Preventable Complications• Prevent Serious Conditions From Occurring
$
PhysicianPracticeRevenue
Avoidable Spending
Payments toOther
Providersfor
RelatedServices
Step 1: Identify Opportunities to
Reduce Avoidable SpendingFee-for-ServicePayment (FFS)
TotalSpendingRelevant
to thePhysician’s
Services
214© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Unpaid Services
FFSPayments to
PhysicianPractice
BARRIERS IN CURRENT FFS SYSTEM• No Payment for Many High-Value Services
• Insufficient Revenue to Cover Costs WhenUsing Fewer or Lower-Cost Services
$
PhysicianPracticeRevenue
Avoidable Spending
Payments toOther
Providersfor
RelatedServices
Step 2: Identify Barriers in Current
Payments That Need to Be FixedFee-for-ServicePayment (FFS)
TotalSpendingRelevant
to thePhysician’s
Services
OPPORTUNITIES TO REDUCE SPENDING
WITHOUT HARMING PATIENTS
• Reduce Avoidable Hospital Admissions• Reduce Unnecessary Tests and Treatments• Use Lower-Cost Tests and Treatments• Deliver Services More Efficiently• Use Lower-Cost Sites of Service• Reduce Preventable Complications• Prevent Serious Conditions From Occurring
215© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Fee-for-ServicePayment (FFS)
Physician-FocusedAlternative
Payment Model
Flexible,Adequate
Payment forPhysician’s
Services
$
PhysicianPracticeRevenue
Step 3: Design an APM That
Removes the Payment Barriers
Unpaid Services
FFSPayments to
PhysicianPractice
Avoidable Spending
Payments toOther
Providersfor
RelatedServices
TotalSpendingRelevant
to thePhysician’s
Services
216© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Fee-for-ServicePayment (FFS)
Physician-FocusedAlternative
Payment Model
Savings
Flexible,Adequate
Payment forPhysician’s
Services
AvoidableSpending
Payments toOther
Providersfor
RelatedServices
Accountabilityfor
ControllingAvoidableSpending
$
PhysicianPracticeRevenue
Step 4: Include Provisions to
Assure Control of Cost & Quality
Unpaid Services
FFSPayments to
PhysicianPractice
Avoidable Spending
Payments toOther
Providersfor
RelatedServices
TotalSpendingRelevant
to thePhysician’s
Services
217© Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Starting Point is Care Design,
Not a Payment Model
Medicare and
Health Plans
Define
Payment Systems
Physicians Have
To Change Care
to Align With
Payment Systems
Patients and
Physicians
May Not
Come Out Ahead
Physicians
Redesign Care
and Identify
Payment Barriers
Payers Change
Payment to
Support
Redesigned Care
Patients Get
Better Care and
Physicians Stay
Financially Viable
THE RIGHT WAY TO DESIGN PAYMENT REFORMS
HOW PAYMENT REFORMS ARE DESIGNED TODAY
218© Center for Healthcare Quality and Payment Reform www.CHQPR.org
FFSPayments to
PhysicianPractice
OPPORTUNITIES TO REDUCE SPENDING
WITHOUT HARMING PATIENTS
• Reduce Avoidable Hospital Admissions• Reduce Unnecessary Tests and Treatments• Use Lower-Cost Tests and Treatments• Deliver Services More Efficiently• Use Lower-Cost Sites of Service• Reduce Preventable Complications• Prevent Serious Conditions From Occurring
$
PhysicianPracticeRevenue
Avoidable Spending
Payments toOther
Providersfor
RelatedServices
Step 1: Identify Opportunities to
Reduce Avoidable SpendingFee-for-ServicePayment (FFS)
TotalSpendingRelevant
to thePhysician’s
Services
219© Center for Healthcare Quality and Payment Reform www.CHQPR.org
5-17% of Hospital Admissions
Are Potentially Preventable
Source:
AHRQ
HCUP
220© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Millions of Preventable Events
Harm Patients and Increase Costs
Medical Error
# Errors
(2008)
Cost Per
Error Total U.S. Cost
Pressure Ulcers 374,964 $10,288 $3,857,629,632
Postoperative Infection 252,695 $14,548 $3,676,000,000
Complications of Implanted Device 60,380 $18,771 $1,133,392,980
Infection Following Injection 8,855 $78,083 $691,424,965
Pneumothorax 25,559 $24,132 $616,789,788
Central Venous Catheter Infection 7,062 $83,365 $588,723,630
Others 773,808 $11,640 $9,007,039,005
TOTAL 1,503,323 $13,019 $19,571,000,000
Source: The Economic Measurement of Medical Errors, Milliman and the Society of Actuaries, 2010
3 Adverse Events Every Minute
221© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Many Ways to Reduce Tests &
Services Without Harming Patients
222© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Diagnostic Error is a Fundamental
Quality Issue Underlying All Others
223© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Institute of Medicine Estimate:
30% of Spending is Avoidable
224© Center for Healthcare Quality and Payment Reform www.CHQPR.org
FFSPayments to
PhysicianPractice
$
PhysicianPracticeRevenue
Avoidable Spending
Payments toOther
Providersfor
RelatedServices
Avoidable Spending Opportunities
Differ from Specialty to SpecialtyFee-for-ServicePayment (FFS)
TotalSpendingRelevant
to thePhysician’s
Services
CANCER TREATMENT• Use of unnecessarily-expensive drugs• ER visits/hospital stays for dehydration and avoidable complications
• Fruitless treatment at end of life
SURGERY• Unnecessary surgery• Use of unnecessarily-expensive implants• Infections and complications of surgery• Overuse of inpatient rehabilitation
CHEST PAIN DIAGNOSIS/TREATMENT• Overuse of high-tech stress tests/imaging• Overuse of cardiac catheterization• Overuse of PCIs, high-priced stents
MATERNITY CARE• Unnecessary C-Sections• Early elective deliveries• Underuse of birth centers• Complications of delivery
225© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Unpaid Services
FFSPayments to
PhysicianPractice
BARRIERS IN CURRENT FFS SYSTEM• No Payment for Many High-Value Services
• Insufficient Revenue to Cover Costs WhenUsing Fewer or Lower-Cost Services
$
PhysicianPracticeRevenue
Avoidable Spending
Payments toOther
Providersfor
RelatedServices
Step 2: Identify Barriers in Current
Payments to Delivering Better CareFee-for-ServicePayment (FFS)
TotalSpendingRelevant
to thePhysician’s
Services
OPPORTUNITIES TO REDUCE SPENDING
WITHOUT HARMING PATIENTS
• Reduce Avoidable Hospital Admissions• Reduce Unnecessary Tests and Treatments• Use Lower-Cost Tests and Treatments• Deliver Services More Efficiently• Use Lower-Cost Sites of Service• Reduce Preventable Complications• Prevent Serious Conditions From Occurring
226© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Your Turn
What is an opportunity to reduce healthcare spending on the patients in
your practice that is related to the services you deliver or order?
Be specific about:1. what kinds of patients would be involved2. where or how savings would be generated
(what would there be less of, or what lower-cost alternative would be used?)
What is the most important change in the way care is delivered that you
or others would need to make in order to achieve savings for this
opportunity?
What are the biggest problems with the current payment system that
would make it difficult or impossible for you or others to implement the
changes in care and achieve these savings?
227© Center for Healthcare Quality and Payment Reform www.CHQPR.org
There Are Many Physician-Focused
Alternatives to CMS APMs
APM #1: Payment for a High-Value Service
APM #2: Condition-Based Payment for a Physician’s Services
APM #3: Multi-Physician Bundled Payment
APM #4: Physician-Facility Procedure Bundle
APM #5: Warrantied Payment for Physician Services
APM #6: Episode Payment for a Procedure
APM #7: Condition-Based Payment
www.PaymentReform.org
228© Center for Healthcare Quality and Payment Reform www.CHQPR.org
There Are Many Physician-Focused
Alternatives to CMS APMs
APM #1: Payment for a High-Value Service
APM #2: Condition-Based Payment for a Physician’s Services
APM #3: Multi-Physician Bundled Payment
APM #4: Physician-Facility Procedure Bundle
APM #5: Warrantied Payment for Physician Services
APM #6: Episode Payment for a Procedure
APM #7: Condition-Based Payment
www.PaymentReform.orgMultipleTypes
ofAPMs
NeededBecause
PhysiciansDeliver
DifferentTypes
of Careto
Different Patients
229© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Proceduralists Can Reduce
Complications & Improve Efficiency
High Spending on
Complications &
Post-Acute Care
Low Complication
& PAC Spending
$Hospital
Proceduralist
230© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Procedural Episode Payments
Support Higher Quality/Lower Cost
$Hospital
ProceduralEpisodePayment
High Spending on
Complications &
Post-Acute Care
Low Complication
& PAC Spending
Proceduralist
231© Center for Healthcare Quality and Payment Reform www.CHQPR.org
What if You Can Avoid the
Procedure Altogether?
$
Medical
Management
Hospital
High Spending on
Complications &
Post-Acute Care
Low Complication
& PAC Spending
Proceduralist
ProceduralEpisodePayment
$
232© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Specialists Managing a Condition
Can Avoid Unnecessary Procedures
$
Condition
Specialist
Medical
Management
Hospital
High Spending on
Complications &
Post-Acute Care
Low Complication
& PAC Spending
Proceduralist
ProceduralEpisodePayment
$
233© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Condition-Based Payment Supports
Use of Highest-Value Treatment
$
Condition
Specialist
Medical
Management
Hospital
Condition-Based
PaymentHigh Spending on
Complications &
Post-Acute Care
Low Complication
& PAC Spending$
ProceduralEpisodePayment
Proceduralist
234© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Are We Making the Payment
for the Correct Condition??
$
Wrong
Condition
Medical
Management???????
Correct
Condition
Correct
Treatment
Hospital
Condition-Based
PaymentHigh Spending on
Complications &
Post-Acute Care
Low Complication
& PAC Spending$
$
Proceduralist
ProceduralEpisodePayment
235© Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Diagnostician Ensures the
Right Condition is Being Treated
$
Condition
Specialist
Medical
ManagementDiagnostician
Correct
Condition
Correct
Treatment
Hospital
Condition-Based
PaymentHigh Spending on
Complications &
Post-Acute Care
Low Complication
& PAC Spending$
$
Proceduralist
ProceduralEpisodePayment
236© Center for Healthcare Quality and Payment Reform www.CHQPR.org
“Condition-Based” Payment Also
Needed to Support Good Diagnosis
Correct
Condition
Correct
Treatment
Condition-Based
Payment(Symptoms)
$
$
Condition
Specialist
Medical
Management
Hospital
Condition-Based
Payment(Diagnosis)
High Spending on
Complications &
Post-Acute Care
Low Complication
& PAC Spending$
Proceduralist
ProceduralEpisodePayment
Diagnostician
237© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Different Physicians Play These
Roles & Need Appropriate APMs
$Hospital
High Spending on
Complications &
Post-Acute Care
Low Complication
& PAC Spending
Surgeon
ProceduralEpisodePayment
238© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Different Physicians Play These
Roles & Need Appropriate APMs
$
Internist
Medical
Management
Hospital
Condition-Based
Payment(Diagnosis)
High Spending on
Complications &
Post-Acute Care
Low Complication
& PAC Spending$
ProceduralEpisodePayment
Surgeon
239© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Different Physicians Play These
Roles & Need Appropriate APMs
Correct
Condition
Correct
Treatment
Condition-Based
Payment(Symptoms)
$
$
Medical
Management
Hospital
Condition-Based
Payment(Diagnosis)
High Spending on
Complications &
Post-Acute Care
Low Complication
& PAC Spending$
ProceduralEpisodePayment
Radiologist
Internist
Surgeon
How Do You Design
Alternative Payment Models
for Endocrinology?
241© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Look at Each
Condition Separately
ThyroidProblems
Osteoporosis
ConditionsTreated
Diabetes
Other Conditions
242© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Step 1: Identify the Opportunities
to Improve Care & Reduce Cost
ThyroidProblems
Osteoporosis
ConditionsTreated
Opportunitiesto Improve Care
and Reduce Cost
Diabetes
• Reduce avoidableED visits, admits,readmissions
• Reduce avoidablespending on drugs
• Prevent pre-diabetesfrom progressing
Other Conditions
243© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Step 2: Identify the Barriers in
the Current Payment System
ThyroidProblems
Osteoporosis
ConditionsTreated
Opportunitiesto Improve Care
and Reduce Cost
Barriers inCurrent
Payment System
Diabetes
• Reduce avoidableED visits, admits,readmissions
• Reduce avoidablespending on drugs
• Prevent pre-diabetesfrom progressing
• No payment for caremanagement svcs
• No payment forphone/emailconsults
• No payment forevidence-basedprevention programs
Other Conditions
244© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Step 3: Design Solutions to
Overcome the Barriers
ThyroidProblems
Osteoporosis
ConditionsTreated
Opportunitiesto Improve Care
and Reduce Cost
Barriers inCurrent
Payment System
Solutions viaAlternative
Payment Models
Diabetes
• Reduce avoidableED visits, admits,readmissions
• Reduce avoidablespending on drugs
• Prevent pre-diabetesfrom progressing
• Payment for care management& specialty consults
• Condition-basedpayment for diabetesmanagement
• Multi-year paymentto support prevention
• No payment for caremanagement svcs
• No payment forphone/emailconsults
• No payment forevidence-basedprevention programs
Other Conditions
245© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Opportunities, Barriers, and
Solutions Will Differ by Condition
ThyroidProblems
Osteoporosis
ConditionsTreated
Opportunitiesto Improve Care
and Reduce Cost
Barriers inCurrent
Payment System
Solutions viaAlternative
Payment Models
• Reduce rate offractures
• Reduce unnecessarytesting
• Reduce unnecessaryuse of expensive Rx
• Condition-basedpayment for mgt ofosteoporosis
• Condition-basedpayment for mgt ofosteopenia
• No payment forcare managementservices
• Payment based onnumber of tests
Diabetes
• Reduce avoidableED visits, admits,readmissions
• Reduce avoidablespending on drugs
• Prevent pre-diabetesfrom progressing
• Payment for care management& specialty consults
• Condition-basedpayment for diabetesmanagement
• Multi-year paymentto support prevention
• No payment for caremanagement svcs
• No payment forphone/emailconsults
• No payment forevidence-basedprevention programs
Other Conditions
246© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Different Payment Models for
Different Endocrine Conditions
ThyroidProblems
Osteoporosis
ConditionsTreated
Opportunitiesto Improve Care
and Reduce Cost
Barriers inCurrent
Payment System
Solutions viaAlternative
Payment Models
• Reduce rate offractures
• Reduce unnecessarytesting
• Reduce unnecessaryuse of expensive Rx
• Reduce unnecessaryimaging and testing
• Reduce over- andunder-treatment
• Low payment fortime to diagnose &do patient education
• Payment based ontests & treatments
• Bundled paymentfor diagnosis
• Condition-basedpayment formanagement
• Condition-basedpayment for mgt ofosteoporosis
• Condition-basedpayment for mgt ofosteopenia
• No payment forcare managementservices
• Payment based onnumber of tests
Diabetes
• Reduce avoidableED visits, admits,readmissions
• Reduce avoidablespending on drugs
• Prevent pre-diabetesfrom progressing
• Payment for care management& specialty consults
• Condition-basedpayment for diabetesmanagement
• Multi-year paymentto support prevention
• No payment for caremanagement svcs
• No payment forphone/emailconsults
• No payment forevidence-basedprevention programs
Other Conditions
247© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Not Every Condition Needs
an Alternative Payment Model
ThyroidProblems
Osteoporosis
ConditionsTreated
Opportunitiesto Improve Care
and Reduce Cost
Barriers inCurrent
Payment System
Solutions viaAlternative
Payment Models
• Reduce rate offractures
• Reduce unnecessarytesting
• Reduce unnecessaryuse of expensive Rx
• Reduce unnecessaryimaging and testing
• Reduce over- andunder-treatment
• Low payment fortime to diagnose &do patient education
• Payment based ontests & treatments
• Bundled paymentfor diagnosis
• Condition-basedpayment formanagement
• Condition-basedpayment for mgt ofosteoporosis
• Condition-basedpayment for mgt ofosteopenia
• No payment forcare managementservices
• Payment based onnumber of tests
Diabetes
• Reduce avoidableED visits, admits,readmissions
• Reduce avoidablespending on drugs
• Prevent pre-diabetesfrom progressing
• Payment for care management& specialty consults
• Condition-basedpayment for diabetesmanagement
• Multi-year paymentto support prevention
• No payment for caremanagement svcs
• No payment forphone/emailconsults
• No payment forevidence-basedprevention programs
Other Conditions • FFS• APM
248© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Hypothetical, Simplified Example of
Diabetes Management
249© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Hypothetical, Simplified Example of
Diabetes Management
1000 Patientswith Diabetes
250© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Hypothetical, Simplified Example of
Diabetes ManagementCURRENT FFS
$/Pt # Pts Total $PCP
Office Visits $600 1000 $600,000
1000 Patientswith Diabetes
• PCP paid only for periodic office visits(6 visits @ $100/visit)
251© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Hypothetical, Simplified Example of
Diabetes ManagementCURRENT FFS
$/Pt # Pts Total $PCP
Office Visits $600 1000 $600,000
EndocrinologistOffice Visits $100 1000 $100,000
1000 Patientswith Diabetes
• PCP paid only for periodic office visits(6 visits @ $100/visit)
• Endocrinologist seespatients once per year
252© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Hypothetical, Simplified Example of
Diabetes ManagementCURRENT FFS
$/Pt # Pts Total $PCP
Office Visits $600 1000 $600,000
EndocrinologistOffice Visits $100 1000 $100,000
Pharmaceuticals $1,000 1000 $1,000,000
1000 Patientswith Diabetes
• PCP paid only for periodic office visits(6 visits @ $100/visit)
• Endocrinologist seespatients once per year
• Patients take medicationsaveraging $1,000/year
253© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Opportunity:
Avoidable HospitalizationsCURRENT FFS
$/Pt # Pts Total $PCP
Office Visits $600 1000 $600,000
EndocrinologistOffice Visits $100 1000 $100,000
Pharmaceuticals $1,000 1000 $1,000,000Hospitalizations $10,000 250 $2,500,000
1000 Patientswith Diabetes
• PCP paid only for periodic office visits(6 visits @ $100/visit)
• Endocrinologist seespatients once per year
• Patients take medicationsaveraging $1,000/year
• 25% of patients are hospitalized each year;average cost of hospitalization = $10,000
254© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Hypothetical, Simplified Example of
Diabetes ManagementCURRENT FFS
$/Pt # Pts Total $PCP
Office Visits $600 1000 $600,000
EndocrinologistOffice Visits $100 1000 $100,000
Pharmaceuticals $1,000 1000 $1,000,000Hospitalizations $10,000 250 $2,500,000
Total Spending 1000 $4,200,000
1000 Patientswith Diabetes
• PCP paid only for periodic office visits(6 visits @ $100/visit)
• Endocrinologist seespatients once per year
• Patients take medicationsaveraging $1,000/year
• 25% of patients are hospitalized each year;average cost of hospitalization = $10,000
255© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Barrier: No Payment for Services
That Could Reduce HospitalizationsCURRENT FFS
$/Pt # Pts Total $PCP
Office Visits $600 1000 $600,000
EndocrinologistOffice Visits $100 1000 $100,000
Pharmaceuticals $1,000 1000 $1,000,000Hospitalizations $10,000 250 $2,500,000
Total Spending 1000 $4,200,000
1000 Patientswith Diabetes
• PCP paid only for periodic office visits(6 visits @ $100/visit)
• Endocrinologist seespatients once per year
• Patients take medicationsaveraging $1,000/year
• 25% of patients are hospitalized each year;average cost of hospitalization = $10,000
• No payment for phoneconsults by endocrinologistwith PCP; no payment forcase mgt by endocrinologist
256© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Most of the Money Isn’t
Going to the PhysiciansCURRENT FFS
$/Pt # Pts Total $PCP
Office Visits $600 1000 $600,000
EndocrinologistOffice Visits $100 1000 $100,000
Pharmaceuticals $1,000 1000 $1,000,000Hospitalizations $10,000 250 $2,500,000
Total Spending 1000 $4,200,000
PhysicianPayments
=
17%of Spending
257© Center for Healthcare Quality and Payment Reform www.CHQPR.org
What if More Endocrinologist
Support Could Reduce Admissions?CURRENT FFS APM – Higher Spending
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPCP
Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%
EndocrinologistOffice Visits $100 1000 $100,000 $100 1000 $100,000 +0%
Diabetes Mgt $96 1000 $96,000
Total Endocrin. $100,000 $196,000 +96%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 +0%Hospitalizations $10,000 250 $2,500,000 $10,000 200 $2,000,000 -20%
Total Spending 1000 $4,200,000 1000 $3,796,000 -10%
258© Center for Healthcare Quality and Payment Reform www.CHQPR.org
How Much Increased Payment
Does the Endocrinologist Need?CURRENT FFS APM – Higher Spending
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPCP
Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%
EndocrinologistOffice Visits $100 1000 $100,000 $100 1000 $100,000 +0%
Diabetes Mgt $96 1000 $96,000
Total Endocrin. $100,000 $196,000 +96%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 +0%Hospitalizations $10,000 250 $2,500,000 $10,000 200 $2,000,000 -20%
Total Spending 1000 $4,200,000 1000 $3,796,000 -10%
259© Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Endocrinologist Needs a
Business Plan for Improving CareCURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgEndocrinologistRevenues
Office Visits $100 1000 $100,000 $100 1000 $100,000 0%
Diabetes Mgt $96 1000 $96,000
Total Revenue $100,000 $196,000 +96%
EndocrinologistCosts
Current Costs $95,000 $95,000
Physician Time $10,000
Nurse Care Mgr $80,000
Total Costs $95,000 $185,000 +95%
Profit Margin $5,000 $11,000 +120%
260© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Viability May Depend on Volume of
Patients & Type of PaymentCURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgEndocrinologistRevenues
Office Visits $100 500 $50,000 $100 500 $50,000 0%
Diabetes Mgt $96 500 $48,000
Total Revenue $50,000 $98,000 +96%
EndocrinologistCosts
Current Costs $47,500 $47,500
Physician Time $5,000
Nurse Care Mgr $80,000
Total Costs $47,500 $132,500 +179%
Profit Margin $2,500 ($34,500) -1480%
261© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Viability May Depend on Volume of
Patients & Type of PaymentCURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgEndocrinologistRevenues
Office Visits $100 500 $50,000 $100 500 $50,000 0%
Diabetes Mgt $96 500 $48,000
Total Revenue $50,000 $98,000 +96%
EndocrinologistCosts
Current Costs $47,500 $47,500
Physician Time $5,000
Nurse Care Mgr $80,000
Total Costs $47,500 $132,500 +179%
Profit Margin $2,500 ($34,500) -1480%
Potential Solutions:• Share resources with other practices
• Get more payers/patients participating
262© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Higher Payment to Endocrinologist
Must Create Higher Value to PayerCURRENT FFS APM – Higher Spending
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPCP
Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%
EndocrinologistOffice Visits $100 1000 $100,000 $100 1000 $100,000 +0%
Diabetes Mgt $96 1000 $96,000
Total Endocrin. $100,000 $196,000 +96%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 +0%Hospitalizations $10,000 250 $2,500,000 $10,000 200 $2,000,000 -20%
Total Spending 1000 $4,200,000 1000 $3,796,000 -10%
263© Center for Healthcare Quality and Payment Reform www.CHQPR.org
How Does the Payer Know That
Hospitalizations Will Decrease?CURRENT FFS APM – Higher Spending
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPCP
Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%
EndocrinologistOffice Visits $100 1000 $100,000 $100 1000 $100,000 +0%
Diabetes Mgt $96 1000 $96,000
Total Endocrin. $100,000 $196,000 +96%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 +0%Hospitalizations $10,000 250 $2,500,000 $10,000 250 $2,500,000 0%
Total Spending 1000 $4,200,000 1000 $4,296,000 +2%
264© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Solution: Add an Accountability
Component to the PaymentCURRENT FFS APM – Higher Spending
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPCP
Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%
EndocrinologistOffice Visits $100 1000 $100,000 $100 1000 $100,000 +0%
Diabetes Mgt $96 1000 $96,000
P4P(180-220 Admits) $10,000 0 $0
Total Endocrin. $100,000 $196,000 +96%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 +0%Hospitalizations $10,000 250 $2,500,000 $10,000 200 $2,000,000 -20%
Total Spending 1000 $4,200,000 1000 $3,796,000 -10%
265© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Failure to Control Hospitalizations
Sufficiently Reduces PaymentCURRENT FFS APM – Higher Spending
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPCP
Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%
EndocrinologistOffice Visits $100 1000 $100,000 $100 1000 $100,000 +0%
Diabetes Mgt $96 1000 $96,000
P4P(180-220 Admits) $10,000 -5 ($50,000)
Total Endocrin. $100,000 $146,000 +46%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 +0%Hospitalizations $10,000 250 $2,500,000 $10,000 225 $2,250,000 -10%
Total Spending 1000 $4,200,000 1000 $3,996,000 -5%
266© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Greater Success in Preventing
Admissions Increases PaymentCURRENT FFS APM – Higher Spending
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPCP
Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%
EndocrinologistOffice Visits $100 1000 $100,000 $100 1000 $100,000 +0%
Diabetes Mgt $96 1000 $96,000
P4P(180-220 Admits) $10,000 5 $50,000
Total Endocrin. $100,000 $246,000 +146%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 +0%Hospitalizations $10,000 250 $2,500,000 $10,000 175 $1,750,000 -30%
Total Spending 1000 $4,200,000 1000 $3,596,000 -14%
267© Center for Healthcare Quality and Payment Reform www.CHQPR.org
How to Set the
Standard of Performance?• “Tournament” Model
– Success is based on how other physicians performed in the same year– Used in CMS Value Based Modifier – Physicians do not know the standard in advance– Physicians only “win” if other physicians lose– Discourages collaboration in developing ways to improve
268© Center for Healthcare Quality and Payment Reform www.CHQPR.org
How to Set the
Standard of Performance?• “Tournament” Model
– Success is based on how other physicians performed in the same year– Used in CMS Value Based Modifier– Physicians do not know the standard in advance– Physicians only “win” if other physicians lose– Discourages collaboration in developing ways to improve
• “Improvement” Model– Success based on whether physician improves over prior year– Used in CMS Shared Savings Model– Rewards physicians who have been performing poorly,
provides no change in payment to high-performing physicians– As limit on improvement is reached, rationale for payment disappears
269© Center for Healthcare Quality and Payment Reform www.CHQPR.org
How to Set the
Standard of Performance?• “Tournament” Model
– Success is based on how other physicians performed in the same year– Used in CMS Value Based Modifier – Physicians do not know the standard in advance– Physicians only “win” if other physicians lose– Discourages collaboration in developing ways to improve
• “Improvement” Model– Success based on whether physician improves over prior year– Used in CMS Shared Savings Model– Rewards physicians who have been performing poorly,
provides no change in payment to high-performing physicians– As limit on improvement is reached, rationale for payment disappears
• A Better Way: Standards Based on Known Feasible Targets– Success based on achieving performance levels other physicians have
achieved in previous years– All physicians receive adequate payment if they achieve the standard– No need to improve if standard is already met– Standard is defined with a confidence interval based on reliability of measure– Reward for higher performance encourages creation of higher standard
270© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Adequate Payment for All,
Low Performers Generate SavingsFFS Low Performer APM – Expected Results
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPCP $600 1000 $600,000 $600 1000 $600,000 +0%Endocrinologist $100 1000 $100,000 $196 1000 $196,000 +96%Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 +0%Hospitalizations $10,000 300 $3,000,000 $10,000 200 $2,000,000 -33%
Total Spending 1000 $4,700,000 1000 $3,796,000 -19%
FFS High Performer APM – Expected Results
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPCP $600 1000 $600,000 $600 1000 $600,000 +0%Endocrinologist $100 1000 $100,000 $196 1000 $196,000 +96%Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 +0%Hospitalizations $10,000 200 $2,000,000 $10,000 200 $2,000,000 0%
Total Spending 1000 $3,700,000 1000 $3,796,000 +3%
Grand Total 2000 $8,400,000 2000 $7,592,000 -10%
271© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Not All Patients Are The Same
Low Risk Patients High Risk Patients
$/Pt # Pts Total $ $/Pt # Pts Total $PCP
Office Visits
EndocrinologistOffice Visits
Diabetes Mgt
P4P
Total Endocrin.
PharmaceuticalsHospitalizations 50 150
Total Spending 500 500
10% Admission Rate 30% Admission Rate
272© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Not All Patients Are The Same:
Stratifying APMs Based on RiskAPM – Low Risk Patients APM – High Risk Patients
$/Pt # Pts Total $ $/Pt # Pts Total $PCP
Office Visits $400 500 $200,000 $800 500 $400,000
EndocrinologistOffice Visits $50 500 $25,000 $150 500 $75,000
Diabetes Mgt $48 500 $24,000 $144 500 $72,000
P4P
Total Endocrin. $49,000 $147,000
Pharmaceuticals $500 500 $250,000 $1,500 500 $750,000Hospitalizations $10,000 50 $500,000 $10,000 150 $1,500,000
Total Spending 500 $999,000 500 $2,797,000
10% Admission Rate 30% Admission Rate
273© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Fee for Service Has
Built-In Risk Adjustment
Traditional FFS
• Higher paymentsmade for patients who receive more services
• Provider receiveshigher paymentbased on bills submitted forservices delivered
• No higher paymentif individual servicesrequire more timeor resources
274© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Payer Risk Adjustment Models
Are a Poor Substitute
Traditional FFS Payer Risk Adjustment
• Higher paymentsmade for patients who receive more services
• Provider receiveshigher paymentbased on bills submitted forservices delivered
• No higher paymentif individual servicesrequire more timeor resources
• Higher paymentsmade for patients who are assignedmore diagnosis codes
• Provider receiveshigher payment basedon number and typeof diagnosis codesassigned on claims
• No higher payment forsome diagnosis codesor for higher severityconditions withoutseparate codes
275© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Effective Risk Adjustment via
Provider-Defined Classifications
Traditional FFS Payer Risk AdjustmentPatient Classification
• Higher paymentsmade for patients who receive more services
• Provider receiveshigher paymentbased on bills submitted forservices delivered
• No higher paymentif individual servicesrequire more timeor resources
• Higher paymentsmade for patients who are assignedmore diagnosis codes
• Provider receiveshigher payment basedon number and typeof diagnosis codesassigned on claims
• No higher payment forsome diagnosis codesor for higher severityconditions withoutseparate codes
• Higher payments aremade for patients whoare classified as higherneed for their condition
• Provider bills fora “condition-basedpayment” code from afamily of codes stratifiedbased on patient needs
• No higher payment basedsolely on number of services delivered
276© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Development of Patient Condition
Groups Under MACRASEC. 101. REPEALING THE SUSTAINABLE GROWTH RATE (SGR) AND IMPROVING MEDICARE PAYMENT FOR PHYSICIANS’ SERVICES.(f) COLLABORATING WITH THE PHYSICIAN, PRACTITIONER, AND OTHER STAKEHOLDER COMMUNITIES TO IMPROVE RESOURCE USE MEASUREMENT.(2) DEVELOPMENT OF CARE EPISODE AND PATIENT CONDITION GROUPS AND CLASSIFICATION CODES.—(D) DEVELOPMENT OF PROPOSED CLASSIFICATION CODES.—(i) IN GENERAL.—Taking into account the information described in subparagraph (B) and the information received under subparagraph (C), the Secretary shall—(I) establish care episode groups and patient condition groups, which account for a target of an estimated 1⁄2 of expenditures under parts A and B (with such target increasing over time as appropriate); and (II) assign codes to such groups.(ii) CARE EPISODE GROUPS.—In establishing the care episode groups under clause (i), the Secretary shall take into account—(I) the patient’s clinical problems at the time items and services are furnished during an episode of care, such as the clinical conditions or diagnoses, whether or not inpatient hospitalization occurs, and the principal procedures or services furnished; and (II) other factors determined appropriate by the Secretary.(iii) PATIENT CONDITION GROUPS.—In establishing the patient condition groups under clause (i), the Secretary shall take into account— (I) the patient’s clinical history at the time of a medical visit, such as the patient’s combination of chronic conditions, current health status, and recent significant history (such as hospitalization and major surgery during a previous period, such as 3 months); and (II) other factors determined appropriate by the Secretary,
277© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Solution: Add an Accountability
Component to the PaymentCURRENT FFS APM – Higher Spending
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPCP
Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%
EndocrinologistOffice Visits $100 1000 $100,000 $100 1000 $100,000 +0%
Diabetes Mgt $96 1000 $96,000
P4P(180-220 Admits) $10,000 0 $0
Total Endocrin. $100,000 $196,000 +96%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 +0%Hospitalizations $10,000 250 $2,500,000 $10,000 200 $2,000,000 -20%
Total Spending 1000 $4,200,000 1000 $3,796,000 -10%
Higher Endocrinologist payment+
Lower hospitalizations=
Lower net payer spending
278© Center for Healthcare Quality and Payment Reform www.CHQPR.org
What if Increased Drug Spending
Reduced the Hospital Admissions?CURRENT FFS APM – Higher Spending
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPCP
Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%
EndocrinologistOffice Visits $100 1000 $100,000 $100 1000 $100,000 +0%
Diabetes Mgt $96 1000 $96,000
P4P(180-220 Admits) $10,000 5 $50,000
Total Endocrin. $100,000 $246,000 +146%
Pharmaceuticals $1,000 1000 $1,000,000 $1,500 1000 $1,500,000 +50%Hospitalizations $10,000 250 $2,500,000 $10,000 175 $1,750,000 -30%
Total Spending 1000 $4,200,000 1000 $4,096,000 -3%
Higher Endocrinologist payment+
Higher drug spending+
Lower hospitalizations=
Higher net payer spending
279© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Solution: Tie Accountability to
All Substitutable ServicesCURRENT FFS APM – Higher Spending
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPCP
Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%
EndocrinologistOffice Visits $100 1000 $100,000 $100 1000 $100,000 +0%
Diabetes Mgt $96 1000 $96,000
P4P ($2800-$3200) $0 1000 $0
Total Endocrin. $100,000 $196,000 +96%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 +0%Hospitalizations $10,000 250 $2,500,000 $10,000 175 $1,750,000 -30%
Drug + Hospital $3,000 1000 $3,000,000
Total Spending 1000 $4,200,000 1000 $3,796,000 -10%
280© Center for Healthcare Quality and Payment Reform www.CHQPR.org
No Bonus Payment if Admission
Reduction Offset by Drug CostsCURRENT FFS APM – Higher Spending
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPCP
Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%
EndocrinologistOffice Visits $100 1000 $100,000 $100 1000 $100,000 +0%
Diabetes Mgt $96 1000 $96,000
P4P ($2800-$3200) ($50) 1000 ($50,000)
Total Endocrin. $100,000 $146,000 +46%
Pharmaceuticals $1,000 1000 $1,000,000 $1,500 1000 $1,500,000 +50%Hospitalizations $10,000 250 $2,500,000 $10,000 175 $1,750,000 -30%
Other Spending $3,250 1000 $3,250,000
Total Spending 1000 $4,200,000 1000 $3,996,000 -5%
281© Center for Healthcare Quality and Payment Reform www.CHQPR.org
CMS Wants to Make Each Provider
Accountable for Total Spending
Spending onAll
Servicesthe
ACO’sPatientsReceive
Healthcare
Spe
ndin
g
Paymentsto
ACOs
ACOs
Spending onAll
Servicesthe
Oncologists’PatientsReceiveDuringChemo
Treatment
Paymentsto
Oncologists
OncologyCare
Model
Spending onAll
ChronicDisease
CareandCare
Related toJoint
SurgeryAfter
Discharge
Paymentsto
Hospitals
ComprehensiveCare for
Joint Replacement
Spending onAll
Servicesthe
PCP’sPatientsReceive
Paymentsto
PCPs
ComprehensivePrimary Care
Initiative
282© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Accountability Must Be Focused on
What Each Provider Can Influence
Spendingthe
ProviderCannotControl
OtherSpending
theProvider
CanControl
orInfluence
Healthcare
Spe
ndin
g
e.g., PCPs can’t reduce surgical site infections
e.g., surgeons can’t prevent diabetic foot ulcers
e.g., oncologists can’t prevent cancer
e.g., PCPs can help diabetics avoid amputations
e.g., surgeons can reduce surgical site infections
e.g., oncologists can reduce complications from
drug toxicity
Paymentsto the
Provider
Total SpendingPer Patient
283© Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Critical Element is
Shared, Trusted Data
• Physicians need to know the current utilization and costs for
their patients and the likely impact of care changes to know
whether the payment amount will cover the costs of delivering
redesigned care to the patients
• Purchasers/Payers needs to know the current utilization and
costs to know whether the proposed payment amount is a
better deal than they have today
• Both sets of data have to match in order for providers and
payers to agree on the new approach!
284© Center for Healthcare Quality and Payment Reform www.CHQPR.org
How Do Patients Know Physicians
Won’t Stint to Reduce Spending?CURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPCP
Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%
EndocrinologistOffice Visits $100 1000 $100,000 $100 1000 $100,000 +0%
Diabetes Mgt $96 1000 $96,000
P4P ($2800-$3200) $50 1000 $50,000
Total Endocrin. $100,000 $246,000 +146%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 0%Hospitalizations $10,000 250 $2,500,000 $10,000 175 $1,750,000 -30%
Other Spending $3,000 1000 $3,000,000
Total Spending 1000 $4,200,000 1000 $3,796,000 -10%
285© Center for Healthcare Quality and Payment Reform www.CHQPR.org
How Do Patients Know Physicians
Won’t Stint to Reduce Spending?CURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPCP
Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%
EndocrinologistOffice Visits $100 1000 $100,000 $100 1000 $100,000 +0%
Diabetes Mgt $96 1000 $96,000
P4P ($2800-$3200) $50 1000 $50,000
Total Endocrin. $100,000 $246,000 +146%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 0%Hospitalizations $10,000 250 $2,500,000 $10,000 175 $1,750,000 -30%
Other Spending $3,000 1000 $3,000,000
Total Spending 1000 $4,200,000 1000 $3,796,000 -10%
Add a Mechanism for Protecting Against Underuse
286© Center for Healthcare Quality and Payment Reform www.CHQPR.org
How Do You Protect
Against Underuse?
• Use Quality Measures to Adjust Payment?– No single measure of quality exists, so multiple measures are used
– More measures get added every year, but major gaps exist
– Every payer uses a different set of measures
– Claims-based measures fail to capture relevant clinical information
– Process measures may constrain flexibility
– Significant problems in reliability and risk adjustment for many measures
287© Center for Healthcare Quality and Payment Reform www.CHQPR.org
How Do You Protect
Against Underuse?
• Use Quality Measures to Adjust Payment?– No single measure of quality exists, so multiple measures are used
– More measures get added every year, but major gaps exist
– Every payer uses a different set of measures
– Claims-based measures fail to capture relevant clinical information
– Process measures may constrain flexibility
– Significant problems in reliability and risk adjustment for many measures
• Develop and Follow Appropriate Use Criteria– Focus cost accountability on services where appropriate use criteria exist
• Savings result from avoiding unnecessary and inappropriate utilization• No reward for avoiding use of necessary/appropriate services
– Physicians have flexibility to adjust services where no evidence exists
– Tying payment to appropriate use creates a business case for maintenance of registries used to develop and refine appropriate use criteria
– Examples: ASCO Patient-Centered Oncology Payment, ACC SMARTCare
288© Center for Healthcare Quality and Payment Reform www.CHQPR.org
APM #1:
Payment for a High-Value Service
• Continuation of existing FFS payments
• Payment for additional services
• Measurement of avoidable utilization and/or quality/outcomes
• Adjustment of payment amountsbased on performance
• Updating payments over time
289© Center for Healthcare Quality and Payment Reform www.CHQPR.org
APM #1:
Payment for a High-Value Service
• Continuation of existing FFS payments
• Payment for additional services
• Measurement of avoidable utilization and/or quality/outcomes
• Adjustment of payment amountsbased on performance
• Updating payments over time
Is MIPS Better Than an APM?
290© Center for Healthcare Quality and Payment Reform www.CHQPR.org
MIPS Includes Accountability for
Resource Use by Physicians
MIPS
“Merit-Based
Incentive
Payment
System”
Quality
Resource Use“Clinical Practice Improvement Activities”
EHR “Meaningful Use”
50%
10%
25%
15%
30%
30%
25%
15%
291© Center for Healthcare Quality and Payment Reform www.CHQPR.org
MIPS Requires Accountability
With No Change in FFS StructureCURRENT FFS MIPS – Higher Spending
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPCP
Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%
EndocrinologistOffice Visits $100 1000 $100,000 $100 1000 $100,000 +0%
Diabetes Mgt $0 $0
P4P (+/- 9% FFS) $0 1000 $0
Total Endocrin. $100,000 $100,000 +0%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 +0%Hospitalizations $10,000 250 $2,500,000 $10,000 200 $2,000,000 -20%
Other Spending $3,000 1000 $3,000,000
Total Spending 1000 $4,200,000 1000 $3,700,000 -12%
292© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Failure to Control Other Spending
Could Result in FFS ReductionsCURRENT FFS MIPS – Higher Spending
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPCP
Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%
EndocrinologistOffice Visits $100 1000 $100,000 $100 1000 $100,000 +0%
Diabetes Mgt $0 $0
P4P (+/- 9% FFS) ($9) 1000 ($9,000)
Total Endocrin. $100,000 $91,000 -9%
Pharmaceuticals $1,000 1000 $1,000,000 $1,500 1000 $1,500,000 +50%Hospitalizations $10,000 250 $2,500,000 $10,000 210 $2,100,000 -16%
Other Spending $3,600 1000 $3,600,000
Total Spending 1000 $4,200,000 1000 $4,291,000 +2%
293© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Is Shared Savings Easier?
294© Center for Healthcare Quality and Payment Reform www.CHQPR.org
In Shared Savings, No Upfront
Funds for New Physician Costs
295© Center for Healthcare Quality and Payment Reform www.CHQPR.org
If Savings Are Achieved in Year 1,
Shares Are Distributed in Year 2
296© Center for Healthcare Quality and Payment Reform www.CHQPR.org
But the Year 2 Payment Has to
Cover the Year 2 Costs
297© Center for Healthcare Quality and Payment Reform www.CHQPR.org
And The Physician Still Hasn’t
Recouped the Year 1 Costs
298© Center for Healthcare Quality and Payment Reform www.CHQPR.org
So Shared Savings Is Often
a Win-Lose
299© Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Good APM Marries Resources &
Accountability TogetherCURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPCP
Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%
EndocrinologistOffice Visits $100 1000 $100,000 $100 1000 $100,000 +0%
Diabetes Mgt $96 1000 $96,000
P4P ($2800-$3200) $0 1000 $0
Total Endocrin. $100,000 $196,000 +96%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 0%Hospitalizations $10,000 250 $2,500,000 $10,000 200 $2,000,000 -20%
Other Spending $3,000 1000 $3,000,000
Total Spending 1000 $4,200,000 1000 $3,796,000 -10%
300© Center for Healthcare Quality and Payment Reform www.CHQPR.org
APM #1:
Payment for a High-Value Service
• Continuation of existing FFS payments
• Payment for additional services
• Measurement of avoidable utilization and/or quality/outcomes
• Adjustment of payment amountsbased on performance
• Updating payments over time
301© Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Endocrinologist Needs a
Business Plan for Improving CareCURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgEndocrinologistRevenues
Office Visits $100 1000 $100,000 $100 1000 $100,000 0%
Diabetes Mgt $96 1000 $96,000
Total Revenue $100,000 $196,000 +96%
EndocrinologistCosts
Current Costs $95,000 $95,000
Physician Time $10,000
Nurse Care Mgr $80,000
Total Costs $95,000 $185,000 +95%
Profit Margin $5,000 $11,000 +120%
302© Center for Healthcare Quality and Payment Reform www.CHQPR.org
What if Better Care for Patients
Means Fewer MD Office Visits?CURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgEndocrinologistRevenues
Office Visits $100 1000 $100,000 $50 1000 $50,000 -50%
Diabetes Mgt $96 1000 $96,000
Total Revenue $100,000 $146,000 +46%
EndocrinologistCosts
Current Costs $95,000 $95,000
Physician Time $10,000
Nurse Care Mgr $80,000
Total Costs $95,000 $185,000 +95%
Profit Margin $5,000 ($39,000) -880%
303© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Replace FFS Payments With
Per Patient Bundled PaymentsCURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPCP
Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%
EndocrinologistOffice Visits $100 1000 $100,000 X 1000 $0
Diabetes Mgt $0 1000 $0 $196 1000 $196,000
P4P ($2800-$3200) $0 1000 $0
Total Endocrin. $100,000 $196,000 +96%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 0%Hospitalizations $10,000 250 $2,500,000 $10,000 200 $2,000,000 -20%
Other Spending $3,000 1000 $3,000,000
Total Spending 1000 $4,200,000 1000 $3,796,000 -10%
304© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Same Accountability Measure,
But More Flexibility/ProtectionCURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPCP
Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%
EndocrinologistOffice Visits $100 1000 $100,000 X 1000 $0
Diabetes Mgt $0 1000 $0 $196 1000 $196,000
P4P ($2800-$3200) $0 1000 $0
Total Endocrin. $100,000 $196,000 +96%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 0%Hospitalizations $10,000 250 $2,500,000 $10,000 200 $2,000,000 -20%
Other Spending $3,000 1000 $3,000,000
Total Spending 1000 $4,200,000 1000 $3,796,000 -10%
305© Center for Healthcare Quality and Payment Reform www.CHQPR.org
APM #2: Condition-Based
Payment for a Physician’s Services
306© Center for Healthcare Quality and Payment Reform www.CHQPR.org
APM #2: Condition-Based
Payment for a Physician’s Services
• Payment based on the patient’s health condition rather than specific services delivered
• Payment replaces some or all current FFS payments
• Payment amounts stratified based on patient needs
• Measurement of appropriateness and/or outcomes
• Adjustment of payments based on performance
• Updating payment amounts over time
307© Center for Healthcare Quality and Payment Reform www.CHQPR.org
What About the PCP?
CURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPCP
Office Visits $600 1000 $600,000 $600 1000 $600,000 +0%
EndocrinologistOffice Visits $100 1000 $100,000 X 1000 $0
Diabetes Mgt $196 1000 $196,000
P4P ($2800-$3200) $0 1000 $0
Total Endocrin. $100,000 $196,000 +96%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 0%Hospitalizations $10,000 250 $2,500,000 $10,000 200 $2,000,000 -20%
Other Spending $3,000 1000 $3,000,000
Total Spending 1000 $4,200,000 1000 $3,796,000 -10%
308© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Higher Pay for PCP is Feasible
If Savings Are High EnoughCURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPCP
Office Visits $600 1000 $600,000 $660 1000 $660,000 +10%
EndocrinologistOffice Visits $100 1000 $100,000 X 1000 $0
Diabetes Mgt $196 1000 $196,000
P4P ($2800-$3200) $0 1000 $0
Total Endocrin. $100,000 $196,000 +96%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 0%Hospitalizations $10,000 250 $2,500,000 $10,000 200 $2,000,000 -20%
Other Spending $3,000 1000 $3,000,000
Total Spending 1000 $4,200,000 1000 $3,856,000 -8%
309© Center for Healthcare Quality and Payment Reform www.CHQPR.org
PCP May Be Unhappy If Specialist
Gets All Performance-Based PayCURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPCP
Office Visits $600 1000 $600,000 $660 1000 $660,000 +10%
EndocrinologistOffice Visits $100 1000 $100,000 X 1000 $0
Diabetes Mgt $196 1000 $196,000
P4P ($2800-$3200) $50 1000 $50,000
Total Endocrin. $100,000 $246,000 +146%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 0%Hospitalizations $10,000 250 $2,500,000 $10,000 175 $1,750,000 -30%
Other Spending $2,750 1000 $2,750,000
Total Spending 1000 $4,200,000 1000 $3,656,000 -13%
310© Center for Healthcare Quality and Payment Reform www.CHQPR.org
PCP May Be Unhappy If Specialist
Gets All Performance-Based PayCURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPCP
Office Visits $600 1000 $600,000 $660 1000 $660,000 +10%
EndocrinologistOffice Visits $100 1000 $100,000 X 1000 $0
Diabetes Mgt $196 1000 $196,000
P4P ($2800-$3200) $50 1000 $50,000
Total Endocrin. $100,000 $246,000 +146%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 0%Hospitalizations $10,000 250 $2,500,000 $10,000 175 $1,750,000 -30%
Other Spending $2,750 1000 $2,750,000
Total Spending 1000 $4,200,000 1000 $3,656,000 -13%
In other CMS programs, the question is:
Who “gets” the shared savings payment
or who gets credit for the performance?
311© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Specialist May Be Unhappy If PCP
Has No Accountability for ResultsCURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPCP
Office Visits $600 1000 $600,000 $660 1000 $660,000 +10%
EndocrinologistOffice Visits $100 1000 $100,000 X 1000 $0
Diabetes Mgt $196 1000 $196,000
P4P ($2800-$3200) ($100) 1000 ($100,000)
Total Endocrin. $100,000 $96,000 -4%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 0%Hospitalizations $10,000 250 $2,500,000 $10,000 230 $2,300,000 -8%
Other Spending $3,300 1000 $3,300,000
Total Spending 1000 $4,200,000 1000 $4,056,000 -3.4%
312© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Option 1: Create Separate
Performance-Based PaymentsCURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPCP
Office Visits $600 1000 $600,000 $660 1000 $660,000 +10%
P4P ($2800-$3200) ($50) 1000 ($50,000)
Total PCP $600,000 $610,000 +2%
EndocrinologistOffice Visits $100 1000 $100,000 X 1000 $0
Diabetes Mgt $196 1000 $196,000
P4P ($2800-$3200) ($50) 1000 ($50,000)
Total Endocrin. $100,000 $146,000 +46%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 0%Hospitalizations $10,000 250 $2,500,000 $10,000 230 $2,300,000 -8%
Other Spending $3,300 1000 $3,300,000
Total Spending 1000 $4,200,000 1000 $4,056,000 -3.4%
313© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Option 2: Create a Bundled
Payment for PCP+EndocrinologistCURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPhysicians
PCP $600 1000 $600,000 $660 1000 $660,000 +10%
Endocrinologist $100 1000 $100,000 $196 1000 $196,000 +96%
P4P ($2800-$3200) $50 1000 $50,000
Total Physicians $700 1000 $700,000 $906 1000 $906,000 +29%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 0%Hospitalizations $10,000 250 $2,500,000 $10,000 175 $1,750,000 -30%
Other Spending $2,750 1000 $2,750,000
Total Spending 1000 $4,200,000 1000 $3,656,000 -13%
314© Center for Healthcare Quality and Payment Reform www.CHQPR.org
APM #3:
Multi-Physician Bundled Payment
315© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physicians Have to Decide How to
Divide Performance PaymentsCURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPhysicians
PCP $600 1000 $600,000 $660 1000 $660,000 +10%
Endocrinologist $100 1000 $100,000 $196 1000 $196,000 +96%
P4P ($2800-$3200) $50 1000 $50,000
Total Physicians $700 1000 $700,000 $906 1000 $906,000 +29%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 0%Hospitalizations $10,000 250 $2,500,000 $10,000 175 $1,750,000 -30%
Other Spending $2,750 1000 $2,750,000
Total Spending 1000 $4,200,000 1000 $3,656,000 -13%
?
316© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physicians Also Have Ability to
Change FFS PaymentCURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPhysicians
PCP $600 1000 $600,000 $720 1000 $660,000 +20%
Endocrinologist $100 1000 $100,000 $136 1000 $196,000 +36%
P4P ($2800-$3200) $0 1000 $0
Total Physicians $700 1000 $700,000 $856 1000 $856,000 +22%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 0%Hospitalizations $10,000 250 $2,500,000 $10,000 200 $2,000,000 -20%
Other Spending $3,000 1000 $3,000,000
Total Spending 1000 $4,200,000 1000 $3,856,000 -8%
317© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Flexibility Allows Creation of
“Specialty Medical Home”PCP-Managed Patients Endocrinologist-Managed
$/Pt # Pts Total $ $/Pt # Pts Total $Physicians
PCP $500 500 $250,000 $200 500 $100,000
Endocrinologist $212 500 $106,000 $800 500 $400,000
Total Physicians $712 500 $356,000 $906 500 $500,000
Pharmaceuticals $500 500 $500,000 $1,500 500 $750,000Hospitalizations $10,000 50 $500,000 $10,000 150 $1,500,000
Total Spending 500 $1,106,000 500 $2,750,000
10% Hospitalization Rate 30% Hospitalization Rate
318© Center for Healthcare Quality and Payment Reform www.CHQPR.org
APM #3:
Multi-Physician Bundled Payment
• Single payment for services delivered by 2+ physicians
• Payment may supplement or replace FFS payments
• Patient agrees to use the multi-physician team
• Bundled payment is paid to an “alternative payment entity” (e.g., a PCP-Endocrinologist LLC)
• Payment amounts stratified based on patient needs
• Measurement of avoidable utilization
• Measurement of appropriateness, quality, and/or outcomes
• Adjustment of payments based on performance
• Updating payment amounts over time
319© Center for Healthcare Quality and Payment Reform www.CHQPR.org
How Flexible, Adequate Payment
is Better for Patients & Physicians
320© Center for Healthcare Quality and Payment Reform www.CHQPR.org
How Flexible, Adequate Payment
is Better for Patients & Physicians
Current Fee-for-Service• Physicians only get paid when they
have office visits with patients• The PCP doesn’t get paid to
answer a call from the patient• The specialist doesn’t get paid to
answer a call from a PCP that might avoid the need for a visit
• If the specialist doesn’t see the patient, they don’t get paid
• If the patient sees the specialist, the PCP doesn’t get paid
• The physicians get paid the same for a visit regardless of how complex the patient’s needs are
• There is no payment if patients receive help from nurses
• The physicians get paid the same amount regardless of whether the patient has avoidable complications
• Physicians have to document every visit and justify the level of the visitbased on payer requirements
321© Center for Healthcare Quality and Payment Reform www.CHQPR.org
How Flexible, Adequate Payment
is Better for Patients & Physicians
Current Fee-for-Service• Physicians only get paid when they
have office visits with patients• The PCP doesn’t get paid to
answer a call from the patient• The specialist doesn’t get paid to
answer a call from a PCP that might avoid the need for a visit
• If the specialist doesn’t see the patient, they don’t get paid
• If the patient sees the specialist, the PCP doesn’t get paid
• The physicians get paid the same for a visit regardless of how complex the patient’s needs are
• There is no payment if patients receive help from nurses
• The physicians get paid the same amount regardless of whether the patient has avoidable complications
• Physicians have to document every visit and justify the level of the visitbased on payer requirements
Multi-Physician Bundles• Physicians get paid for managing
care of patients with the condition, regardless of whether they have an office visit
• Physicians have the flexibility to determine which patients need to be seen when and by whom
• Physicians have the flexibility to use the payment to hire nurses or other staff to help patients
• Payments are higher for managing more complex patients
• Physicians that do a better job of reducing avoidable complications make more money
• Physicians have to document the presence of the condition and the patient’s designation of the physicians as the managers of their care, and they only document individual services to the extent needed clinically
322© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Does the Hospital Have to Lose
for Everyone Else to Win?CURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPhysicians
PCP $600 1000 $600,000 $660 1000 $660,000 +10%
Endocrinologist $100 1000 $100,000 $196 1000 $196,000 +96%
P4P ($2800-$3200) $50 1000 $50,000
Total Physicians $700 1000 $700,000 $906 1000 $906,000 +29%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 0%Hospitalizations $10,000 250 $2,500,000 $10,000 175 $1,750,000 -30%
Other Spending $2,750 1000 $2,750,000
Total Spending 1000 $4,200,000 1000 $3,656,000 -13%
323© Center for Healthcare Quality and Payment Reform www.CHQPR.org
We Have to Understand the
Hospital’s Cost StructureCURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPhysicians
PCP $600 1000 $600,000 $660 1000 $660,000 +10%
Endocrinologist $100 1000 $100,000 $196 1000 $196,000 +96%
P4P $50 1000 $50,000
Total Physicians $700 1000 $700,000 $906 1000 $906,000 +29%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 0%Hospitalizations
Fixed (60%) $6,000 $1,500,000
Variable (37%) $3,700 $925,000
Margin ( 3%) $300 $75,000
Total Hospital $10,000 250 $2,500,000
Total Spending 1000 $4,200,000
324© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Now, If the Number of Admissions
is Reduced…CURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPhysicians
PCP $600 1000 $600,000 $660 1000 $660,000 +10%
Endocrinologist $100 1000 $100,000 $196 1000 $196,000 +96%
P4P $50 1000 $50,000
Total Physicians $700 1000 $700,000 $906 1000 $906,000 +29%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 0%Hospitalizations
Fixed (60%) $6,000 $1,500,000
Variable (37%) $3,700 $925,000
Margin ( 3%) $300 $75,000
Total Hospital $10,000 250 $2,500,000 175
Total Spending 1000 $4,200,000
325© Center for Healthcare Quality and Payment Reform www.CHQPR.org
…Fixed Costs Will Remain the
Same (in the Short Run)…CURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPhysicians
PCP $600 1000 $600,000 $660 1000 $660,000 +10%
Endocrinologist $100 1000 $100,000 $196 1000 $196,000 +96%
P4P $50 1000 $50,000
Total Physicians $700 1000 $700,000 $906 1000 $906,000 +29%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 0%Hospitalizations
Fixed (60%) $6,000 $1,500,000 $1,500,000 0%
Variable (37%) $3,700 $925,000 $3,700
Margin ( 3%) $300 $75,000
Total Hospital $10,000 250 $2,500,000 175
Total Spending 1000 $4,200,000
326© Center for Healthcare Quality and Payment Reform www.CHQPR.org
…Variable Costs Will Go Down In
Proportion to Admissions…CURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPhysicians
PCP $600 1000 $600,000 $660 1000 $660,000 +10%
Endocrinologist $100 1000 $100,000 $196 1000 $196,000 +96%
P4P $50 1000 $50,000
Total Physicians $700 1000 $700,000 $906 1000 $906,000 +29%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 0%Hospitalizations
Fixed (60%) $6,000 $1,500,000 $1,500,000 0%
Variable (37%) $3,700 $925,000 $3,700 $647,500 -30%
Margin ( 3%) $300 $75,000
Total Hospital $10,000 250 $2,500,000 175
Total Spending 1000 $4,200,000
327© Center for Healthcare Quality and Payment Reform www.CHQPR.org
…And Even With a Higher Margin
For the Hospital…CURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPhysicians
PCP $600 1000 $600,000 $660 1000 $660,000 +10%
Endocrinologist $100 1000 $100,000 $196 1000 $196,000 +96%
P4P $50 1000 $50,000
Total Physicians $700 1000 $700,000 $906 1000 $906,000 +29%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 0%Hospitalizations
Fixed (60%) $6,000 $1,500,000 $1,500,000 0%
Variable (37%) $3,700 $925,000 $3,700 $647,500 -30%
Margin ( 3%) $300 $75,000 $82,500 +10%
Total Hospital $10,000 250 $2,500,000 175
Total Spending 1000 $4,200,000
328© Center for Healthcare Quality and Payment Reform www.CHQPR.org
…Revenue is Reduced …
CURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPhysicians
PCP $600 1000 $600,000 $660 1000 $660,000 +10%
Endocrinologist $100 1000 $100,000 $196 1000 $196,000 +96%
P4P $50 1000 $50,000
Total Physicians $700 1000 $700,000 $906 1000 $906,000 +29%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 0%Hospitalizations
Fixed (60%) $6,000 $1,500,000 $1,500,000 0%
Variable (37%) $3,700 $925,000 $3,700 $647,500 -30%
Margin ( 3%) $300 $75,000 $82,500 +10%
Total Hospital $10,000 250 $2,500,000 175 $2,230,000 -11%
Total Spending 1000 $4,200,000
329© Center for Healthcare Quality and Payment Reform www.CHQPR.org
…And the Payer Still Saves Money
CURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPhysicians
PCP $600 1000 $600,000 $660 1000 $660,000 +10%
Endocrinologist $100 1000 $100,000 $196 1000 $196,000 +96%
P4P $50 1000 $50,000
Total Physicians $700 1000 $700,000 $906 1000 $906,000 +29%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 0%Hospitalizations
Fixed (60%) $6,000 $1,500,000 $1,500,000 0%
Variable (37%) $3,700 $925,000 $3,700 $647,500 -30%
Margin ( 3%) $300 $75,000 $82,500 +10%
Total Hospital $10,000 250 $2,500,000 175 $2,230,000 -11%
Total Spending 1000 $4,200,000 1000 $4,136,000 -1.5%
330© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Win-Win-Win-Win for Patients,
Physicians, Hospital, and PayerCURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPhysicians
PCP $600 1000 $600,000 $660 1000 $660,000 +10%
Endocrinologist $100 1000 $100,000 $196 1000 $196,000 +96%
P4P $50 1000 $50,000
Total Physicians $700 1000 $700,000 $906 1000 $906,000 +29%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 0%Hospitalizations
Fixed (60%) $6,000 $1,500,000 $1,500,000 0%
Variable (37%) $3,700 $925,000 $3,700 $647,500 -30%
Margin ( 3%) $300 $75,000 $82,500 +10%
Total Hospital $10,000 250 $2,500,000 175 $2,230,000 -11%
Total Spending $4,200 1000 $4,200,000 $4,136 1000 $4,136,000 -1.5%
Physicians Win
Payer WinsHospital Wins
331© Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Payment Model Supports
This Approach?CURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPhysicians
PCP $600 1000 $600,000 $660 1000 $660,000 +10%
Endocrinologist $100 1000 $100,000 $196 1000 $196,000 +96%
P4P $50 1000 $50,000
Total Physicians $700 1000 $700,000 $906 1000 $906,000 +29%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 0%Hospitalizations
Fixed (60%) $6,000 $1,500,000 $1,500,000 0%
Variable (37%) $3,700 $925,000 $3,700 $647,500 -30%
Margin ( 3%) $300 $75,000 $82,500 +10%
Total Hospital $10,000 250 $2,500,000 175 $2,230,000 -11%
Total Spending $4,200 1000 $4,200,000 $4,136 1000 $4,136,000 -1.5%
332© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Solution: Pay Based on the Patient’s
Condition, Not the ServicesCURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPhysicians
PCP $600 1000 $600,000
Endocrinologist $100 1000 $100,000
P4P
Total Physicians $700 1000 $700,000
Pharmaceuticals $1,000 1000 $1,000,000Hospitalizations
Fixed (60%) $6,000 $1,500,000
Variable (37%) $3,700 $925,000
Margin ( 3%) $300 $75,000
Total Hospital $10,000 250 $2,500,000
Total Spending $4,200 1000 $4,200,000
333© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Plan to Offer Care of the Condition
at a Lower Cost Per PatientCURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPhysicians
PCP $600 1000 $600,000
Endocrinologist $100 1000 $100,000
P4P
Total Physicians $700 1000 $700,000
Pharmaceuticals $1,000 1000 $1,000,000Hospitalizations
Fixed (60%) $6,000 $1,500,000
Variable (37%) $3,700 $925,000
Margin ( 3%) $300 $75,000
Total Hospital $10,000 250 $2,500,000
Total Spending $4,200 1000 $4,200,000 $4,136 -1.5%
334© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Use the Payment as a Budget to
Redesign CareCURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPhysicians
PCP $600 1000 $600,000
Endocrinologist $100 1000 $100,000
P4P
Total Physicians $700 1000 $700,000 $906,000 +29%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000,000 0%Hospitalizations
Fixed (60%) $6,000 $1,500,000
Variable (37%) $3,700 $925,000
Margin ( 3%) $300 $75,000
Total Hospital $10,000 250 $2,500,000 $2,230,000 -11%
Total Spending $4,200 1000 $4,200,000 $4,136 1000 $4,136,000 -1.5%
335© Center for Healthcare Quality and Payment Reform www.CHQPR.org
And Let Physicians and Hospital
Decide How They Should Be PaidCURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPhysicians
PCP $600 1000 $600,000 $660 1000 $660,000 +10%
Endocrinologist $100 1000 $100,000 $196 1000 $196,000 +96%
P4P $50 1000 $50,000
Total Physicians $700 1000 $700,000 $906 1000 $906,000 +29%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 0%Hospitalizations
Fixed (60%) $6,000 $1,500,000 $1,500,000 0%
Variable (37%) $3,700 $925,000 $3,700 $647,500 -30%
Margin ( 3%) $300 $75,000 $82,500 +10%
Total Hospital $10,000 250 $2,500,000 175 $2,230,000 -11%
Total Spending $4,200 1000 $4,200,000 $4,136 1000 $4,136,000 -1.5%
336© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Condition-Based Payment Puts
Providers in Charge of CompensationCURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPhysicians
PCP $600 1000 $600,000 $660 1000 $660,000 +10%
Endocrinologist $100 1000 $100,000 $196 1000 $196,000 +96%
P4P $50 1000 $50,000
Total Physicians $700 1000 $700,000 $906 1000 $906,000 +29%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 0%Hospitalizations
Fixed (60%) $6,000 $1,500,000 $1,500,000 0%
Variable (37%) $3,700 $925,000 $3,700 $647,500 -30%
Margin ( 3%) $300 $75,000 $82,500 +10%
Total Hospital $10,000 250 $2,500,000 175 $2,230,000 -11%
Total Spending $4,200 1000 $4,200,000 $4,136 1000 $4,136,000 -1.5%
337© Center for Healthcare Quality and Payment Reform www.CHQPR.org
APM #7:
(Full) Condition-Based Payment
338© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Under Condition-Based Payment,
All Services Are Now CostsCURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPhysicians
PCP $600 1000 $600,000 $660 1000 $660,000 +10%
Endocrinologist $100 1000 $100,000 $196 1000 $196,000 +96%
P4P $50 1000 $50,000
Total Physicians $700 1000 $700,000 $906 1000 $906,000 +29%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 0%Hospitalizations
Fixed (60%) $6,000 $1,500,000 $1,500,000 0%
Variable (37%) $3,700 $925,000 $3,700 $647,500 -40%
Margin ( 3%) $300 $75,000 $82,500 +10%
Total Hospital $10,000 250 $2,500,000 175 $2,230,000 -11%
Total Spending $4,200 1000 $4,200,000 $4,136 1000 $4,136,000 -1.5%
Condition-Based Pmt $4,136 1000 $4,136,000 -1.5%
Margin on Payment $0
COSTS
REVENUES
339© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Under Condition-Based Payment,
Better Results Higher MarginsCURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPhysicians
PCP $600 1000 $600,000 $660 1000 $660,000 +10%
Endocrinologist $100 1000 $100,000 $196 1000 $196,000 +96%
P4P $50 1000 $50,000
Total Physicians $700 1000 $700,000 $906 1000 $906,000 +29%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 0%Hospitalizations
Fixed (60%) $6,000 $1,500,000 $1,500,000 0%
Variable (37%) $3,700 $925,000 $3,700 $555,000 -40%
Margin ( 3%) $300 $75,000 $82,500 +10%
Total Hospital $10,000 250 $2,500,000 150 $2,137,000 -15%
Total Spending $4,200 1000 $4,200,000 $4,043,500 -3.7%
Condition-Based Pmt $4,136 1000 $4,136,000 -1.5%
Margin on Payment $92,500
340© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Higher Margins Are Returned to
Providers, Not PayersCURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPhysicians
PCP $600 1000 $600,000 $660 1000 $660,000 +10%
Endocrinologist $100 1000 $100,000 $196 1000 $196,000 +96%
P4P $100 1000 $100,000
Total Physicians $700 1000 $700,000 $906 1000 $956,000 +37%
Pharmaceuticals $1,000 1000 $1,000,000 $1,000 1000 $1,000,000 0%Hospitalizations
Fixed (60%) $6,000 $1,500,000 $1,500,000 0%
Variable (37%) $3,700 $925,000 $3,700 $555,000 -40%
Margin ( 3%) $300 $75,000 $125,000 +67%
Total Hospital $10,000 250 $2,500,000 150 $2,180,000 -13%
Total Spending $4,200 1000 $4,200,000 $4,136,000 -1.5%
Condition-Based Pmt $4,136 1000 $4,136,000 -1.5%
Margin on Payment $0
341© Center for Healthcare Quality and Payment Reform www.CHQPR.org
What if a New Drug Helps
Reduce Hospital Admissions?CURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPhysicians
PCP $600 1000 $600,000 $660 1000 $660,000 +10%
Endocrinologist $100 1000 $100,000 $196 1000 $196,000 +96%
P4P $50 1000 $50,000
Total Physicians $700 1000 $700,000 $906 1000 $906,000 +29%
PharmaceuticalsCurrent Drugs $1,000 1000 $1,000,000 $1,000 0 $0
New Medication $1,250 1000 $1,250,000
Total Rx 1000 $1,000,000 1000 $1,250,000 +25%
Hospitalizations
Fixed (60%) $6,000 $1,500,000 $1,500,000 0%
Variable (37%) $3,700 $925,000 $3,700 $462,500 -50%
Margin ( 3%) $300 $75,000 $82,500 +10%
Total Hospital $10,000 250 $2,500,000 125 $2,045,000 -15%
Total Spending $4,200 1000 $4,200,000 $4,201,000 0.0%
Condition-Based Payment $4,136 1000 $4,136,000 -1.5%
Margin on Payment ($65,000)
342© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Under APM, The Drug Must Be
Cost-Effective for ProvidersCURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPhysicians
PCP $600 1000 $600,000 $660 1000 $660,000 +10%
Endocrinologist $100 1000 $100,000 $196 1000 $196,000 +96%
P4P $50 1000 $50,000
Total Physicians $700 1000 $700,000 $906 1000 $906,000 +29%
PharmaceuticalsCurrent Drugs $1,000 1000 $1,000,000 $1,000 0 $0
New Medication $1,250 1000 $1,250,000
Total Rx 1000 $1,000,000 1000 $1,250,000 +25%
Hospitalizations
Fixed (60%) $6,000 $1,500,000 $1,500,000 0%
Variable (37%) $3,700 $925,000 $3,700 $462,500 -50%
Margin ( 3%) $300 $75,000 $82,500 +10%
Total Hospital $10,000 250 $2,500,000 125 $2,045,000 -15%
Total Spending $4,200 1000 $4,200,000 $4,201,000 0.0%
Condition-Based Payment $4,136 1000 $4,136,000 -1.5%
Margin on Payment ($65,000)
343© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physicians Can Target the Drug to
Patients Who Will Most BenefitCURRENT FFS APM
$/Pt # Pts Total $ $/Pt # Pts Total $ ChgPhysicians
PCP $600 1000 $600,000 $660 1000 $660,000 +10%
Endocrinologist $100 1000 $100,000 $196 1000 $196,000 +96%
P4P $50 1000 $50,000
Total Physicians $700 1000 $700,000 $906 1000 $906,000 +29%
PharmaceuticalsCurrent Drugs $1,000 1000 $1,000,000 $1,000 800 $800,000
New Medication $1,250 200 $250,000
Total Rx 1000 $1,000,000 1000 $1,050,000 +5%
Hospitalizations
Fixed (60%) $6,000 $1,500,000 $1,500,000 0%
Variable (37%) $3,700 $925,000 $3,700 $555,000 -40%
Margin ( 3%) $300 $75,000 $82,500 +10%
Total Hospital $10,000 250 $2,500,000 150 $2,137,500 -15%
Total Spending $4,200 1000 $4,200,000 $4,093,500 -2.5%
Condition-Based Payment $4,136 1000 $4,136,000 -1.5%
Margin on Payment $42,500
344© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Condition-Based Payments Must
Stratify Patients by Risk/NeedAPM – Low Risk Patients APM – High Risk Patients
$/Pt # Pts Total $ $/Pt # Pts Total $Physicians
PCP
Endocrinologist
P4P
Total Physicians
PharmaceuticalsHospitalizations
Fixed
Variable
Margin
Total Hospital 55 120
Total Spending 500 500
11% Admission Rate 24% Admission Rate
345© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Higher Condition-Based Payment
for Higher-Need PatientsAPM – Low Risk Patients APM – High Risk Patients
$/Pt # Pts Total $ $/Pt # Pts Total $Physicians
PCP $440 500 $220,000 $880 500 $440,000
Endocrinologist $96 500 $48,000 $296 500 $148,000
P4P $25 500 $12,500 $75 500 $37,500
Total Physicians $561 500 $280,500 $1,251 500 $625,500
Pharmaceuticals $500 500 $250,000 $1,500 500 $750,000Hospitalizations
Fixed $500,000 $1,000,000
Variable $3,700 $203,500 $3,700 $444,000
Margin $27,500 $55,000
Total Hospital 55 $731,000 120 $1,499,000
Total Spending 500 $1,261,500 500 $2,874,500
APM Payment $2,523 500 $1,261,500 $5,749 500 $2,874,500
11% Admission Rate 24% Admission Rate
346© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Protections For Providers Against
Taking Inappropriate Risk• Risk Stratification: The payment rates would vary based on objective
characteristics of the patient and treatment that would be expected to result in the need for more services or increase the risk of complications.
• Outlier Payment or Individual Stop Loss Insurance: The payment would be increased if spending on an individual patient exceeds a pre-defined threshold. An alternative would be for the provider to purchase individual stop loss insurance (sometimes referred to as reinsurance) and include the cost of the insurance in the payment bundle.
• Risk Corridors or Aggregate Stop Loss Insurance: The payment would be increased if spending on all patients exceeds a pre-defined percentage above the payments. An alternative would be for the provider to purchase aggregate stop loss insurance and include the cost of the insurance in the payment bundle.
• Adjustment for External Price Changes: The payment would be adjusted for changes in the prices of drugs or services from other providers that are beyond the control of the provider accepting the payment.
• Excluded Services: Services the provider does not deliver, or order, or otherwise have the ability to influence would not be included as part of accountability measures in the payment system.
347© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Defining the Patient Population
PCPs/Specialists are Managing
FFS/PPO
• Patient may or maynot have a PCP
• Patient can receiveservices from anyphysician in thenetwork, includingmultiple physiciansdelivering servicesfor the same condition
• No physician knowswhat any other physician is doing
• No one is in charge ofcoordinating services
348© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Defining the Patient Population
PCPs/Specialists are Managing
FFS/PPO
• Patient may or maynot have a PCP
• Patient can receiveservices from anyphysician in thenetwork, includingmultiple physiciansdelivering servicesfor the same condition
• No physician knowswhat any other physician is doing
• No one is in charge ofcoordinating services
PAYER APMs
• Patients are “attributed” to PCPs and specialistsretrospectively basedon the number of officevisits they make
• Healthy patients maynot be attributed to the physicians who keptthem healthy
• Physicians may beattributed patients theyonly saw once
• Physician may be heldaccountable forspending that occurredbefore the patient beganseeing the specialist
349© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Defining the Patient Population
PCPs/Specialists are Managing
PAYER APMsCondition Management
• Patient may or maynot have a PCP
• Patient can receiveservices from anyphysician in thenetwork, includingmultiple physiciansdelivering servicesfor the same condition
• No physician knowswhat any other physician is doing
• No one is in charge ofcoordinating services
• Patients are “attributed” to PCPs and specialistsretrospectively basedon the number of officevisits they make
• Healthy patients maynot be attributed to the physicians who keptthem healthy
• Physicians may beattributed patients theyonly saw once
• Physician may be heldaccountable forspending that occurredbefore the patient beganseeing the specialist
• Patient chooses a PCPbut can change at any time
• Patient choosesspecialists or teamsto manage a specificcondition or combinationof conditions for aperiod of time
• Patients can choosespecialty teams fromdifferent health systemsfor different conditionsif they wish
• PCP is paid to providecare coordination andspecialists are paid tocommunicate/coordinate
FFS/PPO
350© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Patient Relationship Categories
Being Created Under MACRASEC. 101. REPEALING THE SUSTAINABLE GROWTH RATE (SGR) AND IMPROVING MEDICARE PAYMENT FOR PHYSICIANS’ SERVICES.(f) COLLABORATING WITH THE PHYSICIAN, PRACTITIONER, AND OTHER STAKEHOLDER COMMUNITIES TO IMPROVE RESOURCE USE MEASUREMENT.(3) ATTRIBUTION OF PATIENTS TO PHYSICIANS OR PRACTITIONERS.—(B) DEVELOPMENT OF PATIENT RELATIONSHIP CATEGORIES AND CODES.—The Secretary shall develop patient relationship categories and codes that define and distinguish the relationship and responsibility of a physician or applicable practitioner with a patient at the time of furnishing an item or service. Such patient relationship categories shall include different relationships of the physician or applicable practitioner to the patient (and the codes may reflect combinations of such categories), such as a physician or applicable practitioner who—
(i) considers themself to have the primary responsibility for the general and ongoing care for the patient over extended periods of time;
(ii) considers themself to be the lead physician or practitioner and who furnishes items and services and coordinates care furnished by other physicians or practitioners for the patient during an acute episode;
(iii) furnishes items and services to the patient on a continuing basis during an acute episode of care, but in a supportive rather than a lead role;
(iv) furnishes items and services to the patient on an occasional basis, usually at the request of another physician or practitioner; or
(v) furnishes items and services only as ordered by another physician or practitioner.
351© Center for Healthcare Quality and Payment Reform www.CHQPR.org
APM #7:
Condition-Based Payment
• Payment based on the patient’s health condition
• Payment covers multiple treatment options deliveredby the physician(s) and other providers
• Patient agrees to use the provider team for services related to the health condition
• Bundled payment is paid to an “alternative payment entity” (prospective, retrospective, or hybrid)
• Payment amounts stratified based on patient needs
• Outlier payments and risk corridors to address random variation and unusually expensive patients
• Measurement of appropriateness, quality, and/or outcomes
• Adjustment of payments based on performance
• Updating payment amounts over time
352© Center for Healthcare Quality and Payment Reform www.CHQPR.org
How Would You Design APMs for
Gastroenterology?
353© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Identify the Types of Patient
Needs That Physicians Address
InflammatoryBowel
Disease
Upper GIBleeding(NVUGIB)
Types ofPatient Needs
Addressed
ColonCancer
Screening
Other Conditions& Procedures
354© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Step 1: Identify the Opportunities
to Improve Care & Reduce Cost
InflammatoryBowel
Disease
Upper GIBleeding(NVUGIB)
Types ofPatient Needs
Addressed
Opportunitiesto Improve Care
and Reduce Cost
ColonCancer
Screening
• Deliver colonoscopyin lowest-cost way
• Improve adenoma detection rate
• Avoid complicationsin colonoscopy
• Focus on highest-riskpatients
Other Conditions& Procedures
355© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Step 2: Identify the Barriers in
the Current Payment System
InflammatoryBowel
Disease
Upper GIBleeding(NVUGIB)
Types ofPatient Needs
Addressed
Opportunitiesto Improve Care
and Reduce Cost
Barriers inCurrent
Payment System
ColonCancer
Screening
• Deliver colonoscopyin lowest-cost way
• Improve adenoma detection rate
• Avoid complicationsin colonoscopy
• Focus on highest-riskpatients
• All providers paidseparately
• No payment for outreach to high-risk patients
• Higher payment forrepeat & unnecessaryprocedures
Other Conditions& Procedures
356© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Step 3: Design Solutions to
Overcome the Barriers
InflammatoryBowel
Disease
Upper GIBleeding(NVUGIB)
Types ofPatient Needs
Addressed
Opportunitiesto Improve Care
and Reduce Cost
Barriers inCurrent
Payment System
Solutions viaAlternative
Payment Models
ColonCancer
Screening
• Deliver colonoscopyin lowest-cost way
• Improve adenoma detection rate
• Avoid complicationsin colonoscopy
• Focus on highest-riskpatients
• Bundled payment forcolonoscopy
• Warrantied paymentfor colonoscopy
• Population-basedpayment for cancer screening
• All providers paidseparately
• No payment for outreach to high-risk patients
• Higher payment forrepeat & unnecessaryprocedures
Other Conditions& Procedures
357© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Opportunities, Barriers, and
Solutions Will Differ by Condition
InflammatoryBowel
Disease
Upper GIBleeding(NVUGIB)
Types ofPatient Needs
Addressed
Opportunitiesto Improve Care
and Reduce Cost
Barriers inCurrent
Payment System
Solutions viaAlternative
Payment Models
• Reduce ED visitsand hospitalizationsdue to bleeds
• Use lowest-cost,effective intervention
• Avoid complications
• Bundled/warrantiedpayment foracute conditions
• Condition-based payment for chronicconditions
• No payment forcare management
• Financial penalty forusing lower-costprocedures
ColonCancer
Screening
• Deliver colonoscopyin lowest-cost way
• Improve adenoma detection rate
• Avoid complicationsin colonoscopy
• Focus on highest-riskpatients
• Bundled payment forcolonoscopy
• Warrantied paymentfor colonoscopy
• Population-basedpayment for cancer screening
• All providers paidseparately
• No payment for outreach to high-risk patients
• Higher payment forrepeat & unnecessaryprocedures
Other Conditions& Procedures
358© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Different Payment Models for
Different GI Conditions
InflammatoryBowel
Disease
Upper GIBleeding(NVUGIB)
Types ofPatient Needs
Addressed
Opportunitiesto Improve Care
and Reduce Cost
Barriers inCurrent
Payment System
Solutions viaAlternative
Payment Models
• Reduce ED visitsand hospitalizationsdue to bleeds
• Use lowest-cost,effective intervention
• Avoid complications
• Reduce ED visits &hospitalizations
• Reduce drug costs• Reduce absences
from work
• No payment forcare managementor proactive outreach
• No flexibility for non-face-to-face visits
• Add-on payment forcare managementsupport
• Condition-basedpayment for IBD
• Bundled/warrantiedpayment foracute conditions
• Condition-based payment for chronicconditions
• No payment forcare management
• Financial penalty forusing lower-costprocedures
ColonCancer
Screening
• Deliver colonoscopyin lowest-cost way
• Improve adenoma detection rate
• Avoid complicationsin colonoscopy
• Focus on highest-riskpatients
• Bundled payment forcolonoscopy
• Warrantied paymentfor colonoscopy
• Population-basedpayment for cancer screening
• All providers paidseparately
• No payment for outreach to high-risk patients
• Higher payment forrepeat & unnecessaryprocedures
Other Conditions& Procedures
359© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Not Every Condition Needs
an Alternative Payment Model
InflammatoryBowel
Disease
Upper GIBleeding(NVUGIB)
Types ofPatient Needs
Addressed
Opportunitiesto Improve Care
and Reduce Cost
Barriers inCurrent
Payment System
Solutions viaAlternative
Payment Models
• Reduce ED visitsand hospitalizationsdue to bleeds
• Use lowest-cost,effective intervention
• Avoid complications
• Reduce ED visits &hospitalizations
• Reduce drug costs• Reduce absences
from work
• No payment forcare managementor proactive outreach
• No flexibility for non-face-to-face visits
• Add-on payment forcare managementsupport
• Condition-basedpayment for IBD
• Bundled/warrantiedpayment foracute conditions
• Condition-based payment for chronicconditions
• No payment forcare management
• Financial penalty forusing lower-costprocedures
ColonCancer
Screening
• Deliver colonoscopyin lowest-cost way
• Improve adenoma detection rate
• Avoid complicationsin colonoscopy
• Focus on highest-riskpatients
• Bundled payment forcolonoscopy
• Warrantied paymentfor colonoscopy
• Population-basedpayment for cancer screening
• All providers paidseparately
• No payment for outreach to high-risk patients
• Higher payment forrepeat & unnecessaryprocedures
Other Conditions& Procedures • FFS
360© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Many Specialties Developing
Better Payment Models
Neurology
OB/GYN
OrthopedicSurgery
Opportunitiesto Improve Care
and Reduce Cost
Barriers inCurrent
Payment System
Solutions viaAccountable
Payment Models
• Reduce infectionsand complications ofsurgery
• Use non-surgicalcare instead of surgery
• Avoid unnecessaryhospitalizations forepilepsy patients
• Reduce strokes andheart attacks after TIA
• Reduce use ofelective C-sections
• Reduce earlydeliveries and use of NICU
• Similar/lower payment forvaginal deliveries
• Condition-basedpaymentfor total cost ofdelivery in low-riskpregnancy
• Bundled and warrantied paymentfor surgery
• Condition-basedpayment for arthritis
• No support for shareddecision-making
• Lack of resources forgood home-basedcare, patient education
• Condition-basedpayment for epilepsy
• Episode or condition-based payment forTIA
• No flexibility tospend more onpreventive care
• No payment for patienteducation & care mgt
Cardiology
• Use less invasiveprocedures when appropriate
• Reduce exacerbationsof heart failure
• Condition-basedpayment for stableangina
• Condition-basedpayment for HF
• Payment is based onprocedure is used,not the outcome
• No payment for patienteducation & care mgt
361© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Other Examples of Specialty-
Specific Payment Models
Oncology
Primary Care
Gastroenterology
Opportunitiesto Improve Care
and Reduce Cost
Barriers inCurrent
Payment System
Solutions viaAccountable
Payment Models
• Reduce unnecessarycolonoscopies andcolon cancer
• Reduce ER/admits forinflammatory bowel d.
• Reduce ER visitsand admissions fordehydration
• Reduce overuse oftests and drugs
• Reduce avoidablehospitalizations forchronic disease pts
• Reduce unnecessarytests and referrals
• No payment for nurses to work with chronicdisease patients
• No payment for phoneconsults w/ specialists
• Monthly paymentsfor chronic caremanagement
• Payments to supportPCP-specialist partnerships
• Population-basedpayment for coloncancer screening
• Condition-based pmtfor IBD
• No flexibility to focusextra resources onhighest-risk patients
• No flexibility to spendmore on care mgt
• Payment for care management svcs
• Accountability forhospital admissions& use of guidelines
• No payment for caremanagement services
• Inadequate paymentfor diagnosis andtreatment planning
Psychiatry
• Reduce ER visitsand admissions forpatients withdepression andchronic disease
• Joint condition-based payment to PCP andpsychiatrist
• No payment forphone consults with PCPs
• No payment forRN care managers
362© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Should Physicians Fear the Risks
of Accountable Payment Models?
Risks Under APMs•Will the amount of payment be adequate to cover the services patients need?
•Will risk adjustment be adequate to control for differences in need?
•How will you control the costs of other providers involved in the care in the alternative payment model?
•What portion of payments will be withheld based on quality measures?
•Will you have enough patients to cover the costs of managing the new payment?
363© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Risk Is Not New to Physicians,
It’s Just Different Risk in APMs
Risks Under FFS•Will fee levels from payers be adequate to cover the costs of delivering services?
•What utilization controls will payers impose on your services?
•What “value-based” reductions will be made in your payments based on “efficiency” measures?
•What “value-based” reductions will be made in your fees based on quality measures?
•Will you have enough patients to cover your practice expenses?
Risks Under APMs•Will the amount of payment be adequate to cover the services patients need?
•Will risk adjustment be adequate to control for differences in need?
•How will you control the costs of other providers involved in the care in the alternative payment model?
•What portion of payments will be withheld based on quality measures?
•Will you have enough patients to cover the costs of managing the new payment?
364© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Can Small Physician Practices
Manage Accountable Payments?
• Infrastructure/Services
– Small physician practices may not have enough patients to justify staff
or other services to coordinate care, particularly for patients with
complex illnesses (e.g., nurse care managers, patient registries, etc.)
• Quality/Cost Measurement
– Small numbers of patients make measurement unreliable; physicians
may be inappropriately labeled low quality, high cost, or vice versa
DO MD DOMD
DO MD DO MD
DO MD DOMD
DO MD DO MD
MD DO MD DO
Better
Patient
Outcomes &
Lower Cost?
365© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Even Solo Physicians Can Take
Accountability for Cost/Outcomes• In 1987, an orthopedic surgeon in Lansing, Michigan and the
local hospital, Ingham Medical Center, offered:– a fixed total price for surgical services for shoulder and knee problems– a warranty for any subsequent services needed for a two-year period,
including repeat visits, imaging, rehospitalization and additional surgery
• Results:– Health insurer paid 40% less than otherwise– Surgeon received over 80% more in payment than otherwise – Hospital received 13% more than otherwise, despite fewer
rehospitalizations
• Method: – Reducing unnecessary auxiliary services such as radiography and
physical therapy– Reducing the length of stay in the hospital– Reducing complications and readmissions.
Johnson LL, Becker RL. An alternative health-care reimbursement system—application of arthroscopy
and financial warranty: results of a two-year pilot study. Arthroscopy. 1994 Aug;10(4):462–70
366© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Sharing Resources Reduces
Cost/Size of Impact Needed
367© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Sharing Services Across
Multiple Practices
DO MD DOMD
DO MD DO MD
DO MD DOMD
DO MD DO MD
Resources for patient educ. & self-mgt support (e.g., RN care mgr)
Method for targeting high-riskpatients (e.g., predictive modeling
Capability for tracking patient care and ensuring followup (e.g., registry)
Coordinated relationships with specialists and hospitals
Data and analytics to measure and monitor utilization and quality
DO MD DO MD
Shared Services
Better
Patient
Outcomes &
Lower CostDO MD DOMD
DO MD DO MD
DO MD DOMD
DO MD DO MD
MD DO MD DO
368© Center for Healthcare Quality and Payment Reform www.CHQPR.org
IPAs and CINs Can Be Vehicles
for Sharing Services/Accountability
DO MD DOMD
DO MD DO MD
DO MD DOMD
DO MD DO MD
Resources for patient educ. & self-mgt support (e.g., RN care mgr)
Method for targeting high-riskpatients (e.g., predictive modeling
Capability for tracking patient care and ensuring followup (e.g., registry)
Coordinated relationships with specialists and hospitals
Data and analytics to measure and monitor utilization and quality
DO MD DO MD
IPA/CINShared Services
Better
Patient
Outcomes &
Lower CostDO MD DOMD
DO MD DO MD
DO MD DOMD
DO MD DO MD
MD DO MD DO
369© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Still to Come
• Getting payers to implement good payment models
• Redesigning care delivery to improve outcomes and lower spending
• Organizing to succeed under alternative payment models
PART 3:
Implementing
Alternative Payment Models
371© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Ideally, Health Plans Would Use
Physician-Focused Payments
HealthPlans
PhysicianPractice
Physician-Focused Payment Models
Higher Value Care:
• Better Quality
• Lower Spending
372© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Most Health Plans Resist
True Payment Reforms
HealthPlans
PhysicianPractice
“Value-Based Purchasing”
• FFS + P4P
• Shared Savings
• Narrow Network Discounts
Low Value Care:
• Poor Quality
• High Avoidable Spending
373© Center for Healthcare Quality and Payment Reform www.CHQPR.org
For Most Workers, Employers are
the Insurer, Not a Health Plan
Source:
Employer
Health
Benefits
2012 Annual
Survey.
The Kaiser
Family
Foundation
and Health
Research
and
Educational
Trust
60% of Workers Are Now in Self-Insured Plans
374© Center for Healthcare Quality and Payment Reform www.CHQPR.org
For Self-Funded Employers, The
Health Plan is Just a Pass Through
Self-Funded
Purchasers
PhysicianPractice
ASOHealth Plan(No Risk)
Provider Claims
Purchaser Payment
375© Center for Healthcare Quality and Payment Reform www.CHQPR.org
No Incentive for Health Plans to
Change Without Customer Demand
Self-Funded
Purchasers
PhysicianPractice
ASOHealth Plan(No Risk)
For Health Plan:
• Higher costs of implementing new payment models
• Savings will (should) go to the purchasers, not the plans
376© Center for Healthcare Quality and Payment Reform www.CHQPR.org
What We Need Are
Purchaser-Provider Partnerships
Self-Funded
Purchasers
PhysicianPractice
Better Payment and Benefit Structure
Lower Cost, Higher Quality Care
Physicians “win” if:• Patients stay healthy
and need less care• Purchaser pays
adequately for high-quality care to those who need it
Purchasers and Patients “win” if:• Physicians keep
employees healthy • Physicians deliver
high-quality care at low prices
377© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Purchasers and Physicians Have
Common Interests, But Don’t Know It
“We’ve started talking directly to physicians,
and we’ve discovered that
what they want to sell is what we want to buy…”
Cheryl DeMars
CEO, The Alliance(Employer Coalition in Wisconsin)
378© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Health Plan Implements Changes
Purchasers/Providers Agree On
Self-Funded
Purchasers
PhysicianPractice
HealthPlans Implementation
Better Payment and Benefit Structure
Lower Cost, Higher Quality Care
379© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Some Purchasers Are Making
Specialty-Specific Payments
Purchasers
OrthopedicPractice
Cardiac Surgery Practice
E.g.,
Walmart
Lowes
380© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Purchasers Don’t Want to Deal
With Every Specialty Separately
Self-Funded
Purchasers
NeurosurgeryPractice
OB/GYNPractice
GastroenterologyPractice
CardiologyPractice
Primary CarePractice
381© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Purchasers Want
“One Throat to Choke” (a CIN)
Self-Funded
Purchasers
Neurosurgeons
OB/GYNs
Gastroenterologists
Cardiologists
PCPs
Clinically Integrated Network
Global
Payment
382© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physician-Led CINs Can Change
Compensation & Care Delivery
Self-Funded
Purchasers
Clinically Integrated Network
Global
Payment
Neurosurgeons
OB/GYNs
Gastroenterologists
Cardiologists
PCPsChronic Disease
Mgt Payment
Heart Disease Mgt Payment
IBD MgtPayment
Maternity CarePayment
Back Pain Mgt Pmt
383© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Provider-Owned Plans
Allow Direct Contracting
Self-FundedPurchasers Providers
Provider-Owned
Health Plan
Better Payment and Benefit Structure
Lower Cost, Higher Quality Care
384© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Purchasers Have
Total Risk Today
Self-FundedPurchasers,Medicare,Medicaid
Providers
TOTAL
COST OF
HEALTH CARE
385© Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Goal Should Not Be
to Shift Total Risk to Physicians
Self-FundedPurchasers,Medicare,Medicaid
Physicians
TOTAL
COST OF
HEALTH CARE
TOTAL
COST OF
HEALTH CARE
386© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Goal: Share Risk With Physicians
on Costs They Can Control
Self-FundedPurchasers,Medicare,Medicaid
INSURANCERISK
(Risk of Illness)
Physicians
PERFORMANCERISK
(Cost/Illness)
How Many Patients
Do You Need to
(Successfully)
Manage Total Costs?
388© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Companies With <1,000 Workers
Take Total Healthcare Cost Risk
Sources:
Employer
Health
Benefits
2012 Annual
Survey.
The Kaiser
Family
Foundation
and Health
Research
and
Educational
Trust;
State-Level
Trends in
Employer-
Sponsored
Health
Insurance,
April 2013.
State Health
Access Data
Assistance
Center and
Robert
Wood
Johnson
Foundation
Fewer
employees
than typical
physician
practice panel
size
389© Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Keys to Managing Risk
• How Do Small Employers Manage Self-Insurance Risk?
– They know who their employees are and can estimate spending
– They start with what they spent last year and try to control growth
– They have reserves to cover year-to-year variation
– They purchase stop-loss insurance to cover unusually expensive cases
390© Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Keys to Managing Risk
• How Do Small Employers Manage Self-Insurance Risk?
– They know who their employees are and can estimate spending
– They start with what they spent last year and try to control growth
– They have reserves to cover year-to-year variation
– They purchase stop-loss insurance to cover unusually expensive cases
• How Would Physician Practices Manage Risk?
– They need to know who their patients are in order to project spending
– They need to start with last year’s payments and control growth
– They need some reserves to cover year-to-year variation
– They need to purchase stop-loss insurance to cover unusually
expensive cases
391© Center for Healthcare Quality and Payment Reform www.CHQPR.org
It Would Be Eas(ier) if Purchasers &
Providers Matched Geographically
Physiciansin
Community2
Physiciansin
Community1
Physiciansin
Community3
Community
1
CIN
Community
2
CIN
Community
3
CIN
Employerin
Community 1
Employerin
Community 1
Employerin
Community 2
Employerin
Community 2
Employerin
Community 2
Employerin
Community3
Employerin
Community 3
Global
Payment
Global
Payment
Global
Payment
392© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Employers’ Employees Don’t All
Live in the Same Community
Small,Local
Employer
Physiciansin
Community2
Physiciansin
Community1
Small,Local
Employer
Small,Local
Employer
Physiciansin
Community3
393© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Larger Employers Will Span
Even More Communities
Small,Local
Employer
Physiciansin
Community2
Physiciansin
Community1
Small,Local
Employer
Small,Local
Employer
Physiciansin
Community3
Larger andNational
Employers
394© Center for Healthcare Quality and Payment Reform www.CHQPR.org
To Solve This,
You Could Create a Big CIN/ACO
Small,Local
Employer
Physiciansin
Community2
Physiciansin
Community1
Small,Local
Employer
Small,Local
Employer
Physiciansin
Community3
Larger andNational
Employers
Large CIN/ACO
395© Center for Healthcare Quality and Payment Reform www.CHQPR.org
…Or Multiple Local CINs Could
Contract as a Larger Network
Small,Local
Employer
Physiciansin
Community2
Physiciansin
Community1
Small,Local
Employer
Small,Local
Employer
Physiciansin
Community3
Larger andNational
Employers
Contracting Network
CIN
1
CIN
2
CIN
3
396© Center for Healthcare Quality and Payment Reform www.CHQPR.org
…Or Multiple CINs Could
Contract as a Network
Small,Local
Employer
Physiciansin
Community2
Physiciansin
Community1
Small,Local
Employer
Small,Local
Employer
Physiciansin
Community3
Larger andNational
Employers
Contracting Network
CIN
1
CIN
2
CIN
3
It’s easier
to collaborate
if profits
don’t depend
on volume of
procedures or
cherry-picking
patients
397© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Facilitator Needed to Develop
Common Contracting Approach
Small,Local
Employer
Physiciansin
Community2
Physiciansin
Community1
Small,Local
Employer
Small,Local
Employer
Physiciansin
Community3
Larger andNational
Employers
Contracting Network
CIN
1
CIN
2
CIN
3
Facilitator,
e.g.,
PA
Medical
Society
398© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Instead of Having To Accept What
Medicare and Health Plans Pay…
CMS
Physician Group,
IPA,or Health System
Commercial Health Plans
Medicaid MCOs
Self-InsuredEmployers
Individuals &Small Groups
Fully InsuredLarge Groups
State Medicaid
MedicareBeneficiaries
Medicare FFS
Medicaid FFS
MA Plans
Commercial FFS
399© Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Could Happen If Physicians
Had Their Own Health Plans?
CMS
Physician Group,
IPA,or Health System
Commercial Health Plans
Medicaid MCOs
Self-InsuredEmployers
Individuals &Small Groups
Fully InsuredLarge Groups
State Medicaid
MedicareBeneficiaries
MA Plans
Physician-Owned Health Plan
?
?
?
400© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Get Risk-Adjusted Payment from
Medicare, Pay Physicians Better
CMS
Physician Group,
IPA,or Health System
Commercial Health Plans
Medicaid MCOs
Self-InsuredEmployers
Individuals &Small Groups
Fully InsuredLarge Groups
State Medicaid
MedicareBeneficiaries
Physician-Owned Health Plan
Risk-AdjustedMedicare AdvantagePayment
BetterPhysicianPayment
401© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Contract Directly with Self-Insured
Employers, Pay Physicians Better
CMS
Physician Group,
IPA,or Health System
Commercial Health Plans
Medicaid MCOs
Self-InsuredEmployers
Individuals &Small Groups
Fully InsuredLarge Groups
State Medicaid
MedicareBeneficiaries
Physician-Owned Health Plan
Risk-AdjustedMedicare AdvantagePayment
BetterPhysicianPayment
Risk-Adjusted Direct Contract
402© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Use Exchanges for Small Group
Business, Pay Physicians Better
CMS
Physician Group,
IPA,or Health System
Commercial Health Plans
Medicaid MCOs
Self-InsuredEmployers
Individuals &Small Groups
Fully InsuredLarge Groups
State Medicaid
MedicareBeneficiaries
Physician-Owned Health Plan
Risk-AdjustedMedicare AdvantagePayment
BetterPhysicianPayment
InsuranceExchanges Risk-Adjusted
PremiumRevenue
Risk-Adjusted Direct Contract
403© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Contract Directly With State for
Medicaid, Pay Physicians Better
CMS
Physician Group,
IPA,or Health System
Commercial Health Plans
Self-InsuredEmployers
Individuals &Small Groups
Fully InsuredLarge Groups
State Medicaid
MedicareBeneficiaries
Physician-Owned Health Plan
Risk-AdjustedMedicare AdvantagePayment
BetterPhysicianPayment
Risk-AdjustedPremiumRevenue
Risk-Adjusted Direct Contract
InsuranceExchanges
Risk-Adjusted Global Payment
404© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Get Global Payment for Large
Groups, Pay Physicians Better
CMS
Physician Group,
IPA,or Health System
Physician-Owned Health Plan
Self-InsuredEmployers
Individuals &Small Groups
Fully InsuredLarge Groups
InsuranceExchanges
State Medicaid
MedicareBeneficiaries
Risk-Adjusted Direct Contract
Risk-AdjustedMedicare AdvantagePayment
BetterPhysicianPayment
Risk-AdjustedPremiumRevenue
Risk-Adjusted Global Payment
405© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Result: A “Single Payer System”
Controlled by Physicians
CMS
Physician Group,
IPA,or Health System
Physician-Owned Health Plan
Self-InsuredEmployers
Individuals &Small Groups
Fully InsuredLarge Groups
InsuranceExchanges
State Medicaid
MedicareBeneficiaries
Risk-Adjusted Direct Contract
Risk-AdjustedMedicare AdvantagePayment
BetterPhysicianPayment
Risk-AdjustedPremiumRevenue
Risk-Adjusted Global Payment
ONE PAYER,
MANY
CUSTOMERS
406© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Eliminating the Middle Man,
Reconnecting Physicians & Patients
407© Center for Healthcare Quality and Payment Reform www.CHQPR.org
High Quality Health Plans
Run By Physician Groups
408© Center for Healthcare Quality and Payment Reform www.CHQPR.org
What is Needed for Success in an
Alternative Payment Model?
• Clinically Integrated Networks (CINs), and Accountable Care
Organizations (ACOs) can’t succeed under an Alternative
Payment Model if they don’t change the way care is delivered
to patients
• Just as Health Insurance Companies don’t deliver care to
patients, neither do Clinically Integrated Networks (CINs) or
Accountable Care Organizations (ACOs) – physicians deliver
care
• Individual physician practices will have to redesign their care
delivery processes
409© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Reducing Hospitalizations
for COPD
Patient with
COPD
No Exacerbation
Serious
ExacerbationHospital
Home
410© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Intervening Before
ER Visits/Admissions Occur
Patient with
COPD
No Exacerbation
Cold, Failure to
Take Meds, Etc.
Serious
Exacerbation
Serious
ExacerbationHospital
Home
OPPORTUNITY
FOR IMPACT
411© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Creating a COPD Action Plan
Patient with
COPD
No Exacerbation
Cold, Failure to
Take Meds, Etc.
Serious
Exacerbation
Patient with
COPD
Serious
ExacerbationHospital
Home
No Exacerbation
Cold, Failure to
Take Meds, Etc.
ACTION PLAN:
Call MD/RN,
Add Meds, Etc.
Serious
ExacerbationHospital
Home
BEFORE
AFTER
412© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Making an Action Plan Work
Primary
Care
Practice
Patient
Must Be Willing to
Call Right Away
For Help Resolving
an Exacerbation
Must Be Able to
Respond Right Away
When a Patient Calls
(And Not By Sending
Them to the ER)
413© Center for Healthcare Quality and Payment Reform www.CHQPR.org
How We Hope A Primary Care
Practice Answers Patient Calls
Patient with
Action PlanHas
Problem
CallsPCP Office
During
Office
Hours:
After
Office
Hours:
Speaks toScheduler
Patient treated
andremainsout of
hospital
Seen byPCP
CallsAnsw. Svc.
Speaks toPCP
414© Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Actually Happens,
All Too Often
Patient with
Action PlanHas
Problem
CallsPCP Office
During
Office
Hours:
After
Office
Hours:
Goes toER
Can’t GetThrough
Speaks toScheduler
Patient admitted
to Hospital
No ApptsAvailable
Patient treated
andremainsout of
hospital
Seen byPCP
CallsAnsw. Svc.
Goes toER
Patient admitted
to Hospital
Speaks toPCP
Speaks toOn-Call MD
415© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Redesigning How a Primary Care
Practice Answers Patient Calls
Call fromPatient with
COPD Action Plan
Receptionist
AnsweringService
ScheduleVisit TodayIf Possible
PatientCan’t Come
Today
Assessed asOK to Come Tomorrow
Needs Home Visit
or Call Now
PhysicianSees
Patient
Treatment ChangedIf Needed
MD Calls& Assesses
ER VisitNeeded
Patient Stable, Can
Wait
Care MgrNotified
RequiresAdmission
Patient CanReturn Home
Communication Between
Office & Care Manager
Protocol for On-Call
Physicians to Use
Protocol for ER/Admits
Process for Office Phone Screening, Assessment, and Scheduling
NurseNotifies
Care Mgr
Home Visits for At-Risk Patients
During
Office
Hours:
After
Office
Hours:
COPD?
No
Nurse PhoneAssessment
Send toER If
Necessary
ContactRN/MD w/
FindingsNeeds Home
Visitor Call Now
Call CareMgr or
Home Care
Home Visitto Patient
Short-TermTreatment
in ER
RequiresHome Visit
to Not Admit
416© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Costs of Transformation
• Expensive IT systems don’t change care delivery and often make it harder to invest resources in the things that really matter
• The key costs:– Implementing different ways of delivering care is inherently inefficient in
the short run, even if it’s better in the long run, so productivity-based revenue will decline
– New personnel (e.g., nurse care managers) have to be recruited, trained, and paid before the full benefits of savings have been achieved
– Physicians need to plan and manage the transformation, and that takes time away from patients
• Working capital/reserves are needed to cover these costs
• A business plan is needed to make sure that working capital will be recovered
Physicians Have toMeasure Their Performance
(Using Meaningful Measures)and Make Improvements
When Needed
418© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Allergists:
Tendency to Use Testing
419© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Cardiology:
Tendency to Use Echo
420© Center for Healthcare Quality and Payment Reform www.CHQPR.org
GI: Tendency to Use
Upper GI Endoscopy
Physicians Have toMeasure Their Performance
(Using Meaningful Measures)and Make Improvements
When Needed
Colleagues in the Practice, CIN, or ACO
Need to Enforce aCommitment to Improvement
and Accountability andChange Partners If Necessary
422© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physicians Have to Put Aside
Differences and Work Together
Fighting Over Sharesof a Shrinking Pie
Controlled by Payers
Working Together toPut Physicians Back
in Control of HealthcareVS
423© Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Would a Physician-Driven,
Patient-Centered CIN Look Like?• The patient (and their employer) gets a 90 day money-back
guarantee if they choose the CIN
• The CIN helps the patient find a primary care physician with the type of access, team, cultural competence, and personality the patient will be most comfortable with
• The PCP and CIN immediately work to welcome the patient and design a plan of care to match the patient’s needs and preferences, and it regularly solicits feedback on performance
• If the patient has a specific health problem, the PCP & CIN commit to get the patient the best care for that problem at the lowest cost, even if that is not from a provider in the CIN – The CIN provides the patient with comparative information on the
quality and cost of the CIN physicians and providers compared to all other providers (rather than forcing the patient to search the internet)
– If the patient chooses a non-group provider, the patient will pay the difference in cost unless the other provider’s quality is better
• The CIN pays physicians to manage the patient’s conditions effectively, not based on office visits or procedures
424© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Your Turn
• Assuming the problems with the payment system were fixed, what other barriers (if any) would you face in making the changes in care delivery needed to achieve savings?
• What concerns or fears would you have about being held accountable for achieving the savings?
425© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Learn More About Win-Win-Win
Payment and Delivery Reformwww.PaymentReform.org
For More Information:
Harold D. MillerPresident and CEO
Center for Healthcare Quality and Payment Reform
(412) 803-3650
www.CHQPR.org
www.PaymentReform.org
Procedural
Bundles and Warranties
428© Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Hypothetical Case of Surgery
COST TYPE TODAY
Physician Fee $2,000
Hospital Cost $20,900
Hosp. Margin (5%) $ 1,100
Total Hospital Pmt $22,000
Total Cost to Payer $24,000
429© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Most of the Money Is
Not Going to the Physician
COST TYPE TODAY
Physician Fee $2,000
Hospital Cost $20,900
Hosp. Margin (5%) $ 1,100
Total Hospital Pmt $22,000
Total Cost to Payer $24,000
Physician receives 8% of total spending
430© Center for Healthcare Quality and Payment Reform www.CHQPR.org
What if the Surgeon Could
Reduce The Hospital’s Costs?
COST TYPE TODAY CHANGE
Physician Fee $2,000
Hospital Cost $20,900 -3% ($630)
Hosp. Margin (5%) $ 1,100
Total Hospital Pmt $22,000
Total Cost to Payer $24,000
431© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Today: All Savings Goes to the
Hospital, No Reward for Physician
COST TYPE TODAY CHANGE SPLIT
Physician Fee $2,000 + 0%
Hospital Cost $20,900 -3% ($630)
Hosp. Margin (5%) $ 1,100 +57% ($630)
Total Hospital Pmt $22,000
Total Cost to Payer $24,000 -0%
432© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Bundling Eliminates Boundary
Between Hospital & Physician Pmt
COST TYPE TODAY
Physician Fee $ 2,000
Hospital Cost $20,900
Hospital Margin $ 1,100
Total Cost to Payer $24,000
433© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Bundling Allows Savings Split
Among Docs, Hospitals, Payers
COST TYPE TODAY CHANGE SPLIT
Physician Fee $ 2,000 + 10% ($200)
Hospital Cost $20,900 -3% ($630)
Hospital Margin $ 1,100 +18% ($200)
Total Cost to Payer $24,000 - 1% ($230)
434© Center for Healthcare Quality and Payment Reform www.CHQPR.org
So Price of Surgery is Lower
But More Profitable
COST TYPE TODAY CHANGE SPLIT NEW
Physician Fee $ 2,000 + 10% ($200) $ 2,200
Hospital Cost $20,900 -3% ($630) $20,270
Hospital Margin $ 1,100 +18% ($200) $ 1,300
Total Cost to Payer $24,000 - 1% ($230) $23,770
435© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Opportunities to
Reduce Hospital Costs• Use of lower-cost medical devices and equipment, or
negotiating for better prices on devices
• Better scheduling of scarce resources (e.g., surgery suites) to
reduce both underutilization & overtime
• Coordination among multiple physicians and departments to
avoid duplication and conflicts in scheduling
• Standardization of equipment and supplies to facilitate bulk
purchasing
• Less wastage of expensive supplies
• Reduced length of stay
• Etc.
436© Center for Healthcare Quality and Payment Reform www.CHQPR.org
APM #4:
Physician-Facility Bundle
437© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Medicare Acute Care Episode
(ACE) Demonstration
• Bundled Medicare Part A (hospital) and Part B (physician) payments together for cardiac and orthopedic (hips & knees) procedures
• Total Medicare payment was 1%-8% lower than what the standard Medicare DRG + physician fee would have been
• Payment was made to a Physician-Hospital Organization, which then divided the payment between hospital and surgeon
• Surgeon could receive up to 25% above Medicare fee• Patient cost-sharing reduced by up to 50% of Medicare’s savings• CMS waived Stark rules for gainsharing• Implemented in 2009/2010 in five hospital systems based on
competitive bids:– Hillcrest Medical Center, Oklahoma (cardiac + orthopedic procedures)– Baptist Health System, Texas (cardiac + orthopedic procedures)– Oklahoma Heart Hospital, Oklahoma (cardiac procedures)– Lovelace Health System, New Mexico (cardiac + orthopedic procedures)– Exempla Saint Joseph Hospital, Colorado (cardiac procedures)
• Most hospitals achieved significant savings, and physicians received increases in payment for procedures
438© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Yes, a Health Care Provider
Can Offer a WarrantyGeisinger Health System ProvenCare
SM
– A single payment for an ENTIRE 90 day period including:• ALL related pre-admission care
• ALL inpatient physician and hospital services
• ALL related post-acute care
• ALL care for any related complications or readmissions
– Types of conditions/treatments
currently offered:• Cardiac Bypass Surgery
• Cardiac Stents
• Cataract Surgery
• Total Hip Replacement
• Bariatric Surgery
• Perinatal Care
• Low Back Pain
• Treatment of Chronic Kidney Disease
439© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Payment + Process Improvement =
Better Outcomes, Lower Costs
440© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Readmission Reduction: 44%
441© Center for Healthcare Quality and Payment Reform www.CHQPR.org
It Can Be Done By Physicians,
Not Just Large Health Systems• In 1987, an orthopedic surgeon in Lansing, Michigan and the
local hospital, Ingham Medical Center, offered:– a fixed total price for surgical services for shoulder and knee problems– a warranty for any subsequent services needed for a two-year period,
including repeat visits, imaging, rehospitalization and additional surgery
• Results:– Health insurer paid 40% less than otherwise– Surgeon received over 80% more in payment than otherwise – Hospital received 13% more than otherwise, despite fewer
rehospitalizations
• Method: – Reducing unnecessary auxiliary services such as radiography and
physical therapy– Reducing the length of stay in the hospital– Reducing complications and readmissions.
Johnson LL, Becker RL. An alternative health-care reimbursement system—application of arthroscopy
and financial warranty: results of a two-year pilot study. Arthroscopy. 1994 Aug;10(4):462–70
442© Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Warranty is Not an
Outcome Guarantee
• Offering a warranty on care does not imply that you are
guaranteeing a cure or a good outcome
• It merely means that you are agreeing to correct avoidable
problems at no (additional) charge
• Most warranties are “limited warranties,” in the sense that they
agree to pay to correct some problems, but not all
443© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Prices for Warrantied Care
Will Likely Be Higher
444© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Prices for Warrantied Care
Will Likely Be Higher
• Q: “Why should we pay more to get good-quality care??”
• A: In most industries, warrantied products cost more, but
they’re desirable because TOTAL spending on the product
(repairs & replacement) is lower than without the warranty
445© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Example: $5,000 Procedure,
20% Readmission Rate
Cost of
Success
Added
Cost of
Readmit
Rate of
Readmits
$5,000 $5,000 20%
446© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Average Payment for Procedure
is Higher than the Official “Price”
Cost of
Success
Added
Cost of
Readmit
Rate of
Readmits
Average
Total Cost
$5,000 $5,000 20% $6,000
447© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Average Payment for Procedure
is Higher than the Official “Price”
Cost of
Success
Added
Cost of
Readmit
Rate of
Readmits
Average
Total Cost
$5,000 $5,000 20% $6,000
So how much should you charge to offer
this same procedure with a warranty?
448© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Starting Point for Warranty Price:
Actual Current Average Payment
Cost of
Success
Added
Cost of
Readmit
Rate of
Readmits
Average
Total Cost
Price
Charged Net Margin
$5,000 $5,000 20% $6,000 $6,000 $ 0
449© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Limited Warranty Gives Financial
Incentive to Improve Quality
Cost of
Success
Added
Cost of
Readmit
Rate of
Readmits
Average
Total Cost
Price
Charged Net Margin
$5,000 $5,000 20% $6,000 $6,000 $ 0
$5,000 $5,000 15% $5,750 $6,000 $250
Reducing
Adverse
Events…
…Improves
The Bottom
Line
...Reduces
Costs...
450© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Higher-Quality Provider Can
Charge Less, Attract Patients
Cost of
Success
Added
Cost of
Readmit
Rate of
Readmits
Average
Total Cost
Price
Charged Net Margin
$5,000 $5,000 20% $6,000 $6,000 $ 0
$5,000 $5,000 15% $5,750 $6,000 $250
$5,000 $5,000 15% $5,750 $5,900 $ 150
Enables
Lower
Prices
Still With
Better
Margin
451© Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Virtuous Cycle of Quality
Improvement & Cost Reduction
Cost of
Success
Added
Cost of
Readmit
Rate of
Readmits
Average
Total Cost
Price
Charged Net Margin
$5,000 $5,000 20% $6,000 $6,000 $ 0
$5,000 $5,000 15% $5,750 $6,000 $250
$5,000 $5,000 15% $5,750 $5,900 $150
$5,000 $5,000 10% $5,500 $5,900 $400
Reducing
Adverse
Events…
…Improves
The Bottom
Line
...Reduces
Costs...
452© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Win-Win-Win Through
Appropriate Payment & Pricing
Cost of
Success
Added
Cost of
Readmit
Rate of
Readmits
Average
Total Cost
Price
Charged Net Margin
$5,000 $5,000 20% $6,000 $6,000 $ 0
$5,000 $5,000 15% $5,750 $6,000 $250
$5,000 $5,000 15% $5,750 $5,900 $150
$5,000 $5,000 10% $5,500 $5,900 $400
$5,000 $5,000 10% $5,500 $5,700 $200
$5,000 $5,000 5% $5,250 $5,700 $450
Quality is Better......Cost is Lower...
...Providers More Profitable
453© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Different Warranty Prices for
Cases With Different Risks
Cost of
Success
Added
Cost of
Readmit
Rate of
Readmits
Average
Total Cost
Price
Charged Net Margin
$5,000 $5,000 20% $6,000 $6,000 $ 0
$5,000 $5,000 10% $5,500 $5,700 $200
HIGH RISK CASES
$5,000 $5,000 30% $6,500 $6,500 $ 0
$5,000 $5,000 15% $5,750 $6,100 $350
LOW RISK CASES
$5,000 $5,000 10% $5,500 $5,500 $ 0
$5,000 $5,000 5% $5,250 $5,350 $100
454© Center for Healthcare Quality and Payment Reform www.CHQPR.org
APM #5:
Warrantied Payment
455© Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Critical Element is
Shared, Trusted Data
• Physicians and Hospitals need to know the current
utilization and costs for their patients to determine whether a
bundled/warrantied payment amount will cover the costs of
delivering effective care to the patients
• Purchasers and Payers need to know the current utilization
and costs for their employees/members to determine whether
the bundled/warrantied payment amount is a better deal than
they have today
• Both sets of data have to match in order for providers and
payers to agree on the new approach!
456© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Current Transparency Efforts
Are Focused on Procedure PricePayment
for
Procedure
dded
Provider 1:
$25,000
Provider 2:
$23,000
-8%
457© Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Hidden Costs
Accompany the Lower Price?Payment
for
Procedure
Payment and Rate
of Complications
Provider 1:
$25,000 $30,000 2%
Provider 2:
$23,000 $30,000 10%
-8%
458© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Total Spending May Be Higher
With the “Lower Price” ProviderPayment
for
Procedure
Payment and Rate of
Complications
Average
Total
Payment
Provider 1:
$25,000 $30,000 2% $25,600
Provider 2:
$23,000 $30,000 10% $26,000
-8% +2%
Provider 2 hasa lower starting price,but is more expensive
when lower qualityis factored in
459© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Bundled/Warrantied Pmts Allow
Comparing Apples to ApplesPayment
for
Procedure
Payment and Rate of
Complications
Bundled/
Episode
Payment
Provider 1:
2% $25,600
Provider 2:
10% $26,000
+2%
Bundled pricesshow that
Provider 1 is thehigher-value
provider
460© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Many Variations Possible in
Combining Bundles and Warranties
461© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Starting with a Hospital
Procedure…
Hospital DRG
Procedure
Physician Fee
PA
TIE
NT
462© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Simplest Bundle, Already Working
in CMS Demonstrations
Hospital DRG
Procedure
Physician Fee
SINGLE PMT
PA
TIE
NT
463© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Bundling All Physicians Promotes
More Care Coordination
Hospital DRG
Procedure
Lead Doc. Fee
Consultant Fee
Consultant Fee
SINGLE PMT
PA
TIE
NT
464© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Not All Care Providers
Are Inside the Hospital Walls
Hospital DRG
Procedure
Lead Doc. Fee
Consultant Fee
Consultant Fee
Rehab
Post-Acute
Home Health
PCP
Specialist
SINGLE PMT
PA
TIE
NT
PROBLEM:No incentive to reduce
unnecessary use of expensive post-acute care
465© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Bundling Inpatient and Post-Acute
Care Promotes Coordination
Hospital DRG
Procedure
Lead Doc. Fee
Consultant Fee
Consultant Fee
Rehab
Post-Acute
Home Health
PCP
Specialist
PA
TIE
NT
SINGLE PAYMENT
466© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Does the Bundle Stop When
Things Go Bad in the Hospital?
Hospital DRG
Procedure
Lead Doc. Fee
Consultant Fee
Consultant Fee
Rehab
Post-Acute
Home Health
PCP
Specialist
DRG/Outlier
Complication
Lead Doc. Fee
Consultant Fee
Consultant Fee
PA
TIE
NT
PROBLEM:Hospital and physiciansare paid more to treat
expensive infections andcomplications
SINGLE PAYMENT
467© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Including a Warranty for
Complications in the Bundle
Hospital DRG
Procedure
Lead Doc. Fee
Consultant Fee
Consultant Fee
Rehab
Post-Acute
Home Health
PCP
Specialist
DRG/Outlier
Complication
Lead Doc. Fee
Consultant Fee
Consultant Fee
SINGLE PAYMENT
PA
TIE
NT
468© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Including a Warranty for
Post-Discharge Problems
Hospital DRG
Procedure
Lead Doc. Fee
Consultant Fee
Consultant Fee
Rehab
Post-Acute
Home Health
PCP
Specialist
DRG/Outlier
Complication
Lead Doc. Fee
Consultant Fee
Consultant Fee
SINGLE PAYMENT
Hospital DRG
Readmission
Lead Doc. Fee
Consultant Fee
Consultant Fee
PA
TIE
NT
30
Days Post-Discharge
90+15
469© Center for Healthcare Quality and Payment Reform www.CHQPR.org
“Episode” Payments Are Bundles
Over a Full Course of Treatment
Hospital DRG
Procedure
Lead Doc. Fee
Consultant Fee
Consultant Fee
Rehab
Post-Acute
Home Health
PCP
Specialist
DRG/Outlier
Complication
Lead Doc. Fee
Consultant Fee
Consultant Fee
SINGLE PAYMENT
Hospital DRG
Readmission
Lead Doc. Fee
Consultant Fee
Consultant Fee
PA
TIE
NT
30
Days Post-Discharge
90+15
470© Center for Healthcare Quality and Payment Reform www.CHQPR.org
APM #6:
Episode Payment for a Procedure
471© Center for Healthcare Quality and Payment Reform www.CHQPR.org
What If The Procedure Could Be
Done Outside the Hospital?
Hospital DRG
Procedure
Lead Doc. Fee
Consultant Fee
Consultant Fee
Rehab
Post-Acute
Home Health
PCP
Specialist
DRG/Outlier
Complication
Lead Doc. Fee
Consultant Fee
Consultant Fee
SINGLE PAYMENT
Hospital DRG
Readmission
Lead Doc. Fee
Consultant Fee
Consultant Fee
Facility Fee
Alternate Setting
Physician Fee
PA
TIE
NT
PROBLEM:No incentive to use lower-cost setting, since payer
gains all savings from lower facility fees
472© Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Facility-Independent Episode
Hospital DRG
Procedure
Lead Doc. Fee
Consultant Fee
Consultant Fee
Rehab
Post-Acute
Home Health
PCP
Specialist
DRG/Outlier
Complication
Lead Doc. Fee
Consultant Fee
Consultant Fee
SINGLE PAYMENT
Hospital DRG
Readmission
Lead Doc. Fee
Consultant Fee
Consultant Fee
Facility Fee
Alternate Setting
Physician Fee
PA
TIE
NT
SOLUTION:Providers keep some of the
savings from movingprocedures to lower-cost settings
473© Center for Healthcare Quality and Payment Reform www.CHQPR.org
What if An Alternative Procedure
Would Be Better or Cheaper?
Hospital DRG
Procedure
Lead Doc. Fee
Consultant Fee
Consultant Fee
Rehab
Post-Acute
Home Health
PCP
Specialist
DRG/Outlier
Complication
Lead Doc. Fee
Consultant Fee
Consultant Fee
SINGLE PAYMENT
Hospital DRG
Readmission
Lead Doc. Fee
Consultant Fee
Consultant Fee
Facility Fee
Alternate Setting
Physician Fee
Facility Fee
Alternate Procedure
Prof. Fee
PA
TIE
NT
PROBLEM:No incentive to use
lower-cost procedures (or to use no procedure at all)
474© Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Condition-Based
(Not Procedure-Based) Payment
Hospital DRG
Procedure
Lead Doc. Fee
Consultant Fee
Consultant Fee
Rehab
Post-Acute
Home Health
PCP
Specialist
DRG/Outlier
Complication
Lead Doc. Fee
Consultant Fee
Consultant Fee
SINGLE PAYMENT
Hospital DRG
Readmission
Lead Doc. Fee
Consultant Fee
Consultant Fee
Facility Fee
Alternate Setting
Physician Fee
Facility Fee
Alternate Procedure
Prof. Fee
PA
TIE
NT
SOLUTION:Provider keeps some of the savings from using lower-cost procedures
Accountable Medical Home
for Primary Care
476© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Current Payment
for Primary Care
Payer
Payer
Payer
Office Visits forPreventive Services
Office Visits for Chronic Disease Issues
Tests & Procedures forPreventive Services
Tests & Procedures forChronic Disease Mgt
Tests & Procedures forAcute Issues
Office Visits forAcute Issues
CURRENTPAYMENT
PRIMARY CARE
477© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Current Non-Payment
for Primary Care
Payer
Payer
Payer
Office Visits forPreventive Services
Outreach Calls for Preventive Services
Office Visits for Chronic Disease Issues
Proactive Care Mgt for Chronic Disease
Tests & Procedures forPreventive Services
Tests & Procedures forChronic Disease Mgt
Tests & Procedures forAcute Issues
Office Visits forAcute Issues
CURRENTPAYMENT
NO PAYMENT
NO PAYMENT
PRIMARY CARE
478© Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Is Not Paid For Is Exactly
What’s Needed to Improve Quality
Payer
Payer
Payer
Office Visits forPreventive Services
Outreach Calls for Preventive Services
Office Visits for Chronic Disease Issues
Proactive Care Mgt for Chronic Disease
Tests & Procedures forPreventive Services
Tests & Procedures forChronic Disease Mgt
Tests & Procedures forAcute Issues
Office Visits forAcute Issues
CURRENTPAYMENT
NO PAYMENT
NO PAYMENT
PRIMARY CARE
Preventive Care Quality
Chronic Disease Mgt Quality
479© Center for Healthcare Quality and Payment Reform www.CHQPR.org
One Option: New CPT Fees
for Currently Unpaid Services
Tests & Procedures forPreventive Services
Tests & Procedures forChronic Disease Mgt
Tests & Procedures forAcute Issues
Office Visits forAcute Issues
PROPOSEDPAYMENT
Payer
Payer
Payer
PRIMARY CARE
Office Visits forPreventive Services
Outreach Calls for Preventive Services
Office Visits for Chronic Disease Issues
Proactive Care Mgt for Chronic Disease
CPT Fee
480© Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Better Approach:
Flexible Bundled Payment
Office Visits forPreventive Services
Outreach Calls for Preventive Services
Office Visits for Chronic Disease Issues
Tests & Procedures forPreventive Services
Tests & Procedures forChronic Disease Mgt
Tests & Procedures forAcute Issues
Office Visits forAcute Issues
PROPOSEDPAYMENT
Payer
Payer
Payer
MonthlyCore
Primary Care
Services Payment
PRIMARY CARE
Proactive Care Mgt for Chronic Disease
481© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Size of Monthly Payment Should
Differ Based on Patient Health
No Chronic Diseaseand
No Major Risk Factors
PATIENT HEALTH ISSUES
SIZ
E O
F M
ON
TH
LY
PE
R-P
AT
IEN
T P
AY
ME
NT
One Chronic Diseaseor
Major Risk Factors
Two Chronic Diseasesor One Chronic Dis.
and Major Risk Factors
Complex andHigh-RiskPatients
Small Payment forLarge # of Patients H
igh P
aym
ent
for
Sm
all
# o
f P
atients
LargerPayment
forSubset ofPatientsNeeding
MoreProactive
Care
StillLarger
Payment for
Subset of
PatientsNeeding
EvenMore
ProactiveCare
482© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physicians Could Bill for Codes
for Patients by Risk/Acuity Level
No Chronic Diseaseand
No Major Risk Factors
PATIENT HEALTH ISSUES
SIZ
E O
F M
ON
TH
LY
PE
R-P
AT
IEN
T P
AY
ME
NT
One Chronic Diseaseor
Major Risk Factors
Two Chronic Diseasesor One Chronic Dis.
and Major Risk Factors
Complex andHigh-RiskPatients
Small Payment forLarge # of Patients H
igh P
aym
ent
for
Sm
all
# o
f P
atients
LargerPayment
forSubset ofPatientsNeeding
MoreProactive
Care
StillLarger
Payment for
Subset of
PatientsNeeding
EvenMore
ProactiveCare
Condition-BasedBillingCodexxx01
Condition-BasedBillingCodexxx02
Condition-BasedBillingCodexxx03
Condition-BasedBillingCodexxx04
483© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Adjust Payment Amounts Based
on Results PCPs Can Control
No Chronic Diseaseand
No Major Risk Factors
PATIENT HEALTH ISSUES
SIZ
E O
F M
ON
TH
LY
PE
R-P
AT
IEN
T P
AY
ME
NT
One Chronic Diseaseor
Major Risk Factors
Two Chronic Diseasesor One Chronic Dis.
and Major Risk Factors
Complex andHigh-RiskPatients
Penalty
Bonus
• Monthly payment would be adjusted up or downbased on quality and avoidable utilization Quality of preventive care Quality of chronic disease care Avoidable ER utilization High-tech imaging Specialty referrals
484© Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Per Patient Payment is the
Core Payment, Not an Add-On
Tests & Procedures forPreventive Services
Tests & Procedures forChronic Disease Mgt
Tests & Procedures forAcute Issues
Office Visits forAcute Issues
NEW MODEL
Core Primary CareServices Payment
Performance Adjustment
485© Center for Healthcare Quality and Payment Reform www.CHQPR.org
This is Different Than
Current PCMH Programs
Office Visits forPreventive Services
Office Visits for Chronic Disease Issues
Tests & Procedures forPreventive Services
Tests & Procedures forChronic Disease Mgt
Tests & Procedures forAcute Issues
Office Visits forAcute Issues
PMPM for“Care Management”
Current PCMH Model
P4P/Shared Savings
Tests & Procedures forPreventive Services
Tests & Procedures forChronic Disease Mgt
Tests & Procedures forAcute Issues
Office Visits forAcute Issues
NEW MODEL
Core Primary CareServices Payment
Performance Adjustment
486© Center for Healthcare Quality and Payment Reform www.CHQPR.org
It’s Also Different from Traditional
PCP Capitation Programs
Primary CareCapitation
Current PCMH Model
P4P
PCP CapitationNEW MODEL
Office Visits forPreventive Services
Office Visits for Chronic Disease Issues
Tests & Procedures forPreventive Services
Tests & Procedures forChronic Disease Mgt
Tests & Procedures forAcute Issues
Office Visits forAcute Issues
PMPM for“Care Management”
P4P/Shared Savings
Tests & Procedures forPreventive Services
Tests & Procedures forChronic Disease Mgt
Tests & Procedures forAcute Issues
Office Visits forAcute Issues
Core Primary CareServices Payment
Performance Adjustment
487© Center for Healthcare Quality and Payment Reform www.CHQPR.org
APM #2: Condition-Based
Payment for a Physician’s Services
488© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Comparison to New CMS
CPC+ Program• Provides significant, risk-adjusted care management
payments without requiring PCPs to earn them through shared savings
• Focuses accountability on things that primary care practices can control, such as ED visits and ambulatory care sensitive hospitalizations, not spending on cancer treatment, surgical site infections, etc.
• Limits potential losses to a specific amount of payment paid in advance
Specialty Medical Homes
490© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Phases of Care for Specialist
Diagnosis and Ongoing Mgt
Symptomsof an
Acute orChronic
Condition
491© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Phases of Care for Specialist
Diagnosis and Ongoing Mgt
Diagnosisand
TreatmentPlanning
bySpecialist
Symptomsof an
Acute orChronic
Condition
PCP Input
492© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Phases of Care for Specialist
Diagnosis and Ongoing Mgt
Diagnosisand
TreatmentPlanning
bySpecialist
Symptomsof an
Acute orChronic
Condition
No Conditionor
DifferentCondition
PCP Input
493© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Phases of Care for Specialist
Diagnosis and Ongoing Mgt
Diagnosisand
TreatmentPlanning
bySpecialist
Symptomsof an
Acute orChronic
Condition
Continued Care By Specialist
for Patients withDifficult-to-Control
Condition
No Conditionor
DifferentCondition
PCP Input
494© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Phases of Care for Specialist
Diagnosis and Ongoing Mgt
Diagnosisand
TreatmentPlanning
bySpecialist
Symptomsof an
Acute orChronic
Condition
Continued Care By Specialist
for Patients withDifficult-to-Control
Condition
No Conditionor
DifferentCondition
Continued Care By PCP for Patients with Well-Controlled
Condition
Specialty Consults
PCP Input
495© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Payment Model for Specialist
Diagnosis and Ongoing Mgt
Diagnosisand
TreatmentPlanning
bySpecialist
Symptomsof an
Acute orChronic
Condition
Continued Care By Specialist
for Patients withDifficult-to-Control
Condition
No Conditionor
DifferentCondition
Specialty Consults
PCP Input
One-TimePayment
Continued Care By PCP for Patients with Well-Controlled
Condition
496© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Payment Model for Specialist
Diagnosis and Ongoing Mgt
Diagnosisand
TreatmentPlanning
bySpecialist
Symptomsof an
Acute orChronic
Condition
Continued Care By Specialist
for Patients withDifficult-to-Control
Condition
No Conditionor
DifferentCondition
Specialty Consults
PCP Input
One-TimePayment
Monthly Payments
Continued Care By PCP for Patients with Well-Controlled
Condition
497© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Payment Model for Specialist
Diagnosis and Ongoing Mgt
Diagnosisand
TreatmentPlanning
bySpecialist
Symptomsof an
Acute orChronic
Condition
Continued Care By Specialist
for Patients withDifficult-to-Control
Condition
No Conditionor
DifferentCondition
Specialty Consults
PCP Input
One-TimePayment
Monthly Payments
Payments forPhone/Email Contacts
Continued Care By PCP for Patients with Well-Controlled
Condition
498© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Payment Model for Specialist
Diagnosis and Ongoing Mgt
Diagnosisand
TreatmentPlanning
bySpecialist
Symptomsof an
Acute orChronic
Condition
Continued Care By Specialist
for Patients withDifficult-to-Control
Condition
No Conditionor
DifferentCondition
Specialty Consults
PCP Input
One-TimePayment
Monthly Payments
Payments forPhone/Email Contacts
Continued Care By PCP for Patients with Well-Controlled
ConditionMonthly Payments
Part 4
Transitioning to
Total Cost Management
500© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Purchasers Want to Reduce Their
Total Spending on Healthcare
Sp
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NOTE:Graph Is notdrawnto scale
TODAY
PayerSpending
Lower
Spending
Without
Rationing
PayerSavings
FUTURE
PayerSpending
Total
Spending
for a
Group
of Patients
501© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Traditional Actuarial Breakdowns
Aren’t Very Actionable
Sp
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Pati
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TODAY
PayerSpending
Lower
Spending
Without
Rationing
Payer Savings
FUTURE
PayerSpending
Total
Spending
for a
Group
of Patients
Inpatient
Physicians
Outpatient
Labs
Other
Which categories
can be reduced?
And how wouldthat be done?
502© Center for Healthcare Quality and Payment Reform www.CHQPR.org
More Detailed Breakdowns By
Type of Service Don’t Help Much
Sp
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TODAY
PayerSpending
Lower
Spending
Without
Rationing
Payer Savings
FUTURE
PayerSpending
Total
Spending
for a
Group
of Patients
E&M
Tests
ER Visits
Medical Admissions
Surgeries
TestsProcedures
SNF
Home Health
Drugs
DME
Other
Which categories
can be reduced?
And how wouldthat be done?
503© Center for Healthcare Quality and Payment Reform www.CHQPR.org
A Better Way: Look at Patients
By Their Health Conditions..
Sp
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ChronicDiseases
Cancer
Chest Pain
Maternity
Other
Total
Spending
for a
Group
of Patients
TODAY
PayerSpending
504© Center for Healthcare Quality and Payment Reform www.CHQPR.org
…and Identify Avoidable Services
for Each Condition
Sp
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ChronicDiseases
Avoidable $
Avoidable $
Cancer
Avoidable $
Chest Pain
Maternity
Avoidable $
OtherAvoidable $
Total
Spending
for a
Group
of Patients
TODAY
PayerSpending
505© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Example: Avoidable Costs for
Chronic Disease Patients
Sp
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ChronicDiseases
Avoidable $
Avoidable $
Cancer
Avoidable $
Chest Pain
Maternity
Avoidable $
OtherAvoidable $
• ER visits for exacerbations• Hospital admissions and readmissions• Amputations, blindness
Total
Spending
for a
Group
of Patients
TODAY
PayerSpending
506© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Example: Avoidable Costs in
Diagnosis/Intervention for Chest Pain
Sp
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ChronicDiseases
Avoidable $
Avoidable $
Cancer
Avoidable $
Chest Pain
Maternity
Avoidable $
OtherAvoidable $
• Overuse of high-tech stress tests/imaging• Overuse of cardiac catheterization• Overuse of PCIs, high-priced stents
• ER visits for exacerbations• Hospital admissions and readmissions• Amputations, blindness
Total
Spending
for a
Group
of Patients
TODAY
PayerSpending
507© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Example: Avoidable Costs in
Cancer Care
Sp
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NOTE:Graph Is notdrawnto scale
ChronicDiseases
Avoidable $
Avoidable $
Cancer
Avoidable $
Chest Pain
Maternity
Avoidable $
OtherAvoidable $
• Use of unnecessarily-expensive drugs• ER visits/hospital stays for dehydration and avoidable complications
• Fruitless treatment at end of life• Late-stage cancers due to poor screening
• Overuse of high-tech stress tests/imaging• Overuse of cardiac catheterization• Overuse of PCIs, high-priced stents
• ER visits for exacerbations• Hospital admissions and readmissions• Amputations, blindness
Total
Spending
for a
Group
of Patients
TODAY
PayerSpending
508© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Example: Avoidable Costs for
Maternity Care
Sp
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Pati
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t
NOTE:Graph Is notdrawnto scale
ChronicDiseases
Avoidable $
Avoidable $
Cancer
Avoidable $
Chest Pain
Maternity
Avoidable $
OtherAvoidable $
• Use of unnecessarily-expensive drugs• ER visits/hospital stays for dehydration and avoidable complications
• Fruitless treatment at end of life• Late-stage cancers due to poor screening
• Overuse of C-Sections• Early elective deliveries• Low birthweight due to poor prenatal care• Use of hospitals instead of birth centers
• Overuse of high-tech stress tests/imaging• Overuse of cardiac catheterization• Overuse of PCIs, high-priced stents
• ER visits for exacerbations• Hospital admissions and readmissions• Amputations, blindness
Total
Spending
for a
Group
of Patients
TODAY
PayerSpending
509© Center for Healthcare Quality and Payment Reform www.CHQPR.org
And Many Other OpportunitiesS
pen
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ChronicDiseases
Avoidable $
Avoidable $
Cancer
Avoidable $
Chest Pain
Maternity
Avoidable $
OtherAvoidable $
• Use of unnecessarily-expensive drugs• ER visits/hospital stays for dehydration and avoidable complications
• Fruitless treatment at end of life• Late-stage cancers due to poor screening
• Overuse of C-Sections• Early elective deliveries• Low birthweight due to poor prenatal care• Use of hospitals instead of birth centers
• Overuse of high-tech stress tests/imaging• Overuse of cardiac catheterization• Overuse of PCIs, high-priced stents
• ER visits for exacerbations• Hospital admissions and readmissions• Amputations, blindness
• Unnecessary/avoidable services
Total
Spending
for a
Group
of Patients
TODAY
PayerSpending
510© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Only Physicians Know How to
Change Care to Reduce Costs
Sp
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Chest PainAvoidable $
ChronicDiseases
CancerAvoidable $
Avoidable $
Maternity
Avoidable $
Other
Avoidable $
Payer Savings
TODAY
PayerSpending
FUTURE
PayerSpending
ChronicDiseases
Avoidable $
Avoidable $
Cancer
Avoidable $
Chest Pain
Maternity
Avoidable $
OtherAvoidable $
Total
Spending
for a
Group
of Patients
511© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Primary Care Can’t Do It AloneS
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Chest PainAvoidable $
ChronicDiseases
CancerAvoidable $
Avoidable $
Maternity
Avoidable $
Other
Avoidable $
Payer Savings
TODAY
PayerSpending
FUTURE
PayerSpending
ChronicDiseases
Avoidable $
Avoidable $
Cancer
Avoidable $
Chest Pain
Maternity
Avoidable $
OtherAvoidable $
Total
Spending
for a
Group
of Patients
512© Center for Healthcare Quality and Payment Reform www.CHQPR.org
You Also Need the Specialists
Who Deliver the Services
Sp
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Chest PainAvoidable $
ChronicDiseases
CancerAvoidable $
Avoidable $
Maternity
Avoidable $
Other
Avoidable $
Payer Savings
TODAY
PayerSpending
FUTURE
PayerSpending
ChronicDiseases
Avoidable $
Avoidable $
Cancer
Avoidable $
Chest Pain
Maternity
Avoidable $
OtherAvoidable $
Total
Spending
for a
Group
of Patients
513© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Allergists:
Tendency to Use Testing
514© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Cardiology:
Tendency to Use Echo
515© Center for Healthcare Quality and Payment Reform www.CHQPR.org
GI: Tendency to Use
Upper GI Endoscopy
516© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Mix of Patient Conditions Varies
(A Lot) From Payer to Payer
517© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Purchaser and Specialty-Specific
Strategy for Reducing Spending
Sp
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Chest PainAvoidable $
ChronicDiseases
CancerAvoidable $
Avoidable $
Maternity
Avoidable $
Other
Avoidable $
Payer Savings
TODAY
PayerSpending
FUTURE
PayerSpending
ChronicDiseases
Avoidable $
Avoidable $
Cancer
Avoidable $
Chest Pain
Maternity
Avoidable $
OtherAvoidable $
Total
Spending
for a
Group
of Patients
518© Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Kind of Data Do You Need?
519© Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Kind of Data Do You Need?
• Healthcare Billings/Claims Data (Payers)– Data on (billable) services delivered– Data on payment amounts for services, if released
• It’s hard to save someone money if they won’t tell you what they’re paying now– Does not include information on unbillable services or costs– Does not include adequate information on patient characteristics
520© Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Kind of Data Do You Need?
• Healthcare Billings/Claims Data (Payers)– Data on (billable) services delivered– Data on payment amounts for services, if released
• It’s hard to save someone money if they won’t tell you what they’re paying now– Does not include information on unbillable services or costs– Does not include adequate information on patient characteristics
• Clinical Data (Provider EHRs)– Data on patient characteristics– Data on services– Only includes information on services patient received from the provider– Does not include information on costs or payments
521© Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Kind of Data Do You Need?
• Healthcare Billings/Claims Data (Payers)– Data on (billable) services delivered– Data on payment amounts for services, if released
• It’s hard to save someone money if they won’t tell you what they’re paying now– Does not include information on unbillable services or costs– Does not include adequate information on patient characteristics
• Clinical Data (Provider EHRs)– Data on patient characteristics– Data on services– Only includes information on services patient received from the provider– Does not include information on costs or payments
• Data on the Costs of Services (Cost Accounting and Modeling)– Information on what provider pays for staff, equipment, supplies used– Need to know not just what costs are today, but how costs will change– Cost accounting helps with baseline, but analytic models also needed– Variable costs is most important information in short run
522© Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Kind of Data Do You Need?
• Healthcare Billings/Claims Data (Payers)– Data on (billable) services delivered– Data on payment amounts for services, if released
• It’s hard to save someone money if they won’t tell you what they’re paying now– Does not include information on unbillable services or costs– Does not include adequate information on patient characteristics
• Clinical Data (Provider EHRs)– Data on patient characteristics– Data on services– Only includes information on services patient received from the provider– Does not include information on costs or payments
• Data on the Costs of Services (Cost Accounting and Modeling)– Information on what provider pays for staff, equipment, supplies used– Need to know not just what costs are today, but how costs will change– Cost accounting helps with baseline, but analytic models also needed– Variable costs is most important information in short run
• Data on Patient-Reported Outcomes (Surveys)– Information on benefits to patients beyond the services they received, such as
quality of life, ability to work and perform activities of daily living
523© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Achieving Significant Savings Is
Much Easier Than It Looks…
Sp
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PayerSpending
TODAY
PayerSpending
PayerSpending
PayerSpending
YEAR 1 YEAR 2 YEAR 3
TotalHealthcareSpending
for aGroup
of Patients
TotalHealthcareSpending
for aGroup
of Patients
TotalHealthcareSpending
for aGroup
of Patients
TotalHealthcareSpending
for aGroup
of Patients
524© Center for Healthcare Quality and Payment Reform www.CHQPR.org
What Payers Want and Need is to
Reduce Growth in Spending
Sp
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Pati
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PayerSpending
TODAY
PayerSpending
PayerSpending
PayerSpending
YEAR 1 YEAR 2 YEAR 3
TotalHealthcareSpending
for aGroup
of Patients
TotalHealthcareSpending
for aGroup
of Patients
TotalHealthcareSpending
for aGroup
of Patients
TotalHealthcareSpending
for aGroup
of Patients
525© Center for Healthcare Quality and Payment Reform www.CHQPR.org
“Savings” Means
Slower Growth Each Year
Sp
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Pati
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PayerSpending
TODAY
PayerSpending
PayerSpending
PayerSpending
YEAR 1 YEAR 2 YEAR 3
TotalHealthcareSpending
for aGroup
of Patients
TotalHealthcareSpending
for aGroup
of Patients
TotalHealthcareSpending
for aGroup
of Patients
TotalHealthcareSpending
for aGroup
of Patients
Slower-GrowingSpending
for of Patients
526© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Additional Care Redesign Initiatives
Each Year Control the Trend
Sp
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Pati
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t
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PayerSpending
TODAY
PayerSpending
PayerSpending
PayerSpending
YEAR 1 YEAR 2 YEAR 3
TotalHealthcareSpending
for aGroup
of Patients
TotalHealthcareSpending
for aGroup
of Patients
TotalHealthcareSpending
for aGroup
of Patients
TotalHealthcareSpending
for aGroup
of Patients
Slower-GrowingSpending
for of Patients
Slower-GrowingSpending
for of Patients
527© Center for Healthcare Quality and Payment Reform www.CHQPR.org
So Significant Savings Achieved
Even Though Spending is Higher
Sp
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Pati
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t
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PayerSpending
TODAY
PayerSpending
PayerSpending
PayerSpending
YEAR 1 YEAR 2 YEAR 3
TotalHealthcareSpending
for aGroup
of Patients
TotalHealthcareSpending
for aGroup
of Patients
TotalHealthcareSpending
for aGroup
of Patients
TotalHealthcareSpending
for aGroup
of Patients
Slower-GrowingSpending
for of Patients
Slower-GrowingSpending
for of Patients
Slower-GrowingSpending
for of Patients
528© Center for Healthcare Quality and Payment Reform www.CHQPR.org
How Do You Control The Trend?S
pen
din
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Pati
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t
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PayerSpending
TODAY
PayerSpending
PayerSpending
PayerSpending
YEAR 1 YEAR 2 YEAR 3
TotalHealthcareSpending
for aGroup
of Patients
TotalHealthcareSpending
for aGroup
of Patients
TotalHealthcareSpending
for aGroup
of Patients
TotalHealthcareSpending
for aGroup
of Patients
Slower-GrowingSpending
for of Patients
Slower-GrowingSpending
for of Patients
Slower-GrowingSpending
for of Patients
529© Center for Healthcare Quality and Payment Reform www.CHQPR.org
AvoidableSpending
AvoidableSpending
AvoidableSpending
Identify the Avoidable Spending..S
pen
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Pati
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t
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PayerSpending
TODAY
PayerSpending
PayerSpending
PayerSpending
YEAR 1 YEAR 2 YEAR 3
AvoidableSpending
NecessarySpending
NecessarySpending
NecessarySpending
NecessarySpending
530© Center for Healthcare Quality and Payment Reform www.CHQPR.org
AvoidableSpending
…And Reduce It Over Time…S
pen
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t
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PayerSpending
TODAY
PayerSpending
YEAR 1 YEAR 2 YEAR 3
AvoidableSpending
NecessarySpending
NecessarySpending
AvoidableSpending
AvoidableSpending
NecessarySpending
NecessarySpending
PayerSpending
PayerSpending
531© Center for Healthcare Quality and Payment Reform www.CHQPR.org
AvoidableSpending
…While the Appropriate Spending
Can Still Increase….
Sp
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t
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PayerSpending
TODAY
PayerSpending
YEAR 1 YEAR 2 YEAR 3
AvoidableSpending
NecessarySpending
NecessarySpending
AvoidableSpending
NecessarySpending
AvoidableSpending
NecessarySpending
PayerSpending
PayerSpending
532© Center for Healthcare Quality and Payment Reform www.CHQPR.org
AvoidableSpending
So Patients Are Getting Better
Care at Lower Cost
Sp
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Pati
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t
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PayerSpending
TODAY
PayerSpending
YEAR 1 YEAR 2 YEAR 3
AvoidableSpending
NecessarySpending
NecessarySpending
NecessarySpending
AvoidableSpending
NecessarySpending
Avoidable $
PayerSpending
PayerSpending
Controlling Risk
534© Center for Healthcare Quality and Payment Reform www.CHQPR.org
To Attract Payers, New Payment
Must Be < Projected FFS Spend
COST
TIME
FFS
$
FFS
$
APM
$
Bundled
or
Condition-
Based
Payment
Level
LowerSpend
Actual Actual Proposed
535© Center for Healthcare Quality and Payment Reform www.CHQPR.org
…If All Goes Well, Provider’s Costs
Are Lower Than the Payment…
COST
TIME
Costs
of
SvcsFFS
$
FFS
$
APM
$
LowerSpend
LowerCosts
Actual Actual Proposed Actual
Bundled
or
Condition-
Based
Payment
Level
536© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Profit for
Provider
...And Both the Payer and
Provider Will “Win”
COST
TIME
Costs
of
SvcsFFS
$
FFS
$
APM
$
LowerSpend
LowerCosts
WIN-
WINSavings
For Payer
Actual Actual Proposed Actual
Bundled
or
Condition-
Based
Payment
Level
537© Center for Healthcare Quality and Payment Reform www.CHQPR.org
The Risk Physicians Fear:
All Won’t Go Well (Costs Go Up)..
COST
TIME
Costs
of
SvcsFFS
$
FFS
$
APM
$
Excess
CostLowerSpend
Actual Actual Proposed Actual
Bundled
or
Condition-
Based
Payment
Level
538© Center for Healthcare Quality and Payment Reform www.CHQPR.org
…Creating a Win-Lose Situation
COST
TIME
Costs
of
SvcsFFS
$
FFS
$
APM
$
Excess
CostLowerSpend
Loss for
Provider
Savings
For Payer
WIN-
LOSE
Actual Actual Proposed Actual
Bundled
or
Condition-
Based
Payment
Level
539© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Many Different Reasons Costs
May Increase Beyond Payment
COST
TIME
Costs
of
SvcsFFS
$
FFS
$
APM
$
Excess
Cost
UnusuallyCostly Patient
Overutilizationof Services
New, High-CostTreatment
Many Avoidable Complications
Higher-SeverityPatients
Large RandomVariation
Failure to FollowGuidelines
Actual Actual Proposed Actual
Bundled
or
Condition-
Based
Payment
Level
LowerSpend
540© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physicians CAN Control Many of
the Factors Causing Higher Costs
COST
TIME
Costs
of
SvcsFFS
$
FFS
$
APM
$
Excess
Cost
UnusuallyCostly Patient
Overutilizationof Services
New, High-CostTreatment
Many Avoidable Complications
Higher-SeverityPatients
Large RandomVariation
Failure to FollowGuidelines
What
Physicians
CAN Control
(Performance
Risk)
Actual Actual Proposed Actual
Bundled
or
Condition-
Based
Payment
Level
LowerSpend
541© Center for Healthcare Quality and Payment Reform www.CHQPR.org
But Other Causes of Higher Costs
CANNOT Be Controlled by Doctors
COST
TIME
Costs
of
SvcsFFS
$
FFS
$
APM
$
Excess
Cost
UnusuallyCostly Patient
Overutilizationof Services
New, High-CostTreatment
Many Avoidable Complications
Higher-SeverityPatients
Large RandomVariation
Failure to FollowGuidelines
What
Physicians
CAN Control
(Performance
Risk)
What
Physicians
CANNOT
Control
(Insurance
Risk)
Actual Actual Proposed Actual
Bundled
or
Condition-
Based
Payment
Level
LowerSpend
542© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physicians Should NOT Be
Expected To Take Insurance Risk
COST
TIME
Costs
of
SvcsFFS
$
FFS
$
APM
$
Excess
Cost
UnusuallyCostly Patient
Overutilizationof Services
New, High-CostTreatment
Many Avoidable Complications
Higher-SeverityPatients
Large RandomVariation
Failure to FollowGuidelines
What
Physicians
CAN Control
(Performance
Risk)
What
Physicians
CANNOT
Control
(Insurance
Risk)
Actual Actual Proposed Actual
Bundled
or
Condition-
Based
Payment
Level
LowerSpend
543© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Four Mechanisms for Separating
Insurance and Performance Risk
COST
TIME
Costs
of
SvcsFFS
$
FFS
$
APM
$
Excess
Cost
UnusuallyCostly Patient
Overutilizationof Services
New, High-CostTreatment
Many Avoidable Complications
Higher-SeverityPatients
RiskAdjustment
Large RandomVariation
Failure to FollowGuidelines
Outlier Pmt/Stop-Loss
Risk Exclusions
RiskCorridors
PerformanceRisk
(Provider’sResponsibility)
Actual Actual Proposed Actual
Bundled
or
Condition-
Based
Payment
Level
LowerSpend
544© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Risk Exclusions
TIME
COST
TIME
Costs
of
SvcsFFS
$
FFS
$
APM
$
Excess
Cost
UnusuallyCostly Patient
Overutilizationof Services
New, High-CostTreatment
Many Avoidable Complications
Higher-SeverityPatients
RiskAdjustment
Large RandomVariation
Failure to FollowGuidelines
Outlier Pmt/Stop-Loss
Risk Exclusions
RiskCorridors
PerformanceRisk
(Provider’sResponsibility)
Actual Actual Proposed Actual
Bundled
or
Condition-
Based
Payment
Level
LowerSpend
545© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Division of Financial Responsibility
(DOFR)Category of
Utilization/SpendingPhysician Accountability
Under APMPaid by Payer Without
Impact on APM
Physician Services
• All services delivered bypatient’s PCP
• All services delivered bypatient’s endocrinologist
• All diabetes-specific services delivered by other physicians
• All other services delivered by other physicians
Medications
• Diabetes-related medications@ base year prices
• Price increases in diabetes-related medications
• Cost differential of new diabetes medications with significantly improved outcomes
• Non-diabetes-related medications
ED Visits and Hospital Admits
• ED visits and hospitalizations other than trauma or oncology @ base year prices
• Price increases in hospital services
• Other ED visits and hospitalizations
546© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Division of Financial Responsibility
(DOFR)Category of
Utilization/SpendingPhysician Accountability
Under APMPaid by Payer Without
Impact on APM
Physician Services
• All services delivered bypatient’s PCP
• All services delivered bypatient’s endocrinologist
• All diabetes-specific services delivered by other physicians
• All other services delivered by other physicians
Medications
• Diabetes-related medications@ base year prices
• Price increases in diabetes-related medications
• Cost differential of new diabetes medications with significantly improved outcomes
• Non-diabetes-related medications
ED Visits and Hospital Admits
• ED visits and hospitalizations other than trauma or oncology @ base year prices
• Price increases in hospital services
• Other ED visits and hospitalizations
547© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Division of Financial Responsibility
(DOFR)Category of
Utilization/SpendingPhysician Accountability
Under APMPaid by Payer Without
Impact on APM
Physician Services
• All services delivered bypatient’s PCP
• All services delivered bypatient’s endocrinologist
• All diabetes-specific services delivered by other physicians
• All other services delivered by other physicians
Medications
• Utilization of diabetes-related medications @ base year prices
• Price increases in diabetes-related medications
• Cost differential of new diabetes medications with significantly improved outcomes
• Non-diabetes-related medications
ED Visits and Hospital Admits
• ED visits and hospitalizations other than trauma or oncology @ base year prices
• Price increases in hospital services
• Other ED visits and hospitalizations
548© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Division of Financial Responsibility
(DOFR)Category of
Utilization/SpendingPhysician Accountability
Under APMPaid by Payer Without
Impact on APM
Physician Services
• All services delivered bypatient’s PCP
• All services delivered bypatient’s endocrinologist
• All diabetes-specific services delivered by other physicians
• All other services delivered by other physicians
Medications
• Utilization of diabetes-related medications @ base year prices
• Price increases in diabetes-related medications
• Cost differential of new diabetes medications with significantly improved outcomes
• Non-diabetes-related medications
ED Visits and Hospital Admits
• # of ED visits and hospitalizations other than trauma or oncology @ base year prices
• Price increases in hospital services
• Other ED visits and hospitalizations
549© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Risk (Acuity/Severity) Adjustment
TIME
COST
TIME
Costs
of
SvcsFFS
$
FFS
$
APM
$
Excess
Cost
UnusuallyCostly Patient
Overutilizationof Services
New, High-CostTreatment
Many Avoidable Complications
Higher-SeverityPatients
RiskAdjustment
Large RandomVariation
Failure to FollowGuidelines
Outlier Pmt/Stop-Loss
Risk Exclusions
RiskCorridors
PerformanceRisk
(Provider’sResponsibility)
Actual Actual Proposed Actual
Bundled
or
Condition-
Based
Payment
Level
LowerSpend
550© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Sp
en
din
g P
er
Pati
en
t
Provider 1 Provider 2
AllPatients
Risk Adjustment Applies to
the Total Patient Population
551© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Provider 1
Sp
en
din
g P
er
Pati
en
t
Provider 2
Patients WithNo Chronic
Disease
Provider 1 Provider 2
Patients WithOne Chronic
Disease
Provider 1 Provider 2
Patients With2+ Chronic Diseases
Provider 1 Provider 2
AllPatients
Risk Adjustment Masks
Differences in Subgroups
552© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Paym
en
t P
er
Pati
en
t
Patients WithNo Chronic
Disease
Patients WithOne Chronic
Disease
Patients With2+ Chronic Diseases
Alternative Approach:
Stratifying Payments & Measures
553© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Outlier Payments/Stop-Loss
TIME
COST
TIME
Costs
of
SvcsFFS
$
FFS
$
APM
$
Excess
Cost
UnusuallyCostly Patient
Overutilizationof Services
New, High-CostTreatment
Many Avoidable Complications
Higher-SeverityPatients
RiskAdjustment
Large RandomVariation
Failure to FollowGuidelines
Outlier Pmt/Stop-Loss
Risk Exclusions
RiskCorridors
PerformanceRisk
(Provider’sResponsibility)
Actual Actual Proposed Actual
Bundled
or
Condition-
Based
Payment
Level
LowerSpend
554© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Outlier Payment
(Individual Stop-Loss)
• Some patients are unusually expensive– Risk adjustment models/stratifications are designed to predict average costs of
groups of patients, not the exact cost of an individual patient
– Risk for even a small percentage of the costs of treating a very expensive patient can result in a large financial penalty for a physician
• Outlier payment: an additional payment from a payer to a provider to cover all or part of the higher cost of the patient’s care– A threshold is created to define when a patient is an “outlier.”
– The payer pays the physician or hospital a percentage (e.g., 80% or 100%) of the difference between the actual cost and the threshold amount
• Individual stop-loss insurance– Similar to an outlier payment, except that the provider has to pay a premium to
an insurer to be eligible to receive the stop-loss payment
• Excluding or “Winsorizing” patients in spending measures– When the physician is not directly responsible for paying for services, but is
held accountable for a measure of spending, “Winsorizing” means capping the amount included for an individual patient at a maximum amount. (The alternative is to exclude the patient from the measure denominator altogether.)
555© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Using Risk Corridors to Share Risks
Not Captured by Risk Adjustment
TIME
COST
TIME
Costs
of
SvcsFFS
$
FFS
$
APM
$
Excess
Cost
UnusuallyCostly Patient
Overutilizationof Services
New, High-CostTreatment
Many Avoidable Complications
Higher-SeverityPatients
RiskAdjustment
Large RandomVariation
Failure to FollowGuidelines
Outlier Pmt/Stop-Loss
Risk Exclusions
RiskCorridors
PerformanceRisk
(Provider’sResponsibility)
Actual Actual Proposed Actual
Bundled
or
Condition-
Based
Payment
Level
LowerSpend
556© Center for Healthcare Quality and Payment Reform www.CHQPR.org
No One Expects That the Payment
Amount Will Be Exactly Right
Actual Costof Services
Cost = Payment
Actual Costof Services
PaymentAmount
557© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Some Random Variation Will Occur
From Year to Year
Actual Costof Services
Cost = Payment
Actual Costof Services
PaymentAmount
558© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Physician Practice Can Handle
Some Variation, As It Does Today
Actual Costof Services
Cost = Payment
Cost=Pmt-x%
Actual Costof Services
ProviderRetains100% of Savings
Cost=Pmt+x% ProviderPays
100% of Extra Cost in this
Range PaymentAmount
Risk Corridor #1
Risk Corridor #1
559© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Payers Should Remain Responsible
for All or Part of Large Variation
Actual Costof Services
Cost = Payment
Cost=Pmt-x%
Actual Costof Services
ProviderRetains100% of Savings
PayerReceives
All or Part ofSavings
Cost=Pmt+x% ProviderPays
100% of Extra Cost in this
Range
PayerPays All or
Partof Excess
Cost
PaymentAmount
Risk Corridor #1
Risk Corridor #2
Risk Corridor #1
Risk Corridor #2
560© Center for Healthcare Quality and Payment Reform www.CHQPR.org
New APMs Can Start with
Narrow Risk Corridors
Actual Costof Services
Cost = Payment
Cost=Pmt-x%
Actual Costof Services
Provider Retains100% of Savings
PayerReceives
All ofSavings
Cost=Pmt+x%
PayerPays All of
Excess Cost
PaymentAmount
Risk Corridor #1
Risk Corridor #2
Risk Corridor #1
Risk Corridor #2
Provider Pays100% of Extra Cost
561© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Expand Risk Corridors Over Time,
As Medicare Did in Part D
TIME
562© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Use Narrow Risk Corridors for
Small Providers over Short Times
Annual
Measures
Multi-Year
Measures
563© Center for Healthcare Quality and Payment Reform www.CHQPR.org
Complex Risk Corridor
Arrangements Possible
Actual Costof Services
Cost = Payment
Cost=Base+5%
Cost=Base+10%
Cost=Base-8%
Cost=Base-15%
Actual Costof Services
EXAMPLE OF ASYMMETRIC TIERED RISK CORRIDORS
ProviderPays20%
PayerPays
80% of Extra Cost
ProviderPays
50% of Extra Cost
ProviderPays
80% of Extra Cost in this Range
ProviderRetains
100% of Savings in this Range
ProviderRetains
60% of Savings
ProviderRetains
34% of Savings
PayerPays
50% of Extra Cost
PayerPays20%
PayerReceives
40% of Savings
PayerReceives
66% of Savings
BasePaymentAmount