Value-Based Purchasing: Yes, Virginia,

there is a Santa Claus

Brady A. Augustine, Bureau Chief

Medicaid Health Systems Development

Presentation to Florida’s Medicaid Managed Care Plans

June 18, 2008

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Part 1.The Real and Growing Problems

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“All great leaders have had one characteristic in common: it was the willingness to confront unequivocally the major anxiety of their

people in their time. This, and not much else, is the essence of leadership.” John Kenneth Galbraith

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It’s a System – not a Person – Problem

Source: Congressional Budget Office. The Long Term Outlook for Health Care Spending: Sources of Growth in Projected Federal spending on Medicare and Medicaid. November, 2007.

(Attributable to Medicare and Medicaid)

In fact, it is a many system problem

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Source: Congressional Budget Office. Geographic Variation in Health Care Spending. February, 2008.

It is our Problem…

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7000 United StatesGermanyCanadaFranceAustraliaUnited Kingdom

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1980

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United StatesGermanyCanadaFranceAustraliaUnited Kingdom

Source: OECD Health Data 2007

Average spending on healthper capita ($US PPP)

Total health expendituresas percent of GDP

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2000 2001 2002 2003 2004 2005 2006* 2007*

Net cost of private health insurance administration

Family private health insurance premiums

Personal health care

Workers earnings

Notes: Data on premium increases reflect the cost of health insurance premiums for a family of four/the average premium increase is weighted by covered workers. * 2006-7 private insurance administration and personal health care spending growth rates are projections.Sources: A. Catlin, C. Cowan, S. Heffler et al., “National Health Spending in 2005: The Slowdown Continues,” Health Affairs, Jan./Feb. 2007 26(1):143–53; J. A. Poisal, C. Truffer, S. Smith et al., “Health Spending Projections Through 2016: Modest Changes Obscure Part D’s Impact,” Health Affairs Web Exclusive (Feb. 21, 2007):w242–w253; Henry J. Kaiser Family Foundation/Health Research and Educational Trust, Employer Health Benefits Annual Surveys, 2000–2007 (Washington, D.C.: KFF/HRET).

109%

65%

91%

24%

Percent…and it affects ALL of us.

U.S. health care mediocre across the board: Rich or poor, black or white, Americans get equally shoddy treatmentAssociated Press (March 15, 2006)

“Overall, patients received only 55% of recommended steps for top-quality care and no group did much better or worse than that.”

We also have a Quality Problem…

…and a Satisfaction Problem.

Spending Doesn't Improve Patients' Perception of CarePosted May 27, 2008

TUESDAY, May 27 (HealthDay News) -- Higher levels of spending on medical care don't improve patients' perceptions of the care they receive, according to researchers who conducted a survey of Medicare beneficiaries.

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Where’s the Value?

State Level Medicare Spending per Beneficiary (thousands of $)

Source: Congressional Budget Office. Geographic Variation in Health Care Spending. February, 2008.Note: Composite measure of quality reflects 2004 data for the provision of recommended care to patients hospitalized with AMI, heart failure, and pneumonia.

Part 2.Some Promising Solutions

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“The times…they are a-changin’.” Bob Dylan

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First, let’s get back to basics

Dirty words in healthcareBy Joseph L. Dorsey and Donald M. Berwick  |  February 27, 2008

“What system of payment will best support innovations that can make care less expensive and better at the same time?...The answer to the question is that healthcare should be managed in the same way, and for the same reasons, that school systems and air traffic are managed. Managed healthcare was a great idea when it first emerged, before the term got hijacked by insurance companies that claimed to manage care but in many cases only managed money…

We practiced medicine in one of the best managed-care systems in the nation: the former Harvard Community Health Plan. What made it great was the freedom of staff to think creatively about what patients really needed, and to reinvent care to meet those needs. Harvard Community Health Plan pioneered innovations that most US healthcare still pines for: electronic medical records, patient reminders, creative roles for advanced practice nurses and physician assistants, quality measurement, and more.”

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Strategies for Change

1. It’s a systems thing

2. Innovation

3. Collaboration

4. Incentives

5. Accountability

6. Effectiveness

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Virginia Mason Hospital

In 2000, hospital leaders looked at their infrastructure and saw it was designed around them, not the patient.

They looked for a better way to improve quality, safety, and patient satisfaction. After 2 years of searching, they discovered the Toyota Production system, also known as lean manufacturing, which focuses on eliminating waste and defects in production.

Overall benefits include an 85 percent reduction in turnaround time for lab results and lowering inventory costs by $1 million. The hospital reduced overtime and temporary labor expenses by $500,000 in one year and increased productivity by 93 percent. Patients benefit from less waiting, increased safety, and more efficient care.

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Chartered Value Exchanges (CVEs)

CVEs are community-based collaboratives to transform health care at the local level. Providers, employers, insurers, and community leaders achieve this special Federal distinction for their strong commitment to improving quality and value in health care.

Examples:

Massachusetts Health Quality Partners

Minnesota Community Measurement

Wisconsin Collaborative for Healthcare Quality

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Comparative Effectiveness Research (CER)

…findings suggest that better information about the costs, risks, and benefits of different treatment options, combined with new incentives reflecting the information, could eventually alter the way in which medicine is practiced and yield lower health care spending without having adverse effects on health. Over the long term, the potential reduction in spending below projected levels could be substantial.

Example: National Institute for Health and Clinical Excellence (UK)

Source: Congressional Budget Office. Research on the Comparative Effectiveness of Medical Treatments. November, 2007.

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AV Fistula First Breakthrough Initiative

Instituted by CMS in 2003 with help of the Institute for Healthcare Improvement and local ESRD Networks

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P4P (Medi-Cal)

In 2003, California created a performance-based auto-assignment algorithm to better align health plans with public health objectives.

Established Local Initiative Rewarding Results Project in 2002 to implement provider incentives to improve care for low-income children 7 health plans participated covering ~1M children in 9 counties

For plans that implemented incentives, 2 year average HEDIS scores for well-baby visits improved by 7.5 percent.

For plans that implemented incentives, 2 year average HEDIS scores for well-adolescent visits improved by 2.5 percent.

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P4P (NY Medicaid)

In 2000, NY created a performance-based auto-assignment algorithm to better align health plans with public health objectives.

In 2002, NY started augmenting capitation payments for managed care plans with high rates of quality and satisfaction.

In 2006, NY initiated 5 regional demonstrations that involve collaboration between multiple insurers and physicians to develop physician incentive programs designed to promote patient safety and quality of care.

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P4P (Integrated Healthcare Association)

Largest P4P effort in the country – collaborative involves 7 health plans, 225 physician organizations, and over 35000 physicians serving more than 6.2M commercial beneficiaries in California.

Agreed-upon measures are aggregated across all health plans to evaluate and reward physician groups.

Between 2003 and 2005, performance on breast cancer screening increased by 4%, cervical cancer screening increased by 6.9%, and HbA1c screening for diabetics increased by 7.6%.

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P4P (Medicare Premier Hospital Demo.)

In 2003, CMS instituted demo to reward and recognize hospital performance. Initial results show that the hospitals have improved care in all 5 targeted clinical areas.

Summary

Health care quality is improving but the quality chasm is still very wide and more money for more services is not the solution…

…but successful projects are showing that an increased focus on incentives, collaboration, and accountability are necessary to accelerate improvement.