AGENDA ITEM X Action Item Information Only

Date: March 22, 2018

Item Number: VIII

Title: Expansion of Medicare-Plus Pilot Program – Carson Tahoe Health

SUMMARY This report requests the Board approve an expansion to the Medicare-plus provider reimbursement pilot program to include Carson Tahoe Health (CTH) in Carson City, NV.

REPORT BACKGROUND In the spring of 2017, PEBP and Carson Tahoe Health met to explore an opportunity to direct contract for services for PEBP members in the Carson City area. Many years ago, PEBP had a direct contract with Carson Tahoe Health that was replaced by a comprehensive network agreement in northern Nevada. At the time, Carson Tahoe Health informed PEBP the potential increase to costs could be as high as $4 million annually. Nevertheless, PEBP moved away from this contract arrangement and moved forward with a comprehensive network which we have maintained for years. Consistent with PEBP’s program analysis of all contracts last year, PEBP scheduled a meeting with Carson Tahoe Health to discuss opportunities. When PEBP discovered Carson Tahoe Health provided a proposal for PEBP’s near-site clinic Request for Proposal (RFP) released last summer, PEBP halted all discussions to protect the integrity of the solicitation. In the meantime, PEBP and Saint Mary’s (who did not bid on the open solicitation) had initial discussions about direct contracting through a pilot program. CURRENT APPROVED PILOT PROGRAM On November 30, 2017, the PEBP Board approved a pilot program with Saint Mary’s to implement Medicare-plus reimbursement of hospital and primary care services for Plan Year 2019 (July 1, 2018).

STATE OF NEVADA

PUBLIC EMPLOYEES’ BENEFITS PROGRAM 901 S. Stewart Street, Suite 1001

Carson City, Nevada 89701

Telephone (775) 684-7000 (800) 326-5496

Fax (775) 684-7028

www.pebp.state.nv.us

PATRICK CATES Board Chairman

BRIAN SANDOVAL Governor

DAMON HAYCOCK Executive Officer

Expansion of the Medicare-Plus Pilot Program - CTH March 22, 2018 Page 2 This pilot program is aligned with PEBP’s Board approved Strategic Plan overall strategies:

1. Increase Access to Care a. This contract opens up more primary care providers and another high quality

hospital for services in northern Nevada. 2. Improve the Member Experience

a. This contract allows members to utilize high quality services traditionally excluded from their healthcare.

3. Reduce Costs to the Program a. This contract will apply competitively negotiated Medicare-plus reimbursement

for all associated services which should lower costs. b. Additionally, portions of this contract will have tiers of reimbursement reducing

costs as volume increases. PROPOSED EXPANSION OF THE PILOT PROGRAM Carson Tahoe Health and PEBP resumed discussions late last year after the RFP concluded. Recognizing the pilot program approved by the Board, Carson Tahoe Health asked PEBP to be included, and they have shown a willingness to participate in a Medicare-plus model of reimbursement to save PEBP costs. PEBP reached out to the Purchasing Division of the Department of Administration for guidance and received approval to include Carson Tahoe Health in the two-year pilot for the Carson City region. PEBP has previously shared the shortcomings and lack of inflation protection of the current hospital contracts on PEBP’s network. The network discounts are a percentage-off-billed arrangement whereby hospitals and their associated systems of care can increase their costs annually to achieve whatever net result they want with no protection to PEBP. PEBP has requested numerous times to be part of the negotiating discussions with providers, however, we have not been given the opportunity. Therefore in an effort to protect the program, the plan, the members, and the Nevada taxpayer, PEBP is seeking to share risk with providers and create direct partnerships with the healthcare community to address healthcare needs of our members. GOVERNOR DEVELOPED BIPARTISAN BLUEPRINT On February 23, 2018, Governors across the nation released “A Bipartisan Blueprint for Improving Our Nation’s Health System Performance” (see attached). This blueprint highlights core beliefs and strategies for improving health system performance. One of those strategies is to “encourage more competition and innovation.” One of the goals of the pilot program is to implement innovative provider payment reform while encouraging a competitive landscape by including previously excluded hospital systems of care in Nevada.

Expansion of the Medicare-Plus Pilot Program - CTH March 22, 2018 Page 3 PEBP is convinced this pilot program, among other PEBP initiatives, is in line with this blueprint and showcases our shared vision with our Governor and other bipartisan Governors across the nation. RECOMMENDATION PEBP recommends the Board approve the expansion of the Medicare-plus reimbursement pilot program to include Carson Tahoe Health beginning Plan Year 2019 (July 1, 2018) for a two-year period. If approved, PEBP will bring back a contract for services to the Board for ratification at the May 24, 2018 Board meeting.

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ABipartisanBlueprintforImprovingOurNation’sHealthSystemPerformanceFebruary 23, 2018 John W. Hickenlooper, Governor, State of Colorado John Kasich, Governor, State of Ohio Bill Walker, Governor, State of Alaska Tom Wolf, Governor, State of Pennsylvania Brian Sandoval, Governor, State of Nevada

08Fall

ABipartisanBlueprintforImprovingOurNation’sHealthSystemPerformance1

ABipartisanBlueprintforImprovingOurNation’sHealthSystemPerformance

February23,2018

Governorsacrossthecountryareleadingeffortstotransformtheirhealthcaresystemstoproducebetterhealthoutcomesatalowercosttogovernments,employersandindividuals.Statesplayakeyroleinhealthcaretransformationasmajorpurchasersofhealthcare,aschiefregulatorsandadministrators,andascatalystsforbringingtogetherdiversestakeholdersaroundasharedvisionforimprovingoverallhealthsystemperformance.Governorsunderstandthat,whilesomeissuesmaytemporarilydivideus,onmostissueswecanfindagreementandactforthegoodofourstatesandcountry.Thispaperrepresentsabipartisanapproachforimprovingournation’shealthsystemperformance,includingprinciplesandcorebeliefstoguidereform,aswellasspecificstrategiesthataddressthemosturgentproblemsinthecurrentsysteminwaysthatwebelievewillsustainbroadsupport.

GUIDINGPRINCIPLES• ImproveAffordability:Insurancereformsthatincreaseaccesstoquality,affordablehealthcare

coveragemustbecoupledwithreformsthataddressrisinghealthcarecostsacrossthehealthcaresystem.Insurancereformsshouldbedoneinamannerthatisconsistentwithsoundandsustainablecostcontrolpractices.

• RestoreStabilitytoInsuranceMarkets:Americanswithoutaccesstoemployer-sponsoredcoverageor

governmentplansneedtohaveaccesstoahealthy,stableandcompetitivemarketofinsurersfromwhichtochoose.

• ProvideStateFlexibilityandEncourageInnovation:Statescandevelopinnovativeapproachesthat

havethepotentialtostrengthenhealthinsuranceforallAmericans.Withinstandardsthatprotectthemostvulnerable,statesshouldhaveappropriateflexibilitytoimplementreformsinamannerthatisresponsivetolocalandregionalmarketconditions.

• ImprovetheRegulatoryEnvironment:Astheprincipalregulatorsofinsurance,statesareinthebest

positiontopromotecompetitionwithinstateinsurancemarkets.Federaleffortsshouldprovideappropriatestandardstoprotectconsumerswhilelimitingduplicativeorburdensomeregulationsandprovidingrelieftosmallbusinessownersandindividuals.

ABipartisanBlueprintforImprovingOurNation’sHealthSystemPerformance2

COREBELIEFS• Wecanandmustachievemultiple,complementaryobjectives:protectionforall,accesstohighquality

care,andaffordable,sustainablecostsforconsumersandpayersovertime.Toooften,theseobjectivesareframedasoptionsinoppositiontoeachother:

− WecanensureAmericanshavehighqualityhealthcareorwecanreducecosts.− Wecaneitherbefiscallyresponsibleorbegenerousandhumane.− Wecanfosterindividualaccountabilityorwecansupportpeopleinneed.− Wecanembraceanationalvisionorwecanaddresstheneedsofeachmarket.

Werejectthesefalsechoices.Othersectorsoftheeconomyhavedeliveredgreateroutputatlowercostoverthelast30years.Weshouldexpectthesamehighperformanceandcontinuousimprovementfromourhealthcaresystem.

• Thebeststrategiestoimproveourhealthcaresystemaddressmultipleobjectivessimultaneously,reconcilecompetingpriorities,andholisticallyaddressourpresentandfutureneeds.

• Material,lastingimprovementtoourhealthcaresystemrequiresharnessingprivatesectorinnovationandcompetitiontothebenefitofall.Wheningenuityandcapitalarefocusedonwhatwemostvalue,weseeincredibleinnovationandproductivitygains.Enablingcompetitionrequiresalignmentoftheincentivesofallstakeholderswithwhatwevalue,sufficienttransparency,andappropriateregulation.Inourcurrenthealthcaresystem,providerscompetetoprovidemorecare,notnecessarilybettercare.Thismisalignmentofincentives,whichrewardsvolumeinsteadofvalue,isthemostsignificantroot-causechallengeinoursystemandaddressingitshouldbeourgreatestpriority.

• Targetedgovernmentactionisjustifiedandrequiredwhenmarketforces,alone,willnotachieveourobjectives,suchasprotectingvulnerableindividualswithouttheresourcestoindependentlysecurehealthcare.

• Reformmustaddresstheunderlyingdriversofcostsandcostincreases,includingthecurrentlackofvalue-basedcompetitioninourhealthcaredeliverysystem(e.g.,hospitals,medicalserviceproviders,andpharmaceuticals)andlifestyle-induceddisease.

• Ourexpectationsforourhealthcaresystemshouldbeconsistentnationally.Everycitizenineverypartofthecountrydeservesahighperformingsystem.Weneedasingle,holistic,integratedframeworktoimproveoursystemovertime.

Butwithinanationalframeworkonesizewillnotfitall.Manyaspectsofhealthcare,suchaspopulationcharacteristics,marketstructure,andvarianceinlocalgovernance(e.g.,tribalauthorities),differsignificantlyacrossmarkets.Theexecutionofanationalstrategywillnecessarilyvarybystateandregion.

• Itismorepracticalandlessriskytobuildfromtheelementsofoursystemthatarestable.Forexample,ourprimarycoverageandfinancingmechanisms–employersponsoredinsurance,Medicare,andMedicaid–areimperfectandwouldbenefitfromreform,buttheyarealsowellunderstoodandmuchmorestablethanisoftenbelieved.Thesemechanismsshouldbethefoundationofeffortstoexpandaffordablehealthcarecoverage.

ABipartisanBlueprintforImprovingOurNation’sHealthSystemPerformance3

• Howwedeliverreformisfundamentaltoitspotentialsuccess.Lasting,highimpactreformmustbebipartisan,driventhroughaninclusive,transparentprocess,andnecessarilyinvolvecompromise.Tosustainreform,bothnationalpartiesmustfeelownershipforreformsandtheirsuccess–orfailure–overtime.

STRATEGIESFORIMPROVINGHEALTHSYSTEMPERFORMANCEPayers,providers,andconsumersknowthatwemustreorientourhealthcaresystemonvalue.Toachievethisgoal,wemustalignconsumerandproviderincentives,encouragemorecompetitionandinnovation,reforminsurancemarkets,expandprovenstateMedicaidinnovations,andmodernizethestateandfederalrelationship.

ReorientthesystemonvalueCoverageisimportant,andcoveragereformscanhelpcontaincosts,butournationneedstoconfronttheunderlyingmarketdynamicsthataredrivingunsustainableincreasesinthecostofcare.Withthesupportofthefederalgovernment,statesareresettingthebasicrulesofhealthcarecompetitiontopayprovidersbasedonthequality,notthequantityofcaretheygivepatients.Thisistrueinourstates,whereweareincreasingaccesstocomprehensiveprimarycareandreducingtheincentivesformedicalproviderstooverusemarginalorunnecessaryserviceswithinhighcostepisodesofcare.Reorientingthesystemonvalueneedstobeourgreatestpriority.CongressandtheAdministrationshouldworkwithstatesandmakeaclearcommitmenttovalue-basedhealthcarepurchasing.Keycomponents:• Measurethevaluedeliveredbyallhealthcareprovidersandpayersinawaythatisfair,technically

credible,andrelevanttopatientsandpurchasers;andmakethisinformationbroadlytransparenttoallpolicymakers,consumers,andstakeholders.

• Useinformationandincentivestodriveanevolutionofprimarycare,frombeingreactive,focusedonindividualencounters,andfragmented,toholisticcaredeliveredbycoordinatedteamsofcliniciansempoweredandaccountableforthehealthandcostofpopulationsovertime.

• Useinformationandincentivestoempowerandholdprovidersaccountablefortheend-to-endcostsandoutcomesforepisodesofcare.

• States“leadbyexample”usingMedicaidandstateemployeebenefits(andtoalesserextent,individualandsmallgroupmarkets)asacatalystforchange,toovercomeinertia,andachievecriticalmasstoreorientthesystemonvalueacrosspublicandprivatesectors.

• Federalgovernmentchampionsvalue-basedcareinfederalprograms(e.g.,Medicare,MACRAQualityPaymentProgram,FederalEmployeeBenefits)andthosejointly-administeredwiththestates,alignsprioritiesforvalue-basedpurchasingacrossallfederalagencies,andusesitsregulatorycapacitytosupportorpartnerwithstatesandtheprivatesector.

ABipartisanBlueprintforImprovingOurNation’sHealthSystemPerformance4

AlignconsumerincentivesConsumersplayacriticalroleinthemedicaldecision-makingprocessandmakemultipledecisionsinthepathofcarethatultimatelyimpactthevalueofcaredelivered.Thefederalgovernmentandstatescanworktoalignconsumer-focusedincentivesandencouragethedevelopmentoftoolsthatprovideconsumerswiththeinformationtheyneedtocreatevalueinourhealthcaresystem.Keycomponents:• EnsurethatallAmericanshaveaccesstoappropriate,affordable,highqualitycoverageindependentof

theirhealth,age,gender,employmentstatus,orfinancialsituation.

• Builduponexistingfinancialincentivestoencourageconsumerstosecurecoverageandprepareforpotentialout-of-pocketexpenditures.

• EnsurethateachAmericanfinanciallycontributestotheirhealthcareconsistentwiththeirfinancialcapacity

• Encourageresponsiblechoicesbyempoweringconsumerswithusefulinformationandincentinghealthylifestylesandvalue-consciouscaredeliverydecisions.

• Encouragethecreationofnewtechnologiesandtoolsthatwillallowconsumerstocreatevalue-basedhealthcaredecisions.

EncouragemorecompetitionandinnovationOverthepasttwodecades,therehasbeentremendousconsolidationamonghealthcareproviders.Consolidatedprovidersystemscanresistthekindofcompetitionandinnovationthathascreatedefficienciesandbenefitedconsumersinothersectors.TheFederalandStategovernmentsmustensurethatmarketcompetitionisfocusedondrivingbetterpatientoutcomes,increasingefficiency,anddecreasingcosts.Keycomponents:• Encourageinnovation(includingcost-reducinginnovation)inbusiness,technology,andworkforce

models.

• Directlycombatanti-competitivebehavior,particularlyamonglocalhospitalsystems,pharmacybenefitsmanagers,andpharmaceuticalcompanies.

• Requiregreatersharingofhealthcaredataofalltypesacrossentities.

• Systematicallyreviewandrationalizefederalandstateregulationthatmayinhibitinnovationandcompetition(e.g.,credentialing,clinicaltrials,andprescriptiondrugimportregulations).

ABipartisanBlueprintforImprovingOurNation’sHealthSystemPerformance5

ReforminsurancemarketsMostAmericanscurrentlyhaveaccesstoastablesourceofhealthinsurancecoveragethroughtheiremployer,orfrompublicprograms,likeMedicareandMedicaid.Risingcostsareaconcernthroughoutthesystem,butthevolatilityoftheindividualmarketmoreimmediatelythreatenscoveragefor22millionAmericans.Werecommendbuildingonthestrengthsofthecurrentsystem,andtakingimmediateactiontostabilizetheindividualmarket.Keycomponents:• Encouragemoreconsumerstoparticipateinplansthatareavailabletothemeitherthoughtheir

employerorothermarkets(e.g.,ERISAplansatlargeemployers,smallgroupplans,MedicareAdvantage,individualmarket).

• Ensurelowerincomeconsumershaveaccesstoqualitycoveragebymaximizingallavailableoptions(e.g.,financialassistance,expandingMedicaid),whileavoidingperverseincentives.

• BuildontheAugust30,2017,bipartisangovernor’srecommendationstostrengthenournation’sindividualhealthinsurancemarkets:

− ReinstituteCostSharingReductionPayments,− Maximizecarrierparticipation(e.g.,byexemptingcarrierswhoofferplansinunderservedareas

fromthefederalhealthinsurancetaxinthoseareas),− Maximizeconsumerparticipation(e.g.,byincreasingoutreachtohealthierindividuals,andfixing

thefamilyglitch),− Promoteappropriateenrollment(e.g.,byverifyingspecialenrollmentperiodqualifications).− Stabilizeriskpools(e.g.,viariskadjustments,reinsurance,andrisksharing),and− Reducecostthroughcoverageredesignandpaymentinnovation(e.g.,bygrantingstatesmore

flexibilityinchoosingreferenceplansforessentialhealthbenefits).

ExpandprovenstateMedicaidinnovationsStateshavetakentheleadinpromotingvalueintheirMedicaidsystems.Manystatesareworkingtomoveawayfromvolume-driven,fee-for-servicetovalue-basedpaymentsandcarecoordination.FederalandstategovernmentsshouldrecognizeandreplicatethesuccessfultrackrecordofselectstatestoincreasequalityandlowercostsinstateMedicaidprograms.Keycomponents:

• Defineandscalevalue-basedcareandpaymentmodels(e.g.,integrationofphysicalandbehavioralhealth,comprehensiveprimarycare,episodesofcare).

• Investinstate-basedtransitionstonewvalue-basedmodelsofcarethathavethepotentialtoreducepercapitaMedicaidspendingovertime.

• IncorporatesocialdeterminantsofhealthintoMedicaid.

ABipartisanBlueprintforImprovingOurNation’sHealthSystemPerformance6

• Measureandincenthealthandcriticalsocialoutcomes(e.g.,reducingpoverty,increasingemployment,reducingcriminalrecidivism).

• ManageMedicaidrisk-adjustedcostperperson,overtime,belownationalmedicalinflation.

• Usebestpracticevendormanagementtoextractmeaningfulvaluefromthirdparties(e.g.,managedcarecompanies,ITvendors).

• ProvideasmoothtransitionfromMedicaidtotheindividualmarket(backandforth)whilereducingchurnbetweenthetwo.

ModernizethestateandfederalrelationshipStatescanpursuemanyhealthcarereformswithoutfederalassistance.However,insomecasesstatesareconstrainedbyfederallawandregulationfrombeingtrulyinnovative.WeurgeCongressandfederalagenciestoworkwithstatestoovercometheseconstraints.Keycomponents:• Inpartnershipwithstates,theFederalgovernmentshouldfocusondefiningandprotectingareal

"minimum"standard,or"floor,”forhealthcaresystemsineverystatethatmaintainscoverage,increasesvalue,andprotectsconsumers,whileaffordingstatesbroadindependenceabovethatfloor.

• Federalgovernmenttoprovideleadershipwhereanationalapproachismostefficient(e.g.,regulationofpharmaceuticals,airambulances).

• Fullyaligngovernanceandincentivesinprogramssharedamongstatesandfederalgovernment(e.g.,dual-eligiblemembers).

• Explicitlyrecognizesuccessfulstateinnovationsinvalue-basedcare(e.g.,viatheStateInnovationModelprogram)andsupportotherstatesinreplicatingthosesuccesses(e.g.,resources,expeditedwaivers)whilealigningMedicareasmuchaspossible.

• Streamlineadministrativeprocesses(e.g.,waiverrequests)tobeeasier,faster,moreconsistent,andmorepredictable.

JohnW.Hickenlooper,GovernorStateofColorado

JohnKasich,GovernorStateofOhio

BillWalker,GovernorStateofAlaska

TomWolf,GovernorStateofPennsylvania

BrianSandoval,GovernorStateofNevada