THE COMMONWEALTH

FUND

Developing Innovative Payment Approaches: Developing Innovative Payment Approaches: Finding the Path to High PerformanceFinding the Path to High Performance

Stuart GutermanStuart GutermanAssistant Vice President andAssistant Vice President and

Director, Program on Payment System ReformDirector, Program on Payment System Reform

Alliance for Health Reform Hill BriefingAlliance for Health Reform Hill BriefingPathways to Payment Innovation in aPathways to Payment Innovation in a

Post-Health Reform EraPost-Health Reform EraWashington, DCWashington, DCMay 10, 2010May 10, 2010

THE COMMONWEALTH

FUND

“The country needs, and unless I mistake its temper, the country demands, bold, persistent experimentation. It is common sense to take a method and try it. If it fails, admit it frankly and try another. But above all, try something.”

Franklin D. Roosevelt, 1932

THE COMMONWEALTH

FUND

Problems with the Current Payment System and Problems with the Current Payment System and Goals of ReformGoals of Reform

• Problems:– Fragmented care– Lack of coordination– Variable quality– High and rapidly-growing costs

• Goals:– Create incentives for providers to take broader accountability

for patient care, outcomes, and resource use– Provide rewards for improved care coordination among

providers– Slow growth in health spending– Put in place an infrastructure to support providers in

improving quality and efficiency

THE COMMONWEALTH

FUND

The Relationship BetweenThe Relationship BetweenPayment Methods and Organizational ModelsPayment Methods and Organizational Models

Fee-for-Service

Global Case Rates

Global Payment

Con

tin

uu

m o

f Paym

en

t B

un

dlin

g

Continuum of Organization

Small practices; unrelated hospitals

Independent Practice Associations; Physician Hospital Organizations

Fully integrated delivery system

Con

tinu

um

of R

ew

ard

s for

Hig

h P

erfo

rman

ce

Outcome measures; large

% of total payment

Simple process and structure measures;

small % of total payment

Blended FFS/Care

Management fee

Care coordination and

intermediate outcome

measures; moderate % of total paymentMore

Feasible

Source: Adapted from A. Shih, K. Davis, S. Schoenbaum, A. Gauthier, R. Nuzum, and D. McCarthy, Organizing the U.S. Health Care Delivery System for High Performance, The Commonwealth Fund, August 2008.

Less Feasible

THE COMMONWEALTH

FUND

Implications forImplications forPayment and System ReformPayment and System Reform

• There is an array of organizational models in the health care system, and corresponding arrays of payment approaches and approaches to rewarding high performance

• We aren’t starting from a single point on the continuum of organization, and we won’t end up at one point—even high-performing, integrated systems can be very different from each other

• There is no single ‘right’ way for care to be organized or to pay for care

• But the results we demand from our health system should be consistent everywhere, and we have a right to expect that those demands will be met everywhere

THE COMMONWEALTH

FUND

Payment Innovation inPayment Innovation inHealth Reform LegislationHealth Reform Legislation

• Medical home: Expansion of current Medicare demonstration, new Medicare pilots, Medicaid initiatives

• ACO: Broad responsibility for quality and cost of patient care, rewards for quality, shared savings

• Bundled payments: Medicare pilots for hospital and post-acute care, Medicaid initiatives

• Medicare Advantage: Rates based on plan performance

• Center for Medicare and Medicaid Innovation

THE COMMONWEALTH

FUND

Center for Medicare and Medicaid InnovationCenter for Medicare and Medicaid Innovation

• Beginning in 2011, Center in CMS to test innovative payment and service delivery models to reduce program expenditures under Medicare, Medicaid, and CHIP while preserving or enhancing the quality of care; current demonstration authority expanded

• Models to be selected based on evidence that they address a defined population for which there are deficits in care leading to poor clinical outcomes or potentially avoidable expenditures

• Emphasis on care coordination, patient-centeredness

• Could increase spending initially, but over time must improve quality without increasing spending, reduce spending without reducing quality, or both

• Evaluation should include quality of care, including patient-level outcomes, and changes in spending; could consider cross-program impact

• Secretary could expand duration and scope if model reduces spending without reducing quality

THE COMMONWEALTH

FUND

Key Considerations for Successful PilotsKey Considerations for Successful Pilots

• Multi-payer involvement

• ‘Ground-up’ as well as ‘top-down’ development

• Array of potential models

• Flexibility in design and implementation

• Try vs. test/trust but verify

• Establish infrastructure to support success

• Work with MedPAC, MACPAC/feed into IPAB deliberations

THE COMMONWEALTH

FUND

Improving the ProcessImproving the Process

• Transparency

• Site selection and approval

• Evaluation

• Translating pilots into policy

• Resource availability

THE COMMONWEALTH

FUND

“At this point, we can’t afford any illusions: the system won’t fix itself, and there’s no piece of legislation that will have all the answers, either. The task will require dedicated and talented people in government agencies and in communities who recognize that the country’s future depends on their sidestepping the ideological battles, encouraging local change, and following the results. But if we’re willing to accept an arduous, messy, and continuous process we can come to grips with a problem even of this immensity. We’ve done it before.”

Atul Gawande, 2010

THE COMMONWEALTH

FUND

Thank You!Thank You!

For more information, please visit:

www.commonwealthfund.org

Heather Drake, Program AssociatePayment System Reformhd@cmwf.org