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Value Based Contracting -TransformationNovember 2013

Current Value Based ProgramsCurrent Value Based Programs

FFS to RiskFFS to Risk

Success in the New EnvironmentSuccess in the New Environment

Learning Objectives

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Describe various current national payer value based contracting programs.

Prepare for new payment methodologies through transitioning from traditional fee for service to risk based payment methodologies.

Define critical elements necessary for success in this new environment.

Agenda

Driving Factors

Government Models

Commercial Payer Models

Barriers & Success Factors

Next Steps

Transformation

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DRIVING FACTORS

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Driving Factors

SOURCE: Organisation for Economic Co-operation and Development (2010), ”OECD Health Data”, OECD Health Statistics (database). doi: 10.1787/data-00350-en (Accessed on 14 February 2011).

1 France

2 Italy

3 San Marino

SOURCE: http://thepatientfactor.com/canadian-health-care-information/world-health-organizations-ranking-of-the-worlds-health-systems/

Highest Cost Does Not Equal Highest Quality

WHO Ranking on Health System Performance, 2010

11 Norway

19 Ireland

27 USA

Per C

apita

Spe

ndin

g –

PPP

Adju

sted $8k

$7k

$6k

$5k

$4k

$3k

$2k

$1k

$0

$2,870$3,353 $3,696

$5,003

$7,538Ita

ly

Aust

ralia

Fran

ce

Nor

way

USA

OECD Health Data

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Many drivers of high cost….

Segmented Care

Aging Population

Market Consolidation

Direct to Consumer Advertising

Fee for Service Payment Model Drives Volume

ER Instead of PCP

Duplicative Services

Social & Economic Conditions

Fraud & Abuse

Pharmaceuticals

Lack of Care Coordination

Compensation Models

Technology Costs

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What can the provider control, prescribe and/or impact?National Health Expenditures, 2010

Cost Drivers

7SOURCE: http://www.kaiseredu.org/issue-modules/us-health-care-costs/background-brief.aspx

Affordable Care Act• Most significant government expansion and regulatory overhaul

of the United States health care system since the passage of Medicare and Medicaid in 1965– Goals for new payment models:

• Increase coverage• Incentivize Cost effective care• Increase Coordination of Care across the continuum

8SOURCE: James Vicini and Jonathan Stempel, “US top court upholds healthcare law in Obama triumph.” June 29, 2012. Reuters. http://uk.reuters.com/article/2012/06/29/uk‐usa‐healthcare‐court‐idUKBRE85R0PP20120629 (accessed April 13, 2013)

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Institute for Healthcare Improvement’s “Triple Aim”

SOURCE: D. Derwick, Institute of Healthcare Improvement

The best care

For the whole

population

At the lowest cost

Improve individual experience

Control inflation of per capita costsImprove population health

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Today…• Fee For Service payment model attributes:

– Provide services with highest reimbursement– Potentially provide more services than necessary– Introduce new services that generate high additional

revenue– Compensate providers through productivity measures– Payment the same regardless of quality of care and in fact

can reward rework– Retrospective– Facility and professional service billed separately– In the future we will still need to calculate FFS

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Foot in two pools…

Net

Rev

enue

Time

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Tomorrow…• Value Base Contracting Models represent an evolution in

clinical and payment methodologies– focuses on creating quality outcomes– fosters greater accountability– utilizes substantial innovations in medical technology – requires a higher degree of risk from providers relative to

payment for services– aligns incentives across providers, members, employers and

payers– enhances the patient experience– shifts from volume driven payments to rewarding for quality– improves cost efficiency & coordination of care

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TRANSFORMATION

The Question

What does a medical practice need to do in order to Thrive, Survive

and Succeed in a risk-based environment?

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Revenue Transformation

• Assess Current Risk-Based Payment Environment• Measure and Monitor Impact on Current Revenue Base• Assess Gaps in Infrastructure Necessary to Successful Risk

Contracting Execution• Acquire Tools Necessary to Model Financial Impacts of

New Revenue Streams

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How do we begin to shift?• Identify where and how in the market you want to be

positioned

• Understand how to best evaluate the potential rewards and risks associated with options your practice will consider

• Adapt your infrastructure to support the paradigm shift

• Be able to “tell your story” to demonstrate your value proposition

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Existing Capabilities – where are you?

LOW HIGHImportance

IT Platform

Clinical Cost & Utilization

Integrated Networks

Efficiency (cost)

Care Management Process

Capa

bility

LOW

HIGH

Clinical Documentation and Coding

Clinical Capability (quality of care) 

Data Analytics / Business Intelligence

Clinical Outcome Tracking (episodic care)

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Data Analytics

THE FOUNDATION OF SUCCESS IN A RISK-BASED ENVIRONMENT• Patient Demographics and Disease Aggregation Analysis

• Utilization Trends and Patterns

• DRG and Service Line Analysis

• Clinical and Enterprise Risk Analysis

• Revenue Cycle Process Analysis

• Physician Practice Analytics

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Align Internal Capabilities for Risk-Based Revenue Transformation

TACTICAL

LOW HIGHDegree of Alignment

Evaluate Cost Structure

Improve Clinical Documentation

Care Management Process Implementation

Partnership/Affiliation/Joint Venture

Redesign Cost Structure

Patient‐Centered Medical Home

STRATEGIC TRANSFORMATIONAL

Build Data Analytics Capability

Pursue Development of Risk‐Based Contracts:  gain‐sharing, diagnosis‐specific bundles, limited capitation

Integration with ACO Systems (EHR, PCMH, POC Registries, etc.)

Accountable Care Organization

Resources Re

quire

dLO

WHIGH

Education/Marketing

Enhanced Care Coordination across Continuum (Systems)

Risk‐Capable

FFS to Bundled Payment Conversion for Selected Services

Proactive Physician Leadership /Active Medical Mgmt Program

Care Management Audit & Performance Monitoring

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Critical Transformational ThemesKey Areas Defining Risk and Success in Healthcare Transformation

Understanding and Planning for the Rapidly Evolving Market

Alignment Across an Extended Continuum of Care

Clinical Integration and Operational Excellence

Patient Outcomes and Satisfaction

Business Intelligence

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Execution vs. Concept

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Alignment Summary

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• Raise Awareness• Determine Technology Platforms• Focus on Data Analytics• Redesign Workflow• Overhaul Compensation Plans• Create Robust Governance• Explore New and Different Partnerships• Tell your story – value proposition

GOVERNMENT MODELS

Government Models• Bundled Payment Initiative• Shared Savings/Accountable Care Organizations

(ACOs)• Comprehensive Primary Care Initiative• State Innovation Models Initiative• Patient Centered Medical Home• Value Based Payment Modifier

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Bundled Payments for Care Improvement• Bundled payments - reimbursement for all or part of the

services needed by specific patient for a particular condition or treatment. Creates incentive for provider coordination of efforts.

• Primary goal: reduce costs by reducing cost variation, including through reduction in avoidable complications

• Example: hip replacement surgery bundle– Includes acute care inpatient services; physician services delivered

inside and outside the hospital; and post‐acute care service, such as home health, skilled nursing and other services – can vary.

SOURCE: Centers for Medicare & Medicaid Services “State Innovation Models Initiative: General Information.”http://innovation.cms.gov/initiatives/state‐innovations/ (accessed April 27, 2013) 25

Shared Savings/Accountable Care Organizations (ACOs)

ACO must have at least 5,000 assigned Medicare beneficiaries and have in place the following:

1) formal legal structure 2) robust leadership structure 3) defined processes to promote evidence based medicine; 4) implemented processes to report on quality and cost measures.

26SOURCE: American Medical Association, “New Federal Payment and Delivery Models 101,” February 2013.http://www.ama‐assn.org/resources/doc/washington/hsr‐payment‐reform‐models.pdf (accessed June 8, 2013)

Three year commitment – 50% Physician lead

Current fee for service payments would continue and any shared savings achieved in excess of established thresholds would be shared with participants.

Shared Savings/Accountable Care Organizations (ACOs)• ACOs - providers jointly accountable for the health of their

patients, giving them financial incentives to cooperate and save money by avoiding unnecessary tests and procedures

• Providers can choose to be at risk of losing money if they want to aim for a bigger reward, or they can enter the program with no risk at all

• Pioneer Program, for high-performing health systems to pocket more of the expected savings in exchange for taking on greater financial risk – 32 of these…not all going well

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Comprehensive Primary Care Initiative• Multiyear payer initiative fostering collaboration between public

and private health care payers to strengthen primary care in select markets (Arkansas, Oklahoma, Colorado, New Jersey, Oregon, Ohio, Kentucky and New York)

• Starting in 2012 practices receive a management fee for:– risk stratified care management – 24 hour access and coverage – planned care for chronic conditions / preventive care– patient and caregiver engagement and care coordination

• Will transition to a shared savings model

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State Innovation Models Initiative• Purpose to design and test multi payer payment and delivery

reform models for Medicare, Medicaid and Children’s Health Insurance Program (CHIP) populations– Patient Centered Medical Home Initiatives, – Evidence Based Medicine Programs,– ACOs, Transparency Initiatives, – State Wide Quality Metrics and – Coordinated Care Models focusing on physical, behavioral health and

oral health

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• Defined in pilot programs in 44 states

• Built on 7 fundamental principles

• Focuses on comprehensive patient management

• Focuses on treatment and management of chronic conditions

• Manages expense of high cost, perpetual patients (Diabetes, COPD, Hypertension, Asthma)

• Increases access by leveraging physician extenders

• Qualifies for additional incentive based payments

Cornerstone of Accountable Care Organizations

Patient Centered Medical Home (PCMH)

Safety and Quality

CoordinatedCare

PersonalPhysician

Enhanced Access

Whole Person Orientation

Payment for Added Value

PhysicianDirectedPractice

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Value Based Payment Modifier• Medicare

– Value Based Payment Modifier

• Based on 2013 data affecting all by 2017

• The modifier will be budget-neutral for Medicare and will adjust Part B payments based on the quality and cost of care delivered.

31SOURCE: Proposed 2013 physician fee schedule, Centers for Medicare & Medicaid Services, Federal Register, July 30 (gpo.gov/fdsys/pkg/FR-2012-07-30/pdf/2012-16814.pdf)

Assessment Low Cost

Average Cost

High Cost

High Quality 2.0%* 1.0%* 0.0%

Average Quality 1.0%* 0.0% -0.5%

Low Quality 0.0% -0.5% -1.0%

* Physicians who score in these categories who treat high-risk beneficiaries could receive an additional one percentage point in bonus money. COMMERCIAL PAYER

MODELS

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Value Based Contracting • Payment Methodology Possibilities:

– Foundation - quality/efficiency ratings– Fee for Service + management fee– Threshold Incentives– Shared Savings– Bonus/Withhold– Tiered Structure– Capitation– Bundled Payments– Episodic Payments

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New Math Value = Quality/Cost

You Peers Variance Index

Professional $100 $95 5 105%

Surgery $95 $100 -5 95%

Facility $200 $185 10 108%

Pharmacy $25 $28 -3 89%

Total $420 $408 12 103%

Quality = Evidence Based Metrics

How many times did youmeet the measure?

How many times your peers met the measure?

Cost = Episode of Care

107% / 103% = 104% You perform 4% better than your peers.34

103%

100% 93% 107%

New MetricsQuality Measures

Possible Actual VarianceMetric 1 10 10 0

Metric 2 10 5 50%

Patient Satisfaction

Month-6%

YTD-3%

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Readmission RateGenerics

Month35%

YTD50%

Goal70%

BCBS• 2011 the BCBS Association published its action plan, “Building Tomorrow’s Healthcare System: The Pathway to High‐Quality, Affordable Care in America”

– Reward Safety: eliminate preventable errors– Do What Works: align incentives– Reinforce Front‐Line Care: A higher value must be placed on

primary care– Inspire Healthy Living: focus on prevention

SOURCE: Blue Cross Blue Shield, “The Blue Cross and Blue Shield Association Unveils Action Plan to Improve Healthcare Quality and Rein in Rising Healthcare Costs,” press release, October 4, 2011. http://www.bcbs.com/healthcare-news/bcbsa/bcbsa-unveils-pathway-action-plan.html (accessed May 26, 2013) 36

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BCBS• Blue Physician Recognition (BPR) program – icon displayed in

web search for providers recognized for the following:

– Patient rates – star method– Recognitions– Accepting New patients– Languages– Blue Distinction Centers– Extended hours– Affiliations– Gender– Network– Quality Measures

37SOURCE: http://provider.bcbs.com/consumer?ReviseSearch=true# (accessed September 22, 2013)

BCBS• ACO partnerships – around the country• Blue Quality Physician Programs (BQPP) program -

earn higher reimbursement by achieving standards in three categories – Clinical quality outcomes– Administrative efficiency– Patient experience

SOURCE: Blue Cross Blue Shield of North Carolina, “BCBSNC Rewarding Physicians for Better Care, Not More Care, Through Blue Quality Physician Program” press release, December 18, 2009. http://www.prweb.com/releases/BCBSNC/Quality-Physician-Program/prweb3359544.htm (accessed July 1, 2013) 38

BCBS• Blue Distinction & Bridges to Excellence Recognition Programs

- designations for high quality cost‐efficient care• Blue Cross Blue Shield of Massachusetts contractual global

payment system - Alternative Quality Contract (AQC) • Bundled Payments - PROMETHEUS• Tiered Networks - Practices that exceed both the quality and

cost thresholds set for analysis were designated as Tier 1 practices, and all other practices were designated as Tier 2

• Quality measures are adopted from those endorsed by the National QualityForum (NQF), National Committee for Quality Assurance (NCQA), and theAmbulatory Quality Alliance (AQA).

• Efficiency information is based on claims data – new math….

39SOURCE: (BCBS NC Website March 2013)

CIGNA• CAC Triple Aim:

– Information• Includes patient-specific actionable information, such as “gaps in care”

reports, performance reports, including total medical cost reports, emergencyroom (ER) visit reports, etc., which enable a group to understandimprovement progress and opportunities.

– Clinical collaboration• CIGNA ’ s clinical health coaching services can be a valuable virtual

extension of the physician practice’s clinical capabilities. These servicesrange from stress management to transplant case management to healthadvocacy programs, like coaching for chronically ill patients.

– Consultation• Consultant works with the medical group and local CIGNA team to provide

expert guidance, supporting program implementation and ongoingmanagement..

40SOURCE: CIGNA Website 10/12/12

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CIGNA • Cigna Care Designation

– Individual physicians and physician groups that are ranked in the upper third for quality and the upper third for cost & efficiency compared to all physicians and physician groups of the same group specialty type in the same geographic market receive the Cigna Care designation.

– Cigna Care benefit design – steering– Cost-Efficiency Symbols – star system

41SOURCE: Cigna, “Collaborative Accountable Care: Cigna’s Approach to Accountable Care Organizations,” white paper, June 2011.

CIGNA• 38 patient-centered initiatives in 19 states, including

six multi-payer pilots and 32 CIGNA-only collaborativeaccountable care (CAC) initiatives.

• Encompass more than 300,000 Cigna customers andmore than 4,500 primary care physicians.

• First CAC program in 2008 - goal is to have 100 CACprograms with 1 million customers by the end of 2014.

42SOURCE: CIGNA Website 10/12/12

CIGNA – Incentives• Access: ER visit rate totals for minor illnesses, chronic

illnesses and frequent utilizers.• Optimal Care Coordination: Inpatient admission, with a focus

on avoidable admissions and readmission rates.• Adherence to EBM: Preventive care (e.g., mammography

rate), chronic care (e.g., appropriate diabetes testing) and acute care (e.g., high‐tech imaging rates).

• Appropriate Prescribing: Generic fill rate and formulary adherence.

• Value‐Based Referrals: Use of preferred laboratories or preferred specialists to achieve the greatest quality and cost‐efficiency results

SOURCE: Mark Slitt, “Data Published in Health Affairs Demonstrates Improved Health Outcomes and Lower Costs Associated with Cigna's Collaborative Accountable Care Program,”Cigna, November 12, 2012. http://newsroom.cigna.com/NewsReleases/data-published-in-health-affairs-demonstrates-improved-health-outcomes-and-lower-costs-associated-with-cignas-collaborative-accountable-care-program.htm (accessed April, 28 2013) 43

UHC

• United Healthcare is using the following relativeto a starting point for value based contracts:– Premium designation program– Centers of Excellence– Patient-Centered Medical Home– Accountable Care Organizations pilots

• Using evidence based medicine standards todrive quality and efficiency on a national level.

44SOURCE: United Healthcare, “Shifting from Fee-for-Service to Value-Based Contracting Model,” 2012. http://consultant.uhc.com/assets/vbc_overview_flier.pdf (accessed May 4, 2013)

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UHC• Central Goals:

– Transform care delivery by rewarding care providers for thequality and value of care delivered rather than basingpayment solely on the volume of services delivered andnumber of patients treated.

– Provide health information on patients, enabling the doctorsto more easily collaborate with each other on health caredecisions.

– Data will also help providers better understand and identifybest practices for overall patient wellness and diseasemanagement, leading to meaningful health improvementsover time.

45SOURCE: UHC Website March 2013

UHC• United Healthcare - value-based contracting options

that leverage new payment models:– Performance-Based Contracting– Patient-Centered Medical Homes– Bundled and Episodic Payments– Risk-Based Compensation/Delivery System

Configuration – Narrow/Tiered Networks– Specialty Networks/Centers of Excellence

46SOURCE: United Healthcare, “Considerations for Value Based Contracting: Frequently Asked Questions,” January 2, 2012 https://broker.uhc.com/assets/ASA%20Frequently%20Asked%20Questions.pdf (accessed May 11, 2014)

UHC

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UHC

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UHC• Sample Metrics:

– Inpatient Admits/1,000– Inpatient Days/1,000– ER Visits/1,000– All Cause Readmission Rate– Risk‐Adjusted total cost of care– Risk Adjusted Average Length of Stay– Tier One prescription percentage– Lab Cost per Accession– Non‐Par Lab Provider Referrals percentage– Non‐Par ambulatory surgery utilization percentage

49SOURCE: Shifting from Fee-for-Service to Value-Based Contracting Model 2012 UHC http://consultant.uhc.com/assets/vbc_overview_flier.pdf

UHC• “An aggressive transformation of our provider network

will begin in 2012 with a significant ramp up ofalternative payment models during the next threeyears. A modest one to two percent of our commercialmembers will benefit from our value-based contractingin 2012, and that number is expected to reach 50percent to 70 percent by 2015.”

50SOURCE: Shifting from Fee-for-Service to Value-Based Contracting Model 2012 UHC http://consultant.uhc.com/assets/vbc_overview_flier.pdf

UHC• UHC expects to exceed a 2:1 ratio relative to

return on investment in terms of savings compared to incentives paid. – By 2015, gross savings of $1.35 to $7.80 PMPM are

expected, with provider incentive payments and fees growing to a range of $0.45 to $3.30 PMPM.

– UHC is spending 16% of its total spending on healthcare services on Value Based Contracting arrangements.

51SOURCE: Shifting from Fee-for-Service to Value-Based Contracting Model 2012 UHC http://consultant.uhc.com/assets/vbc_overview_flier.pdf

Acquisition Activity

• UHC - Monarch, a large physician network in California over 2,000 providers

• Humana - Concentra, a large provider WC care nationally in 40 states

• CIGNA - Phoenix and HealthSmart• Blue Cross Blue Shield in Pennsylvania and West Virginia

acquired a six‐hospital System• WellPoint - Caremore

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BARRIERS & SUCCESS FACTORS

Barriers – Forbes insights

SOURCE: Forbes Insights

Difficulty in fully engaging physicians

Complexity and unpredictable impact of VBP contracts

Decrease in profitability during transition

Lack of information management infrastructure

Lack of sufficient economic predictability

50%

46%

32%

32%

31%

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The Path to Success

Retrospective Payment Prospective Payment

No Risk Shared to Full Risk

Volume Driven Value Driven

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The path to Success

Low Collaboration High Collaboration

Unengaged Providers Fully Engaged Providers

Low Tech High Tech

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The path to Success

Low Goal Alignment Aligned Goals

Low Trust High Trust

Little Understandingof Cost

Full Understandingof Cost

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NEXT STEPS

Next Steps• Complete a Risk Capable “gap” analysis – where are your

opportunities?• Find out how your providers rate with payers• Meet with major payers in your market and request profile

reports and review details face-to-face• Assess payer strategies in your market – what might be interest

to your practice? • Understand and define costs for your services, members,

episodes of care, diagnosis• Fully involve providers – they have the pens…• Dive into quality metrics and analytics – create a baseline and

focus on actionable information• Trust and Collaborate 59

Questions?

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