Separating Myth from Reality in Payment Transformation

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Phytel Executive SummitDecember 4, 2013Dallas

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Some say we’ve turned a corner…

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On the other hand…

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Only 11 percent of payment to doctors and hospitals in the commercial sector today is tied to their performance

First-of-its kind report is reality check on nation’s progress in moving from volume-based to value-oriented payment

SAN FRANCISCO/WASHINGTON, D.C. – March 26, 2013 – Catalyst for Payment Reform (CPR), an independent, non-profit employer coalition pushing for better value in health care, today released its first annual National Scorecard on Payment Reform. The Scorecard shows that only about 11 percent of the health care dollars we pay to doctors and hospitals today are value-oriented -- tied to how well they deliver care or create incentives for both improving quality and reducing waste. Almost 90 percent of payments reported remain in traditional fee-for-service, paying providers for every test and procedure they perform regardless of necessity or outcome, or in bundled, capitated, or partially-capitated payments without quality incentives.

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Hot Topic Q&A

1. How many of you would self-apply the ‘ACO’ label?

2. Where are your systems in terms of risk-based reimbursement/payment transformation (today and looking forward over the next few years)?

• Pioneers/MSSPs• Commercial payers• Medicaid• Other (e.g., Exchanges)?

3. For those who have been engaged in risk-based contracts for some time, can you share current progress and how you got there?

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ACO Payment Arrangements

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Shared Savings (Upside Only)

Shared Savings (Up & Downside)

Capitation

Episodic Bundled Payment/DRG

0 10 20 30 40 50 60

53%

38%

25%

18%

ACO 2012: The Train Has Left The Station, Leavitt Partners and KLAS Research

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Payment Transformation Models All Seem to be Unpopular

Change is Clearly a Top-Down Initiative

© Harris Interactive 11

Level of agreement on need to make changes toaddress financial challenges*

4%

4%

3%

4%

17%

26%

27%

18%

19%

22%

33%

36%

62%

57%

57%

68%

77%

74%

64%

60%

21%

17%

15%

14%

Not in agreement Somewhat in agreement Very much in agreement

Your CFO

Your CEO

Your board

Other senior management

*Physicians on your staff

Specialists who do a lot of procedures in hospital

Nurses

Other medical staff

SOURCE: Strategic Health Perspectives 2012 Hospital Exec Surveys

*Large Hospitals are more likely to report that staff physicians are Very Much in agreement about

changes

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Hot Topic Q&A

1. What forms of risk-based contracts seem to be gaining traction?

• With administrators• With providers

2. What forms of risk-sharing have enough upside to pursue?

3. How big of a role will the SGR fix play in determining the move away from FFS?

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Change is a comin’…

MSSPs Continue to Crop Up

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Source: Center for Medicare & Medicaid Innovation

3rd Round

2nd Round

1st Round

ACOs Are Heavily Dominated by Provider Sponsors…

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Leavitt Partners Center for Accountable Care Intelligence 2013

Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 20130

50

100

150

200

250

48

76

148153

199 202203

89

111

149161 187

198

203

1522

33 3748

51 51

26 11 12

30 33 34

Physician Group Hospital System Insurer Other

#o

f A

CO

s

…and Geographically Concentrated

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Leavitt Partners Center for Accountable Care Intelligence 2013

Series1

31%

12%

41%

12%

4%

Most Hospitals are Either Part of an ACO or Working to Become One

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ACO Affiliation

Base: All 2013 Hospital-Based Execs (n=210)Q340: Is your hospital part of one or more Accountable Care Organizations (ACO)?

Among rural hospitals, 26% say

they have no plans to become an ACO.

Yes, one Yes, two or moreNo, but we are working on it

No, and we have no plans to do it

Not sure

43% are part of ACOs

© Harris Interactive

SOURCE: Strategic Health Perspectives 2012 Hospital Exec Surveys

Most Hospitals Anticipate Significant Movement Towards Capitation Over the Next 5 Years

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Base: All 2013 Hospital-Based Execs (n=210)Q705/Q706/Q707: Many hospitals are starting to be paid differently for their services, moving from a fee for service environment to more capitation or value based payments. Where is your hospital/hospital system on the spectrum today, and where will you be five years from now?

*Only asked in 2013

Completely Fee for Service

Completely CapitatedPayments

Evenly Split

Completely Fee for Service

Completely CapitatedPayments

Evenly Split

CURRENT:

FIVE YEARSFROM NOW:

(0) (50) (100)

(0) (50) (100)

36.8

59.6

© Harris Interactive

SOURCE: Strategic Health Perspectives 2012 Hospital Exec Surveys

And Boards Appear to be Focused on This

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Hot Topic Q&A

1. What are some of the critical success factors for value-based care?

• Health IT?• Data analytics, benchmarking?• In/out of network visibility (blinded or non-blinded)?• Others…?

2. What are some of the biggest barriers?

• Accessibility of payer data?• Structural systems focused on FFS (claims, accounting)?• Cultural change?• Others…?

3. Lastly…how quickly will we get there?

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