How ACO s Can Impact Contracting A Real World Example. Mike Medel Pharm D, MBA Banner Health

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1 How ACO s Can Impact Contracting A Real World Example Mike Medel Pharm D, MBA Banner Health

2 Agenda Banner Pharmacy Services Introduction Accountable Care Organization Summary Basic Constructs of ACO Partnership Division of Responsibilities in an ACO

3 Banner Pharmacy Services Vision Statement Banner Pharmacy Services will be recognized nationally as a clinical leader and trusted partner in providing innovative pharmacy services and coordinated patient care through convenient access and improved medication outcomes across the continuum.

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5 Banner Pharmacy Benefit Management History and Vision Large Traditional PBM 2013 Smaller PBM (Alignment) 2015 Banner Health Integrated Pharmacy Program 2018 Standard formulary Standard clinical programs Standard benefit design Standard Network PBM Home Delivery PBM Specialty Pharmacy Custom Home Delivery Specialty Pharmacy Semi-Custom Benefit Design Formulary Clinical programs Network Customized formulary Customized clinical programs Customized Network Customized benefit designs Continue Home Delivery Continue Specialty Pharmacy Fast Facts: The traditional PBM business model is misaligned with at risk payers BPS strategy is completely aligned with Banner Plan strategy

6 Accountable Care Organizations Payer/Provider Joint Venture Goals Multi-System (Super ACO) Medicare Shared Savings Program (MSSP) Improve care coordination Improve quality Improve costs Accountable Care Organization Payers Providers

7 General Payer Partnership Goals Provide Quality Care Application of recognized clinical guidelines Providers integrated into limited (or one) EHR Consumer Friendly Product Easy access points to care and information Many provider choices Multiple ways to access care Low out of pocket costs Efficient Cost of Care Network Strategy Appropriate provider/member incentives Formulary development with appropriate utilization management Successful Partnership

8 Types of Workgroups in a Payer/Provider Collaboration Leadership Team Go to Market Strategy Differentiation Population Health/Clinical Oversight Corporate Structure Product *(plan design) Network Marketing Sales Digital Sales Pharmacy Multidisciplinary Care Team (MDCT) Pharmacy Licensure Finance/Accounting Ancillary Legal Review/Contracts Clinical Savings Team Specialty Pharmacy DOPR Division Of Pharmacy Responsibility

9 Flow of Funds in a Shared Premium Relationship Example JV collects $100 in monthly premium Generally: Cost of care is a Provider function Cost of operations is a Payer function Cost of Care = ($45) Cost of Operations = ($35) $20 left over which is split 49% 51% * Financials are for example only Provider $9.80 Payer $10.20

10 Flow of Funds in a Shared Premium Relationship Rx Example JV collects $100 in monthly premium Cost of Care = ($45) Cost of Operations = ($35) $20 left over 49% which is split 51% Provider $9.80 Payer $10.20 Margin lost to PBM Cost of Care = $45* 25% = Pharmacy Costs ($11.25) 10% Margin from drug costs ($1.13) No financial benefit to partnership Payer own/relationship with Pharmacy Provider $ $1.13 = $11.33 Plan should put additional margin into the amount split Payer/PBM could end up with additional 3% which may not sound like much but a mid-size MA plan with membership of 50,000 members can spend over $100,000,000 on outpatient drugs. * Financials are for example only

11 Payer/Provider Partnership Misalignment vs. Traditional PBM Payer/Provider Partnership Goals Consumer Friendly Easy to understand pricing Quality Care Right drug Right patient Right time Lower Cost Provide lowest cost drug to solve clinical issue Traditional PBM Goals Increase claim volume Increase home delivery margin Increase specialty margin Increase rebate margin Push to higher cost products

12 Traditional and Optimal Plan/Payer Partnerships Traditional Partnership Health System Payer Health System Optimal Partnership Payer VS. Home Delivery Retail Pharmacy Prescriber UM Manufacturer Rebates Plan Design Strategy Specialty Pharmacy Formulary Management Retail Pharmacy Benefit Operations Manufacturer Rebates Plan Design Strategy Network Management Formulary Management

13 Division of Pharmacy Responsibility - DOPR DOPR The document negotiated between the health plan partner and health system that assigns responsibility for the strategy, development and execution of tasks relating to the management of pharmacy component of a risk arrangement. The DOPR will be part of the final Agreement. Highlights ~100 individual items Clinical PBM Specialty Pharmacy Provider Home Delivery Provider Retail Network Collaborate on plan design offered to market Data sharing

14 ACO Pharmacy Contracting Summary Specialty Pharmacy ACO Partnership Provider (Pharmacy Dept.) Retail Pharmacy Rebates Mail Order Pharmacy Data and Analytics PBM Payer (Insurer) Ambulatory Infusion Clinical Programs