Blue Shield of California Bundled Payments in the Commercial Market: Results and Applications for Self-Funded Employers Presented by Scott Leggett Global 1 April 10, 2018 OVERVIEW 1. Better Models Facilitate Competition 2. Blue Shield of California & Global 1: 3-Year Results 3. Q&A 1
CONSOLIDATION 1. 1412 hospital mergers from 1998 to 2015 CONSOLIDATION 1. 1412 hospital mergers from 1998 to 2015 2. Nearly 50% of hospital markets are highly concentrated/dominated by one or large systems (oligopoly or monopoly) 2
CONSOLIDATION 1. 1412 hospital mergers from 1998 to 2015 2. Nearly 50% of hospital markets are highly concentrated/dominated by one or large systems (oligopoly or monopoly) 3. Top-4 Insurers nationally CONSOLIDATION 1. 1412 hospital mergers from 1998 to 2015 2. Nearly 50% of hospital markets are highly concentrated/dominated by one or large systems (oligopoly or monopoly) 3. Top 4 Insurers nationally market share grew from 74% in 2006 to 83% in 2014 4. Health insurance markets are mainly local Gaynor, Mostashari & Ginsburg, Making Health Care Markets Work, April 2017* 3
CURRENT MODEL: not working CURRENT MODEL: not working 4
BACK TO BASICS Is it such a bad thing to be small provider? Small, physician-owned practices: a. Lower average cost per patient 1 b. Fewer preventable hospital admissions 2 c. Lower readmission rates than larger independent & hospital-owned practices 3 1 Casalino et al, Health Affairs, 2014 2 McWilliams et al, JAMA, 2013 3 Friedberg et al, RAND Corporation 2015 1-3 Gaynor, Mostashari & Ginsburg, Making Health Care Markets Work, April 2017 BACK TO BASICS Is it such a bad thing to be small provider? 1. ACO squatting 2. Small, physician-owned practices can favorably compete under new value-based systems 1 1 McWillams et al. New England Journal of Medicine 2016 1 Gaynor, Mostashari & Ginsburg, Making Health Care Markets Work, April 2017 5
COMPETITION POLICY Guiding principle: Public and private payers should focus on alternative models that facilitate integration of delivery without consolidation 1 Gaynor, Mostashari & Ginsburg, Making Health Care Markets Work, April 2017 COMPETITION POLICY David Goldhill: The Competitive Model Overlooked Healthcare system is huge and diverse Missing the competitive battle for customers Why? Conventional wisdom said there are no customers in healthcare Competitive mindset in healthcare will provide benefit for consumers David Goldhill summary of main points 6
10-YEAR PRICE CHANGES Services subjected to consumer pressure vs. those more influenced by regulatory oversight BUNDLED PAYMENTS Bundle Payments Value Proposition 7
BUNDLED PAYMENTS Most industries have identified packaging products and services to be consumer friendly. Bundle Payments are a single price for all the care required to treat a patient s medical condition. BUNDLED PAYMENTS Attractive to Insurance and Self-Insured Companies Payment contingent on delivering good outcomes At the Patient Level Physician Recruitment & Growth Opportunity for ASCs ASCs very motivated! Will finally unleash the competition that patients want Transparency Price Outcomes 8
BUNDLED PAYMENTS Bundled Payment Only Value Payment to Produce True Cost Savings 2009 County of Stockholm, Sweden Introduced BP for TJRs, large Spine Cost savings = 17% Reduction of Complications = 33% 2011 Medicare Introduced BPCI * One of few value programs that has actually worked * Therefore, CMS has maintained interest and expanded with Advanced BPCI in 2018 PURCHASERS DRIVE TRANSITION 9
BLUE SHIELD OF CALIFORNIA Blue Shield mission: To ensure all Californians have access to high-quality healthcare at an affordable price. California company Annual revenue - $20 billion 4,020,000 Members (PPO & HMO) #2 in enrollment for Covered CA for 2017 The ultimate goal is to make health care worthy of our family and friends. (1) Source Blue Shield of California GLOBAL 1 Network: 85 ASCs >800 Surgeons 10
GLOBAL 1 DISTINCTIONS Co-Founders have operated ASCs for 30 & 20 years respectively Fully Automated IT system Patient Call Center BLUE SHIELD OF CA & G1 1. Redirect complex cases from hospitals to Ambulatory Surgery Centers (ASCs) 2. Works with Global 1 (G1) as a TPA for managing bundled payments and as a ASC network developer and manager 11
BLUE SHIELD OF CA & G1 Why ASCs & Bundle Payments More surgeries are being performed on an outpatient basis. Shift complex procedures currently performed in hospital inpatient and outpatient to ASCs ASC costs lower and bundles fix the amount of payment per case Savings to Member/Blue Shield/ASO is 30%-60% less than hospital outpatient or inpatient costs Better customer experience BLUE SHIELD OF CA & G1 Why ASCs & Bundle Payments Benchmarking study of 1,000,000 surgeries in ASCs demonstrates minimal surgical site infections, emergency department visits and readmission rates Written by Thomas D. Wilson August 24, 2017 Includes data from over a million outpatient surgeries performed in 145 CA ASCs in 2015-2016. Compared surgical site infection (SSI) rates between ASCs and HOPDs. The HOPD SSI rate was 6 times higher. The ASC overall SIS rate was 0.45 infections per 1000 cases. According to the CA DPH, CA hospitals self reported SIS rate for spine surgeries in 2016 was 4.5 per 1000. This is 10 times higher that the CASA rate. 12
BLUE SHIELD OF CA & G1 Timeline 2009 -preliminary discussions: BSC-G1 2010, Blue Shield and G1 launched a Bundled Payment Pilot Program in Monterey and SD 8 bundles 2012-2014 obtained DMHC approval & BSC actuary analysis with G1 to develop rates In 2015 expanded the program to entire state. Currently 71 bundles Continual refinement of bundles & adding bundles Currently PPO, ASO and HMO (5 medical groups) BLUE SHIELD OF CA & G1 Contracting Design Funds Flow 13
BLUE SHIELD OF CA & G1 Fine Tuning Contracting Process G1 Contract is a rider to base BSC Provider Contract Contract Language that we have learned: ASCs & Surgeons must use G1 for codes in the G1 contract Base Implant Contract limits implants to $400 Bi-Weekly calls with G1 and BSC Contracting Team (1) Source Blue Shield of California BLUE SHIELD OF CA & G1 Patient Benefit Design Planned for roll out in 2020 20% ASC Co-Insurance 30 or 40% % Hospital Co-Insurance Inpatient & HOPD (1) Source Blue Shield of California 14
G1 SELF-FUNDED CLIENT School System JPA Self-Insured Group 159 BP cases $2,284,830 $14,370 (1) Source Municipal Collegiate and School Insurance Group WHAT G1 IS REALLY DOING De-Risking the plan sponsor (payor) Guarantee fixed price At the same quality or better than the hospital 15
ASC CHALLENGE Comparable Outcome Data ASCA Benchmarking program Transitioning all centers in the G1 network WHAT G1 IS DOING TODAY 16
G1 ADVANCING QUALITY Current ASC quality reporting is not comprehensive or risk adjusted. Currently assess risk adjusted quality of surgeons on inpatient Px which are also performed in ASC. Using composite quality scoring & rating approach New risk adjusted analytics being developed: Ø ASC to ASC profiling Ø ASC to hospitals (OP & IP) for same Px Ø Risk adjusted surgeon outcomes across ASC, hospital IP & OP ØPost-surgical settings assessed for bundle G1 ADVANCING QUALITY Credentialing physicians based on performance. Modifying physician practice patterns with more advanced analytics. Assisting surgeons on appropriate site selection for procedure Financial and risk modeling becoming more advanced: ØThinking episodically ØThinking quality ØThinking efficiency 17
PHYSICIAN DATA LOCAL MARKET BLUE SHIELD OF CA & G1 Key Takeaways Critically Important: Partnership of Payor & TPA Support from C Suite Level Sales & Development function Face to Face with Surgeons Not the ASCs Dedicated training function for ASC and Surgeon staff (high staff turnover & it s a new concept!) 18
BLUE SHIELD OF CA & G1 Key Takeaways Independent TPA model more flexible and all members focused on Bundles Volume model vs PEPM model Holds everyone accountable for overcoming internal negative inertia Create new PPO benefit designs to incentivize members to utilize G1 ASC s vs. Inpatient Hospital / Outpatient Surgical Departments THANK YOU. I d prefer to be crazy and happy rather than normal and bitter. Paulo Coelho Author 19