Catalyzing Payment Innovation Suzanne Delbanco, Ph.D. Executive Director September 20, 2012
Payment Reform: Why Should We Care? The health care payment systems of the status quo continue to drain the value out of the care we buy. The system is failing in safety and quality Factors that have nothing to do with quality and value are driving up health care costs www.catalyzepaymentreform.org September 20, 2012 1
You Get What You Pay For Current payment system characterized by More and more expensive care Payment variation not tied to quality Lack of transparency Misaligned incentives www.catalyzepaymentreform.org September 20, 2012 2
Is the Time Right? Transforming payment has momentum... Health Reform included several game changers - some will take time and they will be disruptive Focus on specific models but is there some irrational exuberance at work? We still know very little about what works Our current system will be around for a while - and we shouldn t ignore it www.catalyzepaymentreform.org September 20, 2012 3
Interplay of Medicare, Medicaid and Private Sector Federal Payers Private Purchasers/Payers Top 3 priorities: cost, cost & cost Medicare momentum get in the game or accept what s next Doing nothing = cost shift Medicaid Alignment can increase leverage Many Medicaid-specific issues... But cross-sector opportunities too Details matter www.catalyzepaymentreform.org September 20, 2012 4
The Audience s Turn Optimistic/pessimistic about pending delivery reforms? Optimistic/pessimistic about pending payment reforms? www.catalyzepaymentreform.org September 20, 2012 5
Does Payment Reform Work? ROI comes from payments designed to cut waste and promote higher value. RAND study for Massachusetts estimated savings from various payment reforms: Bundled payment: up to -6% off total spending Non-payment for adverse events: up to -3% off total spending Reference pricing for AMCs: up to -1% off total spending www.catalyzepaymentreform.org September 20, 2012 6
CPR s Approach Shared Purchaser Agenda Demand payments be designed to cut waste or reflective of performance 20% by 2020 Leverage purchasers and create alignment Model health plan RFI questions and contracts and dialogue with plans Alignment with CMS, e.g. HHS Partnership for Patients Implement Innovations Price transparency Reference or value pricing Maternity care payment www.centerforpaymentreform.org September 20, 2012 7
The Audience s Turn What percent of payment to hospitals and doctors today is tied to performance? What percent of payment to hospitals and doctors today should be tied to performance? www.catalyzepaymentreform.org September 20, 2012 8
Purchasers Have a Catalyst Role to Play Coordinated Purchaser Action Leverage Purchaser Power: Critical Mass Environment Conducive to Reform Shared vision - payment reform framework & principles Aligned employer agenda - short term wins, longer-term bold approaches Clear signals to plans RFIs and contracts Toolkit for local action Market Assessment, Action Briefs, etc. Direct dialogue with HHS for alignment and influence National Scorecard on Payment Compendium of Payment Reform Efforts what works? Analyze and raise visibility of provider market power and cost shifting issues www.catalyzepaymentreform.org September 20, 2012 9
Shared Principles Start With Aligned Perspectives 1. Reward delivery of high-quality, cost-effective and affordable care 2. Reward patient-centered care that coordinates services across health care providers and settings and reduces disparities 3. Encourage alignment between public and private sectors to promote improvement and minimize impact of payment decisions in one sector on the other 4. Balance perspectives of consumers, purchasers, payers and health care providers and be guided by what serves the patient and society 5. Reduce expenditures on administrative processes 6. Balance the need for urgency against realistic goals and timelines www.catalyzepaymentreform.org September 20, 2012 10
Critical Mass Starts With Active Purchasers Why It s Important? CPR Toolkit developed to create shared understanding of opportunities and to encourage actions that leverage payment to improve value. Payment Framework Action Briefs Sourcing Tools Market Assessment Help purchasers understand range of payment models and associated benefits and challenges Outline steps to implement payment reforms and ways to mitigate potential unintended consequences Support purchaser initiatives though standardize d RFI/RFP language and contract modules Identify opportunities based on market conditions, capacity, and organization Plus, a National Scorecard to monitor the nation s progress SPECIAL INITIATIVES Maternity Care Payment Value Pricing Price Transparency www.catalyzepaymentreform.org September 20, 2012 11
Shared Understanding Begins with Payment Framework BASE PAYMENT MODELS Fee For Service Bundled Payment Global Payment Charges Fee Schedule Per Diem DRG Episode Case Rate Partial Capitation Full Capitation Increasing Accountability, Risk, Provider Collaboration, Resistance, and Complexity PERFORMANCE-BASED PAYMENT OR PAYMENT DESIGNED TO CUT WASTE (financial upside & downside depends on quality, efficiency, cost, etc.) www.catalyzepaymentreform.org September 20, 2012 12
Moving Understanding to Action: Action Briefs Action Briefs detail design options and steps purchasers can take for more positive reforms Fee-For-Service Bundled Payment Global Payment Accountable Care Organizations Medical Homes Maternity Care Payment From Reference to Value Pricing Ensuring Competition Price Transparency Brief to come www.catalyzepaymentreform.org September 20, 2012 13
Loud, Yet Consistent Signals: Mission Critical Sourcing Tools The RFI tool and model health plan contract language signal to plans that the following is important to us: Progress toward payment that cuts waste or is tied to performance Immediate opportunities such as value pricing, maternity care and price transparency Future plans for payment reforms and efforts to evaluate payment innovations Alignment with coming changes to Medicare reimbursement is important Oversight of ACOs to manage provider market power www.catalyzepaymentreform.org September 20, 2012 14
Health Plan Sourcing Tools: RFI Questions Intro Assessing Payments Impact of Payment Changes Future Strategy Measure Performance Maternity Care Payment Reference and Value Pricing Price Transparency Aligning with Medicare Oversight of ACOs General Questions Payment Initiatives RFI developed through a comprehensive, well-vetted and multi-stakeholder process Distribution of the RFI is made possible through the support of Aetna Inc. and the Aetna Foundation. www.catalyzepaymentreform.org September 20, 2012 15
Health Plan Sourcing Tools: Model Contract Language Outlines purchaser expectations creating accountability Sets short and long term expectations For use during renewals or as addendum Focuses on: - Value-oriented payment - Transparency - Market competition and consumerism - Alignment with Medicare - Oversight of ACOs - Evaluating Results www.catalyzepaymentreform.org September 20, 2012 16
Health Plan User Groups & User Group Quarterly Progress Report Quarterly Health Plan User Group meetings with Aetna, CIGNA, UnitedHealthcare and WellPoint (some regional plans soon) Phone meetings with each plan take place quarterly Meetings focus on progress report that tracks plan developments quarterly Progress report aligned with CPR Tools and National Scorecard on Payment Reform Purchaser participation is critical Topics: Paying for Value Reference/Value Pricing Maternity Care Payment Price Transparency Plan-specified Initiatives www.catalyzepaymentreform.org September 20, 2012 17
What Can We Do? Get coordinated Share an agenda Each play our part Measure performance of providers, make performance and price/cost transparent, reform payment www.catalyzepaymentreform.org September 20, 2012 18
Short- & Long-Term Opportunities Short-Term (largely based on fee-for-service) Align with Medicare Maternity care payment reform Reference pricing Shared savings or shared risk pilots Tiered or narrow networks Pay for asynchronous visits Primary Care Medical Homes Reduced or non-payment for undesired events (e.g., readmissions, hospital-acquired conditions) Long-Term Bundled payments Global payments Accountable care Enhance competition among providers Other innovations TBD www.catalyzepaymentreform.org September 20, 2012 19
Alignment with Medicare Obvious First Step Why It s Important? Huge momentum around value-oriented payment and dangers of cost-shifting without alignment. Policy 2011 2012 2013 2014 2015 2016 2017 Hospital Inpatient Quality Reporting Program /a Meaningful Use + Incentive Payments /b - Hospital Acquired Conditions (Current) /c Hospital Acquired Conditions (ACA) /d -2.0% -2.0% -2.0% -2.0% -1.0% -1.0% -1.0%.5% 1.7% 1.7% 1.3% 1.4% -1.0% -2.0% -3.0% -.02% -.02% -.02% -.02% -.02% -.02% -.02% -1.0% -1.0% -1.0% Readmissions /e -1.0% -2.0% -3.0% -3.0% -3.0% Hospital Value-Based + Purchasing /f - 1.0% - 1.0% 1.25% - 1.25% 1.5% - 1.5% 1.75% - 1.75% 2.0% - 2.0% $70 billion Medicare hospital payments tied to performance over 10 years www.catalyzepaymentreform.org September 20, 2012 20
Maternity Care Payment Reform Why It s Important? Unnecessary intervention increases costs and complications, with no evidence of improved outcomes. Practice patterns straying from the evidence Pre-term elective births Unnecessary medical intervention in labor and delivery Worse outcomes and higher costs US is moving farther away from goals www.catalyzepaymentreform.org September 20, 2012 21
Maternity Care Payment Reform: Push for Health Plan Support Health Plan RFI Questions The incidence/rate: Cesarean delivery Births electively induced prior to 39 weeks Vaginal births after cesarean delivery, etc. Strategies Payment Bundled payment Blended payment for cesarean and vaginal deliveries Payment incentives or penalties Education Policy -Hard Stop prior <39 weeks Health Plan Contract Language Administrators must: Remove the established financial incentives for medically unnecessary intervention in labor and delivery Measure and report results Educate network about what constitutes high-quality, safe, costeffective maternity care If successful, consider applying payment approach to other areas where care is not evidence-based www.catalyzepaymentreform.org September 20, 2012 22
Transparency: Understanding the Cost and Value of Care Why It s Important? Making price and quality information more transparent is a building block to making payment more value-oriented. Why is Transparency needed? Need to shine the light on payment variation - masked by lack of transparency Payment variation across and within markets - paying up to 500% of Medicare Support informed decision making among consumers Help purchasers judge value of payment reforms What can Purchasers do? Require tools to be available to consumers and data to be available to purchasers Engage employees, retirees etc. through consumer education and benefit design Phase-out gag clauses All-payer claims databases Coming Soon: Action Brief, Specs & CPR Purchaser Statement www.catalyzepaymentreform.org September 20, 2012 23
From Reference to Value Pricing Value-Oriented Payment & Benefit Design Reference Pricing establishes a standard price for a drug, procedure, service or bundle of services, and generally requires that health plan members pay any allowed charges beyond this amount. Value Pricing is when quality is also taken into consideration in addition to the standard price. www.catalyzepaymentreform.org September 20, 2012 24
From Reference to Value Pricing Purchaser Expectations & Plans Encourage providers to offer lower prices Encourage member engagement while preserving choice Decrease the substantial cost variation per unit Expand application of reference pricing to services where quality is known to vary & pair with payment reform Developing joint pilots www.catalyzepaymentreform.org September 20, 2012 25
Longer-Term: Address Price Impact of Provider Market Power Market power drives price thus it often does not reflect value Study compared price variation across and within eight markets San Francisco: average inpatient hospital payment rates = 210% of Medicare Los Angeles average inpatient stay: 25 percentile = 84% of Medicare 75 percentile = 184% of Medicare Highest paid = 418% of Medicare www.catalyzepaymentreform.org September 20, 2012 26
Enhancing Provider Competition Why It s Important? Provider consolidation can impact cost and quality. Can t count on antitrust enforcement to address this problem Examples of market based solutions to provider market power include: Price transparency Encouraging use of other high-quality, lower-cost providers through contracting and/or benefit design Health plan expectations (e.g. shared savings should depend on meeting quality thresholds) Participate in development of ACOs www.catalyzepaymentreform.org September 20, 2012 27
Tracking the Nation s Progress on Payment Reform National Scorecard on Payment Reform National Compendium on Payment Reform What is the status of the private sector s progress from volume- to value-oriented payment? National and potentially regional views Aggregate view - will not compare health plans individually or by name Issued annually Funded by: The Commonwealth Fund California HealthCare Foundation Detailed information on privatesector payment reform initiatives Who is doing what? What is working? Free, web-based, searchable and sortable database with information about payment reform programs across the U.S. Data provided directly by program sponsors Opportunities to update Scheduled Release - March 2013 www.catalyzepaymentreform.org September 20, 2012 28
Adapting to Market Conditions: Market Assessment Tool Structured process to assess local dynamics and identify most appropriate payment reform options Comprehensive inventory of market characteristics Purchaser activation, provider interest/organization, payer readiness, consumer perspective, competition, regulatory/ legal Developed through rigorous analysis and national/regional expert input Markets to date: Columbus, Memphis, Long Beach (pilots) and Twin Cities www.catalyzepaymentreform.org September 20, 2012 29
How Purchasers and Benefit Consultants Get In The Game... The CPR commitment means creating leverage and coordinating the ask by: Using the CPR health plan RFI and sharing responses with CPR Using CPR model health plan contract language Participating in coordinated initiatives and dialogue with the plans Listing your organization s name on CPR s website www.catalyzepaymentreform.org September 20, 2012 30
More to Come Model health plan contract language Quarterly engagement with health plans and benefits consultants CPR National Scorecard and Compendium on Payment Reform Dec 2011 Jan 2012 Summer 2012 2012 Fall 2012 March 2013 Reference/value pricing, price transparency, and maternity care payment RFI modules Market Assessment Tool Report on ensuring provider competition Price transparency tools & statement Many opportunities to set expectations and provide further shape to shared agenda www.catalyzepaymentreform.org September 20, 2012 31
Contact information: www.catalyzepaymentreform.org Suzanne Delbanco, Ph.D., Executive Director sdelbanco@catalyzepaymentreform.org 510-435-2364 www.catalyzepaymentreform.org September 20, 2012 32