WIN-WIN-WIN APPROACHES TO ACCOUNTABLE CARE How Physicians, Hospitals, Patients, and

WIN-WIN-WIN APPROACHES TO ACCOUNTABLE CARE How Physicians, Hospitals, Patients, and Payers Can All Benefit from Better Healthcare Payment Systems Harold D. Miller President and CEO Center for Healthcare Quality and Payment Reform www.chqpr.org

A Short Quiz QUESTION #1: Which U.S. industry told its employees every year for the past decade that their pay would be cut by 15-30% regardless of how well they performed? 2

A Short Quiz QUESTION #1: Which U.S. industry told its employees every year for the past decade that their pay would be cut by 15-30% regardless of how well they performed? ANSWER: Health Care 3

Medicare SGR Is Now Gone, But Physician Pay Is Behind Inflation 28% Lower Than Inflation If SGR Cut Had Been Made 4

A Short Quiz QUESTION #2: In which U.S. industry can one set of employees only get a raise if other employees take a pay cut, even when the business is performing well? 5

A Short Quiz QUESTION #2: In which U.S. industry can one set of employees only get a raise if other employees take a pay cut, even when the business is performing well? ANSWER: Health Care 6

Even Without the SGR, Physician Pay Must Be Budget-Neutral Physician Payment Budget Neutrality Payments for Specialists Payments for Specialists Payments for PCPs Payments for PCPs 7

A Short Quiz QUESTION #3: In which U.S. industries are businesses only able to sell their products and services to consumers through an intermediary who demands large discounts and increases prices by 18-25%? 8

Health Plans Spend As Much on Administration/Profit as on Drugs Admin: $110 billion Drugs: $117 billion Physicians Hospitals 10

A Lot of a Physician s Pay Goes To Costs of Dealing with Health Plans Admin: $110 billion Drugs: $117 billion Admin: $30 billion Physicians Hospitals 11

A Short Quiz QUESTION #4: Who is to blame for the way physicians are paid and micromanaged? 13

A Short Quiz QUESTION #4: Who is to blame for the way physicians are paid and micromanaged? ANSWER: Physicians 14

The Blame Rests With Physicians Physicians haven t defined solutions to control healthcare costs without rationing Physicians have allowed themselves to be seen as the causes of higher spending Physicians haven t defined payment models that will support lower-cost, higherquality care and maintain financial viability for physician practices Physicians aren t organized to manage and deliver high-value population health care to purchasers and patients 15

Three Paths to the Future: Which Door Will Doctors Choose? FUTURE #1 SGR Repeal FUTURE #2 FUTURE #3 16

Door #1: Pay for Performance (AKA Value Based Purchasing ) PAY FOR PERFORMANCE ( Value-Based Purchasing ) ( Merit-Based Incentive Payment System ) SGR Repeal 17

PROBLEM The Problem That P4P Was Supposed to Solve Physicians are paid the same amount under fee-for-service regardless of the quality of care they deliver 18

Bad Solutions Developed by CMS and Other Payers PROBLEM Physicians are paid the same amount under fee-for-service regardless of the quality of care they deliver BAD P4P Requiring physicians to deliver high-quality care regardless of whether they are paid adequately to do so Penalizing physicians for quality problems they did not cause and cannot control Penalizing physicians when patients don t receive services they don t need or want 19

Do Physicians Need Incentives to Deliver Higher Value Care? $ Bonus Penalty FFS P4P QUALITY MEASURES Mammograms Flu Vaccine Tobacco Counseling HbA1c Control RESOURCE USE MEASURES Total Spending per Patient Spending Per Episode of Care 20

The Problem Isn t Incentives But Lack of Adequate FFS Payment $ QUALITY A small bonus may not be MEASURES enough to pay for delivering Mammograms a high-value service or for Flu Vaccine the added costs of improving Tobacco Counseling quality HbA1c Control A small bonus may not be RESOURCE USE enough to offset the costs of MEASURES collecting and reporting the Total Spending quality data per Patient Spending A small penalty may be less Per Episode Bonus of Care than the loss of Penalty fee-for-service revenue from healthier patients or FFS lower utilization Unpaid Services P4P 21

Quality Reporting Alone Costs Physicians $15 Billion 22

MIPS is Just More P4P On Top of the Same FFS $ +x% -4.5% +x% -6% +x% -9% +x% -10% +4% -4% +5% -5% +7% -7% +9% -9% +9% -9% +9% -9% FFS + PQRS + MU + VBM FFS + PQRS + MU + VBM FFS + PQRS + MU + VBM FFS + PQRS + MU + VBM FFS + MIPS FFS + MIPS FFS + MIPS FFS + MIPS FFS + MIPS FFS + MIPS 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 MIPS Merit-Based Incentive Payment System Quality Resource Use Clinical Practice Improvement Activities EHR Meaningful Use 50% -> 30% 10% -> 30% 15% 25% 23

Docs Will Be Responsible for Costs They Can t Control $ +x% -4.5% +x% -6% +x% -9% +x% -10% +4% -4% +5% -5% +7% -7% +9% -9% +9% -9% +9% -9% FFS + PQRS + MU + VBM FFS + PQRS + MU + VBM FFS + PQRS + MU + VBM FFS + PQRS + MU + VBM FFS + MIPS FFS + MIPS FFS + MIPS FFS + MIPS FFS + MIPS FFS + MIPS 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Physicians Pay Will Be Based on Total Cost of Care Without the Ability to Control It Quality Resource Use Clinical Practice Improvement Activities EHR Meaningful Use 50% -> 30% 10% -> 30% 15% 25% 24

Door #1: Accountability Without Resources or Flexibility PAY FOR PERFORMANCE ( Value-Based Purchasing ) ( Merit-Based Incentive Payment System ) SGR Repeal Accountability for: Quality Measures Meaningful Use Practice Improvement Total Spending on Patients No Change in What Physicians are Paid For or How They re Paid 25

Door #2: Alternative Payment Models PAY FOR PERFORMANCE ( Value-Based Purchasing ) ( Merit-Based Incentive Payment System ) SGR Repeal ALTERNATIVE PAYMENT MODELS (APMs) 26

PROBLEM The Need for Alternative Payment Models Barriers in fee-for-service prevent physicians from delivering higher-quality care at lower total cost 27

The Need for Alternative Payment Models PROBLEM Barriers in fee-for-service prevent physicians from delivering higher-quality care at lower total cost BARRIER #1 No payment or inadequate payment for many high-value services, e.g., Responding to patient phone calls that can avoid office or ER visits Calls among physicians to determine a diagnosis or coordinate care delivery Hiring nurses to help chronic disease patient avoid exacerbations Providing palliative care, not just hospice BARRIER #2 Loss of revenue when patients stay healthy and don t need procedures 28

Bad Alternative Payment Models From CMS and Other Payers PROBLEM Barriers in fee-for-service prevent physicians from delivering higher-quality care at lower total cost BAD PAYMENT MODELS Paying for high-value services only if physicians can reduce total spending Dictating how care should be provided in order to increase payments Paying physicians more if their patients receive fewer services Paying physicians the same amount for all services patients need regardless of how sick the patients are 29

CMS Alternative Payment Models Announced To Date TYPE OF PROVIDER CMS PROGRAM PAYMENT STRUCTURE Health Systems, PHOs, Multi-Specialty Groups, IPAs, and Dialysis Ctrs Primary Care Specialty Care Hospitals and Post-Acute Care Accountable Care Organizations (MSSP, Pioneer, ESCO) Comprehensive Primary Care Initiative Oncology Care Model Comprehensive Care for Joint Replacement FFS + Shared Savings on Attributed Total Spending FFS + PMPM $ for Attributed Patients w/ Detailed Service Specifications + Shared Savings on Attributed Total Spending (for State or Region) FFS + PMPM $ for Attributed Patients w/ Detailed Service Specifications + Shared Savings on Attributed Total Spending (for 6-month window) FFS + Hospital Bonuses/Penalties for Attributed Total Spending 30

CMS Alternative Payment Models Don t Change Current Payments TYPE OF PROVIDER CMS PROGRAM PAYMENT STRUCTURE Health Systems, PHOs, Multi-Specialty Groups, IPAs, and Dialysis Ctrs Primary Care Specialty Care Hospitals and Post-Acute Care Accountable Care Organizations (MSSP, Pioneer, ESCO) Comprehensive Primary Care Initiative Oncology Care Model Comprehensive Care for Joint Replacement FFS + Shared Savings on Attributed Total Spending FFS + PMPM $ for Attributed Patients w/ Detailed Service Specifications + Shared Savings on Attributed Total Spending (for State or Region) FFS + PMPM $ for Attributed Patients w/ Detailed Service Specifications + Shared Savings on Attributed Total Spending (for 6-month window) FFS + Hospital Bonuses/Penalties for Attributed Total Spending 31

Some Provide Additional Upfront Resources to Physicians TYPE OF PROVIDER CMS PROGRAM PAYMENT STRUCTURE Health Systems, PHOs, Multi-Specialty Groups, IPAs, and Dialysis Ctrs Primary Care Specialty Care Hospitals and Post-Acute Care Accountable Care Organizations (MSSP, Pioneer, ESCO) Comprehensive Primary Care Initiative Oncology Care Model Comprehensive Care for Joint Replacement FFS + Shared Savings on Attributed Total Spending FFS + PMPM $ for Attributed Patients w/ Detailed Service Specifications + Shared Savings on Attributed Total Spending (for State or Region) FFS + PMPM $ for Attributed Patients w/ Detailed Service Specifications + Shared Savings on Attributed Total Spending (for 6-month window) FFS + Hospital Bonuses/Penalties for Attributed Total Spending 32

But With Many Strings Attached TYPE OF PROVIDER CMS PROGRAM PAYMENT STRUCTURE Health Systems, PHOs, Multi-Specialty Groups, IPAs, and Dialysis Ctrs Primary Care Specialty Care Hospitals and Post-Acute Care Accountable Care Organizations (MSSP, Pioneer, ESCO) Comprehensive Primary Care Initiative Oncology Care Model Comprehensive Care for Joint Replacement FFS + Shared Savings on Attributed Total Spending FFS + PMPM $ for Attributed Patients w/ Detailed Service Specifications + Shared Savings on Attributed Total Spending (for State or Region) FFS + PMPM $ for Attributed Patients w/ Detailed Service Specifications + Shared Savings on Attributed Total Spending (for 6-month window) FFS + Hospital Bonuses/Penalties for Attributed Total Spending 33

Practice Transformation Required in CMS Oncology Care Model 1. 24/7 patient access to clinicians with real-time access to medical records 2. Meet Meaningful Use requirements for EHR 3. Create care plans with 13 components recommended by IOM 4. Provide patient navigation services 5. Adhere to clinical guidelines for treatment 6. Collect, report, and improve on quality metrics 34

Performance Measures in the CMS Oncology Care Model 1. Percentage of beneficiaries who are treated with therapies consistent with nationally recognized clinical guidelines 2. Provide and attest to 24 hour, 7 days a week patient access to appropriate clinician who has real-time access to practice s medical record 3. Attestation and Use of ONC certified EHRs 4. Submission of all quality measures required by the program team 5. Provide core functions of patient navigation 6. Electronically document a care plan that contains the 13 components in the IOM Care Management Plan 7. Number of emergency department visits per attributed OCM-FFS beneficiary per OCM-FFS episode (Risk adjusted) 8. Number of hospital admissions per attributed OCM-FFS beneficiaries per OCM-FFS episode for (Risk adjusted) 9. Percentage of all Medicare FFS beneficiaries managed by a practice who are admitted to hospice for less than 3 days in the last 30 days of life 10. % of all Medicare FFS beneficiaries managed by a practice who experience more than one emergency department visit in the last 30 days of life 11. % of face-to-face visits to the participating practice in which there is a documented plan of care for pain AND pain intensity is quantified 12. Score on patient experience survey (CAHPS as modified by the evaluation contractor) 13. Percentage of OCM-FFS beneficiary face-to-face visits in which the patient is assessed by an approved patient-reported outcomes tool. This would include a minimum of the PROMIS tool short forms for anxiety, depression, fatigue, pain interference, and physical function 14. Percentage of OCM-FFS beneficiaries that receive psychosocial screening and intervention at least once per OCM-FFS episode 15. Percentage of OCM-FFS beneficiaries with least one palliative care consultation per OCM-FFS episode 16. Mortality rates of OCM-FFS beneficiaries, risk adjusted 17. Number of emergency department visits per OCM-FFS beneficiary in the 6 months following the OCM-FFS episode 18. Number of hospital admissions per OCM-FFS beneficiary in the 6 months following the OCM-FFS episode 19. Number of hospital readmissions per OCM-FFS beneficiary during the OCM-FFS episode and the following 6 months 20. Number of ICU admissions per OCM-FFS beneficiary during the OCM-FFS episode and the following 6 months 21. Proportion of all Medicare FFS beneficiaries managed by a practice not admitted to hospice 22. Proportion of all Medicare FFS beneficiaries managed by a practice receiving chemotherapy in the last 14 days of life 23. % of attributed beneficiaries that receive a follow-up visit from the participating practice within 7 days after discharge from any inpatient hospitalization 24. Percentage of face-to-face encounters between an attributed OCM-FFS beneficiary and a participating practice which include medication reconciliation 25. Breast Cancer: Hormonal therapy for Stage IC-IIIC (ER/PR) Positive Cancer in OCM-FFS beneficiaries 26. Breast Cancer: Combination chemotherapy is considered or administered within 4 months (120 days) of diagnosis for women under 70 with AJCC T1c, or Stage II or Stage III hormone receptor negative breast cancer in OCM-FFS beneficiaries 27. Colon Cancer: Chemotherapy for Stage IIIA through Stage IIIC OCM-FFS beneficiaries with colon cancer 28. Colon Cancer: Adjuvant chemotherapy is considered or administered within 4 months (120 days) of surgery to OCM-FFS beneficiaries under the age of 80 with AJCC III (lymph node positive) colon 29. Prostate Cancer: Adjuvant hormonal therapy for high-risk OCM-FFS beneficiaries 30. Percentage of OCM-FFS beneficiaries with documented ECOG, Karnofsky, or WHO performance status assessment prior to OCM-FFS episode initiation and at episode conclusion 31. Percentage of OCM-FFS beneficiaries that receive tobacco screening and cessation intervention at least once per OCM-FFS episode 32. Percentage of OCM-FFS beneficiaries that have an Influenza Immunization 33. Number of OCM-FFS beneficiaries enrolled in clinical trials at any point during an OCM-FFS episode 34. Prescription drug utilization under Medicare Part B and Part D 35. Radiation utilization by OCM-FFS beneficiaries 36. Imaging utilization by OCM-FFS beneficiaries 37. Post-acute provider utilization by OCM-FFS beneficiaries 38. Therapy service utilization by OCM-FFS beneficiaries 39. Home health services utilization by OCM-FFS beneficiaries 35

Most Only Provide More $ After Other Spending is Reduced TYPE OF PROVIDER CMS PROGRAM PAYMENT STRUCTURE Health Systems, PHOs, Multi-Specialty Groups, IPAs, and Dialysis Ctrs Primary Care Specialty Care Hospitals and Post-Acute Care Accountable Care Organizations (MSSP, Pioneer, ESCO) Comprehensive Primary Care Initiative Oncology Care Model Comprehensive Care for Joint Replacement FFS + Shared Savings on Attributed Total Spending FFS + PMPM $ for Attributed Patients w/ Detailed Service Specifications + Shared Savings on Attributed Total Spending (for State or Region) FFS + PMPM $ for Attributed Patients w/ Detailed Service Specifications + Shared Savings on Attributed Total Spending (for 6-month window) FFS + Hospital Bonuses/Penalties for Attributed Total Spending 36

Problems With Shared Savings Already efficient providers receive little or no additional revenue and may be forced out of business Physicians who have been practicing inefficiently or inappropriately are paid more than conservative physicians Physicians could be rewarded for denying needed care as well as by reducing overuse Physicians are placed at risk for costs they cannot control and random variation in spending Shared savings bonuses are temporary and when there are no more savings to be generated, physicians are underpaid 37

Higher Payment Only for Patients Attributed to Physician/Provider TYPE OF PROVIDER CMS PROGRAM PAYMENT STRUCTURE Health Systems, PHOs, Multi-Specialty Groups, IPAs, and Dialysis Ctrs Primary Care Specialty Care Hospitals and Post-Acute Care Accountable Care Organizations (MSSP, Pioneer, ESCO) Comprehensive Primary Care Initiative Oncology Care Model Comprehensive Care for Joint Replacement FFS + Shared Savings on Attributed Total Spending FFS + PMPM $ for Attributed Patients w/ Detailed Service Specifications + Shared Savings on Attributed Total Spending (for State or Region) FFS + PMPM $ for Attributed Patients w/ Detailed Service Specifications + Shared Savings on Attributed Total Spending (for 6-month window) FFS + Hospital Bonuses/Penalties for Attributed Total Spending 38

Models Hold Individual Physicians Accountable for Total Cost of Care TYPE OF PROVIDER CMS PROGRAM PAYMENT STRUCTURE Health Systems, PHOs, Multi-Specialty Groups, IPAs, and Dialysis Ctrs Primary Care Specialty Care Hospitals and Post-Acute Care Accountable Care Organizations (MSSP, Pioneer, ESCO) Comprehensive Primary Care Initiative Oncology Care Model Comprehensive Care for Joint Replacement FFS + Shared Savings on Attributed Total Spending FFS + PMPM $ for Attributed Patients w/ Detailed Service Specifications + Shared Savings on Attributed Total Spending (for State or Region) FFS + PMPM $ for Attributed Patients w/ Detailed Service Specifications + Shared Savings on Attributed Total Spending (for 6-month window) FFS + Hospital Bonuses/Penalties for Attributed Total Spending 39

CMS Wants to Make Each Provider Accountable for Total Spending ACOs Comp. ESRD Care Comprehensive Primary Care Initiative Oncology Care Model Comp. Care for Joint Replacement Healthcare Spending Spending on All Services the ACO s Patients Receive Spending on All Services End-Stage Renal Disease Patients Receive Spending on All Services the PCP s Patients Receive Spending on All Services Cancer Patients Receive During 6 Month Chemo Treatment Episodes Spending on All Chronic Disease Care & Care Related to Joint Surgery 90 Days After Discharge Payments to ACOs Payments to ESCOs Payments to PCPs Payments to Oncologists Payments to Hospitals 40

What s Behind Door #3? PAY FOR PERFORMANCE ( Value-Based Purchasing ) ( Merit-Based Incentive Payment System ) SGR Repeal PAYER-DESIGNED ALTERNATIVE PAYMENT MODELS FUTURE #3 41

Physicians Taking Charge of Payment & Delivery Reform PAY FOR PERFORMANCE ( Value-Based Purchasing ) ( Merit-Based Incentive Payment System ) SGR Repeal PAYER-DESIGNED ALTERNATIVE PAYMENT MODELS PHYSICIAN-DESIGNED ALTERNATIVE PAYMENT MODELS (APMs) 42

Instead of Payer Designed Payment Systems HOW PAYMENT REFORMS ARE DESIGNED TODAY Medicare and Health Plans Define Payment Systems Physicians Have To Change Care to Align With Payment Systems Patients and Physicians May Not Come Out Ahead 43

Physicians Should Design Payments to Support Good Care HOW PAYMENT REFORMS ARE DESIGNED TODAY Medicare and Health Plans Define Payment Systems Physicians Have To Change Care to Align With Payment Systems Patients and Physicians May Not Come Out Ahead THE RIGHT WAY TO DESIGN PAYMENT REFORMS Physicians Redesign Care and Identify Payment Barriers Payers Change Payment to Support Redesigned Care Patients Get Better Care and Physicians Stay Financially Viable 44

What Happens When Physicians Redesign Patient Care and Receive Adequate Payments to Support It?

Better Care at Lower Cost for Crohn s Disease PHYSICIAN LEADER: Lawrence R. Kosinski, MD Managing Partner, Illinois Gastroenterology Group 46

Better Care at Lower Cost for Crohn s Disease PHYSICIAN LEADER: Lawrence R. Kosinski, MD Managing Partner, Illinois Gastroenterology Group OPPORTUNITIES TO IMPROVE CARE AND LOWER COSTS Health plan spends $11,000/year/patient on patients with Crohn s >50% of expenses are for hospital care, most due to complications <33% of patients seen by physician in 30 days prior to hospitalization 10% of expenses for biologics, many administered in hospitals 3.5% of spending goes to gastroenterologists BARRIERS IN THE CURRENT PAYMENT SYSTEM No payment to support medical home services in gastroenterology practice: No payment for nurse care manager No payment for clinical decision support tools to ensure evidencebased care No payment for proactive telephone contact with patients 48

Better Care at Lower Cost for Cancer PHYSICIAN LEADER: Barbara McAneny, MD CEO, New Mexico Cancer Center 50

Better Care at Lower Cost for Cancer PHYSICIAN LEADER: Barbara McAneny, MD CEO, New Mexico Cancer Center OPPORTUNITIES TO IMPROVE CARE AND LOWER COSTS 40-50% of patients receiving chemotherapy are hospitalized for complications of treatment BARRIERS IN THE CURRENT PAYMENT SYSTEM No payment for triage services to enable rapid response to patient complications No payment for patient and family education about complications and how to respond Inadequate payment to reserve capacity for IV hydration of patients experiencing problems 52

The Promise of Physician-Focused PROBLEMS Barriers in fee-for-service prevent physicians from delivering higher-quality care at lower total cost + Physicians are paid the same amount under fee-for-service regardless of the quality of care they deliver Alternative Payment Models 54

The Promise of Physician-Focused Alternative Payment Models PROBLEMS Barriers in fee-for-service prevent physicians from delivering higher-quality care at lower total cost GOOD ALTERNATIVE PAYMENT MODELS Give physicians adequate resources and flexibility to deliver the kind of care that patients need + + Physicians are paid the same amount under fee-for-service regardless of the quality of care they deliver Ask physicians to take accountability for improving quality and reducing costs in the aspects of care they can control 55

Are the CMS Models the Only Way to Define APMs? CMS APM Models Primary Care Medical Home Episode Payment to Hospital Upside-Only Shared Savings Two-Sided Risk Shared Savings Full-Risk Capitation 56

Models Authorized by ACA/MACRA for Innovation Center to Implement (i) Promoting broad payment and practice reform in primary care, including patient-centered medical home models for high-need applicable individuals, medical homes that address women s unique health care needs, and models that transition primary care practices away from fee-for-service based reimbursement and toward comprehensive payment or salary-based payment. (ii) Contracting directly with groups of providers of services and suppliers to promote innovative care delivery models, such as through risk-based comprehensive payment or salary-based payment. (iii) Utilizing geriatric assessments and comprehensive care plans to coordinate the care (including through interdisciplinary teams) of applicable individuals with multiple chronic conditions and at least one of the following: (I) An inability to perform 2 or more activities of daily living. (II) Cognitive impairment, including dementia. (iv) Promote care coordination between providers of services and suppliers that transition health care providers away from fee-for-service based reimbursement and toward salary-based payment. (v) Supporting care coordination for chronically ill applicable individuals at high risk of hospitalization through a health information technology-enabled provider network that includes care coordinators, a chronic disease registry, and home tele-health technology. (vi) Varying payment to physicians who order advanced diagnostic imaging services (as defined in section 1834(e)(1)(B)) according to the physician s adherence to appropriateness criteria for the ordering of such services, as determined in consultation with physician specialty groups and other relevant stakeholders. (vii) Utilizing medication therapy management services, such as those described in section 935 of the Public Health Service Act. (viii) Establishing community-based health teams to support small-practice medical homes by assisting the primary care practitioner in chronic care management, including patient selfmanagement, activities. (ix) Assisting applicable individuals in making informed health care choices by paying providers of services and suppliers for using patient decision-support tools, including tools that meet the standards developed and identified under section 936(c)(2)(A) of the Public Health Service Act, that improve applicable individual and caregiver understanding of medical treatment options. (x) Allowing States to test and evaluate fully integrating care for dual eligible individuals in the State, including the management and oversight of all funds under the applicable titles with respect to such individuals. (xi) Allowing States to test and evaluate systems of all-payer payment reform for the medical care of residents of the State, including dual eligible individuals. (xii) Aligning nationally recognized, evidence based guidelines of cancer care with payment incentives under title XVIII in the areas of treatment planning and follow-up care planning for applicable individuals described in clause (i) or (iii) of subsection (a)(4)(a) with cancer, including the identification of gaps in applicable quality measures. (xiii) Improving post-acute care through continuing care hospitals that offer inpatient rehabilitation, long-term care hospitals, and home health or skilled nursing care during an inpatient stay and the 30 days immediately following discharge. (xiv) Funding home health providers who offer chronic care management services to applicable individuals in cooperation with interdisciplinary teams. (xv) Promoting improved quality and reduced cost by developing a collaborative of high-quality, low-cost health care institutions that is responsible for (I) developing, documenting, and disseminating best practices and proven care methods; (II) implementing such best practices and proven care methods within such institutions to demonstrate further improvements in quality and efficiency; and (III) providing assistance to other health care institutions on how best to employ such best practices and proven care methods to improve health care quality and lower costs. (xvi) Facilitate inpatient care, including intensive care, of hospitalized applicable individuals at their local hospital through the use of electronic monitoring by specialists, including intensivists and critical care specialists, based at integrated health systems. (xvii) Promoting greater efficiencies and timely access to outpatient services (such as outpatient physical therapy services) through models that do not require a physician or other health professional to refer the service or be involved in establishing the plan of care for the service, when such service is furnished by a health professional who has the authority to furnish the service under existing State law. (xviii) Establishing comprehensive payments to Healthcare Innovation Zones, consisting of groups of providers that include a teaching hospital, physicians, and other clinical entities, that, through their structure, operations, and joint-activity deliver a full spectrum of integrated and comprehensive health care services to applicable individuals while also incorporating innovative methods for the clinical training of future health care professionals. (xix) Utilizing, in particular in entities located in medically underserved areas and facilities of the Indian Health Service (whether operated by such Service or by an Indian tribe or tribal organization (as those terms are defined in section 4 of the Indian Health Care Improvement Act)), telehealth services (I) in treating behavioral health issues (such as post-traumatic stress disorder) and stroke; and (II) to improve the capacity of non-medical providers and non-specialized medical providers to provide health services for patients with chronic complex conditions. (xx) Utilizing a diverse network of providers of services and suppliers to improve care coordination for applicable individuals described in subsection (a)(4)(a)(i) with 2 or more chronic conditions and a history of prior-year hospitalization through interventions developed under the Medicare Coordinated Care Demonstration Project under section 4016 of the Balanced Budget Act of 1997 (42 U.S.C. 1395b 1 note). (xxi) Focusing primarily on physicians services (as defined in section 1848(j)(3)) furnished by physicians who are not primary care practitioners (xxii) Focusing on practices of 15 or fewer professionals. (xxiii) Focusing on risk-based models for small physician practices which may involve two-sided risk and prospective patient assignment, and which examine risk-adjusted decreases in mortality rates, hospital readmissions rates, and other relevant and appropriate clinical measures. (xxiv) Focusing primarily on title XIX, working in conjunction with the Center for Medicaid and CHIP Services; 57

There are Many More Ways to Create Physician-Focused APMs Primary Care Medical Home Episode Payment to Hospital Upside-Only Shared Savings Two-Sided Risk Shared Savings Full-Risk Capitation APM #1: Payment for a High-Value Service APM #2: Condition-Based Payment for a Physician s Services APM #3: Multi-Physician Bundled Payment APM #4: Physician-Facility Procedure Bundle APM #5: Warrantied Payment for Physician Services APM #6: Episode Payment for a Procedure APM #7: Condition-Based Payment 58

How Do You Define a Good Alternative Payment Model?

Step 1: Identify Opportunities to Reduce Related Spending $ Total Spending Relevant to the Physician s Services Physician Practice Revenue Fee-for-Service Payment (FFS) Avoidable Spending Payments to Other Providers for Related Services FFS Payments to Physician Practice OPPORTUNITIES TO REDUCE SPENDING Reduce Avoidable Hospital Admissions Reduce Unnecessary Tests and Treatments Use Lower-Cost Tests and Treatments Deliver Services More Efficiently Use Lower-Cost Sites of Service Reduce Preventable Complications Prevent Serious Conditions From Occurring 60

Step 2: Identify Barriers in Current Payments That Need to Be Fixed $ Total Spending Relevant to the Physician s Services Physician Practice Revenue Fee-for-Service Payment (FFS) Avoidable Spending Payments to Other Providers for Related Services FFS Payments to Physician Practice Unpaid Services OPPORTUNITIES TO REDUCE SPENDING Reduce Avoidable Hospital Admissions Reduce Unnecessary Tests and Treatments Use Lower-Cost Tests and Treatments Deliver Services More Efficiently Use Lower-Cost Sites of Service Reduce Preventable Complications Prevent Serious Conditions From Occurring BARRIERS IN CURRENT FFS SYSTEM No Payment for Many High-Value Services Insufficient Revenue to Cover Costs When Using Fewer or Lower-Cost Services 61

Step 3: Design an APM That Removes the Payment Barriers $ Total Spending Relevant to the Physician s Services Physician Practice Revenue Fee-for-Service Payment (FFS) Avoidable Spending Payments to Other Providers for Related Services FFS Payments to Physician Practice Unpaid Services Physician-Focused Alternative Payment Model Flexible, Adequate Payment for Physician s Services 62

Step 4: Include Provisions to Assure Control of Cost & Quality $ Total Spending Relevant to the Physician s Services Physician Practice Revenue Fee-for-Service Payment (FFS) Avoidable Spending Payments to Other Providers for Related Services FFS Payments to Physician Practice Unpaid Services Physician-Focused Alternative Payment Model Savings Avoidable Spending Payments to Other Providers for Related Services Flexible, Adequate Payment for Physician s Services Accountability for Controlling Avoidable Spending 63

Alternative Payment Models Can Be Win-Win-Wins $ Total Spending Relevant to the Physician s Services Physician Practice Revenue Fee-for-Service Payment (FFS) Avoidable Spending Payments to Other Providers for Related Services FFS Payments to Physician Practice Unpaid Services Physician-Focused Alternative Payment Model Savings Avoidable Spending Payments to Other Providers for Related Services Flexible, Adequate Payment for Physician s Services Win for Payer: Lower Total Spending Win for Patient: Better Care Without Unnecessary Services Win for Physician: Adequate Payment for High-Value Services 64

Most of the Money in Healthcare Doesn t Go to Physicians Physicians: 16% 65

How Could This Work for Renal Physicians?

CMS Focus Has Been on ESRD Because of High Spending Per Patient 67

But the Majority of Patients With Kidney Disease Aren t ESRD 68

And So Most Spending on Kidney Disease Isn t ESRD 69

< 2% of Spending on CKD Patients Goes to Nephrologists 70

Nephrologists Can Help Control the Other 98% of Spending What Nephrologists Control or Influence What Nephrologists Get Paid 71

If Nephrologists Can Reduce the Other Spending 5% Reduction in Other Spending Savings 72

They Can Be Paid Significantly Better 5% Reduction in Other Spending Savings 50% Increase in Nephrology Payments 73

While Still Reducing Overall Healthcare Spending 5% Reduction in Other Spending Savings 4% Reduction in Total Medicare Spending 50% Increase in Nephrology Payments 74

How Can Nephrologists Improve Care and Reduce Spending? $ Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 ESRD 75

Improving Care/Reducing Costs for ESRD Patients $ Reduce catheterrelated infections through increased use of fistulas Increase use of home dialysis Avoid ED visits and hospitalizations Transition patients to hospice sooner Increase successful use of transplants Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 ESRD 76

Improving Care/Reducing Costs for CKD Patients, Too $ Avoid ED visits and hospitalizations Reduce cardiovascular complications Avoid overuse of ESAs Reduce unnecessary testing & medications Avoid hospitalizations for first dialysis Slow progression to ESRD and reduce use of dialysis Reduce catheterrelated infections through increased use of fistulas Increase use of home dialysis Avoid ED visits and hospitalizations Transition patients to hospice sooner Increase successful use of transplants Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 ESRD 77

Improving Care/Reducing Costs By Avoiding Need for Dialysis $ Avoid ED visits and hospitalizations Reduce cardiovascular complications Avoid overuse of ESAs Reduce unnecessary testing & medications Avoid hospitalizations for first dialysis Slow progression to ESRD and reduce use of dialysis Reduce catheterrelated infections through increased use of fistulas Increase use of home dialysis Avoid ED visits and hospitalizations Transition patients to hospice sooner Increase successful use of transplants Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 ESRD 78

Better Care for <65 CKD Patients Needed to Reduce ESRD Costs 79

Hypothetical, Simplified Example of Kidney Disease Management 1000 Patients with Stage 3 Chronic Kidney Disease 80

Hypothetical, Simplified Example of Kidney Disease Management CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 1000 $600,000 1000 Patients with Stage 3 Chronic Kidney Disease PCP paid only for periodic office visits (6 visits @ $100/visit) 81

Hypothetical, Simplified Example of Kidney Disease Management CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 1000 $600,000 Nephrologist Office Visits $50 1000 $50,000 1000 Patients with Stage 3 Chronic Kidney Disease PCP paid only for periodic office visits (6 visits @ $100/visit) Nephrologist sees only one-half the patients for 1 visit/year @ $100) 82

Hypothetical, Simplified Example of Kidney Disease Management CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 1000 $600,000 Nephrologist Office Visits $50 1000 $50,000 Other Services $2,500 1000 $2,500,000 Hospitalizations $10,000 600 $6,000,000 1000 Patients with Stage 3 Chronic Kidney Disease PCP paid only for periodic office visits (6 visits @ $100/visit) Nephrologist sees only one-half the patients for 1 visit/year @ $100) 60% of patients are hospitalized each year; average cost of hospitalization = $10,000 83

Hypothetical, Simplified Example of Kidney Disease Management CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 1000 $600,000 Nephrologist Office Visits $50 1000 $50,000 Other Services $2,500 1000 $2,500,000 Hospitalizations $10,000 600 $6,000,000 Total Spending 1000 $9,150,000 1000 Patients with Stage 3 Chronic Kidney Disease PCP paid only for periodic office visits (6 visits @ $100/visit) Nephrologist sees only one-half the patients for 1 visit/year @ $100) 60% of patients are hospitalized each year; average cost of hospitalization = $10,000 Spending on other services averages $2,500/patient 85

Hypothetical, Simplified Example of Kidney Disease Management CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 1000 $600,000 Nephrologist Office Visits $50 1000 $50,000 Other Services $2,500 1000 $2,500,000 Hospitalizations $10,000 600 $6,000,000 Total Spending 1000 $9,150,000 1000 Patients with Stage 3 Chronic Kidney Disease PCP paid only for periodic office visits (6 visits @ $100/visit) Nephrologist sees only one-half the patients for 1 visit/year @ $100) 60% of patients are hospitalized each year; average cost of hospitalization = $10,000 Spending on other services averages $2,500/patient No payment for phone consults by nephrologist with PCP; no payment for case mgt by nephrologist 86

Most of the Money Isn t Going to the Physicians CURRENT FFS $/Pt # Pts Total $ PCP Office Visits $600 1000 $600,000 Nephrologist Office Visits $50 1000 $50,000 Other Services $2,500 1000 $2,500,000 Hospitalizations $10,000 600 $6,000,000 Total Spending 1000 $9,150,000 Physician Payments = 7% of Spending 87

What if More Nephrologist Support Could Reduce Hospital Admissions? CURRENT FFS APM $/Pt # Pts Total $ $/Pt # Pts Total $ Chg PCP Office Visits $600 1000 $600,000 $600 1000 $600,000 +0% Nephrologist Office Visits $50 1000 $50,000 $50 1000 $50,000 CKD Mgt $120 1000 $120,000 Total Nephrol. $50,000 $170,000 +240% Other Services $2,500 1000 $2,500,000 Hospitalizations $10,000 600 $6,000,000 Total Spending 1000 $9,150,000 New CKD Management Payment to Nephrologist: $10/patient/month Allows phone support to PCPs and hiring of a nurse care manager 88

What if More Nephrologist Support Could Reduce Hospital Admissions? CURRENT FFS APM $/Pt # Pts Total $ $/Pt # Pts Total $ Chg PCP Office Visits $600 1000 $600,000 $600 1000 $600,000 +0% Nephrologist Office Visits $50 1000 $50,000 $50 1000 $50,000 CKD Mgt $120 1000 $120,000 Total Nephrol. $50,000 $170,000 +240% Other Services $2,500 1000 $2,500,000 $2,500 1000 $2,500,000 0% Hospitalizations $10,000 600 $6,000,000 $10,000 450 $4,500,000-25% Total Spending 1000 $9,150,000 1000 $7,770,000-15% New CKD Management Payment to Nephrologist: $10/patient/month Allows phone support to PCPs and hiring of a nurse care manager 25% reduction in hospitalizations through improved treatment and case management 89

Win-Win-Win for Patients, Physicians, and Payers CURRENT FFS APM $/Pt # Pts Total $ $/Pt # Pts Total $ Chg PCP Office Visits $600 1000 $600,000 $600 1000 $600,000 +0% Nephrologist Office Visits $50 1000 $50,000 $50 1000 $50,000 CKD Mgt $120 1000 $120,000 Total Nephrol. $50,000 $170,000 +240% Other Services $2,500 1000 $2,500,000 $2,500 1000 $2,500,000 0% Hospitalizations $10,000 600 $6,000,000 $10,000 450 $4,500,000-25% Total Spending 1000 $9,150,000 1000 $7,770,000-15% Win for Nephrologist Win for Patient Win for Payer 90

How Does the Payer Know That Hospitalizations Will Decrease? CURRENT FFS APM $/Pt # Pts Total $ $/Pt # Pts Total $ Chg PCP Office Visits $600 1000 $600,000 $600 1000 $600,000 +0% Nephrologist Office Visits $50 1000 $50,000 $50 1000 $50,000 CKD Mgt $120 1000 $120,000 Total Nephrol. $50,000 $170,000 +240% Other Services $2,500 1000 $2,500,000 $2,500 1000 $2,500,000 0% Hospitalizations $10,000 600 $6,000,000 $10,000 600 $6,000,000-0% Total Spending 1000 $9,150,000 1000 $9,270,000 +1% 91

Solution: Add an Accountability Component to the Payment CURRENT FFS APM $/Pt # Pts Total $ $/Pt # Pts Total $ Chg PCP Office Visits $600 1000 $600,000 $600 1000 $600,000 +40% Nephrologist Office Visits $50 1000 $50,000 $50 1000 $50,000 CKD Mgt $120 1000 $120,000 P4P -$60 1000 ($60,000) Total Nephrol. $50,000 $110,000 +120% Other Services $2,500 1000 $2,500,000 $2,500 1000 $2,500,000 0% Hospitalizations $10,000 600 $6,000,000 $10,000 540 $5,400,000-10% Total Spending 1000 $9,150,000 1000 $8,610,000-6% New CKD Management Payment to Nephrologist: $10/patient/month Allows phone support to PCPs and hiring of a nurse care manager P4P Adjustment to CKD Management Payment Based on Keeping Hospitalization Rate to 400-500 Admits/1000 (assuming current average rate is 600/1000) 92

Greater Success in Preventing Admissions Increases Payment CURRENT FFS APM $/Pt # Pts Total $ $/Pt # Pts Total $ Chg PCP Office Visits $600 1000 $600,000 $600 1000 $600,000 +40% Nephrologist Office Visits $50 1000 $50,000 $50 1000 $50,000 CKD Mgt $120 1000 $120,000 P4P +$60 1000 $60,000 Total Nephrol. $50,000 $230,000 +360% Other Services $2,500 1000 $2,500,000 $2,500 1000 $2,500,000 0% Hospitalizations $10,000 600 $6,000,000 $10,000 360 $3,600,000-40% Total Spending 1000 $9,150,000 1000 $6,930,000-24% New CKD Management Payment to Nephrologist: $10/patient/month Allows phone support to PCPs and hiring of a nurse care manager P4P Adjustment to CKD Management Payment Based on Keeping Hospitalization Rate to 400-500 Admits/1000 (assuming current average rate is 600/1000) 93

Not All Patients Are The Same: APM Low Risk Patients APM High Risk Patients $/Pt # Pts Total $ $/Pt # Pts Total $ PCP Office Visits Nephrologist Office Visits CKD Mgt P4P Total Nephrol. Other Services Hospitalizations 150 300 Total Spending 600 400 1000 Patients 25% Admission Rate 75% Admission Rate 94

Not All Patients Are The Same: Stratifying APMs Based on Risk APM Low Risk Patients APM High Risk Patients $/Pt # Pts Total $ $/Pt # Pts Total $ PCP Office Visits $450 600 $270,000 $825 400 $330,000 Nephrologist Office Visits $20 600 $12,000 $95 400 $38,000 CKD Mgt $60 600 $36,000 $210 400 $84,000 P4P Total Nephrol. $48,000 $122,000 Other Services $2,000 600 $1,200,000 $3,250 400 $1,300,000 Hospitalizations $10,000 150 $1,500,000 $10,000 300 $3,000,000 Total Spending 600 $3,018,000 400 $4,752,000 $5.00 PMPM CKD Payment $17.50 PMPM CKD Payment 25% Admission Rate 75% Admission Rate 95

APM #1: Payment for a High-Value Service Continuation of existing FFS payments Payment for additional services Measurement of avoidable utilization and/or quality/outcomes Adjustment of payment amounts based on performance Updating payments over time 96

A Critical Element is Shared, Trusted Data Physicians need to know the current utilization and costs for their patients and the likely impact of care changes to know whether the payment amount will cover the costs of delivering redesigned care to the patients Purchasers/Payers needs to know the current utilization and costs to know whether the proposed payment amount is a better deal than they have today Both sets of data have to match in order for providers and payers to agree on the new approach! 97

Option: Replace FFS Payments w/ Per Patient Bundled Payments CURRENT FFS APM $/Pt # Pts Total $ $/Pt # Pts Total $ Chg PCP Office Visits $600 1000 $600,000 $600 1000 $600,000 +0% Nephrologist Office Visits $50 1000 $50,000 X 1000 $0 CKD Mgt $170 1000 $170,000 P4P $0 1000 $0 Total Nephrol. $50,000 $170,000 +240% Other Services $2,500 1000 $2,500,000 $2,500 1000 $2,500,000 0% Hospitalizations $10,000 600 $6,000,000 $10,000 450 $4,500,000-25% Total Spending 1000 $9,150,000 1000 $7,770,000-15% 98

APM #2: Condition-Based Payment for a Physician s Services 99

What About the PCP? CURRENT FFS APM $/Pt # Pts Total $ $/Pt # Pts Total $ Chg PCP Office Visits $600 1000 $600,000 $600 1000 $600,000 +0% Nephrologist Office Visits $50 1000 $50,000 X 1000 $0 CKD Mgt $170 1000 $170,000 P4P $0 1000 $0 Total Nephrol. $50,000 $170,000 +240% Other Services $2,500 1000 $2,500,000 $2,500 1000 $2,500,000 0% Hospitalizations $10,000 600 $6,000,000 $10,000 450 $4,500,000-25% Total Spending 1000 $9,150,000 1000 $7,770,000-15% Do nephrologists want to manage all of the patients other health problems in addition to kidney disease? 100

Savings Allows Higher Pay for Both PCPs and Nephrologists If Savings CURRENT FFSAre High Enough APM $/Pt # Pts Total $ $/Pt # Pts Total $ Chg PCP Office Visits $600 1000 $600,000 $840 1000 $840,000 +40% Nephrologist Office Visits $50 1000 $50,000 X 1000 $0 CKD Mgt $170 1000 $170,000 P4P $0 1000 $0 Total Nephrol. $50,000 $170,000 +240% Other Services $2,500 1000 $2,500,000 $2,500 1000 $2,500,000 0% Hospitalizations $10,000 600 $6,000,000 $10,000 450 $4,500,000-25% Total Spending 1000 $9,150,000 1000 $8,010,000-13% 101

Win-Win-Win for Patients, Payers, and All Physicians CURRENT FFS APM $/Pt # Pts Total $ $/Pt # Pts Total $ Chg PCP Office Visits $600 1000 $600,000 $840 1000 $840,000 +40% Nephrologist Office Visits $50 1000 $50,000 X 1000 $0 CKD Mgt $170 1000 $170,000 P4P $0 1000 $0 Total Nephrol. $50,000 $170,000 +240% Other Services $2,500 1000 $2,500,000 $2,500 1000 $2,500,000 0% Hospitalizations $10,000 600 $6,000,000 $10,000 450 $4,500,000-25% Total Spending 1000 $9,150,000 1000 $8,010,000-13% Win for PCP Win for Nephrologist Win for Patient Win for Payer 102

Option: Create a Bundled Payment for PCP + Nephrologist CURRENT FFS APM $/Pt # Pts Total $ $/Pt # Pts Total $ Chg Physicians PCP $600 1000 $600,000 $840 1000 $840,000 +40% Nephrologist $50 1000 $50,000 $170 1000 $170,000 +240% P4P Total Physicians $700 1000 $700,000 $1,010 1000 $1,010,000 +55% Other Services $2,500 1000 $2,500,000 $2,500 1000 $2,500,000 0% Hospitalizations $10,000 600 $6,000,000 $10,000 450 $4,500,000-25% Total Spending 1000 $9,150,000 1000 $8,010,000-13% With a bundled payment, the PCP and nephrologist are no longer limited to delivering services supported by current fee-for-service payments 103

Flexibility Allows Creation of Specialty Medical Home PCP-Managed Patients Nephrologist-Managed $/Pt # Pts Total $ $/Pt # Pts Total $ Physicians PCP $700 600 $420,000 $120 400 $48,000 Nephrologist $100 600 $60,000 $1,200 400 $480,000 Total Physicians $800 600 $480,000 $1,320 400 $528,000 Other Services $2,000 600 $1,200,000 $3,250 400 $1,300,000 Hospitalizations $10,000 150 $1,500,000 $10,000 300 $3,000,000 Total Spending 600 $3,180,000 400 $4,828,000 1000 Patients 25% Hospitalization Rate 75% Hospitalization Rate 104

APM #3: Multi-Physician Bundled Payment 105

Does the Hospital Have to Lose for Everyone Else to Win? CURRENT FFS APM $/Pt # Pts Total $ $/Pt # Pts Total $ Chg Physicians PCP $600 1000 $600,000 $840 1000 $840,000 +40% Nephrologist $50 1000 $50,000 $170 1000 $170,000 +240% P4P Total Physicians $700 1000 $700,000 $1,010 1000 $1,010,000 +55% Other Services $2,500 1000 $2,500,000 $2,500 1000 $2,500,000 0% Hospitalizations $10,000 600 $6,000,000 $10,000 450 $4,500,000-25% Total Spending 1000 $9,150,000 1000 $8,010,000-13% Win for PCP Win for Nephrologist Loss for Hospital Win for Patient Win for Payer 106

We Have to Understand the Hospital s Cost Structure CURRENT FFS APM $/Pt # Pts Total $ $/Pt # Pts Total $ Chg Physicians PCP $600 1000 $600,000 $840 1000 $840,000 +40% Nephrologist $50 1000 $50,000 $170 1000 $170,000 +240% P4P Total Physicians $700 1000 $700,000 $1,010 1000 $1,010,000 +55% Other Services $2,500 1000 $2,500,000 $2,500 1000 $2,500,000 0% Hospitalizations Fixed (60%) $6,000 $3,600,000 Variable (37%) $3,700 $2,220,000 Margin ( 3%) $300 $180,000 Total Hospital $10,000 600 $6,000,000 Total Spending 1000 $9,150,000 107

Now, If the Number of Admissions is Reduced CURRENT FFS APM $/Pt # Pts Total $ $/Pt # Pts Total $ Chg Physicians PCP $600 1000 $600,000 $840 1000 $840,000 +40% Nephrologist $50 1000 $50,000 $170 1000 $170,000 +240% P4P Total Physicians $700 1000 $700,000 $1,010 1000 $1,010,000 +55% Other Services $2,500 1000 $2,500,000 $2,500 1000 $2,500,000 0% Hospitalizations Fixed (60%) $6,000 $3,600,000 Variable (37%) $3,700 $2,220,000 Margin ( 3%) $300 $180,000 Total Hospital $10,000 600 $6,000,000 450 Total Spending 1000 $9,150,000 108

Continue to Support Fixed Costs (in the Short Run) CURRENT FFS APM $/Pt # Pts Total $ $/Pt # Pts Total $ Chg Physicians PCP $600 1000 $600,000 $840 1000 $840,000 +40% Nephrologist $50 1000 $50,000 $170 1000 $170,000 +240% P4P Total Physicians $700 1000 $700,000 $1,010 1000 $1,010,000 +55% Other Services $2,500 1000 $2,500,000 $2,500 1000 $2,500,000 0% Hospitalizations Fixed (60%) $6,000 $3,600,000 $3,600,000 0% Variable (37%) $3,700 $2,220,000 Margin ( 3%) $300 $180,000 Total Hospital $10,000 600 $6,000,000 450 Total Spending 1000 $9,150,000 109

Variable Costs Will Go Down In Proportion to Admissions CURRENT FFS APM $/Pt # Pts Total $ $/Pt # Pts Total $ Chg Physicians PCP $600 1000 $600,000 $840 1000 $840,000 +40% Nephrologist $50 1000 $50,000 $170 1000 $170,000 +240% P4P Total Physicians $700 1000 $700,000 $1,010 1000 $1,010,000 +55% Other Services $2,500 1000 $2,500,000 $2,500 1000 $2,500,000 0% Hospitalizations Fixed (60%) $6,000 $3,600,000 $3,600,000 0% Variable (37%) $3,700 $2,220,000 $3,700 $1,665,000-25% Margin ( 3%) $300 $180,000 Total Hospital $10,000 600 $6,000,000 450 Total Spending 1000 $9,150,000 110

And Even With a Higher Margin For the Hospital CURRENT FFS APM $/Pt # Pts Total $ $/Pt # Pts Total $ Chg Physicians PCP $600 1000 $600,000 $840 1000 $840,000 +40% Nephrologist $50 1000 $50,000 $170 1000 $170,000 +240% P4P Total Physicians $700 1000 $700,000 $1,010 1000 $1,010,000 +55% Other Services $2,500 1000 $2,500,000 $2,500 1000 $2,500,000 0% Hospitalizations Fixed (60%) $6,000 $3,600,000 $3,600,000 0% Variable (37%) $3,700 $2,220,000 $3,700 $1,665,000-25% Margin ( 3%) $300 $180,000 $198,000 +10% Total Hospital $10,000 600 $6,000,000 450 Total Spending 1000 $9,150,000 111

Spending on Hospitalizations Is Reduced (Just Not as Much) CURRENT FFS APM $/Pt # Pts Total $ $/Pt # Pts Total $ Chg Physicians PCP $600 1000 $600,000 $840 1000 $840,000 +40% Nephrologist $50 1000 $50,000 $170 1000 $170,000 +240% P4P Total Physicians $700 1000 $700,000 $1,010 1000 $1,010,000 +55% Other Services $2,500 1000 $2,500,000 $2,500 1000 $2,500,000 0% Hospitalizations Fixed (60%) $6,000 $3,600,000 $3,600,000 0% Variable (37%) $3,700 $2,220,000 $3,700 $1,665,000-25% Margin ( 3%) $300 $180,000 $198,000 +10% Total Hospital $10,000 600 $6,000,000 450 $5,463,000-9% Total Spending 1000 $9,150,000 112

And the Payer Still Saves Money CURRENT FFS APM $/Pt # Pts Total $ $/Pt # Pts Total $ Chg Physicians PCP $600 1000 $600,000 $840 1000 $840,000 +40% Nephrologist $50 1000 $50,000 $170 1000 $170,000 +240% P4P Total Physicians $700 1000 $700,000 $1,010 1000 $1,010,000 +55% Other Services $2,500 1000 $2,500,000 $2,500 1000 $2,500,000 0% Hospitalizations Fixed (60%) $6,000 $3,600,000 $3,600,000 0% Variable (37%) $3,700 $2,220,000 $3,700 $1,665,000-25% Margin ( 3%) $300 $180,000 $198,000 +10% Total Hospital $10,000 600 $6,000,000 450 $5,463,000-9% Total Spending 1000 $9,150,000 1000 $8,973,000-2% 113

Win-Win-Win-Win for Patients, Physicians, Hospital, and Payer CURRENT FFS APM $/Pt # Pts Total $ $/Pt # Pts Total $ Chg Physicians PCP $600 1000 $600,000 $840 1000 $840,000 +40% Nephrologist $50 1000 $50,000 $170 1000 $170,000 +240% P4P Total Physicians $700 1000 $700,000 $1,010 1000 $1,010,000 +55% Other Services $2,500 1000 $2,500,000 $2,500 1000 $2,500,000 0% Hospitalizations Fixed (60%) $6,000 $3,600,000 $3,600,000 0% Variable (37%) $3,700 $2,220,000 $3,700 $1,665,000-25% Margin ( 3%) $300 $180,000 $198,000 +10% Total Hospital $10,000 600 $6,000,000 450 $5,463,000-9% Total Spending 1000 $9,150,000 1000 $8,973,000-2% Win for PCP Win for Nephrologist Win for Patient Win for Hospital Win for Payer 114

APM #7: (Full) Condition-Based Payment 115

Simplified Example #2: Stage 4 CKD ESRD 200 Patients with Stage 4 CKD + 40 ESRD Patients Nephrologist paid only for periodic office visits with Stage 4 Patients (6 visits @ $100/visit) Nephrologist receives $280/month dialysis capitation for 7 months for ESRD pts 116

Simplified Example #2: Stage 4 CKD ESRD CURRENT FFS $/Pt # Pts Total $ Nephrologist Stage 4 Pt Visits $600 200 $120,000 200 Patients with Stage 4 CKD + 40 ESRD Patients Nephrologist paid only for periodic office visits with Stage 4 Patients (6 visits @ $100/visit) Nephrologist receives $280/month dialysis capitation for 7 months for ESRD pts 117

Simplified Example #2: Stage 4 CKD ESRD CURRENT FFS $/Pt # Pts Total $ Nephrologist Stage 4 Pt Visits $600 200 $120,000 ESRD Capitation $2,352 40 $94,080 200 Patients with Stage 4 CKD + 40 ESRD Patients Nephrologist paid only for periodic office visits with Stage 4 Patients (6 visits @ $100/visit) Nephrologist receives $280/month dialysis capitation for 7 months for ESRD pts 118

Simplified Example #2: Stage 4 CKD ESRD CURRENT FFS $/Pt # Pts Total $ Nephrologist Stage 4 Pt Visits $600 200 $120,000 ESRD Capitation $2,352 40 $94,080 Tot. Nephrologist 240 $214,080 Stage 4 PPPY $20,000 200 $4,000,000 200 Patients with Stage 4 CKD + 40 ESRD Patients Nephrologist paid only for periodic office visits with Stage 4 Patients (6 visits @ $100/visit) Nephrologist receives $280/month dialysis capitation for 7 months for ESRD pts Average other spending on Stage 4 Patients = $20,000/pt 119

Simplified Example #2: Stage 4 CKD ESRD CURRENT FFS $/Pt # Pts Total $ Nephrologist Stage 4 Pt Visits $600 200 $120,000 ESRD Capitation $2,352 40 $94,080 Tot. Nephrologist 240 $214,080 Stage 4 PPPY $20,000 200 $4,000,000 ESRD PPPY $55,000 40 $2,200,000 200 Patients with Stage 4 CKD + 40 ESRD Patients Nephrologist paid only for periodic office visits with Stage 4 Patients (6 visits @ $100/visit) Nephrologist receives $280/month dialysis capitation for 7 months for ESRD pts Average other spending on Stage 4 Patients = $20,000/pt Average other spending on ESRD Patients = $55,000/pt 120

Simplified Example #2: Stage 4 CKD ESRD CURRENT FFS $/Pt # Pts Total $ Nephrologist Stage 4 Pt Visits $600 200 $120,000 ESRD Capitation $2,352 40 $94,080 Tot. Nephrologist 240 $214,080 Stage 4 PPPY $20,000 200 $4,000,000 ESRD PPPY $55,000 40 $2,200,000 Total Spending 240 $6,414,080 200 Patients with Stage 4 CKD + 40 ESRD Patients Nephrologist paid only for periodic office visits with Stage 4 Patients (6 visits @ $100/visit) Nephrologist receives $280/month dialysis capitation for 7 months for ESRD pts Average other spending on Stage 4 Patients = $20,000/pt Average other spending on ESRD Patients = $55,000/pt 121

Simplified Example #2: Stage 4 CKD ESRD CURRENT FFS $/Pt # Pts Total $ Nephrologist Stage 4 Pt Visits $600 200 $120,000 ESRD Capitation $2,352 40 $94,080 Tot. Nephrologist 240 $214,080 Stage 4 PPPY $20,000 200 $4,000,000 ESRD PPPY $55,000 40 $2,200,000 Total Spending 240 $6,414,080 200 Patients with Stage 4 CKD + 40 ESRD Patients Nephrologist paid only for periodic office visits with Stage 4 Patients (6 visits @ $100/visit) Nephrologist receives $280/month dialysis capitation for 7 months for ESRD pts Average other spending on Stage 4 Patients = $20,000/pt Average other spending on ESRD Patients = $55,000/pt No payment for non-face-to-face services or case mgt by nephrologist 122

Most of the Money Isn t Going to the Nephrologist CURRENT FFS $/Pt # Pts Total $ Nephrologist Stage 4 Pt Visits $600 200 $120,000 ESRD Capitation $2,352 40 $94,080 Tot. Nephrologist 240 $214,080 Stage 4 PPPY $20,000 200 $4,000,000 ESRD PPPY $55,000 40 $2,200,000 Total Spending 240 $6,414,080 Physician Payments = 3.3% of Spending 123

What If the Nephrologist Could Slow Progression to ESRD? CURRENT FFS IMPROVED CARE TODAY $/Pt # Pts Total $ $/Pt # Pts Total $ Chg Nephrologist Stage 4 Pt Visits $600 200 $120,000 206 ESRD Capitation $2,352 40 $94,080 34 Tot. Nephrologist 240 $214,080 240 Stage 4 PPPY $20,000 200 $4,000,000 ESRD PPPY $55,000 40 $2,200,000 Total Spending 240 $6,414,080 124

Revenue for Stage 4 Patients Would Increase CURRENT FFS IMPROVED CARE TODAY $/Pt # Pts Total $ $/Pt # Pts Total $ Chg Nephrologist Stage 4 Pt Visits $600 200 $120,000 $600 206 $123,600 +3% ESRD Capitation $2,352 40 $94,080 34 Tot. Nephrologist 240 $214,080 240 Stage 4 PPPY $20,000 200 $4,000,000 ESRD PPPY $55,000 40 $2,200,000 Total Spending 240 $6,414,080 125

But Revenue for ESRD Patients Would Decrease CURRENT FFS IMPROVED CARE TODAY $/Pt # Pts Total $ $/Pt # Pts Total $ Chg Nephrologist Stage 4 Pt Visits $600 200 $120,000 $600 206 $123,600 +3% ESRD Capitation $2,352 40 $94,080 $2,352 34 $79,968-15% Tot. Nephrologist 240 $214,080 240 Stage 4 PPPY $20,000 200 $4,000,000 ESRD PPPY $55,000 40 $2,200,000 Total Spending 240 $6,414,080 126

the Nephrology Practice Would Lose Money Overall CURRENT FFS IMPROVED CARE TODAY $/Pt # Pts Total $ $/Pt # Pts Total $ Chg Nephrologist Stage 4 Pt Visits $600 200 $120,000 $600 206 $123,600 +3% ESRD Capitation $2,352 40 $94,080 $2,352 34 $79,968-15% Tot. Nephrologist 240 $214,080 240 $203,568-5% Stage 4 PPPY $20,000 200 $4,000,000 ESRD PPPY $55,000 40 $2,200,000 Total Spending 240 $6,414,080 127

Even Though Medicare Would Save Money on Total Cost of Care CURRENT FFS IMPROVED CARE TODAY $/Pt # Pts Total $ $/Pt # Pts Total $ Chg Nephrologist Stage 4 Pt Visits $600 200 $120,000 $600 206 $123,600 +3% ESRD Capitation $2,352 40 $94,080 $2,352 34 $79,968-15% Tot. Nephrologist 240 $214,080 240 $203,568-5% Stage 4 PPPY $20,000 200 $4,000,000 $20,000 206 $4,120,000 +3% ESRD PPPY $55,000 40 $2,200,000 $55,000 34 $1,870,000-15% Total Spending 240 $6,414,080 240 $6,193,568-3.4% 128

Win for Patient, Win for Payer, Loss for Physician CURRENT FFS IMPROVED CARE TODAY $/Pt # Pts Total $ $/Pt # Pts Total $ Chg Nephrologist Stage 4 Pt Visits $600 200 $120,000 $600 206 $123,600 +3% ESRD Capitation $2,352 40 $94,080 $2,352 34 $79,968-15% Tot. Nephrologist 240 $214,080 240 $203,568-5% Stage 4 PPPY $20,000 200 $4,000,000 $20,000 206 $4,120,000 +3% ESRD PPPY $55,000 40 $2,200,000 $55,000 34 $1,870,000-15% Total Spending 240 $6,414,080 240 $6,193,568-3.4% 129

APM Solution: Pay the Nephrologist to Support Improved Care CURRENT FFS APM $/Pt # Pts Total $ $/Pt # Pts Total $ Chg Nephrologist Stage 4 Pt Visits $600 200 $120,000 $600 206 $123,600 +3% ESRD Capitation $2,352 40 $94,080 $2,352 34 $79,968-15% Stage 4 PMPM $480 206 $98,880 P4P Tot. Nephrologist 240 $214,080 Stage 4 PPPY $20,000 200 $4,000,000 ESRD PPPY $55,000 40 $2,200,000 Total Spending 240 $6,414,080 130

APM Creates Significant Increase in Nephrologist Revenue CURRENT FFS APM $/Pt # Pts Total $ $/Pt # Pts Total $ Chg Nephrologist Stage 4 Pt Visits $600 200 $120,000 $600 206 $123,600 +3% ESRD Capitation $2,352 40 $94,080 $2,352 34 $79,968-15% Stage 4 PMPM $480 206 $98,880 P4P Tot. Nephrologist 240 $214,080 240 $302,448 +41% Stage 4 PPPY $20,000 200 $4,000,000 ESRD PPPY $55,000 40 $2,200,000 Total Spending 240 $6,414,080 131

And Medicare Still Saves Money CURRENT FFS APM $/Pt # Pts Total $ $/Pt # Pts Total $ Chg Nephrologist Stage 4 Pt Visits $600 200 $120,000 $600 206 $123,600 +3% ESRD Capitation $2,352 40 $94,080 $2,352 34 $79,968-15% Stage 4 PMPM $480 206 $98,880 P4P Tot. Nephrologist 240 $214,080 240 $302,448 +41% Stage 4 PPPY $20,000 200 $4,000,000 $20,000 206 $4,120,000 +3% ESRD PPPY $55,000 40 $2,200,000 $55,000 34 $1,870,000-15% Total Spending 240 $6,414,080 240 $6,292,448-2% 132

Win-Win-Win for Patients, Physician, and Payer CURRENT FFS APM $/Pt # Pts Total $ $/Pt # Pts Total $ Chg Nephrologist Stage 4 Pt Visits $600 200 $120,000 $600 206 $123,600 +3% ESRD Capitation $2,352 40 $94,080 $2,352 34 $79,968-15% Stage 4 PMPM $480 206 $98,880 P4P Tot. Nephrologist 240 $214,080 240 $302,448 +41% Stage 4 PPPY $20,000 200 $4,000,000 $20,000 206 $4,120,000 +3% ESRD PPPY $55,000 40 $2,200,000 $55,000 34 $1,870,000-15% Total Spending 240 $6,414,080 240 $6,292,448-2% Win for Patients Win for Nephrologist Win for Payer 133

Protections For Physicians Against Taking Inappropriate Risk Risk Stratification: The payment rates would vary based on objective characteristics of the patient and treatment that would be expected to result in the need for more services or increase the risk of complications. Outlier Payment or Individual Stop Loss Insurance: The payment would be increased if spending on an individual patient exceeds a pre-defined threshold. An alternative would be for the provider to purchase individual stop loss insurance (sometimes referred to as reinsurance) and include the cost of the insurance in the payment bundle. Risk Corridors or Aggregate Stop Loss Insurance: The payment would be increased if spending on all patients exceeds a pre-defined percentage above the payments. An alternative would be for the provider to purchase aggregate stop loss insurance and include the cost of the insurance in the payment bundle. Adjustment for External Price Changes: The payment would be adjusted for changes in the prices of drugs or services from other providers that are beyond the control of the provider accepting the payment. Excluded Services: Services the provider does not deliver, or order, or otherwise have the ability to influence would not be included as part of accountability measures in the payment system. 134

How Many Patients Do You Need to (Successfully) Manage Costs?

Companies With <1,000 Workers Take Total Healthcare Cost Risk Sources: Employer Health Benefits 2012 Annual Survey. The Kaiser Family Foundation and Health Research and Educational Trust; State-Level Trends in Employer- Sponsored Health Insurance, April 2013. State Health Access Data Assistance Center and Robert Wood Johnson Foundation Fewer employees than typical physician practice panel size 136

The Keys to Managing Risk How Do Small Employers Manage Self-Insurance Risk? They know who their employees are and can estimate spending They start with what they spent last year and try to control growth They have reserves to cover year-to-year variation They purchase stop-loss insurance to cover unusually expensive cases How Would Physician Practices Manage Risk? They need to know who their patients are in order to project spending They need to start with last year s payments and control growth They need some reserves to cover year-to-year variation They purchase stop-loss insurance to cover unusually expensive cases (if the payment system does not incorporate outlier payments) 138

How Does All This Fit Into ACOs? 139

Patients Have Many Healthcare Needs PATIENTS Heart Disease Diabetes CKD Pregnancy 140

Each Patient Should Choose & Use a Primary Care Practice PATIENTS Heart Disease Diabetes CKD Pregnancy Primary Care Practice 141

Which Takes Accountability for What PCPs Can Control/Influence MEDICARE, MEDICAID HEALTH PLAN PATIENTS Heart Disease Diabetes CKD Pregnancy Accountable Medical Home Primary Care Practice Accountability for: Avoidable ER Visits Avoidable Hospitalizations Unnecessary Tests Unnecessary Referrals 142

With a Medical Neighborhood to Consult With on Complex Cases MEDICARE, MEDICAID HEALTH PLAN PATIENTS Heart Disease Diabetes CKD Pregnancy Accountable Medical Home Primary Care Practice Endocrinology, Cardiology, Nephrology Accountable Medical Neighborhood Accountability for: Unnecessary Tests Unnecessary Referrals Co-Managed Outcomes 143

..And Specialists Accountable for the Conditions They Manage PATIENTS Heart Disease Diabetes CKD Pregnancy Accountable Medical Home MEDICARE, MEDICAID HEALTH PLAN Primary Care Practice Endocrinology, Cardiology, Physiatry Accountable Medical Neighborhood Accountability for: Unnecessary Tests Unnecessary Procedures Infections, Complications Cardiology Group Nephrology Group OB/GYN Group Heart Episode/ Condition Pmt Kidney Disease Condition Pmt Pregnancy Condition Pmt 144

That s Building the ACO from the Bottom Up PATIENTS Heart Disease Diabetes CKD Pregnancy Accountable Medical Home MEDICARE, MEDICAID HEALTH PLAN Primary Care Practice Endocrinology, Cardiology, Nephrology Accountable Medical Neighborhood Alternative Payment Models Cardiology Group Nephrology Group OB/GYN Group ACO Heart Episode/ Condition Pmt Kidney Disease Condition Pmt Pregnancy Condition Pmt 145

Most ACOs Today Aren t Truly Reinventing Care Fee-for-Service Payment MEDICARE, MEDICAID HEALTH PLAN Shared Savings Payment PATIENTS Heart Disease Expensive IT Systems ACO Nurse Care Managers Diabetes CKD Share of Shared Savings Payment?? Pregnancy Primary Care Endocrinology Cardiology Nephrology OB/GYN 146

Medicare ACOs Aren t Succeeding Due to Flaws in Payment Model 2013 Results for Medicare Shared Savings ACOs 46% of ACOs (102/220) increased Medicare spending Only one-fourth (52/220) received shared savings payments After making shared savings payments, Medicare spent more than it saved 2014 Results for Medicare Shared Savings ACOs 45% of ACOs (152/333) increased Medicare spending Only one-fourth (86/333) received shared savings payments After making shared savings payments, Medicare spent more than it saved 147

A True ACO Can Take a Global Payment And Make It Work PATIENTS Heart Disease Diabetes CKD Pregnancy Accountable Medical Home MEDICARE, MEDICAID HEALTH PLAN, EMPLOYER Primary Care Practice Endocrinology, Cardiology, Nephrology ACO Accountable Medical Neighborhood Risk-Adjusted Global Payment Cardiology Group Nephrology Group OB/GYN Group Heart Episode/ Condition Pmt Kidney Disease Condition Pmt Pregnancy Condition Pmt 148

You Don t Need a Big Health System to Manage Global Payment Independent PCPs & Specialists Managing Global Payments North Texas Specialty Physicians, a 600 physician multi-specialty IPA in Fort Worth, set up its own Medicare Advantage PPO plan and uses revenues from the health plan and capitation contracts to pay its PCPs 250% of Medicare rates and provides high quality, coordinated care to patients. www.ntsp.com Joint Contracting by MDs & Hospitals for Global Payments The Mount Auburn Cambridge IPA (MACIPA) and Mount Auburn Hospital jointly contract with three major Boston-area health plans for full-risk capitation. The IPA is independent of the hospital; they coordinate care with each other without any formal legal structure. www.macipa.com 149

This All Sounds Really Hard

This All Sounds Really Hard Can t We Just Keep Doing What We re Doing Today Until We Retire?

Choices for the Future VALUE-BASED PURCHASING P4P for hundreds of process measures Shared savings with no changes to FFS Transparency about procedure prices but not the total cost of care Shifting of insurance risk to small providers Government-mandated prices & budgets High deductibles and high cost-sharing Narrow networks & centers of excellence PHYSICIAN-LED REFORMS Adequate payment for high-value services by specialists as well as PCPs Condition-based payments to support good outcomes, not just low cost procedures Accountability for costs and quality that providers can control, not shifting full risk Accessible data on the utilization and prices for all services in every community Support for community-based, multi-stakeholder solutions to create high-value delivery & payment BAD OUTCOMES Small providers forced out of business High prices from consolidated providers Shifts in care to higher-cost settings Overuse of expensive procedures Loss of innovation Large increases in insurance premiums Patients unable to afford necessary care A SUSTAINABLE FUTURE Collaboration to develop innovative solutions for higher value care Competition to achieve the most effective implementation of solutions Savings by reducing avoidable services, not denying access to needed care Rewards for physicians based on outcomes, not their size or structure Patients able to access affordable care that enables them to be healthy and productive 153

Learn More About Win-Win-Win Payment and Delivery Reform www.paymentreform.org 154

For More Information: Harold D. Miller President and CEO Center for Healthcare Quality and Payment Reform Miller.Harold@CHQPR.org (412) 803-3650 www.chqpr.org www.paymentreform.org