Joseph W. Thompson, MD, MPH Arkansas Surgeon General Director, Arkansas Center for Health Improvement

Joseph W. Thompson, MD, MPH Arkansas Surgeon General Director, Arkansas Center for Health Improvement

Arkansas Health System Improvement Workforce Payment System Health Information Technology Insurance Coverage

Coordinated Multi-payer Leadership Value of working together recognized by payers with close involvement from other stakeholders Consistent incentives and standardized reporting rules and tools Change in practice patterns as program applies to many patients Enough scale to justify investments in new infrastructure and operational models Motivate patients to play larger role in their health and health care 3

Included in Payment Improvement: Medical Homes, Episodes, and Health Homes Prevention, screening, chronic care Patient populations (examples) Healthy, at-risk Chronic, e.g., - CHF - Diabetes Care/payment models Medical homes - Care coordination - Overall health mgmt - Rewards quality and cost saving Acute + post-acute care Supportive care Acute medical, e.g. - CHF - Pneumonia Acute procedural, e.g. - Hip replacement Developmental disability Long-term care Behavioral health (mental illness/ substance abuse) Episodes - Rewards high-quality, effective care delivery for a specific episode Health homes + episodes - Health home: care coordination - Episodes: payment for supportive care service

Episode Arkansas Payment Improvement Initiative s Integrated Model Episode Episode Episode 5

Wave 2c (not started) Wave 2 Wave 2b Wave 2a Wave 1b Wave 1 Wave 1a Episodes Update PRELIMINARY WORKING DRAFT; SUBJECT TO CHANGE For Medicaid, work has occurred on 15 Episodes, with 9 having gone live Episode Legislative Review Reporting Period Start Date 1 Upper Respiratory Infection Spring 2012 July 2012 2 Attention Deficit Hyperactivity Disorder (ADHD) Spring 2012 July 2012 3 Perinatal Spring 2012 July 2012 4 Congestive Heart Failure November 2012 October 2012 5 Total Joint Replacement (Hip & Knee) November 2012 October 2012 6 Colonoscopy May 2013 July 2013 7 Cholecystectomy (Gallbladder Removal) May 2013 July 2013 8 Tonsillectomy May 2013 July 2013 9 Oppositional Defiance Disorder (ODD) July 2013 October 2013 10 Coronary Artery Bypass Grafting (CABG) July 2013 January 2014 11 Percutaneous Coronary Intervention (PCI) July 2013 Q2 CY 2014 12 Asthma July 2013 Q2 CY 2014 13 Chronic Obstructive Pulmonary Disease (COPD) July 2013 Q2 CY 2014 14 ADHD/ODD Comorbidity Q2 CY 2014 2H CY 2014 15 Neonatal Q2 CY 2014 2H CY 2014 Undecided Undecided Undecided Undecided 1 Participation includes development and rollout of episode In Development Live Seeking clinical input Pending legislative review Multipayer Participation 1 6

How episodes work for patients and providers (1/2) Patients and providers deliver care as today (performance period) 1 2 3 Patients seek care and select providers as they do today Providers submit claims as they do today Payers reimburse for all services as they do today 7

How episodes work for patients and providers (2/2) Calculate incentive payments based on outcomes after close of 12 month performance period 4 5 6 Review claims from performance period to identify a Principal Accountable Provider (PAP) for each episode Payers calculate average cost per episode for each PAP 1 Compare average costs to predetermined commendable and acceptable levels 2 Based on results, providers will: Share savings: avg. costs below commendable levels /quality targets met Pay part of excess cost: avg. costs above acceptable level See no change in pay: avg. costs between commendable and acceptable levels 1 Outliers removed and adjusted for risk and hospital per diems 2 Appropriate cost and quality metrics based on latest and best clinical evidence, nationally recognized clinical guidelines and local considerations 8

Case for Change Total average cost per episode post-risk adjustment by Principal Accountable Provider, 2008-2010 Simple upper respiratory infection 1 $120 100 80 60 40 20 0 Total episodes Median cost 10% percentile 90% percentile ~80,000 $57 $44 $76 Pregnancy 2 $5,000 4,000 3,000 2,500 500 0 Total episodes Median cost 10% percentile 90% percentile Preliminary working draft; subject to change ~30,000 $3,608 $3,208 $4,071 ADHD 3 Total hip replacement $12,000 10,000 8,000 Total episodes Median cost 10% percentile 90% percentile ~20,000 $1,641 $1,073 $7,046 $20,000 15,000 Total episodes Median cost 10% percentile 90% percentile 140 $7,953 $5,867 $12,814 6,000 10,000 4,000 2,000 5,000 0 0 1 Episode costs for children less than 10 risk-adjusted by a historically-derived multiplier. 2 Individual episode costs risk-adjusted for clinical drivers of severity based upon historically-derived multipliers. 3 Eligible defined as ADHD without comorbidities between ages 6 and 17. SOURCE: Arkansas Medicaid claims data; Team analysis

How the Episode Payment Model Works Historic distribution of provider average costs for an episode are assessed Year 1 results Year 1 results High Average cost per episode for each provider Low Individual providers, in order from highest to lowest average cost 10

How the Episode Payment Model Works Thresholds are selected to promote highquality and cost-effective care Year 1 results Year 1 results High Average cost per episode for each provider Acceptable Commendable Gain sharing limit Low Individual providers, in order from highest to lowest average cost 11

How the Episode Payment Model Works Thresholds remain the same the next year with expectation that cost effectiveness will improve Year 2 results High Year 2 results Year 1 results Average cost per episode for each provider Acceptable Commendable Gain sharing limit Low Individual providers, in order from highest to lowest average cost 12

How the Episode Payment Model Works Shared Savings Year 2 results High Average cost per episode for each provider Acceptable Commendable Gain sharing limit Low Individual providers, in order from highest to lowest average cost 13

How the Episode Payment Model Works Savings/Cost Neutral Year 2 results High Average cost per episode for each provider Acceptable Commendable Gain sharing limit Low Individual providers, in order from highest to lowest average cost 14

How the Episode Payment Model Works Shared Costs Year 1 results High Average cost per episode for each provider Acceptable Commendable Gain sharing limit Low Individual providers, in order from highest to lowest average cost 15

How the Episode Payment Model Works Quality of care protected by limits on gain sharing and required quality metrics Year 1 results High Average cost per episode for each provider Acceptable Commendable Gain sharing limit Low Individual providers, in order from highest to lowest average cost 16

Included in Payment Improvement: Medical Homes, Episodes, and Health Homes Prevention, screening, chronic care Patient populations (examples) Healthy, at-risk Chronic, e.g., - CHF - Diabetes Care/payment models Medical homes - Care coordination - Overall health mgmt - Rewards quality and cost saving Acute + post-acute care Supportive care Acute medical, e.g. - CHF - Pneumonia Acute procedural, e.g. - Hip replacement Developmental disability Long-term care Behavioral health (mental illness/ substance abuse) Episodes - Rewards high-quality, effective care delivery for a specific episode Health homes + episodes - Health home: care coordination - Episodes: payment for supportive care service

Medical Home: Rollout Timeline PCMH coverage strategy over next several years Wave 3 Wave 1 CPCI Wave 2 Open to all (primary care early adopters enroll 10/1/13-12/15/13) Expansion to remaining primary care (family practice, etc.) Start of wave: October 2012 Jan 2014 Enroll throughout 2014

Wave 1: Comprehensive Primary Care Initiative (CPCI) 69 primary care practices FFS + enhanced payments Improving patient experience Practices responsible for ALL patients Quality, cost, and transformation milestones evaluated PMPM began October 12 Medicare $8 40; risk-adjusted Medicaid +$3 kids; +$7 adults Private ~$5 Must meet targets Quality, performance, transformation Shared savings model yrs 2 4 19

Wave 2: Patient Centered Medical Home (PCMH) Enrollment 637 primary care physicians Covering nearly 243,000 Medicaid beneficiaries (including 40,000 covered in Wave 1: CPC) Together PCMH and CPC cover about 72% of all eligible Medicaid beneficiaries 20

With PCMH, existing fee-for-service reimbursement remains the same Patients and providers deliver care as today Patients seek care and select providers as they do today Providers submit claims as they do today Payers reimburse for all services as they do today

But PCPs can also receive shared savings payments For a shared savings entity (PCMH or group of voluntarily affiliated PCMHs) A B C Providers must perform on quality metrics Must meet ¾ of targets for quality metrics And providers must Remain in good standing for practice support payments Payers calculate average yearly cost per member for each shared savings entity Average costs are compared to Pre-set medium and high cost levels Benchmark costs, based on historical costs projected forward Results PCMH can earn shared savings payment in one of two ways (receive greater of the two): Beating its own benchmark cost Beating a system-wide medium cost threshold If the PCMH is not eligible for either payment, then the provider sees no change in reimbursement.