transforming maternity care how payment reform can
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TRANSFORMING MATERNITY CARE
How Payment Reform Can
Lower Costs and Improve Quality
Harold D. Miller Executive Director
Center for Healthcare Quality and Payment Reform
2 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
What We Need:
A Way to Reduce Costs
Without Rationing
It Can’t Be Done from Washington...
...It Has to Happen at the Local Level,
Where Health Care is Delivered.
3 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Big Opportunity for Commercial
Payers & Medicaid is Maternity
$0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000
Osteoarthritis and other non-traumatic joint …
Back problems
Infectious diseases
Mental disorders
Pneumonia
Other CNS disorders
COPD, asthma
Kidney Disease
Other endocrine, nutritional & immune …
Hypertension
Gallbladder, pancreatic, and liver disease
Diabetes mellitus
Other circulatory conditions arteries, veins, …
Trauma-related disorders
Cancer
Heart conditions
Normal birth/live born
U.S. Expenditures on Hospital Inpatient Stays, Age 0-65, 2006 (Millions)
Medical Expenditure Panel Survey, 2006
4 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Can We Reduce Maternity Care
Costs Without Rationing?
Pregnant
Woman
5 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Reducing Costs Without Rationing:
Better Pregnancy Management
Complicated
Pregnancy
Uncomplicated
Pregnancy
Pregnant
Woman
6 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Reducing Costs Without Rationing:
Better Choices About Delivery
Complicated
Pregnancy
Uncomplicated
Pregnancy
Pregnant
Woman
Term Vaginal
Delivery
Pre-Term,
C-Section
7 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Reducing Costs Without Rationing:
Better Management of Delivery
Complicated
Pregnancy
Uncomplicated
Pregnancy
Pregnant
Woman
Term Vaginal
Delivery
Pre-Term,
C-Section
Efficient Successful
Delivery
Maternal Complications, Readmissions
High-Cost Successful
Delivery
Infants with Low Birth Weight, Injuries, Etc.
8 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Better for Moms and Babies
As Well as Payers Better Outcomes/Lower Cost
Complicated
Pregnancy
Uncomplicated
Pregnancy
Pregnant
Woman
Term Vaginal
Delivery
Pre-Term,
C-Section
Efficient Successful
Delivery
Maternal Complications, Readmissions
High-Cost Successful
Delivery
Infants with Low Birth Weight, Injuries, Etc.
9 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Current Payment Systems
Reward Bad Outcomes
$
Complicated
Pregnancy
Uncomplicated
Pregnancy
Pregnant
Woman
Term Vaginal
Delivery
Pre-Term,
C-Section
Efficient Successful
Delivery
Maternal Complications, Readmissions
High-Cost Successful
Delivery
Infants with Low Birth Weight, Injuries, Etc.
10 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
How Payment Systems Impede
Better Maternity Care
Goals for
High-Value Maternity Care
Barriers Created by
Current Payment Systems
Achieve Good Birth Outcomes
•No financial penalty for poor outcomes, and no reward for good outcomes;
•More/higher payments to physicians and hospitals when adverse events occur;
•Same payment to physicians regardless of quality of prenatal care provided
11 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
How Payment Systems Impede
Better Maternity Care
Goals for
High-Value Maternity Care
Barriers Created by
Current Payment Systems
Achieve Good Birth Outcomes
•No financial penalty for poor outcomes, and no reward for good outcomes;
•More/higher payments to physicians and hospitals when adverse events occur;
•Same payment to physicians regardless of quality of prenatal care provided
Avoid Use of Expensive/
Undesirable Procedures
•Higher payment/higher margins for hospitals for C-sections
12 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
How Payment Systems Impede
Better Maternity Care
Goals for
High-Value Maternity Care
Barriers Created by
Current Payment Systems
Achieve Good Birth Outcomes
•No financial penalty for poor outcomes, and no reward for good outcomes;
•More/higher payments to physicians and hospitals when adverse events occur;
•Same payment to physicians regardless of quality of prenatal care provided
Avoid Use of Expensive/
Undesirable Procedures
•Higher payment/higher margins for hospitals for C-sections
Reduce Costs of Delivery
and Post-Partum Care
•No reward for physicians to help hospitals reduce costs or to use lower-cost settings such as birth centers;
•No incentive for mothers to choose lower-cost/higher-value providers
13 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Improving Payment for
Maternity Care: Part 1
Goals for
High-Value Maternity Care
Barriers Created by
Current Payment Systems
Achieve Good Birth Outcomes
•No financial penalty for poor outcomes, and no reward for good outcomes;
•More/higher payments to physicians and hospitals when adverse events occur;
•Same payment to physicians regardless of quality of prenatal care provided
Avoid Use of Expensive/
Undesirable Procedures
•Higher payment/higher margins for hospitals for C-sections
Reduce Costs of Delivery
and Post-Partum Care
•No reward for physicians to help hospitals reduce costs or to use lower-cost settings such as birth centers;
•No incentive for mothers to choose lower-cost/higher-value providers
14 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
3 Payment Reform Approaches to
Reduce Undesirable Outcomes
1. Don’t pay providers (hospitals, physicians, midwives, etc.) for
costs associated with undesirable outcomes
2. Pay providers bonuses/penalties based on rate of desirable
or undesirable outcomes
3. Pay for care with a limited warranty from the provider
(i.e., provider does not charge more for undesirable
outcomes)
15 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
#1: The “Never Event” Approach:
Don’t Pay at All
1. Don’t pay providers (hospitals, physicians, midwives, etc.) for
costs associated with undesirable outcomes
2. Pay providers bonuses/penalties based on rate of desirable
or undesirable outcomes
3. Pay for care with a limited warranty from the provider
(i.e., provider does not charge more for undesirable
outcomes)
16 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Non-Payment Only Works Well
For True “Never Events”
• If it’s clear that the event should never happen and can be prevented, then non-payment makes sense
• But if the event is merely undesirable and particularly if it is unavoidable or even necessary in some cases, then non-payment penalizes the providers involved
• Payers need to define and enforce rules as to which events are eligible and which are not – e.g., medically indicated vs. truly elective early term deliveries
• Hospitals/physicians may refuse to accept patients in the first place if they feel the patients are at high risk of the event that won’t be paid for but still must be treated
17 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
#2: Creating Incentives for
Improving Birth Outcomes
1. Don’t pay providers (hospitals, physicians, midwives, etc.) for
costs associated with undesirable outcomes
2. Pay providers bonuses/penalties based on rate of desirable
or undesirable outcomes
3. Pay for care with a limited warranty from the provider
(i.e., provider does not charge more for undesirable
outcomes)
18 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
The Problems With
P4P Bonuses/Penalties • The P4P penalty has to be very large if the underlying
incentive in the DRG/FFS payment system is large
• The P4P penalty has to be even larger if changing outcomes means the provider will need to incur extra costs for improvement programs in addition to reducing its revenues
• The larger the P4P penalty, the closer it comes to looking like non-payment for outcomes that are undesirable but not necessarily preventable, which may lead providers to avoid taking higher-risk patients
• The payer has to define what level of performance will be rewarded or penalized
• There is no incentive to do better than the performance standard which is set in the P4P program
19 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Example of P4P vs.
FFS Incentives for NICU Use
• Example: A pay-for-performance (P4P) program that reduces
payments to the hospital for labor & delivery by 10% if its rate
of NICU use is higher than average
• Scenario: Hospital has 12% NICU use rate;
the average for all hospitals is 8%
Births
Delivery
Payment
Delivery
Revenues
NICU
Rate
NICU Revenue
@ $20K/stay
Total
Revenues Change
500 $4000 $2,000,000 12% $1,200,000 $3,200,000
20 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
P4P Hurts the Hospital If It
Doesn’t Reduce NICU Use
• Example: A pay-for-performance (P4P) program that reduces
payments to the hospital for labor & delivery by 10% if its rate
of NICU use is higher than average
• Scenario: Hospital has 12% NICU use rate;
the average for all hospitals is 8%
Births
Delivery
Payment
Delivery
Revenues
NICU
Rate
NICU Revenue
@ $20K/stay
Total
Revenues Change
500 $4000 $2,000,000 12% $1,200,000 $3,200,000
500 $3600
(-10%)
$1,800,000 12% $1,200,000 $3,000,000 ($200K)
21 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
But the Hospital May Be Hurt
More If It Does Reduce NICU Use
• Example: A pay-for-performance (P4P) program that reduces
payments to the hospital for labor & delivery by 10% if its rate
of NICU use is higher than average
• Scenario: Hospital has 12% NICU use rate;
the average for all hospitals is 8%
Births
Delivery
Payment
Delivery
Revenues
NICU
Rate
NICU Revenue
@ $20K/stay
Total
Revenues Change
500 $4000 $2,000,000 12% $1,200,000 $3,200,000
500 $3600
(-10%)
$1,800,000 12% $1,200,000 $3,000,000 ($200K)
500 $4000 $2,000,000 8% $800,000 $2,800,000 ($400K)
The P4P penalty actually costs the hospital less than reducing NICU use, particularly if additional costs must be incurred for better maternity care and delivery
22 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
#3: Paying for Care With a
Warranty
1. Don’t pay providers (hospitals, physicians, midwives, etc.) for
costs associated with undesirable outcomes
2. Pay providers bonuses/penalties based on rate of desirable
or undesirable outcomes
3. Pay for care with a limited warranty from the provider
(i.e., provider does not charge more for undesirable
outcomes)
23 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Yes, a Health Care Provider
Can Offer a Warranty
Geisinger Health System ProvenCareSM
– A single payment for an ENTIRE 90 day period including:
• ALL related pre-admission care
• ALL inpatient physician and hospital services
• ALL related post-acute care
• ALL care for any related complications or readmissions
– Types of conditions/treatments currently offered: • Cardiac Bypass Surgery
• Cardiac Stents
• Cataract Surgery
• Total Hip Replacement
• Bariatric Surgery
• Perinatal Care
• Low Back Pain
• Treatment of Chronic Kidney Disease
24 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Major Improvements in
Outcomes, and Quickly
25 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
• 103 discrete evidence-based elements of care are
incorporated, measured and tracked for compliance
• Redesign, from the ground up, all aspects of provider
workflow
– Drive fundamental efficiency improvements
– Increase patient safety and process reliability
– Reduce/eliminate documentation redundancy
– Streamline patient education and cut costs
• Seek observable reductions in C-section rates and
premature births
• Enhance management of comorbid conditions
• Improve fetal/child health and wellness
Geisinger Perinatal ProvenCare
26 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Results of Geisinger
Perinatal ProvenCare
• 26% Reduction in Cesarean Sections
• 68% Reduction in Birth Trauma
• 23% Reduction in NICU Use
Berry SA, et al, “ProvenCare Perinatal: A Model for Delivering Evidence/Guideline-Based Care for Perinatal Populations,”
Joint Commission Journal on Quality and Safety, May 2011
27 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Individual Physicians Can Offer
Warranties, Not Just Big Systems
• In 1987, an orthopedic surgeon in Lansing, MI and the local hospital, Ingham Medical Center, offered: – a fixed total price for surgical services for shoulder and knee problems – a warranty for any subsequent services needed for a two-year period,
including repeat visits, imaging, rehospitalization and additional surgery
• Results: – Surgeon received over 80% more in payment than otherwise – Hospital received 13% more than otherwise, despite fewer
rehospitalizations – Health insurer paid 40% less than otherwise
• Method: – Reducing unnecessary auxiliary services such as radiography and
physical therapy – Reducing the length of stay in the hospital – Reducing complications and readmissions
28 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
A Warranty is Not an
Outcome Guarantee
• Offering a warranty on care does not imply that you
are guaranteeing a cure or a good outcome
• It merely means that you are agreeing to correct
avoidable problems at no (additional) charge
• Most warranties are “limited warranties,” in the sense
that they agree to pay to correct some problems, but
not all
29 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Prices for Warranted Care
Will Likely Be Higher
30 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Prices for Warranted Care
Will Likely Be Higher
• Q: “Why should we pay more to get good-quality care??”
• A: In most industries, warrantied products cost more, but
they’re desirable because TOTAL spending on the product
(repairs & replacement) is lower than without the warranty
31 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Prices for Warranted Care May
Be Higher, But Spending Lower
• Q: “Why should we pay more to get good-quality care??”
• A: In most industries, warrantied products cost more, but
they’re desirable because TOTAL spending on the product
(repairs & replacement) is lower than without the warranty
• In healthcare, a procedure with a warranty would need to have
a higher payment rate than the equivalent non-warrantied
procedure, but the higher price would be offset by fewer
costs of complications, outlier payments, and readmissions
32 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Example: $5,000 Cost of Delivery
Cost of
Delivery
$5,000
33 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Actual Average Payment is
Higher Due to Complications
Cost of
Delivery
Cost and Rate of
Complications
Average
Total Cost
$5,000 $10,000 8% $5,800
34 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
How Much Should be Charged
for Delivery With a Warranty?
Cost of
Delivery
Cost and Rate of
Complications
Average
Total Cost
$5,000 $10,000 8% $5,800
35 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
How Much Should be Charged
for Delivery With a Warranty?
Cost of
Delivery
Cost and Rate of
Complications
Average
Total Cost
Price
Charged
$5,000 $10,000 8% $5,800 ?
36 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Starting Point for Warranty Price:
Actual Current Average Payment
Cost of
Delivery
Cost and Rate of
Complications
Average
Total Cost
Price
Charged
Change in
Net
Revenue
$5,000 $10,000 8% $5,800 $5,800 $0
37 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Limited Warranty Gives Financial
Incentive to Improve Quality
Cost of
Delivery
Cost and Rate of
Complications
Average
Total Cost
Price
Charged
Change in
Net
Revenue
$5,000 $10,000 8% $5,800 $5,800 $0
$5,000 $10,000 6% $5,600 $5,800 $200
Reducing
Adverse
Events…
…Improves
The Bottom
Line
...Reduces
Costs...
38 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Higher-Quality Provider Can
Charge Less, Attract More Patients
Cost of
Delivery
Cost and Rate of
Complications
Average
Total Cost
Price
Charged
Change in
Net
Revenue
$5,000 $10,000 8% $5,800 $5,800 $0
$5,000 $10,000 6% $5,600 $5,800 $200
$5,000 $10,000 6% $5,600 $5,600 $0
Enables
Lower
Prices
39 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
A Virtuous Cycle of Quality
Improvement & Cost Reduction
Cost of
Delivery
Cost and Rate of
Complications
Average
Total Cost
Price
Charged
Change in
Net
Revenue
$5,000 $10,000 8% $5,800 $5,800 $0
$5,000 $10,000 6% $5,600 $5,800 $200
$5,000 $10,000 6% $5,600 $5,600 $0
$5,000 $10,000 4% $5,400 $5,600 $200
Reducing
Adverse
Events…
…Improves
The Bottom
Line
...Reduces
Costs...
40 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Win-Win-Win for
Patients, Payers, and Providers
Cost of
Delivery
Cost and Rate of
Complications
Average
Total Cost
Price
Charged
Change in
Net
Revenue
$5,000 $10,000 8% $5,800 $5,800 $0
$5,000 $10,000 6% $5,600 $5,800 $200
$5,000 $10,000 6% $5,600 $5,600 $0
$5,000 $10,000 4% $5,400 $5,600 $200
$5,000 $10,000 4% $5,400 $5,500 $100
$5,000 $10,000 2% $5,200 $5,500 $300
Quality is Better... ...Spending is Lower...
...Providers More Profitable
41 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
In Contrast, Non-Payment or
Penalties Create Financial Losses
Cost of
Delivery
Cost and Rate of
Complications
Average
Total Cost
Amount
Paid
Change in
Net
Revenue
$5,000 $10,000 8% $5,800 $5,000 -$800
$5,000 $10,000 6% $5,600 $5,000 -$600
$5,000 $10,000 4% $5,400 $5,000 -$ 400
$5,000 $10,000 0% $5,000 $5,000 $ 0
Non-Payment
for Infections
Causes Losses While
Improving
42 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Different Warranty Prices for
Cases With Different Risks
Cost of
Procedure
Cost and Rate of
Complications
Average
Total Cost
Price
Charged
Change in
Net
Revenue
HIGH RISK CASES
$5,000 $10,000 10% $6,000 $0
$5,000 $10,000 8% $5,800 $5,900 $100
Payer Savings: $ 100
LOW RISK CASES
$5,000 $10,000 4% $5,400 $0
$5,000 $10,000 2% $5,200 $5,300 $100
Payer Savings: $ 100
43 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Many Potential Opportunities for
P4P/Warranties in Maternity Care
• Maternal injuries, infections, complications
• Birth injuries, infections, complications
• Neonatal problems (e.g., respiratory distress
syndrome) after induced birth
• Readmissions (both maternal and infant)
44 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
To Make It Work:
Shared, Trusted Data for Pricing
• Hospital/Health System needs to know its current rates of poor outcomes and how many are preventable to know whether the warranty price will cover its costs of delivering care
• Purchaser/Payer needs to know its current rates of poor outcomes to know whether the warranty price is a better deal than they have today
• Both sets of data have to match in order for both providers and payers to agree!
45 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Improving Payment for
Maternity Care: Part 2
Goals for
High-Value Maternity Care
Barriers Created by
Current Payment Systems
Achieve Good Birth Outcomes
•No financial penalty for poor outcomes, and no reward for good outcomes;
•More/higher payments to physicians and hospitals when adverse events occur;
•Same payment to physicians regardless of quality of prenatal care provided
Avoid Use of Expensive/
Undesirable Procedures
•Higher payment/higher margins for hospitals for C-sections
Reduce Costs of Delivery
and Post-Partum Care
•No reward for physicians to help hospitals reduce costs or to use lower-cost settings such as birth centers;
•No incentive for mothers to choose lower-cost/higher-value providers
46 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Normal Pregnancy,
Term Delivery, No Complications
Normal
Pregnancy
Term Delivery
w/ No CCs
Vaginal Delivery
in Hospital
C-Section in Hospital
47 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Today: Payment Based on Type
of Delivery, Regardless of Need
Normal
Pregnancy
Term Delivery
w/ No CCs
Vaginal Delivery
in Hospital
C-Section in Hospital
HEALTH
PLAN
Lower Payment
Higher Payment
48 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Alternative: A Payment Based on
Condition, Not Procedure
Normal
Pregnancy
Term Delivery
w/ No CCs
Vaginal Delivery
in Hospital
C-Section in Hospital
Condition-Specific Payment
HEALTH
PLAN
Single
Payment
49 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Example: Typical Payments
for Delivery Today TODAY
$/Patient # Pts Total $
Physician Svcs
Vaginal Deliv. $1,900 134 $254,600
C-Section $2,100 66 $138,600
Subtotal 200 $393,200
Hospital Pmt
Vaginal Deliv. $3,000 134 $402,000
C-Section $6,000 66 $396,000
Subtotal 200 $798,000
Total Pmt (Cost) $1,191,200
Labor & Delivery for Uncomplicated
Pregnancy • 33% C-Section rate
50 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Physician Loses $ (and Time) By
Reducing C-Sections TODAY TOMORROW
$/Patient # Pts Total $ $/Pt # Pts Total $ Chg
Physician Svcs
Vaginal Deliv. $1,900 134 $254,600 $1,900 160 $304,000
C-Section $2,100 66 $138,600 $2,100 40 $84,000
Subtotal 200 $393,200 200 $388,000 -1.3%
Hospital Pmt
Vaginal Deliv. $3,000 134 $402,000 $3,000 160 $480,000
C-Section $6,000 66 $396,000 $6,000 40 $240,000
Subtotal 200 $798,000 200 $720,000 -10%
Total Pmt (Cost) $1,191,200 $1,108,000 -6%
51 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Pay Physician More for
Vaginal Deliveries, Save Money TODAY TOMORROW
$/Patient # Pts Total $ $/Pt # Pts Total $ Chg
Physician Svcs
Vaginal Deliv. $1,900 134 $254,600 $2,200 160 $352,000
C-Section $2,100 66 $138,600 $2,100 40 $84,000
Subtotal 200 $393,200 200 $436,000 +11%
Hospital Pmt
Vaginal Deliv. $3,000 134 $402,000 $3,000 160 $480,000
C-Section $6,000 66 $396,000 $6,000 40 $240,000
Subtotal $798,000 200 $720,000 -10%
Total Pmt (Cost) $1,191,200 $1,156,000 -3%
52 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
What About the Hospital?
TODAY TOMORROW
$/Patient # Pts Total $ $/Pt # Pts Total $ Chg
Physician Svcs
Vaginal Deliv. $1,900 134 $254,600 $2,200 160 $352,000
C-Section $2,100 66 $138,600 $2,100 40 $84,000
Subtotal 200 $393,200 200 $436,000 +11%
Hospital Pmt
Vaginal Deliv. $3,000 134 $402,000 $3,000 160 $480,000
C-Section $6,000 66 $396,000 $6,000 40 $240,000
Subtotal $798,000 200 $720,000 -10%
Total Pmt (Cost) $1,191,200 $1,156,000 -3%
53 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Hospital Costs Are Not
Proportional to Utilization
$800$820$840$860$880$900$920$940$960$980$1,000
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0
$0
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#Patients
Cost & Revenue Changes With Fewer Patients
.
Costs
20% reduction in volume
7% reduction
in cost
54 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Reductions in Utilization Reduce
Revenues More Than Costs
$800$820$840$860$880$900$920$940$960$980$1,000
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$0
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#Patients
Cost & Revenue Changes With Fewer Patients
Revenues
Costs
20% reduction in volume
7% reduction
in cost
20% reduction
in revenue
55 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Causing Negative Margins
for Hospitals
$800$820$840$860$880$900$920$940$960$980$1,000
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$0
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#Patients
Cost & Revenue Changes With Fewer Patients
Revenues
Costs
Payers Will Be
Underpaying For
Care If
Adverse Events,
Readmissions, Etc.
Are Reduced
56 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
So Prices Need to Be Re-Set
Under Payment Reform
$800$820$840$860$880$900$920$940$960$980$1,000
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#Patients
Cost & Revenue Changes With Fewer Patients
Revenues
Costs
Payers Can
Still Save $
Without Causing
Negative Margins
for Hospital
57 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Example: Typical Payments
for Delivery Today
Type of
Delivery Number Payment
Hospital
Revenue Avg Cost Total Costs
Margin
($)
Margin
(%)
Vaginal 67% 1,333 $3,000 $4,000,000
C-Section 33% 667 $6,000 $4,000,000
Total/Average 100% 2,000 $4,000 $8,000,000 $3,810 $7,619,048 $380,952 5%
Type of
Delivery Number Payment
Hospital
Revenue Avg Cost Total Costs
Margin
($)
Margin
(%)
Vaginal 80% 1,600 $3,000 $4,800,000
C-Section 20% 400 $6,000 $2,400,000
Total/Average 100% 2,000 $3,600 $7,200,000 $3,619 $7,238,095 -$38,095 -1%
Change -10.0% -10.0% -5.0% -5.0% -110.0%
TODAY
REDUCTION IN C-SECTION RATE
58 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Starting Point: Hospital is
Covering Its Costs + Margin
Type of
Delivery Number Payment
Hospital
Revenue Avg Cost Total Costs
Margin
($)
Margin
(%)
Vaginal 67% 1,333 $3,000 $4,000,000
C-Section 33% 667 $6,000 $4,000,000
Total/Average 100% 2,000 $4,000 $8,000,000 $3,810 $7,619,048 $380,952 5%
Type of
Delivery Number Payment
Hospital
Revenue Avg Cost Total Costs
Margin
($)
Margin
(%)
Vaginal 80% 1,600 $3,000 $4,800,000
C-Section 20% 400 $6,000 $2,400,000
Total/Average 100% 2,000 $3,600 $7,200,000 $3,619 $7,238,095 -$38,095 -1%
Change -10.0% -10.0% -5.0% -5.0% -110.0%
TODAY
REDUCTION IN C-SECTION RATE
59 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Financial Implications of
Changing Type of Delivery
Type of
Delivery Number Payment
Hospital
Revenue Avg Cost Total Costs
Margin
($)
Margin
(%)
Vaginal 67% 1,333 $3,000 $4,000,000
C-Section 33% 667 $6,000 $4,000,000
Total/Average 100% 2,000 $4,000 $8,000,000 $3,810 $7,619,048 $380,952 5%
Type of
Delivery Number Payment
Hospital
Revenue Avg Cost Total Costs
Margin
($)
Margin
(%)
Vaginal 80% 1,600 $3,000 $4,800,000
C-Section 20% 400 $6,000 $2,400,000
Total/Average 100% 2,000 $3,600 $7,200,000 $3,619 $7,238,095 -$38,095 -1%
Change -10.0% -10.0% -5.0% -5.0% -110.0%
TODAY
REDUCTION IN C-SECTION RATE
Fewer C-Sections
60 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Reducing C-Sections is
Good for the Payer...
Type of
Delivery Number Payment
Hospital
Revenue Avg Cost Total Costs
Margin
($)
Margin
(%)
Vaginal 67% 1,333 $3,000 $4,000,000
C-Section 33% 667 $6,000 $4,000,000
Total/Average 100% 2,000 $4,000 $8,000,000 $3,810 $7,619,048 $380,952 5%
Type of
Delivery Number Payment
Hospital
Revenue Avg Cost Total Costs
Margin
($)
Margin
(%)
Vaginal 80% 1,600 $3,000 $4,800,000
C-Section 20% 400 $6,000 $2,400,000
Total/Average 100% 2,000 $3,600 $7,200,000 $3,619 $7,238,095 -$38,095 -1%
Change -10.0% -10.0% -5.0% -5.0% -110.0%
TODAY
REDUCTION IN C-SECTION RATE
The payer saves money
61 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
...But Reduces Hospital Revenues
Type of
Delivery Number Payment
Hospital
Revenue Avg Cost Total Costs
Margin
($)
Margin
(%)
Vaginal 67% 1,333 $3,000 $4,000,000
C-Section 33% 667 $6,000 $4,000,000
Total/Average 100% 2,000 $4,000 $8,000,000 $3,810 $7,619,048 $380,952 5%
Type of
Delivery Number Payment
Hospital
Revenue Avg Cost Total Costs
Margin
($)
Margin
(%)
Vaginal 80% 1,600 $3,000 $4,800,000
C-Section 20% 400 $6,000 $2,400,000
Total/Average 100% 2,000 $3,600 $7,200,000 $3,619 $7,238,095 -$38,095 -1%
Change -10.0% -10.0% -5.0% -5.0% -110.0%
TODAY
REDUCTION IN C-SECTION RATE
But hospital revenues decrease
62 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Hospital Costs Will Go Down,
But Not As Much as Revenues...
Type of
Delivery Number Payment
Hospital
Revenue Avg Cost Total Costs
Margin
($)
Margin
(%)
Vaginal 67% 1,333 $3,000 $4,000,000
C-Section 33% 667 $6,000 $4,000,000
Total/Average 100% 2,000 $4,000 $8,000,000 $3,810 $7,619,048 $380,952 5%
Type of
Delivery Number Payment
Hospital
Revenue Avg Cost Total Costs
Margin
($)
Margin
(%)
Vaginal 80% 1,600 $3,000 $4,800,000
C-Section 20% 400 $6,000 $2,400,000
Total/Average 100% 2,000 $3,600 $7,200,000 $3,619 $7,238,095 -$38,095 -1%
Change -10.0% -10.0% -5.0% -5.0% -110.0%
TODAY
REDUCTION IN C-SECTION RATE
Costs decrease less because fixed costs remain
63 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
...Hurting the Hospital’s
Financial Viability
Type of
Delivery Number Payment
Hospital
Revenue Avg Cost Total Costs
Margin
($)
Margin
(%)
Vaginal 67% 1,333 $3,000 $4,000,000
C-Section 33% 667 $6,000 $4,000,000
Total/Average 100% 2,000 $4,000 $8,000,000 $3,810 $7,619,048 $380,952 5%
Type of
Delivery Number Payment
Hospital
Revenue Avg Cost Total Costs
Margin
($)
Margin
(%)
Vaginal 80% 1,600 $3,000 $4,800,000
C-Section 20% 400 $6,000 $2,400,000
Total/Average 100% 2,000 $3,600 $7,200,000 $3,619 $7,238,095 -$38,095 -1%
Change -10.0% -10.0% -5.0% -5.0% -110.0%
TODAY
REDUCTION IN C-SECTION RATE
Resulting in negative margins
64 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Solution: Pay A Flat Amount
Regardless of Delivery Type
Type of
Delivery Number Payment
Hospital
Revenue Avg Cost Total Costs
Margin
($)
Margin
(%)
Vaginal 67% 1,333 $3,000 $4,000,000
C-Section 33% 667 $6,000 $4,000,000
Total/Average 100% 2,000 $4,000 $8,000,000 $3,810 $7,619,048 $380,952 5%
Type of
Delivery Number Payment
Hospital
Revenue Avg Cost Total Costs
Margin
($)
Margin
(%)
Vaginal 80% 1,600 $3,820 $6,112,000
C-Section 20% 400 $3,820 $1,528,000
Total/Average 100% 2,000 $3,820 $7,640,000 $3,619 $7,238,095 $401,905 6%
Change -4.5% -4.5% -5.0% -5.0% 5.5%
TODAY
FLAT PAYMENT REGARDLESS OF DELIVERY TYPE
65 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Reducing C-Sections Is
Still Good for the Payer
Type of
Delivery Number Payment
Hospital
Revenue Avg Cost Total Costs
Margin
($)
Margin
(%)
Vaginal 67% 1,333 $3,000 $4,000,000
C-Section 33% 667 $6,000 $4,000,000
Total/Average 100% 2,000 $4,000 $8,000,000 $3,810 $7,619,048 $380,952 5%
Type of
Delivery Number Payment
Hospital
Revenue Avg Cost Total Costs
Margin
($)
Margin
(%)
Vaginal 80% 1,600 $3,820 $6,112,000
C-Section 20% 400 $3,820 $1,528,000
Total/Average 100% 2,000 $3,820 $7,640,000 $3,619 $7,238,095 $401,905 6%
Change -4.5% -4.5% -5.0% -5.0% 5.5%
TODAY
FLAT PAYMENT REGARDLESS OF DELIVERY TYPE
The payer still saves money (just not as much)
66 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
But the Price is Set to Reflect the
Hospital’s Change in Costs
Type of
Delivery Number Payment
Hospital
Revenue Avg Cost Total Costs
Margin
($)
Margin
(%)
Vaginal 67% 1,333 $3,000 $4,000,000
C-Section 33% 667 $6,000 $4,000,000
Total/Average 100% 2,000 $4,000 $8,000,000 $3,810 $7,619,048 $380,952 5%
Type of
Delivery Number Payment
Hospital
Revenue Avg Cost Total Costs
Margin
($)
Margin
(%)
Vaginal 80% 1,600 $3,820 $6,112,000
C-Section 20% 400 $3,820 $1,528,000
Total/Average 100% 2,000 $3,820 $7,640,000 $3,619 $7,238,095 $401,905 6%
Change -4.5% -4.5% -5.0% -5.0% 5.5%
TODAY
FLAT PAYMENT REGARDLESS OF DELIVERY TYPE
Hospital costs decrease more than revenues decrease
67 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
So the Hospital
Remains Solvent
Type of
Delivery Number Payment
Hospital
Revenue Avg Cost Total Costs
Margin
($)
Margin
(%)
Vaginal 67% 1,333 $3,000 $4,000,000
C-Section 33% 667 $6,000 $4,000,000
Total/Average 100% 2,000 $4,000 $8,000,000 $3,810 $7,619,048 $380,952 5%
Type of
Delivery Number Payment
Hospital
Revenue Avg Cost Total Costs
Margin
($)
Margin
(%)
Vaginal 80% 1,600 $3,820 $6,112,000
C-Section 20% 400 $3,820 $1,528,000
Total/Average 100% 2,000 $3,820 $7,640,000 $3,619 $7,238,095 $401,905 6%
Change -4.5% -4.5% -5.0% -5.0% 5.5%
TODAY
FLAT PAYMENT REGARDLESS OF DELIVERY TYPE
Resulting in higher margins
68 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Result: A Win-Win-Win for
Mothers, Payers, and Providers
Type of
Delivery Number Payment
Hospital
Revenue Avg Cost Total Costs
Margin
($)
Margin
(%)
Vaginal 67% 1,333 $3,000 $4,000,000
C-Section 33% 667 $6,000 $4,000,000
Total/Average 100% 2,000 $4,000 $8,000,000 $3,810 $7,619,048 $380,952 5%
Type of
Delivery Number Payment
Hospital
Revenue Avg Cost Total Costs
Margin
($)
Margin
(%)
Vaginal 80% 1,600 $3,820 $6,112,000
C-Section 20% 400 $3,820 $1,528,000
Total/Average 100% 2,000 $3,820 $7,640,000 $3,619 $7,238,095 $401,905 6%
Change -4.5% -4.5% -5.0% -5.0% 5.5%
TODAY
FLAT PAYMENT REGARDLESS OF DELIVERY TYPE
Higher Margins
Lower Payments
Fewer C-Sections
69 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Payment Would Vary Based
on Patient Conditions/Needs
Normal
Pregnancy
Term Delivery
w/ No CCs
Vaginal Delivery
in Hospital
C-Section in Hospital
Delivery w/o Complications
HEALTH
PLAN
Lower
Payment
Term Delivery w/ CCs
Vaginal Delivery
in Hospital
C-Section in Hospital
Delivery with Complications
Higher
Payment
70 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Better Prenatal Care Can Reduce
Post-Partum Costs
Conception Delivery
Prenatal Care
Post- Partum Care Costs
Conception Delivery
Prenatal Care
Prenatal Care
Post- Partum Care Costs
Prenatal Care
Poor
Prenatal
Care
Good
Prenatal
Care
71 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Global Fees Make Good Prenatal
Care Financially Bad for Docs
Conception Delivery
Prenatal Care
Post- Partum Care Costs
Conception Delivery
Prenatal Care
Prenatal Care
Post- Partum Care Costs
Prenatal Care
Poor
Prenatal
Care
Good
Prenatal
Care
No greater payment for physician for frequent/intensive prenatal care
No reward for physician for lower delivery costs
72 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Potential Payment Solutions for
Better Prenatal Care
• Remove prenatal care from physician global fee and
pay fee-for-service for each prenatal care visit
• Pay P4P bonuses to physicians based on either
adequacy of prenatal care or pregnancy outcomes or
both
• Bundle physician and hospital payments to create a
financial incentive to have better pregnancy
outcomes (through less expensive delivery and
newborn care)
73 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Many Variations of
Payment Reform
Normal
Pregnancy
Term Delivery
w/ No CCs
Vaginal Delivery
in Hospital
No Complications
C-Section in Hospital
Complications
No Complications
Complications
OB/CNM $
Hospital $$
OB/CNM $
Hospital $$$
74 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Payments with Warranties
Normal
Pregnancy
Term Delivery
w/ No CCs
Vaginal Delivery
in Hospital
No Complications
C-Section in Hospital
Complications
No Complications
Complications
OB/CNM $
Hospital $$
OB/CNM $
Hospital $$$
Bundled Payment with Warranty
Bundled Payment with Warranty
75 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Payments for Delivery Adjusted
by Condition, Not Procedure
Normal
Pregnancy
Term Delivery
w/ No CCs
Vaginal Delivery
in Hospital
No Complications
C-Section in Hospital
Complications
No Complications
Complications
OB/CNM $
Hospital $$
OB/CNM $
Hospital $$$
Condition-Based Bundled Payment with Warranty
76 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Authorizing/Enabling Use of
Alternative Delivery Sites
Normal
Pregnancy
Term Delivery
w/ No CCs
Vaginal Delivery
in Hospital
No Complications
C-Section in Hospital
Complications
Delivery in
Birth Center
OB/CNM $
Birth Ctr $
OB/CNM $
Hospital $$
OB/CNM $
Hospital $$$
No Complications
Complications
No Complications
Complications
Condition-Based Bundled Payment with Warranty
77 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Moving Upstream to Broader
Range of Conditions
Normal
Pregnancy
Term Delivery
w/ No CCs
Vaginal Delivery
in Hospital
No Complications
Pre-Term Elective
Induction
C-Section in Hospital
Complications
Delivery in
Birth Center
OB/CNM $
Birth Ctr $
OB/CNM $
Hospital $$
OB/CNM $
Hospital $$$
No Complications
Complications
No Complications
Complications
Broader Condition-Based Bundled Payment with Warranty
78 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Ideal:
A Maternity Care ACO
Normal
Pregnancy
Term Delivery
w/ No CCs
Vaginal Delivery
in Hospital
No Complications
Pre-Term Elective
Induction
C-Section in Hospital
Complications
Delivery in
Birth Center
OB/CNM $
Birth Ctr $
Bundled Condition-Based Payment with Warranty
OB/CNM $
Hospital $$
OB/CNM $
Hospital $$$
No Complications
Complications
High-Risk Pregnancy
No Complications
Complications
Payment rates would still be adjusted based on maternal risk factors at the beginning
of pregnancy and unpreventable factors that occur during pregnancy, but not for
preventable complications or discretionary choice of delivery timing, method, or site
79 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
It’s Not Just the Payment Method
But Also the Price
• Changing the method of payment creates better
incentives to improve efficiency and reduce
overutilization, but…
• If the payment level is (too) high, there is no savings
and no incentive to transform care
• If the payment level is too low, providers will be
unable to deliver high-quality care and risk financial
disaster
80 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Wide Variation in Prices Per
Delivery in MA Hospitals…
Source: Massachusetts Health Care Cost Trends: Price Variation in Health Care Services
Massachusetts Division of Health Care Finance and Policy, June 2011
5-Fold Difference
81 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
…With No Relationship to Quality
Source: Massachusetts Health Care Cost Trends: Price Variation in Health Care Services
Massachusetts Division of Health Care Finance and Policy, June 2011
82 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Pricing Alternatives
(All Payer) Regulation Maryland sets all-payer
rates for hospital services
APPROACHES TO SETTING PRICES
83 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Pricing Alternatives
(All Payer) Regulation Maryland sets all-payer
rates for hospital services
Large Payer Dictation Congress/CMS establish
the rates Medicare will pay
APPROACHES TO SETTING PRICES
84 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Pricing Alternatives
(All Payer) Regulation Maryland sets all-payer
rates for hospital services
Large Payer Dictation Congress/CMS establish
the rates Medicare will pay
Small Payer Negotiation Result varies depending on
size of payer vs. provider
APPROACHES TO SETTING PRICES
85 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Ability to Negotiate
Depends on Market Power
PAYER
PAYER
Provider
Provider
Provider
Provider Provider
Provider
Provider
Provider
Provider
86 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Ability to Negotiate
Depends on Market Power
PAYER
PAYER
Provider
Provider
Provider
Provider Provider
Provider
Provider
Provider
Provider
Payer
Payer
Payer
Payer
Payer
PROVIDER
PROVIDER
87 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Pricing Alternatives
(All Payer) Regulation Maryland sets all-payer
rates for hospital services
Large Payer Dictation Congress/CMS establish
the rates Medicare will pay
Small Payer Negotiation Result varies depending on
size of payer vs. provider
Competition Providers set prices in order
to attract more patients
APPROACHES TO SETTING PRICES
88 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Improving Payment for
Maternity Care: Part 3
Goals for
High-Value Maternity Care
Barriers Created by
Current Payment Systems
Achieve Good Birth Outcomes
•No financial penalty for poor outcomes, and no reward for good outcomes;
•More/higher payments to physicians and hospitals when adverse events occur;
•Same payment to physicians regardless of quality of prenatal care provided
Avoid Use of Expensive/
Undesirable Procedures
•Higher payment/higher margins for hospitals for C-sections
Reduce Costs of Delivery
and Post-Partum Care
•No reward for physicians to help hospitals reduce costs or to use lower-cost settings such as birth centers;
•No incentive for mothers to choose lower-cost/higher-value providers
89 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Lack of Effective Incentives for
Value-Based Choice by Patients
• Copays, Co-insurance, and High Deductibles do little
to encourage patients to be cost-conscious in
choosing among high-cost providers and services
90 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Where Will You Have
Your Baby Delivered?
Consumer Share
of Delivery Cost Price #1
$5,000
Price #2
$6,000
Price #3
$7,000
$1,000 Copayment: $1,000 $1,000 $1,000
10% Coinsurance
w/$2,000 OOP Max:
$2,000 $2,000 $2,000
$5,000 Deductible: $5,000 $5,000 $5,000
91 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Where Will You Have
Your Baby Delivered?
Consumer Share
of Delivery Cost Price #1
$5,000
Price #2
$6,000
Price #3
$7,000
$1,000 Copayment: $1,000 $1,000 $1,000
10% Coinsurance
w/$2,000 OOP Max:
$2,000 $2,000 $2,000
$5,000 Deductible: $5,000 $5,000 $5,000
Highest-Value: $0 $1,000 $2,000
92 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Tiered, Open Network is Better for
Patient Than a Narrow Network
Consumer Share
of Delivery Cost Price #1
$5,000
Price #2
$6,000
Price #3
$7,000
$1,000 Copayment: $1,000 $1,000 $1,000
10% Coinsurance
w/$2,000 OOP Max:
$2,000 $2,000 $2,000
$5,000 Deductible: $5,000 $5,000 $5,000
Highest-Value: $0 $1,000 $2,000
Narrow Network: $1,000 $6,000 $7,000
93 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Today: Hard to Know if Better
Price Means Better Value Payment
for
Procedure
dded
Provider 1:
$6,000
Provider 2:
$5,500
-8%
94 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
What Hidden Costs
Accompany the Lower Price? Payment
for
Procedure
Payment and Rate
of Complications
Provider 1:
$6,000 $10,000 3%
Provider 2:
$5,500 $10,000 10%
-8%
95 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Total Spending May Be Higher
With the “Lower Price” Provider Payment
for
Procedure
Payment and Rate of
Complications
Average
Total
Payment
Provider 1:
$6,000 $10,000 3% $6,300
Provider 2:
$5,500 $10,000 10% $6,500
-8% +3%
Provider 2 has a lower starting price, but is more expensive
when lower quality is factored in
96 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Bundled/Warrantied Pmts Allow
Comparing Apples to Apples Payment
for
Procedure
Payment and Rate of
Complications
Bundled/
Episode
Payment
Provider 1:
3% $6,300
Provider 2:
10% $6,500
+3%
Bundled prices show that
Provider 1 is the higher-value
provider
97 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Community Quality Measures To
Ensure Lower Cost ≠Lower Quality • Concern: Giving healthcare providers more accountability for
costs reduces the incentives for overuse, but raises concerns about whether patients will get too little care
• Solution: Measure healthcare quality and include incentives for providers to maintain/improve quality as well as reduce costs
• Ideal: Develop quality
and cost measures
with participation
of physicians and
hospitals, as a
growing number of
other regions do
98 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Maternity Care Quality and Cost
Reporting In Virginia
99 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Lack of Effective Incentives for
Value-Based Choice by Patients
• Copays, Co-insurance, and High Deductibles do little
to encourage patients to be cost-conscious in
choosing among high-cost providers and services
• Copays, Co-insurance, and High Deductibles can
discourage patients from getting preventive
treatments they need
– If we want mothers to get adequate prenatal care, why do
we make them pay in order to get it?
– What if mothers need medications to improve pregnancy
outcomes, but can’t afford them?
100 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Benefit Design Changes Are
Also Critical to Success
Provider Patient
Payment
System
Benefit
Design
Ability and
Incentives to:
• Keep patients well
• Avoid unneeded services
• Deliver services efficiently
• Coordinate services with other providers
Ability and
Incentives to:
• Improve health
• Take prescribed medications
• Allow a provider to coordinate care
• Choose the highest-value providers and services
101 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Both Payment & Benefits Are
Controlled by the Payer
Provider Patient
Payment
System
Benefit
Design
PAYER
Ability and
Incentives to:
• Keep patients well
• Avoid unneeded services
• Deliver services efficiently
• Coordinate services with other providers
Ability and
Incentives to:
• Improve health
• Take prescribed medications
• Allow a provider to coordinate care
• Choose the highest-value providers and services
102 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
But Purchaser Support is Needed
Particularly for Benefit Changes
Provider Patient
Payment
System
Benefit
Design
PAYER
Purchaser Purchaser Purchaser
Ability and
Incentives to:
• Keep patients well
• Avoid unneeded services
• Deliver services efficiently
• Coordinate services with other providers
Ability and
Incentives to:
• Improve health
• Take prescribed medications
• Allow a provider to coordinate care
• Choose the highest-value providers and services
103 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
And Consumer Support is Critical
for Purchaser/Plan Support
Provider Patient
Payment
System
Benefit
Design
PAYER
Purchaser Purchaser Purchaser
104 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Many Things Necessary for
Win-Win Solutions in Communities
Value-Driven Payment & Benefits
Quality/ Cost Analysis & Reporting
Public Reporting
Business Case
Analysis
Value-Driven Delivery Systems
Technical Assistance to Providers
Design & Delivery of
Care
Patient Education/ Engagement
Value-Based Choice
Education Materials
Engagement of
Purchasers
Alignment of Multiple Payers
Payment System Design
Benefit Design
Provider Organization/Coordination
Claims, Clinical &
Patient Data
Wellness & Adherence
Reducing Costs
Without Rationing
105 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
How Can You Ensure All This Is
Happening in a Coordinated Way?
Public Reporting
Business Case
Analysis
Design & Delivery of
Care
Value-Based Choice
Engagement of
Purchasers
Alignment of Multiple Payers
Payment System Design
Benefit Design
Provider Organization/Coordination
Claims, Clinical &
Patient Data
Wellness & Adherence
Technical Assistance to Providers
Education Materials
?
106 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
The Role of Regional Health
Improvement Collaboratives
Public Reporting
Business Case
Analysis
Design & Delivery of
Care
Value-Based Choice
Engagement of
Purchasers
Alignment of Multiple Payers
Payment System Design
Benefit Design
Provider Organization/Coordination
Claims, Clinical &
Patient Data
Wellness & Adherence
Regional Health
Improvement Collaborative
Technical Assistance to Providers
Education Materials
107 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
...With Active Involvement of All
Healthcare Stakeholders
Regional Health
Improve-ment
Collab.
Physicians & Hospitals
Health Plans
Healthcare Consumers
Employers & Purchasers
108 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Leading Regional Health
Improvement Collaboratives in U.S. –Albuquerque Coalition for Healthcare Quality –Aligning Forces for Quality – South Central PA –Alliance for Health –Better Health Greater Cleveland –California Quality Collaborative –Center for Improving Value in Health Care (Colorado) –Finger Lakes Health Systems Agency –Greater Detroit Area Health Council –Health Improvement Collaborative of Greater Cincinnati –Healthy Memphis Common Table –Institute for Clinical Systems Improvement –Integrated Healthcare Association –Iowa Healthcare Collaborative –Kansas City Quality Improvement Consortium –Louisiana Health Care Quality Forum –Maine Health Management Coalition –Massachusetts Health Quality Partners –Midwest Health Initiative –Minnesota Community Measurement –Nevada Partnership for Value-Driven Healthcare (HealthInsight) –Oregon Health Care Quality Corporation –P2 Collaborative of Western New York –Pittsburgh Regional Health Initiative –Puget Sound Health Alliance –Quality Counts (Maine) –Quality Quest for Health of Illinois –Utah Partnership for Value-Driven Healthcare (HealthInsight) –Wisconsin Collaborative for Healthcare Quality –Wisconsin Healthcare Value Exchange
Network for Regional
Healthcare Improvement
www.NRHI.org
109 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Recommendations of the Illinois
Maternity Care Payment Summit • Bundle Payments for Labor, Delivery, & Neonatal Care
– Pay hospitals and physicians/midwives jointly, not separately – Pay for care of both mother and baby jointly, not separately – Adjust payment based on risk factors, not procedures used
• Provide Warranties for Adverse Events – No additional payment for treating preventable adverse events – Measure & publicly report rates of preventable adverse events
• Limit Payment Differentials Based on Delivery Method – Pay as much or more for vaginal deliveries as for C-sections
• Reduce Payment for Elective Early Deliveries
• Unbundle Payment for Prenatal Care Services – Pay separately for prenatal care services to encourage early
and frequent prenatal care, and pay for pregnancy support services for high-risk mothers
– Measure and publicly report on pregnancy outcomes
• Change Benefits for Mothers to Support Better Outcomes – Reduce copayments for prenatal care visits and medications – Provide financial incentives to adhere to prenatal care plans
• Encourage Use of High Quality/Low-Cost Providers
110 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
Moving to Higher-Quality,
More Affordable Maternity Care • There is no one-size-fits-all solution to healthcare
transformation; each region will need to actually make it happen in its own unique environment. The best federal policy will support regional innovation.
• Payment reform is necessary, but not sufficient. Delivery system reform, lean redesign of care processes, changes in benefit design, and effective quality measurement are also essential. Everything needs to focus on delivering the best outcomes for patients at the lowest cost to the purchasers.
• All stakeholders need to come together with shared data in a neutral forum to look for win-win-win solutions and then implement them successfully.
111 © 2009 – 2012 Center for Healthcare Quality and Payment Reform
For More Information on
Payment and Delivery Reforms
www.PaymentReform.org
For More Information:
Harold D. Miller Executive Director, Center for Healthcare Quality and Payment Reform
Miller.Harold@GMail.com
(412) 803-3650
www.CHQPR.org
www.PaymentReform.org
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