Putting It All Together and Driving Quality:GM’s Value-Based Purchasing Strategy

Tricia Marine BarrettManaged Care ConsultantGM Health Care Initiatives

MichPHA Fall Kick-off Ann Arbor, Michigan September 21, 2006

The Big Picture

General Motors is the largest private purchaser of health care in the United States

• 1.1 million employees, retirees & dependents• 30 percent in fully insured HMOs• Older population with more than three

retirees/surviving spouses for each active worker

• Total 2005 health care expenditure - $5.3 billion• ~$1.2 billion in HMOs

HMO Portfolio

• Over 120 Plans administered by ~35 carriers nationwide

GM U.S. Health Care Total Cash Expenditures

$5.3

$4.7

$5.2

$4.5

$4.2

$3.9

$3.5

$3.3$3.1

$3.0

$2.9

$3.9

$4.9

$5.9

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

$ Bill

ions

U.S. Health Care Trends In Double Digits

0%

5%

10%

15%

20% Avg Health Care

CPI

Per Watson Wyatt Worldwide

Growing Utilization and Increasing Prices Driving Health Care Inflation To Unsustainable Levels

13.5%

3.3%

Responsible Healthcare Purchasing

“The current cost crisis is inextricably linked to quality and the perverse payment structures that discourage quality while driving up costs.”

(IOM Crossing the Quality Chasm, chapter 8).

Purchaser

Health PlanHold

Accountable

Consumer

Expect to Meet Needs

•Provide Quality Leadership•Hold Delivery System Accountable for Value•Provide Delivery System With

- Information - Coordination- Support - Communication

•Selection and Contracting

Delivery System

Primary Care PhysicianHospital Pharmacy

Centers of Excellence

Specialty Physician

Diagnostic Services

Home Health Care

Other Therapeutic Services

Behavioral Health

Health Plan Role

Value Based Purchasing

QUALITY_______________________

COST= VALUE

General Motors Value Purchasing Strategy

GM’s 3-Pronged Strategy

• Health Plan Accountability• Annual quality assessment through eValue8 RFI,

NCQA accreditation and HEDIS/CAHPS scores (CARS Project)

• Motivate migration of enrollees to higher value health plans• Compare quality and cost of HMOs• 4 performance bands• Salaried monthly contribution is tied to HMO

performance • Requires significant communication with employees

• Aggressive Supplier Development• Best practice sharing among PlanseValue8 is an integral part of each

prong

Accountability: Coordinated Autos Reporting System (CARS)

• Partnership with Ford, GM, Delphi and the State of Michigan (DaimlerChrysler participated until 2006)

• Purchasers contract with NCQA to conduct the analysis

• NCQA uses CAHPS and HEDIS performance to assign 1-5 stars in four categories:• Getting Better/Living with Illness• Staying Healthy• Access and Service• Doctor Communication and Service

• Methodology consistent with NCQA/US News & World Report health plan report card

Accountability: National Business Coalition on Health eValue8 RFI

• Common RFI sets expectations and assesses performance of HMOs and PPOs• Plan Profile

• Health Information Technology

• Consumer Engagement

• Provider Measurement, Incentives and Rewards

• Primary Prevention and Health Promotion

• Chronic Disease Management

• Behavioral Health

• Pharmaceutical Management

Key Objectives of Common RFI

• Create and Implement Standardized Performance Expectations

• Reduce Redundancy by Consolidating Purchaser Requests

• Promote Health Plan Accountability & Transparency

• Recognition of the Importance of Health on Productivity and the Bottom Line

• Foster Market Reform

• Sustained Movement to Higher Value = Fn(Quality/Price)

Why GM uses the eValue8 RFI

The eValue8 RFI tool enables GM to:

•Measure health plan quality and monitor improvements

•Differentiate among health plans

•Support rate negotiations

•Inform and target supplier development activities

Motivate Migration: 2006 Salaried Flex Pricing Health Plan Scoring Table HMO

AHMO B

HMO C

HMO D

eValue8RFI Results

Raw ScoreFlex Score (25)

HEDIS / CAHPS (CARS evaluation)

Raw ScoreFlex Score (20)

NCQA Accreditation

Raw ScoreFlex Score (5)

National Rate Rankings

Relationships of rates to Local Indemnity

Total Cost Score (50)

Total Quality + Cost (100)

1295

221 25

211 24

77

1414

13 13

Commendable2

Total Quality Score (50)

Avg Benchmark

14 44 42

24

23

47

20

13

33

19

12

31

61 77 73

Strong GoodRating

Sample Employee Contribution

176 16

1313

Accredited1

30

22

14

36

66

$200 $100 $150 $180

Excellent5

Excellent5

Changes to Quality Score Methodology for 2007 Enrollment•Increased score for eValue8 from 25 to 30 points

•Relative performance evaluation completed for each eValue8 section rather than by total score

•Removed points dedicated to NCQA accreditation• Accreditation is required• 90% of GM HMOs have Excellent accreditation• Subtract points for HMOs with less than Excellent rating• Bring these points back when Quality Plus elements have

been fully integrated and new rating system developed

•Subtract 4 points from the CARS ‘stars’ (minimum score)

•Add 4 points for ‘Partnership” rating

10

15

20

25

30

35

40

45

50

10 15 20 25 30 35 40 45 50

2005 Top HMOs Cost/Quality Comparison

Lo

w C

os

tH

igh

Co

st

Low Quality High Quality

Based on Salaried Banding Study – 2005

B-Band C-Band + D-Band ▬ E- Band F-Band X G-Band ▲ ∎ ∗

Improve QualityH & S Members = 0

Improve CostH & S Members = 86,752

Well PerformingH & S Members = 101,318

Improve Quality & CostH & S Members = 24,689

$ 0 $100 $150 $180 $200

StrongHMO

Good HMO

Benchmark HMO

AverageHMO

Monthly Employee Contribution (Family)

HSA PPO

EMP PPO

$1252006

2005 $ 0 $45 $70-$85 $85 $110 $145 -$190

Motivate Migration: Salaried Health Care Monthly Contributions

Employees/ Retirees can compare Plan options on aggregate quality performance

MotivateMigration

Results of annual CARS analysis: Values represent the number of “Stars” earned

MotivateMigration

Employees/Retirees can also use the Asparity Plan Finder tool to compare performance on individual measures of interest to them.

MotivateMigration

MotivateMigration

Salaried HMO Migration% of HMO Members By Band

13% 12%

34%

19%

38%

25%

41%39%

31%

9%

22%

41%

18%

34%

13%11%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Benchmark Strong Good Average & below

1996 2000 2003 2006

Benchmark Strong Good Average

Total 5 16 23 36

Number Of Plans By Band - 2006

MigrationResults

Aggressive Supplier Development Using eValue8: Driving HMO Collaboration for Quality Improvement

•Quarterly Meetings with High Volume HMOs

•Monitor Work Plans in areas of poor performance

•Monthly Conference Calls (Accelerating Improvement in Managed Care)

• Accountability for Quality motivates improvement

• Premium adjustment and performance transparency effectively migrates members to higher performing health plans

• GM believes the way to reduce health care cost is to improve quality…and provide people with the information to make smart health care decisions

Summary

Parting Thoughts ...

“We’ve concluded that the quality of care cannot improve until physicians and hospitals [and health plans] nationwide are held accountable to common measures of performance.”

McGlynn and Brook, Rand Institute, “Full Disclosure: Time for the Naked Truth About Healthcare” RAND Review, Summer 2001