Suzanne Delbanco, Ph.D.Executive Director, Catalyst for Payment Reformc/o PBGHFebruary 21, 2012

California Health Benefit Exchange Board:Private Purchaser Strategies

Big Picture

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TWO STRATEGIES

Creating the Environment• Coordinating the ask• Understanding the value

and cost of care

Implementing reforms• Align payment to the

evidence• Value-oriented payment

and benefit design• Enhancing primary care

through payment

The health care payment systems of the status quo continue to drain the value out of the care we buy.

• Only about 1% of payments to doctors and hospitals are tied to performance

• The system is failing in safety and quality

• Factors that have nothing to do with quality and value are driving up health care costs

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Creating the environment #1: Coordinating the ask on payment reform

www.catalyzepaymentreform.org

Topics include• Value-oriented payment• Transparency • Market competition and

consumerism • Alignment with Medicare• Oversight of ACOs• Evaluating Results

Health Plan RFI Questions

Model Contract Language

GOALS

• Define a shared purchaser agenda

• Send clear signals and create business case for health plans

• Lead to better quality and lower costs for all

• Reduce opportunities for cost shifting

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Creating the environment #2: Understanding Value and Cost of Care

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Information must be available to understand and compare the quality, cost, patient experience, etc., among providers in the network.

Key elements

1. Provider Background

2. Quality performance

3. Efficiency 4. Price of services5. Volume6. Patient Experience

Usability is key

Transparency is essential

• Need to shine the light on payment variation - masked by lack of transparency

• Payment variation across and within markets - paying up to 500% of Medicare

• Phase-out gag-clauses• Support informed consumer decision

making

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Implementing Reforms #1: Align Payment to the Evidence

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Example: Maternity Care

• Practice patterns straying from the evidence• Pre-term elective births• Unnecessary medical intervention in labor and delivery• Worse outcomes and higher costs

• Payment options• Providing one case rate for delivery, regardless of mode,

removes the financial incentives for unnecessary intervention in delivery

• Creating a “do not pay” policy for elective deliveries prior to 39 weeks

• Bundled payments

Payment changes need to be accompanied by facility, provider and patient education and supportive clinical policies and benefit design

Implementing Reforms #2: Value-Oriented Payment and Benefit Design

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Example: Spectrum of Reference to Value Pricing

Implementing Reforms #3: Enhancing Primary Care through Payment

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Patient Centered Medical Homes• Increased compensation for primary care

doctors and gain-sharing agreement

Medical Home for Patients with Severe Chronic Disease• Monthly fee paid to physician groups plus

the usual fee for service• Gain-sharing based on total cost of care

savings

*Pilot site results = unit price-standardized per capita spending dropped by estimated 20%

*Implementation planned for 1/1/13 in Midland, MI

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Large Purchaser Strategies: Key Lessons Learned

1. Send clear and consistent signals

2. Transparency is essential

3. Carefully monitor health plan compliance

4. Benefit design should complement payment reform

5. Purchasers in all sectors must align

Appendices

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• Appendix A – Additional Background on CPR (slides 9-11)

• Appendix B – RFI http://www.catalyzepaymentreform.org/uploads/CPR_Health_Plan_RFI_010412.xlsx

• Appendix C – Model Contract Languagehttp://www.catalyzepaymentreform.org/uploads/CPR_Model_Health_Plan_Contract_Language_011212.docx

• Appendix D – Maternity Care Action Briefhttp://www.catalyzepaymentreform.org/uploads/CPR_Action_Brief_Maternity_Care.pdf

• Appendix E – Reference and Value Pricing Action Brief http://www.catalyzepaymentreform.org/uploads/CPR_Action_Brief_Reference_Pricing.pdf

All CPR materials available in the public domain at:www.catalyzepaymentreform.org

Appendix A:CPR Purchasers Working Together

www.centerforpaymentreform.org February 21, 2012 9

Contact information: Suzanne Delbanco, Ph.D., Executive Directorsdelbanco@catalyzepaymentreform.org, 510-435-2364

• 3M• The Boeing Company• CalPERS• Capital One• Carlson • Delta Air Lines• Dow• eBay

• Equity Healthcare• FedEx• GE• Group Insurance

Commission, State of Massachusetts

• Intel• Marriott

• Ohio Medicaid• Ohio PERS• OSI Partners, LLC• Safeway• US Foods• Verizon• Wal-Mart• Xerox

A national independent organization led by large employers, with the active involvement of providers, health plans, consumers and labor groups working to improve health care quality and reduce costs by identifying and

coordinating workable solutions to improve how we pay for health care in the U.S.

Appendix A continued:Purchasers Have a Catalyst Role

Leverage Purchaser Power: Critical Mass

Environment Conducive to Reform

Shared vision - payment reform framework & principles

Aligned employer agenda - short term wins, longer-term bold approaches

Clear signals to plans – RFIs and contracts

Toolkit for local action – Market Assessment, Action Briefs, etc.

Direct dialogue with HHS for alignment and influence

National Scorecard on Payment

Compendium of Payment Reform Efforts – what works?

Analyze and raise visibility of provider market power and cost shifting issues

Coordinated Purchaser Action

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CPR Toolkit developed to create shared understanding of opportunities and to encourage actions that leverage payment to improve value.

Payment Framework

• Help purchasers understand range of payment models and associated benefits and challenges

Action Briefs Market Assessment

• Outline steps to implement payment reforms and ways to mitigate potential unintended consequences

Sourcing Tools

• Support purchaser initiatives though standardized RFI/RFP language and contract modules

• Identify opportunities based on market conditions, health plan capacity, and delivery system organization

Plus, a National Scorecard to monitor the nation’s progress

Appendix A continued: Critical Mass Starts With Active Purchasers

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SPECIAL INITIATIVES• Maternity Care

Payment • Value Pricing

• Price Transparency