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THE BUILDING BLOCKS OF SUCCESSFUL PAYMENT REFORMDesigning Payment Systems ThatSupport Higher-Value Health Care
Harold D. MillerPresident and CEO
Center for Healthcare Quality and Payment Reform
www.CHQPR.org
2© 2009 – 2015 Center for Healthcare Quality and Payment Reform
How Do You Control Growing
Healthcare Spending?
TOTALHEALTHCARE
SPENDING
TOTALHEALTHCARE
SPENDING
TOTALHEALTHCARE
SPENDING
TOTALHEALTHCARE
SPENDING
$
TIME
3© 2009 – 2015 Center for Healthcare Quality and Payment Reform
The Opportunity: Spending
That is Unnecessary or Avoidable
AVOIDABLESPENDING
AVOIDABLESPENDING
AVOIDABLESPENDING
NECESSARYSPENDING
AVOIDABLESPENDING
NECESSARYSPENDING
NECESSARYSPENDING
NECESSARYSPENDING
$
TIME
4© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Avoidable Spending Occurs
In All Aspects of Healthcare
NECESSARYSPENDING
AVOIDABLESPENDING
$
CANCER TREATMENT• Use of unnecessarily-expensive drugs• ER visits/hospital stays for dehydration and avoidable complications
• Fruitless treatment at end of life• Late-stage cancers due to poor screening
SURGERY• Unnecessary surgery• Use of unnecessarily-expensive implants• Infections and complications of surgery• Overuse of inpatient rehabilitation
CHEST PAIN DIAGNOSIS/TREATMENT• Overuse of high-tech stress tests/imaging• Overuse of cardiac catheterization• Overuse of PCIs, high-priced stents
CHRONIC DISEASE• ER visits for exacerbations• Hospital admissions and readmissions• Amputations, blindness
5© 2009 – 2015 Center for Healthcare Quality and Payment Reform
The Goal: Less Avoidable $,
More Necessary $, Less Total $
NECESSARYSPENDING
AVOIDABLESPENDING
NECESSARYSPENDING
NECESSARYSPENDING
NECESSARYSPENDING
$
TIME
SAVINGSSAVINGS SAVINGS
AVOIDABLESPENDING
AVOIDABLESPENDING AVOIDABLE
SPENDING
6© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Payment Reform Needed When
Payment System Creates Barriers
NECESSARYSPENDING
AVOIDABLESPENDING
$
NECESSARYSPENDING
SAVINGS
BARRIERSIN THE
CURRENTPAYMENTSYSTEM
AVOIDABLESPENDING
7© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Barrier #1: No $ or Inadequate $
for High-Value Services
NECESSARYSPENDING
AVOIDABLESPENDING
UNPAIDSERVICES
$
NECESSARYSPENDING
AVOIDABLESPENDING
No Payment orInadequate Payment for:
• Services deliveredoutside of face-to-facevisits with clinicians, e.g.,phone calls, e-mails, etc.
• Services delivered bynon-clinicians, e.g., nurses, community healthworkers, etc.
• Non-medical services,e.g., transportation
• Additional time or costfor patients with higher intensity needs
• Services not covered bybenefit restrictions
8© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Barrier #2: Avoidable Spending
May Be Revenue for Providers…
NECESSARYSPENDING
AVOIDABLESPENDING
$
COSTOF
SERVICEDELIVERY
PROFIT
PROVIDERREVENUE
9© 2009 – 2015 Center for Healthcare Quality and Payment Reform
…And When Avoidable Services
Aren’t Delivered…
NECESSARYSPENDING
AVOIDABLESPENDING
$
NECESSARYSPENDING
AVOIDABLESPENDING
COSTOF
SERVICEDELIVERY
PROFIT
PROVIDERREVENUE
10© 2009 – 2015 Center for Healthcare Quality and Payment Reform
…Providers’ Revenue
May Decrease…
NECESSARYSPENDING
AVOIDABLESPENDING
$
NECESSARYSPENDING
AVOIDABLESPENDING
COSTOF
SERVICEDELIVERY
PROFIT
PROVIDERREVENUE
PROVIDERREVENUE
11© 2009 – 2015 Center for Healthcare Quality and Payment Reform
…But Providers’ Fixed Costs
Don’t Disappear…
NECESSARYSPENDING
AVOIDABLESPENDING
$
NECESSARYSPENDING
AVOIDABLESPENDING
COSTOF
SERVICEDELIVERY
PROFIT
PROVIDERREVENUE
COSTOF
SERVICEDELIVERY
PROVIDERREVENUE
Many Fixed Costs of ServicesRemain When Volume Decreases
12© 2009 – 2015 Center for Healthcare Quality and Payment Reform
…Leaving Providers With Losses
(or Bigger Losses Than Today)
NECESSARYSPENDING
AVOIDABLESPENDING
$
NECESSARYSPENDING
AVOIDABLESPENDING
COSTOF
SERVICEDELIVERY
PROFIT
LOSS
PROVIDERREVENUE
COSTOF
SERVICEDELIVERY
PROVIDERREVENUE
Many Fixed Costs of ServicesRemain When Volume Decreases
Potentially Causing Financial Losses
13© 2009 – 2015 Center for Healthcare Quality and Payment Reform
A Payment Change isn’t Reform
Unless It Removes the BarriersBARRIER #1
BARRIER #2
Payers Are From Mars,
Providers Are From Venus
16© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Provider Approach: Pay Us More…
NECESSARYSPENDING
AVOIDABLESPENDING
UNPAIDSERVICES
NECESSARYSPENDING
NEWLY PAIDSERVICES
$
PROVIDERSOLUTION:
17© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Provider Approach: Pay Us More…
…and “Trust Us” on Savings
NECESSARYSPENDING
AVOIDABLESPENDING
UNPAIDSERVICES
NECESSARYSPENDING
NEWLY PAIDSERVICES
SAVINGS
$
PROVIDERSOLUTION:
AVOIDABLESPENDING
18© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Provider Approach: Pay Us More…
…and “Trust Us” on Savings
NECESSARYSPENDING
AVOIDABLESPENDING
UNPAIDSERVICES
NECESSARYSPENDING
NEWLY PAIDSERVICES
SAVINGS
$
PROVIDERSOLUTION: No matter how
many studies have been done
saying that a service saved money
in demonstration projects,
that’s no guarantee that savings will be
achieved when the service is
implementedby all providers for
all patients
AVOIDABLESPENDING
19© 2009 – 2015 Center for Healthcare Quality and Payment Reform
NECESSARYSPENDING
AVOIDABLESPENDING
NEWLY PAIDSERVICES
Payer Concern: No Accountability
to Reduce Avoidable Spending
NECESSARYSPENDING
AVOIDABLESPENDING
UNPAIDSERVICES
NECESSARYSPENDING
NEWLY PAIDSERVICES
SAVINGS
$
PROVIDERSOLUTION:
PAYER FEAR:
AVOIDABLESPENDING
20© 2009 – 2015 Center for Healthcare Quality and Payment Reform
NECESSARYSPENDING
NEWLY PAIDSERVICES
Payer Concern #2: New Services
Will Be Used More Than Necessary
NECESSARYSPENDING
AVOIDABLESPENDING
UNPAIDSERVICES
NECESSARYSPENDING
NEWLY PAIDSERVICES
SAVINGS AVOIDABLESPENDING
$
PROVIDERSOLUTION:
PAYER FEAR:
AVOIDABLESPENDING
Payers Are From Mars,
Providers Are From Venus
22© 2009 – 2015 Center for Healthcare Quality and Payment Reform
NECESSARYSPENDING
NEW SVCS
Payer Response:
Pay for Less Than What’s Needed
NECESSARYSPENDING
AVOIDABLESPENDING
UNPAIDSERVICES
NECESSARYSPENDING
NEWLY PAIDSERVICES
SAVINGS
$
PROVIDERSOLUTION:
PAYER RESPONSE:
Home Visits
Office Visits
Phone Calls
AVOIDABLESPENDING
23© 2009 – 2015 Center for Healthcare Quality and Payment Reform
NECESSARYSPENDING
Result: Inadequate Services =
Little or No Impact on Spending
NECESSARYSPENDING
AVOIDABLESPENDING
UNPAIDSERVICES
NECESSARYSPENDING
NEWLY PAIDSERVICES
SAVINGS
AVOIDABLESPENDING
$
PROVIDERSOLUTION:
PAYER RESPONSE:
NEW SVCS
AVOIDABLESPENDING
24© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Payer Approach: Save Us Money
and…
NECESSARYSPENDING
AVOIDABLESPENDING
UNPAIDSERVICES
NECESSARYSPENDING
SAVINGS
UNPAIDSERVICES
$
PAYER SOLUTION:
YEAR 1
AVOIDABLESPENDING
25© 2009 – 2015 Center for Healthcare Quality and Payment Reform
NECESSARYSPENDING
P4P/ShrdSvgs
Payer Approach: Save Us Money
and We’ll You Pay More Next Year
NECESSARYSPENDING
AVOIDABLESPENDING
UNPAIDSERVICES
NECESSARYSPENDING
SAVINGS
UNPAIDSERVICES
UNPAIDSERVICES
SAVINGS
AVOIDABLESPENDING
$
PAYER SOLUTION:
YEAR 1 YEAR 2
AVOIDABLESPENDING
26© 2009 – 2015 Center for Healthcare Quality and Payment Reform
NECESSARYSPENDING
P4P/ShrdSvgs
Provider Concern: Shared
Savings is Too Little, Too Late
NECESSARYSPENDING
AVOIDABLESPENDING
UNPAIDSERVICES
NECESSARYSPENDING
SAVINGS
UNPAIDSERVICES
UNPAIDSERVICES
SAVINGS
AVOIDABLESPENDING
P4P orsharedsavingsmay betoo littletoo lateto cover
costs
$
PAYER SOLUTION:
YEAR 1 YEAR 2
Howdoes
providercover
upfrontcosts of
additionalservices?
AVOIDABLESPENDING
27© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Payer Approach #2:
Global Budget for Services
NECESSARYSPENDING
AVOIDABLESPENDING
UNPAIDSERVICES
SAVINGS
GLOBALBUDGET
FORSERVICES
$
PAYER SOLUTION #2:
28© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Provider Has Flexibility to Provide
Different Services Within Budget
NECESSARYSPENDING
AVOIDABLESPENDING
UNPAIDSERVICES
NECESSARYSPENDING
AVOIDABLESPENDING
NEWLY PAIDSERVICES
SAVINGS
$
PAYER SOLUTION #2:
29© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Payers Cut Global Payments to
Achieve More Savings…
NECESSARYSPENDING
AVOIDABLESPENDING
UNPAIDSERVICES
NECESSARYSPENDING
AVOIDABLESPENDING
NEWLY PAIDSERVICES
SAVINGS
$
PAYER SOLUTION #2:
Adequate $
SAVINGS
GLOBALBUDGET
FORSERVICES
30© 2009 – 2015 Center for Healthcare Quality and Payment Reform
…But Lower Payments May Be
Inadequate for Necessary Services
NECESSARYSPENDING
AVOIDABLESPENDING
UNPAIDSERVICES
NECESSARYSPENDING
AVOIDABLESPENDING
NEWLY PAIDSERVICES
SAVINGS
$
PAYER SOLUTION #2:
Adequate $
SAVINGS
LESSTHAN
NECESSARYSPENDING
31© 2009 – 2015 Center for Healthcare Quality and Payment Reform
UNRELATEDSPENDING
UNRELATEDSPENDING
Or Costs Increase for Services
Provider Can’t Control
NECESSARYSPENDING
AVOIDABLESPENDING
UNPAIDSERVICES
NECESSARYSPENDING
AVOIDABLESPENDING
NEWLY PAIDSERVICES
SAVINGS
$
PAYER SOLUTION #2:
Adequate $ Inadequate $UNRELATEDSPENDING
NECESSARYSPENDING
AVOIDABLESPENDING
NEWLY PAIDSERVICES
It is unrealistic to expect providers to improve quality or reduce spending
if the payment system does not provide adequate financial support for their efforts.
It is unrealistic to expect providers to improve quality or reduce spending
if the payment system does not provide adequate financial support for their efforts.
It’s unrealistic to expect patients & purchasers to pay more or differently without assurances
that quality will be improved, spending will be lower, or both.
It is unrealistic to expect providers to improve quality or reduce spending
if the payment system does not provide adequate financial support for their efforts.
It’s unrealistic to expect patients & purchasers to pay more or differently without assurances
that quality will be improved, spending will be lower, or both.
Payment reforms must be designed to support delivery of
higher-quality care for patients at lower costs for purchasers
in ways that are financially feasible for providers.
35© 2009 – 2015 Center for Healthcare Quality and Payment Reform
A Successful Compromise:
Spending Provider Can Control…
NECESSARYSPENDINGPROVIDER
CANCONTROL
AVOIDABLESPENDINGPROVIDER
CANCONTROL
UNPAIDSERVICES
$
36© 2009 – 2015 Center for Healthcare Quality and Payment Reform
A Successful Compromise:
…Provide Flexibility…
NECESSARYSPENDINGPROVIDER
CANCONTROL
AVOIDABLESPENDINGPROVIDER
CANCONTROL
UNPAIDSERVICES
NECESSARYSPENDING
NEWLY PAIDSERVICES
$
PROVIDER-PAYER
AGREEMENT
Upfront payment to supportimproved delivery of care
37© 2009 – 2015 Center for Healthcare Quality and Payment Reform
A Successful Compromise:
Provide Flexibility + Accountability
NECESSARYSPENDINGPROVIDER
CANCONTROL
AVOIDABLESPENDINGPROVIDER
CANCONTROL
UNPAIDSERVICES
NECESSARYSPENDING
NEWLY PAIDSERVICES
SAVINGS
$
PROVIDER-PAYER
AGREEMENT
AVOIDABLESPENDING
Upfront payment to supportimproved delivery of care
Commitment to reduce avoidablespending sufficiently to achieve savings
38© 2009 – 2015 Center for Healthcare Quality and Payment Reform
NECESSARYSPENDING
AVOIDABLESPENDING
NEWLY PAIDSERVICES
Accountability is Assured
As Part of the Payment Contract
NECESSARYSPENDINGPROVIDER
CANCONTROL
AVOIDABLESPENDINGPROVIDER
CANCONTROL
UNPAIDSERVICES
NECESSARYSPENDING
NEWLY PAIDSERVICES
SAVINGS
$
PROVIDER-PAYER
AGREEMENT
IF SAVINGSIS NOT
ACHIEVED..
AVOIDABLESPENDING
39© 2009 – 2015 Center for Healthcare Quality and Payment Reform
NECESSARYSPENDING
AVOIDABLESPENDING
NEWLY PAIDSERVICES
Accountability is Assured
As Part of the Payment Contract
NECESSARYSPENDINGPROVIDER
CANCONTROL
AVOIDABLESPENDINGPROVIDER
CANCONTROL
UNPAIDSERVICES
NECESSARYSPENDING
NEWLY PAIDSERVICES
SAVINGS
$
PROVIDER-PAYER
AGREEMENT
IF SAVINGSIS NOT
ACHIEVED..
AVOIDABLESPENDING
NECESSARYSPENDING
AVOIDABLESPENDING
PROVIDER $
SAVINGS
…PROVIDERPAYMENTREDUCED
40© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Flexibility/Adequacy/Accountability
via Bundles & Warranties
NECESSARYSPENDINGPROVIDER
CANCONTROL
AVOIDABLESPENDINGPROVIDER
CANCONTROL
UNPAIDSERVICES
NECESSARYSPENDING
NEWLY PAIDSERVICES
SAVINGS
$
PROVIDER-PAYER
AGREEMENT
AVOIDABLESPENDING
BUNDLED
PAYMENT
Bundled payment provides flexibilityto support improved delivery of care
Bundled payment is adequate to cover costs of necessary services
Bundled payment is lower than current spending
Provider warrants that avoidablespending will be lower
41© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Protections Against
Underuse Needed
NECESSARYSPENDINGPROVIDER
CANCONTROL
AVOIDABLESPENDINGPROVIDER
CANCONTROL
UNPAIDSERVICES
NECESSARYSPENDING
NEWLY PAIDSERVICES
SAVINGS
$
PROVIDER-PAYER
AGREEMENT
AVOIDABLESPENDING
BUNDLED
PAYMENT
CUTS INNECESSARYSERVICES
THAT HARMQUALITY
AVOIDABLESPENDING
NEWLY PAIDSERVICES
IF QUALITYIS
REDUCED…
PROVIDERPROFITS
SAVINGS
42© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Protections Against
Underuse Needed
NECESSARYSPENDINGPROVIDER
CANCONTROL
AVOIDABLESPENDINGPROVIDER
CANCONTROL
UNPAIDSERVICES
NECESSARYSPENDING
NEWLY PAIDSERVICES
SAVINGS
$
PROVIDER-PAYER
AGREEMENT
AVOIDABLESPENDING
BUNDLED
PAYMENT
CUTS INNECESSARYSERVICES
THAT HARMQUALITY
AVOIDABLESPENDING
NEWLY PAIDSERVICES
IF QUALITYIS
REDUCED…
PROVIDERPROFITS
CUTS INNECESSARYSERVICES
THAT HARMQUALITY
AVOIDABLESPENDING
NEWLY PAIDSERVICES
PROVIDERPROFITS
SAVINGS SAVINGSQUALITY
MEASURES
PAYMENTSARE
REDUCED
43© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Successful Payment Reforms
Have Four Characteristics
44© 2009 – 2015 Center for Healthcare Quality and Payment Reform
The Four Characteristics
of Successful Payment Reforms
1. Flexibility in Care Delivery. The payment system should give providers freedom to deliver care in ways that will achieve high quality in the most efficient way and to adjust care delivery to the unique needs of individual patients.
45© 2009 – 2015 Center for Healthcare Quality and Payment Reform
The Four Characteristics
of Successful Payment Reforms
1. Flexibility in Care Delivery. The payment system should give providers freedom to deliver care in ways that will achieve high quality in the most efficient way and to adjust care delivery to the unique needs of individual patients.
2. Appropriate Accountability for Spending. The payment system should assure purchasers and payers that spending will decrease (or grow more slowly).
46© 2009 – 2015 Center for Healthcare Quality and Payment Reform
The Four Characteristics
of Successful Payment Reforms
1. Flexibility in Care Delivery. The payment system should give providers freedom to deliver care in ways that will achieve high quality in the most efficient way and to adjust care delivery to the unique needs of individual patients.
2. Appropriate Accountability for Spending. The payment system should assure purchasers and payers that spending will decrease (or grow more slowly). The payment system should hold providers accountable for utilization and spending they can control, but not for services or costs they cannot control or influence.
47© 2009 – 2015 Center for Healthcare Quality and Payment Reform
The Four Characteristics
of Successful Payment Reforms
1. Flexibility in Care Delivery. The payment system should give providers freedom to deliver care in ways that will achieve high quality in the most efficient way and to adjust care delivery to the unique needs of individual patients.
2. Appropriate Accountability for Spending. The payment system should assure purchasers and payers that spending will decrease (or grow more slowly). The payment system should hold providers accountable for utilization and spending they can control, but not for services or costs they cannot control or influence.
3. Appropriate Accountability for Quality. The payment system should assure patients and payers that the quality of care will remain the same or improve.
48© 2009 – 2015 Center for Healthcare Quality and Payment Reform
The Four Characteristics
of Successful Payment Reforms
1. Flexibility in Care Delivery. The payment system should give providers freedom to deliver care in ways that will achieve high quality in the most efficient way and to adjust care delivery to the unique needs of individual patients.
2. Appropriate Accountability for Spending. The payment system should assure purchasers and payers that spending will decrease (or grow more slowly). The payment system should hold providers accountable for utilization and spending they can control, but not for services or costs they cannot control or influence.
3. Appropriate Accountability for Quality. The payment system should assure patients and payers that the quality of care will remain the same or improve. The payment system should hold providers accountable for quality they can control, but not for aspects of quality or outcomes they cannot control or influence.
49© 2009 – 2015 Center for Healthcare Quality and Payment Reform
The Four Characteristics
of Successful Payment Reforms
1. Flexibility in Care Delivery. The payment system should give providers freedom to deliver care in ways that will achieve high quality in the most efficient way and to adjust care delivery to the unique needs of individual patients.
2. Appropriate Accountability for Spending. The payment system should assure purchasers and payers that spending will decrease (or grow more slowly). The payment system should hold providers accountable for utilization and spending they can control, but not for services or costs they cannot control or influence.
3. Appropriate Accountability for Quality. The payment system should assure patients and payers that the quality of care will remain the same or improve. The payment system should hold providers accountable for quality they can control, but not for aspects of quality or outcomes they cannot control or influence.
4. Adequacy of Payment. The size of the payments should be adequate to cover the providers’ costs of delivering high quality care for the types of patients they see and at the levels of cost or efficiency that are feasible for them to achieve.
50© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Four Building Blocks to Address
Four Characteristics for Success
1. Flexibility in Care Delivery.
2. Appropriate Accountability for Spending.
3. Appropriate Accountability for Quality
4. Adequacy of Payment.
51© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Four Building Blocks to Address
Four Characteristics for Success
1. Flexibility in Care Delivery.
2. Appropriate Accountability for Spending.
3. Appropriate Accountability for Quality
4. Adequacy of Payment.
BUILDING BLOCK 1:Services Covered by a Single Payment
52© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Four Building Blocks to Address
Four Characteristics for Success
1. Flexibility in Care Delivery.
2. Appropriate Accountability for Spending.
3. Appropriate Accountability for Quality
4. Adequacy of Payment.
BUILDING BLOCK 1:Services Covered by a Single Payment
BUILDING BLOCK 2:Mechanism for ControllingUtilization and Spending
53© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Four Building Blocks to Address
Four Characteristics for Success
1. Flexibility in Care Delivery.
2. Appropriate Accountability for Spending.
3. Appropriate Accountability for Quality
4. Adequacy of Payment.
BUILDING BLOCK 1:Services Covered by a Single Payment
BUILDING BLOCK 2:Mechanism for ControllingUtilization and Spending
BUILDING BLOCK 3:Mechanism for AssuringGood Quality and Outcomes
54© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Four Building Blocks to Address
Four Characteristics for Success
1. Flexibility in Care Delivery.
2. Appropriate Accountability for Spending.
3. Appropriate Accountability for Quality
4. Adequacy of Payment.
BUILDING BLOCK 1:Services Covered by a Single Payment
BUILDING BLOCK 2:Mechanism for ControllingUtilization and Spending
BUILDING BLOCK 3:Mechanism for AssuringGood Quality and Outcomes
BUILDING BLOCK 4:Mechanism for AssuringAdequacy of Payment
55© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Multiple Options for Implementing
Each of the Four Building Blocks
BUILDING BLOCK 1:Services Covered by a Single Payment
BUILDING BLOCK 2:Mechanism for ControllingUtilization and Spending
BUILDING BLOCK 3:Mechanism for AssuringGood Quality and Outcomes
BUILDING BLOCK 4:Mechanism for AssuringAdequacy of Payment
• New service-based fees• Treatment-based bundles• Condition-based bundles• Population-based payment
56© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Multiple Options for Implementing
Each of the Four Building Blocks
BUILDING BLOCK 1:Services Covered by a Single Payment
BUILDING BLOCK 2:Mechanism for ControllingUtilization and Spending
BUILDING BLOCK 3:Mechanism for AssuringGood Quality and Outcomes
BUILDING BLOCK 4:Mechanism for AssuringAdequacy of Payment
• New service-based fees• Treatment-based bundles• Condition-based bundles• Population-based payment
• P4P based on utilization• P4P based on spending/savings• Bundled payment
57© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Multiple Options for Implementing
Each of the Four Building Blocks
BUILDING BLOCK 1:Services Covered by a Single Payment
BUILDING BLOCK 2:Mechanism for ControllingUtilization and Spending
BUILDING BLOCK 3:Mechanism for AssuringGood Quality and Outcomes
BUILDING BLOCK 4:Mechanism for AssuringAdequacy of Payment
• New service-based fees• Treatment-based bundles• Condition-based bundles• Population-based payment
• P4P based on utilization• P4P based on spending/savings• Bundled payment
• Minimum performance standards• P4P based on quality• Warrantied payment
58© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Multiple Options for Implementing
Each of the Four Building Blocks
BUILDING BLOCK 1:Services Covered by a Single Payment
BUILDING BLOCK 2:Mechanism for ControllingUtilization and Spending
BUILDING BLOCK 3:Mechanism for AssuringGood Quality and Outcomes
BUILDING BLOCK 4:Mechanism for AssuringAdequacy of Payment
• New service-based fees• Treatment-based bundles• Condition-based bundles• Population-based payment
• P4P based on utilization• P4P based on spending/savings• Bundled payment
• Minimum performance standards• P4P based on quality• Warrantied payment
• Risk adjustment/stratification• Outlier payments• Risk corridors• Volume-based adjustments• Periodic adjustments to match cost
59© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Under FFS, Separate Payments
for Individual Services…
Fee for Service
Payment
Separate Payments for
Individual Svcs
BUILDINGBLOCK 1ServicesCovered
by a SinglePayment
60© 2009 – 2015 Center for Healthcare Quality and Payment Reform
…But Not Every Service is Paid
For Under FFS
Fee for Service
Payment
Separate Payments for
Individual Svcs
No Payments for Valuable
Services
BUILDINGBLOCK 1ServicesCovered
by a SinglePayment
61© 2009 – 2015 Center for Healthcare Quality and Payment Reform
There is No Control on Total
Spending in FFS
Fee for Service
Payment
BUILDINGBLOCK 2ControllingUtilization
& Spending
Separate Payments for
Individual Svcs
No Payments for Valuable
Services
No Control on Total
Spending
BUILDINGBLOCK 1ServicesCovered
by a SinglePayment
62© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Services Are Paid For
Regardless of Quality
Fee for Service
Payment
BUILDINGBLOCK 2ControllingUtilization
& Spending
BUILDINGBLOCK 3EnsuringAdequate
Quality
Separate Payments for
Individual Svcs
No Payments for Valuable
Services
No Control on Total
Spending
PaymentSame
Regardlessof Quality
BUILDINGBLOCK 1ServicesCovered
by a SinglePayment
63© 2009 – 2015 Center for Healthcare Quality and Payment Reform
In FFS, Efforts are Made to
Ensure Payment Covers Costs
Fee for Service
Payment
BUILDINGBLOCK 2ControllingUtilization
& Spending
BUILDINGBLOCK 4EnsuringAdequacy
of Payment
BUILDINGBLOCK 3EnsuringAdequate
Quality
Separate Payments for
Individual Svcs
No Payments for Valuable
Services
No Control on Total
Spending
PaymentSame
Regardlessof Quality
Pay > Cost of Services
BUILDINGBLOCK 1ServicesCovered
by a SinglePayment
64© 2009 – 2015 Center for Healthcare Quality and Payment Reform
One Approach: Pay for Services
Not Currently Paid for in FFS
Fee for Service
Payment
EnhancedFee for Service
BUILDINGBLOCK 1ServicesCovered
by a SinglePayment
BUILDINGBLOCK 2ControllingUtilization
& Spending
BUILDINGBLOCK 4EnsuringAdequacy
of Payment
BUILDINGBLOCK 3EnsuringAdequate
Quality
Separate Payments for
Individual Svcs
No Payments for Valuable
Services
No Control on Total
Spending
PaymentSame
Regardlessof Quality
Pay > Cost of Services
Separate Payments for
Individual Svcs
Payments for Additional
Services
65© 2009 – 2015 Center for Healthcare Quality and Payment Reform
But Also Adjust Payments to
Protect Against Overutilization
Fee for Service
Payment
EnhancedFee for Service
BUILDINGBLOCK 1ServicesCovered
by a SinglePayment
BUILDINGBLOCK 2ControllingUtilization
& Spending
BUILDINGBLOCK 4EnsuringAdequacy
of Payment
BUILDINGBLOCK 3EnsuringAdequate
Quality
Separate Payments for
Individual Svcs
No Payments for Valuable
Services
No Control on Total
Spending
PaymentSame
Regardlessof Quality
PaymentAdjustmentsfor Utilization of Services
Pay > Cost of Services
Separate Payments for
Individual Svcs
Payments for Additional
Services
66© 2009 – 2015 Center for Healthcare Quality and Payment Reform
And Adjust Payments Based
on Quality of Services Delivered
Fee for Service
Payment
EnhancedFee for Service
BUILDINGBLOCK 1ServicesCovered
by a SinglePayment
BUILDINGBLOCK 2ControllingUtilization
& Spending
BUILDINGBLOCK 4EnsuringAdequacy
of Payment
BUILDINGBLOCK 3EnsuringAdequate
Quality
Separate Payments for
Individual Svcs
No Payments for Valuable
Services
No Control on Total
Spending
PaymentSame
Regardlessof Quality
PaymentAdjustmentsfor Utilization of Services
PaymentAdjustmentsfor Qualityof Services
Pay > Cost of Services
Separate Payments for
Individual Svcs
Payments for Additional
Services
67© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Continue to Ensure that Payment
Covers Costs of Needed Services
Fee for Service
Payment
EnhancedFee for Service
BUILDINGBLOCK 1ServicesCovered
by a SinglePayment
BUILDINGBLOCK 2ControllingUtilization
& Spending
BUILDINGBLOCK 4EnsuringAdequacy
of Payment
BUILDINGBLOCK 3EnsuringAdequate
Quality
Separate Payments for
Individual Svcs
No Payments for Valuable
Services
No Control on Total
Spending
PaymentSame
Regardlessof Quality
PaymentAdjustmentsfor Utilization of Services
PaymentAdjustmentsfor Qualityof Services
Pay > Cost of Services
Pay > Cost of Services
Separate Payments for
Individual Svcs
Payments for Additional
Services
68© 2009 – 2015 Center for Healthcare Quality and Payment Reform
A Second Approach:
Create Treatment Bundles
Fee for Service
Payment
EnhancedFee for Service
BUILDINGBLOCK 1ServicesCovered
by a SinglePayment
BUILDINGBLOCK 2ControllingUtilization
& Spending
BUILDINGBLOCK 4EnsuringAdequacy
of Payment
BUILDINGBLOCK 3EnsuringAdequate
Quality
Treatment-Based
Bundles
Separate Payments for
Individual Svcs
No Payments for Valuable
Services
No Control on Total
Spending
PaymentSame
Regardlessof Quality
PaymentAdjustmentsfor Utilization of Services
PaymentAdjustmentsfor Qualityof Services
Treatment-Based Bundle
Pay > Cost of Services
Pay > Cost of Services
Separate Payments for
Individual Svcs
Payments for Additional
Services Treatment-Based Bundle
Treatment-Based Bundle
Treatment-Based Bundle A single payment
that covers all of theservices needed todeliver a particulartreatment or procedure
69© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Treatment Bundles
Are Nothing New
Fee for Service
Payment
EnhancedFee for Service
BUILDINGBLOCK 1ServicesCovered
by a SinglePayment
BUILDINGBLOCK 2ControllingUtilization
& Spending
BUILDINGBLOCK 4EnsuringAdequacy
of Payment
BUILDINGBLOCK 3EnsuringAdequate
Quality
Treatment-Based
Bundles
Separate Payments for
Individual Svcs
No Payments for Valuable
Services
No Control on Total
Spending
PaymentSame
Regardlessof Quality
PaymentAdjustmentsfor Utilization of Services
PaymentAdjustmentsfor Qualityof Services
Treatment-Based Bundle
Pay > Cost of Services
Pay > Cost of Services
Separate Payments for
Individual Svcs
Payments for Additional
Services Treatment-Based Bundle
Treatment-Based Bundle
Treatment-Based Bundle A single payment
that covers all of theservices needed todeliver a particulartreatment or procedure
Prenatal VisitPrenatal Visit
Delivery of BabyPost-Partum Visit
PHYSICIAN PAYMENTFOR PREGNANCY CARE
70© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Treatment Bundles
Are Nothing New
Fee for Service
Payment
EnhancedFee for Service
BUILDINGBLOCK 1ServicesCovered
by a SinglePayment
BUILDINGBLOCK 2ControllingUtilization
& Spending
BUILDINGBLOCK 4EnsuringAdequacy
of Payment
BUILDINGBLOCK 3EnsuringAdequate
Quality
Treatment-Based
Bundles
Separate Payments for
Individual Svcs
No Payments for Valuable
Services
No Control on Total
Spending
PaymentSame
Regardlessof Quality
PaymentAdjustmentsfor Utilization of Services
PaymentAdjustmentsfor Qualityof Services
Treatment-Based Bundle
Pay > Cost of Services
Pay > Cost of Services
Separate Payments for
Individual Svcs
Payments for Additional
Services Treatment-Based Bundle
Treatment-Based Bundle
Treatment-Based Bundle A single payment
that covers all of theservices needed todeliver a particulartreatment or procedure
Prenatal VisitPrenatal Visit
Delivery of BabyPost-Partum Visit
GlobalFee for
Labor & Delivery
PHYSICIAN PAYMENTFOR PREGNANCY CARE
71© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Treatment Bundles
Are Nothing New
Fee for Service
Payment
EnhancedFee for Service
BUILDINGBLOCK 1ServicesCovered
by a SinglePayment
BUILDINGBLOCK 2ControllingUtilization
& Spending
BUILDINGBLOCK 4EnsuringAdequacy
of Payment
BUILDINGBLOCK 3EnsuringAdequate
Quality
Treatment-Based
Bundles
Separate Payments for
Individual Svcs
No Payments for Valuable
Services
No Control on Total
Spending
PaymentSame
Regardlessof Quality
PaymentAdjustmentsfor Utilization of Services
PaymentAdjustmentsfor Qualityof Services
Treatment-Based Bundle
Pay > Cost of Services
Pay > Cost of Services
Separate Payments for
Individual Svcs
Payments for Additional
Services Treatment-Based Bundle
Treatment-Based Bundle
Treatment-Based Bundle A single payment
that covers all of theservices needed todeliver a particulartreatment or procedure
Prenatal VisitPrenatal Visit
Delivery of BabyPost-Partum Visit
GlobalFee for
Labor & Delivery
PHYSICIAN PAYMENTFOR PREGNANCY CARE
Room & BoardTesting
Surgery SuiteMedications
DRG Paymentfor Procedure
HOSPITAL PAYMENT FOR SURGERY
72© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Bundles Only Control Service
Utilization Per Treatment…
Fee for Service
Payment
EnhancedFee for Service
BUILDINGBLOCK 1ServicesCovered
by a SinglePayment
BUILDINGBLOCK 2ControllingUtilization
& Spending
BUILDINGBLOCK 4EnsuringAdequacy
of Payment
BUILDINGBLOCK 3EnsuringAdequate
Quality
Treatment-Based
Bundles
Separate Payments for
Individual Svcs
No Payments for Valuable
Services
No Control on Total
Spending
PaymentSame
Regardlessof Quality
PaymentAdjustmentsfor Utilization of Services
PaymentAdjustmentsfor Qualityof Services
Treatment-Based Bundle
Pay > Cost of Services
Pay > Cost of Services
Separate Payments for
Individual Svcs
Payments for Additional
Services Treatment-Based Bundle
Treatment-Based Bundle
Treatment-Based Bundle
Single payment controlscost of services for performing back surgery
Potential overuseof surgery to treatback problems
73© 2009 – 2015 Center for Healthcare Quality and Payment Reform
…But Controls Are Needed to
Avoid Overtreatment
Fee for Service
Payment
EnhancedFee for Service
BUILDINGBLOCK 1ServicesCovered
by a SinglePayment
BUILDINGBLOCK 2ControllingUtilization
& Spending
BUILDINGBLOCK 4EnsuringAdequacy
of Payment
BUILDINGBLOCK 3EnsuringAdequate
Quality
Treatment-Based
Bundles
Separate Payments for
Individual Svcs
No Payments for Valuable
Services
No Control on Total
Spending
PaymentSame
Regardlessof Quality
PaymentAdjustmentsfor Utilization of Services
PaymentAdjustmentsfor Qualityof Services
Treatment-Based Bundle
Payment Adj.for Utilizationof Treatment
Pay > Cost of Services
Pay > Cost of Services
Separate Payments for
Individual Svcs
Payments for Additional
Services Treatment-Based Bundle
Treatment-Based Bundle
Treatment-Based Bundle
Single payment controlscost of services for performing back surgery
Potential overuseof surgery to treatback problems
Ensure back surgery isonly used when appropriate
74© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Quality Measures Must Now
Protect Against Underuse
Fee for Service
Payment
EnhancedFee for Service
BUILDINGBLOCK 1ServicesCovered
by a SinglePayment
BUILDINGBLOCK 2ControllingUtilization
& Spending
BUILDINGBLOCK 4EnsuringAdequacy
of Payment
BUILDINGBLOCK 3EnsuringAdequate
Quality
Treatment-Based
Bundles
Separate Payments for
Individual Svcs
No Payments for Valuable
Services
No Control on Total
Spending
PaymentSame
Regardlessof Quality
PaymentAdjustmentsfor Utilization of Services
PaymentAdjustmentsfor Qualityof Services
Treatment-Based Bundle
Payment Adj.for Utilizationof Treatment
PaymentAdjustmentsfor Quality
and Underuse of Services
Pay > Cost of Services
Pay > Cost of Services
Separate Payments for
Individual Svcs
Payments for Additional
Services Treatment-Based Bundle
Treatment-Based Bundle
Treatment-Based Bundle
Single payment controlscost of services for performing back surgery
Potential overuseof surgery to treatback problems
Ensure back surgery isonly used when appropriate
Ensure good outcomeswhen back surgery isperformed
75© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Assure Payment Covers
Costs of Treatment
Fee for Service
Payment
EnhancedFee for Service
BUILDINGBLOCK 1ServicesCovered
by a SinglePayment
BUILDINGBLOCK 2ControllingUtilization
& Spending
BUILDINGBLOCK 4EnsuringAdequacy
of Payment
BUILDINGBLOCK 3EnsuringAdequate
Quality
Treatment-Based
Bundles
Separate Payments for
Individual Svcs
No Payments for Valuable
Services
No Control on Total
Spending
PaymentSame
Regardlessof Quality
PaymentAdjustmentsfor Utilization of Services
PaymentAdjustmentsfor Qualityof Services
Treatment-Based Bundle
Payment Adj.for Utilizationof Treatment
PaymentAdjustmentsfor Quality
and Underuse of Services
Pay > Cost of Services
Pay > Cost of Services
Pay > Costof Treatment
Separate Payments for
Individual Svcs
Payments for Additional
Services Treatment-Based Bundle
Treatment-Based Bundle
Treatment-Based Bundle
Single payment controlscost of services for performing back surgery
Potential overuseof surgery to treatback problems
Ensure back surgery isonly used when appropriate
Ensure good outcomeswhen back surgery isperformed
Payment sufficient to covercosts of spinal implants
76© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Provider Now Needs Protection
for Expenses It Can’t Control
Fee for Service
Payment
EnhancedFee for Service
BUILDINGBLOCK 1ServicesCovered
by a SinglePayment
BUILDINGBLOCK 2ControllingUtilization
& Spending
BUILDINGBLOCK 4EnsuringAdequacy
of Payment
BUILDINGBLOCK 3EnsuringAdequate
Quality
Treatment-Based
Bundles
Separate Payments for
Individual Svcs
No Payments for Valuable
Services
No Control on Total
Spending
PaymentSame
Regardlessof Quality
PaymentAdjustmentsfor Utilization of Services
PaymentAdjustmentsfor Qualityof Services
Treatment-Based Bundle
Payment Adj.for Utilizationof Treatment
PaymentAdjustmentsfor Quality
and Underuse of Services
Pay > Cost of Services
Pay > Cost of Services
Pay > Costof Treatment
Risk Adjust.,Outlier Pmts,Risk Corridor
Separate Payments for
Individual Svcs
Payments for Additional
Services Treatment-Based Bundle
Treatment-Based Bundle
Treatment-Based Bundle
Single payment controlscost of services for performing back surgery
Potential overuseof surgery to treatback problems
Ensure back surgery isonly used when appropriate
Ensure good outcomeswhen back surgery isperformed
Payment sufficient to covercosts of spinal implants
Protections againstuncontrollable costs
77© 2009 – 2015 Center for Healthcare Quality and Payment Reform
FFS
Pmts
The Goal: Slower Growth in
Spending Than Under FFS
COST
TIME
FFS
Pmts
FFS
Pmts
Actual Actual Projected
78© 2009 – 2015 Center for Healthcare Quality and Payment Reform
To Attract Payers, New Payment
Must Be < Projected FFS Spend
COST
TIME
FFS
Pmts
FFS
Pmts
Alt.
Pmt
Model
$
Bundled
or
Condition-
Based
Payment
Level
LowerPmt
Actual Actual Proposed
79© 2009 – 2015 Center for Healthcare Quality and Payment Reform
…If All Goes Well, Provider’s Costs
Are Lower Than the Payment…
COST
TIME
Costs
of
SvcsFFS
Pmts
FFS
Pmts
Alt.
Pmt
Model
$
LowerPmt
LowerCosts
Actual Actual Proposed Actual
Bundled
or
Condition-
Based
Payment
Level
80© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Profit for
Provider
...And Both the Payer and
Provider Will “Win”
COST
TIME
Costs
of
SvcsFFS
Pmts
FFS
Pmts
Alt.
Pmt
Model
$
LowerPmt
LowerCosts
WIN-
WINSavings
For Payer
Actual Actual Proposed Actual
Bundled
or
Condition-
Based
Payment
Level
81© 2009 – 2015 Center for Healthcare Quality and Payment Reform
The Risk Providers Fear:
All Won’t Go Well (Costs Go Up)..
COST
TIME
Costs
of
SvcsFFS
Pmts
FFS
Pmts
Alt.
Pmt
Model
$
Excess
CostLowerPmt
Actual Actual Proposed Actual
Bundled
or
Condition-
Based
Payment
Level
82© 2009 – 2015 Center for Healthcare Quality and Payment Reform
…Creating a Win-Lose Situation
COST
TIME
Costs
of
SvcsFFS
Pmts
FFS
Pmts
Alt.
Pmt
Model
$
Excess
CostLowerPmt
Loss for
Provider
Savings
For Payer
WIN-
LOSE
Actual Actual Proposed Actual
Bundled
or
Condition-
Based
Payment
Level
83© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Many Different Reasons Costs
May Increase Beyond Payment
COST
TIME
Costs
of
SvcsFFS
Pmts
FFS
Pmts
Alt.
Pmt
Model
$
Excess
Cost
UnusuallyCostly Patient
Overutilizationof Services
New, High-CostTreatment
Many Avoidable Complications
Higher-SeverityPatients
Large RandomVariation
Failure to FollowGuidelines
Savings
Actual Actual Proposed Actual
Bundled
or
Condition-
Based
Payment
Level
84© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Providers CAN Control Many of
the Factors Causing Higher Costs
COST
TIME
Costs
of
SvcsFFS
Pmts
FFS
Pmts
Alt.
Pmt
Model
$
Excess
Cost
UnusuallyCostly Patient
Overutilizationof Services
New, High-CostTreatment
Many Avoidable Complications
Higher-SeverityPatients
Large RandomVariation
Failure to FollowGuidelines
Savings
What
Providers
CAN Control
(Performance
Risk)
Actual Actual Proposed Actual
Bundled
or
Condition-
Based
Payment
Level
85© 2009 – 2015 Center for Healthcare Quality and Payment Reform
But Other Causes of Higher Costs
CAN’T Be Controlled by Providers
COST
TIME
Costs
of
SvcsFFS
Pmts
FFS
Pmts
Alt.
Pmt
Model
$
Excess
Cost
UnusuallyCostly Patient
Overutilizationof Services
New, High-CostTreatment
Many Avoidable Complications
Higher-SeverityPatients
Large RandomVariation
Failure to FollowGuidelines
Savings
What
Providers
CAN Control
(Performance
Risk)
What
Providers
CANNOT
Control
(Insurance
Risk)
Actual Actual Proposed Actual
Bundled
or
Condition-
Based
Payment
Level
86© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Providers Should NOT Be
Expected To Take Insurance Risk
COST
TIME
Costs
of
SvcsFFS
Pmts
FFS
Pmts
Alt.
Pmt
Model
$
Excess
Cost
UnusuallyCostly Patient
Overutilizationof Services
New, High-CostTreatment
Many Avoidable Complications
Higher-SeverityPatients
Large RandomVariation
Failure to FollowGuidelines
Savings
What
Providers
CAN Control
(Performance
Risk)
What
Providers
CANNOT
Control
(Insurance
Risk)
Actual Actual Proposed Actual
Bundled
or
Condition-
Based
Payment
Level
87© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Four Mechanisms for Separating
Insurance and Performance Risk
COST
TIME
Costs
of
SvcsFFS
Pmts
FFS
Pmts
Alt.
Pmt
Model
$
Excess
Cost
UnusuallyCostly Patient
Overutilizationof Services
New, High-CostTreatment
Many Avoidable Complications
Higher-SeverityPatients
RiskAdjustment
Large RandomVariation
Failure to FollowGuidelines
Outlier Pmt/Stop-Loss
Risk Exclusions
RiskCorridors
PerformanceRisk
(Provider’sResponsibility)
Savings
Actual Actual Proposed Actual
Bundled
or
Condition-
Based
Payment
Level
88© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Payments Can be Bundled by
Condition Instead of Treatment
Fee for Service
Payment
EnhancedFee for Service
Condition-Based
Payment
BUILDINGBLOCK 1ServicesCovered
by a SinglePayment
BUILDINGBLOCK 2ControllingUtilization
& Spending
BUILDINGBLOCK 4EnsuringAdequacy
of Payment
BUILDINGBLOCK 3EnsuringAdequate
Quality
Treatment-Based
Bundles
Separate Payments for
Individual Svcs
No Payments for Valuable
Services
No Control on Total
Spending
PaymentSame
Regardlessof Quality
PaymentAdjustmentsfor Utilization of Services
PaymentAdjustmentsfor Qualityof Services
Treatment-Based Bundle
Condition-Based
Payment
Payment Adj.for Utilizationof Treatment
PaymentAdjustmentsfor Quality
and Underuse of Services
Pay > Cost of Services
Pay > Cost of Services
Pay > Costof Treatment
Risk Adjust.,Outlier Pmts,Risk Corridor
Separate Payments for
Individual Svcs
Payments for Additional
Services Treatment-Based Bundle
Treatment-Based Bundle
Treatment-Based Bundle
Condition-Based
Payment
89© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Start From Treatment-Based
Bundles..PHYSICIAN PAYMENT
FOR PREGNANCY CARE
Prenatal VisitPrenatal Visit
Cesarean SectionPost-Partum Visit
GlobalFee for
C-Section
Prenatal VisitPrenatal Visit
Vaginal DeliveryPost-Partum Visit
GlobalFee for
Vaginal Delivery
PaymentBased on Type of Procedure Used
Rather ThanNeed of Patient
90© 2009 – 2015 Center for Healthcare Quality and Payment Reform
…to Create Condition-Based
Bundles
Prenatal VisitPrenatal Visit
Cesarean SectionPost-Partum Visit
GlobalFee for
C-Section
PHYSICIAN PAYMENTFOR PREGNANCY CARE
Prenatal VisitPrenatal Visit
Vaginal DeliveryPost-Partum Visit
GlobalFee for
Vaginal Delivery
Global Fee forHigh-RiskPregnancy
Global Fee forLow-Risk
Pregnancy
PaymentBased on Need
of Patient RatherThan Type of
Procedure Used
91© 2009 – 2015 Center for Healthcare Quality and Payment Reform
And From
Single-Provider Bundles…PHYSICIAN PAYMENT
FOR PREGNANCY CARE
HOSPITAL PAYMENTFOR LABOR & DELIVERY
Room & BoardTesting
Delivery SuiteMedications
DRG Paymentfor Labor &
Delivery
Prenatal VisitPrenatal Visit
Cesarean SectionPost-Partum Visit
GlobalFee for
C-Section
Prenatal VisitPrenatal Visit
Vaginal DeliveryPost-Partum Visit
GlobalFee for
Vaginal Delivery
Global Fee forHigh-RiskPregnancy
Global Fee forLow-Risk
Pregnancy
92© 2009 – 2015 Center for Healthcare Quality and Payment Reform
…To Multi-Provider Bundles
PHYSICIAN PAYMENTFOR PREGNANCY CARE
HOSPITAL PAYMENTFOR LABOR & DELIVERY
Room & BoardTesting
Delivery SuiteMedications
DRG Paymentfor Labor &
Delivery
Full Bundled Payment for High-RiskPregnancy
Full BundledPayment for
Low-RiskPregnancy
Prenatal VisitPrenatal Visit
Cesarean SectionPost-Partum Visit
GlobalFee for
C-Section
Prenatal VisitPrenatal Visit
Vaginal DeliveryPost-Partum Visit
GlobalFee for
Vaginal Delivery
Global Fee forHigh-RiskPregnancy
Global Fee forLow-Risk
Pregnancy
93© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Controls Needed to Protect
Against Overdiagnosis
Fee for Service
Payment
EnhancedFee for Service
Condition-Based
Payment
BUILDINGBLOCK 1ServicesCovered
by a SinglePayment
BUILDINGBLOCK 2ControllingUtilization
& Spending
BUILDINGBLOCK 4EnsuringAdequacy
of Payment
BUILDINGBLOCK 3EnsuringAdequate
Quality
Treatment-Based
Bundles
Separate Payments for
Individual Svcs
No Payments for Valuable
Services
No Control on Total
Spending
PaymentSame
Regardlessof Quality
PaymentAdjustmentsfor Utilization of Services
PaymentAdjustmentsfor Qualityof Services
Treatment-Based Bundle
Condition-Based
Payment
Payment Adj.for Utilizationof Treatment
Payment Adj.for Over-Diag.
PaymentAdjustmentsfor Quality
and Underuse of Services
Pay > Cost of Services
Pay > Cost of Services
Pay > Costof Treatment
Risk Adjust.,Outlier Pmts,Risk Corridor
Separate Payments for
Individual Svcs
Payments for Additional
Services Treatment-Based Bundle
Treatment-Based Bundle
Treatment-Based Bundle
Condition-Based
Payment
Payment foraddressingback pain(paymentunrelated towhethersurgery isperformed)
Evidence ofspinal problem
94© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Ensure Quality of Services and
Protect Against Underuse
Fee for Service
Payment
EnhancedFee for Service
Condition-Based
Payment
BUILDINGBLOCK 1ServicesCovered
by a SinglePayment
BUILDINGBLOCK 2ControllingUtilization
& Spending
BUILDINGBLOCK 4EnsuringAdequacy
of Payment
BUILDINGBLOCK 3EnsuringAdequate
Quality
Treatment-Based
Bundles
Separate Payments for
Individual Svcs
No Payments for Valuable
Services
No Control on Total
Spending
PaymentSame
Regardlessof Quality
PaymentAdjustmentsfor Utilization of Services
PaymentAdjustmentsfor Qualityof Services
Treatment-Based Bundle
Condition-Based
Payment
Payment Adj.for Utilizationof Treatment
Payment Adj.for Over-Diag.
PaymentAdjustmentsfor Quality
and Underuse of Services
PaymentAdjustmentsfor Quality
and Underuse of Treatment
Pay > Cost of Services
Pay > Cost of Services
Pay > Costof Treatment
Risk Adjust.,Outlier Pmts,Risk Corridor
Separate Payments for
Individual Svcs
Payments for Additional
Services Treatment-Based Bundle
Treatment-Based Bundle
Treatment-Based Bundle
Condition-Based
Payment
95© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Ensure Payments Are Adequate
to Cover Costs for All Patients
Fee for Service
Payment
EnhancedFee for Service
Condition-Based
Payment
BUILDINGBLOCK 1ServicesCovered
by a SinglePayment
BUILDINGBLOCK 2ControllingUtilization
& Spending
BUILDINGBLOCK 4EnsuringAdequacy
of Payment
BUILDINGBLOCK 3EnsuringAdequate
Quality
Treatment-Based
Bundles
Separate Payments for
Individual Svcs
No Payments for Valuable
Services
No Control on Total
Spending
PaymentSame
Regardlessof Quality
PaymentAdjustmentsfor Utilization of Services
PaymentAdjustmentsfor Qualityof Services
Treatment-Based Bundle
Condition-Based
Payment
Payment Adj.for Utilizationof Treatment
Payment Adj.for Over-Diag.
PaymentAdjustmentsfor Quality
and Underuse of Services
PaymentAdjustmentsfor Quality
and Underuse of Treatment
Pay > Cost of Services
Pay > Cost of Services
Pay > Costof Treatment
Risk Adjust.,Outlier Pmts,Risk Corridor
Separate Payments for
Individual Svcs
Payments for Additional
Services Treatment-Based Bundle
Treatment-Based Bundle
Treatment-Based Bundle
Condition-Based
Payment
Pay > Costof Condition
Risk Adjust.,Outlier Pmts,Risk Corridor
96© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Pay a “Global Payment” for
All Conditions and Treatment
Population-Based
Payment
Fee for Service
Payment
EnhancedFee for Service
Condition-Based
Payment
BUILDINGBLOCK 1ServicesCovered
by a SinglePayment
BUILDINGBLOCK 2ControllingUtilization
& Spending
BUILDINGBLOCK 4EnsuringAdequacy
of Payment
BUILDINGBLOCK 3EnsuringAdequate
Quality
Treatment-Based
Bundles
Separate Payments for
Individual Svcs
No Payments for Valuable
Services
No Control on Total
Spending
PaymentSame
Regardlessof Quality
PaymentAdjustmentsfor Utilization of Services
PaymentAdjustmentsfor Qualityof Services
Treatment-Based Bundle
Condition-Based
Payment
Population-Based
Payment
Payment Adj.for Utilizationof Treatment
Payment Adj.for Over-Diag.
PaymentAdjustmentsfor Quality
and Underuse of Services
PaymentAdjustmentsfor Quality
and Underuse of Treatment
Pay > Cost of Services
Pay > Cost of Services
Pay > Costof Treatment
Risk Adjust.,Outlier Pmts,Risk Corridor
Separate Payments for
Individual Svcs
Payments for Additional
Services Treatment-Based Bundle
Treatment-Based Bundle
Treatment-Based Bundle
Condition-Based
Payment
Pay > Costof Condition
Risk Adjust.,Outlier Pmts,Risk Corridor
97© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Ensure Quality and
Protect Against Underuse
Population-Based
Payment
Fee for Service
Payment
EnhancedFee for Service
Condition-Based
Payment
BUILDINGBLOCK 1ServicesCovered
by a SinglePayment
BUILDINGBLOCK 2ControllingUtilization
& Spending
BUILDINGBLOCK 4EnsuringAdequacy
of Payment
BUILDINGBLOCK 3EnsuringAdequate
Quality
Treatment-Based
Bundles
Separate Payments for
Individual Svcs
No Payments for Valuable
Services
No Control on Total
Spending
PaymentSame
Regardlessof Quality
PaymentAdjustmentsfor Utilization of Services
PaymentAdjustmentsfor Qualityof Services
Treatment-Based Bundle
Condition-Based
Payment
Population-Based
Payment
Payment Adj.for Utilizationof Treatment
Payment Adj.for Over-Diag.
PaymentAdjustmentsfor Quality
and Underuse of Services
PaymentAdjustmentsfor Quality
and Underuse of Treatment
PaymentAdjustmentsfor Quality
and Underuse of Prevention
Pay > Cost of Services
Pay > Cost of Services
Pay > Costof Treatment
Risk Adjust.,Outlier Pmts,Risk Corridor
Separate Payments for
Individual Svcs
Payments for Additional
Services Treatment-Based Bundle
Treatment-Based Bundle
Treatment-Based Bundle
Condition-Based
Payment
Pay > Costof Condition
Risk Adjust.,Outlier Pmts,Risk Corridor
98© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Ensure Payments are Adequate
to Cover Cost of Quality Care
Population-Based
Payment
Fee for Service
Payment
EnhancedFee for Service
Condition-Based
Payment
BUILDINGBLOCK 1ServicesCovered
by a SinglePayment
BUILDINGBLOCK 2ControllingUtilization
& Spending
BUILDINGBLOCK 4EnsuringAdequacy
of Payment
BUILDINGBLOCK 3EnsuringAdequate
Quality
Treatment-Based
Bundles
Separate Payments for
Individual Svcs
No Payments for Valuable
Services
No Control on Total
Spending
PaymentSame
Regardlessof Quality
PaymentAdjustmentsfor Utilization of Services
PaymentAdjustmentsfor Qualityof Services
Treatment-Based Bundle
Condition-Based
Payment
Population-Based
Payment
Payment Adj.for Utilizationof Treatment
Payment Adj.for Over-Diag.
PaymentAdjustmentsfor Quality
and Underuse of Services
PaymentAdjustmentsfor Quality
and Underuse of Treatment
PaymentAdjustmentsfor Quality
and Underuse of Prevention
Pay > Cost of Services
Pay > Cost of Services
Pay > Costof Treatment
Risk Adjust.,Outlier Pmts,Risk Corridor
Separate Payments for
Individual Svcs
Payments for Additional
Services Treatment-Based Bundle
Treatment-Based Bundle
Treatment-Based Bundle
Condition-Based
Payment
Pay > Costof Condition
Risk Adjust.,Outlier Pmts,Risk Corridor
Pay > Costof Population
Risk Adjust.,Outlier Pmts,Risk Corridor
99© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Options Can Also Be Viewed as a
Transition Strategy
Population-Based
Payment
Fee for Service
Payment
BUILDINGBLOCK 1ServicesCovered
by a SinglePayment
BUILDINGBLOCK 2ControllingUtilization
& Spending
BUILDINGBLOCK 4EnsuringAdequacy
of Payment
BUILDINGBLOCK 3EnsuringAdequate
Quality
Separate Payments for
Individual Svcs
No Payments for Valuable
Services
No Control on Total
Spending
PaymentSame
Regardlessof Quality
Population-Based
Payment
PaymentAdjustmentsfor Quality
and Underuse of Prevention
Pay > Cost of Services
Pay > Costof Population
Risk Adjust.,Outlier Pmts,Risk Corridor
100© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Options Can Also Be Viewed as a
Transition Strategy
Fee for Service
Payment
EnhancedFee for Service
BUILDINGBLOCK 1ServicesCovered
by a SinglePayment
BUILDINGBLOCK 2ControllingUtilization
& Spending
BUILDINGBLOCK 4EnsuringAdequacy
of Payment
BUILDINGBLOCK 3EnsuringAdequate
Quality
Separate Payments for
Individual Svcs
No Payments for Valuable
Services
No Control on Total
Spending
PaymentSame
Regardlessof Quality
PaymentAdjustmentsfor Utilization of Services
PaymentAdjustmentsfor Qualityof Services
Pay > Cost of Services
Pay > Cost of Services
Separate Payments for
Individual Svcs
Payments for Additional
Services
101© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Options Can Also Be Viewed as a
Transition Strategy
Fee for Service
Payment
EnhancedFee for Service
BUILDINGBLOCK 1ServicesCovered
by a SinglePayment
BUILDINGBLOCK 2ControllingUtilization
& Spending
BUILDINGBLOCK 4EnsuringAdequacy
of Payment
BUILDINGBLOCK 3EnsuringAdequate
Quality
Treatment-Based
Bundles
Separate Payments for
Individual Svcs
No Payments for Valuable
Services
No Control on Total
Spending
PaymentSame
Regardlessof Quality
PaymentAdjustmentsfor Utilization of Services
PaymentAdjustmentsfor Qualityof Services
Treatment-Based Bundle
Payment Adj.for Utilizationof Treatment
PaymentAdjustmentsfor Quality
and Underuse of Services
Pay > Cost of Services
Pay > Cost of Services
Pay > Costof Treatment
Risk Adjust.,Outlier Pmts,Risk Corridor
Separate Payments for
Individual Svcs
Payments for Additional
Services Treatment-Based Bundle
Treatment-Based Bundle
Treatment-Based Bundle
102© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Options Can Also Be Viewed as a
Transition Strategy
Fee for Service
Payment
EnhancedFee for Service
Condition-Based
Payment
BUILDINGBLOCK 1ServicesCovered
by a SinglePayment
BUILDINGBLOCK 2ControllingUtilization
& Spending
BUILDINGBLOCK 4EnsuringAdequacy
of Payment
BUILDINGBLOCK 3EnsuringAdequate
Quality
Treatment-Based
Bundles
Separate Payments for
Individual Svcs
No Payments for Valuable
Services
No Control on Total
Spending
PaymentSame
Regardlessof Quality
PaymentAdjustmentsfor Utilization of Services
PaymentAdjustmentsfor Qualityof Services
Treatment-Based Bundle
Condition-Based
Payment
Payment Adj.for Utilizationof Treatment
Payment Adj.for Over-Diag.
PaymentAdjustmentsfor Quality
and Underuse of Services
PaymentAdjustmentsfor Quality
and Underuse of Treatment
Pay > Cost of Services
Pay > Cost of Services
Pay > Costof Treatment
Risk Adjust.,Outlier Pmts,Risk Corridor
Separate Payments for
Individual Svcs
Payments for Additional
Services Treatment-Based Bundle
Treatment-Based Bundle
Treatment-Based Bundle
Condition-Based
Payment
Pay > Costof Condition
Risk Adjust.,Outlier Pmts,Risk Corridor
103© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Allow Providers and Payers to
Evolve Payment Over Time
Population-Based
Payment
Fee for Service
Payment
EnhancedFee for Service
Condition-Based
Payment
BUILDINGBLOCK 1ServicesCovered
by a SinglePayment
BUILDINGBLOCK 2ControllingUtilization
& Spending
BUILDINGBLOCK 4EnsuringAdequacy
of Payment
BUILDINGBLOCK 3EnsuringAdequate
Quality
Treatment-Based
Bundles
Separate Payments for
Individual Svcs
No Payments for Valuable
Services
No Control on Total
Spending
PaymentSame
Regardlessof Quality
PaymentAdjustmentsfor Utilization of Services
PaymentAdjustmentsfor Qualityof Services
Treatment-Based Bundle
Condition-Based
Payment
Population-Based
Payment
Payment Adj.for Utilizationof Treatment
Payment Adj.for Over-Diag.
PaymentAdjustmentsfor Quality
and Underuse of Services
PaymentAdjustmentsfor Quality
and Underuse of Treatment
PaymentAdjustmentsfor Quality
and Underuse of Prevention
Pay > Cost of Services
Pay > Cost of Services
Pay > Costof Treatment
Risk Adjust.,Outlier Pmts,Risk Corridor
Separate Payments for
Individual Svcs
Payments for Additional
Services Treatment-Based Bundle
Treatment-Based Bundle
Treatment-Based Bundle
Condition-Based
Payment
Pay > Costof Condition
Risk Adjust.,Outlier Pmts,Risk Corridor
Pay > Costof Population
Risk Adjust.,Outlier Pmts,Risk Corridor
104© 2009 – 2015 Center for Healthcare Quality and Payment Reform
More Detail on Building Blocks
Available in Full Report
www.nrhi.org/uploads/nrhi_pymntrfrm_3_r9-2.pdf
www.paymentreform.org/downloads/BuildingBlocksofSuccessfulPaymentReform.pdf
105© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Three Step Process Needed in
Designing Payment Reforms
106© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Changing Payment Isn’t Worth It
Without Opportunities to Improve
What is the Opportunity
to Improve Careand Reduce Cost?
107© 2009 – 2015 Center for Healthcare Quality and Payment Reform
If No Barriers in Payment,
No Need for Payment Reform
What is the Opportunity
to Improve Careand Reduce Cost?
What are the Barriers in the
Current Payment System?
108© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Payment Reforms Must Remove
Barriers to Improving Care
What is the Opportunity
to Improve Careand Reduce Cost?
What are the Barriers in the
Current Payment System?
What Kind ofAlternative
Payment ModelRemoves the
Barriers?
109© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Opportunities for Improvement
Exist in Every Specialty
Psychiatry
OB/GYN
OrthopedicSurgery
Opportunitiesto Improve Care
and Reduce Cost
• Reduce infectionsand complications
• Use less expensivepost-acute carefollowing surgery
• Reduce ER visitsand admissions forpatients withdepression andchronic disease
• Reduce use ofelective C-sections
• Reduce earlydeliveries and use of NICU
Cardiology
• Use less invasiveand expensiveprocedures when appropriate
110© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Most Specialties Face Barriers in
FFS to Making Improvements
Psychiatry
OB/GYN
OrthopedicSurgery
Opportunitiesto Improve Care
and Reduce Cost
Barriers inCurrent
Payment System
• Reduce infectionsand complications
• Use less expensivepost-acute carefollowing surgery
• Reduce ER visitsand admissions forpatients withdepression andchronic disease
• Reduce use ofelective C-sections
• Reduce earlydeliveries and use of NICU
• Similar/lower payment forvaginal deliveries
• No flexibility toincrease inpatientservices to reducecomplications &post-acute care
• No payment forphone consults with PCPs
• No payment forRN care managers
Cardiology
• Use less invasiveand expensiveprocedures when appropriate
• Payment is basedon which procedure is used,not the outcomefor the patient
111© 2009 – 2015 Center for Healthcare Quality and Payment Reform
There Are Win-Win-Win Solutions
Through Better Payment Systems
Psychiatry
OB/GYN
OrthopedicSurgery
Opportunitiesto Improve Care
and Reduce Cost
Barriers inCurrent
Payment System
Solutions viaAccountable
Payment Models
• Reduce infectionsand complications
• Use less expensivepost-acute carefollowing surgery
• Reduce ER visitsand admissions forpatients withdepression andchronic disease
• Reduce use ofelective C-sections
• Reduce earlydeliveries and use of NICU
• Similar/lower payment forvaginal deliveries
• Condition-basedpaymentfor total cost ofdelivery in low-riskpregnancy
• Episode paymentfor hospital andpost-acute carecosts withwarranty
• No flexibility toincrease inpatientservices to reducecomplications &post-acute care
• Joint condition-based payment to PCP andpsychiatrist
• No payment forphone consults with PCPs
• No payment forRN care managers
Cardiology
• Use less invasiveand expensiveprocedures when appropriate
• Condition-basedpayment coveringCABG, PCI, or medicationmanagement
• Payment is basedon which procedure is used,not the outcomefor the patient
112© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Examples from Other Specialties
Oncology
Radiology
Gastroenterology
Opportunitiesto Improve Care
and Reduce Cost
Barriers inCurrent
Payment System
Solutions viaAccountable
Payment Models
• Reduce unnecessarycolonoscopies andcolon cancer
• Reduce ER/admits forinflammatory bowel d.
• Reduce ER visitsand admissions fordehydration
• Reduce anti-emeticdrug costs
• Reduce use of high-cost imaging
• Improve diagnosticspeed & accuracy
• Low payment forreading images &penalty for 2x
• Inability to changeinapprop. orders
• Global paymentfor imaging costs
• Partnership in condition-basedpayments
• Population-basedpayment for coloncancer screening
• Condition-based pmtfor IBD
• No flexibility to focusextra resources onhighest-risk patients
• No flexibility to spendmore on care mgt
• Condition-basedpayment includingnon-oncolytic Rxand ED/hospitalutilization
• No flexibility tospend more onpreventive care
• Payment based onoffice visits, notoutcomes
Neurology
• Avoid unnecessaryhospitalizations forepilepsy patients
• Reduce strokes andheart attacks after TIA
• Condition-basedpayment for epilepsy
• Episode or condition-based payment forTIA
• No flexibility tospend more onpreventive care
• No payment tocoordinate w/ cardio
113© 2009 – 2015 Center for Healthcare Quality and Payment Reform
A Critical Element is
Shared, Trusted Data
• Providers need to know the current utilization and costs for
their patients to know whether the condition-based or
bundled/warrantied payment amount will cover the costs of
delivering effective care to the patients
• Purchaser/Payer needs to know the current utilization and
costs to know whether the condition-based or
bundled/warrantied 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!
114© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Using Data to Show the
Business Case for Payment Reform
www.PaymentReform.org
115© 2009 – 2015 Center for Healthcare Quality and Payment Reform
Providers and Payers Have to
Collaborate for Win-Win Solutions
PROVIDERS PAYERS
116© 2009 – 2015 Center for Healthcare Quality and Payment Reform
RHICs Can Provide the
Critical Bridge for Success
PROVIDERS PAYERS
REGIONAL HEALTH
IMPROVEMENT COLLABORATIVE
• Neutral Facilitation
• Shared, Trusted Data and Analysis
Harold D. MillerPresident and CEO
Center for Healthcare Quality and Payment Reform
(412) 803-3650
www.CHQPR.org
www.PaymentReform.org