transforming maternity care how payment reform can

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.


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


Can We Reduce Maternity Care

Costs Without Rationing?

Pregnant

Woman


Reducing Costs Without Rationing:

Better Pregnancy Management

Complicated

Pregnancy

Uncomplicated

Pregnancy

Pregnant

Woman



Better Choices About Delivery

Complicated

Pregnancy

Uncomplicated

Pregnancy

Pregnant

Woman

Term Vaginal

Delivery

Pre-Term,

C-Section



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.


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


Delivery



Delivery



Current Payment Systems

Reward Bad Outcomes

$

Complicated

Pregnancy

Uncomplicated

Pregnancy

Pregnant

Woman

Term Vaginal

Delivery

Pre-Term,

C-Section


Delivery



Delivery



How Payment Systems Impede

Better Maternity Care

Goals for

High-Value Maternity Care

Barriers Created by


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




Goals for


Barriers Created by






Avoid Use of Expensive/

Undesirable Procedures

•Higher payment/higher margins for hospitals for C-sections




Goals for


Barriers Created by









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


Improving Payment for

Maternity Care: Part 1

Goals for


Barriers Created by














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)


#1: The “Never Event” Approach:

Don’t Pay at All







outcomes)


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


#2: Creating Incentives for

Improving Birth Outcomes







outcomes)


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


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


P4P Hurts the Hospital If It

Doesn’t Reduce NICU Use






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)


But the Hospital May Be Hurt

More If It Does Reduce NICU Use






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


#3: Paying for Care With a

Warranty







outcomes)


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


Major Improvements in

Outcomes, and Quickly


• 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


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


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


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


Prices for Warranted Care

Will Likely Be Higher


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


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


Example: $5,000 Cost of Delivery

Cost of

Delivery

$5,000


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


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


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 ?


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


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...


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


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...


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


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


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


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)


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!




Goals for


Barriers Created by














Normal Pregnancy,

Term Delivery, No Complications

Normal

Pregnancy

Term Delivery

w/ No CCs

Vaginal Delivery

in Hospital

C-Section in Hospital


Today: Payment Based on Type

of Delivery, Regardless of Need

Normal

Pregnancy

Term Delivery

w/ No CCs

Vaginal Delivery

in Hospital


HEALTH

PLAN

Lower Payment

Higher Payment


Alternative: A Payment Based on

Condition, Not Procedure

Normal

Pregnancy

Term Delivery

w/ No CCs

Vaginal Delivery

in Hospital


Condition-Specific Payment

HEALTH

PLAN

Single

Payment


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


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%


Pay Physician More for

Vaginal Deliveries, Save Money TODAY TOMORROW


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%


What About the Hospital?

TODAY TOMORROW


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%


Hospital Costs Are Not

Proportional to Utilization

$800$820$840$860$880$900$920$940$960$980$1,000

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#Patients

Cost & Revenue Changes With Fewer Patients

.

Costs

20% reduction in volume

7% reduction

in cost


Reductions in Utilization Reduce

Revenues More Than Costs

$800$820$840$860$880$900$920$940$960$980$1,000

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Revenues

Costs

20% reduction in volume

7% reduction

in cost

20% reduction

in revenue


Causing Negative Margins

for Hospitals

$800$820$840$860$880$900$920$940$960$980$1,000

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#Patients


Revenues

Costs

Payers Will Be

Underpaying For

Care If

Adverse Events,

Readmissions, Etc.

Are Reduced


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


Revenues

Costs

Payers Can

Still Save $

Without Causing

Negative Margins

for Hospital


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


Hospital


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


Starting Point: Hospital is

Covering Its Costs + Margin

Type of


Hospital


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


Hospital


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



Financial Implications of

Changing Type of Delivery

Type of


Hospital


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


Hospital


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


Fewer C-Sections


Reducing C-Sections is

Good for the Payer...

Type of


Hospital


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


Hospital


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


The payer saves money


...But Reduces Hospital Revenues

Type of


Hospital


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


Hospital


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


But hospital revenues decrease


Hospital Costs Will Go Down,

But Not As Much as Revenues...

Type of


Hospital


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


Hospital


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


Costs decrease less because fixed costs remain


...Hurting the Hospital’s

Financial Viability

Type of


Hospital


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


Hospital


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


Resulting in negative margins


Solution: Pay A Flat Amount

Regardless of Delivery Type

Type of


Hospital


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


Hospital


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


Reducing C-Sections Is

Still Good for the Payer

Type of


Hospital


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


Hospital


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


The payer still saves money (just not as much)


But the Price is Set to Reflect the

Hospital’s Change in Costs

Type of


Hospital


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


Hospital


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


Hospital costs decrease more than revenues decrease


So the Hospital

Remains Solvent

Type of


Hospital


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


Hospital


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


Resulting in higher margins


Result: A Win-Win-Win for

Mothers, Payers, and Providers

Type of


Hospital


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


Hospital


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


Higher Margins

Lower Payments

Fewer C-Sections


Payment Would Vary Based

on Patient Conditions/Needs

Normal

Pregnancy

Term Delivery

w/ No CCs

Vaginal Delivery

in Hospital


Delivery w/o Complications

HEALTH

PLAN

Lower

Payment

Term Delivery w/ CCs

Vaginal Delivery

in Hospital


Delivery with Complications

Higher

Payment


Better Prenatal Care Can Reduce

Post-Partum Costs

Conception Delivery

Prenatal Care

Post- Partum Care Costs

Conception Delivery

Prenatal Care

Prenatal Care


Prenatal Care

Poor

Prenatal

Care

Good

Prenatal

Care


Global Fees Make Good Prenatal

Care Financially Bad for Docs

Conception Delivery

Prenatal Care


Conception Delivery

Prenatal Care

Prenatal Care


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


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)


Many Variations of

Payment Reform

Normal

Pregnancy

Term Delivery

w/ No CCs

Vaginal Delivery

in Hospital

No Complications


Complications

No Complications

Complications

OB/CNM $

Hospital $$

OB/CNM $

Hospital $$$


Payments with Warranties

Normal

Pregnancy

Term Delivery

w/ No CCs

Vaginal Delivery

in Hospital

No Complications


Complications

No Complications

Complications

OB/CNM $

Hospital $$

OB/CNM $

Hospital $$$

Bundled Payment with Warranty

Bundled Payment with Warranty


Payments for Delivery Adjusted

by Condition, Not Procedure

Normal

Pregnancy

Term Delivery

w/ No CCs

Vaginal Delivery

in Hospital

No Complications


Complications

No Complications

Complications

OB/CNM $

Hospital $$

OB/CNM $

Hospital $$$

Condition-Based Bundled Payment with Warranty


Authorizing/Enabling Use of

Alternative Delivery Sites

Normal

Pregnancy

Term Delivery

w/ No CCs

Vaginal Delivery

in Hospital

No Complications


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


Moving Upstream to Broader

Range of Conditions

Normal

Pregnancy

Term Delivery

w/ No CCs

Vaginal Delivery

in Hospital

No Complications

Pre-Term Elective

Induction


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


Ideal:

A Maternity Care ACO

Normal

Pregnancy

Term Delivery

w/ No CCs

Vaginal Delivery

in Hospital

No Complications

Pre-Term Elective

Induction


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


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


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


…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


Pricing Alternatives

(All Payer) Regulation Maryland sets all-payer

rates for hospital services

APPROACHES TO SETTING PRICES





Large Payer Dictation Congress/CMS establish

the rates Medicare will pay








Small Payer Negotiation Result varies depending on

size of payer vs. provider



Ability to Negotiate

Depends on Market Power

PAYER

PAYER

Provider

Provider

Provider

Provider Provider

Provider

Provider

Provider

Provider


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







Small Payer Negotiation Result varies depending on

size of payer vs. provider

Competition Providers set prices in order

to attract more patients





Goals for


Barriers Created by














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


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


Where Will You Have

Your Baby Delivered?

Consumer Share


$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


Tiered, Open Network is Better for

Patient Than a Narrow Network

Consumer Share


$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


Today: Hard to Know if Better

Price Means Better Value Payment

for

Procedure

dded

Provider 1:

$6,000

Provider 2:

$5,500

-8%


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%


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


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


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


Maternity Care Quality and Cost

Reporting In Virginia


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?


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


Both Payment & Benefits Are

Controlled by the Payer

Provider Patient

Payment

System

Benefit

Design

PAYER

Ability and

Incentives to:





Ability and

Incentives to:

• Improve health





But Purchaser Support is Needed

Particularly for Benefit Changes

Provider Patient

Payment

System

Benefit

Design

PAYER

Purchaser Purchaser Purchaser

Ability and

Incentives to:





Ability and

Incentives to:

• Improve health





And Consumer Support is Critical

for Purchaser/Plan Support

Provider Patient

Payment

System

Benefit

Design

PAYER

Purchaser Purchaser Purchaser


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


How Can You Ensure All This Is

Happening in a Coordinated Way?

Public Reporting

Business Case

Analysis


Care

Value-Based Choice

Engagement of

Purchasers



Benefit Design


Claims, Clinical &

Patient Data



Education Materials

?


The Role of Regional Health

Improvement Collaboratives

Public Reporting

Business Case

Analysis


Care

Value-Based Choice

Engagement of

Purchasers



Benefit Design


Claims, Clinical &

Patient Data


Regional Health

Improvement Collaborative


Education Materials


...With Active Involvement of All

Healthcare Stakeholders

Regional Health

Improve-ment

Collab.

Physicians & Hospitals

Health Plans

Healthcare Consumers

Employers & Purchasers


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


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


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.


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

[email protected]

(412) 803-3650

www.CHQPR.org

www.PaymentReform.org

http://www.chqpr.org/

transforming maternity care how payment reform can

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