Geographic Variation in Healthcare and Promotion of High-Value Care Margaret E. O’Kane November 10, 2010

2 Institute of Medicine November 10, 2010 Overview Conceptual framework: sources of variation – Effective care – Supply sensitive care At the health plan level At the delivery system level – Delivery system innovations to drive change – Preference sensitive care Recommendations

3 Institute of Medicine November 10, 2010 Conceptual framework Effective care (15%) Making health plans and delivery system accountable, reward results Supply-sensitive care (60%) Accountability mechanisms at the delivery system level, use incentives to drive results Preference-sensitive care (25%) Comparative effectiveness research, shared decision making and patient activation Source: Wennberg estimates based on Medicare claims

4 Institute of Medicine November 10, 2010 EFFECTIVE CARE

5 Institute of Medicine November 10, 2010 Pacific: +1.2 Mountain: -0.8 West North Central: +1.3 South Central: -5.3 East North Central: +1.8 Middle Atlantic: +0.5 New England: +5.6 South Atlantic: % or more +1.0% to 2.5% Within 1.0% of mean -1.0% to 2.5% -2.5% or more Regional Performance Relative to National Average: Commercial plans, 2009 Variation in the Quality of Care for Diabetes

6 Institute of Medicine November 10, 2010 SUPPLY SENSITIVE CARE: LOOKING AT PLANS AND DELIVERY SYSTEMS

7 Institute of Medicine November 10, 2010 Relative Resource Use (RRU) Measures Indicates how intensively a plan uses resources (physician visits, hospital stays, etc.) vs. similar plans With HEDIS quality measures, RRUs let us talk about quality and cost together This gives purchasers and plans a basis for discussing the value plans offer, not merely unit price and discount

8 Institute of Medicine November 10, 2010 Relative Resource Use: Total Medical Costs (excluding Rx) For Patients with Diabetes All U.S. Commercial Plans, 2009

9 Institute of Medicine November 10, 2010 RRUs for Plans Show Wide Variation Within States: Florida 2009 HEDIS & Relative Resource Use Composite Measures for Diabetes

10 Institute of Medicine November 10, 2010 What Can We Learn From RRU ? No correlation between quality and resource use Tremendous variation within regions among plans High quality care can be delivered at either high or low resource levels Moving to high-quality, low-resource use would yield significant savings

11 Institute of Medicine November 10, 2010 California Integrated Healthcare Association Pay-for-Performance – Looking at the Delivery System Largest P4P program outside UK – Includes 7 insurers, 12 million commercial HMO lives Aggregates insurers’ data to score results – Significantly increased reliability and physician trust

12 Institute of Medicine November 10, Variation in California Physician Organization Performance. (1) Lower rates indicate better performance for HbA1c Poor Control.

13 Institute of Medicine November 10, Variation in California Physician Organization Resource Use

14 Institute of Medicine November 10, 2010 California’s Integrated Healthcare Association Now moving to also reward efficiency: – Inpatient Readmissions within 30 Days – Inpatient Utilization - Acute Care Discharges – Inpatient Utilization - Bed Days – % of Outpatient Surgeries Done in ASC – Emergency Department Visits – Generic Prescribing And performance based contracting – Standardize utilization metrics and bring under the P4P umbrella (Total Cost of Care measure) More

15 Institute of Medicine November 10, 2010 DELIVERY SYSTEM INNOVATIONS TO DRIVE CHANGE

16 Institute of Medicine November 10, 2010 PCMH: Driving Quality and Cost Savings 7 medical home demonstrations show: – Reduced hospitalization rates (6-19.2%) – Reduced ER visits (0-29%) – Increased savings per patient ($71-$640) Four common features in demonstrations – Dedicated care managers – Expanded access to health practitioners – Data-driven analytic tools – Use of incentives Source: Fields, et al. 2010

17 Institute of Medicine November 10, 2010 What is an ACO? Goal to meet the “triple aim:” – Improve people’s experience of care – Improve population health – Reduce overall cost of care Aligns incentives and rewards providers based on the performance (both quality and financial) – Payment mechanisms such as shared savings or partial/full-risk contracts – Quality measures essential to assure needed care provided even with incentives to reduce costs

18 Institute of Medicine November 10, 2010 Medical Homes & ACOs Medical Homes are basic building blocks for Accountable Care Organizations NCQA’s ACO Guiding Principles: – a strong primary care foundation that promotes the delivery of services consistent with the principles of the Patient-Centered Medical Home NCQA’s draft ACO criteria open for public comment until Nov. 19

19 Institute of Medicine November 10, 2010 PREFERENCE SENSITIVE CARE

20 Institute of Medicine November 10, 2010 Decision-Making and Patient Engagement The engaged patient: – Takes steps to be healthy – If unhealthy, understands medical condition and the therapies, asks questions, open to shared decision making – Prepares for expected events (childbirth, hospitalization, e.g. Coleman approach) – Understands the cost tradeoffs and the health tradeoffs Policies and plan design can support patient engagement

21 Institute of Medicine November 10, 2010 CONCLUSIONS There are high-performing plans and providers in low performing regions and vice versa Different types of variation require different strategies Bringing accountability to the delivery system level allows plans/payers to take action – Easier than mobilizing a community – Shared decision making can help Improvement can/should be rewarded

22 Institute of Medicine November 10, 2010 Recommendations for the Committee to Consider PCMH and ACO two key strategies to continue to pursue – but still need to address others who don’t participate (specialists) – Networks of PCMH, PCMH neighborhood One option is to set quality/resource targets to reflect care patterns at the local level and rewards/penalties that are meaningful to providers Tiered networks a good idea – worth trying in Medicare