A Framework for Innovation James R. Tallon, Jr. President United Hospital Fund March 1, 2012

INNOVATION. The introduction of something new. 2

An Avalanche of Acronyms and Ideas 3 RHIO EMRPCMH ACO SHIN-NY BHO MLTC SNP MRT CMMI Health Home PCORI IPAB IDS Bundled Payment MSGP CPCI P4P P4Q AF4Q Value-Based Purchasing Regional Extension Center PACE

“Every system is perfectly designed to get the results it gets.” Dr. Paul Batalden Dartmouth University 4

The U.S. Health Care System is Designed to:  Create gaps in coverage  Produce uneven quality  Cost more 5

International Comparison of Spending on Health: Source: The Commonwealth Fund. Analysis of OECD Health Statistics, June Note: $US PPP = purchasing power parity. Average spending on health per capita ($US PPP) Total expenditures on health as percent of GDP $7,960 $3, % 9.5% 6

Source:United Hospital Fund analysis of CMS National Health Expenditure data. Note:Expenditures in 2020 are projected. U.S. National Health Expenditures: 1980– Dollars in Billions

Health Insurance Programs as Shares of Federal Outlays: 1980–2020 Source:United Hospital Fund analysis of Office of Management and Budget data; Congressional Budget Office data and projections. Note:Shares may not sum to totals due to rounding. Outlays in 2020 are a current-law projection. 11% 21% 18% 27% 8% 8

Responses to Unyielding Cost Pressure  Reduce payments  Reduce coverage  Shift costs  Improve value and efficiency 9

Elements of System Innovation 1.How services are organized and delivered 2.How services are paid for 10

A small share of patients accounts for most health care costs. 10% of the Population 64% of Costs Source: AHRQ. The Concentration and Persistence in the Level of Health Expenditures over Time: Estimates for the U.S. Population, Patients and U.S. Health Care Costs, All Funds

Source: Adapted from A. Shih, K. Davis, S. Schoenbaum, A. Gauthier, R. Nuzum, and D. McCarthy, Organizing the U.S. Health Care Delivery System for High Performance (New York: The Commonwealth Fund, Aug. 2008). Global payments Continuum of Payment Bundling Organized delivery systems that deliver high quality, coordinated care Fragmented Delivery System Continuum of Organization FFS and DRGs Promising Models of Payment and Care Delivery Episode payments, Shared Savings Medical Home payments Continuum of Pay-for-Performance Small % of payment; process measures Large % of payment; outcomes measures 12

Elements of System Innovation (cont.) 3.Improved flow, use, and transparency of information 4.Improved engagement of patients 13

A Framework for Innovation  What exactly is the “something new”?  How do we take innovation to scale?  How can multiple innovations lead to system change? 14