Accountable Care Organizations & Pay-for-Performance April 14, 2014

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Goals What is P4P and how is it working? What are ACOs and how are they working? PHP310, 2014

Pay-for-Performance (P4P) PHP310, 2014

P4P Why P4P? How does P4P work? Examples Does it work? PHP310, 2014

Why P4P? Pay for quality and outcomes, not for volume PHP310, 2014

How Does P4P Work? Many ways to operationalize it Common element: identify processes or outcomes that you want to create incentives around, and then develop a reimbursement system that aligns with those goals Domains of focus: outpatient & inpatient, and potentially others PHP310, 2014

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The performance of the hospitals in the project initially improved more than the performance of the control group: More than half of the pay-forperformance hospitals achieved high performance scores, compared to fewer than a third of the control hospitals. However, after five years, the two groups’ scores were virtually identical. PHP310, 2014

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P4P Summary and Take Home P4P has been well tested in the last decade, and the jury is still out How to do P4P is still not clear Solutions may be context dependent, e.g. US different than UK MA different from TX Inpatient different from outpatient Global different from partial PHP310, 2014

P4P Summary and Take Home P4P has been well tested in the last decade, and the jury is still out How to do P4P is still not clear Solutions may be context dependent Alignment of economic/financial incentives is probably necessary but not sufficient to transform to a value-based health care system PHP310, 2014

Accountable Care Organizations (ACOs) PHP310, 2014

ACOs Why ACO’s The concept of ACOs Medicare ACOs Private sector ACOs Do they work? PHP310, 2014

One Extreme FFS Medicare High cost No financial incentives for integration No incentives for quality Volume focus Excessive Utilization PHP310, 2014

One Extreme The Other Extreme FFS Medicare High cost No financial incentives for integration No incentives for quality Volume focus Excessive Utilization 1990’s HMOs Little patient choice MDs feel disempowered, don’t like being told what to do Cost focus Under care PHP310, 2014

One Extreme The Other Extreme FFS Medicare High cost No financial incentives for integration No incentives for quality Volume focus Excessive Utilization 1990’s HMOs Little patient choice MDs feel disempowered, don’t like being told what to do Cost focus Under care Medicare Advantage PHP310, 2014

One Extreme The Other Extreme FFS Medicare High cost No financial incentives for integration No incentives for quality Volume focus Excessive Utilization 1990’s HMOs Little patient choice MDs feel disempowered, don’t like being told what to do Cost focus Under care Medicare Advantage Higher cost! PHP310, 2014

One Extreme The Other Extreme FFS Medicare High cost No financial incentives for integration No incentives for quality Volume focus Excessive Utilization 1990’s HMOs Little patient choice MDs feel disempowered, don’t like being told what to do Cost focus Under care Medicare Advantage Higher cost! The FUTURE Patients engaged Care integrated and coordinated Incentives of PCPs, specialists, hospitals aligned Focus on quality Focus on populations Lower cost

Accountable Care Organizations One Extreme The Other Extreme FFS Medicare High cost No financial incentives for integration No incentives for quality Volume focus Excessive Utilization 1990’s HMOs Little patient choice MDs feel disempowered, don’t like being told what to do Cost focus Under care Medicare Advantage Higher cost! Accountable Care Organizations The FUTURE Patients engaged Care integrated and coordinated Incentives of PCPs, specialists, hospitals aligned Focus on quality Focus on populations Lower cost PHP310, 2014

“No restrictions, not an HMO …” PHP310, 2014

ACOs are groups of doctors, hospitals, and other health care providers, who come together voluntarily to give coordinated high quality care to the Medicare patients they serve. Coordinated care helps ensure that patients, especially the chronically ill, get the right care at the right time, with the goal of avoiding unnecessary duplication of services and preventing medical errors. When an ACO succeeds in both delivering high-quality care and spending health care dollars more wisely, it will share in the savings it achieves for the Medicare program.  “No restrictions, not an HMO …” PHP310, 2014

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Why ACOs? Problem Move away from FFS Improve quality and decrease costs Solution: make simultaneous changes in financing and delivery systems ACO concept Evolutionary not revolutionary Built on previous concepts including HMO’s, capitation, integrated delivery systems, PCMHs, pay for performance PHP310, 2014

What are ACOs? Not a single, well-defined entity Generally agreed upon concepts Group of providers Joint responsibility for a population of patients Responsibility includes quality improvements and cost reductions Variety of provider configurations Variety of payment models McClellan et al. Health Affairs 2010; 29(5):982-990. PHP310, 2014

3 Core Principles Provider led group with strong primary care base that is collectively responsible for quality and costs across the continuum of care for a population Payments linked to quality improvements that also reduce costs Measurement that supports quality improvement and shows that cost improvements are not from stinting on needed care McClellan et al. Health Affairs 2010; 29(5):982-990. PHP310, 2014

Two Examples of ACOs Medicare ACOs Private or commercial ACOs NB: there are many types of ACO arrangements PHP310, 2014

Medicare ACOs Note that this is a conceptual overview PHP310, 2014

Medicare ACOs: Provider Group Eligibility Many acceptable to CMS Group practice arrangement Networks of individual practices Partnerships between hospitals and non-hospital providers Hospitals employing other non-hospital providers Other PHP310, 2014

Medicare ACOs: Governance Recognized, authorized organization Must have Taxpayer ID Governing body (Board of Directors) Providers: 75% of the control Beneficiaries PHP310, 2014

Medicare ACOs: Operations Required processes Promote evidence based medicine Ensure beneficiary engagement Report internally on quality and cost Coordinate care Wide implementation latitude for the above Meet patient centeredness criteria PHP310, 2014

Medicare ACOs: Beneficiary Assignment and Notification NB: FFS Medicare only (not MA) Based in primary care service utilization Prospective assignment, retrospective reconciliation PCPs can only be in one ACO Patient notification by signs in facility Specialists can be in more than 1 ACO Patients have complete freedom of choice of providers (NOT like typical HMO) PHP310, 2014

Medicare ACOs: Quality Measures 33 measures in 4 domains Patient/caregiver experience (7 measures) Care coordination/patient safety (6 measures) Preventive health (8 measures) At-risk population Diabetes (1 measure and 1 composite consisting of five measures) Hypertension (1 measure) Ischemic Vascular Disease (2 measures) Heart Failure (1 measure) Coronary Artery Disease (1 composite consisting of 2 measures) PHP310, 2014

Medicare ACOs: Utilization/Cost Benchmark Concept 3 year prior utilization history (Parts A and B spending), weighted toward most recent year Spending projections will use national data and will go out 3 years Shared savings only start if you exceed a certain amount of savings (MSR or minimum savings rate) PHP310, 2014

Shared Savings Budget = 100% 3% MSR = 97% 12% = Shared Savings which is split between CMS and the ACO according to various formulas: generally between 50 and 65% goes to the ACO … DEPENDING on the quality scores Actual Costs = 85% PHP310, 2014

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Medicare ACOs: Shared Savings ACO then shares with CMS savings that exceed the MSR Maximum the ACO can get is between 52.5 and 65% and is quality adjusted PHP310, 2014

Do Medicare ACOs Work? We don’t know yet … Two broad types of Medicare ACOs Pioneer ACOs (more risk) Shared Savings ACOs (Less risk) 32 Pioneer ACOs Year 1 results July 2013 18 had savings, 14 had losses 2 dropped out, 7 moved to Shared Savings Model PHP310, 2014

Medicare ACOs: Summary Simplified view with emphasis on concepts Hybrid: FFS payment system with later sharing of savings (if there are any) This is intentionally a transitional model; Pioneer ACO’s can move to full capitation in year 3 PHP310, 2014

Private Sector ACOs Lots of experimentation with Providers Patients Governance Patient attribution Payment models PHP310, 2014

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Alternative Quality Contract Insurer driven Existing, established HMO network Global capitation Strong quality incentives Outcomes weighed more strongly than processes PHP310, 2014

Savings were accounted for by lower prices achieved through shifting procedures, imaging, and tests to facilities with lower fees, as well as reduced utilization among some groups. Quality of care also improved Compared to control organizations, with chronic care management, adult preventive care, and pediatric care within the contracting groups improving more in year 2 than in year 1. These results suggest that global budgets with pay-for-performance can begin to slow underlying growth in medical spending while improving quality of care. PHP310, 2014

MA AQC Experience MA health care environment Mature managed care environment Established networks Universal coverage in MA since 2006 AQC experiment seems to be working Note that this is private sector innovation PHP310, 2014

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National Survey of ACOs 253 Medicare 235 Non-Medicare All 50 states + DC PHP310, 2014

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http://leavittpartners.com/wp-content/uploads/2013/03/Growth-and-Dispersion-of-ACOs-June-2012-Update-Download.pdf PHP310, 2014

ACOs: Take Home Messages Simultaneous change of how care is paid for and how it is delivered Evolutionary, not revolutionary Current forms of ACOs are explicitly intermediate forms But, for some the idea is to eventually move completely away from FFS PHP310, 2014

ACOs: Take Home Messages Ideal future state Mostly capitated care PCMHs at the center of the care system But integrated with specialists, hospitals, long term care, etc. Quality measurement to prevent under care Choice: tight vs. loose networks Not clear how this will work out Incentives for patients and providers to use regional centers of excellence PHP310, 2014

ACOs: Take Home Messages Careful evaluations of ACO experiments needed Possible that many structures will work Need to meet needs of very diverse provider communities My biggest concern: too heavy a lift for many of the providers in the country PHP310, 2014

Bigger Picture Issues On the Road to Better Value P4P as a micro-intervention with plusses and minuses Indicator processes vs. other processes ACOs are a next step, but are still transitional forms; trend toward providers accepting more and more financial risk Paying for outcomes: need excellent risk adjustment in setting capitated payment rates; else you get gaming PHP310, 2014