Quality and Pricing Transparency from a Payor’s Perspective Bill Fried, M.D. Medical Director MidAtlantic Region Aetna

Agenda The Changing Health Care Environment Consumerism Price Transparency Quality Transparency Consumer Decision-Support Tools

The Financial Projections The Changing Health Care Environment Employer Funding Breaking Point 4.6% Annual Growth Rate in Household Income 12% Annual Growth Rate in Health Insurance Premiums $68,277 $48,769 $34,836 $24,882 $17,773 $12,695 $9,068(1) 19% 23% 28% 34% 42% 51% 63% Health Benefits as a % of Total Compensation (1) Projected 2003 Average Health Insurance Premium for Family Coverage Source: Kaiser/HRET Survey of Employer-Sponsored Health Plans, Bureau of Labor Statistics 2003 National Compensation Survey

Percentage of U.S. Firms Offering Health Coverage Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits: 2000-2005

Executive Order on Transparency August 2006 – President Bush signed Executive Order on Transparency Requires federal health programs to make health care quality and cost transparency information available to consumers The “Four Cornerstones” Support Health Information Technology Provide Quality Information Provide Pricing Information Promote Quality and Efficiency of Care More information available at: www.hhs.gov/transparency

American Medical Association statement on Executive Order "Today's Executive Order is a step toward increased price transparency in the health care system. However, gone are the days when a doctor posts fees and patients pay the doctor directly. Now, it's third-party payers — insurers and the government — who set prices. If we want patients to become more prudent purchasers of health care, they need to be in greater control of their own health insurance choices and decisions, and need price transparency from all insurers — not just the federal government.”

Four Cornerstones of Value-Driven Health Care: Health Plans’ Responses Support Health Information Technology Personal Health Records Physician incentives to increase use of electronic services Provide Quality Information High Performance Networks Hospital Comparison Tools Leapfrog Group Hospital Quality and Safety Survey NCQA accreditation NCQA Physician Recognition Programs

Four Cornerstones of Value-Driven Health Care: Health Plans’ Responses Provide Pricing Information Physician-specific pricing Average cost information for a variety of office-based, ambulatory, and inpatient services and procedures, drug costs, and episodes of care CMS posting of rates for elective inpatient procedures and common hospital admissions Promote Quality and Efficiency of Care Support of Leapfrog Group’s “Never Events” policy Care Focused Purchasing initiative, which focuses on the quality and efficiency of health care providers Pay for Performance programs Bridges to Excellence program

Consumerism Consumerism Individuals will have more responsibility for health decisions; will pay more of costs Content, tools, programs and services to encourage smarter, informed decisions Requires individuals to acknowledge that they each have a personal responsibility in achieving optimal health care outcomes

Placing the Patient at the Center HDHP, HRA, HSA plans Decision tools for value-based purchasing Performance networks Personal Health Record Health incentives Health care transparency Integrated medical management Wellness programs Effective communications and education

Do Consumers Really Understand the Cost of Health Care? Consumer Perceptions vs. Reality of Medical Costs Employee Estimated Average Average Actual Cost Source: Lehman Brothers, Health Insurance & Consumerism, May 2006

The True Cost of Care: Physician Unit Price Price Transparency Actual negotiated rate available to consumers before they receive care Via secure website, members can access doctors’ rates for up to 30 different services most commonly delivered by that physician’s specialty Rates appear in 5 categories: office visits, diagnostic services, minor procedures, major procedures and other services

Price Transparency Rates Available to Members View Rates for the Selected Doctor

Price Transparency Rates Available to Members (cont’d)

Consumer Research: How Do People Select Facilities? How do you decide which hospital or facility to go to? 1st Choice (% of respondents) Covered by my health insurance plan 40 Doctor recommends 26 Best reputation for quality in the area 16 Highly recommended specialists admit there 9 Most conveniently located 5 Other 4 Recommended by family or friend - Least cost

Radiology and Diagnostic Imaging Average Cost per Unit Do Consumers Really Understand the Site of Service Cost Differences of Health Care? Radiology and Diagnostic Imaging Average Cost per Unit

Consumer Research: What We Have Found Consumers like the idea of site of service transparency Information in one online location, ability to match right facility to medical condition, convenience, and peace of mind Searching by site location or by name of health care professional depends on the procedure type Relatively high risk (e.g., cataract eye surgery, cardiac catheterization), consumers prefer searching by physician Relatively low risk diagnostic procedures (e.g., CT scans, sleep study), site location is preferred method for searching

Procedure-Based Site of Service Tool Facility-specific information – not regional averages Includes ambulatory and inpatient facility types Reasonable bundle of services for the procedure All costs included Range of costs based on payer claims experience Costs are broken down into two categories Managing physician charges Facility & Ancillary charges combined (medical supplies, laboratory, etc.)

Procedure-Based Site of Service Procedures Elective services where people are more likely to consider their out-of-pocket costs Common and familiar to consumers Planned for by a consumer High volume Multiple options for locations to seek care MRI, CT scan, colonoscopy, common maternity and cardiac procedures are a few examples of procedures that are available

Medical Procedure by Facility Cost - Search on Procedure

The Current System Needs Improving Quality Transparency Quality reliability Average patient has 50% chance of getting the right care at the first physician’s visit* Health care inefficiencies** The right treatment The right delivery 40% opportunity to improve costs Public perceptions about health care 42% say they, or a family member, experienced a preventable medical error Consumers not using quality data *** * Shuster (Rand) ** Wennberg *** Kaiser Family Foundation

Consumers Want Information on Physicians/Hospitals Types of Information Health Plans (Provide): Doing Now Not Doing/Want Not Doing/Don't Want Info. to choose best plan 58% 36% 6% 1-800 RN/med. prof. hotline 55% 34% 11% Providing Info. on best MDs/hospitals 35% 52% 12% Working hard to keep me 34% 48% 18% well Making sure I get tests I need 29% 46% 25% Ensuring all my MDs have 26% 47% 27% current Rx info Full info. on meds/alt. meds 23% 44% 23% Helping with Q's to ask/tests 20% 45% 35% to be done Source: Consumer Habits and Practices Study, 2005

“New” Health Care System Value Assessment Patients Information & Accountability Health Care Professionals Information & Accountability Payers

An Approach Whose Time Has Come? Mitigate increases in medical trends through consumerism by identifying and selecting physicians responsible for significant portions of health care spending who have met certain thresholds for clinical performance and effective use of health care resources

High Performance Networks Subset of broad network High numbers of physicians within each specialty Responsible for high dollars Measures available to allow for differentiation Significant variability in efficiency and quality Sufficient claims experience for credible analysis Viability of new network

High Performance Networks: Caveats Significant employer commitment Collaboration with physicians Clinical and efficiency measures externally validated using established national standards Rankings not based solely on cost Disclosure to physicians and consumers Measures understandable and meaningful to consumers Independent oversight

Designation Evaluation Process High Performance Networks: Designation Process Criteria Type Measure Volume Symmetry Episode Treatment Group (ETG): At least 20 episodes of care over 3 years Clinical Performance All specialties measured on the following: Adverse events during inpatient hospital stays 30-day unplanned hospital readmission rate Measures applicable to obstetricians/gynecologists: Cervical cancer screening rate Breast cancer screening rate HIV testing in pregnancy Measures applicable to cardiologists: Beta blocker use after cardiac event ACE inhibitor (or ARB) use in patients with congestive heart failure Use of cholesterol-lowering medication (statin) for members with cardiac disease Cost-Efficiency ETG efficiency index (percentiles), relative to regional norms Network Adequacy Verify final network satisfies established access standards

Stakeholders in Performance Improvement

Quality Transparency Available to Members Physician met all standards

Quality Transparency Available to Members Physician not meeting volume

Driving Improvement Opportunities: Virginia Mason Medical Center Collaborative relationship with high quality, nationally respected health care system Employer support Collaborative experiment created New clinical pathway for delivery of care for back pain New reimbursement strategy required to align incentives Improved ways of working with PCPs, specialists and/or facilities Documentation and publicity of initiative designed to assist in repeating new approach in other locations, with other provider organizations

Helping Plan Members Make the Change to Consumerism Consumer Decision- Support Tools The right decision-support tools can help consumers Cost of care Cost advantages of using network doctors and hospitals Quality of care Health information Health risk assessment Management of HRA, HSA or FSA dollars

Resources to Help Consumers Research Cost & Quality Intuitive, easy navigation Delivers what users want Links to related information Easy on the eye Secure Access to Online Tools 24/7

Estimate the Cost of Care

Estimate the Cost of Care – Diseases and Conditions

Informed Care Decisions – Treatment Options This screen shot shows the Quick Look option. Although the power of this tool lies in providing members with a personalized evaluation, we realize that not everyone will want to spend the time necessary to respond to a questionnaire, so we created the Quick Look for them to provide an overview of various treatment option. It’s important to note that this is not personalized, but is a general overview of various treatment options and how effective, safe, easy to use, and if there are side effects. An overview score – based on a composite of the 4 categories – is also provided. .

Price-A-DrugSM* Cost of medications based on the consumer’s pharmacy benefit plan Retail & mail-order, including mail-order savings Generic/brand alternatives consumers can discuss with their doctor * Available only if enrolled in this benefit with Aetna

Hospital Comparison Tool Nationwide quality outcomes information on hospitals for certain diagnoses and procedures: Number of patients Mortality rates Complication rates Length of stay Links to Leapfrog Data

Consumers Give Feedback on Their Doctors