UNDERSTANDING TOTAL COST OF CARE CONTRACTING BHCAG Member Meeting – March 28, 2012

Agenda 8:00 Introductions 8:10 Total Cost of Care – What is it? 8:30 Total Cost of Care from a Provider’s Point of View Paul Beresford – FHSM (Non-Integrated Care System) Meg Hasbrouck - Allina (Integrated Care System) 9:15 Discussion: What Employers Know and Need to Know about Total Cost of Care Contracting 9:45 What to ask your health plans and next steps?

Total Cost of Care: What is it? National Payment Reform Minnesota Health Reform Public Programs Commercial Sector Definitions

National Payment Reform ACA established value based purchasing programs including shared savings to encourage ACO development Tremendous provider investment in ACO development Medicare named 32 Pioneer ACOs 12/19/11 MN: Allina, Fairview and Park Nicollet Minimal discussion of Commercial TCOC nationally Minnesota is leading the way nationally

Minnesota 2008 Public Reform All Payer Provider Peer Grouping Similar to TCOC; some difficulty in getting off the ground Providers to use to improve quality and reduce cost Consumers can use to choose providers Other Public Programs DHS/DOH – Health Care Home certification DHS - Direct Health Care Services (TCOC contracts)

Minnesota Commercial Payment Reform 2008 - Medica piloted a 3 year contract with Fairview Health Services that rewarded quality and reduced costs. It has spawned a new health plan product. June 2009 - HealthPartners announced a TCOC arrangement with HPMG and entered into a multi-year collaboration with Allina to form the Twin Cities’ NorthWest Metro Alliance November 2010 - BCBSMN announced similar TCOC arrangements with Fairview, Allina, HealthEast, Essentia 2011 – BCBSMN, HealthPartners, and Medica expand TCOC December 2011 – Allina, Fairview, Park Nicollet, named Medicare Pioneer ACOs

Definitions ICSI/MNCM forum 11/15/11: The measurement of per patient costs across the continuum of services. Patients are attributed to the primary car provider who delivered the majority of primary care services to that patient, or were designated by that patient at enrollment. All of that patient’s care costs across all service types are aggregated and catastrophic and/or risk adjusted. The costs for all attributed patients for that provider are combined and an average per member per month total cost of care is determined.

Definitions BDC Advisors: An ambitious payment reform effort of private insurance companies and providers that aims to change the payment mechanisms from FFS based on volume to FFV that links payment to the rate of growth in total cost of care provided a patient annually regardless of where the care is provided. It provides incentives for providers to meet annual quality goals. Typical features: 3-5 year contracts with limits to annual rate increases, less than market value Year end PMPY medical loss ratio determined Savings shared between insurer and provider, if quality goals met Providers paid FFS at less than market rates through out the year

Are we headed for an iceberg?

Who’s Steering the Ship?

Discussion Questions Why did your organization move to TCOC? How are targets set? Do you envision engaging employers (60% of the market) and if so, how? How fast is the cost curve bending? When can employers expect to see actual savings? Must quality goals be met to realize shared savings? What is 3-5 year strategy outlook for TCOC?