Intro to Risk Based Contracts/Value Based Agreements Torrey D. Sundall Senior Director, Payor Contracting and Analytics Sanford Health

Primary Footprint for Sanford Health

South Dakota, North Dakota, Minnesota Environment Blue Cross Blue Shield of North Dakota United HealthCare Traditional Medicaid and Medicaid Expansion Sanford Health Plan Health Partners Preferred One / Ucare Medicare Cost and Advantage Products PMAP Medica Wellmark Avera / Dakota Care Blue Cross Blue Shield of Minnesota

Triple Aim

Why Risk: Bend the trend curve overtime for sustainable long term savings (not a 1 year or short term approach to cost containment) PMPM Time

Key Components of Risk Models Attribution of patients to care system Support/report to providers to help achieve success Risk Model Financial Model that aligns incentives i.e. reduces costs, shared savings Quality component

Some Key Terms to Understand Medical Loss Ratio (MLR) Risk Score Profit and Loss (P&L) Per Member Per Month (PMPM) Capitation Shared Savings/Shared Loss Total Cost of Care (TCOC) Attribution Bundle/Episodic Payments Pay for Performance (P4P) Stop Loss Risk Adjusted PMPM Care Management Fees Accountable Care Organization (ACO)

Essentials of Risk-Based Contracting Attribution of Patients – not a perfect science •Attribution may be based on patient choice of product/PCP •Attribution may be prospective assignment based on # of patients visits Attribution at PCP level only or additionally to specialty level Structure of Incentive Payments •Understand how contracts impact overall revenue goals •Cost incentive payments may be contingent upon quality performance Pass/go, pro rata based upon achievement points •Determine model: MLR, P & L, P4P, Bundle Payments, CMFs, TCOC •Prospectively agree upon cost and quality targets •Pre-payment of quality incentives – care management fees

Essentials of Risk-Based Contracting cont. Quality Terms •Standardize quality measures, targets across contracts – avoid chasing circles •Ensure quality measures are achievable, applicable and actionable •Collaborate with clinical leadership to ensure alignment of cost and quality initiatives Core Team and Responsibilities •Create core team infrastructure, collaboration among departments •Optimize existing data sources, it’s all about the data! •Requires data support from payors •Involve care management programs Provider Network Buy In •Do you structure physician compensation models to incent focus on quality and cost of care?

Alternative Payment Models (APM) Framework $ Category 2 Fee for Service – Link to Quality & Value Category 3 APMs Built on Fee-for-Service Architecture Category 4 Population-Based Payment Category 1 Fee for Service – No Link to Quality & Value Fee-for-Service A Foundational Payments for Infrastructure & Operations B Pay for Reporting C Rewards for Performance D Rewards and Penalties for Performance APMs with Upside Gainsharing APMs with Upside Gainsharing/ Downside Risk Condition-Specific Population-Based Payment Comprehensive Population-Based Payment Majority of base CMS payments Care Management Fees Medicare Pay for Reporting programs: outpatient, home health, nursing facility, inpatient rehab, and inpatient psych Quality Incentive Program Medicare Pay for Performance programs: hospital value based purchasing, hospital readmissions reduction program, hospital acquired conditions program, dialysis, HHA pilot in Iowa, Physician MIPS ACO/TCOC risk agreement with upside only, or MLR with upside only Medicare Comprehensive Care for Joint Replacement program Diabetes “bundle” ACO/TCOC risk agreement with up and downside risk State Medicaid programs SD Medicaid Health Homes Bundled Payments Majority of commercial payments

Total Cost of Care Definition Sum of all costs generated by all providers across all places of service for an attributed insurance plan member population

Cardiac bypass surgery Total Cost of Care Definition: Example care episode for ischemic heart DZ Emergency Room: Possible heart attack Cardiac bypass surgery

Cardiac bypass surgery Total Cost of Care – “Hold the Mayo” Definition: Example care episode for ischemic heart DZ $+$+$ + Emergency Room: Possible heart attack $+$+$ + Cardiac bypass surgery

Rational Standards and Basic Risk Model Principles Principle 1: Collaboration with Health Plan and Payors. Principle 2: Patient Involvement. Principle 3: Quality Incentives. Principle 4: Scope of Contract. Principle 5: Shared Savings. Principle 6: Readiness.

Risk Tolerance Options Allow providers to choose option that reflects risk tolerance Less downside (less risk) may mean less upside (opportunity) More downside may mean more upside Example of 3 options: Option 1 2 3 Upside 40% 50% 70% downside 0% 20% 35% Could also put a $ cap or corridor on both upside & downside as a transition to full unlimited model.

Quality should be a factor in model Set simple metrics that are supportive of long term cost control, limited number, consistent with other quality programs. Sample Measures: Optimal diabetes care Optimal vascular care Transition of Care Colorectal screening Well Child Visits 0-15 months, 3-6 years Mammography screening Depression Screening Asthma care Patient Experience HEDIS Measures Potentially Preventable Admissions Potentially Preventable ER Visits MN Community Measures

Performance and Reporting Settlement payouts Shared savings paid out (shared losses collected) in lump sum to (from) providers after appropriate run out period (generally 3-4 months) Reporting & Provider Support Financial reconciliation reporting should be done on regular basis over the year. Due diligence to ensure data integrity. Provider utilization & TCOC reporting is integral to success of program & must be deployed at the outset & on quarterly basis thereafter. Care management needs to pivot to supporting role to providers. You need buy in!