Presenter: Tom Simmer M.D. Chief Medical Officer Blue Cross Blue Shield of Michigan Taming the Healthcare Beast: A Plan for Michigan March 31, 2009 Federal Reserve Bank

2 Overview A few facts about health status, healthcare costs, and personal income in Michigan. The Goal: Improve the competitive position of the state of Michigan for business while supporting access to needed medical services. Provider Partnership Programs improve healthcare delivery through population based, collaborative initiatives, often connected with performance-based payment. A quick look at results.

3 Michigan Personal Income Falling Relative to U.S. Source: Department of Treasury calculations from Bureau of Economic Analysis data Michigan per Capita Income as a Percent of U.S. Per Capita Income 89% 93% 122%

4 Source: “Michigan’s Health Care Safety Net: In Jeopardy,” A MHA Special Report

5 Older, fatter, smokier, sicker 2007 DataMichigan U.S. Average % Change of U.S. Average Median age in years Obesity prevalence among adults28.2%26.3%7.2 Diabetes prevalence among adults 8.8%8.1%8.6 Smoking prevalence among adults 21.1%19.7%7.1

2008 Michigan Health Plan Costs* State: $8,812 Regional: $7,557 National: $7,327 State: $6,152 Regional: $4,904 National: $4,117 State: $2,660 Regional: $2,653 National: $3,210 Average Annual Cost to Employer Per Employee Employer Share Employee Share 2008 health plan costs according to the annual United Benefit Advisors Health Plan Survey. The survey included 18,019 employers nationally, 5,283 in a four-state region and 828 in Michigan. United Benefits Advisors is a national alliance of independent insurance agencies that includes The Campbell Group in Grand Rapids, BenePro Inc. in Royal Oak, Pappas Financial in Farmington Hills, Saginaw Bay Underwriters in Saginaw and Employee Benefits Agency in Marquette.

7 Why haven’t we succeeded in healthcare? Lack of Population focus – fee for service / third party payment system drives increased delivery of services. Cottage industry: Physician practices lack capacity to build information infrastructure and implement lean processes that are key to improving performance. Health plan, rather than delivery system, focus introduces process variation and re-work, not clinical process improvement. Weak primary care foundation misses opportunities for care coordination and lower cost approaches. BCBSM programs are unique in rewarding population-based improvements in care, strengthening primary care, investing in infrastructure through large physician organizations, and reducing variation through lean process improvement across the delivery systems and across payers.

8 BCBSM Members Effective Providers Care Relationship Basics -Precertification -Utilization Review Michigan BCBSM Clinical Programs Support Wellness & Care Management

9 Physicians Hospitals Hospital Incentive Program (in Participating Hospital Agreement) Current Partnering for Value Programs CQIs: Collaborative Quality Initiatives BMC2: BCBSM Cardiovascular Consortium Angioplasty Collaborative Quality Initiative Michigan Surgical Quality Collaborative Michigan Bariatric Surgery Collaborative Etc. Michigan Society of Thoracic Surgeons Cardiac Surgery Collaborative Quality Initiative PGIP: Physician Group Incentive Program

10 Iron Gogebic Ontonagon Houghton Baraga Dickinson Menominee Marquette Alger Schoolcraft Delta Luce Chippewa Mackinac Berrien CassHillsdale Branch St. Joseph Monroe Lenawee Van Buren Calhoun Washtenaw Jackson Kalamazoo Livingston Ingham Eaton BarryAllegan Oakland Montcalm OttawaKent Ionia Oceana Muskegon Mecosta Newaygo OsceolaLakeMason Gratiot Clinton Lapeer Genesee Shiawassee Sanilac Huron Arenac Bay Saginaw Tuscola Clare Isabella Midland Ogemaw Iosco Gladwin Wexford Missaukee Roscommon Benzie Manistee Leelanau Grand Traverse Kalkaska Crawford Oscoda Alcona Presque Isle Cheboygan Emmet Antrim Charlevoix Montmorency Otsego Alpena Keweenaw Washtenaw County: Huron Valley Physicians Association (245), Integrated Health Associates (109), U- M Health System Faculty Group Practice (387) Oakland County: Medical Network One (303), Oakland Physician Network Services (144), Oakland Southfield Physicians (204), Oncology Physician Resource (64), Quality Partners of MI (34), St. John Medical Group (223), United Physicians (560) Kalamazoo County: Bronson Medical Group (50) and ProMed Healthcare (83) Genesee County: Genesys Integrated Group Physicians(87), Hurley PHO (116), McLaren Medical Management (95) Kent County: Advantage Health Physicians (146), Michigan Medical, PC (MMPC) (90), Regional Delivery Network of West MI (136), West Michigan Physicians Network (227) Calhoun County: Integrated Health Partners (69) Macomb County: DMC Primary Care Physicians (115), St. John HealthPartners (417) Muskegon County: Hackley PHO (79) Ingham County: Consortium of Independent Physician Associations (1,230), MSU Health Team (104), Sparrow Family Medical Services (45) St. Clair County: Mercy~ Physician Community PHO (38), Physician Healthcare Network (26) Saginaw County: Primary Healthcare Partners (57) Marquette County: Upper Peninsula Health Plan (176) PGIP Participants (June 2008) 35 groups35 groups 6,471 physicians6,471 physicians 1,700,000 members1,700,000 members Ottawa County: Principal Health PHO (35) Jackson County: Jackson Physician Alliance (70) Wayne Macomb Wayne County: Henry Ford Medical Group (328), Olympia Medical Services (127), UOP, LLC (252) St. Clair 10

11 ValuePartnerships: Leveraging Provider Relationships and Market Share to transform healthcare delivery. Current State Next-Generation PPO Stronger role for primary care (medical home, not gatekeeper) Strong link between performance and payment Partnering for Value Incremental Savings and Improvement Short- Term Value Foundation for Future Preparations Build effective physician organizations. Care commitment to a defined population Facilitated practice improvement and technology dissemination. Substantial improvement in healthcare delivery

12 Programs to Improve Hospital Care: MHA Keystone: Hospital-Associated Infection (HAI) The Challenge: 5-10% of hospital inpatients develop infections each year, resulting in 90,000 deaths nationally $5 billion to $6 billion in national health care costs The Response: Launched in 2007 to eliminate Hospital Associated Infections Hand hygiene compliance nearly 80% (U.S. average is 40%) Eliminating nonessential catheters 112 participating hospitals in MHA Keystone: HAI

13 Keystone Results in Michigan Lives Saved – 1,729* Patient Days Saved – in excess of 127,000* Dollars Saved – 0ver $246 Million* Culture of Safety improved 28% Teamwork improved 15% * Based on the Johns Hopkins Opportunity Calculator

14 Improving Cardiac Interventions – Participating Centers – 2009

15 Comparison of Outcomes for * DeathKidney Failure TransfusionVascular Complications All CABGRevasc % 40% 22% 1.5% 25% 26% Percent

16 Improving Performance to the Population: Evidence Based Care Measures 2008 Measures (scored in 2008) Diabetes –Comprehensive Diabetes Care - HbA1c Testing –Comprehensive Diabetes Care - LDL-C Screening –Comprehensive Diabetes Care - Monitoring Nephropathy –Lipid Lowering Drug Rate –Statin Therapy for Persons with Diabetes –ACE/ARB Use with Comorbidity CHF –ACE/ARB Use with Comorbidity Nephropathy –ACE/ARB Use with Comorbidity Hypertension Asthma –Use of Appropriate Medications for People with Asthma – Combined Congestive Heart Failure (CHF) –LDL-C Screening –Beta Blocker Prescription over Last 12 Months –Rate of ACE/ARB Coronary Artery Disease (CAD) –Beta Blocker Treatment After a Heart Attack –Cholesterol Management for Patients with Cardiovascular Conditions - Screening –Lipid Lowering Drug Rate –Statin Use Additional Measures –Appropriate Treatment for Children with an Upper Respiratory Infection –Avoidance of Antibiotic Treatment in Adults with Acute Bronchitis New Measures for 2008 (scored in 2009) Adult Prevention –Breast Cancer Screening –Cervical Cancer Screening Child/Adolescent Prevention/Treatment –Adolescent Well Care Visit –Adolescent Immunization Status – Combo 2 –Childhood Immunization Status – Combo 3 –Well Child Visits in First 15 Months of Life –Well Child Visits in 3, 4, 5, 6 Years of Life Chronic Obstructive Pulmonary Disease (COPD) –Use of Spirometry in Assessment and Diagnosis Congestive Heart Failure (CHF) –ACE/ARB Continuation/Persistence Coronary Artery Disease (CAD) –Persistence of Beta Blocker Treatment After AMI Low Back Pain –Imaging Studies for Low Back Pain

17 EBCR Performance Trend

18 1Q 2008 EBCR Performance

19 Increasing Generic Use

20 PMPM by Year Initial PMPM Difference= $4.84 Final Difference=$21.08 Savings=$16.24 PMPM

21 Improving Primary Care Performance Performance assessment is based on attributed population rates. –PC-MH practice characteristics, based on national criteria –Performance on Quality metrics – “Evidence-Based Care Report” –Resource management Generic dispensing rate High tech imaging Low tech imaging Rate of use of ER for non-emergent care

22 Building the Primary Care Foundation: Patient Centered Medical Home PCP PC-MH PGIP Phys Org A PGIP Phys Org B PGIP Phys Org C “Control Group” PC-MH Nominee PC-MH Nominee PC-MH Nominee

23 Summary Michigan has unfavorable health status and medical costs compared to regional and national benchmarks. BCBSM is working to make Michigan a more competitive state to attract business and job growth, while improving medical care. Health Plan-based Wellness and Care Management programs are cost-effective and act as a safety net for failure of the primary clinical process, but they do not change healthcare delivery and do not significantly affect health benefit costs. Population-based collaborative programs improve key clinical processes and achieve substantial savings. PCP’s are actively transforming their practices by implementing the Patient-Centered Medical Home model, creating a lower cost model of care.