THE COMMONWEALTH FUND Developing Innovative Payment Approaches: Finding the Path to High Performance Stuart Guterman Assistant Vice President and Director, Program on Payment System Reform Council of State Governments/Eastern Region Webinar/Conference Call November 30, 2009

THE COMMONWEALTH FUND The Relationship Between Payment Methods and Organizational Models Fee-for- Service Global Case Rates Global Payment Continuum of Payment Bundling Continuum of Organization Small practices; unrelated hospitals Independent Practice Associations; Physician Hospital Organizations Fully integrated delivery system Continuum of P4P Design Outcome measures; large % of total payment Simple process and structure measures; small % of total payment Blended FFS/Care Management fee Care coordination and intermediate outcome measures; moderate % of total payment More Feasible Source: Adapted from A. Shih, K. Davis, S. Schoenbaum, A. Gauthier, R. Nuzum, and D. McCarthy, Organizing the U.S. Health Care Delivery System for High Performance, The Commonwealth Fund, August Less Feasible

THE COMMONWEALTH FUND Current Public and Private Sector Initiatives I Medicare –Collecting and reporting data on quality in nursing homes, home health agencies, hospitals, dialysis facilities; preliminary process for physician reporting –Testing value-based purchasing models for hospitals, physicians; nursing homes and home health agencies –Testing models for improving coordination of care among different types of providers (mainly hospitals and physicians) –Testing models of broader system redesign

THE COMMONWEALTH FUND Current Public and Private Sector Initiatives II Medicaid –Pay for performance mechanisms in place in more than half the states –Medical home models being tested in more than 30 states –New initiative to align incentives in Medicare and Medicaid around the establishment of medical homes Private Sector –Initiatives by individual payers aimed at improving quality and efficiency –Collaborative initiatives by groups of payers (e.g., Institute for Clinical Systems Improvement, Patient Choice Healthcare) or purchasers (e.g., Bridges to Excellence) –Development of alternative payment models (e.g., PROMETHEUS) or organizational models (e.g., Accountable Care Organizations or ACOs)

THE COMMONWEALTH FUND How Can the (Medicare) Process Be Improved? Ensuring transparency in selecting demonstration projects and conducting demonstrations Eliminating barriers to Medicare’s ability to participate in multi-payer initiatives Streamlining the long and burdensome process required to identify sites and to approve demonstrations Addressing limitations in the methodology and data available to conduct comprehensive evaluations of demonstration projects Establishing an explicit mechanism for translating initiatives into policy change Providing sufficient resources for developing, implementing, monitoring, and evaluating demonstration projects

THE COMMONWEALTH FUND Health Reform Legislation House bill mandates Medical Home pilot program (with 10 percent participation goal) Senate Finance bill allows states to designate health homes for chronically ill Medicaid beneficiaries House and Senate Finance bills call for ACO pilots (House bill includes 10 percent participation goal) House and Senate Finance bills include pilots bundling Medicare payments for acute and post-acute care Senate Finance bill establishes value-based purchasing programs for hospitals and physicians

THE COMMONWEALTH FUND Center for Medicare and Medicaid Innovation: Selection, Evaluation, and Expansion of Pilots Beginning January 1, 2011, Center in CMS to test innovative payment and service delivery models to reduce program expenditures under Medicare, Medicaid, and CHIP while preserving or enhancing the quality of care; current demonstration authority expanded Models to be selected based on evidence that they address a defined population for which there are deficits in care leading to poor clinical outcomes or potentially avoidable expenditures Emphasis on care coordination, patient-centeredness Can’t require budget neutrality initially, but over time must improve quality without increasing spending, reduce spending without reducing quality, or both Evaluation should include quality of care, including patient-level outcomes, and changes in spending; could consider cross-program impact Secretary could expand duration and scope if model reduces spending without reducing quality

THE COMMONWEALTH FUND Center for Medicare and Medicaid Innovation: Structure, Funding, and Reporting Director reports to Administrator of CMS $10 billion for funding remains until expended; $25 million of this to design, implement and evaluate models Beginning in 2012, a report to Congress not less than every other year, describing models tested, models expanded, and results of evaluations

THE COMMONWEALTH FUND Expanding the Power of the Secretary of Health and Human Services to Put Medicare Payment Pilots on “Fast Track” Source: Commonwealth Fund Health Care Opinion Leaders Survey, October “How strongly would you favor or oppose expansion of the Secretary of Health and Human Services’ authority to put Medicare payment pilots that meet appropriate requirements on a ‘fast track’, with the ability to extend their duration and scope if they appear to be successful?” Strongly Favor 74% Somewhat Oppose 2% Somewhat Favor 21% Strongly Oppose 2%

THE COMMONWEALTH FUND Expanding the Power of the Secretary of Health and Human Services to Work with Other Parties to Implement Multipayer Payment Initiatives Source: Commonwealth Fund Health Care Opinion Leaders Survey, October “How strongly would you favor or oppose expansion of the Secretary of Health and Human Services’ authority to work with private payers, providers, and other interested parties to develop and implement multipayer payment initiatives (including Medicare, Medicaid, and private payers) in selected areas?” Strongly Favor 68% Somewhat Favor 26% Neither Favor nor Oppose 3% Strongly Oppose 2%

THE COMMONWEALTH FUND Requiring Medicare recipients to participate in an all-payer database for research, policy development, and monitoring and evaluation purposes Source: Commonwealth Fund Health Care Opinion Leaders Survey, October “How strongly would you favor or oppose requiring Medicare to participate in the development of state/regional/national all-payer data bases, including Medicare, Medicaid, and private insurance data, to provide a foundation for research, policy development, and monitoring and evaluation?” Strongly Favor 73% Somewhat Oppose 4% Somewhat Favor 18% Neither Favor nor Oppose 3% Strongly Oppose 2%