Volume to Value: Quality Based Purchasing for Policymakers Trish Riley, Director Governor’s Office of Health Policy and Finance Council of State Governments / Eastern Regional Conference August 17, 2010 Portland, ME

“You Get What you Pay For” US spends 2X other developed nations but does not get better health or quality More surgery, without better outcomes Physicians see more patients and are paid more despite same distribution of generalists: specialists 10% fewer in-patient beds but pay 4X other nations per bed Source: McKinsey Global 1

“Every System is Perfectly Designed to Get the Results it Gets” Maine:  $400 M in potentially avoidable hospitalizations  30% higher ED use than U.S.  1.3 M People; 39 Hospitals  Fee for service environment 2

Where are we headed? Integrated system capitation Global DRG fee: hospital, post- acute, and physician inpatient Global DRG fee: hospital only Global ambulatory care fees Global primary care fees Blended FFS and medical home fees FFS and DRGs Hospital system Integrated delivery system Outcome measures; large % of total payment Preventive care; management of chronic conditions measures; small % of total payment Care coordination and intermediate outcome measures; moderate % of total payment Less Feasible More Feasible Primary care MD group practice Small MD practice: unrelated hospitals Multi-specialty MD group practice 3 Source: Commonwealth Fund

How are we getting there? Provider & Payer Demos & State Initiatives Maine Health Management Coalition Patient Centered Medical Homes – 26 Sites Policy Approaches State Health Plan Capital Investment Fund (Supply drives demand) Hospital Cooperation Act CON Criteria – Must address health care variation and ED use 4

Legislature established Payment Reform Workgroup and endorsed principles for reform - Part of Advisory Council on Health Systems Development Charge: 1) Consider research & Implications for payment reform. 2) Assess merits of reform against principles. 3)Develop consumer awareness. 4)Identify statutory and regulatory changes needed to advance models for payment reform 5)Design a 3-yr. demo to advance payment reform models Report to Jt. Committees on Health and Human Services and Insurance and Financial Services – 1/15/2011 5

Core Principles of Payment Reform A.Support integrated, efficient and effective systems of care delivery and payment B.Promote a patient centered approach to service payment and delivery C.Encourage and reward prevention and management of service D.Promote the value of care over volume to measurably lower costs E.Promote payment and processes that are transparent, easy to understand and simple to administer for patients, providers, purchasers and other stakeholders F.Balance the interests of patients, providers and payers while pursuing necessary change. 6

Payment Reform and the ACA Numerous opportunities for demonstrations Exchange as new marketplace – vehicle to advance payment reform 7