Suzanne Delbanco, Ph.D. Executive Director, Catalyst for Payment Reform c/o PBGH February 21, 2012 California Health Benefit Exchange Board: Private Purchaser Strategies

Big Picture TWO STRATEGIES Creating the Environment Coordinating the ask Understanding the value and cost of care Implementing reforms Align payment to the evidence Value-oriented payment and benefit design Enhancing primary care through payment The health care payment systems of the status quo continue to drain the value out of the care we buy. Only about 1% of payments to doctors and hospitals are tied to performance The system is failing in safety and quality Factors that have nothing to do with quality and value are driving up health care costs February 21, 20121

Creating the environment #1: Coordinating the ask on payment reform Topics include Value-oriented payment Transparency Market competition and consumerism Alignment with Medicare Oversight of ACOs Evaluating Results Health Plan RFI Questions Model Contract Language GOALS Define a shared purchaser agenda Send clear signals and create business case for health plans Lead to better quality and lower costs for all Reduce opportunities for cost shifting February 21, 20122

Creating the environment #2: Understanding Value and Cost of Care February 21, 2012www.catalyzepaymentreform.org3 Information must be available to understand and compare the quality, cost, patient experience, etc., among providers in the network. Key elements 1.Provider Background 2.Quality performance 3.Efficiency 4.Price of services 5.Volume 6.Patient Experience Usability is key Transparency is essential Need to shine the light on payment variation - masked by lack of transparency Payment variation across and within markets - paying up to 500% of Medicare Phase-out gag-clauses Support informed consumer decision making

February 21, 2012www.catalyzepaymentreform.org4 Implementing Reforms #1: Align Payment to the Evidence Example: Maternity Care Practice patterns straying from the evidence Pre-term elective births Unnecessary medical intervention in labor and delivery Worse outcomes and higher costs Payment options Providing one case rate for delivery, regardless of mode, removes the financial incentives for unnecessary intervention in delivery Creating a “do not pay” policy for elective deliveries prior to 39 weeks Bundled payments Payment changes need to be accompanied by facility, provider and patient education and supportive clinical policies and benefit design

Implementing Reforms #2: Value- Oriented Payment and Benefit Design February 21, 2012www.catalyzepaymentreform.org5 Example: Spectrum of Reference to Value Pricing

Implementing Reforms #3: Enhancing Primary Care through Payment February 21, 2012www.catalyzepaymentreform.org6 Patient Centered Medical Homes Increased compensation for primary care doctors and gain-sharing agreement Medical Home for Patients with Severe Chronic Disease Monthly fee paid to physician groups plus the usual fee for service Gain-sharing based on total cost of care savings *Pilot site results = unit price-standardized per capita spending dropped by estimated 20% *Implementation planned for 1/1/13 in Midland, MI

February 21, 2012www.catalyzepaymentreform.org7 Large Purchaser Strategies: Key Lessons Learned 1.Send clear and consistent signals 2.Transparency is essential 3.Carefully monitor health plan compliance 4.Benefit design should complement payment reform 5.Purchasers in all sectors must align

Appendices February 21, 2012www.catalyzepaymentreform.org8 Appendix A – Additional Background on CPR (slides 9-11) Appendix B – RFI Appendix C – Model Contract Language docx Appendix D – Maternity Care Action Brief Appendix E – Reference and Value Pricing Action Brief All CPR materials available in the public domain at:

Appendix A: CPR Purchasers Working Together February 21, Contact information: Suzanne Delbanco, Ph.D., Executive Director M The Boeing Company CalPERS Capital One Carlson Delta Air Lines Dow eBay Equity Healthcare FedEx GE Group Insurance Commission, State of Massachusetts Intel Marriott Ohio Medicaid Ohio PERS OSI Partners, LLC Safeway US Foods Verizon Wal-Mart Xerox A national independent organization led by large employers, with the active involvement of providers, health plans, consumers and labor groups working to improve health care quality and reduce costs by identifying and coordinating workable solutions to improve how we pay for health care in the U.S.

Appendix A continued: Purchasers Have a Catalyst Role Leverage Purchaser Power: Critical Mass Environment Conducive to Reform  Shared vision - payment reform framework & principles  Aligned employer agenda - short term wins, longer-term bold approaches  Clear signals to plans – RFIs and contracts  Toolkit for local action – Market Assessment, Action Briefs, etc.  Direct dialogue with HHS for alignment and influence  National Scorecard on Payment  Compendium of Payment Reform Efforts – what works?  Analyze and raise visibility of provider market power and cost shifting issues Coordinated Purchaser Action 21,

CPR Toolkit developed to create shared understanding of opportunities and to encourage actions that leverage payment to improve value. Payment Framework Help purchasers understand range of payment models and associated benefits and challenges Action Briefs Market Assessment Outline steps to implement payment reforms and ways to mitigate potential unintended consequences Sourcing Tools Support purchaser initiatives though standardized RFI/RFP language and contract modules Identify opportunities based on market conditions, health plan capacity, and delivery system organization Plus, a National Scorecard to monitor the nation’s progress Appendix A continued: Critical Mass Starts With Active Purchasers 21, SPECIAL INITIATIVES Maternity Care Payment Value Pricing Price Transparency