1. Chapter 6 Bending the Cost Curve Copyright 2015 Health Administration Press 1

2. After mastering this material, students will be able to  explain what the Triple Aim is,  identify ways to reduce cost per service,  use standard insurance terminology,  describe cost reduction strategies, and  identify narrow networks and ACOs. Copyright 2015 Health Administration Press 2

3. THE TRIPLE AIM Improved Health, Improved Experience of Care, Lower Cost Copyright 2015 Health Administration Press3

4. The Triple Aim  Three simultaneous goals – Improved experience of care – Improved population health – Reduced healthcare costs per person Copyright 2015 Health Administration Press4

5. Why does healthcare cost so much in the United States? Copyright 2015 Health Administration Press5

6. Annual Doctor Visits per Person Copyright 2015 Health Administration Press6

7. Hospital Discharge Rates per 100,000 People Copyright 2015 Health Administration Press7

8. Hospital Length of Stay Copyright 2015 Health Administration Press8

9. Public and Private Prices: Office Visits Copyright 2015 Health Administration Press9

10. Public and Private Prices: Surgical Fee for Hip Replacement Copyright 2015 Health Administration Press 10

11. CT Scans per 1,000 and Average Price Copyright 2015 Health Administration Press11

12. Prices in the United States vary a lot. Copyright 2015 Health Administration Press Prices for CT scans 12

13. Prices in the United States vary a lot. Copyright 2015 Health Administration Press Prices per hospital day 13

14. As a consumer, what’s your reaction? Copyright 2015 Health Administration Press Prices per hospital day 14

15. Increasing Interest in Transparency  Price – By employers – By insurers – By consumers  Health outcomes  Patient experience Copyright 2015 Health Administration Press15

16. What happens if your firm scores poorly on  price?  health outcomes?  patient experience? Copyright 2015 Health Administration Press16

17. COST AND COST REDUCTION Copyright 2015 Health Administration Press17

18. Costs depend on  the resources used – by the healthcare provider, and – by the consumer.  the prices paid for those resources – by the healthcare provider, and – by the consumer. Copyright 2015 Health Administration Press18

19. How do you reduce costs?  The resources used – by the healthcare provider, and – by the consumer  The prices paid for those resources – by the healthcare provider, and – by the consumer Copyright 2015 Health Administration Press19

20. How do you reduce costs  while improving the customer experience  and improving health?  You redesign care. Copyright 2015 Health Administration Press20

21. Redesigning Care  Eliminate steps in the care process – that do not add value for customers, and – that are not effective.  Modify steps in the care process – that add less value than they should, and – that are not as effective as they should be. Copyright 2015 Health Administration Press21

22. Why the lack of efficiency?  Fee-for-service pricing distorts value.  Improving efficiency is hard. – Providers have been able to raise prices instead. – The competition is not efficient either. Copyright 2015 Health Administration Press22

23. Improving Care for Diabetes  A diabetic checkup every 3–6 months to measure – weight and blood pressure, and – HbA1c  Annual check on – LDL, and – foot neuropathy Copyright 2015 Health Administration Press23

24. Share with Assessments PeriodUrbanSmall RuralIsolated HbA1cThis year69%77% Blood PressureLast visit90%95%93% LDLPast two years65%69%70% Copyright 2015 Health Administration Press24

25. Typical Visit for a Diabetic Patient  Nurse takes vital signs and escorts to room  Patient waits for doctor  Typical visit lasts 20 minutes  Mostly doctor responding to problems – Patients typically say little – May not understand what they are expected to do – Do not comply with recommendations well Copyright 2015 Health Administration Press25

26. How could this visit be improved?  Nurse takes vital signs and escorts to room  Patient waits for doctor  Typical visit lasts 20 minutes  Mostly doctor responding to problems – Patients typically say little – May not understand what they are expected to do – Do not comply with recommendations well Copyright 2015 Health Administration Press26

27. Your recommendations?  Would these make financial sense – for the doctor? – for the patient? – for society? Copyright 2015 Health Administration Press 27

28. INNOVATIONS Ways to Realize the Triple Aim Copyright 2015 Health Administration Press28

29. A number of innovations are being tested.  Bundled payments  ACOs and HMOs  Patient-centered medical homes  Narrow networks  High-deductible plans  Reference pricing Copyright 2015 Health Administration Press29

30. Bundled Payments  A single payment for an episode of care – Typically covers most services – Typically one provider “hires” all the others  How does this change incentives? – Other providers become cost centers. – It is more profitable to reduce resource use. Copyright 2015 Health Administration Press30

31. Results of ProvenCare CABG Bundled Payment Copyright 2015 Health Administration Press 31

32. Results of ProvenCare CABG Bundled Payment Copyright 2015 Health Administration Press32

33. How could both be true? Copyright 2015 Health Administration Press33

34. ACOs and HMOs  Both combine insurance and care.  Both change incentives. – Reward providers for high-value services – Reward providers for being efficient – Minimize institutional care Copyright 2015 Health Administration Press34

35. ACOs are Medicare phenomena.  Traditional Medicare prohibits networks.  Elsewhere, networks are key. – HMOs – Medicare Advantage – Marketplace plans – Full-risk insurance plans Copyright 2015 Health Administration Press35

36. Accountable Care Organization (ACO)  Initiative is funded by the Affordable Care Act (ACA).  Reimbursement is based on – quality metrics, and – costs. Copyright 2015 Health Administration Press36

37. Pioneer ACOs  saved over $96 million,  earned $68 million,  increased the mean quality score by 19 percent, and  improved patient experience scores. Copyright 2015 Health Administration Press37

38. Shared Savings ACOs  saved over $652 million,  earned more than $300 million,  increased quality scores, and  increased patient experience scores. Copyright 2015 Health Administration Press38

39. Patient-Centered Medical Homes  A personal physician  A whole-person orientation  Coordinated care  Enhanced access – After hours – Improved communication – Same-day care Copyright 2015 Health Administration Press39

40. Full implementation of the PCMH  Higher quality scores  Better preventive services  Slightly lower medical costs for adults – Fewer ED visits – Lower hospitalization rates Copyright 2015 Health Administration Press40

41. Narrow Networks  Spending falls significantly. – Reduced spending on specialists – Reduced spending on ED visits – Reduced spending on hospitalization – Reduced prices per service  Primary care spending goes up.  There is no evidence of poorer quality. Copyright 2015 Health Administration Press41

42. High deductible plans reduce costs. Copyright 2015 Health Administration Press42

43. If you were an employer, which would you choose? Copyright 2015 Health Administration Press43

44. Prices are seldom available.  Prices are trade secrets. – For providers – For insurers  Why are prices trade secrets?  The link to patient costs is complex. – It depends on benefit design. – Prices often vary more than patient costs. Copyright 2015 Health Administration Press44

45. The effects of price transparency are not known.  Patients may – have trouble making comparisons, and – assume that higher prices mean higher quality. Copyright 2015 Health Administration Press45

46. What Anthem paid for joint replacement. Copyright 2015 Health Administration Press46

47. Patients tended to favor high priced hospitals. Copyright 2015 Health Administration Press47

48. High-deductible plans seek transparency.  Heath Care Cost Institute Founders – Aetna – Humana – United Healthcare  Joined in September – Assurant – NCQA – Harvard Pilgrim – Health Net – Kaiser Permanente – Partners Healthcare Copyright 2015 Health Administration Press48

49. Insurers are scrambling to let patients see price differences. Copyright 2014 Health Administration Press

50. Multiple Sources of Price Data  Aetna’s Member Payment EstimatorMember Payment Estimator  www.aetnatools.com/ www.aetnatools.com/  Castlight Castlight  Healthcare Blue Book Healthcare Blue Book  And more Copyright 2015 Health Administration Press50

51. Reference Pricing  Prices vary a lot. – Well-known providers have very high prices. – Some very good providers have low prices.  Patients often choose well-known providers. Copyright 2015 Health Administration Press51

52. What CalPERS paid for joint replacement. Copyright 2015 Health Administration Press52

53. In January 2011 CalPERS started reference pricing. Copyright 2015 Health Administration Press53

54. Why would a health system  participate in a bundled-payment trial?  start an ACO?  test any payment innovation? Copyright 2015 Health Administration Press54

55. CONCLUSIONS Copyright 2015 Health Administration Press55

56. US costs are high because of private sector prices.  A few people get stuck paying charges. – The uninsured – Some accident victims  Medicare prices are – somewhat higher than prices in other countries, and – usually much lower than private prices. Copyright 2015 Health Administration Press56

57. US costs are high because of private sector prices.  In most cases, utilization is not higher in the United States. – Imaging is a major exception. Copyright 2015 Health Administration Press57

58. Private prices are high in the United States.  Prices are high because – some providers have leverage, – most providers are not efficient, and – patients choose high-priced providers. Copyright 2015 Health Administration Press58

59. The Triple Aim  Three simultaneous goals – Improved experience of care – Improved population health – Reduced healthcare costs per person Copyright 2015 Health Administration Press59

60. Cost reduction requires  using fewer resources, and  paying less for those resources. Copyright 2015 Health Administration Press60

61. Multiple innovations are being tried in the United States.  Bundled payments  ACOs and HMOs  Patient-centered medical homes  Narrow networks  High-deductible plans  Reference pricing Copyright 2015 Health Administration Press61

62. Some innovations have spread already.  Bundled payments  ACOs and HMOs  Patient-centered medical homes  Narrow networks  High-deductible plans  Reference pricing Copyright 2015 Health Administration Press62