1. Purchasers’ Path to Promoting Higher Value in Health Care Peter V. Lee Pacific Business Group on Health Citizens’ Health Care Working Group – Salt Lake City, Utah July 22, 2005

2. 1 Pacific Business Group on Health: Mission and Priorities  Quality Measurement and Improvement  Value Purchasing  Consumer Engagement Mission: To improve the quality and availability of health care while moderating costs.

3. 2 Pacific Business Group on Health Members

4. 3 Cost Pressures – No End in Sight

5. 4 Quality Shortfalls: Getting it Right 50% of the Time Adults receive about half of recommended care 54.9% = Overall care 54.9% = Preventive care 53.5% = Acute care 56.1% = Chronic care Not Getting the Right Care at the Right Time Source: McGlynn EA, et al., “The Quality of Health Care Delivered to Adults in the United States,” New England Journal of Medicine, Vol. 348, No. 26, June 26, 2003, pp. 2635-2645

6. 5 Employers Using Blunt Instruments

7. 6 Putting the Consumer in the Driver’s Seat

8. 7 PBGH Purchasing Elements for Value Breakthrough *The six Institute of Medicine performance dimensions: Safe, Timely, Effective, Efficient, Equitable, Patient-centered © Pacific Business Group on Health, 2005 Count Value: Higher value options are identified and made available 1.Health Plans are routinely assessed on 6 IOM dimensions of performance*, starting with: risk & benefit- adjusted total cost PMPY, HEDIS and CAHPS; and implementation of breakthrough elements 2-6 2.Individual Providers and Provider Organizations are routinely assessed on 6 IOM dimensions of performance, starting with (allocative) efficiency, effectiveness, and patient centeredness 3.Health & Disease (H/D) Management Programs and Treatment Options are routinely assessed on 6 IOM dimensions of performance Make Value Count: Higher value options are reinforced by the market 4.Consumer Support enables consumers to recognize higher value plans, providers, H/D management programs, and treatment options in a timely and individualized manner 5.Benefit Architecture encourages all consumers to select high value options 6.Provider Payment incents high performance today and re-engineering to enable higher performance tomorrow Capture Value Gains: Breakthroughs in health benefits value occur Today’s Gain: Migration Consumers migrate to more efficient, higher quality plans, providers, H/D management programs, and treatment options (= an initial 5-15 net percentage point offset of future cost increases; and > 2  quality reliability) Tomorrow’s Gain: Re- engineering Sensing a much more performance-sensitive market, health plans, providers, H/D management programs, and biomedical researchers create stunning breakthroughs in efficiency and quality of health benefits (= further net percentage point offsets of future cost increases; and > 4  quality reliability)

9. 8 Breakthrough Plan Competencies: Potential Impact on Premium Health Plan Competency Potential Premium Savings LowMediumHigh 1. Health Promotion0.1%1.7%5.2% 2. Health Risk Management a.Risk reduction b.Self-care and triage c.Disease management -1.3%1.1%5.6% 3. Shared Decision-Making/Treatment Options0.1%0.4%1.0% 4. Provider Options7.3%12.2%17.0% 5. Consumer Incentives & Engagement Included above 6. Provider Incentives & Engagement Included above TOTAL PREMIUM VALUE6.2%15.4%28.8% Source: Business Roundtable; Mercer HR Consulting

10. 9 Adapted from Regence Blue Shield © Pacific Business Group on Health, 2005 SAVE LIVES, SAVE MONEY Measuring Provider Quality and Cost-Efficiency to Improve Value

11. 10 Putting Information & Money to Work Consumer and Provider Incentives Patient/Consumer Incentives Provider Incentives  Information  Tools for the Right People at the Right Time  Information  Tools for Quality Improvement and Accountability  Network Limits  (Narrow Networks)  Channeling Volume  Value Pricing  Price Differentiation  Contribution  Point of Care  P4P  Variable Payment

12. 11 Nearing the Tipping Point: Millions Using Health Care “Quality” Information Saw information on quality among… Used the information in making a decision… Physicians 11%5.4% 11 Million Hospitals 22%8.4% 17 Million Health Plans 28%13.4% 27 Million Source: Kaiser Family Foundation et al., National Survey on Consumers’ Experiences, 2004 of all Americans % and Number

13. 12 Health Plan Chooser – Showing cost and paving the way to quality Consumer Support for Plan Choice Member preference-based ranking: Cost Doctor Quality Features Services

14. 13 Salary Level <$40K$40-$80K & retirees $80-$120K$120K plus Health Net  Monthly $$ $36$86$141$187  % of Pay 1.3%1.8% 1.5% Blue Cross  Monthly $$ $172$215$274$320  % of Pay 6.3%4.5%3.4%2.6% Source: University of California 2004 Supporting Equity: UC Employee’s Family Plan Cost Consumer Incentives for Plan Choice

15. 14 Hospital Choice Tools Hospital quality linked to treatment choice information Network, cost and quality information linked to tiered benefit design Member preference-based ranking: Volume Mortality Complications Length of Stay Leapfrog Cost Patient Experience Consumer Support for Hospital Choice

16. 15 Relative cost 0.69 0.72 1.05 1.38 1.23 0.98 1.18 1.29 - 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 Hospital 1Hospital 2Hospital 3Hospital 4Hospital 5Hospital 6Hospital 7Hospital 8 Blue Shield of California Variation in Facility Relative Cost for Network Choice (Bay Area) Hospital Value Variation

17. 16 PacifiCare HMO Value Network Example - 0.50 1.00 1.50 2.00 2.50 3.00 3.50 $100.00$150.00$200.00$250.00$300.00 2004 Normalized Cost PMPM Quality Score Non-ValueValue Value Network Avg. Cost: $141.09 Avg. Quality Score: 1.34 Non-Value Avg. Cost: $168.77 Avg.. Quality Score: 1.13 Promoting Higher Value Medical Groups

18. 17 Medical Group Payments: California’s Integrated Healthcare Association Pay for Performance GOAL: Breakthrough improvements in quality and patient experience Multi-stakeholder Collaborative:  Seven health plans with nearly 14 million enrollees  Over 200 medical groups  Purchasers  State of California  Consumers Common Measures: Clinical QualityPatient ExperienceInvestment and Adoption of IT 50% weight30% weight20% weight 10 HEDIS-based preventive and chronic care measures 5 measures ( i.e. access, specialty care, MD communication) 2 Measures: point of care and population management Reported with Administrative data Collected through common statewide CAHPS-like survey Collected through web-based survey plus audit Public Reporting and Performance Scorecard:  California Office of Patient Advocate (http://www.opa.ca.gov/report_card/)http://www.opa.ca.gov/report_card/  Pacific Business Group on Health (http://www.healthscope.org)http://www.healthscope.org Pay for Performance and Transparency:  In 2004 over $50 million paid based on common metrics  Performance information used for consumer choice and benefit design

19. 18 Clinical Information Systems Patient Education and Support Care Management Use of Patient RegistriesEducational Resources (languages) Care of Chronic Conditions (disease management) Electronic RX and Test ordering systems Referrals for Risk Factors & Chronic Conditions Preventable Admissions Electronic Medical RecordsQuality Measurement and Improvement Care of High-Risk Medical Conditions (care management) Physician Office Link: Physician Rewards of up to $50 pmpy Consumer Activation from report card and patient experience survey Bridges to Excellence: Physician Rewards Using NCQA Recognition Programs Diabetes Care Link (NCQA Diabetes Recognition Program): 12 measures developed with the American Diabetes Association Physician Rewards of up to $100 pd/py Consumer Activation from report card, care management tool and rewards for compliance Cardiac Care Link (NCQA Heart Stroke Recognition Program): 6 measures developed with the American Heart Association Physician Rewards of up to $160 pcp/py Consumer Activation from report card, care management tool and rewards for compliance

20. 19 PBGH & Where to Get More Information To Learn More… www.pbgh.orgwww.pbgh.org — an overview of PBGH programs and initiatives www.HealthScope.orgwww.HealthScope.org — consumer Web site with health plan and provider quality measurements www.PacAdvantage.orgwww.PacAdvantage.org — small group purchasing pool http://chooser.pacadvantage.orghttp://chooser.pacadvantage.org — sample site to assist enrollees in plan selection To subscribe to the PBGH E-Letter, go to www.pbgh.org/news/eletters