1. Understanding Accountable Care Organizations Timothy J. Fisher, MD, MS, FACOG July 10, 2014

2. How My Brain Works VALUE= QUALITY/COST

3. TRANSFORMING MATERNITY CARE How Payment Reform Can Help Improve Quality and Lower Costs Harold D. Miller President and CEO Center for Healthcare Quality and Payment Reform www.CHQPR.org

4. Big Opportunity for Commercial Payers & Medicaid is Maternity Medical Expenditure Panel Survey, 2006

5. Can We Reduce Maternity Care Costs Without Rationing? Pregnant Woman

6. Reducing Costs Without Rationing: Better Pregnancy Management Complicated Pregnancy Uncomplicated Pregnancy Pregnant Woman

7. Reducing Costs Without Rationing: Better Choices About Delivery Complicated Pregnancy Uncomplicated Pregnancy Pregnant Woman Term Vaginal Delivery Pre-Term, C-Section

8. Reducing Costs Without Rationing: Better Management of Delivery Complicated Pregnancy Uncomplicated Pregnancy Pregnant Woman Term Vaginal Delivery Pre-Term, C-Section Efficient Successful Delivery Maternal Complications, Readmissions High-Cost Successful Delivery Infants with Low Birth Weight, Injuries, Etc.

9. Better for Moms and Babies As Well as Payers Better Outcomes/Lower Cost Complicated Pregnancy Uncomplicated Pregnancy Pregnant Woman Term Vaginal Delivery Pre-Term, C-Section Efficient Successful Delivery Maternal Complications, Readmissions High-Cost Successful Delivery Infants with Low Birth Weight, Injuries, Etc.

10. Current Payment Systems Reward Bad Outcomes $ Complicated Pregnancy Uncomplicated Pregnancy Pregnant Woman Term Vaginal Delivery Pre-Term, C-Section Efficient Successful Delivery Maternal Complications, Readmissions High-Cost Successful Delivery Infants with Low Birth Weight, Injuries, Etc.

11. How Payment Systems Impede Better Maternity Care Goals for High-Value Maternity Care Barriers Created by Current Payment Systems Achieve Good Birth Outcomes No financial penalty for poor outcomes, and no reward for good outcomes; More/higher payments to physicians and hospitals when adverse events occur; Same payment to physicians regardless of quality of prenatal care provided

12. How Payment Systems Impede Better Maternity Care Goals for High-Value Maternity Care Barriers Created by Current Payment Systems Achieve Good Birth Outcomes No financial penalty for poor outcomes, and no reward for good outcomes; More/higher payments to physicians and hospitals when adverse events occur; Same payment to physicians regardless of quality of prenatal care provided Avoid Use of Expensive/ Undesirable Procedures Higher payment/higher margins for hospitals for C-sections

13. How Payment Systems Impede Better Maternity Care Goals for High-Value Maternity Care Barriers Created by Current Payment Systems Achieve Good Birth Outcomes No financial penalty for poor outcomes, and no reward for good outcomes; More/higher payments to physicians and hospitals when adverse events occur; Same payment to physicians regardless of quality of prenatal care provided Avoid Use of Expensive/ Undesirable Procedures Higher physician payment/higher hospital margins for C-sections Reduce Costs of Delivery and Post-Partum Care No reward for physicians to help hospitals reduce costs or to use lower-cost settings such as birth centers; No incentive for mothers to choose lower- cost/higher-value providers

14. Accountable Payment Models Provide Flexibility + Accountability BUILDING BLOCKSHOW IT WORKS Bundled Payment Single payment to 2+ providers who are now paid separately (e.g., hospital+physician) Warrantied Payment Higher payment for quality care, no extra payment for avoiding complications Condition- Based Payment Payment based on the patient’s condition, rather than on the procedure used

15. Accountable Payment Models Allow Win-Win-Win Approaches BUILDING BLOCKSHOW IT WORKS HOW PHYSICIANS AND HOSPITALS CAN BENEFIT HOW PAYERS CAN BENEFIT Bundled Payment Single payment to 2+ providers who are now paid separately (e.g., hospital+physician) Higher payment for physicians if they reduce costs paid by hospitals Physician and hospital offer a lower total price to Medicaid or health plan than today Warrantied Payment Higher payment for quality care, no extra payment for avoiding complications Higher payment for physicians and hospitals with low rates of complications Medicaid or health plan no longer pays more for high rates of complications Condition- Based Payment Payment based on the patient’s condition, rather than on the procedure used No loss of payment for physicians and hospitals using fewer tests and procedures Medicaid or health plan no longer pays more for unnecessary procedures

16. Improving Payment for Maternity Care: Part 1 Goals for High-Value Maternity Care Barriers Created by Current Payment Systems Achieve Good Birth Outcomes No financial penalty for poor outcomes, and no reward for good outcomes; More/higher payments to physicians and hospitals when adverse events occur; Same payment to physicians regardless of quality of prenatal care provided Avoid Use of Expensive/ Undesirable Procedures Higher physician payment/higher hospital margins for C-sections Reduce Costs of Delivery and Post-Partum Care No reward for physicians to help hospitals reduce costs or to use lower-cost settings such as birth centers; No incentive for mothers to choose lower- cost/higher-value providers

17. Normal Pregnancy, Term Delivery, No Complications Normal Pregnancy Term Delivery w/ No CCs Vaginal Delivery in Hospital C-Section in Hospital

18. Today: Higher Payment for C-Sections, Regardless of Need Normal Pregnancy Term Delivery w/ No CCs Vaginal Delivery in Hospital C-Section in Hospital HEALTH PLAN Lower Payment Higher Payment

19. Condition-Based Payment Encourages Lower-Cost Care Normal Pregnancy Term Delivery w/ No CCs Vaginal Delivery in Hospital C-Section in Hospital Condition-Specific Payment HEALTH PLAN Single Payment

20. Payment Would Vary Based on Patient Conditions/Needs Normal Pregnancy Term Delivery w/ No CCs Vaginal Delivery in Hospital C-Section in Hospital Delivery w/o Complications HEALTH PLAN Lower Payment Term Delivery w/ CCs Vaginal Delivery in Hospital C-Section in Hospital Delivery with Complications Higher Payment

21. Condition-Based Payment Also Encourages Lower-Cost Locations Normal Pregnancy Term Delivery w/ No CCs Vaginal Delivery in Hospital C-Section in Hospital Condition-Specific Payment HEALTH PLAN Single Payment Vaginal Delivery in Birth Center

22. Improving Payment for Maternity Care: Part 2 Goals for High-Value Maternity Care Barriers Created by Current Payment Systems Achieve Good Birth Outcomes No financial penalty for poor outcomes, and no reward for good outcomes; More/higher payments to physicians and hospitals when adverse events occur; Same payment to physicians regardless of quality of prenatal care provided Avoid Use of Expensive/ Undesirable Procedures Higher payment/higher margins for hospitals for C-sections Reduce Costs of Delivery and Post-Partum Care No reward for physicians to help hospitals reduce costs or to use lower-cost settings such as birth centers; No incentive for mothers to choose lower- cost/higher-value providers

23. Accountable Payment Models Allow Win-Win-Win Approaches BUILDING BLOCKSHOW IT WORKS HOW PHYSICIANS AND HOSPITALS CAN BENEFIT HOW PAYERS CAN BENEFIT Bundled Payment Single payment to 2+ providers who are now paid separately (e.g., hospital+physician) Higher payment for physicians if they reduce costs paid by hospitals Physician and hospital offer a lower total price to Medicare or health plan than today Warrantied Payment Higher payment for quality care, no extra payment for avoiding complications Higher payment for physicians and hospitals with low rates of complications Medicaid or health plan no longer pays more for high rates of complications Condition- Based Payment Payment based on the patient’s condition, rather than on the procedure used No loss of payment for physicians and hospitals using fewer tests and procedures Medicare or health plan no longer pays more for unnecessary procedures

24. Yes, a Health Care Provider Can Offer a Warranty Geisinger Health System ProvenCare SM –A single payment for an ENTIRE 90 day period including: ALL related pre-admission care ALL inpatient physician and hospital services ALL related post-acute care ALL care for any related complications or readmissions –Types of conditions/treatments currently offered: Cardiac Bypass Surgery Cardiac Stents Cataract Surgery Total Hip Replacement Bariatric Surgery Perinatal Care Low Back Pain Treatment of Chronic Kidney Disease

25. Major Improvements in Outcomes, and Quickly

26. 103 discrete evidence-based elements of care are incorporated, measured and tracked for compliance Redesign, from the ground up, all aspects of provider workflow –Drive fundamental efficiency improvements –Increase patient safety and process reliability –Reduce/eliminate documentation redundancy –Streamline patient education and cut costs Seek observable reductions in C-section rates and premature births Enhance management of comorbid conditions Improve fetal/child health and wellness Geisinger Perinatal ProvenCare

27. Results of Geisinger Perinatal ProvenCare 26% Reduction in Cesarean Sections 68% Reduction in Birth Trauma 23% Reduction in NICU Use Berry SA, et al, “ProvenCare Perinatal: A Model for Delivering Evidence/Guideline-Based Care for Perinatal Populations,” Joint Commission Journal on Quality and Safety, May 2011

28. A Warranty is Not an Outcome Guarantee Offering a warranty on care does not imply that you are guaranteeing a cure or a good outcome It merely means that you are agreeing to correct avoidable problems at no (additional) charge Most warranties are “limited warranties,” in the sense that they agree to pay to correct some problems, but not all

29. Prices for Warranted Care Will Likely Be Higher Q: “Why should we pay more to get good-quality care??” A: In most industries, warrantied products cost more, but they’re desirable because TOTAL spending on the product (repairs & replacement) is lower than without the warranty

30. Prices for Warranted Care May Be Higher, But Spending Lower Q: “Why should we pay more to get good-quality care??” A: In most industries, warrantied products cost more, but they’re desirable because TOTAL spending on the product (repairs & replacement) is lower than without the warranty In healthcare, a procedure with a warranty would need to have a higher payment rate than the equivalent non-warrantied procedure, but the higher price would be offset by fewer costs of complications, outlier payments, and readmissions

31. Example: $6,000 Cost of Delivery Cost of Delivery $6,000

32. Actual Average Payment is Higher Due to NICU Use Cost of Delivery Cost and Rate of NICU Use Average Total Cost $6,000$20,0008%$7,600

33. How Much Should be Charged for Delivery With a Warranty? Cost of Delivery Cost and Rate of NICU Use Average Total Cost Price Charged $6,000$20,0008%$7,600?

34. Starting Point for Warranty Price: Actual Current Average Payment Cost of Delivery Cost and Rate of NICU Use Average Total Cost Price Charged Change in Net Revenue $6,000$20,0008%$7,600 $0

35. Limited Warranty Gives Financial Incentive to Improve Quality Cost of Delivery Cost and Rate of NICU Use Average Total Cost Price Charged Change in Net Revenue $6,000$20,0008%$7,600 $0 $6,000$20,0007%$7,400$7,600$200 Reducing Adverse Events… …Improves The Bottom Line...Reduces Costs...

36. Higher-Quality Provider Can Charge Less, Attract More Patients Cost of Delivery Cost and Rate of NICU Use Average Total Cost Price Charged Change in Net Revenue $6,000$20,0008%$7,600 $0 $6,000$20,0007%$7,400$7,600$200 $6,000$20,0007%$7,400$7,500$100 Enables Lower Prices

37. A Virtuous Cycle of Quality Improvement & Cost Reduction Cost of Delivery Cost and Rate of NICU Use Average Total Cost Price Charged Change in Net Revenue $6,000$20,0008%$7,600 $0 $6,000$20,0007%$7,400$7,600$200 $6,000$20,0007%$7,400$7,500$100 $6,000$20,0006%$7,200$7,500$300 Reducing Adverse Events… …Improves The Bottom Line...Reduces Costs...

38. Win-Win-Win for Patients, Payers, and Providers Cost of Delivery Cost and Rate of NICU Use Average Total Cost Price Charged Change in Net Revenue $6,000$20,0008%$7,600 $0 $6,000$20,0007%$7,400$7,600$200 $6,000$20,0007%$7,400$7,500$100 $6,000$20,0006%$7,200$7,500$300 $6,000$20,0006%$7,200$7,400$200 $6,000$20,0005%$7,000$7,400$400 Quality is Better......Spending is Lower......Providers More Profitable

39. To Make It Work: Shared, Trusted Data for Pricing Physician/Hospital needs to know their current rates of utilization and how many are preventable to know whether the warranty price will cover its costs of delivering care Purchaser/Payer needs to know its current rates of utilization to know whether the warranty price is a better deal than they have today Both sets of data have to match in order for both providers and payers to agree!

40. Many Potential Opportunities for Warranties in Maternity Care Maternal injuries, infections, complications Birth injuries, infections, complications Neonatal problems (e.g., respiratory distress syndrome) after induced birth Readmissions (both maternal and infant)

41. Many Variations of Payment Reform Normal Pregnancy Term Delivery w/ No CCs Vaginal Delivery in Hospital No Complications C-Section in Hospital Complications No Complications Complications OB/CNM $ Hospital $$ OB/CNM $ Hospital $$$

42. Bundled Payments Normal Pregnancy Term Delivery w/ No CCs Vaginal Delivery in Hospital No Complications C-Section in Hospital Complications No Complications Complications OB/CNM $ Hospital $$ OB/CNM $ Hospital $$$ Bundled Payment

43. Payments with Warranties Normal Pregnancy Term Delivery w/ No CCs Vaginal Delivery in Hospital No Complications C-Section in Hospital Complications No Complications Complications OB/CNM $ Hospital $$ OB/CNM $ Hospital $$$ Bundled Payment with Warranty

44. Condition-Based Payment Normal Pregnancy Term Delivery w/ No CCs Vaginal Delivery in Hospital No Complications C-Section in Hospital Complications No Complications Complications OB/CNM $ Hospital $$ OB/CNM $ Hospital $$$ Condition-Based Bundled Payment with Warranty

45. Authorizing/Enabling Use of Alternative Delivery Sites Normal Pregnancy Term Delivery w/ No CCs Vaginal Delivery in Hospital No Complications C-Section in Hospital Complications Delivery in Birth Center OB/CNM $ Birth Ctr $ OB/CNM $ Hospital $$ OB/CNM $ Hospital $$$ No Complications Complications No Complications Complications Condition-Based Bundled Payment with Warranty

46. Moving Upstream to Broader Range of Conditions Normal Pregnancy Term Delivery w/ No CCs Vaginal Delivery in Hospital No Complications Pre-Term Elective Induction C-Section in Hospital Complications Delivery in Birth Center OB/CNM $ Birth Ctr $ OB/CNM $ Hospital $$ OB/CNM $ Hospital $$$ No Complications Complications No Complications Complications Broader Condition-Based Bundled Payment with Warranty

47. A Maternity Care ACO Normal Pregnancy Term Delivery w/ No CCs Vaginal Delivery in Hospital No Complications Pre-Term Elective Induction C-Section in Hospital Complications Delivery in Birth Center OB/CNM $ Birth Ctr $ Bundled Condition-Based Payment with Warranty OB/CNM $ Hospital $$ OB/CNM $ Hospital $$$ No Complications Complications High-Risk Pregnancy No Complications Complications Payment rates would still be adjusted based on maternal risk factors at the beginning of pregnancy and unpreventable factors that occur during pregnancy, but not for preventable complications or discretionary choice of delivery timing, method, or site

48. Four Things Needed For Win-Win-Win Solutions 1.Defining the Change in Care Delivery –How can the physician, hospital, or other provider change the way care is delivered to reduce costs without harming patients?

49. Four Things Needed For Win-Win-Win Solutions 1.Defining the Change in Care Delivery –How can the physician, hospital, or other provider change the way care is delivered to reduce costs without harming patients? 2.Analyzing Expected Costs and Savings –What will there be less of, and how much does that save? –What will there be more of, and how much does that cost? –Will the savings offset the costs on average? –How much variation in costs and savings is likely?

50. Four Things Needed For Win-Win-Win Solutions 1.Defining the Change in Care Delivery –How can the physician, hospital, or other provider change the way care is delivered to reduce costs without harming patients? 2.Analyzing Expected Costs and Savings –What will there be less of, and how much does that save? –What will there be more of, and how much does that cost? –Will the savings offset the costs on average? –How much variation in costs and savings is likely? 3.Designing a Payment Model To Support Change –Flexibility to change the way care is delivered –Accountability for costs and quality related to care –Adequate payment to cover lowest-achievable costs –Protection for the provider from insurance risk

51. Four Things Needed For Win-Win-Win Solutions 1.Defining the Change in Care Delivery –How can the physician, hospital, or other provider change the way care is delivered to reduce costs without harming patients? 2.Analyzing Expected Costs and Savings –What will there be less of, and how much does that save? –What will there be more of, and how much does that cost? –Will the savings offset the costs on average? –How much variation in costs and savings is likely? 3.Designing a Payment Model To Support Change –Flexibility to change the way care is delivered –Accountability for costs and quality related to care –Adequate payment to cover lowest-achievable costs –Protection for the provider from insurance risk 4.Compensating Providers Appropriately –Changing payment to the provider organization (physician practice/group/IPA/health system) does not automatically change compensation to physicians or hospitals

52. Lack of Effective Incentives for Value-Based Choice by Patients Copays, Co-insurance, and High Deductibles do little to encourage patients to be cost-conscious in choosing among high-cost providers and services

53. Where Will You Have Your Baby Delivered? Consumer Share of Delivery Cost Price #1 $5,000 Price #2 $6,000 Price #3 $7,000 $1,000 Copayment:$1,000 10% Coinsurance w/$2,000 OOP Max: $2,000 $5,000 Deductible:$5,000

54. Where Will You Have Your Baby Delivered? Consumer Share of Delivery Cost Price #1 $5,000 Price #2 $6,000 Price #3 $7,000 $1,000 Copayment:$1,000 10% Coinsurance w/$2,000 OOP Max: $2,000 $5,000 Deductible:$5,000 Highest-Value:$0$1,000$2,000

55. Lack of Effective Incentives for Value-Based Choice by Patients Copays, Co-insurance, and High Deductibles do little to encourage patients to be cost-conscious in choosing among high-cost providers and services Copays, Co-insurance, and High Deductibles can discourage patients from getting preventive treatments they need –If we want mothers to get adequate prenatal care, why do we make them pay in order to get it? –What if mothers need medications to improve pregnancy outcomes, but can’t afford them?

56. Moving to Higher-Quality, More Affordable Maternity Care There is no one-size-fits-all solution to healthcare transformation; each region will need to actually make it happen in its own unique environment. The best federal policy will support regional innovation. Payment reform is necessary, but not sufficient. Delivery system reform, lean redesign of care processes, changes in benefit design, and effective quality measurement are also essential. Everything needs to focus on delivering the best outcomes for patients at the lowest cost to the purchasers. All stakeholders need to come together with shared data in a neutral forum to look for win-win-win solutions and then implement them successfully.

57. Learn More About Win-Win-Win Payment and Delivery Reform Center for Healthcare Quality and Payment Reform www.PaymentReform.org www.PaymentReform.org

58. Acknowledgement and Thanks: Harold D. Miller President and CEO Center for Healthcare Quality and Payment Reform Miller.Harold@CHQPR.org (412) 803-3650 www.CHQPR.org www.PaymentReform.org