1. Improving Orthopedic Value from the Buy Side – Perspectives From The Alliance Minnesota Health Action Group Community Dialogue Improving Value for Hip and Knee Replacements March 28, 2014

2. About The Alliance ® >Not-for-profit, employer-owned cooperative Shareholders = customers >Founded in 1990 by 7 employers; now over 200 employers 90,000 employees and family members 23 counties in WI, IA and IL $500,000,000 in health care/yr >Move health care forward by controlling costs, improving quality and engaging individuals in their health

3. Our Genesis >Mid 1980’s: State of WI pursues “managed competition” >Large multi-specialty medical groups and hospitals form their own HMO’s –Favorable unit prices made up by shifting costs to the rest of the market >1990: The Alliance –Direct contracting with providers, data warehouse, cost and quality comparisons

5. Employer Perspectives on Orthopedic Care 1.Source of significant and rising costs 2.Increase in volume >Shift to younger patients >Questions about appropriate use (NEJM Sept 11, 2008) 3.Uncertain quality >Limited information to distinguish better and worse performance

6. Left to Choose Based on Cost Mortality not a factor All hospitals received “As Expected” rating on 6 types of preventable complications Cost is remaining differentiator Source: QualityCounts  Inpatient Hospital Report, Fall 2009

7. 33 miles in 49 minutes = $7,994 difference Arthroscopic Knee Surgery for Torn Cartilage Examples From The Alliance Market.25 miles + elevator turn = $2,725 difference 11 miles in 20 minutes = $4,781 difference Source: QualityCounts  Outpatient Procedures & Tests Report, 2010; Source for Distance and Time: www.mapquest.com Fort Atkinson and Madison Janesville and Beloit Madison and Madison

8. AAOS’ Modest Choosing Wisely List 1.Avoid performing routine post-operative deep vein thrombosis ultrasonography screening in patients who undergo elective hip or knee arthroplasty 2.Don’t use needle lavage to treat patients with symptomatic osteoarthritis of the knee for long-term relief. 3.Don’t use glucosamine and chondroitin to treat patients with symptomatic osteoarthritis of the knee. 4.Don’t use lateral wedge insoles to treat patients with symptomatic medial compartment osteoarthritis of the knee. 5.Don’t use post-operative splinting of the wrist after carpal tunnel release for long-term relief.

9. The QualityPath to Higher Value 1.Identify common, expensive elective procedures 2.Evaluate physicians + hospitals on important quality measures and characteristics Involve clinicians in the process 3.Negotiate lower bundled payments 4.Use benefit plan designs to move market share to high value physicians + hospitals

10. Common, Expensive Elective Procedures >Heart Bypass Surgery >Elective Angiography and Angioplasty >Knee Replacement >Hip Replacement

11. Unit of Analysis >Physician/surgeon + Hospital Pairs –Physician-level information important to employers to create benefit plan-based incentives >Variation in performance between physicians >Role of steward/fiduciary of resources –Impact of ordering and billing practices –Specialists account for 8 – 15% of charges, but can control/influence much more

12. Hip and Knee Criteria 1.Registry Participation Accelerate progress to include patient-reported outcomes 2.Full transparency with results at or above average for individual physicians + hospitals 5-year revision rates THA/TKA 30-day readmission rates THA/TKA complication rates Patient experience/CAHPS results Additional measures via CMS “Compare” programs

13. Hip and Knee Criteria cont. 3.Standardized Clinical Processes in Routine Use a.Consistently collected pre and post patient-reported outcome measures b.Decision support for ordering high tech imaging (e.g. MRI) c.Shared decision-making >Quality of process assessed 4.Pre-procedure joint school

14. Hip and Knee Criteria cont. 5.Disclosure of all industry payments to patients 6.Conversation about future care needs documented in an advanced directive, as appropriate

15. Quality First, Then Price >Bundled payments for episodes of care  Less than today’s reimbursement

16. Employer Commitment >Benefit plans to encourage patients to use QualityPath designated hospital and physicians  Reference pricing: 100% coverage for QualityPath providers  Lower co-pays and deductibles for QualityPath providers

17. Positive Incentives >Patients  Better odds of getting appropriate, high quality care  Lower cost  Easy to understand and use >Physicians and Hospitals  Reputation – public reporting, QualityPath designation  Financial – greater market share >Employers  Better odds of getting appropriate, high quality care  Lower cost

18. Process and Timeline 1.Provider engagement - ongoing 2.Quality criteria established – review and comment period: Jan 2014 3.RFI released – Feb 13 4.Responses due – April 3 5.Employer engagement – ongoing 6.Evaluation period – April 4 – April 27  Feedback to applicants – April 27 – 30

19. Process and Timeline cont. 7.Designated hospitals + surgeons announced 8.Contract Negotiations: 5/1 – 9/1  Aggressive bundled pricing + warranties 9.Benefit plan design: 5/1 – 8/1 10.Consumer support: 2/1 – 12/1 11.Evaluation: 2/14 - ongoing

20. Cheryl DeMars, President and CEO The Alliance (608) 210-6621 cdemars@the-alliance.org