1. Bob Doherty Senior Vice President, Governmental Affairs and Public Policy American College of Physicians March 3, 2009 Designing new payment models for Medical Care: Version 2009 (PCMH) Presentation to The Medical Home Summit

2. Traditional FFS Medical Care: Version 1965  Based on the way that care was provided 40 years ago—not way it delivered today patients treated only when sick (acute condition) little or no emphasis on prevention and coordination care based on doctor’s best judgment as informed by CME and journals but not on evidence-based guidelines specific visit or procedure code individuals not teams “usual, customary, reasonable” (UCR)

3. RBRVS-FFS Medical care: Version 1989 Same as 1965 version but Instead of UCR, based on RBRVS Relative values based on time, mental and physical effort, and iatrogenic risk Initial pay shift to primary care, eroded over time

4. Traditional capitation: Medical Care: Version 1995  Per patient per month  Not risk-adjusted  Transfer of insurance risk to physicians  Incentive: do as little as possible, for as few as possible; keep people out of the office; don’t take on higher risk/higher use patients

5. Wanted! New pay models for Medical Care: Version 2009  Medical care today: prevention/management of illness rather than just treating disease care rendered by coordinated teams of health professionals clinical judgment informed by evidence-based clinical decision support results matter (not just service rendered) systems and processes of care to support better outcomes

6. Getting from here to there  “Here” is a payment system that discourages innovation, care coordination, teams, systems and better outcomes  “There” is a payment system that rewards practice innovation, care coordination, teams, systems and better outcomes  How do we get from here to there?

7. “There”...  The Patient-Centered Medical Home Care coordinated by personal physician Responsible for “whole” person Prevention and coordination Systems Patient-Centeredness  But a PCMH won’t work without a payment model designed for Medical Care: Version 2009

8. Payments to a PCMH must:  Be sufficient to recognize the costs, work and time for a practice to be qualified as a PCMH and sustain it over time  Recognize the value of physician time and work that falls outside of a face-to-face visit  Help offset the costs of acquiring HIT and other systems

9. Payments to a PCMH must:  Recognize the increased expense and work associated with caring for more complex patients  Provide positive incentives for practices take the first step up the QI ladder... with additional incentives to climb higher

10. Payments to a PCMH should not be based solely on:  doing as much as possible for as many as possible (FFS)  or doing as little as possible for as few as possible (capitation)  or how well a practice scores on quality measures (P4P) that may ignore elements of care that are not being measured

11. A better idea: combine FFS, monthly care coordination fees, and performance The PCMH payment equation: $Monthly care coordination prospective payments (tiered: levels 1, 2, 3) x risk adjuster $Risk-adjusted care coordination fee + $ FFS payment for visits $ Total payment w/o performance + $Performance based payments* = $Total payment to the PCMH *could be combined with shared savings model *Incorporates work outside of visit and costs of HIT; amount could vary depending on practice capabilities per NCQA scoring

12. Patient-Centered Primary Care: The Denmark Example ______  Blended primary care payment system Fee-for-service Medical home payment  Organized off-hours service  Health information technology Reimbursement for email Health information exchange; common portal

13. “Denmark leads the way”  98% of primary care MDs have totally electronic records and e-RX  Highest public satisfaction with health system among European countries Source: Commonwealth Fund, 2006

14. Why is this a better way to pay?  Reduces incentives for excess volume  Creates incentives for physicians to spend time coordinating care outside a visit  Accelerates adoption of HIT and other best practices  Assures that physicians will see the most complex patients  Rewards measurable improvements (quality, efficiency, satisfaction) and patient-centered care  Supports value of primary care

15. Payment Model for Non-PCMH Prospective Payment: -Structure -Care coordination & -Non face-to-face care -Adjusted for complexity of population & services Enhanced RBRVS Fee for Service Performance Fee For Service Enhanced RBRVS Performance A la carte codes for: -Care Coordination -Non face-to- face care

16. Payment Models for the PCMH Fee For Service Enhanced RBRVS Add-on codes Performance Prospective Payment: -Structure -Care coordination & -Non face-to-face care -Adjusted for complexity of population & services Enhanced RBRVS Fee for Service Performance Global Payment Procedures Performance

17. MEDICARE MEDICAL HOME DEMONSTRATION PER PATIENT PER MONTH PAYMENT RATES, OVERALL AND BY PATIENT HCC SCORE PPPM HCC Score <1.6 ≥1.6 Tier 1 $40.40 $27.12 $80.25 Tier 2 $51.70 $35.48 $100.35

18. Practice Implications  Need to understand challenges of transformation  Initial capital and restructuring costs  Ongoing support & maintenance  Reporting on quality, cost and satisfaction  Implementation of HIT coincident with PCMH

19. What needs to be done to get “there”?  More study needed on costs to practices to become PCMHs  More work on risk-adjusters and tiers for the PPPM care coordination fees  Work with payers to overcome technical and administrative challenges  More work on building in performance-based compensation and shared savings  Pilot-testing  Benchmarks for evaluations

20.  Does it provide sufficient support for practice transformation?  Does it make primary care more competitive and viable?  Is it administratively feasible for physicians and payers?  Does it work in smaller practices?  Does it create incentives for patient-centered care?  Does it accelerate adoption of the PCMH model?  Can it be scaled up to a national scale?  Does it lead to better patient care? Benchmarks

21. Summary  Current pay models do not support the way care is delivered in 2009 (or the way it should be)  New models are needed to support prevention, systems, and care coordination in PCMH  Hybrid model (Denmark) holds particular promise  Model must be viable for practices (including smaller ones), payers

22. Summary  More work needs to be done on development, implementation and evaluation  But the promise of the PCMH will not be realized without a new payment system that works for patients, physicians and payers

23. COMING SOON! Physician Payment: Version 2009!