1. Medicare Payment Innovations: Perspective from Group Health Inland Northwest State of Reform Conference Karen Lewis Smith Executive Director, Government Programs Group Health Cooperative September 15, 2015

2. Today’s Presentation Group Health Overview HHS Payment Reform Group Health’s Value-Based Approach −Contracting −Bundles −Value-Based Insurance Design (VBID) Challenges and Opportunities Ahead 2

3. About Group Health Founded in 1947, we are a consumer-governed nonprofit health care system that coordinates care and coverage. ~ 600,000 members served by Group Health Physicians, contracted physicians and contracted hospitals/other facilities Group Health Physicians: largest multispecialty medical group in State with 1,000 physicians 25 primary care sites 60 specialties and subspecialties Salaried physicians Focus on high value, not high volume ~ 80,000 members in our Medicare Advantage plan 5-Star rating four years in a row – 2012, 2013, 2014, and 2015 No longer accept original Medicare/FFS in Group Health Medical Centers Value-based contracting arrangements 3

4. Together: Triple Aim and Payment Reform FFS Volume driven model with unaligned incentives between payers and providers Fragmented care with focus on acute singular care event Value- Based Aligned incentives between payers and providers; pay for value, not volume Improved outcomes with focus on prevention, management of conditions over full-cycle of care 4 Improve Patient Experience Improve Health of Population Reduce Costs Triple Aim Payment Reform

5. 1/15 News Alert: HHS Releases Value-Based Payment Targets CMS Framework20162018 1.FFS w/no link to quality 2. FFS w/link to quality 3. Alternative payment built on FFS 4. Population based payment 5  Goal 1: 30% of Medicare FFS payments are tied to value through alternative payment models by the end of 2016, and 50% by the end of 2018  Goal 2: 85% of all Medicare FFS payments are tied to quality metrics by the end of 2016, and 90% by the end of 2018 90% 50% 85% 30% FFS linked to quality All Medicare FFS Alternative payment models

6. Group Health: Pioneers in Value- Based Contracting 6 Large undifferentiated FFS Quality initiatives/ bonuses Shared savings Full risk for TCC & quality Since 2012, Group Health has been partnering with contracted network providers to move them successfully along our value-based payment continuum. And today, 77% of our membership, representing 84% of our costs, are covered by a value based arrangement 6

7. Group Health’s Journey: Value-Based Payment and Provider Contracting 7 Fee-For-Service with Quality Bonus Fee-For- Service PLUS Shared Savings Shared Risk Capitation or Full Risk 2014 8 4 1 17 2015 4 1 17 2016 4 2 Journey along the Value Continuum

8. Bundles: Driving Value and Better Outcomes 8 Selected because of significant variation in cost and outcomes What are bundles? Episode ‐ based payment for multiple providers, bundled into a single, comprehensive payment covering all services in a patient’s care over set period Usually acute, some chronic care In 2013, the Bree Collaborative adopted bundled payment model for knee and hip replacements (TKR, THR) Existing Value Solutions New Smart Solution Evolving Care Delivery: Bundles Triple Aim Improved Health Outcomes Health Care Cost Management Great Customer Experience

9. 7/15 News Alert: CMS Proposed Rule for CCJR Released July 9, 2015, comment period ended last week; five year performance period begins January 1, 2016 Focus on Medicare FFS Establishes a bundled payment model for TKR and THR in 75 Metropolitan Statistical Areas (MSAs) Bundle includes hospitalization for surgery through 90 days post-op Hospital bears financial responsibility −Two-sided risk sharing based on target pricing and quality measures Hospitals may establish financial arrangements with the supply chain (e.g. physician group practices, SNF, PT, etc.) to share two-sided risk 9

10. Group Health’s Bundles Journey 10 COMMERCIAL MEDICARE FFS 2014 Approached by two large Purchasers for THR and TKR GH bears risk 2015 Pilot with one hospital 2016 Performance assessment / refinement 2017 Launch with two more hospitals Launch with one additional purchaser Explore additional bundle packages CCJR announced Hospital bears financial risk May establish financial arrangements w/supply chain Performance year Reconciliation year Next set of CMS bundles? GH Positioned as a Leader GH Positioned as a Partner

11. GH: Value-Based Insurance Design for Commercial Populations (VBID) 11 “Total Health” program - Reduced cost-sharing for chronic care medications to increase adherence to care plans and reduce avoidable hospital admissions. Results: 90% participation rate Multi-million dollar reduction in expected costs “Engaged Partnership” program – Benefit design includes cash incentives/discounts for valued-added interventions and increased co-pays to dis-incent inappropriate ER use. Results: Utilization with Prior Carrier Year OneYear ThreeImprovement from Prior Carrier to Year 3 YTD Improvement from Year 1 to Year 3 YTD ER Visits/1,00032727223129%15% IP Admits/1,00092887716%13% IP Days/1,00036931326229%16%

12. Challenges Ahead Medicare Advantage −Increased flexibility in benefit design (e.g. VBID) Value based contracting −Committed leadership −Time it takes to implement and see results −Aligned contracting incentives Bundles −Ability to understand true costs −Flexibility to be leader and a partner −Meaningful spread −Many payment reform strategies remain “opt in” 12

13. © 2015 Group Health Cooperative and Group Health Options, Inc.