1. © 2009 A. Milstein Arnold Milstein, MD, MPH A Clinical Home Run for the Sandovals Designing Payment for Purpose March 10, 2009

2. © 2009 A. Milstein Learning How to Pay From Lean Benchmark Providers RWJF and CHCF supported search for “lean care idols” Lowering total annual cost by >15% pivots on designed-for-purpose chronic care Chronic care designed to lower total cost (and raise Q) requires shared savings with, or global cap, of PCPs

3. © 2009 A. Milstein Three Ingredients Were Applied to Two Reengineering Goals: A. ↓ Health Crises/Year (Primary) B. ↓ Cost/Service (Secondary) Salient Caring, Tailored to ↓ ↓ Hospital Use Team-based Production Tight Supplier Mgmt (↓ Crises/Year)(↓ Cost/Service) (↓ Both) See “Medical Homes – And Medical Home Runs?” By A. Milstein, Sept. 10, 2008. Health Affairs Blog. URL: http://healthaffairs.org/blog/2008/09/10/medical-homes-and-medical-home-runs/ And R. Bohmer & D. Lawrence in Health Affairs Sept/Oct 2008

4. © 2009 A. Milstein Lowering Hospital Use is Not Rocket Science: U.S. Chronic Illness Patients’ Experience of Care (10 yrs after IOM Blue Ribbon Quality Report) Night/weekend non-ER access difficult60% No between-visit checks by MD (ever)51% Perceptible errors when > 4 MDs involved43% Reference: Schoen C, Osborn R, How S, Doty M, Peugh J. In chronic condition: Experiences of patients with complex health care needs, in eight countries, 2008. Health Affairs. 2008;8:w1-w16.

5. © 2009 A. Milstein Final Evolutionary Step is Rocket Science: Fluid “Learning Organizations” Offer Lower Near-term & Greater Long-term Gains  Industrial engineering core  Lowering cost/service is primary  No detectable performance limits  Larger scale required  Shared plan savings not essential

6. © 2009 A. Milstein Options for Funding the Sandovals’ Care A.Today: 5-10% savings via “20/20”: (a) incentivize sicker patients to switch to better (Q + E) PCPs (b) incentivize better PCPs to ↑↑ throughput via team-based care B.Tomorrow: ~35% (?) savings via “ACOs”: incentivize all providers to boost value Reference pricing encourages all patients to select higher value providers Chronic & preventive care providers share in plan’s total PMPM savings only when needed Episodic care providers share in plan’s total episode savings only when needed C.Transforming care savings into care affordability will require expanded professionalism and/or more provider competition