1. Physician and Hospital Challenges under Consumer Directed Health Plans September 26, 2007 David Levenstein

2. Sepember 26, 20072nd National Consumer Driven Healthcare Summit Agenda Baycare Health Partners Overview Baycare Health Partners Overview Consumer Directed Health Care Consumer Directed Health Care  High Deductible Health Plans  Provider Tiering Physicians Physicians Hospitals Hospitals

3. Sepember 26, 20072nd National Consumer Driven Healthcare Summit Formed in 1994, Baycare ® is a physician-hospital organization (PHO) jointly owned by: Formed in 1994, Baycare ® is a physician-hospital organization (PHO) jointly owned by:  Greater Springfield IPA and  Baystate Health Baycare ® represents a three-hospital health system and approximately 1,100 physicians Baycare ® represents a three-hospital health system and approximately 1,100 physicians Messenger model PHO offers managed care contract analysis and clinical integration programs that use process and outcome clinical measures and shared clinical information networks Messenger model PHO offers managed care contract analysis and clinical integration programs that use process and outcome clinical measures and shared clinical information networks What is Baycare Health Partners?

4. Sepember 26, 20072nd National Consumer Driven Healthcare Summit Tsunami: Consumerism in Health Care Public Reporting Pay-for-Performance Cost Shifting Provider Tiering Market Sensitivity to Provider Performance

5. Sepember 26, 20072nd National Consumer Driven Healthcare Summit Environmental Assessment: Market Forces in Play As health care costs increase, As health care costs increase,  Payers (government, employers and MCOs) are  Shifting more financial responsibility for medical care to their beneficiaries, employees and members  Designing insurance products that encourage the patient, now consumer, to consider cost differences when choosing among providers Benefit designs vary, but they all share a common purpose: Benefit designs vary, but they all share a common purpose:  Members will become better informed (transparency) about and actively engaged (consumerism) in the quality and cost of the health care they receive  MCOs often refer to these new products as “Consumer-Directed/Driven Health Care” (CDHC) plans

6. Sepember 26, 20072nd National Consumer Driven Healthcare Summit Environmental Assessment: Market Forces in Play Purchaser Premise: Health care expenditures will be lower and more rational by using market forces Purchaser Premise: Health care expenditures will be lower and more rational by using market forces Response: Response:  Shift more of the costs for the health care services to the patient with the presumption that the patient will choose higher value (quality/cost) healthcare providers  Transparency Public reporting of efficiency and quality ratings of health care providers (hospitals, nursing homes, physicians) Public reporting of efficiency and quality ratings of health care providers (hospitals, nursing homes, physicians)  Pay for performance Incentivize the high quality efficient providers Incentivize the high quality efficient providers  High deductible programs Lower premium/ high annual deductibles Lower premium/ high annual deductibles  Tiered programs Differential copays & deductibles based on efficiency & quality ratings of providers Differential copays & deductibles based on efficiency & quality ratings of providers

7. Consumer Directed Health Care: A Brief History 2003 2004 2005 2006 2004200320052006 20042005 2006  Consumer Directed Health Care (CDHC) plans arrive in Western MA  High deductible: e.g., Aetna Health Fund, Tufts Liberty, others  High copay (rather than high deductible): HNE  Baycare ® develops position paper on CDHC products (approved by the Board in May)  HPHC Primary Choice and Tufts Navigator become commercially available (tiered products)  Baycare ® sends Newsletter to membership highlighting the emergence of and explaining CDHC products  GIC requires each of the MCOs with which it contracts to include a benefit design with tiered member copayments for some hospital services  Baycare ® develops Principles for Tiered Premium/Copayment & Pay-for- Performance Programs  GIC requires each of the MCOs with which it contracts to include tiered member copayments for visits to at least some types of physicians  GIC continues to require MCOs to offer its members tiered products; most now tier both PCPs and specialists, but using their own tiering methodologies  Many MCOs offer, tiered, high deductible, and/or narrow network product’s under the Commonwealth of Massachusetts’ Commonwealth Choice Program under the Connector Authority 2007

8. Sepember 26, 20072nd National Consumer Driven Healthcare Summit Environmental Assessment: Market Forces in Play Provider perspective: Provider perspective:  All the conditions required for perfectly competitive markets do not exist in health care, making the health care market quite different than markets for other goods and services  Supply limitations and geographic variation  The purchasers (employers) of health care are one step removed from the consumer (patients) and providers  Price information is of little value by itself  The current state of information is inadequate  Patient use of information is not likely to transform health care  Consumerism in health care may be the wrong prescription, particularly for the  Financially strapped and chronically ill

9. Adults with High Deductibles Have Problems Paying Medical Bills or Are Paying Off Medical Debt Percent of adults ages 19–64 insured all year with private insurance * Includes only those individuals who had a bill sent to a collection agency when they were unable to pay it. Source: S.R. Collins, J.L. Kriss et al., Squeezed: Why Rising Exposure to Health Care Costs Threatens the Health and Financial Well-Being of American Families, The Commonwealth Fund, Sept. 2006.

10. Sepember 26, 20072nd National Consumer Driven Healthcare Summit Provider Challenges Access to data Access to data  Relationship between claims data and MCO bundling logic Lack of uniform tiering methodologies Lack of uniform tiering methodologies Lack of patient understanding of financial obligations Lack of patient understanding of financial obligations  Provider, not plan, necessarily informs patient  Interferes with provider-patient relationship Bad debt and debt collection Bad debt and debt collection

11. Sepember 26, 20072nd National Consumer Driven Healthcare Summit Potential Legislative Responses MA and RI – bills proposed in legislatures: MA and RI – bills proposed in legislatures: Requiring carriers to fully explain specific patient financial obligations prior to receiving care Requiring carriers to fully explain specific patient financial obligations prior to receiving care Shifting some responsibility to carriers to collect member payment obligations on behalf of providers Shifting some responsibility to carriers to collect member payment obligations on behalf of providers