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Innovation While Reforming Health Care
Mark McClellan, MD, PhDDirector, Duke-Margolis Center for Health Policy
Professor of Business, Medicine, and Policy
Overview
• Fundamentals Driving Health Care Reform
- Growing pressures for reform from rising health care costs
- Growing opportunities to improve patient outcomes
• Health Care Reform Update
• “Value-Based” Health Care Reforms
• Competencies and Infrastructure to Support Value-Based
Health Care
• Implications for Health Care Reform Leadership
1
Breakthroughs in Medical Treatment- HIV: fatal chronic disease
- Cancer: 20% reduction in death rates over 25 years
- Cardiovascular disease: 60% population mortality
reduction in last 50 years
- Significant progress in most diseases
- More to come
Result: Generally Rising Costs- Demographic trends, availability of more and better
treatments
- Living longer and better is worth a lot
Health Care Progress
2
Breakthroughs in Medical Treatment- HIV: fatal chronic disease
- Cancer: 20% reduction in death rates over 25 years
- Cardiovascular disease: 60% population mortality
reduction in last 50 years
- Significant progress in most diseases
- More to come
Result: Generally Rising Costs- Demographic trends, availability of more and better
treatments
- Living longer and better is worth a lot
Health Care Progress + Increased Costs
3
0
5
10
15
20
25
1974 1984 1994 2004 2014 2024 2034
Perc
en
t o
f G
DP
Fiscal Year
Source: Congressional Budget Office, 2016 Long-Term Budget Outlook.
Healthcare and Federal Budget
Everything else
Healthcare Programs
Social Security
4
Income-related health disparities are large…
5Source: Chetty et al, JAMA 2016.
...and Income-related health disparities are growing
Source: Chetty et al, JAMA 2016.
Source: Case and Deaton PNAS 2015
Death rates have risen for some middle-aged American populations
Determinants of Health Outcomes
McGinnis, Social Determinants of
Health, 2002
Determinants of Health and Their
Contribution to Premature DeathNumbers of U.S. Deaths from
Behavioral Causes, 2000.
Adapted from Mokdad et al.
8
Source: Bradley and Taylor, 2013
Total health-service and social-service expenditures for OECD Countries
Current Health Coverage Debate• Affordable Care Act Repeal/Replace Plus
- Individual insurance market reform
- Medicaid expansion
- Two core issues
▪ High and rising costs of insurance coverage, with individual markets that are fragile in many
states
▪ Rising importance of ”preexisting conditions”
• Graham-Cassidy
- Repeal ACA coverage provisions as of 2020 and convert most of ACA coverage
expansion funding to state grants for improving access to coverage and care for
lower-income adults, allocated on basis of lower-income population
▪ $1.04 T for 2020-2026
▪ Favors less urban, lower-income states that did not expand Medicaid
- Convert Medicaid financing from entitlement to per-capita capped allocation, with state
option for block grants
▪ Ends retroactive Medicaid enrollment, allows work requirement for nondisabled adults, limits
provider taxes, and allows more flexibility in Medicaid funding for inpatient behavioral health
services (e.g., residential treatment facilities for substance abuse)
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Current Health Coverage Debate, Cont.
• Bipartisan ACA Modification (Alexander-Murray)- Funding authorization for Cost Sharing Reduction payments
- Increased state flexibility under ACA Section 1332 to modify coverage requirements without increasing costs
• “Must-Pass” Legislation- Federal budget
- Debt limit legislation
- Childrens Health Insurance Program reauthorization
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Longer-Term Reform Context
• Sanders/2020 Dem Candidates: Medicare For All- Expand access to government-run (“traditional”) Medicare insurance
coverage
- Expanded role for government price negotiation and regulation to help control costs
- Financing unclear
• Bipartisan Approaches to Addressing High Costs and Access - Prices that better reflect value and cost – and encourage innovation
- More efficient, innovative care
12
Opportunities for Reducing Costs
While Improving Quality• Total excess costs over $750B (IOM, 2013)
Image source: Kliff S. We spend $750 billion on unnecessary health care. Two charts explain why.
Washington Post. September 7, 2012. https://www.washingtonpost.com/news/wonk/wp/2012/09/07/we-
spend-750-billion-on-unnecessary-health-care-two-charts-explain-why/.
• 18 months of collective review, analysis, and deliberation
• Core goals:
• Better health and well-being
• High-value health care
• Strong science and technology
• Commissioned 150+ experts to write 19 discussion papers
#NAMVitalDx
The Next Round: Evidence-Guided Reforms to Make Coverage Reforms Easier
ACTION PRIORITIES• Pay for value
• Empower people
• Activate communities
• Connect care
ESSENTIAL INFRASTRUCTURE NEEDS
• Measure what matters most
• Modernize skills
• Accelerate real-world evidence
• Advance science
Eight Categories of Recommendations
ACTION PRIORITIES• Pay for value
• Empower people
• Activate communities
• Connect care
ESSENTIAL INFRASTRUCTURE NEEDS
• Measure what matters most
• Modernize skills
• Accelerate real-world evidence
• Advance science
Eight Categories of Recommendations
Opportunities for Higher-Value Health Care
OFTEN COST INCREASING – USUALLY REIMBURSED
• Effective treatments for unmet health needs
POTENTIALLY COST DECREASING – OFTEN NOT REIMBURSED
• Innovations to better target use of medical technologies to patients
who will benefit
• Wireless/ remote personal health tools and supports, telemedicine
• Lower-cost methods of treatment or sites of care
• Better care coordination
• Non- medical strategies for health improvement – such as targeted
assistance to high-risk individuals, and support for accessing
social and community services to prevent complications
Opportunities for Higher-Value Health Care
OFTEN COST INCREASING
• Effective treatments for unmet health needs
POTENTIALLY COST DECREASING
• Innovations to better target use of medical technologies to patients
who will benefit
• Wireless/ remote personal health tools and supports, telemedicine
• Lower-cost methods of treatment or sites of care
• Better care coordination
• Non- medical strategies for health improvement – such as targeted
assistance to high-risk individuals, and support for accessing
social and community services to prevent complications
Opportunities for Higher-Value Health Care
OFTEN COST INCREASING – USUALLY REIMBURSED
• Effective treatments for unmet health needs
POTENTIALLY COST DECREASING – OFTEN NOT REIMBURSED
• Innovations to better target use of medical technologies to patients
who will benefit
• Wireless/ remote personal health tools and supports, telemedicine
• Lower-cost methods of treatment or sites of care
• Better care coordination
• Non- medical strategies for health improvement – such as targeted
assistance to high-risk individuals, and support for accessing
social and community services to prevent complications
Alternative Payment Models (APMs)
CATEGORY 1 CATEGORY 2 CATEGORY 3 CATEGORY 4
Payment Linked to Patient Not ServicesLimited More CompleteTraditional
“Pay forPerformance”
Source: World Innovation Summit for Health Report, 2013
”Alternative” Payment Models: Shifting from Accountability for Servicestoward Accountability for Patient Health and Total Spending
Accountable care organizations continue to grow
1370
563
711
88
0
200
400
600
800
1000
1200
1400
1600
Q22011
Q32011
Q42011
Q12012
Q22012
Q32012
Q42012
Q12013
Q22013
Q32013
Q42013
Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Total Medicare Commercial Medicaid
18.79.5
3.9
ACO Contract Growth by Payer Type
ACO Lives Per Payer (in Millions)
Growing Participation in Primary Care Medical Homes:CMMI/Multipayer Comprehensive Primary Care Plus (CPC+)
Medicare Oncology Care Model
https://innovation.cms.gov/initiatives/oncology-care/
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Care for Specialized Populations:CMMI Comprehensive ESRD Care Pilot
• 14 organizations taking on accountability for attributed Medicare
beneficiaries with End-Stage Renal Disease (ESRD) in their regions
- Share in savings if total spending reductions below expected benchmark while
achieving quality benchmark measures
• Mostly large dialysis providers: Fresenius, Davita, DCI
• Notable initial results
- Total 16,100 beneficiary-years of care, average expected expenditures
$88,000 per beneficiary with high expected mortality and morbidity
- High performance on measures of quality of care – mainly measures of
process of care and patient experience (CAHPS)
- Lower than expected mortality
- Substantial spending reductions: total spending per beneficiary 5% lower
than benchmark, net Medicare savings 3.6%
Alternative Payment Models for Care Episodes
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Source: Medtronic Chronic Care Management Model
2016 LAN Survey of Health Care Payments
COMMERCIAL
22%
MEDICAREADVANTAGE
41%
MEDICAID
18%
% of Healthcare Dollars
TRADITIONALMEDICARE
30%
*
25%
…Of total payments as of Jan 2016in LAN categories 3 & 4
25%
*The “25%” above does not include the “30%” traditional Medicare.
Most health care organizations not yet succeeding in alternative payment models
Source: Muhlestein, Saunders, and McClellan, Health Affairs 2016
Competencies needed for success in accountable care
Leadership• Board, leadership, staff engagement in patient value goals
• Organizational structure reflects patient value focus
Care Model• Patient centeredness
• Care coordination and teams
• Care pathways for quality and safety improvement
Finance• Adequate capital
• Financial tracking and modeling
Health IT• Aligned IT infrastructure
• Key data sharing including patients
• Patient stratification for risk/impact assessment
New CMMI Directions in Payment Reform• Voluntary
• Clearer pathway to expansion needed
• Less administratively burdensome payment reforms• Simpler meaningful measures, data sharing and support
• Patient/consumer-focused• Transparency and public reporting
• Shared savings with consumers
• Quality and price transparency to support competition
• Smaller physician groups
• Specialized care
• Reforms through and in collaboration with private plans and states
• Behavioral health
• Drugs
• Prior evidence: Indication-specific pricing
• Results-based: Drug payment/rebates linked to measures of quality and outcomes in practice- Results dependent on patient features, adherence, and other aspects of
quality of care - Uncertainty about outcome and cost impacts in “real-world” populations - Capital for sharing risk, supporting new care models- Reliably measurable results
• Growing range of examples in and out of US- Repatha/ Amgen and CVS, ExpressScripts, Harvard Pilgrim- Entresto/ Novartis and Cigna, Aetna- Kymriah/ Novartis and CMS- Outside-US examples
Drug Payments Based (In Part) on Results
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• Implementation issues
- US regulatory barriers designed for fee-for-service payment systems (“antikickback” rules, Medicaid Best Price rules)
- FDA off-label communications restrictions
- New administrative systems required (i.e., tracking performance impacts in affected populations rather than volume)
• Impact on outcomes vs. value- Alignment with insurance benefit designs: consumers sharing
in savings from using drugs that improve outcomes and lower total costs of care
Drug Payments Based (In Part) on Results - 2
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National Evaluation System for health Technologies (NEST): Voluntary partnerships for better evidence on medical devices
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High-Value Health Care:Operational Leadership Needed
• Active engagement in efforts to make medical practice
more longitudinal and patient-focused – especially for
chronic conditions and early disease interventions
• Operational and data support for new models of care
delivery that aim to improve outcomes and lower costs,
with aligned with payment reforms
• Progress in higher-value care enables sustainable
innovation and better population health
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Thank You
Duke-Margolis Center for Health Policywww.healthpolicy.duke.edu
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