Performance Based ContractingPerformance Based Contractingin the Consumer Driven Environmentin the Consumer Driven Environment

Presented to Presented to The National Consumer Driven HealthCare SummitThe National Consumer Driven HealthCare Summit

September 2006September 2006

AgendaAgenda

•• The Big PictureThe Big Picture

•• Why Medicare began Pay for PerformanceWhy Medicare began Pay for Performance

•• Defining Performance Based ContractingDefining Performance Based Contracting

•• Trends driving new Performance driven organizations. Trends driving new Performance driven organizations.

•• What employers are looking forWhat employers are looking for

•• What employers are doingWhat employers are doing

•• New insights for physicians and hospitals.New insights for physicians and hospitals.

•• Getting startedGetting started

The Big PictureThe Big Picture

•• Alan Greenspan thinks major investors who understand Global popuAlan Greenspan thinks major investors who understand Global population changes will lation changes will rethink their long term bond betsrethink their long term bond bets

•• ““Once foreign creditors digest the extent of the population Once foreign creditors digest the extent of the population shift that is turning Medicare and Social Security into fiscal shift that is turning Medicare and Social Security into fiscal time bombstime bombs--and its negative implications for the broader and its negative implications for the broader US economyUS economy-- they will demand higher returns for their they will demand higher returns for their money and be far less willing to accept the current low money and be far less willing to accept the current low rates of 20 and 30 year US treasuriesrates of 20 and 30 year US treasuries””..

•• ““The cost of public pensions and health benefits is on track The cost of public pensions and health benefits is on track to double to 24% of the Gross Domestic Product by 2040.to double to 24% of the Gross Domestic Product by 2040.””

Health benefits Ail as Pensions Health benefits Ail as Pensions HealHeal

•• ““While traditional pension plans often are contractual obligationWhile traditional pension plans often are contractual obligations at s at companies that have them, health benefits are not. Thus most companies that have them, health benefits are not. Thus most companies are trimming their post retirement health care spendincompanies are trimming their post retirement health care spendingg””

•• ““Under funded pensions at US Auto makers have gotten a lot of inkUnder funded pensions at US Auto makers have gotten a lot of inkbut their health plans are in worse shapebut their health plans are in worse shape””. .

•• ““Of the 110 Billion total pension and healthcare under funding atOf the 110 Billion total pension and healthcare under funding at the the start of this year at GM and Ford more than 97 Billion of that astart of this year at GM and Ford more than 97 Billion of that amount mount was accounted for by retiree health care costswas accounted for by retiree health care costs”” according to Standard according to Standard and Poor's.and Poor's.

•• Source WSJ June 6Source WSJ June 6thth 2006 2006 Tracking NumbersTracking Numbers by Ian McDonaldby Ian McDonald

Eliminate Tax deductions for Eliminate Tax deductions for Health Insurance purchased by Health Insurance purchased by

employersemployers

President Bush's federal tax advisory commission said it President Bush's federal tax advisory commission said it would recommend limits to tax deductions for employerwould recommend limits to tax deductions for employer--provided health insurance.provided health insurance.

Employers can deduct health benefits expenditures, and Employers can deduct health benefits expenditures, and workers ordinarily are not taxed on the benefit. Panel workers ordinarily are not taxed on the benefit. Panel spokesperson Tera Bradshaw said "the current structure spokesperson Tera Bradshaw said "the current structure creates incentives that lead to inefficiencies in the market creates incentives that lead to inefficiencies in the market for health care." She added that the panel also is for health care." She added that the panel also is considering changes to the tax rules to help people considering changes to the tax rules to help people purchase health insurance when their employers do not purchase health insurance when their employers do not offer plans. offer plans.

•• Used with permission from the Oct. 17, 2005, issue of Used with permission from the Oct. 17, 2005, issue of MANAGED CARE WEEKMANAGED CARE WEEK. .

Tax reform may not be easyTax reform may not be easy

•• "Exactly how would one withdraw the tax preference? At the extre"Exactly how would one withdraw the tax preference? At the extreme, me, employers might be mandated to add what they now spend on healthemployers might be mandated to add what they now spend on healthinsurance premiums to the employee's taxable income on the Winsurance premiums to the employee's taxable income on the W--2 2 form. But how much? form. But how much?

•• Would it be an amount averaged over all employees Would it be an amount averaged over all employees —— young and young and old, healthy and sick? Young workers might deeply resent having old, healthy and sick? Young workers might deeply resent having to to pay taxes for something that really benefits not them but their pay taxes for something that really benefits not them but their older older and sicker colleagues. and sicker colleagues.

•• We could, of course, riskWe could, of course, risk--adjust the amount adjust the amount —— say, add only $2,000 to say, add only $2,000 to the taxable income of a young worker and $12,000 or more to the the taxable income of a young worker and $12,000 or more to the income of an older sicker worker. income of an older sicker worker.

•• Can you imagine the litigation this would trigger?" Can you imagine the litigation this would trigger?"

Ewe Reinhardt James Madison Professor of Political Economy PrincEwe Reinhardt James Madison Professor of Political Economy Princeton Universityeton University

Preferred One to cost shift to sickPreferred One to cost shift to sick

•• A company would sign up for the plan, then in most cases notify A company would sign up for the plan, then in most cases notify its workers, its workers, giving them some time and informational resources to help them sgiving them some time and informational resources to help them shape up hape up their health habits. their health habits.

•• Then an independent laboratory would send nurses to the company Then an independent laboratory would send nurses to the company to to evaluate workers' health, placing them in appropriate deductibleevaluate workers' health, placing them in appropriate deductible plans (which plans (which cover their health care expenses after the annual deductible is cover their health care expenses after the annual deductible is paid). paid).

•• The plan measures five lifestyle factors: blood pressure, bodyThe plan measures five lifestyle factors: blood pressure, body--mass index, mass index, tobacco use, and cholesterol and glucose levels. tobacco use, and cholesterol and glucose levels.

•• Healthy employees win lower deductibles to reward them for consiHealthy employees win lower deductibles to reward them for consistent stent exercise or for not smoking, for instance. In some cases, an empexercise or for not smoking, for instance. In some cases, an employee's loyee's deductible could be nothing. deductible could be nothing.

•• Employees who make unhealthy lifestyle choices (which usually acEmployees who make unhealthy lifestyle choices (which usually account for a count for a majority of employers' health care costs) would get higher deducmajority of employers' health care costs) would get higher deductibles, tibles, possibly as high as $2,500. possibly as high as $2,500.

•• All employees would be evaluated regularly, so workers faced witAll employees would be evaluated regularly, so workers faced with high h high deductibles could move to a cheaper plan once they improve theirdeductibles could move to a cheaper plan once they improve their health, health, such as giving up smoking. such as giving up smoking.

•• Workers with chronic illnesses would not be penalizedWorkers with chronic illnesses would not be penalized

Future Medicare SpendingFuture Medicare Spending

•• Medicare Parts A, B, and D (beginning in 2006) are financed diffMedicare Parts A, B, and D (beginning in 2006) are financed differently. erently. Payroll taxes paid by workers and employers finance the majorityPayroll taxes paid by workers and employers finance the majority of Part A (the Hospitalof Part A (the HospitalInsurance (HI) Trust Fund). The Part B Supplementary Medical InsInsurance (HI) Trust Fund). The Part B Supplementary Medical Insurance (SMI) Trust Fund is financed byurance (SMI) Trust Fund is financed bya combination of beneficiary premiums (24 percent) and general ta combination of beneficiary premiums (24 percent) and general tax revenues (most of the remainder).ax revenues (most of the remainder).

•• General revenue makes up roughly threeGeneral revenue makes up roughly three--quarters of revenues for Part B and (beginning in 2006) Part D.quarters of revenues for Part B and (beginning in 2006) Part D.In total, Medicare revenue in FY2006 will come mostly from generIn total, Medicare revenue in FY2006 will come mostly from general revenue (41 percent), payroll taxes (40al revenue (41 percent), payroll taxes (40percent), and beneficiary premiums (11 percent). According to thpercent), and beneficiary premiums (11 percent). According to the Medicare Boards of Trusteese Medicare Boards of Trustees’’ 20052005intermediate assumptions, total Part A spending is expected to eintermediate assumptions, total Part A spending is expected to exceed income in 2012, and the HI Trustxceed income in 2012, and the HI TrustFund reserves are projected to be exhausted in 2020. Fund reserves are projected to be exhausted in 2020. Spending for Part B services, however, are nowSpending for Part B services, however, are nowrising faster than spending for Part A services.rising faster than spending for Part A services.

•• The aging of the Baby Boom generation, a reduction in the ratio The aging of the Baby Boom generation, a reduction in the ratio of workers to beneficiaries, and otherof workers to beneficiaries, and otherdemographic and economic factors will likely play a role in the demographic and economic factors will likely play a role in the debate over additional changes in Medicaredebate over additional changes in Medicare’’ssfinancing in the coming years. With the aging of the population financing in the coming years. With the aging of the population and expected increases in overall healthand expected increases in overall healthcare costs, care costs, Medicare spending is projected to grow at a rate significantly hMedicare spending is projected to grow at a rate significantly higher than that of the overalligher than that of the overalleconomy. economy. •• Between 2000 and 2030, MedicareBetween 2000 and 2030, Medicare’’s share of the gross domestic product (GDP) is estimated tos share of the gross domestic product (GDP) is estimated totriple from 2.3 percent to 6.8 percent. The addition of the prestriple from 2.3 percent to 6.8 percent. The addition of the prescription drug benefit in 2006 accounts forcription drug benefit in 2006 accounts forabout oneabout one--third of the increasethird of the increase..

All Medicare beneficiaries have health coverage, yet the qualityAll Medicare beneficiaries have health coverage, yet the qualityof the care they receive differs significantly from state to staof the care they receive differs significantly from state to state.te.

First

ThirdFourth

Source: S. F. Jencks, E. D. Huff, and T. Cuerdon, “Change in the Quality of Care Delivered to Medicare Beneficiaries, 1998–1999 to 2000–2001,” Journal of the American Medical Association, Jan. 15, 2003 289(3):305–12.

Second

Quartile Rank

Note: State ranking based on 22 Medicare performance measures.

Performance on Medicare quality indicators, 2000Performance on Medicare quality indicators, 2000––20012001

DC

CMS expands quality reporting CMS expands quality reporting for hospitalsfor hospitals

•• Hospital Compare, a quality Web site run by the CMS in Hospital Compare, a quality Web site run by the CMS in collaboration with the Hospital Quality Alliance, will collaboration with the Hospital Quality Alliance, will expand significantly between 2007 and 2009, incorporating expand significantly between 2007 and 2009, incorporating mortality rates for the conditions it currently tracks, mortality rates for the conditions it currently tracks, quality measures for additional categories of care and data quality measures for additional categories of care and data on patients' experience at hospitals, the quality alliance on patients' experience at hospitals, the quality alliance said. said.

•• The new categories will be intensive care, pediatric asthma The new categories will be intensive care, pediatric asthma and surgery. and surgery.

•• Data on patients' experience, from the Health Care Data on patients' experience, from the Health Care Acquisition Performance System survey, will cover Acquisition Performance System survey, will cover caregiver performance, hospital cleanliness and noise caregiver performance, hospital cleanliness and noise levels. The goal is to get half the measures implemented by levels. The goal is to get half the measures implemented by early 2007.early 2007.

Consumer Driven driving Pay for Consumer Driven driving Pay for Performance but what about Performance but what about

Providers?Providers?•• Is it working in your area? Survey employers and see who is offeIs it working in your area? Survey employers and see who is offering ring

CDHP and P4P.CDHP and P4P.

•• Cost sharing deductible in your contracts replaces old language Cost sharing deductible in your contracts replaces old language in in your managed care agreement.your managed care agreement.

•• Remove all barriers to balance billing or you cannot bill under Remove all barriers to balance billing or you cannot bill under current current MC.MC.

•• ReRe--pricing complicated and creates suspicion, who gets bill first?pricing complicated and creates suspicion, who gets bill first?

•• No decision support tools, patients making up prices from hearsaNo decision support tools, patients making up prices from hearsay.y.

•• Physicians are delaying billing to stick it to the hospital.Physicians are delaying billing to stick it to the hospital.

•• CDHP will change case mix of patients so can no longer cross CDHP will change case mix of patients so can no longer cross subsidizesubsidize

Pay for Performance Driving Pay for Performance Driving TechnologyTechnology

•• A payA pay--forfor--performance program in upstate New York hopes to tap into bonuseperformance program in upstate New York hopes to tap into bonuses offered s offered by Bridges to Excellence as well. That, however, would be icing by Bridges to Excellence as well. That, however, would be icing on the cake for on the cake for participating doctors who came together to get a health informatparticipating doctors who came together to get a health information technology network ion technology network up and running in order, in part, to garner P4P bonuses from indup and running in order, in part, to garner P4P bonuses from individual health plans.ividual health plans.

•• "Many health plans are prepared to pay for performance," John Bl"Many health plans are prepared to pay for performance," John Blair, CEO of Taconic air, CEO of Taconic Health Information Network and Community, tells the New York TimHealth Information Network and Community, tells the New York Times. es. "The rub is "The rub is that you have to have the technology in place to garner those inthat you have to have the technology in place to garner those incentives. You need to centives. You need to automate the reporting capability."automate the reporting capability."

•• Taconic is a collaboration of 500 physicians who don't want the Taconic is a collaboration of 500 physicians who don't want the technological revolution technological revolution to pass them by. The program, launched with $100,000 in seed monto pass them by. The program, launched with $100,000 in seed money from the notey from the not--forfor--profit eHealth Initiative, is being watched by federal officialsprofit eHealth Initiative, is being watched by federal officials with an eye for making with an eye for making President Bush's goal of having all Americans' medical historiesPresident Bush's goal of having all Americans' medical histories put on electronic put on electronic medical records. medical records.

•• Taconic physicians pay a monthly subscription fee of $500 to $60Taconic physicians pay a monthly subscription fee of $500 to $600. It's well worth it, 0. It's well worth it, says Eugene P. Heslin, MD. "The large groups can afford the softsays Eugene P. Heslin, MD. "The large groups can afford the software," Heslin tells ware," Heslin tells the Times. "For the onesies and twosies, small groups like ours.the Times. "For the onesies and twosies, small groups like ours...." the cost is ..." the cost is prohibitive. prohibitive.

•• As reported in MANAGED CARE October 2005. As reported in MANAGED CARE October 2005. ©©MediMedia USAMediMedia USA

Performance based contractingPerformance based contracting

MedicalMedicalManagementManagement

ManagedManagedCareCare

PrivatePrivate PayerPayerNeedsNeeds InformaticsInformatics

DiseaseDiseaseManagementManagement

QualityQualityImprovementImprovement

P4PP4P

ConsumerConsumer

Performance based contracting Performance based contracting (PBC)(PBC)

•• Requires multiple disciplines Requires multiple disciplines within a health system work within a health system work togethertogether

•• Integrates external with Integrates external with environmental changesenvironmental changes

•• Creates an opportunity for Creates an opportunity for growth in private pay markets growth in private pay markets to balance public pay reductionsto balance public pay reductions

•• Should be a core strategy to Should be a core strategy to your organization not just a your organization not just a agenda item in a management agenda item in a management meetingmeeting

Product is driving industry changeProduct is driving industry change

•• Life insurance offered health insurance to get in the doorLife insurance offered health insurance to get in the door•• Health insurance stand alones like BCBS and Lumenos are relativeHealth insurance stand alones like BCBS and Lumenos are relatively ly

new new •• But consolidation is now occurring as the underwriting to controBut consolidation is now occurring as the underwriting to control l

MLR is getting tighter.MLR is getting tighter.•• The NEW health insurance which include HSA and HRA and big The NEW health insurance which include HSA and HRA and big

deductible plans are being sold to the unprofitable market segmedeductible plans are being sold to the unprofitable market segments of nts of self funded and replace ASO business to reduce expense and bolstself funded and replace ASO business to reduce expense and bolster er margins.margins.

•• The new health plan is more about quality management and market The new health plan is more about quality management and market differentiation than it is about size and revenue.differentiation than it is about size and revenue.

•• By linking the ability to finance large deductibles at the consuBy linking the ability to finance large deductibles at the consumer mer level with high performance networks at the provider level we selevel with high performance networks at the provider level we see an e an entirely new industry platform being created .entirely new industry platform being created .

CDHP accelerates CDHP accelerates Organizational changeOrganizational change

CDHPCDHPdrivingdriving P4PP4P

NewNew ProductProductdrivingdriving

OrgOrg ChangeChange

HealthHealth PlansPlansDrivingDrivingCDHPCDHP

P4PP4P drivingdriving newnewInfotechInfotech

NewNew InfotechInfotechdrivingdriving NewNew ProductProduct

Savannah Businesses to Benefit From More Savannah Businesses to Benefit From More Competition in Health Insurance MarketCompetition in Health Insurance Market

•• SAVANNAH, Ga., Aug. 3 /PRNewswire/ SAVANNAH, Ga., Aug. 3 /PRNewswire/ ---- The Savannah Business Group (SBG) is teaming up The Savannah Business Group (SBG) is teaming up with St. Joseph's/Candler Health System and Consumers Life Insurwith St. Joseph's/Candler Health System and Consumers Life Insurance Company to offer small ance Company to offer small businesses the opportunity to take advantage of highbusinesses the opportunity to take advantage of high--quality, affordable health insurance. quality, affordable health insurance. ADVERTISEMENTADVERTISEMENTConsumer's Life will become SBG's endorsed plan for small businConsumer's Life will become SBG's endorsed plan for small businesses looking for affordable health esses looking for affordable health insurance benefits. insurance benefits.

•• ""Under the new agreement that is effective September 1, 2006, smaUnder the new agreement that is effective September 1, 2006, small businesses in the sixll businesses in the six--county county Greater Savannah area will have access to St. Joseph's/Candler HGreater Savannah area will have access to St. Joseph's/Candler Health System and The Care ealth System and The Care Network of physiciansNetwork of physicians. .

•• Outside the area, they will have access to 1st Medical Network (Outside the area, they will have access to 1st Medical Network (1st MN), the largest provider1st MN), the largest provider--sponsored PPO network in Georgia, representing 15,000 physicianssponsored PPO network in Georgia, representing 15,000 physicians and 150 hospitals and academic and 150 hospitals and academic medical centers and ancillary service providers. medical centers and ancillary service providers.

•• "This partnership is going to benefit the Savannah business comm"This partnership is going to benefit the Savannah business community," said Michael Taddeo, vice unity," said Michael Taddeo, vice president Network Management for Consumer's Life. "Competition ipresident Network Management for Consumer's Life. "Competition is always good for the consumer. s always good for the consumer. We are going to be very competitive in the marketplace as we tryWe are going to be very competitive in the marketplace as we try to help small businesses in to help small businesses in Savannah obtain health insurance benefits for their employees." Savannah obtain health insurance benefits for their employees."

•• "This is another way in which we're working with employers in th"This is another way in which we're working with employers in the Creative Coast to keep e Creative Coast to keep healthcare affordable and available," said Paul P. Hinchey, preshealthcare affordable and available," said Paul P. Hinchey, president & CEO of St. Joseph's/Candler. ident & CEO of St. Joseph's/Candler. "We realize that affordable healthcare is critical to both indiv"We realize that affordable healthcare is critical to both individuals and the economic development iduals and the economic development of our region." of our region."

Hospital Sponsors new Hospital Sponsors new Healthplan to better differentiate Healthplan to better differentiate

itself in a crowded marketitself in a crowded market

•• Seton Healthcare Network is going against the industry grain by Seton Healthcare Network is going against the industry grain by wading wading deeper into the insurance business deeper into the insurance business ---- an area that hospital systems have been an area that hospital systems have been abandoning in droves. abandoning in droves.

•• The Austin, TexasThe Austin, Texas--based system is teaming up with longtime partner Austin based system is teaming up with longtime partner Austin Regional Clinic to Regional Clinic to launch a new "narrowlaunch a new "narrow--network" health plan for selfnetwork" health plan for self--funded employers. Called Healthy Equationsfunded employers. Called Healthy Equations, the HMO is designed to , the HMO is designed to contain costs by limiting coverage to a select panel of providercontain costs by limiting coverage to a select panel of providers, namely s, namely Seton's seven hospitals and the roughly 800 physicians affiliateSeton's seven hospitals and the roughly 800 physicians affiliated with Austin d with Austin Regional. Members who seek care outside the network will have toRegional. Members who seek care outside the network will have to pay more pay more out of pocket. out of pocket.

•• Seton's goal is to secure Seton's goal is to secure ---- if not boost if not boost ---- its patient volume in the increasingly its patient volume in the increasingly competitive Austin metropolitan area, where it controls a 40% macompetitive Austin metropolitan area, where it controls a 40% market share.rket share.

•• Reported in Modern Healthcare July 2006Reported in Modern Healthcare July 2006

Employer

PhysiciansJVCO Hospital

New Structure of CommunityNew Structure of Community--based Benchmarking Consortium/ based Benchmarking Consortium/

Health PlanHealth Plan

Fallon Community Health Plan Fallon Community Health Plan expandsexpands

•• Fallon Community health plan is a small NFP plan in Worchester MFallon Community health plan is a small NFP plan in Worchester Mass.ass.

•• The plan recently announced it will expand into contiguous countThe plan recently announced it will expand into contiguous counties ies including Springfield Mass as well as other counties that will including Springfield Mass as well as other counties that will represent a represent a service area of over 800,000 residents.service area of over 800,000 residents.

•• Although they are going up against some large players like BCBS,Although they are going up against some large players like BCBS,Harvard/Pilgrim and Tufts, Fallon believes its favorable relatioHarvard/Pilgrim and Tufts, Fallon believes its favorable relationship with nship with hospital and physicians, capabilities in terms of small town serhospital and physicians, capabilities in terms of small town service and overall vice and overall economies to scale as a provider owned plan gives it a good chaneconomies to scale as a provider owned plan gives it a good chance to move ce to move from 4from 4thth in size to number 2. in size to number 2.

HMO Product Has ChangedHMO Product Has Changed•• PPO products and HMO PPO products and HMO

products blur as deductibles products blur as deductibles riserise

•• PPO and product lines like POS PPO and product lines like POS starting to see the value of starting to see the value of preventive servicespreventive services

•• Investments by large and Investments by large and medium plans into medical medium plans into medical management process management process improvement .improvement .

•• Quality measurement will be Quality measurement will be the defining factor to get the defining factor to get optimum reimbursement as a optimum reimbursement as a health plan or a provider.health plan or a provider.

Insurers still waiting for 'wave of the future'Insurers still waiting for 'wave of the future'Most consumers avoiding consumerMost consumers avoiding consumer--driven driven

plansplans

•• "Promoting consumerism in health care is the latest big idea in "Promoting consumerism in health care is the latest big idea in health health insurance," begins a study published in March by the insurance," begins a study published in March by the Employee Benefit Employee Benefit Research InstituteResearch Institute and the Commonwealth Fund. The study's conclusion: and the Commonwealth Fund. The study's conclusion: "Among the small number of American adults who do have these pla"Among the small number of American adults who do have these plans, few ns, few are satisfied with them." are satisfied with them."

•• Health plans that are eligible for use with health savings accouHealth plans that are eligible for use with health savings accounts, or HSAs, nts, or HSAs, covered slightly more than 1 million Americans in May 2006, up fcovered slightly more than 1 million Americans in May 2006, up from just rom just 438,000 eight months earlier, according to data from America's H438,000 eight months earlier, according to data from America's Health ealth Insurance Plans Insurance Plans

•• The ( EBRI) study also notes there is a lack of information on cThe ( EBRI) study also notes there is a lack of information on cost and quality ost and quality of health care, which works against the idea of an educated healof health care, which works against the idea of an educated health care th care consumer. consumer.

•• Zachary Berk, a venture capitalist with KBL HealthcareVentures iZachary Berk, a venture capitalist with KBL HealthcareVentures in n New York, who helped launch consumerNew York, who helped launch consumer--driven health care service driven health care service LumenosLumenos, said people have to realize that consumer, said people have to realize that consumer--driven health care driven health care is still in its infancy. is still in its infancy.

The hidden revolution The hidden revolution

•• 1975: General Motors was the largest single non1975: General Motors was the largest single non--government employer government employer in the USA in the USA -- 2.2 million employees, and everyone of them had full 2.2 million employees, and everyone of them had full wombwomb--toto--tomb health care paid 100% by GM tomb health care paid 100% by GM

•• 1985: ATT was the largest employer, 1.8 million employees, all 1985: ATT was the largest employer, 1.8 million employees, all with with 100% employer100% employer--paid coverage paid coverage

•• 2005: Wal2005: Wal--Mart is the nation's largest employer, with 1.5 million US Mart is the nation's largest employer, with 1.5 million US employees employees -- less than 400,000 have health care and it costs them from less than 400,000 have health care and it costs them from $120$120--190/month for a high deductible limited coverage plan 190/month for a high deductible limited coverage plan

Jeanne Scott, chief of healthJeanne Scott, chief of health--politics.com politics.com

What employers are looking What employers are looking forfor

•• Large self funded employer groups have (TPA Outsourced) systemsLarge self funded employer groups have (TPA Outsourced) systems to to track and pay claims, conduct traditional UR . This accounting atrack and pay claims, conduct traditional UR . This accounting approach pproach is usually retrospective and helps identify where the money wentis usually retrospective and helps identify where the money went but but does not help identify the future. does not help identify the future.

•• Most health plans understand prospective payment and the need toMost health plans understand prospective payment and the need toanticipate costs and frequency of illness . To date actuarial moanticipate costs and frequency of illness . To date actuarial modeling of deling of claims behavior per 1000 and using various forms of case managemclaims behavior per 1000 and using various forms of case management ent has helped keep the medical expense ratio at 85% to 90% of premihas helped keep the medical expense ratio at 85% to 90% of premium.um.

•• To remain competitive the goal for both is to move to 85% or lesTo remain competitive the goal for both is to move to 85% or less.s.•• That requires non traditional medical management and a comprehenThat requires non traditional medical management and a comprehensive sive

view of many reasons why this is happening ( Root Cause Analysiview of many reasons why this is happening ( Root Cause Analysis).s).•• Consumer driven leaves out considerable data on up front costs sConsumer driven leaves out considerable data on up front costs so o

tracking systems are going to track the big items and attribute tracking systems are going to track the big items and attribute the the utilization and cost to your facility .utilization and cost to your facility .

Milwaukee represents the complexity of setting Milwaukee represents the complexity of setting standards by the numbersstandards by the numbers

Fed to move the bar on employer Fed to move the bar on employer data usedata use

•• Noting that he had 952 more days in office before the end of theNoting that he had 952 more days in office before the end of the Bush Bush administration, ( CMS Secretary) Leavitt said he planned to uadministration, ( CMS Secretary) Leavitt said he planned to urge rge corporate leaders to adopt corporate leaders to adopt health data sharing, data standards and health data sharing, data standards and paypay--forfor--performance programs.performance programs.

•• He will also promote the concept of transparency by encouraging He will also promote the concept of transparency by encouraging companies to make price and quality information available to companies to make price and quality information available to consumers and offer incentives for consumers to demand electroniconsumers and offer incentives for consumers to demand electronic c health recordshealth records

Source Government health IT 6/19 Source Government health IT 6/19

Bush backs Payer Muscle to Bush backs Payer Muscle to implement Infotech requirements implement Infotech requirements

•• Executive Order signed August 22Executive Order signed August 22ndnd 2006 requires all entities that 2006 requires all entities that contract with the federal employees health benefits plans, Tricacontract with the federal employees health benefits plans, Tricare, re, Veterans health services, Managed Care Advantage plans that contVeterans health services, Managed Care Advantage plans that contract ract for Medicare beneficiaries to now report pricing, quality indicafor Medicare beneficiaries to now report pricing, quality indicators, tors, meet current and future interoperability requirements meet current and future interoperability requirements effective effective January 1 2007.January 1 2007.

•• Leavitt strongly suggesting to all state governments and fortuneLeavitt strongly suggesting to all state governments and fortune 500 500 that performance measurement has working to improve nursing homethat performance measurement has working to improve nursing homequality and outcome so quality and outcome so all employers should require this same all employers should require this same language in there contracts with managed care payers.language in there contracts with managed care payers.

•• If you ran a managed care company and wanted to make sure you meIf you ran a managed care company and wanted to make sure you met t this requirement, what would you put in your contracts?this requirement, what would you put in your contracts?

Beyond trends, Beyond trends, from buying benefits to managing from buying benefits to managing

benchmarksbenchmarks

•• As employers move away from the defined benefit approach to buyiAs employers move away from the defined benefit approach to buying ng insurance ( one benefit) to a defined contribution approach (oneinsurance ( one benefit) to a defined contribution approach (one cost) cost) and attempt to give employees choice of new plans, cafeteria seland attempt to give employees choice of new plans, cafeteria selection ection and include Medical savings accounts the quest of managing benefand include Medical savings accounts the quest of managing benefits its comes to the forefront.comes to the forefront.

•• Many of the techniques used by health plans in terms of medical Many of the techniques used by health plans in terms of medical management are now part of what employers are curious about. Themanagement are now part of what employers are curious about. They y see charges and utilization that points out problems of inconsissee charges and utilization that points out problems of inconsistency tency and also see the government taking a role in standardizing qualiand also see the government taking a role in standardizing quality ty measures for Medicare Contracting health plans .measures for Medicare Contracting health plans .

•• These measure or benchmarks are key to stabilizing/projecting riThese measure or benchmarks are key to stabilizing/projecting risk sk and cost. and cost.

To manage and predict benchmarks To manage and predict benchmarks requires a return to arequires a return to a focus on the focus on the

patient physician relationshippatient physician relationship

•• Discounting physician care after the fact only makes physicians Discounting physician care after the fact only makes physicians angry angry at the insurer /employer and the patient.at the insurer /employer and the patient.

•• In many cases we are seeing the downward pressure on physician In many cases we are seeing the downward pressure on physician reimbursement actually shrinking the availability of PCP s riskireimbursement actually shrinking the availability of PCP s risking up ng up to date hospital care in smaller communities. to date hospital care in smaller communities.

•• Patients who get caught short by non covered benefits and angry Patients who get caught short by non covered benefits and angry docs docs usually do not follow treatment thatusually do not follow treatment that’’s recommended so patients s recommended so patients sometimes only receive a small fraction of the VALUE of care sometimes only receive a small fraction of the VALUE of care employers purchase.employers purchase.

•• The Solution is to create a plan that changes behavior of the phThe Solution is to create a plan that changes behavior of the physician ysician and patient through new incentives to reand patient through new incentives to re--create value. create value.

•• The goal will be to swing back the Pendulum in favor of The goal will be to swing back the Pendulum in favor of comprehensive care at affordable and predictable costs.comprehensive care at affordable and predictable costs.

What employers are doing with this What employers are doing with this datadata

Tiering hospital and physician services just Tiering hospital and physician services just like they did pharmacy serviceslike they did pharmacy services

Discuss Quality Initiatives/Standards

Include in Select Network Gold Card

for UM Review

Consider Remediation Including Network

Termination

Alter Reimbursement

Physician PerformancePhysician Performance

LowLow QualityQuality HighHighLo

wLo

wEf

ficie

ncy

Effic

ienc

yH

igh

Hig

h

Estimated Savings From Estimated Savings From RedirectionRedirection

REDIRECTION

ID Name MbrsSeen

ActualPaid Amt

ExpectedPaid Amt Diff Perf

Index 25% 50% 75% 100%

6636498 Provider 6636498 183 $127,190 $75,642 $51,547 1.68 $12,886.75 $25,773.50 $38,660.25 $51,547.006636492 Provider 6636492 350 $229,000 $166,453 $62,547 1.38 $15,636.75 $31,273.50 $46,910.25 $62,547.006631410 Provider 6631410 165 $99,304 $72,703 $26,600 1.37 $6,650.00 $13,300.00 $19,950.00 $26,600.006637732 Provider 6637732 354 $214,405 $167,368 $47,037 1.28 $11,759.25 $23,518.50 $35,277.75 $47,037.006636491 Provider 6636491 336 $176,154 $141,255 $34,900 1.25 $8,725.00 $17,450.00 $26,175.00 $34,900.00

Total Redirection: $55,657.75 $111,315.50 $168,973.25 $222,631.00

Total Redirection:

$55,657.75 $111,315.50 $168,973.25 $222,631.00

PHDC Population Profiling SystemPHDC Population Profiling SystemProvider Ranking Provider Ranking -- Total DollarsTotal Dollars

Develop Tiered NetworksDevelop Tiered NetworksCompare Risk Adjusted CostCompare Risk Adjusted Cost

Population: The Universe Benchmark: N/A

PROVIDER POPULATION Rank ID Name Mbrs

Seen Actual

Paid Amt Expected Paid Amt Diff Perf

Index phdc™

3899 6636498 Provider 6636498 183 $127,190 $75,642 $51,547 1.68 0.90 3905 6636492 Provider 6636492 350 $229,000 $166,453 $62,547 1.38 1.03 3876 6631410 Provider 6631410 165 $99,304 $72,703 $26,600 1.37 0.95 3897 6637732 Provider 6637732 354 $214,405 $167,368 $47,037 1.28 1.02 3883 6636491 Provider 6636491 336 $176,154 $141,255 $34,900 1.25 0.91 3813 6637895 Provider 6637895 150 $83,074 $75,027 $8,047 1.11 1.08 3823 6636495 Provider 6636495 232 $120,429 $111,345 $9,084 1.08 1.04 3776 6636242 Provider 6636242 157 $79,036 $74,498 $4,538 1.06 1.03 3387 6637765 Provider 6637765 265 $96,586 $96,279 $307 1.00 0.79

315 6634381 Provider 6634381 219 $111,192 $119,540 -$8,348 0.93 1.18 99 6633835 Provider 6633835 525 $170,727 $211,799 -$41,072 0.81 0.87

147 6633712 Provider 6633712 280 $101,897 $127,628 -$25,731 0.80 0.99

RedirectRedirectPatientsPatients

Include Include Provider in Provider in

Select Select NetworkNetwork

Tiered Network ExampleTiered Network Example

0%

20%

40%

60%

80%

100%

TiersTiers

Parti

cipa

ting

Phys

icia

nsPa

rtici

patin

g Ph

ysic

ians RegularRegular

100%100%PremiumPremium

75%75%UltraUltra

50%50%

65 Year Old Male 90 Year Old Male65 Year Old Male 90 Year Old Male

Source: Pendulum, CopyrightSource: Pendulum, Copyright ©© 2002 Learning and Knowledge Resources.2002 Learning and Knowledge Resources.

Risk Adjustment In ActionRisk Adjustment In Action

Two male patients with the same principal diagnosis (congestive Two male patients with the same principal diagnosis (congestive heart failure) are admitted to different emergency rooms. Thougheart failure) are admitted to different emergency rooms. Though h medical intervention does its best for both patients, the realitmedical intervention does its best for both patients, the reality is that y is that advanced age and serious secondary diagnoses put the 90 year oldadvanced age and serious secondary diagnoses put the 90 year oldat a much higher risk of death. It would be unfair to compare at a much higher risk of death. It would be unfair to compare mortality outcomes of the two without risk adjustment. Thereformortality outcomes of the two without risk adjustment. Therefore, e, risk adjustment provides a better comparison.risk adjustment provides a better comparison.

Congestive Heart Failure with Congestive Heart Failure with Diabetes Mellitus with Diabetes Mellitus with

HypertensionHypertension

Congestive Heart Failure Congestive Heart Failure with COPD with Mitral Valve with COPD with Mitral Valve

Insuffic with Aortic Valve StenosisInsuffic with Aortic Valve Stenosis

This patientThis patient’’ssexpected mortality is 8.0 timesexpected mortality is 8.0 times

the expected mortality forthe expected mortality forthe 65 year oldthe 65 year old

Visualizing An Annual >>2.5% Visualizing An Annual >>2.5% Gain In Cost EfficiencyGain In Cost Efficiency

2.5%/year2.5%/year2.5%/year

2.5%/year2.5%/year2.5%/year

50th %ile5050thth %ile%ile

50th%

ile5050

thth%ile

%ile

MD

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Inde

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Low

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Low

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Lower Longit. Efficiency/ Higher Total CostLower Longit. Efficiency/ Lower Longit. Efficiency/ Higher Total CostHigher Total Cost

Higher Longit. Efficiency/ Lower Total Cost

Higher Longit. Efficiency/ Higher Longit. Efficiency/ Lower Total CostLower Total Cost

Low Longit. Efficiency Low Quality (Worst)

Low Longit. Efficiency Low Longit. Efficiency Low Quality Low Quality (Worst)(Worst)

High Longit. Efficiency High Quality (Best)

High Longit. Efficiency High Longit. Efficiency High Quality High Quality (Best)(Best)

High Longit. Efficiency Low QualityHigh Longit. Efficiency High Longit. Efficiency Low QualityLow Quality

Total Cost of Care Index for Seattle MDs(total cost per case mix-adjusted treatment episode)

Total Cost of Care Index for Seattle MDsTotal Cost of Care Index for Seattle MDs(total cost per case mix(total cost per case mix--adjusted treatment episode)adjusted treatment episode)

Low Longit. Efficiency High QualityLow Longit. Efficiency Low Longit. Efficiency High QualityHigh Quality

If Payers give you a low score, If Payers give you a low score, what will you say?what will you say?

Acute care sales strategy failing?Acute care sales strategy failing?

•• Fairview Health Services, Minneapolis, had a $21 Fairview Health Services, Minneapolis, had a $21 million revenue shortfall during the first three million revenue shortfall during the first three months of the year ( 2006) and plans to eliminate months of the year ( 2006) and plans to eliminate about 250 jobs as part of an effort to reduce about 250 jobs as part of an effort to reduce expenses. Of those jobs, 20 to 80 will be through expenses. Of those jobs, 20 to 80 will be through layoffs, with the remainder coming through layoffs, with the remainder coming through attrition. Fairview, which includes the University attrition. Fairview, which includes the University of Minnesota Medical Center, employs 19,000 of Minnesota Medical Center, employs 19,000 workers and already has a hiring freeze for workers and already has a hiring freeze for support services. Part of the problem is that the support services. Part of the problem is that the number of patient admissions is stagnant, number of patient admissions is stagnant, Fairview said.Fairview said.

New Insights for Physicians and New Insights for Physicians and HospitalsHospitals

Once employers and managed care understand that Once employers and managed care understand that they can differentiate providers on quality, product, they can differentiate providers on quality, product,

technology and price the market, as we once knew it , technology and price the market, as we once knew it , shifts and providers will need to look at risk differently shifts and providers will need to look at risk differently

The system does not behave the The system does not behave the way employers or patients want it way employers or patients want it

to behaveto behave

•• The system actually rewards providers who let patients get The system actually rewards providers who let patients get sicker. The more complex the patient the more the sicker. The more complex the patient the more the providers can charge.providers can charge.

•• When hospitals become more efficient and more effective When hospitals become more efficient and more effective they lower costs, save lives but also lower revenue they lower costs, save lives but also lower revenue projections .projections .

•• Right now the more efficient and effective the hospital is , Right now the more efficient and effective the hospital is , the more money the insurance company makes.the more money the insurance company makes.

•• The only way to harvest these savings from improvements The only way to harvest these savings from improvements is to share risk in carefully constructed performance driven is to share risk in carefully constructed performance driven agreements. agreements.

CAP Protocol ComplianceCAP Protocol Compliance

Source: Intermountain Healthcare, Dr. Brent James, 2006.Source: Intermountain Healthcare, Dr. Brent James, 2006.

Prop

ortio

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ompl

iant

Prop

ortio

n C

ompl

iant

Prop

ortio

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iant

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

-23 -21 -19 -17 -15 -13 -11 -9 -7 -5 -3 -1 1 3 5 7 9 11 13 15 170

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8Baseline ImplementationBaselineBaseline ImplementationImplementation

Month Relative to CPM ImplementationMonth Relative to CPM ImplementationMonth Relative to CPM Implementation

Implementation Group Implementation Group –– Loose Abx ComplianceLoose Abx Compliance

Impact On Net IncomeImpact On Net Income

Source: Intermountain Healthcare, Dr. Brent James, 2006.Source: Intermountain Healthcare, Dr. Brent James, 2006.

(15%)(15%)(0%)(0%)(40%)(40%)(45%)(45%)Decrease Decrease # of Cases# of Cases

Per Per DiemDiem

Payment MechanismPayment Mechanism

Decrease LOS (# nursing hours)Decrease LOS (# nursing hours)

Decrease other units per caseDecrease other units per case

Decrease Decrease # Units per Case# Units per CaseDecrease Decrease Cost per UnitCost per Unit

Shared Shared RiskRisk

Per Per CaseCase

Discounted Discounted FFSFFS

Improvement to Improvement to Cost StructureCost Structure

CAP: Cost Vs. ReimbursementCAP: Cost Vs. Reimbursement

Source: Intermountain Healthcare, Dr. Brent James, 2006.Source: Intermountain Healthcare, Dr. Brent James, 2006.

Act

ual v

s. Ex

pect

ed R

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burs

emen

t ($)

Act

ual v

s. Ex

pect

ed R

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burs

emen

t ($)

Act

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s. Ex

pect

ed R

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burs

emen

t ($)

0

5000

10000

15000

-37 -35 -33 -31 -29 -27 -25 -23 -21 -19 -17 -15 -13 -11 -9 -7 -5 -3 -1 1 3 5 7 9 11 13 15 17 19 21 230

5000

10000

15000

Expected Cost projected from risk-adjusted history, controls

Actual Cost as complication rate fell

Actual Reimbursement

Expected CostExpected Cost projected from riskprojected from risk--adjusted history, controlsadjusted history, controls

Actual CostActual Cost as complication rate fellas complication rate fell

Actual ReimbursementActual Reimbursement

Month Relative to Protocol IntroductionMonth Relative to Protocol IntroductionMonth Relative to Protocol Introduction

Impact On Net IncomeImpact On Net Income

Source: Intermountain Healthcare, Dr. Brent James, 2006.Source: Intermountain Healthcare, Dr. Brent James, 2006.

(15%)(15%)(0%)(0%)(40%)(40%)(45%)(45%)Decrease Decrease # of Cases# of Cases

Per Per DiemDiem

Payment MechanismPayment Mechanism

Decrease LOS (# nursing hours)Decrease LOS (# nursing hours)

Decrease other units per caseDecrease other units per case

Decrease Decrease # Units per Case# Units per CaseDecrease Decrease Cost per UnitCost per Unit

Shared Shared RiskRisk

Per Per CaseCase

Discounted Discounted FFSFFS

Improvement to Improvement to Cost StructureCost Structure

Failure to understand this Failure to understand this fundamental constructfundamental construct

•• The leading source of frustration for CFOs and The leading source of frustration for CFOs and Administrators has been they make no money on Provider Administrators has been they make no money on Provider Sponsored plans because they thought risk was all about Sponsored plans because they thought risk was all about insurance . They did not understand that insurance . They did not understand that to manage risk to manage risk well requires the delivery system to change.well requires the delivery system to change.

•• The failure of most hospitals to integrate with medical staff The failure of most hospitals to integrate with medical staff and benefit from the efficiencies of this process was a and benefit from the efficiencies of this process was a misunderstanding that misunderstanding that true integration required a change true integration required a change in delivery system process and outcomein delivery system process and outcome not just written not just written contracts and information systems that makes it look like contracts and information systems that makes it look like we are integrated.we are integrated.

0

10000

20000

30000

40000

IdentifyingIdentifyingProfitable Service LinesProfitable Service Lines

Source: Health Leaders, March 2003.Source: Health Leaders, March 2003.

Cardio/VascularThoracic Surgery Orthopedics General Surgery

Complications Tot

Pats Tot Pay Avg

Tot Cost Avg

Tot Profit Avg

Tot Pats

Tot Pay Avg

Tot Cost Avg

Tot Profit Avg

Tot Pats

Tot Pay Avg

Tot Cost Avg

Tot Profit Avg

None

838 13732 30505 3227 925 5688 6702 -1014 842 8473 9410 -937

Single CoC 350 16672 16585 87 152 7100 9728 -2628 346 13608 36293 -2685 Multiple CoCs 180 17649 27080 -9431 80 8296 12530 -4234 335 23910 36270 -12360 Grand Total 1368 14999 14241 758 1157 6054 7503 -1449 1523 13035 16882 -3847

Tot Pay Avg Tot Cost Avg Tot Pay Avg Tot Cost Avg Tot Pay Avg Tot Cost AvgTot Pay AvgTot Pay Avg Tot Cost AvgTot Cost Avg Tot Pay AvgTot Pay Avg Tot Cost AvgTot Cost Avg Tot Pay AvgTot Pay Avg Tot Cost AvgTot Cost Avg

NoneSingle CoCMultiple CoCs

NoneNoneSingle CoCSingle CoCMultiple CoCsMultiple CoCs

Cardio/Vascular/Thoracic Surgery Orthopedics General SurgeryCardio/Vascular/Thoracic SurgeryCardio/Vascular/Thoracic Surgery OrthopedicsOrthopedics General SurgeryGeneral Surgery

Population: Eastern Region

EMPLOYER RETROSPECTIVE PROSPECTIVERank ID Name Mbrs

SeenActual

Paid AmtExpectedPaid Amt Diff Perf

IndexRisk

ScoreExpectedPaid Amt Diff Perf

IndexRisk

Score4 00210087843 ProDrive 461 $541,952 $514,627 $27,326 1.05 1.07 $643,283 -$101,331 0.84 1.346 00210061234 Brembo Brakes 467 $439,141 $471,195 -$32,054 0.93 0.97 $565,434 -$126,293 0.78 1.162 00210033453 Borla Exhaust 198 $171,569 $143,319 $28,250 1.20 0.70 $190,614 -$19,045 0.90 0.921 00210098789 ZP Transmissions 187 $167,157 $174,216 -$7,059 0.96 0.89 $257,840 -$90,683 0.65 1.327 00210038739 Allison Transmissions 101 $153,511 $174,891 -$21,380 0.88 1.67 $162,648 -$9,137 0.94 1.553 00210044774 Neuspeed 33 $34,791 $29,288 $5,503 1.19 0.85 $34,852 -$61 1.00 1.015 00210082882 K&N Industries 9 $9,867 $10,453 -$585 0.94 1.13 $13,798 -$3,930 0.72 1.49

Average per Employer: 208 $216,855 $216,855 $0 1.02 1.04 $266,924 -$50,069 0.83 1.26Total for Report: 1,455 $1,517,988 $1,517,988 $0 $1,868,470 -$350,482

Average per Member: $1,043 $1,043 $0 $1,284 -$241

Predicting Future CostPredicting Future Cost

PHDC Population Profiling SystemPHDC Population Profiling SystemEmployer Ranking Risk Employer Ranking Risk -- Adjusted Total DollarsAdjusted Total Dollars

Retrospective and Prospective ERGRetrospective and Prospective ERG™™ss

Wholesale to RetailWholesale to Retail

Not unlike the drug companies who sold to patients Not unlike the drug companies who sold to patients and bypassed physicians to create demand for the and bypassed physicians to create demand for the

productproduct

Insurers and bankers are doing the same thing going Insurers and bankers are doing the same thing going directdirect

Wholesale to retailWholesale to retail

•• As consumer directed products drive new technology the As consumer directed products drive new technology the consumer, not the insurer or employer is at risk for consumer, not the insurer or employer is at risk for substantial out of pocket costs.substantial out of pocket costs.

•• Consumers are using information more than ever before to Consumers are using information more than ever before to look at disease states but also performance expectations.look at disease states but also performance expectations.

•• Physicians and hospitals who get ahead of this curve and Physicians and hospitals who get ahead of this curve and realize thy are in a retail environment will have an realize thy are in a retail environment will have an advantage.advantage.

•• Will your restaurant have an A or a D designation as they Will your restaurant have an A or a D designation as they do in Los Angeles?do in Los Angeles?

Health Care A Supermarket ServiceHealth Care A Supermarket ServiceProHealth Physicians To Open WalkProHealth Physicians To Open Walk--In Clinics In Clinics

In Price Chopper StoresIn Price Chopper Stores

•• ProHealth Physicians, the state's largest group practice of primProHealth Physicians, the state's largest group practice of primaryary--care doctors, care doctors, plans to open walkplans to open walk--in clinics in Price Chopper supermarkets, starting next month, iin clinics in Price Chopper supermarkets, starting next month, in n the first venture of its kind in Connecticut. the first venture of its kind in Connecticut.

The clinics are designed to offer lowThe clinics are designed to offer low--level, routine medical care to shoppers under level, routine medical care to shoppers under the new brand name, MedAccess. Each visit would cost a flat fee the new brand name, MedAccess. Each visit would cost a flat fee of $45 for services, of $45 for services, ProHealth said.ProHealth said.

•• "We're only doing this in stores where there is an existing phar"We're only doing this in stores where there is an existing pharmacy," said Cheryl macy," said Cheryl Lescarbeau, director of clinical operations for ProHealth.Lescarbeau, director of clinical operations for ProHealth.

Pharmacies, floral shops, banks and other services have become cPharmacies, floral shops, banks and other services have become commonplace in ommonplace in supermarkets.supermarkets.

Around the nation, some health clinics have opened, as well, as Around the nation, some health clinics have opened, as well, as part of that trend.part of that trend.

DAN HAAR, Courant Staff Writer July 19, 2006 DAN HAAR, Courant Staff Writer July 19, 2006

Wholesale to RetailWholesale to RetailPatients Desire Improved Patients Desire Improved

Communication Communication

•• Vendors are both frustrated with physician footVendors are both frustrated with physician foot--dragging when it comes to upgrading technology, said dragging when it comes to upgrading technology, said Gary Bryant, editor of Health Industry News and a coGary Bryant, editor of Health Industry News and a co--author of the study. "Maybe vendors should take a author of the study. "Maybe vendors should take a page from pharmaceutical firms and market benefits directly to cpage from pharmaceutical firms and market benefits directly to consumers and let them educate The onsumers and let them educate The healthcare industry is lagging behind other industries in adoptihealthcare industry is lagging behind other industries in adopting communication technology that would ng communication technology that would benefit consumers, according to a report from Osterman Research benefit consumers, according to a report from Osterman Research and Health Industry News, and Health Industry News, Communications Issues in the Healthcare Industry, 2006Communications Issues in the Healthcare Industry, 2006--2009. The report's findings indicate a major 2009. The report's findings indicate a major communication disconnect between patients and healthcare providecommunication disconnect between patients and healthcare providers: rs:

•• Among healthcare providers, eAmong healthcare providers, e--mail is used heavily only in communications mail is used heavily only in communications between physicians. Yet 82 percent of healthcare consumers indicbetween physicians. Yet 82 percent of healthcare consumers indicated that they ated that they have never received an ehave never received an e--mail message from their primary healthcare provider. mail message from their primary healthcare provider.

•• Only 15 percent of survey respondents indicated that their healtOnly 15 percent of survey respondents indicated that their healthcare providers hcare providers give them the option of scheduling their own appointments by egive them the option of scheduling their own appointments by e--mail or mail or through a Web site. through a Web site.

•• Nearly threeNearly three--quarters of healthcare consumers would prefer to pay their quarters of healthcare consumers would prefer to pay their medical bills through an online system, but only one in seven camedical bills through an online system, but only one in seven can currently do n currently do so. so.

•• Source: Osterman Research, August 8, 2006 Source: Osterman Research, August 8, 2006

Trouble to avoidTrouble to avoid

•• This is not a program or an isolated academic project. Do not tuThis is not a program or an isolated academic project. Do not turn this rn this over to the revenue cycle management people alone as their goalsover to the revenue cycle management people alone as their goals are are maximum billing not quality improvement.maximum billing not quality improvement.

•• This strategy has winners and losers and losers are the ones whoThis strategy has winners and losers and losers are the ones whocannot produce reasonable evidence as to their quality and will cannot produce reasonable evidence as to their quality and will loose loose market share and trust in the marketplace.market share and trust in the marketplace.

•• Employers and third parties including Medicare are very concerneEmployers and third parties including Medicare are very concerned d that as consumer driven exposes patients to large out of pocket that as consumer driven exposes patients to large out of pocket risks risks that the care is done right the first time. Otherwise it comes othat the care is done right the first time. Otherwise it comes out of the ut of the payers side of the bank not the consumerspayers side of the bank not the consumers

•• Hospitals and physicians will spend more money trying to re estaHospitals and physicians will spend more money trying to re establish blish themselves as a quality facility than they will taking a leadersthemselves as a quality facility than they will taking a leadership role hip role RIGHT NOW in positioning themselves for the future as the ally tRIGHT NOW in positioning themselves for the future as the ally to the o the employer and consumer.employer and consumer.

Measurement and perfectionMeasurement and perfection

•• DaVinciDaVinci’’s s ''Vitruvian Man'Vitruvian Man' proportion proportion and ratios of human measurement and ratios of human measurement revolutionized art and medicine.revolutionized art and medicine.

•• A A palmpalm is the width of four fingers is the width of four fingers •• A A footfoot is the width of four palms is the width of four palms •• The length of the hand is oneThe length of the hand is one--tenth of tenth of

a man's height a man's height •• The length of a man's outspread arms The length of a man's outspread arms

is equal to his height is equal to his height •• Imagine the perfectly executed DRGImagine the perfectly executed DRG•• Imagine the perfectly executed billing Imagine the perfectly executed billing

and recoveryand recovery•• What would it look like on a process What would it look like on a process

chart?chart?•• What would it mean in terms of revenue What would it mean in terms of revenue

improvement? improvement?

Corporate Health DepartmentCorporate Health Department

•• Most health systems and physcians do not know how many patients Most health systems and physcians do not know how many patients come from which employer in their service area as insurers and come from which employer in their service area as insurers and TPAsTPAscontrol payment to providers.control payment to providers.

•• Most health systems have someone selling Occupational Medicine, Most health systems have someone selling Occupational Medicine, Wellness programs, Fitness programs, some on site screening Wellness programs, Fitness programs, some on site screening programs etc.. Most departments cannot link volume of visits or programs etc.. Most departments cannot link volume of visits or admissions to this activity so budgets are sparse.admissions to this activity so budgets are sparse.

•• Combining these programs with a central core strategy of PBC offCombining these programs with a central core strategy of PBC offers a ers a new dimension to partner directly with payers as they move theirnew dimension to partner directly with payers as they move theiremployees to the role of a consumer.employees to the role of a consumer.

•• Employers, when asked which doctor does the best job for a partiEmployers, when asked which doctor does the best job for a particular cular illness , do not know the answer and will buy outside data serviillness , do not know the answer and will buy outside data services to ces to get the answer. You know the answer and should charge for it.get the answer. You know the answer and should charge for it.

Direct ContractingDirect Contracting

•• Health system takes the lead to approach select employers with dHealth system takes the lead to approach select employers with dee--identified patient data to suggest problem areas where hospital identified patient data to suggest problem areas where hospital and and physcians can help lower cost and improve quality.physcians can help lower cost and improve quality.

•• The employer has never seen all of their work comp, disability The employer has never seen all of their work comp, disability management, disease management, claims cost, network access feesmanagement, disease management, claims cost, network access fees, , ancillary costs and productivity costs in one database.ancillary costs and productivity costs in one database.

•• Your strategy is looking for ways to improve productivity and hoYour strategy is looking for ways to improve productivity and holding lding yourself accountable to the employer and the consumer to reform yourself accountable to the employer and the consumer to reform the the delivery system and share in the savings.delivery system and share in the savings.

•• The more employers save money the more employers they will sell The more employers save money the more employers they will sell on on the idea that your organization is a good partnerthe idea that your organization is a good partner

Benchmarking ConsortiumBenchmarking Consortium

•• Collaborative between large employers, hospitals, physicians.Collaborative between large employers, hospitals, physicians.

•• Mission is to collect and share data for the purpose of improvinMission is to collect and share data for the purpose of improving g quality and cost through understanding capabilities and limitatiquality and cost through understanding capabilities and limitations.ons.

•• Everyone pays into the confederation to support it.Everyone pays into the confederation to support it.

•• End user is the consumer and success is a combination of satisfaEnd user is the consumer and success is a combination of satisfaction, ction, affordability and quality outcomes.affordability and quality outcomes.

•• This can be a new revenue stream to pay for ongoing data initiatThis can be a new revenue stream to pay for ongoing data initiativesives

•• Any new health plan visits with the employer will need to use yoAny new health plan visits with the employer will need to use your ur ““high performance panelhigh performance panel”” as long as you can continue to improve as long as you can continue to improve quality ( something the insurer cannot)quality ( something the insurer cannot)

What these approaches have in What these approaches have in commoncommon

•• Requires a better understanding of employers needs and Requires a better understanding of employers needs and makes PBC a vital payer strategy with an ROImakes PBC a vital payer strategy with an ROI

•• Requires a sincere effort to bring physcians into the future Requires a sincere effort to bring physcians into the future shift in the insurance and delivery system businessshift in the insurance and delivery system business

•• Builds confidence in the community as local Leadership is Builds confidence in the community as local Leadership is in charge of the processin charge of the process

•• Allows the health system or physician network to get Allows the health system or physician network to get prepared for Pay for Performance and leverage that prepared for Pay for Performance and leverage that knowledge into a new revenue stream by helping knowledge into a new revenue stream by helping employers meet their employees needs.employers meet their employees needs.

Getting startedGetting started

Pay for Performance preparednessPay for Performance preparednessInventory of current process improvement tasksInventory of current process improvement tasks

Physician issues of quality measures ETGs, ERGs, AVGs, Physician issues of quality measures ETGs, ERGs, AVGs,

Information gaps in being able to collect and analyze (RCA)Information gaps in being able to collect and analyze (RCA)

Performance Based Contracting ( PBC) feasibilityPerformance Based Contracting ( PBC) feasibilityEmployers interest Employers interest

Health plan demandsHealth plan demands

Internal assessment of management AND STAFFInternal assessment of management AND STAFF

Understanding the difference between management and leadership.Understanding the difference between management and leadership.

The Relationship of Leadership, The Relationship of Leadership, Management, ShortManagement, Short--Term Results Term Results

& Successful Transformation& Successful Transformation

Transformation efforts can be successful for a while, but often fall after short-term results become erratic.

Transformation efforts can be successful for a while, but often fall after short-term results become erratic.

All highly successful transformation efforts combine good leadership with good management

All highly successful transformation efforts combine good leadership with good management

Transformation efforts go nowhereTransformation efforts go nowhere

Short-term results are possible, especially through cost cutting or mergers and acquisitions. But real transformation programs have trouble getting started and major, long-term change is rarely achieved.

Short-term results are possible, especially through cost cutting or mergers and acquisitions. But real transformation programs have trouble getting started and major, long-term change is rarely achieved.

Lead

ersh

ipLe

ader

ship

Lead

ersh

ip

ManagementManagementManagement

+ ++ +

+ ++ +

++

00

A Failure to Communicate: How a A Failure to Communicate: How a Change Vision Gets Lost in the Change Vision Gets Lost in the

ClutterClutter

Vision Communication.58 %

Other Communication99.42%

• The total amount of communication going to an employee in three months = 2,300,000 words or numbers

• The typical communication of a change vision over a period of three months 13,400 words or numbers (that is, the equivalent of one 30-minute speech, one hour-long meeting, one 600- word article in the firm’s newspaper, and one 2,000-word memo).

• 13,400 / 2,300,000 = .0058 The change vision captures only .58 percent of the communication market share.

• The total amount of communication going to an employee in three months = 2,300,000 words or numbers

• The typical communication of a change vision over a period of three months 13,400 words or numbers (that is, the equivalent of one 30-minute speech, one hour-long meeting, one 600- word article in the firm’s newspaper, and one 2,000-word memo).

• 13,400 / 2,300,000 = .0058 The change vision captures only .58 percent of the communication market share.

The Relationship of Vision, The Relationship of Vision, Strategies, Plans and BudgetsStrategies, Plans and Budgets

Management CreatesManagement Management CreatesCreates

PlansPlans

BudgetsBudgets

Specific steps and timetables to implement the strategiesSpecific steps and timetables to implement the strategies

Plans converted into financial projections and goalsPlans converted into financial projections and goals

Leadership CreatesLeadership Leadership CreatesCreates

VisionVision

StrategiesStrategies

A sensible and appealing picture of the futureA sensible and appealing picture of the future

A logic for how the vision can be achievedA logic for how the vision can be achieved

Sources of ComplacencySources of Complacency

The absence of a major and visible crisisThe absence of a major and visible crisis

Too many visible resourcesToo many visible resources

Low overall performance standardsLow overall performance standards

Organizational structures that focus employees on narrow functional goals

Organizational structures that focus employees on narrow functional goals

Internal measurement systems that focus on the wrong performance indexes

Internal measurement systems that focus on the wrong performance indexes

A lack of sufficient performance feedback from external sources

A lack of sufficient performance feedback from external sources

A kill-the-messenger-of-bad-news, low-candor, low-confrontation culture

A kill-the-messenger-of-bad-news, low-candor, low-confrontation culture

Human nature, with its capacity for denial, especially if people are already busy or stressed

Human nature, with its capacity for denial, especially if people are already busy or stressed

Too much happy talk from senior managementToo much happy talk from senior management

SummarySummary

•• Large employers and regional health plans are in a hurry to manaLarge employers and regional health plans are in a hurry to manage ge benchmarks not just benefits.benchmarks not just benefits.

•• Building benchmarks creates new interest in the minds of buyers Building benchmarks creates new interest in the minds of buyers to tier to tier providers and design benefits to incent use of top providers.providers and design benefits to incent use of top providers.

•• The governments pay for performance demo projects and initial The governments pay for performance demo projects and initial success with risk adjusters is a driving force that is not goingsuccess with risk adjusters is a driving force that is not going away.away.

•• These changes create new opportunities for providers to collaborThese changes create new opportunities for providers to collaborate ate and harvest savings through performance arrangements.and harvest savings through performance arrangements.

•• Technology is changing in favor of supporting these more Technology is changing in favor of supporting these more sophisticated models of care improvement and reimbursement sophisticated models of care improvement and reimbursement improvement.improvement.

ConclusionConclusion

•• Employers and Hospitals and Physicians have a new opportunity toEmployers and Hospitals and Physicians have a new opportunity tonot only take unnecessary costs out of the system but also impronot only take unnecessary costs out of the system but also improve the ve the quality of necessary services while being paid a success fee to quality of necessary services while being paid a success fee to improve.improve.

•• This is not a social engineering project but rather a business This is not a social engineering project but rather a business proposition that starts with making the case for quality from alproposition that starts with making the case for quality from all l stakeholder perspectives .stakeholder perspectives .

•• Do not let the complexity of informatics be the failure of your Do not let the complexity of informatics be the failure of your plan. plan. Instead make data the common key to making sure you have a plan Instead make data the common key to making sure you have a plan for for the 80% of care that is routine. Focus on the 20% that is not rothe 80% of care that is routine. Focus on the 20% that is not routine and utine and must be managed individually and employers and good health plansmust be managed individually and employers and good health planswill make help you make this happen because they have a vested will make help you make this happen because they have a vested interest in delivery system reform.interest in delivery system reform.

•• We have just shown you a way to be paid well for being the leadeWe have just shown you a way to be paid well for being the leader of r of that reform as a provider in your community.that reform as a provider in your community.

For more information For more information PendulumHealth.comPendulumHealth.com