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THE COMMONWEALTH
FUND
THE COMMONWEALTH
FUND
Reforming Provider Payment: Reforming Provider Payment: Essential Building Block for Health Essential Building Block for Health
ReformReform
Stuart GutermanAssistant Vice President
Director, Program on Medicare’s FutureThe Commonwealth Fund
Alliance for Health Reform Briefing onPayment ReformWashington, DCMarch 20, 2009
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Path To High Performance: Key Strategies for Achieving Access for All, Better Health Care and
Outcomes, and Slower Cost Growth• Affordable coverage for all: access and foundation for
payment and system reforms– Insurance exchange: choice of private and new public plan– Market reforms, affordability, and shared responsibility
• Align incentives: payment reform to enhance value– Accessible patient-centered primary care
– Move from fee-for-service to more “bundled” payment, with accountability
– Align price signals with efficient care and value
• Aim high to improve quality and health outcomes– Invest in infrastructure: information systems– Promote health and disease prevention
• Accountable, patient-centered, coordinated care
• Leadership and collaboration
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Trend in the Number of Uninsured, 2009–2020 Under Current Law and Path Proposal
48.9 50.3 51.8 53.3 54.7 56.0 57.2 58.3 59.2 60.2 61.1
48.0
19.7
6.3 4.0 4.1 4.1 4.1 4.1 4.2 4.2 4.2 4.2
48.0
0
20
40
60
80
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Current law
Path proposal
Millions
Note: Assumes insurance exchange opens in 2010 and take up by uninsured occurs over two years. Remaining uninsured are mainly non-tax-filers.Data: Estimates by The Lewin Group for The Commonwealth Fund.Source: The Path to a High Performance U.S. Health System: A 2020 Vision and the Policies to Pave the Way , Feb. 2009.
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Potential Gain in Population HealthIf the U.S. Reaches Benchmarks
• 37 million more adults and 10 million more children with accessible primary care
• 68 million more adults receiving recommended preventive care
• 70,000 fewer children admitted to hospitals for asthma
• 250,000 fewer admissions to hospitals for complications of diabetes
• 600,000 fewer elderly hospitalized or re-admitted for preventable conditions
• 100,000 fewer deaths before age 75 from conditions amendable to health care
• 180,000 more physicians using electronic medical records and information networks linking teams
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Total National Health Expenditures (NHE), 2009–2020
Current Projection and Alternative Scenarios
5.2
4.6
2.6
4.2
$1
$2
$3
$4
$5
$6
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Current projection (6.7% annual growth)
Path proposals (5.5% annual growth)
Constant (2009) proportion of GDP (4.7% annual growth)
NHE in trillions
Cumulative reduction in NHE through 2020: $3 trillion
Note: GDP = Gross Domestic Product.Data: Estimates by The Lewin Group for The Commonwealth Fund.Source: The Path to a High Performance U.S. Health System: A 2020 Vision and the Policies to Pave the Way , Feb. 2009.
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Interrelation of Organization and PaymentInterrelation of Organization and Payment
Integrated system capitation
Global DRG fee: hospital, post- acute, and physician inpatient
Global DRG fee: hospital only
Global ambulatory care fees
Global primary care fees
Blended FFS and medical home fees
FFS and DRGs
Conti
nuum
of
Paym
ent
Bu
ndlin
g
Small MD practice; unrelated hospitals
Hospital system
Integrated
delivery system
Contin
uum
of P
4P D
esig
n
Outcome measures; large % of total payment
Preventive care; management of chronic conditions measures; small % of total payment
Care coordination
and intermediate outcome measures; moderate % of total payment
Less Feasible
More Feasible
Source: A. Shih, K. Davis, S. Schoenbaum, A. Gauthier, R. Nuzum, and D. McCarthy, Organizing the U.S. Health Care Delivery System for High Performance (New York: The Commonwealth Fund, Aug. 2008).
Primary care MD group practice
Multi-specialty MD group practice
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Net Impact of Path Payment Reforms on CumulativeNet Impact of Path Payment Reforms on CumulativeNational Health Expenditures Compared withNational Health Expenditures Compared with Current Projection, 2010–2020 (in billions) Current Projection, 2010–2020 (in billions)
Data: Estimates by The Lewin Group for The Commonwealth Fund.Source: The Lewin Group, The Path to a High Performance U.S. Health System: Technical Documentation (Washington, D.C.: The Lewin Group, 2009).
Total NHE
Private Employers
State & Local Governments
Households
Federal Budget
Total Payment Reforms –$1,010 –$170 –$10 –$82 –$749
Enhanced payment for primary care
–$71 –$28 –$2 –$11 –$30
Encouraged adoption of Medical Home model
–$175 –$25 –$13 –$36 –$101
Bundled payment for acute care episodes
–$301 –$75 –$4 –$11 –$211
Correcting price signals
• High cost area updates
–$223 –$64 –$3 –$29 –$127
• Prescription drugs –$76 +$22 +$12 +$5 –$115
• Medicare Advantage –$165 $0 $0 $0 –$165
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0.75
1.00
1.25
0.75 1.00 1.25
Relative Resource Use**(M edian Re lative Resource Use = $25,994)
Qu
ali
ty o
f C
are
* (1
Ye
ar
Su
rviv
al
Ind
ex
, M
ed
ian
= 7
0%
)
* Indexed to risk-adjusted 1 year survival rate (median = 0.70).** Risk-adjusted spending on hospital and physician services using standardized national prices, indexed to median.Data: E. Fisher and D. Staiger, Dartmouth College analysis of data from a 20% national sample of Medicare beneficiaries.
Quality and Cost of Care for Medicare Patients Quality and Cost of Care for Medicare Patients Hospitalized for Heart Attacks, Colon Cancer, and Hospitalized for Heart Attacks, Colon Cancer, and
Hip Fracture, by Hospital Referral Regions,Hip Fracture, by Hospital Referral Regions,2000–20022000–2002
Source: Commonwealth Fund National Scorecard on U.S. Health System Performance, 2006 8
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What Drives Variation in Spending?What Drives Variation in Spending?
Average risk-adjusted standardized spending for chronic obstructive pulmonary disease episode
Difference between high and average
Type of service Low Average High % $
Total episode 6372 7871 9748 23.8 1877
Initial hospital stay 4408 4414 4406 -0.2 -8
Physician 547 569 576 1.2 7
Readmissions 671 1543 2550 65.3 1007
Post-acute care 466 998 1780 78.4 782
Other 280 347 436 25.6 89
Source: G. Hackbarth, R. Reischauer, and A. Mutti. “Collective Accountability for Medical Care—Toward Bundled Medicare Payments” New England Journal of Medicine July 3, 2008 359(1):3-5.
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$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
$1.8
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Current ProjectionPath Policy
Total National Health Expenditure Growth for Total National Health Expenditure Growth for Hospitals and Physicians, Current Projections and Hospitals and Physicians, Current Projections and
With Policy Changes, 2009-2020With Policy Changes, 2009-2020
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
$1.8
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Current Projection
Path Policy
Hospital Expenditures (trillions) Physician Expenditures (trillions)
Data: Estimates by The Lewin Group for The Commonwealth Fund.Source: The Lewin Group, The Path to a High Performance U.S. Health System: Technical Documentation (Washington, D.C.: The Lewin Group, 2009).
$0.8
$1.6
$1.4
$0.7
$1.3
$1.1
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ConclusionsConclusions
• Emphasis on primary care can provide better access to needed care and more patient-centered care
• Bundled payment can encourage more coordinated care across providers and settings, and more accountability for outcomes and resource use
• The main objective of payment reform is to provide more organized, effective, and efficient health care delivery
• Payment reform built on a foundation of coverage for all and system reforms can be more effective
• These changes will be difficult—they affect how $42 trillion in projected cumulative spending will be allocated
• But we are not talking about shutting down the health care system—only reducing cumulative spending from $42 trillion to $39 trillion, with annual growth slowing from a projected 6.7% to 5.5% (compared with 4.7% for GDP)
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AcknowledgementsAcknowledgements
Cathy Schoen,Sr. Vice President, Research & Evaluation
Karen Davis, Ph.D.,President
Stephen Schoenbaum, M.D.Executive Vice President for Programs
Kristof Stremikis, M.P.PResearch Associateto the President