DESIGNING VALUE-BASED CARE FROM THE BOTTOM UP … · DESIGNING VALUE-BASED CARE FROM THE BOTTOM UP...

DESIGNING VALUE-BASED CAREFROM THE BOTTOM UP

INSTEAD OF THE TOP DOWNHow to Create a Physician-Led,

Patient-Centered Healthcare Future

Harold D. MillerPresident and CEO

Center for Healthcare Quality and Payment Reform

www.CHQPR.org

2© Center for Healthcare Quality and Payment Reform www.CHQPR.org

How Do You Control High &

Growing Healthcare Spending?

TOTALHEALTHCARE

SPENDING

TOTALHEALTHCARE

SPENDING

TOTALHEALTHCARE

SPENDING

TOTALHEALTHCARE

SPENDING

$

TIME


TOTALHEALTHCARE

SPENDINGBY

PAYERS

Payer Strategy #1:

Cut Provider Fees for Services

$Cut

Provider Fees

SAVINGS

TOTALHEALTHCARE

SPENDING

TOTALHEALTHCARE

SPENDING

TOTALHEALTHCARE

SPENDING


TOTALHEALTHCARE

SPENDINGBY

PAYERS

Payer Strategy #2:

Shift Costs to Patients

$ SAVINGS

HigherCost-Share &Deductibles

TOTALHEALTHCARE

SPENDING

TOTALHEALTHCARE

SPENDING

TOTALHEALTHCARE

SPENDING


TOTALHEALTHCARE

SPENDINGBY

PAYERS

Payer Strategy #3:

Delay or Deny Care to Patients

$ SAVINGS

Lack of Needed Care

TOTALHEALTHCARE

SPENDING

TOTALHEALTHCARE

SPENDING

TOTALHEALTHCARE

SPENDING


Results of Typical Strategies

• Patients don’t get the care they need and costs increase in the future

• Small physician practices and hospitals are forced out of business

• Health insurance premiums continue to rise and access to insurance coverage decreases


“VALUE-BASED”

PAYMENT

New Strategy: Replace FFS

With “Value-Based” Payment

$ SAVINGS

FEEFOR

SERVICEPAYMENT

FEEFOR

SERVICEPAYMENT

FEEFOR

SERVICEPAYMENT


Does Value-Based Payment

Mean the End of FFS?

“I'll tell you a lot of what I do in my role running CMMI as senior adviser to Secretary Azar is to blow up fee for service. That's one of our prime

goals— is to get rid of fee for service.”

“We’re going to do everything we can to change that system. We can’t support a system that’s based on

volume— because you get what you pay for. That is a goal underlying everything.”

Adam BoehlerDirector, Center for Medicare and Medicaid Innovation (CMMI)

Deputy Administrator, CMS

Senior Advisor to Secretary Azar for Value-Based Transformation and Innovation

What Exactly is

Wrong With

Fee for Service?


People Seem to Believe FFS is an

Addiction Physicians Can’t Control

“I wish I could stop ordering more services,

but I can’t control myself”


The Four (Real) Problems with

(Current) FFS Payment Systems




1. No fee for many high value services that could help patients and reduce overall healthcare spending


Diagnosing a New Symptom:

Call to Doctor Might Be Enough

Phone Call

$

$27


Medicare Doesn’t Pay for

Phone Calls

Phone Call

$

$27


Medicare Only Pays for

Face-to-Face Visits with Physician

Phone CallPhysicianOffice Visit

$

$75$27


What If the Patient is Too Sick to

Drive or Has No Transportation?


Transport toOffice

$

$150

$27


Medicare Doesn’t Pay for

Transportation to Doctor’s Office


Transport toOffice

$

$150

$27


Medicare WILL Pay for an ED Visit


Transport toOffice

EmergencyDepartment

Visit

$

$480+

$150

$27


Medicare WILL Pay for an ED Visit

AND the Ambulance to Get There


Transport toOffice

EmergencyDepartment

Visit

Ambulanceto

Hospital

$ $700+

$150

$27


A Phone Call That Prevented an

ED Visit Would Save a Lot of $

Phone Call

EmergencyDepartment

Visit

Ambulanceto

Hospital

$ $700+

$27


Avoidable Spending Occurs

In All Aspects of Healthcare

NECESSARYSPENDING

AVOIDABLESPENDING

$

MATERNITY CARE• Unnecessary C-Sections• Early elective deliveries• Underuse of birth centers

CHRONIC DISEASE• ER visits for exacerbations• Hospital admissions and readmissions• Preventable progression of disease• Preventable chronic conditions

CANCER TREATMENT• Use of unnecessarily-expensive drugs• ER visits/hospital stays for dehydration and avoidable complications

• Fruitless treatment at end of life

SURGERY• Unnecessary surgery• Use of unnecessarily-expensive implants• Infections and complications of surgery• Overuse of inpatient rehabilitation


Institute of Medicine Estimate:

30% of Spending is Avoidable


No Payment for Services Needed

to Reduce the Avoidable Services

NECESSARYSPENDING

AVOIDABLESPENDING

$No Payment or

Inadequate Payment for:

• Services deliveredoutside of face-to-facevisits with clinicians, e.g.,phone calls, e-mails, etc.

• Services delivered bynon-clinicians, e.g., nurses, community healthworkers, etc.

• Communication betweenphysicians to ensure accuratediagnosis & coordinate care

• Non-medical services,e.g., transportation

• Palliative care for patientsat end of life

Unpaid &UnderpaidServices





2. Fees don’t match the cost of delivering high-quality care


It Doesn’t Cost Twice as Much

to Do Surgery in an HOPD

$ ASC Payment

Paymentto

HospitalOutpatient

Departmentfor

CataractSurgery($1917)

Paymentto

AmbulatorySurgeryCenter

forCataractSurgery($977)

HOPD Payment


It Costs More Than Half As Much

For a 2nd Surgery on Same Day

$

SurgeonFee and ASC

Paymentfor

First Eye

Fees for Cataract Surgeries

on Both Eyeson Separate Days

SurgeonFee and ASC

Paymentfor

Second Eye

SurgeonFee

and ASCPayment

for First Eye

SurgeonFee

and ASCPayment

for Second Eye

-50%

Fees for Cataract Surgeries

on Both Eyeson the Same Day






3. Impossible for patients or payers to know how much they will have to spend for treatment of a health problem


How Much Will a Procedure or

Treatment Cost, In Total?

$ Total Payments for Cataract Surgery

Surgeon Fee

ASC Fee




$

Anesthesia Fee

Total Payments for Cataract Surgery

Surgeon Fee

ASC Fee

Post-Op Drugs

Surgeon Fee

ASC Fee




$

HOPD PaymentAnesthesia Fee


Surgeon Fee

ASC Fee

Post-Op Drugs

Anesthesia Fee

Surgeon Fee

Post-Op Drugs

Surgeon Fee

ASC Fee




$

Surgeon Fee

ASC Fee

HOPD PaymentAnesthesia Fee


Surgeon Fee

ASC Fee

Post-Op Drugs

Anesthesia Fee

Surgeon Fee

Post-Op Drugs

HOPD Payment

Anesthesia Fee

Surgeon Fee

Post-Op Drugs

Payments toTreat

Complications







4. No assurance that a patient will receive high quality care


Payment When the Surgery

Achieves the Desired Outcome

$ Surgery That Achieves the

Desired Outcome

Payments toSurgeon,

Anesthesiologist,and

Surgery Facility


Payment When the Surgery

is Unsuccessful


Desired Outcome

Payments toSurgeon,


Surgery Facility

SamePayments to

Surgeon,Anesthesiologist,

and Surgery Facility

Surgery That Fails to Achieve theDesired Outcome


Payment When the

Surgery Makes Things Worse


Desired Outcome

Payments toSurgeon,


Surgery Facility

SamePayments to



Surgery That Fails to Achieve theDesired Outcome

SamePayments to



AdditionalPayments for

Treatmentof Infection or

for RepeatSurgery

Surgery That Results in Infectionor Complications

We Don’t Pay for OtherProducts & Services

This Way

What if We Paid for Carsthe Way We Paid for Care?

We Don’t Pay for OtherProducts & Services

This Way


The Government Would

Set Fees for Each Car Part

HCPCS Codes(Hierarchical

Car PartsCompensation

System)


And Pay Auto Workers Based On

How Many Parts They Installed

HCPCS Codes(Hierarchical

Car PartsCompensation

System)AMA

Automobile ManufacturingAssociation

CPT System(Car Parts Tokens)


The Result for Drivers

If We Paid That Way…




Cars would get many unnecessary parts




Cars would be readmitted to the factory

frequentlyto correct malfunctions

Cars would get many unnecessary parts


Do “Value-Based” Payments

Solve the Problems With FFS?

$

FFS


“VALUE-BASED”

PAYMENT


The Most Common “Value-Based”

Payment is P4P (MIPS)

$

FFS

MIPS/P4P


Merit-Based

IncentivePaymentSystem(MIPS)


MIPS/P4P Doesn’t Change

Fee for Service Payments

$

FFS

MIPS/P4P


FFS

No NewPayments

BonusPenalty

AllCurrent

FFSPayments


MIPS/P4P Bonuses/Penalties

Don’t Enable or Ensure Quality

$

FFS

MIPS/P4P


FFS

No NewPayments

BonusPenalty

AllCurrent

FFSPayments

There is no bonus unless other physicians get a penalty.




$

FFS

MIPS/P4P


FFS

No NewPayments

BonusPenalty

AllCurrent

FFSPayments


Bonuses may not be sufficient to support the costs of services needed to achieve better results or even the administrative costs of collecting the measures.




$

FFS

MIPS/P4P


FFS

No NewPayments

BonusPenalty

AllCurrent

FFSPayments


Bonuses may not be sufficient to support the costs of services needed to achieve better results or even the administrative costs of collecting the measures.

Patients/payers still have to pay for services to a patient who failed to achieve the desired outcome or experienced complications as a result of the services.


Value-Based Payment Option #2:

Alternative Payment Models (APMs)

$

FFS

MIPS/P4P APMs


AlternativePaymentModels

FFS

No NewPayments

BonusPenalty

AllCurrent

FFSPayments


In MACRA, Congress Encouraged

Use of APMs Instead of MIPS

$

FFS

MIPS/P4P APMs


AlternativePaymentModels

FFS

No NewPayments

BonusPenalty

AllCurrent

FFSPayments

Physicians who participate in approved Alternative Payment Models (APMs) at more than a minimum level:

• are exempt from MIPS

• receive a 5% lump sum bonus

• receive a higher annual update in their FFS revenues

• receive the benefits of participating in the APM


CMS Has Only Implemented a

Small Number of APMs

$

FFS

MIPS/P4P


MedicareSharedSavingsProgram

ACOs

Comp.Care for

Joint Rep.(CJR)

&BundledPmts for

CareImp.

(BPCI)

Comp.Primary

CareInitiative(CPC+)

&Oncology

CareModel(OCM)

FFS

No NewPayments

BonusPenalty

AllCurrent

FFSPayments

ALTERNATIVE PAYMENT MODELS

CJR/BPCICPC+/OCM MSSP


Only 2 CMS APMs Pay for Things

Standard FFS Doesn’t Cover

$

FFS

MIPS/P4PALTERNATIVE PAYMENT MODELS



FFSFFS

No NewPayments

BonusPenalty

AllCurrent

FFSPayments

AllCurrent

FFSPayments

New Per-PatientPayment

Bonus


ACOs

Comp.Care for

Joint Rep.(CJR)

&BundledPmts for

CareImp.

(BPCI)


Other APMs Just Pay Standard FFS

+ Bonus/Penalty for Total Spending

$

FFS




FFSFFS

No NewPayments

BonusPenalty

AllCurrent

FFSPayments

AllCurrent

FFSPayments


Bonus


ACOs

FFS

No NewPayments

BonusPenalty

AllCurrent

FFSPayments


FFS

No NewPayments

BonusPenalty

AllCurrent

FFSPayments

ACOs Get Standard FFS

w/ ”Shared Savings” Payments

$

FFS




FFS

No NewPayments

BonusPenalty

FFSFFS

No NewPayments

BonusPenalty

AllCurrent

FFSPayments

AllCurrent

FFSPayments

AllCurrent

FFSPayments


Bonus


The “Shared Savings” Approach

Isn’t Working Very Well2013 Results for Medicare Shared Savings ACOs• 46% of ACOs (102/220) increased Medicare spending• After making shared savings payments, Medicare spent more than its goal• Net loss to Medicare: $78 million

2014 Results for Medicare Shared Savings ACOs• 45% of ACOs (152/333) increased Medicare spending• After making shared savings payments, Medicare spent more than its goal• Net loss to Medicare: $50 million



2017 Results for Medicare Shared Savings ACOs• 40% of ACOs (188/472) increased Medicare spending• After making shared savings payments, Medicare spent less than its goal• Net gain to Medicare: $314 million

2013-2017 Results: Net Loss of $69 million


How Did the ACOs That Saved

Money Achieve the Savings?

$SAVINGS

PRE-ACOBASELINESPENDING

ACOACTUAL

SPENDING

???????????????????????????


Did They Reduce Spending on

Undesirable/Unnecessary Svcs?

NECESSARYSPENDING

AVOIDABLESPENDING

$

NECESSARYSPENDING

AVOIDABLESPENDING

SAVINGS


ACOACTUAL

SPENDING


AVOIDABLESPENDING

Or Did They Stint on Necessary

Care to Produce Savings?

NECESSARYSPENDING

$

NECESSARYSPENDING


ACOACTUAL

SPENDING

SAVINGS

AVOIDABLESPENDING


The

ACO

Black

Box

ACOs Don’t Have to Tell Us

and CMS Doesn’t Ask

$SAVINGS


ACOACTUAL

SPENDING


Financial Risk for Total Cost,

But Not for Total Quality of CareACO Quality Measures

• Timely Care• Provider Communication• Rating of Provider• Access to Specialists• Health Promotion & Education• Shared Decision-Making• Health Status• Readmissions• COPD/Asthma Admissions• Heart Failure Admissions• Meaningful Use• Fall Risk Screening• Flu Vaccine• Pneumonia Vaccine• BMI Screening & Follow-Up• Depression Screening• Colon Cancer Screening• Breast Cancer Screening• Blood Pressure Screening• HbA1c Poor Control• Diabetic Eye Exam• Blood Pressure Control• Aspirin for Vascular Disease• Beta Blockers for HF• ACE/ARB Therapy• SNF Readmissions• Diabetes Admissions• Multiple Condition Admissions• Medication Documentation• Depression Remission• Statin Therapy

No Measures to Assure:

• Delivery of high-quality cataract & retinal surgery

• Evidence-based treatment for cancer

• Effective management ofcancer treatment side effects

• Evidence-based treatmentfor rheumatoid arthritis

• Evidence-based treatmentof inflammatory bowel disease

• Rapid treatment and rehabilitation for stroke

• Effective management for joint pain and mobility

• Effective management of back pain and mobility

• Access to and quality of care for many other conditions


FFS

BonusPenalty

AllCurrent

FFSPayments

Since Current APMs

Aren’t Reducing Spending…

$

FFS




FFS

BonusPenalty

FFSFFS

BonusPenalty

AllCurrent

FFSPayments

AllCurrent

FFSPayments

AllCurrent

FFSPayments


Bonus

MedicareSpending

UnderAPMs


…CMS Wants to Put Physicians

at Risk for Reducing Spending

$

FFS


“PopulationBased

Payment”

“DirectContracting”

FULL RISKAPMs/ACOs

DISCOUNT

FFS

BonusPenalty

FFSFFS

BonusPenalty

AllCurrent

FFSPayments

AllCurrent

FFSPayments

AllCurrent

FFSPayments


Bonus

FFS


Problems With Shared Savings

and Population-Based Payments

1. Physicians can receive financial bonuses for denying patients needed services

2. Payments may not be adequate for patients who need multiple services or expensive services

3. Physicians are penalized for increases in spending they can’t control, such as services ordered by other providers and increases in prices by pharmaceutical companies

4. Physicians don’t know how much they will be paid until long after services are delivered


Current APMs Don’t Fix FFS

Problems and Make Things Worse

Problems with Current Fee for Service Payment Systems1. No fee for many high value services that could help patients and reduce

overall healthcare spending



4. No assurance that a patient will receive high quality care

Problems with Alternative Payment Models1. Physicians can receive bonuses for denying patients needed services

2. Payments may not be adequate for patients who need many services or expensive services

3. Physicians are penalized for increases in spending they can’t control, such as services ordered by other providers and increases in prices by pharmaceutical companies

4. Physicians don’t know how much they will be paid until long after services are delivered


Value-Based Payment Is Being

Designed the Wrong Way Today




CMSDefines

Alternative Payment ModelsThat Shift Risk to Physicians

TOP-DOWN PAYMENT REFORM




CMSDefines


PhysiciansHave To Change Care

to Align WithPayer-Focused APMs



Patients Get Worse Careand

Physician PracticesClose/Consolidate



CMSDefines








Is There a Better Way?

CMSDefines








Start By Identifying Ways to

Improve Care & Reduce Costs…

CMSDefines





BOTTOM-UPPAYMENT REFORM

Physicians Identify Ways to Improve Care for Patients

and Eliminate Avoidable Costs




…Design and Implement APMs

That Work for Physicians…

CMSDefines








CMS ImplementsPhysician-Designed

Patient-Focused APMs




…So the Result is Better,

More Affordable Patient Care

CMSDefines








Patients Get Good Careat an Affordable Cost andIndependent Physicians

Remain Financially Viable

CMS ImplementsPhysician-Designed

Patient-Focused APMs

What HappensWhen Physicians

Redesign Patient Careand Receive

Adequate Payments to Support It?


Better Care at Lower Cost for

Total Joint ReplacementPHYSICIAN LEADER: Stephen J. Zabinski, MD

Director, Division of Orthopaedic Surgery, Shore Medical Ctr



Total Joint Replacement

OPPORTUNITIESTO IMPROVE CARE AND LOWER COSTS

• Reduce surgical complications by reducing patient risk factors prior to surgery

• Obtain lower prices for implants from vendors

• Match implants to patient needs

• Return patients home as quickly as possible

• Use lower cost settings for surgery and rehabilitation

PHYSICIAN LEADER: Stephen J. Zabinski, MDDirector, Division of Orthopaedic Surgery, Shore Medical Ctr





BARRIERS IN THE CURRENT

PAYMENT SYSTEM






• No payment for pre-operative patient risk reduction programs

• No payment for care coordination throughout surgical episode

• Separate payments to hospital and physician

• No data on costs of facilities






BARRIERS IN THE CURRENT

PAYMENT SYSTEM

RESULTS WITHADEQUATE PAYMENTFOR BETTER CARE






• No payment for pre-operative patient risk reduction programs

• No payment for care coordination throughout surgical episode

• Separate payments to hospital and physician

• No data on costs of facilities

• Average length of stayTKR: 3.3 → 1.8 daysTHR: 2.9 → 1.6 days

• Average device cost$6,301 → $4,242

• Discharges to home34% → 78%

• Readmission rate3.2% → 2.7%

• Total Episode SpendingTKR: $25,365 → $19,597THR: $26,580 → $20,636



Congress Wants Physicians

to Develop Better Payment Models

Congress created the Physician-Focused Payment Model

Technical Advisory Committee (PTAC)

to solicit and review proposals from physician groups,

medical specialty societies, and others for

“physician-focused payment models” and to make recommendations

to CMS as to which models to implement

How Do You Design

a Good Alternative Payment Model?


CurrentPayment

$

Step 1: Identify Opportunities to

Reduce Avoidable Spending

Avoidable Spending

Paymentsfor

NecessaryServices

TotalSpending

OPPORTUNITIES TO REDUCE SPENDING

THAT PHYSICIANS CAN CONTROL

• Reduce Unnecessary Tests and Treatments

• Use Lower-Cost Tests and Treatments

• Deliver Services More Efficiently

• Use Lower-Cost Sites of Service

• Reduce Preventable Complications

• Prevent Serious Conditions From Occurring


CurrentPayment

$

Step 2: Identify Barriers in Current

Payments That Need to Be Fixed

Avoidable Spending

Paymentsfor

NecessaryServices

TotalSpending

Unpaid Services& Losses

BARRIERS IN CURRENT PAYMENT• No Payment or Inadequate Payment

for High-Value Services

• Insufficient Revenue to Cover Costs WhenUsing Fewer or Lower-Cost Services

OPPORTUNITIES TO REDUCE SPENDING

THAT PHYSICIANS CAN CONTROL

• Reduce Unnecessary Tests and Treatments

• Use Lower-Cost Tests and Treatments

• Deliver Services More Efficiently

• Use Lower-Cost Sites of Service

• Reduce Preventable Complications

• Prevent Serious Conditions From Occurring


CurrentPayment

AlternativePayment Model

Flexible,Adequate

Payment forNecessary

andHigh-ValueServices

$

Step 3: Design Payments That

Remove the Current Barriers

Avoidable Spending

Paymentsfor

NecessaryServices

TotalSpending



CurrentPayment


Flexible,Adequate



$

Different Payment Models Will Be

Appropriate for Different Specialties

Avoidable Spending

Paymentsfor

NecessaryServices

TotalSpending


BundledPayments

WarrantiedPayments

Condition-Based

Payments

Outcome-Based

Payments


CurrentPayment


Savings

Flexible,Adequate



AvoidableSpending

Accountabilityfor

ControllingAvoidableSpending

$

Step 4: Include Accountability for

Spending the Physician Can Control

Avoidable Spending

Paymentsfor

NecessaryServices

TotalSpending



Accountability Must Be Focused on

What Each Physician Can Influence

Spendingthe

PhysicianCannotControl

OtherSpending

thePhysician

CanControl

orInfluence

Healthcare

Spe

ndin

g

e.g., PCPs can’t control the cost of cancer treatmente.g., oncologists can’t prevent cancere.g., cataract surgeons can’t prevent cataracts

e.g., PCPs can encourage patients to get mammograms and colonoscopies

e.g., oncologists can help patients avoid or minimize problems from chemotherapy toxicity

e.g., cataract surgeons can prevent complicationswhen cataracts need to be removed

Paymentsto the

Physician

Total SpendingPer Patient


CurrentPayment


Savings

Flexible,Adequate



AvoidableSpending

$

Good Alternative Payment Models

Can Be Win-Win-Wins

Avoidable Spending

Paymentsfor

NecessaryServices

TotalSpending


Win for Payer:

Lower Total Spending

Win for Patient:

Better Care Without

Unnecessary Services

Win forPhysicians:

Adequate Payment forHigh-Value Services

What Might aGood APM for

Cataract SurgeryLook Like?


Today: All Participants in Cataract

Surgery Are Paid Separately

COST TYPE TODAY

Ophthalmologist $655

Anesthesiologist $134

ASC Payment $977

Total Cost to Payer $1,766


Most of the Money is Not

Going to the Surgeon

COST TYPE TODAY



ASC Payment $977


Surgeon

Only Receives

1/3 of the Total


Need to Understand the

Actual Costs of the Facility

COST TYPE TODAY



IOL Cost $100

ASC Operating Cost $779

ASC Margin (10%) $ 98

Total Facility Pmt $977



What If the Surgeon Could Reduce

the Facility’s Costs by 10%?

COST TYPE TODAY CHANGE



IOL Cost $100 ($10)

ASC Operating Cost $779 ($78)





Today: All of the Savings

Would Go to the Facility

COST TYPE TODAY CHANGE SPLIT



IOL Cost $100 ($10)


ASC Margin (10%) $ 98 $88




ASC Would Be More Profitable

COST TYPE TODAY CHANGE SPLIT NEW % CHG



IOL Cost $100 ($10) $90 -10%

ASC Operating Cost $779 ($78) $701 -10%

ASC Margin (10%) $ 98 $88 $186 +90%

Total Facility Pmt $977 $977 0%



ASC Would Be More Profitable,

No Reward for Physician or CMS


Ophthalmologist $655 $655 0%

Anesthesiologist $134 $0 0%

IOL Cost $100 ($10) $90 -10%


ASC Margin (10%) $ 98 $88 $186 +90%

Total Facility Pmt $977 $977 0%

Total Cost to Payer $1,766 $1,766 0%


Instead of Paying in Silos…

COST TYPE TODAY



IOL Cost $100






…Create a Bundled Payment

for the Entire Provider Team

COST TYPE TODAY



IOL Cost $100



Bundled Payment $1,766

Single

Bundled

Payment

(to Surgeon

or Partnership

of Surgeon/ASC)


Now, if the Surgeon Can Reduce

the Facility’s Costs…

COST TYPE TODAY CHANGE



IOL Cost $100 ($10)





The Surgeon Could Receive a

Share of the Savings…


Ophthalmologist $655 $44


IOL Cost $100 ($10)





…Medicare Could Also

Receive a Share of Savings…




IOL Cost $100 ($10)



Bundled Payment $1,766 ($36)


…as Well as the Facility

Retaining a Share of Savings




IOL Cost $100 ($10)


ASC Margin (10%) $ 98 $8

Bundled Payment $1,766 ($36)


Price of Procedure is Lower But

More Profitable (Win-Win)


Ophthalmologist $655 $44 $699 +7%


IOL Cost $100 ($10) $90 -10%


ASC Margin (10%) $ 98 $8 $106 +8%

Bundled Payment $1,766 ($36) $1,730 -2%


Why Would CMS Be Interested

in Saving $36 Per Surgery?




IOL Cost $100 ($10) $90 -10%


ASC Margin (10%) $ 98 $8 $106 +8%

Bundled Payment $1,766 ($36) $1,730 -2%


High Volume of Cataract Surgery:

$36/Surgery = $61 Million Total




IOL Cost $100 ($10) $90 -10%


ASC Margin (10%) $ 98 $8 $106 +8%

Bundled Payment $1,766 ($36) $1,730 -2%

# Cataract Procedures 1,700,000

Potential Total Savings $61 million


$36/Patient is as Much or More

Than CMS APMs Have Saved




IOL Cost $100 ($10) $90 -10%


ASC Margin (10%) $ 98 $8 $106 +8%

Bundled Payment $1,766 ($36) $1,730 -2%

# Cataract Procedures 1,700,000

Potential Total Savings $61 million

Beneficiaries Per Year

Gross Savings Per Beneficiary

Net Savings Per Beneficiary

Total (Cost)or Savings

ACOs 8,750,000 $125 $36 $314 million

BPCI 250,000 $702 ($268) ($67 million)

CJR 100,000 $1,084 ($212) ($21 million)


Yes, a Health Care Provider

Can Offer a WarrantyGeisinger Health System ProvenCare

SM

– A single payment for an ENTIRE 90 day period including:• ALL related pre-admission care

• ALL inpatient physician and hospital services

• ALL related post-acute care

• ALL care for any related complications or readmissions

– Types of conditions/treatments

currently offered:• Cardiac Bypass Procedure

• Cardiac Stents

• Cataract Procedure

• Total Hip Replacement

• Bariatric Procedure

• Perinatal Care

• Low Back Pain

• Treatment of Chronic Kidney Disease


Payment + Process Improvement =

Better Outcomes, Lower Costs


Warranties Can Be Offered By

Individual Docs & Small Hospitals• In 1987, an orthopedic surgeon in Lansing, Michigan and the

local hospital, Ingham Medical Center, offered:– a fixed total price for surgical services for shoulder and knee problems– a warranty for any subsequent services needed for a two-year period,

including repeat visits, imaging, rehospitalizations, and additional procedures

• Results:– Health insurer paid 40% less than otherwise– Surgeon received over 80% more in payment than otherwise – Hospital received 13% more than otherwise, despite fewer

rehospitalizations

• Method: – Reducing unnecessary auxiliary services such as radiography and

physical therapy– Reducing the length of stay in the hospital– Reducing complications and readmissions

Johnson LL, Becker RL. An alternative health-care reimbursement system—application of arthroscopy

and financial warranty: results of a two-year pilot study. Arthroscopy. 1994 Aug;10(4):462–70


A Warranty Does Not Guarantee

There Will Be No Complications

• Offering a warranty on care does not imply that you are guaranteeing there will be no errors or complications

• It merely means that you are agreeing to correct those problems at no (additional) charge

• Most warranties are “limited warranties,” in the sense that they agree to pay to correct some problems, but not all


Prices for Warrantied Care

Will Likely Be Higher

• Q: “Why should we pay more to get good-quality care??”

• A: In most industries, warrantied products cost more, but

they’re desirable because TOTAL spending on the product

(repairs & replacement) is lower than without the warranty


What Would This Look Like

in Cataract Surgery?


FFS Payment Makes

Surgery Profitable (Hopefully)

$

FFSPayment

forCataractSurgery

Costof

CataractSurgery

Profit


But Profit Increases Under FFS

When Complications Occur

$

FFSPayment

forCataractSurgery

FFSPayment

toTreat

Compli-cations

Costof

CataractSurgery

Profit

FFSPayment

forCataractSurgery

Costof

CataractSurgery

LargerProfit

Costof

TreatingCompli-cations


Warrantied Payment is Higher,

$

WarrantiedPayment

forCataractSurgery

FFSPayment

forCataractSurgery


Warrantied Payment is Higher,

With Higher Profit for Success…

$

WarrantiedPayment

forCataractSurgery

Costof

CataractSurgery

Profit

FFSPayment

forCataractSurgery


…But No Additional Payment

When Complications Occur…

$

WarrantiedPayment

forCataractSurgery

NoAdditionalPayment

forCompli-cations

WarrantiedPayment

forCataractSurgery

Costof

CataractSurgery

Profit

FFSPayment

forCataractSurgery


…So a Complication Reduces

Profit Instead of Increasing It

$

WarrantiedPayment

forCataractSurgery

Costof

CataractSurgery

Loss Costof

TreatingCompli-cations

WarrantiedPayment

forCataractSurgery

Costof

CataractSurgery

Profit

FFSPayment

forCataractSurgery


Example:

200 Cataract Surgery Patients

STANDARD FEE FOR SERVICE PAYMENT

Surgeries

200


Assume 1% of Cases

Need a Second Surgery


Surgeries

Complications

Rate #

200 1.0% 2


Surgeon is Paid for Initial Surgery

and for Repeat Operation


Surgeries

Complications Payments Total

RevenueRate # Surgery Complic.

200 1.0% 2 $655 $788 $132,576


What Happens If the Surgeon

Has Fewer Complications?


Surgeries



200 1.0% 2 $655 $788 $132,576

200 0.5% 1 $655 $788


The Surgeon’s

Revenue Decreases


Surgeries


Revenue ChangeRate # Surgery Complic.

200 1.0% 2 $655 $788 $132,576

200 0.5% 1 $655 $788 $131,788 -0.6%


If Complications Increase,

Revenue Increases


Surgeries



200 1.0% 2 $655 $788 $132,576

200 0.5% 1 $655 $788 $131,788 -0.6%

200 2.0% 4 $655 $788 $134,152 +1.8%


If Complications Increase,

Revenue Increases


Surgeries



200 1.0% 2 $655 $788 $132,576

200 0.5% 1 $655 $788 $131,788 -0.6%

200 2.0% 4 $655 $788 $134,152 +1.8%

WIN-LOSE

Better Quality for Patient,

Lower Spending for Payer

=

Lower Revenue for Physician


Solution: Warrantied Payment


Surgeries



200 1.0% 2 $655 $788 $132,576

200 0.5% 1 $655 $788 $131,788 -0.6%

200 2.0% 4 $655 $788 $134,152 +1.8%

PAYMENT WITH A WARRANTY FOR COMPLICATIONS

Under a warrantied payment, the surgeon is

no longer paid for treating complications.


Under a Warranty, How Much

Would You Charge for Surgery?


Surgeries



200 1.0% 2 $655 $788 $132,576

200 0.5% 1 $655 $788 $131,788 -0.6%

200 2.0% 4 $655 $788 $134,152 +1.8%


Surgeries

Complications Payments

Rate # Surgery Complic.

200 1.0% 2 ????? $0


Charge What Was Earned On Avg

for Surgery + Complications


Surgeries


Revenue Change

$ Per

PatientRate # Surgery Complic.

200 1.0% 2 $655 $788 $132,576 $663

200 0.5% 1 $655 $788 $131,788 -0.6%

200 2.0% 4 $655 $788 $134,152 +1.8%


Surgeries


Revenue Change

$ Per


200 1.0% 2 $663 $0 $132,576 $663


Now, There is No Reward for

More Complications


Surgeries


Revenue Change

$ Per


200 1.0% 2 $655 $788 $132,576 $663

200 0.5% 1 $655 $788 $131,788 -0.6%

200 2.0% 4 $655 $788 $134,152 +1.8%


Surgeries


Revenue Change

$ Per


200 1.0% 2 $663 $0 $132,576 $663

200 2.0% 4 $663 $0 $132,576 0.0%


Instead of Good Surgeons

Earning Less..


Surgeries



201 0.5% 1 $655 $788 $132,443-0.3%

198 2.0% 4 $655 $788 $132,842


…Good Surgeons Could Earn More

By Doing Surgeries on More Pts


Surgeries



201 0.5% 1 $655 $788 $132,443-0.3%

198 2.0% 4 $655 $788 $132,842


Surgeries



201 0.5% 1 $663 $0 $133,239+1.5%

198 2.0% 4 $663 $0 $131,250


Win-Win: Better Quality for Patient

Equals Higher Physician Revenue


Surgeries



201 0.5% 1 $663 $0 $133,239+1.5%

198 2.0% 4 $663 $0 $131,250


The Right Payment Model Depends

on the Opportunities & Barriers

OPPORTUNITY FOR

QUALITY/SAVINGS

Intra-surgery cost savings

Reduction in post-surgery complications

More predictable payment

Improvement in outcomes

Reducing unnecessary surgery

Efficient/effective treatment of both eyes

Treating cataracts + other eye problems




OPPORTUNITY FOR

QUALITY/SAVINGS

APM STRUCTURE TO

OVERCOME FFS BARRIERS

Intra-surgery cost savings Bundled payment

Reduction in post-surgery complications Warrantied payment

More predictable payment Episode payment (bundle + warranty)

Improvement in outcomes Outcome-based payment

Reducing unnecessary surgery Condition-based payment

Efficient/effective treatment of both eyes Condition-based payment

Treating cataracts + other eye problems Condition-based payment




OPPORTUNITY FOR

QUALITY/SAVINGS

APM STRUCTURE TO









ONLY SURGEONS KNOW

WHERE OPPORTUNITIES EXIST

AND HOW TO ACHIEVE THEM




OPPORTUNITY FOR

QUALITY/SAVINGS

APM STRUCTURE TO









ONLY SURGEONS KNOW

WHERE OPPORTUNITIES EXIST

AND HOW TO ACHIEVE THEM

ONLY SURGEONS CAN

DESIGN A PAYMENT MODEL

TO SUPPORT GOOD CARE


There Are NOT (Just) 2 Choices

Under MACRA…

CMS-DESIGNED ALTERNATIVE

PAYMENT MODELS

MERIT-BASED INCENTIVEPAYMENT SYSTEM

(MIPS)

MACRA

#1

#2


…There are 3 Choices; Which

Will Cataract Surgeons Choose?

MERIT-BASED INCENTIVEPAYMENT SYSTEM

(MIPS)

PHYSICIAN-DESIGNEDALTERNATIVE

PAYMENT MODELS

MACRA

#1

#2

#3

CMS-DESIGNED ALTERNATIVE

PAYMENT MODELS


Learn More About Win-Win-Win

Payment and Delivery Reform

www.PaymentReform.org

http://www.paymentreform.org/

For More Information:

Harold D. MillerPresident and CEO

Center for Healthcare Quality and Payment Reform

[email protected]

(412) 803-3650

@HaroldDMiller

www.CHQPR.org

www.PaymentReform.org

@PaymentReform

Date post:	12-Jul-2020
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