Session 110 PD, ACOs and Value Based Care. Moderator: James Patrick Hazelrigs, ASA, MAAA

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1 Session 110 PD, ACOs and Value Based Care Moderator: James Patrick Hazelrigs, ASA, MAAA Presenters: Johann K. Leida, FSA, MAAA Chris Pallot Jeremiah D. Reuter, ASA, MAAA

2 Chris Pallot Director of Strategy and Partnerships Northampton General Hospital NHS Trust

3 The NHS Established on 5 July 1948 Founded by the post-war Labour government Funded through general taxation Free at the point of delivery Since then, charges for prescriptions and some dental treatment commenced Primary care physician and all hospital treatment is free

4 Structure of the NHS Ref: Understanding the new NHS, 2014 BMJ and NHS England

5 Northampton General Hospital Founded in 1744 On present site since beds Serves population of 400,000 (700,000 for specialist services) 4,700 staff Income 244m (c$360m) in 2015/16

6 Central approach to improvement Centrally mandated standards Accident and Emergency 95% of patients seen in 4-hours Cancer 95% of patients receive 1st definitive treatment in 62-days Diagnostics 100% within 6-weeks Centrally mandated quality targets Pressure sores MRSA Considerable performance management processes Fines/Penalties approach weighted heavily in favour of Commissioners Care Quality Commission inspections

7 The Standard Acute Contract Nationally mandated Some elements varied locally Payment activity generated mainly for outpatients, diagnostic and admissions Elective and Non-Elective patients are coded to Health Resource Groups (HRGs) Each HRG attracts a set level of income for the hospital (the tariff ) Demand increasing 3-10% per year

8 The National Tariff Set nationally, no negotiation, deflated by 3% annually Example tariff prices Carpal tunnel surgery ($1275) $1252 Cataract surgery ($1143) - $2146 C-section delivery - 1,562 ($2343) - $20,022 Varicose vein surgery ($1624) - $3660

9 The Approach to Increase Quality Firstly what is exactly meant by this? It means different things to different people Clinicians QUALY, morbidity and mortality, infection rates.. Commissioners more activity for less cost, increase in certain outcomes, increase in patient satisfaction, meeting their quality premium Patients infection rates, outcomes, waiting times, car parking, food, environment

10 Value based reimbursement metrics within the Contract National operational standards no incentive, but financial penalties National quality metrics as above Commissioning for Quality and Improvement Locally negotiated quality schedule Business intelligence/systems are challenged

11 Operational Standards Ref: NHS England, Crown copyright 2015 First published: March 2015

12 National Clinical Quality Metrics Ref: NHS England, Crown copyright 2015 First published: March 2015

13 Commissioning for Quality & Innovation Known throughout the NHS as CQUIN Nationally mandated and locally determined metrics 2.5% of the total contract value available as an incentive payment Typically around 6-8 schemes per contract year

14 National CQUIN Dementia and Delirium Ref: NHS England, Crown copyright 2015 First published: March 2015

15 Locally negotiated Clinical Quality Metrics Ref: NHS England, Crown copyright 2015 First published: March 2015

16 NHS Outcomes Framework Focused on health and social care system performance Monitored at Commissioner (payer) level Provides a focus for accountability and improvements Framework by which the Secretary of State for Health holds NHS England to account

17 NHS Outcomes Framework - Domains

18 Behaviours Note the difference between the national and local negotiated metrics National specified with a high breach consequence Local much more quantitative, penalties negotiated out The style adopted by Commissioners directly influences Provider response NGH financial penalties in 2015/16-1.2m Most were entirely outside of our control but in the context of a financial deficit are very significant

19 Behaviours When centralised metrics are imposed the service does respond In 1995 in the UK patients could wait c1-year for an outpatient, c2-years for a procedure Now - 18-weeks from referral to procedure Measurement and reimbursement are prescribed Using UK experience the likelihood is there will be a high degree of central control with some room for local variation

20 Behaviours An example Breach of cancer targets leads to financial penalties and delivery of an action plan Failure of the action plan also leads to increased financial sanctions As a Provider my action plan will reflect the consequence for the hospital Remove the financial consequence and replace with an incentive to reduce waiting times = an engaged provider that works alongside the Commissioner to improve More importantly patient experience improves

21 Moving from mantra to fact Everyone speaks about quality improvement few can articulate exactly what they mean To truly deliver this contractually requires a partnership between Commissioner and Provider (NHS) Traditional contractual relationships do not always deliver improvement particularly in relationship terms NHS is now adopting new models of care, we are seek to learn from the US especially integrated care

22 Most Importantly the Patients Undeniably getting a much improved service Patient expectations rise inexorably Outcomes, reporting and transparency much improved but at a large cost to providers We still don t get it right every time Very financially and clinically challenged

23 Volume To Value

24 Better, Smarter, Healthier 2

25 Better, Smarter, Healthier HHS has set a goal of tying 30 percent of traditional, or fee-for-service, Medicare payments to quality or value through alternative payment models, such as Accountable Care Organizations (ACOs) or bundled payment arrangements by the end of 2016, and tying 50 percent of payments to these models by the end of HHS also set a goal of tying 85 percent of all traditional Medicare payments to quality or value by 2016 and 90 percent by 2018 through programs such as the Hospital Value Based Purchasing and the Hospital Readmissions Reduction Programs. This is the first time in the history of the Medicare program that HHS has set explicit goals for alternative payment models and value-based payments. Source: 3

26 Future of Value Based Contracts and ACOs: Triple Aim The Affordable Care Act (ACA) established the Medicare Shared Savings Program (MSSP, aka ACO) as a new voluntary practice and payment model to serve traditional Medicare fee-for-service (FFS) patients beginning in ACOs are responsible for the quality/cost of care for the Medicare FFS beneficiaries they serve and share in savings achieved. Primary goal is to achieve the Triple Aim. Triple Aim Better care for individuals Better health for populations Slower growth in costs The ACA provided the tipping point for many providers to seek additional provider risk opportunities note first tipping point local 4

27 Future of Value Based Contracts and ACOs Misaligned Stakeholder Incentives Providers, payers and patients have not historically shared aligned incentives: Private payers worried about ACA, Health Benefit Exchanges, MLR requirements, etc. and impacts to PMPMs and bottom-line Government payers worried about limited budgets with escalating medical expenses & expanding covered populations (baby boomers, Medicaid) Providers worried about market share, medical care (as opposed to health care) and payment reform Patients typically worried about affordability and make me better fast rather than staying healthy 5

28 Future of Value Based Contracts and ACOs: Value Based Tipping Point Total Market View 2 nd Tipping Point Value Market Opportunity by Funding Source $3.7T in 2025 (70% of total spend) Value market tops 30% of the total 2 nd TIPPING POINT $231B $1.2T $578B $1.5T $268B Source: Oliver Wyman 6

29 Future of Value Based Contracts and ACOs: Value-Based Transformation Stages Value Proposition Formation Explore/Design Establish the necessary organizational foundation and build provider network Understand market shifts Sequencing the transformation deliberately will enable providers to make the transition effectively Prioritize Formation of Opportunities and clinical Risk Contracts partnerships, provider incentives Efficient episode management (i.e. continuity of care) Operationalize Value Clinical integration and care redesign to shift toward quality, efficiency and pop mgmt. Service Line Management (i.e. cancer) Manage conditions (i.e. complex case management) Commercialize Expand capabilities to full risk and accountability for expanded population Population health management Integrated value transformation (all parties) Licensed Products Time Current areas of provider focus: important but limited for true transformational value yield Empowering and incenting physicians to advance quality and reduce cost through elimination of variation and adoption of EBM True accountability and value delivery 7

30 Medicare Accountable Care Organizations Overview MSSP ACOs separate legal entity, primarily owned by providers Three year contract with CMS Minimum 5,000 Medicare attributed beneficiaries ACO & CMS share savings/losses on Parts A and B only Three ACO shared savings options Track 1: no downside risk Track 2: risk beginning day 1 Track 3: full risk CMS pays providers Medicare FFS rates, different than Medicare Advantage program Anti-trust issues may persist 8

31 Medicare Accountable Care Organizations Overview Pioneer & Next Generation Program administered through CMMI Alternative to MSSP Developed for more mature risk taking organizations Two-sided risk for all options 9

32 Medicare Accountable Care Organizations: What is CMS Benefit Plan and Network Portfolio Strategy for Medicare? Medicare Advantage (HMO) CMS cedes risk to Medicare Advantage plans (A/B & D) Most restrictive to beneficiaries Closed network Prior authorizations Benefit plan changes from traditional Medicare Financial risk can be shared downstream with providers Might it be? ACO (PPO) CMS cedes partial risk with ACOs and beneficiaries, future will likely see an increase of risk transfer to ACOs Currently no restrictions to beneficiaries but likely see changes with new ACO programs such as Benefit plan modifications Part D responsibility Traditional Medicare (Indemnity) CMS retains majority of risk, beneficiaries ceded small risk Least restrictive to beneficiaries Open network Self referral Traditional Medicare benefit plan Other CMMI Innovations (e.g. Bundled Payments (BPCI)) 10

33 Medicare Accountable Care Organizations: MSSP ACO Performance First Year Results 204 ACOs with reported results 53 ACOs generated total savings of $650 million 49 ACOs received $300 million 25% 4 ACOs missed out on receiving $20 million 1 ACO had losses of almost $10 million, owes CMS almost $4 million 11

34 Medicare Accountable Care Organizations: Pioneer ACO Performance First Year Results (2012) 32 ACOs as of 1/1/12 18 ACOs with total savings of $140 million/ $90 million revenues 1 generated loss, owed CMS $2.5 million 9 exited the Pioneer program, 7 moved to MSSP 50% Second Year Results (2013) 23 ACOs as of 1/1/13 14 ACOs with total savings of $130 million/ $70 million revenues 3 generated losses, owed CMS 4 exited the Pioneer program 60% 12

35 Other CMS & CMMI Initiative Bundled Payments for Care Improvement (BPCI) Hospital Value-Based Purchasing Hospital Readmissions Reduction Program 13

36 Jeremiah Reuter, ASA, MAAA Director, Provider Risk Advisory Consulting Optum M T Jeremiah is a Director in the Provider Risk Advisory team within the Network and Population Health Consulting division in Optum. He is in his 15 th year working in the health care actuarial field. His primary focus has been in the area of U.S. healthcare consulting. He has worked with health insurance plans, health care providers, ACOs, Medicare Advantage plans, CMS and state and national regulatory agencies. Jeremiah also has an extensive background in international healthcare, having spent two years working with the National Health Service (NHS) in the UK as well as working with Canadian principals. Jeremiah currently serves in the chief actuary role for ACOs as well as leading the valuation team for a top-10 health insurer. Jeremiah is also currently consulting with health plans and health care providers on the impact of the Affordable Care Act (ACA) legislation on providers. He is a member of the American Academy of Actuaries and an Associate of the Society of Actuaries. Jeremiah graduated magna cum laude from Mayville State University with a double major in mathematics and physical science. He also holds a Master of Science degree in mathematics from the University of North Dakota. Confidential property of Optum. Do not distribute or reproduce without express permission from Optum.

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