An Overview of Clinical Integration, ACOs and Risk Contracting
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1 An Overview of Clinical Integration, ACOs and Risk Contracting November 9, 2012 Todd Fitz Vice President Strategic Advisory Services
2 Agenda Review factors driving evolution toward value-based care Outline key elements of major value-based care models ACOs Clinical Integration Population Health Management 1
3 Healthcare Expenditures Continue to Rise at Unsustainable Levels Notes: Health spending refers to National Health Expenditures. Projections (P) include the impact of the Affordable Care Act. Source: Centers for Medicare & Medicaid Services (CMS), Office of the Actuary, National Health Expenditure Data, 2012 release. 2
4 Everyone Is Feeling the Squeeze Individuals are paying more: Employers have shifted more out-of-pocket responsibility to individuals and families through higher employee contributions, copays and deductibles Businesses are paying more: On average, small businesses pay up to 18 percent more than large firms for the same health insurance policies Large companies that are self-insured are directly bearing the brunt of increased costs, utilization and administrative expenses Insurance companies continue to pass administrative and other costs to their customers to maintain their margins Medicare spending is growing despite cost-control efforts: Represents almost half of all healthcare spending and has steadily risen since 1965, significantly outpacing inflation and CPI Healthcare spending has risen from 7% of GDP in 1970 to 17.9% in 2010 and continues to rise 3
5 Premiums Are Rising Faster than Wages and Employees Are Absorbing a Larger Share of the Costs Family of Four Total PPO Cost vs. Median Family Income % of Income 15% 18% 26% 45% Sources: PPO cost , Milliman; median family income , Census Bureau. Notes: 2011 family income is an estimate for Federal FY12; total PPO cost = employer contribution, employee payroll deduction, and employee out-of-pocket co-pays/deductibles. Numbers rounded to nearest hundred. 4
6 A Variety of Factors Are Driving Costs and Premiums Input costs, volume, and complexity of services continue to rise Baby boomers are becoming eligible at record rates Chronic disease is growing rapidly and has proven difficult to manage Inefficient consumption and delivery of care continues to be problems Administrative and operational costs remain high Premiums are increasing due to the requirement to cover preexisting conditions, elimination of lifetime caps, and guaranteeissue mandates 5
7 Value-based Models Imply That Providers Have Increased Accountability for Total and Quality of Care Element of Change TODAY FUTURE Healthcare focus Sick care Wellness and prevention Care management Delivery models Care setting Quality measures Reimbursement Manage utilization and cost within a care setting Fragmented/ silos In-office/ hospital Process-focused, individual Fee-for-service Manage ongoing health (and optimize care episodes) Care continuum and coordination (right care, right place, right time) In-home, virtual (e-visits, home monitoring, etc.) Outcomes-focused, populationbased Value-based (outcomes, utilization, total cost) Financial incentives Do more, make more Perform better, make more Financial performance Margin per service, procedure, etc. (bed, doc, etc.) Margin per covered life 6
8 More Than Semantics: Case Management vs. Care Coordination vs. Population Health Management Case Management Care Coordination Population Health Management Objective Contain cost Facilitate access/ deliver value Maintain health, minimize illness Target Population High-cost/ high-use patients High-risk populations At-risk populations Functional Orientation Prior authorization Problem solving and process improvement Prevention of acute illness Context Incident Longitudinal Anticipatory Nature of Work Within a single organization providing medical care Across various organizations/ providers providing care In the community/ home Note: Adapted from Colorado Department of Public Health; Kaufman Hall analysis. 7
9 Cost/Effort/Risk Clinical Integration, ACOs and Risk Contracting Driving Results Will Require an Increasing Level of Integration High Integrated Full-risk Provider Employment Risk Contracting Employment Clinical Integration ACO MSO PHO Joint Venture Value Curve Low Admitting Med Staff Co- Management Low Degree of Provider Integration High 8
10 Defining Value-Based Transformation Models Clinical Integration, ACOs and Risk Contracting Accountable Care Organizations Technically, a CMS-sponsored approach to making providers more accountable for care costs for FFS Medicare beneficiaries by offering shared savings to providers if they improve costs. Commercial ACO models also exist, but vary widely in terms of requirements and benefits Clinical Integration An FTC-sanctioned program allowing private and employed physicians to collaborate based on the expectation of delivering higher quality and efficiency to commercial payors. A clinically integrated entity is allowed to collectively negotiate contracts Risk-Based Contracting Involves some expansion of potential downside risk for the cost of care, through bundling of payments, global, partial or full capitation, or full assumption of both administrative and clinical costs (e.g., a system-owned health plan) 9
11 The Definition of an ACO Depends on Who s in the Room Service Specific MSSP Population Health Payer Model CMS Model Payer Model Focused Improvement Laser focus on targeted challenges Single payer oriented P4P driven Example: Huntington- Blue Shield CA ED throughput Participant defined Medicare Specific CMS-sponsored Makes providers accountable for FFS beneficiary costs of care Shares savings if improvements realized Requires CMS application CMS defined Population Focused Provider/payer partnership to manage full risk for targeted population Capitated payment, shared savings model Example: Advocate- BCBS Illinois Participant defined 10
12 Clinical Integration (Big C, Big I ) Formal program between health system and defined private physicians Designed to improve outcomes through collaboration, evidence-based care May distribute some of the improvement back to the physicians in the form of an incentive payment Low or no downside financial risk for missing quality thresholds First step in shifting from a volume-based focus to a value-based focus for a limited subset of specific clinical measures Still subject to FTC/ OIG scrutiny if market share of combined entity arouses concern; Simply moves joint contracting from a per se illegal basis to one subject to specific review 11
13 Inpatient Care Clinical Integration, ACOs and Risk Contracting The Concept of Clinical Integration Medical care delivery enabled by: Primary care serving as the core of the delivery structure; with features similar to Medical Home Patient-centric electronic health record accessible by all stakeholders Health Management functions provided by Physician Network delivery entity Standardized diagnostic and treatment protocols and decision support across Physician Network Patient s self-care decisions enabled by: PhysicianNetwork.com highly functional, highly adopted web portal Health alerts targeting both preventive needs and risk alerts Health coaching provided via variety of channels Behavioral economic incentives to incent good choices and outcomes Expanded primary care and urgent care access Health Management Services Specialty Care Emergent Care Retail Rx Primary Care Patient Self-Care Community Care Other Care Health Coach 12
14 The Acid Test Is it Real Clinical Integration? Is it a program consisting of authentic initiatives (metrics and processes) Actually undertaken by the network Involving all physicians in the network Applying to the physician practice patterns for fee-for-service patients Is the program likely to achieve improvements in healthcare quality and efficiency? Are there significant penalties (such as network removal) for physicians who do not perform? Can individual, rank-and-file physicians explain the program, its aims and objectives? Is joint contracting with fee-for-service health plans reasonably necessary to achieve the efficiencies of a Clinical Integration program? Achieving clinical integration (i.e., demonstrating higher performance through coordination and measurement) without joint contracting negotiations will prove that you didn't need the joint contracting arrangement to drive the increased alignment! 13
15 Population Health Management A Different Approach Identification and surveillance of those at risk of developing disease, or those with chronic disease within identified populations Intervention in early stages of disease processes intended to avoid or reduce the cost and health impact by preventing illness or slowing progression of chronic illness to acute stages A radically different approach to providing healthcare, and implies broadening the scope, environments, and capabilities in which healthcare organizations must operate to be successful in the role of a population health manager 14
16 How Does PHM Differ from What We re Doing Now? Differs greatly from traditional clinical management models that may be in place today Proactive and predictive approach versus reactive identification Objective Target Population Tactical Approach Case Management Contain costs High-cost/ high-use patients Prior authorization Care Coordination Facilitate access/ deliver value High-risk populations Problem solving and process improvement Population Health Management Maintain health, minimize illness At-risk populations Prevention of acute illness Mindset Episodic Longitudinal Predictive Setting Within a single organization providing medical care Across various organizations/ providers providing care In the community/ home 15
17 Value-Based Model Characteristics Model Features Estimated Startup Costs Estimated Time to Implement Regulatory Implications Degree of Physician Alignment Required Payor Alignment Target Population Population Threshold MSSP ACO Commercial ACO Clinical Integration Risk-Based Contracting $1.5M-$12M $0.5M-$2M $2M-$15M $1M-$5M 9-12 months 9-12 months months 9-24 months Anti-trust Reserve reqs. (track 2) Defined governance Moderate Medicare Specific Medicare FFS Anti-trust Moderate and targeted to scope of contract Depends on # of Commercial Payors in Market Self insured, Commercial FFS Anti-trust High, including joint clinical pathways and metrics, performance monitoring, etc Depends on # of Commercial Payors in Market Commercial FFS 5K-15K 5K 200K Governance & finance thresholds for risk Local licensing Moderate and targeted to scope of contract Unique to Provider- Payor Contract(s) Medicare Risk, Commercial Risk, Self-insured Unique to Risk Focused Area(s) 16
18 Value-Based Model Characteristics, cont. Model Features IT Requirements Data Access Leadership and Governance Examples Quality Requirements MSSP ACO EMR, Registry Capabilities, HIE, Quality Analytics Granted via MSSP Approval Defined Legal Structures, Governance board include s1 patient rep, 75% ACO partners Commercial ACO Specific to Provider- Payor Payor Specific Claims Contracting and Distributing Entity Clinical Integration EHR, HIE, Quality Analytics Comprehensive Claims, Historical and Current Data Physician led and driven Org. Structure Flexible Risk-Based Contracting Provider profiling, Cost accounting, Claims/Util. mgmt. Claims and Cost Data Specific to Contract Contracting Entity Required Financial Thresholds may apply Partners, Steward NEQCA, PCHI Medicare Advantage; Celtic Care; Owned Health Plan 34 Metrics, Governance, Variable 130+ metrics, Collaborative forums, Analytics capability, Investment Varies based on contract terms. (MA: HEDIS metrics, AMI, SCIP, PNE, CHF) 17
19 A Wide Range of Reimbursement Alternatives Clinical Integration, ACOs and Risk Contracting The reimbursement market is shifting Your market may be offering some, or possibly all, of these options Markets will likely offer a variety of choices based on payers, providers, costs, and sophistication Increasing Risk FFS No risk Incentive- Based FFS Quality and cost target payments PQRS P4P VBP Bonuses Withholds Case Rates Episodic Bundled payments Partial Risk Limited scope Gainshare Shared savings ACOs Full Risk PMPM Percent of premium Health Plan Full integration Health plan and delivery system Where are you along the continuum? What is your go-forward strategy? Notes: FFS = fee for service; P4P = pay for performance; PMPM = per member, per month; PQRS = Physician Quality and Reporting System. 18
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