Comparing the Effects of Two Valued-Based Purchasing Health Insurance Benefit Programs Hui Zhang, Ph.D. David Cowling, Ph.D. Matthew Facer, Ph.D.

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1 Comparing the Effects of Two Valued-Based Purchasing Health Insurance Benefit Programs Hui Zhang, Ph.D. David Cowling, Ph.D. Matthew Facer, Ph.D. Center for Innovation California Public Employees Retirement System

2 Objectives To compare the impact of two value-based purchasing health insurance benefit programs for inpatient total hip or knee joint replacement (THR/TKR) for CalPERS health plan members To determine factors associated with the cost and utilization of THR/TKR in the two valued-based purchasing health insurance benefit programs 2

3 Background: Value-based Purchasing Design CalPERS initiated two value-based purchasing health insurance benefit design programs for inpatient facility THR/TKR surgeries: CalPERS Anthem Blue Cross of California preferred provider organization (PPO) health plans: Reference Pricing (RP) or Reference-based Pricing/Purchasing: Valued-based Purchasing Design Facilities (VBF) CalPERS Blue Shield of California health maintenance organization (HMO) health plans: Centers of Excellence (COE): Blue Distinction Centers or Preferred Centers 3

4 Background: Reference Pricing vs Centers of Excellence PPO members either choose a VBF charging less than $30,000 (reference price) for a routine single THR/TKR hospital stay since 2011, or a non-vbf and pay any charges above $30,000, in addition to regular coinsurance and annual outof-pocket maximum HMO members required to receive most elective hip and knee joint replacement from Preferred Centers for 100% hospital benefits coverage by HMO since 2012, otherwise, HMO members shall pay all allowed charges out of own pockets PPO selected qualified VBF facilities: 46 (2011), 55 (2012), 54 (2013) in California HMO selected qualified Preferred Centers: 29 (2012), 36 (2013) in California 4

5 Methods: Study Population and Data CalPERS California PPO and HMO health plan members aged between 18 and 64 years old Patients with single THR/TKR within the year by ICD-9 procedure codes, excluding bilateral, multiple or combination of hip or knee replacements, surgery revisions, or paid by a third party CalPERS California inpatient facility claims or encounter data and member eligibility data from January 2008 through July

6 Methods: Study Design and Statistical Models Quasi-experimental difference-in-differences (DID) design: Comparing PPO and HMO health plans before and after intervention; PPO and HMO pre/post intervention self-comparisons. Payment: generalized linear models (GLM), with log link and Gamma distribution, standard errors adjusted for patients within same facility correlation by generalized estimating equation methods. Utilization: GLM with log link and Poisson distribution, standard errors adjusted for overdispersion. 6

7 Methods: Study Measures and Control Variables Dependent variables: Inpatient facility total allowed payments for single THR/TKR for payment models Count of patients of THR/TKR for utilization models Independent variables: Age, gender, osteoarthrosis, Charlson comorbidity index, region, health plan status, year indicator, and interaction of plan status and year indicator for facility payment models Age, gender, region, DxCG risk score, health plan status, year indicator, and interaction of health plan status and year indicator for population utilization models 7

8 Findings Descriptive Statistics Patient count and percentage Member utilization rate Facility allowed payment amount Regression Statistics DID adjusted relative risk of health plan member utilization DID adjusted growth rate of facility allowed payment 8

9 Patient Count for Total Hip or Knee Joint Replacement PPO - All HMO - All 100 PPO RP Started HMO COE Started Source: CalPERS, Center for Innovation, January,

10 Patient Percent for Total Hip or Knee Joint Replacement 90% 80% 70% 60% 50% 40% 30% PPO-VBF PPO-nonVBF HMO-COE HMO-nonCOE 20% 10% PPO RP Started HMO COE Started 0% Source: CalPERS, Center for Innovation, January,

11 Patient Count per 1,000 Members for THR/TKR, by PPO and HMO Health Plan Status and Age Group PPO PPO PPO HMO HMO HMO Source: CalPERS, Center for Innovation, January,

12 Adjusted Risk Ratio of THR/TKR Utilization for PPO Population (Reference Year=2009) p < 0.05 p < 0.01 p < PPO Un Adjusted PPO Self Adjusted PPO - DID Adjusted Source: CalPERS, Center for Innovation, January,

13 Adjusted Risk Ratio of THR/TKR Utilization for HMO Population (Reference Year=2009) p < 0.05 p < 0.01 p < HMO Un Adjusted HMO Self Adjusted HMO - DID Adjusted Source: CalPERS, Center for Innovation, January,

14 Average Facility Allowed Payments for THR/TKR by Health Plan Type, $40,000 $35,000 $30,000 $25,000 PPO - All $20,000 $15,000 HMO - All $10,000 $5,000 PPO RP Started HMO COE Started $ Source: CalPERS, Center for Innovation, January,

15 Average Facility Allowed Payments for THR/TKR by Facility Type, $50,000 $45,000 $40,000 $35,000 $30,000 PPO-VBF PPO-nonVBF $25,000 $20,000 $15,000 $10,000 HMO-COE HMO-nonCOE $5,000 PPO RP Started HMO COE Started $ Source: CalPERS, Center for Innovation, January,

16 Facility Average Allowed Dollars Growth Rate for PPO THR/TKR (Reference Year=2009) 30% 20% 10% 0% -10% -20% p < 0.05 p < 0.01 p < % PPO - DID Adjusted 3% 0% 6% -20% 0% 7% PPO - Self Adjusted -7% 0% 5% -15% -7% 0% PPO - Un Adjusted -13% 0% 5% -22% -18% -11% Source: CalPERS, Center for Innovation, January,

17 Facility Average Allowed Dollars Growth Rate for HMO THR/TKR (Reference Year=2009) 30% 20% 10% 0% -10% -20% p < 0.05 p < 0.01 p < % HMO - DID Adjusted -3% 0% -6% 24% 0% -7% HMO - Self Adjusted -11% 0% -2% 5% -8% -8% HMO - Un Adjusted -12% 0% -4% -2% -10% -12% Source: CalPERS, Center for Innovation, January,

18 Conclusions RP significantly lowered CalPERS PPO average facility allowed payments down to the reference price for THR/TKR, primarily through lowered payments for high-priced non-vbf facilities and higher percentages of patients choice of low-price VBF facilities. COE design maintained lower CalPERS HMO average facility allowed payments for THR/TKR, primarily through the majority of patients choice of low-price high-quality COE facilities. COE significantly reduced CalPERS HMO members utilization of THR/TKR, RP had no such impacts on CalPERS PPO members. RP and COE are both promising value-based purchasing health benefit design to increase health plan members choice of low-price or high quality providers and control high cost of orthopedic surgeries. 18

19 Questions Thank You! 19