Emad Rizk, MD - Navigating the Complexity of New Value-Based Reimbursement Models
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Emad Rizk, MD - Navigating the Complexity of New Value-Based Reimbursement Models
- 1. Navigating the Complexity of New Value-Based Reimbursement Models Emad Rizk, MD President McKesson Health Solutions
- 2. Agenda/ Outline ā¢ Healthcare Economic Trends ā¢ ā¢ ā¢ ā¢ ā¢ ā¢ Funding sources over time Types of employer benefit plans over time Medicare reimbursement cut projections by provider type Medicare piloting value reimbursement methods Prevalence of value-based reimbursement Resulting industry consolidation ā¢ Value Based Reimbursement: A way to survive ā¢ What is it? ā¢ How do you prove value? ā¢ What do you need to be successful
- 3. Healthcare has changed significantly in its funding since the 1960s Source: Kaiser Family Foundation calculations using NHE data from Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, at http://www.cms.hhs.gov/NationalHealthExpendData/ (see Historical; National Health Expenditures by type of service and source of funds, CY 1960-2010; file nhe2010.zip). 3
- 4. We are increasingly becoming a government funded healthcare industry Government Private 1987 (Total = $519.1 billion) Government Private 2000 (Total = $1,377.2 billion) Government 2010 (Total = $2,593.6 billion) Source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group https://www.cms.gov/NationalHealthExpendData/ (see Historical; NHE Web tables, Table 5). 4 Private
- 5. Insurance Enrollment Projections Projected Insurance Enrollment 2012 - 2017 ļ Uninsured drops 50% due to ACA ļ FFS Gov Market up 13% ā¢ Most of growth due to FFS Medicare with more boomers drawing Medicare benefits Government ļ Commercial Market up 17% ā¢ Employer market remains relatively flat ā¢ Managed Medicare down 10% due to parity of payment laws Commercial ā¢ Managed Medicaid up 65% due to Medicaid expansion Note: Lives add up to more than US population due to Dual Eligible lives and consumers who hold dual coverage. ā¢ HIX market @ 22M lives in 2017 ā includes current Individual, Uninsured and Small Group Source: CMS office of Actuary 5 Copyright Ā© 2013 McKesson Corporation and/or one of its subsidiaries.
- 6. Employer plans have changed dramatically Distribution of Health Plan Enrollment, by Plan Type, 1988-2012 Conventional 1988 PPO POS HDHP/SO 73% 1993 16% 46% 1996 27% 1999 2000 8% 2001 21% 31% 10% 7% 2002 HMO 7% 14% 39% 29% 24% 42% 24% 21% 46% 23% 27% 52% 18% 54% 17% 2003 5% 24% 2004 5% 25% 2005 3% 2006 3% 55% 21% 20% 2007 3% 2008 2% 2009 1% 2010 1% 1% 21% 16% 8% 12% 60% 8% 10% 58% 56% 5% 13% 58% 55% 4% 13% 57% 20% 17% 15% 60% 19% 2011 15% 61% 20% 2012 <1% 26% 28% 28% 4% 11% 8% 10% 9% 13% 17% 19% NOTE: Information was not obtained for POS plans in 1988. A portion of the change in plan type enrollment for 2005 is likely attributable to incorporating more recent Census Bureau estimates of the number of state and local government workers and removing federal workers from the weights. See the Survey Design and Methods section from the 2005 Kaiser/HRET Survey of Employer-Sponsored Health Benefits for additional information. SOURCE: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2012; KPMG Survey of Employer-Sponsored Health Benefits, 1993, 1996; The Health Insurance Association of America (HIAA), 1988.
- 7. Medicare spending will decrease: inpatient services Projected Medicare Expenditures under Illustrative Scenarios with Alternative Payment updates to Medicare Providers, CMS Office of the Actuary, 5/31/13 7 Copyright Ā© 2013 McKesson Corporation and/or one of its subsidiaries.
- 8. Medicare spending will decrease: physician services Projected Medicare Expenditures under Illustrative Scenarios with Alternative Payment updates to Medicare Providers, CMS Office of the Actuary, 5/31/13 8 Copyright Ā© 2013 McKesson Corporation and/or one of its subsidiaries.
- 9. Medicare payment changes by specialty Top winners and losers by percent Specialty Estimated 2013 charges Family practice Change from 2012 $5,879 7% $11,058 5% Pediatrics $64 5% Geriatrics $217 4% Anesthesiology $1,970 -3% Cardiology $6,568 -3% $203 -3% Nuclear medicine $49 -3% Vascular surgery $882 -3% Radiology $4,791 -4% Radiation oncology $1,983 -14% Internal medicine Interventional radiology Source: Proposed 2013 Medicare physician fee schedule, Centers for Medicare & Medicaid Services 9 PROPRIETARY AND CONFIDENTIAL. Copyright Ā© 2013 McKesson Corporation and/or one of its subsidiaries.
- 10. Medicare is piloting many VBR models to remain viable 10 Copyright Ā© 2012 McKesson Corporation and/or one of its subsidiaries.
- 11. And to tackle $800B in Healthcare Waste Manual & Duplicative Processes Complex, siloed systems Payers Myriad payer specific requirements and systems (e.g. auths, billing) Providers Many point solution vendors targeted at individual transactions $100-150B Administrative inefficiencies $75-100B Provider inefficiencies (incl. unnecessary care) & error $25-50B Lack of info & primary care creating inappropriate & duplicative care $125-175B Fraud & Abuse $250-325B Unwarranted use & over-utilization Thomson Reuters White Paper October, 2009 11 PROPRIETARY AND CONFIDENTIAL. Copyright Ā© 2013 McKesson Corporation and/or one of its subsidiaries.
- 12. Providers are hesitant as traditional programs require expensive, manual resources Payer Programs Provider Involvement Utilization Management ā¢ Too much time spent requesting authorizations and/or reimbursement Case & Disease Management ā¢ Need care coordination tools ā¢ Need decision support tools Network Referral Programs ā¢ Lack of transparency Complex Benefit Designs ā¢ Struggling with administration $74B spent annually1 1 Sherlock Expense Evaluation Report, BCBS Edition, 2010. āThe 2009 Survey of Healthcare Consumersā $31B spent annually2 Calculated as average administrative costs as a percentage of premium dollars. 2 Deloitte, 12 PROPRIETARY AND CONFIDENTIAL. Copyright Ā© 2013 McKesson Corporation and/or one of its subsidiaries.
- 13. Prevalence of value based reimbursement FFS+ Care Coordination 9% P4P 9% Shared Savings 33% FFS 12% Full risk capitation In the 2011 survey, no one was at full riskā¦so 12% FFS+ Care Coordination + Shared Savings 15% there appears to be some movement to ACOs bearing full risk Source: 2012 Healthcare Benchmarks, ACOs, Healthcare Intelligence Network, July 2012. 13 PROPRIETARY AND CONFIDENTIAL. Copyright Ā© 2013 McKesson Corporation and/or one of its subsidiaries.
- 14. The delivery system adapts to new payment models, often through consolidation- in 2012 consolidation hits a high Physicians becoming employees of Hospitals ā¢ 40% of PCPs are now employed by hospitalsā this has more than doubled in the last decade1 ā¢ In 2000, 1 in 20 specialists were employed by hospitals, today itās 1 in 41 ā¢ 73% of surgical specialists recently reported consolidation between physicians & hospitals as ālikelyā or very likelyā in the near future2 Hospitals Consolidating & Collaborating ā¢ 2012 consolidation activity was highest since 20003 (94 deals4) & consolidation is projected to continue ā¢ But, the FDC is taking a watchful eye and blocked 4 deals in 20125 ā¢ In 2011, 92 deals were doneābut they were much larger in dollar value4 ā¢ 52% of hospitals plan to acquire physician practices in 20133 ā¢ Baylor and Scott & White plan to merge, includes health plan ā¢ 70% of hospital Execs say providers are approaching them first3 ā¢ Cleveland Clinic announced collaboration with Community Health Systems, TN (March 2013) ā¢ Beth Israel Deaconess & Lahey Clinic are āThe great consolidation is coming. It will considering an affiliation, this would rival the remake healthcare in coming years and size of Partners in the Boston area (April 2013) change itā¦for the betterā Delos Cosgrove, CEO, Cleveland Clinic, March 2013 Sources: 1=As hospitals take over doctors' practices, fees rise, September 15, 2012, By Marni Jameson, Orlando Sentinel (stats from Southwind, an Advisory Board Company); 2= 2013 Deloitte Survey of US Physicians; 3=Trend Watch: Physician Practice Acquisitions, Jackson Healthcare, March 2003; 3=Fitch: U.S. Hospital Consolidation Activity Hits High in 2012 Spurred By Healthcare Reform, Jan. 2013; 4=Irving Lewis Associates, Jan 2013; 5=4 FTC-challenged hospital mergers of 2012, FierceHealthcare, Dec. 2012.
- 15. Physician Practice Acquisitions Physician Consolidation Has Been Underway for the Last Decade, and it is Now a Two-Sided Trend 1993 ā 95: Number of hospital-owned practices tripled Direct Employment Health care reform response M&A 1995 ā 2002: Hospitalowned physician practices suffered significant losses Securing profitable FFS procedures & surgeries Physician Practice Divestitures 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 The āGreat Reconsolidationā PhyCor Collapses ā¢ A number of market trends and expert consensus support continued consolidation of physicians ā¢ Consolidation will affect our businesses in different ways, as technology and services decisions move to aggregators, where supplies decisions may remain at the practice level Source: Accenture; MGMA; Merritt Hawkins; Investment Banks Wave 1 ā Specialist Revenue ā¢ Surgical specialists ā¢ Proceduralists ā¢ Internal Medicine / Primary Care Wave 2 (current) ā¢ Direct employment ā¢ Cardiology ā¢ IM/Primary care ā¢ Oncology ā¢ Radiology Wave 3 ā¢ Direct employment ā¢ CIN to employment ā¢ Multi-specialty to corporate & health system
- 16. Goals of Value Based Reimbursement āThe central focus must be on increasing value for patients ā the health outcomes achieved per dollar spent.ā Porter, Michael E. New England Journal of Medicine 2009; 351:109-112, July 9, 2009. http://www.nejm.org/doi/full/10.1056/NEJMp0904131 16 PROPRIETARY AND CONFIDENTIAL. Copyright Ā© 2013 McKesson Corporation and/or one of its subsidiaries.
- 17. VBR payment models spectrum Payment Models Pay for Performance No Risk Increasing incentives for care coordination and efficiencies Bundled Payments Blended Payments Partial Capitation Global Payment Full Risk Each bases payment upon financial, utilization, and quality measures 17 PROPRIETARY AND CONFIDENTIAL. Copyright Ā© 2013 McKesson Corporation and/or one of its subsidiaries.
- 18. Reimbursement Model Comparison Model Definition Incentive Fee-For-Service Provider is paid for services previously rendered at cost plus profit No incentive. Although, itās been argued that there is an incentiveā¦to provide more than needed Capitation Provider is at risk for care delivered. Provider receives a lump sum of $$ per member monthlyā no matter how much or how little care is delivered. Prevention & Efficiency. Provide the care that is needed with an emphasis on keeping patients well. Although, some feel this model can incent providers not to provide care Pay-forPerformance Providers receive bonuses based on quality and efficiency performance or other predetermined metrics Quality & Efficiency. Replacing some of the other incentive driven programs. Large focus on quality metrics. Episodes of Care/ Bundled Payments A group of providers receive a single payment for care delivered to a patient for a defined bundle of services related to an episode, such as a knee replacement. Providers are at risk for that episode of care. Quality & Efficiency. Providers are incented to improve care coordination and find more efficient ways to deliver care Global Payment Providers are at risk for care delivered. Providers receive a fixed-dollar payment for care delivered during a given time period. Global payments are risk adjusted, include incentives for quality and access, and require more sophisticated systems to manage care. Prevention & Efficiency. Providers have an incentive to constrain costs so as not to exceed the global payment amount and to integrate services in order to manage risk, especially when payment covers services in multiple settings. 18
- 19. Example: Knee replacement bundle 19 Copyright Ā© 2013 McKesson Corporation
- 20. What health plans want from VBR ā¢ High quality of care / great outcomes ā¢ Multiple episodes with choice of providers ā¢ Large service areas ā¢ Substantial financial risk sharing ā¢ Proof of performance ā¢ Predictable expenses ā¢ Consistent contracts ā¢ Administrative efficiency 20 Copyright Ā© 2013 McKesson Corporation
- 21. Provider concerns about value-based reimbursement Forbes Insights, Getting from volume to value in health care, 2012. www.forbes.com/forbesinsights 21
- 22. What providers want from VBR ā¢ High quality of care / great outcomes ā¢ Preferred/exclusive referrals ā¢ Gain-sharing opportunities ā¢ Minimal risk; manage only what they control ā¢ Reduced bureaucracy ā¢ Predictable and timely reimbursement 22 Copyright Ā© 2013 McKesson Corporation
- 23. Current provider use of IT 23 PROPRIETARY AND CONFIDENTIAL. Copyright Ā© 2013 McKesson Corporation and/or one of its subsidiaries.
- 24. Providers are investing in information technology to support VBR 24 PROPRIETARY AND CONFIDENTIAL. Copyright Ā© 2013 McKesson Corporation and/or one of its subsidiaries.
- 25. What both health plans & providers need ā¢ Clearly specified clinical outcome measures ā¢ Clinical and claims data across settings of care ā¢ Shared, aligned financial risk ā Clarity on risk-sharing arrangements ā Consistent program definitions ā¢ Full transparency for included data ā¢ Full disclosure to patients 25 Copyright Ā© 2013 McKesson Corporation
- 26. Strategic competencies required for survival in VBR Clinical Care Coordination Point of care tools : ā¢ Eligibility ā¢ Coverage ā¢ Authorizations ā¢ Payment Estimates 26 Analytics to Demonstrate Performance Addition of service lines/partnerships Ā© 2013 McKesson Corporation, All Rights Reserved