high value care presentation by ACP

1. Health Care Costs
and Payment Models
Fellowship HVC Curriculum 2016-2017 • Presentation 2 of 7

2. Learning Objectives
• Define three types of health care costs.
• Describe how traditional payment models promote
cost variation and lack of price transparency.
• Calculate out-of-pocket expenses depending on
insurance status, type of plan, and setting of care.
• Weigh the impact of out-of-pocket expenses on the
ability to adhere to recommendations.
• Describe recent value-based payment reforms.

3. Case #1 : Patient Perspective1
• Read this brief summary of how a patient
balances her need for periodic thyroid
biopsies with her out-of-pocket costs:
http://www.costsofcare.org/high-costs-of-
important-procedures/

4. Health Care Costs
• Charges: What hospitals and other delivery systems charge
is often much higher than reimbursements; only uninsured
patients are billed charges (these are highly variable)
• Reimbursement: Set by Medicare and Medicaid or
negotiated with insurance plans as percentage of charges;
may drive charge inflation
• Out of pocket: Hardest number to estimate because it
varies based on insurance and geography, but this matters
most to patients

5. Case #2
• A 65-year-old man is evaluated in a clinic in
Lebanon, NH, for lightheadedness and found
to have a systolic murmur and diminished
carotid pulses on exam. Transthoracic
echocardiography is ordered to look for
evidence of aortic stenosis.

6. Case #22
• Use the calculator below to estimate the patient’s
out-of-pocket expenses for the echo, and
compare the results based on the following three
insurance variables: no insurance, Medicare,
private high-deductible plan ($5,000 deductible,
$75 copay)
• http://www.dartmouth-hitchcock.org/billing-
charges/out_of_pocket_estimator.html

7. Case #2
Identify a commonly ordered test in your subspecialty, and
compare out-of-pocket expenses for that test based on the
three insurance variables: no insurance, Medicare, private
high-deductible plan ($5,000 deductible, $75 co-pay)
• Were you surprised by how much the out-of-pocket
expenses varied based on insurance?
• Should this knowledge impact your clinical
recommendations?
• If so, how should it?

8. Sources of Health Insurance (2013)3
Medicare and Medicaid spending
• 39% of national health
spending
• 23% of federal budget
• 43% of hospital revenues
Employment
based 54%
Medicaid 17%
Medicare
16%
Individual
private
insurance
11%
Military 5% Uninsured
13%

9. Individual Private Insurance3
• Individual policies involve a person paying a premium
directly to a “health plan” or insurance company, which
reimburses providers
• Individual policies provided health insurance for
approximately 6% of the U.S. population in 2014

10. Employment-Based Private Insurance3
• Employers often pay all or part of the premium that purchases health insurance
for their employees (covers approximately 48% of the U.S. population)
• This is a tax-deductible business expense, and the government does not treat the
health insurance fringe benefit as taxable income to the employee
• Therefore, the government is, in essence, subsidizing employer-sponsored health
insurance
• This subsidy was estimated at $200 billion/year in 2006

11. Government-Financed Insurance4
Medicare Part A
• Hospital insurance plan for the elderly
• Financed through social security taxes
• At age 65 years, patients who have
paid >10 years into SSI are
automatically enrolled
• Those <65 years of age who are
totally and permanently disabled
may enroll after 24 months of
disability
• Those with ESRD on HD usually
enrolled without wait period
Medicare Part B
• Insures the elderly for physicians’
services
• Financed by federal taxes and
monthly premiums from beneficiaries
• Available to those eligible for
Medicare Part A who elect to pay the
Medicare Part B premium of
$147/month (2015) adjusted upward
according to income

12. Medicare Prescription Coverage4
Medicare Part D
• Voluntary prescription coverage
that is added to original Medicare
• Plans have monthly premiums in
addition to that paid for Part B
• Deductibles vary but may not
exceed $360/year (2016)
• Beneficiaries may owe a late
enrollment penalty if they are
without drug coverage for >63
days
Medicare Advantage Plan
• Beneficiaries can enroll in a
private health plan to receive
Medicare-covered benefits
• Plans cover Medicare Parts A and
B and usually D
• One MUST have Medicare Parts A
and B to sign up

13. Government-Financed Insurance5
Medicaid (varies by state)
• Federal program administered by the states
• Federal government
• Pays between 50% and 76% of total Medicaid costs
• Requires that a broad set of services be covered,
including hospital, physician, laboratory, x-ray,
prenatal, preventive, nursing home, and home health
services

14. The Affordable Care Act of 20106
Affordable Care Act (ACA = Obamacare)
Aims: To decrease the number of uninsured Americans and reduce health
care costs through insurance reform
Expansion of coverage:
• Medicaid expansion: Sets the Medicaid minimum income eligibility
across the U.S. to <138% of the federal poverty level
• Includes District of Columbia and 28 states as of March 2015
• Health insurance exchanges: Competitive markets with clear
information to assist persons in purchasing insurance; subsidized for
families with income <400% of the poverty level
• For the first time, low-income adults without children are guaranteed
coverage without needing a waiver

15. Pre-ACA: Who Were the Uninsured?6
• Adults without dependent children
• Low- or moderate-income families (income <400% of the
poverty level)
• Working families without access to employer-sponsored
insurance coverage
• Undocumented persons

16. Access to Health Care6

17. Does Health Insurance Make a Difference?
6,7
Uninsured
• Fewer regular medical visits and preventive health screening tests
• Higher rates of undiagnosed and uncontrolled HTN, diabetes,
and hypercholesterolemia
• Lower survival rates for breast and colorectal cancers
• Increased mortality (likely owing to greater morbidity from chronic
medical conditions like diabetes, HTN, and cardiovascular disease)
• Worse clinical outcomes during hospitalization
• May lead to underuse and/or overuse
• Higher in-hospital mortality rates

18. Traditional Methods of Payment
(Health Provider Reimbursement Models)
Diagnosis-Related Groups (DRGs)
Physician or hospital is paid one sum for all services delivered during one illness; there is a different set
case-price for each of approximately 750 distinct DRGs (Medicare).
Per Diem
The hospital is paid for all services delivered to a patient during 1 day (private insurance, PPOs/HMOs).
Fee-For-Service
The physician or hospital is paid a fee for each service (for example, medication, IV fluids, ECG, surgical
procedure) provided (uninsured, some private insurance).
Capitation
One payment is made for each patient’s treatment during a month or year (has now virtually
disappeared; previously, largely HMOs).

19. New Methods: ACOs
Accountable Care Organizations (ACOs)
• Realign value with payment incentives (“pay for performance”)
• Financial incentives to improve the coordination and quality of care
• In 2010, a portion of the ACA authorized CMS to create an ACO
program to service CMS users (Medicare and Medicaid)
• Shared savings/risk approach that sets aside a financial reward to
groups of providers or large health care organizations that attain a
yearly “benchmark” spending goal and meet predefined quality
standards

20. New Methods: Pay for Performance
• A pay-for-performance (P4P) model provides a financial
incentive to providers who meet defined performance goals
• Often used as a first step in transitioning toward more value-based
care; easily combines with current fee-for-service methodology
• Traditionally has been implemented as an “upside only” (bonus)
approach to promote increased quality; more recently, the developing
trend is to add a downside (penalty) component for poor performance
on defined measures

21. New Methods: Pay for Performance
• Literature reflects potential ethical “pitfalls” and
unintended consequences of this approach. For
example, this model:
• Creates a potential incentive to deselect patients who are
difficult to treat and would make meeting the performance
goals more difficult
• Creates a potential incentive to provide unnecessary
care—care unnecessary for appropriate patient care but
helpful to meet the performance goal

22. Example of Pay for Performance
• In 2008, Medicare reduced payments to hospitals for
hospital-acquired infections
• In the short term, there were hospital-level decreases
in numbers of hospital-acquired infections, but these
were difficult to sustain
• In 2012, there was no measurable effect on rates of
central line–associated infections or catheter-
associated urinary tract infections nationally

23. New Methods: Bundled Payment
• Bundled payment is a single payment to a provider for all services
associated with a treatment or condition (for example, knee
replacement or all outpatient services for a patient with type 2
diabetes for 1 year)
• Provider assumes risk; can profit if cost of care is below bundled
payment or lose money if above bundled payment
• Important for provider to ensure bundle is appropriately priced (that
is, adequately risk adjusted)
• Often linked to meeting certain quality measures to ensure delivery of
high-quality care is maintained

24. Example of a Bundled Payment
Mr. Jones has a heart attack for which he is evaluated in the office,
sent to the emergency department, and admitted to the hospital. He
undergoes cardiac catheterization and stent placement.
• A bundled or global payment means that all of those settings and
providers of care will be given a lump sum payment for the episode of
care, and the payment will need to be divided up
• This incentivizes all the providers to work more efficiently to integrate and
coordinate care

25. Future Methods: MACRA Legislation
• Medicare Access and CHIP Reauthorization
Act of 2015 (MACRA)
• Applies to Medicare Part B—physician billing
reimbursement ONLY
• Replaced the sustainable growth rate (SGR)
physician payment patch

26. Future Methods: MACRA (Continued)
Goals: Improve the quality of care for Medicare patients and
transition clinicians from volume-based to value-based payments
by 2019
• Many of the specific rules are still being worked out; 2017 data
most likely will count for 2019 payments, so START NOW!
• Very well aligned with the provision of high value care and the
patient-centered medical home/neighborhood model
• To learn more about how to participate as a subspecialist, go to
https://www.acponline.org/running_practice/delivery_and_pay
ment_models/pcmh/understanding/specialty_physicians.htm

27. Case #38
• Go to http://costofcancercare.uchicago.edu/, and in a small
group, review the online survey about financial toxicity for
cancer patients
• Answer the following questions:
• Should we screen our patients for financial harm from medical
bills?
• If so, how?
• Which questions might be helpful for patients in your specialty?

28. Steps Toward High Value,
Cost-Conscious Care9
• Step 1: Understand the benefits, harms, and relative costs of the
interventions that you are considering
• Step 2: Decrease or eliminate the use of interventions that provide no
benefits and/or may be harmful
• Step 3: Choose interventions and care settings that maximize benefits,
minimize harms, and reduce costs (using comparative effectiveness and
cost-effectiveness data)
• Step 4: Customize a care plan with the patient that incorporates his or her
values and addresses his or her concerns
• Step 5: Identify system-level opportunities to improve outcomes, minimize
harms, and reduce health care waste

29. Summary
• Insurance status and type of coverage
affects adherence to recommended
treatment plans
• Given large differences in
coverage/affordability, we must all
seek to individualize patient care to
improve quality and safety and
decrease waste
• There are new models of clinician
reimbursement that reward the
practice of high value care/patient-
centered medical home and
neighborhood models

30. Commitment in Your Practice
• Can you think of a time when your patient didn’t
comply with your recommendations because of
cost?
• How could you have tailored your treatment plan to
improve outcomes?
Write down at least one thing to start doing and one
thing to stop doing.
START:
STOP:

31. References
1. Vignette courtesy of Costs of Care. High costs of important procedures. Costs of Care Web site. http://www.costsofcare.org/high-
costs-of-important-procedures/. Accessed March 17, 2016.
2. Calculator courtesy of Dartmouth-Hitchcock Medical Center. Out-of-pocket estimator. Dartmouth-Hitchcock Web site.
http://www.dartmouth-hitchcock.org/billing-charges/out_of_pocket_estimator.html. Accessed March 17, 2016.
3. The Henry J Kaiser Family Foundation. Health insurance coverage of the total population. The Henry J Kaiser Family Foundation Web
site. http://kff.org/other/state-indicator/total-population/. Accessed March 17, 2016.
4. Centers for Medicare and Medicaid Services. Medicare Web site. www.medicare.gov. Accessed March 17, 2016.
5. Centers for Medicare and Medicaid Services. Medicaid Web site. www.medicaid.gov. Accessed March 17, 2016.
6. The Henry J Kaiser Family Foundation. Key facts about the uninsured population. The Henry J Kaiser Family Foundation Web site.
http://kff.org/uninsured/fact-sheet/key-facts-about-the-uninsured-population/. Published October 15, 2015. Accessed March 17,
2016.
7. McWilliams JM. Health consequences of uninsurance among adults in the United States: recent evidence and implications. Milbank
Q. 2009 Jun;87(2):443-94. [PMID: 19523125]
8. Financial toxicity survey courtesy of The University of Chicago. Cost of cancer care: understand your financial toxicity. The University
of Chicago Web site. https://costofcancercare-sites.uchicago.edu. Accessed March 17, 2016.
9. Adapted from Owens, D, Qaseem A, Chou R, Shekelle P; Clinical Guidelines Committee of the American College of Physicians. High-
value, cost-conscious health care: concepts for clinicians to evaluate the benefits, harms, and costs of medical interventions. Ann
Intern Med. 2011 Feb 1;154(3):174-80. [PMID: 21282697]