The Future of Health Care Financing

Dec 5, 2014 WPA Meeting Kohler, WI Tim Bartholow, MD 1

Key Questions

• How will WI citizens who make $25K to $50K per year secure their health care into the near future?

• What is the obligation of organizations which purchase health care to enhance health care delivery?

• What is our duty to our entire population of members as compared to our duty to each individual member?

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Provider Economic Model

Commercial Ins Medicare Medicaid Uninsured (Charity) “Revenue” Cost to Provider + + + + Revenue to Provider +++ + + 0

Like Others, WI Population Grows Older…and Will Need Intense Resources

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International Comparison of Spending on Health, 1980 –2008

Average spending on health per capita ($US PPP) 8000 7000 6000 5000 4000 3000 2000 1000 0 United States Norway Switzerland Canada Netherlands Germany France Denmark Australia Sweden United Kingdom New Zealand

Source: OECD Health Data 2010 (June 2010).

Paul Fischbeck: US-Europe Comparisons of Health Risk for Gender Specific Groups 7

Trustees: Medicare Will Go Broke in 2016, If You Exclude Obamacare's Double-Counting

• Avik Roy, Forbes, 4/23/12 The Trustees of the Medicare program released their annual report have on the solvency of the program. They calculate that the program is “expected to remain solvent until 2024, the same as last year’s estimate.” But what that headline obfuscates is that Obamacare’s tax increases and spending cuts are counted towards the program’s alleged “deficit-neutrality,” Medicare is to go bankrupt in 2016. And if you listen to Medicare’s own actuary, Richard Foster, the program’s bankruptcy could come even sooner than that.

Medicare Trustees Report, 2013 Part A (Hospital) Trust Fund

Fund at Year End

$350,00 $300,00 $250,00 $200,00 $150,00 $100,00 $50,00 $0,00 1970 2005 2006 2007 2008 2009 2010 2011 2012

Medicare Trustees Report,

2014

Part A (Hospital) Trust Fund

2007 2015

Patrick Conway, MD: Chief Medical Officer for CMS, in the CMS Blog from November 14, 2013 The Affordable Care Act gave CMS many new tools to convert Medicare from a program that paid for decades on automatic pilot into one that deliberately pays to promote better health .

In FY 2014, 1.25 percent of a hospital’s Medicare base-operating DRG payments go into a value-based purchasing pool . Depending on how well hospitals measured up to their peers on important health-care quality indicators during a prior performance period, they will either break even, get a bonus, or—if their performance is lower than average—get back less than what they contributed to the FY 2014 pool.

(Patrick Conway, Nov 14, 2013, cont’d) FY 2014 payments began October 1

About half of the hospitals participating in the program — over 1300 hospitals—will essentially break even (payment change of -0.2 % and +0.2 %) 630 hospitals—just under a quarter—will receive a bonus (+0.2% or more) 778 will receive an overall decrease in Medicare payment (-0.2 % or more)

Bonuses And Penalties For U.S. Hospitals, Partial List (Oct. 2012-Sept. 2014) Hospital Name Mile Bluff Medical Center, Inc St Joseph's Community Hospital Of West Bend, Inc St Mary's Janesville Hospital Fort Healthcare St Nicholas Hospital Wheaton Franciscan Healthcare- All Saints Theda Clark Med Ctr St Vincent Hospital St Marys Hospital Med Ctr Bay Area Med Ctr Columbia St Mary's Hospital Ozaukee, Inc Columbia St Mary's Hospital Milwaukee Ministry Saint Joseph's Hospital City Mauston West Bend Janesville Fort Atkinson Sheboygan Racine Neenah Green Bay Green Bay Marinette Mequon Milwaukee Marshfield Total VBP & Readmission Bonus/Penalty 2014 -0.81% -0.61% -0.42% -0.38% -0.36% -0.34% -0.32% -0.32% -0.26% -0.24% -0.23% -0.21% -0.20% Community Memorial Hospital University Of Wi Hospitals & Clinics Authority Sacred Heart Hospital Holy Family Memorial Inc Others truncated from this list…..

Menomonee Falls Madison Eau Claire Manitowoc -0.20% -0.19% -0.18% -0.16% A [1] means that Medicare did not calculate a payment adjustment for the hospital this year. A [2] means KHN could not calculate the annual change because one or both years lacked data. For details about the data, read the KHN methodology: http://www.kaiserhealthnews.org/Stories/2013/November/14/value-based-purchasing-medicaremethodology.aspx

Quality Cost Hospitals

Physicians

HHS, May 2014

Shared Savings Program: Dec 1, 2014

330 ACOs in 47 states, 4.9 million beneficiaries. First year Shared Savings Program (SSP) results: • 58 SSP ACOs held spending below their benchmarks by a total of $705 million and earned shared savings payments of more than $315 million.

• Another 60 ACOs had expenditures below their benchmark, but not by a sufficient amount to earn shared savings.

CMS Seeking Comment, Dec 2014

• •

Providing more flexibility for ACOs

financial losses in return for the opportunity for a higher share of savings may elect to enter a two-sided model.

Experienced ACOs that are ready to share in

Encouraging ACOs to take on greater performance-based risk and reward

. create a new two sided risk model, called “track 3,” which integrates some elements from the Pioneer ACO model, such as higher rates of shared savings and prospective attribution of beneficiaries •

Expanded use

of telehealth, beneficiary attestation, and more flexibility around post-acute care referrals to help ACOs better coordinate care for beneficiaries •

Emphasis on primary care

participate in multiple ACOs.

. refine assignment to an ACO to place greater emphasis on primary care services delivered by nurse practitioners, physician assistants and clinical nurse specialists and to allow certain specialists not associated with primary care to •

Alternative methodologies for benchmarks

: determining shared savings and losses to be gradually more independent of the ACO’s past performance and more dependent on the ACO’s success in being more cost efficient relative to its local market.

•

Streamlining data sharing and reducing administrative burden

.

Specialty Drug Challenge

• Expenditures expected to quadruple by 2020 – From $87 Billion to $400 Billion

Yervoy

: Billed at $250K, Contract $168K, 340b Acquisition ~$69K

UC Berkeley:

James P. Allison and Matthew F. Krummel as part of Krummel’s PhD thesis work in Allison's lab, published in the journal Science.

[38]

University of Chicago:

Jeff Bluestone published studies, with Krummel and Allison in collaboration with

University of Minnesota:

Mark Jenkin Peter Linsley’s group at

Oncogen

Seattle.

Bristol-Meyer Squib

and

then Bristol-Meyer Squib

ultimately came to license the in Allison/Leach/Krummel patent though their acquisition of Medarex and the fully humanized antibody MDX010 (which later became Ipilimumab, trade name

Yervoy

).

Wikipedia, Accessed July 7, 2014

All Payer Claims Data Base, WI Health Information Organization (WHIO): $40B, 3.7 Million WI Residents by Major Practice Category (MPC)

Over 50% Of Expense Is Contained Within Few Illness Categories

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Docs Control Most Of The Spending

• • •

ISCHEMIC HEART DISEASE WITH ANGIOPLASTY STANDARD COST DISTRIBUTION BY TYPE OF SERVICE WHIO DMV4 ALL SEVERITY LEVELS; EXCLUDES PARTIAL CLAIMS EPISODES

PROFESSIONAL 13% ANCILLARY 8% PHARMACY 4%

Specialty Primary Care “Therapists”

OUTPATIENT FACILITY 19% INPATIENT FACILITY 56%

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Episode Treatment Group:

Total Episode Standard Cost, DMV4

Specialist

Facility, IP & OP

Total $ % of Episode $

Total $ % of Episode Primary Care Total $ % of Episode Prescription Drugs Total $ % of Episode “The Specialist” is 5 to 10% of Resource Use for These Expensive Areas. Can Physicians Judiciously Authorize the Other 90%?

Ischemic Heart Disease with Angioplasty Inflammation of the Esophagus, without Surgery Joint Degeneration, localized - Knee and Lower Leg, with Surgery Mood Disorder, Depressed

$243 M

Cardiology $23 M 9.5%

$187 M 77% $3 M 1% $5 M 2% $195 M

Gastroenterology $10 M 5.1%

$287 M

Orthopedic Surgery $28 M 9.8%

$76 M 39% $13 M 7% $63 M 32% $229 M 80% $2 M 1% $2 M 1% 23 $499 M

Psychiatry $23 M 4.6%

$149 M 30% $22 M 5% $174 M 35%

Primary Care Specialists

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Facilities

Today We Too Often Pay One Item At A Time, eg Knee Replacement Soap Gauze Knee Implant Orthopedic Surgeon Hospital Day Physical Therapy

Soap Gauze Knee Implant Orthopedic Surgeon = Hospital Day Physical Therapy

Knee Bundle (One price for all services necessary) Warrantee against infection for 90 days Perhaps other outcomes

Shifting Risk to Providers High Zone of Risk Sharing

Insurance product Global capitation Partial Capitation Shared Savings / Losses

Low

Bundled episodes (pre- and post-care included) Bundled episodes (inpatient only) P4P programs Inpatient case rates (DRGs) Fee for service

Scope of Risk High

17 Source: HFMA Presentation “Managing the Transition from Volume to Value”, August 22, 2013

Angioplasty, By County

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Angioplasty, By Physician

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Cardiology Practice Ownership

Wisconsin

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

3% 1% 25% 62% 3% 1% 25% 49% 11% 11%

Physicians

2007

Other Hospital Med School/Univ.

2012

Gov't HMO/Insurance

Hospital Employment of Cardiologists: 2007 2012 5% 45%

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Cardiology Practice Ownership

National

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

1% 6% 15% 11% 4% 59% 1% 6% 16% 35% 4% 36% 2007 2012

Physicians Other Hospital Med Sch/Univ.

Gov't HMO/Insurance

Wisconsin

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

3% 1% 25% 62% 3% 1% 25% 49% 11% 11%

Physicians

2007

Other Hospital Med School/Univ.

2012

Gov't HMO/Insurance 32

“Appropriate Use” In Legislative Language For Sustainable Growth Rate In Each Of The 3 Committees Of Jurisdiction

“Public Reporting”

Delayed until January 2015

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Basic Tenets of

Enhancing Value: The Value Agenda

1. Keep people well , members have a duty to maintain health 2. If not well be sure the patient receives what is “ Appropriate,” and 3. Provide this care with as little variation as possible 4. Shared Decision Making with health challenges or intervention, • including

Advance Care Planning

5. Anticipate Care Needs 36

The Value Agenda

1. Assist members to health achieve the best health we can, members have a duty to maintain 2. If not well be sure the patient receives what is “ Appropriate,” and 3. Provide this care with as little variation between physicians as possible 4. Shared Decision Making with health challenges or intervention, • including

Advance Care Planning

5. Anticipate Care Needs 37

For CT, MRI, PET, the Use of Appropriate Use Criteria at the point of service (Radport) in Minnesota in 2006 appears to have changed utilization 55 50 45 40 35

Aggregate HTDI Utilization Rate per 1,000 Members, 1Q03-4Q09 Aggregate Data Include: BCBS, HealthPartners, Medica, UCare and DHS Claims and Membership Data (Hospital Inpatient and ER Claims Excluded)

*Membership profile differs across health plans.

Projected Utilization (yellow line) at 53,24 52,24 Projected Utilization (red line) at 1Q03 51,26 50,30 49,35 48,43 47,52 46,63 45,75 44,89 33,71 Actual utilization 37,83 36,83 36,12 35,27 35,92 39,19 38,09 44,05 43,22 42,41 41,62 40,63 40,84 40,87 39,77 40,21 38,51 38,85 38,07 42,54 42,39 43,94 42,76 42,13 42,72 42,02 33,02 33,39 32,03 30 ICSI DS 25 1Q03 3Q03 1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 38 www.bhcag.com/.../%7B18F569D4-A334-4CBC-B4CB-649DF181FA03%7D.PPT

http://go.bloomberg.com/multimedia/mapping-coronary-stent-hot-spots/ 39

IHD with Angioplasty, 2 Groups 2 Hours From One Another, Doctors with at Least 10 Episodes, DMV2 $40,000 $35,000 $36,009 $33,911 $33,508 $30,865 $29,853 $30,000 $26,728 $25,221 $24,897 $24,890 $24,772 $25,000 $21,863 3 2.5

2 $20,000 1.5

$15,000 $10,000 1 0.5

$5,000 $ A A A A A A A

Doctor in Clinic A or B

B A B B 41 0 Std Cost per Episode Health Risk

IHD with Angioplasty, Clinic A & B, DMV 2, Profile Service Category: Category 1 Drop Page Fields Here $30,000 Sum of Std Cost per Episode $25,000 $20,000 $15,000 $10,000 Clinic A B $5,000 $ ER Hospital Services Laboratory Pharmacy Primary Care Core Radiology Specialty Care Unknown PSC Category 1 42

County Health Rankings: Interactive Maps http://www.countyhealthrankings.org/app/wisconsin/2013/rankings/outcomes/overall/by-rank 43

UW PHINIX: Uncontrolled A1c and Diabetes

LP Hanrahan ( [email protected]

) and B Arndt, http://videos.med.wisc.edu/videos/42741 11/5/2012

Prevalence 2007-9

https://www.wisconsinmedicalsociety.org/_WMS/publications/wmj/pdf/111/3/124.pdf

$3121 PMPM $2004 PMPM

High Poverty High Economic Hardship High Social Vulnerability Low FF&V Consumption High T2DM Prevalence Lower Good A1c Control Higher Uncontrolled A1c

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Conclusions

• Physicians must be aware of their economic impact to the system • Models of payment that have the physician more responsible for the total cost of patient care are opportunities • Medicare is demonstrating real savings with a carrots and stick approach • Middle income patients have no additional disposable income for health care

Questions?