Becoming a High-performing Accountable Care Organization (ACO):

The Cambridge Health Alliance (CHA) Experience

ACAP CEO Summit July 16, 2010

Christina Severin, President, Network Health, Inc.

Doug Thompson, CFO, Network Health, Inc.

Agenda

• Cambridge Health Alliance (CHA) • ACO vision and strategy • Building blocks: – New payment model – Strategic partnerships – New physician leadership model – Primary care medical home 2

Cambridge Health Alliance (CHA)

• Offers: – 24-hour emergency services at three campuses – Inpatient services at two campuses – Primary and secondary care services – Community-based primary care and mental health services at: • Hospital campuses • 12 neighborhood health centers and 4 school-based health centers • Includes in its hospital network: – Primary Service Area (PSA): Cambridge, Somerville, Everett, Malden, Chelsea, Revere, and Winthrop – Patients in more than 230 communities • Last public hospital in MA – Also runs the Cambridge Health Department 3

Cambridge Health Alliance

Organization – Key groups

Full-time employees Employed MDs Contracted MDs Leased MDs Primary care providers (PCPs) Medical-surgical specialists Psychiatrists

Quantity

2,800 464 82 28 89 139 94 4

Cambridge Health Alliance

• CHA created Network Health in 1997 • Network Health: – Is a nonprofit, comprehensive health plan serving Massachusetts residents with low and moderate incomes – Is the fastest-growing and highest-value Medicaid Managed Care Organization (MMCO) in Massachusetts • Has more than 18,000 PCPs and specialists • Has more than 160,000 members in more than 300 cities and towns across the state • Has industry-leading ALR and MLR – Offers MassHealth and Commonwealth Care products – Has 350 full-time employees 5

Vision and strategy: ACO definition

In simplest terms, ACOs bring together physicians, hospitals, and others who provide the full range of medical services a defined group of patients will need and are accountable for the cost and quality of their patients’ care.

Source: 6

Vision and strategy: ACO model

Source: 7

The vision

We will be leaders in our model of care and leaders in our way of caring.

“ As we prepare CHA for 2015, we are committed to a reinvigorated CHA that integrates its three major components – health care delivery system, managed health plan, and physician organization – so that we improve the health of the individuals and communities we serve. To accomplish this, we must provide a high-quality, personal care experience for our patients, and put aside location, clinical discipline, and bureaucracy boundaries. We will create “medical homes” to coordinate access to our services and those of our chosen partners. This “learning system” must be guided by innovation, leadership, and efficiency, to earn the appreciation of our patients and the respect of our industry. Although many of the challenges that face our system and our patients are beyond our control, our ability to innovate and remain faithful to our principles rest with us entirely. We must conduct each day and every patient experience as an expression of both.” Source: Cambridge Health Alliance 8

The strategy: Become a high-performing ACO

“National health reform legislation may contain the seeds of opportunities for CHA to transform itself into a more financially viable and self-sustaining operation. There appears to be growing consensus that existing systems of fee-for-service payment undervalue primary care and preventive services, and encourage overuse of expensive diagnostic and therapeutic care. Yet the unsuccessful efforts of less than two decades ago to convert much of the health insurance system to a capitated basis left a bad taste in many policymakers’ mouths, and a reluctance to mandate full-risk arrangements for non-Medicaid populations. As a result, there is increasing talk, perhaps especially at the state level in Massachusetts, of developing payment systems that will integrate payment for physician, hospital, and other services during a single episode of illness or other defined period of time; reward primary care providers that can provide a “medical home”; and/or encourage more effective management of chronic illnesses. All of these developments could play into CHA’s strengths as a health system with a primarily salaried, full-time medical staff; an experienced and committed provider of primary care; and a pioneer in some approaches to chronic disease management.” –

Ernest/Young Strategy Consulting Engagement

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The plan

• Create a five-year plan to become a high-performing ACO • Develop an effective work structure: Board of trustees Board strategic planning committee ACO steering committee New payment model Strategic alliances Physician leadership Medical home liaison task force 10

ACO steering committee

• Objectives: – Develop initial strategic objectives – Oversee all strategy components – Review and approve overall project plan – Direct various project efforts – Ensure consistency and focus – Resolve interdisciplinary issues – Regularly update CEO and board – Educate and engage CHA staff 11

New payment model

• A new payment model among CHA’s three major components (hospital system, physician organization, and health plan) – Will directly align financial interests of all internal stakeholders • Improve patient/member health • Reduce patient/member medical expenses – Will serve as a critical starting point for expanding global payments as the new payment methodology beyond CHA/ Network Health, Inc. capitated business – Will prepare the delivery system for an all-payer global-payment environment 12

New payment model

• Financial model development – Assess payment options under a global-payment model – Analyze historical costs and revenue allocations among the three stakeholders, and determine how much historical experience to account for, if any, in the new payment model – Determine what changes in obligations or functions among stakeholders will occur in conjunction with changes in financial terms – Assess options associated with integrating quality indicators into the global-payment model 13

New payment model

• Assessing payment options 

Global

versus partial capitation 

Budgeted

versus direct capitation 

Premium revenue allocation

versus historical claims build-up • Acknowledging driving rationales – Recognize that CHA is one “family” receiving payment from the state only once for

all covered services

this population receives – Recognize need to simplify limit operational “lift” for new payment model through a budgeted capitation with reconciliation process 14

New payment model

• Analyze historical costs and revenue allocations – Reviewed claims experience against premiums in FY09 and FY10 for CHA population – Benchmarked claims experience by service level category against plan-wide experience – Analyzed improvement opportunities around ‘leakage’ at non-CHA sites and fee-for-service variations from service-level benchmarks – Modeled performance based upon historical claims and actuarial trend projections in FY10 and FY11 regarding expected premium revenues and costs 15

New payment model

• Global budget capitation methodology – FFS adjudication against a set budget for year one – 88% of capitation for medical expenses • Calculated based on traditional administrative loss ratio and new costs incurred by Network Health, Inc. for extensive chronic care management program 16

New payment model

• Developed a risk-sharing formula: – Plan is100% liable for budgeted deficit – Plan and CHA will equally share deficit beyond budgeted amount – Plan and CHA will equally share positive surplus • Understanding material surplus opportunities – ‘Leakage’ reduction is low-hanging fruit • 60% of hospital services currently occur outside of CHA 17

Strategic partnerships

• Given that CHA does not provide tertiary and quaternary care effective strategic partnerships must: – Include a full continuum of providers – Provide CHA patients with comprehensive, responsive, and patient-centered care – Be negotiated to have good economic value – Enable CHA to maintain medical education programs 18

Strategic partnerships

• Relying on Network Health, Inc. provider network and contracts for services provided outside of CHA during year one • Potentially developing a more limited, select provider network – Better control of patient care patterns and cost and quality outcomes • Moving to global payments and ACOs in Mass.

– Unleash significant interest among institutions and provider groups – Create new relationships that enable success in new environments 19

New provider leadership model

• Guiding principles – Encourage effective provider leadership at strategic and operational levels • Utilize substantial existing leadership talent – Achieve clarity and simplicity in decision making – Evolve and support operational business units – Achieve dynamic balance between outcomes standardization and operational flexibility • Requires efficient, effective matrix – Must have single point of “executive intersection” – Support, wherever possible, a sense of “organizational home” 20

New provider leadership model

• Matrixed organizations need to provide a common point for escalation of decisions when necessary – Single point of contact for medical decision making, tying inpatient and ambulatory into single complimentary system of care, with same goals and incentives • Department Chiefs and clinical/business units must be able to manage and resolve issues locally; however if needed, there is the ability to escalate issues 21

New provider leadership model

• New CMO position created • CMO reports to the CEO • Provides senior medical leadership for the operation and development of the health system • The CMO works in partnership with the EVP/COO and together they: – oversee delivery system operations – ensure appropriate integration and resource allocation to achieve system wide quality, financial and academic goals.

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Primary care medical home

• CHA patient-centered medical neighborhood model of care – Applies principles of a patient-centered medical home to an integrated care system – Evolves from CHA’s long-term commitment to improving the health of its community – Is a financial stewardship imperative • Model goals – Effectively achieve high-quality outcomes – Create a satisfying patient experience – Contain costs for the safety net population 23

Primary care medical home: Model principles

• Strengthen primary care • Improve care coordination and integration – Focus on improving referral relationship efficiency and effectiveness, to enhance care transitions • Improve access to primary and specialty care – Advanced access – Electronic and phone visits – E-consultations • Foster stronger relationship between patients and their health care team 24

Primary Care Medical Home: Model principles

• Increase consumer involvement in the design of care • Implement effective panel management – Includes risk-based escalating case-management levels • Establish provider payment reform – Discourage fee-for-service cost escalation – Encourage collaboration and integration to promote high-value patient outcomes 25

Primary care medical home: Organization

Primary Care Medical Home Steering Committee Education & Academics Compensation Changes Data, Metrics, Reports Collaboration Workgroup Care Redesign Make recommendations about how to create a process that will:

a. Help CHA clinicians and trainees understand what it means to practice in a medical home / ACO b. Engage and inspire CHA providers and trainees actively adapt a medical home model within CHA c. Emphasize hands-on learning approach about current clinical issues d. Support the academic mission of CHA

Make recommendations about compensation and incentive structures that will:

a. Support the medical home / ACO based on specialty b. Incorporate best features of existing models - Geisinger, Kaiser, Mayo c. Develop phased-in incentives at different levels d. Ensure alignment with goals of the organization as a whole e. Look specifically at physician retention factors f. Support the academic mission of CHA g. Explore new funding sources to help with start-up costs

Make recommendations about quality and utilization reports and measures that will:

a. Monitor and shape the medical home within an ACO b. Inform providers within the medical home c. Focus on issues such as access, quality, utilization, outcomes, patient experience, staff satisfaction d. Enhance management decision-making at various levels (provider, unit/site leader, CHAPO level

Make recommendations about practice redesign and best practices that will:

a. Enable primary care sites to meet NCQA criteria as patient-centered medical homes b. Encourage patient centered care and patient inclusive care design c. Develop teambuilding processes and supports within sites and across collaborations d. Improve access, efficiency and work flow e. Support financial accountability for high value care f. Clarify roles of different team members

Make recommendations about our system of care that will:

a. Emphasize communication and coordination across the continuum of care b. Develop collaboration across all disciplines c. Define the relationship “contract” between PCPs, specialists, hospitalists, ED, etc.

d. Identify systems that are needed to support these agreements e. Recognize and address the union work environment of CHA 26

Primary care medical home – Three-year cost projection

$1.5M

1.

Expansion of EMR functionality to provide patient-centered, high-value, integrated care – Integrate disease-registry functions into EMR – Integrate decision-support functions into EMR – Integrate panel-management functions such as reporting workbench and EMR referral tracking – Develop and expand patient portal (MyChart) with appointment scheduling, lab review, patient education, and secure messaging capability – Create ability to do secure e-visits, e-consultations, and phone visits – Develop multispecialty care plans in the EMR 2. Team engagement and training costs, including lost revenue 3. Net cost of LPN/PA health coach/panel managers (1.0FTE/4.0 PCP MDs) 4. Net cost of complex case managers (RNs/NPs) and community health workers for moderate- and high-risk patients 5. Shared medical appointments in primary and specialty care 6. NCQA-certification costs 7. Patient-education supplies 8. Patient self-management group visits 9. Data development, collection, and measurement 10. Miscellaneous 11. Administrative costs of implementation 12. Year one provider bonuses for meeting goals

Net investment over three years In PMPM per year over three years for 38,000 patients

$1.5M

$3.6M

$3.6M

$0.2M

$0.05M

$0.06M

$0.06M

$1.2M

$0.5M

$0.6M

$1.0M

$13.75M

$10PMPM

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Primary care medical home: Expected outcomes

• Expect to recoup initial investment by the middle of year two – Year one • Reduce ED utilization by 10% from baseline • Decrease readmissions by 5% from baseline – Year two • Reduce ED utilization by 20% from baseline • Reduce ambulatory sensitive hospitalizations by 5% from baseline • Reduce readmissions by 10% from baseline • Reduce specialty costs by 5% from baseline by using e-consultations – Year three • Decrease ED utilization by 25% from baseline • Decrease ambulatory sensitive hospitalizations by 10% from baseline • Decrease readmissions by 10% from baseline • Decrease specialty costs by 10% from baseline by using e-consultations 28

Primary care medical home: Expected outcomes

• Additional performance benchmarks – Improved/maintained quality outcomes – ambulatory HEDIS measures and inpatient core measures – Improved patient-care experience in inpatient and outpatient settings – Decreased utilization 29

Primary care medical home: Annual development milestones

• Year one – Achieve advanced access for all primary care sites – Rollout patient portal across all primary care sites – Develop and train primary care, specialty care, and inpatient unit teams – Develop shared referral guidelines between primary care and specialties – Implement panel managers across ambulatory care – Develop ED-to-outpatient care transition pathway • Year two – Achieve NCQA Tier 3 certification for all primary care sites – Develop inpatient-to-outpatient care transition pathway – Implement complex care managers across ambulatory care – Implement e-consultations for specialists • Year three – Develop inpatient-to-SNF transition – Develop care pathways for two high-risk conditions – Implement advanced access across specialties 30

Conclusion

• The journey to becoming a high-performing ACO is complex and needs to be uniquely designed for each delivery system • Health plans, specifically provider-sponsored, can play an important role in assisting providers with this transition • Global-payment arrangements and primary care medical homes offer significant opportunities to improve care and truly bend the cost curve 31

Thank you

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