Fundamentals of Payment Reform —

What is coming and how to prepare March 16, 2011 Larry Pheifer, Executive Director, WAFP 1

• •

Objectives

• Describe how PCMH can improve compensation to primary care providers Identify what role payers play in developing a PCMH Access resources for the PCMH business model 2

Payment Reform

• Complex array of initiatives underway – Federal – State – Local – Health Plans – Practice level • Need to share knowledge and experiences

National Health Care Spending in Billions

$2,300 $1,310 $1,426 $1,559 $1,679 $1,805 $1,937 $2,000 $990 $696 $246 $73 $27 1960 1970 1980 1990 1995 2000 2001 2002 2003 2004P 2005P 2006P 2008P

Starfield B. Is U.S. Health Really the Best in the World? JAMA 2000; 284(4):483-485.

Primary Care – Answer to Quality and Cost Issues

• Primary Care Physicians are the key to improved health care for the increased number of insured.

• Primary Care Physicians can provide the coordination of care that will reduce fragmentation and restrain costs.

SGR

• Current 12 month fix through December 31, 2011 • AAFP is seeking permanent replacement or 2 to 5 year fix with positive primary care differential while a permanent fix is developed

PPACA Impacts on Physician Payment

• Incentive Payment Program for Primary Care Services – 10-percent bonus payment for primary care services provided by a primary care physician.

– No additional paperwork required.

Primary Care Bonus

• Eligibility criteria for physicians: – enrolled in Medicare with a primary specialty designation of family medicine, internal medicine, pediatrics or geriatrics – for whom primary care services in 2009 (limited to codes for office visits, nursing home visits and home visits) account for at least 60 percent of the allowed charges under Part B minus non-physician services and hospital E&M.

– 80% of family physicians are eligible.

– Program begins in January 2011 and ends on December 31, 2015.

Medicaid Parity with Medicare for Primary Care

• For 2013 and 2014, Medicaid must pay primary care physicians at least as much as Medicare pays for primary care services.

• Only applies to primary care physicians (and providers) and for primary care services, including preventive health.

• Federal government, not states, pay for this increase in physician payment in 2013 and 2014.

Health Delivery System Reforms

• CMS Center for Innovation – Responsible for developing innovative approaches to: • reimbursement methodology, • delivery of health care, and • provision of benefits in government-sponsored programs

Health Delivery System Reforms

• CMS Center of Innovation, cont.

– Headed by Family Physician, Richard Gilfillan – Has $10 billion to use for demonstrations projects

Cost Containment

• Patient Centered Outcomes Research Institute (PCORI) – Private, independent, non-profit corporation – Identify priorities for and conduct comparative clinical outcomes research – Methodology Committee

Cost Containment

• PCORI, cont.

– Goal is to identify effective and efficient treatment options.

– HHS may use this research to make Medicare coverage determinations.

– Safeguards to prevent this research from being used to ration care.

Cost Containment

• Independent Payment Advisory Board (IPAB) To develop and submit comprehensive proposals on Medicare reimbursement rates, to reduce the rate of growth in Medicare spending and to improve the quality of care for Medicare patients .

Meaningful Use

• HITECH portion of ARRA • Payments to “eligible providers” for “meaningful use” of “certified EHR” • Up to $44,000 per provider for Medicare, $63,750 for Medicaid • Not really payment reform, but will result in decreased Medicare payments beginning in 2015 if you are not a “meaningful user”

Capitation

• Still has a strong presence in some market areas, absent in others • Suffers from negative image from the 1990s experience • Future is uncertain

Fee for Service

• Incents “doing things” rather than quality and outcomes • Major driver of growth in health care costs • Primary care gets lumped in with subspecialists

Pay-for-Performance(P4P)

The AAFP supports pay-for-performance (P4P) programs that focus on improved patient outcomes and provide positive physician incentives. The AAFP policy emphasizes seven principles for P4P programs: 1.

2.

3.

4.

5.

6.

7.

Focus on improved quality of care.

Support the physician/patient relationship.

Utilize evidence-based clinical guidelines.

Involve practicing physicians in program design.

Use reliable, accurate and scientifically valid data.

Provide positive physician incentives.

Offer voluntary physician participation.

Care Management Fees

RUC Medicare Home Workgroup Monthly management fee for care coordination within the medical home

Tier

1 2 3

Physician Time

6.5 minutes 7.8 minutes 9.2 minutes

Work RVUs

0.25

0.30

0.35

Estimated $$ Value*

$30 $40 $50 *based on 2008 Medicare conversion factor

Practice as we know it

Hitting the “Sweet Spot”

Family Medicine Model Patient-centered Physician-directed

PCMH Demystified

PCMH is nothing less than an

extreme make-over

for primary care practices, to make them: • More

Service Oriented

• More

Efficient

• More

Effective

• More

Fun

to work in 24

The Hype Cycle: Waves of Irrational Exuberance

Medical Home

?

Expectations Real Progress Trigger Time Peak of Inflated Expectations Trough of Disillusionment

25 Adapted from Gartner Research

Slope of Enlightenment Plateau of Productivity

US Healthcare: A Series Of Ideas And Hype

Great Ideas : P4P, EHRs, RHIOs, HSAs, PHRs, CDHC, PCMH, “competition”, ACOs, RECs etc.

Caught up in the hype

26

Filter the hype, see the value

27

Patient Centered Medical Home

What is the Family Medicine Model of the PCMH?

• It provides a

Vision

for the future practice of family medicine.

• It is a

Guide

for office redesign that promises better results for patients, for staff and for you.

• It provides a

Path

to fortify primary care and establish its value in our health system.

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Transforming America’s Health Care System and Engaging Members

Great Outcomes

Practice Organization Health IT Quality Measures Patient Experience Transforming Primary Care Practices

29

Payment Reform And The New Practice Environment

• Regardless of the details of the new payment models, the practice changes recommended for the PCMH will help make family medicine practices more successful • Virtually all proposed payment models value primary care at a much higher level than FFS using the RBRVS system • The primary care/specialist physician payment gap will narrow but not be eliminated 30

31

Reality Check #1 How Physicians Are Paid Matters Basic Payment Method

• Salary • Fee for Service • Capitation • Pay for performance

Potential Pitfalls

• Productivity • Overuse • Under use • Decreased effort on care not being measured 32

Four Payment Models With Effects on Volume, Organizational Structure And Consumer Shopping Payment Mode Core Incentive Organizational Effect Consumer Shopping Effect

Fee-for-Service Capitation Global Episode Increase volume Decrease volume Decrease episodes Favors fragmentation Favors consolidation Can only shop for individual services Can only shop for “systems” Decrease volume Decrease episodes Decrease volume w/in episode Increase number of episodes Favors financial and clinical integration Can shop for Medical Home Favors some consolidation at the disease/procedure level Can shop for “care packages” – relevant price transparency 33

Reality Check #2

• Changes to the E & M codes through the RBRVS system or the conversion factors are

NOT

payment reform 34

Reality Check #3 Shared Savings Models Have Issues

• Most financial benefit accrues to those who are currently inefficient • Relatively short term incentive • Some of the potential savings should be used to increase the base for primary care • Basically P4P

not

payment reform 35

36 36

Reality Check #4 Transition Strategy Required

• Moving to a new payment model will take time to adjust deep seated habits and beliefs • There will be winners and losers, both will need time to adapt to changing incentives • Some will not do well in the long run because of failure to adapt 37

Payment Models

• Blended payment • Risk adjusted comprehensive primary care payment-Goroll model • Evidence informed case rate bundled payment-Prometheus 38

Blended Payment Elements

• Fee for service – Based on RBRVS • Care management fee – A capitated fee (per member per month) to cover non-visit based care • Pay for performance – Bonus dependent on reporting or performance on quality measures 39

Blended Payment

Advantages

• Moderates the adverse effects of pure fee for service • Evolutionary (not revolutionary) in nature • Ease of implementation • Acceptability to payers 40

Blended Payment

Disadvantages

• Maintains RBRVS • Does not address current payment disparities among specialties • Maintains or adds to administrative burden for physicians • Ill-defined care management fee • Undefined funding source 41

The Proportions Matter!

30% Change Over Time

Blended Payment Model

42

43

Risk Adjusted Comprehensive PC Payment - Goroll Model

• Recognizes value of primary care team • Increases base payment in return for redesigning delivery to improve access, quality, safety, cost efficiency, and comprehensive patient-centered care • Risk adjustment reduces risk of avoiding complex patients 44

Payment Features

• Monthly Management Fee (PMPM) – Additional for risk/needs adjustment, panel size, estimated cost to build infrastructure • Performance Bonus – Guards against under-service – Incents improved outcomes, reduced costs, patient satisfaction 45

Case Study

Payment Reform – Compensation Today CDPHP Today Typical MH Pilot

46

Case Study

Payment Reform – CDPHP Pilot 27% Bonus Payment 10% FFS - RBRVS 63% Risk-Adjusted Comprehensive Payment *

*Targeted at improving base reimbursement by approximately $35,000 47

Risk Adjusted PC Payment

Advantages

• “Guaranteed salary” for physicians/staff • Allows for significant innovation without worrying about survival • Reduces “treadmill medicine” and simplifies administrative burden 48

Risk Adjusted PC Payment

Advantages

• Improves physician satisfaction • Does not transfer insurance risks • Risk adjustment encourages taking on complex patients.

• Potentially attracts medical students to primary care 49

Risk Adjusted PC Payment

Disadvantages

• Difficulty engaging major payers to participate • Model is more expensive because it invests in primary care infrastructure and risk adjustment up front. • Risk adjustment is somewhat costly and complex.

• Payment does not include the “medical neighborhood” 50

51 51

Bundled Payment Prometheus

• Single payment for all services related to a treatment or a condition • Evidence-informed base payment • Patient specific severity adjustment • Allowance for potentially avoidable complications (PAC) • May be across multiple providers and settings 52

Construction Of The Evidence-based Case Rate (ECR) Potentially Avoidable Complications (PAC) 10 % Margin Base Rate Determined By Evidence and Typical Episodes Potential Savings From Better Care Potential savings from better efficiency

53

Relevant Claims Get Assigned As Typical

Lab tests Knee Replacement Surgery

or PACs

Typical: Risk Adjustment - Diabetes - Hypertension Typical: Lab tests Care for Wound Infection Knee Replacement Surgery Exclude: • CABG • Breast Surgery 54 PAC: • Care for Wound Infection • Pneumonia Irrelevant claims

55

Other Payment Changes That Favor Primary Care

• No patient cost sharing for PC services • Medicaid payments at Medicare rates • Commitment to PC workforce support • Medicare E & M increase 10% • PCMH support payments in pilots • HIT stimulus payments ($44K) • E-prescribing bonus • CMS PQRS 55

Accountable Care Organization (ACO)

“ACOs are like unicorns. Everyone can describe one… no one has ever seen one.” Rich Umbdenstock, President/CEO American Hospital Association http://www.youtube.com/watch?v=lF8bK7AJyL0

ACO - Definition

According to the Centers for Medicare and Medicaid Services (CMS), an ACO is "an organization of health care providers that agrees to be accountable for the quality, cost, and overall care of Medicare beneficiaries who are enrolled in the traditional fee-for-service program who are assigned to it."

PCMH And ACOs

• PCMH is an important component of an ACO • Primary care is central to the success of an ACO • All components must add value for patients • Internal payment incentives must value primary care • AAFP developed principles for payment reform Resource: Center for Healthcare Quality and Payment Reform 58

PCMH And ACOs

• The ACO model does not dictate a particular payment mechanism for physicians • Internal payment incentives must value primary care • PCMH is an

essential

component of an ACO • Efficient primary care is central to the success of any ACO • All components must add value for patients 59 • AAFP has developed principles for payment reform Source: Center for Healthcare Quality and Payment Reform 59

Medical Home Communit y Services Imaging and Lab ACO Management Patient Information Systems Home Care

61

Medical Neighborh ood Hospital Care

ACOs

Offer of potential – Global Payment – Shared Savings Current rush to form ACOs Recommend caution, especially about long-term commitment

ACOs

• AMGA – http://www.amga.org/AboutAMGA/ACO/principles_aco.asp

• AHA – www.aha.org/aha/content/2010/pdf/09-26-2010-Res-Synth-Rep.pdf

• Joint Principles (AAFP, AAP, ACP, AOA) – http://www.aafp.org/online/en/home/publications/news/news-now/professional issues/20101118acojointprinciples.html

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Important New Negotiating Currency For Primary Care Practices

• Total medical spend for the patient panel compared to the community • Hospital bed days per thousand • Emergency department visit rates 65

Important New Negotiating Currency For Primary Care Practices

• Hospital readmission rates • Performance levels on PC related measures (e.g. DM, HTN, CAD) • Comprehensive set of services and care coordination 66

Payment Reform And The New Practice Environment

• Regardless of the details of the new payment models, the practice changes recommended for the PCMH will help make family medicine practices more successful • Virtually all proposed payment models value primary care at a much higher level than FFS using the RBRVS system • The primary care/specialist physician payment gap will narrow but not be eliminated (goal is 70%) 67

68

Conclusions

• Payment reforms are likely to look different in the variety of organizations and markets • Physicians must understand and be responsive to changing payment mechanisms and be aware of the offered incentives • The core features of the PCMH that we are advocating are first and foremost good for patients, good for your staff and good for you • Tools and support are available through the AAFP and TransforMED 68

Payment Changes For PC

• No patient cost sharing for PC services • Medicaid payments at Medicare rates • Commitment to PC workforce support • Medicare E & M increase • PCMH support payments • HIT stimulus payments ($44K) • E-prescribing bonus • PQRI 69

Conclusions

• The PCMH has helped refocus the healthcare system on

primary care

• The PCMH has helped all understand and begin the needed changes for

practices

succeed in the new system of payment to • The PCMH provides better care and better service for

patients

70

Remaining Challenges

• Enhanced primary care payment in health care reform needs to be made permanent.

• Private insurers must implement meaningful and sustained enhanced payment for primary care • Blended payment must include adequate care management fee • Income distribution within medical groups

72

What is happening in Wisconsin

• DHS PCMH Pilot Project – SEW High Risk OB • PCMH Multi Stakeholder demonstration project • WI Payment Reform Initiative 73