WORKING DRAFT Last Modified 5/22/2014 12:18 PM Eastern Standard Time Printed
Implementing retrospective episode-based payments in a multi-payer environment
Presentation Document May 23, 2014
CONFIDENTIAL AND PROPRIETARY Any use of this material without specific permission of McKinsey & Company is strictly prohibited
Introduction to McKinsey and our experience Last Modified 5/22/2014 12:18 PM Eastern Standard Time
Experience in payment innovation
▪ Introduction to McKinsey
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Serve clients from strategy through implementation
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Not political organization in any way
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Experience designing and launching new payment models in private sector as well Printed
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World’s leading management consulting firm, with >9,000 professionals in 102 offices worldwide
Serve six states directly and have had discussions and workshops in ~10 additional states to design and launch new payment models including episode based payment, Patient Centered Medical Homes, Accountable Care Organizations, Health Homes
Significant direct investment in proprietary capabilities including data management, advanced analytics, clinical (e.g., 150+ clinicians), statistics, actuarial, Medicaid member research, etc.
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Contents
Refresher on the mechanics of retrospective episodes
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The case for retrospective episodes
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Select lessons learned
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The episode model is designed to reward coordinated, team-based, highquality care for specific conditions or procedures
Accountability
A provider “quarterback�, the Principal Accountable Provider (PAP), is designated as accountable for all pre-specified services across the episode (PAP is provider in best position to influence quality and cost of care)
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Incentives
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The goal
Coordinated, team-based care for all services related to a specific condition, procedure, or disability (e.g., pregnancy episode includes delivery as well as pre- and post-natal care for the mother)
High-quality, cost-efficient care is rewarded beyond current reimbursement, based on the PAP’s average cost and total quality of care across each episode
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What is an episode?
0-90 days before surgery Initial assessment by surgeon
Selfreferral
▪ Necessity of procedure
Referral by PCP
imaging A Reduce unnecessary or duplicate imaging/services
Preadmission work
Surgery (inpatient)
▪ Pre-work (e.g.,
▪ Procedure ▪ Implant ▪ Post-op stay
blood, ECG)
▪ Consultation as necessary B
Use more cost efficient facilities
30 -180 days after surgery IP recovery/ rehab
Readmission/ D avoidable Ensure optimal complication ▪ SNF/ IP rehab recovery / rehab treatment ▪ DVT/ PEs
▪ Revisions ▪ Infections ▪ Hemorrhages
No IP rehab
▪ Physical therapy Surgery (outpatient)
▪ Home health
▪ Procedure ▪ Implant C
E
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Referral by other orthopod
▪ Physical exam ▪ Diagnostic
Procedure
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Services included in the episode Sources of value
Hip & Knee Example.
Minimize readmissions and complications
Tertiary sources of value: ▪ Reduce implant costs ▪ Optimize inpatient length of stay
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Retrospective episode model mechanics for patients & providers
Patients and providers continue to deliver care as they do today
Patients seek care and select providers as they do today
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Review claims from the performance period to identify a ‘Principal Accountable Provider’ (PAP) for each episode
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Providers submit claims as they do today
5 Payers calculate average cost per episode for each PAP
Payers reimburse for all services as they do today
6 ▪ PAPs may: ▪ Share savings: if average costs below commendable levels and quality targets are met
▪ Pay part of excess cost: if average costs are above acceptable level Compare average costs to predetermined ‘commendable’ and ‘acceptable’ levels
▪ See no change in pay: if average costs are between commendable and acceptable levels McKinsey & Company
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Calculate incentive payments based on outcomes after close of 12 month performance period
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Each payer assesses historic provider average costs for each episode
ILLUSTRATIVE
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Provider cost distribution Average episode cost per provider1 Cost per episode Average cost/episode $
Avg. cost per episode Individual episodes for a single provider
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Providers are sorted from highest to lowest average cost
Principal Accountable Provider
1 Each vertical bar represents the average cost for a provider, sorted from highest to lowest average cost
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Retrospective threshold model rewards providers for delivering cost-efficient, high-quality care
ILLUSTRATIVE
Eligible for gain sharing based on cost, didn’t pass quality metrics
Average cost/episode $ _
Risk sharing Pay portion of excess costs
Gain sharing
No change
+
No change in payment to providers
Risk sharing
Gain sharing Eligible for incentive payment Acceptable
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Provider cost distribution 7 Average episode cost per provider1
Commendable
Principal Accountable Provider
1 Each vertical bar represents the average cost for a provider, sorted from highest to lowest average cost
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Gain sharing limit
Transparency and feedback is crucial to making payment reform work Providers will receive several reports from payers:
Sample provider report
▪ Summary – Overview: Total number of episodes
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▪ ▪
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(included and excluded) – Risk adjusted average cost of care compared to other providers – Quality and utilization metrics summary – Risk adjustment summary – Gain sharing and risk sharing eligibility Performance summary – Individual PAP cost distribution – Inputs to gain/risk sharing calculation Quality detail – Detailed benchmarks for quality metrics across all providers Cost detail – Breakdown of episode cost by care category Episode detail – Cost detail by care category for each included episode – List of excluded episodes
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ILLUSTRATIVE
McKinsey & Company
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Contents
Refresher on the mechanics of retrospective episodes
▪
The case for retrospective episodes
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Select lessons learned
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Case for Retrospective Episode Based Payment
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Directly targets large, clear sources of value around unjustified variation in provider performance Potentially applicable to as much as 50-70% of healthcare spending Growing evidence it can be implemented at scale quickly at reasonable investment for payors and providers Potential to offer true win-win for payor and accountable provider
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Evidence it can and does motivate provider behavior change, potentially more quickly than other payment models Growing competitive requirement, but with opportunity for competitive advantage
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Potential for improvement: Sources of value
Root causes of inefficiency, poor clinical outcomes and patient experiences
Episodes
Episodes and pop’n based approaches
Primary prevention and early detection
Choice of tests, treatment, and setting of care
Efficient and effective delivery of each clinical encounter
▪ Behavioral health
▪ Overuse or misuse
▪ Medical errors ▪ Poor treatment ▪ Clinicians practicing compliance below top of license ▪ Missed follow-up ▪ High fixed costs due care leading to
risks (e.g., smoking, poor diet, sedentary lifestyle, etc.)
▪ Delayed detection
▪ Use of medically unnecessary care
▪ Use of higher-cost setting of care where not indicated
to excess capacity
▪ High fixed costs due to sub-scale
▪ Use of branded drugs instead of generic equivalents
▪ Use of medical
preventable complications
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contributing to increased severity and preventable complications
of diagnostics
Care coordination and treatment adherence
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Addressed by payment model :
Pop’n based approaches
▪ Ineffective transitions of care
▪ Misaligned treatment guidance among providers
devices ill-matched to patient needs
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Average cost per episode varies significantly across providers Difference in cost between the 10th and 90th percentile providers
Cholecystectomy
Pregnancy/delivery
Acute asthma exacerbation
Gallbladder removal plus 90 days
Prenatal care through 2 mo. post birth
Hospital visit plus 1 mo. post discharge
U.S. State A
U.S. State B
U.S. State C
189%
192%
368%
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Distribution in average total cost per episode, by provider
Printed
▪ % of cases done in inpatient ▪
setting varies from 0% to 20% >400% variation in hospital length of stay
▪ >500% variation in imaging ▪
and diagnostic costs C-section rate varies from 20% to 70%
▪ Rate of admission from the ▪
ER varies from 0% to 100% >400% variation in rate of repeat visit to ER or hospital (within 30 days of discharge)
Each bar represents the average total cost per episode for 3-5 providers with similar costs (performing surgeons for a cholecystectomy, delivering providers for a birth, and facilities for an acute asthma exacerbation). Total costs include all relevant professional, facility, and other inpatient and outpatient claims. Patients with meaningful co-morbidities or risk factors are excluded or risk-adjusted. Outlier (high cost) episodes were also removed.
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Perinatal care, practice pattern variation
PRELIMINARY
Average C-section rate per quarterback – Quarterback C-section rate distribution: Perinatal Low-volume quarterback
High-volume quarterback
100 80 60 40 20 0
Quarterbacks
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n = 33,606 episodes, 488 quarterbacks1
Distribution of ultrasounds – Variation in ultrasounds per episode: Perinatal n = 33,467 episodes2, 488 quarterbacks3
Count of episodes4 8,000
6,692
4,000 2,000
4,681
5,757 4,243
1,818
2,776 1,919
0
0
1
2
3
4
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Printed
6,000
1,332 915 742 545 516 381 318 244 169 128 110
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8
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87
47
47
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# of ultrasounds/episode Count 1 Excludes unknown providers (3914 episodes) 2 Excludes 139 episodes with over 20 ultrasounds an episode 3 No other exclusions applied (except unknown providers (3914 episodes) were removed) 4 Ultrasounds claims were counted if they were performed on different days SOURCE: TennCare, trigger dates during 2012
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Contents
Refresher on the mechanics of retrospective episodes
▪
The case for retrospective episodes
▪
Select lessons learned
Last Modified 5/22/2014 12:18 PM Eastern Standard Time
▪
Printed
McKinsey & Company
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New payment models must meet 8 requirements to drive cost-reducing innovations
Significant
Maximize the proportion of provider revenue and earnings that are subject to outcomes-based payment
at Scale
Ensure that a critical mass of providers transition to outcomes-based reimbursement
Stable
Clarify long-term vision and make a long-term commitment to providers
Striving but practical
Design the new approach so that it is effective in current regulatory, legal, and industry structures
Sustainable
Ensure that providers that adapt thrive financially
Supportive
Champion innovation with information, insights, and infrastructure
Synch with consumers
Align payment with benefits, network design, and consumer engagement
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Create clear roles for Component Providers, Healers, and Partners; pay through a mix of enhanced fee-forservice, episode-based, and population-based payments
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re-Set expectations and align payment
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Ingredients for state-led large-scale improvements to healthcare systems Last Modified 5/22/2014 12:18 PM Eastern Standard Time
1 Clear and repeated “case for change”
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Healthcare cost growth and “waste” hurt economic growth Stakeholders, irrespective of all politics or role, increasingly agree that “paying for outcomes” is positive and required States have opportunity to lead the innovation
2 Executive leadership
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Power of inevitability (i.e., not debating “if”, but “how”) State as “convener” and “leader” vs. “prescriber” Active leadership/involvement of Governor, Medicaid Director, agency heads, and ultimately CEOs of large stakeholders
3 Stakeholder engagement
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Appreciation for sensitivity around payment models Everyone needs potential to benefit Power of objective facts and open dialogue Seeking and incorporating stakeholder feedback
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Evidence ▪ Several states have made significant progress in last 3-5 years ▪ Dozens of private sector initiatives ▪ Multiple global examples ▪ Many more failures than successes
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Payment Innovation showing positive impact in Medicaid Changes in provider behavior
Performance improvement
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Provider assessment of performance - both cost and quality Growing support/acceptance from many (but not all) larger hospitals/health systems and special needs providers
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Deeper understanding of economic implications of clinical decisions within control Explicit acknowledgement of changes in treatment patterns
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Improvements quality (e.g., reduction in antibiotic use, alignment with guidelines) Reduction in episode specific costs Mitigation of overall trend
Investments in care coordination and infrastructure
Printed
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Thousands of clinicians and administrators engaged in design process
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Provider engagement and growing acceptance
Greater openness to sharing performance risk
Examples of “at scale” contracting and/or enrollment in programs McKinsey & Company
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Early signs of success from Arkansas episodes Last Modified 5/22/2014 12:18 PM Eastern Standard Time
Taking the Payment Improvement Initiative to heart (Apr 2014) Cardiologist David Rutlen and UAMS team make changes in the best way to care for their patient “The approach was to see "what exactly do we need to know to take care of the patient?" Rutlen said. The result was a "sea change," impacting not just its Medicaid patients but all heart patients seen at the medical center.”
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Better health care, lower cost. (Apr 2014) Arkansas's Payment Improvement Initiative shows it can be done “…since the PII began to provide doctors with information on their peers' costs and outcomes in the treatment of upper respiratory infection, the prescribing of antibiotics to treat a common cold has fallen more than 10 percent. The number of doctors that prescribed two courses of antibiotics has fallen by 40 to 50 percent, Golden said.”
SOURCE: http://www.arktimes.com/arkansas/taking-the-payment-improvement-initiative-to-heart/Content?oid=3257813 http://www.arktimes.com/arkansas/better-health-care-lower-cost/Content?oid=3257807
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