Creating New Value Together

Creating New Value Together
Scott Sarran, M.D., M.M.

Chief Medical Officer, Government Programs Health Care Service Corporation
Confidential and Proprietary Information

Dr. Scott Sarran The Partnership to Fight Chronic Disease Briefing: April 17, 2013
Who is HCSC ?
Health l Dental l Life l Disability l Connectivity l Pharmacy l Health IT
13
million members
U.S. th largest health insurer
2 Confidential and Proprietary Information

Health Plans and Providers Defining Their Roles
Traditional Health Plan Roles
Currently a Relative Value Void
Traditional Provider Roles
Sales & Marketing
Actuarial Cost Analysis & Trending
Customer Population Product Service, Claims Health Benefit Design & Management & Pricing Reimbursement
Information Value-based & Analytics Clinical linking clinical Process & & Infrastructure administrative Design data sets
Wellness & Prevention
Care Delivery
We Want to Help Providers Shift from Volume to Value

Limitations of FFS
Vicious cycle
Unit Price
Drive the change create a tipping point
What Do We Want?
Provider system redesign + Providers compete on value = Improved outcomes, experiences, and affordability of care for our members
Cost
Units of Service
Fails to address cost drivers:

Lifestyle & behavior change Application of new technologies Care coordination
Doesnt support system redesign
Value Creation and Population Acuity: Whose Role?

Employer Health Plan
Value Creation
DM, UM, DM, Wellness Value-based provider Wellness & Lifestyle Evidence-based contracting Culture Patient-centered Carrots & Sticks Safety Multi-channel programs Care coordination Value-based benefit designs
Provider
Well
Risk factors
Stable condition
High-risk chronic diseases
High-acuity active conditions
Population Acuity
Evolving Distribution of HCSC Membership
Fee-forService
Pay for Performance*
Medical Home
Accountable Care Organization (ACO)
Shared Risk HMO
Global Payment or % of Premium
Population Health Provider Accountability

Bridges to Excellence IL Hospital Outcomes Based Bonuses IMH Intense & Extended Medical Homes CPCI Advocate THR OSF ABQHP 15 others in pipeline IL: HMOI IL: MA, Advocate HMO NM: MA, Medicaid
Proven Models: HMO Illinois

Value vs. Broad PPO:
Over
Cost: 25% lower PMPM

Demonstrably higher quality with a total annual physician incentive payout of >$75 M
Members
725,000
Overall
Member Satisfaction: 92.2% vs. 91.5%
Critical Success Factors:

Provider partnerships (organized entities) Aligned incentives: $ and Quality Shared learnings Continually raise the bar for performance

New Models: ACO Shared Savings Agreement
Who?

Advocate Health Care
What?
Three-year (20112013) shared savings PPO agreement with upside and downside risk Three-year global risk HMO agreement
10 hospitals and 4,000 physicians 260,000 attributed Blue Cross PPO lives 175,000 Blue Cross HMO lives $2 billion annual Blue Cross spend
How?
IF medical cost trend better than network AND meet patient quality, safety, and satisfaction metrics, THEN share in savings
Where?
Metro Chicago, IL (9 hospitals)
Bloomington, IL (1 hospital)
Advocate / BCBSIL Agreement: Rationale, Goals and Context

Rationale and Background
History of contentious fee-for-service negotiations Previous unit price increases above market
BCBSIL Goals
Reduce Advocates trend sufficiently to impact pricing Develop replicable approach to total cost management via ACO model in a PPO product Achieve major impact on market transition to value-based care
How Does It Work?

PPO
Total BCBSIL Members seeking care at Advocate
~200,000 members
~250,000 members
Attributed members Total cost of care, including:

Physician Hospital Ancillary
Acute Episodic Care

(ex. Surgery)
Personal Physician
Shared savings model for beating risk adjusted, aggregate network medical trend and exceeding thresholds in quality, safety and satisfaction measures.

10
Shared Savings
PPO
Percent Medical Trend
Illustrative Only
Customer Share
Network Trend
ACO w/Actual Incentive ACO Actual 2011 2012 2013
Advocate Share
11
Paramount to Success: Continuous Quality Improvement

Keep it simple: Start with CMS four domains
Addition of small # of measures specific to

commercial populations
Fewest # of measures in each domain necessary Financial penalty for degradation (1st year) /
failure to improve (years 2 &3) in aggregate bundle of measures
12
ACO Operations: Key Decisions

Benefit plan design: Changes? Member notification: Yes/No?
Attribution logic: How tight?

Cohort and control group creation and adjustment(s): How,
when?
Risk adjustment: How, when? Definition of savings target? Split of savings?
Quality: How do results impact payout of savings?
No one best set of answers.

13
BCBSIL-Advocate Healthcare ACO: Year 1

Outcomes Achieved: Strategic Goals Met:
Advocate: Grew new market share Reduced costs without sacrificing revenue BCBSIL: Added Advocate to low-cost HMO network => more attractive product Achieved further moderation of medical cost trend => incorporated into customer pricing Both: Used shift from volume => value to drive ongoing investments in enabling technology and services Expanded sense of long-term strategic partnership
Outperformed unadjusted cost trend by ~2%
Maintained targeted high-level performance on clinical quality and service metrics
14
BCBSIL-Advocate ACO: Year 1 Recap

Operational: A large amount of process work
New: e.g. concurrent notification in PPO product, attribution logic Expanded: risk adjustment, outcomes tracking and monitoring, data feeds Only now fully codified and systematized
Unexpected finding:
~ 50% of hospital events for attributed PPO members
occurred outside the Advocate system
What does this tell us about our ability to achieve HMO-level

results with an unmodified PPO benefit plan design?
For all the above reasons, these arrangements need to be:

In a partnership context
Long-term Strategic Associated with (for hospitals/IDSs) ability to backfill with new market share
15
ACOs A Three-Legged Stool

H.I.T
Payer-provider
Aligned Incentives

integration Population management Analytics

Predictive Program
Upside Downside Quality & outcomes Physician performance management
evaluation
Clinical Programs
Outpatient: High-risk Inpatient, ED, SNF Evidence-based:
Referrals Prescribing
16
Network Management Future State Scenario

Current
Adherence to generally accepted standards of care put; documented medical necessity
Provider Accountabilities
Future-state
Clinical and financial outcomes, along a spectrum of accountability (e.g., episode bundling to global cap)
Unit prices (e.g., CPT, per-diem, DRG) with modest P4P; P4P primarily clinical
Traditional; often adversarial: splitting a fixed pie Broad PPO Traditional UM Done by us
Payment
Based on accountability (i.e., payment aligned with clinical accountability); have major P4P; P4P aligns clinical and financial
Partnership: value-creation
Relationship Network / Product Participation Oversight Disease, Case, Utilization Management
Broad PPO, HMOs, New/Exchange/Targeted products and networks Protocols and processes agreed on up front, back-end audits as needed
Done by provider or us: who can do it better/more efficiently
17
Its a Race Against Time

The faster we improve efficiency, quality and outcomes the less we will need to slash prices for drugs and devices, doctors and hospitals and increase cost sharing
The sooner we do this by changing the delivery system and reimbursement reform the less we will have to cut fees/prices and increase skin in the game Lets Build the System We Need and Want and Can Have
18

Creating New Value Together

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Creating New Value Together

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Creating New Value Together

Scott Sarran, M.D., M.M.

Confidential and Proprietary Information

U.S. th largest health insurer

2 Confidential and Proprietary Information

Health Plans and Providers Defining Their Roles

Traditional Health Plan Roles

Currently a Relative Value Void

Traditional Provider Roles

Sales & Marketing

Actuarial Cost Analysis & Trending

Wellness & Prevention

Confidential and Proprietary Information

We Want to Help Providers Shift from Volume to Value

Drive the change create a tipping point

Fails to address cost drivers:

Doesnt support system redesign

Confidential and Proprietary Information

Value Creation and Population Acuity: Whose Role?

High-risk chronic diseases

High-acuity active conditions

Evolving Distribution of HCSC Membership

Pay for Performance*

Accountable Care Organization (ACO)

Shared Risk HMO

Global Payment or % of Premium

Population Health Provider Accountability

Confidential and Proprietary Information

Proven Models: HMO Illinois

Cost: 25% lower PMPM

Critical Success Factors:

7 Confidential and Proprietary Information

New Models: ACO Shared Savings Agreement

Advocate Health Care

Confidential and Proprietary Information

Advocate / BCBSIL Agreement: Rationale, Goals and Context

How Does It Work?

Attributed members Total cost of care, including:

Acute Episodic Care

10 Confidential and Proprietary Information

Confidential and Proprietary Information

Paramount to Success: Continuous Quality Improvement

Addition of small # of measures specific to

Confidential and Proprietary Information

ACO Operations: Key Decisions

Attribution logic: How tight?

Risk adjustment: How, when? Definition of savings target? Split of savings?

Quality: How do results impact payout of savings?

No one best set of answers.

BCBSIL-Advocate Healthcare ACO: Year 1

Outperformed unadjusted cost trend by ~2%

Maintained targeted high-level performance on clinical quality and service metrics

Confidential and Proprietary Information

BCBSIL-Advocate ACO: Year 1 Recap

What does this tell us about our ability to achieve HMO-level

For all the above reasons, these arrangements need to be:

ACOs A Three-Legged Stool

integration Population management Analytics

Upside Downside Quality & outcomes Physician performance management

Confidential and Proprietary Information

Network Management Future State Scenario

Relationship Network / Product Participation Oversight Disease, Case, Utilization Management

Confidential and Proprietary Information

Its a Race Against Time