Welcome to implications of policy, finance, and business on population health. This is Lecture b. The objectives for this lecture of implications of policy, finance, and business on population healthy are to, discuss and interpret the key financial drivers in the US healthcare system and their implications. Summarize the major federal policy changes driving value-based purchasing of health care and population health. This slide outlines the history of value-based payment, which goes back to the Bush administration and pre-dates ObamaCare. Many people are surprised that value-based payment is in fact a republican idea and not a democratic idea. Its origins go back to the Heritage Foundation, which focused on a private market approach instead of a single payer. And the individual mandate and insurance exchanges of private insurers. This approach laid the foundation for RomneyCare in Massachusetts and served in many ways as a framework for ObamaCare. As we look at the slide, in October 2003, there was pay for reporting for hospitals that was put into effect by the medicare modernization act. Which initially paid providers an extra 0.4% in return for reporting on 10 quality measures. Then a 2% payment increase in 2007 for reporting on 21 measures followed by patient satisfaction in 2008. There were increasing expectations for measurement and also increasing rewards for providers for doing so. In April 2004, the Office of the National Coordinator for Health IT, ONCHIT, was formed under an executive order from President Bush to facilitate the implementation of HIT. Unfortunately, as you all know, there was no money associated with that order. So real implementation of HIT did not begin until it was funded under Obama as part of the Stimulus Act. In 2006, there was another Bush Executive Order, that directed federal agencies to purchase on the basis of health care quality and price, which introduced pay for performance at the federal level. In 2007, physicians were introduced to pay for performance with a voluntary program in which they would receive a 1.5% payment bonus, for reporting on 16 core measures. In 2009, the Centers for Medicare and Medicaid Services, CMS, broadened pay for performance to include outpatient hospital care to complement the inpatient reporting that was introduced in 2003. Also, 2009 was the year value-based purchasing began under the Deficit Reduction Act of 2005. Under this law, CMS was directed to become an active purchaser, rather than just passively accepting the price and quality of thr care that was delivered by providers, CMS would actively try to improve the care by paying for performance, developing better measures, and focusing on lowering costs. Now, we get to 2010, and ObamaCare begins under the Affordable Care Act, ACA. One of the first tangible outcomes was the establishment of the Patient-Centered Outcomes Research Institute, referred to commonly as PCORI. Which was charged to develop and implement patient-centered outcome measures. If we define value in a value based purchasing as outcome over cost, then how patients value the care they receive is fundamental, since they are the ultimate quote customer unquote. In 2011, Medicare increased the reimbursement for primary care physicians to help address the perceived shortage in primary care physicians, which are vital to coordinate care under value-based purchasing. Also in 2011, CMS created the Center for Medicare and Medicaid Innovation, the Innovation Center, to develop new payment mechanisms such as the Physician Group Practice Demonstration project. This project worked with physician groups, which were willing to coordinate care and take on more risk, per our discussion in the previous lecture. Accountable Care Organizations, ACOs, were created in 2012, and we will go into more detail about these entities later on in this lecture. There was also the introduction of bundled payments for care improvements, as well as value-based purchasing for hospital services, which included for the first time reductions in payment for preventable admissions. Up until this point, Medicare would pay bonuses i.e., quote, carrots, unquote, for reporting and for improving care. Payment initiatives began in 2012 in which there were not only bonuses but also penalties if appropriate care was not provided. Quote, carrot and sticks, unquote. In 2013, a national pilot around bundling was introduced. As well as federal support to increase Medicaid reimbursement to primary care physicians to compliment the increased payments in Medicare. The independent advisory board, which was charged of establishing new rates of reimbursement for physician services was established in 2014 under the ACA. Finally, in 2015, there was the passage of the Medicare Access and CHIP Reauthorization Act, MACRA, which was signed into law by President Obama in April 2015. We will go into the details of MACRA later on in this lecture. Also in 2015, we saw the introduction of penalties for hospital acquired infections. There are 16 so called Ambulatory Care Sensitive Conditions. These are ambulatory conditions where research indicates, that better care and care coordination provided in the ambulatory setting, would prevent unnecessary hospital admissions. The research and indicators were developed by the agency for healthcare research and quality, AHRQ, which was established in 1989 to produce evidence to make healthcare safer and more effective. You see some very common diagnoses on this list. Diabetes, congestive heart failure, hypertension, asthma, pneumonia, etc. This slide shows the reductions in the Ambulatory Care Sensitive Admissions in Chicago from 2010 to 2012. Among the service lines in the dashed box, with cardiology at the top, and pulmonary down at the bottom, there were statistically significant reductions in the ambulatory care sensitive admissions, ranging from 23.5% to 2.4% in comparison to all the other cases in the service line. These results support the idea that if you do a better job in the ambulatory setting, You can have a positive impact on avoiding unnecessary admissions. In this study, there were no statistically significant differences in cardiology, vascular surgery and urology. The net effect of this decrease in the Chicago market was a reduction in inpatient hospital stays. It is consistent with national trends toward lower hospital and patient utilization. It underscores the impact of having value-based payment in the system. Medicare Accountable Care Organizations were created under the 2010 Affordable Care Act. And as you know, Medicare represents about 20% of the national health expenditures. One of the key attributes of ACOs is that they are provider led, eg., a hospital system or physician group with a formal separate governance structure. The ACO needs to have sufficient primary care and care across the continuum in order to be eligible for this program. Only Medicare fee-for-service beneficiaries are eligible to join and it is entirely voluntary for them. There is no quote, lock in, unquote for patients. Meaning that as a member of the ACO, they are free to see any other provider outside the ACO. The agreements with CMS are for three years. The underlying payment mechanism is still free-for-service for the participating hospitals and physicians. There are shared savings between CMS and the ACO. If the per capita cost, that's what PCC stands for is better than some mutually agreed upon predetermined benchmarks. In return for potential rewards, the ACOs are expected to report on 33 quality measures and institute defined programs in patient protections and transparency. There are two ACO tracks. Number one, reward only. And number two, rewards and potential losses. Not surprisingly, given that most providers are risk averse and have had little experience with risk, the overwhelming majority of providers have opted for track one. So, what are the under pinning building blocks from a current FFS to accountable care? Eugene Kroch's 2012 report on ACOs to the Commonwealth Fund illustrated the fundamental building blocks for the transition from a fee-for-service, FFS system to accountable care. Accountable Care Core Components make up the supporting blocks of the bridge from FFS to accountable care. Among these components is a People Centered Foundation, which means that the ACO is focused on patient-centered care delivery, i.e., meeting patient expectations. The next component is a Health Home. A primary care home consisting of a team of physicians, nurses, social workers, et cetera who can coordinate the primary care of a Medicare beneficiary. Also, included is a High Value Network. So that if a patient needs referral to specialty care or hospitalization, there is a network of hospitals and specialists who are willing to provide excellent care at a lower cost. The population health data management component supports the reporting of the 33 health quality measures and to enable care coordination across the care continuum. The next component serving as a building block is leadership. Most healthcare leaders have grown up on FFS and now need to be trained on how to provide accountable care. Finally, Payer Partnerships are required to support the outreach to individual medicare beneficiaries for enrollment and to provide some of the infrastructure around care coordination and risk management. The first major challenge is that the underlying reimbursement model is still fee-for-service. So, there is a misalignment of incentives. Both the hospital and the physicians are rewarded for increasing volume, but the ACO is on a fixed budget. The second is that there is no lock in of the beneficiaries. The Medicare patients are free to go to any other delivery system outside of the ACO. So that if you make investments in these patients to improve their care, there is no guarantee that you're going to reap the benefits of that investment. The third challenge is that since most healthcare executives have spent their careers working under FFS, they have had very little experience in care coordination across the continuum of care to improve health and reduce inpatient admissions. The fourth is that the IT infrastructure in most provider systems is built for billing. It was not designed to report on required quality measures, monitor the health of the population and provide performance feedback to individual providers about unnecessary treatment variations and best practices. The fifth challenge is that there is a need for a network of resources across the care continuum, particularly with home health agencies skilled in nursing facilities and rehabilitation facilities to ensure that the right care is provided in the right setting. The final challenge is to optimize the social determinants of health for patients rather than just focusing on their care in the acute ambulatory or inpatient settings. Even the most severely ill patients, those with multiple or chronic coma or big conditions spend about only 5% of their time in any given year in the acute care system. Since they spend 95% of their time outside the conventional health system, many experts believe that what happens to patients out there has a greater impact on their health, such as access to good food, a safe and supportive home environment, transportation, etc. The acronym, MACRA stands for the Medicare Access and CHIP Reauthorization Act. CHIP stands for the Children's Health Insurance Program, which provides children in Medicaid with health insurance. We will go into more detail about MACRA in the next slide after a little more context. In January 2015, the Department of Health and Human Services, HHS announced the two goals for value-based payment by Medicare. Goal one, 30% of Medicare payments to go through alternative payment models by the end of 2016 with the goal of 50% by the end of 2018. Goal number two, 85% of Medicare fee-for-service payments would be tied to quality or value by the end of 2016 and 90% by the end of 2018. This was a very clear statement of Medicare's intent to move to a value-based payment model. On April 16th, 2015, MACRA was signed into law by President Obama. Many observers believe this is the biggest change in healthcare reimbursement since the passage of Medicare 50 years ago. MACRA charts a ten-year move away from fee-for-service to value-based payment. MACRA had extraordinary bipartisan support. 392 to 37 in the House of Representatives and 92 to 8 in the Senate. As you all know, in this era of polarized politics, it is very unusual to have this kind of bipartisan support. These legislative margins lead many industry experts to believe that no matter who gets elected president in 2016 or who controls Congress over the next ten years, this legislation will continue to move the health system forward into value-based reimbursement. MACRA was enacted to repeal the Medicare sustainable growth rate formula, which was commonly known as quote, doc fix, unquote. It was meant to be a budget balance in quote, circuit breaker, unquote installed by the Balance Budget Act in 1997. Basically, if healthcare costs exceeded the rate of GDP growth, Medicare physician reimbursement would be reduced according to a formula administered by CMS. Each time, healthcare inflation exceeded growth in GDP, which frequently happened over the last 17 years, Congress decided not to enforce the reduction and deferred to the following year. By last year, the aggregate deferred reductions totaled almost $169 billion, which forced congress to pass MACRA. Instead of the reductions, a legislation calls for a half percent annual physician fee increase between 2015 and 2018 at the front-end and then a system based on performance with a mix of bonuses and penalties in the out years. The legislation calls for two models. The alternative payment model, APM includes bonus potential, carrots, but no penalties for those physicians willing to join in ACO or pPatient-Centered Medical Home, PCMH and the merit-based incentive payment systems, MIPS includes carrots and sticks and is designed for those physicians who wish to remain in the FFS system. More detail on these two reimbursement models in a couple of slides. As mentioned earlier, Medicare announced ambitious goals to tie 30% of payments to alternative payment models and 85% to quality or value. This slide lays out graphically the 2016 targets and the 2018 targets. As you can see, MACRA supports the achievements of these goals. The info graphic shows us comparisons for FFS, MIPS, 85% in 2016 compared to 90% in 2018 and the alternative payment models, 30% compared to 50%. Alternative payment models are provider sponsored entities, like ACOs and Patient-Centered Medical Home. MIPS are a consolidation of existing physician pay for performance program with the addition of a new metric, which will be covered in more detail in the next couple of slides. The bottom line is that this law will provide incentives to achieve the 2018 HHS goals of 90% of payments tied to value and quality. And 50% tied to alternative payment models Alternative payment models, APMs are entities that can assume financial risk for the care of a population of patients, such as ACOs, PCMHs and comprehensive primary care demonstration initiatives. The follow Innovation Center demo criteria, including the use of electronic health records, EHRs, data analytics and coordination infrastructure to improve the health of populations under their care. More detail about Patient-Centered Medical Homes is provided elsewhere in this curriculum. Providers in these models can receive up to 5% of their aggregate Medicare payments in a bonus, if they meet quality and value targets. There is no downside risk. In order to be eligible for the bonus, providers must provide 25% of their Medicare business through these entities by 2019, 2020. 50% by 2021 and 2022. And then finally, 75% or more in 2023. This is a very clear pathway for moving toward value-based reimbursement. The merit-based incentive payment system is designed for those physicians who want to maintain independent FFS practice and do not want to join an ACO, Patient-Centered Medical Home, etc. MIPS consolidates three previously enacted CMS physician incentive programs. The physician quality reporting system enacted in the 2005 Deficit Reduction Act worth 30%. The value-based payment modifier system enacted in the Affordable Care Act were 30% and meaningful use enacted as part of the Stimulus Act in 2009. More about this later on this lecture, worth 25%. A new category was created called clinical improvement activities, worth 15%. This category is meant to reward activities that improve access, coordinate care or provide population management. If a physician were to join a PCMH, then he or she would get an automatic full credit of 15%, which is another incentive to move over to an APM. The key feature of MIPS is an up and down side risk versus only up side in the APM program. In 2019, providers can get a four percent bonus, but they can also lose 4%. And by 2022, providers could gain 9%, but also stand to lose 9%. For most physicians, the prospect of losing 9% is not going to be very attractive, so that we believe in MIPS really pushes providers towards the APM model. You can review this timeline for MACRA at your leisure after this lecture. The bottom line is that it highlights the fact that all physicians will be paid under some kind of value-based payment model over the next ten years. The Health Information Technology for Economic and Clinical Health Act, HITECH was enacted in 2009 as part Stimulus Act and it provided $19.2 billion for the adoption of health IT in support of the medical home model. And also provides for incentives for meaningful use, which we will cover in the next slide. Stage one in 2011 called for data capturing and sharing in an EHR. Stage two, which began in 2014 and extended to 2016 provide support for advanced clinical processes. Stage three, delayed until 2017 will pay for improved outcomes. The incentives associated with the HITECH Act included $21,250 in the first year for each eligible provider and $8,500 in subsequent years, subject to successful demonstration Of meaningful use. There are some significant issues with meaningful use. The first is complexity. Providers must meet 26 objectives, 15 core objectives, five of ten from a menu of ten additional objectives And 6 total clinical quality measures with 3 core and 3 of 38 from an additional set. There are also challenges with interoperability. As you probably all know, the different EHR vendors have erected walls around their particular EHRs. Which make information sharing across EHRs difficult. Even among EHRs from the same vendor there may be some interoperability issues between different installations. There are also challenges associated with incorporating patient reported information. Since EHRs are typically provider based and not a personal health record, each provider may enact different policies governing patient access and their ability to add relevant information into the electronic record. Another major challenge is incorporating behavioral health information. Even with paper records, it was very common to find that behavioral health information was stored in a different folder and segregated from the rest of the medical record. With the implementation of the EHR that segregation continues. Finally, there are two operational challenges. Training staff, which is why you are here, and significant ongoing operating costs. Implementation costs were significantly subsidized by the High Tech Act, but operating costs are entirely born by providers. This concludes Lecture B of Implications of Policy, Finance, and Business on Population Health. In this lecture we finished our review of federal policies on value-based payment, including its roots in the Bush Administration, the Affordable Care Act ACOs and MACRA.
