What Works to Control Costs: Go Where the Money Is

1. What Works to Control Costs:Go Where the Money Is Karen Davis President The Commonwealth Fund www.commonwealthfund.org kd@cmwf.org Alliance for Health Reform June 12, 2012

2. 1% 5% 10% $90,061 22% 45% $40,682 50% $26,767 65% $7,978 97% For Savings, Go Where the Money Is • 10% of patients account for 65% of costs • Focus efforts on patients with highest costs • Three part strategy: • Primary care/delivery system reform • Payment reform • Health information technology • Leadership can come from: • Federal government • State government • Employers • Providers • Insurers • Collaboration among all Distribution of health expenditures for the U.S. population, by magnitude of expenditure, 2009 Annual Mean Expenditure Source: D. Blumenthal, "Performance Improvement in Health Care—Seizing the Moment," New England Journal of Medicine, April 26, 2012 366(17)1203–427.

3. What Is Already Underway? ACA Payment and Delivery System Reforms Support a High Performance Health System • Primary Care and Medical Homes: three new Medicare pilots, several Medicaid initiatives; increased payment for primary care • Bundled payments: Medicare pilots for hospital and post-acute care, Medicaid initiatives • ACO: Broad responsibility for quality and cost of patient care, rewards for quality, shared savings • Value-based purchasing • More transparency on quality and cost • Meaningful use of health information technology Payment and Delivery System Integration Global Budget Pioneer ACOs Medicare Shared Savings Plan Payment Integration CMMI Acute Episode Bundled Payment Pilots Comprehensive Primary Care Initiative FFS and DRGs Small MD practice; unrelated hospitals Integrated delivery system Delivery System Integration Source: The Commonwealth Fund, The New Wave of Innovation: How the Health Care System Is Reforming, (New York: Columbia Journalism Review, November 2011); A. Shih, K. Davis, S. Schoenbaum, A. Gauthier, R. Nuzum, and D. McCarthy, Organizing the U.S. Health Care Delivery System for High Performance (New York: The Commonwealth Fund, Aug. 2008); A. Dreyfus, The Alternative Quality Contract and ACOs: Lessons for Policy-Makers, presentation to 2012 Bipartisan Congressional Health Policy Conference, January 22, 2012.

4. Medicaid/State Government Innovations • About five percent of beneficiaries account for more than half of Medicaid spending; 83 cents of every dollar spent in Medicaid goes to treat chronic diseases, including diabetes, asthma, and hypertension • Community Care of North Carolina – regional organizations support primary care physicians and provide care coordination – reduced hospitalization; started by Medicaid; now includes Blues and Medicare • Vermont Blueprint for Health – community health teams, multi-insurer payment reform: preliminary evidence on reduced health care expenditures per capita, 21% reduced hospitalization, 32% reduced ER • Montana Health Improvement Project – community-based primary care, nurse care coordinators: preliminary evidence on lower Medicaid costs for select conditions • Missouri Health Home – integrating behavioral health and primary care: 16% reduction in per Medicaid beneficiary per month • Illinois Medicaid Medical Home – primary care case management: reduced Medicaid outlays • Commonwealth Care Alliance (MA) – • Indiana “Right Choices” – “ER frequent flyers” or numerous medications prescribed by different physicians; ED use fell by 72 percent and use of controlled substances decreased by 38 percent • Care Transition Model deployed in 39 states to reduce expensive rehospitalizations; health coach for patients with complex care needs and their families Source: Takach M. Reinventing Medicaid: state innovations to qualify and pay for patient-centered medical homes show promising results. Health Aff (Millwood). 2011 Jul;30(7):1325-34; K. Thorpe, Understanding and Addressing “Hot Spots” Critical to Bending the Medicaid Cost Curve, (Washington: Partnership to Fight Chronic Disease, May 2012).

5. Early Evidence from Primary Care Medical Home Interventions • Geisinger Health System (Pennsylvania) • 18 percent reduction in all-cause hospital admissions; 36% lower readmissions • 7 percent total medical cost savings • Mass General High-Cost Medicare Chronic Care Demo (Massachusetts) • 20 percent lower hospital admissions; 25% lower ED uses • Mortality decline: 16 percent compared to 20% in control group • 4.7% net savings annual • Guided Care - Geriatric Patients (Baltimore, Maryland) • 24 percent reduction in total hospital inpatient days; 15% fewer ER visits • 37 percent decrease in skilled nursing facility days • Annual net Medicare savings of $1,364 per patient • Group Health Cooperative of Puget Sound (Seattle, Washington) • 29 percent reduction in ER visits; 11% reduction ambulatory sensitive admissions • Health Partners (Minnesota) • 39% decrease ED visits; 24% decrease hospital admissions • Intermountain Healthcare (Utah) • Lower mortality; 5% relative reduction in hospitalization • Highest $ savings for high-risk patients Source: K. Grumbach and P. Grundy, Outcomes of Implementing Patient Centered Medical Home Interventions: A Review of the Evidence from Prospective Evaluation Studies in the United States, (Washington: Patient Centered Primary Care Collaborative, November 2010); T. Ferris et al. “Cost Savings From Managing High-Risk Patients” in The Healthcare Imperative: Lowering Costs and Improving Outcomes: Workshop Series Summary, (Washington: National Academies Press, 2010).

6. State Action to Reduce Avoidable Rehospitalizations • STAAR program poised to inform public policy and initiatives related to care transitions and readmissions – Michigan, Massachusetts, Washington. • Preliminary national survey of hospitals suggests that STAAR hospitals are more likely to have adopted interventions such as enhanced assessments, enhanced patient education and to have activated the post acute care delivery system prior to discharge, compared to non STAAR hospitals. • Trend in STAAR cohort of hospitals in each state suggests reductions in readmissions for certain groups of patients, on targeted units or hospital-wide. • Top performers show up to 50% reduction in readmissions for targeted patient population on specific units (e.g. high risk patients with CHF)

7. INTERACT – Improved Nursing Home Care Reduces Hospitalization • Interventions to Reduce Acute Care Transfers (INTERACT) II helps nursing home staff identify, assess, communicate, and document changes in residents' status • Resulted in a 17 percent reduction in hospital admissions • Three strategies: • identifying, assessing, and managing conditions to prevent them from becoming severe enough to require hospitalization; • managing selected conditions, such as respiratory and urinary tract infections, in the nursing home itself; and, • improving advance care planning and developing palliative care plans as an alternative to acute hospitalization for residents at the end of life INTERACT II Shows Potential to Reduce Hospital Admissions Hospitalizations per 1,000 resident days Source: J. G. Ouslander, G. Lamb, R. Tappen et al., "Interventions to Reduce Hospitalizations from Nursing Homes: Evaluation of the INTERACT II Collaborative Quality Improvement Project," Journal of the American Geriatrics Society, April 2011 59(4):745–53.

8. International Examples: Disease Management Programs in Germany • Conditions: Diabetes, COPD, coronary heart disease, breast cancer • Funding from government to ~115 private insurers (sickness funds) • Insurers receive extra risk-adjusted payments to cover patients with these conditions • Insurers pay primary care docs to enroll eligible patients into programs & provide periodic reports back to the docs (the closest to coordination) • Patients: reduced cost sharing if enrolled • Care guideline protocols plus patient education Source: S. Stock, A. Drabik, G. Büscher et al., "German Diabetes Management Programs Improve Quality of Care and Curb Costs,“ Health Affairs, Dec. 2010 29(12):2197–2205.

9. International Examples: Community Approach to After-Hours Care in the Netherlands to Reduce Use of ER • ~130 large-scale after-hours primary care cooperatives serving 90%+ of Dutch population • Nurse telephone triage and advice with back-up by physician, walk-in visits and house calls • Evidence-based triage protocols and guidelines • GP average after-hours care workload dropped from 19 to 4 hours per week • Preliminary impacts for advanced model integrated with ER: • 25% increase in primary care contact • 53% reduction in contacts with emergency services • 12% reduction in ambulance calls Source: Grol R, Giesen P, van Uden C. After-hours care in the United Kingdom, Denmark, and the Netherlands: new models. Health Aff (Millwood). 2006 Nov-Dec;25(6):1733-7.

10. Cost Savings from Payment and Delivery System Reforms • Innovations to date show promise of achieving savings by reducing hospitalization and emergency room use and improving care management for high cost patients • Requires primary care foundation, aligned incentives, and information systems • Needs to be targeted on those who can best benefit • Will take trial and error to find the most effective intervention components – what works for whom under what circumstances • Interventions and incentives need to be economically prudent • Strategy should be quick data feedback on effects, continuous improvement, and long-term commitment

11. Thank You! Tony Shih, Executive Vice President for Programs, ts@cmwf.org Stu Guterman, Vice President, Payment Reform sxg@cmwf.org Cathy Schoen, Senior Vice President for Research and Evaluation, cs@cmwf.org Melinda Abrams, Vice President, mka@cmwf.org Anne-Marie Audet, Vice President, Health System Quality and Efficiency ama@cmwf.org Kristof Stremikis, Senior Research Associate, ks@cmwf.org For more information, please visit: www.commonwealthfund.org