Rosenthal NEPSQI conference Feb 5 2011

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					 The 2010 Affordable Care Act and the
Future of Provider Payment in the U.S.:
   New Urgency, New Ground Rules
            Meredith B. Rosenthal, Ph.D.
            Associate Professor of Health
               Economics and Policy
                  February 5, 2010




                                            1
2010 Patient Protection and Affordable Care Act: A
     watershed moment in U.S. health policy




                                                     2
          32 million fewer uninsured by 2019




Source: Estimated Financial Effects of the “Patient Protection and Affordable Care Act,” as Amended. Centers for
Medicare and Medicaid Services, Office of the Actuary, April 22, 2010.                                             3
                                                                                                                                    0%
                                                                                                                                         5%
                                                                                                                                              10%
                                                                                                                                                          20%
                                                                                                                                                                25%
                                                                                                                                                                                  40%




                                                                                                                                                    15%
                                                                                                                                                                      30%
                                                                                                                                                                            35%
                                                                                                                           Alabama
                                                                                                                             Alaska
                                                                                                                            Arizona
                                                                                                                          Arkansas
                                                                                                                         California
                                                                                                                          Colorado
                                                                                                                       Connecticut
                                                                                                                         Delaware
                                                                                                                             Florida
                                                                                                                            Georgia
                                                                                                                             Hawaii
                                                                                                                              Idaho
                                                                                                                             Illinois
                                                                                                                            Indiana
                                                                                                                                Iowa
                                                                                                                             Kansas
                                                                                                                          Kentucky
                                                                                                                          Louisiana
                                                                                                                             Maine
                                                                                                                         Maryland
                                                                                                                    Massachusetts
                                                                                                                          Michigan
                                                                                                                        Minnesota
                                                                                                                        Mississippi
                                                                                                                           Missouri
                                                                                                                          Montana
                                                                                                                          Nebraska
                                                                                                                            Nevada
                                                                                                                   New Hampshire
                                                                                                                        New Jersey
                                                                                                                      New Mexico
                                                                                                                         New York
                                                                                                                    North Carolina
                                                                                                                                                                                                                                                   public coffers




                                                                                                                     North Dakota
                                                                                                                                Ohio
                                                                                                                         Oklahoma
                                                                                                                            Oregon
                                                                                                                     Pennsylvania
                                                                                                                      Rhode Island
                                                                                                                    South Carolina
                                                                                                                                                                                        Medicaid as a % of State Spending, FY 2008




                                                                                                                     South Dakota
                                                                                                                        Tennessee
                                                                                                                              Texas
                                                                                                                                Utah
                                                                                                                          Vermont
                                                                                                                            Virginia
                                                                                                                       Washington
                                                                                                                     West Virginia
                                                                                                                         Wisconsin
                                                                                                                         Wyoming
    Source: FY 2008 State Expenditure Report, National Conference of State Budget Officers, Washington DC, 2009.
                                                                                                                                                                                                                                     New urgency: Medicaid expansions will strain




4
New urgency: affordability of individual
        insurance is critical




                                           5
       New urgency: influx of demand may cause
         access problems as in Massachusetts




Source: Long SK and Masi PB, Access and Affordability: An Update on Health Reform in Massachusetts, Fall 2008. Health Affairs May 2009.
                                                                                                                                      6
  Important New Ground Rules for Payment
              Reform in 2010

• Independent Payment Advisory Board
• Center for Medicare and Medicaid
  Innovation




                                           7
         Spectrum of Provider Payment: Reform
       Trajectory Moving Towards Global Payment




                             Subtract        Mixed
  Current                                               Episode-
              Add pay for   payment for    payment                   Global
payment for                                               based
              performanc    preventable     (fee for
  units of
                   e        complicatio   service and
                                                        (bundled)   payment
  service                       ns                       payment
                                          capitation)




                                                                         8
 What We Know About Provider Payment That
       Should Inform Current Policy
• Providers respond to incentives at the margin
• One size does not fit all
• Organizational capabilities need to be aligned
  with payment policy
• Provider and patient incentives should fit
  together



                                                   9
Providers Respond to Incentives at
           the Margin




 Source: Rosenthal MB. Risk Sharing and the Supply of Mental Health Services. Journal of
 Health Economics, 2000 Nov; 19(6):1047-65.                                                10
               One Size Does Not Fit All
   Category of provider                    Improvement in                Bonuses Earned
                                            Cervical Cancer
                                          Screening after pay
                                           for performance
      Providers with                                2.5%                     $ 436,618
performance above target
        at baseline
      Providers with                                7.4%                     $ 127,632
 performance just below
    target at baseline
      Providers with                               11.1%                      $ 26,859
performance more than 10
    points below target
Source: Rosenthal et al., From Concept to Practice: Early Experience with Pay for Performance,
                                                                                               11
JAMA, 2005.
 Organizational capabilities need to be
     aligned with payment policy
• Moving towards global
  payment requires
  contracting with
  organizations of greater
  scope
• Experience in California
  suggests that these
  organizations transmit
  incentives through non-
  financial means
   Source: Rosenthal et al., Transmission of financial incentives to physicians by intermediary
   organizations in California, Health Affairs, 2002.                                             12
  Provider and patient incentives
        should fit together




Source: Rosenthal et al., Impact of Financial Incentives for Prenatal Care on Birth Outcomes
and Spending, HSR, 2009.                                                                       13
Ongoing Natural Experiments That Will
      Yield Additional Insights
• Medicare rule precluding severity adjustment
  for preventable complications
• Patient-centered Medical Home pilots
• Prometheus Payment case rate pilots




                                                 14
Medicare rule precluding severity adjustment
       for preventable complications
 Condition                                                   Number of Medicare Cases for
                                                             FY 2006
 Object left in surgery                                      764
 Air embolism                                                45
 Blood incompatibility                                       33
 Cather-associated UTI                                       11,780
 Pressure ulcer                                              322,946
 Vascular catheter-associated                                Unknown
 infection
 Mediastinitis after CABG                                    108
 Falls                                                       2,591

 Source: Medicare program: changes to the hospital inpatient prospective payment systems and fiscal year 2008
 rates. Fed Regist 2007;72:47379-428.
                                                                                                                15
Patient-centered Medical Home Pilots




                                       16
Prometheus Payment case rate pilots




                                      17
What We Need to Learn to Implement Payment
            Policy That Works
• Where to use pay for performance and how
  much weight to give it
• Where to use episode-based payment and how
  to address appropriateness of episodes
• How to structure global payment to optimize
  tradeoffs among efficiency, selection, and risk
  aversion
• How to use incentives and information to engage
  patients in ways that complement new payment
  models
                                                18
              Will this work?
• Coverage reform looks easy compared to
  provider payment
• Affordable Care Act provides some traction
• Critical to success:
  – Tailored approach
  – Remove the status quo as an option
  – Align patient incentives


                                               19

				
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