EMHI Payment Reform Recommendations

General Structure of Recommendations

Oversight

Transparency

Spending Targets

Requirements during a Transition Period

OVERSIGHT

Independent Oversight Mechanism What should it look like?

Entity should be organized as an Independent Commission of approximately 9-12 members, with a majority of members being independent experts and a minority of members representing stakeholders. Stakeholder groups could nominate individuals for membership, but final selection of members should be made by the Governor, with the Legislatures approval. The Chair of the Independent Commission should not be from a state agency or any payer or provider group.
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Independent Commission Functions

Develop payment methodologies for public payers (Medicaid, Medicare, GIC and Connector) (Year 1).

Develop broad outlines for what constitutes alternative payment methodologies in the private sector and review and approve such models (by Year 3).
Have access to the data that other state agencies collect in this area, with the power to request additional data from those agencies (Years 1+).

Independent Commission Functions (Cont.)

Along with the state, where feasible, develop recommendations for payers and providers to commit upfront funding, including from reserves, to develop new primary care delivery systems, with funds to be repaid from future savings (Year 1).

Develop recommendations on significant administrative simplification initiatives at both provider and payer levels, and explore the possibility of establishing a common pipeline for providers to submit claims (Years 1+).

Independent Commission Functions (Cont.)

Report annually to both the Governor and the Legislature, with its own staff and a multi-year budget appropriation sufficient to support the staff and analytical research necessary to carry out its duties effectively.

Develop enforcement mechanisms for: 1) failure to meet recommended benchmarks for using alternative payment methods; and 2) failure to reach spending targets. These mechanisms would not be imposed during the three-year transition period, but would be imposed after that time if the Commission finds benchmarks are not being met.
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TRANSPARENCY

Reporting and Transparency

Independent Commission should collect and publicize information reported by plans and providers, including:

The breakdown of payer contracts by payment model and risk model; Total spending and total at-risk spending for payers; Information on which providers are participating in ACO-type arrangements; Relative growth in total medical expenses; Spending trends for the state; Specific standardized quality measures as determined by the Commission; and Other information the Commission deems necessary to ensure a successful transition.
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SPENDING TARGETS

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The current situation, as best we know it

Measure of Spending Premiums

Forecast medical spending per capita Forecast GSP per capita Inflation rate

Approximate magnitude 8.0% 5.5% - 6.0% 4.0% 2.0%

Cost increases are about 2.0 percentage points above potential GSP growth.
Potential Gross State Product is a measurement of the economic output of a state if the state was not moving into or out of a recession.
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Proposed Spending Target

Achieve potential GSP* + 1% by 3 years.

Achieve potential GSP* by 5 years. Reset to potential GSP* + 1% at 10 years.

*Adjusted for unforeseen medical circumstances and stage of business cycle.

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Proposed Spending Target (cont.)

Target relates to total spending. Target relates to in-state spending for state residents. The Independent Commission should be mindful of price variations when tracking spending. Spending targets could be applied differentially for example, looser targets for groups choosing alternative payment arrangements.

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What this means

Savings

$0

$0

$0

$1

$1

$2

$3

$5

$7

$8 $10 $13 $15 $17 $20 $23 14

Public Payers
Medicaid: Assuming appropriate rate structure, as spending increases fall below GSP growth, 75% of such savings should be dedicated to rate increases the following year. Medicare: Pursue waiver for payment reforms similar to Medicaid recommendations. Ideal: share Medicare savings 60-40 relative to benchmark CMS cost increase (higher provider percentage to compensate for up-front spending).

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PAYMENT TRANSITION

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Transition Period

Providers and payers should be encouraged to meet targets on alternative payment methodologies during a three-year, penalty-free transition period.

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Goal for Payment Models Accountable Care Organization

Organization that accepts global payment for the entirety of the care it receives, with some degree of profit/loss sharing.

Non-ACO Patient-Centered Medical Home +

Partly risk-based payment for primary care where the primary care is provided outside of an ACO.

Bundled Episode Payment

Partly risk-based payment for an episode under the control of one or more specialists.
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Examples
ACO
A patient goes to ACO XXX, using their physicians and hospitals. ACO XXX is paid on a capitated basis for that care.

Episode
A patient goes to Medical Associates of XXX, a stand-alone facility of 5 PCPs. These PCPs are a medical home and accept some risk. The patient is referred to BWH for specialty cardiac care. BWH is paid on a bundled episode basis 19 for the care.

Payer Requirements During Transition Period

At the end of each year, payers should report on the breakdown of their contracts by payment model and risk model, and their total expenditures and at-risk expenditures in spending for that previous year. By end of Year 3, payers should document/attest that contracts covering a majority of the claims they pay use any of: Bundled payments Risk sharing around total costs (e.g., AQC, other shared savings), full risk Pay-for-performance in which cost or utilization can move at least 25% of revenue Mixed payment (e.g., Non-ACO medical homes) As on the previous slide
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Provider Requirements During Transition Period

By the end of Year 3, hospitals and physician groups with 25 providers should document/attest that at least 50% of their revenues have upside or downside risk of at least 25%.

At risk payments include the payment types noted above.

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Alternative Plan Types

Payers should be encouraged to develop, and should be required to report data on, network designs that encourage enrollees to seek care at lower-cost institutions / with lower cost physicians (tiered or limited networks).
Such plans should be offered by the GIC and the Connector.

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Referral Institutions

Referral institutions treating patients enrolled in ACOs should get credit for participating in alternative arrangements regardless of how they are actually paid by the ACO/payer.

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