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Creating New Value Together

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


Chief Medical Officer, Government Programs Health Care Service Corporation

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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

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Dr. Scott Sarran The Partnership to Fight Chronic Disease Briefing: April 17, 2013

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

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Dr. Scott Sarran The Partnership to Fight Chronic Disease Briefing: April 17, 2013

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

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Dr. Scott Sarran The Partnership to Fight Chronic Disease Briefing: April 17, 2013

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
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Dr. Scott Sarran The Partnership to Fight Chronic Disease Briefing: April 17, 2013

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

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Dr. Scott Sarran The Partnership to Fight Chronic Disease Briefing: April 17, 2013

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

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Dr. Scott Sarran The Partnership to Fight Chronic Disease Briefing: April 17, 2013

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)

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Dr. Scott Sarran The Partnership to Fight Chronic Disease Briefing: April 17, 2013

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
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Dr. Scott Sarran The Partnership to Fight Chronic Disease Briefing: April 17, 2013

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.

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Dr. Scott Sarran The Partnership to Fight Chronic Disease Briefing: April 17, 2013

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Shared Savings
PPO
Percent Medical Trend

Illustrative Only

Customer Share

Network Trend
ACO w/Actual Incentive ACO Actual 2011 2012 2013

Advocate Share

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Dr. Scott Sarran The Partnership to Fight Chronic Disease Briefing: April 17, 2013

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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

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Dr. Scott Sarran The Partnership to Fight Chronic Disease Briefing: April 17, 2013

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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.


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Dr. Scott Sarran The Partnership to Fight Chronic Disease Briefing: April 17, 2013

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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

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Dr. Scott Sarran The Partnership to Fight Chronic Disease Briefing: April 17, 2013

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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
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Dr. Scott Sarran The Partnership to Fight Chronic Disease Briefing: April 17, 2013

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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

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Dr. Scott Sarran The Partnership to Fight Chronic Disease Briefing: April 17, 2013

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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

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Dr. Scott Sarran The Partnership to Fight Chronic Disease Briefing: April 17, 2013

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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

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Dr. Scott Sarran The Partnership to Fight Chronic Disease Briefing: April 17, 2013

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