Case Studies in Value-Based Benefit Design. Results and Lessons Learned. Jerry Reeves MD HEREIU Welfare Funds Health Innovations

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1 Case Studies in Value-Based Benefit Design Results and Lessons Learned Jerry Reeves MD HEREIU Welfare Funds Health Innovations

2 Value Based Benefit Design VBBD is a strategy that minimizes or eliminates out of of pocket costs for high value services in defined patient populations High value services are identified through scientific evidence The more clinically beneficial and cost effective the therapy is for a patient group, the lower the out of of pocket costs Lowering out of of pocket costs for high value services has been found to improve access to and use of those services More effective use of high value services may positively impact the health of the targeted population Preventable adverse health consequences reduced Related high cost health care services avoided Chernew ME et al. Health Aff (Millwood). 2008;27: ; Fendrick AM et al. Am J Manag Care. 2001;7: ; Fendrick AM, Chernew ME. Am J Manag Care. 2006;12 (special issue):sp5-sp10.

3 Value Based Intervention Strategies Identify Top Risks Cost and Use Outliers Chronic Disease Drivers Diabetes, Blood Vessels Depression/Anxiety Lung Disease, Smoking, Cancer Sedentary, Musculoskeletal Structured Interventions HRA, Screen Tests, Measures Tobacco Cessation, Medication Adherence Preventive Services Campaign Steer to Best Value Providers Steer to Best Value Services Ofc visits vs. ER, Hospital Medical Home (Top Docs) Engage the Patients & Providers Multiple Touches- Face to Face if Possible Incentives Know Their Numbers Wellness Programs Walking- Steps per Week Weight and Waist EAP/ Substance Abuse Coordinate the Partners Connect the Dots Measure / Report Results Prescribing Patterns, Provider Profiles Care opportunities taken Improve

4 Cost and Use Outliers - 50,000 Feet View Importance Index Small Plans Mid Size Plans N (% Change) Importance Index* N (% Change) Importance Index* Lives 3,709 ( - 8.2%) 31,152 ( - 0.5%) Patients 1,631 ( +5.8%) 27,292 ( + 6.9%) Paid (000s) $6,389 ( +13.3%) $91,577 ( + 8.5%) Patients/ ( +14.6%) 876 ( + 7.4%) Physician $pmpm $447 ( +24%) 107* $383 ( +10.6%) 42* OP Facility $ pmpm $304 ( +37.3%) 112* $304 ( +19.6%) 61* IP Facility $ pmpm $332 ( +3.0%) 10* $269 ( - 2.8%) -8* Drugs $ pmpm $122 ( +10%) 12* $208 ( + 8.0%) 17* All Medical $ pmpm $1257 ( +18%) 1150** $1225 ( + 9.0%) 2803** * Importance Index by Service Category = $ pmpm times the % Change ** For All Medical, it is % Change times the total paid in 000s

5 Impacts of Surgery and Anesthesia - 5 Plans Paid (000s) PMPM Yr to Yr Change InPt Facility- Med/Surg 17, % Outpt Surg Facility 6, % IP Surgeon 1, % Outpt Surgeon 2, % Office Surgeon 2, % IP Anesthesia % OP Anesthesia 1, % Total 32, % Surgery and anesthesia = 35% of total medical spend

6 MD Cost Variation; Same Outcome Specialty FP IM Cardiology Orthopedics Condition Low Average High Otitis media $46 $109 (+137%) $412 (+796%) Bronchitis $89 $150 (+69%) $771 (+766%) UTI $81 $140 (+73%) $778 (+860%) Angina $86 $297 (+245%) $743 (+764%) Angina $241 $611 (+154%) $1389 (+476%) Knee surg. $2,727 $4,473 (+64%) $9,383 (+244%)

7 Site of Care Matters 5 Plan Units Hospital cost per admit = $9,363 Emergency Room cost per visit = $737 Urgent Care cost per visit = $64 Office Visit cost per visit = $69 Doctors receive 6 times as much payment to administer chemotherapy and specialty drugs in an outpatient facility compared to in their office.

8 Data Based Interventions Focus scheduled meetings with UM partners and PPO network partners on action plans Avoidable non value added surgery and imaging - action plans Require expected impact on management in prior auth for imaging studies Require independent radiologist evaluation of abused imaging studies Informed consent and patient education on alternatives as part of the prior authorization process Retrospective medical record reviews of medical necessity and impacts on subsequent treatments Consider higher co-pays or co-insurance for non value added imaging, ER visits and elective surgeries Consider contracting radiology sub-network and/or radiology benefit management company Consider contracts with Centers of Excellence ( medical tourism ) and oncology management company Steer to Infusion Centers, free standing surgery centers for better rates and service Consider investigations of suspected churning and upcoding Consider implementing Tel-A-Doc, phone nurses, Doctor Tomorrow & self-care guides to reduce unnecessary ER visits. Incentives to use retail clinics & doctor offices instead of ERs.

9 Focus for Lower Costs and Better Outcomes Priorities for Lowering Illness Burden Health Risk Measure Added Cost per Year Believe health is fair or poor (reaction to stress) $3,530 Feel depressed (reaction to stress) $2,326 Have high stress (reaction to stress) $1,435 Poor life or job satisfaction (reaction to stress) High blood sugar (diabetes) Overweight by BMI (>27.3 women, >27.8 men) Current smoker High cholesterol (>239) More than 14 drinks per week BP above 139 systolic or 89 diastolic Walk < 30 minutes per week No self-care book being used (not engaged ) $1,313 $1,150 $690 $447 $428 $398 $390 $339 $225 From: University of Michigan Health Management Research Center and Wellness, Inc

10 Health Improvement Opportunities Serious disease Minor Disease No Disease Prevention/ Fitness Opportunity Acute Illness Opportunity Chronic Condition Opportunity 0 Q_12 Q_9 Q_6 Q_3 Q0 Q3 Q6 Q9 Q12 Medical and Drug Costs only From Dee Edington, University of Michigan

11 Many At Risk Are Unaware/Undiagnosed CONDITION % UNAWARE/ UNDIAGNOSED Hypertension (Adults) 37% Diabetes (Adults) 29% Pre-Diabetes (Ages 40-74) High Blood Lipids (LDL above 129 mg/dl) > 50% 41% From: Metabolic Syndrome and Employer Sponsored Medical Benefits: An Actuarial Analysis K Fitch, B Pyenson, K Iwasaki; Milliman Consultants and Actuaries, March

12 Lower rates of medication adherence lead to higher total medical costs in patients with diabetes Patients who were most adherent had total costs 49% lower than patients who were least adherent Similar findings were reported for hypertension and hyperlipidemia Patients who were most adherent were less likely to be hospitalized than patients with lower adherence levels (P<.05) Cost ($) 18,000 16,000 14,000 12,000 10, Mean medical and drug costs by adherence-rate category over 12 months (patients with diabetes) $16,498 $15,186* $13,077 $12,976 $11,200* $11,008* $1312 $1877 $1970 $2121 $ n=259 n=419 n=599 n=1801 n=182 Least Adherent *P<.05 compared with medical costs for most adherent. Retrospective cohort study of sample of 137,277 patients aged <65 years. Adapted from Sokol MC et al. Med Care. 2005;43: Medical Costs Drug Costs $11,484 $9363* $8887 $6377 Less Medium More Most Adherent

13 Obesity Trends in the U.S.

14 Medical Complications of Obesity Pulmonary disease abnormal function obstructive sleep apnea hypoventilation syndrome Nonalcoholic fatty liver disease steatosis steatohepatitis cirrhosis Gall bladder disease Gynecologic abnormalities abnormal menses infertility polycystic ovarian syndrome Osteoarthritis Skin Gout Idiopathic intracranial hypertension Stroke Cataracts Coronary heart disease Diabetes Dyslipidemia Hypertension Severe pancreatitis Cancer breast, uterus, cervix colon, esophagus, pancreas kidney, prostate Phlebitis venous stasis

15 MEDICAL COST INCREASES BY BMI STRATA (US) BMI BMI BMI BMI >40 3,915 MEN +17% +21% +58% +105% 3,999 WOMEN +9% +27% +43% +112% From: Bachman K. Obesity, Weight Management, and Health Care Costs- A Primer. Disease Management 2007; 10:

16 Impacts of Chronic Disease 5 Plans ALL LIVES IN 5 PLANS LIVES % OF ALL LIVES PAID/PATIENT (YEAR) RATIO TO AVERAGE PATIENT TOTAL PAID (MILLIONS) 31, % $3, $91.6 M DIABETES 2, % $7, $17.9 M ASTHMA 1, % $5, $8.1 M CAD 1, % $10, $12.0 M COPD % $12, $5.9 M CHF % $13, $6.9 M ONE OR MORE CHANGE VS PRIOR YR. 4, % $6, $31.5 M 4.4% 2.5% Recommendations: Implement Chronicare Programs; Integrate health management outreach for primary and secondary prevention of chronic disease; Implement obesity management programs for moderate and severe obesity.

17 Chronic Disease Interventions High Cost Claimant Care Coordination Example Employee # 1 Heart Disease Pulmonary / Respiratory Issues Esophageal Issues High Blood Pressure High Cholesterol Joint Pain Example Employee # 2 COPD/Respiratory Hypertension High Cholesterol Depression Seizures / Grand Mal Example Employee # 3 Heart Disease Hypertension High Cholesterol Total Cost: $16,305 (6 months) 5 PCPs 33 Cardiologists 1 Pulmonologist Total Cost: $27,215 (6 months) 4 PCPs 2 Pulmonologists 2 Cardiologists Total Cost: $93,244 (6 months) 4 PCPs 22 Physician s s Assistants 2 Cardiologists

18 Findings High cost patients Obesity, chronic diseases, cancer, kidney failure (dialysis), serious heart disease, and surgery complications drive the most costs. Chronic disease patients who take their medications have lower costs. c Generic drugs cost $130 less / Rx / mo Discontinuous care exaggerates complications and costs Interventions Steerage and incentives to use Blue Distinction and other Centers of Excellence Cardiac, Surgery, Cancer, Bariatric, Kidney Integrate health management- primary and secondary prevention of diabetes (obesity), cancer (smoking cessation, cancer screening),, heart disease (fitness), Connect the Dots (PBM/ medication adherence, UM) Consider Chronicare Program,, high touch disease management Value based benefit design Lower out of pocket costs for higher value services (i.e. chronic condition drugs, preventive services) Higher out of pocket costs for lower value services (i.e. imaging) g) Consider lower out of pocket costs for health age near chronologic age

19 What We Must Do Engage doctors and patients through incentives and consequences in rational decisions about Elective surgery Non value added imaging Lifestyle choices Handling depression Diabetes self care Cancer prevention/ early intervention Adherence to chronic medications

20 Connect the Dots - Engage the Members Welfare Fund/ Health Plan (Claims Analysis, Benefit Design, Customer Service) Work Site Programs (Flyers, Lunch & Learns, HRA, Biometrics, Tests,) Doctors/ Clinics/ Pharmacies Fitness Center Weight Watchers EAP, Mental Health Tobacco Cessation Program Phone Nurses Participant PBM (Care Tracking, Med Adherence) Hospitals/ Education Centers Dieticians Case Managers, UM Employee Cafeteria Meals/ Snacks Health Coaches Laboratories Pharma Companies

21 Case Studies Lessons Learned

22 West Virginia 1340 Employees Avg. Age= 44 VBBD Case Study HEREIU Welfare Fund PROBLEM 14.5% Annual Medical Cost Trend for 8 years running Overweight: 75% High BP: 41% Use Tobacco: 31% Diabetes: 29% Didn't Know Their Numbers Outpt hosp pmpm: 88% higher Radiology: 85% higher Ofc visits: 66% higher Drugs: 48% higher VALUE BASED DESIGN Enrollment requires coaching calls RESULTS Saved $2 million first year Generic drug co-pays waived 3 Year Annual Cost Trend <4% Free self-care book (Rest of WV Cost Trends +12%) Free tobacco cessation program Drug Cost Trend: Negative 9% On site clinic Generic fill rate: Increased 18% Cost transparency Prescribing transparency Co-insurance incentives Outpatient facility CT scans Steer to better value providers 60% + Know Their Numbers Average Cholesterol: 8% lower Quit Tobacco: 6% in first year Good nutrition: 50% increase Good cholesterol: 29% increase Good exercise: 25% increase

23 Physician Prescribing Transparency

24 DTC Generic Alternatives Campaign

25 Aurora Units Drug Trends - Successes DRUG CLASS DIFFERENCE CLAIMS/1000 % DIFFERENCE CLAIMS/1000 Antidiabetics % Antilipemics % Blood Pressure % Asthma % Antidepressants % Cardiovascular % As medication adherence increased, inpatient med/surg dropped 4%. For 5 plans, drugs increased $1.1 M, IP med/surg dropped $0.8 M.

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27 Chronicare Program Flow Sheets Diabetes, Hypertension, Lipids

28 Summary Improvements in health and medical cost trends can be achieved through integrated health management interventions. Value based benefit designs and care management engagement Incentives and consequences for patients and providers aligned with desired behaviors. Challenges remain in moving health choices from being externally motivated to becoming internally driven.