Value-Based Healthcare: The Evolving Model

1. Value-Based Healthcare:The Evolving Model Presented by: Bruce Shepard, Executive Director Dr. Andrea Read, Medical Director

2. Overview • The traditional model … Fee for Service • What has happened to healthcare costs? • How has the rising cost affected employers? • The shift to value-based payment and care models • Overview of value-based models • Keys to success in the value-based world

3. The Traditional Model … Fee for Service • Fee-for-service (FFS) is a payment model where services are unbundled and paid for separately. In health care, it gives an incentive for provers to provide more treatments because payment is dependent on the quantity of care, rather than quality of care. • … dates back more than 100 years. The model worked well for much of the 20th century…1 • If medical costs continue to surge 2% to 3% higher than our nation’s ability to pay, the healthcare system will soon reach a breaking point.1 • National Health Expenditures reached $3.3 trillion, or $10,348 per person in 2016.2 1: Forbes: Healthcare's Dangerous Fee-For-Service Addiction, 9/25/2017 2: Centers for Medicare and Medicaid Services: National Healthcare Spending in2016,

5. The Effect of Healthcare Costs on Employers…

6. The Shift to Value-Based Healthcare • Value-based healthcare is a healthcare delivery model in which providers, including hospitals and physicians, are paid based on patient health outcomes. Under value-based care agreements, providers are rewarded for helping patients improve their health, reduce the effects and incidence of chronic disease, and live healthier lives in an evidence-based way.3 • Also known as accountable care, population health management, at risk contracting, proactive patient management, … • Value = (Quality + Outcomes) / Cost … better care at a better cost • Evolution of value-based care… • P4P – early 2000s • Patient Protection and Accountable Care Act (PPACA) - 2010 • Accountable Care Organizations (ACOs) – 2011 3: NEJM Catalyst: What is Value-Based Healthcare, 1/1/2017.

7. The Value-Based Timeline

8. Value-Based Care Models • Medical Homes • a coordinated approach to patient care, led by a patient’s primary physician who directs a patient’s total clinical care team4 • Accountable Care Organizations • doctors, hospitals, and other healthcare providers work as a networked team to deliver the best possible coordinated care at the lowest possible cost. Each member of the team shares both risk and reward, with incentives to improve access to care, quality of care, and patient health outcomes while reducing costs4 • Hospital Value-Based Purchasing • acute care hospitals receive adjusted payments based on the quality of care they deliver4 • Bundled Payment / Episode of Care • the total allowable acute and/or post-acute expenditures (target price) for an episode of care are predetermined. Participant providers share in any losses or savings that result from the difference between this target price and actual costs • Clinically Integrated Networks • a legal structure that facilitates sanctioned collaboration among health care providers. With shared goals in performance, quality, value and efficiency, CINs help providers remain competitive promoting higher quality, better coordinated care at more affordable cost with the goal of achieving superior reimbursement rate negotiation5 4: NEJM Catalyst: What Is Value-Based Healthcare, January 1, 2017. 5: Nthrive, What Is a Clinically Integrated Network and What Are It’s Primary Characteristics?, February 19, 2018

9. The Risk Continuum Financial Opportunity & Incentive Alignment P4P PCMH CLINICAL INTEGRATION Provider-SPONSOREDPLANS BUNDLEDPAYMENTS CAPITATIONFULL RISK SHAREDSAVINGS • CLINICAL INTEGRATION PCMH BUNDLEDPAYMENT SHAREDRISK CAPITATIONFULL RISK CLINICAL INTEGRATION SHAREDSAVINGS P4P HEALTH PLANS Credit: Valence Health, 2016.

10. Keys to Success in the Value-Based World • Governance that Educates, Engages, and Energizes • Data Transformation that Addresses Clinical, Financial, and Operational Questions • Analytic Transformation that Aligns Information and Identifies Populations • Payment Transformation that Drives Long-term Sustainability • Care Transformation as a Key Intervention in Value-Based Contracts6 4: NEJM Catalyst: What Is Value-Based Healthcare, January 1, 2017.

11. Where is this value-based care model going? • “Moving from a fee-for-service to a fee-for-value system will take time, and the transition has proved more difficult than expected. As the healthcare landscape continues to evolve and providers increase their adoption of value-based care models, they may see short-term financial hits before longer-term costs decline. However, the transition from fee-for-service to fee-for-value has been embraced as the best method for lowering healthcare costs while increasing quality care and helping people lead healthier lives.” 7 7: NEJM Catalyst: What Is Value-Based Healthcare, January 1, 2017.

12. Value-Based Healthcare:The Evolving Model Presented by: Bruce Shepard, Executive Director bshepard@nw-health.com, 479-757-4490 Dr. Andrea Read, Medical Director aread@nw-health.com, 479-757-4098