Roles for Government Purchasers in Payment Reform Doug McKeever, Chief CalPERS Health Policy Research Division October 30, 2014 1
Roles for Government Purchasers in Payment Reform CalPERS Overview • Nearly 1.4 million members • More than 1,200 employers – State – Public agencies – Schools • Will spend approx $7.7 billion in 2014 to purchase health benefits • Largest employer health benefits purchaser in California and second largest in the nation 2
Roles for Government Purchasers in Payment Reform Significant Savings Needed to Bend Trend CalPERS future healthcare cost by growth rate $ billions 9.5 Historic growth rate $800 million annual (CPI+5%) 9.0 savings required to reach CPI+3% by 2015 8.5 CPI+3% CPI+2% 8.0 CPI +1% 7.5 7.0 6.5 6.0 2010 2011 2012 2013 2014 2015 3
Roles for Government Purchasers in Payment Reform 4
Roles for Government Purchasers in Payment Reform Reference Pricing: Hips and Knees • CalPERS total costs for muscle, bone and joint disorders topped $540 million in 2008 • Elective knee and hip replacements - $55 million – Hospital costs varied from $15,000 to $110,000 with no difference in quality or outcome • In 2011, for CalPERS self-funded PPO plans, Anthem Blue Cross of California established payment threshold of $30,000 for routine single knee and hip joint replacement hospital stays 5
Roles for Government Purchasers in Payment Reform Reference Pricing: Hips and Knee (continued) • If member does not elect a designated hospital and there are provider charges in excess of the threshold, member pays difference between threshold and hospital charges • Program promotes access to, and use of, higher value providers, treatments, and services to drive down costs while maintaining quality • Average hip or knee replacement charge declined by 26 percent, or an average of $9,000 per procedure 6
Roles for Government Purchasers in Payment Reform Reference Pricing Percentage of Surgery Patients Choosing Low ‐ Priced and High ‐ Priced Hospitals before and after the Implementation of Reference Pricing 70% CalPERS low ‐ price hospitals 65% 60% Anthem low ‐ price hospitals 55% 50% 45% Anthem high ‐ price hospitals 40% 35% Reference Price CalPERS high ‐ price hospitals Implementation 30% 2008 2009 2010 2011 2012* 7
Roles for Government Purchasers in Payment Reform Reference Pricing 2010 Claims – Pre Implementation 2011 Claims – Post Implementation Average of Average of Paid Amount Paid Amount $120,000.00 $120,000.00 $100,000.00 $100,000.00 $80,000.00 $80,000.00 $60,000.00 $60,000.00 $40,000.00 $40,000.00 Reference Pricing of $30,000 Reference Pricing of $30,000 $20,000.00 $20,000.00 $- $- Total Avg Paid Amount: $32,932 Total Avg Paid Amount: $23,112 8
Roles for Government Purchasers in Payment Reform Reference Pricing CalPERS savings, compared to what would have been paid without Reference Pricing: • 2011: -19.6% ($2.8 million) • 2012: -18.6% ($2.7 million) • Cumulative savings: $5.5 million 9
Roles for Government Purchasers in Payment Reform ACO-like Integrated Health Care Model • Begun as two-year pilot in 2010 – Blue Shield of California – Catholic Healthcare West (Dignity Health) – Hill Physicians Medical Group • First year results: – Reduced inpatient utilization – $15.5 million savings • Continue to expand integration with health plans 10
Roles for Government Purchasers in Payment Reform Priority Care Project – Humboldt-Del Norte Goals: • Increase health care quality and reduce costs • Improve member safety, quality of life, and health outcomes through coordination of care and high intensity case management • Align incentives for plans and providers using shared savings model: – 50 percent of the savings to CalPERS – 45 percent to the physician group – 5 percent to Anthem 11
Roles for Government Purchasers in Payment Reform Priority Care Project – Humboldt-Del Norte Accomplishments: • Provider and Member engagement • Effective enrollment strategies • Open communication channels for all participants • Shareable electronic Care Management software in place • Strong, effective Member-RN relationships established and on-going 12
Roles for Government Purchasers in Payment Reform Questions Doug McKeever 916-795-0767 Doug_McKeever@CalPERS.CA.GOV 13
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