David Hom, Chairman Center for Health Value Innovation

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Building a MovementValue Based Benefits -The
Business Case for Change

• David Hom, ChairmanCenter for Health Value
  Innovation
• June 10, 2008 Portland Oregon

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What to Expect Today

• Does the concept of health as an investment make
  good business sense?
• Is this model sustainable and scalable?
• The Movement-Update on the Market

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Total Value Total Returnby Jack Mahoney, MD and
David Hom
Seven Rules for Optimizing Employee Health
Benefits for a Healthier and More Productive
Workforce Rule 1 The Health of Your Organization
Begins with Your People Rule 2 To Realize Total
Value, You Must Understand Total Cost Rule 3
Higher Costs Dont Always Mean Higher Value Rule
4 Health Begins and Ends With the
Individual Rule 5 Avoid Barriers to Effective
Treatment Rule 6 Carrots Are Valued Over
Sticks Rule 7 Total Value Demands Total
Teamwork -Over 50,000 books have been
distributed since 2005
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BeneFit Design 7 Steps to Value Based Health
Benefit Decisions by Jack Mahoney, MD and David
Hom

• Define Value
• Collect Data
• Organize Your Data
• Analyze Your Data
• Target Your Initiatives
• Pitch Your Initiatives to the C-Suite
• Implement Your Initiatives
• - Over 30,000 copies have been distributed since
  2007

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US Healthcare Market- Why Inflation

• Inelastic Demand and expectations
• Baby Boomers growth
• Increased life expectancy
• New Technologies
• Bio Tech pipelines
• Incentives are not aligned with stakeholder
• Paid for sickness
• Short term vs. long term tension
• Increase volume of chronic conditions
• Population with Diabetes will increase by 100
• Poor patient adherence
• Patients do not follow their doctors
  recommendations

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Solutions to Meet the Challenges

• Give up and ask for the Government to intervene
• Allow things to continue as they are
• Act on what you can do-Line of sight
• Rethink the value proposition focused on improve
  employee engagement and productivity
• Join the movement-Value Base Designs

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Center for Health Value Innovation
501c3Mission We will share evidence that
value-based designs improve health and financial
sustainability
All market segments are focused on the Value
Proposition of Investing in Workforce/ Consumer
Health
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Center for Health Value Innovation
Board of Directors Officers Chair David
Hom President Cyndy Nayer Secretary Mike
Taylor MD Caterpillar Chief Medical Officer
Jack Mahoney MD Treasurer Greg Judd Special
Advisors Joycelyn Elders MD, former US Surgeon
General Robert Campbell, former chair, Robert
Wood Johnson Foundation

• Board of Directors
• Caterpillar
• City of Springfield, OR
• AIAG
• Detroit Chamber of Commerce
• FPL
• Gulfstream
• Hannaford Brothers
• Health Alliance Medical Plans
• HEB
• H.E.R.E.I.U.
• Horizon BCBS
• Humana
• IBM
• Johns Hopkins Health Care
• Kellogg
• Partners in Care
• Pfizer
• Prime Therapeutics

• Board of Advisors
• Abbott
• Chrysler
• Cisco
• Cleveland Clinic Health Plan
• Corporate Synergies
• Dow Chemical Company
• GlaxoSmithKline
• Holmes Murphy
• Home Depot
• Intercare Solutions
• Integrated Health Partners
• King County, Washington
• Mayo
• Merrill Lynch
• Merck
• Procter Gamble
• sanofi-aventis
• Set Seg

• Industry Allies
• World Health Care Congress
• AIAG
• NBCH
• PBMI
• Interface EAP
• Colorado Business Group on Health
• Midwest Business Group on Health
• New York Business Group on Health
• Resolution Health, Inc.
• Navigator MD

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Definition of Value-Based Design

• Value-based design is a health management process
  that
• 1 Uses data to
• 2 Invest in incentives that
• 3 Change behaviors to
• 4 Reduce financial and health risk (ROI)

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Value Based Design is a Totally Integrated program

• The program will include the following suite of
  designs
• Enhanced communication to reach the member
• Use of a health portal for 24/7
• Wellness programs that can be measured
• Cafeteria messaging
• Lower administrative barriers
• Lower financial barriers for physician office
  visits , labs and Rx
• Focus care management programs focused on chronic
  conditions

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Data Drives Benefits Design

• Capture as much data as possible including
  medical/Rx, disability and workers compensation
• Look at what are the underlying cost drivers of
  chronic conditions such as diabetes or asthma
• Review what barriers exist to prohibit access to
  care
• Financials
• Administrative
• Driving distances to providers and hours of
  providers

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Data Drives Benefits Designs-Barrier-Cannot get
Data Possible Solutions

• Assume your population chronic conditions are
  similar to the health plans population
• Ask for what were the top 5 highest chronic
  conditions 5 years prior vs. most recent year
• Pull the same data from the Disability and
  workers compensation carrier
• Create the graph of rising health care costs and
  profit over the next 10 years
• Create the solutions to offset the medical
  inflation

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Pitney Bowes Develops Value-based Designs

• Setting the Stage

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Creating a Culture of Health Health Begins and
Ends with the Individual
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The Pitney Bowes Timeline17 Years of Innovation
Using Plan Design to Change Behavior
Costs begin to come down
Value- Based Benefits Launch

• Algorithms
• Consumer- directed choice

EAP-Behavioral Health
EPO HCU
First free Rx Design
DATA Warehouse
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Managed Competition-Cost Focus

• The Concept
• Access to a broad array of managed care plans
• Employee cost based on quality
• The Issues
• Annual Plan Design Changes
• Entry/Exit of HMOs
• Network Geographic Changes
• Fluctuating Employee Contributions
• Manage resource consumption through
  deductibles/co pays/coinsurance
• Focus on high cost cases
• Strategic Issues
• HMO Centric
• Overemphasis of Financials
• Reactive not Proactive

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Enrollee Annual Cost Distribution-Data
Segmentation-Your cost will be like this
Participants
Total
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Enrollee Annual Cost Distribution-Traditional
Approach-Shift to how to manage the Nonusers and
Low cost users
Participants
Total
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Benefits Redesign Based on Predictive
Modeling-This can be applied to your population

• Finding
• Individuals with no exposure to health care
  system (zero claims) are at high risk of becoming
  high cost claimants within 3 years.
• Response
• Engage people in health care system
• Free or limited cost of preventive/screening
  services
• First dollar coverage for routine medical care
• Eliminate front-end deductibles
• Robust EAP services

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Benefits Redesign Based on Predictive
Modeling-This can be applied to your population

• Finding
• Individuals with chronic conditions and low
  medication compliance rates have high probability
  of moving to a higher cost tier within one year
• Asthma
• More than 1 fill of Albuterol in a 30 day period
• Diabetes
• Less than 9 30-day fills in a 12 month period
• Hypertension
• Less than 9 30-day fills in a 12 month period

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Solution Rx Access Benefit Design
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Five Year Change in Medication Adherence
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Case StudyPitney Bowes
Investments Resulted in Improved
Outcomes-2002-2006
SAVINGS OF 1 MILLION IN 1st -2nd YEAR

• Annual cost of care decreased for both conditions
  (asthma and diabetes)
• Pharmacy costs decreased
• Hospital admissions declined for people w/ asthma
• Increased for people w/ diabetes (still below
  benchmark)
• ER visits declined for people w/ diabetes
• Disability costs decreased by 50 diabetes
• Changes in medication/possession rates for both
  groups
• Improved adherence
• Types of medications (more controllers, less
  rescue)

SAVINGS OF 2.5 MILLION 3rd YEAR
SAVINGS OF 4 MILLION 4th YEAR
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Pitney Bowes Total Annual Cost per Employee vs.
Benchmark
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Updating the Strategy for 2007

• No co pay on all statins and statin fixed-dose
  combinations for
• Diabetics
• Post cardiac event
• MI
• Angioplasty
• Stent
• Preliminary statin results for diabetics
  (reflects first 6 months of 2007)
• MPR increased from 85 to 88
• Sub-Optimal users decreased from 28 to 23
• Other investments

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Evidence of Success in Value-based Designs

• The Shift is Sustainable and Scalable

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What weve learned

• Multiple market segments are embracing and/or
  innovating VBD
• Employers-100 plus large and small
• Brokers/Consultants
• Health Plans
• Coalitions
• Unions
• Hospital Systems
• Physician Groups

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What weve learned-What are the key questions

• How do I start?
• Anywhere but use the principles of FIT-Design
• How do I create the business case for investing?
• Show the Do nothing strategy
• How do I make it work?
• Partner with your key internal/external teams
• How do I measure the plan changes?
• Keep it simple

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Health Value Innovators Are Leading the
Value-Based Movement
80employers identified Health plans and
employers are in the Innovations space Many have
made co-pay changes
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New Case Studies Are Uploaded
April 2008
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Midwest Company AchievesValue-Based
Results16,000 employees
Quad Graphics-QuadMed
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Grocery Chain Achieves Value and Health
Improvement
Hannaford Brothers Co.
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Midwest Health Plan AchievesValue-Based Results
for Employees
Health Alliance Medical Plans
Reduce financial barriers to maintaining
health. Move all meds for diabetes and asthma to
Tier 1 of formulary to improve compliance
adherence.
Diabetes and Asthma show cost/benefit Rx
Utilization Diabetics 8.8. Asthmatics
6.9 Med Possession Ratio gt.8 Diabetics
10.6 Asthmatics 32.7 Monthly Rx
Costs Diabetics 19.5 Asthmatics
56.7 compared to control population
Carle Clinic medical costs for asthma and
diabetes were projected to reach more than 3
million in 2007. Total costs estimated at nearly
9 million.
Results
Problem
Value-Based Design
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Large Manufacturing Firm Uses Design to
Re-Balance Business Health Strategy
Procter and Gamble
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Mid-Market Company in Southeast Achieves Results
in Value-Based Design6000 employees
SCANA
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Municipality Shows Reduced Trend in Random Study
fully insured
City of Springfield, OR
450 employees
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The Center Forecasts VB Health Trends

• Alignment of stakeholders
• Provider participation in incentive-based designs
• Emergence of value-based products
• Technologies for consumer health improvement
• Focus on personalization of benefits

http//www.forbes.com/businesswire/feeds/businessw
ire/2008/03/18/businesswire2008031
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Whats in the Future?-New VBD Products

• Data Platforms which will integrate all
  medical/rx claims, wellness data, and
  productivity data which will be easily to use and
  deploy at a fraction of todays cost
• Adherence based platforms using web/text
  messaging creating daily scorecards for consumers
  and will train them to adhere to the regiment
  recommended by the doctor
• Re-Insurance Companies will create opportunities
  for reduced Stop Loss premiums to health plans
  and to employers who adopted a VBD product

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States and Municipalities-The Perfect Storm

• GASB accounting will force States/Cities and
  Towns to recognize retiree medical liability for
  current/future State workers
• Large exposure for many States
• Increase cost burdens
• Creative solution will be needed
• Value Base Designs can lower the assumption of
  the rate of inflation

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Summary

• Companies are investing in value-based designs
  for
• Long-term reduction in health cost, disability
  and accounting trend
• For improved employee/consumer engagement
• Value-based design is replicable and scalable
• VBD will change, improve, mature based upon the
  market and the companies who lead
• Innovative companies and service providers will
  adopt adherence-based contracting-Align the
  incentives

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Comments/ Contact Information

• David Hom
• DaveHom_at_VBHealth.org
• 203-218-8333
• Cyndy Nayer
• CyndyN_at_VBHealth.org
• 314-422-4385
• Greg Judd
• Gjudd_at_VBHealth.org
• 203-231-1372