Redesigning Consumer Cost Sharing to Support Episode-of- Care Payment for Providers

Transcription

1 Redesigning Consumer Cost Sharing to Support Episode-of- Care Payment for Providers The Second National Bundled Payment Summit Designing and Implementing Healthcare Solutions That Work August 25,

2 Safeway Overview Fortune 100 company Sales: $43.6 billion Gross profit: $ % Operating profit $ % Cash flow from operations $ % Scope of core business Stores 1,678 Pharmacies 1,330 Wellness Centers 800 Fuel Stations 300 U.S. and Canada Western focus 2

3 Safeway Operating Area Carrs Vancouver Alberta Winnipeg Seattle Portland Northern California Vons Phoenix Denver Dominick s Eastern 22 States U.S. 5 Provinces - Canada Randall's / Tom Thumb 3

4 Safeway s Results Our Healthcare Challenge in 2005 Health benefits costs exceeded pre-tax earnings Annual Healthcare Cost Growth (%) Historically, growing at twice the rate of sales growth Inaction would compromise the business viability 4

5 Making a Market in Health Care Provide access / choice to competitively priced and high-quality care Deliver price information and quality metrics to inform consumer choice and encourage shopping behavior Use defined contribution benefit designs or reference pricing approaches to motivate smart choices at the therapeutic level Ask members to make informed, active choices with their physician about their care and related costs Add price to a marketplace that already has all other direct to consumer components of the marketing mix 5

6 The Market Sweet Spot Comparable Sweet Spot Value Shoppable 6

7 Safeway s Pharmacy Benefit Redesign Encouraged use of lower cost therapeutic alternatives Based on proprietary tools to identify opportunities Integrated into the existing pharmacy plan Launched independently of open enrollment cycle Achieved savings immediately 7

8 A Market Priced Drug Design ILLUSTRATIVE ILLUSTRATIVE Typical Plan Design ($10/$30/$45) Our Plan Design Nexium 40mg Lansoprazole 30mg Omeprazole 40mg Total $ Plan $ EE $ $201 $156 $45 $19 $9 $10 $14 $4 $10 Nexium 40mg Lansoprazole 30mg Omeprazole 40mg Total $ Plan $ EE $ $201 $4 $197 $19 $4 $15 $14 $4 $10 Note: More than three member options are available 8

9 Safeway s Program Options ILLUSTRATIVE ILLUSTRATIVE Options 1 Keep Nexium 40mg $197 Current Formulary You pay for 30-day prescription of Nexium 40mg $45 2 Switch to therapeutic alternative Omeprazole 20mg $10 OR Switch to therapeutic alternative Lansoprazole 30 mg $15 3 Request and receive exception approval for Nexium 40mg $45 Note: Assumes a typical 3 tier Rx structure 9

10 Transparency Web-Tools Current RX Information with New Cost Lowest Cost Alternative Send to Physician Additional Lower Cost Options 10

11 Mobile Medicine Cabinet Drug Pricing and Options Medicine Cabinet Users can access their Medicine Cabinet directly on any mobile device and: Perform a drug search Access local pharmacy pricing Review drug pricing options Access their drug history. 11

12 Pharmacy Program Impact Addresses over 50 therapeutic categories Savings per category exceeds 50% of category spend Total gross savings of 18% - 20% of plan spend 85% of consumers switch to lower-cost prescriptions 3% of impacted prescriptions request program exceptions Expanding program to specialty products next year 12

13 Enabling Healthcare Consumers - Medical Fill critical gaps in consumer information Procedure information What is this operation really about? Price Information Historically not available Quality information NOT correlated with price Expose members to pricing for scheduled medical procedures Motivate informed, active decisions with physicians Deliver significant plan and member savings Integrate with healthcare plan to adjudicate benefit cap Achieve savings quickly not tied to open enrollment cycle 13

14 Price Variation in Medical Procedures Cost Per Procedure - Greater SF Bay Area MSA $28,887 Low Cost High Cost $15,773 $7,245 $913 $3,664 $887 $1,010 $3,039 MRI Spine Colonoscopy Diagnostic CT Scan Abdomen Knee Arthroscopy 4:1 8:1 16:1 10:1 High Cost : Low Cost Multiple 14

15 Price Variation for MRI - Spine Cost Per Procedure Greater SF Bay Area MSA Facility Professional $3,664 $3,016 $2,276 $2,460 $1,477 $1,728 $913 A B C D E F G MRI Providers 15

16 Price Variation for Colonoscopies Cost Per Procedure Greater SF Bay Area MSA Room & Supplies Professional Medications Diagnostics $7,245 $5,596 $2,876 $3,333 $3,769 $887 $1,249 $1, Representative sample: 8 out of 41 facilities Diagnostic Colonoscopy Providers 16

17 Price Variation for CT Scan Abdomen Cost Per Procedure Greater SF Bay Area MSA Facility Professional $15,773 $7,375 $2,447 $3,513 $4,312 $5,470 $6,081 $1,010 A D J N U X AA DD Representative sample: 8 out of 30 facilities CT Scan Providers 17

18 Safeway s Progress ~550 labs implemented ~70 imaging procedures implemented Select outpatient procedures Achieving 3-5% reduction in healthcare cost trend this year Expect total savings to be 8% - 10% of cost when fully implemented 18

19 Closing Points Providers have engaged patients to drive purchase choice Direct to consumer advertising Promotions (e.g. free prescriptions, coupons) Historically, price information has been conspicuously absent and extraordinarily complicated to collect Fragmented billing practices Percent of charges billing Contractual restrictions, non-disclosures, etc. However, price information tools have arrived Purchasers, both employers and consumers reward price simplicity 19

20 Redesigning Consumer Cost Sharing to Support Episode-of- Care Payment for Providers The Second National Bundled Payment Summit Designing and Implementing Healthcare Solutions That Work August 25,