Putting It All Together and Driving Quality:

GMs Value-Based Purchasing Strategy

Tricia Marine Barrett Managed Care Consultant GM Health Care Initiatives MichPHA Fall Kick-off Ann Arbor, Michigan September 21, 2006

The Big Picture

General Motors is the largest private purchaser of health care in the United States

1.1 million employees, retirees & dependents 30 percent in fully insured HMOs Older population with more than three retirees/surviving spouses for each active worker Total 2005 health care expenditure - $5.3 billion ~$1.2 billion in HMOs Over 120 Plans administered by ~35 carriers nationwide

HMO Portfolio

GM U.S. Health Care Total Cash Expenditures

$5.9
$5.2

$5

$ Billions

$4.9
$4.2 $3.9

$4.5

$4.7

$3.9
$3.3 $3.0 $3.1

$3.5

$2.9
1996 1997 1998 1999 2000 2001 2002 2003 2004

20

U.S. Health Care Trends In Double Digits

20% 15% 10% 5%

Avg Health Care CPI

13.5%

3.3%

0%
19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04

Growing Utilization and Increasing Prices Driving Health Care Inflation To Unsustainable Levels
Per Watson Wyatt Worldwide

Responsible Healthcare Purchasing

The current cost crisis is inextricably linked to quality and the perverse payment structures that discourage quality while driving up costs.
(IOM Crossing the Quality Chasm, chapter 8).

Health Plan Role

Purchaser
Hold Accountable

Consumer Health Plan

Expect to Meet Needs

Provide Quality Leadership Hold Delivery System Accountable for Value Provide Delivery System With - Information - Coordination - Support - Communication Selection and Contracting

Delivery System
Hospital Primary Care Physician Pharmacy Behavioral Health Home Health Care Specialty Physician Other Therapeutic Services Diagnostic Services Centers of Excellence

Value Based Purchasing

_______________________

QUALITY COST

= VALUE

General Motors Value Purchasing Strategy

GMs 3-Pronged Strategy

Health Plan Accountability

health plans

Annual quality assessment through eValue8 RFI, NCQA accreditation and HEDIS/CAHPS scores (CARS Project)

Motivate migration of enrollees to higher value

Compare quality and cost of HMOs 4 performance bands Salaried monthly contribution is tied to HMO performance Requires significant communication with employees

Aggressive Supplier Development

Best practice sharing among Plans

eValue8 is an integral part of each prong

Accountability: Coordinated Autos Reporting System (CARS)

Partnership with Ford, GM, Delphi and the State of
Michigan (DaimlerChrysler participated until 2006)

Purchasers contract with NCQA to conduct the analysis NCQA uses CAHPS and HEDIS performance to assign 15 stars in four categories:
Getting Better/Living with Illness Staying Healthy Access and Service Doctor Communication and Service

Methodology consistent with NCQA/US News & World

Report health plan report card

Accountability: National Business Coalition on Health eValue8 RFI

Common RFI sets expectations and assesses

performance of HMOs and PPOs
Plan Profile Health Information Technology Consumer Engagement Provider Measurement, Incentives and Rewards Primary Prevention and Health Promotion Chronic Disease Management Behavioral Health Pharmaceutical Management

Key Objectives of Common RFI

Create and Implement Standardized Performance Expectations Reduce Redundancy by Consolidating Purchaser Requests Promote Health Plan Accountability & Transparency Recognition of the Importance of Health on Productivity and the Bottom Line Foster Market Reform Sustained Movement to Higher Value = Fn(Quality/Price)

Why GM uses the eValue8 RFI

The eValue8 RFI tool enables GM to:

Measure health plan quality and monitor

improvements

Differentiate among health plans Support rate negotiations Inform and target supplier development
activities

Motivate Migration: 2006 Salaried Flex Pricing Health Plan Scoring HMO HMO HMO HMO Table A B D C
eValue8 RFI Results HEDIS / CAHPS (CARS evaluation) NCQA Accreditation Raw Score Flex Score (25) Raw Score Flex Score (20) Raw Score Flex Score (5) 129 5 7 7 221 25 14 14 211 24 13 13 176 16 13 13

Commendable Excellent 2 5 14 24 23 47 61 Avg $200 44 20 13 33 77 Benchmark $100

Excellent Accredited 5 1 42 19 12 31 73 Strong $150 30 22 14 36 6 6 Good $180

Total Quality Score (50) National Rate Rankings Relationships of rates to Local Indemnity Total Cost Score (50) Total Quality + Cost (100) Rating Sample Employee Contribution

Changes to Quality Score Methodology for 2007 Enrollment from 25 to 30 points Increased score for eValue8 Relative performance evaluation completed for each
eValue8 section rather than by total score

Removed points dedicated to NCQA accreditation

Accreditation is required 90% of GM HMOs have Excellent accreditation Subtract points for HMOs with less than Excellent rating Bring these points back when Quality Plus elements have been fully integrated and new rating system developed

Subtract 4 points from the CARS stars (minimum

score)

Add 4 points for Partnership rating

2005 Top HMOs Cost/Quality Comparison

50

Low Cost

45

Improve Quality H & S Members = 0

Well Performing H & S Members = 101,318

40

35

30

25

20

High Cost

15

10 10

Improve Quality & Cost H & S Members = 24,689

15 20 25 30

Improve Cost H & S Members = 86,752

35 40 45 50

Low Quality

High Quality

B-Band

C-Band +

D-Band

E- Band

F-Band X

G-Band

Based on Salaried Banding Study 2005

Motivate Migration: Salaried Health Care Monthly Contributions

Monthly Employee Contribution (Family)
EMP PPO

HSA PPO 2006 2005 $0 $0

Benchma rk HMO

Strong HMO

Good HMO $180 $110

Average HMO $200 $145 -$190

$100 $45

$125 $70-$85

$150 $85

Motivate Migration

Employees/ Retirees can compare Plan options on aggregate quality performance

Motivate Migration

Results of annual CARS analysis: Values represen t the number of Stars earned

Motivate Migration

Employees/Retirees can also use the Asparity Plan Finder tool to compare performance on individual measures of interest to them.

Motivate Migration

Migration Results

Salaried HMO Migration % of HMO Members By Band

1996 2000 2003 2006
4% 1 3% 8 3% 4 3% 1 2% 5 2% 2 1% 8 1% 3 1% 2 1% 9 1% 1 1% 3 9 % 3% 4 4% 1

45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

3% 9

Benchmark
Benchmark Total 5

Strong
Strong 16 Good 23

Good

Average & below

Average 36

Number Of Plans By Band - 2006

Aggressive Supplier Development Using eValue8:

Driving HMO Collaboration for Quality Improvement

Quarterly Meetings with High Volume HMOs Monitor Work Plans in areas of poor performance Monthly Conference Calls (Accelerating Improvement in Managed Care)

Summary
Accountability for Quality motivates improvement Premium adjustment and performance transparency effectively migrates members to higher performing health plans GM believes the way to reduce health care cost is to improve qualityand provide people with the information to make smart health care decisions

Parting Thoughts ...

Weve concluded that the quality of care cannot improve until physicians and hospitals [and health plans] nationwide are held accountable to common measures of performance.

McGlynn and Brook, Rand Institute, Full Disclosure: Time for the Naked Truth About Healthcare RAND Review, Summer 2001