Davis County Chamber of Commerce David Entwistle Chief Executive Officer University of Utah Hospitals & Clinics April, 2013
Health reform as a topic1. I saw this topic and was so excited.2. I feel I have marginal knowledge and want to learn more.3. What was the planning committee thinking when they picked this topic?4. I wonder if they can tell if I am asleep if I put on my sunglasses.
Agenda 1. U.S. Spend Comparisons 2. National Perspective 3. Health Reform Outlined 4. How Hospitals Responding 5. Employer Strategies
Healthcare Spending per Capita, 2008 Adjusted for Differences in Cost of Living* 2007.Source: OECD Health Data 2010 (Oct. 2010) 4
Hospital Spending per Discharge, 2008 Adjusted for Differences in Cost of Living* 2007.** 2006.Source: OECD Health Data 2010 (Oct. 2010) 5
2009 U.S. Healthcare Expenditures per Capita SignificantlyGreater Than Other OECD Countries for Similar LifeExpectancy 85 Japan Spain France Canada Average Life Expectancy U.K. 80 Germany U.S. 75 Turkey 70 $0 $2,000 $4,000 $6,000 $8,000 Healthcare Spending per CapitaNote: Canada average life expectancy for 2007. Italy life expectancy for 2008. Australia, Japan, Portugal, and Turkeyhealthcare spending for 2008. Greece healthcare spending for 2007.Source: OECD updated November 2011.
Costs by Age Categories Healthcare Costs by Age U.S. is spending much more for older agesSource: Fischbeck, Paul. “US-Europe Comparisons of Health Risk for SpecificGender-Age Groups.” Carnegie Mellon University; September, 2009. 7
Happy New Year!“The aging population and the rising cost of health care makes Medicare the biggest contributor to our deficit...We’ve got to find ways to reform that program without hurting seniors who count on it to survive.” President Barack Obama, January 1, 2013 News conference after Fiscal Cliff Tax Deal passes
At the Inauguration“We must make the hard choices to reduce the cost of health care and the size of our deficit, But we reject the belief that America must choose between caring for the generation that built this country and investing in the generation that will build its future.” President Barack Obama, January 21, 2013 Inaugural Address
Sequestration Impact on KeyBudget Areas Medicaid Medicare Other Defense 0.0% 0.0% -2.0% -2.0% -4.0% -6.0% -8.0% -7.8% -10.0% -10.0% -12.0% Source: cbo.gov
Healthcare Inflation Continues to Outpace National Inflation10% 9.50%9% 8.50% 8.40%8%7% 7.10% 7.10% 6.80% 6.60% 6.20%6%5% 4.70%4% 3.85% 3.90% 3.91% 3.80% 3.80% 3.39% 3.24%3% 2.83% 2.85% 2.68% 2.27%2% 2.10% 1.59% 1.64%1% 0.34%0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total National Health Expenditures US Inflation Rate Source: Bureau of Labor Statistics and CMS
So What is Reform really about?$/N Healthier Population Lower Use Lower Prices Higher Quality 201 Time 3 Source: Len Nichols, George Mason University
Health Reform Law: Two Big Themes • Payer Reform- More people will be covered by insurance but at a lower reimbursement rates for hospitals & providers. • Delivery Reform- Shift from “Pay for Procedures” to “Pay for Outcomes.” 15
The Market is Changing…• Focus on delivering greater value. – Improved clinical outcomes – Increased patient satisfaction – Lower cost• Payment systems and methodologies are changing… rewarding those who deliver value.• Initial projections indicate we will be paid on average at Medicare Rates.• Academic Medical Centers funding to support academic mission will be diminished.
Accountable Care Organizations (ACO)• Goal: maintain or improve quality of care while reducing overall health care costs.• ACO Model – Care for a defined population of patients – Focus on keeping individuals well – Eliminate unnecesary, test, care, etc 17
So why Have ACOs been such a hottopic in Reform?• Dartmouth Atlas showed that costs and quality could be attributed fairly accurately to the “community practice” defined by hospital service areas, and that performance varies widely from one hospital community to another• So...if cost and quality can be attributed to hospitals and their “extended medical staffs” perhaps they could be held accountable• And...if they could be held accountable, they could share in the savings from their lower costs, and risk if costs could not be reduced.
ACOs: Some early lessons andquestions – Intense focus on cost and cost reduction – Physicians move to laser-like focus on “My Results vs. Peers” – A huge interest in and need for data – Physicians have been willing to make difficult decisions that had been avoided in the past – Costs decrease from: • Reduced ED use; Reduced admissions: Reduced discretionary diagnostics
Forget the 80-20 Rule. It’s the 5-50 Role that willget you in Population Health ManagementACOs routinely report that 5 percent of their populations account for 50 percent of their claims costs. These 5 percent are patients with one or more chronic illnesses. The need is to focus on the 5 percent, and then on the “Pre-5 percent”, or the next 5 percent.
Concentration of Health Spending in the U.S., 2004 97% 80% 74% 64% 49% 23% 3%Top 1% Top 5% Top 10% Top 15% Top 20% Top 50% Bottom 50% Population Percentile Ranked by Health Care Spending
Variability of Quality and Cost Cost and LOS Variation by Surgeon, Major Joint Replacement (MS-DRG 470) Avg. Cost ALOS Avg: $14,962 Individual PhysiciansSource: Internal data from client in southeast United States 22
Reliable care costs less (Premier) Data reveal that lower hospital costs are associated with patients receiving better patient care Hospital Costs for Pneumonia Patients $10,298 $9,158Average Hospital Costs $8,412 Low High Degree of Patient Process Measurement and Improvements
Financial Model is Changing – Health industry growing beyond sustainability… – We must focus on cost reduction – Key to success is a systematic approach, data- driven process & communication – Must focus care processes that limit variation 25
Promote & Reward Accountability• Accelerate payment and delivery system reforms• Eliminate preventable infection and complications• Engage individuals in their health and health care• Better manage advanced illness• Advance the use of health information technology and electronic health records• Promote transparency of quality and pricing information “Ensuring a Healthier Tomorrow”, American Hospital Association
Use limited health care dollars wisely• Eliminate non-value added treatments• Revamp care for vulnerable populations• Promote population health• Modernize federal health programs• Simplify administrative and regulatory processes• Reform the medical liability system “Ensuring a Healthier Tomorrow”, American Hospital Association
Top 5 Things Hospitals Doing to Respond 1. Align high-quality physicians – ACOs require physician partnership. – Hospitals must align physicians & engage them to create lower-cost, higher-quality outcomes. – Implement strategies to strengthen physician relationships. 28
Top 5 Things Hospitals Doing to Respond 2. Focus beyond the hospital – The hospital itself is no longer the center of the health care model. – Organizations need to assess the continuum of care. 29
Top 5 Things Hospitals Doing to Respond 3. Create information transparency – Build IT infrastructure; create common IT across the care continuum. – Pricing (Time, Bitter Pill) – The success of the population management model depends on information transparency across multiple organizations. 30
Top 5 Things HospitalsCan Do To Respond (continued) 4. Think value, not volume – Move the organization’s direction from growing inpatient volumes to delivering the most effective care. – Monitor costs, not margin 5. Create a shared community vision – Bring providers together – requires a common vision between the community and providers of care. 31
Different strategies for different healthcarespend segmentsSource: Wellspan Health
Employers Getting Aggressive on Cost and QualitySchool System in Southern California; 55 School Districts$500 Million in Healthcare ClaimsTop 10% of Users Account for 60-70% of claims. Sent these records to Best Doctors for 2nd Opinion: 15% had Wrong Diagnosis 60% of Treatments were NOT state-of-the-art WHAT TO DO???
Incentivize Employees to Go to BestProviders!Out of NetworkNO Reimbursement
Incentivize Employees to Go to BestProviders! 16% Premium Contribution $1,000 Deductible Higher Co-Pay
Incentivize Employees to Go to BestProviders! 8% Premium Contribution Small Deductible Co-Pay
Incentivize Employees to Go to BestProviders! NO Premium Increase NO Deductible NO Co-Pay
Incentivize Employees to Go to BestProviders! 16% Premium NO Premium Increase Contribution NO Deductible $1,000 Deductible NO Co-Pay Higher Co-Pay 8% Premium Contribution Out of Network Small Deductible NO Co-Pay Reimbursement
Results?By adjusting Premium Contributions, Co- Payments, and Deductibles 87% of Covered Population now go to the Low Cost & High Quality Quadrant of ProvidersPreliminary Savings to the TPA and VEBA (Voluntary Employee Benefit Association) are in the Multiple Millions of Dollars
Case Study – Individual Intervention One Year of Services Visit Count Ambulatory Visits 12 Hospital Admits – Medical & Mental 8 Hospital Outpatient – Radiology, GI 16 Emergency Room Visits 59 Total 95
Care Management Interventions• Care Manager contacted patient• Primary Care Physician identified• Team meeting with physician, Care Manager, and patient to develop a Care Plan• Care Manager contacts patient weekly• Patient utilizing various day treatment and wellness programs• No Emergency Room visits since Care Manager made contact 2 months ago
Summary• Tremendous Challenges Ahead• Momentum for change in Provider Industry Growing• Costs Leveling Off• Risks and incentives are shifting• Must be new innovative solutions• We must take accountability for own health in proactive ways