New Focus, New Structures, New Results in the Provider Sector of Healthcare

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In a C-Suite Resources presentation, Chairman Emeritus Don Wegmiller provided INTEGRATED with knowledge and insight into the state of the provider sector of healthcare today. Topics covered include new structures, reforms impacting providers, and provider challenges.

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New Focus, New Structures, New Results in the Provider Sector of Healthcare

  1. 1. Your Trusted Advisor for Healthcare Business Intelligence New Focus, New Structures, New Results in the Provider Sector of Healthcare presented to INTEGRATED Institute by Don Wegmiller Chairman Emeritus July 23, 2014 Note – all lines are open – please mute your line Dial In: 909-259-5900 Conf ID: 254-905-934
  2. 2. Overview of Presentation 2 I.  New Focus: The Triple Aim II.  New Structures III.  New Results IV.  Reforms Impacting Providers t  Payment Reforms t  Insurance Reforms §  Public Exchanges §  Private Exchanges V.  Provider Challenges t  Finances t  Quality Improvements t  Physician Shortages t  Population Health Improvement t  Demands for New Type Leadership VI.  Summary VII.  Implications for IHStrategies Note – all lines are open – please mute your line Dial In: 909-259-5900 Conf ID: 254-905-934
  3. 3. New Focus: The Triple Aim Note – all lines are open – please mute your line Dial In: 909-259-5900 Conf ID: 254-905-934
  4. 4. New Focus: The Triple Aim 4 I.  New Focus: The Triple Aim t  Improving health of the population t  Reducing per capita costs t  Improving individual experience
  5. 5. Background 5 t  Originally introduced by Don Berwick, MD., when CEO, Institute for Healthcare Improvement, 2008. t  Organized a coalition of healthcare organizations; “The Triple Aim Community” t  Berwick moves to HHS as Administrator, CMS §  Incorporates many of Triple Aims goals into ACA t  AHA and others adopt Triple Aim goals
  6. 6. The Triple Aim 6 t  Improving the health of populations t  Reducing the per capita costs of care for populations t  Improving the individual experience of care §  Including quality and satisfaction
  7. 7. Priorities for Achieving Triple Aim 7 t  Redesign of primary care services and structures t  Population health management t  Cost control platform t  System integration and execution t  Focus on individuals and families
  8. 8. Original (2008) Measures of Triple Aim 8 Dimension Measure Population Health 1. Health/Functional Status: single-question (e.g. from CDC HRQOL-4) or multi-domain (e.g. SF-12, EuroQol) 2. Risk Status: composite health risk appraisal (HRA) score 3. Disease Burden: Incidence (yearly rate of onset, avg. age of onset) and/or prevalence of major chronic conditions; summary of predictive model scores 4. Mortality: life expectancy; years of potential life lost; standardized mortality rates. Note: Healthy Life Expectancy (HLE) combines life expectancy and health status into a single measure, reflecting remaining years of life in good health. See http://reves.site.ined.fr/ en/DFLE/definition/ Patient Experience 1. Standard questions from patient surveys, for example: •  Global questions from US CAHPS or How’s Your Health surveys •  Experience questions from NHS World Class Commissioning or CareQuality Commission •  Likelihood to recommend 2. Set of Measures based on key dimensions (e.g., US IOM Quality Chasm aims: Safe, Effective, Timely, Efficient, Equitable and Patient-centered) Per Capita Cost 1.  Total cost per member of the population per month 2. Hospital and ED utilization rate Source:www.qualityforum.org
  9. 9. New Structures
  10. 10. New Structures 10 II.  New Structures t  Industry Consolidation t  Providers As Insurers t  Insurers into Care t  ACO’s § Commercial § CMS
  11. 11. hospital hospital systems of hospitals physician groups Integrated systems ACO system insurers retail clinics post acute care orgs. hospitals physician groups alternative care sites insurer Healthcare Consolidation Progression 11
  12. 12. Healthcare Industry Consolidation Trend is similar among hospitals and health plans 12          2008                                              2009                                                                          2010                                                                                    2011                                    Source:  New  York  Times,  A  Wave  of  Hospital  Mergers,  August  2013                                    *Kaufruall  Hall,  April  2013   0   10   20   30   40   50   60   70   80   90   100   Hospital  TransacGons   2013  
  13. 13. Healthcare Industry Consolidation Trend is similar among hospitals and health plans 2008                    2009                                                      2010                                                                                  2011                                                                                            2011     *Source:  DeloiIe  Center  for  Health  SoluGons,  The  future  of  health  care  insurance:  What’s  ahead?,  July  2013   0   5   10   15   20   25   30   35   40   Health  Plan  TransacGons   13
  14. 14. Hospital Consolidation Can Benefit Consumers t  Enhanced access to care t  Improved quality of care t  Reduced costs through operating efficiency t  Economies of scale t  Access to capital for investment 14 3.7%   5.8%   4.9%   3.8%   4.4%   3.5%   3.0%   3.0%   3.0%   2.1%   2.5%   1.5%   1.0%   2.0%   3.0%   4.0%   5.0%   6.0%   2002   2003   2004   2005   2006  2007  2008  2009  2010  2011  2012  2013   Source:  Bureau  of  Labor  Sta;s;cs  Producer  Price  Index  data,  2002-­‐2012  for  Hospitals   Annual Percent Change in Hospital Prices t  Maintain services in communities that might otherwise be reduced or eliminated Source:  Hospital  Realignment:  Mergers  Offer  Significant  Pa8ent  and   Community  Benefits,  Center  for  Healthcare  Economics  and  Policy,  January  2014  
  15. 15. Notable Examples 15 t  Mergers / Acquisitions §  Detroit − Beaumont Health System; Oakwood Health System; Botsford Health Care − 8 hospitals; $3.8 billion revenues; 30% of southeast Michigan market − All 3 posted lower inpatient volumes in 2013. §  Pennsylvania – New Jersey — Geisinger Health; AtlantiCare — 9 hospitals; 35,000 employees — Expansion of 448,000 member Geisinger Health Plan into a new region
  16. 16. Notable Examples (cont.) 16 t  Partnerships §  Chicago suburbs − Alexian Brothers Health System (division of Ascension Health); Adventist Midwest Health (division of Adventist Health System) − Joint Operating Company of 9 hospitals − Not a merger or acquisition
  17. 17. New Structures 17 t  Providers As Insurers §  Health Systems with Health Plans − 64 Systems (AHA proprietary data) − Notables: Baylor Scott & White: CHI; CHE Trinity; Dignity Health; Geisinger; HealthPartners; Henry Ford; IHC; Presbyterian; Sentara; SSM
  18. 18. Provider Landscape: Blurred Lines Between Providers and Payers 18 23%   16%   40%   63%   71%   53%   14%  14%   7%   Managing care coordination Performance measurement Population health management Not  at  all   Prepared   Somewhat   Prepared   Very   Prepared   Source:  Hospital  and  Health  Networks;  Physician  Compensa;on  and   Produc;on  Survey,  Medical  Group  Management  Survey,  2002-­‐12;   Source:  Execu;ve  Survey  on  Hospital  and  Physician  Affilia;on  Strategies,  Sponsored  by   McKesson.  
  19. 19. United  acquired  a   physician  IPA   WellPoint  acquired  a   primary  care    provider   Humana  acquired  an   urgent  care  chain   Highmark  acquired  a   hospital  system   Insurers Also are Expanding into Care 19
  20. 20. Growth of ACO’s Over Time - Medicare vs. Non-Medicare 32 59 146 253 253 122 164 199 219 235 45 60 101 141 181 310 345 458 472 488 0 100 200 300 400 500 600 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Medicare Non-Medicare Total 109 #ofACOs 20
  21. 21. A Broader Definition of Accountable Care 0 CMS Model •  Medicare patient only •  Narrowly defined provider network •  Quality measures and reporting •  Shared savings; 80 – 20 •  Minimum 3 year commitment to participate •  Focus on lowering hospital costs •  Population group defined at end of year Commercial Model •  All patient – Medicare, Medicaid, Commercial •  Multi-payers – not limited to one plans members. •  Use of both databases, insurer and provider •  Symmetrical risk sharing •  Identified population group •  Committed to quality, total cost management and patient satisfaction •  Supports physicians, physician groups and health systems •  Focus on lowering population health costs •  Financially sustainable business models 21
  22. 22. Providers Need a New Business Model Current Model Accountable Care Model Today (3-5% Operating Margin) Impact from Rate Pressures (Negative margin within 3-5 years) Reduce Unnecessary Utilization Shared Savings Operating Cost Improvements New Growth (i.e. covered lives) 22
  23. 23. Growth and Dispersion of Accountable Care Organizations 23 Growth of ACO Covered Lives Over Time Source: June 2014 Update; Leavitt Partners
  24. 24. Growth and Dispersion of Accountable Care Organizations 24 Estimated ACO Penetration by State Source: June 2014 Update; Leavitt Partners
  25. 25. New Results
  26. 26. New Results 26 III.  New Results t  Costs t  Quality t  Patient experience
  27. 27. New Results 27 t  Cost reduction §  Spending Growth Rate Has Slowed in Recent Years §  Percent of Hospitals with Negative Total Margins §  Costs Began Picking Up at End of 2013
  28. 28. Cost Reduction - Spending Growth Rate Has Slowed in Recent Years Source: Martin AB, Hartman M, Whittle L, Catlin A; National Health Expenditure Accounts Team. National health spending in 2012: rate of health spending growth remained low for the fourth consecutive year. Health Aff (Millwood). 7 6 5 4 3 2 1 0 2014 Jan;33(1):67-77. 2005 2006 2007 2008 2009 2010 2011 2012 NHE per capita spending growthPercent 28
  29. 29. Percent of Hospitals with Negative Total Margins 42.2 36.7 33.4 35.9 33.4 32 31.8 30.2 32.8 30.1 28.3 28.4 25.9 0 10 20 30 40 50 2000 2001 2003 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Percent of Hospitals with Negative Operating Margins 29
  30. 30. …Costs Began Picking Up at the End of 2013 30 April 8, 2014. Source: “Insights from Monthly National Health Expenditures Estimates through February 2014,” Altarum Institute, Year-Over-Year Growth Rates in NHE
  31. 31. New Results (cont.) 31 t  Cost Reduction §  Mantra: “Lower costs to be able to breakeven on Medicare level of payment” §  Why Medicare Breakeven? §  One System’s Experience — Benefis Health System §  A Local Collaboration Experience
  32. 32. Why Medicare Breakeven? 32 t  90.4% of CFOs cited Medicare reimbursement as having primary importance to their revenue stream in the next three years; 78% of CFOs reported Medicare / Medicaid would have a negative or strongly negative impact on their organization. t  Medicare typically only reimburses 75% to 80% of costs, and cost shifting is generally required – using vastly better reimbursement from commercial payors - for a hospital to stay in the black. t  The days of cost shifting are coming to an end. And once you’re no longer able to cost shift to private insurance to climb out of a Medicare hole, you’ll see your bottom line start to deteriorate.
  33. 33. New Results (cont.) t  One System’s Experience §  Benefis Health System 33
  34. 34. Benefis has Reduced Costs by over $20 Million Just in the Past Two Years t  Three key factors in their cost reduction: §  Productivity improvement = $5.6 Million in past 2 years §  Process improvement, work simplification and non-value added work elimination §  Reducing all “non-labor” expenses. Leave no rock unturned! 34 Source: 2014 Congress on Healthcare Leadership. Where Knowledge, Ideas and Solutions Connect
  35. 35. Medicare Reimbursement 75 86 91 95 102.6 0 20 40 60 80 100 120 2008 2009 2010 2011 2012 Medicare Reimbursement Compared to Our Costs 35 Source: 2014 Congress on Healthcare Leadership. Where Knowledge, Ideas and Solutions Connect
  36. 36. Benefis Health System’s Cost Reduction Impact $7,095 $6,436 $6,041 $5,769 $5,322 $4,968 0 1000 2000 3000 4000 5000 6000 7000 8000 2008 2009 2010 2011 2012 2013 Benefis Health System's Cost Reduction Impact On Hospital Cost per Case Mix Adjusted Admission 36 Source: 2014 Congress on Healthcare Leadership. Where Knowledge, Ideas and Solutions Connect
  37. 37. Examples of Savings in 2013 t  Contract renegotiation with Aramark (Food and Environmental Services) $184,280 t  Reduction in MedMal Premium for 2013 vs 2012: $1,030,650 t  Reduction in retainer amount to BKBH for 2013 vs 2012: $24,000 t  Renegotiated Pad Net contract: $22,000 t  Renegotiated rate for physicians short term disability coverage: $20,000 t  Savings from bringing the wound care management contract in house vs. outsourced: $293,129 t  Renegotiated monthly administrative rate with Wells Fargo for employee HSA accounts: $7,764 t  BMG contract changes, salaried start-up contracts to productivity contracts: $1,342,945 t  Bringing revenue cycle in house vs. contracting out: $1,605,065 t  Material services supply chain: $956,050 37
  38. 38. Examples of Savings in 2013 (cont.) t  Negotiated savings on legal services: $169,220 t  Cancellation of software program: $42,000 t  Cancellation of EHR consultant: $186,000 t  Bring sprinkler head maintenance in house: $18,114 t  Elimination of outpatient therapist dictation via automation: $80,000 t  Reduction in investment management fees: $37,500 t  Elimination of unused corporation and tax prep fee: $1,500 t  Reduction in monthly retainer to legal (for remainder 2013), based on improved utilization; steps put into place to make legal review of matters more efficient: $50,004 t  Decrease in pharmacy expense 2013 YTD over 2012 from 340(B) Program: $202,147 t  Savings on patient transports from Hospice: $6,929 t  Savings on excess Worker’s Comp premium: $23,667 38
  39. 39. Examples of Savings in 2013 (cont.) t  Savings from not mailing the July pay increase letter to employees and doing the individual increase notices online instead: $3,000 t  Savings from outsourcing Biomedical Engineering to Aramark. July – Dec., 2013 only savings: $320,255 t  Reduction of OR education program (AORN peri-op) Balance of 2013: $56,704 t  Reduction in investment management fees (RBC Wealth Management). Balance of 2013: $37,500 t  Elimination of an unused corporation and tax prep fee for it: $1,500 t  Reduction in monthly retainer to legal by $8,334 per moth for the last 6 months of 2013, based on improved utilization, resulting from steps put into place to make legal review of matters more efficient: $50,004 t  The difference in not replacing the NP for the remainder of the year at a savings for $42,312 and replacing the NICU manager: $53,276 t  Reduced the cost of supplies form an average of $43.58 per patient to $33.30 per patient for 2013 vs 2012: $84,000 t  EPOB improved from 4.6 in 2012 to 4.5 in 2013 (Terry and management throughout BHS): $1,920,000 39
  40. 40. Examples of Savings in 2013 – Leave No Rock Unturned! t  Perfusion contract renegotiation ($1825 savings in 2013 and $9125 savings in 2014) $1825 t  NMHA Conference cost savings (via a grant) $2,100 t  Savings on electricity via lighting upgrades, building control changes, a hot water pumping project and retro commissioning efforts: $156,286 t  Savings on natural gas (2013 compared to 2012): $231,613 t  Savings, not picked up by the EPOB calculation, on a management change: $15,200 t  Savings, not picked up by the EPOB calculation, from Nurse Practitioners covering for an Intensivist (Dec. only): $5,412 t  340-b Savings (2013 over and above 2012): $998,992 t  340-b Orphan Drug exclusion savings (new as of 10-1-2013) (through Dec 2013): $495,280 t  Antibiotic savings for 2013: $141,367 t  National Drug Shortage savings for 2013 (vs 2012): $98,399 t  Savings from bringing 2013 Biometric Testing in-house: $95,627 40
  41. 41. A Local Collaboration Experience 41 NQF’s nine endorsed “resource use” measures monitor sources of healthcare costs. Used on their own, these measures reveal only a part of the “value” picture. The full picture comes into focus when resource use measures are used in concert with quality measures. Together, these two powerful sets of measures help providers, health plans, employers, government agencies, and community collaboratives identify opportunities for creating a higher value healthcare system. A compelling example is the work being done by the NW Metro Alliance, a partnership of HealthPartners Medical Group, the Allina Medical Clinics, and Mercy Hospital, which together care for nearly 300,000 Minnesotans. Through measurement, the Alliance demonstrated improved care for patients with bronchitis, a reduction in elective deliveries prior to 39 weeks, which is better for babies and moms, fewer patients being unnecessarily readmitted to the hospital, and increased prescription rates of lower cost generic medications. These and other quality efforts have resulted in a dramatic decline in total cost of care for the participating organizations. HealthPartners developed the NQF-endorsed total cost of care measure which is being used by the Alliance and also in 29 states, including five statewide organizations. This measure allows organizations to chart their progress and benchmark themselves against others. Source:www.qualityforum.org
  42. 42. New Results (cont.) 42 t  Quality of Outcomes §  Healthcare Associated Infections Declining §  Medicare Hospital Readmissions Declining §  Highlights from 2013 National Healthcare Quality and Disparities Report
  43. 43. Healthcare Associated Infections Declining 43 Source: “National and State Healthcare Associated Infections: Progress Report,” Centers for Disease Control and Prevention, March 2014. 1 0.8 0.6 0.4 0.2 0 44% drop 20% drop 2008 2012 Central Line-associated Bloodstream Infections Surgical-site Infections for 10 Common Procedures Standard Infection Rate [2008 set to 1.0]
  44. 44. Medicare Hospital Readmissions Declining 44 17% Source: CMS. 18% 19% 20% 2007 2008 2009 2010 2011 2012 2013 Monthly Rate Trendline Note: Medicare 30-Day, All-Condition Hospital Readmission Rates January 2007 - May 2013 44
  45. 45. Highlights from the 2013 National Healthcare Quality and Disparities Reports Status Change over time Areas improving Areas lagging Quality Fair •  70% of recommended care actually received •  Large variation across States Getting Better Improving more quickly •  Hospital care •  CMS publicly reported measures •  Adolescent vaccines Performing well •  New England and West North Central States Improving more slowly •  Ambulatory care •  Diabetes care •  Maternal and child health Performing more poorly •  West South Central and East South Central States Access Fair •  26% with difficulties getting care* Getting worse* Improving •  Availability of providers by telephone Not improving •  Private health insurance coverage* Disparities Poor •  Minorities and people in poverty •  with worse quality and access for large proportion of measures No change Disparities getting smaller •  HIV disease •  Patient perceptions of care Few gaps in disparities data on Blacks, Hispanics, and Asians Disparities getting bigger •  Cancer screening •  Maternal and child health Many gaps in disparities data on Native Hawaiians and Other Pacific Islanders 45 Source: National Healthcare Quality Report, 2013 *Findings reflect access prior to implementation of most of the health insurance expansions included in the Affordable Care Act. After a decade of deterioration, access was better in 2011 than in 2010 (see Figure H.6.) Key: CMS = Centers for Medicare & Medicaid Services Note: For the vast majority of measures in the reports, trend data are available from 2000-2002 to 2010 - 2011
  46. 46. Number and Proportion of Measures Figure H.3. Number and proportion of measures that are improving, not changing, or worsening, by setting of care 0 20 40 60 80 100 1 6 1 7 9 7 34 29 9 11 45 Key: n = number of measures. Improving = Quality is going in a positive direction at an average annual rate greater than 1% per year. No Change = Quality is not changing or is changing at an average annual rate less than or equal to 1% per year. Worsening = Quality is going in a negative direction at an average annual rate greater than 1% per year. Note: For the vast majority of measures, trend data are available from 2000-2002 to 2010-2011. improving no change worsening percent Source: National Healthcare Quality Report, 2013 46
  47. 47. Quality of Care 47 Figure H.4. Quality of care, by setting and state Quality of Ambulatory Care Lowest Quality Quartile 3rd Quartile 2nd Quartile Highest Quality Quartile Quality of Hospital Care 2nd Quartile Highest Quality Quartile Lowest Quality Quartile 3rd Quartile Source: Agency for Healthcare Research and Quality, 2012 State Snapshots. Note: States are divided into quartiles based on health care score for each setting of care.
  48. 48. Quality of Care (cont.) 48 Lowest Quality Quartile 3rd Quartile 2nd Quartile Highest Quality Quartile Quality of Home Health and Hospice Care Lowest Quality Quartile 3rd Quartile 2nd Quartile Highest Quality Quartile Quality of Nursing Home Care Source: Agency for Healthcare Research and Quality, 2012 State Snapshots. Note: States are divided into quartiles based on health care score for each setting of care.
  49. 49. New Results (cont.) 49 t  Patient Experience §  Organization’s Top Three Priorities §  Feelings About Progress Toward Improving the “Patient Experience” §  Key Components of Your Organization’s “Patient Experience” §  Measuring Overall Improvement in the "Patient Experience”
  50. 50. Organization’s Top 3 Priorities 50 FIGURE 4. Top Three Organizational Priorities Please rank your organization’s top 3 priorities for the next 3 years. Patient Experience/Satisfaction 70% Quality/Patient Safety 63% Cost Management/Reduction 37% EMRs/Meaningful Use/IT 35% Employee Engagement/Satisfaction 22% ACO Development/Implementation 18% Physician Recruitment/Retention 17% Construction/Captial Improvements 11% Source: theberryInstitute.org; Improving the Patient Experience
  51. 51. Feelings About Progress Toward Improving the “Patient Experience” 51 Very Positive Positive Neutral Negative Very Negative 25% 17% 54% 12% 21% 2% 6% 0% 1% 1% 2011 2013 61% FIGURE 5. Feeling about Progress towards Improvement Source: theberryInstitute.org At this point, how do you feel about the progress your organization is making toward improving the “Patient Experience?”61% Don’tKnow
  52. 52. Key Components of Your Organization’s “Patient Experience” 52 Which of the following are key components of your organization’s “Patient Experience” effort (top 5 of 25)? Sharing Patient Satisfaction/Action/Experience Stories Regular/Hourly Roundingby Clinical Team Members Leadership rounding (by members of senior management) Staff Training Programs (for Customer Service or Other Behaviors) Special Initiative(s) to Improve Specific HCAHPS Domains 52% 50% 49% 49% 38% Source: www.theberryInstitute.org FIGURE 10. Key Component of Patient Experience Effort
  53. 53. Measuring Overall Improvement in the “Patient Experience” 53 Aside from tracking the success of individual improvement activities, what metrics is your organization using to measure overall improvement in the “Patient Experience?” Patient Satisfaction/Experience Surveying Calls Made to Patients/Caretakers After Discharge Bedside Surveys/Instant Feedback During Rounding Patient/Family Advisory Committee Patient/Family Member Focus Groups or Individual Interviews 80% 70% 42% 32% 29% Government Mandated Surveys (e.g., HCAHPS Scores) 86% FIGURE 11. Key Component of Patient Experience Effort Source: theberryInstitute.org
  54. 54. New Results (cont.) 54 Summary of New Results t  Costs growth slowing §  Medicare payment level is new Mantra §  Many different approaches t  Quality scores improved / improving §  Targeted areas §  Hospitals showing most improvement t  Patient experience data not conclusive §  Wide variation §  Some measuring patient satisfaction (HCAHPS); some measuring hospital experience
  55. 55. Reforms Impacting Providers
  56. 56. Reforms Impacting Providers 56 IV.  Reforms Impacting Providers t  Payment Reform §  Commercial — Narrow networks — Tiered networks — Pricing/payment — Deductibles/co-pays — Reference pricing §  Medicare, Medicaid
  57. 57. Reforms Impacting Providers (cont.) 57 t  Insurance reform §  Public exchanges – Insured – Uninsured – Plans (silver) – Deductibles/co-pays/premiums – 2015 premiums §  Private Exchanges – Wholesale to retail – B2B to B2C
  58. 58. Reforms Impacting Providers (cont.) 58 t  Payment Reform §  Commercial Insurers – Narrow / Tiered Networks » Insurers have limited choice of providers by: •  Narrow (or Ultra-Narrow) networks and /or •  Tiered networks » Reasons: •  Negotiate lower payments to providers •  Steer patients to lower cost providers » Close to 70% of Lowest - Price Products are offered thru Narrowed Networks
  59. 59. Consumer Preference: Less Expensive Plans and Narrower Networks 59 Network Design 78% narrow 22% broad Benefit Plan Level 69% silver/bronze 31% platinum/gold 55% Of those who selected narrow network plans Source:  McKinsey  Consumer  Exchange  Simula;on  2011-­‐2013   24% are silver / bronze customers are platinum/gold customers
  60. 60. Reforms (cont.) 60 t  Deductibles – CoPays §  Patient responsibility for payment has increased from 9% in 2007 to 30% in 2012¹ Hospital Expected Payment Source Patient  Responsibility (not  collected) Patient  Responsibility (collected) Non-‐‑‒Patient   Responsibility (e.g.,  Medicare,  Medicaid,   private  insurance) 2007 2012 ¹Source: Patient Matters Inc., National Healthcare Credit and Collection Forum
  61. 61. Deductibles – CoPays (cont.) §  With 7 million additional insured through public exchanges, where average deductible/co-pay is $1,500; patient responsibility will rise to 40%.¹ §  Self pay is now #3 payor behind Medicare and Medicaid.¹ §  55% of patient financial responsibilities are never collected.¹ §  It costs 100% more to collect from the patient compared to an insurer. 61 ¹Source: Patient Matters Inc., National Healthcare Credit and Collection Forum
  62. 62. Reforms (cont.) 62 t  Medicare, Medicaid §  2015 proposed payments continue to shift from volume to value − Inpatient increase of 1.3% − Increased reductions for: » Readmissions 1% (total penalty increases from 2 to 3% of total Medicare payment) » HAI 1% − Unless value goals are reached, a net reduction of 0.7%
  63. 63. Hospitals Have Absorbed $113 Billion of New Cuts Since 2010 Source: American Hospital Association 63
  64. 64. Reimbursement Cliff Coming or Decline in Payment for Each Patient Visit t  Medicare payments reduced by 1% / year from 2010 to 2019 t  Insurance exchange rates falling between Medicare and Medicaid payment rates t  Insurers and health systems losing best customers – baby boomers – to Medicare §  From commercial insurer rates to Medicare rates §  5,000 to 10,000 move to Medicare per DAY! 64
  65. 65. Previously Insured Respondents were More Likely to Enroll than Those Previously Uninsured 65 1 Self-reported in response to: “Which of the following best describes your primary insurance coverage in 2013? For most of the year I was covered by:” 2 Does not include previously insured who renewed their 2013 policy or enrolled in a pre-ACA plan
  66. 66. 66 Most Frequently Cited Reason for Not Enrolling
  67. 67. In April, 26 Percent of Respondents Who Reported Selecting a New Plan had Previously Been Uninsured 67 1 Includes previously insured whose policies were automatically renewed or who decided to renew existing policies with their current carrier, and those enrolling in a pre-ACA policy with effective date prior to Jan 1 2 Includes previously insured who switched from one carrier to another or who changed policies but stayed with the same carrier and also previously uninsured who enrolled. Policies could be selected on- or off-exchange. Includes those who had paid their premium and those who had not yet done so 3 Self-reported in response to: “Which of the following best describes your primary insurance coverage in 2013? For most of the year I was covered by:”
  68. 68. Reported Intended Actions During 2015 Open Enrollment Period 68
  69. 69. National and State Impact Analyses of the ACA 69 The Need for Estimating the National and State Impacts of the Affordable Care Act Beyond 2014 $1,375 Cost increase of an Individual exchange health plan within 5 years (Silver) $4,198 Cost increase of a family exchange health plan within 5 years (Silver) 489K Increase in the uninsured within 5 years Earlier this month, the Obama Administration released final reports detailing health insurance exchange and Medicaid enrollment for 2014. These reports provide a snapshot of information regarding the geographic and demographic make-up of Affordable Care Act’s first year, but fail to offer a forward-looking estimate of health plan prices and enrollment as insurance companies prepare to submit their health plan offerings for 2015. Source: Medical Industry Leadership Institute: Working Paper Series. May 20, 2014. By Stephen T Parente (Professor of Health Finance) and Michael Ramlet (MILI Adjunct Professor)
  70. 70. Reforms (cont.) 70 t  Insurance Reforms §  Public Exchanges − 8.1 million enrolled through ACA open enrollment » Unknown how many have paid premiums − Previously Insured Respondents were More Likely to Enroll than Those Previously Uninsured − Most Frequently Cited Reason for Not Enrolling − In April, 26 Percent of Respondents Who Reported Selecting a New Plan had Previously Been Uninsured − Reported Intended Actions During 2015 Open Enrollment Period − National and State Impact Analyses of the ACA
  71. 71. Provider Challenges
  72. 72. Provider Challenges 72 V.  Provider Challenges Universal t  Make consolidations work §  System vs. Federation §  Hospitals and Physicians §  Systems and Insurers t  New payment models §  Self pay collections
  73. 73. Provider Challenges (cont.) 73 V.  Provider Challenges t  Clinical shortages Specific §  Academic Med. Centers §  CAH’s §  Safety Net §  Childrens
  74. 74. Provider Challenges (cont.) t  Top Three Improvement Areas to Reach Financial Targets t  Threats t  Opportunities t  Greatest Clinical Quality Improvement Challenge t  Top Three Areas Next Year to Control Cost t  Physician Shortage Continues §  Medical school enrollment up; projected to 21,000 by 2017 §  Clinical training opportunities frozen at 1997 levels — 2013 and 2014 “match” of M.D. seniors to residences left hundreds of seniors “unmatched”. — Lack of qualified primary care preceptors — Lack of qualified specialty preceptors 74
  75. 75. Top Three Improvement Areas to Reach Financial Targets in Three Years 75 Total Responses Percent Physician-hospital alignment 44% Cost reduction 41% Care model (e.g., population health, medical home) 40% Reimbursement 39% Strategic partnerships with providers 30% Information technology, critical 29% Strategic partnerships with payers 25% Revenue cycle 23% Decline in acute care admissions 14% Information technology, financial 8% Q: Which are the top three areas your organization must improve or address in order to reach your financial targets in the three-year time frame? TAKEAWAYS -  More than half of hospitals (54%) and health systems (53%) named physician-hospital alignment among the top three areas to improve or address to reach their financial goals. -  Only 25% of health systems, 28% of hospitals, and one-third of physician organizations named clinical information technology among the top three areas. -  One-half of health systems (50%) named cost- reduction as a top concern, versus 39% of hospitals WHAT DOES IT MEAN? Physician-hospital alignment can help drive cost efficiencies in healthcare delivery, but there is still work to be done in overcoming some long-held turf issues between physicians and hospitals. It is a good sign, then, that more than half of hospitals and health systems recognize the need to work on this relationship. Still, only one-third of physician organizations named physician-hospital alignment among their three areas to improve or address their financial goals, which could signal a difficult road ahead. Instead, their focus is solidly on care models (46%) and reimbursement (42%). Base = 792
  76. 76. Threats Total responses Percent Reduced Reimbursements 91% Industry Consolidation 37% Healthcare reform, overall 36% Retail healthcare (e.g., clinics, pharmacies) 30% Shared risk, shared reward payments 20% Health insurance exchanges 20% Care continuum relationships, financial 13% Primary care redesign 9% Population health management 8% Health information exchange 7% Care continuum relationships, clinical 4% 76 Q: Does your organization consider each of the following to be a threat? TAKEAWAYS -  Some 91% consider reduced reimbursements to be a threat; this response dominates all settings, with no other choice even coming close. -  Hospitals (42%) are more likely than health systems (32%) or physician groups (29%) to view healthcare reform overall as a threat). -  With the news that several influential payers are offering products within the health insurance exchanges that reduce provider network participation, one-fifth of hospitals and physician organizations (21% each) and 18% of health systems view the exchanges as a threat. WHAT DOES IT MEAN? Healthcare executives face a continuing threat of reduced reimbursement from government payers. Not only are fee- for-service reimbursements for procedures being reduced, but there is also pressure to develop new contracts that will require providers to share in risk and meet certain quality and outcome standards. Meanwhile, commercial payers are stoking another level of reimbursement uncertainty as they move into the outcomes arena with accountable care organizations and patient-centered medical homes. In addition, new emphasis on payment models such as bundled payments means providers must be able to integrate clinical and financial information to measure provider performance and to determine the cost of care. The pressures on reimbursements are never-ending. Base = 792
  77. 77. Opportunities Total responses Percent Care continuum relationships, clinical 89% Health information exchange 76% Population health management 75% Primary care redesign 74% Care continuum relationships, financial 66% Shared risk, shared reward payments 62% Health insurance exchanges 53% Healthcare reform, overall 52% Industry consolidation 44% Retail healthcare (e.g., clinics, pharmacies) 43% Reduced reimbursements 5% 77 Q: Does your organization consider each of the following to be an opportunity? TAKEAWAYS -  Clinical care continuum relationships top the list of opportunities across all settings – 89% of the survey respondents. -  More health systems (87%) see primary care redesign as an opportunity than hospitals (73%) or physician organizations (64%). -  Population health was cited as an opportunity more often by health systems (84%) than hospitals (71%) or physician organizations (75%). WHAT DOES IT MEAN? As the healthcare industry strives to improve care and lower costs, it is encouraging to see that large majorities of leaders are optimistic about the potential in clinical care continuum relationships, health information exchanges, population health management, and primary care redesign-the components that will help them achieve those goals. Health systems have an advantage as they often include many of the resources and players necessary to provide patient care across continuum. Base = 792
  78. 78. Greatest Clinical Quality Improvement Challenge 78 4% 3% 8% 13% 14% 15% 15% 27% Other Patient safety Clinical decision support Electronic health record Readmissions Clinical analytics Patient experience Monitoring quality along the care continuum Total responses Q: Regarding clinical quality improvement, which of the following areas represents the single greatest challenge for your organization? TAKEAWAYS -  Monitoring quality along the care continuum is identified as the greatest challenge to clinical quality improvement by more than on-quarter(27%) of respondents, making it the #1 choice overall. -  More physician organizations (36%) than health systems (27%) or hospitals (20%) cite monitoring quality across the care continuum as their greatest challenge. -  While patient experience is cited by 15% of respondents as the top clinical quality challenge, it is a greater concern among hospitals (19%) and health systems (18%) than physician organizations (8%). WHAT DOES IT MEAN? The care continuum will hold providers accountable for patient care beyond their four walls, including pre- and post acute care, as well as hospital readmissions. Monitoring this care requires establishing strategic partnerships or alignments-with, for example, physicians, specialists, care managers, community health centers, and nursing homes-that will foster and standardize the exchange of patient information to ensure patient outcomes. As we see in Figure 5, an almost equal portion of respondents identified health information exchanges (76%), population health management (75%), and primary care redesign (74%) as opportunities. Healthcare leaders recognize that each plays a role in managing quality along the care continuum. The challenge is in putting the pieces together in a meaningful way. Base = 776
  79. 79. Top Three Areas Next Year to Control Cost 79 16% 17% 41% 53% 67% 81% Employee benefit reductions Labor reductions Capacity management Expense reduction via supply-chain effeciencies Labor efficiencies Expense reduction via process improvement Total responses Q: What are the top three areas you will focus on next year to control costs? TAKEAWAYS -  Registering the importance of producing sustainable results and taking the long view, process improvement is named among the top three cost-control focus areas by 81% of respondents. -  Health systems (89%), which have the resources and personnel to commit to process improvement, are more likely than hospitals (77%) and physician organizations (78%) to identify process improvement, but it is the top cost-control choice across all three settings. -  Across all settings, labor efficiencies (67%) is the second cost-control choice. The emphasis on process improvement, including analytics, will help in identifying opportunities to use labor more effectively and efficiently. Despite the dominance of leaders’ reliance on efficiencies, one in five hospitals (20%) will look to labor reductions to control cost, which is somewhat greater than health systems and physician organizations (16% each). WHAT DOES IT MEAN? To be successful and produce returns year after year, expense reduction must be sustainable. Process improvement provides the structure for an organization to assess and reassess how it controls costs. When implemented correctly across an organization, the process becomes part of the culture and is hardwired for daily practice, which often reduces the need for more severe steps such as labor reductions (17%) or employee benefit reductions (16%). Base = 792
  80. 80. Percent of Schools Concerned About Clinical Training Opportunities, 2010-2012 72% 78% 54% 65% 74% 53% 78% 82% 67% Number of clinical training sites Supply of qualified primary care preceptors Supply of qualified specialty preceptors 2010 2011 2012 80 Source: Association of American Medical Colleges (Results of the 2012 Medical School Enrollment Survey)
  81. 81. Percent of Schools Expressing Concern about Graduate Medical Education 81 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Nationally In my state For my incoming students Major concern Moderate concern Minor concern No concern Source: Association of American Medical Colleges (Results of the 2012 Medical School Enrollment Survey)
  82. 82. M.D. and D.O. Growth Since 2002 82 10,000 9,000 8,000 2,000 1,000 0 3,000 4,000 5,000 6,000 7,000 2002 3,707 Additional D.O. Enrollment by 2017 4,946 Additional M.D. Enrollment by 2017 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Figure 8: M.D. and D.O. Growth Since 2002 M.D. D.O. Source: Association of American Medical Colleges (Results of the 2012 Medical School Enrollment Survey)
  83. 83. Provider Challenges (cont.) t  Population Health Improvement §  Health Care Costs are Concentrated §  Population Health and Training §  Population Health Management – Investments §  Care Coordination / Population Health Management 83
  84. 84. Health Care Costs are Concentrated 84 23 Million Beneficiaries •  Spending $1,130 each •  Total Spending = 5% ($26 B) 16.1 Million Beneficiaries •  Spending $6,150 each •  Total Spending = 20% ($104 B) 7 Million Beneficiaries •  Spending $55,000 each •  Total Spending = 75% ($391B) 15% of beneficiaries = 75% Spending 85% of beneficiaries = 25% Spending
  85. 85. Care Coordination/ Population Health Management 26% 15% 22% 35% 22% 27% 0% 5% 10% 15% 20% 25% 30% 35% 40% Assigned nurse manager to patients at risk Assigned nurse manager outpatient care Disease management 2011 2013 85 Source: 2011 data based on the 2011 Care Coordination Survey (n= 1,680). 2013 data based on preliminary data from the AHA’s 2013 New Care Systems & Payment Survey (n=1,323). PRELIMINARY DATA. Copyright 2013 Health Forum
  86. 86. Care Coordination/ Population Health Management 21% 12% 23% 26% 18% 28% 0% 5% 10% 15% 20% 25% 30% Chronic care programs Use of predictive analytic tools Prospective patient management 2011 2012 86 Source: 2011 data based on the 2011 Care Coordination Survey (n= 1,680). 2013 data based on preliminary data from the AHA’s 2013 New Care Systems & Payment Survey (n=1,323). PRELIMINARY DATA. Copyright 2013 Health Forum
  87. 87. Provider Challenges (cont.) t  Strategies for Managing Population Health §  Shift emphasis from hospital care to primary care §  Changes in physician culture — “Team leader” — Medical home leader §  Incentives to participate in approaches for specific populations; e.g., diabetics, COPD §  Patient engagement §  Skilled nursing — Long term care management §  Post-discharge management 87
  88. 88. Provider Challenges (cont.) t  Financial Stability §  2014 Financial Forecast t  Demands for New Type Leadership §  Hospital CEO Turnover Rate Increases 88
  89. 89. 2014 Financial Forecast 6% 41% 36% 13% 2% 2% 10% 45% 30% 9% 3% 2% Strongly positive Positive Flat Negative Strongly negative Don't know 2014 2013 89 Q: What is your organization’s financial forecast for the 2014 fiscal year?
  90. 90. American College of Healthcare Executives Hospital CEO Turnover 14% 18% 16% 16% 17% 20% 2008 2009 2010 2011 2012 2013 90 Source: http://www.ache.org/pubs/Releases/2014/hospital_ceo_turnover_rate14.cfm Adjusted PercentYear
  91. 91. I.  Summary
  92. 92. Summary VI.  Summary t  U.S. Health System Performance §  Overall Health System Performance for Low Income Populations §  When it Comes to Health Care, There are Two Americas 92
  93. 93. Overall Health System Performance for Low Income Populations 93 Source: D. Blumenthal, Two Americas, (New York: The Commonwealth Fund, August 2013).
  94. 94. When it Comes to Health Care, There are Two Americas 94 Source: D. Blumenthal, Two Americas, (New York: The Commonwealth Fund, August 2013).
  95. 95. none “In Times of Change, Learners Inherit the Earth, while the Learned find themselves beautifully equipped to deal with a World that no longer Exists.” Eric Hoffer (Stolen from Gary Kaplan; his Favorite Quote) 95
  96. 96. “THE HARDEST THING IS NOT TO GET PEOPLE TO ACCEPT NEW IDEAS, IT IS TO GET THEM TO FORGET OLD ONES.” John Meynard Keynes 96
  97. 97. Implications- Integrated Healthcare Strategies
  98. 98. Implications- Integrated Healthcare Strategies VII. Implications- Integrated Healthcare Strategies t  Providers , particularly systems, are focused (maybe pre- occupied) by new focus, new structures, therefore, don’t “reach out” to consulting firms for advice and counsel. t  Firms need to reach out to customers suggesting new ideas; even “old” ideas customers haven’t used yet. t  See Dan Schleeters July 9th Notes to File on CAMC re: use of Tally Sheets. 98
  99. 99. Implications- Integrated Healthcare Strategies (cont.) t  Certain Consulting functions become “commodities” in the new environment; so more “face time” is necessary with influencers, recommenders, and decision-makers. §  Whenever in a region on a “client paid” visit, make a point to ask for a 15 minute drop by with one or more other clients. t  Always have “new” approaches to describe, whether you personally work on these approaches, e.g., §  Don Seymour on Governance, Strategy §  Any Physician Services ideas §  All “engagement” services; employee, physician, manager. 99
  100. 100. Implications- Integrated Healthcare Strategies (cont.) t  Most systems have now bought in to “peer comparative” benchmarks as contrasted to either: §  Year over year comparisons for their organization §  Generic peer group comparisons §  So, always offer some unique peer comparative service, e.g., “comparison of your employed physician comp. vs. six other peer organizations” t  Be prepared to demo any new service or product at “no risk” pricing to select customers. 100
  101. 101. Implications- Integrated Healthcare Strategies (cont.) t  Know all the current “buzz words” in the industry and be prepared to show how IHS has products/services to aid the customer in that area; e.g., §  Population Health Improvement §  Patient engagement §  Physician productivity §  Quality performance §  Tie an IHS service to one of the current buzz words, e.g., — Kevin Talbot’s work at Novant tying executive compensation level to organization performance level of peers. 101
  102. 102. Implications- Integrated Healthcare Strategies (cont.) t  Always be prepared to offer other clients use of your services to something this customer needs, e.g., “You know David Bjork of our firm just led an organization structure assignment for the merger of Scottsdale Healthcare- John C. Lincoln System in Arizona.” t  Always bring materials on at least one product / service of IHS to every customer or prospect service, whether they’re related to the current assignment or not. t  Show you’re interested in your clients’ success by noting some new service they’re offering; some new recognition they’ve received; some healthcare issue in their state or region. 102

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