2014 usnwr hot greg sorensen presentation final

October 2014
Productivity Improvement: The Key to Sustainable Healthcare
Greg Sorensen, MD, CEO Siemens Healthcare USA
Restricted © Siemens AG 2014 All rights reserved. Answers for life.
Page 0

Restricted © Siemens AG 2014 All rights reserved.
Where were you in 1980?
Housing
interest rates:
14%

Jimmy Carter was
President

The Soviet Union
had just invaded
Afghanistan

The U.S. boycotted the
Moscow Olympics

Blondie’s Call Me
was the #1 song

I was beginning a career in medical research

Norman Shumway
introduced
cyclosporine for heart
transplantation

MRI was still a curiosity…
Cross sectional Nuclear Magnetic Resonance Image of
the abdomen.

Hospital stays were
reimbursed on a
fee for service basis.

Why 1980: Data suggests that hospital productivity improved
since the introduction of DRGs in 1980
Average Length of Stay – Global Comparison
Japan
Russian Fed.
Germany
Switzerland
China
Canada
United Kingdom
OECD Average
Spain
Australia
France
United States
Norway
12
10
8
6
4
2
<65 yrs
65-74
75-84 yrs
>85 yrs
Restricted © Page 10 Siemens AG 2014 All rights reserved.
(2010)
9.7
9.7
8.6
7.7
7.7
6.9
6.7
6.0
4.9
4.6
4.5
4.3
3.9
5.6
7.2
13.6
18.5
Italy
Mexico
-32%
Israel
Turkey
Average Length of Stay in U.S. Over Time
0
1980 1985 1990 1995 2000 2005
ALOS (Days)

Defining Productivity
Productivity is measure of output per unit of input.
It is a measure of efficiency of production.
Productivity =
Output
Input
Improving productivity implies “doing more with less”

In healthcare, USA’s productivity lags that of other countries:
We spend a lot more for similar (or worse) outcomes
90
80
70
60
MEX
JPN
ISR
FRA
ESP
ISL
NZL NOR
KOR LUX
EST
DEU NLD
DNK
PRT
CZE
FIN
RUS
POL
SVN
SVK
HUN
GRC IRL
IDN
IND
0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500 6,000 6,500 7,000 7,500 8,000 8,500
USA
GBR
CHN
CHL
CAN
BRA
BEL
AUT
AUS
TUR
CHE
SUE
Life Expectancy at Birth
Health Spending per Capita

Typically, USA is one of the leading countries in overall
productivity – and continues to lead in productivity growth
27
31
41 40
47 47 47 44 48 48
53 52 51 58 55 61 60 59
67
81
Ireland
Norway
Czech Republic
Rep. of Korea
Spain
Australia
Finland
Austria
Singapore
Japan
Italy
Canada
United Kingdom
Sweden
Denmark
Germany
France
Netherlands
Belgium
United States
Real GDP per Hour Worked (USD, 2011)
Source: BLS

Labor productivity in healthcare is lagging (1 of 8)
Health care
Education
Information & Technology
Manufacturing
Construction
Mining
Agriculture
2002 – 2005 Industry
Output Change
High
Output
Growth
Page 14
Less efficient More efficient
Low
Employment
Efficiency
Source: BLS
2002 – 2005 Employment Efficiency Change

Health care
Agriculture
Education
Manufacturing
Construction
Mining
Output Change
High
Output
Growth
Page 15
Low
Employment
Efficiency
Source: BLS

Manufacturing
Construction
Mining
Agriculture
Health care
Education
High
Output
Growth
Page 16
Low
Employment
Efficiency
Output Change
Source: BLS

Agriculture
Health care
Education
Manufacturing
Construction
Mining
High
Output
Growth
Page 17
Low
Employment
Efficiency
Output Change
Source: BLS

Agriculture
Health care
Education
Manufacturing
Construction
Mining
High
Output
Growth
Page 18
Low
Employment
Efficiency
Output Change
Source: BLS

Agriculture
Health care
Education
Manufacturing
Construction
Mining
High
Output
Growth
Page 19
Low
Employment
Efficiency
Output Change
Source: BLS

Agriculture
Health care
Education
Manufacturing
Construction
Mining
High
Output
Growth
Page 20
Low
Employment
Efficiency
Output Change
Source: BLS

Agriculture
Health care
Education
Information &
Technology
Manufacturing
Construction
Mining
Output Change
High
Output
Growth
Page 21
Low
Employment
Efficiency
Source: BLS
Start End

Productivity improvements could positively impact
medical spending growth
$2.9T
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
3.0
2.5
2.0
1.5
0.0
$2.0T
$T
$1.8T
National Health Expenditure (2000 – 2013)
Source: CBO, BLS, Siemens analysis
NHE Actual
NHE with U.S. average
productivity
NHE with Manufacturing
productivity
-30%
-40%

Key Question: How can we improve productivity in healthcare?
Page 23
Productivity Growth in Healthcare
High
Output
Growth
Low
Employment
Efficiency
Future
?
Recent

Variation in quality and outcomes in our healthcare system
should be an opportunity for improving productivity
90
80
70
60
MEX
FRA
ESP
ISL
NZL NOR
LUX
KOR
JPN
ISR
EST
DEU NLD
DNK
PRT
CZE
FIN
RUS
POL
SVN
SVK
HUN
GRC IRL
IDN
IND
0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500 6,000 6,500 7,000 7,500 8,000 8,500
USA
GBR
CHN
CHL
CAN
BRA
BEL
AUT
AUS
TUR
CHE
SUE
Sources: WHO, quickfacts.census.gov, kff.org,
healthmetricsandevaluation.org, NBC News
NBC News –
“People in the U.S.
could be as
healthy as their
counterparts in
Switzerland or
Japan, or as
unhealthy as
people in Algeria
or Bangladesh”
Fairfax, VA Marin, CA
Tunica, Miss
McDowell, WV
RUS
JPN
Life Expectancy at Birth
Health Spending per Capita

We have observed variation in use of our imaging technologies
(1 of 2)
Variation in MR Utilization
(n=2,000 sampled from Siemens U.S. Installed Base)
Variation in CT Utilization
(n=2,000 sampled from Siemens U.S. Installed Base)
Min: 3
Max: 7619
Mean: 2470
Min: 1
Max: 29729
Mean: 4963

We have observed variation in use of our imaging technologies
(2 of 2)
Health System A
1,476 3,864 5,261 2,194
n = 6
3,702 8,070 14,558
Health System B Health System C
1,461
849 579 3,438 5,959
n = 6
MR
1,041 6,972 23,202
CT
n = 5
4,339
1,367
7,604
Annual Exams per Machine
(Min – Average – Max)
CT
MR
CT
MR
n = 5 n = 13 n = 6

Key Question: How can we improve productivity in healthcare?
Reducing variation is one way
to improve productivity.
What are other possible
solutions?
How to Improve Productivity
in Healthcare?
Recent
Less
efficient
Future
?
More
efficient
High
Output
Growth
Low
Employment
Efficiency

Apply business principles to improve productivity in healthcare
High
Output
Growth
Leverage the power of
economic incentives
Define products broadly and
reduce regulatory barriers
Allow for innovation and
flexibility in the system
Source: McKinsey and Company
How to Improve Productivity
in Healthcare?
Less
efficient
More
efficient
Low
Employment
Efficiency
Future
?
Recent

Example: Leverage the power of economic incentives
Early and accurate diagnosis brings significant
clinical and economic value
• 5% - 15% of diagnoses in the U.S. are incorrect
• 5% - 10% of autopsy results show patient had been
misdiagnosed and new findings could have changed
outcome
• 9% of strokes are connected to an error in diagnosis
• 35% of cranial CTs read by emergency department
physicians are misread
• 40,000 to 80,000 deaths each year are due to
misdiagnosis4 and are preventable
Develop incentives for early and accurate
diagnosis, similar to Readmissions program
Medicare
Readmission
Rate
18.5%
17.9%
19.0%
19.1%
19.2%
19.0%
18.9%
Beginning of Medicare
Readmissions Program
19.2
18.8
18.4
18.0
0.0
2007 2008 2009 2010 2011 2012 2013
2013 data YTD 8 December 2013

Example: Reduce/eliminate regulatory barriers,
allow markets to define healthcare products broadly
“Working top of license” will increase
leverage and overall productivity
Number of Practitioners
770K
275K
192K
97K
Specialists
Primary Care
Physicians
Nurse Practitioners
Physician Assistants
Investments in high-yield capabilities such
as Telemedicine will improve productivity
Geographic
Reach
Benefits of Telemedicine
Remove
barriers to
care
provided
by NPs
and PAs
Patient
Access
Source: Advisory Board
Cost
Avoidance
Improved
Outcomes
Telemedicine Solves Provider Concerns
30%
93%
Decrease in
Reduction in ED
utilization
use for Centura
for VA remote
Health monitoring
monitoring
participants
patients with
hypertension
$10.3M
Savings across
seven
years from remote
monitoring program
at Partners
HealthCare

Example: Allow for experimentation and flexibility in the system
while preserving quality
Adopt high-leverage care settings for many
routine needs…
… while breaking through care silos using secure
information exchange
$400
$350
$300
$250
$200
$150
$100
$50
$0
70%
60%
50%
40%
30%
20%
10%
0%
Quality vs. Cost in Alternative Care Settings
$370
55%
Emergency
Room
61%
$106
Primary Care
Provider
63%
Quality of Care
Average Visit Cost
$103
Urgent Care
Center
64%
$66
Retail Clinic
Percent of Physicians
Any exchange inside the organization 35%
Providers inside the office/group 28%
Affiliated hospitals 28%
Any exchange outside the organization 14%
Source: RAND, Siemens analysis
Quality measure includes 14 indicators expressed as percentages Source: ONC, Health Affairs, Siemens analysis
13%
Providers outside the office/group
Unaffiliated hospitals 5%
Exchange Inside the Organization
Exchange Outside the Organization

Key Takeaways
Apply business principles to
improve productivity in healthcare
Recent
Less
efficient
Future
?
More
efficient
High
Output
Growth
Low
Employment
Efficiency
Measure improvements by ranking all hospitals,
care settings, and providers
Care Settings
Retail Clinics
Urgent Care
Centers
Medical Groups
Care Providers
Nurse
Practitioners
Physician
Assistants
PCPs
Specialists
1 2
Hospitals
Complex Care
Routine Care

2014 usnwr hot greg sorensen presentation final

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