Healthcare Realities from the post Presidential Election Larry Kloess Senior Advisor, Clayton Associates April 2, 2013
Healthcare Realities from the post Presidential Election Larry Kloess, November 15, 20121. Healthcare Trends2. Healthcare Overview: Dissecting the Mess3. The “New Normal” of Healthcare4. Larry’s 10 Predictions for Healthcare
10 Trends in Healthcare• Unsustainable Spending: Healthcare spending is increasing at 7% a year; a rate that is unsustainable in the future.• Regulatory Pressures: Healthcare regulations are increasing; PPACA, HITECH Act, meaningful use, Medicaid reform, etc.• Pressure on Hospital Margins: Hospital revenues are squeezed thru readmission penalties, HACs, RACs, etc.• Payment Reform: The healthcare sector is gradually transitioning to Value Based Purchasing.• Outpatient on the Rise: Outpatient centers are increasing in size and scope.
10 Trends in Healthcare• Shortage of Primary Care: There is a shortage of primary care docs. Expect to see more NPs and delivery models in the future.• Pressure on Physician Margins: As practice costs have increased, reimbursements from Medicare have decreased.• Shared Risk: Payers and providers are pursuing shared risk arrangements thru ACOs and new payment models.• Evidence Based Medicine: Payers are requiring providers to follow established clinical protocols & standards.• Creative Innovation: Increase in health technology entrepreneurship. VC’s $194M invested in 37 HC IT deals in Q3, 2012 alone.
10 Trends in Healthcare: An Infographic Source: Visual.ly
Cost of Healthcare in the U.S.The cost of Healthcare in America and its % of GDP is unsustainable.Source: CMMS & BEA.org Source: Kaiser Family Foundation Source: OECD Stats
The Economic Engine of HealthcareThe economic engine of healthcare, in terms of job growth, taxes paid, capital investment, number of jobs,and technology infusion is huge. Too often, the public sees healthcare as purely a cost to the economy;rather than a ‘contributor’. But, healthcare is a huge part of our economy and a huge job creator. Healthcare Industry Jobs The healthcare industry will create 5.6M more jobs by 2020. 16.4M Jobs total 11.5% of our economy projected to grow at 3% a year. At the occupational level, the positions with the fastest projected growth are registered nurses (expected to add 712,000 jobs), retail sales workers (707,000), home health aides (706,000) and personal care aides (607,000). Source: Bureau of Labor Statistics
Challenges Facing MedicareMedicare, which is expected to provide health insurance to more than 50 million elderly and disabledAmericans this year, is expected to start operating in the red in its largest fund in 2024, according to theannual assessment by the trustees charged with overseeing the programs. Source: CMS.gov report & medicare.gov
Clueless about MedicareThe U.S. Population does not understand the link between Medicare and the U.S. Debt.“The net present value of the transfer — the amount that would haveto be set aside today to fund Medicare’s future intergenerationalpromises — has grown to at least $25 trillion, as calculated by theGovernment Accountability Office. This number is buried infootnotes of the annual Treasury-OMB report and is so large (almosttwice the $14 trillion value of all public U.S. companies) that it defiescomprehension. It’s not surprising that Americans can’t relate thealarming cost of this transfer to their own lives.” Article: “Clueless about Medicare” The Public does not want to face this reality Source: Washington Post Article: Clueless about Medicare
The Future of HealthcareThere are difficult choices ahead for healthcare no matter what strategy is pursued. Source: Harvard University / Urban Institute
The Rise of ObesityThere has been a huge rise in Obesity in the last 20 years. The medical care costs of obesity in the UnitedStates are staggering. In today’s dollars, these costs total about $160 billion per year. 70% of all health-care costs are the direct result of behavior 74% of all costs are confined to four chronic conditions (cardiovascular disease, cancer, diabetes and obesity) 80% of cardiovascular disease and diabetes is preventable 60% of cancers are preventable 90%+ of obesity is preventable (I.e. Nutrition & Exercise) Source: cdc.gov, OECD, Brookings, Reuters, Visually, WallStreetJournal
The Five P’s of Healthcare• Patient: Today’s patients are generally older, heavier, sicker, and out-patient oriented.• Provider: It’s no longer just the doctor and the hospital.• Payer: The organization or person actually paying the bill; in our country its the employer, government, or employee.• Purchaser: The broker who negotiates on behalf of the Payer; essentially, the insurance company.• Politician: The rule-maker, regulator, surveyor, accrediting entity, etc. who sets the parameters and priorities for the sector; everyone in the sector must respond as a result.• The Public: They are now weighing in on the cost and quality of the services they receive, and demanding transparency and convenience from their providers. The Public is creating a "New Normal" for healthcare delivery.
The “New Normal” of HealthcareEfficiency, Effectiveness, Transparency, Interconnectivity, & Convenience
The New Normal of Healthcare: EfficiencyPayers and Patients will no longer tolerate waste, duplication, and inefficiency. If providersare not embracing Lean methodologies today, it might be too late for them to survive. Access Case Study: Entrada Health Costs Time Quality Mobile Dictation Platform for Doctors that integrates with their EHR. $3M Lead investment from FCA Venture Partners.
The New Normal of Healthcare: EffectivenessPayers and Patients will demand evidence based medicine and protocols. "Instead ofpaying for 10 different hip replacement techniques, well pay for the best 3; period.”
The New Normal of Healthcare: TransparencyPayers and Patients will demand to see the providers report card on quality and efficiency."Show me!” Website for healthcare organization ratings , providing ratings and profiles of hospitals, nursing homes and physicians to consumers, corporations, health plans and hospitals. The company was acquired in 2010 for $194M. Source: CrunchBase
The New Normal of Healthcare: InterconnectivityPayers and Patients will demand medical records and information to be transportedelectronically for everyones benefit. No duplication of effort or work arounds. Download Your Personal Health Data One million patients are now registered for Blue Button, and are using it to access their personal health records, officials at the Department of Veterans Affairs announced in September, 2012. Source: HealthITNews
The New Normal of Healthcare: ConvenienceEase of access for primary care services; no longer requiring several weeks to see aphysician.ZocDoc is a Doctor appointment booking /check-in service used by about 2M people every month. The company has raised $95M in Venture Capital investment to scale worldwide. Source: CrunchBase
Larry’s Predictions for Healthcare1. Primary Care Medicine:The typical primary care physicians office within the next 5 years will closely resemble a dental practice oftoday. Just as you see your dental hygienist, youll see your nurse practitioner, and then the doctor at the endof the exam. The focus will be on high volume, with high efficiency and effectiveness.
Larry’s Predictions for Healthcare2. Hospital Transformations:Sole community hospitals will no longer be independent. Large regional and nationalhospital systems will be the norm. Small hospitals will be closed or converted into24/7 freestanding emergency rooms, with imaging services, OP surgeries, and officespace. All hospitals will either pay tax or an equivalent amount in lieu of tax.
Larry’s Predictions for Healthcare3. Employer Health:Employers, especially the larger ones, will take charge of their employees health and createincentives for a healthier workforce. In the face of rising health benefit claims, the ROI is toocompelling for the employer to not embrace it. Many will focus on the chronically ill within theirworkforce - e.g., diabetic employees, obese employees - to give them cash incentives for betterhealth. Many employers will also install health clinics inside their factories or offices. Case Study: Safeway Case Study: PharmMD PharmMD connects patients, physician andObesity and smoking rates are roughly 70% of the pharmacists to improve lives and lower healthcarenational average and our health-care costs for four costs through medication therapy managementyears have been held constant. technology. Misuse of medications results in $177This is the beginning of the trend. billion in medical costs, annually. Source: Wall Street Journal
Larry’s Predictions for Healthcare4. Alignment:Hospitals, Payers, and Physicians will align under models very similar to Kaiser Permanente,where the doctors are employed by the hospital, and the hospital is aligned with a giveninsurance company. Many insurance companies will actually own hospitals and certainphysician groups; especially primary care practices. "Narrow networks" and "Accountable CareOrganizations" will be the norm, not the exception. Source: Premier Inc.
Larry’s Predictions for Healthcare5. Value (not Volume):Success will be determined by the level of value provided to the patient, rather than the level ofvolume performed on them. For example, if a diabetic patient is no longer on any medication andhasnt been to an ER in over 12 months, then that cost savings will be rewarded. If an orthopedicsurgeon produces the very best outcomes for hip replacement (lowest cost, shortest stay in thehospital, lowest complication rate) then that surgeon will be rewarded with a bonus. Mistakes,redos, and readmissions will be penalized. Source: healthonomics
Larry’s Predictions for Healthcare6. iPad World:Everything will be on the IPad or tablet; i.e., the medical record, IP and OP material, drug storeprescription reports, hospital bill, doctor bill, etc. And, well have complete clinical connectivitywith the doctor and the hospital from our own IPad. For example, blood pressure monitoring,glucose, pulse oximeter, Skype with our doctor, etc., everything will connect into the IPad.
Larry’s Predictions for Healthcare7. Prescription drugs:Prescription drugs will no longer be advertised to the general public; no differentthan tobacco and liquor today. No one needs to know about the purple pill; only thedoctor and the pharmacist need to know about it. Source: CDC Study & NYT Article
Larry’s Predictions for Healthcare8. Creative Innovation:Creative innovation which focuses on convenience and value will be the norm, not theexception. Examples will include texting your physician and hospital (it will be standard practicein 5 years), voice recognition transcription via iPhone, pharmacy to pharmacy transfer andinterconnectivity of prescription information, and adult day care inside hospitals with Skypecapabilities throughout the day (no different than child care today). Nimble Medicine Set to Reshape Healthcare – Dave Chase, CEO of Avado, in Forbes
Larry’s Predictions for Healthcare9. The Healthcare Bubble:Just as we experienced the housing bubble and the banking bubble just a few short years ago, we willexperience a "healthcare bubble" within 5 years. Especially true among hospitals, as providers continue toexpand their debt obligations through extremely low interest financing, the future payment pressures andcuts in Medicare reimbursement will cause many providers to fail. Some will be acquired by competitors,some will be converted to other uses (e.g., 24/7 emergency centers, multi-specialty outpatient clinics), butothers will close; causing a ripple effect across the bond market. Source: New England Journal of Medicine
Larry’s Predictions for Healthcare10. Military medicine:As with every major military conflict in our nations history, the medical and surgical lessons learned from thebattlefield will become quickly deployed in medical schools and healthcare settings throughout the country.We can expect this to occur within the next 5 years as new techniques for trauma care, pain management,psycho therapy, medication management, and other new methods for delivering care become incorporated intothe teaching curricula of major academic training centers across the US. The new Veterans Affairs Medical Center in North Las Vegas will assist 45,000 veterans. The U.S. military is using acupuncture to treat The Hospital is a $600 million, 1.3 million- American soldiers, with results that are being square-foot complex. described as “off the charts.” Source: Metro West Whole Health & The Last Vegas Sun