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Healthcare update 2013


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This presentation describes the current drivers of healthcare reform and the obstacles ahead

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Healthcare update 2013

  3. 3.  Cost Issues  Demographics  Quality Challenges  Affordable Care Act  Implications for Physicians  Changes in Care Delivery  Immediate Challenges
  5. 5. 2011 US HEALTHCARE  $2.7 TRILLION  $8680/PERSON  3.9% GROWTH
  6. 6. Per Capita Total Current Health Care Expenditures, U.S. and Selected Countries, 2010
  7. 7. 0 1000 2000 3000 4000 5000 6000 7000 8000 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 US NOR SWIZ NETH CAN DEN GER FR SWE AUS UK NZ JPN Average spending on health per capita ($US PPP) 0 2 4 6 8 10 12 14 16 18 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 US NETH FR GER DEN CAN SWIZ NZ SWE UK NOR AUS JPN Total expenditures on health as percent of GDP
  8. 8. Hospital Spending per Discharge, 2009 Adjusted for Differences in Cost of Living 18,142 13,483 13,244 11,112 10,875 10,441 9,870 8,350 7,160 6,222 5,204 5,072 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 US* CAN* NETH DEN SWIZ NOR** SWE AUS* NZ* OECD Median FR GER Dollars * 2008. ** 2007. Source: OECD Health Data 2011 (Nov. 2011).
  10. 10. DRUG COSTS  More than $280 billion will be spent this year on prescription drugs in the U.S. If we paid what other countries did for the same products, we would save about $94 billion a year.
  11. 11.  Gerard Anderson, a health care economist at the Johns Hopkins Bloomberg School of Public Health, says is the obvious and only issue: “All the prices are too damn high.”
  13. 13. Cumulative Increases in Health Insurance Premiums, Workers’ Contributions to Premiums, Inflation, and Workers’ Earnings, 1999-2012 Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2012. Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April), 1999-2012; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey, 1999-2012 (April to April).
  14. 14. Average Annual Worker and Employer Contributions to Premiums and Total Premiums for Family Coverage Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2002- 2012.
  15. 15. Proportion Of Nonelderly Adults Who Delayed Care Because Of Cost, By Coverage Status, 2000–10. Kenney G M et al. Health Aff 2012;31:899-908 ©2012 by Project HOPE - The People-to-People Health Foundation, Inc.
  17. 17. ©2011THEADVISORYBOARDCOMPANY•24740A 48 Source: U.S. Census Bureau, availableat:, accessed on September13, 2011; Kaiser FamilyFoundation,availableat:,accessed on September13, 2011; Health Care Advisory Board interviewsand analysis. Baby Boomer Surge Beginning Medicare Rolls in Line to Increase Dramatically 2011 US Population Distribution By Age 75 M Baby Boomers ~7,000/day Newly eligible Medicare beneficiaries 23% Percentage of population covered by Medicare in 2030
  18. 18. Number of Elderly Will Double by 2030
  19. 19. Medicare Enrollment, 1966-2011 NOTES: Numbers may not sum to total due to rounding. People with disabilities under age 65 were not eligible for Medicare prior to 1972. SOURCE: Centers for Medicare & Medicaid Services, Medicare Enrollment: Hospital Insurance and/or Supplemental Medical Insurance Programs for Total, Fee-for-Service and Managed Care Enrollees as of July 1, 2008: Selected Calendar Years 1966-2008; 2009-2011, HHS Budget in Brief, FY2011. Number in millions:
  20. 20. Percent Distribution of National Health Expenditures, by Type of Sponsor, 1987, 2000, 2010 Government Private 1987 (Total = $519.1 billion) Government Private Government Private 2000 (Total = $1,377.2 billion) 31.8% 68.2% 35.5% 64.5% 44.9% 55.1% Federal Private Business State & Local Household Other Private Revenues 2010 (Total = $2,593.6 billion)
  21. 21. ©2011THEADVISORYBOARDCOMPANY•24740A 49 Source: Health Care Advisory Board interviews and analysis. 52% 20% 27% Moving Ever Closer to Single Payer Medicare to Constitute Majority of Discharges by 2021 Inpatient Volume by Payer Class Medicaid Commercial Medicare37%35% 22% Medicaid Commercial Medicare 2011 Self Pay 5% 2021 0.3% Self Pay
  22. 22. ©2011THEADVISORYBOARDCOMPANY•24740A Programs 17 Health Care Likely On the Chopping Block But Little Agreement on How Source: New York Times,availableat: 2010/02/01/us/budget.html,accessed September17, 2011; Health Care AdvisoryBoard interviews and analysis. 1) Includes spending for Medicare, Medicaid,CHIP, substance abuse and mental health services, National Institutes of Health, and Food and Drug Administration. 2) Includes spending for unemploymentinsurance programs, food stamps, militaryand federal civilian employeeretirementand disability, and TemporaryAssistance for Needy Families(TANF) program. 24% 20% 20% 15% 14% Health Care1 Defense Social Security Other Safety Net 2 Interest on Debt 7% Distribution of Spending in 2011 Budget Proposal Other Possible Approaches to Reducing Health Care Spending Decreased supplemental payments Eligibility changes Provider rate cuts Payment model overhaul (i.e. voucher system) Fraud, waste reduction Cost shifting to beneficiaries
  23. 23. “Medicare spent an estimated $4.4 billion in 2009 to care for patients who had been harmed in the hospital, and readmissions cost Medicare another $26 billion.” Room for Improvement
  24. 24. ©2012THEADVISORYBOARDCOMPANY 4 Our Inability to Execute on the Vision Faced with an Unsustainable Status Quo Public Insurance Financing Inadequate “The Medicare Hospital Insurance trust fund is now estimated to be exhausted in 2024, 5 year’s earlier than was shown in last year’s report and the fund is not adequately financed over the next 10 years.” Board of Trustees Annual Report of Federal Hospital Insurance Trust Fund April 2012 Rampant Delivery System Inefficiencies "Our healthcare system is fragmented, with a misalignment of incentives…that spawns inefficient allocation of resources [and] adversely impacts quality, cost, and outcomes. Eliminating waste … is crucial. . . .“ Alain C. Enthoven American Journal of Managed Care December 2009 A Cottage Industry Lacking Standardization “Our current health care system is essentially a cottage industry of non-integrated, dedicated artisans …Services are often highly variable, performance is largely unmeasured…and standardized processes are regarded skeptically. …The gap between established science and current practice is wide.” . . . Stephen Swensen, Gregg Meyer et al. New England Journal of Medicine January 2010
  25. 25. IMAGECREDIT:SHUTTERSTOCK. ©2011THEADVISORYBOARDCOMPANY•24740A Source: Health Care Advisory Board interviews and analysis. An Industry Preparing For Fundamental Change Coverage Expansion, Payment Reform Reshaping Health Care Timeline of Health Reform Developments VAAttorney General files first lawsuit against individual mandate CMS releases proposed rule for Medicare Shared Savings Program HHS releases Meaningful Use regulations Patient Protection and Affordable Care Act (PPACA) passes House of Representatives President Obama repeals 1099 reporting requirement from PPACA CMS issues provisions to Hospital Readmissions Reduction Program HHS releases Medicare Value- Based Purchasing Program final rule 5
  26. 26. DONE DEAL!
  27. 27.  Expand health insurance coverage  Improve coverage for those with health insurance  Improve access to and quality of care  Control rising health care costs Goals for Health Reform
  28. 28. Promoting Health Coverage Medicaid Coverage (up to 133% FPL) Employer-Sponsored Coverage Exchanges (subsidies 133- 400% FPL) Individual Mandate Health Insurance Market Reforms Universal Coverage
  29. 29. Health Reform and Delivery System Changes  Promoting primary care and prevention  Improving provider supply  Developing new models for coordinating and delivering care  Making use of information technology  Reforming provider payments to promote quality
  30. 30. Improving Health Care Quality • Development of a national quality strategy • Coordinated care through medical homes and other models • Quality-based payments for health care providers and improved information on provider quality • Comparative effectiveness research to identify most effective treatments and interventions • Enhanced data collection to address health care disparities
  31. 31. Health Reform Implementation Timeline 2010 • Some insurance market changes—no cost-sharing for preventive services, dependent coverage to age 26, no lifetime caps • Pre-existing condition insurance plan • Small business tax credits • Premium review 2011-2013 • No cost-sharing for preventive services in Medicare and Medicaid • Increased payments for primary care • Reduced payments for Medicare providers and health plans • New delivery system models in Medicare and Medicaid • Tax changes and new health industry fees 2014 • Medicaid expansion • Health Insurance Exchanges • Premium subsidies • Insurance market rules—prohibition on denying coverage or charging more to those who are sick, standardized benefits • Individual mandate • Employer requirements
  32. 32. Health Insurance Coverage Among Young Adults, Ages 19–25 And 26–34, By Quarter, 2005– 11. Sommers B D et al. Health Aff 2013;32:165-174 ©2013 by Project HOPE - The People-to-People Health Foundation, Inc.
  33. 33. Medicare Part A Trust Fund Pre-health reform: 2017 projected insolvency date Assets as a share of annual spending: Post-health reform: 2029 projected insolvency date Projection: Health reform legislation will extend the life of the Medicare Part A Trust Fund from 2017 to 2029
  34. 34. Rate of Medicare Spending Projected to Slow NOTE: Estimates do not take into account future changes to the Sustainable Growth Rate formula to prevent reduction in fees. SOURCE: Medicare Baseline Spending before reform from CBO, March 2009 Baseline: MEDICARE; after reform from Kaiser Family Foundation analysis of CBO cost estimates of health reform legislation, March 20, 2010. Medicare Baseline Spending (in $ billions) Baseline Medicare Spending Medicare Spending AFTER Health Reform Congressional Budget Office Projections Projected Savings
  36. 36. ©2011THEADVISORYBOARDCOMPANY•24740A Decelerating Price Growth • Federal, state budget pressures constraining public payer price growth • Payments subject to quality, cost-based risks • Commercial cost shifting stretched to the limit Shifting Payer Mix • Baby Boomers entering Medicare rolls • Coverage expansion boosting Medicaid eligibility • Most demand growth over the next decade comes from publicly insured patients 15 Four Forces Shaping Future Margins Financial, Clinical Profiles Shifting Dramatically Continuing Cost Pressure • No sign of slower cost growth ahead • Drivers of new cost growth largely non-accretive Deteriorating Case Mix • Medical demand from aging population threatens to crowd out profitable procedures • Incidence of chronic disease, multiple comorbidities rising Source: Health Care Advisory Board interviews and analysis.
  38. 38. ©2011THEADVISORYBOARDCOMPANY•24740A 10 Getting Paid Less to Do Less New Payment Models Calling Old Imperatives Into Question Accountable Payment Models Performance Risk Cost of Care Bundled Pricing • Bundled Payments for Care Improvement program • Commercial bundled contracts Utilization Risk Volume of Care Shared Savings • Medicare Shared Savings Program • Pioneer ACO Program • Commercial ACO contracts Quality of Care Pay-for-Performance • Value-Based Purchasing • Readmissions penalties • Quality-based commercial contracts Source: Health Care Advisory Board interviews and analysis.
  39. 39. ©2012THEADVISORYBOARDCOMPANY 8 Increased Provider Accountability Has Arrived Value-Based Purchasing Represents First (of Newest) Pushes Initiative Value-Based Purchasing Description • Mandatory pay-for-performance program • Percentage of hospital inpatient payments withheld, earned back based on quality performance Payment Timeline • Withholds begin at 1% in 2013, grow to 2% by 2017 • Hospitals with greater than expected readmission rate subject to financial penalty • Penalties capped at 1% of total DRG paymentsin 2013,2% in 2014, and not to Readmissions Bundled Payment • Performance based on 30-day readmission metrics for three conditions in 2013, expanding in 2015 to include four others • Payer disburses single payment to cover hospital, physician, or other services performed during an inpatient stay or episode of care • • • • exceed 3% in 2015 and beyond Nov 4th: Letter of intent due for Models 2 to 4 Q1 2012: Model 1 begins H2 2012: Model 2-4 begins 2013: National pilot on episodic bundling starts Shared Savings Medical Home Reimbursement 1) Center for Medicare and Medicaid Innovation. • ACOs receive shared savingspayments if spending per attributed beneficiary grows slower than national per beneficiary spending • Two CMS pilots currently operational • First ACO contracts to begin April 2012; contracts to last minimum of three years • CMMI primary care pilot expected to launch in mid-20121 • CMS multi-payer advanced primary care demonstration started in mid-2011 Source: Clinical Advisory Board interviews and analysis. Mandatory Voluntary For Now
  40. 40. ©2011THEADVISORYBOARDCOMPANY•24740A 22 Source: Centers for Medicare and Medicaid Services, “CMS Issues Final Rule for First Year of Hospital Value-Based Purchasing Program,”April 29, 2011; Health Care Advisory Board interviewsand analysis. 1) In FY 2013, clinical care measures are weighted at 70 percent and patient experiencemeasures are weighted at 30 percent. Picking Winners, Losers Based on Performance Performance Scores Drive Payment Redistribution Final Rule: Value-Based Purchasing Program Structure Measure Performance • CMS evaluates hospitals based on achievement and improvement on selected clinical care, patient experience measures • Based on weighted average of achievement and improvement scores, CMS calculates Total Performance Scores (TPS) for each hospital1 Compare Hospitals • Medicare ranks all hospitals based on TPS • For achievement score, hospitals ranked below the 50th percentile do not receive points towards TPS • For improvement score, hospitals whose performance has not improved relative to a baseline score do not receive points toward TPS Adjust Payments • Medicare converts TPS into incentive payments • Calculation will use linear exchange function • Hospitals that receive higher TPS will receive higher incentive payments • CMS to notify hospitals of incentive payment for FY 2013 on November 1, 2012
  41. 41. ©2011THEADVISORYBOARDCOMPANY•24740A 35 Case in Brief: BCBS Hospital Choice Product • Product spurred by Massachusetts regulation, which mandated that insurers in the Connector network offer at least one tiered or limited network plan • Product incents patients to choose low-cost, in-network providers by imposing fees for seeking care at 15 higher cost hospitals • BCBS reports that the plan saves employers 5.5 percent; product the most successful in plan’s history Source: Blue Cross Blue Shield, “Hospital Choice Cost Sharing,” availableat:,accessed April 15, 2011; Health Care Advisory Board interviewsand analysis. Employers Increasingly Willing to Restrict Choice Limiting Choice No Longer the Third Rail Narrow Networks Making a Resurgence Employer Visits to higher-cost hospitals require higher out-of-pocket payment Access to lower-cost hospitals available at standard co-payment rates
  42. 42. ©2011THEADVISORYBOARDCOMPANY•24740A 36 Case in Brief: WellPoint • Insurer replacing traditional eight percent annual rate increases with new mandatory program that pays increases only to hospitals with sufficient scores on 51 quality of care indicators • WellPoint estimates that program will reduce annual inpatient cost growth by three to five percentage points 55%35% Satisfaction 10% Health Outcomes Patient Safety Quality Performance Risk Increasingly Prevalent Private Insurers Raising the Stakes WellPoint Tying Pay Increases to Quality Metrics Quality Metric Weights Patient 3-5% Estimated percentage reduction in annual inpatient cost growth Source: Adamy J., “WellPointShakes Up Hospital Payments,” The Wall Street Journal,May 16, 2011; Health Care AdvisoryBoard interviewsand analysis.
  43. 43. NO PLACE TO HIDE
  44. 44. ©2012THEADVISORYBOARDCOMPANY Hospitals Facing Increased Transparency CMS – Federal Level MS-DRG 313 – Chest Pain January 2009 – December 2009 5
  45. 45. ©2012THEADVISORYBOARDCOMPANY Laser Focus on Individual Physicians Outcomes Matter Source: 7
  46. 46. ©2012THEADVISORYBOARDCOMPANY Preparing for Physician Compare Full Transparency at Your Fingertips Source: 8
  48. 48. ©2011THEADVISORYBOARDCOMPANY•24740A 23 Redefining the Acute Care Episode: BUNDLED PAYMENTS Driving Delivery System Integration Bundled Payment Framework Lump Sum Payments Drive Integration Through Shared Accountability Payer Physician Services Hospital Services Post-Acute Services Program in Brief: Medicare’s Bundled Payments for Care Improvement • Program seeking voluntary participation in four bundled payment models • Models 1-3 provide retrospective reimbursement; Models 2 and 3 include post-episode reconciliation; Model 4 offers single prospective payment • Acute care hospitals, physician groups, health systems eligible for all models; post-acute facilities may participate without hospitals in Model 3 • Physicians eligible for gainsharing bonuses up to 50 percent of traditional fee schedule • For all models, applicants must propose quality measures, which CMS will use to develop set of standardized metrics Source: Centers for Medicare and Medicaid Services; Health Care AdvisoryBoard interviews and analysis.
  49. 49. ©2011THEADVISORYBOARDCOMPANY•24740A 27 Program in Brief: Medicare Shared Savings Program • Program begins April 1 or July 1, 2012; contracts to last minimum of three years • Physician groups and hospitals eligible to participate, but primary care physicians must be included in any ACO group • Participating ACOs must serve at least 5,000 Medicare beneficiaries • Bonus potential to depend on Medicare cost savings, quality metrics • Two payment models available: one with no downside risk, the second with downside risk in all three years ACCOUNTABLE CARE ORGANIZATIONS Applying Total Cost Accountability to Fee-for-Service Payments Shared Savings Payment Cycle Assignment Patients assigned to ACO Target Actual based on terms of contract Billing Providers bill normally, receive standard fee-for-service payments Comparison Total cost of care for assigned population compared to risk- adjusted target expenditures Bonus Bonuses or penalties levied based on variance of 1 2 3 4 5 expenditures from target Distribution ACO responsible for dividing bonus payments among stakeholders Source: Health Care Advisory Board interviews and analysis.
  50. 50. ©2011THEADVISORYBOARDCOMPANY•24740A (40%) (14%) (15%) (24%) 90 PATIENT CENTERED MEDICAL HOME PreventableAdmissions Drop Upon Improved Management Central Aims of Medical Home Model Comprehensive Care Enhanced Access Patient Engagement Coordinated Care Community Care of North Carolina Source: Patient Centered PrimaryCare Collaborative,availableat:,accessed May 3, 2011; Health Care Advisory Board interviews and analysis. Percent Change in Hospitalizations Resulting from Medical Home Models Geisinger Health System (ProvenHealth Navigator) Genesee Health Plan (HealthWorks) HealthPartners Medical Group (BestCare)
  51. 51. ©2012THEADVISORYBOARDCOMPANY Fee-for-Service Accountable Care Utilization Maximization Optimization Expense Management Cost per patient Cost per population Quality and Clinical Outcomes Hospital-based care Care across continuum Shifting Economics Require Collaboration Physician Engagement Fundamental to Accountable Care 16
  52. 52. ©2012THEADVISORYBOARDCOMPANY 5 Source: Crossing the Quality Chasm: A New Health System for the 21st Century, Institute of Medicine,2001 REDESIGNED CARE SYSTEM Organizations that facilitate work of patient- centered teams High- performing patient- centered teams • • • • • REDESIGN IMPERATIVES Reengineered care processes Effective use of information technologies Knowledge and skills management Development of effective care teams Coordination of care across patient conditions, services, sites of care over time An Inarguable Right Answer A Redesigned Care System Centered on Value, Safety, and Outcomes Recommendations from Institute of Medicine Rules for Redesigning the Care System 1. 2. Care is based on continuous healing relationships Care is customized to patient needs 3. 4. 5. 6. and values Patient is the source of control Knowledge is shared and information flows freely Decision making is evidence-based Safety is a system priority 7. 8. 9. 10. Transparency is necessary Needs are anticipated Waste is continuously decreased Cooperation among clinicians is a priority
  54. 54. ACCESS TO CARE
  55. 55. United States Has Low Physician-to- Population Level
  56. 56. 30 Million People Live in Federally Designated Shortage Areas
  57. 57. The Physician Workforce Is Aging: 250,000 Active Physicians Are Over 55
  58. 58. First-Year M.D. Enrollment per 100,000 Population Has Declined Since 1980
  59. 59. Doctor Visits Are Sharply Higher for Those Over 65
  60. 60. ©2011THEADVISORYBOARDCOMPANY•24740A Productivity 79 Source: Health Care Advisory Board interviews and analysis. Imperative #5: Redesign Inpatient Care Models Migrating Toward Top-of-License Inpatient Care Progress Must Continue Even in the Face of Practical Pressures Single RN responsible during shift, but can delegate tasks to ancillary staff Yesterday Time Primary Single RN responsible for patient’s care across entire stay Today Hybrid Tomorrow Team-Based Total Patient Care Single RN responsible for patient’s care across nurse’s shift Progress RN leads team of ancillary staff jointly responsible for all assigned patients Practical Pressures Impeding Productivity • Union pressure • Workforce stability/training requirements • Inadequate delegation skills Practical Pressure
  61. 61. ER LINES IN 2014????
  63. 63. What sets our really expensive health-care system apart from most others isn’t necessarily the fact it’s not single-payer or universal. It’s that the federal government does not regulate the prices that health- care providers can charge. An Emerging Conversation
  65. 65. Thank You