Leading the Journey: Cultivating Success in Healthcare
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Healthcare leaders share insights at the fifth annual CEO Forum with a focus in three crucial areas: balancing risk and reward, building the foundation for population health and responding to the rise of consumerism.
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Leading the Journey: Cultivating Success in Healthcare
- 1. © 2015 Huron Consulting Group. All rights reserved. Proprietary and confidential. 1 Leading the Journey: Cultivating Success in Healthcare Insights from Leading Healthcare Executives Hosted by Modern Healthcare Custom Media March 11, 2015 © 2015 Huron Consulting Group. All rights reserved. Proprietary and confidential.
- 2. © 2015 Huron Consulting Group. All rights reserved. Proprietary and confidential. 2 Today’s Presenters Reynold Jennings CEO WellStar Health System Gordon Mountford Executive Vice President Huron Healthcare
- 3. © 2015 Huron Consulting Group. All rights reserved. Proprietary and confidential. TRANSFORMATIVE CHANGE Gordon Mountford, Executive Vice President, Huron Healthcare
- 4. © 2015 Huron Consulting Group. All rights reserved. Proprietary and confidential. 4 Fifth Annual CEO Forum HealthcareCEOForum.com
- 5. © 2015 Huron Consulting Group. All rights reserved. Proprietary and confidential. 5 The Traditional Business Model is Changing Commercial insurance is declining. Government subsidized and self-pay segments are growing.
- 6. © 2015 Huron Consulting Group. All rights reserved. Proprietary and confidential. 6 Market Demands 20% to 40% Performance Improvement
- 7. © 2015 Huron Consulting Group. All rights reserved. Proprietary and confidential. 7 Audience Question: Transformational Change Which of these five areas do you believe holds the largest performance improvement opportunity for your organization? Revenue transition Scale and integration Operational excellence Clinical transformation Human capital
- 8. © 2015 Huron Consulting Group. All rights reserved. Proprietary and confidential. RISK AND REWARD / MARKET INTEGRATION Reynold Jennings, CEO, WellStar Health System
- 9. © 2015 Huron Consulting Group. All rights reserved. Proprietary and confidential. 9 Risk and Reward / Market Integration Tectonic Shifts Mega Trends Healthcare is Local Population Impact Risk Continuum
- 10. © 2015 Huron Consulting Group. All rights reserved. Proprietary and confidential. 10 Tectonic Shifts Baby Boomer Total Cost Growth Medicaid Expansion Total Cost Growth US Debt Interest Burden
- 11. © 2015 Huron Consulting Group. All rights reserved. Proprietary and confidential. 11 Federal Spending and Revenues (Percent of GDP)
- 12. © 2015 Huron Consulting Group. All rights reserved. Proprietary and confidential. 12 ACA Revenue Reductions Estimated Changes to Medicare Fee-for-Service Payments, 2013-2022 Reductions in Annual Updates to FFS Payment Rates: $415 Billion over Ten Years Source: Letter from the Congressional Budget Office to the Honorable John Boehner, Page 5, Table 2, July 24, 2012 .
- 13. © 2015 Huron Consulting Group. All rights reserved. Proprietary and confidential. 13 Mega Trends Financial Payments FFS to Value Consumerism Aging of America Physician Shortage/Distribution
- 14. © 2015 Huron Consulting Group. All rights reserved. Proprietary and confidential. 14 Healthcare is Local 50% Population in Top 25 MSAs #53 MSA: Population less than 1.0 mm #105 MSA: Less than 500,000 #185 MSA: Less than 250,000 Top 25 MSA’s
- 15. © 2015 Huron Consulting Group. All rights reserved. Proprietary and confidential. 15 Population Impact 24 of 25 Top MSAs Already Consolidated Other 415 MSAs Will Use Other 4 Models
- 16. © 2015 Huron Consulting Group. All rights reserved. Proprietary and confidential. 16 Risk Continuum Clinical Affiliation Regional Collaboration Clinically Integrated Hospital Network Accountable Care Organization Merger or Acquisition
- 17. © 2015 Huron Consulting Group. All rights reserved. Proprietary and confidential. POPULATION HEALTH Reynold Jennings, CEO, WellStar Health System
- 18. © 2015 Huron Consulting Group. All rights reserved. Proprietary and confidential. 18 Population Health ACOs – Pioneer – MSSP CIOs – Commercial – Triple Aim – Total Physician Alignment
- 19. © 2015 Huron Consulting Group. All rights reserved. Proprietary and confidential. 19 CEO Forum Insights Take Reasonable Risk Data Parity Has Long Way To Go Physician Engagement Communication Focus Efforts Based On Community Resources
- 20. © 2015 Huron Consulting Group. All rights reserved. Proprietary and confidential. 20 Audience Question: Population Health What do you see as the biggest challenge in the shift to a population health management approach? Managing across the full continuum of care Developing data analytics capabilities Achieving appropriate scale Aligning physicians/providers Developing organizational leadership
- 21. © 2015 Huron Consulting Group. All rights reserved. Proprietary and confidential. LEADERSHIP IMPERATIVES Gordon Mountford, Executive Vice President, Huron Healthcare
- 22. © 2015 Huron Consulting Group. All rights reserved. Proprietary and confidential. 22 New Models of Leadership
- 23. © 2015 Huron Consulting Group. All rights reserved. Proprietary and confidential. 23 Taking Reasonable Risk
- 24. © 2015 Huron Consulting Group. All rights reserved. Proprietary and confidential. 24 Need for Urgency
- 25. © 2015 Huron Consulting Group. All rights reserved. Proprietary and confidential. 25 Leading the Transformation Journey Requires critical investments in technology, operational performance, organizational culture, etc. All depend on human capital to succeed. Three essential elements: – Operational excellence – A strategy for transformational change – The ability to optimize human potential and leadership Organizations that combine all three will be in the best position to succeed.
- 26. © 2015 Huron Consulting Group. All rights reserved. Proprietary and confidential. 26 Ten Questions for Leaders How are costs aligned with revenue trajectory? What changes in patient care revenue streams are forecast? What increases, decreases, or shifts in utilization are occurring? What partnerships or alliances are shaping the market? Where are the greatest opportunities to drive more value in care delivery – improving outcomes, experiences, or efficiency?
- 27. © 2015 Huron Consulting Group. All rights reserved. Proprietary and confidential. 27 Ten Questions for Leaders (continued) Is there active engagement with physicians and patients? Do current hard and soft assets align with the strategy, revenues, and delivery model, and will they scale effectively? What changes in organization structure and incentives are needed? What are the greatest opportunities today to strengthen the business, optimize revenues, and align costs? Are there clear, prioritized goals and the leadership to achieve them?
- 28. © 2015 Huron Consulting Group. All rights reserved. Proprietary and confidential. Questions 28
Editor's Notes
- The CEO Forum is an opportunity for a select group of CEOs to talk with each other in a detailed and thoughtful way. We also bring in speakers, both from outside healthcare, and from other parts of the healthcare industry, to spark discussion. This year we heard from leading executives from payer organizations, Aetna and Anthem, to get their perspectives. We also heard from leaders from The Home Depot, Turner Broadcasting System, and Coca-Cola. And we heard a non-political keynote from Jeb Bush, who talked about leadership during times of change. More information is available in our CEO Forum Report. So if you’re interested in what Governor Bush had to say, or in Coca-Cola’s advice for real-time marketing, or how leaders at CNN have responded to many of the same challenges facing healthcare, you can download a free copy of the report at HealthcareCEOForum dot com
- Throughout the Forum, some key points were raised repeatedly. One key point we heard is that the traditional business model is changing. The portion of reimbursement from commercial insurance is declining, while the government subsidized portion and the self-pay portions are growing. That trend puts pressure on health systems to optimize performance while decreasing the total cost of care.
- As we listened to CEOs at the Forum, and as we consider what our clients are experiencing, we believe the transformation facing the industry falls into four categories. Revenue Transition requires leaders to manage the top-line revenue mix, increase market reach, and manage the evolving payer mix. Scale and Integration involves establishing deep operational and data integration, optimizing assets, and aligning incentives Operational Excellence is a matter of creating an organizational structure aligned with strategy, continuously improving while executing long-term change, and establishing data-driven decision making and accountability. Clinical Transformation includes improving access, developing proactive case management and care coordination across the care continuum, reducing care variation, and engaging patients and providers. And all of this needs to be supported by informational technology and driven by human capital.
- Thank you Christine. I appreciate the opportunity to partner with Gordon and hopefully highlight some important insights into strategies and tactics currently underway to create the new Value Based Future State of Healthcare. One key take away from today's comments: -Gordon's slide on payer mix is a general trend line for the majority of health systems -However, the depth and speed of change varies by market for reasons I will cover later A second key take away: -actions by federal or state government have always been and will always be about distributing a fixed amount of tax dollars. Not about care delivery transformation no matter what they say! -government is the Capital in the movie the Hunger Games where the rules are subject to change frequently. -therefore, Key Lesson #1 "taking risk contracts from a government payor should be done to the smallest level possible until experience and results indicate the ability to handle a large number of risk lives".
- Thousands of pages of information has been and is being written each month on these five topics, however, I hope to focus today's discussion to a few critical points.
- We talk a lot about mega Trends, but we many times fail to recognize the forces that are unstoppable! -First the baby boomers: 10,000 a day starting in 2014 for 19 years in a row will double the number of medicare recipients. We are going from 8:1 workers to 3:1 workers at the same time. Even holding healthcare inflation to CPI will not cover the gross cost increase. -second medicaid expansion: 60% of US families make $60,000 a year or less, flat for a decade. Middle class is $48,000 and up. Most available jobs are low wage service industry. The ability to keep passing deductibles and copays on to the working class is limited at best. Ultimately the gross numbers of lives in medicaid will grow at the same time states are having trouble with transportation costs, pension costs, education costs and public safety costs. -third is the never ending growth of the US national debt, currently at $18 T and no end in sight for at least 10 years, so $24-25 T in 10 years. The entire US discretionary budget is about $563 B. 2% = $460 B, 3% = $690 B. HHS = $80 B, Education = $71 B, H = $41 B ($193 B for top 3). Key Lesson #2: you are going to be paid less each year and you need to double down now on your strategies to lower the unit cost of care, provide access to the largest population practical so as to spread high risk costs, and align all physicians into a Clinical Integration Organization or Network to achieve the highest level of quality scores possible. This is the performance improvement slide Gordon talked about.
- This slide is the summary of slide 10 Tectonic Shifts. The bottom two lines, cost and revenue without healthcare costs are stable predictions where revenue exceeds costs. The third red line is healthcare costs and the top green line is all costs plus healthcare costs. Please note that the lines start the gigantic diversion in 2020, 6 years after the baby boomer started joining medicare.
- After seeing slide 11, it should come as no surprise that the new federal law started attacking the reimbursement side of medicare. The $413 B of cuts over 10 years divided by 5000 hospitals is about $82.6 MM per hospital, or $8.26 MM per year. 60% of hospitals have an operating margin of about 3.5%, which is $7-15 MM per year. EHR costs to try and earn back bonus dollars or to reduce performance penalties are already doubling from about 3% to 5-6% of net revenues, so there is a double whammy happening at the revenue line and the cost line. Lesson #3: the large commercial insurance companies understand this slide also and that is why Aetna announced right after the President's state of the union speech that they are moving to 50% risk based payments by 2018 so as to prevent cost shifting for what medicare, medicare and indigents are not going to pay. Expect Blue Cross, United, Cigna, etc. to follow Aetna's lead.
- Three of these, the aging of America, Consumerism and physician shortages definitely apply to my different speed and depth comment. They all 3 need active strategies, but their ranking will vary based on local demographics. The fourth one, FFS to Value has now been kick started by the President and HHS indicating that the federal government will move from 10% in 2014 to 30% by 2016 and 50% by 2018. These targets may be overly aggressive as they were for ICD-10, but I would recommend believing it is going to happen and accelerate readiness now. The disturbing thing is that even the top tier health care systems are touting bundled payments for things like joint surgery, spine surgery, bariatric surgery, organ transplant, and heart surgery. The things needing evidence based care and cost effective management solutions are the chronic disease, complex case diseases as COPD, diabetes, infectious diseases, behavior health care, hypertension, stroke care, and unique diseases.
- Lesson #4: most of the national advocated solutions are very good and appropriate for the top 25 MSA's. For example, I live in Atlanta, the 9th largest MSA and the only one that has not consolidated in the top 25 markets. Therefore, it should not have surprised anyone that my system WellStar, and Emory Healthcare, the only academic center in Atlanta are talking about merging/unifying. There are at least 2 other confidential consolidation plays underway in the Atlanta market.
- Last year Rich Umbdenstock, President of AHA, said most healthcare systems will not merge, they will pick one of the other collaboration models which we will talk about in a minute. He said this because this chart and the previous chart point out that the health systems in MSA #53-430 will not get enough savings out of merger efficiencies to cover the revenue and cost hits we mentioned earlier, so collaborating within state regional networks is the only option. This trend is already happening in several states.
- Clinical Affiliation: 10 years ago, Emory Healthcare and WellStar started open heart services, now WellStar discussing helping two systems adjacent to us Regional Affiliation: in 2014 WellStar and Piedmont formed a joint venture insurance company to manage our employees and dependents (28,000) and start a medicare advantage program (16,000 to date). Accountable Care Organization: WellStar did on our own in 2014. Now talking to outlying hospital organizations about supporting their population health and ACO efforts. Locally, Emory and DeKalb also have ACO's. Clinically Integrated Hospital Network: WellStar's CIO just coming to life in April. Piedmont has had one for many years. Tenet has one. This is the only way to effectively engage all physicians, private, employed, faculty in redesigning care delivery for the coming future state delivery system. Lesson #5 Healthcare has always been and will always be LOCAL! Your strategies and tactics must match your local environment. "Be all you can be" (US army) tempered by ""BE WHAT YOU CAN BE"!
- WellStar started developing our capabilities two years ago. We invested about $5 MM in manpower and systems. This resource was the prime reason we had the 10th best ACO performance in 2014, saved $20 MM. Our new insurance company was not mature enough in 2014 to have enough data to effect cost savings within our employee health plan. We did save $7 MM through progressing into a high deductible plan design, but for reasons I noted early on, we prefer to now manage our Quality/cost formula through population health data management IN 2015 and beyond. Data is so far posing a lot of difficulty, so getting patients into the physician office regularly, having a reasonably effective EHR, and supporting primary care with nurse case managers and clinical pharmacist seem to be the best approach right now.
- Lot of confusion on these two. At WellStar I chose to keep them separate and let the ACO concentrate on all things medicare, the CIO to concentrate on all things commercial insurance. I believe we will need a medicaid CIO before long.
- I touched on all these except communication. In 2012 a smart CEO told me that no matter how much you are communicating about the changes and your strategies, it is not enough. Was he every right. We keep doubling down and it is still now as effective as I would like, but we are changing and improving every day.
- Keith Pitts, Vice Chairman, Tenet Healthcare Corporation, shared insights into new models of leadership.
- Parker “Pete” Petit, who is chairman of the board and CEO of MiMedx Group, spoke about the willing to take risks.
- And finally, Charles Evans, who is president of the International Health Services Group and senior advisor at Jackson Healthcare, spoke about the need for urgency.
- What’s clear is that this transformational journey requires a lot of critical investments, in areas like technology, operational performance, organizational culture, and so on. All of these depend on human capital to succeed. Based on our experience, there are three essential elements to transformational change: operational excellence, a strategy for transformational change, and the ability to optimize human potential and leadership. Organizations that combine all three will be in the best position to succeed.
- As we have talked with leaders of health systems across the country we have identified ten areas where they are focusing attention and we have distilled those areas into questions that leaders are asking. I won’t go over all ten, but you can see them here and on the next slide. I would be happy to talk about them during he Q/A.