Structure of US Healthcare industry determines its economic performance

1. OVERALL US
HEALTHCARE INDUSTRY
STRUCTURE
Presented by
Philip Corsano
CEO Gnostam Consulting

2. How to drive costs down?
— Collect data, is there an “exchange” where the data
for price and service delivery lives?
— Understand what part of the “value chain” you
occupy;
— Build an economic model;
— Optimize strategic choice by running scenarios’s;
— Quality improvements;
— Process improvements;

4. The Problem ~ Complexity

5. Healthcare Exchange

6. The Problem
— Overuse, inappropriate use of care, fee for service;
— Payment incentivizes delivery of more service;
— Old oligopolistic market structure, favors big
pharma, big insurers, and suppliers who restrict
efficient price discovery;
— Barriers to access in primary, preventive care, leads
to over use of Hospital admissions, ER and
complications of chronic acute disease.

7. The US Heathcare System

8. Health Care Costs Concentrated in Sick Few—
Sickest 10 Percent Account for 64 Percent of
Expenses
1%
5%
$36,280
24%
49% $12,046
50%
$715
Distribution of health expenditures for
the U.S. population,
by magnitude of expenditure, 2003

9. The Model
— First acquire the procedure data, best if payment
for services with an outcome:
— Is there an obvious process for price discovery?
— Is the data in a form that allows for like with like
comparisons?
— Is there a model against which to benchmark?
— Is there a process improvement component?
— Is there a quality control, reliability component?

10. Quality Assurance
Improvement
Threshold
Threshold
Improvement
better worse
worse

11. Quality Improvement
In this case the whole process delivery system is overhauled
better worse better worse

12. Costs of Care for Medicare Beneficiaries with
Multiple Chronic Conditions, by Hospital Referral
Regions, 2001
Ratio of percentile
Average annual reimbursement groups
10th 25th 75th 90th 90th to 75th to
Average percentile percentile percentile percentile 10th 25th
All 3 conditions
(Diabetes + CHF $31,792 $20,960 $23,973 $37,879 $43,973 2.10 1.58
+ COPD)
Diabetes + CHF $18,461 $12,747 $14,355 $20,592 $27,310 2.14 1.43
Diabetes + COPD $13,188 $8,872 $10,304 $15,246 $18,024 2.03 1.48
CHF + COPD $22,415 $15,355 $17,312 $25,023 $32,732 2.13 1.45
CHF = Congestive heart failure; COPD = Chronic obstructive pulmonary
disease.
Data: G. Anderson and R. Herbert, Johns Hopkins University analysis of 2001
Medicare Standard Analytical Files (SAF) 5% Inpatient Data.

13. How “Breakthrough
Improvement” manifests itself
B
A
Incremental Breakthrough Refinements Breakthrough
improvements Vision/ to vision/ Vision/
Redefine context Redefining
Context Context

14. Continuous feedback loop strategic model

15. Tools for Improving How We Do Our Work:
Improving the Process
Process flowchart
Cause and effect
Category Frequency
A lll Data Collection
B llll ll
C llll
Data Analysis

16. Tools for improving what we do:
Content
Benchmarking best practice
Field force analysis
Driving Restraining
Evidence based practice, run scenario’s

17. Leverage performance
improvements
How we think
Appreciating a Systems Perspective
What we do Addressing Underlying Assumptions:
•Goals
•Purpose
•Measurement
•Traction
•Implementation
•Teams
How we do it
•Improving Content •Improving Content
•Improving Process •Improving Process •Improving Process
Low leverage High Leverage

18. Thank you
for your attention
Philip Corsano
Gnostam Consulting LLC
5731 Kirkwood Place N
Seattle, WA 98103
E-mail: pcorsano@gnostamconsulting.com or
pcorsano@gmail.com
Tel 206 384 0069
www.gnostamconsulting.com

19. One idea for the New System, Medicare for all. REJECTED