Top 7 Financial Healthcare Trends and Challenges for 2016

Top 7 Financial Healthcare Trends
and Challenges for 2016 – Bobbi Brown

© 2014 Health Catalyst
www.healthcatalyst.com
Proprietary. Feel free to share but we would appreciate a Health Catalyst citation.
2015 Look Back
2
0
2
4
6
8
10
12
14
2009 2010 2011 2012 2013 2014
% Growth in Spending
Hospital Physician, clinic RX DrugsSource: CMS Office of the Actuary
Did not predict
speed for CMS
payment reform
Chronic care management
CPT code 99490
 Not being used, hard to
incorporate
 13% submitted successful
claims
DOC Fix
Drug cost rising

Surprises in 2015
3

Common Leadership Traits
On a recent “Face the Nation,” episode
there was a panel discussion about
former presidents who were skilled at
helping their country overcome
challenges in the 21st century.
The discussion noted traits, common to
effective leaders:
• Resilient
• Inspiring
• Collaborative
• Great communicators
Speaker: Doris Kearns Goodwin

Don Berwick- Moral approach
“We will never solve the problem of cost and finance by
focusing on cost and finance." Instead, it will be resolved
"by focusing on the design and redesign of healthcare
and the improvement of its quality."
Donald Berwick, MD, president emeritus and senior fellow at the Institute
for Healthcare Improvement
5

Top 10 CEO Issues for 2015
1. Financial challenges
2. Patient safety and quality
3. Government mandates
4. Personnel shortages
5. Patient satisfaction
6. Physician-hospital relations
7. Access to care
8. Population health management
9. Technology
10. Reorganization
6
Source: American College of Healthcare Executives 2015 survey released Feb 2016

Poll question one:
MACRA is an acronym for:
a. Medicare administrative control review act
b. Medicare access & CHIP reauthorization act
c. Multiple access care recovery act
7

Poll question two:
How many Medicare beneficiaries were covered by
an MSSP ACO as of April 2015?
a. 7.9 Million
b. 1.5 Million
c. 15.4 Million
8

Poll question three:
Per capita healthcare spending in 2014 was:
a. $7,893
b. $15,980
c. $9,523
9

Healthcare Financial Trends for 2016
What follows are seven financial
healthcare trends for 2016, including
action-oriented strategies that will
help healthcare financial leaders stay
ahead of the curve.

c
11
Journey
First Mile

More Data Sharing
As health systems improve their
analytics capabilities and the
quality of their healthcare data,
sharing it with clinicians will
become increasingly important.
Sharing data has a proven
impact on accountability,
productivity, care quality, and
innovation.
Financial
Trends
For 2016
1

Transparency
New Guidelines Nudge Doctors to Give Patients Access to
Medical Records By Robert Pear, New York Times, JAN. 16, 2016
Largest nonprofit health system joins trend towards fully transparent
pricing. A patient (or a doctor advising a patient) can see the true
costs of care in advance in plain English. Effort lead by David Pynn,
Ascension St. John CEO
Blue Cross Blue Shield of North Carolina made news when it decided
to publish prices it pays to specific sites of care for specific
procedures. Currently published rates for 1,200 procedures.
Geisinger Health System President and CEO David Feinberg, MD,
said the Danville, Pa.-based health system is going to start offering a
money-back guarantee to patients who receive care at its facilities.
13

More Data Sharing
Lead the way:
Financial
Trends
For 2016
1
Share data with your clinicians: Stop hoarding data.
Stop waiting for perfect data. Share data with your
clinicians often.
Develop your transparency strategy: Find a partner,
answer the questions in your community.

Proprietary. Feel free to share but we would appreciate a Health Catalyst citation. 15
Journey
Mile Two
Find a flower
Journey
Mile Two

Continued shift from volume-
based care to value-based care
CMS announced its goal: by
2018, 50% of fee-for-service
payments will move to
alternative payment models,
such as bundled payments
and accountable care
organizations.
CMS also issued final
regulations for joint
replacement bundles.
Financial
Trends
For 2016
2

ACOs: Count over 700
17
ACO CMS announces 21 Next Generation ACOs(NGA)
in January. Providers take more risk.
ACO CMS proposes improvements for the Medicare
Shared Savings Program (MSSP)
56%
37% 34%
25%
12% 9% 8%
0%
10%
20%
30%
40%
50%
60%
Composition of MSSP ACOs
Source: Fast fact sheet CMS April 2015
Multiple response per ACO

CMS Programs for IP Hospital
18
VBP (Value Based Purchasing) Incentive / Penalty
 2016 1.75% + or –
 651 Hospitals =>1% Penalty
 330 Hospitals => 1% Bonus
Readmission Penalty
 2016 - 3% maximum
 220 Hospitals > 2% Penalty
 Add CABG in 2017
HAC (Hospital Acquired Conditions)
 2016 -1% for all hospitals in worst 25P
 758 Hospitals In Penalty

New trend data
19
145
142
132
121 121
105
110
115
120
125
130
135
140
145
150
2010 2011 2012 2013 2014
Rateper1000discharge
HAC Trend
17% drop, savings of $20B
2.1 million fewer cases
Source: CMS Website

CJR
Comprehensive Care for Joint Replacement
• Promote quality and financial accountability
Improve care coordination
Promote investment/incentives for value
• Reduce medical expenditures while improving quality
Five year program with goal to save $153M
• Test concepts on large scale- 700 hospitals/67
geographic areas
• Mandatory program with hospital accountable
20

Physician Fix HR Bill 02 Timeline April
2015
21
2015 2019 20202018 2025 2026
.5% annual update
thru 2019
Zero update 2020
thru 2025
Combine
MU,
PQRS,
VBM
Value Based participation bonus 5% (APM)
Updates .25% to .75%
Merit Based Incentive Payment System (MIPS) combines three programs under Medicare
Access & CHIP Reauthorization Act (MACRA) of 2015. PQRS expires in 2018.
Poll question one: Answer is B.

Meaningful Use
Tweet from Andy Slavitt:
In 2016, MU as it has existed-- with MACRA-- will now be
effectively over and replaced with something better #JPM16
Slavitt said: ‘The focus will move away from rewarding providers
for the use of technology and towards the outcome they achieve
with their patients.’
EP penalty news
Starting January 2016 more than 200,000 eligible professionals
are set to see a decrease in their Medicare payments after failing
to meet Meaningful Use standards in 2014.
22

Where are you?
“The shift from volume to value is a trillion dollar
opportunity right now,” Farzad Mostashari, M.D. said, and
noted that large hospital systems are far along the path
toward making that transition. But others are struggling.
“It’s very difficult for those rooted in a volume-based
model.”
23

Continued shift from volume-
based care to value-based care
Lead the way:
Financial
Trends
For 2016
2
Understand clinical measures: healthcare financial
leaders need to get a handle on clinical quality and
how much it costs to achieve a unit of healthcare
outcome and quality.
Develop cost systems to quantify your margins:
develop new, automated systems that show costs for
activities across all sectors
Create your risk vision: we’ve been under various
CMS quality programs for years. If you aren’t
improving yet, then you need to prioritize helping
your teams improve.
Analyze claims data: see what is happening to the
total population for a payer

Journey
Mile Three
Wildlife
Ahead

We’ve recently seen three propsosed large insurance
mergers:
According to a recent Health Affairs blog (December 1
2015), Georgia, Connecticut, and Colorado could
experience a 40 percent or more commercial insurance
concentration.
Industry consolidation
(and alternative delivery models)
Financial
Trends
For 2016
3

Anthem at JP Morgan Annual
Health Care Conference
Strength of Cigna that adds to Anthem:
Affordability and Choice for Consumer
Strong Commercial player with broad geographic
coverage
Middle Market ASO/Stop Loss solutions
A leading Specialty capability (Behavioral Health, Dental,
Pharmacy, Disability & Life)
Proven wellness programs
Medicare position with leading physician-engagement
model
27

Aetna at Credit Suisse Conference
The Humana acquisition better positions Aetna
for growth
Humana increases Aetna’s exposure to Medicare
growth and high growth services business
28

Large Pharma
29
Enhance Category Leadership
Optimize our two pharma businesses
Generate Sustainable Growth
Optimize Capital Structure
Leverage Global Scale
and Capabilities

We’re also seeing a spike in alternative
delivery models, including retail space.
In October 2015, Walgreens announced
they were acquiring Rite Aid to broaden
their expanse into retail health.
Both Walgreens and Rite Aid are very
active in the walk-in health clinic business.
Financial
Trends
For 2016
3

Retail side
The retail health clinic trend continues to be strong,
according to a new report by Accenture, with experts
saying the number of these clinics will likely hit 3,000
by 2017.
There were nearly 2,000 retail clinics in operation at
the end of 2014, Accenture said.
31

Lead the way:
Financial
Trends
For 2016
3
Update your marketing/contracting plan: determine what consolidation
means for your contracting strategy. Assess what you’ve lost to the retail
movement. Have you seen a decrease in urgent care and physician office
visits? Decide if it’s a market you should compete in.

Journey
Lots of
bumps in
the road

Population health is a top
priority
Population health is the recurring theme
in a recent interview of healthcare leaders
from the 21 winning Healthcare IT News’
2015 Best Hospital IT Departments.
Fort HealthCare’s Senior Director of IT
effectively summarized the increasing
prioritization of population health:
Financial
Trends
For 2016
4
Population health is 100 times bigger and the road isn’t
yet paved; it isn’t just about the data or the tools used by
clinicians, it really is about changing the way healthcare
organizations think about practicing medicine.”

35
Patient Stratification & Care Strategy
5%
30% Rising
Risk
65% Low Risk
Complex, Acute
& High Risk
CareManagement
Condition/Disease
Management
• Personal Relationship
• Comorbidity Management
• Cross Continuum
• Risk of Escalation
• Self Management
• Condition/Disease Focused
• Self Service
• Preventive
• Coaching

Medicare Spending
36
14%
46%
23%
29%
32%
19%31%
6%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Beneficiaries Spending
6 > Conditions 4-5 Conditions 2-3 Conditions 0-1 Condition
Source: MedPAC Report March 2015, CMS 2012

High risk, high cost
Intermountain Healthcare found that between 2008
and 2012, its top 5% of high-cost, high-utilizing
patients consumed 51% of healthcare costs. Even
more telling, the top 1%— what they call the true hot-
spotters—accounted for a very disproportionate
share: 24% of all healthcare costs.
37

Using data
"[The health plan is] able to share utilization patterns
with primary care groups in our system and get them
risk-adjusted and timely data. They can then focus
on areas like ED trends, well child visits, and office
visit rates. It helps us to get our members
appropriate care at the right time at the right price.
It's a great opportunity in this day and age with
managing populations," Robert Duncan, Executive
Vice President, Children’s Hospital of Wisconsin.
38

Care Management Products
Care Team Insights
39

Patient Flow
40

priority
Lead the way:
Financial
Trends
For 2016
4
Get comfortable with blurred lines: provider and payer
roles will become less obvious, and we’ll continue to rely
less on four-walled structures.
Learn the new terminology: Are you familiar with Return
on Engagement? In a PMPM capitated environment, you
must budget time and resources for patients. You need to
predict where to invest for greatest return.
Know how to treat a population: and take risk for that
population. Load claims data and analyzing physician,
diagnosis codes, and treatment pattern data.

priority
Financial
Trends
For 2016
4
Learn new measurements: with 23.5 million lives covered
by commercial ACO and 7.9 million Medicare ACO
beneficiaries, you must know your population to define how
to measure success.
Collaborate to improve the care continuum: identify
partner organizations and stakeholders you’ll need to
collaborate with to achieve a broader definition of care.
Study patient flow: start by identifying the bottlenecks at
your hospital or clinic. Use data to study patient movement
and focus on improving the admission/discharge process.
Lead the way:
Poll question two: Answer is A.

Journey
Top of
Mountain

Engaging patients through
technology
Using technology to engage
patients will be a focal point of
patient engagement
conversations in 2016.
Financial
Trends
For 2016
5

Virtual Visits
Kaiser Permanente Northern California forecasts that
virtual visits will surpass in-person visits by 2018.
Source: R. Pearl, Health Affairs 2014 (33)
45

Society for Healthcare Strategy
and Market Development
A common thread throughout a majority of the
findings is a belief that patients will become more
involved in their own care. In fact, 99 percent of
those surveyed agreed that by 2021 patients will
demand a greater role in the planning of their
treatment.
46

Lack of usage
Only 2% of patients in the nation’s largest hospitals
currently use mobile health apps provided by their
hospitals, Accenture said.
The study shows that two-thirds (66%) of the 100
largest hospitals in the U.S. have mobile apps for
consumers, while 38% of that group have developed
proprietary mobile health apps for their patients.
47

Top 40 Transformers
Medical Marketing & Media January 2016
48
Sonny Vu, CEO, Founder MISFIT
Widely regarded as one of the legitimately
transformative minds within the realm of wearables
technology. “Wearables are only the first step in a
bigger movement toward more connected devices and
ambient monitoring.” Misfit has added Link (an activity
monitor/smart button), Bolt (a wireless smart bulb) and
Beddit (a sleep monitor).
17.5% of top 40 working
on wearable technology

Engaging patients through
technology
Lead the way:
Financial
Trends
For 2016
5
Understand how different patient segments use
technology: technology is not a one-size-fits-all solution.
Understand how different patient segments use technology.
Attend the International Consumer Electronics Show:
CES is a global consumer electronics tradeshow that takes
place every January in Las Vegas. Or attend HIMSS at the
beginning of March.

Journey
Find the
flowers

Revive the analytics around
revenue cycle
ICD-10
The first month of CMS claims
processing didn’t show any huge
spikes in denials.
Now that ICD-10 is in place, we
need to revive the analytics around
revenue cycle.
Patient accountability
Also more responsibility shifted to
patient.
Financial
Trends
For 2016
6

ICD -10
52
2%
0.09%
10.1%
2%
0.17%
10%
0%
2%
4%
6%
8%
10%
12%
Claims rejected-
incomplete
Claims rejected-invalid
code
Total denied claims
Medicare Claims
Oct-15 Historical Average
A recent survey
conducted by KPMG
during a November
webinar finds that 79%
of respondents said the
transition to ICD-10 has
been successful.
Cash is king
and that will take time
to determine impact.

More facts on ICD-10
Survey respondents:
99% were prepared
60% no impact on monthly revenue
66% plan to work on improving revenue cycle
Source: Navicure Survey done in January
53

6%
7%
12%*
16%
20%
28%* 27%
31%
34%
1% 1% 2% 3%* 4% 5%
7%
8%
11%*
3%
3%
5%*
7%*
10%
12%*
14%
15%
18%
0%
10%
20%
30%
40%
50%
2006 2007 2008 2009 2010 2011 2012 2013 2014
All Small Firms (3-199 Workers)
All Large Firms (200 or More Workers)
All Firms
SOURCE: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2006-2014.
Percentage of Covered Workers Enrolled in a Deductible Plan

$584
$616
$735*
$826*
$917*
$991
$1,097*
$1,135
$1,217
$1,318
$303
$343
$433*
$533*
$646*
$747*
$802
$883
$989*
$1,077
$275
$375
$475
$575
$675
$775
$875
$975
$1,075
$1,175
$1,275
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Average Deductible Among Covered
Workers With a Deductible
Average Deductible Among All
Covered Workers
* Estimate is statistically different from estimate for the previous year shown (p<.05).
NOTES: Average general annual deductible is among all covered workers. Workers in plans without a general annual deductible for in-
network services are assigned a value of zero.
SOURCE: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2006-2015.
Average General Annual Deductible for Covered Workers Enrolled in
Single Coverage, 2006-2015

More facts
As health insurance plans feature high deductibles,
many providers are changing procedures to increase
their collection by asking patients to pay their share
of the bill up front or helping them to explore
payment options. More education up front is needed.
A Commonwealth Fund study shows, 25% of
privately insured adult Americans can’t afford to pay
their medical bills.
56

Analytics
57

Revive the analytics around
revenue cycle
Lead the way:
Financial
Trends
For 2016
6
Put the right analytics tools in place: Don’t get too comfortable
in that false state of tranquility based on high-level metrics. Make
sure cash is still flowing at the same rate. Implement frequent
reporting so you can quickly and efficiently identify trends.

Journey
Beware of
Cactus

Increased healthcare spending
Healthcare spending increased
by 5.3% in 2014—a significant
increase compared to previous
years, when it was closer to
2.5%.
We’re spending $9,523 per
person for healthcare. To
contain increases we must be
vigilant about costs.
Source: HealthAffairs Jan 2016 35
Financial
Trends
For 2016
7
Poll question 3: Answer is C.

Source: Kaiser Family Foundation analysis of National Health Expenditure (NHE) Historical (1960-2014) and Projected (2014-2024)
data from Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group (Accessed on
December 7, 2015) Note: 2014 to 2015 percent changes are calculated using 2014 actual and 2015 projected amounts.
Growth in Rx increased rapidly in 2014 and
2015
Average annual growth rate of prescription drug spending per capita for 1970’s – 1990’s;
Annual change in actual prescription drug spending per capita 2000 – 2014 and projected prescription drug spending per
capita 2015 - 2024
7.2%
11.7%
10.5%
14.7%
13.7%
12.6%
10.9%
8.1%
5.4%
8.2%
4.2%
1.5%
3.8%
-0.7%
1.5%
-0.6%
1.6%
11.4%
9.6%
3.6%
5.2%
4.7%
5.1%
5.5%5.6%5.8%5.8%5.9%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
1970s
1980s
1990s
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Prescription (Actual)
Prescription (Projected)
Total Health (Actual)
Total Health (Projected)

Source: Express Scripts 2014 Drug Trend Report and Year in Review . Available at http://lab.express-scripts.com/drug-trend-report/
and http://lab.express-scripts.com/drug-trend-report/introduction/year-in-review
Costly specialty drugs are a major driver of
increased health spending
Express Scripts drug trend by therapy class, 2006 -2014
14.1%
30.9%
2.4%
6.4%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
2006 2007 2008 2009 2010 2011 2012 2013 2014
Specialty Drug Trend Traditional Drug Trend Overall Drug Trend

Source: Express Scripts 2014 Drug Trend Report
Specialty drug spending in 2014
Express Scripts per-member-per-year spending, top 10 specialty therapy class drugs, 2014
$5.13
$5.41
$5.49
$9.98
$11.10
$27.24
$37.95
$41.64
$52.36
$80.03
$0 $10 $20 $30 $40 $50 $60 $70 $80 $90
Transplant
Pulmonary Arterial Hypertension
Hemophilia
Growth Deficiency
Miscellaneous Specialty Conditions
HIV
Hepatitis C
Oncology
Multiple Sclerosis
Inflammatory conditions

Source: Express Scripts 2014 Drug Trend Report
Traditional drug spending in 2014
Per-member-per-year spending on top 10 traditional therapy class drugs, 2014
$24.85
$25.98
$27.97
$29.59
$33.40
$36.06
$45.98
$46.04
$48.73
$97.68
$0 $20 $40 $60 $80 $100 $120
Mental/Neurological disorders
Depression
Attention disorders
Asthma
Heartburn/Ulcer Disease
High Blood Pressure/Heart Disease
Pain/Inflammation
Compounded Drugs
High Blood Cholesterol
Diabetes

Medicare Spending
65
9%
6% 6%
3%
4%
2%
2%
1%
2%
0%
3%
3%
0%
2%
4%
6%
8%
10%
12%
1980 1990 2000 2010-2014 2014-24 Trustee 2014-24 CBO
Medicare % Growth
Per Beneficiary Enrollment
Source: MedPAC Report March 2015, CMS 2012

Increased healthcare spending
Lead the way:
Financial
Trends
For 2016
7
Take a leadership role in reducing waste, overtreatments, and
unnecessary variation: you can’t tackle everything at once. Work
with clinicians to do the right thing for your patients/members.

Think positive
Only when it’s warranted by the facts
Focused Grit
1. Take paper, pen and a timer
2. Identify a large problem
3. Think about problem/solution for 5 minutes
4. Did you come up with a solution?
Source: The Happiness Code, Jennifer Kahn
NY Time Magazine January 17, 2016
67

2016: The Year of the ??
“2016 will be an
enormous and pivotal
year for progress and
it’s starting off with a
bang”
–Andy Slavitt, Acting CMS Administrator

More about this topic
Top 7 Healthcare Trends and Challenges for 2015: From Our Financial Expert
Bobbi Brown – Vice President of Financial Engagement
10 Trends in Healthcare Data Warehousing That Every Health System Needs to Know
Dale Sanders – Executive Vice President, Software
Understanding the Market Trends and Business Drivers of a Complex Healthcare
Organization – Health Catalyst success story
Implementing 4 of AHA’s Must-Do Healthcare Transformation Strategies
Scott Holbrook – Strategic Advisor
Why An EMR Can’t Solve Your Most Important Healthcare Transformation Challenges
Dan Burton – Health Catalyst CEO
Link to original article for a more in-depth discussion.
Top 7 Financial Healthcare Trends and Challenges for 2016

For more information:

Bobbi Brown is the Vice President of Financial
Engagement for Health Catalyst. Ms. Brown
started her healthcare career at Intermountain
Healthcare supporting clinical integration efforts
before moving to Sutter Health and, later,
Kaiser Permanente, where she served as Vice
President of Financial Planning and
Performance. Ms. Brown holds an MBA from
the Thunderbird School of Global Management
as well as a BA in Spanish and Education from
Misericordia University. She regularly writes and
teaches on finance-related healthcare topics.
Other Clinical Quality Improvement
Resources
Click to read additional information at www.healthcatalyst.com

Top 7 Financial Healthcare Trends and Challenges for 2016

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