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800.581.5363 fidelitybankonline.com Fitchburg Gardner Leominster Millbury Shirley Worcester
Member FDIC. Member SIF. Equal Housing Lender.
Economic Forecast Breakfast
April 10, 2015
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Roy Nascimento President, North Central Massachusetts Chamber of Commerce
Welcome
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Ed Manzi Chairman & CEO, Fidelity Bank
Introductions
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John Merrill President & COO, Fidelity Bank
Survey Review
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Direct Survey Method
• Conducted by Princeton Research Associates • Data collected over last 4 weeks • Phone surveys
• 200 consumers • 200 businesses
• All respondents within the North Central MA footprint
5
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Survey Results Consumer
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Consumer Survey Demographics
7
45%
28%
6%
19%
2%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
Full time
Part time
Unemployed
Retired
Other
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Thinking about Massachusetts overall, over the next 12 months how do you think the economy will be in comparison to today?
8
25%
48%
16%
4% 3% 4%
0%
10%
20%
30%
40%
50%
60%
Much better
Somewhat better
About the same
Somewhat worse
Much worse
Don't know
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Thinking about North Central Mass., over the next 12 months how do you think the economy will be in comparison to today?
9
18%
45%
28%
2% 3% 4%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Much better
Somewhat better
About the same
Somewhat worse
Much worse
Don't know
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Thinking only about your job opportunities or security, over the next 12 months how do you think they will be in comparison to today?
10
19%
35%
25%
5% 5%
11%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Much better
Somewhat better
About the same
Somewhat worse
Much worse
Don't know
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Thinking only about your advancement opportunities at work or in a new job, over the next 12 months how do you think they will be in comparison to today?
11
19%
27% 29%
4% 6%
15%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Much better
Somewhat better
About the same
Somewhat worse
Much worse
Don't know
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Which of the following best describes your personal spending plan in 2015?
12
12%
43%
30%
12%
6%
1% 0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Significant increase
Slight increase No change Slight decrease Significant decrease
Don't know
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What do you think is the top challenge facing your region?
13
20%
16%
12%
12%
10%
0% 5% 10% 15% 20% 25% 30% 35%
Employment / job creation
Quality of public education
Corporate and personal taxes
Cost of health care
Cost of fuel & energy
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How would you rate your town or city’s snow removal efforts over the past winter?
14
Excellent 29%
Good 41%
Not so good 13%
Poor 16%
Don't know 1%
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Survey Results Business
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Business Survey Demographics
16
24%
10%
34%
20%
12%
0% 5% 10% 15% 20% 25% 30% 35% 40%
Principal owner or partner
President / CEO
Senior management
Middle management
Other
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Thinking about Massachusetts overall, over the next 12 months how do you think the economy will be in comparison to today?
17
9%
51%
31%
4% 2% 3% 0%
10%
20%
30%
40%
50%
60%
Much better
Somewhat better
About the same
Somewhat worse
Much worse
Don't know
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Thinking about North Central Massachusetts, over the next 12 months how do you think the economy will be in comparison to today?
18
12%
46%
31%
3% 4% 4%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Much better
Somewhat better
About the same
Somewhat worse
Much worse
Don't know
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Thinking only about your business, over the next 12 months how do you think the economy will be in comparison to today?
19
46%
29%
20%
2% 2% 1% 0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Much better
Somewhat better
About the same
Somewhat worse
Much worse
Don't know
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Which of the following best describes your hiring plan for this region in 2015?
20
9%
46%
38%
2% 1% 4%
0%
10%
20%
30%
40%
50%
60%
Significant increase
Slight increase
No change Slight decrease
Significant decrease
Don't know
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Which of the following best describes your business’s spending plan for this region in 2015?
21
13%
21%
40%
8% 9% 9%
0%
10%
20%
30%
40%
50%
60%
Significant increase
Slight increase
No change Slight decrease
Significant decrease
Don't know
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Thinking about your business, what is the most challenging issue you expect to face in the next two years?
22
18%
13%
10%
9%
8%
0% 5% 10% 15% 20% 25%
Transportation / infrastructure
Corporate and personal taxes
Real estate prices / market
Cost of healthcare
Availability of skilled labor
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What do you think is the top challenge facing this region?
23
15%
10%
10%
10%
8%
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%
Corporate and personal taxes
Transportation / infrastructure
Quality of public education
International Competition
Cost of fuel & energy
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What effect did this season’s snow fall have on your business?
24
Negative 29%
No Effect 40%
Positive 31%
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Survey Takeaways - Overall • Both consumers and businesses continue to have a very
favorable outlook on both the North Central MA and greater MA regions and this outlook continues to improve.
• Both consumers and businesses plan to increase spending in 2015. 55% of consumers and 34% of businesses to at least “slightly increase.”
• Consumers and businesses showing positive trending
outlooks on employment. Consumer concerns fading and businesses planning to hire.
25
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Survey Takeaways - Consumer • Top concern still employment but trending positive. • Quality of public education spiked as a major concern
with 16% citing it as top challenge - up from 9%. • Cost of fuel and energy concerns faded with only 10%
indicating it as a top challenge – down from 22%. • Concerns over the cost of health care faded slightly to
12% from 20%.
26
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Survey Takeaways - Business • Transportation and infrastructure a growing concern for region and
businesses. • Commitment to hiring continued, with 55% stating at least a “slight
increase” in their hiring plan.
• Concern for availability of skilled labor subsiding with only 8% citing it as top challenge – down from 18%.
• Concern over taxes decreased dramatically from 23% to 13%
• Quality of public education spiked as a major concern for the region.
• Concerns grew regarding real estate and the market from only 3% in 2014 to 10%.
27
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Economic Forecast Panelists
Lt. Governor Karyn Polito Commonwealth of Massachusetts
Jeff Fuhrer EVP & Sr. Policy Advisor, Federal Reserve Bank of Boston
Deborah Weymouth President & CEO, HealthAlliance Hospital
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Lt. Governor Karyn Polito
Commonwealth of Massachusetts
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Jeff Fuhrer Executive Vice President & Senior Policy Advisor
Federal Reserve Bank of Boston
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North Central MA Chamber of Commerce Economic Breakfast
April 10, 2015 Jeff Fuhrer, EVP and Senior Policy Advisor
Federal Reserve Bank of Boston
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X Not this lady
X Not this guy
32
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1. Unprecedented depth and duration of recession 2. Extraordinary policy responses 3. Complications going forward as a consequence
0.90
0.95
1.00
1.05
1.10
1.15
1.20
1.25
0 8 16 24 32 40 48 56 64 72 80 Months after recession onset
Employment, recession start=1.0
Current (2007-present)
0
1
2
3
4
5
6
0 0.5
1 1.5
2 2.5
3 3.5
4 4.5
2006
:Jan
2006
:Sep
20
07:…
20
08:Ja
n 20
08:S
ep
2009
:…
2010
:Jan
2010
:Sep
20
11:…
20
12:Ja
n 20
12:S
ep
2013
:…
2014
:Jan
2014
:Sep
Fund
s rat
e, pe
rcen
t
$ tri
llion
s
Federal Reserve Assets ($ trillions) Agency and MBS CB Swaps CPFF TAF Treasuries
Funds rate
Range of all
Average of all postwar
Sources: Bureau of Labor Statistics (employment), Board of Governors of the Federal Reserve H.4.1, Haver Analytics
0.0
1.0
2.0
3.0
4.0
5.0
6.0
2006
:Jan
2006
:Jul
2007
:Jan
2007
:Jul
2008
:Jan
2008
:Jul
2009
:Jan
2009
:Jul
2010
:Jan
2010
:Jul
2011
:Jan
2011
:Jul
2012
:Jan
2012
:Jul
2013
:Jan
2013
:Jul
2014
:Jan
2014
:Jul
2015
:Jan
Funds rate
6+ YEARS Of ZERO
INTEREST RATES… (and counting)
33 of 16
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-2
-1.5
-1
-0.5
0
0.5
1
1.5
2
0 2 4 6 8 10 12 14 16 18 20 22 Quarters into recovery
Contribution of government spending and investment to GDP growth
Average, 1947-2006 Current recovery
Sources: Bureau of Economic Analysis, Haver Analytics
1. Subtracting near zero in 2015 2. Taxes, transfers less
contractionary in 2015 3. Less craziness improves
confidence, reduces uncertainty
34 of 16
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By household income growth (4% after inflation over past 12 mos.)
By increases in net worth
By lower oil prices We’ll talk more in a
minute Confidence has
improved
35 of 16
Sources: Bureau Economic Analysis (spending, income, saving rate), Flow of Funds Accounts (HH wealth), Core Logic (house prices), Board of Governors H.15 release (mortgage rates), Haver Analytics
-6 -4 -2 0 2 4
20
40
60
80
100
2004:Jan 2006:Jan 2008:Jan 2010:Jan 2012:Jan 2014:Jan
Consumer confidence and spending
Consumer sentiment Consumer spending growth
-1.0
1.5
2011:Q1 2012:Q1 2013:Q1 2014:Q1
$ B
illio
ns
Increase in Household Net Worth Housing assets Stock market assets
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4
5
6
7
8
9
10
11
-1000
-800
-600
-400
-200
0
200
400
2007:Nov 2008:Nov 2009:Nov 2010:Nov 2011:Nov 2012:Nov 2013:Nov 2014:Nov
Tho
usan
ds
Employment growth (3-month average)
Total nonfarm Private nonfarm Unemployment rate (right)
Sources: Bureau of Labor Statistics, Haver Analytics
… and lots of progress on unemployment
Mar 3-mo
Emp. 126 197
Unemp 5.5 -0.1
36 of 16
• Broader measures of slack have also improved • But are not quite back to normal yet
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Holy mackerel! Effects on US spending
Adds 0.5 ppt?
Effects on inflation
Subtracts 0.2 ppt, core
Effects on US oil production
Hurts US producers’ income more than in previous years
Effects on Russia/financial stability
40 50 60 70 80 90
100 110
20140101 20140423 20140813 20141203 20150325
US
$ pe
r bar
rel
Oil price per barrel, WTI
37 of 16
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Capital goods orders have weakened Effects of the stronger
dollar have contributed Housing—even
adjusting for weather—is weaker than we’d like
Foreign economies Pushing the dollar up But keeping rates low Their recovery will help
us Weather?
69000
69500
70000
70500
71000
71500
2014:Oct 2014:Nov 2014:Dec 2015:Jan 2015:Feb 2015:Mar
Capital goods
Mfrs.' orders of capital goods
550
600
650
700
750
2014:Oct 2014:Nov 2014:Dec 2015:Jan 2015:Feb 2015:Mar
Housing
Housing starts
Housing permits Weather?
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-1.5 -1
-0.5 0
0.5 1
1.5 2
2.5 3
3.5
2009:Jan 2010:Jul 2012:Jan 2013:Jul 2015:Jan
Inflation: persistently below 2%
Core PCE inflation (12-mo.) Total PCE inflation -1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
2007:Q2 2009:Q2 2011:Q2 2013:Q2
Wages, compensation (4-qtr. growth) ECI Average hourly earnings Nonfarm compensation
FOMC inflation goal
Sources: BEA (PCE inflation, profit share), Bureau of Labor Statistics and CBO (unemployment gap, chained core CPI, import prices, labor costs), Haver Analytics (Treasury inflation expectations)
2%
All three measures: No wage pressures
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Underpinnings for spending are good Employment and income growth strong to date Wealth increases significant (housing and financial) Low oil prices help Strong consumer confidence readings
Tepid growth in housing, capital equipment Some risks from foreign economic and geopolitical
activity Inflation persistently low
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1. Inflation below the Fed’s target usually implies a weak economy
-2
-1
0
1
2
3
4
5
6
1990
:I 19
91:II
19
92:II
I 19
93:IV
19
95:I
1996
:II
1997
:III
1998
:IV
2000
:I 20
01:II
20
02:II
I 20
03:IV
20
05:I
2006
:II
2007
:III
2008
:IV
2010
:I 20
11:II
20
12:II
I 20
13:IV
20
15:II
Bad times (high unemployment) Good times (low unemployment) Inflation gap (Actual inflation - Fed target)
So low inflation is in part a sign that the economy hasn’t fully recovered yet
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2. When times are normal, other things equal, lower inflation=lower interest rates (and vice versa)
0 2 4 6 8
10 12 14 16 18
1960
19
63
1966
19
69
1972
19
75
1978
19
81
1984
19
87
1990
19
93
1996
19
99
2002
20
05
2008
20
11
2014
Interest rates and inflation, 1960-present
BAA Corporate rate 30-yr. Mortgage rate 10-year Treasury yield Federal funds rate Inflation (PCE)
High inflation
years
Low inflation
years Low
inflation years
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So low interest rates limit our ability to respond to and offset recessions (more room to lower rates)
This mattered A LOT in the recent recession Hence our use of “non-traditional” policies
0
1
2
3
4
5
6
1 2 3 4 5 6 7 8 9 10
Starting interest rates at different rates of inflation
Inflation=3% Inflation = 2% Inflation = 1%
Recession hits
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3. Too close to deflation? Deflation increases incentive to save/postpone consumption Can be both a symptom of and a contributor to a very weak
economy
4. Wage adjustments during recessions are more difficult Historically, workers do not like outright wage cuts But have accepted slower wage growth, especially slower
than inflation Harder to do if prevailing inflation is very low or negative
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NOT a restrictive monetary policy Going from a hugely expansionary policy to a highly
expansionary policy
0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5
0 1 2 3 4 5 6 7 8 9
Fed balance sheet ($ trillions) 30-year mortgage rate 10-year Treasury rate Federal funds rate
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Recovery still in train Some recent weak data makes me cautious, but still
optimistic
Inflation is lower than desired
We discussed why anyone might want higher inflation!
“Lift-off ” does not mean restrictive monetary policy
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Deborah Weymouth President & CEO
HealthAlliance Hospital
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Health Care in our Community
Deborah Weymouth HealthAlliance Hospital
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About HealthAlliance HealthAlliance Hospital is a not-for-profit, full service, acute care hospital
that serves the communities in North Central Massachusetts and Southern New Hampshire. As a member of UMass Memorial Health Care, HealthAlliance Hospital offers you direct access to the advanced medical technology and specialty services that are part of the region’s academic medical center.
The HealthAlliance system includes: • 122-bed community hospital with services on two campuses in Leominster
and Fitchburg • More than 1,300 Employees • Over 250 Physicians • Providing 40+ Health Care Specialties • 200 Volunteers
“Delivering confidence and compassion in every health care experience”
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Questions??
11th Largest Employer in
Worcester Co.
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Why Did We Need Reform?
Cost Quality
17.9% of GDP
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Summary of Health Care Reform “Federal health reform — the Affordable Care Act (ACA) — became law in
March 2010, and the implementation is reshaping the American health care system.”
Trends to Watch…… • Value-Based Purchasing Models • Health Insurance Reform • Integrated Systems of Care • Health Insurance Exchanges • Medicaid Expansion and Flexibility • Information Technology
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Reform Implications
“Volume” to “Value” • Bundled Payments for Episodes of Care • Population Health Status Critical • Consumerism Increasing • Quality Transparency Increasing • Patient Engagement in Care • Resources/Payments Decreasing • Risk Shifting to Providers
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Care Shifts and Payer Shifts
Care Moving to Outpatient Baby Boomers Dominate
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Medicare Impact
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IMF Report: Cost of Life Expectancy
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Where does my premium dollar GO?
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Cost Shifting
Why doesn’t it work now like it used to??
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COST DRIVERS
Common Causes Prescription Drugs
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Medicare
Source: CBO, “Letter to the Honorable John Boehner Providing an Estimate for H.R.6079, The Repeal of Obamacare Act,” July 24, 2012; CBO, “Estimated Impact
Includes hospital, skilled nursing facility, hospice, and home health services; excludes physician services; annual reductions rounded. Disproportionate Share Hospital.
1)Medicare Payment Cuts Continue
($4B)
($14B) ($21B)
($25B) ($32B)
($42B)
($53B)
($64B)
($75B)
($86B)
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
ACA’s Medicare Fee-for-Service Payment Cuts Reductions to Annual Payment Rate Increases1
$415B in total fee-for-service cuts, 2013-2022
$260B Hospital payment
rate cuts, 2013-2022
$56B Reduced Medicare and
Medicaid DSH2 payments, 2013-2022
$151B Reduced Medicare payments
due to sequestration and 2013 budget bill
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Current Financial Results
Pay for PERFORMANCE
Value Based Purchasing: Demand Side Strategy Safety 20%
Efficiency 25% Patient Experience 25%
Outcomes 25% Process 5%
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65 89 95 98
2010 2011 2012 2013
Mergers/Acquisitions Continue to Rise
Source: AHA Hospital Fast Facts, il bl t h GE C it l
Mergers and Acquisition
September 2013.
Hospital Mergers and Acquisitions
M&A Plans for the Next 12 Months1
Number of Hospitals Part of a Health System
2000-2012
2000 2003 2006 2009 2012
2542 2626 2775
2921 3100
88%
12%
n=189
No M&A Activity Planned
Planning to Pursue M&A Within the Next
12 Months
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Will Employers Maintain Coverage, and How?
Employers
Source: Health Care Advisory Board interviews and analysis.
1)Traditional Employer Coverage Eroding
“Activation” “Abdication”
Convert to Self-Funding
Pros:
• Close control over network design
• Exemption from minimum benefits requirements
Cons:
• Greater financial risk
• Network assembly challenging
Shift to Private Exchange
Pros:
• Responsiveness to employee preference
• Predictable, defined contributions
Cons:
• Disruption to benefit design
• Risk employees may underinsure
Spectrum of Options for Controlling Health Benefits Expense
Drop Coverage
Pros:
• Escape from cycle of rising premium costs
Cons:
• Employer mandate penalty
• Labor market disadvantage
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Employers
Source: Herring B and Lentz LK: “What Can We Expect from the ‘Cadillac Tax’ in 2018 and Beyond?” Inquiry, 48(4):322-37;
Full-time equivalents.
1)Employers’ Alternatives to Providing Coverage
Average Cost of 2014 Employer-Sponsored Insurance
$5,884
$16,351
Single Family
Penalty per employee for failing to provide
qualifying health coverage
$2,000
Several Strategies to Avoid ACA Mandate Penalties…
Cut jobs to remain under 50 FTEs1
Convert full-time employees to part-time status
Hire all new employees at part-time status
Split into smaller companies with fewer than 50 FTEs
…Though Some May Consider Penalty a More Economical Option
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Commercial Payers
Source: Breakaway Policy Strategies, “Eight Million and Counting: A Deeper Look at Premiums, Cost Sharing and Benefit Design in the
1)Public Exchange Participants Choosing High Deductibles
Annual Deductibles of Individual Plans Selected on eHealth
13%
3%
11%
5%
30%
39% $6,000+
$3,000-$5,999
$2,000-$2,999
$1,000-$1,999
$500-$999 < $500
October 2013 – March 2014
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A Growing Network of Immediate Access Choices
Markets Responding to Unmet Needs
Source: Mehrota A et al, "Visits To Retail Clinics Grew Fourfold From 2007 To 2009, Although Their Share Of Overall Outpatient Visits Remains Low," Health Affairs, August 2012; Health Care Advisory Board interviews and analysis.
Primary Care Network
Traditional Access Points
Consumer-Oriented Access
Points Retail Clinic
Urgent Care Center
Virtual Visit
Primary Care Office
Low Acuity High Acuity Emergency Department
Consumer-Oriented Service Delivery Sites Filling the Gap
Driving Provider Questions: • Should we partner to establish retail clinics?
• Should we build or expand our urgent care footprint?
• Is virtual care something that we should provide?
• When should we enter into partnerships to meet patient demands?
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Access Strategy for the Future
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Unprecedented Competition
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Primary Care for 130 Million
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Increasingly Sophisticated
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Vision Exam App
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ZocDOC
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Provide Alternatives and Create Capacity Urgent Care: -Convenient -Lower Cost vs. ED -High Quality Opened Jan. 5th http://www.urgentcareleominster.com/
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Partnership including: HealthAlliance Hospital Heywood Health Care Community Health Connections Joint Coalition on Health Montachusett Public Health Network GOAL: Provide information and analyses relative to health status, issues, concerns and assets of North Central MA
Community Health Needs Assessment
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•14 Focus Groups •17 Community Partners •21 Interviews with Key informants •Other Sources: MassCHIP, MPHN Community Assessment, Athol Community Assessment, North Quabbin Community Assessment, Ma Health Aging Report, Ma Dept of Edu, Ma Dept. of Workforce Dev., Ma Dept of Corrections, CDC Behavioral Risk Factor Surveillance System, US Census/American Community Survey
•Facilitator: Joanne Calista, Central MA AHEC, Inc.
Quantitative Data: Sources
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• The Study Area population is generally older than that of the Commonwealth
which is a change from the last assessment. Our area reports 52% are older than 50 years of age compared to 33.5% in the State
• Unemployment rates have dropped similar to the Commonwealth (8.9%)
with the exception of Orange which is still high at 10.6% • The % of families living below 100% of poverty level in the State is 14.9%
while Gardner, Shirley, Royalston and Fitchburg all reported above 24%.
• According to 2014 HUD data, there were 158 individuals experiencing homelessness in our Study Area and majority were adults and 33% were under the age of 18
• Latinos largest racial/ethnic minority group in the study area, more than
twice the state percentage
Socio-Demographic Data
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Our Region is HIGHER than the State Averages in… Suicide Mortality Rates Behavioral Health Hospitalizations Alcohol/Substance Abuse Rates Mortality Rates Diabetes Obesity Tobacco Use in Women Lung Cancer Mortality Cerebro-vasular Disease Rates Chronic Liver Disease Mortality Our Region is on PAR with the State Averages in…. Tobacco Use in Men High Blood Pressure Cancer Mortality Our Region is LOWER than the State Averages in…. Breast Cancer Mortality
Key Findings
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Common Themes
• Substance Use and lack of treatment – Includes drugs, alcohol and tobacco use
• Mental Health –inadequate treatment resources
• Transportation • Cost of Health Care (copays/insurance limits) • Obesity – cost of healthy food • Shortage of clinicians/primary care/specialists
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HealthAlliance Behavior Health Population Diagnosis Group # Visits # Patients
Alcohol and Drug Induced Psychoses 32 30 Dementia 1 1 Intellectual Disabilities 21 13 Mental Disorders Diagnosed in Childhood 166 136 Mood Disorders 584 449 Neuroses 320 278 Organic Psychotic Conditions 36 33 Other Non-Organic Psychoses 157 133 Other Nonpsychotic Mental Disorders 699 547 Paranoid States 51 46 Personality Disorders 29 23 Psychosexual Disorders 2 2 Psychotic Disorder 9 9 Pyschoses Associated with Childhood 21 17 Schizophrenia 146 83 Substance Use Disorders 714 517 Grand Totals 2988 2317
The data is based on patients with a coded Primary Dx in one of the above Dx groups from Jan 1, 2014 through Nov 30, 2014 The shape represents the SA category + pts with-drawning from alcohol and/or drugs
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CHART II Investment in HealthAlliance Health Policy Commission
• 25 Single & Joint Awards were distributed amongst 28 Community Hospitals
• HealthAlliance received $3.8 million – Second Highest Single Hospital
Award
• Combined with the joint award between Heywood, Athol & HealthAlliance our region received $6 million investment for our Behavioral Health Patients
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CHART Phase II – AIM Statement & Primary Drivers
The CHART Phase II Initiatives will reduce ED revisits and ED LOS, for patients with a Primary
and/or Secondary Behavioral Health (BH) diagnosis, by
15% and 31% respectively by the end of the 2-year period
of performance.
Improve the quality and efficiency of care provided to BH patients
presenting to HealthAlliance Hospital
Provide integrated, collaborative, holistic care to BH patients across all
care settings
Leverage technology to simplify administrative complexity and support
across settings of care
P1
P2
P3
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Questions