the coming industrialization in healthcare: a 360° view
TRANSCRIPT
Don McDaniel
The Coming Industrializa4on In Healthcare: A 360° View
Hypothesis:
The US Healthcare business is Pre-‐Industrial and will be disrupted. Revenue redistribu4on will be the
catalyst.
Pre-‐Industrial Symptoms
High Degree of Variability
Lack of Transparency – lots of informa:on asymmetries
Opportunis:c Innova:on
Limited Division of Labor
Marginal Quality
Health Status Inequality
How we got here -‐ IMHO The “Great Society” created “Great Gaming”
Fee-‐for-‐Service has driven a volume mentality
Third Party Insurance and a lack of consumer sovereignty have kept the watchdog at bay
“Fourth-‐Party” -‐ Employers have been complicit — “Out to Lunch?”
Government’s growing role—Provider, purchaser, payer, regulator, educator, trainer, insurer—has created a feeding frenzy without accountability
Industrializa4on The extensive reorganiza:on of an economy – in every sector
Investment gets redirected (therapeu:cs vs diagnos:cs) and efficiency drives growth – the $1T arbitrage opportunity
The supply-‐side will have less influence on demand
Don’t Confuse Industrializa4on with Protec4onism
It’s NOT Consolida:on to drive prices or control access Ins:tu:ng cookie cuYer medicine A mechanism to force physicians to the employment of hospitals An inhibitor to Innova:on
Intractable Problems
Demography
Economics
Technology
Societal
17.2% 17.6% 17.6% 17.7% 17.8% 17.9% 18.1% 18.4% 18.7% 19.0% 19.3%
PROBLEM #1 -‐ Health Expenditures as a Percentage of GDP
NHE as a Share of GDP: SOURCE: Kaiser Family Founda7on calcula7ons using NHE data from Centers for Medicare and Medicaid Services, Office of the Actuary, Na7onal Health Sta7s7cs Group, at hFp://www.cms.hhs.gov/Na7onalHealthExpendData/ (see Projected; NHE Historical and projec7ons, 1965-‐2023, file nhe65-‐23.zip).
$2,895 $3,057 $3,207 $3,386
$3,579 $3,797 $4,042
$4,307 $4,578
$4,862 $5,159
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Is the Juice Worth the Squeeze?
PROBLEM #2: Consumerism is Coming!
SOURCE: Kaiser/HRET Survey of Employer-‐Sponsored Health Benefits, 1999-‐2014. Bureau of Labor Sta7s7cs, Consumer Price Index, U.S. City Average of Annual Infla7on (April to April), 1999-‐2014; Bureau of Labor Sta7s7cs, Seasonally Adjusted Data from the Current Employment Sta7s7cs Survey, 1999-‐2014 (April to April).
AND
131%
191%
72%
127%
212%
17%
38% 54%
13% 28% 43%
0%
50%
100%
150%
200%
250%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Health Insurance Premiums Workers' Contribu4on to Premiums Workers' Earnings Overall Infla4on
Rapidly Increasing High Deduc4bles
4% 5%
8%* 8%
13%*
17%* 19%
20% 20%
0%
5%
10%
15%
20%
25%
2006 2007 2008 2009 2010 2011 2012 2013 2014
* Es7mate is sta7s7cally different from es7mate for the previous year shown (p<.05). SOURCE: Kaiser/HRET Survey of Employer-‐Sponsored Health Benefits, 2006-‐2014.
AND
We aren’t good healthcare consumers
Problem #3: The En4tlements are Under-‐Water
Source: Avalere Health analysis of American Hospital Association Annual Survey data, 2013, for community hospitals. (1) Includes Medicare Disproportionate Share payments. (2) Includes Medicaid Disproportionate Share payments.
Medicaid Enrollment and Expenditures
PROBLEM #4: The Demographic Tsunami
In 1950, people 65 and older represented 8.1% of the total U.S. popula:on.
By 2050 the percentage is projected to
reach 20.2%.
Problem #5: US Health System is Not Safe
Face the Brutal Facts
1 in 25 hospital pa7ents has at
least one healthcare-‐associated infec7on
Yearly 210K – 440K hospital
pa7ents suffer preventable harm that
contributes to their death.
About 75K hospital
pa7ents with HAIs died during their
hospitaliza7ons
Over 2 Million
adverse drug reac7ons (ADR)
>100K Deaths yearly–
4th leading cause of death
Problem #6: Opera4ng on Razor-‐thin Margins
Hospitals won’t disrupt themselves!
Some Bright Spots Emerging: Evidence of Industrializa4on
The VBC Lens
The Two Canoes Collided!
Medicare Funding Chronic Care?
Prac44oner • Perform (and bill separately for) -‐ Ini7al Preven7ve Physical Exam -‐ Annual Wellnesss Visit -‐ Evalua7on & Management Service • Obtain WriFen consent
Care Plan (electronic) Updated at
least annually)
Care Team (licensed clinical
Staff and Prac77oner)
Other Providers
Medicare Administra4ve Contractor
• Coordinate referrals • Iden7fy appropriate providers • Capable of sharing electronic care plan and electronic summary care record • Medica7on reconcilia7on • Communicate to/from community-‐based providers Payment = 80%
Applicable fee schedule rate
Step-‐by-‐Step Chronic Care Management*
Cer4fied EHR • Generate -‐ Demographics -‐ Medica7on/Medica7on Allergies • Record -‐ Pa7ent Consent -‐ Delivery of Care Plan -‐ Communica7on to/from home & community-‐based providers • Obtain WriFen consent
Copy (paper or
electronic)
• >20 minutes CCM/month • 24/7 access for urgent needs • Telephone and asynchronous consulta7on • Post-‐discharge TCM • ER follow-‐up
Co-‐Payment 20% of applicable fee schedule rate (Medicare Supplemental) Beneficiary
Bill CCM Code 99490 Monthly
©2015 Pershing Yoakley and Associates, PC. *This infographic does not cons7tute legal advise. It is offered for illustra7ve purposes only. Revised March 2015 For more informa7on, contact Mar7e Ross ([email protected]) or Lori Foley ([email protected])
Employers: Part of the problem or solu4on?
Shihing hires to where they receive the greatest HC value
Paradigm shih “HC as a benefit to HC as a cost driver”
Recognize the power of voluntary transparency
Built 2nd opinion program–findings were startling
Built COE for joints and CV
Savings? Outcomes?
Alarmed @ variability in cost of joints
Built reference pricing program
Drama:c reduc:on in prices for joints
Supply-‐induced Demand? Walmart discovered most expensive pa:ents were transplants
Began to offer to pay to send the pa:ent and a caregiver to the Mayo Clinic or other hand-‐selected ins:tu:ons for a second opinion and — if the employee chose — treatment
Found that 40% of the transplants recommended to the employees were unnecessary
In those cases, experienced transplant physicians and specialists recommended other, far less invasive and less painful treatments.
Source: hFp://healthaffairs.org/blog/2014/04/02/the-‐payment-‐reform-‐landscape-‐price-‐transparency/
CalPERS decided to cap payments for knee and hip replacement surgeries at $30,000 for its Anthem Blue Cross members because the pension fund was paying anywhere between $15,000 and $110,000 for such procedures.
The average price for the knee and hip replacements at higher-‐priced hospitals in the state decreased by 37%.
In addi7on, the use of preferred hospitals among CalPERS members increased by 21% between 2010 and 2012.
Pricing Power
Disrup4ve Delivery – Top of License
Site Pharmacy Medical Total
MinuteClinic $28 $75 $104
ED $27 $356 $383
Physician’s Office $32 $127 $159
Urgent care facility $30 $124 $154
Source: hFp://content.healthaffairs.org/content/27/5/1283/T1.expansion.html
The Original Focused Factory?
Founded in 1945, Shouldice Hospital is the world’s leading center of excellence in abdominal wall hernia repair.
Designed exclusively to meet the needs of hernia pa:ents, Shouldice is a fully licensed, 89-‐bed surgical hospital.
Specially trained surgical teams perform over 7,000 hernia repairs every year
Most general surgeons will repair 20 to 30 hernias in a year. Shouldice surgeons average over 700 cases a year
“The Henry Ford of Hearts”
Distributed Diagnos4cs Radiofrequency wireless-‐enabled devices
Diagnoses asymptoma:c atrial fibrilla:on same-‐day
Study found that follow-‐up on the network was associated with a 50% rela:ve reduc:on in the risk of death
Implica4ons for Post-‐Industrial Ac4ons
Desperately need Business Model transforma:on
Entrepreneurs are important—Physician entrepreneurs are REALLY important
Embrace Transparency and Drive Communica:on
Payment models so Cri:cal -‐ Wake up employers and Payers!
Get capital into the hands of entrepreneurs
Never been a beYer :me to “Do Good and Do Well”
Contact: Sage Growth Partners 3500 Boston Street, Suite 435 Bal:more, Maryland 21224 410.534.1161