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Transforming for Tomorrow Session 2: Scan September 19, 2012 or September 25, 2012 CHA Web Seminar

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Page 1: Transforming for Tomorrow Session 2: Scan · Support review and presentation of findings to CHA Board and/or es other stakeholder groups In late February, the Transforming for Tomorrow

Transforming for Tomorrow

Session 2: Scan

September 19, 2012 or

September 25, 2012

CHA Web Seminar

Page 2: Transforming for Tomorrow Session 2: Scan · Support review and presentation of findings to CHA Board and/or es other stakeholder groups In late February, the Transforming for Tomorrow

Welcome

Liz Mekjavich

California Hospital Association

Page 3: Transforming for Tomorrow Session 2: Scan · Support review and presentation of findings to CHA Board and/or es other stakeholder groups In late February, the Transforming for Tomorrow

Continuing Education Offered

for this Program

Health Care Executives — CHA is authorized to

award 2 hours of pre-approved ACHE Qualified

Education Credit (non-ACHE) for this program

toward the advancement, or recertification in the

American College of Healthcare Executives.

Participants in this program wishing to have the

continuing education hours applied toward ACHE

Qualified Education credit should indicate their

attendance when submitting application to the

American College of Healthcare Executives for

advancement or recertification. 3

Page 4: Transforming for Tomorrow Session 2: Scan · Support review and presentation of findings to CHA Board and/or es other stakeholder groups In late February, the Transforming for Tomorrow

Continuing Education

Requirements

Full attendance, completion of online survey, and

attestation of attendance is required to receive

continuing education credit for this seminar. Note:

only registrant may receive complimentary CEs.

If additional participants under the same registration

would like to be awarded CEs, a fee of $20 per

person, will apply. Post-event survey will be sent to

registrant and provide information on how to apply

online for additional CEs.

4

Page 5: Transforming for Tomorrow Session 2: Scan · Support review and presentation of findings to CHA Board and/or es other stakeholder groups In late February, the Transforming for Tomorrow

Program Overview

Anne McLeod

California Hospital Association

Page 6: Transforming for Tomorrow Session 2: Scan · Support review and presentation of findings to CHA Board and/or es other stakeholder groups In late February, the Transforming for Tomorrow

Faculty: Michael Cohen

• Michael Cohen, Principal, Deloitte

Consulting LLP

• Michael Cohen is the leader of Deloitte

Consulting’s Strategy Practice for Health Care

Providers. In this role, Mike focuses on

leading strategic and financial transformation

engagements for hospital and physician group

clients with an emphasis on strategic planning,

growth, accountable care and strategic

partnering.

6

Page 7: Transforming for Tomorrow Session 2: Scan · Support review and presentation of findings to CHA Board and/or es other stakeholder groups In late February, the Transforming for Tomorrow

Faculty: James Bush

James “Randy” Bush, Principal,

Deloitte Consulting LLP

Randy has been with Deloitte eight years

and focuses on assisting Health Care

Provider executives with their most

challenging performance improvement

projects including clinical and operations

transformation, administrative

simplification, and strategic cost reduction.

7

Page 8: Transforming for Tomorrow Session 2: Scan · Support review and presentation of findings to CHA Board and/or es other stakeholder groups In late February, the Transforming for Tomorrow

Deloitte Consulting LLP

Transforming for Tomorrow — Session 2 — Scan

Environmental Assessment –

California hospitals’ relative exposure to and readiness for tomorrow

September 2012

Page 9: Transforming for Tomorrow Session 2: Scan · Support review and presentation of findings to CHA Board and/or es other stakeholder groups In late February, the Transforming for Tomorrow

The California Hospital Association’s (CHA) Board of

Trustees authorized the creation of a special task force to

analyze the state and federal landscapes and prepare

recommendations for policies, services, programs and

strategies to assist hospitals’ transformation for the future

and guide CHA’s public policy development. The

“Transforming for Tomorrow” Task Force served as a

think tank to develop transitional strategies for hospitals.

Deloitte Consulting LLP was engaged to assist CHA and

the Task Force in developing these strategies in the

context of California’s unique fiscal and regulatory

environment.

Preface

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Transforming for Tomorrow Task Force Approach

Phase 1:

Identify/Prioritize

Strategic Issues

Phase 2:

Formulate Core

Strategies

Phase 3:

Document Proposed

Actions

Isolate and evaluate the “big

issues” facing CHA Members

Identify and “stress-test” potential

strategies against market evolution

scenarios

Flesh out the detail and isolate

actions for consideration by CHA

Stakeholder interviews

Develop a strategic fact-base

‒Demographics and population

health needs

‒Relative financial/operational

health of California hospitals

and providers

‒ Level of integration in key

markets

Establish strategic positioning of

CHA members (current/forward

looking)

Isolate and prioritize strategic

imperatives

Evaluate applicable industry

leading practices and market

trends

Identify a set of “strategic

destinations” for California

hospitals

Frame potential strategies/actions

Member/hospital level

Association level

Test “strategic destinations” and

related strategies against market

evolution scenarios

Core strategies

Situation-specific

strategies

Prepare report of findings and

recommendations

Isolate actions for consideration

by CHA

Identify potential capability gaps

Support review and presentation

of findings to CHA Board and/or

other stakeholder groups Activitie

s

In late February, the Transforming for Tomorrow Task Force adopted a three-phased approach to assess

the environment, identify transformational strategies for California hospitals, and develop consensus on

recommendations to be adopted by CHA’s Board of Directors.

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Webinar Series Overview

Introduce (8/23 and 8/30)

Scan (9/19 and 9/25)

Explore (10/3 and 10/10)

Plan (10/24 and 10/31)

Participants will be introduced to

the purpose and

recommendations of the

Transforming for Tomorrow

Task Force. This session will

provide an overview of key

findings from the work, orient

participants to strategies for

long-term success, and

introduce tools for planning and

preparation. Session includes:

• Task Force purpose, focus

• “Fact-Base” conclusions —

scan of the national and state

environment

• Framework for action — core,

differentiating, and contingent

strategies to support success

• Tactics to support California

hospitals during transition

• Transformation Roadmap —

applying Task Force insights

in planning for tomorrow

Hear a detailed review of key

analytics and insights from the

Task Force’s scan of the

national and California

marketplaces. Faculty will focus

on the "Vulnerability Index," a

framework used to assess

California hospitals’ relative

exposure to future trends and

readiness for the future. Session

includes:

• Impact of aging,

demographic, and coverage

shifts

• Value proposition — cost,

quality, and consumer

engagement

• Effects of scale and

integration

• "Transformational Leaders" v.

"Acutely Vulnerable"

organizations

• Key conclusions and core

strategies

Learn about several potential

paths to future differentiation

and sustainability for California

hospitals and health systems.

Participants will explore each of

five potential “Destinations”

which represent prototype

strategies for achieving

differentiated revenue or cost

performance. Session includes:

• Representative strategies —

tactics used to drive success

under each Destination

• Early signals — examples of

national organizations

pursuing these strategies

• Competencies — changes in

capabilities and culture

required to support

Destination success

Participants will review the

“Transformation Roadmap” — a

framework executive teams can

use to plan and stimulate

discussion on strategic direction

and value proposition, identify

key considerations related to

defining a sustainable strategy

for success, and more quickly

translate task force perspectives

into local action. Session

includes:

• Difference between core,

differentiating, and contingent

strategies

• Insights and information

leveraged from the Task

Force

• Key questions to be

answered at each stage of

exploration and desired

outcomes

• Guiding principles and other

critical success factors

Today’s discussion is the continuation of a series of webinars to educate CHA members on the key

findings and recommendations from the Task Force.

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The two parts of the environmental assessment focused on measuring providers’ overall exposure to

drivers of change and their readiness for change in an effort to assess positioning for the future

Analysis Framework

Vulnerability Index = Exposure to Drivers of Change x Readiness for Change

Higher

Exposure

Capacity in Question Near-term threats may challenge these

providers, despite readiness for tomorrow

Acutely Vulnerable These organizations are most at risk for

failure and potential acquisition

Challenged Sustainability Repositioning will be required for these

organizations to survive longer-term

Transformational Leaders These organizations are best in a position

to lead and thrive in the new environment

Readiness

Lower

Lower Higher

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Exposure

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Population Growth and Aging

Overall population growth in California is slightly below the national average, with higher observed growth

concentrated in aged populations

Source: US Census American Community Survey 2007, US Census 2010, Deloitte Analysis

Population Distribution

CAGR: 0% 3% 6%

Under 55

55 to 65

Over 65

Population in Millions

Ye

ar

Population Growth

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Impact of Aging on Utilization

Should recent trends continue, a significant increase in the utilization of inpatient services can be expected

as the population ages

Chronic Illness vs. Current Utilization Rates

Chronic Disease Incidence

Me

dic

are

In

pa

tien

t U

tili

za

tio

n /

10

00

For every 1% change in

the incidence of chronic

disease there is a

corresponding increase

in utilization of 6%

Source: California HealthCare Foundation

Kings Colusa Stanislaus

Tehama

Glenn

Calaveras

Lake

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Caregiver Supply

However, primary care physician supply could constrain the ability to manage the increase of chronic

disease and other increases in utilization in several parts of the state

Source: AMA Physicians Master File, California Health Care Foundation

Caregiver Supply Health Status

Percentage of adults with one or more chronic illnesses Number of primary care physicians per 1,000

San Francisco

San Jose

Los Angeles

28-35%

35-39%

39-43%

44-49%

No data

San Francisco

San Jose

Los Angeles

1.3-2.5

1.1-1.3

0.8-1.1

0.2-0.7

No data

The combination of

low caregiver supply

and poor health

status is evident

throughout the state

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55% of the workers in the state are employed by firms of less than 100 employees, firms most likely to

push employees to the exchange

Exchange Exposure

Potential Movements

to the Exchange by Firm Size

Firm Size

Nu

mb

er

of

Em

plo

ye

es

Source: State of California, Employment Development Department, Labor Market Information Division, Deloitte Analysis

Exchange

Commercial

Up to 50%

Conversion

Up to 25%

Conversion

Up to 10%

Conversion

Up to 5%

Conversion

Up to 38%

Conversion

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Polling Question:

How do you expect reimbursement to be affected by the Exchange?

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Coverage Shifts

En

roll

me

nt Uninsured

Commercial

(Group and

Individual)

Government –

Medicare &

Medicaid

Source: Deloitte Analysis

Government –

HIX

Under any potential scenario, government-level reimbursement will become a larger proportion of the

overall mix

ACA implemented; 5% of

large and 10% of small

employers drop coverage

ACA delayed to 2016

including penalties,

HIX, SHOP, etc.

ACA implemented; add’l 25%

of large and 50% of small

employers drop coverage.

California Enrollment Projections

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Hospital Impact – An Illustrative Example

Illustrative Margin Assumptions

Source: Deloitte Analysis, Illustrative 2012 Margins derived from 2008 Milliman Report

Despite an increase in the total insured, the net effect of these shifts will be a significant dilution of margin

2012 Margin

(Pre-ACA)

2020 Margin

(Post-ACA)

Commercial +20% +25%

Government -10% -30%

Uninsured -25% -45%

1

Initial

Margin

2.0%

Δ Margin

= +1.2%

Key Shifts

New

Margin

-8.3%

Δ Margin

= -1.5%

3

Δ Margin

= -10.0%

We

igh

ted

Ave

rag

e O

pe

rati

ng

Ma

rgin

2

Reduction in the uninsured from 20%

to 12% improves margin profile

(Δ = +1.2%, now 3.2%)

1

With a higher mix of ‘Government’

business, ACA reimbursement reform

significantly degrades margin

(Δ = -10.0%, now -8.3%)

3

Aging into Medicare and the

Exchanges (SHOP / HBEX) reduce

proportion of Commercially insured

from 50% to 44% and dilutes margin

(Δ = -1.5%, now 1.7%)

2

Margin Impact

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Polling Question:

How would you describe the competitive dynamic in your region?

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-0.2

0.0

0.2

0.4

0.6

0.8

1.0

-20% -15% -10% -5% 0% 5% 10% 15% 20%

Competitive Dynamics

In anticipation of continued pressure, most California counties are trending toward market consolidation

California Competitive Dynamics by County

% Change HHI 2007-2010

2010 HHI

Concentration

Index

= 75,000 discharges

More

Competitive

Markets

Highly

Concentrated

Markets

Markets Becoming More Competitive Markets Becoming More Concentrated

Highly Concentrated

Becoming More Concentrated

Competitive

Becoming More Competitive

Highly Concentrated

Becoming More Competitive

Competitive

Becoming More Concentrated Los Angeles

San Bernardino

San Diego

Sacramento

Orange

Alameda Contra Costa

San Joaquin

Lake Madera

Merced

Inyo

Kings

Stanislaus

Source: OSPHD 2010 and Deloitte Analysis

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Payor Leverage

Given their relative consolidation in most markets, plans currently have more negotiation leverage

Relative Concentration

Plans to Hospitals

Source: Health Leaders 2011, OSHPD 2010

Counties

12.1

Plans have higher concentrations in 55% of counties,

potentially creating reimbursement pressure for hospitals

Providers Relatively

More Consolidated

Plans Relatively

More Consolidated

Los Angeles

Orange

Alameda

San Diego

San Benito

El Dorado

Placer

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Physician Group Consolidation

In addition, physician groups are consolidating to create scale economies in purchasing and payer

negotiations, and are more concentrated than acute providers in a number of counties

Source: RAND Corporation 2010 – Physicians and Surgeons in California; Cattaneo & Stroud - Physician Count for Active California Medical Groups 2012; OSHPD 2010

Relative Concentration

Physicians to Hospitals

Counties

Physicians have reached critical mass in a

number of counties, and could become more

aggressive in managing care, accepting risk,

and negotiating with hospitals

Providers Relatively

More Consolidated

Physicians Relatively

More Consolidated

Contra Costa

Los Angeles

Riverside

Kern

Napa

Sutter

Monterey

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Polling Question:

Which actions are you taking to address these shifts?

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Key Takeaways

• A lack of primary care supply will require organizations to innovate the care model, and

in particular, the role of non-physician providers to successfully address the incoming

wave of utilization due to aging and the newly insured

• California’s high proportion of small business and active legislature will likely result in a

more active health insurance exchange, which will be another key driver of financial

risk between now and 2020

• Competition is fierce in most counties, and a focus on value proposition will be

essential to long-term relevance/viability

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Readiness

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California leads the nation in many areas of hospital, system, and physician care integration

Integration

Integrated Delivery System

Pioneer or SSP ACO

Source: including Becker’s Hospital Review (“50 Integrated Delivery Systems to Know”), SDI’s Integrated Healthcare Networks (IHN) Benchmark Report, HealthLeaders

InterStudy Health Plan Review, CMS, and Deloitte Analysis

State ACOs

California 8

New York 7

Massachusetts 7

Texas 4

Florida 4

New Jersey 3

Minnesota 3

North Carolina 3

Michigan 3

Arizona 2

Hospital Led

Physician Led

California Integration Top 10 ACO States Physician vs. Hospital

Led ACOs

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California hospitals already operate in an environment with high penetration of “managed” care

Managed Care Penetration

US Average

California

*as a percentage of commercial membership

Source: HealthLeaders January 2011

Commercial HMO Penetration*

16%

49%

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Technology

California hospitals appear to have a lead in developing technology infrastructure to support greater

clinical collaboration across organizations and are on par with the nation for planned “Meaningful Use”

Health Information

Exchange (HIE) Participation

Source: AHA Hospital EHR Adoption Database 2011 release of 2009 survey results, Deloitte Analysis

Planned “Meaningful

Use” Adoption

California

US Average

(Excluding CA) 60%

California is ahead of the nation in building the infrastructure to

support health information exchange

52%

No HIE

technology

HIE technology

exists, but no

participation

Active HIE

participation

% o

f H

osp

ita

ls

% o

f H

osp

ita

ls

California is on par with the national average for planned

“Meaningful Use” adoption

(Excluding CA)

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Methodology: Quality Index is calculated by averaging the standard variation for morality and readmission rates for heart attack, heart failure, and pneumonia, as reported in CMS’ Hospital Compare Database. Market Basket Cost per episode

is calculated using the Medicate costs of the 79 most common DRGs in CA in 2010. DRGs were weighted using state-wide average case load per DRG to arrive at an equally weighted market basket of DRGs by provider

Value Proposition

The desired correlation between cost and quality does not yet exist across California hospitals

Cost

Hig

h

Source: CMS Hospital Compare 2010, Data Advantage 2010, Deloitte Analysis

32% of

Discharges

24% of

Discharges

21% of

Discharges

23% of

Discharges

Market Basket Cost per episode

Qu

ali

ty I

nd

ex

2010

2009

Lo

w

Qu

ali

ty

Low High

Many California hospitals are achieving high quality

but most are still high cost

At the lower end of the cost curve, California hospitals

appear to have improved quality in the past year

Value Distribution 2010 Value Curve 2009-2010

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Future Profitability

While many hospitals report operating profits today, most will likely be unprofitable as reimbursement

approaches Medicare rates

Pe

rce

nta

ge o

f C

ali

forn

ia H

osp

ita

ls

Source: OSPHD 2010, DataAdvantage 2010, Deloitte Analysis

Methodology: Percentage of CA hospitals profitable under Medicare calculated using per episode Market Basket cost and revenue. Market Basket s calculated using the Medicate costs of the 79 most common

DRGs in CA in 2010. DRGs were weighted using state-wide average case load per DRG to arrive at an equally weighted market basket of DRGs by provider

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Scale Effects

In California, smaller health system members appear better able to exercise cost efficiencies and

reimbursement increases relative to similar size independent hospitals

Source: Data Advantage 2010, OSPHD 2010, Deloitte Analysis

Methodology Revenue per adjusted patient day is calculated by dividing total net revenue by adjusted patient days. Market Basket s calculated using the Medicate costs of the 79 most common

DRGs in CA in 2010. DRGs were weighted using state-wide average case load per DRG to arrive at an equally weighted market basket of DRGs by provider

Total Discharges

Ma

rke

t B

as

ke

t C

ost

pe

r E

pis

od

e

Health Systems

Independent Hospitals

Total Discharges

Reve

nu

e p

er

Ad

juste

d P

ati

en

t D

ay

Health Systems

Independent Hospitals

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Polling Question:

Which is the most important factor governing CA hospitals’ readiness for the future?

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Key Takeaways

• California is ahead of many states in their strides toward accepting risk, sharing data

and information, and innovating the care model

• However, a limited number of organizations are prepared to succeed in an environment

where value matters more than volume and reimbursement rates are significantly

depressed

• As such, alignment with larger health systems will continue to be a key support

strategy, particularly for smaller independent hospitals to achieve a new level of

reimbursement and cost efficiency

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Vulnerability

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Exposure Scoring Methodology

A standard set of metrics was used to evaluate current environmental challenges and assess future shifts

(1) Competition level is measured by the Herfindahl-Hirschman Index (HHI), calculated by adding the squared market shares of each competitor in a region (2) Diversity index is calculated by adding the squared

percentage of the total population for a given racial/ethnic group

Category Key Indicator Desired

Position Rationale

Current

Competitive level (HHI) (1) Lower Lower = less current competitive threats

Commercial payor percentage Higher Higher = higher average reimbursement rates

Diversity index (2) Lower Lower = less complex populations to serve

Chronic disease incidence Lower Lower = less cost and utilization

PCPs per 1,000 population Higher Higher = more access to care

Future

Growth in average income Higher Higher = more people will be able to afford care

Growth in 55+ aged population Lower Lower = less chronic illness

Percentage of small employers Lower Lower = less risk they will be moved to the exchange

Population growth Higher Higher = more opportunities to serve target patient segments

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Readiness Scoring Methodology

Category Metric Key Indicator Desired

Position Rationale

Financial

Durability

Scale Total net revenue Higher More revenue resulting in greater scale

Cost

Effectiveness Market basket cost Lower Cost effectiveness

Profitability

Operating margin Higher More profit from operations

Return on assets Higher Ability to generate incremental profit with

scale

Capital

Structure Access to capital score Higher Greater ability to borrow money

Capabilities

Brand /

Reputation Net promoter score Higher Higher favorable brand awareness

Value Quality/cost Higher Higher quality, lower cost yields more value

Technological

Integration HIE usage rate Higher Higher electronic coordination of care

Payor

Alignment

HMO as a percentage of

commercial plans Higher

More integration between consumers,

providers, and plans

Financing and delivery

integration score Higher More integrated, efficient delivery of care

Physician

Alignment

Note: A measurement of the degree of physician alignment

to a given hospital would be highly desirable but is not widely available

Similarly, another set of metrics was used to evaluate relative readiness to address the challenges ahead

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Exposure

Vulnerability Index: Exposure vs. Readiness

Note: Care in the above boxes refers to discharges Source: Deloitte Analysis

Higher

Capacity in Question Near-term threats may challenge these

providers, despite readiness for tomorrow

Acutely Vulnerable These organizations are most at risk for

failure and potential acquisition

Challenged Sustainability Repositioning will be required for these

organizations to survive longer-term

Transformational Leaders These organizations are best in a position

to lead and thrive in the new environment

Readiness

Lower

Higher Lower

43% of

Discharges

11% of

Discharges

24% of

Discharges

23% of

Discharges

Illustrative Case:

“An independent hospital in

Coastal California serving a

high commercial population,

with median quality

performance, but bottom

quartile cost performance”

Illustrative Case:

“AA rated, integrated system

facility that is also participating

with a medical group in a

Pioneer ACO”

Illustrative Case:

“A progressive urban facility

that has made recent

improvements in quality, but

faces a significant risk once the

exchange goes live”

Illustrative Case:

“A safety net hospital in rural

Southern California serving a

population that is highly

dependent on Medicaid”

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Rural, critical access, and public hospitals comprise the base of California’s “Acutely Vulnerable” hospitals

California Hospital Segments

Exposure

13%

15%

17%

16%

17%

21%

23%

27%

43%

49%

50%

53%

26%

15%

10%

4%

Teaching

System

Independent

Investor-owned

Favorable Unfavorable

24%

38%

27%

31%

36%

20%

13%

11%

Public

Rural

Readiness

Source: Deloitte Analysis, OSHPD 2010 Self-reported Segments

23%

13%

38%

22%

18%

20%

29%

19%

9%

33%

19%

34%

50%

34%

13%

25%

Favorable Unfavorable

58%

51%

32%

29%

8%

14%

2%

7%

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Vulnerability Implications: Shift “Epicenters”

Markets with higher concentrations of “Acutely Vulnerable” organizations or “Transformational Leaders”

may experience significant change

Acutely Vulnerable %

of Discharges

Transformational Leaders

% of Discharges

76-100% of discharges

0-25% of discharges 26-50% of discharges

51-75% of discharges

San Francisco

San Jose

Los Angeles

San Francisco

San Jose

Los Angeles

Markets that are most

likely to be impacted

by the solvency of the

“Acutely Vulnerable”

Markets that are most

prepared to make

innovative changes to

care delivery and

payment models

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h

Under an extreme situation in which the “Acutely Vulnerable” hospitals begin to close, a potentially large

number of patients would be displaced

Vulnerability Implications:

Impact of “Acutely Vulnerable” Hospital Closings on Access

Cumulative Capacity

Shortage of 1M Patient

Days

Hospitals Closed

Mil

lio

ns o

f p

ati

en

t d

ays

Up to half of acutely

vulnerable hospitals could

close without creating access

issues

1

Closing more could result in a

shortage of capacity to serve this

population

2

A third or more of the inpatient care provided by acutely vulnerable hospitals is at risk

Note: This analysis assumes the best case, orderly closures with least impact

Source: OSHPD 2010, Deloitte Analysis

3M Patient Days

2M Patient Days

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Vulnerability Implications:

Impact of “Acutely Vulnerable” Hospital Closings on Remaining Hospital Margins

Closure of acutely vulnerable hospitals would displace a disproportionate number of Medicaid patients,

which would dilute the margins of remaining facilities

Pe

rce

nta

ge o

f C

ali

forn

ia H

osp

ita

ls

Source: OSPHD 2010, Deloitte Analysis

Methodology: Percentage of CA hospitals profitable under Medicare calculated using per episode Market Basket cost and revenue. Market Basket s calculated using the Medicate costs of the 79 most common

DRGs in CA in 2010. DRGs were weighted using state-wide average case load per DRG to arrive at an equally weighted market basket of DRGs by provider

Public aid is more prevalent in acutely vulnerable hospitals

Medicaid

Medicare

Commercial

+ 9%

- 4%

- 8%

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Key Takeaways

• California hospitals show early signs of readiness for the future, but some face

significant near-term challenges to sustainability

• The state’s rural, critical access, and several public hospitals are acutely vulnerable,

and without additional support could potentially create access issues for patients and

dilute the margins of surrounding facilities

Page 45: Transforming for Tomorrow Session 2: Scan · Support review and presentation of findings to CHA Board and/or es other stakeholder groups In late February, the Transforming for Tomorrow

Key Conclusions

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Environmental Assessment Key Conclusions

California has long built a reputation for being on the leading edge of care and

innovation. However, demographic and coverage shifts as well as forecasted

challenges in the reimbursement and labor markets will challenge several hospitals as

they prepare to transform for tomorrow.

• Demographic trends and coverage shifts will require organizations to innovate their

care model to, among other considerations, address primary care supply, cost

management, the evolving health needs of an aging population and the imperative

to transition from “providing care” to “managing health”

• Scale is important, but integration will be critical in driving revenue and cost

leadership to support sustainable margins at significantly reduced levels of

reimbursement

• California’s high proportion of small business and active legislature will

likely increase the impact of the health insurance exchange, which will be a key

future driver of financial risk

• California hospitals show early signs of readiness for the future, but some face

significant near-term challenges to sustainability

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Key Fact Base Conclusions

Core Strategies to Support Transformation Journey

Core Strategies from the Task Force

* Strategies which may require CHA to be a driver

Demographic and coverage shifts will require

organizations to innovate their care model to,

among other considerations, address caregiver

supply, cost levels, the needs of an aging

population and the transition from “providing

care” to “managing health”

Scale is important, but integration will be critical

in driving revenue and cost leadership to

support sustainable margins at significantly

reduced levels of reimbursement

California’s high proportion of small business

and active legislature will likely increase the

impact of the health insurance exchange, which

will be a key future driver of financial risk

• Begin testing methods for reducing cost and improving quality

beginning with hospitals’ self-insured populations

• Acquire care management technology that incorporates

performance management and predictive analytics capabilities

• Develop new models to drive greater clinical integration by

aligning incentives with community physicians

• Develop strategic partnerships that augment actual and virtual

scale, leveraging shared networks and technology as enablers

• Evaluate and prioritize current health plan relationships in

preparation for Exchange-based competition

• Increase outreach to employers and other institutional

purchasers to drive stickiness and explore pay for performance

The key conclusions from the Fact Base led the Task Force to develop a set of Core Strategies applicable

to all California hospitals

California hospitals show early signs of

readiness for the future, but some face

significant near-term challenges to sustainability

• Develop initiatives to boost cost performance in preparation for

additional payer and purchaser pressure on reimbursement

• Access financing to support needed infrastructure and

capability investments

Page 48: Transforming for Tomorrow Session 2: Scan · Support review and presentation of findings to CHA Board and/or es other stakeholder groups In late February, the Transforming for Tomorrow

Thank you

Michael Cohen

[email protected] (773) 251-5247 James R. Bush [email protected] (310) 739-9302

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Page 49: Transforming for Tomorrow Session 2: Scan · Support review and presentation of findings to CHA Board and/or es other stakeholder groups In late February, the Transforming for Tomorrow

Questions

Online questions:

Type your question in the

Q & A box, hit enter

Phone questions:

To ask a question hit 14

To remove a question hit 13

Page 50: Transforming for Tomorrow Session 2: Scan · Support review and presentation of findings to CHA Board and/or es other stakeholder groups In late February, the Transforming for Tomorrow

Transforming for Tomorrow

is a four-part program

Remaining Sessions

All sessions run 9:00 – 11:00 a.m., Pacific Time.

Choose one date for each session.

Session 3: Explore Oct 3 or Oct 10

Session 4: Plan Oct 24 or Oct 31

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Page 51: Transforming for Tomorrow Session 2: Scan · Support review and presentation of findings to CHA Board and/or es other stakeholder groups In late February, the Transforming for Tomorrow

California Hospital

Compliance Manual

Consent Law

Principles of Consent

and Advance Directives

Minors and Health Care Law

Mental Health Law

California Health Information Privacy Manual

(Available Late 2012)

2012 Publications

Learn more at www.calhospital.org/publications 51

Page 52: Transforming for Tomorrow Session 2: Scan · Support review and presentation of findings to CHA Board and/or es other stakeholder groups In late February, the Transforming for Tomorrow

Upcoming Programs

Disaster Planning for California Hospitals October 15 – 17, 2012, Sacramento

Behavioral Health Care Symposium December 3 – 4, 2012, Huntington Beach

Post-Acute Care Conference January 31 – February 1, 2013, Huntington Beach

Rural Health Care Symposium March 13 – 15 , 2013, Sacramento

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Page 53: Transforming for Tomorrow Session 2: Scan · Support review and presentation of findings to CHA Board and/or es other stakeholder groups In late February, the Transforming for Tomorrow

Thank You and Evaluation

Thank you for participating in today’s program.

An online evaluation will be sent to you shortly.

Reminder: evaluation completion is required to

receive continuing education credits.

For education questions, contact Liz Mekjavich at

(916) 552-7500 or [email protected].

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