weathering healthcare's derechos
TRANSCRIPT
Weathering Healthcare’s Derechos May 2014 Don McDaniel Sage Growth Partners
Derecho Slide
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DEMOGRAPHY AND THE IMPACTS OF AGING
Demography and the Impact of Aging
2010 2025
Under 65 65+ • 2010: 65+ 13% of populaGon
• 2025: 18% of populaGon
• 60% ($188,658) of lifeGmes HC costs ($316,600) occur in 65+ years
This means an extra $4.5 trillion in HC spending
270 million
293 million
40 million
64 million
Source: 2008 Census projecGons and “The LifeGme DistribuGon of Health Care Costs” arGcle from Health Services Research. 3
LABOR MARKET
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A Tale of Two Industries
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Shortage of Primary Care Physicians
180000
190000
200000
210000
220000
230000
240000
250000
2010 2020
Physician Supply Physician Demand
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} 20,400 Physicians Projected Shortage
Source: November 2013 h\p://bhpr.hrsa.gov/healthworkforce/supplydemand/usworkforce/primarycare/projecGngprimarycare.pdf
CONSUMER SOVEREIGNTY
NaJonal Health Expenditures Per Capita and Percent of Out-‐of-‐Pocket Costs
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$147 $356
$1,112
$2,851
$4,884 $5,240
$5,687 $6,131
$6,504 $6,900
$7,271 $7,651
$7,933 $8,157
$8,411 $8,658 $8,925
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
1960 1970 1980 1990 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
48
33
23
19
15 14 14 13 13 13 13 13 12 12 12 12 12
Axis Title
Source: h\p://www.cms.gov/Research-‐StaGsGcs-‐Data-‐and-‐Systems/StaGsGcs-‐Trends-‐and-‐Reports/NaGonalHealthExpendData/Downloads/tables.pdf
Lack of Price Transparency
§ The InsGtute of Medicine esGmates that $105 billion of annual waste in health care spending can be a\ributed to lack of compeGGon and excessive price variaGon.
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Sources: h\p://www.rwjf.org/en/blogs/culture-‐of-‐health/2013/05/sorGng_out_the_mean.html and h\p://www.rwjf.org/content/dam/farm/reports/issue_briefs/2013/rwjf407306
§ Authors called top-‐ranked orthopedic hospitals in the US and 2 largest hospitals in each state § Fee for hospital + fee for surgeon
§ Of the 20 top-‐ranked hospitals, 55% could not provide a single “bundled price” for the procedure § 40% could not provide an esGmate
§ 90% could not provide a single “bundled price” § 37% could not provide an esGmate
§ VariaGon was shockingly vast, ranging from a low of $11,100 to a high of $125,798.70
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Source: Journal of the American Medical AssociaGon Internal Medicine h\p://archinte.jamanetwork.com/data/Journals/INTEMED/0/jamainternmed.2013.465.pdf
ReacJon to Price Transparency
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§ 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 addiGon, the use of preferred hospitals among CalPERS members increased by 21% between 2010 and 2012.
How Consumers Should Be Able to Make Decisions
12 Source: h\p://www.rwjf.org/content/dam/farm/reports/issue_briefs/2013/rwjf407306
GLOBALIZATION OF HEALTH CARE
Life Expectancy at Birth
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Infant Mortality Rate
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“The Henry Ford of Hearts”
ATTRIBUTES US Narayana Hrudayalaya
COST $20,000-‐$100,000 for Open Heart Surgery
$2,000 for Open Heart Surgery
BEDS 160 Beds (US Hospital Average)
1,000-‐bed Narayana Hrudayalaya Hospital
# PROCEDURES
1,367 cardiac bypass surgeries at the Cleveland Clinic 2008
Performed 3,174 cardiac bypass surgeries in 2008
CHILD PROCEDURES
Boston Children’s Hospital-‐ 1,026 surgeries
Performed 2,777 operaGons on children
PROFIT 6.9%-‐Average US Hospital Profit 7.7% Profit Aler-‐Taxes
MORTALITY RATE 1.9% 1.4%
The Data
Maine to Allow PrescripJon Drug Imports
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UNSUSTAINABILITY OF THE TRADITIONAL MEDICAL BUSINESS MODEL
OperaJng Costs Increasing
690,032 684,130
428,238 470,340
272,460 249,824
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
2007 2013
Medical Revenue OperaGng Cost Medical Revenue Aler OperaGng Cost
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9% Increase
8.3% Decrease
Physician Employment Trends
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Source: Accenture Physician Alignment Survey 2012. h\p://www.accenture.com/SiteCollecGonDocuments/PDF/Accenture-‐Clinical-‐TransformaGon-‐New-‐Business-‐Models-‐for-‐a-‐New-‐Era-‐in-‐Healthcare.pdf
Sustainable?
§ Hospitals lose on average $176,463 per physician on owned physician pracGces
§ The longer a hospital owns physician groups, the higher the likelihood it is losing money on them.
§ The more physicians a hospital employs, the more likely they incur losses
§ 78% of hospitals are paying physicians non-‐producGvity incenGves (paGent saGsfacGon, clinical quality, and ciGzenship), expected to rise to 94% in 3 years
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Sources: MGMA 2013 Cost Survey All mulG-‐specialty groups, hospital-‐owned and Report: Hospital-‐owned pracGces lose up to $100K per doc each year – FiercePracGceManagement
INSTABILITY OF THE PUBLIC SECTOR ENTITLEMENT PROGRAMS
Challenged Public Payers
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Source: Avalere Health analysis of American Hospital Association Annual Survey data, 2012, for community hospitals. (1) Includes Medicare Disproportionate Share payments. (2) Includes Medicaid Disproportionate Share payments.
70%
80%
90%
100%
110%
120%
130%
140%
150%
92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
Private Payer
Medicaid Medicare
Medicare Payment System is Broken
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Increase in Medicaid Enrollment and Spending Growth
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Unsustainable
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ROLE OF INNOVATION
Why VBP?
§ Purchasers are demanding more accountability around quality and cost
§ Medicare and Medicaid need the “stop loss” § Its a way to take and grow share § It allows a focus on “industrial improvement” § Its working in key markets § Its driving quality outcomes
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Building Blocks of Value Based Payments
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Economic Outlook
Reform and RegulaGon
Delivery Redesign
Payment Model AnalyGcs
PopulaGon Health
Consumer Engagement
Employers are Agitated
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Lines are Blurring: Providers/Payers
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AlternaJve Payment Models
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ACO Reach by the Numbers
Source: h\p://www.oliverwyman.com/media/OW_ENG_HLS_PUBL_The_ACO_Surprise.pdf 34
CumulaJve Percent Change in NaJonal Health Expenditures, 2010 to 2019 Given ImplementaJon of Possible Approaches to Health Reform
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The Garage Comes to Healthcare
36 Source: h\p://www.chcf.org/innovaGon-‐fund/accelerator-‐incubator
Remote PaJent Monitoring
§ 24 hour healthcare a day § Via phone, Web video or the tradiGonal house call
§ Just received $14 million in financing led by CHI § Franciscan Health System has been using the Carena service for more than a year for
its own staff § Employees of the hospital receive aler-‐hours medical advice and treatment
§ Independent analysis shows Carena’s service saves employers money by replacing ED visits with comprehensive and less expensive medical house calls
DisrupJve DiagnosJcs
• Radiofrequency wireless-‐enabled devices • Diagnoses asymptomaGc atrial fibrillaGon same-‐day • Study found that follow-‐up on the network was associated with a 50% relaGve reducGon in the risk of death
DisrupJve Delivery
§ Health care delivery model that responds to consumer demand and bypasses ED § Nurse pracGGoners and physician assistants who can diagnose, treat and write prescripGons
Adjusted Mean Costs per Episode by Site of Care
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: h\p://content.healthaffairs.org/content/27/5/1283/T1.expansion.html
AnalyJcs Drive Clinical AcJon
§ 300,000 VenGlated Acquired Pneumonia (VAP) cases per year in the US § Clinical team established eight measures that help to alleviate VAP (i.e., sucGoning phlegm, brushing teeth, and backslaps) § Health status had not improved commensurately
§ Conducted a subset analysis § Compliance with all eight of measures provided the Gpping point to avoiding VAP.
“People are now comparing us to best of breed, where we were just average in the past. It is really an analy@cs victory in the ability to see paAerns that
would have been invisible without the data warehouse to see that retrospec@ve analysis and real-‐@me repor@ng.”
-‐ Ed Shultz, M.D., CMIO
Payment IncenJves
§ Non-‐profit organizaGon working to: § Measure outcomes § Reduce care defects § Promote a team approach to caring for paGents § Realign payment incenGves around quality § Reward excellence
§ Bridges to Excellence § Programs to reward recognized providers who meet certain performance measures.
§ PROMETHEUS Payment § A compensaGon approach, based on medical episodes of care, that provides a fair and realisGc blueprint for true payment reform.
§ Being used by CMS for bundled payment pilot
Transparency
§ Compares providers cost and quality to show evidence of value – “transparency sheds light”
§ Improved employee engagement
§ Behavior change
§ ReducGon in spending and out-‐of-‐network use
§ Improved care quality
§ 70% employee engagement rates
§ One company saved 13% on their health care spend
§ 40% less likely to go out-‐of-‐network
§ 38% reducGon in gaps-‐in-‐care for chronic condiGons such as diabetes, COPD, high-‐blood pressure, and high cholesterol
QuesJons?
Thank you
Don McDaniel dmcdaniel@sage-‐growth.com
410.534.1161 443.904.2882
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