2015 prognosis on healthcare
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2015 Prognosis on Health Care
Ed Park, Chief Operating OfficerSeptember 17, 2014
The information presented in this Webinar is current as of date of live airing – September 17, 2014
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Healthcare spending backgroundSlowing… but still up
EmployersGetting tired of covering their employees
The Government Launching!
Emerging stakeholder strategies
Healthcare cost inflation is at a historic low
“Personal health care costs rose in the 12 months ending in May at the slowest rate in
the last 50 years, as spending on hospital and nursing home services declined.”
–USA Today, July 29, 2013Source: CMS, WSJ4
Care is moving out of the hospital while outpatient visits continue to
rise
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One theory is that there is an economic megatrend moving care out of the hospital, and we should
expect inpatient admissions to continue to drop by ~0.5% per year
http://www.objectivehealth.com/our-thinking/infographics/transition-outpatient-coronary-angioplasty-ptca
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Regardless, the trend on overall healthcare costs remains up!
http://www.medpac.gov/documents/Mar14_entirereport.pdf
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Employers(“private purchasers”)
Employer healthcare costs have tripled over the last decade
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Today’s average family premium is half a year’s work
at median wage
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http://www.nytimes.com/2014/04/28/business/economy/recovery-has-created-far-more-low-wage-jobs-than-better-paid-ones.html?_r=0
“The strongest employment growth during the sluggish recovery has been in low-wage work, at places
like strip malls and fast-food restaurants.”
New York Times, April 27, 2014
http://www.post-gazette.com/stories/news/health/us-health-care-costs-for-the-aged-are-sky-high-371246/
Retirees are particularly expensive
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“We continuously assess our benefit programs to strike a balance among employees, retirees, investors and our ability to compete,” GE said by e-mail.
GE, IBM Ending Retiree Health Plans in Historic Shift
Bloomberg News, Sept 9, 2013
http://www.bloomberg.com/news/2013-09-09/ge-to-ibm-ending-retiree-health-plans-in-historic-shift.html
“Walgreens is moving 120,000 employees to a private health insurance exchange where they can choose a plan from multiple insurers, a sign of the shifting landscape for corporate healthcare because of rising costs.”
Reuters, Sept 18, 2013
http://www.reuters.com/article/2013/09/18/us-healthcare-exchanges-private-idUSBRE98H03120130918
http://www.advisory.com/daily-briefing/2013/10/09/walmart-lowes-enter-bundled-pay-deal-with-four-health-systems
“A first-of-its-kind coalition of large U.S. employers—including Walmart and
Lowe's—will offer no-cost coverage for hip and knee implant procedures at four U.S. health systems starting on Jan. 1,
2014.”
“An increasing number of employees would be willing to use a private exchange to shop for employer-subsidized insurance, and to travel more than two hours to a center of excellence if their costs would be lower than using a local provider.”
Society of Human Resource Management,
October 24, 2013
http://www.shrm.org/hrdisciplines/benefits/articles/pages/health-exchanges-centers-of-excellence.aspx
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33 miles in 49 minutes = $7,994 difference
Arthroscopic Knee Surgery for Torn Cartilage Examples From The Alliance Market
.25 miles + elevator turn = $2,725 difference
11 miles in 20 minutes = $4,781 difference
Source: QualityCounts Outpatient Procedures & Tests Report, 2010; Source for Distance and Time: www.mapquest.com
Fort Atkinson and Madison
Janesville and Beloit
Madison and Madison
The cat is out of the bag and shopping will continue– variation in pricing is
the norm in the industry, not the exception
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The Government(“public purchasers”)
Many groups are still going about their business as if the Affordable Care Act (PPACA) had never been
passed
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But make no mistake, the ACA is changing the rules of
the game
Reductions in payments to hospitals to fund “value based purchasing” - Section 3001
Reductions in payments to hospitals based on the 30-day readmission rate - Sections 3001, 10335
Reductions in payments to hospitals for hospital-acquired conditions (HACs) – Section 3008
Establishment of Accountable Care Organizations – Section 3022, 10307
Establishment of Bundled Payment Pilots – Sections
3023, 10308
Funding of FQHCs – Section 5601, 10503
Expansion of Eligibility under Medicaid – Section 2001, 10201
Establishment of Insurance Exchanges – Section 1311
And more…• Pediatric ACO
Demonstration Project – Section 2706
• …
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While there are many carrots in this game, there is also a half-trillion dollar stick built
into the legislation (~10% of Medicare costs over 10 years)
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Most of this $575B is coming out of the hide of hospitals, who will try to cut
costs to “manage to Medicare” (but not all will be successful)
Total Hospital Medicare Margins by Year
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Hospitals have historically cost-shifted onto their commercial book, but that well is running dry
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The Grand Bargain in the ACA is that the Medicare fee cuts were supposed to
be made up for by expanded coverage
Source: Advisory Board
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This is somewhat working… in half the states
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http://www.npr.org/blogs/health/2014/05/09/311099950/health-centers-hurt-in-states-that-skipped-medicaid-expansion
“More than 1 million patients who use federally funded community
health centers will remain uninsured because they live in states that chose not to expand Medicaid under the Affordable
Care Act”
npr.org, May 9, 2014
This lack of Medicaid expansion has hurt more than hospitals
“More than eight million people signed up for private insurance in
federal and state exchanges during the initial enrollment
period, exceeding the administration’s original goal of
seven million”
New York Times, May 2, 2014
4 million individuals in Medicare Shared Savings Program
~40 million patients see physicians participating in 1 or more ACO
52% of population lives in markets served by ACOs
Meanwhile, ACOs are outpacing all expectations
Sources Muhlestein, D., Continued Growth of Public and Private Accountable Care Organizations, Health Affairs Blog, February 19, 2013; Reuters, “Accountable Care Organizations Now Serve 14% of Americans,”
February 19, 2013.
Number of Accountable Care Organizations
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SOURCE: Reward Health Sciences. April 25, 2013. http://rewardhealth.com/archives/2549
And the number of physician-led ACOs is outpacing hospital-
based ACOs
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Prediction:uncertainty and
confusion are here to stay
Stakeholder Strategies
The new world order has caused a scramble for
patient volume
Combined with revenue difficulties, this is creating tremendous pressure to
consolidate
“Healthcare is a low-margin economic activity. Almost a quarter of American
hospitals are already losing money. With that number bound to increase in
coming years, we already know what to expect because we’ve seen it before in
the airline, supermarket, phone and electronics businesses. There will be a wave of mergers and acquisitions to
improve quality and lower costs.”
Delos Cosgrove, M.D.CEO and President at Cleveland Clinic
The Great Consolidation BeginsMarch 11, 2013
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Hospitals are merging at record levels
35
And there are no net new hospitals being built
http://www.medpac.gov/documents/Mar14_entirereport.pdf
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Meanwhile, physicians are increasingly choosing
employment
http://www.accenture.com/SiteCollectionDocuments/PDF/Accenture-Clinical-Transformation-New-Business-Models-for-a-New-Era-in-Healthcare.pdf#zoom=50
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…although there are some dissenting views here!
“To paraphrase Mark Twain, the reports of the death of private practice medicine have
been greatly exaggerated,” said AMA President Ardis Dee Hoven, M.D. “This new
data shows that while there has been an increase in hospital employment, more than half of physicians (53.2 percent) were self-employed in 2012, and 60 percent worked in practices wholly owned by physicians.”
The American Medical AssociationSept 17, 2013http://www.ama-assn.org/ama/pub/news/news/2013/2013-09-17-new-study-physician-practice-arrangements.page
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Hospital Employed
Physician-Owned Practice (Non-Owner)
Physician-Owned Practice (Owner)
Solo Practice
Independent Contractor
35%
12%
23%
21%
9%
40%
15%
22%
15%
8%
Physicians by Practice Setting
2013 2012
http://www.jacksonhealthcare.com/media/191888/2013physiciantrends-void_ebk0513.pdf39
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22
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Three dominant consolidation strategies
are emerging
Build a hospital-centered health system
Build a multispecialty group that focuses on primary care delivery and takes on
significant risk
Build a specialty group that focuses on doing a few things really, really well
40
Hospital
The health care chess board…
Imaging Center
Orthopedics
Specialty Clinic
Lab
Pharmacy
Urgent Care
Special SurgeryRetail Clinic
Small Physician Group
HospitalSmall Physician
Group
Small Physician Group
Small Physician Group
At-risk health system
At-risk health system
1Build a hospital-centered health system
Specialty Clinic
Special SurgeryRetail Clinic
Small Physician Group
At-risk health system
Hospital
Imaging Center
Urgent Care
Pharmacy
Lab
HospitalSmall Physician
Group
Small Physician Group
Small Physician Group
Orthopedics
Special Surgery
Specialty Clinic
Retail Clinic
Small Physician Group
At-risk health system
Imaging Center
Urgent Care
Pharmacy
Small Physician Group
Small Physician Group
Build a multispecialty group that focuses on primary care delivery and takes on significant risk2
Lab
Orthopedics
Hospital
Hospital
Small Physician Group
At-risk health system
Build a specialty group that focuses on doing a few things really, really well3
Hospital
Small Physician Group
Small Physician Group
At-risk health system
At-risk health system
Small Physician Group
HospitalSmall Physician Group
Imaging Center
Orthopedics
Specialty Clinic
Lab
Pharmacy
Urgent Care
Specialty Clinic Retail Clinic
Other Macro Trends
Demographics (and expectations) are changing
Marie Meeker, “Internet Trends” presentation. http://allthingsd.com/20130529/mary-meekers-internet-trends-report-is-back-at-d11-slides/
46
High-tech customer engagement is becoming the new norm
47
In addition, technology is enabling new kinds of business integration across organizational boundaries
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coordination@amazon: “…to construct a product detail page, our software calls on between 200 and 300 services to
present a highly personalized experience for that customer.” - 2010 Letter to
Shareholders
Hospital
Small Physician Group
Small Physician Group
At-risk health system
At-risk health system
Small Physician Group
HospitalSmall Physician Group
Imaging Center
Orthopedics
Specialty Clinic
Lab
Pharmacy
Urgent Care
Special SurgeryRetail Clinic
And technology will enable new forms of coordination across
providers
The cat is out of the bag: employers and patients are beginning to shop for care and will have ever-higher expectations 1 Market pressure is forcing consolidation, but there are multiple strategies to align groups2Technology will enable healthcare enterprises to coordinate in new ways to deliver truly patient-centric care3
Key Takeaways
athenahealth is the largest cloud-based network of physicians
55,000 providers strong. …actively exchanging health information with each other.
with payers, labs, pharmacies, HIEs, etc.
6% Increase in Collections
8% Decrease in No Show Rate
97% EHR Adoption Rate
95.5% Meaningful Use Attestation Rate
32% Reduction in Days in Account
Receivable
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