The Health System of the Future: A Model

April 10, 2018

Beckers Hospital Conference

Objectives

10100.015\450103(pptx)-E1 DD 4-10-18

» Understand the drivers of competition in the health system of the future.

» Define potential strategies for addressing these drivers.

What Is the Health System of the Future?

20100.015\450103(pptx)-E1 DD 4-10-18

Assumptions/Preconditions

» Exists in a competitive environment

» Is significantly at risk for total cost of care for a defined population

» Handles entire continuum of care, whether through ownership, management, or partnership

Key Implications

» Hospitals become cost centers, not revenue centers.

» The optimal PCP network is critical to capture “covered lives” for prospective payment; specialists are valuable only if cost-effective.

» Appropriately optimizing technology to drive cost-effectiveness and patient engagement is essential.

Competitive Drivers

» Patient centricity

» Value transparency

Care Will Shift to the Most Cost-Effective

Environments across a Broader Continuum

Form Follows Finance

30100.015\450103(pptx)-E1 DD 4-10-18

Home25%

Digital50%

Ambulatory20%

Acute5%

Care EnvironmentHome

2%

Digital3%

Ambulatory80%

Acute15%

Care Environment

34%of respondentsself-referred

42%of respondents followed a physician referral

Access and Convenience

Rank 1-4

Provider Continuity

Rank 5

Provider Credentials

Rank 8

Patient Centricity and “Consumerism”

Cost and Convenience Will Drive Competitive Success

40100.015\450103(pptx)-E1 DD 4-10-18

Source: The Advisory Board, 2015. https://www.advisory.com/media/Advisorycom/Research/MPLC/Resources/2015/30502_MPLC_Consumer_Survery_IG_web.pdf.

0

500

1,000

1,500

2,000

2007 2014

Consumers prioritize convenience over continuity and credentials.

Respondents preferred email visits over a visit to a clinic near errands or work.

Respondents demonstrated a likelihood of using newer sites of care for an illness like the flu.

“Short distance” is the most frequently cited reason for choosing a specialist.

Consumers self-refer to specialty care, and the trend is growing.

Between 2007 and 2014, the number of retail clinics increased from approximately 300 to 1,800.

Rank of Clinic Attributes Preference for Service Location

NearWork

NearErrands

Email

Visits

NearHome

Least Preferred Most Preferred

56%of consumers would consider using retail clinics

42%of consumers would consider using email visits

Percentage of Consumers

Citing Distance as Factor

42%of consumers said distance was in their top three reasons for choosing a specialist

11%of consumers said distance was their number one reason for choosing a specialist

but only…

Source of Specialist Visit

Value Transparency

Value transparency is the need to be able to define and express the cost of services predictably.

50100.015\450103(pptx)-E1 DD 4-10-18

18.6% patients would switch their PCP if it would mean saving $500 to $1,000.1

St. George Surgical Center saw 5% to 10% growth in cash-paying patients after six months of posting prices.2

Of those who have compared prices across multiple providers, 82% will do so again.3

External Pressures

» Reference pricing

» High-deductible health plans

Internal Pressures

» Bundled pricing

Drivers Impacts

1 https://www.healthpocket.com/healthcare-research/surveys/more-than-half-not-wed-to-doctor#.WYH_vIWcF9M.2 https://www.ahcmedia.com/articles/135442-price-transparency-is-growing-but-hear-lessons-from-frontrunners-first.3 “How Much Will it Cost? How Americans Use Prices in Health Care.” Public Agenda. https://www.publicagenda.org/media/how-much-will-it-cost-topline-methodology.

What is Patient Centricity?

It’s NOT “Patient Experience”

60100.015\450103(pptx)-E1 DD 4-10-18

Comprehensiveness

Coordination

Environments

Service

Patient

Technology

» 24/7 convenience» “Valued customer” attitude» Tailored education» Anticipated needs

» Appropriate self-service› Centralized scheduling› Pricing visibility› Messaging

Service

» Fewest steps for patient» Bring services to the patient» Healing household milieu

» In your neighborhood (retail, UCC)

» In your home (extensivism)

Environments

» Meaningful apps» Home monitoring devices» Telehealth support

» E-visits» Risk identification

Technology

» Personal physician (PCP)» Care navigator» Connected specialists

» A team that coordinates care across all services

Coordination

» Wellness to hospice » Connected by IT

Comprehensiveness

Innovation in Care DeliveryToday: Emphasis on Access

70100.015\450103(pptx)-E1 DD 4-10-18

Implication: Customer preferences for low-touch care are evolving, but traditional providers are at risk of losing profitable low-acuity cases.

Call Centers: These centers offer around-the-clock access to nurse advice, triaging of clinical conditions, and appointment scheduling.

Retail Medicine: Urgent care and drugstore-based mini-clinicsare the sites of choice for many patients who appreciateconvenience.

Video Visits and E-Visits: These visits are on therise as preferred service modalities for technology-friendly patients. Reimbursement is becoming less of a barrier.

What’s Next: This area is evolving rapidly.

Patients are demanding more convenient access to healthcare services that mirrors

the 24/7 expectations of other consumer services.

Innovation in Care DeliveryTechnology Investment

80100.015\450103(pptx)-E1 DD 4-10-18

Platforms create actionable patient data to aid in the treatment or prevention of diseases

outside of the traditional care setting, drastically reducing costs in the process.

Potential Cost-Saving Opportunity

Investment advisers are increasingly focused on research related to market size opportunities in technological approaches to wellness and healthcare.

Increasing Venture Capital (VC) Funds Flow

» 2017 is on pace for a record year of funding after a high of $3.8 billion in invested capital for Q2 2017.

» Average deal size has recently almost doubled, rising to $21.3 million in 2017 from $12.2 million in 2014.

Vertical Disease State

Total Savings

Opportunity

RemotePatient Monitoring

Heart disease, COPD/asthma, diabetes

More than$200 billion

Telehealth Routine and psychological care

More than $100 billion

Behavior Modification

Obesity, smoking cessation, overall lifestyle improvement

Indefinitely large

Source: Goldman Sachs Global Investment Research.

Source: StartUp Health Insights, 2017 Mid-Year Funding Report.

Baby Boomers Are Peaking

90100.015\450103(pptx)-E1 DD 4-10-18

70 60 50 40 30 20100 90 80

Today’s Systems Must Transform across Seven

Key Dimensions over the Next 10–15 Years

100100.015\450103(pptx)-E1 DD 4-10-18

Value Transparency

Patient Centricity

Dis

trib

ute

d F

ac

ilit

ies

& S

erv

ice

s

Ris

k-B

as

ed

Fin

an

cia

l M

od

el

Po

pu

lati

on

-Ba

se

d C

are

Mo

de

l

Pro

vid

er

Ne

two

rk

Inte

rop

era

ble

Te

ch

no

log

y

Ne

w G

ove

rna

nc

e &

Org

Mo

de

l

Risk-Based Payment Models

Health System

of the FutureThis is what needs to be enabled to compete and succeed.

This is the environment to which we need to respond.

These are the elements that need to be transformed.

Wo

rkfo

rce

Defined Populations

Increased Scope Is Needed to Be Successful in

More Value-Based Models

» Management of costs across the continuum is needed.

» Lower-cost environments will need to be included through gainsharing or ownership.

» Fixed costs need to decrease.

» Cost accounting analytics are essential to measuring performance.

110100.015\450103(pptx)-E1 DD 4-10-18

Employed Physicians

Hospitals

PrivatePhysicians

Diagnostics

Home Care Services

Community Services

Post–Acute Rehab

Pharmacy

Retail and Urgent Care

Ambulatory Centers

Population-Level Risk

There is no “opting out” of the

Value game, as payors shift more

volume to providers offering

better value (cost/quality)

Innovation In Care DeliveryIn-Home Hospitalization

» While prevalent in many other developed countries, providing in-home acute healthcare services is still developing in the United States.

› In Victoria, Australia, 6% of all hospital bed days are provided through in-home hospitalization programs.

» Leading healthcare systems are operating in-home

hospitalization programs with equivalent outcomes and fewer

complications when compared to receiving traditional hospital care.

› Johns Hopkins Medicine’s in-home hospitalization program continues to operate (started 1994), and its delivery model serves as a benchmark to other healthcare systems.

› Johns Hopkins developed its in-home hospitalization program to provide care to elderly patients who were at heightened risk of hospital-acquired conditions.

› Results highlights from Johns Hopkins include lower cost of care (32%) and dramatically lower instances of delirium (9% at home versus 24% in the hospital).

120100.015\450103(pptx)-E1 DD 4-10-18

In-home hospitalization programs offer patients the convenience of receiving care

in the comfort of their own home, while concurrently reducing complications and

the cost of care by over 30%. 1

Innovation In Care DeliveryVirtual Urgent Care

130100.015\450103(pptx)-E1 DD 4-10-18

Virtual technology is now capable of providing on-demand healthcare remotely.

Concierge medical services, such as One Medical, are using this technology to

redefine how high-quality care can be delivered anytime, anywhere.

» Through their mobile devices, patients have access

to most of the care they can receive when visiting a

brick-and-mortar urgent care center.

› Book appointments, renew prescriptions, and access health records.

» The most innovative piece of the mobile urgent care platform is capability to communicate live with

healthcare providers via videoconference.

» Physical storefronts supplement the mobile application to provide the care scheduled and/or evaluated through video chat.

› Multiple points of access mean increased convenience for patients and a larger footprint for affiliated healthcare systems.

Innovation In Care DeliveryMobile Urgent Care and Home Diagnostics

140100.015\450103(pptx)-E1 DD 4-10-18

Mobile technology is now capable of bringing specific clinical professionals to the

home for urgent care, x-ray imaging, physical therapy, etc. DispatchHealth is using

this technology to redefine how high-quality care can be delivered anytime,

anywhere.

Nurse Advice Line

Empower staff to offer on-demand medical care in the comfort of an individual’s home.

Senior Communities

Direct contracting with independent living and assisted living communities to reengineer processes for acute care medicine.

Hospice and Palliative Care

Treat acute exacerbations of underlying illnesses in the home and thereby allow patients to live out their remaining days with comfort and dignity.

Home Health

Aid in delivering simple to complex medical care as an adjunct to provider services.

Skilled Nursing Facilities

Aid in preventing readmission penalties by providing improved access to acutely ill patients.

911 System

Interrupt unnecessary transports to the emergency room through direct integration into the triage process and definitive on-scene treatment.

PCPs/Specialty Groups

Extend the reach of care through an integrated approach.

Growth MarketKey Delivery Environments

150100.015\450103(pptx)-E1 DD 4-10-18

Digital Care Home Care Community Care Center

Milieu Home/Work Home Neighborhood

Populations» Episodic concerns and

illnesses

» Chronic illness management

» Uncomplicated, short term, acute

» Long term, high intensity, chronic 65+

» Chronic 65+

» Adult day care

Providers » PCPs and SPCs

» RN/RNP triage

» Peer communities

» Care managers and navigators

» Extensivist MD, RN, RT, PT

» RNPs, Aides, PharmD

» PCP/RNP

» Nutritionist

» PT/OT

» Health coach/navigator

» Activities coordinator

Population 60% (150,000) 4% (10,000) 20% (50,000)

Services » Social media

» Provider messaging

» Scheduling

» Patient education

» Prompted reminders

» Health record

» Infusion

» Imaging

» Biometrics

» Lab

» Specialty tele-consult

» Open access scheduling

» Imaging

» OT

» Day care services

» Lab

» Specialty tele-consult

Design

Considerations

» Mobility and ease of use

» Privacy

» Integration and breadth

» Self-service

Safety » Access/community convenience

» Multiuse spaces

What to Think About Now

Challenging Facts Current Strategy Needed Strategy

» Baby boomer demographics are about to peak.

» Markets will be 50% overbuilt in 10 years.

Keep building 40-year plants. » Build flexible, lower-cost environments.

» Focus in the community.

» Competitors are getting larger.

» VC funding is involved.

» Continue “shrink to profitability” strategy.

» Focus on service lines.

Focus on patient centricity and value.

» Care outside hospital will grow dramatically.

» Playing field will not be level.

Dabble where the current revenue models permit.

» Move care to the home and community.

» Figure out digital.

» Get paid to do it now.

» Approach commercial payors on total-cost basis.

» Get cost structures down.

» Be nimble with regard to change management.

Payors are hesitant to disrupt what is profitable for them.

» Take what you can get for now.

» Wait for market to change.

Risk for costs will shift almost entirely to the providers.

Continue to shift to commercial payors.

160100.015\450103(pptx)-E1 DD 4-10-18