Where Is Healthcare Going? And How Will We Get There?

Exclusive to Healthcare. Dedicated to People. SM
WHERE IS HEALTHCARE GOING?
AND HOW WILL WE GET THERE?
Iowa Hospital Association Annual Meeting
October 7, 2014
Copyright 2013, INTEGRATED Healthcare Strategies. All rights reserved.
Des Moines
Presented by:
William F. Jessee, M.D., FACMPE, Chief Medical Officer & Senior Advisor
INTEGRATED Healthcare Strategies

INTEGRATED Healthcare Strategies:
Who We Are
We provide a range of interconnected solutions–compensation, employee &
physician engagement, labor, governance, physician services, and executive
placement–that together help you align people, pay, and performance throughout
your organization.
ENGAGEMENT & PATIENT
SATISFACTION SURVEYS
Quantify and improve engagement
to drive business performance
1
PHYSICIAN SERVICES
Maximize performance and
physician affiliations
TOTAL COMPENSATION & REWARDS
Enhance your organization’s success
with complete compensation solutions
GOVERNANCE & LEADERSHIP
Gain confidence with the complexities of
healthcare governance
HR CONSULTING
Enhance the power of the people-side
of your business
MSA EXECUTIVE SEARCH
Connect with the firm that specializes in
healthcare leadership placement
MERGER & ACQUISITION ADVISORY
Maximize your operational and
financial performance
ONE Source,
YOUR Solutions

INTEGRATED Healthcare Strategies:
Who We Are
2

WHAT ARE THE FORCES
SHAPING HEALTHCARE TODAY?
3

Five Trends that Are Driving
Change
1. Rising costs
2. Spotty quality
3. Waste
4. Changing patient and physician
demographics
5. Economic pressures on physician practices
4

1. Rising Costs
5

Consistently higher than GDP growth
6

While rate of rise has slowed, it is still
going up
•Real spending for healthcare increased by only 0.8% per
person in 2012, just below the real gross domestic product
•Healthcare prices in October 2013 rose 0.9% above
October of 2012—the lowest reading in the 50+ years for
which data are available
•For six consecutive months, healthcare prices have grown
more slowly than economy-wide prices
•Medicare spending per beneficiary grew at a rate of 1.7%
annually from 2010 to 2012—down considerably from
previous experience
Exclusive to Healthcare. Dedicated to People. SM 7

We Get Less Than We Pay For…
8

2. Spotty Quality
Some care is superb
• Leader in technology and innovation
• Leader in delivery innovations, such as
ambulatory surgery centers, disease management
programs, ESRD care
• Top tier places for care of serious illness---like
Mayo, Cleveland, Hopkins, Partners, etc.
• Shorter waiting times for specialist or surgery
than any OECD country except Germany
• Transplantation services best in the world
9

2. Spotty Quality (cont.)
Some care is far below expectations…
• Around 47 million with no insurance in 2012...
• ...but rate dropped from 18% to 13.4% between
September, 2013, and April, 2014
• Significant racial / ethnic / socio-economic
disparities
• Hospital readmissions
• Hospital-acquired infections
• Never events
• High rates of treatment-related injury
• Hospitalizations from inadequate ambulatory
management
10

3. Waste
Institute of Medicine estimates 30% of total cost is
waste
Unnecessary services ($210B)
Excessive administrative costs ($190B)
US Admin cost = 30%; Taiwan = 2%
Inefficiently delivered services ($130B)
Excessive prices ($105B)
Fraud ($75B)
Missed prevention opportunities ($55)
http://resources.iom.edu/widgets/vsrt/healthcare-waste.
html
11

4. Changing Demographics
Patients
–Living longer (a double-edged sword)
–More active lifestyles (some)
–The obesity epidemic
–More chronic disease associated with aging
–The Baby Boomer surge
12

4. Changing Demographics
(cont.)
Physicians
– Currently 40% women; by 2020, a majority
– Gen X and Gen Y values
– Large number of (male, Baby Boomer)
physicians approaching retirement
– Almost 40% of physician work force is 55 or
older
–Younger physicians are employees, rather than
owners
– Primary care / specialist imbalance
13

5. Economic Pressures
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
-10.0%
-20.0%
Cumulative Percent Change Since 2001 for the Medicare Conversion Factor,
Not Hospital/IDS-Owned Multispecialty Group Operating Cost, and the Consumer Price Index
* 2010, 2011, and 2012 median operating cost values are three year moving average projections of previous years'data.
* 2010, 2011, and 2012 CPI figures are the July 2010 semiannual figure.
* 2011 MCF figure illustrates the estimated net impact of the 12/2010 legislation.
14
-5.4% -3.8% -2.4%
-0.9% -0.9% -0.9% -0.4%
0.6% 2.9% 2.9%
-25.4%
0.0% 1.6%
3.9%
6.7%
10.3%
13.8%
17.1%
21.6% 21.1%
23.1% 23.1% 23.1%
13.8%
16.6%
20.6%
30.0%
34.0%
44.5%
50.2%
53.1%
49.3% 50.9% 51.1%
-30.0%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010* 2011* 2012*
Medicare Conversion Factor CPI Total Operating Cost per FTE Physician
Projected

HOW IS THE DELIVERY
SYSTEM CHANGING IN
RESPONSE TO THE
ENVIRONMENT?
15

How the System is Changing
1. Decentralization of care delivery
2. Physician / hospital consolidation
3. Blurring of lines between providers and insurers
4. Declining payment rates
5. Demands for value and accountability
16

1. Decentralization
“Big Box” hospitals vs purpose-built facilities
Ambulatory surgery centers
Endoscopy centers
Imaging centers
Dialysis centers
Specialty hospitals
Large medical office buildings vs small practices
Patient convenience / experience
Supply chain challenges
17

2. Consolidation
Insurers consolidating
Physician practices getting larger
Hospitals acquiring physician practices
“Consolidation” easy---”integration” a
challenge
18

3. Blurring Lines
Insurers acquiring practices, hospitals (Highmark,
Cigna for example)
Provider organizations starting health plans,
assuming other forms of risk
Employers becoming more aggressive (Walmart,
Boeing, Disney, Lowe’s for example)
Insurer / provider JVs---esp. for ACOs
19

4. Declining Payments
Physician payment rates have been essentially
flat for 10 years
Increased volume as a response
Likely across the board cuts coming
Hospitals, health plans already seeing cuts
Physicians, pharma likely
Moving away from payment based on volume---
but 90% of physician payments are still FFS
20

5. Value and Accountability
All providers are being held ACCOUNTABLE for
the Patient Experience:
Safety
Quality
Cost-effectiveness
Patient satisfaction
21

Value and Accountability
Payment mechanisms drive changes in the
delivery system (“follow the money”)
Both insurers and provider groups are driving
change in the private sector
Highmark “Quality Blue” program
Massachusetts Blue Cross “Alternative Quality
Contract”
Advocate Health Care / Blue Cross of Illinois ACO
Norton Healthcare / Humana ACO
Integrated Healthcare Association (CA)
22

WHAT DOES ALL THIS MEAN
FOR HOSPITALS AND
PHYSICIANS?
23

“Disruptive Innovations”
•Greater transparency: http://www.surgerycenterok.com/
•Patient friendly: http://visitingphysicians.com/house-call-
physicians/
•Tech savvy: http://www.americanwell.com/
•Mainstreaming: http://www.hmsa.com/wellness-programs/
online-care/
• Big dogs win:
https://www.youtube.com/watch?v=tHvExOg4NI0
24

Likely Impacts of Changes
1. Payment rates are likely to decline
2. Free-standing physician practices will find
survival a challenge
3. High cost, chronic conditions* will be a major
target for cost reductions
4. Physician-led, team-based care will be critical
5. At least part of hospital and physician payments
will be at risk, driven by metrics of safety, quality,
cost-efficiency, patient satisfaction
6. Chronic disease management expertise in high
demand
7. Extensive use of HIT essential
25

Accountable Care ORGANIZATION
Vs.
ACCOUNTABLE CARE Organization
Exclusive to Healthcare. Dedicated to People. SM 26

The Bottom Line
•Healthcare today DEMANDS measurable
performance (on measures of safety, quality, efficiency
and patient satisfaction)
•Performance REQUIRES alignment, engagement and
integration of the work force—and a CULTURE
committed to performance
•The work force INCLUDES physicians, nurses, other
clinicians, management, support staff, volunteers, and
board members
27

Some Suggestions for Thriving
•Focus on creating a culture of accountability
•Enhance relationships and communication among
PCPs, specialists, hospitalists, nursing staff, and post-acute
providers
•Become adept with HIT---not just EHRs, but
telemedicine, home monitoring, patient education,
etc.
•Discuss possible partnerships with payers and
employers
•Align executive, physician and staff pay with
performance metrics
•Participate in value-based payment experiments
28

Final Points
29
1 The status quo is unsustainable
2 Change is happening---and healthcare organizations
and professionals must lead the process---not be
swept aside by it
3 Leadership is essential
4 “Skate to where the puck is going to be…”
5 “You miss 100% of the shots you don’t take.”

Contact Information
www.INTEGRATEDHealthcareStrategies.com
30
William F. Jessee, MD, FACMPE
Bill.Jessee@IHStrategies.com
612-339-0919
BOSTON | DALLAS │ KANSAS CITY │ MINNEAPOLIS

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