dave entwistle

Davis County Chamberof Commerce

David Entwistle

Chief Executive OfficerUniversity of Utah Hospitals & Clinics

April, 2013

Health reform as a topic

1. I saw this topic and was so excited.

2. I feel I have marginal knowledge and want to learn more.

3. What was the planning committee thinking when they picked this topic?

4. I wonder if they can tell if I am asleep if I put on my sunglasses.

Agenda

1. U.S. Spend Comparisons

2. National Perspective

3. Health Reform Outlined

4. How Hospitals Responding

5. Employer Strategies

Healthcare Spending per Capita, 2008

Adjusted for Differences in Cost of Living

4

* 2007.Source: OECD Health Data 2010 (Oct. 2010)

Hospital Spending per Discharge, 2008

Adjusted for Differences in Cost of Living

5

* 2007.** 2006.Source: OECD Health Data 2010 (Oct. 2010)

2009 U.S. Healthcare Expenditures per Capita Significantly Greater Than Other OECD Countries for Similar Life Expectancy

Note: Canada average life expectancy for 2007. Italy life expectancy for 2008. Australia, Japan, Portugal, and Turkey healthcare spending for 2008. Greece healthcare spending for 2007. Source: OECD updated November 2011.

70

75

80

85

$0 $2,000 $4,000 $6,000 $8,000

Ave

rage

Lif

e E

xpec

tan

cy

Healthcare Spending per Capita

Turkey

Japan

CanadaFrance

U.S.

GermanyU.K.

Spain

7

U.S. is spending much more for older ages

Healthcare Costs by Age

Costs by Age Categories

Source: Fischbeck, Paul. “US-Europe Comparisons of Health Risk for Specific Gender-Age Groups.” Carnegie Mellon University; September, 2009.

Happy New Year!

“The aging population and the rising cost of health care makes Medicare the biggest contributor to our deficit...We’ve got to find ways to reform that program without hurting seniors who count on it to survive.”

President Barack Obama, January 1, 2013

News conference after Fiscal Cliff Tax Deal passes

At the Inauguration

“We must make the hard choices to reduce the cost of health care and the size of our deficit, But we reject the belief that America must choose between caring for the generation that built this country and investing in the generation that will build its future.”

President Barack Obama, January 21, 2013

Inaugural Address

Sequestration Impact on Key Budget Areas

Source: cbo.gov

-10.0%

-7.8%

-2.0%

0.0%

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

Medicaid Medicare Other Defense

7.10%

8.50%

9.50%

8.40%

7.10%6.80%

6.60%

6.20%

4.70%

3.80% 3.90% 3.91%3.80%

2.83%

1.59%

2.27%

2.68%

3.39% 3.24%2.85%

3.85%

0.34%

1.64%

2.10%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Healthcare Inflation Continues to Outpace National Inflation

Total National Health Expenditures US Inflation Rate

Source: Bureau of Labor Statistics and CMS

The Problem: Current Growth Rate

So What is Reform really about?

2013

Time

$/N

Healthier PopulationLower UseLower PricesHigher Quality

Source: Len Nichols, George Mason University

Health Reform Law: Two Big Themes

• Payer Reform- More people will be covered by insurance but at a lower reimbursement rates for hospitals & providers.

• Delivery Reform- Shift from “Pay for Procedures” to “Pay for Outcomes.”

15

The Market is Changing…

• Focus on delivering greater value.

– Improved clinical outcomes

– Increased patient satisfaction

– Lower cost

• Payment systems and methodologies are changing… rewarding those who deliver value.

• Initial projections indicate we will be paid on average at Medicare Rates.

• Academic Medical Centers funding to support academic mission will be diminished.

Accountable Care Organizations (ACO)

• Goal: maintain or improve quality of care while reducing overall health care costs.

• ACO Model

– Care for a defined population of patients

– Focus on keeping individuals well

– Eliminate unnecesary, test, care, etc

17

So why Have ACOs been such a hot topic in Reform?

• Dartmouth Atlas showed that costs and quality could be attributed fairly accurately to the “community practice” defined by hospital service areas, and that performance varies widely from one hospital community to another

• So...if cost and quality can be attributed to hospitals and their “extended medical staffs” perhaps they could be held accountable

• And...if they could be held accountable, they could share in the savings from their lower costs, and risk if costs could not be reduced.

ACOs: Some early lessons and questions

– Intense focus on cost and cost reduction

– Physicians move to laser-like focus on “My Results vs. Peers”

– A huge interest in and need for data

– Physicians have been willing to make difficult decisions that had been avoided in the past

– Costs decrease from:

• Reduced ED use; Reduced admissions: Reduced discretionary diagnostics

Forget the 80-20 Rule. It’s the 5-50 Role that will get you in Population Health Management

ACOs routinely report that 5 percent of their populations account for 50 percent of their claims costs. These 5 percent are patients with one or more chronic illnesses. The need is to focus on the 5 percent, and then on the “Pre-5 percent”, or the next 5 percent.

23%

49%

64%

74%80%

97%

3%

Top 1% Top 5% Top 10% Top 15% Top 20% Top 50% Bottom 50%

Concentration of Health Spending in the U.S., 2004

Population Percentile Ranked by Health Care Spending

Variability of Quality and Cost

22

Avg. CostALOS

Individual Physicians

Avg: $14,962

Cost and LOS Variation by Surgeon, Major Joint Replacement (MS-DRG 470)

Source: Internal data from client in southeast United States

Reliable care costs less (Premier)

Data reveal that lower hospital costs are associated with patients receiving better patient care

$10,298

$9,158

$8,412

Hospital Costs for Pneumonia Patients

Ave

rage

Ho

spit

al C

ost

s

Degree of Patient Process Measurement and Improvements

Low High

How Hospitals Responding

Financial Model is Changing

– Health industry growing beyond sustainability…

– We must focus on cost reduction

– Key to success is a systematic approach, data-driven process & communication

– Must focus care processes that limit variation

25

Promote & Reward Accountability

• Accelerate payment and delivery system reforms

• Eliminate preventable infection and complications

• Engage individuals in their health and health care

• Better manage advanced illness

• Advance the use of health information technology and electronic health records

• Promote transparency of quality and pricing information

“Ensuring a Healthier Tomorrow”, American Hospital Association

Use limited health care dollars wisely

• Eliminate non-value added treatments

• Revamp care for vulnerable populations

• Promote population health

• Modernize federal health programs

• Simplify administrative and regulatory processes

• Reform the medical liability system

“Ensuring a Healthier Tomorrow”, American Hospital Association

Top 5 Things Hospitals Doing to Respond

1. Align high-quality physicians

– ACOs require physician partnership.

– Hospitals must align physicians & engage them to create lower-cost, higher-quality outcomes.

– Implement strategies to strengthen physician relationships.

28

2. Focus beyond the hospital

– The hospital itself is no longer the center of the health care model.

– Organizations need to assess the continuum of care.

29

Top 5 Things Hospitals Doing to Respond

3. Create information transparency

– Build IT infrastructure; create common IT across the care continuum.

– Pricing (Time, Bitter Pill)

– The success of the population management model depends on information transparency across multiple organizations.

30

Top 5 Things Hospitals Doing to Respond

Top 5 Things Hospitals Can Do To Respond (continued)

4. Think value, not volume

– Move the organization’s direction from growing inpatient volumes to delivering the most effective care.

– Monitor costs, not margin

5. Create a shared community vision

– Bring providers together – requires a common vision between the community and providers of care.

31

32

Different strategies for different healthcare spend segments

Source: Wellspan Health

Employers Getting Aggressive on Cost and Quality

School System in Southern California; 55 School Districts

$500 Million in Healthcare Claims

Top 10% of Users Account for 60-70% of claims. Sent these records to Best Doctors for 2nd Opinion:

15% had Wrong Diagnosis

60% of Treatments were NOT state-of-the-art

WHAT TO DO???

Incentivize Employees to Go to Best Providers!

Out of Network NO Reimbursement

Incentivize Employees to Go to Best Providers!

16% Premium Contribution$1,000 DeductibleHigher Co-Pay

Incentivize Employees to Go to Best Providers!

8% Premium ContributionSmall DeductibleCo-Pay

Incentivize Employees to Go to Best Providers!

NO Premium IncreaseNO DeductibleNO Co-Pay

Incentivize Employees to Go to Best Providers!

NO Premium IncreaseNO DeductibleNO Co-Pay

8% Premium ContributionSmall DeductibleCo-Pay

16% Premium Contribution$1,000 DeductibleHigher Co-Pay

Out of Network NO Reimbursement

Incentivize Employees to Go to Best Providers!

Results?

By adjusting Premium Contributions, Co-Payments, and Deductibles 87% of Covered Population now go to the Low Cost & High Quality Quadrant of Providers

Preliminary Savings to the TPA and VEBA (Voluntary Employee Benefit Association) are in the Multiple Millions of Dollars

One Year of Services Visit Count

Ambulatory Visits 12

Hospital Admits – Medical & Mental 8

Hospital Outpatient – Radiology, GI 16

Emergency Room Visits 59

Total 95

Case Study – Individual Intervention

Care Management Interventions

• Care Manager contacted patient

• Primary Care Physician identified

• Team meeting with physician, Care Manager, and patient to develop a Care Plan

• Care Manager contacts patient weekly

• Patient utilizing various day treatment and wellness programs

• No Emergency Room visits since Care Manager made contact 2 months ago

Summary

• Tremendous Challenges Ahead

• Momentum for change in Provider Industry Growing

• Costs Leveling Off

• Risks and incentives are shifting

• Must be new innovative solutions

• We must take accountability for own health in proactive ways

Questions?