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CAHL – Higher Education Network

Mission College

Healthcare IT and Industry Trends Discussion

August 2, 2012

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2

Agenda

I. Top Ten Trends in Healthcare

II. Value of Networking

III. Internships

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I. Top Ten Trends in HealthcareSummary

1. Improved Finances – While there will still be haves and have-nots, the financial health of hospitals and health systems will collectively stabilize.

2. Market Consolidation – The number of mergers and acquisition (M&A) transactions within the industry will continue to increase.

3. Focused Program Strategies – Hospitals will continue to focus on increasing the market share of those services with favorable margins in the current fee-for-service payment methodologies.

4. Cost-Conscious – Providers must continue to focus on reducing costs through operational improvement efforts.

5. Increasing Physician Employment – The number of physicians becoming employed by hospitals/health systems will continue to increase.

6. New Payment Formulas – Payors will begin to look at various models to address long-term solvency issues and/or short-term investor pressures.

7. Evolving Quality Definition – Quality improvement initiatives will transition from process measures to outcomes.

8. IT Optimization – Providers will begin to determine the best way to optimize their investments in IT systems to succeed in a value-based environment.

9. Innovative Care Models – Estimated physician shortages will require providers to begin implementing new patient care models.

10. Comparison Shopping – Consumerism will continue to force all market segments (providers and payors) to provide user-friendly information in a way that allows for effective comparison of cost and quality.

As healthcare reform continues to evolve, providers will have to balance operating in the current fee-for-service environment while preparing for a future value-based industry.

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II. Top Ten Trends in HealthcareImproved Finances

While there will still be haves and have-nots, the financial health of hospitals and health systems will collectively stabilize.

Dow Jones Industrial Average – 10-Year Chart

The positive outlook will allow providers more favorable interest rates for debt, both public and private, to fund capital

expenditures, such as acquisitions, IT systems, and facilities.

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II. Top Ten Trends in HealthcareMarket Consolidation

• Diversification – It may be more advantageous to acquire services and facilities rather than develop the service and/or facility from scratch.

• Sharing Cost Burdens – Smaller, less profitable hospitals are looking to create economies of scale with other hospitals in order to bear the burden of large expenses.

• Pending Payment Reform – Hospitals facing changes in payment structures resulting from healthcare reform are looking to position themselves favorably and develop negotiating leverage in a changing landscape dominated by consolidated national carriers.

“A report from Irving Levin Associates recorded 23 hospital deals in the first quarter of 2012, a 5% increase over the same period last year and a 10% increase over the fourth quarter. In total, hospital deals amount to $129

million in the first quarter of this year.” – Modern Healthcare, April 26, 2012

The number of M&As within the industry will continue to increase.

Source: “Hospital M&A Continued to Grow in Second Half of 2010,” Becker’s Hospital Review, Irving Levin Associates.

Hospital M&A Deals

Deals Value (in Billions)

Year

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II. Top Ten Trends in HealthcareFocused Program Strategies

Hospitals will continue to focus on increasing the market share of those services with favorable margins in the current fee-for-service payment methodologies.

Source: Total Hospital Industry Contribution Profit, 2007 (Inpatient and Outpatient), The Advisory Board Company, 2009.

Ranking Total Hospital Contribution Profit and Inpatient Revenue

1.9%

3.1%

4.1%

5.0%

6.4%

6.5%

16.3%

21.3%

24.3%

2.1%

3.8%

2.7%

11.4%

5.4%

1.4%

6.8%

16.9%

31.6%

Inpatient Revenue Contribution Margin

More progressive health systems will have market advantage to demonstrate quality and cost advantages with key services.

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II. Top Ten Trends in HealthcareCost-Conscious

Improve Operational Efficiency – “Unit Costs”

• Minimize overhead expenses and increase the efficiency of administrative services.

• Reduce the cost of operating units and services through supply and labor control.

• Outsource select functions as appropriate.

• Focus on using the integrated structure to simplify the healthcare experience for members and patients.

Improve Intra-Case Utilization – “Episodic Costs”

• Identify and eliminate waste or ineffective utilization within existing inpatient and outpatient cases.

• Direct care to lower-cost settings and/or use lower-cost providers.

Improve Utilization of Overall Care – “Cost Avoidance”

• Manage provider and facility capacity as reductions in utilization rates take effect.

• Align the incentives around creating value.

Providers must continue to focus on reducing costs through operational improvement efforts.

Executives at leading health systems report that they will need to find a way to cut operating costs by as much as 5% per year over the next few years to

survive the changes brought about by the passage of health reform.

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II. Top Ten Trends in HealthcareIncreasing Physician Employment

• Changing Landscape of Physician Practice – 80% of physicians surveyed reported that they believed health reform will erode the viability of the private practice model.1

• Physician Preference – Unlike previous generations of physicians, new physicians are unwilling to accept the risks of private practice.

• Reimbursement Cuts – Reimbursement cuts in key areas, such as imaging, ancillary testing, and drug administration, are resulting in declining incomes for physicians in independent practices (or longer work hours and stagnant incomes).

The number of physicians becoming employed by hospitals/health systems will continue to increase.

Physician Employment

Per

cen

tag

e o

f A

ctiv

e P

hys

icia

ns

Em

plo

yed

18%

22%

31%

40%

5%8%

15%

24%

Primary Care Specialists1 Survey of Physicians and Health Reform, The Physicians Foundation,

Merritt Hawkins, October 2010.

Primary care employment is designed to secure future success in a value-based payment environment, while specialty care employment is designed

to secure profitability in today’s era of declining reimbursement.

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II. Top Ten Trends in HealthcareNew Payment Formulas

Payors will begin to look at various models to address long-term solvency issues and/or short-term investor pressures.

Payor Burning Platform Solution

Medicare The Medicare Board of Trustees reports that Medicare’s Hospital Insurance Trust Fund is now projected to remain solvent until 2029 as a result of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010. Previous projections estimated insolvency in 2017. (Report issued on August 12, 2010.)

• Shared savings program (ACO).

• Center for Medicare and Medicaid Innovation.

Medicaid Eighteen states reported that Medicaid or other healthcare programs were over budget. Connecticut indicated that the Medicaid shortfall is projected at $185 million in FY 2011. Maryland reports a deficiency need of $239 million in its Medicaid program due to an increase in children’s enrollment and a decrease in federal stimulus funds. (National Conference of State Legislatures, State Budget Update: November 2010.)

• Managed care.

• ACO.

• Exit program.

Commercial Beginning in 2011, insurers in the individual and small group market must spend at least 80%, and insurers in the large group market at least 85%, of their premium revenues (excluding federal and state taxes and licensing and regulatory fees) on healthcare and quality improvement activities. (Patient Protection and Affordable Care Act, Section 2718.)

Full or partial provider risk agreements.

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II. Top Ten Trends in HealthcareEvolving Quality Definition

Process Measurement

• Success is measured by completing tasks for a specific illness or disease.

• Efficiency and thoroughness are measurements of success.

• Metrics are self-defined and personally monitored.

Quality Measurement

• Success is measured by achieving treatment goals and improving patients’ health, which could translate to cost savings.

• Metrics are defined by multiple organizations, including individual health plans, NCQA, and CMS.

• Outcomes are currently measured in financial savings, with quality improvement considered a possible driver of the savings.

Outcomes are currently driven by financial savings, but with an eye toward translating financial savings into improved health as a result of improved quality of care.

Quality improvement initiatives will transition from process measures to outcomes.

Process Measurement

Outcomes Measurement

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II. Top Ten Trends in HealthcareIT Optimization

34%

16%

29%

20%

Providers will begin to determine the best way to optimize their substantial investments in IT systems to succeed in a value-based environment.

Source: CompTIA, Second Annual Healthcare IT Insights and Opportunities Study.

Results are based on two separate online surveys conducted in July 2010 of 370 IT companies and 300 healthcare providers, including dentists, nurses, office managers, physicians, and physician assistants.

A report from Circle Square, Inc., mentioned that as of June 2012, 71% of physicians in California had an EMR, but only 30% met meaningful use capabilities.

How Far Along Are Healthcare Providers in Using an Electronic Health Record System?

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II. Top Ten Trends in HealthcareInnovative Care Models

Decline in Primary Care Physicians

• A shortage of 64,000 primary care physicians is projected in 2015.1

• Medical students entering family practice dropped 50% from 1997 to 2005.2

New Care Models

• Expanding prevalence and utilization of retail medicine clinics.

– From 2007 to 2009, the rate at which patients visited these clinics rose by almost 1000%.3

– MinuteClinic experienced a 22% growth, each year, in 2010 and 2011.

• Concierge medicine expanding beyond highest income segment.

– 16% of physicians plan to switch to concierge practice in the next 1 to 3 years.4

– Patients pay a yearly or monthly fee for more personalized access to physicians.

• Nurse practitioners and physician assistants (PAs) serving as primary care practitioners.

– Employment of PAs is expected to grow by 39% through 2018.5

As primary care availability continues to decrease, retail medicine and team-based models will be pursued as strategies to improve access.

Estimated physician shortages will require providers to begin implementing new patient care models.

1 Reuters News, “Doctor Shortage Looming? Use Nurses, Report Says,” October 5, 2010.2 St. Louis Post-Dispatch, “Is There a Doctor in the House?” February 7, 2010.3 Los Angeles Times, “Use of Retail Medical Clinics is Rising, Study Says.” November 22, 2011.4 Survey of Physicians and Health Reform, The Physicians Foundation, Merritt Hawkins, October 2010.5 Bureau of Labor Statistics.

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II. Top Ten Trends in HealthcareComparison Shopping

Organizations will need to develop innovative methods of delivering health-related information to their consumers.

Provider Market Payor Market

Searching Internet for diagnoses and treatment advice.

Health plan prices available online at Department of Health and Human Services Web site.

Researching hospital quality outcomes data.

Network physicians’ education and training, and quality ratings as available.

Consumerism will continue to force all market segments (providers and payors) to provide user-friendly information in a way that allows for effective comparison of costs and quality.

Source: Manhattan Research, “Cybercitizen Health” v7.0-v10.0.

2007 2009 20110

20

40

60

80

100

120

Number of Americans (in Millions) Consulting Social Media for Health Information

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II. Top Ten Trends in HealthcareImplications

• An argument can be made that IT figures prominently in seven of the key trends.

• Value-based reimbursement, a key tenet of the health reform efforts, will require information technology:

– Inform providers.

– Coordinate care activity.

– Improve operational efficiency.

• Health IT impacts consumers of care:

– Retail applications (e.g., ED wait time, available clinic appointments).

– Clinical transparency (e.g., quality metrics, patient feedback).

– System performance (e.g., outcomes, readmissions, conditions).

• Health Reform Implications on IT.

– CMS hospital reimbursement programs (e.g., value-based purchasing, readmission rates).

– Transparency and efficiency of health exchanges.

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II. Value of NetworkingWhat is Networking?

Networking is not about:

• Schmoozing.

• Rapid-fire business card exchanges.

• Insincere glad-handing.

• Reeling in favors.

• Meeting as many people as possible.

• Manipulating people to get them to work with you.

Networking is about:

• Building relationships before you need them.

• Communicating openly and honestly about how you can help others and how they can help you.

• Sustaining relationships with people of similar minds and similar business interests.

Relationships are the key to networking.

Develop relationships by finding common ground with everyone you meet and avoiding writing people off as “not your kind of person.”

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II. Value of NetworkingExercise: Identify Opportunities

Opportunities

• Where do you see opportunities for building your network?

• What are 2-3 conferences/meetings that you plan to attend in the next year.

Considerations

• Grab a volunteer opportunity to meet people regionally.

• Attend local meetings when possible.

• Student chapter outreach (e.g., ACHE/CAHL).

• Graduate school recruitment “meet the firm”.

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II. Value of NetworkingNetwork Management

Developing the Network

Establishing the Network

• Former employers/coworkers.

• Alumni networks.

• Friends in related fields.

• Professional associations (ask before joining).

• Attend local meetings.

Managing the Network

• “Touches”

• Calls – “I’m working on X and would like to get your opinion on…”

• Taking advantage of mentorship opportunities.

• Social Media – LinkedIn, Blogs, Facebook, Twitter.

• Setup meetings.

• Establish realistic goals.

• Stick to a plan.

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II. Value of NetworkingCreating Relationships

• How do you break the ice?

– Introduce yourself and where you are from (e.g., XYZ University Healthcare IT Program).

– Remember names.

– Redirect responses and questions to others in the group.

• How do you meet people?

– Geography, where are they from.

– System affiliation, who are they with.

– Function, what department do they work in.

• What are the topics that you can bring up?

– News of the day.

– Topics trending in healthcare.

– Regional issues (e.g., recent phenomenon, sports).

– Ask open ended questions (e.g., what are your thoughts on…, how is your system responding to…, what barriers are you facing on…).

Creating connections in a hostile environment can be challenging. They take time and are not build immediately.

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II. Value of NetworkingTrade Organizations - CAHL

CAHL and other organizations like it can serve as the following: 

• A great venue for early careerists to build and develop networks by exposing them to others in the industry and creating forums for discussion.

• Provides specific events focused for the HEN such as the

– College Bowl in the Spring 2013.

– Career shadow day in Winter.

• Educational opportunities (e.g., conferences, seminars) at discounted rates.

Trade organizations offer an easy and inviting way to quickly expand your network and avenues into internships and future jobs.

To become a HEN program, just need the program director to sign up the program and they can enjoy the accesses to all the events.

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III. Internship Opportunities

Resources

• Consulting firms.

• Non-profit organizations (e.g., California Health Care Foundation, Cal HIPSO).

• Large systems.

• Health Care Careers - HIT Fellowship Program

– HCC provides paid, full-time Health Information Technology (HIT) Fellowships in California for recent graduates and individuals interested in pursuing hands on experience and careers in Health IT.  

– In partnership with the CA Health Workforce Alliance, HIMSS Southern California and leading employers and associations, 3 and 6 month HCC HIT Fellowships connect talented candidates to employers building their HIT workforce.

– http://www.healthcareers.org/program-overview/hit-fellowship

– http://www.healthcareers.org/program-overview/hit-fellowship/hit-process-and-timeline

There are opportunities all around, but they require diligence to identify them and seek them out.

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For additional information on our firm, visit our Web site at www.ecgmc.com.

Contact Information

Mr. Jason C. LeeSenior Manager

ECG Management Consultantsjlee@ecgmc.com

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