Health System Successin the

Post-Election Environment

South Texas Annual Joint Healthcare ConferenceJanuary 25, 2013

Change

Our Changing Communities

• Chronic conditions:o 80% of workers have oneo 55% of workers have more than oneo 50% of Medicare recipients have 3+

• People over 65:o 44% of hospital careo 38% of EMS responseso 35% of prescription drugso 26% of physician office visitso 90% of nursing home beds

Demand is Increasing

Obesity:• Adults

o 34% obeseo 34% overweight

• Childreno 17% obeseo 15% overweight

Mental Health:• Lifetime

o Nearly half will develop mental illnesso 27% will have substance abuse problems

• Each yearo 25% have mental illness or substance abuse

Demand is Increasing

• Medicare comprises 43% of hospital revenue

• Medicaid represents 11% of hospital revenue

• Healthcare costs continue to grow at a faster rate than wages

“ Up to one-third of the over $2 trillion that we now spend annually on healthcare is squandered on unnecessary hospitalizations; unneeded and often redundant tests; unproven treatments; overpriced, cutting-edge drugs; devices no better than the less expensive products they replaced; and end-of-life care that brings comfort nor cure.”

– Dr. Jack Wennberg

Healthcare Cost Escalation is Unsustainable

How Large is 1,000,000,000,000?

• A million million or a thousand billion

• A trillion seconds equal 31,688 years

• One trillion dollar bills placed end to end would circle the sun and back to Earth with many miles left over

• A trillion dollars would cover the cost of an additional 11 weeks of vacation for every American worker

• Private payor pressure

• Uninsured and underinsured

• New payment methods

• Relocation of traditional hospital care to other settings

• Deteriorating government payments

• Labor

• Life saving technologies

• Redundant regulation and added administrative burden

• Information technology

• Emergency readiness

Health Systems Face Numerous Challenges in Balancing Cost With Demand

Decreasing Revenue Increasing Cost

The Affordable Care Act (ACA)

• Coverage for 32 million Americans

• Major insurance reforms

• Payment and delivery system reforms

• Supreme Court decision

• Obama’s re-election

First Fiscal Cliff

Health-Related Provisions of the American Taxpayer Relief Act of 2012

• Suspends 26. 5% cut to Medicare physician payments

• Applies $11 billion documentation and coding reductionfor hospital inpatient payments

• Extends Medicaid DSH cuts by one year to FY 2022 for $4.2 billion savings

• Extends outpatient therapy exceptions for one year

• Implements 50% multiple procedure payment reduction

• Extends statue of limitations to five years for Medicare overpayment recovery

More Fiscal Cliffs

• Delay in temporary cuts expire

• Debt limit is reached

• Continuing resolutions expire

www.aha.org

What to Expect: Payors

1. Providers and employees incentivized to participate in new care models

2. Institution of more comprehensive workplace wellness programs

3. Premium cost based on participation in improving health

4. Palliative care coverage

1. Payment methods reward care coordination, especially for chronic conditions

2. Data provided to hospitals and physicians

3. Billing, credentialing, and other administrative functions further automated

4. Lower premiums for patients who use preventive services or improve their health

Insurers Employers

What to Expect: Public

1. ‘Owning’ your health• healthy lifestyle• vaccines• compliance with caregiver instructions

2. Personal health records

3. More patient and family engagement in care wishes

4. Reduction in unjustified malpractice claims

What to Expect: Providers

Accountable Transparent Value-based

Volume-Based

Value-Based

Hospital Merger and Acquisition Trends

2004 2005 2006 2007 2008 2009 2010 20110

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100

150

200

250

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0

5000

10000

15000

20000

25000

30000

35000

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Deals # of Hospitals Total Price

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in m

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2004-2011

Ensuring a Healthier Tomorrow

Promote and Reward Accountability• Accelerate payment and delivery system reforms• Eliminate preventable infections 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• Require transparency of quality and pricing information

Use Limited Health Care Dollars Wisely• Eliminate inefficient care• Revamp care for vulnerable populations• Promote population health• Modernize federal health programs• Simplify administrative and regulatory processes• Reform the medical liability system

Core Competencies for Health System Leaders

• Design and implementation of patient-centered, integrated care

• Creation of accountable governance and leadership

• Strategic planning in an unstable environment

• Internal and external collaboration

• Financial stewardship and enterprise risk management

• Engagement of full employee potential

• Utilization of electronic data for performance improvement

www.aha.org

Thank You!