healthcare industry landscape
TRANSCRIPT
Healthcare Industry LandscapeJanuary 2016Ed ParkChief Operating Officer
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What is inevitable in healthcare?
Government/Medicare will continue to push towards fee-for-value
Employers will continue to shift risk onto patients – high deductibles, private exchanges, etc.
Payers and Providers will continue to consolidate
Patients will begin to act more like consumers when shopping for plans and shopping for providers
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Purchaser response
Macro trends
Provider strategies
Macro trends
$2.9 trillion
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2007 2008 2009 2010 2011 2012 2013 2014 201518
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22
24
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https://www.nasbo.org/sites/default/files/State%20Expenditure%20Report%20%28Fiscal%202013-2015%29S.pdf
Perc
enta
ge o
f tot
al s
tate
exp
endi
ture
s
Medicaid and K-12 Spending
Medicaid
K-12
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Source: NIHC Concentration of Health Care Spending (Washington, DC: National Institute for Health Care Management Foundation, July 2012), http://www.nihcm.org/pdf/DataBrief3%20Final.pdf
Individual Spender Tier
Spending per Person
Percent of Total Spending
Top 1% $97,859 21.8%
Top 5% $43,038 49.5%
Top 10% $28,452 65.2%
Top 30% $12,951 89.6%
It is well known that costs are highly concentrated5% of patients represent half of spending
13Source: http://www.forbes.com/sites/danmunro/2012/12/30/2012-the-year-in-healthcare-charts/#2715e4857a0bb9c66a1458f9
We also spend more than twice as much per person on healthcare as other developed
countries
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80
75
79
0 1000 2000 3000 4000 5000 6000 7000
Aver
age
Life
Expe
ctan
cy a
t Birt
h (Y
ears
)
Total Expenditure on Health per capita in USD
Linear Trend Line
Hungary
Japan
S. Korea
Mexico
UK
USA
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http://www.post-gazette.com/stories/news/health/us-health-care-costs-for-the-aged-are-sky-high-371246/
Annual Per Capital Healthcare Costs by Age$45,000$40,000$35,000$30,000$25,000$20,000$15,000$10,000$5,000
$010 20 30 40 50 60 70 80 90
USGermanyUKSwedenSpain
Less well known is how rapidly U.S. costs rise with age
relative to other countries
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Source: 2014 annual report of the Boards of Trustees of the Medicare trust funds.
Projected Change in Medicare Enrollment, 2000-2050
75 8580 9590 0500 1510
100908070605040302010
0
10%9%8%7%6%5%4%3%2%1%0%
2000 2010 2020 2013 2040 2050
1.9%3.0%
2.4%
0.9% 0.4%
39.747.7
64.3
81.588.9 92.4
Average Annual Growth in EnrollmentMedicare Enrollment (in millions)
We know that overall costs will continue to increase as the population ages – 11,000 people enter
Medicare daily
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2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140%
2%
4%
6%
8%
10%
12%
8.50%
9.60%
8.60%
7.20%6.80%
6.50%
6.30%
4.80%3.80%
3.90%
3.90%
4.10%
3.60%
5.30%
Average Annual Percent Change in National Health Expenditure (Nominal)
Source: Michael Chernew, Harvard School of Public Health
There was some respite as medical inflation slowed 2008-2013,
but spending appears to be re-accelerating
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Source: http://www.realclearpolicy.com/blog/2012/05/
30%
25%
20%
15%
10%
5%
0%1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2085
19703.9%
201110.4%
208525.7%
Social Security
Medicaid, ObamacareSubsidies,CHIP
Medicare
Actual Projected
ActualRevenue
Average HistoricalRevenue;
18.1%
2045: Entitlement spending matches tax revenue average
Overall, we’re still on pace to bankrupt the U.S.
Government(“public purchasers”)
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Reminder: the Grand Bargain of the ACA is to expand coverage while reducing Medicare rates
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Source: The Advisory Board Company as of January 13, 2016. https://www.advisory.com/daily-briefing/resources/primers/medicaidmap
Expanding Medicaid
31States plus DC
ConsideringExpansion
2States
Not Expanding Medicaid
17States
Medicaid expansion continues to (selectively) move forward
And the public exchanges are on track with projections
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Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
Q2 2013
Q3 2013
Q4 2013
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
0%2%4%6%8%
10%12%14%16%18%20%
17.3%
17.1%
16.9%
16.3%
16.8%
17.1%
18.0%
17.1%15.6%
13.4%
13.4%
12.9%
11.9%
11.4%
11.6%
11.9%
Lowest Uninsured Rate on RecordPercentage of U.S. Adults Without Insurance, by Quarter
Decrease in Uninsured Adult Visits on athenaNet1, Expansion States
32%
Decrease in Uninsured Adult Visits on athenaNet1, Non-Expansion States
16%
Source: Gallup, “Uninsured rate essentially unchanged throughout 2015.” 1Quarter 1, 2012 to Quarter 4, 2015. ACAView
All in, we are seeing the lowest uninsured rate on record
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http://www.politico.com/tipsheets/morning-ehealth/2016/01/politicos-morning-ehealth-209-000-doctors-hit-with-meaningful-use-penalty-this-year-212129
On the other side of the ledger, carrots are turning into sticks
14%
swing in Medicare FFS payments in 2018
based on 2016 performance under
MU/PQRS/VBM (-10% to +4%)
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36%
swing in Medicare FFS payments by 2022
under MIPS (-9% to +27%)
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CMS has signaled that it is putting its foot on the gas
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Source: https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2015-Fact-sheets-items/2015-01-26-3.html
2016
All Medicare FFS
85%
30%
2018
All Medicare FFS
90%
50%
All Medicare FFS (Categories 1-4)FFS linked to quality (Categories 2-4)Alternative payment models (Categories 3-4)
Target percentage of Medicare FFS payments linked to quality and alternative payment models in 2016
and 2018
“2016 will be an enormous and pivotal year for progress and it’s starting off with a bang”
–Andy Slavitt, Acting CMS AdministratorJanuary 2016
Fee-For-ServiceOptional
Value-BasedMandatory
20152010 2020+
Meaningful Use Stage 1
Meaningful Use Stage 2
Meaningful Use Stage 3
PQRS Bonuses PQRS Penalties
Value-Based Modifier (VBM) Bonuses/Penalties
Merit-Based Incentive Payment
System (MIPS)
Pioneer ACOs
Medicare Shared Savings Plan (MSSP) – Track 1/2/3 Next-Generation ACOs
Voluntary Bundled Payments (BPCI) Mandatory Bundles (CJR)(hips/knees) ?
FFS+
Global Risk
Episodic Risk
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Still, it is difficult to predict the future!
Employers(“private purchasers”)
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Average Annual Worker and Employer Contributions to Premiums and Total Premiums for Family Coverage,
1999-2015
*Estimate is statistically different from estimate for the previous year shown (p<.05).Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2015.
20152014201320122011201020092008200720062005200420032002200120001999
$4,955$4,823
$4,565$4,316$4,129$3,997
$3,515$3,354$3,281
$2,973$2,713$2,661
$2,412$2,137
$1,787$1,619$1,543
$12,591$12,011
$11,786$11,429
$10,944$9,773
$9,860$9,325
$8,824$8,508
$8,167$7,289
$6,657$5,866
$5,274*$4,819
$4,247Worker ContributionEmployer Contribution
$5,791$6,438*
$7,061*$8,003*
$9,068*
$9,950*$10,880*
$11,480*
$12,106*$12,680*
$13,375*$13,770*
$15,073*$15,745*
$16,351*$16,834*
$17,545*
Employer healthcare costs have tripled since 1999
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Source: Kaiser Employee Benefits Survey, 2013; median wage from EPI analysis of CPS
The Health Care Cost Crunch, 1999-2013$20,000
$16,000
$12,000
$8,000
$4,000
$01999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
$20.50
$19.50
$18.50
$17.50
$16.50
$15.50
$14.40
8.710.4
13.1
16.0
17.8
19.3
22.7
24.5
Weeks of full time work (at median wage need to pay family premium)Average annual premiums (single coverage)Average annual premiums (family coverage)Median wage (right axis)
Today’s average family premium is half a year’s work at median wage
Private Exchanges Direct Contracting
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Activist employers continue to experiment, but advanced mechanisms such as direct-to-employer contracting or private exchanges have yet to catch
fire
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SOURCE: Kaiser/HRET Survey of Employer Sponsored Health Benefits, 2006-2015
The dominant response so far has been to simply increase the deductible
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015$0 $200 $400 $600 $800
$1,000 $1,200 $1,400 $1,600 $1,800 $2,000
$775 $852 $1,124
$1,254 $1,391
$1,537 $1,596 $1,715 $1,797 $1,836
$496 $519 $553 $640 $686 $757 $875 $884 $971
$1,105 $584 $616
$735 $826 $917 $991 $1,097 $$1,135 $1,217 $1,318
All Small Firms (3-199 Workers)All Large Firms (200 or More Workers)All Firms
Deductibles RisingThe year-to-average increases in employer-paid health insurance deductibles aren’t all
that big because some firms haven’t raised them much. But the overall trend is for deductibles to keep rising, especially at smaller firms.
$1,318
average employee deductibleup 60% since 2009
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With patients at full risk up to the deductible, Yelp for healthcare is going mainstream
Payers
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Source: 2014 Aetna investor presentation
38%
16%
34%
13%
25%
16%
50%
9%Uninsured
Consumer Choice• Public/Private Exchanges• Individual MA• Medicare Supplement• Managed Medicaid
Government• Medicare FFS• Medicaid FFS
Employer
2014
2020
319M334M
We are increasingly becoming a government funded industry
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Note: Includes cost and demonstration plans, and enrollees in Special Needs Plans as well as other Medicare Advantage plansSource: MPR/Kaiser Family Foundation analysis of CMS Medicare Advantage enrollment files, 2008-2014, and MPR, “Tracking Medicare Health and Prescription Drug Plans Monthly Report,” 2001-2207. Report of the Medicare Board of Trustees, 2002.
199219931994 1995199619971998 199920002001 2002200320042005 200620072008 2009201020112012 201320142015
2.2 2.5 2.83.5
4.45.4
6.4 6.9 6.8 6.2 5.6 5.3 5.3 5.66.8
8.49.7
10.511.111.9
13.114.4
15.716.8
Total Medicare Advantage Enrollment, 1992-2015In Millions
BBA MMA ACA
Medicare Advantage and Managed Medicaid are growing especially quickly
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As of March 31, 2015. t Assuming Anthem maintains CEO and headquartersSource: The Wall Street Journal, http://www.wsj.com/articles/anthem-agrees-to-buy-cigna-for-48-billion-1437732331
These opportunities in managed Medicare/Medicaid, along with regulation and reach for market share, is
fueling a dance of the elephants
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http://www.managedcaremag.com/archives/2015/12/big-meets-even-bigger-more-consolidation-offing
These proposed mergers raise the specter of consolidating the already-potent market
power of these insurers
Anthem-Cigna merger increases market powerAnthem-Cigna merger raises competitive concernsAetna-Humana merger raises concernsBoth mergers reduce competition
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Source: http://www.wsj.com/articles/health-care-providers-insurers-supersize-1442850400http://www.aha.org/research/reports/tw/chartbook/2015/15chartbook.pdf, Oliver WymanIrving Levin Associates
125 Deals
100
75
50
25
0’09 ’10 ’11 ‘12 ‘13 ’14 ‘15
Full YearTo Aug.31
In part to counter this power imbalance, we have seen significant hospital consolidation
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Source: Oliver Wyman, http://issuu.com/oliverwymangroup/docs/oliver_wyman_ahip_vertical_integrat
And back to the future – payers and providers are dipping their toes in the waters of narrowed
networks and vertical consolidation
Patients
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Americans are the best shoppers in the world and we’re starting to shop
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Access and convenience are becoming increasingly important
Health systems are responding by increasingly trying to meet patients where they are in their neighborhood…
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…or in the home with telehealth
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Remote monitoring has not yet hit mass-market but it will inevitably play a larger role
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Quick Stats6,380 Google Play Store ratings: 4.54 / 5 stars
1,243 Apple App Store ratings: 4.5 / 5 stars
Net Promoter Score: 58• Amex: 45• Netflix: 45• CVS: 26• Health insurance avg: 17
9,755 Facebook fans• Omada Health: 825• Propeller Health: 515
Consumers are beginning to demand healthcare experiences that are every bit as sophisticated as other
consumer experiences
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Provider Strategies
Consolidation remains the dominant primary response
The health care chess board…
UrgentCare
ImagingCenter
Lab
Pharmacy
RetailClinic
Small Physician
Group
Small Physician
GroupHospital
Hospital
Small Physician
Group
Small Physician
Group
Specialty Clinic
Orthopedics
SpecialSurgery
At-risk healthsystem
At-risk healthsystem
UrgentCare
ImagingCenter
Lab
Pharmacy
RetailClinic
Small Physician
Group
Small Physician
GroupHospital
Hospital
Small Physician
Group
Small Physician
Group
Specialty Clinic
Orthopedics
SpecialSurgery
At-risk healthsystem
At-risk healthsystem
1Build a hospital-centered health system and own most of the continuum of care
UrgentCare
ImagingCenter
Lab
Pharmacy
RetailClinic
Small Physician
Group
Small Physician
GroupHospital
Hospital
Small Physician
Group
Small Physician
Group
Specialty Clinic
Orthopedics
SpecialSurgery
At-risk healthsystem
At-risk healthsystem
2Build a multispecialty group that focuses on primary care delivery with “consulting” specialists
UrgentCare
ImagingCenter
Lab
Pharmacy
RetailClinic
Small Physician
Group
Small Physician
GroupHospital
Hospital
Small Physician
Group
Small Physician
Group
Specialty Clinic
Orthopedics
SpecialSurgery
At-risk healthsystem
At-risk healthsystem
3Build a specialty bloc that focuses on doing a few things well
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4 Create a new model at the periphery – a reinvention of traditional primary care
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Stepping back, some of the most successful strategies will be hybrids
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ownershipvs
alignment
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Advances in interoperability are making these hybrid models easier
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Medications are manually reconciled by
the MA or provider
Vaccines, problems, allergiesare automaticallyreconciled with
source attributionnoted
All documents and notes across the
continuum of care (labs, imaging centers, discharge summaries)
are available
For the first time, a cross-system view of the patient is within reach
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The Argonaut Project
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Note: Responses from physicians in management-led organizationsSource: Bain Front Line of Healthcare Survey, January 2015
What is the most important change your organization needs to make in order to achieve its mission?
Responses from physicians in management-led organizations
Physician leadership remains the scarcest commodity
Engage Physicians
Communicate With PhysiciansImprove Tech Capabilities
Qua
lity
Pati
ent
Care
Adap
t To
Cha
ngin
g H
ealt
hcar
e La
ndsc
ape
Impr
ove
Wor
k En
viro
nmen
tBetter Access
Alignment On Mission
Incr
ease
Ser
vice
sO
ther
Stay
On
Curr
ent
Path
Increase Services Group Oversight Improve Allocation Of Resources
Align With Other Health Entities
Maintain/Increase Autonomy
Better Training
Reduced Overhead
Accountability Increase Efficiency
Reduce CostsImprove Reimbursements
Improve Leadership
Improve FacilityImprove BenefitsFocus On Staffing
Improve Org Structure
Low
er C
osts
Phys
icia
n Le
ader
ship
Grow Market Share
Focus On Niche
Increase patient TimeIncrease Marketing
Redu
ce B
urea
ucra
cy
Incr
ease
pat
ient
Vol
ume
Continue Clinical Excellence
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The government is becoming an even bigger player and value-based payments (MU, PQRS/VBM, MSSP, CJR, MIPS, etc.) are here to stay1The patient-as-consumer movement is rapidly unfolding– developing an intentional strategy for this is crucial2With great uncertainty comes great opportunity – those who lead can gather outsized gains3
Key Takeaways
Thank You