integrated care: opportunities for manufacturers · for pharma and medtech” ... compliance...

Integrated Care: Opportunities for Manufacturers

May 13, 2014

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent 2NYC IntegratedCareDiscussion_2014_05_12

Introductions

• Leader in Bain’s Healthcare practice

• 20 years experience consulting/ executive roles

• Consulting work focused on clients in the pharmaceutical, med tech, vaccines and diagnostics industries as well as not-for-profit global health organizations

- Recent work in development of corporate and business unit strategies, product launch and growth strategies, organizational design/capability building and go-to-market models.

• Executive roles in Medical Diagnostics at Sanofi and Boehringer Mannheim (now Roche)

• MBA at INSEAD; MSc. in Molecular Biology and BSc. in Biochemistry from the University of Waterloo, Canada

• Recent Bain Brief publications on “Healthcare 2020” and “Integrated Care: Implications for Pharma and Medtech”

Michael RetterathPartnerNew York


Agenda

• Overview of Bain Healthcare Practice

• Sector trends towards Integrated Care and implication for manufacturers

• Path forward for manufacturers

• Discussion/Q&A


Global network to serve client needs

New Delhi

Helsinki

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New York

BostonSan Francisco

Paris

London

MunichTokyo

Rome

Chicago Toronto

Houston

Beijing

Hong Kong

Singapore

Sydney

Madrid

Stockholm

Mexico City

Los Angeles

Atlanta

São PauloJohannesburg

Seoul

Amsterdam

Palo Alto

Melbourne

Shanghai

Brussels

Düsseldorf

Kyiv

Moscow

Zurich

Milan

Buenos Aires

Mumbai

Oslo

Copenhagen

DallasBangkokKuala Lumpur

Perth

Rio de Janeiro

Istanbul

Warsaw

5,400 EMPLOYEES ACROSS 49 OFFICES

Washington, D.C.


We take an integrated view of healthcare across sectors to provide deep customer and stakeholder insight

Integrated view of

healthcare

Payers

Pharma Med tech

ProvidersServices

Changes in one sector can impact othersTrends impacting one sector can emerge in others

Expertise in one sector = customer/stakeholder expertise in others


This expertise is made stronger by our heavy involvement in healthcare deal activity

Bain serves cases in all major segments of healthcare…

• Cardiac devices• Aesthetic lasers• Imaging equipment and

media• Medical appliances

and supplies• Outsourcers• Contract manufacturers• Diagnostics

…including 350+ diligence assignments for financial investors over the last decade

Consumer health• Eye glass lenses• Hearing aids• Vitamin supplements• Personal care products• Nutritional

supplements• OTC pharmaceuticals• Health food

Med Tech

Providers• Hospitals• Imaging Centers• Eye Surgery• Healthcare/ physician

practice management• Dental physician

management• Counseling services• Urgent care centers• Ambulatory surgery

centers• Post acute care centers

Services• Travel nursing• Out-sources blood

testing• I/T hardware,

software, PACS, etc.• Lab services• Infusion• Personal hygiene

services• Radiology services• Dental products and

distribution

Payers• Regional Payers• Regional and national

payer systems• Third-party

administrators• Disease management

• Drugs (primary and specialty care)

• Reagents• Genomics• Generics• Contract research• Contract manufacturing• Animal pharma

Pharma/Biotech

0

20

40

60

80

100%

HC Cases(including due diligence)2002-2012

Sub-sector

Pharma/Biotech

Due Diligence

Med Tech

Healthcare Payer

HealthcareProvider

Healthcare Services

1,170


Agenda



• Path forward for manufacturers

• Discussion/Q&A


Executive Summary

• Traditional model for HC delivery (siloed care, fee-for-service) has led to cost inflation without commensurate improvement in clinical outcomes or patient experience

• Recognition of untapped value in managing across care pathways: i.e.: “Integrated Care”…- New “S-curve”, with potential to improve quality, experience and cost of care

- Enabled by trends in provider consolidation, advances in IT/communications, increased role of consumer, etc.

• Value creation derived from a number of key drivers:- Improving integration of patient data across points of care (better care, less waste)

- Enabling patient prevention/adherence (reduced events, improved outcomes)

- Facilitating shift of care to better value locations (more convenient, lower cost, equal/higher quality)

• Models largely converging around two patient-based “units of integration”, each with its own clinical and economic logic and associated metrics

- Episode of care, e.g.: CABG procedure

- Continuous care: e.g.: A-fib, diabetes, elderly

• Implications for Pharma and Medtech companies still emerging but with clearly identifiable priorities for investment and exploration

- Clear implications on clinical design, marketing messages and commercial model- Less clear on market acceptance and value of “integrated solutions”- Specific categories rise to the top, (e.g. Diabetes and heart failure)


Integrated Care must be seen in context of broader trends towards reform

NEED FOR HEALTHCARE REFORM• Rising demand (aging population, chronic conditions, uninsured)

coupled with a restricted ability to pay

Reform: Policy directive based in law reform: Market based initiatives

• Increased access- Medicaid expansion, public exchanges

• CMS reimbursement rates, taxes- ‘Donut hole’ rebate, PCP rate increases, rate cuts for hospitals and post-acutes, Medtech excise tax, etc.

• CMS payment models- Medicare/Medicaid bundled payment pilots, ACOs, etc

• CMS quality initiatives- Re-hospitalization penalties, HCAHPS, etc.

• Changes in employer attitudes about benefits

- High deductible plans, private networks, narrow networks, etc.

• Health plan product/benefit design- Network strategy, gatekeeper, tiering, compliance incentive, etc.

• Commercial plan payment reform- P4P, bundled/global payments, etc.

• Incentives to delivery system to change its operating model

- ACOs, PCMHs, etc.


A number of market trends are driving shift in care towards more integrated models for care

New models for care delivery, consumption and reimbursement

MARKET- and POLICY BASED REFORM

‘CONSUMERIZATION’ OF HEALTHCARE

• Consumers more economically sensitive around utilization and provider choice

• Consumer increasingly enabled in healthcare decisions

- Readily available information on disease, treatment, providers, etc.

IT / COMMUNICATIONIMPROVEMENTS

• Advances in ability to generate and leverage data

- Including predictive analytics, data-driven protocols, patient monitoring, etc.

STRUCTURAL ANDATTITUDINAL SHIFTS

• Rise in physician employment

• Physicians becoming more economically sensitive around utilization and referrals


Physician practice ‘land grab’ underway, increasing integration with hospitals and other stakeholders

Source: The Advisory Board Company - Physician Compensation and Production Survey, Medical Group Management Association 2002-2010 data; 2011 survey; 2012 The Health Care Services Acquisition Report, Irving Levin Associates

IN RECENT YEARS, PHYSICIAN EMPLOYMENT HAS ACCELERATED

0

20

40

60

80

100%

Physician Practice Ownership,2002-2011

2002

Phys

icia

n-ow

ned

pr

actic

e

2003

2004

2005

2006

2007

2008

2009

2010

2011

Hos

pita

l-ow

ned

prac

tice

PLAYERS ACROSS THE INDUSTRY ARE MOVING TOWARDS INTEGRATION

Acquirer TargetYear

Price

Pay

er Metropolitan Health:Network of ~480 PCP practices serving 70K+ patients

2013

$850M

Hos

pit

al Carle Clinic: Deal included network of 300+ physicians and subsidiary health plan with 320K members

2010

$250M

Pro

vid

er HealthCare Partners: 152-clinic network with over 8,300 contracted PCP and multi-specialty physicians

2012

$4.4B

Ph

arm

acy Scott & White Healthcare:

Partnered with system of 12 hospitals, 65 clinics to share governance and create one of the first pharmacy-led ACOs

2013

N/A

Ser

vice

s US Oncology: Largest US integrated oncology provider with over 1,300 affiliated community-based physicians

2010

$2.2B


Level of integration varies considerably by geography; particularly challenging for manufacturers

*Includes Medicare Shared Savings, Pioneer, Advanced Payment, and certain commercial payer/provider funded ACO programsNote: Data as of February 2013. Data will need to be refreshed frequently as new ACOs are continually being addedSource: American Hospital Association, Leavitt Partners Center for ACO Intelligence report ”Growth and Dispersion of Accountable Care Organizations” (June 2012), CMS.gov

BUNDLED PAYMENT PROGRAMS BY TYPE

Model 1: Retrospective Acute Care Hospital Stay Only, does not have episode breakoutsModel 2: Retrospective Acute Care Hospital Stay plus Post-Acute CareModel 3: Retrospective Post-Acute Care OnlyModel 4: Acute Care Hospital Stay Only

PRELIMINARYPREVALENCE OF ACOs* VARIES BY STATE

PRESENCE OF BUNDLED PAYMENT INITIATIVES VARIES BY STATE /URBAN SETTING

NUMBER OF ORGANIZATIONS WITH ACO-LIKE PAYMENT STRUCTURES PER 1M INSURED CITIZENS

52

0197

6

2

82

149

3

5

6

9

77

9

1

11

22

364

11

6

4

17

33

9

73 1

32

0

71

2

1

6

0

00

1

0

0 1

0

4

5+

<5

<2

<1

# BPIs/M

0

0

• 2+• 1 - 1.99• 0.50 - 0.99• 0 – 0.49

Number in state indicates absolute number of ACOs present


Physicians' expectations point to a trend towards new payment models…

Q: Please describe your participation in the following payment models.

Note: 2011 data included for comparison purposes only; populations of 2011 and 2013 surveys not comparable; excludes physicians who responded “don’t know/can’t answer”

Source: Bain Feb 2013 PCP survey, N=414; Bain 2011 survey, N=158


Emerging models connect providers to address the highest-value gaps in care

ASC

Home care

Pharm-acy

Hosp.

Spec-ialist

PCPRehab

Providers

Episode of care Continuous care

• Focus on better managing events by bundling pre- and post-procedure activities into holistic program

- Treat (and price) as one vs many events

- Maintain or enhance quality while reducing cost and improving convenience

• Incentivized by bundle payment initiatives, readmission penalties

• Focus on avoiding events by better connecting points-of-care

- Reduce duplication and waste

- Improve clinical outcomes

- Enhance patient and physician experience

• Enabled by capitated payment programs at ACOs and ICNs

- Price actuarially defined for given population

Patient


Gov'tEmpl-oyer

TPA

Episode of Care: provider offering a bundled payment and better outcomes for CABG patients

• Patient type: CABG patients, from admission through 30 days post-op

• What activities: - All hospital care, specialty care, labs/imaging, rehabilitation

- Protocol design for suite of heart procedures- Flat fee and claims management

• What customers: Covers 1.6M nationally, including Lowe’s, Kohl’s, Rich’s, Boeing; now added Walmart

Scope:

• Improve clinical outcomes by using defined protocols, reducing variance in treatmentsPhar-

ma

OTC

Med tech

Services Mfg’er

Payer

PROVIDER INTEGRATING RISK MANAGEMENT CAPABILITIES

Provider

• Triple aim results: Patients overwhelmingly rate program as “excellent” and would recommend to a coworker; Lowe’s has reported savings of up to $62K in one patient example

• Profitability: Expand reach to other geographies

Continuous careContinuous care

Episode of care

Patient

Insur-er

Labs, imag-

ingRemote Monitor

-ing

HIE

Well-ness

Data analy-

tics

ASC Pharm-acy

Spec-ialist

Home care

PCPRehab

Hosp.

Nutra-ceutical

Results and Profitability

Objectives:

Note: *Relationships with health plans and employers is managed by the Cleveland Clinic’s Department of Market and Network Services Source: Bain proprietary analysis


Continuous Care: Payer acquiring PCP practice and using analytics to improve outcomes, lower costs

Patient

Med tech

Phar-ma

Nutra-ceutical

OTC

HIE

Med tech

HIE

Well-ness

Services Mfg’er

Provider

Payer/Adm.

Data analy-

tics

Remote Monitor

-ing

Gov't

Empl-oyer

Insur-er

ASC

Rehab

Home care

Spec-ialist

Labs/Imag-

ing

Phar-macy

PCP

Hosp.

INSURER ACQUIRING PCPS AND BIG DATA ANALYTICS CAPABILITIES

Episode of careEpisode of care

Continuous care

• Patient type: Complete care for 200K patients aged 65+ with complicated conditions

• What activities: - Primary care, clinics, nurse case managers- Protocol design for patient types- Incentivized physician contracts- PBM: Zero-dollar co-pays on tier 1 and 2 drugs- Vitality behavior management toolkit

• What customer: Medicare Advantage enrollees

What’s in scope:

• Improved clinical outcomes by investing in long term outcomes through nurse case managers, in-home visits

• Aligning with physicians for value based decisions through innovative contracts

• Optimizing treatment plans through big data

• Triple aim results: 20% decrease in acute care visits and 11% decrease in costs compared to Medicare. 3.12 average star rating

• Monetization: Humana profit margins 50% higher than competitors in Florida; strong share gain

Results and Monetization

Objectives:

PBM/TPA

Source: Bain proprietary analysis


Role for manufacturers in integrated care is still being defined

Hosp. Spec. PCP Rehab. HomeCare

Episode of care

Hosp. Spec. PCP Pharm-acy

HomeCare

Continuous care

• Facilitate alignment and shifting of care across centers

- Consistent with bundled payment models

• Elements of package could include:- Devices, Rx, monitoring tools

- Protocols, analytics

- Post-acute care support

• Potential for risk-sharing contracts structured around episode

• Customer is payer/provider

• Facilitate patient adherence / early intervention

- Consistent with capitated payment models

• Elements of package could include:- Rx, devices, monitoring tools

- Protocols, analytics

- Care coordination, outreach

• Potential for risk-sharing contracts structured around patient population

• Customer is payer/provider, employer, consumer


A set of key factors drive potential for integrated solutions for a given condition

FACTORS FAVORING IC SOLUTIONS

Patient

Med tech

Phar-ma

Nutra-ceutical

OTC

HIE

HIE

Well-ness

Services Mfg’er

Provider

Payer/Adm.

Data analy-

tics

Gov't

Empl-oyer

PBM/TPA

Insur-er

ASC

Rehab

Home care

Labs/Imag-

ing

Phar-macy

PCP

Hosp.

Remote Monitor

-ing

Spec-ialist

Med tech

Provider• Gap in meaningful patient information to

enable better treatment

• High variability in treatment models• Distinct provider group for patient

population

Payer• High cumulative cost of disease

• Multiple levers to realize cost savings

• “Difficult” disease: uncomfortable treatment choices for payers


Continuous careContinuous care


Patient• Variability in patient behaviors impacts

cost/clinical outcomes• Fragmented care system with multiple

touch points per patient

• Unmet need for additional patient support (e.g., informational, emotional, financial)


Continuous Care (pharma): Sanofi is offering a full suite of diabetes care to drive adherence, share gain

What’s in scope:

• Facilitate communication and coordination of care by increasing frequency of data to providers

• Address compliance by offering integrated tools, e.g. wellness and home health mobile apps, that make it easier for patients to stay on track

Patient

Nutra-ceutical

OTC

Services Mfg’er

Payer/ admin

PHARMA EXPANDING INTO MEDTECH, SERVICES AND PROVIDER SILOS

Provider

• Triple aim results: 10% reduction in HbA1C results and support from patients

• Monetization: New revenue stream in testing devices as well as Lantus share gain

• Patient type: Chronic condition – diabetes

• What activities: - Pharma: Market leading insulin drug (Lantus)- Wellness: Go Meals provides nutritional information,

tracks glucose and activity levels- Med tech, monitoring: Smart glucose monitor,

connects to iPhone; data sent to doctor- Home care: Web-based mgmt system to allow

personalized care and enable dose adjustments

• What customer: Diabetes patients, payersMed tech

Remote Monitor

-ing

Well-ness

Home care

Phar-ma

Gov'tPBM/TPA

Insur-er Results and Monetization:

Objectives:

HIE

Data analy-

tics

Dx/labs/Imag-

ing

ASC

Spec-ialist

Hosp.

PCP

Pharm-acy

Empl-oyer

Rehab


Continuous care



Agenda



• Path forward for Pharma companies

• Discussion/Q&A


Companies are beginning to adjust their operating and business models to adapt to the new environment…

OPERATING MODEL BUSINESS MODEL

R&D Manufacturing/Operations

Commercial-ization Diagnosis TreatmentOrigination Monitoring

• Design for patient experience

• Focus on cost-reduction in manufacturing, incl. ‘asset light’ models

• Segment-specific insights

• Customized “B2B” approach for organized customers

• Enhance “evidence package” with real-world data and population metrics

• Consolidate logistics to serve larger accounts

• Enhanced consumer engagement

• … • … • …

Redesign or ‘clean sheet’current activities

Adjacency moves and re-invention of overall business model

Products

Applicat-ions

Services

Extend to other areas

of care continuum

Develop applications and

services within a stage of the

patient journey

1

2

Current

Source: Bain analysis


Operating Model: market evolving towards a “rubixcube” across payer, provider and patient dimensions

PROVIDERS

PAYERS

• Public vs commercial

• Use of PBMs

• FFS vs capitated pharm / med benefits

• Share/mix of lives from exchanges

• Level of integration –e.g., doc employment

• Exposure to pharm benefits risk

• Cost sensitivity (e.g., private exchange buyer)

• Degree of engagement in care decision and management

For each segment, critical to:

• Assess company performance- % revenue, profits- Market share- Price realization

• Understand needs, incentives and influence patterns of the players

• Determine full potential, and specific strategy- Areas to double-down, pull back- Where to change value proposition

and/or commercial approach

• Translate strategy to local market implications


Operating Model: illustrative examples of potential integrated segments

Payers • Commercial payer with drug benefits outsourced to PBMs

• Commercial payer offeringfully insured products (incl. drug benefits)

• Mix skewed toward exchange plans

• Commercial payer administers plan but takes no risk – i.e., fully capitated payments to providers (incl. drug benefits)

Providers • Independent physician group operating on FFS basis

• Independent physician group operating on FFS basis

• Doc employed with accountable care organization

Patients • Employer provided group plan with low deductible, co-pay

• Limited engagement –relying on doc advice

• Cost sensitive patients purchase plans through private exchange, semi-funded by employers

• Highly engaged patient,seeking information on care

SEGMENT 1 SEGMENT 2 SEGMENT 3

Traditional commercial approach

Opportunity to align incentives with

providers

Opportunity to customize offerings to payers and patients


Business Model: three key questions can help frame the opportunity for integrated care solutions

• Where are the highest-impact pain points in the care pathway?- Drop-offs, inconveniences,

economic loss, etc.

• For the key pain points:- What behavior change is

required?- What are incentives / dis-

incentives to act?- What are key enablers of

change?

• Which customer segmentsare most open to change?

Are there significant unmet needs for care integration?

Do we have distinctive assets / competencies?

Is there a viable business model to capture value?

1 2 3

• How far from the core do we need to go?

- Product vs. solution; open vs. closed system

• How do we gain access to required assets /capabilities?

• How do we monetize value?

- Direct: new revenue streams, increased share, higher prices

- Indirect: customer insights/loyalty, lower commercialization costs etc.

• What assets can we bring to bear?

- Hard: clinical expertise, technology, sales infrastructure, etc.

- Soft: market leadership, KOL relationships, reputation, regulatory insight

• Where are we most uniquely positioned?

- Who else could do?

- What are barriers to entry?

• What new capabilities would we need to build?


Economic benefits that can be captured vary by disease state: Heart Failure example

0

20

40

60

80

100%

Hospitalization

Outpatient

Admission

Readmission (within 30 days)

$17B

Other services

Nursing Home

Physicians/OtherProfessionals

Home Health Care

$10B

Drugs

Betablockers,

ACEinhibitors,

etc.

$4B

Devices

CRT

VAD

IABP

$3B

US expenditure on heart failure treatments (2012) Total = ~$35B

Note: Cardiac resynchronization therapy (CRT), ventricular assist device (VAD), intra-aortic balloon pump (IABP); Admission rates for HF patients are 75-90%; Not all readmissions are addressable for cost savings due to high prevalence of comorbiditySource: Medtech Insights, March 2012; Cowen Therapeutic Categories Outlook 2013; Global Data CHF report 2012; The Economics and Reimbursement of Congestive Heart Failure, 2012 (Adapted from AHA Cardiovascular Diseases in the United States, 2009); Patterns of hospital performance in acute myocardial infarction and heart failure 30-day mortality and readmission, Circ Cardiovasc Qual Outcomes, 2009

Drugs DevicesServices

Direct costs

ILLUSTRATIVE

…policy-mandated

reduction in 30-day

readmission

…decreasing number of non-urgent hospital

admissions

Cost savings driven by…

1


Chronic conditions where patient behavior plays a key role in outcomes are often seen as best candidates

Q: Please rate the following chronic conditions on how likely integrated care is to be able to improve costs, clinical outcomes, and/or the patient and provider experience.

Note: Excludes physicians who responded “don’t know/can’t answer”Source: Bain Feb 2013 PCP survey, N=414

1


Integrated care will require deployment of new tools, some of which manufacturers could support…

Q: Please describe your use of the following clinical tools.

Note: 2011 data included for comparison purposes only; populations of 2011 and 2013 surveys not comparable; version of slide for external use in Appendix; excludes physicians who responded “don’t know/can’t answer”; bold indicates potential role for manufacturers

Source: Bain Feb 2013 PCP survey, N=414

2


0

20

40

60

80%

Remotemonitor-

ing

51%

23%

Tele-medicine

46%

23%

Wellnessprogr-ams

37%

47%

Casemgrs

32%35%

Treatmentteams

29%30%

Adher-ence

initiatives

28%

57%

Dataanalytics

42%

31%

Evidence-based

protocols

37%40%

Compeffective-

ness

33%32%

Transpar-ency

initiatives

31%34%

Sharedsavings

29%27%

26%23%

25%23%

Percent of physicians stating interest in pharma/med tech solution

Bundledpayment,condition

Bundledpayment,episode

… and medtech and pharma companies are viewed as potential partners for some integrated solutions

Q: For each of the following integrated care initiatives, please check whether you would be interested in a program offered and managed by a pharmaceutical/medical device company


Clinical care extenders Clinical decision-making Payment models

2


However, many physicians expressed concerns related to bias and lack of transparency

“Some aspect of mercenary motivation exists for certain services/plans, but by employing more physicians and working closely with these companies hopefully it will help with decision making and is aligned with patients' best interests.”

General practitioner

“There clearly becomes a conflict of interest when companies are involved in the process of delivering health care. I feel these companies have a role in clinics and hospitals, but do not feel that role should encompass healthcare delivery.”

Internist

“I always worry about these companies worrying about the "bottom line" first and compromising the patient’s healthcare for a profit.”

PCP

“I would not have any concern with medical device companies but I am not sure about a conflict of interest when a pharmaceutical company is involved.”

Family practitioner


PRELIMINARY

2


US HEALTHCARE PROFIT POOLS TO 2020

For manufacturers, integrated solutions require moving into lower margin (but faster-growing) profit pools

Source: Bain analysis

= Products

= Services

3


Integrated perspective continuing to drive insights into emerging healthcare market

Strategic Choices

Payers

Pharma Med tech

ProvidersServices

• Segmentation and engagement models with Payers/Providers• Development of integrated value propositions and monetization models• M&A screening and development of alliance programs• Etc.


Agenda



• Path forward for Pharma companies

• Discussion/Q&A


Thank You!

integrated care: opportunities for manufacturers · for pharma and medtech” ... compliance...

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