preparing for health care reform
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Preparing for health care reform. Dr. wm. Marty martin. Patient care protection and affordable care act in a nutshell. Incenting prevention and primary care. Aligning incentives in payment. Increasing transparency. Increasing efficiency and investments in IT. - PowerPoint PPT PresentationTRANSCRIPT
D R. W M . M A RT Y M A RT I N
PREPARING FOR HEALTH CARE REFORM
PATIENT CARE PROTECTION AND AFFORDABLE CARE ACT IN A NUTSHELL
Incenting prevention and primary care.
Aligning incentives in payment.
Increasing transparency.
Increasing efficiency and investments in IT.
Rewarding value-based services.
Source: Rooney (2011). Is Your Supply Chain Ready to Survive Health Care Reform?Journal of Healthcare Contracting.
HEALTH INSURANCE
2010 Several new provisions already implemented.
2011 Innovation Center
for CMS established.
Prohibits federal Medicaid payments to states for services related to HAI conditions.
TIMELINE (2012-2013).
2012 Establishment of non-profit
insurance co-ops to compete with commercial plans.
Penalty on hospitals with high rates of preventable readmissions by cutting Medicare payments.
Medicare Value-Based Purchasing (VBP) program begins.
Medicaid bundled payment demonstration project begins.
Comparative effectiveness research fee begins.
2013 Financial relationship
disclosure required between providers and drug manufacturers and suppliers.
Medicare bundled payment demonstration project begins
Medical device tax of 2.3 percent.
TIMELINE (2014-2020) 2014
Individual and employer mandates begin.
Health insurance state based exchanges begin.
Independent Payment Advisory Board (IPAB) submits first recommendation on reducing Medicare spending growth.
Reduction in states’ DSH allotment.
2015Reduce Medicare
payments for HAI conditions.
2018 A new “Cadillac tax”
on employer sponsored insurance.
2020The Medicare
“doughnut hole” will officially be closed.
IS THIS PREDICTION PLAUSIBLE?
“To make economies of scale work in an environment featuringlower reimbursement, I predict that the healthcare
supplychain will feature further consolidation at every level.
In addition, vendors will need to rethink how their products
fit into the new processes being developed for disease
management and care coordination (page 35).”
Source: Rooney (2011). Is Your Supply Chain Ready to Survive Health Care Reform?Journal of Healthcare Contracting.
INDUSTRY CHALLENGES & RESPONSES
GoalIncongruence
EnvironmentalUncertainty
Strategy Performance
• Leveraging volume • Local SC capabilities• Process improvement • New entrants
•E-commerce solutions•Distribution services•Other new services
WHAT IS BEING MANAGED? THE ENTERPRISE-WIDE SUPPLY CHAIN
Deliver toPoint of
Use
Evaluate,Select
Contract Order Ship ReceiveandPay
Inventoryand
Store
Pick
Customer ManufacturerDistributor
Customer
Pick Use
SUPPLY CHAIN PERFORMANCE OUTCOMES
Safety
Sustainability
CustomerSatisfaction
RevenueReliability
Responsiveness
AssetsCost
Outcomes
Source: Sg2 2009 | ACHE 2009
Private Payer Professional Reimbursement Changes
Overhead / Expense Management
Practice Growth
Malpractice Costs
Pay for Call
Hospital Relations
Regulatory Changes
Quality Reporting
Workload
78%
74%
71%
32%
28%27%
22%
17%
15%
14%
78%Financial Challenges
Patient Safety and Quality
Care for the Uninsured
Hospital / Physician Relations
Personnel Changes
Healthcare Reform
Patient Satisfaction
Capacity
Technology
Malpractice
43%
41%
32%
30%
26%22%
16%
9%2%
Top Hospital ConcernsTop Physician Concerns
Hospital – Physician ConcernsPhysician Concerns
Hospital CEO ConcernsMedicare Professional Reimbursement Changes
10
IS YOUR PLAN ALIGNED WITH THE CONCERNS OF PHYSICIANS AND HOSPITAL CEOS?
HOSPITAL – PHYSICIAN ALIGNMENTCeding the Market Head-On Battle Splitting the Market Putting Them
on Salary
Hosp
itals
Phys
ician
s
Complex/ Unprofitable
CasesRecruited or
Employed Physicians
Surgery, Imaging, Ancillary Services
Complex/Co-morbid Cases
Independent PracticeSurgery,
Imaging, Ancillary Services
Joint Venture
Employment / Foundation
Working Together
Independent Practice
Co-Management
Source: Advisory Board 200812
CLINICAL SUPPLY CHAIN AND PPIPRESENT A GREAT SAVINGS
OPPORTUNITY
• A typical 400+ bed hospital spends about $56M annually on Physician Preference Items (PPI)
• On average, $6-10M (10-20%) could be saved on these items on an annual basis.
PHYSICIAN PREFERENCE ITEMS INTENSIFY CHALLENGE
• 30-40% of supply expense are • physician preference items
• 6–10% of operating expense
• Preference items may or may not…• be linked to outcomes/ performance• have associated contracted purchase price• be fully reimbursed
“We had our first physician preference contract negotiations to narrow the number of vendors down and guarantee 95% utilization of one vendor through engaging the physicians, resulting in an annual savings of $300,000.” - Mid Sized Hospital Survey Respondent
PHYSICIAN ENGAGEMENT STRATEGY
• Value of Time• Don’t Compromise on Quality• Show Tangible Results of Their Efforts• Recognize….
HOSPITAL–PHYSICIAN ALIGNMENTIntegration / Employment Trends
Source: Sg2 2008
1980 1985 1990 1995
Degree of Integration
2000 2005 2010 2015
Employment of hospital based specialists.
Hospital and health systems acquire primary care practices.
Many hospitals divest of primary care practices, refocus on core business.
Employment of specialists and PCPs will become more common.
Growing interest in alignment and willingness to partner with physicians.
CHART 4.1: PERCENTAGE OF HOSPITALS WITH NEGATIVE TOTAL AND OPERATING MARGINS, 1995 – 2007
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
95 96 97 98 99 00 01 02 03 04 05 06 07
Source: Avalere Health analysis of American Hospital Association Annual Survey data, 2007, for community hospitals.
Negative Operating Margin
Negative Total Margin
Source: Sargent & Smith-Daniels
FROM A LARGE SLICE OF THE PIE
OtherHospital Operating
Expense
55% to 70%
Supply Chain Management
Expense
35% to45%
Total Supply Chain Expense as a Percentage of Total Hospital Expense
WHAT ARE YOU THINKING IF YOU ARE THE CFO, CEO OR BOARD?
Source: Sargent & Smith-Daniels
25%
Supplies
* Figures based on HFMA estimates. Labor cost includes salaries, wages and benefits based on average of leading hospitals in the U.S. and Others is inclusive of profits to the hospitals. Source: S&P Industry Surveys: Healthcare Facilities; HFMA; industry reporting; Pipal Research analysis.
Total
100%
Clinical &GeneralLabor, Other
45%
Others
15%
Logistics & Distribution
15%
Total Cost Incurred by Hospitals
Supply Chain Management
To a tipping point size slice: >50% of the budget
SUPPLY EXPENSE MANAGEMENT STRATEGIES
• Reduce product pricing• Leverage total volume with single supplier• Utilization/renegotiation of corporate contracts• Assessment/reduction of value add costs• Utilization of bid process
• Increase inventory turns• Par Levels• Ordering frequency, volume
• Product standardization• Fewer items• Leverage to sole source
• Increase budgetary accountability at department level
SUPPLY EXPENSE MANAGEMENT STRATEGIES (CONTINUED)
• Product utilization review…Physician Preference Items (PPI)• Use of clinical pathways• Quantity of items used• Type of items used• Alternative procedure
• Utilize a Value Analysis approach for product selection• Based on matching (not exceeding) the quantity and
quality of resources to the required outcome
TOTAL SUPPLY EXPENSE DRIVERS IMPACT, MANAGEABILITY
• Patient acuity• Procedure volume• Patient care protocols/clinical paths• Technology• Product quality• Product brand• Price inflation• Procurement proficiency
Source: Sargent & Smith-Daniels
APPROACHES CONSIDERED or TAKEN to IMPROVE PROFITABILITY
• Enhancing collaboration with physicians in supply standardization and expense reduction
• Identifying appropriate metrics to benchmark the organization’s supply chain performance
• Decreasing direct/off-contract ordering
• Initiating a value analysis process
• Achieving minimum total expense for specialty/physician preference supplies (e.g., stents)
AHRMM Survey 2008
’08: Improving Profitability By Supply Chain
C-Suit
eSC E
xecs
1 1
2 5
3 6
7 2
6 3
PREPARING FOR HEALTH CARE REFORMRECOMMENDATIONS FOR ACTION
1. Read the actual law in a PDF format and search for terms that are relevant to materials management like value-based purchasing.
2. Draw out a timeline of when specific provisions impact your work.
3. Develop a concrete action to address each provision outlined the health care bill.
4. Identify your stakeholders by formulating a stakeholder map and ask the question: How will the healthcare law impact our key stakeholders?
5. Formulate at least three scenarios for your materials management function including the following:
A. The Ideal CaseB. The Most Probably CaseC. The Nightmare Case
RECOMMENDATIONS FOR ACTION
6. View your action plan as a change management initiative using Kotter’s Model of Change.
7. Be sure that materials management is positioned not only as a cost-center but also as a center of value.
8. Innovate your organizational structure, work processes, administrative processes, supply chain processes, and business model.
9. Persuade the CEO to have a board committee on strategic supply chain.
10.Enlist clinicians to advocate for the value of materials management but be prepared to give up some control for enlisting clinicians.
KOTTER’S CHANGE MODEL
• 1) Establishing a sense of urgency• 2) Creating the guiding coalition• 3) Developing a vision and strategy• 4) Communicating the change vision• 5) Empowering broad-based action• 6) Generating short-term wins• 7) Consolidating gains and producing more
change• 8) Anchoring new approaches in the
culture
DO YOU HAVE CAREER INSURANCE?