the future of health care: a prognosis for 2016
TRANSCRIPT
The Future of Health Care:
A Prognosis for 2016Ed Park
Chief Operating Officer
2
4
Agenda
1 Macro Trends
Purchaser response
Provider strategies
2
3
Macro trends
“Personal health care costs rose in the 12 months ending in May at the slowest rate in the last 50 years, as spending on hospital and nursing home services declined.”
–USA Today, July 29, 2013
6
Source: CMS, WSJ
Healthcare cost inflation has been tracking to a historic low
Care is moving out of the hospital while outpatient visits continue to rise
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35
30
25
20
15
10
5
0
-5
-10
-15
-20
v vv v v
v
vv
vv
vv 33%
-17%
Outpatient services per FFS Part B beneficiary
Inpatient discharges per FFS Part A beneficiary
v
v
v
v
Fiscal year
Cum
ulat
ive
perc
ent c
hang
e
vv
20062007
20082009
20102011
2012 2013
Medicare enrollment project to grow rapidly as members
of the baby-boom generation age into the program
Source: 2014 annual report of the Boards of Trustees of the Medicare trust funds, https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/downloads/tr2014.pdf.
100
90
80
70
60
50
402015 2020 2025 2030 20402035 2045 20502010
Num
ber
of b
enefi
ciar
ies
(in m
illion
s)
10,000 people will enter Medicare every day for the next 15 years
8
Source: http://www.realclearpolicy.com/blog/2012/05/
30%
25%
20%
15%
10%
5%
0
19703.9%
201110.4%
208525.7%
< Social Security
< Medicaid, ObamacareSubsidies, CHIP
Actual Projected
ActualRevenue
Average HistoricalRevenue;
18.1%
2045: Entitlement spending matches tax revenue average
1970
1980
1990
2000
2010
2020
2030
2040
2050
2060
2070
2080
2090
< Medicare
And overall, we’re still on pace to bankrupt the U.S.
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Government“public purchasers”
The Grand Bargain of the ACA is to expand coverage while reducing Medicare rates
-575.1
11
On the coverage side, there is increasing enrollment in the public exchanges…
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Expanding Medicaid
28States plus DC
ConsideringExpansion
5States
Not Expanding Medicaid
17States
Source: The Advisory Board Company.
…and Medicaid expansion continues to (selectively) move forward…
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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
0%
4%
8%
12%
16%
20%17.5% 17.3% 16.9% 16.3% 16.8% 17.1%
18.0%17.1%
15.6%
13.4% 13.4% 12.9%11.9%
Source: http://www.gallup.com/poll/182348/uninsured-rate-dips-first-quarter.aspx
1 December 2013 to September 2014.
Lowest Uninsured Rate on RecordPercentage of U.S. Adults Without Insurance, by Quarter
34%Decrease in Proportion of
Uninsured Visits on athenaNet1,
ExpansionStates
10%Decrease in Proportion of
Uninsured Visits on athenaNet1, Non-Expansion
States
…resulting in the lowest uninsured rate on record
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Physicians providing care to Medicare patients could face a “tsunami” of regulatory penalties over the next 10 years, potentially seeing payments cut by more than 13 percent by the end of the decade.
- American Medical Association
On the other side of the ledger, the promised cuts are coming!
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By 2018, the Obama Administration wants 50% of all Medicare payment to flow through value-based entities
like ACOs, up from 30% today. 90% of payments to be tied
in some way to quality.
In January, CMS signaled that it would get more aggressive about making good on the promised cuts
16
In July, CMS announced mandatory bundles in some areas through the Comprehensive Care for Joint
Replacement Initiative
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LET’SGEEKOUT
http://medicaleconomics.modernmedicine.com/medical-economics/news/top-5-financial-challenges-facing-physicians-2015?page=full
The carrots are becoming sticks – CMS has shifted to Penalty for Performance for PQRS and
MU
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Your Performance: Average Quality, Average Cost
Each year a Quality and Resource Use Report (QRUR) comes out where CMS uses practice’s data reported from PQRS to
show you where you fall in terms of performance.
A new program, the Value-Based Modifier (VM) is an adjustment that builds on top of PQRS
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Quality
Cost
Low Avg High
Low 0% +2.0% +4.0%
Avg -2.0% 0% +2.0%
High -4.0% -2.0% 0%
Groups with
10+ EPs
Quality
Cost
Low Avg High
Low 0% +1.0% +2.0%
Avg 0% 0% +1.0%
High 0% 0% 0%
With the VM, depending on how you place in the QRUR, a penalty or bonus will be applied your fee
schedule
Groups with <10 Eps &
Solo EPs
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http://www.ama-assn.org/resources/images/washington/medicare-sgr-penalties-850x1100.jpg
Year Deficit E-prescribing Health information
Physician quality reporting system, including Maintenance of Certification (MOC) Program
Value-based modifier (budget neutral increases and decreases in payments based on cost/quality data measures from 2 years earlier)
Total possible paymenty cuts including sequester
2014 (-2%)* (-2%) $4-12K 0.5% if no MOC:1%if MOC (-4%)
2015 (-2%) $2-8K (-1 to 2%) (-1.5%)
(-1.5%) Applied to groups of 100 or more/2013 data**
(-5.5% to 6.5%)
2016 (-2%) $2-4K (-2%) (-2%) (-2%) Groups of 10 or more/2014 data ** (-8%)
2017 (-2%) (-3%) (-2%) (-4%) all physicians/2015 data** (-11%)
2018 (-2%) (-3%) (-2%) (?) all physicians/2016 data**
(-12%) or more
2019 (-2%) (-3%) (-2%) (?) all physicians/2017 data**
(-13%) or more
*Red text indicates penalties, black text indicates bonuses. ** 2017 marks the third year that the VBM will be applied; the magnitude of the adjustments that will be made in future years is determined through annual rulemaking. Since adjustments have doubled each year since the VBM was first implemented, the potential for increasingly severe cuts in 2018 and beyond is significant. Some physicians will qualify for payment bonuses of an amount not yet known.
2017 (-2%) (-3%) (-2%) (-4%) (-11%)
There is 11% downside to 2017 Medicare payments based on 2015 performance!
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Source: http://www.healthcare-informatics.com/article/breaking-president-obama-signs-sgr-repeal-legislation-shifting-medicare-physician-payment-in
And the rules will keep changing… in 2019, as part of the SGR fix, MU+PQRS+VBM will be rolled into the
Merit-Based Incentive Payment System
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MU
VM
Source: The Medicare Access and CHIP Reauthorization Act of 2015; Advisory Board analysis.
Under MIPS, the swing in Medicare FFS rates will increase to 36% by the year
2022
Merit-Based Incentive Payment System1
2020: -5% to +15%
2019: -4% to +12%
2022 and on: -9% to +27%
2021: -7% to +21%2018: Last year of separate
MU, PQRS, and VBM penalties1. Positive adjustments may be scaled by a factor of up to 3 times the negative adjustment to ensure budget neutrality. Actual positive adjustments may be lower than numbers shown here. In addition, top performers may earn additional adjustments of up to 10 percent.
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Source: The Medicare Access and CHIP Reauthorization Act of 2015; Advisory Board analysis.
Starting in 2019, groups can opt out of MIPS if 25% of their revenue is Medicare AND they enter an
alternative model like MSSP
2.APM participants who are close to but fall short of APM bonus requirements will not qualify for bonus but can report MIPS measures and receive incentives or can decline to participate in MIPS.
2019 - 2024: 5% participation bonus2019 - 2020: 25% Medicare revenue requirement
2021 and on: Ramped up Medicare or all-payer revenue requirements
Advanced Alternative Payment Models2
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MIPS
MSSP
The Medicare Shared Savings Plan (MSSP) has its own set of complex rules
www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Downloads/RY2015-Narrative-Specifications.pdf
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As an ACO, quality hurdles must be met across 33 measures to obtain any savings realized in the MSSP
program.
Patient/Caregiver Experience1
Care Coordination2
Preventative Health3
At-Risk Populations4
The Medicare Shared Savings Plan (MSSP) has its own set of complex rules
www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Downloads/RY2015-Narrative-Specifications.pdf
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http://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/downloads/Evaluation_Risk_Adj_Model_2011.pdf
Hypothetical example of CMS-HCC (version 12) expenditure predictions and risk score
community-residing, 76-year-old woman with AMI, angina pectoris, COPD, renal failure, chest pain, and ankle sprain
Risk marker Incremental prediction
Relative risk factor
Female, age 75-79 $3,409 0.457Acute myocardial infraction (HCC 81) $2,681 0.359Angina pectoris (HCC 83) $0 -Chronic obstructive pulmonary disease (HCC 108) $2,975 0.399Renal failure (HCC 131) $2,745 0.368Chest pain (HCC 166) $0 -Ankle sprain (HCC 162) $0 -Total $11,810 1.583
And regardless of model, providers will need to master HCC risk adjustment
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Employers(“private purchasers”)
Average Annual Worker and Employer Contributions to Premiums and Total Premiums for Family Coverage,
1999-2013
*Estimate is statistically different from estimate for the previous year shown (p<.05).Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2013.
199920002001200220032004200520062007200820092010201120122013
$1,543$1,61
9$1,787*
$2,137*
$2,412*
$2,661*
$2,713
$3,281*
$3,354$3,515$3,997*
$4,129$4,316
$2,973*
$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*
$4,247* $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*
Worker ContributionEmployer Contribution
Employer healthcare costs have tripled over the last decade
$4,565 $11,786* $16,351*
34
35
The Health Care Cost Crunch, 1999-2013
Source: Kaiser Employee Benefits Survey, 2013; median wage from EPI analysis of CPS
$20,000
$16,000
$12,000
$8,000
$4,000
$0
1999 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 premiumAverage 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
The dominant response so far has been higher deductibles
36
Source: Accenture Private Health Insurance Exchange Consumer Research
But trade-offs will become more complex% of respondents willing to accept tradeoff for reduced monthly premium
Higher Deductible
78%
Greater Cost Sharing
(e.g., Copay)
23%75%
Wellness Program
Participation
26%
Less Network Flexibility
25%
Fewer Services Covered
With 6 million enrollees for 2015, according to Accenture, a prominent management consulting company, private-exchange enrollment has doubled since 2014. May 2015
http://www.heritage.org/research/commentary/2015/5/a-health-care-revolution-on-private-exchanges
Source: Accenture analysis, based on data from : U.S. Census, Bureau of Labor and Statistics, Kaiser Employer Health Benefits Annual Survey. Calculation includes pre-65 employees and dependents.http://www.accenture.com/us-en/Pages/insight-private-health-insurance-exchange-annual-enrollment.aspx
2014 2015 2016 2017 20183 6
12
22
4040
30
20
10
0
Enro
llmen
t (M
illion
s)
EstimatedProjected
This trend towards private exchanges will likely continue to skyrocket
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The Cadillac Tax begins to reverse healthcare as an
employer-sponsored pre-tax expense
Effective 2018, the Cadillac Tax, a 40% corporate tax on benefits above a threshold, will push employers
towards exchanges
41
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And the beat goes on-- narrow networks are increasingly prevalent in the exchange market,
offering a new litmus test
Source: McKinsey Center for U.S. Health System Reform/McKinsey Advanced Healthcare Analytics analysis of publicly available rate filings and carrier information; AHA database, Data as of 11.15.2013, McKinsey & Company.
70% of hospital networks on
exchanges are narrow or
ultra-narrow
Ultra-narrow38%
Narrow32%
Broad30%
Distribution of networks by network breadth1
2014 individual exchange – Percent of analyzed silver networks (n = 1202)
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Provider Strategies
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
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 and takes on significant risk
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 group that focuses on doing a few things really, really well
49
A fourth option, virtual networks, is being enabled as the floodgates
are open on interoperability
• Demographics• Referral Reason
(Referral)• Plan of Care• Reasons for Visit• Instructions (Discharge)• Insurance• Problems• Medications• Allergies
CCDA Content (MU2 Standard)• Immunizations• Diagnostic
Results• Vitals• Procedures• Encounters• Advance
Directives• Social History• Family History• Cognitive Status
The hole in the dike was Meaningful Use, which standardized key vocabularies
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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 unified view of the patient, the holy grail of healthcare IT, is within reach
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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
4These advances in interoperability will enable a strategy based on technology-enabled partnerships
We have been pushing forward aggressively with Epic, Cerner, and Meditech on interop
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The Argonaut Project
54
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The newest battleground is patient access
6 OF TOP 10 FEATURES ON
ACCESS, CONVENIENCE
Service • Provider education on illness and wellness • Provider continuity
Affordability • In-network status • Eliminated out of pocket charges
Access, Convenience •Walk in availability, less than 30 minutes wait • Lab tests. X-rays, pharmacy onsite • 24/7 access • Same day appointment availability •Geographic proximity
SOURCE: The Advisory Board Company
Avg. wait time under
8 min.Avg. door to door time for patients is
45 min.Patients register via mobile tablet, saving
2½ minutes per patient
⅕ the cost of the ED
Retail clinics are growing at a blistering clip
The Growth of Retail Clinics
Source: Merchant Medicine LLC.
2007 2008 2009 2010 2011 2012 2013 2014 2015 -
500
1,000
1,500
2,000
Year
Reta
il Clin
ics a
t Sta
rt o
f Yea
r
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Urgent care is growing explosively as well
The Growth of Urgent Care Centers
Source: Estill Advisory Group Research
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E 2017E 4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
Year
Num
ber o
f Urg
ent C
are
Cent
ers
61
This surge in access is funded by big backers
62
And many health systems are launching their own branded urgent care centers
63
But retail/urgent is just the first salvo– telehealth is also coming of age
64
And telehealth platforms are rapidly increasing in sophistication
65
As patients take virtual care for granted, more complex cases will inevitably be
handled
66
And consumers will demand apps that are every bit as polished as any other consumer-native app
Quick Stats:
• 6,380 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
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We are still in the early innings, but this is all unfolding faster than many
expected
68
And radically increased levels of funding will continue to fuel the patient-as-consumer rocket
Private-equity and Venture Capital Activity in Health IT
and related Services since 2008 (1)
(1) Chart summarizes private-equity and venture capital activity in health IT and related services since 2008, according to the Healthcare Growth Partners database. The data do not include buyout private equity activity. Source: Healthcare Growth Partners Health IT & Health Information Services 2015 Midyear Market Review.
$8000
$7000
$6000
$5000
$4000
$3000
$2000
$1000
$0
Total Transaction Value ($mm)Number of Transactions
Num
ber
of T
rans
acti
ons
Total Transaction Value
450
400
350
300
250
200
150
100
50
02008 2009 2010 2011 2012E 2013 2014 2015P
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Value-based payments (MU, PQRS/VBM, MSSP, MIPS, etc.) are here to stay1
Advances in interoperability are allowing for new kinds of partnerships2
The patient-as-consumer movement is rapidly unfolding– developing an intentional strategy for this is crucial3
Key Takeaways
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Thank You