title slide jun 8 – 10, 2015 healthcare captives
TRANSCRIPT
Title Slide
JUN 8 – 10, 2015
www.bermudacaptive.bm
Healthcare Captives
Healthcare Captives
Speakers:
• Susan Pateras, SVP, Healthcare Practice Leader, Iron-Starr Excess Agency Ltd.
• Kim Morgan, SVP, Healthcare Practice Leader Bermuda, Endurance
• John Littig, Stanford University Medical Network (Aon Client)
Moderator:
• Nancy Gray, Regional Managing Director – Americas, Aon Captive & Insurance Management
Captive Growth
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
1000
2000
3000
4000
5000
6000
7000
8000
4659 46884881 4951
5119 5211
5525 55875831
61256420
6876
Source: Business Insurance – March 16, 2015
Captives by Industry Groups
Healthcare – Lines of Business Written
...means healthcare is
• Big news
• Big business
• Experiencing transformational change
and fundamentally challenging the insurance market’s ability to adapt and respond.
The New Normal for Healthcare…
Healthcare is big news.
US HEALTH CARE SYSTEM WASTES $750B A YEARHospitals consider benefits, risks of becoming insurers too
Tuits, Vanguard Mass. Doc Network in TalksHealthcare Partners acquires N.M. medical group
STRONG HEADWINDS CONTINUEMedicare Penalizes Hospitals Over ReadmissionsA GIANT HOSPITAL CHAIN IS BLAZING A PROFIT TRAILSupreme Court Ruling Allows States to Opt out of Medicaid Expansion
• Healthcare is America’s largest industryo Employs a sixth of the Country’s workforce
• America’s total healthcare bill for 2014 was approximately $3 trilliono More than the next ten biggest countries combinedo We spend $8.5 billion treating back paino There are 31.5 MRI machines per million people in the U.S. but 5.9 per
million in Englando We spend $17 billion a year on artificial knees and hips which is 55% more
than Hollywood takes in at the box officeo Medicare’s drug purchasing costs are $40 billion a yearo Approximately $65 billion was spent last year on blood, urine and other
routine lab tests
• 75% of America’s 5,700 hospitals are non-profit organizations
Healthcare is big business.
Healthcare is BROKEN…..
• Fee for Service vs Quality
• Lack of coordination
• Level of uninsured's
• Chronic Diseases unmanaged
Healthcare - in a state of transition
• The system isn’t really a systemo A system defined as a group of interrelated or interdependent
elements forming a complete wholeo Today’s healthcare system remains a highly fractured, costly,
poorly coordinated approach to care delivery
…However,
The goal is to become a highly coordinated system of providers supported by a common electronic backbone, compensated on outcomes based on efficient, high quality care and service while broadening access to care.
The New Normal for Healthcare
The Healthcare system is experiencing transformational change, but…
Achieving the goal requires fundamental
change.
The New Normal for Healthcare
• As the nation navigates healthcare reform, one of the key strategies they will deploy is integration.
• Successful health systems will need to achieve an “essential” market position to drive revenues and achieve scale.
o They will integrate physicians to support quality and cost initiatives.o They will need to be able to demonstrate value to employers and
payors.o They will need to align with other providers to enable patients to move
seamlessly across multiple care sites.o They will need to possess sophisticated IT and care management
infrastructures.o They will need to have access to capitol to fund increasing capital
expenditure requirements.
The New Normal for Healthcare
How will successful organizations adapt?
• New and emergent• Challenge existing standards of care• Extend across multiple product lines• Often emerge from a convergence of factors and dynamics that
historically were not related
Success in the “new normal” of healthcare requires a deep understanding of the contextual drivers in how healthcare organizations are likely to
change and adapt in a post ACA environment.
The New Normal for Healthcare
The risks associated with increasingly complex healthcare delivery are:
• A broad, multi-state geographical footprint• Multiple hospital locations, including specialty hospitals and teaching
facilities• Outpatient clinical services• Physician practices• Managed care health insurance products and services• Complex “at risk” reimbursement• Long term care facilities• Self funded employee healthcare benefits• Sophisticated risk transfer structures: captives, self-insured retentions,
and other alternative finance vehicles
The New Normal for Healthcare
Can our industry respond to increasingly integrated, complex healthcare delivery systems whose business models include the following?
New World … Emerging Risk
Client Need
Breadth of Coverage &
Contract Certainty
Credentialing
Supervision
Tort Environment
Standard of Care
• Protocols
Electronic Health
Records
Key Force
Key Force
Clinical Integration
Accountable Care and
Continuum of Care
Revenue and
Expense Controls
Quality and
Outcomes
Evolving Landscape
Risks
Utilization Review
Negligence
Gatekeeping
Discrimination/ Misconduct
Privacy & Network
Regulatory
Stop Loss
Reimbursement Rate
?
Emerging Claim Trends
1. BATCH , or multi claimant losses
o Last 24 months : 2 batch claims paid for total of $290M (all carriers)
• Allegation types:o Improper Supervision/Credentialingo Infection Controlo Sterilizationo Privacyo Supply Chaino Drug Diversion/Patient Infectiono Equipment Erroro Medical Study Errors
Emerging Claim Trends• Why now?
o Common coverage
o Greater recognition of root cause events affecting multiple patients
o Follow on actions from regulatory investigations/Medicare overbilling
o Plaintiff Attorney Recognition of Batch Coverage
• Variables Affecting Settlement Values
o # of potentially affected patients
o Recognition of “fear of” claims
o Potential for losses to exceed limits
o Venue; caps; community perceptions
o Aversion to headline risk
• Lesson : Focus on physician behavior
Emerging Claim Trends
2. Sepsis/Multiple Amputation Cases
• Significant increase in #’s reported in last 3 yearso Failure to diagnose in ERo Hospital Acquiredo Admissions with Sepsis
• Typical settlement range $10M up to … $17.8M; $19.9M, $32M, $17.7Mo 2 Verdicts in Fla of $30M
• Why Now?o Providers are salvaging patients that as recently as 5 years ago were not salvageable, but
with significant cost in terms of loss of limbs and or organs, kidneys in particularo Antibiotic resistance is making treatment more difficulto There are simply more septic patients
• Lesson: Focus on quick identification and sepsis bundles
Emerging Claim Trends
3. Electronic Health Records
• Despite the significant technological and clinical improvements by virtue of data to help diagnose and treat as well as provide alerts and hard stops, EHR’s are proving complex systems from a liability perspective – kinks still being worked out
• Provides plaintiff more information, eg when records are altered, alerts silenced
• Training Issues
• System Issues – difficult to print chart
• Too many drop downs, auto carry through, cut and paste
• Just one example of unintended consequences and there will be more in this changing environment …
Integrated Product
POTENTIAL
NEW
PRODUCTS
????
21
PRIVACY &
NETWORK
LIABILITY
FIDD&O/EPL
HPL
Pt. GL
MCE&O
GLAUTO
ELNON-
OWNED AIRCRAFTHELIPAD
EXCESS
The Risk Authority
We believe in inspiring tomorrow’s risk management leaders by providing exposure to dynamic, innovative strategies that help organizations leverage
and expand the value of their risk management investments.
TRA Structure
Value Driven Enterprise Risk Management
• Builds on the “core” of Traditional & Enterprise Risk Management
• Uses data and decision science in the risk process to create risk intelligence.
VDERM
- $ +-
p
VALUE PROTECTION VALUE CREATION
Current State Future State
VDERM Tool Kit
ERM Decision Analysis
Design Thinking
Risk Management Strategies
Risk Identification Loss Prevention Loss Mitigation
APS
Safe Patient Handling
Risk Education
Stanford Risk Assessments
Physician Peer Support
PEARL
Simulation
ERM ISO 31000
Value Protected & Value Created
Risk InterventionsExample: Safe Patient Handling
IDENTIFY Data review indicated escalation in Workers’ Compensations costs over 2 year period. Survey indicated decreased compliance with utilization of patient handling equipment.
ASSESS WC data indicated repositioning, transporting, lifting patients accounted for 70% of costs. Literature revealed potential >70% reduction in patient & RN injuries, >15% reduction in nursing turnover, >90% savings in lost work days, if robust Safe Patient Handling program was implemented.
EVALUATE Total Value ROI for institution-wide program calculated as $5.18M.Included expected savings in workers’ compensation claims, reduction in nursing turnover, increase in patient satisfaction, reduction in lost & restricted days, and other factors.
MITIGATE Developed and implemented “Lift Coach” pilot program in high risk area, including experts to conduct bedside training, rounding, inventory management and patient care assists.
MONITOR Results from April 1 – August 31, 2015: • 91% decrease in patient handling injuries; 100% decrease in
lost work days and 99% decrease in restricted work days due to patient handling injuries, 30% increase in compliance.
• Received approval to proceed with institution-wide program.
Risk InterventionsExample: TRANSFORM Program
IDENTIFY Patient Harm• Severe sepsis/shock rate: 1.78*• Acute Respiratory Failure rate: 2.44*
ASSESS Incident review revealed lack of early recognition and early intervention.Team Communication was major contributing factor.Only 30% of clinicians had prior simulation experience.
EVALUATE
Developed TRANSFORM program for in-situ team training using microsystem theory. Expected outcomes: decreased hospital-acquired complications, unplanned transfers, O:E Mortality, improved safety culture.
MITIGATE Program implemented: Initial Team Training, Simulated Practice, Group Reflection, Daily Practice.Achieved 90% first time participation in Team training, enabled critical mass participation with feedback regarding team performance.
MONITOR Correlated improvements in patient harm over 3 years:• Severe sepsis/shock rate: 0.21*• Acute Respiratory Failure rate: 0.21*
• Weighted O:E Mortality: 0.5• AHRQ Safety Culture rating:
66.3%
• Weighted O:E Mortality: 0.4
• AHRQ Safety Culture: 83.3%
*complications per 1000 unit discharges
Risk InterventionsExample: Patient Advocacy Reporting Systems
IDENTIFY Vanderbilt study indicated ~2% of patients injured due to negligence sue; non-$ factors motivate patients to sue; some physicians attract more suits; unsolicited complaints/concerns are predictive of claims.
ASSESS Comprehensive review and initial screen for high risk physicians at Stanford in 2009.Estimated ~15-20 physicians would qualify as high risk based on analysis of PARS® data and appropriate for committee consideration for intervention.
EVALUATE
Vanderbilt measured ROI with potential 49% reduction in risk management payouts for high risk physicians involved in the program.
MITIGATE Program rolled out via PARS Committee. Measured interventions implemented: Level I – III
MONITOR High risk physicians identified; 71% noted as improved (29% no longer need intervention).Decreased disruptive behavior and improving Professionalism.NB: Risk management ROI not measured by design.
Risk InterventionsExample: Obstetrics Simulation Program
IDENTIFY OB claim rate: 11 per year (2000-2005).$1.85 million average annual losses.
ASSESS Claims and Incidents data analysis reveal major contributing factors.• Clinical Judgment (Selection & Management of delivery) in
76% of cases.• Communication regarding patient’s condition was a major
factor in 60% of cases.
EVALUATE
Developed in-situ simulation program.Risk management data and input utilized to focus modules on high risk areas
MITIGATE Implemented in 2005, 30 drills per year, 2 hours per drill, covering 9 different scenariosChange in clinical protocols; space redesign
MONITOR Correlated reduction in OB-related claims: 8.3 claims per year for first 3 years of the program; 1.6 claims per year for past 7 yearsROI study from 2001-2011 calculated $700k per year less payouts 331% return on investment
SUMIT Loss Rate vs. AON HPL Benchmark
The graph shows Stanford loss rate vs Aon 2014 HPL Benchmark California & Teaching Hospitals Loss rate.
Red represents the total loss rate for Stanford.
Blue represents the total loss rate for Aon HPL Benchmark California
Green represents the total loss rate for Aon HPL Benchmark Teaching Hospitals.
Loss Rate = Ultimate loss at $15M divided by Occupied Bed Equivalents9/1/2005-06 9/1/2006-07 9/1/2007-08 9/1/2008-09 9/1/2009-10 9/1/2010-11 9/1/2011-12 9/1/2012-13 9/1/2013-14
0
1000
2000
3000
4000
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6000
Consolidated SUMIT Aon Benchmark: California
Aon Benchmark: Teaching Hospitals
Loss and Expense Payments Per Discharge
SUMIT Indemnity
Payments are
86% below the UHC average.
SUMIT’s combined costs
are 33% below the UHC
average.
SUMIT Data as of 2/28/2014
Indemnity Paid Loss and Expense Paid $-
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
$140.00
$160.00
$180.00
$200.00
UHC Average SUMITResults published: May 15, 2014
SUMIT Insurance Company Ltd.Claims and Litigation 35
UHC Claims Benchmarking Study
Combined Ratio:The sum of losses, loss adjustment expenses and captive expenses divided by net premium
Lower is better, values over 100% indicate an underwriting loss for the year, investment income is not considered
2008 2009 2010 2011 2012 2013 2014 Average
-20.0%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
57.9%
11.4%
110.4%
55.1%
108.7%
3.8%
45.9%
56.2%
SUMIT Combined Ratio
Expense Ratio (net of premium target premium credits) Loss Ratio
SUMIT Insurance Company Ltd.Risk Finance
SUMIT Financial Indicators
The New Normal for Healthcare
As the healthcare market continues to evolve at an
unprecedented rate with increased merger and acquisition
activity, alliances, and new ventures overshadowed by
increased government oversight, captives and companies
such as Endurance, Ironshore and Risk Authority will
continue to listen, explore and probe in order to develop
innovative solutions for today's needs as well as those that
may be on the horizon.