Employer Led Innovation for Healthcare Delivery and Reform. FEI April 12, 2016

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1 Employer Led Innovation for Healthcare Delivery and Reform FEI April 12, 2016

2 Why Focus on Healthcare? 18% of GDP (rising to 20%) Extreme demographic pressures domestically Passage and Implementation of ACA A significant technology component to the spend Medicare Trust Fund projected to be insolvent in 2026 State s budgets are strained by the HC spend Most significant reason for personal bankruptcy The Corporate situation is not much different! Page 2

Finances Health Spending on the Rise Again Annual Growth in National Health Expenditures 10% U.S. Health-Care Spending Is on the Rise Again 9% 8% 7% 6.5% 6.

0% 2% Health Spending Is Rising More Sharply Again 1% 0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 Page 3 Source: Altarum Institute, Health Sector Trend Report, March 2015, accessed April 2015;

3 Finances Health Spending on the Rise Again Annual Growth in National Health Expenditures 10% U.S. Health-Care Spending Is on the Rise Again 9% 8% 7% 6.5% 6.3% 6% Health care spending growth hits 10-year high 5% 4% 3% 4.8% 3.8% 3.9% 3.9% 4.1% 3.6% 5.0% 2% Health Spending Is Rising More Sharply Again 1% 0% Page 3 Source: Altarum Institute, Health Sector Trend Report, March 2015, accessed April 2015; Tozzi J, U.S. Health-Care Spending Is on the Rise Again, Bloomberg Businessweek, February 18, 2015, available at: Davidson P, Health care spending growth hits 10-year high, USA Today, April 1, 2014, available at: Altman D, Health Spending is Rising More Sharply Again, The Wall Street Journal, February 27, 2015, available at: Health Care Advisory Board interviews and analysis.

4 Primary Care Network A Growing Network of Immediate Access Choices 4 Markets Responding to Unmet Needs Consumer-Oriented Service Delivery Sites Filling the Gap Traditional Access Points Primary Care Office Low Acuity High Acuity Emergency Department (ER) Consumer- Oriented Access Points Virtual Visit Retail Clinic Urgent Care Center Page 4 Source: Mehrota A et al, "Visits To Retail Clinics Grew Fourfold From 2007 To 2009, Although Their Share Of Overall Outpatient Visits Remains Low," Health Affairs, August 2012; Health Care Advisory Board interviews and analysis.

Despite Predictions, Networks Remain Narrow Insurers Betting Consumers Will Continue to Trade Choice for Price Narrow Network Plan Designs Continue to Dominate Exchange Marketplace Network Breadth in

5 Despite Predictions, Networks Remain Narrow Insurers Betting Consumers Will Continue to Trade Choice for Price Narrow Network Plan Designs Continue to Dominate Exchange Marketplace Network Breadth in Largest City of Each State Narrow Network Premium Advantages Increasing Over Time Median PMPM Difference For Products From the Same Payer and Product Type Ultra Narrow Narrow 22% 21% 38% 41% 11-17% Narrow network premium advantage in % Narrow network premium advantage in 2015 Few Buying-Up to Broad Networks Page 5 Broad % 40% 17% Consumers with narrow-network plans for year one that switched to a broad-network plan in year two Source: McKinsey & Co., Hospital Networks: Evolution of the Configurations on the 2015 Exchanges, April 2015, available at: Health Care Advisory Board interviews and analysis.

6 Employers Moving Away From the Traditional HMO Looking to Combine Network Advantages with Consumer Accountability Employers Looking to Narrower Networks Percent of Covered Workers Enrolled in a Plan with a $1,000+ Deductible 17% Employers with a high performance or tiered network in their largest health plan 9% Employer eliminated hospitals or health systems from their plans to reduce costs in % 17% 50% 49% 22% 26% 58% 28% 61% 17% 32% 63% 39% Small Firms (3-199 Workers) Large Firms (200+ Workers). Page 6 Source: Kaiser Family Foundation/Health Research & Educational Trust, Employer Health Benefits 2015 Annual Survey, September 2015, available at: Health Care Advisory Board interviews and analysis.

7 Status Quo and Next Generation Healthcare Page 7 Stakeholder Typical Status Quo Next Generation Employees Overwhelmed by choices and growing costs No visibility into quality and cost data Need help navigating healthcare system Unhappy with inefficiencies, long waits, paperwork, etc. Lack of incentives Employer Double-digit trends in annual healthcare costs Frustrated by lack of data Frustrated by lack of influence Limited data to understand improvements in employee health Comprehensive, evidencebased, coordinated care with prevention Efficient, high-quality healthcare experience Transparent data Meaningful financial and health incentives Personal health is expected, supported, and rewarded Compensation for value Patient centered medical home with qualified network Unified, real-time system with accessible data Effective collaboration with providers to drive change

options Constant employee premium contribution, low deductibles 1 Growing number of buyers 2 Proliferation of product options 3 Increased transparency 4 Reduced switching costs 5 Greater consumer

8 Patients 8 Market Forces Turning Patients into Consumers Catalyzing a Shift in Network Demands Characteristics of a Traditional vs. Retail Market Page 8 Traditional Market Passive employer, price-insulated employee Broad, open networks No platform for apples-toapples plan comparison Disruptive for employers to change benefit options Constant employee premium contribution, low deductibles 1 Growing number of buyers 2 Proliferation of product options 3 Increased transparency 4 Reduced switching costs 5 Greater consumer cost exposure Retail Market Activist employer, price-sensitive individual Narrow, custom networks Clear plan comparison on exchange platforms Easy for individuals to switch plans annually Variable individual premium contribution, high deductibles Source: Health Care Advisory Board interviews and analysis.

Activist Employers Investing in a Range of Tools Four Primary Models for Controlling Employee Utilization Manage Costs at Point of Network Assembly The One- Stop Shop ACO networks: Employer contracts

9 Activist Employers Investing in a Range of Tools Four Primary Models for Controlling Employee Utilization Manage Costs at Point of Network Assembly The One- Stop Shop ACO networks: Employer contracts with single delivery system based on promise of reduced cost trend Manage Costs at Point of Referral, Point of Care The Accountable Physician The Neutral Third Party Enhanced primary care: Employees directed to PCPs with proven ability to reduce utilization, refer responsibly Personal health navigators: Guide employees through all health care related decisions, refer to high-value providers The Second Opinion Specialty carve-out networks: Employees evaluated against appropriateness of care criteria, sent to centers of excellence Page 9 Source: Health Care Advisory Board interviews and analysis.

10 What is an ACO? As the concept of healthcare value becomes more prominent, healthcare providers will increasingly need to focus on the whole patient or on populations of patients, encouraging and requiring teamwork among clinicians across specialties, as well as coordination among clinical care units and healthcare organizations of all types across the continuum of care (e.g., physician groups, hospitals, health systems, payers, and vendors). This will require all parties to relinquish their traditional siloed views and adopt a more expansive and collaborative model of care delivery respecting the talent and experience brought to the table by all stakeholders. The need for this level of collaboration and coordination has led to the concept of the Accountable Care Organization (ACO). The goal of coordinated care is to ensure that patients, especially the chronically ill, get the right care at the right time, while avoiding unnecessary duplication of services and preventing medical errors. When an ACO succeeds both in delivering high-quality care and spending health care dollars more wisely, it will share in the savings it achieves for the Medicare program. Page 10

Key Clinical Management Activities PRIMARY CARE HOSPITAL SKILLED

for urgent needs Patient centered medical home Proactive health

to lower cost, in network hospitals Dedicated hospitalists

Aggressive case management Pharmacy Steer patients to lower

innetwork SNF, TCU, rehab SNFist manage nursing home care with

management, patient navigator Home visits grow Hospital RX

11 Key Clinical Management Activities PRIMARY CARE HOSPITAL SKILLED NURSING FACILITY HOME CARE TELEHEALTH Real time MD availability for urgent needs Patient centered medical home Proactive health management Urgent care, walkins, retail clinics Enure admission to lower cost, in network hospitals Dedicated hospitalists optimally manage care Steer patients to lower levels of care Aggressive case management Pharmacy Steer patients to lower levels of post acute care Ensure admission to lower cost, innetwork SNF, TCU, rehab SNFist manage nursing home care with PCP Rehab management Robust in home training in disease self management, patient navigator Home visits grow Hospital RX TeleHealth for sickest patients In-home monitoring Post-admission follow-up and tracking Page 11

12 Employer sponsored ACO The employer-sponsored segment of commercial insurance business is substantial and could be leveraged into an ACO. Under the ACA, there are increased uncertainties and escalating costs for employers that continue to offer a group health plan. Employers are looking to establish direct relationships with medical providers to improve quality and reduce costs Employers are becoming more frustrated with the lack of information when rate increases are being presented Employees from the fully-insured marketplace are looking at self-funding alternatives Employees are increasingly becoming less satisfied with their health benefit plans Very little risk management exists in the marketplace to manage and understand the key elements affecting healthcare quality and cost By becoming active participants in the emergence of Accountable Care Organizations, employers can shape ACO priorities and business decisions and thereby secure potential value for their own organizations. Page 12

13 Delivery Method Changes Physicians Self Insured Fully Insured Employer Hospital Health Plan Page 13

14 Employer sponsored Health Clinics Interest in onsite clinics is linked to greater demand for workplace wellness programs an interest shared by both employers and policy makers as the ACA includes provisions that may encourage more employers to offer wellness programs. Motivations for implementing health clinics: Contain direct medical costs Specialist visits Non-generic prescriptions ED visits Avoidable hospitalizations Managing chronic conditions Boost productivity and reduce absenteeism Improve access to and quality of care Improve care coordination Improve employee recruitment and retention Page 14

15 Direct to Employer Contracting An ACO can take advantage of current market conditions by developing a direct to employer contracting strategy. Key benefits may include: Securing direct reimbursement terms through gain sharing, plan management revenues, increased revenues through payment of certain disease management regimens of care, and reduction in outmigration of services through plan design and plan steerage Directly having a voice in the development of protocols and procedures with regard to case management, regimens of care, referral authorizations, plan design parameters and use of nurse managers to effectively engage in population health management in order to positively impact employers' healthcare budget. Disintermediate commercial payers in order to better negotiate current reimbursement contracts Page 15

16 Case Study Examples Boeing Boeing offered 27,000 of its employees in 2015 the option of joining health plans under new accountable care contracts through three health systems in Washington state, with financial incentives to encourage ACO use. Goal: Lower costs for employees and Boeing by incentivizing wellness and coordinated care. Reduce confusion that often comes with dealing with third parties. Intel Intel Corp. last year contracted directly with Presbyterian Healthcare Services in Albuquerque to provide health benefits for its manufacturing employees. As part of the ACO arrangement, Presbyterian and Intel share financial risks and rewards if results exceed or fall short of specific care, cost and performance targets they set. Intel employees chose from 11 medical practices, including Intel s onsite clinic, which is managed by Presbyterian. One year after its inception, 60 percent of Intel s New Mexico employees remain enrolled in the ACO and 98 percent of those are satisfied with the quality of their care. What of this is a tipping point for employer activism? How will providers participate? What are the care delivery requirements? Page 16

17 What Can Employers Do Today? Employers will remain the primary avenue through which the majority of working-age people receive their health insurance Employers can have varying levels of influence on ACO development although any influence can be a win Directing members to more efficient health providers will benefit the bottom lines of both employers and Accountable Care Organizations. Employer participation in accountable care has the potential to help drive ACO development in a direction that will more fully meet the needs of the employer community. With employers, health plans and provider systems all aligning priorities to achieve similar results, delivery systems can become more efficient and affordable. 1. Options to participate in ACO development depend upon specific circumstances and size 2. Direct employees to more efficient providers 3. Attempt to increase your share of the market 4. Get involved help guide the pace of change Page 17

18 Conclusion While many are thinking about minimizing healthcare costs in the short run, BDO Healthcare advocates employers to think strategically about how to use the value of employee health to achieve desired business objectives. Healthcare is no longer just a cost Health is a top-line business performance issue Employers have a stake in keeping their employees healthy Critical decision making about managing workplace health and performance is necessary Page 18

19 Thank you Randy Zarin, MBA, MPH, CPA Managing Director BDO Center for Healthcare Excellence & Innovation (713)

Accountable Care Organizations

Accountable Care Organizations Randy Wexler, MD, MPH, FAAFP Associate Professor Vice Chair, Clinical Services Department of Family Medicine The Ohio State University Wexner Medical Center Objectives To