Innovative Business Activities in Health Care with Commercial Partners Steve Witman, CPA, MBA Vice President of Business Development / Financial and Capital Planning LifeBridge Health March 4, 2014
Business Development in Health Care Business development activities and responsibilities within the health care provider market are undergoing a Sea change in this era of market-driven and legislated health reform. The traditional role of health system business development involved: Expanding relationships with physicians (strengthening bonds with voluntary groups, employing hospital-based and some primary care and specialists) to drive patient volume. Program development for service line expansion, diagnostic testing, etc. Specialty and tertiary clinical program development with community hospitals. 1
Business Development in Provider Health Care The hospitals have been the traditional drivers of the process: Employ or contract with physicians Offer the most comprehensive services to the patients Drive mostly inpatient and less outpatient services While quality was important, the volume drove reimbursement Operated in silos 2
A Little History Looking back in time, the Clinton administration s attempt in the 1990 s to legislate health reform drove health systems through a haphazard process of rapidly developing the integrated health care delivery system. Hospitals tried to vertically integrate by acquiring physician practices and accepting risk from insurers in the form of capitated (per member per month) arrangements. Some physicians sold practices to Physician Practice Management Companies ( PPMC s ). The proposed legislation collapsed in the mid-1990 s which also led to the collapse of the PPMC model, and many hospitals determined they were not willing to fund huge losses on the physician practices without a real driving purpose. 3
A Little History The period from the 2000 s to the present returned to the traditional business development model as well as hospital mergers and acquisitions. For-profit chains proliferated, acquiring not-for-profit community hospitals. Mergers among not-for-profit health systems mostly driven by larger systems and academic medical centers. In Maryland, there has not been much horizontal integration among health systems and other types of providers. 4
Changing Times Recently there has been a change which is redefining the role of Business Development in health care. Driven By: Health care consumerism Emphasis on wellness and disease management Marketplace driven, and legislative health reform Payment systems are acceleration to Accountable Care/Global Budget Revenue/Population Health Management. 5
Accountable Care TRANSFORMATION OF THE HEALTHCARE DELIVERY MODEL: Treatment Based Episode Based Population Based TODAY Paid for Volume TOMORROW Paid for Episodes & Lives Cost Access DIABETES Quality Fee For Service (FFS) Pay for Performance Bundled Payments Global Payment for Discrete Populations Own the Lives Alignment of Reimbursement Incentives with Clinical Outcomes 6
Changing Times Some of the key drivers which are changing how health systems approach business development in this environment: Little or no reward for volume growth Continual reductions in reimbursement Value-based care Readmissions/hospital acquired conditions affecting payment More uninsured will have some type of access to insurance. Physicians are again aligning with health systems and in some instances, larger groups Shift towards accountable care 7
Changing Times Under Global Revenue Budget/Population Health, health systems will need to understand the types of volumes they currently have. What is the expected impact from lower utilization through elimination of unnecessary admissions? Target the right volumes in the right settings. Where to make new investments, and where to reduce Hospitals are only one component of a health system. No more silos Having access to all of the necessary components in a health system will be key under the new normal. 8
Key Components of an Innovative Health System Access to a broad base of primary care and specialty physicians. Physician employment has again accelerated, but it feels different this time. Urgent care has proliferated in recent years due to shortages of primary care and consumer preferences. Allows for a source of referrals to primary care physicians. Many consumers of urgent care do not have a primary care physician. Referral to specialists (orthopedic, ENT, urology, etc.) and follow-up for the continuum of care. Expands beyond the traditional service area (larger footprint). 9
Key Components of an Innovative Health System Other outpatient services: Ambulatory surgery Imaging Dialysis DME Respiratory care/sleep studies Pharmacy Medical transportation Wellness and fitness 10
Key Components of an Innovative Health System Post acute care services to return the patient to the right setting: Sub-acute Home health Rehabilitation (inpatient and outpatient) Nursing home (skilled, dementia, chronic) Home infusion services Hospice 11
How are Health Systems Accessing the Key Components? Many health systems are finding the experts in these areas and are collaborating for success. Contractual arrangements Management agreements Joint Ventures Outright acquisition An alternative, reminiscent of the past, is building on their own. 12
Examples in Maryland Many independent community health systems are developing their outpatient and post-acute services to try to complete the continuum of care. LifeBridge Health has a growing Commercial Division which actively partners with the experts who provide the continuum of services. Most recently partnered with ExpressCare, a rapidly growing urgent care provider currently with 11 sites in the central Maryland area. Has several other joint venture and fully owned for-profit health care providers in the ambulatory and post-acute area. 13
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Examples in Maryland Walgreens drug store moved into the health care provider arena in 2007 through and recently entered the ACO market. Walgreens entered into a collaboration arrangement with Johns Hopkins after entering the chronic disease management and diabetes wellness program arena. Provides access to evidence-based science and scientific outcomes, as well as, medical education. 15
Retail Clinics Meet Your New Competitors Walgreens Aims to Become the Premier Health Destination 2009: Launches flu vaccine campaign 2013: Launches three ACOs; begins diagnosing and managing chronic disease Simple Acute Services Vaccinations and Physicals Chronic Disease Monitoring Chronic Disease Diagnosis and Management 2007: Acquires Take Care Health Systems 2012: Offers three new chronic disease tests Case in Brief: Walgreen Co. Largest drug retail chain in the United States, with 372 Take Care Clinics In April 2013, became first retail clinic to offer diagnosis and treatment of chronic diseases Not Just a Drugstore Our vision is to become My Walgreens for everyone in America by transforming the traditional drugstore into a health and daily living destination... Walgreen Co. Overview Source: Japsen B, How Flu Shorts Became Big Sales Booster for Walgreen, CVS, Forbes, February 8, 2013, available at: www.forbes.com; Take Care Clinics at Select Walgreens Expand Service Offerings, Reuters, May 31, 2012, available at: www.reuters.com; Murphy T, Drugstore Clinics Expand Care into Chronic Illness, The Salt Lake Tribune, April 4, 2013, available at: www.sltrib.com, Walgreens, Company Overview, available at: www.walgreens.com; Health Care Advisory Board interviews and analysis. 16
Examples in Maryland In 2011 MedStar became a founding customer of Evolent Health, a fully integrated population and health platform, which is backed by UPMC and The Advisory Board. MedStar will utilize the platform to drive cost and quality outcomes for: Its employee base and its existing managed Medicaid plan Across multiple Medicare initiatives, and Future shared savings partnerships with commercial payors MedStar has also been active in the Urgent Care area, with seven locations opened in the Baltimore-Washington area. 17
Examples in Maryland University of Maryland Medical System, like Johns Hopkins and MedStar, have been actively merging independent health systems recent years. Many of these community health systems had ventures and programs with commercial partners. UMMS has also developed the University of Maryland Diabetes Network with more than 150 diabetes providers in six locations in an effort to stop diabetes. 18
The End Game The health care market place will continue to evolve with the dramatic changes driven by market forces and legislated health reform. Focusing on the Triple Aim will require health systems to be innovative and think outside the box and move more quickly than in the past. Improving the patient experience of care (including quality and satisfaction); Improving the health of populations; and Reducing the per capita cost of health care. It is impossible to predict the End Game as providers, payors, pharma, and consumers navigate through the rapid changes ahead. 19