Health Reform, Medicaid Expansion and Challenges for Providers Jeff Moser Vice President, Sg2 May 31, 2012 www.sg2.com
Agenda Market Update Redesigning Care
2012 Outlook: A Year Like No Other Unprecedented Threats Market share battles intensify Bad debt driven by deductibles/co-pays/tiered networks Risk-based payments pushed at providers Margin improvement paramount Role of the consumer IT implementation costs create risk New market entrants challenge models Health care mandates looming Confidential and Proprietary May 2012 Sg2 3
The Timeline of Health Care Reform Marches on, for Now The Prelude Market Expansion Regulation and Restructuring 2010 2013 2014 2017 2018 2020 Constitutionality challenge? Republican-led rollbacks? Health insurance exchanges? Confidential and Proprietary May 2012 Sg2 4
2014 2017: The Industry Is Getting Prepared Select Initiatives Within Health Reform Law, 2014 2017 Market Expansion Hospital Payment Cuts Medicare DSH payments cut by 75% Avoidable admissions Insurance Market Reforms Guaranteed issue Essential benefit package defined Insurance industry moves to regulation Coverage Expansion Medicaid expanded to 133% of FPL, estimated 16 million covered State-based insurance exchanges Individual mandate to purchase (subsidies up to 400% of poverty level) DSH = disproportionate share hospital; FPL = federal poverty level. Confidential and Proprietary May 2012 Sg2 5
What Won t Change: The Era of Risk-Based Reimbursement Is Here Hospital Medicare Payment at Risk, Year by Year Oct 2010 Oct 2011 Oct 2012 Oct 2013 Oct 2014 Oct 2015 Oct 2016 Oct 2017 Oct 2018 Oct 2019 Oct 2020 Value-Based Purchasing 1% 2% 30-Day Readmissions 1 % 2 % 3% Hospital-Acquired Conditions 1% TOTAL 2 % 3 % 5% 6% Source: Sg2 Analysis, 2011. Confidential and Proprietary May 2012 Sg2 6
Sg2 Perspective on the Growth of Risk Contracting, 2012 2020 2012 2013 2014 2015 2016 2017 2018 2019 2020 Medicare Medicaid Dual Eligible Patients in Provider Risk Contracts Commercial Self-Pay Confidential and Proprietary May 2012 Sg2 7
Emerging Payment Models Will Take Various Forms High Insurance product Global capitation ACO Clinical integration program Disease-specific capitation Bundled episodes (pre- and post-care included) Bundled episodes (inpatient only) P4P/value-based purchasing Inpatient case rates (DRGs) Low Fee for service Scope of Risk High ACO = accountable care organization; P4P = pay for performance; DRG = diagnosis-related group. Confidential and Proprietary May 2012 Sg2 8
Risk Readiness Varies Widely From Market to Market Decision Scale Level of Readiness High Above Average Average Below Average Least Data Not Available Confidential and Proprietary May 2012 Sg2 9
What Does This Mean for a Typical Health System? Focused on inpatient business Strong physician referral channel ED as the front door for majority of admissions Excels at revenue cycle, LOS management Few System of CARE linkages Lots of inappropriate utilization and readmissions CFO pushed 5% cost reduction over the past 3 years ED = emergency department; LOS = length of stay; CARE = Clinical Alignment and Resource Effectiveness. Confidential and Proprietary May 2012 Sg2 10
Fast Forward to 2016 2011 2016 Hospital is is a success! Hospital is is growing and profitable. Physicians are happy. System wins best employer award. Weaker aspects of performance do not affect market or financial results. CMS = Centers for Medicare & Medicaid Services; PCP = primary care physician; PAA = potentially avoidable admission. Confidential and Proprietary May 2012 Sg2 11 CMS docks hospital 5% of revenues for PAAs, readmissions. Hospital is is excluded from private payers preferred tier networks. Patients shop to manage their out-ofpocket liability. PCPs redirect cases away to maximize their incentives/reduce penalty exposure. Profitability and market share erode.
Start by Asking New Questions Old Should we become an ACO? How are volumes? New What is our product? How good is our product? How are we changing the total cost of care? Confidential and Proprietary May 2012 Sg2 12
The Scope of Your Strategy Must Encompass the System of CARE Acuity Community-Based Care Ambulatory Procedure Center Hospital IP Rehab Acute Care Home Retail Pharmacy Wellness and Fitness Center Physician Clinic Diagnostic/ Imaging Center Urgent Care Center Post- Acute Care SNF Home Care OP Rehab CARE = Clinical Alignment and Resource Effectiveness; IP = inpatient; OP = outpatient; SNF = skilled nursing facility. Confidential and Proprietary May 2012 Sg2 13
Agenda Market Update Redesigning Care
Outpatient (OP) Growth Opportunities Will Overwhelm Inpatient (IP) Decline Adult IP Forecast US Market, 2011 2021 Millions Population-Based Forecast +18% Adult OP Forecast US Market, 2011 2021 Billions Sg2 Forecast +32% +15% Sg2 Forecast 3% Population-Based Forecast Forecast excludes 0 17 age group and psychiatry and obstetrics service lines. Sources: Impact of Change v10.0; NIS; Pharmetrics; CMS; Sg2 Analysis, 2011. Confidential and Proprietary May 2012 Sg2 15
Patients Are Coming From Mars, Physicians Are Leaving for Venus The Complicated Universe of Ambulatory Care Dr Jones, I m having knee pain. I can t keep up with my child anymore. I hope she doesn t tell me I am fat. Your blood pressure is high, and I am worried that you cannot walk up a flight of stairs. Let s have you come back next week to talk about your knee. How could they schedule this man for a 15-minute visit? My wife is really unhappy that I lost my job. I should schedule him for a treadmill in case he has silent ischemia with his diabetes. Confidential and Proprietary May 2012 Sg2 16
MDs Challenged With Aligning Patients Clinical Needs While Lowering Costs Care Customization Simple Visit Priority Delivery Ambulatory ICU Social ICU Team MLP Physician ICU = intensive care unit; MLP = midlevel provider. Physician MLP MLP Social worker Nurse Physician Nurse Social worker MLP Physician Behavioralists Setting Office Office Multispecialty practice Multispecialty practice Example Sprained ankle Multiple issues, pick 1 Serious chronic condition(s) Overweight smoker, uninsured Confidential and Proprietary May 2012 Sg2 17
Key to Customizing Priority Delivery Care: Increased Efficiency Utilize group visits to manage patients with similar diseases. Advantages Time saving (2 hours = 20 patients) Cost-effective (generate ~$15,000/physician/year) Addresses projected demand Increased access to PCPs Disadvantages Uncertain reimbursement coverage (eg, no CPT code) Concerns over patient confidentiality Unclear how to document every patient encounter High attrition rates CPT is a registered trademark of the American Medical Association. CPT = Current Procedural Terminology. Source: Jaber R et al. Fam Pract Manag 2006;13:37 40. Confidential and Proprietary May 2012 Sg2 18 Encounter Expectation Communication Service Supply & Demand
Segmenting Patients by Risk Welcome to the Ambulatory ICU Ambulatory ICU aims to reduce costs and improve quality. Multidisciplinary team approach to intensive care management for the highest-risk patients (80/20 rule) Eligible patients suffer from multiple chronic conditions. Dedicated care manager (eg, registered nurse, social worker) Strengthens primary care relationships and patient engagement through proactive outreach (eg, calls, emails, visits) Creation of personalized care plan Thorough education in disease self-management Prompt access to care team for appointments and questions Use of evidence-based practices/medical assistance software to improve visit efficiency Source: California Healthcare Foundation. The ambulatory intensive caring unit: early experiences. www.chcf.org/events/2010/cin-webinar-05-26-2010. Accessed October 2011. Confidential and Proprietary May 2012 Sg2 19
Segmenting Patients by Nonmedical Needs: Welcome to the Social ICU Social ICU Addresses Nonhealth Factors Working Against Seamless Care Model this after the ambulatory ICU (eg, multidisciplinary care team, patient education, proactive outreach). Focus on managing social factors that drive clinical conditions. Care manager determines social barriers (eg, uninsured, domestic violence, depression, substance abuse, air quality in home, access to healthy food). Team works with community support network to address these issues. Clinicians able to focus on treating disease after social issues are resolved. Personal Behaviors Social ICU Patient Encounter Expectation Communication Service Supply & Demand SES = socioeconomic status. Sources: Schroeder SA. N Engl J Med 2007;357:1221 1228; Wilper AP et al. Ann Intern Med 2008;149:170 176; Partnership for Clear Health Communication. What is health literacy? www.npsf.org/pchc/health-literacy.php. Accessed October 2011. Confidential and Proprietary May 2012 Sg2 20
System Optimization: Extensivist Clinic Created to Care for Uninsured Patients Texas Hospital Animated 9,000 patients with high utilization were responsible for 42% of the net hospital losses. Identified 4 patient classification for the program Established an expanded care team: physician, social worker, nurse practitioner, 4 community health aids Empowered care team to do whatever it takes Created a program phone line to be a direct point-of-contact Results Anecdotal evidence shows a reduction in ED and hospital utilization. Impact: Hospitals that create innovative care models can improve patient care with the right patient, right setting and right care. Confidential and Proprietary May 2012 Sg2 21
Consider the Rapidly Changing Role of Health System in Patient Engagement 14-Year-Old Patient With Diabetes Before Glucose readings reviewed quarterly in diabetes clinic. Handwritten logs incomplete, time consuming to analyze Delays in insulin dose changes, phone tag Delayed gratification, poor compliance Elevated hemoglobin A1c Admitted for hyperglycemia Now Online monitoring tools Frequent care team contact via e-visits Continuous glucose monitoring results sent electronically Insulin dosage changes made in real time Lower hemoglobin A1c No hospitalizations for uncontrolled diabetes Confidential and Proprietary May 2012 Sg2 22
Next Steps: Prepare for Care Redesign Benchmark performance against competitors. Understand market forecast for services. Anticipate how quickly your market may move toward new payment models. Identify diseases/service lines with subpar performance, high cost/low margins, quality variability, etc. Target efforts to services that are key to the goals established in the organization s strategic plan. Assemble a team of physicians, clinical staff, administrators, operations staff, patient advocate, etc. Address potential hurdles from the outset: physician resistance, questionable leadership support, insufficient IT, etc. Confidential and Proprietary May 2012 Sg2 23
Sg2 s analytics-based health care expertise helps hospitals and health systems integrate, prioritize and drive growth and performance across the continuum of care. Over 1,200 organizations around the world rely on Sg2 s analytics, intelligence, consulting and educational services. www.sg2.com + 1 847 779 5300 Confidential and Proprietary May 2012 Sg2 24