Succeeding in the Reform Era Jeff Moser, Vice President Sg2 August 2, 2012 www.sg2.com Agenda What is this all about? How the industry is responding 2012 Outlook: May You Live in Interesting Times Market share is redefined and with it, intensified battles. Tiered/narrowed networks move markets overnight. Redesigned benefits = more bad debt Cost cutting yields to margin management. Patients expect Apple at Dollar General prices. IT implementation breaks the bank and drives alliances. New market entrants and technology enablement threaten incumbent dominance. Policy, politics, budgets keep the C-suite up at night. IT = information technology. Confidential and Proprietary © 2011 Sg2 3 At the Heart of Health Care Reform… Efficiency Quality and Safety Well-Defined Care Paths Provider Error Less Costly Sites of Care Value 70% Waste 30% Coordinated Care Unnecessary Care Readmissions Avoidable Conditions Increased Access Lack of Care Coordination Predictive Care Paths “Estimates suggest that as much as $700 billion a year in health care costs do not improve health outcomes.” –Peter Orszag, Former Director of the Congressional Budget Office Source: Inskeep S. Budget chief: for health care, more is not better. National Public Radio. www.npr.org/templates/transcript/transcript.php?storyId=103153156. Published April 2009 on Morning Edition. Accessed June 2011. Confidential and Proprietary © 2011 Sg2 4 Health Care Reform Accelerates the Need for Proving Performance Medicare Shared Savings Program Payment pilot programs Medicare readmission penalties Hospital VBP Program PPACA passes 2008 2010 Payment adjustment for HACs 2012 2014 2016 The Middle Game Health care reform highlights tension between increased access and cost control. Payers are piloting new models that reward coordination, quality and efficiency. Evidence-based multidisciplinary care that spans the care continuum is a required competency for programs. Clinical practice research continues to uncover opportunities to improve care. Focus on decreasing inpatient costs continues as hospitals try to control staffing, length of stay (LOS) and device costs. HAC = hospital-acquired condition; VBP = value-based purchasing; PPACA = Patient Protection and Affordable Care Act. Confidential and Proprietary © 2011 Sg2 5 While Growth Across the IP Business Is Flat, OP Opportunities Abound Adult Inpatient Forecast US Market, 2012−2022 Millions 40 5 Year 10 Year +18% 35 Adult Outpatient Forecast US Market, 2012−2022 Billions 5 Year 4.5 4.0 +20% +9% 30 3.5 25 3.0 20 2012 –1% 2017 Sg2 IP Forecast –4% 2022 10 Year +28% +15% +7% 2.5 2012 Population-Based Forecast 2017 Sg2 OP Forecast Note: Forecast excludes ages 0–17, psychiatry and obstetrics service lines and the not assigned category. Sources: Impact of Change® v12.0; NIS; Pharmetrics; CMS; Sg2 Analysis, 2012. Confidential and Proprietary © 2011 Sg2 6 2022 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 © 2011 Sg2 7 Fast Forward 5 Years 2011 2016 Hospital is a success! Hospital 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 © 2011 Sg2 8 CMS docks hospital 5% of revenues for PAAs, readmissions. Hospital 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 Standard Thinking Value-Driven Thinking Grab share at all costs. How do I drive sustainable margin? What is our product? Readmits are revenue. Worry later. How do we perform? What is our value proposition? How do I optimize payer rates? Any volume is good. How can I backfill as readmissions drop? MD? Has a pulse? Buy! How do we survive new payment models? The economy is getting better. Volumes will rebound Confidential and Proprietary © 2011 Sg2 How do we capture the System of CARE? 9 What is appropriate future demand? What is market share? What MDs do we want? Who are my real competitors? Future Payment Models Seek to Reward Coordinated, Quality Care Confidential and Proprietary © 2011 Sg2 Out-of-Pocket ACOs Medical Home Model Bundled Payment CMMI Initiatives Emerging Payment and Care Delivery Models 10 Objectives Decrease premiums and slow spending growth Reduce spending variation Improve quality Find efficiency Improve care coordination What New Economic Structures Will Enable Us to Redesign the Work? High Degree of Complexity 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) Fee for service Low Confidential and Proprietary © 2011 Sg2 Scope of Risk 11 High Providers Will Be Asked to Be More Accountable and Take on More “Risk”… What is the cost per patient to manage back pain? How many people have back pain? Cost = Person Service # Conditions Person Conservative management vs. surgical intervention How many acute episodes do they have? × # Episodes Condition × Expensive implant or less-costly implant # Services × Episode Performance Risk Actuarial Risk Source: Network for Regional Healthcare Improvement. From Volume to Value: Transforming Health Care Payment and Delivery Systems to Improve Quality and Reduce Costs. November 17, 2008. Available at Robert Wood Johnson Foundation Web site. www.rwjf.org/newsroom/product.jsp?id=36217. Accessed October 2010. Confidential and Proprietary © 2011 Sg2 12 Cost The Private Market Will Lead Innovation CalPERS Pilot, Northern CA: 40,000 members, well-managed IPA Tucson Medical Center, Tucson, AZ: 50 to 60 PCPs Advocate Health Care, BCBS, Chicago, IL: CI program evolved into ACO. Norton, Louisville, KY: Partnership with Humana Carilion Clinic, Roanoke, VA: 17,000 employees beginning July 1, leading to cobranded insurance product Piedmont Physicians Group, Atlanta, GA: 100 physicians, about 10,000 CIGNA members CalPERS = California Public Employees’ Retirement System; BCBS = Blue Cross and Blue Shield; IPA = independent practice association; CI = clinical integration; PCP = primary care physician. Source: Sg2 Interviews, 2011. Confidential and Proprietary © 2011 Sg2 13 Case Example: CalPERS ACO Pilot in Sacramento CalPERS Pilot (Northern CA) Catholic Healthcare West, Hill Physicians, Blue Shield (CA) 42,000 lives “Virtual cooperation” model http://www.worldatlas.com/webimage/countrys/nam erica/usstates/counties/ca.htm Initial Critical Success Factors Experienced physician participants 3-way risk sharing and ongoing collaboration Upside for all participants “Teach back” program and daily rounds Public validation from payer Source: Sg2 Interview With CalPERS Pilot, July 2010. Confidential and Proprietary © 2011 Sg2 14 Year 1: Significant Savings…Mostly Due to Reduced Hospital Utilization Exceeded target of $15.5 M in savings for the 42,000 member pilot 15% reduction in inpatient readmissions 15% reduction in average length of stay for inpatient admissions 14% reduction in inpatient days per thousand 50% reduction in inpatient stays per thousand of 20 or more days “2010 was the easiest year that we’re going to have. After that, it will require real hardcore process reengineering to be successful.” - Rosaleen Derington, Chief Medical Services Officer, Hill Physicians Medical Group Source: “A Community Model Case Study”, presented by Juan Davila and Rosaleen Derington at the America’s Health Insurance Plans Summit on Shared Accountability, Washington DC, October 2011. Confidential and Proprietary © 2011 Sg2 15 Considerations in Defining the Right Timing for Your Strategy Evolution Slower Faster Organizational Issues ED-driven inpatient strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . Diversified System of CARE strategy Limited IT infrastructure . . . . . . . . . . . . . . . . . . . . . Well-integrated and pervasive EMR Market Issues Highly fragmented splitter market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Regionally consolidated Dominant, conservative payers . . . . . . . . . . . . . . . . . . . . . . . . Competitive and/or innovative payers Regulatory Issues Game-changer 2012 election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stay-the-course election Restrictive insurance exchange . . . . . . . . . . . . . . . . . . . . . . . . Flexible state regulatory environment System of CARE Issues Constrained, fragmented sub-acute capacity . . . . . . . . . . . . . . . . Robust System of CARE capacity Poor integration, effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . Strong integration and relationships Confidential and Proprietary © 2011 Sg2 16 Agenda What is this all about? How the industry is responding In the Short-term, Focus on Protocols, Coordination, Prevention Top Strategies to Improve Quality, According to Health Plan Leaders Score (Scale of 1–5) Better Treatment Guidelines and Protocols EHR and e-prescribing Care Coordination Teams Communication Among Physicians and Hospital Preventive Care and Patient Education Decision Support Tools Pay for Performance Comparative Effectiveness Medical Home Remote Patient Monitoring ACOs Transparency/Public Reporting Employing Physicians 3 3.5 4 EHR = electronic health record. Sources: HealthLeaders Media Intelligence. Industry Survey: Health Plan Leaders. HealthLeaders Media, 2011; Sg2 Analysis, 2011. Confidential and Proprietary © 2011 Sg2 18 4.5 Care Redesign Will Offer a Framework to Help Execute on Value-Driven Strategy Value (Quality/Cost) Elements of Care Redesign System Optimization Clinical Restructuring Unnecessary Care Reduction Variance and Cost Reduction Execution Risk Confidential and Proprietary © 2011 Sg2 19 The Tried and True: Variance and Cost Reduction Value Variance and Cost Reduction: Improving operational efficiencies Risk Sample Analytics Potential Hurdles Margin mix Labor effectiveness Supply cost analysis Physician resistance Inadequate data capabilities Existing vendor relationships Examples Minimizing orthopedics supply chain costs Decreasing turnaround time for chemotherapy chairs Standardizing clinical pathways for asthma patients in the ED Uncovering staffing and productivity opportunities ED = emergency department. Confidential and Proprietary © 2011 Sg2 20 Reduce Variation in Rehabilitation Across Post-Acute Care Sites Sample Hospital TJR Rehab Cost per Patient, 2007–2009 $9,000 Home Health $8,000 HH & OP PT $7,000 OP PT $6,000 SNF $5,000 $4,000 $3,000 $2,000 $1,000 $0 5 10 15 20 25 Duration (Weeks) Note: Postdischarge claims were filed after the date of discharge. Excludes episodes with cost >$46,000. TJR = total joint replacement; HH = home health; OP = outpatient; PT = physical therapy. Source: Sg2 Analysis, 2011. Confidential and Proprietary © 2011 Sg2 21 30 Improve Access and Productivity Through Centralized Scheduling WellSpan Health System, York, PA Centralized call center was implemented to address patient and staff satisfaction. 40 employees, 3 supervisors work shifts 7 am–8 pm weekdays and 8 am–4 pm Saturdays. Goal is to answer 80% of calls within 20 seconds. One practice increased the number of visits from 1.9 to 2.1 per hour. Noise reduction in practices also is increasing employee efficiency. Source: Sg2 Interview, 2011. Confidential and Proprietary © 2011 Sg2 22 Value Prepare for Penalties and Tiered Networks by Reducing Unnecessary Care Risk Unnecessary Care Reduction: Decreasing avoidable, unproductive and duplicative services Sample Analytics Evidence-based clinical criteria Readmission analysis Potential Hurdles Lack of care coordination between providers Weak relationships with post-acute providers Slow development and diffusion of clinical effectiveness research Examples Daily blood draws on inpatients Readmissions for CHF patients discharged to SNFs Excessive or duplicative imaging studies between sites of care Prostate cancer screenings for elderly patients SNF = skilled nursing facility. Confidential and Proprietary © 2011 Sg2 23 Standardize Radiology Ordering Process to Improve Diagnostic Utility Institute for Clinical Systems Improvement, Bloomington, MN Innovation: Standardized Orders Designed a clinical decision support system that grades the tests being ordered based on information and purpose Decision support system approved by ACR, ACC and ACP. System offers evidence-based alternatives. Piloted by 5 medical groups completing more than 1 million imaging tests per year between 2007 and 2010 Results Shorter radiology ordering and approval times 10% improvement in diagnostic utility Estimated savings of $84M No increase in claims for imaging ACR = American College of Radiology; ACC = American College of Cardiology; ACP = American College of Physicians; M = million. Sources: Institute for Clinical Systems Improvement (ICSI). ICSI News November 3, 2010. Accessed June 2011; Sg2 Expert Insight: Transforming How Radiology Studies Are Ordered in Minnesota, February 2, 2011. Confidential and Proprietary © 2011 Sg2 24 Accelerate Access for Unscheduled Visits Sutter Medical Foundation—Sutter Health, Sacramento, CA Operates 3 urgent care centers; 4 more are planned. Integrated with retail care, occupational health and diagnostic centers Future plans to collaborate with FQHCs to manage new Medicaid enrollees Fast-track access for 10 diagnoses. ED = emergency department; UTI = urinary tract infection; IV = intravenous; FQHC = Federally Qualified Health Center. Source: Sg2 Analysis, 2011. Confidential and Proprietary © 2011 Sg2 25 Value Encourage level of Care Optimization Through Clinical Restructuring Risk Clinical Restructuring: Ensuring treatment occurs in the optimal setting with the most appropriate provider level Sample Analytics Site/level of care cost Capacity and access modeling Potential Hurdles Current regulations and benefit coverage limits Lack of human capital planning Physician resistance Poor access to primary care providers (PCPs) Examples Early transfer from an IP to SNF bed Pharmacists managing all medications for patients with chronic diseases Partnerships with a local retail clinic to offer nonurgent, convenient care Palliative care/end of life in ICU/ED IP = inpatient; ICU = intensive care unit. Confidential and Proprietary © 2011 Sg2 26 Improve Quality of Care While Managing Costs California Pacific Medical Center, San Francisco, CA University of California, San Francisco $2.2 million in annual savings and improved clinical outcomes: $2,179 savings for patients who received palliative care (PC) services 33% decrease in mean daily costs 30% decrease in mean LOS 14.5% lower costs when compared to usual care patients 86% decrease in pain scores 64% decrease in dyspnea scores 87% decrease in secretion scores With PC Savings Pharmacy $793 $31 $762 Laboratory $138 $7 $131 Radiology $57 $2 $55 Room $837 $412 $425 Services $616 $16 $600 Supplies $230 $24 $206 Total Costs $2,671 $492 $2,179 Costs Source: California HealthCare Foundation, February 2010. Confidential and Proprietary © 2011 Sg2 Without PC 27 Use OP Palliative Care to Reduce Utilization While Improving Outcomes Everett Clinic, Everett, WA Background Multispecialty practice with 11 locations Challenge High use of hospital services for end-of-life patients Solution: Outpatient Palliative Care Program Patients are referred to palliative program by physicians. Program is run by nurses and assistants. Nurse provides ongoing care management and filters appointments and medications. Nurses proactively call all 250 patients once per month. Results 47% vs 62% hospital admit rate for patients who received palliative care vs those who did not Palliative care patients’ ALOS was 0.5 days fewer than nonpalliative patients. Reduced ED care and inpatient care utilization Selection criteria based on this question posed to physicians: “Would you be surprised if this patient died in the next 1 to 2 years?” ALOS = average length of stay. Source: Szabo J. High-quality palliative care programs bring comfort to terminally ill patients. AHA News September 6, 2010. American Hospital Association. Confidential and Proprietary © 2011 Sg2 28 Use Telehealth and Home Health to Redesign Acute Care Delivery Sentara Healthcare, Northern Virginia Goals Improve compliance, bed capacity and patient satisfaction Reduce readmission, LOS and HAC Innovation: Telehealth and Home Health Pilot project to identify and evaluate acute care patients appropriate for early discharge with enhanced home health and telehealth services HF, pneumonia, COPD, SOB, respiratory failure, atrial fibrillation and MI patients qualify. Admission criteria meet Medicare homebound criteria: cognitively intact, home electrical and telephone services. Patients are referred by nurse and hospital case manager; discussed with patient and hospitalist. Patients seen by home care on day of discharge; telehealth monitoring begins on admission visit. PCP notified of patient’s admission to home care for follow-up orders and plan of care. Results Treated 83 patients under pilot project Decreased LOS by 0.49 days at one hospital and 1.14 days at a second hospital Decreased readmission rates for same diagnoses to 3.6% SOB = shortness of breath. Source: Sg2 Interviews, 2011. Confidential and Proprietary © 2011 Sg2 29 Value Manage Population Risk Through Integration and Prevention Strategies Risk System Optimization: Shifting focus to upstream, preventive care through clinical integration and population health management Sample Analytics Population health analytics Potential Hurdles Lagging incentives for preventive care and care coordination Significant capital investment for a coordinated shared savings infrastructure Poor relationships with PCP networks Examples Disease-based medical homes Patient engagement strategies using telehealth Disease registries Confidential and Proprietary © 2011 Sg2 30 Patients Are Coming From Mars, Physicians Are Leaving for Venus The Complicated Universe of Ambulatory Care 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. 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. How could they schedule this man for a 15-minute visit? I should schedule him for a treadmill in case he has silent ischemia with his diabetes. My wife is really unhappy that I lost my job. Confidential and Proprietary © 2011 Sg2 31 MDs Challenged With Aligning Patients’ Clinical Needs While Lowering Costs Care Customization Simple Visit Priority Delivery Ambulatory ICU Social ICU Team MLP Physician 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 MLP = midlevel provider. Confidential and Proprietary © 2011 Sg2 32 Preliminary Results From Boeing Ambulatory ICU Pilot Boeing Intensive Outpatient Care Program (IOCP), Puget Sound, WA Partnered with 3 clinics, incentivized through per-patient-per-month fee Focused on employees contributing to highest health care costs Care teams included RN care manager, IOCP physician, current PCP Patient involved in development of personalized care plan Care team proactive outreach Education in disease self-management Team huddles to assess patient status, discuss follow-up plan Improved functional status, depression scores, patient and provider satisfaction Met clinical quality metrics for diabetes care, high blood pressure, high cholesterol Reduced per capita spending by 20% Source: Milstein A and Kothari P. Are higher-value care models replicable? Health Affairs Blog. http://healthaffairs.org/blog/2009/10/20/are-higher-value-care-models-replicable. Accessed October 2011. Confidential and Proprietary © 2011 Sg2 33 Utilization and Behavioral Patterns Help Identify Social ICU Patients Jeffrey Brenner, MD, Camden, NJ Used medical billing data to explore health trends: 1% of Camden’s patients accounted for 30% of costs Identified 2 most expensive blocks: a large nursing home and a low-income housing tower Camden Coalition of Healthcare Providers formed to provide a medical home for “super-utilizers” Rely on home visits, phone calls, urgent call number to reach patients Results 40% reduction in ED visits 56% reduction in hospital bills “The people with the highest medical costs—the people cycling in and out of the hospital—were usually the people receiving the worst care.” ED = emergency department. Source: Gawande A. The hot spotters. The New Yorker January 24, 2011. www.newyorker.com/reporting/2011/01/24/110124fa_fact_gawande. Accessed June 2011. Confidential and Proprietary © 2011 Sg2 34 Increase Retention and Improve Patient Outcomes With Care Coordination Advocate Health Care, Oak Brook, IL Background 12-hospital system, including 2 children’s hospitals and a medical group Care Coordination: AdvocateCare Program Focused on 5 Aspects to Improve Care Enterprise care management Enhance ED case management and OP care coordination Improved access Expand PCP/clinic hours Build retail clinic relationship Market share Advocate…“could serve as a model for a Target splitter docs and unassigned new kind of accountable care organization, patients in the ED by demonstrating how to organize Data analytics physicians into partnerships with hospitals OP care management system to improve care, cut costs and be held Prospective risk analysis accountable for the results.” Post-acute care providers –Health Affairs January 2011 Preferred networks of providers Transition coaches Source: Shields MC et al. Health Aff (Millwood) 2011;30:161–172. SNF management with “SNFists” Confidential and Proprietary © 2011 Sg2 35 Extend Outreach to Capture Downstream Revenue Direct Mail Phone Calls Web Presence Printed with permission of ThedaCare. Printed with permission of ThedaCare. ThedaCare, Appleton, WI Results During 2.5-Month Campaign 10% of targeted patients scheduled and completed a colonoscopy. 28% increase in the average number of colonoscopies performed. ThedaCare is preparing to roll program out to other clinics and service areas. Overall Increase in Screening Rate 21% increase to 73% between 2005 and 2010 (also due to disease management efforts) Source: Sg2 Interview, 2011. Confidential and Proprietary © 2011 Sg2 36 Where is the Venture Capital Going CareHubs (Beaverton, OR) is a healthcare enterprise social platform that offers dynamic, innovative tools to help patients and healthcare providers better connect, coordinate and engage. CareWire (Minneapolis, MN) is a patient engagement solution that utilizes automated patient text messaging to increase billable appointment yield, visualize patient satisfaction in near-real-time and improve provider performance. DermLink (Atherton, CA) is a cloud-based, HIPAA compliant application that enables remote diagnosis of dermatology cases, dramatically reducing wait times for patients while driving increased revenue and flexibility for providers. Iconic Data (Norcross, GA) delivers a cloud-based patient list manager solution that provides physicians access to near-real-time snapshots of clinical care episodes across disparate, non-integrated facilities, resulting in increased charge capture and reduced inefficiencies. UnitedPreference (Princeton, NJ) offers a Tailored Spend™ payments network that improves member participation in preventative health initiatives via nationally accepted prepaid cards that can only be used to purchase goods and services pre-determined by health plans and employers. Sample Of HealthBox 2012 Class Confidential and Proprietary © 2011 Sg2 37 Successful Strategy Requires Management and Engagement Care Managers Pt. Profiling Acuity Hospital Community-Based Care Retail Pharmacy Information Systems Ambulatory Procedure Center IP Rehab Data Analytics Physician Clinics SNF Preventive Care Home Acute Care Wellness and Fitness Center Diagnostic/ Imaging Center Technology Urgent Care Center Post-Acute Care Home Care Disease Mgmt CARE = Clinical Alignment and Resource Effectiveness; IP = inpatient; OP = outpatient; SNF = skilled nursing facility. Confidential and Proprietary © 2011 Sg2 38 OP Rehab Sg2 provides business analytics for health care. Our data-driven systems, business intelligence and educational programs deliver growth and performance improvement solutions across the care continuum. Chicago Confidential and Proprietary © 2011 Sg2 London www.sg2.com 39 + 1 847 779 5300