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Health Care Industry Trends 2013Ready-to-Use Presentation Slides
Marketing and Planning Leadership Council
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Bending the Cost Growth CurveHealth Care Spending Growth Continues To Slow
Percent Increase in National Health Care Spending
2003-2011
2004 2005 2006 2007 2008 2009 2010 20110.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%7.1%
6.8%6.5%
6.2%
4.7%
3.9% 3.9% 3.9%
Source: Centers for Medicare and Medicaid, “National Health Expenditure Accounts”, 2013, available at: www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and Reports/NationalHealthExpendData/Downloads/tables.pdf; Department of Health and Human Services, “Growth in Medicare Spending Per Beneficiary Continues to Hit Historic Lows”, January, 2013, available at: http://aspe.hhs.gov/health/reports/2013/medicarespendinggrowth/longdesc.shtml; Marketing and Planning Leadership Council interviews and analysis.
2010 2011 2012
1.8%
3.6%
0.4%
Medicare Spending Growth per Beneficiary
2010-2012
Spending Trends
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Hospital Volume Growth Remains Sluggish
Source: “US Not-for-Profit Healthcare Outlook Remains Negative for 2013,” Moody’s Investors Service, January 22, 2013
Volume Performance
Hospital Volume Growth Rates
2008-2011
2008 2011
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
1.0%
0.0%
-0.4%
0.1%
2.6%
3.7%
1.6% 1.6%1.9%
1.3%
0.6% 1.5%
Admissions Outpatient Visits
Outpatient Surgeries
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Modest Growth Anticipated for the Near TermInpatient and Hospital Based Outpatient Volume Projections
Inpatient Volume, CAGR1
2012-2017
Cardiac Services
Neurology
General Surgery
Orthopedics
General Medicine
Neurosurgery
Overall
0.1%
0.8%
0.9%
1.3%
2.6%
0.4%
Hospital-Based Outpatient Volume, CAGR1
2012-2017
Source: Advisory Board Inpatient and Outpatient Market Estimators; Advisory Board research and analysis.1) Compound Annual Growth Rate
Orthopedics
General Surgery
E&M
Cardiology
Radiology
Oncology
Overall
0.8%
1.0%
1.2%
1.6%
1.8%
3.1%
1.5%
(2.3%)
3.1%
Volume Performance
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Persistent Outpatient Shift
Outmigration a Long-Established Trend
Source: “Report to the Congress: Medicare Payment Policy,” MedPAC, March 2012, available at: www.medpac.gov; Marketing and Planning Leadership Council interviews and analysis.
1) Outpatient services represent entire market regardless of site of service (includes hospital-based settings, ASCs, other freestanding providers and physician offices)
Medicare Volume Growth
Cumulative Percent Change
All Payer Volume Growth Projections1
2012-2017
Outpatient Services per FFS Part B Beneficiary
Inpatient Discharges per FFS Part A Beneficiary
34%
(8%)
2004 2011
19.9%
14.8%
13.8%
10.7%
14.0%
5.0%
(4.1%)
(10.5%)
Inpatient Oupatient
Cardiac Services
Vascular Services
Orthopedics
Neurosurgery
Volume Performance
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ACA Includes Hospital Reimbursement Cuts
Reimbursement Trends
1) Includes hospital, skilled nursing facility, hospice, and home health services; excludes physician services.
2) Disproportionate Share Hospital.
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
($4B)($14B)
($21B) ($25B)($32B)
($42B)
($53B)
($64B)
($75B)
($86B)
Medicare Fee-for-Service Payment Cuts
Reductions to Annual Payment Rate Increases1
$415B in total fee-for-service cuts, 2013-2022
$260BHospital payment
rate cuts, 2013-2022
$56BReduced Medicare and Medicaid DSH2
payments, 2013-2022
Source: CBO, “Letter to the Honorable John Boehner Providing an Estimate for H.R.6079, The Repeal of Obamacare Act,” July 24, 2012, available at: www.cbo.gov; Marketing and Planning Leadership Council interviews and analysis.
Law Reduces Annual Payment Increases Across Ten Years
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RAC Audits Spur Increase in Observation
Shift from Inpatient to Observation Status a “Stealth” Price Cut
Source: The Advisory Board Company Daily Briefing, “Clement: What Medicare is doing to limit observation status,” May 28,2013, Washington, DC; Jaffe S, “Medicare Seeks to Limit Number of Seniors Placed In Hospital Observation Care,” Kaiser Health News, May 3, 2013, available at: www.kaiserhealthnews.org; Gengler A, “The Painful New Trend in Medicare,” CNN Money, August 7, 2012, available at: money.cnn.com; Marketing and Planning Leadership Council interviews and analysis.
Reimbursement Trends
Inpatient Observation "Improperly" Admitted
$4,100
$1,800
$0
Potential Chest Pain Treatment Paths
Medicare Payment Rates
1.6M 69% 745KObservation stays nationwide, 2011
Increase in number of Medicare beneficiaries under
observation, 2006-2011
Hospital observation visits exceeding 24 hours, 2011
Breakdown of RAC Denials
Hospital Overpayments Recovered, 2011
$152M$648MInappropriate
One-day StaysAll Other Reasons
1) Recovery Audit Contractor.
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Medicaid Expansion Uncertain
States Diverge Over Choice to Expand Medicaid Eligibility
Coverage Expansion
State Participation in Medicaid Expansion
Participating
Will Not Participate
Undecided
As of September 2013
Source: Health Care Advisory Board interviews and analysis.
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Who Are The Enrollees?
Will Individuals Shop on the Exchanges?
Low Awareness, Weak Penalties May Dampen Enrollment
Source: Kaiser Family Foundation, “Kaiser Health Tracking Poll,” March 2013, available at: kff.org; PwC, “Health Insurance Exchanges: Long on Options, Short on Time,” October 2012, available at: www.pwc.com; Health Care Advisory Board interviews and analysis.
Coverage Expansion
1) Higher of the two values.
Individuals’ Awareness of Exchanges
How Much Respondents Have Heard About Their State’s Health Insurance Exchange
48%
29%
15%
7%
Nothing at All
Only a Little
A Lot
Some
Year Penalty1
2014 $95 or 1% of income
2015 $325 or 2% of income
2016 $695 or 2.5% of income
Penalties for Non-compliance
n=1,204
70%In good to
excellent health
56%Employed full-time
33Median
age
Sample Penalties
Office Worker
Income: $30,000
Real Estate Agent
Income: $190,000
2014 2015 2016
$300
$600
$750
$1,900
$3,800
$4,750
2014 2015 2016
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Bracing for the ChurnSignificant Crossover Expected Between Medicaid, Exchanges
Coverage Expansion
Source: Benjamin D. Sommers and Sara Rosenbaum, “Issues In Health Reform: How Changes in Eligibility May Move Millions Back and Forth Between Medicaid and Insurance Exchanges ”, Health Affairs, 30, no.2 (2011):228-236.; Marketing and Planning Leadership Council interviews and analysis.
1) Among adults with family incomes below 200 percent of the federal poverty line
2) Using 133% of the federal poverty level as the eligibility threshold
28 MAdults projected to undergo shift in
eligibility across Medicaid-exchange market within one year2
Impact of Coverage Transitions
Fluctuations in plan design, resulting in variable levels of benefits, premiums, and cost-sharing
Potential disruption of existing provider networks, steering enrollees to new care sites
Likely increase in hospital reimbursement with shift from Medicaid to commercial insurance on state exchange
Plan Benefits
Provider Networks
Payment Rate
6-months 12-months 24-months
26.9% 26.6% 19.9%
8.6%23.6% 38.4%
1 Change 2 or More Changes
Percentage of Future Enrollees with Change in Eligibility Between Medicaid, Exchange1
n=19,248
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Health Reform Seeks to Change Provider IncentivesOverview of Accountable Payment Models
1) Center for Medicare and Medicaid Innovation.
Key AttributesBundled Payments
Value-Based Purchasing
Accountable Care Organizations (ACOs)
Definition
Purchaser disburses single payment to cover certain combination of hospital, physician, post-acute, or other services performed during an inpatient stay or across an episode of care; providers propose discounts, can gainshare on any money saved
Pay-for-performance program differentially rewards or punishes hospitals (and likely ASCs and physicians in coming years) based on performance against predefined process and outcomes performance measures
Network of providers collectively accountable for the total cost and quality of care for a population of patients; ACOs are reimbursed through total cost payment structures, such as the shared savings model or capitation
Purpose
Incent multiple types of providers to coordinate care, reduce expenses associated with care episodes
Create material link between reimbursement and clinical quality, patient satisfaction scores
Reward providers for reducing total cost of care for patients through prevention, disease management, coordination
Advisory Board Assessment
Increases accountability for cost and quality within episodes of care without removing FFS volume incentive; new lever for financial alignment between independent specialists and hospitals
Withhold-earnback model will put significant dollars at risk for all providers, force immediate focus on quality and experience metrics
Long-range goal of CMS to migrate to risk contracting; will spark industry-wide investment in primary care infrastructure to establish narrower networks
Role of CMMI1
Accepting providers’ proposals to test four different bundled payment models, including one without inpatient care
Dedicating $500M to Partnership for Patients, targeting hospital-acquired infections, readmissions
Accepting providers’ proposals to test various payment systems, including both shared savings and partial capitation
13
Source: Marketing and Planning Leadership Council interviews and analysis.
Accountable Payment Models
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New Responsibilities of Accountable CareCategorization of Risk-Based Payment Models
Accountable Payment Models
Cost of Care Quality of Care Volume of Care
Performance Risk Utilization Risk
Bundled Pricing
• Bundled Payments for Care Improvement program
• Commercial bundled contracts
Shared Savings
• Medicare Shared Savings Program
• Pioneer ACO Program• Commercial ACO
contracts
Pay-for-Performance
• Value-Based Purchasing• Readmissions penalties• Quality-based
commercial contracts
Source: Health Care Advisory Board interviews and analysis.
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Components of Value-Based Purchasing
Source: Marketing and Planning Leadership Council interviews and analysis.
Value-Based Purchasing
Payment Withhold Quality Performance Assessment Redistribution of Payment
• Payment withhold applies to base operating DRG payment
• Withhold applies only to roughly 3,100 hospitals meeting VBP inclusion criteria
• Provision assesses performance on 12 process of care measures and 8 patient experience of care measures
• Scored on achievement relative to national benchmarks and improvement compared to historical baseline
• Quality measure scores combined to form single figure Total Performance Score (TPS)
• Payment directly proportional to Performance Score
• Roughly half of hospitals earn back more than withhold, others earn back less
FY13 FY14 FY15 FY16 FY17
(1.0%)(1.3%)
(1.5%)(1.7%)
(2.0%)
Lowest performer
Highest performer
1 2 3
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Readmissions Penalties in BriefPenalty-Only Program Means No Upside for High Performers
Readmissions Penalties
Readmissions Incentives
FY13 FY14 FY15
(1.0%)
(2.0%)
(3.0%)
Program in Brief: Hospital Readmissions Reduction Program
• CMS to reduce payments for hospitals exceeding risk adjusted national averages for readmissions for heart failure, AMI and pneumonia
• Penalties based on all-condition readmissions
• Penalties to equal payments for readmissions above national average
• Penalty to reach up to 3% of Medicare inpatient revenue in 2015 and remain capped at that level
Percentage of Inpatient Medicare Revenue at Risk
Source: Marketing and Planning Leadership Council interviews and analysis.
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1) Bundled Payments for Care Improvement.Source: Centers for Medicare and Medicaid Services; Health Care Advisory Board interviews and analysis.
Bundled Payments
BPCI1 Participation by State
Medicare’s Largest Payment Innovation ProgramMore than 450 Providers Participating in BPCI1
1-19 providers
20-49 providers
>50 providers
0 providers
450+Total Number BPCI Participants as of
February 2013
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Redefining the Acute Care EpisodeBundled Payments Drive Delivery System Integration
1) Center for Medicare and Medicaid Innovation.
Bundled Payment Framework
Lump Sum Payments Drive Integration Through Shared Accountability
Payer
Physician Services
Hospital Services
Post-Acute Services
Program in Brief: Medicare’s Bundled Payments for Care Improvement
• CMMI1 initiative offering four voluntary bundled payment models; more than 450 providers selected to participate
• Models 1-3 provide retrospective reimbursement; Models 2 and 3 include post-episode reconciliation; Model 4 offers single prospective payment
• Acute care hospitals, physician groups, health systems eligible for all models; post-acute facilities may participate without hospitals in Model 3
• Physicians eligible for gainsharing bonuses up to 50 percent of traditional fee schedule
• For all models, applicants must propose quality measures, which CMS will use to develop set of standardized metrics
Source: Centers for Medicare and Medicaid Services; Health Care Advisory Board interviews and analysis.
Bundled Payments
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BCPI Participants Favoring Longer Episodes
Participation by Model Type
Bundled Payments
Hospital Inpatient Services
Hospital and Physician
Inpatient and Post-Discharge
Services
Post-Discharge Services
Hospital and Physician Inpatient Services
Model 4Model 3Model 2Model 1
16%
36%
41%
7%
Source: Centers for Medicare and Medicaid Services; Health Care Advisory Board interviews and analysis.
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Not Just a Medicare ProgramPrivate Sector Bundling Pilots Emerging Nationwide
Bundled Payments
1) Coronary Artery Bypass Graft.
Bundling for obstetrics
Bundling total joint replacement
Bundling for CABG1
Exploringcardiac bundling
Four physician groups bundling for orthopedic surgery
Bundling joint replacements, procedures with “defined outcomes”
Developing orthopedic bundling
Reimbursing for “Baskets of Care”
Participating in Prometheus Pilot
Bundling for cardiac surgery
Bundling total knee replacement
Participating in Prometheus Pilot
Source: Health Care Advisory Board interviews and analysis.
ACE Demo Sites
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ACOs Off and Running
ACO Presence Steadily Extending Nationwide
Source: Muhlestein D, “Continued Growth of Public and Private Accountable Care Organizations,” Health Affairs Blog, February 19, 2013; Oliver Wyman, “Accountable Care Organizations Now Serve 14% of Americans,” February 19, 2013; Leavitt Partners, “Growth and Dispersion of ACOs,” August 2013; Health Care Advisory Board interviews and analysis.
Accountable Care Organizations
1) As of February 2013.
Total Number of Operating ACOs
September 2013
Widening Reach of ACOs1
52%Portion of U.S. population living in a primary care service area with an ACO
14%Portion of U.S. population treated by an ACO
4MMedicare FFS beneficiaries treated by an ACOSeries1
23
486
27
88
106 7
235
April 2012
MSSP1 Cohort
July 2012 MSSP Cohort
Private Sector ACOs
Pioneer ACO Model
TotalJan.2013 MSSP Cohort
Pioneers switching
to MSSP
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Where the Medicare ACOs Are23 Pioneer and 228 Shared Savings Program ACOs
Source: Centers for Medicare and Medicaid Services; Health Care Advisory Board interviews and analysis.
Accountable Care Organizations
August 2013
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Mechanics of the Medicare Shared Savings ProgramApplying Total Cost Accountability to Fee-for-Service Payments
Source: Health Care Advisory Board interviews and analysis.
Accountable Care Organizations
Program in Brief: Medicare Shared Savings Program
• Cohorts launched April 2012, July 2012, and January 2013; contracts to last minimum of three years
• Physician groups and hospitals eligible to participate, but primary care physicians must be included in any ACO group
• Participating ACOs must serve at least 5,000 Medicare beneficiaries
• Bonus potential depends on Medicare cost savings, quality metrics
• Two payment models available: one with no downside risk, the second with downside risk in all three years
Shared Savings Payment Cycle
Shared Savings PaymentBonuses or penalties levied based on variance of expenditures from target
4
DistributionACO responsible for dividing bonus payments among stakeholders
5
AssignmentPatients assigned to ACO based on terms of contract
1
ComparisonTotal cost of care for assigned population compared to risk-adjusted target expenditures
3
BillingProviders bill normally, receive standard fee-for-service payments
2
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Three Primary Levers for ACOs to Reduce Spending
ACOs Targeting Total Cost of Care
Source: Health Care Advisory Board interviews and analysis.
Accountable Care Organizations
Retain Utilization Within NetworkPopulation
Health Manager
Prevent Utilization through Medical Management
1
2
3
Options for Risk-Bearing Providers
Example:
High-risk patient care management (e.g., medication management, care transitions management)
Example:
Cost incentives to encourage in-network imaging referrals
Example:
Volume steerage to high-value acute care providers
Direct Unavoidable Utilization to Low-Cost, High-Quality Partner
• Inpatient, outpatient procedures
• Select inpatient medical care
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First Year Pioneer ACO Results Are InStrong Quality Performance, Uneven Financial Results
Source: Centers for Medicare and Medicaid Services; Health Care Advisory Board interviews and analysis.
Accountable Care Organizations
Non-Pioneer Pioneer
0.8%
0.3%
Gross savings: $87.6M
First Year Pioneer ACO Results
Year One Financial Results
Beneficiary Cost Growth, 2012
13Earned bonuses,
totaling $76M
2Incurred losses,
totaling $4M
25Generated lower
risk-adjusted readmission rates
32Successfully
reported quality measures
Year Two Participation Decisions
7
2
23
Moving to MSSP1
Opting Out Entirely
Staying in Pioneer
ACO Model
1) Medicare Shared Savings Program.
26
• Mergers and Acquisitions
• Partnerships and Affiliations
• Physician Market
• Imaging Centers
• Ambulatory Surgery Centers
• Retail Clinics
Provider Market
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2009 2010 2011 2012
5272
90 94
Health Systems Increasingly the Norm
Source: AHA Hospital Fast Facts, available at www.aha.org; Healthleaders Media 2011 Industry Survey, available at: www.healthleaders.com/intelligence; Levin Associates, “Hospital Mergers and Acquisitions”, available at: www.levinassociates.com/pr2012/hos; Advisory Board interviews and analysis.
Mergers and Acquisitions
1) January 2012.
Hospital Mergers and Acquisitions M&A Plans for the next 12-18 months1
Number of Hospitals Part of a Health System2000-2009
2,542
2,921
53%
25%
21%
n=189
No M&A Activity Planned
Completed Deals Underway
Exploring Potential Deals
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P&A: The New M&A?Partnerships and Affiliations On the Rise
2011: Duke Health, Lifepoint form community hospital joint venture to explore joint affiliation options
2011: Medium-sized academic medical center partners with smaller rival to fill cath lab service deficiencies
2011: Large academic medical center signs preliminary partnership agreement with six rival hospitals to better compete with bigger systems
Source: The Advisory Board Company, “Cardiovascular Regionalization and Network Strategy”, Washington, DC; Duke-Lifepoint Healthcare, “Duke University Health System and LifePoint Hospitals Partner to Create Innovative Options for Community Hospitals,” available at: http://www.dlphealthcare.com, accessed May 3, 2011; Accountable Care Alliance, Omaha, NE; http://www.accountablecarealliance.com/partners/; Crosby J, “HealthPartners, Allina form a 'lab' for health reform,” StarTribune, available at http://www.startribune.com/business/133126273.html; accessed November 5 th, 2011;Marketing and Planning Leadership Council interviews and analysis.
2010: Nebraska Medical Center, Methodist Hospital agree to accountable care alliance
Partnerships and Affiliations
2011: Allina and HealthPartners affiliate to create a “testing lab” for accountable care
2011: Large medical center agrees to sell CON-approved open-heart surgery suite to competitor
Growth Goals for Partnerships
• Ambulatory footprint
• Access to new regions
• New clinical program
• Brand equity
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The New Purpose of Partnership
Intent of Partnerships and Affiliations Rapidly Evolving
Source: Marketing and Planning Leadership Council interviews and analysis.
Partnerships and Affiliations
Objectives of Partnership
“New Market” Partnership
Value
Scale Scope Reach
GeographicClinicalOperationalFinancial
Consolidate local position
Centralize supply purchasing
Merge back office functions
Increase operational efficiency
Integrate services across care continuum
Develop care management competencies
Stake regional footprint
Establish national network
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A Host of Available Affiliation Approaches Partnership Models Addressing Existing, Emerging Challenges
Partnerships and Affiliations
Source: Health Care Advisory Board interviews and analysis.
Partnership Model Description
Joint PurchasingHospital organizations band together to form group purchasing organizations centered on vendor negotiations in order to cut supply costs
Best-Practice Sharing
Joint forums among hospitals to discuss clinical protocols, operational initiatives that have been successfully implemented
Regional Clinical Networks
Collaboration among hospitals to steer patients with acute conditions (i.e. STEMI, AAA) to most appropriate site
Service OutreachHospital sends physicians to outlying partner sites, sets up outreach clinics on a temporary basis in order to reach more patients, grow volumes
Quality Assurance Review
Hospital medical staff review medical protocols, outcomes of partner hospital, then advise on protocols to drive quality gains
Equipment Sharing Hospital loans medical equipment, facility space to affiliated partner
Shared Physician Staffing
Partner hospitals loan or share physicians with one another in order to fill gaps in service coverage, usually for more advanced procedures
Joint Program Management
Hospital provides administrative, operational oversight of CV program at partner site
Joint Program Development
Hospital serves in advisory capacity for another hospital seeking to build up a new program; support may cover clinical, legal, HR, marketing
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How Are We Growing?Physician Employment, Medical Group Ownership Continue to Rise
Source: Advisory Board Survey on Physician Employment Trends; MGMA Physician Compensation and Production Survey, available at: mgma.com; Advisory Board interviews and analysis.
Physician Market
Hospitals Employing or Affiliating with Physicians
PrimaryCare
Orthopedists Neurologists General Surgeons
76%
24%37% 39%
11%
39% 13% 11%
Employment Other Formal Affiliations
n=46 Hospitals and Health Systems
2005 2006 2007 2008 2009 2010
69%
39%
26%
58%
Physician Owned Hospital Owned
Medical Group Ownership
44.8%Physicians currently employed or under
contract
70%Hospitals reporting
increase in physician employment requests
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Physician Groups Finding Unlikely Partners
DaVita, HealthCare Partners Join Forces for Scale
Source: Mathews AW, “Dialysis Firm Bets on Branching Out,” Wall Street Journal , May 21, 2012, available at: www.wsj.com; Lee J, “HealthCare Partners Acquires N.M. Medical Group,” Modern Physician, September 11, 2012, available at: www.modernphysician.com; Dunn L, “HealthCare Partners Acquires Two Independent Practice Networks in California,” Becker’s Hospital Review, September 12, 2012, available at: www.beckershospitalreview.com; Health Care Advisory Board interviews and analysis.
Physician Market
1) Through acquisition of ABQ Health Partners and Arta Health Network.
Case in Brief: DaVita HealthCare Partners• In May 2012, dialysis chain DaVita acquired California-based
HealthCare Partners for $4.42 billion
• Deal presents new revenue stream for DaVita, opportunity to capitalize on physician-risk model
HealthCare Partners DaVita
Experience thriving under value-based payment models
Active in successfully acquiring physician groups across the country
Joint Strategy
• Expand, acquire physician groups outside of existing markets
• Franchise value-based physician groups across United States
DaVita Acquires Experienced Population Manager
984Newly acquired physicians since
merger1
Fiscally savvy, generating $7B in annual revenue
Effective in successfully scaling businesses across diverse markets
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Imaging Center Market Dips After Years of Growth
First Decline Since 2009
Source: Radiology Business Journal, “Imaging-center Growth Hits the Wall in 2013; Volumes Plummeted in 2011,” August 30, 2013; Marketing and Planning Leadership Council interviews and analysis.
Imaging Centers
Se-ries1
6,241
6,455
6,150
6,3116,383
7,074
6,816
5.60%3.40%
-4.70%
2.60%1.10%
10.80%
-3.60%
Net percent growth from previous year
Total Number of Imaging Centers in the U.S.
2005-2013
2007 2008 2009 2010 2011 2012 2013
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Total Number of Medicare-Certified ASCs
2005 2006 2007 2008 2009 2010 2011
4,3624,608
4,8795,095 5,217 5,316 5,385
ASC Growth Continues to Slow
Source: “Report to the Congress: Medicare Payment Policy,” MedPAC, March 2012; Marketing and Planning Leadership Council interviews and analysis.
Ambulatory Surgery Centers
7.3%
1.3%
5.6% 5.9%4.4%
2.4% 1.9%
Net percent growth from previous year
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Meet Your New Competitors
Walgreens Aims to Become the Premier Health Destination
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.
Retail Clinics
2009: Launches flu vaccine campaign
Simple Acute Services
Vaccinations and Physicals
Chronic Disease Monitoring
Chronic Disease Diagnosis and Management
2013: Launches three ACOs; begins diagnosing and managing chronic disease
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
2007: Acquires Take Care Health Systems
2012: Offers three new chronic disease tests
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
”
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Walmart Eying the Health Care Industry
Moving Beyond Basic Retail Clinics
Source: Holmes TJ, “The Diffusion of Wal-Mart and Economics of Density,” May, 2006; Zimmerman A and Hudson K, “Managing Wal-Mart: How U.S.-Store Chief Hopes to Fix Wal-Mart,” The Wall Street Journal, April 17, 2006, available at: www.wsj.com; Aboraya A, “Wal-Mart Plans to Offer Primary Care in 5-7 Years,” Orlando Business Journal, January 11, 2013, available at: www.bizjournals.com/orlando; Aboraya A, “Exclusive: Wal-Mart Exploring Private Health Insurance Exchange for Small Biz,” Orlando Business Journal, January 11, 2013, available at: www.bizjournals.com/orlando; Health Care Advisory Board interviews and analysis.
Retail Clinics
Vice PresidentHealth and Wellness
Payer Relations
”
“That’s where we’re going now: full primary care services in five to seven years.”
Potential Evolution of Health Care Products
33%Estimated portion of the US population that visits
Walmart every week
4,600+Number of Walmart
stores in the United States
Median distance between a residence
and Walmart
4.2 miles
Basic Retail Clinic
Full Primary
Care
Health Insurance Exchange
Scope of Services
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Commercial Payers Demanding More Value
Taking Measures to Keep Employers in the Game
Commercial Payers
1) Benefits Value Advisor.
Source: Hostetter M and Klein S, “Health Care Price Transparency: Can It Promote High-Value Care?”, The Commonwealth Fund, April/May 2012, available at: www.commonwealthfund.org; Appleby J, “HMO-Like Plans May Be Poised to Make Comeback in Online Insurance Markets,” Kaiser Health News, January 22, 2013, available at: www.kaiserhealthnews.org; Health Care Service Corporation, “Health Care Consumers Realize Significant Cost Savings Through Benefits Value Advisor Program,” April 17, 2013, available at: www.hcsc.com; Health Care Advisory Board interviews and analysis.
Examples of Commercial Payer Cost Control Initiatives
• Health Care Service Corp. Benefits Value Advisor program
• UnitedHealthcare’s myHealthcare Cost Estimator
• BCBS of Western NY, Kaleida Health cardiac surgery bundle
• ConnectiCare, St. Francis Hospital hip and knee replacement bundle
• Harvard Pilgrim Focus Network
• Anthem BCBS Compass SmartShopper Program
Price Transparency Tools Bundled Payment Narrow Networks, Steerage
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Doubling Down on SteerageAnthem Paying Consumers to Pick Low-Cost Providers
Source: Andrews M, “Cash rewards for thrifty health consumers,” The Washington Post, March 26, 2012; Compass Smartshopper, available at: www.compassmartshopper.com; Advisory Board interviews and analysis.
Commercial Payers
476Participating members of SmartShopper pilot program
$250K $100Health care costs avoided over two year pilot program
Typical incentive paid to participants choosing lower-cost providers
Members receiving care at a low-cost provider from the list receive financial reward
Member accesses list of low-cost providers through toll-free number or website
Member works with referring physician to switch to lower-cost provider or location for service
Upon receipt of claim, Anthem identifies member access of low-cost provider list
Before Scheduled Procedure Following Procedure
Anthem’s Compass SmartShopper Program
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Trading Price for Volume on the Public Exchanges
Expect Lower Provider Payment Rates, Less Patient Choice
Source: Mathews AW and Kamp J, “Another Big Step in Reshaping HealthCare,” Wall Street Journal, February 28, 2013, available at: www.online.wsj.com; Hancock J, “Aetna Cuts Predictions for Obamacare Enrollment,” Kaiser Health News, April 30, 2013, available at: www.capsules.kaiserhealthnews.org; Health Care Advisory Board interviews and analysis.
Commercial Payers
1) Pseudonym.
Anticipated Provider Reimbursement Rates for Exchange Plans
Catholic Health Initiatives
Modest discounts from commercial rates
Tenet Healthcare Up to 10% below commercial rates Meriwether Hospital1
5% below commercial rates
WellPoint Inc.Between Medicare
and Medicaid rates
Meyers Health1
10% above Medicare rates Case in Brief: Aetna Inc.
• Health insurer planning to sell narrow network exchange products in 14 states
• Searching for providers agreeing to lower rates in narrow network products
• Plans for rates to fall closer to Medicare than commercial reimbursement
Aetna’s Planned Reduction in Exchange Network Size
25%-50% reduction in exchange network size, compared to networks for typical commercial products
Millern Medical Center1
20% below commercial rates
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Employers Already Scaling Back Coverage
Erosion of Employer-Sponsored Coverage Well Underway
Sources: Sonier J, et al., “State-Level Trends in Employer-Sponsored Health Insurance,” Robert Wood Johnson Foundation, April 2013, available at: www.rwjf.org; Collins R, et al., “Insuring the Future,” The Commonwealth Fund, April 2013, available at: www.commonwealthfund.org; Towers Watson, “Reshaping Health Care,” 2013, available at: www.towerswatson.com; Health Care Advisory Board interviews and analysis.
Individuals Covered by ESI1
23%Employers planning
to offer CDHP2 as only plan option, 2014
25%Insured non-elderly adults with deductibles $1,000
or higher, 2012
Non-elderly Population
2000 2011
69.7%
59.5%
11.5M fewer individuals
Contribution to Insurance Premiums
1) Employer-sponsored insurance.2) Consumer-directed health plan.
Employers
Coverage for Family of Four
$5,866
$2,137
$11,429
$4,316
2002 2012
Employer
2002 2012
Worker
95% growth
102% growth
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Concerns for Long Term Liability of Health Benefits
Source: Towers Watson “Health Care Changes Ahead Survey 2012;” Advisory Board interviews and analysis.
2007 2008 2009 2010 2011
73%
62%57%
38%
23%
Employers “Very Confident” Health Benefits Will Be Offered At Their Organization a Decade From Now
2011
Employers
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Currently offer access to private
exchange
Considering private exchange in 2014
<1%
15% 46%
36%
6%12%
Employee Benefit Research Institute, 2011
Mounting Pressure on Employer-Sponsored BenefitsWill Defined Contribution Emerge as Funding Strategy?
Source: Employee Benefit Research Institute, Private Health Insurance Exchanges and Defined Contribution Health Plans: Is It Déjà Vu All Over Again?”, July, 2012, no. 373;Towers Watson, “18 th Annual Towers Watson Employer Survey on Purchasing Value in Health Care”, 2013, available at: www.towerswatson.com; Marketing and Planning Leadership Council interviews.
Employers
Company Health Benefits Strategy for Active Employees Over Next Decade
Percentage of Employers Offering Private Exchanges
8.7%Growth in Employees’ Share of
Premium Costs Between 2012-2013
32%Increase in Employer Spending on
Health Benefits Relative to 5-yrs Prior
Undecided
Discontinue health
coverage
Continue offering defined
benefit plans
Consider shift to defined
contribution
Towers Watson Survey, n = 583
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Real Movement in Exchange Plan SelectionSears, Darden Exchange-Style Model in Year One
Source: Mathews AW, “To Save, Workers Take On Health-Cost Risk,” Wall Street Journal, March 17th, 2013; Marketing and Planning Leadership Council interviews and analysis.
Employers
1) Preferred Provider Organization2) Health Maintenance Organization
Case in Brief: Sears, Darden Restaurants
• Self-insured large employers redesigning employee benefits to reduce health spend through defined contribution strategy
• Offering employees lump sum credit to choose coverage from Aon Hewitt’s online marketplace
2013 Health Insurance Offerings at Sears, Darden Restaurants
Employee selects coverage from menu of plans in online marketplace
If selected plan cost exceeds credit, employee pays balance
Employer offers employees fixed credit to select health care coverage
1
2
3
2013
2012
47%
70%
14%
18%
39%
12%
PPO HMO
High-Deductible Plan
Consumer Preferences on Sears-Darden Exchange
1 2
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Most Employers Running to High(er) Deductibles
Source: Towers-Watson & National Business Group on Health, “Employer Survey on Purchasing Value in Health Care,” available at: www.changehealthcare.com/downloads/industry/Towers-Watson-NBGH-2012.pdf; Castlight Health, “Castlight Health and Life Technologies to Discuss Employee Engagement in Health Care at IHC FORUM East,” available at: www.prnewswire.com; “Mini-Microsoft”, available at: http://minimsft.blogspot.com/2010/10/microsoft-health-care-pops-cap-in-one.html; Claxton et al. “Employer Health Benefits: 2011 Annual Survey,” Kaiser Family foundation and Health Research & Educational Trust, Exhibit 4.3.; Advisory Board interviews and analysis.
Employers
1) Consumer Directed/Driven Health Plans. 2) High-deductible health plan with savings option, defined
as a health plan with a deductible of at least $1,000 for single coverage and $2,000 for family coverage.
Select Employers Moving to CDHP1
100 percent CDHP
Moving to 100 percent CDHP
100 percent CDHP
40 percent CDHP
Percent of Firms Offering HDHP/SO2 by Number of Employees
2011
3-199 200-999 1,000-4,999
5,000 or More
23% 26%
38%
49%
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Self-Insured Looking for New Solutions
Employers Bearing More Risk, Turning to Providers as Allies
Source: Kaiser Family Foundation, “2012 Employer Health Benefits Survey,” available at: www.kff.org; Towers Watson, “18th Annual Towers Watson Employer Survey on Purchasing Value in Health Care,” 2013, available at: www.towerswatson.com; Health Care Advisory Board interviews and analysis.
Employers
Percentage of Self-Insured Employers
Partially or Completely Self-Insured
2000 2003 2006 2009 2012
49%
52%
55%57%
60%
29%
21%
13%
20%
12%
8%
7%
6%Adopt new accountable payment models
Contract directly with hospitals, physicians, ACOs
Offer incentives for care coordination
Offer performance-based payments
In Place in 2013 Planned for 2014
Employer Interest in Provider-Oriented Strategies
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Specialist, Hospital Choices Driven by Physicians
Strong Referrals Management Still Critical
Source: Tu HT and Lauer JR, “Word of Mouth and Physician Referrals Still Drive Health Care Provider Choice,” Center for Studying Health System Change, December 2008; Health Care Advisory Board interviews and analysis.
Physicians
1) Survey respondents given option to “select all that apply.”
Information Sources Used to Select a Specialist Physician1
2008
Internet
Health Plan
Another Doctor or Health Care Provider
Friends or Relatives
Referral from PCP
7%
11%
18%
20%
69%
Information Sources Used to Select a Facility for a Procedure1
2008
Internet
Health Plan
Friends or Relatives
Another Doctor
Doctor Performing the Procedure
3%
7%
10%
14%
74%
58% rely solely on referral from PCP
69% rely solely on referring doctor
n=13,500 n=13,500
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The Logic of Physician Choice
Hospital Choice Driven by Service, Culture
Source: Health Care Advisory Board interviews and analysis.
Physicians
Factors Driving Independent Physician Referral Decisions
Clinical Quality
• High-quality nursing staff
• Supportive and knowledgeable physician network
• Positive patient-reported experiences
Contractual Relationships
• Participation in management, operations
• Aligned incentives
Service Quality
• Rapid access to lab, imaging results
• Prompt resolution of complaints and issues
• Non-disruptive IT, EMR systems
Culture of Partnership
• Open communication channels
• Physician-oriented leadership
Workshop of Choice
• Cutting-edge technology, facilities
• Efficient operating rooms, ICUs
• Access to preferred schedule slots
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Medical Home Incentives Influencing Referrals
Source: NCQA, “PCMH Eligibility,” “NCQA and Pfizer Publish Strategies For Becoming A Patient-Centered Medical Home,” both available at: www.ncqa.org; Health Care Advisory Board interviews and analysis.
Physicians
1) National Committee for Quality Assurance.2) Patient-centered medical home.
NCQA PCMH Model Widely Adopted
5,000+ NCQA-certified medical homes 26,000
Approximate number of clinicians practicing in certified medical homes
NCQA1 PCMH2 recognition requires: Hospital partner must offer:
Medical Home Practice Changing Referral Priorities, Partner Expectations
“Whole-person” care Comprehensive care services
Coordinated, integrated care across care system
Health information system interoperability; care management resources
High-quality performance Evidence-based care protocols
Team-based care Staff communication protocols, interdisciplinary care team meetings
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Anticipating the “Activated” Patient
Consumer Role in Decision Making Increasingly Important
Source: Collins R, et al., “Insuring the Future,” The Commonwealth Fund, April 2013, available at: www.commonwealthfund.org; Altarum Institute, “Altarum Institute Survey of Consumer Health Care Opinions,” Fall 2012, available at: www.altarum.org; Health Care Advisory Board interviews and analysis.
Patients
1) From 2003 to 2012.
Consumer Viewpoint on Role in Care Decision Making
n=2,071
38%
29%
6%
0%
26%
High-Deductible Health Plan Enrollment
2003 2005 2010 2012
7%10%
18%
25%
Individuals with Deductible of $1000 or More
43%Decline in proportion of individuals
with a deductible under $5001
33%Respondents age 25 to 34 preferring
fully active role in care decision making
Doctor is completely in charge of treatment decisions
Doctor makes the decisions with some input from patient
Patient is completely in charge of treatment decisions
Doctor and patient make a join treatment decision
Patient makes final decision with some input from their doctor
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Factors Influencing Patient Decisions Expanding
Patients
Key Drivers of Consumers’ Health Care Decisions
Source: Health Care Advisory Board interviews and analysis.
Email Communication
Education During Visit
Social Media Presence
Onsite Amenities
Patient Portal
Care Navigation Services
Brand, Reputation
Coordination with Other Providers
Physician Recommendation
Competitive Pricing
Clinical Quality
Experience, Service Quality
Convenience, Access
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