Data Knows Best - NDHA · Data Knows Best It Will Bring You to Tiers! Nathan Kaufman, Managing Director Kaufman Strategic Advisors, LLC 11440 West Bernardo Ct., Suite 155 San Diego,

KAUFMAN: North Dakota 10061 (DKB0918) 9/22/2015

Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 1

Data Knows BestIt Will Bring You to Tiers!

Nathan Kaufman, Managing DirectorKaufman Strategic Advisors, LLC11440 West Bernardo Ct., Suite 155San Diego, CA 92127(858) [email protected]

Kaufman Strategic Advisors, LLCEvidence Based Consulting

It’s Raining Acronyms - Hallelujah

“ Never ask a barber if you need a haircut!”

~Warren BuffetWarren Buffet

2© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved

“… the shift is occurring much slower than the hype….”



The “Black Swans”

What is the most significant current event in healthcare?

CT State Hospital and ASC Tax will cost hospitals $315 million.

Atlantic Health loses tax exemption

3

Site-Neutral Reimbursement

© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved

Healthcare Policy and Financial Forecasting

HHS to Expand ‘Successful’ Pioneer ACO Program“Pioneer ACOs Anatomy of a Victory” Health Affairs

Where the Rubber Meets the Sky

ACOBundling OWA

• 45% cost Medicare more, 18% profitable• 45% Pioneers Dropped Out• 50% Dropout Rate - Bundled Payments• A’s: TSA, VA, ACO

4

“The Major Benefit of Financial Forecasting Is That It Makes Astrology Look Respectable.”

~John Kenneth Galbraith




Strategy orLemming Syndrome?


Adjacency: The Trap of False Enthusiasm

Adjacency: The belief that an organization can sustain growth by entering into a market adjacent to it’s core business

Failure Rate: 75%

6

Failure Rate: 75%(Bain Analysis of 1,850 companies)




The “Doctor’s Dilemma”

What’s with all this doom and gloom? Right now, I feel great!

If you don’tchange your

lifestyle, there will b Prevalence 2012:feel great! be consequences.

Dr. Eric WestmanKetogenic Diet

Prevalence 2012:

Kids Eating Fast Food Daily: 34% Diabetes: 12.4% (up 3%) Pre-diabetes: 38% Obese: 36% (up 12%) Overweight: 33%


Are the Consolidated“80 Percenters” on Board?

Hospital‐Based Phys.

New Delivery Models

Oncologists

ModelsCardiologists

Gastroenterologists

All Other Surgeons

Neurosurgeons

Orthopedic SurgeonsPCP




Supply Costs

A Health System’s “Circle of Life”: Access to Capital

Providing Value to Patients and Stabilizing

Physician Compensation Requires the

Negotiated Rates,

Government Reimbursement

& Volume

ROI on Physician Investment

q

Ability to Borrow

Revenue –Expenses

= Cash

Bond Rating:

Access to Capital (Credit Score)

Personnel

Costs

Capital SpendingService &

Access


What is the Primary Cause of Cost Differentiation?

Net Payment per Episode - Blue Cross

Hip Replacement Surgery:BCBS NC.com

Hip Replacement Surgery:• $17,910 to $73,987 in Massachusetts1

Angioplasty:• $15,951 to $49,604 in Chicago2

1California Healthline, January 22, 20152 Modern Healthcare, July 20 2015

$10,368 $32,242

$11,641 $48,091

Colonoscopy

CDD: $1,273Duke : $4,766




As in previous years, Partners-affiliated hospitals consistently had prices above each payer’snetwork median. Most Steward-affiliated hospitals had prices below the network median.

Figure 7: Acute Hospital Composite RP Percentile (Blended), by System, 2013Academic

MedicalCenters

100th Teaching

Community,

DSH90th

Community80th Community80th

Geographically

Isolated70th

60th

Within eachhospitalsystem,percent ofpayments tohospitals withcomposite RPpercentilehigher thanthe median

50th

40th

30th

78%

100% 74%85% 73% 23% 67%

the median(50th

percentile)

20th

10th

Number of hospitalsin each system;percent of totalhospital paymentsattributed to each

system

0thPartners

(N=7, 31%)CareGroup(N=4, 8%)

UMass(N=5, 6%)

Lahey Health(N=2, 5%)

Steward(N=10, 5%)

OtherAffiliated

(N=13, 12%)

Unaffiliated(N=20, 20%)

Note: Composite RP percentile for each hospital is equal to the simple average of all payers’ Blended RP percentiles for that hospital. “Blended” denotes that inpatient and outpatient RPresults are combined. “Other Affiliated” includes hospitals affiliated with the following systems: Baystate, Berkshire, Cape Cod, Circle Health, Shriners, and Vanguard. Bubbles denote eachhospital’s composite RP percentile , and are sized according to providers’ shares of total hospital payments. Note that percentages do not sum to 100%: six hospitals were excluded becausethey deliver care to specific patient populations, based either on age or type of medical condition. These "Other Specialty" hospitals are not considered comparable with other cohorts, andare omitted from the analysis. “Geographically isolated” indicates that the hospital was the sole acute hospital within a 20‐mile radius.

System-affiliated physician groups tended to have prices that were above the networkmedian for all payers, whereas most unaffiliated physician groups had prices that fell below the network median.

Figure 12: Physician Group Composite RP Percentile (Blended), Top 30 Physician Groups,by System Affiliation, 2012

100th Partners (PCHI)(N=1, 26%)

Atrius (N=2,

11%)

Steward (N=1

90th

Steward (N=1,

8%)

NEQCA (N=2, 6%)

80th

70th

BIDCO (N=1,6%)

Other Affiliated

(N=7, 14%)

Unaffiliated

(N=16, 29%)

60th

Within eachcategory, percentof payments tophysician groupswith compositeRP percentile

higher than the median (50th

percentile)

50th

40th

30th

20th

96% 49%

20th

10th

Number of physiciangroups in each category;percent of totalphysician grouppayments attributed toeach category

0th

Affiliated(N=14, 71%)

Unaffiliated(N=16, 29%)

Note: Composite RP percentile for each physician group is equal to the simple average of all payers’’ RP percentiles for that group. “Other Affiliated”includes physician groups affiliated with the following health systems: UMass, Baystate, Lahey Health, Circle Health, Berkshire, and Vanguard (nowTenet, as of November, 2013). This figure depicts the Top 30 physician groups, according to share of total physician payments across all payers.



Strategy Requires a Point of View (POV) Regarding Market Pace and Organizational Competencies

What will the local market look like in five years?‒ Show me the evidence!

What competencies do you need to succeed?‒ Do you possess them?‒ Realistically can you develop them?

What is the industry’s conventional wisdom, have we seen this movie before – how did it end?

“Investors Struggle to Evaluate

Population Health Strategies.”

~H&HN Daily, 05.28.15 by James M. Molloy

13

Are the physicians on board?

What are the financial implications (w/o heroics)?


Value= Benefit/Price(Differently better in the eyes of the customer)

Brand




Population Health: Shifting from a Provider-Centric to a Subpopulation-Centric Model of Care

Succeed at Global Risk by Managing the Health of the General Population

1993: Bold, Disruptive Predictions (1,500 Leaders)

Employ Physicians to Prepare for Most Certain

Proliferation of Capitation

Health of the General Population

Chronically Ill and Elderly

Population

Health System-Employee Population

Office-Based

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Office-Based Population

Institutional Population

(APC)

(DRG)


Same Delivery Model?




Designing an Optimal Delivery System for a Sub-Population

▪ Virtual

▪ Wearables and Implantables

▪ Primary Care MD Office

▪ Specialty MD Office

The Old Continuum of Care The New Continuum of Care

▪ Kiosk

▪ Pharmacy/Minute Clinic

▪ Primary care MD & NP office

▪ Specialty MD & PA office

▪ Hospitalists

▪ Ambulatory Ancillaries

▪ Specialty MD Office

▪ Ambulatory Ancillaries

▪ Urgent Care

▪ Hospital/ED

▪ SNFy

▪ Satellite ED

▪ Hospital/ED

▪ SNF

▪ Hospice 17© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved

18.1% GDP

Post ACA Annual Growth in Healthcare Spending

Anecdotes are NOT Evidence

• ACA• Exchangesg• ACOs• Minute Clinics• PCMH• Bundled Payments• Value-based Care• Wellness

1818

• Clinical Integration• Population Health




Unsustainable Economic Trends in Government Spending

“Bundled payments, ACOs, and medical homes can reduce cost levels but not the overall growth rate... Medicare spending will grow faster than projected and

Medicaid spending will double to almost $919 billion in 2023 from $450 billion in 2013. (58% Mg care) ~CMS

grow faster than projected ...and Congress won’t be able to avoid changing course.” (31% MA)

~Richard S. Foster, Chief Actuary for CMS (Ret.) February 28, 2012

19Altarum’s Triangle of Painful Choiceshttp://www.youtube.com/watch?v=QrPaJBh01sE


Commercial Coverage: The Math Does NOT Work

$51,000




The New Regulations Impacting the Commercial Insurance Industry will Eventually Impact Providers

Premium Caps, Transparency, Aging Cadillac Tax & Medicaid Expansion

Health Plan

Profits$

Premiums

21

Benefits

Standard Benefits & Universal Coverage © Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved

Bureau of Labor StatisticsProducer Price Index: Hospital Component

Percent Change in Hospital Producer Price Index

3%

4%

5.8%

4.9%

3.8%4.4%

3.5%3.0% 3.0% 3.0%

2.1%2.5%

2.2%

1.3%2%

3%

4%

5%

6%

7%

22

0%

1%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014




Volume to Value?

Pay for Conformance

Regional Market Power Continues to Drive

Payment Rates

23


Insurance to ReinsurancePremium: $12,000Deductible: $2000/$4,000 (repriced)Co-pay: 30%

The Value-based Network Test

A 2011 Stent Procedures• 50% appropriate, • 38% uncertain

If I had to reduce my message for achieving excellence to just a few

• 12% inappropriate~American College of Cardiology

24

How many different sets of

orders?

words, I'd say: it all has to do with reducing variation.”

~W.E Deming




Rate the Functionality of Your Delivery Network

CCSIA Coalition of

Competing

CA Kaiser Permanente

‘A’ Rating Leapfrog‘5 Star’ Medicare Advantage‘5 Star’ Medical Groups (CA)‘5 Star’ Health Plans (CA) Competing

Self Interests

Value FFS

5 Star Health Plans (CA)Top MA Plans – NCQAJD Powers Best Patient Sat.

25

• Organized broad geographic network• Transparent actionable analytics• Compliance w/ hundreds of clinical guidelines• Focus on team care & collective performance• Interconnected EHR• Full acute care continuum• Integrated health plan, physicians and hospitals

• Limited geographic network• Culture of optionality/autonomy/silos• Patients fend for themselves• Focus on individual compensation• Traditional medical staff-hospital disputes

over authority and money• Incomplete continuum of care


Who is Getting Medicare Advantage Right?

26

NCQA




Are The Physicians “Engaged” in Your Population Health Strategies?

Triple Aim 1. Improve the patient experience of care

Triple Gain1. Improve provider income

2. Improve the health of populations3. Reduce the per capita cost of health care

2. Improve provider work-life3. Reduce provider workload

80%

27

80%ers:Why Change?


“Changing the payment system probably isn't enough to ensure that patient care will improve.”Effects of Alternative Payment on Physician Practices In the US, Rand Corporation, AMA, 3/19/15

Alternative payment models are increasing physician Alternative payment models are increasing physician workload but not income

Alternative payment models haven’t substantially changed the way physicians deliver care

Operational problems in new payment programs are frustrating the physician-participants impacting theirfrustrating the physician participants impacting their enthusiasm




Strategy Requires Leaders to Adopt a Point of View (POV) Re: the Market

The Emergence of More Government Scrutiny – New Focus on Physicians

The OIG states that physicians who enter into “compensation arrangements such as medical directorships must ensure that those arrangements reflect fair market value for bona fide services the physicians actually provide.”

Georgia system to pay up to $35M (MD to pay $425K) for paying a

30

g y p y p $ ( p y $ ) p y gphysician excess salary, directorship, up-coding and self-referral MHC 9/5/15


Broward County Hospital will pay the government $69.5 million to settle allegations that it illegally paid nine doctors for referrals. MHC 9/15/15



Negotiated Rates: Colonoscopy

The Emergence of Price Transparency and Channeling

Negotiated Rates: Colonoscopy


The Emergence of VirtualHealthcare

32

Mass General Pilots Cardiology E-Consults Published: Jun 8, 2015 Medpage Today




Telehealth Users*

© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved 33*American Well

The Emergence of New Health Benefit Design

Domestic Medical Tourism,

Tiered NetworksTier 1 - Preferred: Members pay the lowest cost shareTier 2 - Enhanced: Members pay a higher cost share Tier 3 - Standard: Members pay highest cost share

Direct Contracting, Narrow Networks & Balanced Billing

Private Exchanges (Expedia)Rapid adoption of

Transparency, High Deductibles, Reference Pricing

Deselection of Providers

Domestic Medical Tourism, & Bundled Payments

for Elective Centers of Excellence

Single Payer

34

Provider-Based Health Plans andCommercial Capitation (Risk)

Rapid adoption of “Population Health”Medicare and Medicaid

Increase in “Value“Value--based based Payments”Payments” Moving to Risk!

Comprehensive Care for Joint Replacement Model Announced




Brought to You by United Healthcare


Brought to You by United Healthcare




SurgeonsRatings.OrgHarvard Magazine


Ever Increasing Percentage of Medicare Payments Tied to “Value”

Hospital Name

FY 2015 Estimated

ReadmissionsPenalty

FY 2015 ReadmissionsNet Revenue

Change

FY 2015 Final VBP

Adj. Factor

FY 2015 Estimated VBP

Incentive Payment

FY 2015 VBP Net Revenue

Change

FY 2015 Total P4P Impact

Inc. HAC

FY 2015 % P4P Impact

INOVA FAIRFAX HOSP ($39,645.56) -0.02% 0.9922 ($1,034,238.40) -0.51% ($3,072,601.62) -1.53%

VIRGINIAVIRGINIA HOSP CTR ($150,114.24) -0.18% 1.0069 $434,097.47 0.51% $283,983.23 0.34%

NORTH SHORE UNIV HOSP ($937,785.76) -0.37% 0.9993 ($117,815.36) -0.05% ($3,613,223.42) -1.41%

YALE-NEW HAVEN HOSP ($1,728,414.67) -0.41% 0.9961 ($945,908.23) -0.22% ($6,889,715.58) -1.62%

“Quality scores on Medicare's Hospital Compare website are unlikely to significantly improve hospital outcomes.” ~JAMA Internal Medicine

If Pioneer ACO, Shared Savings ACO and Bundled


38

“The Obama administration wants to dramatically change how doctors are paid.”

~Washington Post 1/26/15

If Pioneer ACO, Shared Savings ACO and Bundled Payment Demonstrations are a success I would hate to see a failure!**

** 1) http://healthaffairs.org/blog/2015/06/19/medicares-rush-to-risk-confounding-theory-and-practice-leaving-acos-vulnerable/ 2) http://healthaffairs.org/blog/2015/06/18/pioneer-acos-anatomy-of-a-victory/3) http://content.healthaffairs.org/content/34/3/371.abstract



ACOs Will Make the Economics of Health Systems Worse for Most Providers!

Payer

50%

ACO

NoInstitutional

Savings

VolumeInfrastructure

Physicians

Savings

10%

50%

39

Price

Hospital

20%

20%


ACO: A Lemming Strategy?

Few ACOs Earned Bonuses:ACO Results in CA:

“The financial results came as a disappointmentbut we were not surprised.”

~National Association of ACOs (NAACOS)

“The progress toward cost stabilization through ACO contracts from Medicare and commercial PPO has been modest at best.” “Medicare Yet To Save Money

40

been modest at best.

~Accountable Care in California: Imperatives and Challenges of Physician –Hospital Alignment, James Robinson Ph.D


Medicare Yet To Save Money Through Heralded [ACO] Medical Payment Model”

~Kaiser Health News By Jordan Rau and Jenny Gold September 14, 2015



Strategy Requires Strategy Requires Leaders to Adopt a Point of View (POV) Re: Organizational CompetenciesAre you a value-based network?

The “Value Proposition" of a Traditional Health System

Your care will be noYour care will be no worse than that

provided by our least competent physician!*

42

*And we cannot guarantee that your care will be appropriate, efficient, state-of-the-art or meet the highest professional standards.




The “Value Proposition” for Future Success

A Value-based Network (VBN) of providers that consistently delivers:y

‒ Superior service‒ Predictable reasonable cost per episode

and‒ Appropriate, accessible, standard care

b d th b t i i di i

43

based on the best science in medicine

VBNs are well-positioned for every payment methodologyif they are geographically indispensable





It Takes More Than Scale

Henry Ford being reviewed for credit downgrade ~MHC May 9, 2014

S&P downgraded CHI’s ratings after CHI lost $641 million for fiscal 2014 on $13.9 billion in revenue (1,500 layoffs) – Healthcare Finance 12/17/14

Partners HealthCare reported a $22 million loss on $11 Partners HealthCare reported a $22 million loss on $11 billion in revenue mainly due to their health plan which lost $110 million –Boston Globe 12/14/14


Creating a Value-based Delivery N t kNetworkWhat’s the plan? How will you be differently better ????



Most Health Systems Have the Same Strategic Plan

Optimize commercial rates

Clinically integrate with employed and independent physicians

Extensive use of protocols, EHR/IT to coordinate care Breakeven on p ,Medicare

Broad rational geographic coverage with a sufficient supply of primary care physicians and specialists

Shared savings relationships with payers

Benchmark financial performance

Top tier quality and patient safetyp q y p y

Service line strategies to drive revenue growth

Highly engaged employees

Operate as a high functioning health system with attractive, modern facilities


Eliminate Waste

Primary Opportunities

Personnel (diminishing returns) Personnel (diminishing returns)

Supply costs (physician preference items)

Cost per episode (e.g., drugs, testing, etc.)

Closing/consolidating facilities/services (#1 or #2 in the market)

Performance of key systems: e.g., Revenue Cycle, IT, Staffing, Case Management Cost Accounting Purchasing etc

48

Case Management, Cost Accounting, Purchasing, etc.

Return on investment in employed and contracted physicians (promote the use of ‘mid-levels’)




Physicians are Seeking Shelter from the Storm

• ICD 10• Regulation• Cyber

Security• Deductibles• MGMA-wRVU

49

2014 Medicare Trustees Report, AMA


Finding the “Magic” in Physician Employment

"A system will not manage itself. Left to themselves,

CONSOLIDATION & DEEP MANAGEMENTtse e t to t e se es,

components become selfish, competitive, independent profit centers, and thus destroy the system.” ~W E Deming

Central, shared governance Compact: gives and asks Physician hierarchy w/performance

evaluation and routine reports Consolidation of offices. Common name & standard office systems Standard use of clinical guidelines

“The problem is management..It is management's job to direct the efforts of all

50

Referral management Blended comp. plan

direct the efforts of all components toward the aim of the system.”

~W E Deming




Promote Appropriate Care

■ Clear lines of accountability and performance expectations for hospital-based/contracted physicians

■ Implement a process for physicians to develop clinical guidelines and measure and encourage compliance‒ Quality Committee of Board creates a quality compact with the

medical staff‒ CI Network

■ Extensive use of EMR and focus on accurate clinical documentation

■ Eliminate optional low volume services/facilities

■ Create disease management programs for high risk populations and companionate palliative care program


Can We Count on “Wellness” Working

Industry Consensus: Wellness centers will become money-makers under population Health

Healthcare Finance 8/15/15

52

Empirical Research: “Wellness and weight loss programs aren’t saving money, reducing disease burden or helping people slim down.”

~Khanna, & Montrose American Journal of Managed Care 2/19/15




Strategic End Game■ You can demonstrate superior value PER EPISODE which attracts

contracts and market share (try to avoid per unit price reductions)

‒ Significant decline in employee health plan costsB f M di d th l b d t l‒ Bonuses from Medicare and other value-based payment plans

■ You become geographically indispensable

■ Multiple “Centers of Excellence” able to win competitive bids based on

quality and cost

‒ “If you are what you do but you don’t document it then you are not”

■ Payors seek out your network for collaborations e.g., for Medicare

53

Advantage, Tiered Networks etc.

■ ROI from investment in employed and contracted physicians

■ Capacity and services are consolidated and your portfolio of facilities is rationalized


Behavior Change Requires a Compelling Reason to Leave Your Comfort Zone

Suits

MAKE IT EASY:MINIMAL WORKFLOW CHANGE

INCREMENTAL RESULTS LEAD TO CREDIBILITY

StatusQuo

ValueNetwork

Suits

Medical Staff

54

Data & Peer Leadership




The Key to Successful Strategic Transformation

You BecomeContinuous Measurement &

Strategy

You Become What You Measure:

■ Actionable clinical analytics

■ Accurate cost

Continuous Measurement & Incremental Improvement to Become Differentiated in the

Eyes of the Consumer

55

■ Accurate cost accounting


Then a Miracle Occurs:Leadership, Trust, Shared Vision




Global Compliance With Standard Work Attracts Payer Collaboration

MHMD Physician Board of Directors

Clinical Programs Committee

H&V

Cardiology

CV Surgery

Neuro

Neurology

Neurosurgery

Woman/Child

Neonatal

OB/Gyn

Surgery

Anesthesia

Bariatrics

Medicine

Critical Care

Emergency

Oncology

Oncology

Contract

Imaging

Pathology

PCP

Peds

57

CV Surgery Neurosurgery OB/Gyn Bariatrics

Orthopedics

ENT

Emergency

Ad hoc

Hospital Medicine

Pathology


58




You Don’t Have to Agree with My POV

“The housing boom is soon to go bust. And it“Nate, Stop! soon to go bust. And it will affect everyone…”

~Gary Shilling, ForbesOctober 14, 2002

“All the doom and gloom forecasts are not only irresponsible but are downright wrong.”

~David Lereah

, pTake a look at what you have become.Look in the mirror, look hard,You are a real downer.Get a grip, rise above the hate!Really. Man up, money to be made.”

From an SVP @ FP Hospital Company 4/2014

59

David LereahChief Economist of NAR (2005)

From an SVP @ FP Hospital Company 4/2014


Healthcare Strategy is All About the Bear Story

That’s OK. I I don’t

think we t just need to

outrun you!can outrun the bear!

Value-based Healthcare




Catch Your Confirmation Bias“People can foresee the future only when it coincides with their own wishes. The most grossly obvious facts can be ignored when they g yare unwelcome.” ~George Orwell, 1945

We have heard the bed rental prediction before!

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Documents

Data Knows Best - NDHA · Data Knows Best It Will Bring You to Tiers! Nathan Kaufman, Managing Director Kaufman Strategic Advisors, LLC 11440 West Bernardo Ct., Suite 155 San Diego,