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KAUFMAN: Wisconsin Assoc Health Plans 091815 (DKB0908) 9/15/2015 Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 1 Data Knows Best Striving to be Differently Better Nathan Kaufman, Managing Director Kaufman Strategic Advisors, LLC 11440 West Bernardo Ct., Suite 155 San Diego, CA 92127 (858) 487-9771 [email protected] www.Kaufmansa.com Kaufman Strategic Advisors, LLC Evidence Based Consulting 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 2 Are the physicians on board? What are the financial implications (w/o heroics)? © Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved

Data Knows Best - WI Health Plans...KAUFMAN: Wisconsin Assoc Health Plans 091815 (DKB0908) 9/15/2015 Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 1 Data Knows Best Striving

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Page 1: Data Knows Best - WI Health Plans...KAUFMAN: Wisconsin Assoc Health Plans 091815 (DKB0908) 9/15/2015 Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 1 Data Knows Best Striving

KAUFMAN: Wisconsin Assoc Health Plans 091815 (DKB0908)

9/15/2015

Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 1

Data Knows BestStriving to be Differently Better

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

Kaufman Strategic Advisors, LLCEvidence Based Consulting

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

2

Are the physicians on board?

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

© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved

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KAUFMAN: Wisconsin Assoc Health Plans 091815 (DKB0908)

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Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 2

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

• 70% MSSP ACOs Did Not Receive a Bonus• 45% Pioneers Dropped Out• 50% Dropout Rate - Bundled Payments

3

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

~John Kenneth Galbraith

© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved

Strategy orLemming Syndrome?

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

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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%

5

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

© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved

M k t FMarket Forces

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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

7Altarum’s Triangle of Painful Choiceshttp://www.youtube.com/watch?v=QrPaJBh01sE

© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved

Commercial Coverage: The Math Does NOT Work

$51,000

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

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New Regulations and Market Forces Putting Pressure on Premiums

Premium Caps, Transparency, Aging, Cadillac Tax & Affordability

Health Plan

Profits$

Premiums

9

Benefits

Standard Benefits, Payer Tax & Universal Coverage

Impact of Rate Review in California- 2011

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

Could Rate Review Come to Wisconsin?What are the Implication?

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The Challenge on the Road to Provider-based Plan Pofitability

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

Payer

50%

ACO

NoInstitutional

Savings

VolumeInfrastructure

Physicians

Savings

10%

50%

12

Price

Hospital

20%

20%

© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved

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ACO: A Lemming Strategy?

Few ACOs Earned Bonuses:ACO Results in CA:

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

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

13

~National Association of ACOs (NAACOS)

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

© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved

Capitation Could Make the Economics of Health Systems Worse!

Out of Network

D C t

Premium

Health System

Revenue

Volume

Drug Costs

ConsolidatedPhysicians

Flow of Funds

Hospital Revenues

14

Price

© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved

Plan ‘Profits’

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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

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

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

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

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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%

17

0%

1%

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

© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved

Possible Downside of Capitation and Provider-Based Health Plans

Reduced

$Reduced

Hospital & Physician

Rates

18

ReducedMedical Costs

If we pull this off we will eat like kings

© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved

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Commercial Hospital Rates in Wisconsin

© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved 19

© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved 20

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Physicians are Seeking Shelter from the Storm

• ICD 10• Regulation• Cyber

Security• Deductibles• MGMA-wRVU

21

2014 Medicare Trustees Report, AMA

© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved

Solution: Become the Differently Better

Value Based Delivery System

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

Brand

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

Segmentation and Focus are Essential(skate to where the money is)

24

Courtesy of Brian Silverstein MD

Conclusion: Chronically ill patients whose primary care providers offer highly fragmented care more often experience lapses in care quality and incur greater healthcare costs.Am J Manag Care. 2015;21(5):355-362 - See more at: http://www.ajmc.com/journals/issue/2015/2015-vol21-n5/Care-Fragmentation-Quality-Costs-Among-Chronically-Ill-Patients#sthash.qtsMmUKF.dpuf

© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved

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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

▪ Ambulatory Ancillaries

S lli ED

▪ Specialty MD Office

▪ Ambulatory Ancillaries

▪ Urgent Care

▪ Hospital/ED

▪ SNF

▪ Satellite ED

▪ Hospital/ED

▪ SNF

▪ Hospice

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

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

26

How many different sets of

orders?

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

~W.E Deming

© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved

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Delivering High-Quality Cancer Care: Charting a New Course for a System in Crisis- IOM 2013

Findings point out a majorout a major quality issue for cancer patients who have no way of knowing how much their doctors' financial incentives i fl th i

27

influence their recommended course of care.

~Karen Hoffman, MDMD Anderson

JAMA IM,7/14/14Health Leaders, 7/17/2014

© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved

Harvard Magazine

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

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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!*

29

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

© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved

The “Value Proposition” for Future Success

A Value-based Network (VBN) of providers th t i t tl d lithat consistently delivers:

‒ Superior service‒ Predictable reasonable cost per episode

and‒ Appropriate accessible standard care

30

Appropriate, accessible, standard care based on the best science in medicine

© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved

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Are the Consolidated“80 Percenters” on Board?

Hospital‐Based  Phys.

New Delivery Models

Oncologists

ModelsCardiologists

Gastroenterologists

All Other Surgeons

Neurosurgeons

Orthopedic SurgeonsPCP

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

The Emergence of VirtualHealthcare

32

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

© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved

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Telehealth Users*

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

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.

34

• 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

© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved

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Who is Getting Medicare Advantage Right?

35

NCQA

© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved

“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

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

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The Emergence of New Health Benefit Design

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 DeductiblesDeselection of Providers

Domestic Medical Tourism, & Bundled Payments

for Elective Centers of Excellence

Single Payer

37

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

© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved

Brought to You by United Healthcare

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

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Brought to You by United Healthcare

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

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

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

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Can We Count on “Wellness” Working

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

Healthcare Finance 8/15/15

41

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

© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved

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

42

■ Accurate cost accounting

© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved

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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

43

David LereahChief Economist of NAR (2005)

From an SVP @ FP Hospital Company 4/2014

© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved

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

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

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Funding the “Sloppy Transition” to New Competencies

Successful health systems will have to become the opposite of what they have been!

Competency: C i l R t

• Standardization• Actionable Analytics• Value-based Prices• Superior Outcomes/Service• Highly Efficient Cost Structure

“Value-based” Competencies Require a Significant

Investment

45

Commercial Rates(170+% Medicare)

Succeeding in theNew Market

© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved

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

46

Data & Peer Leadership

© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved

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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

47

CV Surgery Neurosurgery OB/Gyn Bariatrics

Orthopedics

ENT

Emergency

Ad hoc

Hospital Medicine

Pathology

© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved

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

“It is difficult to get a man to understand something, when his salary depends on

his not understanding it.”Upton Sinclair

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