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© Copyright Orlikoff & Associates, Inc. 2012
EFFECTIVELEADERSHIP IN TIMESOF TRANSFORMATIVE
CHANGE
by
James E. OrlikoffPresident,Orlikoff & Associates, Inc.4800 S. Chicago Beach DriveSuite 307NChicago Il [email protected] www.ORBoardworks.com
THIS is Dr. Doom?
“In Hopeful Sign, Health Spending isFlattening Out” NYT April 29, 2012
“In 2009 and 2010, total healthcare spendinggrew about 4% per year, the slowest annualpace in more than five decades.”
Why??
One Reason…
“Since the recession, hospitals haveexperienced a decrease in demand forinpatient services, much of which is unlikelyto return even if economic growth increases.
… likely to be a permanent loss of demand.”
Moody’s Investors Service Special Comment.
“Doing More with Less: Credit Implications of Hospital Transition Strategies in Era of Reform.” May 9, 2012
Bureau of Labor Statistics and Centers for Medicare & Medicaid Services
“If the growth in Medicare were to come down toa rate of only 1 percentage point a yearfaster than the economy’s growth, theprojected long-term deficit would fall by morethan one third”
NYT April 29, 2012
The Old Measure:
“Bending The Cost Curve”
The New Measure:GDP +/- A percent of Healthcare Cost Growth
GDP + 2%?
GDP + 1%?
GDP Neutral?
Or…
GDP - 1%?
GDP – 2%?
The New Measure in MassachusettsNew Health Spending Law, August 6, 2012:
Health spending will be capped at the rate ofMass’ Gross State Product from 2013 –2017, and at -0.5% through 2022. Projectedsavings of $200 billion.
Moody’s called the new law “credit negative forhospitals…(it will) limit their revenue growthand reduce their operating flexibility.”
“The social imperative for reducinghealth care cost is enormous. And,
to meet that enormous need Isuggest …nothing works.
Only everything works.
It’s all or none, or we head straighton and over the cliff.”
Donald M. Berwick, M.D.IHI National Forum December 7, 2011
Orlando, FL.
Another Possible Future
“In the United States things move
from the impossible to the
inevitable without stopping at the
probable.”
Alexis de Tocqueville
Post SCOTUS Deficit Reduction Options forHealth Care: The Great Risk Transfer
1. From Feds to the States
2. From Feds to Medicare Beneficiaries
3. From Feds to Taxpayers
4. From Feds to Providers
So, What’s Coming?1. Reduced Payment – All Sources
2. Declining Ability to Cost Shift
3. Credit Downgrades as Hospitals SeekCapital (this physician integration stuffis Expensive!)
4. Need for Size and Scale (andCourage?) Drives Merger Frenzy
5. Payment Increasingly Tied toQuality/Safety – All Sources
Market Will Demand 20 to 40% ImprovementCOMPELLING NEED TO DEVELOP A MULTI-PRONGED APPROACH
20
Market Drivers:
PAYMENT REFORM
COST PRESSURES
INFORMATION BOOM
IMPROVED CARE
AssetRationalization
3-6% total Improvement
Scale &Integration
4-8% total Improvement
PerformanceImprovement
8-12% total Improvement
ClinicalTransformation
6-14% total Improvement
© 2012 Huron Consulting Group. All rights reserved.
“The most meaningful cost reduction
strategies will involve standardization
of clinical care and elimination of
variation in patient procedures. This
will be a multi-year, ambitious journey
requiring strong physician,
management and board leadership"
Moody’s Investors Service Special CommentMay 9, 2012
Reliable care costs less (Premier)
Variation Among the Top Health Systems:
High Value Healthcare Collaborative – TotalKnee Replacement Study:
• A difference of more than one full day in LOS
(3 to 4.2 days)
• A difference of 25 minutes in surgery time (80 to105 minutes)
• Readmission rate range from 2.2% to 4.6%
• Surgeons performing more TKRs have shorter ORtimes, shorter LOS, and fewer complications
HVHV: Cleveland Clinic, Dartmouth-Hitchcock, Denver Health, IntermountainHealthcare, Mayo Clinic. Health Affairs “Innovation Profile” May 9, 2012
Variation Within a Hospital:
“Weekend Hospital Patients More Likely to Die”Johns Hopkins Study:
• Patients injured with head trauma on theweekend are 14% more likely to die thanthose injured during the workweek. Same“weekend effect” seen in heart attack, strokeand aneurism care.
Published online in Journal of Surgical Research, August 6, 2012
www.modernphysician.com/article/20120806/MODERNPHYSICIAN/308069965#ixzz22sa4rPYF
Variation Within a Hospital:
“There isn’t a medical reason for worse resultson weekends. It’s more likely a difference inhow hospitals operate over the weekend asopposed to during the week, meaning thatthere may be a real opportunity for hospitalsto change how they operate and save lives.”
Dr. Eric Schneider
Published online in Journal of Surgical Research, August 6, 2012.
www.modernphysician.com/article/20120806/MODERNPHYSICIAN/308069965#ixzz22sa4rPYF
Category Annual Cost to USHealthcare System (in Billions)
Failures of Care Delivery $102-154
Failures of Care Coordination $25-45
Overtreatment $158-226
Administrative Complexity $107-389
Pricing Failures $84-178
Fraud and Abuse $82-272
TOTALS $558-1,263
% of Total Spending 21-47%
Where is the Waste??
Donald Berwick, Andrew HackBerth “Eliminating Waste in US Healthcare” JAMA. 2012;307(14):1513-1516.Published online March 14, 2012. doi:10./jama.2012.362
“The savings potentially achievable from
systematic, comprehensive, and cooperative
pursuit of even a fractional reduction in waste
are far higher than from more direct and
blunter cuts in care and coverage. The
potential economic dislocations, however are
severe and require mitigation through careful
transition strategies"Donald Berwick, Andrew Hackbarth “Eliminating Waste in US Health Care” JAMA.
2012;307(14):1513-1516. Published online March 14, 2012. doi:10.1001/jama.2012.362
Chop or Improve?
• How Many Antibiotic Protocols Can a Physician Choose
From to Treat Bacterial Pneumonia?
• How Many Different Bone Sets Do We Use for Total Knee
Replacement?
• What Percent of Nurse Time is Spent at The Patient’s
Bedside?
• What Percent of Our Patients Are On Evidence-Based
Protocols? How Many Could Be?
• Are We at 100% Compliance for the Central-Line
Associated Bloodstream Infection Protocol?
Questions Boards Can Ask about Waste
• Do you know How Good (or Bad) your organization is?
• Do you know where you stand relative to the BEST? The
Gap can provide both inspiration and great areas for waste
reduction and cost savings.
• Where is the most variation? How can we reduce it?
• How quickly do we improve once we develop a goal or
identify a problem, or variation? How can we accelerate our
rate of improvement?
More Questions For Boards
WHAT IS OUR MEDICAREMARGIN?!
“Many hospitals…are developing a new financial model thatcalculates the impact on performance assuming ascenario whereby 100% of services are reimbursed byMedicare, without the cost-shifting benefit to commercialpayers to subsidize losses. The results usually show apronounced loss and a material weakening of overalloperating performance, giving management an estimateof the financial gap they need to close when ratesbetween commercial payers and Medicare reachequilibrium.”
Moody’s Investors Service Special Comment.
“Doing More with Less: Credit Implications of Hospital Transition Strategies in Era of Reform.” May 9, 2012
Which Animal Best Describes an ACO?
Shamelessly stolen from Nate Kaufman © Kaufman Strategic Advisors, LLC
23%
49%
64%74%
80%
97%
3%
Top1%
Top5%
Top10%
Top15%
Top20%
Top50%
Bottom50%
Population Percentile Ranked by Health Care Spending
Concentration of Health Spending in the U.S.,2004
Notes: Population includes those without any health care spending and excludes those living in institutions. Health spending isdefined as total payments, or the sum of spending by all payer sources.Source: Kaiser Family Foundation calculations using data from U.S. Department of Health and Human Services, Agency forHealthcare Research and Quality, Medical Expenditure Panel Survey (MEPS), 2004.
Forget the 80-20 Rule. It’s the 5-50 RuleThat Will Get You in Population Health
Management
Early ACOs Report That 5% of TheirPopulations Account for 50% of TheirClaims Costs. These 5% are Patients withOne or More Chronic Illnesses. The Needis to Focus on the Five Percent, and Thenon the “Pre-5%”, or the Next 5%.
“Strong oversight and strategic guidance by a hospital‘s
board is imperative….Yet many not-for-profit boards
find it difficult to recruit experience and expert
members capable of guiding management well.
Improving a hospital board’s understanding of the
changes that the industry is facing is a fundamental
characteristic of better governed organizations. Many
hospitals will likely need to add new board members
with expertise…”
Moody’s Investors Service Special Comment.
“Doing More with Less: Credit Implications of Hospital Transition Strategies in Era of Reform.” May 9, 2012
What of Governance?
“The currency of leadership isattention.”
Heifetz
“In Times of Change, Learners Inherit the
Earth, while the Learned find
themselves beautifully equipped to deal
with a World that no longer Exists"
Eric Hoffer
(Stolen from Gary Kaplan; his Favorite Quote)
“LEADERS AREDEALERS IN HOPE”
Napoleon Bonaparte
