National Landscape for Children’s Hospitals Fall Forum Series September 12, 2012

National Landscape for Children’s Hospitals

Fall Forum Series

September 12, 2012

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Objectives – today’s discussion

• FundamentalsFundamentals

• Implications Implications

• StrategyStrategy

• Children’s Hospital AssociationChildren’s Hospital Association

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Fundamentals

PROVIDERSPROVIDERS

POPULATIONPOPULATION

PAYORSPAYORS

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Fundamentals

PROVIDERSPROVIDERSPAYORSPAYORS

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Population: Growth

• U.S. children increasing from ~79 to ~89 million by 2022U.S. children increasing from ~79 to ~89 million by 2022– Million a year paceMillion a year pace– More kids than the total population of any EU nationMore kids than the total population of any EU nation

• Numbers of chronically ill children growing fasterNumbers of chronically ill children growing faster

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Population: ExpectationsHow much life quality is “health care?”

• A life at all…<1950sA life at all…<1950s– Premature birth, polio, MM&R, congenital defects…Premature birth, polio, MM&R, congenital defects…

• A better, longer life…1980-2000sA better, longer life…1980-2000s– Allergies, attention, learning, comfort, convenience, mobility, Allergies, attention, learning, comfort, convenience, mobility,

motility, mood...motility, mood...

• Perfection…2020 and beyond?Perfection…2020 and beyond?– Genetic and pre-natal diagnoses and interventions…Genetic and pre-natal diagnoses and interventions…

Population upshot – more demandPopulation upshot – more demand

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Fundamentals


PROVIDERSPROVIDERSPAYORSPAYORS

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Providers: Supply

• Pediatric subspecialists in short supply vs. demandPediatric subspecialists in short supply vs. demand– CHGME funds > 50% of training – to be cut back…away?CHGME funds > 50% of training – to be cut back…away?

• Physician practice shift from independent to employed Physician practice shift from independent to employed practice modelspractice models– Several major centers now “employ” 100% of subspecialty Several major centers now “employ” 100% of subspecialty

staff: Philadelphia, Boston, National, Cincinnati staff: Philadelphia, Boston, National, Cincinnati

• Children’s hospital beds full; rising CMI and/or complexityChildren’s hospital beds full; rising CMI and/or complexity– New hospital (project) costs running $2-4 million/bedNew hospital (project) costs running $2-4 million/bed

Provider upshot – supply constraints Provider upshot – supply constraints

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Fundamentals

PAYORSPAYORS


PROVIDERSPROVIDERS

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Payors: Multi-sponsor system

All PopulationAll Population

MedicareMedicare MedicaidMedicaid UninsuredUninsuredCommercialCommercial

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Payors: Federal budget problem

Federal Budget Surplus/ DeficitFederal Budget Surplus/ Deficit

Note: Fiscal years end September 30Sources: Congressional Budget Office: Office of Management and Budget

$200 B

0

(200)

(400)

(200)

(800)

($1,000)

FY1980

SurplusDeficit

1985 1990 1995 2000 2005

2010

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Payors: Political process

More LiberalMore Liberal More ConservativeMore Conservative

Most liberal Most liberal Republican senatorRepublican senator

Most conservative Most conservative Democratic senatorDemocratic senator

1982

Source: National Journal, February 26, 2011

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Concentration




1982

1994

2002


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Polarization





19821982

19941994

20022002

20102010

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Payors: Budget sequestration

$1.2 trillion in automatic reductions $1.2 trillion in automatic reductions

FY 2013 FY 2013

9% across-the-board reductions9% across-the-board reductions

FY 2014-2021FY 2014-2021

Cuts achieved through spending capsCuts achieved through spending caps

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Payors: State budget problems

($200) billion

($150)

($100)

($50)

$0 2009 2010 2011 2012

Portion covered Portion covered by statesby states

Portion offset by Portion offset by federal stimulusfederal stimulus

Total Estimated State Budget ShortfallsTotal Estimated State Budget Shortfalls

Sources: Center on Budget and Policy Priorities; Investment Company Institute

($79)($79)

($31)($31)($123)($123)

($68)($68)

($101)($101)

($59)($59) ($6)($6)

($134)($134)

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Payors: Medicaid managed care

Note: Unduplicated count. Includes managed care enrollees receiving comprehensive and limited benefits.Sources: Medicaid Managed Care Enrollment as of December 31, 2008. Centers for Medicare and Medicaid Services; Commonwealth Fund, Kaiser Family Foundation

Medicaid Managed Care Penetration Medicaid Managed Care Penetration Rates by State: 2008Rates by State: 2008

0 - 50% (5 states) 51 - 70% (20 states including DC)

71 - 80% (9 states) 81 - 100% (17 states)

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Payors: Pricing focus

Measures states are planning on taking to Measures states are planning on taking to manage Medicaid expenditures in 2014manage Medicaid expenditures in 2014

Base: All State HCF Finance and PolicymakersSource: Strategic Health Perspectives 2011 State HC Finance and Policymakers Survey

Tougher price negotiations w/ providersTougher price negotiations w/ providers

More use of managed careMore use of managed care

Tougher price negotiations w/ suppliersTougher price negotiations w/ suppliers

Restricting prescription drug formularyRestricting prescription drug formulary

Moving to bundled paymentsMoving to bundled payments

Moving to capitationMoving to capitation

Dropping people from the programDropping people from the program

OtherOther 5%5%

43%43%

48%48%

56%56%

57%57%

63%63%

73%73%

75%75%

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Pediatrics uniquely at risk

• Federal Medicaid cuts of Federal Medicaid cuts of $100M - $1B+ $100M - $1B+ plus state cuts to plus state cuts to worst payor in marketworst payor in market

• CHIP block grant reauthorization in 2014 unclear ... CHIP block grant reauthorization in 2014 unclear ... $10B+$10B+

• CHGME unauthorized and at risk ... CHGME unauthorized and at risk ... $265M+$265M+

• DSH cut DSH cut $17B+ $17B+ under ACA by 2020under ACA by 2020

• Medicare voters outnumber child voters Medicare voters outnumber child voters ~47 million to 0~47 million to 0

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Strategy: accountability

ACCOUNTABILITYACCOUNTABILITY: : The quality or state of being The quality or state of being accountable; especially: an obligation or willingness to accountable; especially: an obligation or willingness to accept responsibility or to account for one’s actionsaccept responsibility or to account for one’s actions

HEALTH CARE TRANSLATION:HEALTH CARE TRANSLATION:• Clinical success outcome vs. work/ service performed• Defined price up front vs. “as incurred” costs• Public reporting of results vs. non-disclosed transaction• Next incarnation of the MCO (managed care organization)

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Strategy: reform scenarios

ACCOUNTABILITYACCOUNTABILITY

ECONOMIC ECONOMIC RECOVERYRECOVERY

MajorMajor

MinorMinor

MajorMajor MinorMinor

We’re We’re backback

““Kalos Kalos orisate stin orisate stin

Ellada!”Ellada!”

Survival of Survival of the Fittestthe Fittest

Super Super SystemsSystems

Strategy vis-à-vis payors

ABILITY TO BE ACCOUNTABLEABILITY TO BE ACCOUNTABLE

LEVERAGE LEVERAGE vs PAYORSvs PAYORS

HighHigh

LowLow

LowLow HighHigh

““Manage Manage population, population,

money; reap money; reap gains”gains”

““Negotiate Negotiate niches; win the niches; win the ‘buy vs build’ ‘buy vs build’

war”war”

““Bled to life Bled to life support”support”

““Benevolent Benevolent dictator or dictator or

robber baron?”robber baron?”

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Models for pediatric accountability

Inve

stm

ent

Inve

stm

ent

HighHigh

LowLow

HighHighLowLow Financial RiskFinancial Risk

Bundles

Population Sector

Population Full

FFSDRG

Pay-for-Perfor-mance

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Model strategy

• Regional multi-payor environment = multi-model strategyRegional multi-payor environment = multi-model strategy

– Pay-for-performance with a local commercial payor?Pay-for-performance with a local commercial payor?

– Bundle contracts with neighboring state Medicaid?Bundle contracts with neighboring state Medicaid?

– Population sector (0-18) with metro/regional HMO?Population sector (0-18) with metro/regional HMO?

– Population sector (complex/chronic) with Medicaid?Population sector (complex/chronic) with Medicaid?

– Own HMO product for local Medicaid populations?Own HMO product for local Medicaid populations?

• ““No regrets strategy” is an accountable provider panelNo regrets strategy” is an accountable provider panel

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Accountability readiness: providers

CliniciansCliniciansOpen/ any willing Open/ any willing

providerprovider Tight/ credentialedTight/ credentialed

ProgramsPrograms Loosely structuredLoosely structured Clear team/ Clear team/ organizationorganization

OutcomesOutcomes Broad/ generalBroad/ general Specific/ uniformSpecific/ uniform

Records/ConnectivityRecords/Connectivity Multiple/ fragmentedMultiple/ fragmented Bridged/ sharedBridged/ shared

Compensation IncentiveCompensation Incentive Multiple/ unalignedMultiple/ unaligned Aligned to outcomesAligned to outcomes

Reporting ScorecardsReporting Scorecards Non-existentNon-existent Detailed/ transparentDetailed/ transparent

AdministrativeAdministrative NoneNone Population analyticsPopulation analytics

HighHighLowLow Readiness LevelReadiness Level

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Strategy cornerstones -- 2020

• More accountability More accountability ‒ organize, measure, publicize‒ organize, measure, publicize

• Demand exceeds supply Demand exceeds supply ‒ success essential in the high ‒ success essential in the high reimbursement sectors of your marketreimbursement sectors of your market

• More consumerism More consumerism ‒ brand and product matter, think like ‒ brand and product matter, think like a retailer!a retailer!

• More regionalizationMore regionalization ‒ demand > supply = choose wisely! ‒ demand > supply = choose wisely!– Clinical-subspecialist access the key factorClinical-subspecialist access the key factor

• ““Have a bank”Have a bank” ‒ you can’t be too rich! ‒ you can’t be too rich!

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Challenge to the Association?

• Federal Medicaid cuts of Federal Medicaid cuts of $100M - $1B+ $100M - $1B+ plus state cuts to plus state cuts to worst payor in marketworst payor in market

• CHIP block grant reauthorization in 2014 unclear ... CHIP block grant reauthorization in 2014 unclear ... $10B+$10B+

• CHGME unauthorized and at risk ... CHGME unauthorized and at risk ... $265M+$265M+

• DSH cut DSH cut $17B+ $17B+ under ACA by 2020under ACA by 2020

• Medicare voters outnumber child voters Medicare voters outnumber child voters ~47 million to 0~47 million to 0

Reorganization and new strategy essential to our ability Reorganization and new strategy essential to our ability to support and advance our children’s hospitalsto support and advance our children’s hospitals

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Children’s Hospital Association

MissionMission

• Advance child health through innovation in care, Advance child health through innovation in care, education and research with our children’s hospitalseducation and research with our children’s hospitals

FocusFocus

• Drive public policy improving child healthDrive public policy improving child health

• Improve care delivery, quality and cost through Improve care delivery, quality and cost through collaborationcollaboration

• Inform awareness and solutions through informationInform awareness and solutions through information

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Strategy

• Extend the power of collaborationExtend the power of collaboration

– World’s preeminent forum driving pediatric performance World’s preeminent forum driving pediatric performance improvement, quality, and strategic leadershipimprovement, quality, and strategic leadership

– Largest and most insightful pediatric analytics capabilitiesLargest and most insightful pediatric analytics capabilities

– Known and respected Known and respected voice for children voice for children on the Hillon the Hill

• Recreate our operating organizationRecreate our operating organization

– High end expertise, service, performance, valueHigh end expertise, service, performance, value

– Affordable and accessible to our children’s hospitalsAffordable and accessible to our children’s hospitals

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Merger reorganization

• ConcludedConcluded both phases of organizational restructuring both phases of organizational restructuring

– Majority of operating costs and merger potential in staffingMajority of operating costs and merger potential in staffing

– Realized redundancy savings of over 30 positionsRealized redundancy savings of over 30 positions

– Streamlined executive positions by more than halfStreamlined executive positions by more than half

• CompletedCompleted GPO outsourcing per Novation contract GPO outsourcing per Novation contract

– Achieved staff outsource of 17 positionsAchieved staff outsource of 17 positions

• RedefinedRedefined the Association from 250 to 200 staff the Association from 250 to 200 staff

– Merger related improvements of $5M+ annual expensesMerger related improvements of $5M+ annual expenses

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Children’s Hospital Association organization

Mark WietechaMark Wietecha

• CHEX• Child advocacy• Communications

• External• Internal• Member

• Corporate relationships

• Education• Executive Institute• Forums• Governance• Marketing• Member services

• BPI• CHND/PSO• Collaboratives (All)• Financial services• FOCUS Groups• Insurance services• QTN• Solutions• Supply Chain

Services (SCS)

• Federal affairs• Outreach and

mobilization• Policy analysis

• Quality strategy• Quality program

development• National visibility –

quality initiatives

• 501c3 HR and facilities

• Cooperative HR and facilities

• Office operations

• Analytics• Data products• Research &

development• Research & statistics

• 501c3 finance• 501c6 finance• Cooperative finance

• Architecture• IT • Project

management• Systems

infrastructure

Amy KnightAmy Knight Marlene MillerMarlene Miller Jim KaufmanJim Kaufman Mark RileyMark Riley David David SpizmanSpizman

David David BertochBertoch

Brian Brian HumphreysHumphreys

Richard Richard StepanekStepanek

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Policy results YTD

Externally -- Patient careExternally -- Patient care

• Medicaid – exempted from the FY2013 SequestrationMedicaid – exempted from the FY2013 Sequestration

• Medicaid – pediatric sub-specialists included in the ACA Medicaid – pediatric sub-specialists included in the ACA Medicare rate packageMedicare rate package

• TRICARE – legislation improving the system for childrenTRICARE – legislation improving the system for children

• Prescription Drug User Fee AuthorizationPrescription Drug User Fee Authorization

– Improve/extend Best Pharmaceuticals for Children Act, and Improve/extend Best Pharmaceuticals for Children Act, and the Pediatric Research Equity Actthe Pediatric Research Equity Act

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Policy results YTD

Externally – EducationExternally – Education

•CHGME – FY2013 appropriations supported by Senate and CHGME – FY2013 appropriations supported by Senate and House at $265M+ House at $265M+

•CHGME – Working for Reauthorization in Lame DuckCHGME – Working for Reauthorization in Lame Duck

Internally – OrganizationInternally – Organization

•Restructured our leadership team, Public Policy Committee Restructured our leadership team, Public Policy Committee of the Board, lobbying teamof the Board, lobbying team

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Business results YTD

• Delivered Delivered our program plan FY2012 with strong user our program plan FY2012 with strong user satisfaction, at or below budget while reorganizingsatisfaction, at or below budget while reorganizing

• ImprovedImproved returns to GPO participants returns to GPO participants

– Patronage dividend up 50% from 2011 to FY2013Patronage dividend up 50% from 2011 to FY2013

• ContainingContaining costs to hospital membership by reducing our costs to hospital membership by reducing our expenses and reinvesting savingexpenses and reinvesting saving

• DevelopingDeveloping the next generation of analytics supporting the next generation of analytics supporting improved hospital operating performanceimproved hospital operating performance

– Merging and redeveloping PHIS, Case Mix, data productsMerging and redeveloping PHIS, Case Mix, data products

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FY2013 priorities

Mission FocusMission Focus

• Drive public policy improving child healthDrive public policy improving child health

– Fundamental reformation of the system – how far?Fundamental reformation of the system – how far?

• Improve care delivery, quality and cost through Improve care delivery, quality and cost through collaborationcollaboration

U Align and deliver insight and innovation to our hospitalsAlign and deliver insight and innovation to our hospitals

• Inform awareness and solutions through informationInform awareness and solutions through information

– Greater visibility for “children” in media, on the HillGreater visibility for “children” in media, on the Hill

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Our Board, Your Reps

Chair: James Mandell, MD

Children’s Hospital BostonBoston, MA

Vice Chair: Christopher J. Durovich

Children’s Medical Center DallasDallas, TX

Treasurer: Amy B. Mansue

Children’s Specialized HospitalMountainside, NJ

Secretary: Herman B. Gray, MD

Children’s Hospital of MichiganDetroit, MI

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Steve J. Allen, MD

Nationwide Children’s Hospital

Columbus, OH

Christopher G. Dawes

Lucile Packard Children’s Hospital at Stanford

Palo Alto, CA

Thomas D. Kmetz

Kosair Children’s Hospital, Norton Healthcare, Inc.

Louisville, KY

James E. Shmerling, DHA, FACHE

The Children’s Hospital

Denver, CO

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Marcy Doderer, FACHE

CHRISTUS Santa Rosa Children’s Hospital

San Antonio, TX

Peggy Troy, RN, MSN

Children’s Hospital of Wisconsin

Milwaukee, WI

Karen R. Wolfson

Wolfson Children’s Hospital

Jacksonville, FL

Steve Worley

Children’s Hospital

New Orleans, LA

Alexandria Office:Alexandria Office:401 Wythe Street401 Wythe StreetAlexandria, VA 22314Alexandria, VA 22314Phone: 703-684-1355Phone: 703-684-1355Fax: 703-684-1589Fax: 703-684-1589

Overland Park Office:Overland Park Office:6803 W. 64th Street6803 W. 64th StreetOverland Park, KS 66202Overland Park, KS 66202Phone: 913-262-1436Phone: 913-262-1436Fax: 913-262-1575Fax: 913-262-1575

Documents

National Landscape for Children’s Hospitals Fall Forum Series September 12, 2012