1. Healthcare 2015
Leadership Austin Program
April 24, 2015
Norman H. Chenven
Founder & CEO
Austin Regional Clinic
512-231-5514
chenven@arcmd.com

2. 1,250,000 patient visits ● 350,000 active patients
1,750 employees ● 335 physicians ● 21 locations
15 specialties ● 7 cities ● 3 counties ● 1 medical group
Austin Regional Clinic

4. HEALTH CARE REFORM
THE PATIENT PROTECTION AND AFFORDABLE CARE ACT
THE NATIONAL DEFICIT
THE POTENTIAL IMPACT OF DECISIONS MADE BY THE SUPREME COURT
OTHER IMPONDERABLES
And…..

5. And 17.5% of the GDP
in
40 minutes…..

7. American Health Care
The American way of health care is both reviled and praised,
sometimes by the same people. It is expensive, but it is
innovative. It is unequal , but it provides some of the best care
in the world. Its cost is growing far too fast for individuals and
businesses, but we want even more of it. There are intense
debates concerning many areas of health care – scientific
issues in medical practice, prescription drugs, and emergency
room use, to name a few – and underlying most of this conflict
is the unusual way we pay for health care in the United States.
Our approach results in our spending much more than other
industrialized countries for, statistically speaking, no better
results.
Richard C. Leone, President
The Century Foundation

8. Data source: MediaTrackers

9. Healthcare Costs are
“Unsustainable”
The size of the federal budget deficit is
unsustainable.
The annual increase in the Medicare budget is
unsustainable.
The percentage of healthcare spending to GDP is
unsustainable.
State Medicaid programs are unsustainable.
The continued transfer of costs to employers and
consumers is unsustainable.

10. CBO Estimated Government Outlays and Revenues (% of GDP)

11. Heathcare Costs by Age
$-
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
0 10 20 30 40 50 60 70 80 90
Age
Annualpercapitahealthcarecosts
UK
Germany
Sweden
US
Spain
U.S. is Spending Much More for Older Ages
Source: Fischbeck, Paul. “US-Europe Comparisons of Health Risk for Specific
Gender-Age Groups,” Carnegie Mellon University; September, 2009.

12. 50
55
60
65
70
75
80
85
1960 1970 1980 1990 2000 2010 2015
Women
Men
Meanwhile, Life Expectancy Has Dramatically Increased…

13. Data source: MediaTrackers

14. Questions:
• Why does medical care cost so much?
• Why are there so many uninsured Americans & Texans?
• Why are medical premiums going up by 5-7% a year?
• Will we need to ration health care?
• Why can’t we do a better job of preventive medicine?
• Why are there predictions that Medicare will go broke?

15. My Answer:
Doctors
Insurers
Nursing
Homes
Medicaid
CHIP
Specialties
Hospitals
Employers
Consultants
Medicare Pharmaceutical
Home Health
Brokers
TFRA G MEN TA ION
Concierge
Medicine
Workman’s
Comp
Equipment
Manufacturers
& Fee for Service

17. Q: Is It Really That Bad? A: Yes!
• Total health care costs = ~ 3 Trillion Dollars
• US ranks 17th internationally in health care outcomes
but 1st in cost per citizen
• 38 million uninsured Americans
• 22% of Texans are uninsured - We’re #1
• Looming shortage of primary care physicians
• 6 billion in uncompensated care (Texas Hospitals)

18. Is It Really That Bad (cont’d)
• 78 million baby boomers (1946-1964)
• 65% of Americans are overweight.
• Medicare funding will go negative in the next
decade.
• Health care costs are the 2nd leading cause of
personal bankruptcy.

20. Cost of Health Care Per Individual
1997 2008 2015
$3,700
$7,500
$8,700

21. We Have an Unsustainable Situation
• Americans have an expectation that health care is a right.
• If care isn’t funded then our safety net system picks up
the slack.
• Government funded health care represents more than 50%
of all health care dollars.
• Medicare alone is projected to create a 60 trillion national
debt by 2050.

22. What Drives the Increases in Cost?
• Lifestyle choices - BAD
• Improved technology - GOOD
 Imaging
 Pharmaceuticals
 Implants
• Aging of America - GOOD
 Baby boomers
 Geriatric population (Men – 77, Women 81)
• Retail features in a third party payer system - BAD
 Direct to consumer advertising
• Bureaucracy, paperwork and regulatory complexity – VERY BAD
• Medical liability system – VERY, VERY BAD
• Lagging information technology - BAD
• Payment for piecework BUT not for good outcomes. - BAD

23. ACA (OBAMACARE)
Patient Protection & Affordable Care Act
• Law signed in 2010 – phasing in through 2020
• More than half of the States have sued to declare
portions of the law unconstitutional.
• The House of Delegates voted repeatedly to repeal the
act.
• Senator Orrin Hatch introduced legislation to repeal the
individual and employer mandate in the Senate.
• Judge Roger Vinson (Florida) ruled against the ACA and
added that the lack of a severability clause required him
to declare, “The whole act void”. Reversed by the
Supreme Court.
• King vs. Burwell currently in the Supreme Court.

24. ACA is “Really” Three Bills
(and probably more…)
• Health Insurance Reform
• Extension of coverage to larger percentage of the
U. S. population.
• Creative payment reform and encouragement for
improved quality (pay for value) via Medicare and
Medicaid payment mechanisms.

25. Health Insurance Reform
• Elimination of lifetime limits
• 85% floor on health plan loss ratios
• Extension of family coverage to adult
children
• Elimination of pre-existing condition
coverage exclusions
• Preventive medicine benefit mandates
• Etc.

26. Extension of Coverage To More Citizens
• Expansion of Medicaid
• Individual mandates
• Employer mandates - delayed
• Establish health insurance exchanges
• Sliding scale premium subsidies for individuals
and small businesses.
Estimated: 11 million newly covered Americans

27. Creative Payment Reform
(encouraged by Medicare and Medicaid)
• Accountable Care Organizations (ACO)
• Bundled payments
• “Innovation Center” experiments
• Improve information systems and health care data
gathering/analytics in the health care industry.
• Congress just reinforced these concepts with SGR bill
language this month (April, 2015).

28. Diabetes Management Pilot
Initial program results have been excellent.
 If Texas implemented a similar diabetes program with similar outcomes,
Texas Medicaid could save $155 million/year.
75%
33%
Decrease in
Inpatient Care
Decrease in
Emergency Care
$2.85 benefit for every
$1.00 spent
Redefining Value:
Better Outcomes at Lower Cost

29. • 1% of the population accounts for more than 25%
of health costs.
• 10% of the population account for 70% of health
care expenditures.
• 95% of Medicare costs are spent on patients with
two or more chronic illnesses.
• 78% of national health care expenditures can be
attributed to chronic illness. On order of $2
trillion.
Follow the Money

30. 30
Fee-for-Service
Pay-for-
Performance
Episodic
Bundling
Global
Payment
Full Risk /
% of
Premium
Episodic Cost Total Cost
Provider Accountability
Continuum of Payment Models
Patient Centered Medical
Home Accountable Care Organization
Enter Reform

31. Geisinger Health System Medical Home
 Preliminary data show a 20% reduction in hospital admissions and a 7%
savings in total medical costs.
Group Health of Pugent Sound Medical Home Pilot
 By End of Year Two, total savings $10.30 pmpm
• Outpatient Primary Care up $1.68 pmpm
• Outpatient Specialty Care up $5.78 pmpm
• ER utilization down $4.02 pmpm
• Inpatient utilization down $14.18 pmpm
• Improved HEDIS measures
• Higher patient and provider satisfaction
Medical Home Successes

32. • Improve preventive care & wellness measures.
• Improve management of chronic conditions.
• Provide optimal service & access to ensure patient
satisfaction.
• Reduce cost trend.
• Demonstrate provider commitment as an organized system
of care to be accountable for the individual patient’s welfare
and the health of the entire program population.
Goals of ACOs

33. Whole population,
Well-managed
with chronic conditions
Chronic conditions
needing attention
Catastrophic Cases
Complex Patients
and Frequent
Utilizers
Types of Patients We Expect to See

34. The 4 Patient Groups
• Whole population: preventive screenings.
• Chronic disease: asthma, diabetics, CAD.
• Catastrophic: transplants, cancers, strokes, etc.
• High utilizers: frequent ER visits, seeing multiple
specialists, poly pharmacy, behavioral, financial
and/or social issues, etc.

35. • Increased informatics and prompting at point of
care
• Patient Outreach unit to focus on care gaps for
healthy patients and controlled chronic disease
patients
• Extensivist team for complex, high-utilizing
patients
High Level Strategy

36. Summary
• The cost of medical care in the U.S. is
concentrated in a small subset of the population.
• Data analytics can identify many (not all) of the
population at risk.
• The current FFS reimbursement methodology
does not reward prospective identification of
this population or care coordination.
• Large, integrated delivery systems have the
ability to identify and direct resources to better
manage the high risk population.
• You get what you pay for!

38. The Health Industry Forum
Last month Secretary Sylvia Matthews Burrell announced
that HHS has adopted a goal of shifting half of Medicare
payments from traditional fee-for-service to an alternative
method by 2018. Despite many new Affordable Care Act
initiatives, progress on payment reform around the country
has been spotty. Most of the new payment initiatives
provide financial incentives for quality or reward provider
groups that control total spending below a budget target.
But most of these programs place little financial risk on
providers. It is not known whether these limited financial
incentives are strong enough to drive meaningful delivery
reforms nor is it know whether they will evolve into
stronger arrangements.