In a C-Suite Resources presentation, Chairman Emeritus Don Wegmiller provided INTEGRATED with knowledge and insight into the state of the provider sector of healthcare today. Topics covered include new structures, reforms impacting providers, and provider challenges.

1. Your Trusted Advisor for Healthcare Business Intelligence
New Focus, New Structures, New Results
in the
Provider Sector of Healthcare
presented to
INTEGRATED Institute
by
Don Wegmiller
Chairman Emeritus
July 23, 2014
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Dial In: 909-259-5900
Conf ID: 254-905-934

2. Overview of Presentation
2
I. New Focus: The Triple Aim
II. New Structures
III. New Results
IV. Reforms Impacting Providers
t Payment Reforms
t Insurance Reforms
§ Public Exchanges
§ Private Exchanges
V. Provider Challenges
t Finances
t Quality Improvements
t Physician Shortages
t Population Health Improvement
t Demands for New Type Leadership
VI. Summary
VII. Implications for IHStrategies
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Conf ID: 254-905-934

3. New Focus: The Triple Aim
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4. New Focus: The Triple Aim
4
I. New Focus: The Triple Aim
t Improving health of the population
t Reducing per capita costs
t Improving individual experience

5. Background
5
t Originally introduced by Don Berwick, MD., when CEO,
Institute for Healthcare Improvement, 2008.
t Organized a coalition of healthcare organizations; “The Triple
Aim Community”
t Berwick moves to HHS as Administrator, CMS
§ Incorporates many of Triple Aims goals into ACA
t AHA and others adopt Triple Aim goals

6. The Triple Aim
6
t Improving the health of populations
t Reducing the per capita costs of care for populations
t Improving the individual experience of care
§ Including quality and satisfaction

7. Priorities for Achieving Triple Aim
7
t Redesign of primary care services and structures
t Population health management
t Cost control platform
t System integration and execution
t Focus on individuals and families

8. Original (2008) Measures of Triple Aim
8
Dimension Measure
Population Health 1. Health/Functional Status: single-question (e.g. from CDC
HRQOL-4) or multi-domain (e.g. SF-12, EuroQol)
2. Risk Status: composite health risk appraisal (HRA) score
3. Disease Burden: Incidence (yearly rate of onset, avg. age of onset)
and/or prevalence of major chronic conditions; summary of
predictive model scores
4. Mortality: life expectancy; years of potential life lost; standardized
mortality rates. Note: Healthy Life Expectancy (HLE) combines life
expectancy and health status into a single measure, reflecting
remaining years of life in good health. See http://reves.site.ined.fr/
en/DFLE/definition/
Patient Experience 1. Standard questions from patient surveys, for example:
• Global questions from US CAHPS or How’s Your Health surveys
• Experience questions from NHS World Class Commissioning or
CareQuality Commission
• Likelihood to recommend
2. Set of Measures based on key dimensions (e.g., US IOM Quality
Chasm aims: Safe, Effective, Timely, Efficient, Equitable and
Patient-centered)
Per Capita Cost 1. Total cost per member of the population per month
2. Hospital and ED utilization rate
Source:www.qualityforum.org

9. New Structures

10. New Structures
10
II. New Structures
t Industry Consolidation
t Providers As Insurers
t Insurers into Care
t ACO’s
§ Commercial
§ CMS

11. hospital hospital
systems
of
hospitals
physician
groups
Integrated
systems
ACO
system
insurers
retail
clinics
post acute
care orgs.
hospitals
physician
groups
alternative
care sites
insurer
Healthcare Consolidation Progression
11

12. Healthcare Industry Consolidation
Trend is similar among hospitals and health plans
12
2008
2009
2010
2011
Source:
New
York
Times,
A
Wave
of
Hospital
Mergers,
August
2013
*Kaufruall
Hall,
April
2013
0
10
20
30
40
50
60
70
80
90
100
Hospital
TransacGons
2013

13. Healthcare Industry Consolidation
Trend is similar among hospitals and health plans
2008
2009
2010
2011
2011
*Source:
DeloiIe
Center
for
Health
SoluGons,
The
future
of
health
care
insurance:
What’s
ahead?,
July
2013
0
5
10
15
20
25
30
35
40
Health
Plan
TransacGons
13

14. Hospital Consolidation Can Benefit Consumers
t Enhanced access to
care
t Improved quality of
care
t Reduced costs through
operating efficiency
t Economies of scale
t Access to capital for
investment
14
3.7%
5.8%
4.9%
3.8%
4.4%
3.5%
3.0%
3.0%
3.0%
2.1%
2.5%
1.5%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Source:
Bureau
of
Labor
Sta;s;cs
Producer
Price
Index
data,
2002-­‐2012
for
Hospitals
Annual Percent Change in Hospital Prices
t Maintain services in communities that might otherwise be
reduced or eliminated
Source:
Hospital
Realignment:
Mergers
Offer
Significant
Pa8ent
and
Community
Benefits,
Center
for
Healthcare
Economics
and
Policy,
January
2014

15. Notable Examples
15
t Mergers / Acquisitions
§ Detroit
− Beaumont Health System; Oakwood Health System;
Botsford Health Care
− 8 hospitals; $3.8 billion revenues; 30% of southeast
Michigan market
− All 3 posted lower inpatient volumes in 2013.
§ Pennsylvania – New Jersey
— Geisinger Health; AtlantiCare
— 9 hospitals; 35,000 employees
— Expansion of 448,000 member Geisinger Health Plan
into a new region

16. Notable Examples (cont.)
16
t Partnerships
§ Chicago suburbs
− Alexian Brothers Health System (division of
Ascension Health); Adventist Midwest Health
(division of Adventist Health System)
− Joint Operating Company of 9 hospitals
− Not a merger or acquisition

17. New Structures
17
t Providers As Insurers
§ Health Systems with Health Plans
− 64 Systems (AHA proprietary data)
− Notables: Baylor Scott & White: CHI; CHE Trinity;
Dignity Health; Geisinger; HealthPartners; Henry
Ford; IHC; Presbyterian; Sentara; SSM

18. Provider Landscape:
Blurred Lines Between Providers and Payers
18
23%
16%
40%
63%
71%
53%
14%
14%
7%
Managing care
coordination
Performance
measurement
Population health
management
Not
at
all
Prepared
Somewhat
Prepared
Very
Prepared
Source:
Hospital
and
Health
Networks;
Physician
Compensa;on
and
Produc;on
Survey,
Medical
Group
Management
Survey,
2002-­‐12;
Source:
Execu;ve
Survey
on
Hospital
and
Physician
Affilia;on
Strategies,
Sponsored
by
McKesson.

19. United
acquired
a
physician
IPA
WellPoint
acquired
a
primary
care
provider
Humana
acquired
an
urgent
care
chain
Highmark
acquired
a
hospital
system
Insurers Also are Expanding into Care
19

20. Growth of ACO’s Over Time - Medicare vs. Non-Medicare
32 59
146
253 253
122
164
199
219
235
45
60
101
141
181
310
345
458
472
488
0
100
200
300
400
500
600
Q4
2010
Q1
2011
Q2
2011
Q3
2011
Q4
2011
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Q3
2013
Medicare Non-Medicare Total
109
#ofACOs
20

21. A Broader Definition of Accountable Care
0
CMS Model
• Medicare patient only
• Narrowly defined provider network
• Quality measures and reporting
• Shared savings; 80 – 20
• Minimum 3 year commitment to
participate
• Focus on lowering hospital costs
• Population group defined at end of
year
Commercial Model
• All patient – Medicare, Medicaid,
Commercial
• Multi-payers – not limited to one
plans members.
• Use of both databases, insurer
and provider
• Symmetrical risk sharing
• Identified population group
• Committed to quality, total cost
management and patient
satisfaction
• Supports physicians, physician
groups and health systems
• Focus on lowering population
health costs
• Financially sustainable business
models
21

22. Providers Need a New Business Model
Current Model Accountable Care Model
Today
(3-5%
Operating
Margin)
Impact from
Rate
Pressures
(Negative
margin within
3-5 years)
Reduce
Unnecessary
Utilization
Shared
Savings
Operating
Cost
Improvements
New Growth
(i.e. covered
lives)
22

23. Growth and Dispersion of Accountable Care Organizations
23
Growth of ACO Covered Lives Over Time
Source: June 2014 Update; Leavitt Partners

24. Growth and Dispersion of Accountable Care Organizations
24
Estimated ACO Penetration by State
Source: June 2014 Update; Leavitt Partners

25. New Results

26. New Results
26
III. New Results
t Costs
t Quality
t Patient experience

27. New Results
27
t Cost reduction
§ Spending Growth Rate Has Slowed in Recent Years
§ Percent of Hospitals with Negative Total Margins
§ Costs Began Picking Up at End of 2013

28. Cost Reduction - Spending Growth Rate Has Slowed in
Recent Years
Source: Martin AB, Hartman M, Whittle L, Catlin A; National Health Expenditure Accounts Team. National health spending in 2012: rate of health spending
growth remained low for the fourth consecutive year. Health Aff (Millwood).
7
6
5
4
3
2
1
0
2014 Jan;33(1):67-77.
2005 2006 2007 2008 2009 2010 2011 2012
NHE per capita spending growthPercent
28

29. Percent of Hospitals with Negative Total Margins
42.2
36.7
33.4
35.9
33.4 32 31.8 30.2
32.8
30.1
28.3 28.4
25.9
0
10
20
30
40
50
2000 2001 2003 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Percent of Hospitals with Negative
Operating Margins
29

30. …Costs Began Picking Up at the End of 2013
30
April 8, 2014.
Source: “Insights from Monthly National Health Expenditures Estimates through February 2014,” Altarum Institute,
Year-Over-Year Growth Rates in NHE

31. New Results (cont.)
31
t Cost Reduction
§ Mantra: “Lower costs to be able to breakeven on Medicare
level of payment”
§ Why Medicare Breakeven?
§ One System’s Experience
— Benefis Health System
§ A Local Collaboration Experience

32. Why Medicare Breakeven?
32
t 90.4% of CFOs cited Medicare reimbursement as having
primary importance to their revenue stream in the next three
years; 78% of CFOs reported Medicare / Medicaid would have
a negative or strongly negative impact on their organization.
t Medicare typically only reimburses 75% to 80% of costs, and
cost shifting is generally required – using vastly better
reimbursement from commercial payors - for a hospital to
stay in the black.
t The days of cost shifting are coming to an end. And once
you’re no longer able to cost shift to private insurance to climb
out of a Medicare hole, you’ll see your bottom line start to
deteriorate.

33. New Results (cont.)
t One System’s Experience
§ Benefis Health System
33

34. Benefis has Reduced Costs by over $20 Million Just in the
Past Two Years
t Three key factors in their cost reduction:
§ Productivity improvement = $5.6 Million in past 2 years
§ Process improvement, work simplification and non-value
added work elimination
§ Reducing all “non-labor” expenses. Leave no rock
unturned!
34
Source: 2014 Congress on Healthcare Leadership. Where Knowledge, Ideas and Solutions Connect

35. Medicare Reimbursement
75
86
91 95
102.6
0
20
40
60
80
100
120
2008 2009 2010 2011 2012
Medicare Reimbursement Compared to Our Costs
35
Source: 2014 Congress on Healthcare Leadership. Where Knowledge, Ideas and Solutions Connect

36. Benefis Health System’s Cost Reduction Impact
$7,095
$6,436
$6,041 $5,769
$5,322
$4,968
0
1000
2000
3000
4000
5000
6000
7000
8000
2008 2009 2010 2011 2012 2013
Benefis Health System's Cost Reduction Impact
On Hospital Cost per Case Mix Adjusted
Admission
36
Source: 2014 Congress on Healthcare Leadership. Where Knowledge, Ideas and Solutions Connect

37. Examples of Savings in 2013
t Contract renegotiation with Aramark (Food and Environmental
Services) $184,280
t Reduction in MedMal Premium for 2013 vs 2012: $1,030,650
t Reduction in retainer amount to BKBH for 2013 vs 2012: $24,000
t Renegotiated Pad Net contract: $22,000
t Renegotiated rate for physicians short term disability coverage:
$20,000
t Savings from bringing the wound care management contract in
house vs. outsourced: $293,129
t Renegotiated monthly administrative rate with Wells Fargo for
employee HSA accounts: $7,764
t BMG contract changes, salaried start-up contracts to productivity
contracts: $1,342,945
t Bringing revenue cycle in house vs. contracting out: $1,605,065
t Material services supply chain: $956,050
37

38. Examples of Savings in 2013 (cont.)
t Negotiated savings on legal services: $169,220
t Cancellation of software program: $42,000
t Cancellation of EHR consultant: $186,000
t Bring sprinkler head maintenance in house: $18,114
t Elimination of outpatient therapist dictation via automation: $80,000
t Reduction in investment management fees: $37,500
t Elimination of unused corporation and tax prep fee: $1,500
t Reduction in monthly retainer to legal (for remainder 2013), based
on improved utilization; steps put into place to make legal review of
matters more efficient: $50,004
t Decrease in pharmacy expense 2013 YTD over 2012 from 340(B)
Program: $202,147
t Savings on patient transports from Hospice: $6,929
t Savings on excess Worker’s Comp premium: $23,667
38

39. Examples of Savings in 2013 (cont.)
t Savings from not mailing the July pay increase letter to employees and
doing the individual increase notices online instead: $3,000
t Savings from outsourcing Biomedical Engineering to Aramark. July – Dec.,
2013 only savings: $320,255
t Reduction of OR education program (AORN peri-op) Balance of 2013:
$56,704
t Reduction in investment management fees (RBC Wealth Management).
Balance of 2013: $37,500
t Elimination of an unused corporation and tax prep fee for it: $1,500
t Reduction in monthly retainer to legal by $8,334 per moth for the last 6
months of 2013, based on improved utilization, resulting from steps put into
place to make legal review of matters more efficient: $50,004
t The difference in not replacing the NP for the remainder of the year at a
savings for $42,312 and replacing the NICU manager: $53,276
t Reduced the cost of supplies form an average of $43.58 per patient to
$33.30 per patient for 2013 vs 2012: $84,000
t EPOB improved from 4.6 in 2012 to 4.5 in 2013 (Terry and management
throughout BHS): $1,920,000
39

40. Examples of Savings in 2013 – Leave No Rock Unturned!
t Perfusion contract renegotiation ($1825 savings in 2013 and $9125
savings in 2014) $1825
t NMHA Conference cost savings (via a grant) $2,100
t Savings on electricity via lighting upgrades, building control changes, a
hot water pumping project and retro commissioning efforts: $156,286
t Savings on natural gas (2013 compared to 2012): $231,613
t Savings, not picked up by the EPOB calculation, on a management
change: $15,200
t Savings, not picked up by the EPOB calculation, from Nurse
Practitioners covering for an Intensivist (Dec. only): $5,412
t 340-b Savings (2013 over and above 2012): $998,992
t 340-b Orphan Drug exclusion savings (new as of 10-1-2013) (through
Dec 2013): $495,280
t Antibiotic savings for 2013: $141,367
t National Drug Shortage savings for 2013 (vs 2012): $98,399
t Savings from bringing 2013 Biometric Testing in-house: $95,627
40

41. A Local Collaboration Experience
41
NQF’s nine endorsed “resource use” measures monitor sources of healthcare costs. Used on their own, these measures reveal only a part
of the “value” picture. The full picture comes into focus when resource use measures are used in concert with quality measures. Together,
these two powerful sets of measures help providers, health plans, employers, government agencies, and community collaboratives identify
opportunities for creating a higher value healthcare system.
A compelling example is the work being done by the NW Metro Alliance, a partnership of HealthPartners Medical Group, the Allina Medical
Clinics, and Mercy Hospital, which together care for nearly 300,000 Minnesotans. Through measurement, the Alliance demonstrated
improved care for patients with bronchitis, a reduction in elective deliveries prior to 39 weeks, which is better for babies and moms, fewer
patients being unnecessarily readmitted to the hospital, and increased prescription rates of lower cost generic medications. These and
other quality efforts have resulted in a dramatic decline in total cost of care for the participating organizations.
HealthPartners developed the NQF-endorsed total cost of care measure which is being used by the Alliance and also in 29 states, including
five statewide organizations. This measure allows organizations to chart their progress and benchmark themselves against others.
Source:www.qualityforum.org

42. New Results (cont.)
42
t Quality of Outcomes
§ Healthcare Associated Infections Declining
§ Medicare Hospital Readmissions Declining
§ Highlights from 2013 National Healthcare Quality and
Disparities Report

43. Healthcare Associated Infections Declining
43
Source: “National and State Healthcare Associated Infections: Progress Report,” Centers for Disease Control and Prevention, March 2014.
1
0.8
0.6
0.4
0.2
0
44% drop
20% drop
2008
2012
Central Line-associated
Bloodstream Infections
Surgical-site Infections for 10
Common Procedures
Standard Infection Rate
[2008 set to 1.0]

44. Medicare Hospital Readmissions Declining
44
17%
Source: CMS.
18%
19%
20%
2007 2008 2009 2010 2011 2012 2013
Monthly Rate
Trendline
Note: Medicare 30-Day, All-Condition Hospital Readmission Rates January 2007 - May 2013
44

45. Highlights from the 2013 National Healthcare Quality and
Disparities Reports
Status Change over
time
Areas improving Areas lagging
Quality Fair
• 70% of
recommended care
actually received
• Large variation
across States
Getting Better Improving more quickly
• Hospital care
• CMS publicly
reported measures
• Adolescent vaccines
Performing well
• New England and
West North Central
States
Improving more slowly
• Ambulatory care
• Diabetes care
• Maternal and child
health
Performing more poorly
• West South Central
and East South
Central States
Access Fair
• 26% with difficulties
getting care*
Getting worse* Improving
• Availability of
providers by
telephone
Not improving
• Private health
insurance coverage*
Disparities Poor
• Minorities and
people in poverty
• with worse quality
and access for large
proportion of
measures
No change Disparities getting
smaller
• HIV disease
• Patient perceptions
of care
Few gaps in disparities
data on Blacks,
Hispanics, and Asians
Disparities getting
bigger
• Cancer screening
• Maternal and child
health
Many gaps in
disparities data on
Native Hawaiians and
Other Pacific Islanders
45
Source: National Healthcare Quality Report, 2013
*Findings reflect access prior to implementation of most of the health insurance expansions included in the Affordable Care Act. After a decade of
deterioration, access was better in 2011 than in 2010 (see Figure H.6.)
Key: CMS = Centers for Medicare & Medicaid Services Note: For the vast majority of measures in the reports, trend data are available from 2000-2002
to 2010 - 2011

46. Number and Proportion of Measures
Figure H.3. Number and proportion of measures that are improving, not changing, or worsening, by setting of care
0
20
40
60
80
100 1
6
1 7
9
7 34
29
9 11 45
Key: n = number of measures.
Improving = Quality is going in a
positive direction at an average
annual rate greater than 1% per
year.
No Change = Quality is not
changing or is changing at an
average annual rate less than or
equal to 1% per year.
Worsening = Quality is going in a
negative direction at an average
annual rate greater than 1% per
year.
Note: For the vast majority of
measures, trend data are
available from 2000-2002 to
2010-2011.
improving
no change
worsening
percent
Source: National Healthcare Quality Report, 2013
46

47. Quality of Care
47
Figure H.4. Quality of care, by setting and state
Quality of Ambulatory Care
Lowest Quality Quartile
3rd Quartile
2nd Quartile
Highest Quality Quartile
Quality of Hospital Care
2nd Quartile
Highest Quality Quartile
Lowest Quality Quartile
3rd Quartile
Source: Agency for Healthcare Research and Quality, 2012 State Snapshots.
Note: States are divided into quartiles based on health care score for each setting of care.

48. Quality of Care (cont.)
48
Lowest Quality Quartile
3rd Quartile
2nd Quartile
Highest Quality Quartile
Quality of Home Health and Hospice Care
Lowest Quality Quartile
3rd Quartile
2nd Quartile
Highest Quality Quartile
Quality of Nursing Home Care
Source: Agency for Healthcare Research and Quality, 2012 State Snapshots.
Note: States are divided into quartiles based on health care score for each setting of care.

49. New Results (cont.)
49
t Patient Experience
§ Organization’s Top Three Priorities
§ Feelings About Progress Toward Improving the “Patient
Experience”
§ Key Components of Your Organization’s “Patient
Experience”
§ Measuring Overall Improvement in the "Patient
Experience”

50. Organization’s Top 3 Priorities
50
FIGURE 4.
Top Three Organizational Priorities
Please rank your organization’s top 3 priorities for the next 3 years.
Patient Experience/Satisfaction
70%
Quality/Patient Safety
63%
Cost Management/Reduction
37%
EMRs/Meaningful Use/IT
35%
Employee Engagement/Satisfaction
22%
ACO Development/Implementation
18%
Physician Recruitment/Retention
17%
Construction/Captial Improvements
11%
Source: theberryInstitute.org; Improving the Patient
Experience

51. Feelings About Progress Toward Improving the
“Patient Experience”
51
Very
Positive Positive Neutral Negative Very
Negative
25%
17%
54%
12%
21%
2%
6%
0% 1% 1%
2011 2013
61%
FIGURE 5.
Feeling about Progress towards Improvement
Source:
theberryInstitute.org
At this point, how do you feel about the progress your
organization is making toward improving the
“Patient Experience?”61%
Don’tKnow

52. Key Components of Your Organization’s “Patient Experience”
52
Which of the following are key components of your organization’s
“Patient Experience” effort (top 5 of 25)?
Sharing Patient Satisfaction/Action/Experience Stories
Regular/Hourly Roundingby Clinical Team Members
Leadership rounding (by members of senior
management)
Staff Training Programs (for Customer Service or
Other Behaviors)
Special Initiative(s) to Improve Specific HCAHPS
Domains
52%
50%
49%
49%
38%
Source: www.theberryInstitute.org
FIGURE 10.
Key Component of Patient Experience Effort

53. Measuring Overall Improvement in the “Patient Experience”
53
Aside from tracking the success of individual improvement activities,
what metrics is your organization using to measure overall
improvement in the “Patient Experience?”
Patient Satisfaction/Experience Surveying
Calls Made to Patients/Caretakers After Discharge
Bedside Surveys/Instant Feedback During Rounding
Patient/Family Advisory Committee
Patient/Family Member Focus Groups or Individual
Interviews
80%
70%
42%
32%
29%
Government Mandated Surveys (e.g., HCAHPS Scores) 86%
FIGURE 11.
Key Component of Patient Experience Effort Source: theberryInstitute.org

54. New Results (cont.)
54
Summary of New Results
t Costs growth slowing
§ Medicare payment level is new Mantra
§ Many different approaches
t Quality scores improved / improving
§ Targeted areas
§ Hospitals showing most improvement
t Patient experience data not conclusive
§ Wide variation
§ Some measuring patient satisfaction (HCAHPS); some
measuring hospital experience

55. Reforms Impacting Providers

56. Reforms Impacting Providers
56
IV. Reforms Impacting Providers
t Payment Reform
§ Commercial
— Narrow networks
— Tiered networks
— Pricing/payment
— Deductibles/co-pays
— Reference pricing
§ Medicare, Medicaid

57. Reforms Impacting Providers (cont.)
57
t Insurance reform
§ Public exchanges
– Insured
– Uninsured
– Plans (silver)
– Deductibles/co-pays/premiums
– 2015 premiums
§ Private Exchanges
– Wholesale to retail
– B2B to B2C

58. Reforms Impacting Providers (cont.)
58
t Payment Reform
§ Commercial Insurers
– Narrow / Tiered Networks
» Insurers have limited choice of providers by:
• Narrow (or Ultra-Narrow) networks and /or
• Tiered networks
» Reasons:
• Negotiate lower payments to providers
• Steer patients to lower cost providers
» Close to 70% of Lowest - Price Products are
offered thru Narrowed Networks

59. Consumer Preference:
Less Expensive Plans and Narrower Networks
59
Network
Design
78%
narrow
22%
broad
Benefit Plan
Level
69%
silver/bronze
31%
platinum/gold
55%
Of those who selected narrow
network plans
Source:
McKinsey
Consumer
Exchange
Simula;on
2011-­‐2013
24%
are silver / bronze
customers
are platinum/gold
customers

60. Reforms (cont.)
60
t Deductibles – CoPays
§ Patient responsibility for payment has increased from 9%
in 2007 to 30% in 2012¹
Hospital Expected Payment Source
Patient Responsibility
(not collected)
Patient Responsibility
(collected)
Non-‐‑‒Patient
Responsibility
(e.g., Medicare, Medicaid,
private insurance)
2007 2012
¹Source: Patient Matters Inc., National Healthcare Credit and Collection Forum

61. Deductibles – CoPays (cont.)
§ With 7 million additional insured through public exchanges,
where average deductible/co-pay is $1,500; patient
responsibility will rise to 40%.¹
§ Self pay is now #3 payor behind Medicare and Medicaid.¹
§ 55% of patient financial responsibilities are never
collected.¹
§ It costs 100% more to collect from the patient compared to
an insurer.
61
¹Source: Patient Matters Inc., National Healthcare Credit and Collection Forum

62. Reforms (cont.)
62
t Medicare, Medicaid
§ 2015 proposed payments continue to shift from volume to
value
− Inpatient increase of 1.3%
− Increased reductions for:
» Readmissions 1% (total penalty increases from
2 to 3% of total Medicare payment)
» HAI 1%
− Unless value goals are reached, a net reduction of
0.7%

63. Hospitals Have Absorbed $113 Billion of New Cuts Since
2010
Source: American Hospital Association
63

64. Reimbursement Cliff Coming or Decline in Payment for Each
Patient Visit
t Medicare payments reduced by 1% / year from 2010 to
2019
t Insurance exchange rates falling between Medicare and
Medicaid payment rates
t Insurers and health systems losing best customers – baby
boomers – to Medicare
§ From commercial insurer rates to Medicare rates
§ 5,000 to 10,000 move to Medicare per DAY!
64

65. Previously Insured Respondents were More Likely to Enroll
than Those Previously Uninsured
65
1 Self-reported in response to: “Which of the following best describes your primary insurance coverage
in 2013? For most of the year I was covered by:”
2 Does not include previously insured who renewed their 2013 policy or enrolled in a pre-ACA plan

66. 66
Most Frequently Cited Reason for Not Enrolling

67. In April, 26 Percent of Respondents Who Reported Selecting a
New Plan had Previously Been Uninsured
67
1 Includes previously insured whose policies were automatically renewed or who decided to renew existing policies with their current
carrier, and those enrolling in a pre-ACA policy with effective date prior to Jan 1
2 Includes previously insured who switched from one carrier to another or who changed policies but stayed with the same carrier and
also previously uninsured who enrolled. Policies could be selected on- or off-exchange. Includes those who had paid their premium and
those who had not yet done so
3 Self-reported in response to: “Which of the following best describes your primary insurance coverage in 2013? For most of the year I
was covered by:”

68. Reported Intended Actions During 2015 Open Enrollment
Period
68

69. National and State Impact Analyses of the ACA
69
The Need for Estimating the National and State Impacts
of the Affordable Care Act Beyond 2014
$1,375
Cost increase of an
Individual exchange
health plan within
5 years (Silver)
$4,198
Cost increase of a family
exchange health plan
within 5 years (Silver)
489K
Increase in the uninsured
within 5 years
Earlier this month, the Obama
Administration released final
reports detailing health insurance
exchange and Medicaid enrollment
for 2014. These reports provide a
snapshot of information regarding
the geographic and demographic
make-up of Affordable Care Act’s
first year, but fail to offer a
forward-looking estimate of health
plan prices and enrollment as
insurance companies prepare to
submit their health plan offerings
for 2015.
Source: Medical Industry Leadership Institute: Working Paper Series. May 20, 2014. By Stephen T Parente (Professor of
Health Finance) and Michael Ramlet (MILI Adjunct Professor)

70. Reforms (cont.)
70
t Insurance Reforms
§ Public Exchanges
− 8.1 million enrolled through ACA open enrollment
» Unknown how many have paid premiums
− Previously Insured Respondents were More Likely to
Enroll than Those Previously Uninsured
− Most Frequently Cited Reason for Not Enrolling
− In April, 26 Percent of Respondents Who Reported
Selecting a New Plan had Previously Been Uninsured
− Reported Intended Actions During 2015 Open Enrollment
Period
− National and State Impact Analyses of the ACA

71. Provider Challenges

72. Provider Challenges
72
V. Provider Challenges
Universal
t Make consolidations work
§ System vs. Federation
§ Hospitals and Physicians
§ Systems and Insurers
t New payment models
§ Self pay collections

73. Provider Challenges (cont.)
73
V. Provider Challenges
t Clinical shortages
Specific
§ Academic Med. Centers
§ CAH’s
§ Safety Net
§ Childrens

74. Provider Challenges (cont.)
t Top Three Improvement Areas to Reach Financial Targets
t Threats
t Opportunities
t Greatest Clinical Quality Improvement Challenge
t Top Three Areas Next Year to Control Cost
t Physician Shortage Continues
§ Medical school enrollment up; projected to 21,000 by 2017
§ Clinical training opportunities frozen at 1997 levels
— 2013 and 2014 “match” of M.D. seniors to residences
left hundreds of seniors “unmatched”.
— Lack of qualified primary care preceptors
— Lack of qualified specialty preceptors
74

75. Top Three Improvement Areas to Reach Financial Targets in
Three Years
75
Total Responses Percent
Physician-hospital alignment 44%
Cost reduction 41%
Care model (e.g., population health,
medical home)
40%
Reimbursement 39%
Strategic partnerships with providers 30%
Information technology, critical 29%
Strategic partnerships with payers 25%
Revenue cycle 23%
Decline in acute care admissions 14%
Information technology, financial 8%
Q: Which are the top three areas your organization must improve or address in order to reach your
financial targets in the three-year time frame?
TAKEAWAYS
- More than half of hospitals (54%) and health
systems (53%) named physician-hospital alignment
among the top three areas to improve or address to
reach their financial goals.
- Only 25% of health systems, 28% of hospitals, and
one-third of physician organizations named clinical
information technology among the top three areas.
- One-half of health systems (50%) named cost-
reduction as a top concern, versus 39% of hospitals
WHAT DOES IT MEAN?
Physician-hospital alignment can help drive cost
efficiencies in healthcare delivery, but there is still work
to be done in overcoming some long-held turf issues
between physicians and hospitals. It is a good sign,
then, that more than half of hospitals and health
systems recognize the need to work on this
relationship. Still, only one-third of physician
organizations named physician-hospital alignment
among their three areas to improve or address their
financial goals, which could signal a difficult road
ahead. Instead, their focus is solidly on care models
(46%) and reimbursement (42%).
Base = 792

76. Threats
Total responses Percent
Reduced Reimbursements 91%
Industry Consolidation 37%
Healthcare reform, overall 36%
Retail healthcare (e.g., clinics,
pharmacies)
30%
Shared risk, shared reward payments 20%
Health insurance exchanges 20%
Care continuum relationships, financial 13%
Primary care redesign 9%
Population health management 8%
Health information exchange 7%
Care continuum relationships, clinical 4%
76
Q: Does your organization consider each of the following to be a threat?
TAKEAWAYS
- Some 91% consider reduced reimbursements to be a
threat; this response dominates all settings, with no other
choice even coming close.
- Hospitals (42%) are more likely than health systems
(32%) or physician groups (29%) to view healthcare
reform overall as a threat).
- With the news that several influential payers are offering
products within the health insurance exchanges that
reduce provider network participation, one-fifth of
hospitals and physician organizations (21% each) and
18% of health systems view the exchanges as a threat.
WHAT DOES IT MEAN?
Healthcare executives face a continuing threat of reduced
reimbursement from government payers. Not only are fee-
for-service reimbursements for procedures being reduced,
but there is also pressure to develop new contracts that will
require providers to share in risk and meet certain quality
and outcome standards. Meanwhile, commercial payers are
stoking another level of reimbursement uncertainty as they
move into the outcomes arena with accountable care
organizations and patient-centered medical homes. In
addition, new emphasis on payment models such as
bundled payments means providers must be able to
integrate clinical and financial information to measure
provider performance and to determine the cost of care. The
pressures on reimbursements are never-ending.
Base = 792

77. Opportunities
Total responses Percent
Care continuum relationships, clinical 89%
Health information exchange 76%
Population health management 75%
Primary care redesign 74%
Care continuum relationships, financial 66%
Shared risk, shared reward payments 62%
Health insurance exchanges 53%
Healthcare reform, overall 52%
Industry consolidation 44%
Retail healthcare (e.g., clinics, pharmacies) 43%
Reduced reimbursements 5%
77
Q: Does your organization consider each of the following to be an opportunity?
TAKEAWAYS
- Clinical care continuum relationships top the list of
opportunities across all settings – 89% of the survey
respondents.
- More health systems (87%) see primary care
redesign as an opportunity than hospitals (73%) or
physician organizations (64%).
- Population health was cited as an opportunity more
often by health systems (84%) than hospitals (71%)
or physician organizations (75%).
WHAT DOES IT MEAN?
As the healthcare industry strives to improve care and
lower costs, it is encouraging to see that large
majorities of leaders are optimistic about the potential
in clinical care continuum relationships, health
information exchanges, population health
management, and primary care redesign-the
components that will help them achieve those goals.
Health systems have an advantage as they often
include many of the resources and players necessary
to provide patient care across continuum.
Base = 792

78. Greatest Clinical Quality Improvement Challenge
78
4%
3%
8%
13%
14%
15%
15%
27%
Other
Patient safety
Clinical decision support
Electronic health record
Readmissions
Clinical analytics
Patient experience
Monitoring quality along the
care continuum
Total responses
Q: Regarding clinical quality improvement, which of the following areas represents the
single greatest challenge for your organization?
TAKEAWAYS
- Monitoring quality along the care continuum is identified as
the greatest challenge to clinical quality improvement by
more than on-quarter(27%) of respondents, making it the
#1 choice overall.
- More physician organizations (36%) than health systems
(27%) or hospitals (20%) cite monitoring quality across
the care continuum as their greatest challenge.
- While patient experience is cited by 15% of respondents
as the top clinical quality challenge, it is a greater
concern among hospitals (19%) and health systems
(18%) than physician organizations (8%).
WHAT DOES IT MEAN?
The care continuum will hold providers accountable for patient
care beyond their four walls, including pre- and post acute
care, as well as hospital readmissions. Monitoring this care
requires establishing strategic partnerships or alignments-with,
for example, physicians, specialists, care managers,
community health centers, and nursing homes-that will foster
and standardize the exchange of patient information to ensure
patient outcomes. As we see in Figure 5, an almost equal
portion of respondents identified health information exchanges
(76%), population health management (75%), and primary
care redesign (74%) as opportunities. Healthcare leaders
recognize that each plays a role in managing quality along the
care continuum. The challenge is in putting the pieces
together in a meaningful way.
Base = 776

79. Top Three Areas Next Year to Control Cost
79
16%
17%
41%
53%
67%
81%
Employee benefit
reductions
Labor reductions
Capacity management
Expense reduction via
supply-chain effeciencies
Labor efficiencies
Expense reduction via
process improvement
Total responses
Q: What are the top three areas you will focus on next year to control costs?
TAKEAWAYS
- Registering the importance of producing sustainable results
and taking the long view, process improvement is named
among the top three cost-control focus areas by 81% of
respondents.
- Health systems (89%), which have the resources and
personnel to commit to process improvement, are more
likely than hospitals (77%) and physician organizations
(78%) to identify process improvement, but it is the top
cost-control choice across all three settings.
- Across all settings, labor efficiencies (67%) is the second
cost-control choice. The emphasis on process
improvement, including analytics, will help in identifying
opportunities to use labor more effectively and efficiently.
Despite the dominance of leaders’ reliance on efficiencies,
one in five hospitals (20%) will look to labor reductions to
control cost, which is somewhat greater than health
systems and physician organizations (16% each).
WHAT DOES IT MEAN?
To be successful and produce returns year after year, expense
reduction must be sustainable. Process improvement provides
the structure for an organization to assess and reassess how
it controls costs. When implemented correctly across an
organization, the process becomes part of the culture and is
hardwired for daily practice, which often reduces the need for
more severe steps such as labor reductions (17%) or
employee benefit reductions (16%).
Base = 792

80. Percent of Schools Concerned About Clinical Training
Opportunities, 2010-2012
72%
78%
54%
65%
74%
53%
78%
82%
67%
Number of clinical
training sites
Supply of qualified
primary care
preceptors
Supply of qualified
specialty preceptors
2010
2011
2012
80
Source: Association of American Medical Colleges (Results of the 2012 Medical School Enrollment Survey)

81. Percent of Schools Expressing Concern about Graduate
Medical Education
81
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Nationally
In my state
For my incoming
students
Major concern Moderate concern Minor concern No concern
Source: Association of American Medical Colleges (Results of the 2012 Medical School Enrollment Survey)

82. M.D. and D.O. Growth Since 2002
82
10,000
9,000
8,000
2,000
1,000
0
3,000
4,000
5,000
6,000
7,000
2002
3,707
Additional D.O.
Enrollment by
2017
4,946
Additional M.D.
Enrollment by
2017
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Figure 8: M.D. and D.O. Growth Since 2002
M.D. D.O.
Source: Association of American Medical Colleges (Results of the 2012 Medical School Enrollment Survey)

83. Provider Challenges (cont.)
t Population Health Improvement
§ Health Care Costs are Concentrated
§ Population Health and Training
§ Population Health Management – Investments
§ Care Coordination / Population Health Management
83

84. Health Care Costs are Concentrated
84
23 Million Beneficiaries
• Spending $1,130 each
• Total Spending = 5%
($26 B)
16.1 Million Beneficiaries
• Spending $6,150 each
• Total Spending = 20%
($104 B)
7 Million Beneficiaries
• Spending $55,000 each
• Total Spending = 75% ($391B)
15% of beneficiaries =
75% Spending
85% of beneficiaries =
25% Spending

85. Care Coordination/ Population Health Management
26%
15%
22%
35%
22%
27%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Assigned nurse
manager to patients
at risk
Assigned nurse
manager outpatient
care
Disease management
2011 2013
85
Source: 2011 data based on the 2011 Care Coordination Survey (n= 1,680). 2013 data based on
preliminary data from the AHA’s 2013 New Care Systems & Payment Survey (n=1,323). PRELIMINARY
DATA. Copyright 2013 Health Forum

86. Care Coordination/ Population Health Management
21%
12%
23%
26%
18%
28%
0%
5%
10%
15%
20%
25%
30%
Chronic care
programs
Use of predictive
analytic tools
Prospective patient
management
2011 2012
86
Source: 2011 data based on the 2011 Care Coordination Survey (n= 1,680). 2013 data based on preliminary data from the
AHA’s 2013 New Care Systems & Payment Survey (n=1,323). PRELIMINARY DATA. Copyright 2013 Health Forum

87. Provider Challenges (cont.)
t Strategies for Managing Population Health
§ Shift emphasis from hospital care to primary care
§ Changes in physician culture
— “Team leader”
— Medical home leader
§ Incentives to participate in approaches for specific
populations; e.g., diabetics, COPD
§ Patient engagement
§ Skilled nursing
— Long term care management
§ Post-discharge management
87

88. Provider Challenges (cont.)
t Financial Stability
§ 2014 Financial Forecast
t Demands for New Type Leadership
§ Hospital CEO Turnover Rate Increases
88

89. 2014 Financial Forecast
6%
41%
36%
13%
2% 2%
10%
45%
30%
9%
3%
2%
Strongly positive Positive Flat Negative Strongly negative Don't know
2014
2013
89
Q: What is your organization’s financial forecast for the 2014 fiscal
year?

90. American College of Healthcare Executives Hospital
CEO Turnover
14%
18%
16%
16%
17%
20%
2008
2009
2010
2011
2012
2013
90
Source: http://www.ache.org/pubs/Releases/2014/hospital_ceo_turnover_rate14.cfm
Adjusted PercentYear

91. I. Summary

92. Summary
VI. Summary
t U.S. Health System Performance
§ Overall Health System Performance for Low Income
Populations
§ When it Comes to Health Care, There are Two Americas
92

93. Overall Health System Performance for Low Income
Populations
93
Source: D. Blumenthal, Two Americas, (New York: The Commonwealth Fund, August 2013).

94. When it Comes to Health Care, There are Two Americas
94
Source: D. Blumenthal, Two Americas, (New York: The Commonwealth Fund, August 2013).

95. none
“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)
95

96. “THE HARDEST THING IS NOT TO
GET PEOPLE TO ACCEPT NEW
IDEAS, IT IS TO GET THEM TO
FORGET OLD ONES.”
John Meynard Keynes
96

97. Implications- Integrated
Healthcare Strategies

98. Implications- Integrated Healthcare Strategies
VII. Implications- Integrated Healthcare Strategies
t Providers , particularly systems, are focused (maybe pre-
occupied) by new focus, new structures, therefore, don’t
“reach out” to consulting firms for advice and counsel.
t Firms need to reach out to customers suggesting new ideas;
even “old” ideas customers haven’t used yet.
t See Dan Schleeters July 9th Notes to File on CAMC re: use
of Tally Sheets.
98

99. Implications- Integrated Healthcare Strategies (cont.)
t Certain Consulting functions become “commodities” in the
new environment; so more “face time” is necessary with
influencers, recommenders, and decision-makers.
§ Whenever in a region on a “client paid” visit, make a point
to ask for a 15 minute drop by with one or more other
clients.
t Always have “new” approaches to describe, whether you
personally work on these approaches, e.g.,
§ Don Seymour on Governance, Strategy
§ Any Physician Services ideas
§ All “engagement” services; employee, physician, manager.
99

100. Implications- Integrated Healthcare Strategies (cont.)
t Most systems have now bought in to “peer comparative”
benchmarks as contrasted to either:
§ Year over year comparisons for their organization
§ Generic peer group comparisons
§ So, always offer some unique peer comparative service,
e.g., “comparison of your employed physician comp. vs.
six other peer organizations”
t Be prepared to demo any new service or product at “no risk”
pricing to select customers.
100

101. Implications- Integrated Healthcare Strategies (cont.)
t Know all the current “buzz words” in the industry and be
prepared to show how IHS has products/services to aid the
customer in that area; e.g.,
§ Population Health Improvement
§ Patient engagement
§ Physician productivity
§ Quality performance
§ Tie an IHS service to one of the current buzz words, e.g.,
— Kevin Talbot’s work at Novant tying executive
compensation level to organization performance level
of peers.
101

102. Implications- Integrated Healthcare Strategies (cont.)
t Always be prepared to offer other clients use of your services
to something this customer needs, e.g., “You know David
Bjork of our firm just led an organization structure assignment
for the merger of Scottsdale Healthcare- John C. Lincoln
System in Arizona.”
t Always bring materials on at least one product / service of IHS
to every customer or prospect service, whether they’re related
to the current assignment or not.
t Show you’re interested in your clients’ success by noting
some new service they’re offering; some new recognition
they’ve received; some healthcare issue in their state or
region.
102