Presented by Don McDaniel at the Rainmaker Alliances 20th Annual Superconference on May 30, 2014 at the Walt Disney World Resort

1. Weathering
Healthcare’s
Derechos
May
2014
Don
McDaniel
Sage
Growth
Partners

2. Derecho
Slide
1

3. DEMOGRAPHY
AND
THE
IMPACTS
OF
AGING

4. Demography
and
the
Impact
of
Aging
2010
2025
Under
65
65+
• 2010:
65+
13%
of
populaGon
• 2025:
18%
of
populaGon
• 60%
($188,658)
of
lifeGmes
HC
costs
($316,600)
occur
in
65+
years
This
means
an
extra
$4.5
trillion
in
HC
spending
270
million
293
million
40
million
64
million
Source:
2008
Census
projecGons
and
“The
LifeGme
DistribuGon
of
Health
Care
Costs”
arGcle
from
Health
Services
Research.
3

5. LABOR
MARKET
4

6. A
Tale
of
Two
Industries
5

7. Shortage
of
Primary
Care
Physicians
180000
190000
200000
210000
220000
230000
240000
250000
2010
2020
Physician
Supply
Physician
Demand
6
}
20,400
Physicians
Projected
Shortage
Source:
November
2013
hp://bhpr.hrsa.gov/healthworkforce/supplydemand/usworkforce/primarycare/
projecGngprimarycare.pdf

8. CONSUMER
SOVEREIGNTY

9. NaJonal
Health
Expenditures
Per
Capita
and
Percent
of
Out-­‐of-­‐
Pocket
Costs
8
$147
$356
$1,112
$2,851
$4,884
$5,240
$5,687
$6,131
$6,504
$6,900
$7,271
$7,651
$7,933
$8,157
$8,411
$8,658
$8,925
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
1960
1970
1980
1990
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
48
33
23
19
15
14
14
13
13
13
13
13
12
12
12
12
12
Axis
Title
Source:
hp://www.cms.gov/Research-­‐StaGsGcs-­‐Data-­‐and-­‐Systems/StaGsGcs-­‐Trends-­‐and-­‐Reports/NaGonalHealthExpendData/
Downloads/tables.pdf

10. Lack
of
Price
Transparency
§ The
InsGtute
of
Medicine
esGmates
that
$105
billion
of
annual
waste
in
health
care
spending
can
be
aributed
to
lack
of
compeGGon
and
excessive
price
variaGon.
9
Sources:
hp://www.rwjf.org/en/blogs/culture-­‐of-­‐health/2013/05/sorGng_out_the_mean.html
and
hp://www.rwjf.org/content/dam/farm/reports/issue_briefs/2013/rwjf407306

11. § Authors
called
top-­‐ranked
orthopedic
hospitals
in
the
US
and
2
largest
hospitals
in
each
state
§ Fee
for
hospital
+
fee
for
surgeon
§ Of
the
20
top-­‐ranked
hospitals,
55%
could
not
provide
a
single
“bundled
price”
for
the
procedure
§ 40%
could
not
provide
an
esGmate
§ 90%
could
not
provide
a
single
“bundled
price”
§ 37%
could
not
provide
an
esGmate
§ VariaGon
was
shockingly
vast,
ranging
from
a
low
of
$11,100
to
a
high
of
$125,798.70
10
Source:
Journal
of
the
American
Medical
AssociaGon
Internal
Medicine
hp://archinte.jamanetwork.com/data/Journals/INTEMED/0/jamainternmed.2013.465.pdf

12. ReacJon
to
Price
Transparency
11
§ CalPERS
decided
to
cap
payments
for
knee
and
hip
replacement
surgeries
at
$30,000
for
its
Anthem
Blue
Cross
members
because
the
pension
fund
was
paying
anywhere
between
$15,000
and
$110,000
for
such
procedures.
§ The
average
price
for
the
knee
and
hip
replacements
at
higher-­‐priced
hospitals
in
the
state
decreased
by
37%.
§ In
addiGon,
the
use
of
preferred
hospitals
among
CalPERS
members
increased
by
21%
between
2010
and
2012.

13. How
Consumers
Should
Be
Able
to
Make
Decisions
12
Source:
hp://www.rwjf.org/content/dam/farm/reports/issue_briefs/2013/rwjf407306

14. GLOBALIZATION
OF
HEALTH
CARE

15. Life
Expectancy
at
Birth
14

16. Infant
Mortality
Rate
15

17. “The
Henry
Ford
of
Hearts”

18. ATTRIBUTES
US
Narayana
Hrudayalaya
COST
$20,000-­‐$100,000
for
Open
Heart
Surgery
$2,000
for
Open
Heart
Surgery
BEDS
160
Beds
(US
Hospital
Average)
1,000-­‐bed
Narayana
Hrudayalaya
Hospital
#
PROCEDURES
1,367
cardiac
bypass
surgeries
at
the
Cleveland
Clinic
2008
Performed
3,174
cardiac
bypass
surgeries
in
2008
CHILD
PROCEDURES
Boston
Children’s
Hospital-­‐
1,026
surgeries
Performed
2,777
operaGons
on
children
PROFIT
6.9%-­‐Average
US
Hospital
Profit
7.7%
Profit
Aler-­‐Taxes
MORTALITY
RATE
1.9%
1.4%
The
Data

19. Maine
to
Allow
PrescripJon
Drug
Imports
18

20. UNSUSTAINABILITY
OF
THE
TRADITIONAL
MEDICAL
BUSINESS
MODEL

21. OperaJng
Costs
Increasing
690,032
684,130
428,238
470,340
272,460
249,824
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
2007
2013
Medical
Revenue
OperaGng
Cost
Medical
Revenue
Aler
OperaGng
Cost
20
9%
Increase
8.3%
Decrease

22. Physician
Employment
Trends
21
Source:
Accenture
Physician
Alignment
Survey
2012.
hp://www.accenture.com/SiteCollecGonDocuments/
PDF/Accenture-­‐Clinical-­‐TransformaGon-­‐New-­‐Business-­‐Models-­‐for-­‐a-­‐New-­‐Era-­‐in-­‐Healthcare.pdf

23. Sustainable?
§ Hospitals
lose
on
average
$176,463
per
physician
on
owned
physician
pracGces
§ The
longer
a
hospital
owns
physician
groups,
the
higher
the
likelihood
it
is
losing
money
on
them.
§ The
more
physicians
a
hospital
employs,
the
more
likely
they
incur
losses
§ 78%
of
hospitals
are
paying
physicians
non-­‐producGvity
incenGves
(paGent
saGsfacGon,
clinical
quality,
and
ciGzenship),
expected
to
rise
to
94%
in
3
years
22
Sources:
MGMA
2013
Cost
Survey
All
mulG-­‐specialty
groups,
hospital-­‐owned
and
Report:
Hospital-­‐owned
pracGces
lose
up
to
$100K
per
doc
each
year
–
FiercePracGceManagement

24. INSTABILITY
OF
THE
PUBLIC
SECTOR
ENTITLEMENT
PROGRAMS

25. Challenged
Public
Payers
24
Source: Avalere Health analysis of American Hospital Association Annual Survey data, 2012, for community hospitals.
(1) Includes Medicare Disproportionate Share payments.
(2) Includes Medicaid Disproportionate Share payments.
70%
80%
90%
100%
110%
120%
130%
140%
150%
92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
Private
Payer
Medicaid
Medicare

26. Medicare
Payment
System
is
Broken
25

27. Increase
in
Medicaid
Enrollment
and
Spending
Growth
26

28. Unsustainable
27

29. ROLE
OF
INNOVATION

30. Why
VBP?
§ Purchasers
are
demanding
more
accountability
around
quality
and
cost
§ Medicare
and
Medicaid
need
the
“stop
loss”
§ Its
a
way
to
take
and
grow
share
§ It
allows
a
focus
on
“industrial
improvement”
§ Its
working
in
key
markets
§ Its
driving
quality
outcomes
29

31. Building
Blocks
of
Value
Based
Payments
30
Economic
Outlook
Reform
and
RegulaGon
Delivery
Redesign
Payment
Model
AnalyGcs
PopulaGon
Health
Consumer
Engagement

32. Employers
are
Agitated
31

33. Lines
are
Blurring:
Providers/Payers
32

34. AlternaJve
Payment
Models
33

35. ACO
Reach
by
the
Numbers
Source:
hp://www.oliverwyman.com/media/OW_ENG_HLS_PUBL_The_ACO_Surprise.pdf
34

36. CumulaJve
Percent
Change
in
NaJonal
Health
Expenditures,
2010
to
2019
Given
ImplementaJon
of
Possible
Approaches
to
Health
Reform
35

37. The
Garage
Comes
to
Healthcare
36
Source:
hp://www.chcf.org/innovaGon-­‐fund/accelerator-­‐incubator

38. Remote
PaJent
Monitoring
§ 24
hour
healthcare
a
day
§ Via
phone,
Web
video
or
the
tradiGonal
house
call
§ Just
received
$14
million
in
financing
led
by
CHI
§ Franciscan
Health
System
has
been
using
the
Carena
service
for
more
than
a
year
for
its
own
staff
§ Employees
of
the
hospital
receive
aler-­‐hours
medical
advice
and
treatment
§ Independent
analysis
shows
Carena’s
service
saves
employers
money
by
replacing
ED
visits
with
comprehensive
and
less
expensive
medical
house
calls

39. DisrupJve
DiagnosJcs
• Radiofrequency
wireless-­‐enabled
devices
• Diagnoses
asymptomaGc
atrial
fibrillaGon
same-­‐day
• Study
found
that
follow-­‐up
on
the
network
was
associated
with
a
50%
relaGve
reducGon
in
the
risk
of
death

40. DisrupJve
Delivery
§ Health
care
delivery
model
that
responds
to
consumer
demand
and
bypasses
ED
§ Nurse
pracGGoners
and
physician
assistants
who
can
diagnose,
treat
and
write
prescripGons
Adjusted
Mean
Costs
per
Episode
by
Site
of
Care
Site
Pharmacy
Medical
Total
MinuteClinic
$28
$75
$104
ED
$27
$356
$383
Physician’s
Office
$32
$127
$159
Urgent
care
facility
$30
$124
$154
Source:
hp://content.healthaffairs.org/content/27/5/1283/T1.expansion.html

41. AnalyJcs
Drive
Clinical
AcJon
§ 300,000
VenGlated
Acquired
Pneumonia
(VAP)
cases
per
year
in
the
US
§ Clinical
team
established
eight
measures
that
help
to
alleviate
VAP
(i.e.,
sucGoning
phlegm,
brushing
teeth,
and
backslaps)
§ Health
status
had
not
improved
commensurately
§ Conducted
a
subset
analysis
§ Compliance
with
all
eight
of
measures
provided
the
Gpping
point
to
avoiding
VAP.
“People
are
now
comparing
us
to
best
of
breed,
where
we
were
just
average
in
the
past.
It
is
really
an
analy@cs
victory
in
the
ability
to
see
paAerns
that
would
have
been
invisible
without
the
data
warehouse
to
see
that
retrospec@ve
analysis
and
real-­‐@me
repor@ng.”
-­‐
Ed
Shultz,
M.D.,
CMIO

42. Payment
IncenJves
§ Non-­‐profit
organizaGon
working
to:
§ Measure
outcomes
§ Reduce
care
defects
§ Promote
a
team
approach
to
caring
for
paGents
§ Realign
payment
incenGves
around
quality
§ Reward
excellence
§ Bridges
to
Excellence
§ Programs
to
reward
recognized
providers
who
meet
certain
performance
measures.
§ PROMETHEUS
Payment
§ A
compensaGon
approach,
based
on
medical
episodes
of
care,
that
provides
a
fair
and
realisGc
blueprint
for
true
payment
reform.
§ Being
used
by
CMS
for
bundled
payment
pilot

43. Transparency
§ Compares
providers
cost
and
quality
to
show
evidence
of
value
–
“transparency
sheds
light”
§ Improved
employee
engagement
§ Behavior
change
§ ReducGon
in
spending
and
out-­‐of-­‐network
use
§ Improved
care
quality
§ 70%
employee
engagement
rates
§ One
company
saved
13%
on
their
health
care
spend
§ 40%
less
likely
to
go
out-­‐of-­‐network
§ 38%
reducGon
in
gaps-­‐in-­‐care
for
chronic
condiGons
such
as
diabetes,
COPD,
high-­‐
blood
pressure,
and
high
cholesterol

44. QuesJons?
Thank
you
Don
McDaniel
dmcdaniel@sage-­‐growth.com
410.534.1161
443.904.2882
43
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2014
Sage
Growth
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