Health Care Advisory Board
Health Care 2020 Population Health, Consumerism, and the Future of Health Care Delivery
©2015 The Advisory Board Company • advisory.com
Health Care Advisory Board Project Director Yulan Egan
Contributing Consultant Corbin Santo, JD
Design Consultant Haley Chapman
Practice Manager Ben Umansky
Executive Director Lisa Bielamowicz, MD
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Health Care Advisory Board
Health Care 2020 Population Health, Consumerism, and the Future of Health Care Delivery
6
A Return to the Good Old Days? Health Care Spending on the Rebound National Health Expenditures See Biggest Jump Since Pre-Recession Annual Growth in National Health Expenditures 10% 9%
“U.S. Health-Care Spending Is on the Rise Again”
8% 7%
6.5%
6.3%
6% 5%
“Health care spending growth hits 10-year high”
4% 3%
5.0%
4.8% 3.8% 3.9% 3.9%
4.1%
3.6%
2%
“Health Spending Is Rising More Sharply Again”
1% 0% 2006 2007 2008 2009 2010 2011 2012 2013 2014
©2015 The Advisory Board Company • advisory.com • 30484
Source: Altarum Institute, Health Sector Trend Report, March 2015, accessed April 2015; Tozzi J, “U.S. Health-Care Spending Is on the Rise Again,” Bloomberg Businessweek, February 18, 2015, available at: www.bloomberg.com; Davidson P, “Health care spending growth hits 10-year high,” USA Today, April 1, 2014, available at: www.usatoday.com; Altman D, “Health Spending is Rising More Sharply Again,” The Wall Street Journal, February 27, 2015, available at: www.blogs.wsj.com; Health Care Advisory Board interviews and analysis.
7
A Closer Look at the Numbers Higher Spending Not Exactly a Boon for Hospitals Hospital Price Growth Down for First Time on Record Annualized Hospital Price Growth, Jan. 2010-Jan. 2015 4.0%
2015 Hospital Price Growth Down Across All Payer Classes
3.5% 2.7%
3.0%
(2.9%)
2.9%
Medicare price growth
1.6% 2.0%
1.5%
(0.1%)
1.0%
Medicaid price growth
0.0% -0.1% -1.0%
Jan. '10
Jan. '11
Jan. '12
Jan. '13
Jan. '14
Jan. '15
1.6% Commercial price growth (lowest growth rate since 2002)
Source: Altarum Institute, Health Sector Economic Indicators: Price Brief, March 2015, March 2014, March 2013, March 2012, available at: www.altarum.org; Health Care Advisory Board interviews and analysis.
©2015 The Advisory Board Company • advisory.com • 30484
8
No End in Sight for Reimbursement Cuts ACA Reductions Persist; New Threats Emerge Hospitals Bearing the Brunt of Payment Cuts
New Proposals Continue to Emerge
Reductions to Medicare Fee-for-Service Payments
President’s FY2016 Budget Proposal Includes Significant Cuts to Providers
2013 2014 2015 2016 2017
ACA IPPS1 Update Adjustments
($4B) ($14B)
ACA DSH2 Payment Cuts
($24B) ($29B)
MACRA3 IPPS Update Adjustments
($38B)
2018 2019 2020 2021 2022 1) Inpatient Prospective Payment System. 2) Disproportionate Share Hospital. 3) Medicare Access and CHIP Reauthorization Act of 2015. ©2015 The Advisory Board Company • advisory.com • 30484
$30.8B
$29.5B
Reduction in Medicare bad debt payments
Savings from moving to site-neutral payments
$14.6B
$720M
Cuts to teaching hospitals and GME payments
Cuts to critical access hospitals
($54B) ($67B) ($76B) ($86B)
($94B)
Source: CBO, “Letter to the Honorable John Boehner Providing an Estimate for H.R. 6079, The Repeal of Obamacare Act,” July 24, 2012; CBO, “Cost Estimate and Supplemental Analyses for H.R. 2, the Medicare Access and CHIP Reauthorization Act of 2015; Budget of the United States Government (Proposed) FY 2016; Health Care Advisory Board interviews and analysis.
9
Market Forces Continue to Threaten Status Quo All Purchasers Looking to Curb Spending
1
2
3
Government
Employers
Consumers
•
Medicare doubling down on risk
•
•
•
Medicare Advantage poised for reform
Private exchanges increasing pricing pressure
Continued premium sensitivity on public exchanges
•
Self-insured employers focusing on utilization control
•
Price sensitivity increasing at point of care
•
Medicaid experimenting with risk, consumerism
©2015 The Advisory Board Company • advisory.com • 30484
Source: Health Care Advisory Board interviews and analysis.
10
Government
CMS Lays Down Marker for Value-Based Payment Historic Payment Targets Demonstrate Commitment to FFS1 Alternatives Aggressive Targets for Transition to Risk
FFS Increasingly Tied to Value
Percent of Medicare Payments Tied to Risk Models
Percent of Medicare Payments Tied to Quality 90% 85%
50% 80%
30% 20%
2016
2018
Medicare Shared Savings Program Bundled Payments for Care Improvement Initiative Patient-Centered Medical Home
2015
2016
2018
Hospital-Acquired Condition Reduction Program Examples of Quality/ Value Programs
Examples of Qualifying Risk Models
2015
Hospital Value-Based Purchasing Program Hospital Readmissions Reduction Program Merit-Based Incentive Payment System
1) Fee-for-Service. ©2015 The Advisory Board Company • advisory.com • 30484
Source: HHS, “Progress Towards Achieving Better Care, Smarter Spending, Healthier People,” available at: http://www.hhs.gov/, accessed February 2015; Health Care Advisory Board interviews and analysis.
11
Mandatory Risk Programs Taking a Toll on Providers Readmissions, HAC Penalties Outweighing VBP Bonuses After Accounting for Penalties1, Few Receive VBP2 Bonuses Estimated Net Impact of P4P3 Programs, FY 2015
28% Hospitals receiving a net bonus or breaking even
50% 3,087 hospitals in VBP program
1,700 hospitals received bonus payment
Hospitals receiving net penalties between 0% and 1%
792 hospitals received net payment increases
6.5% Hospitals receiving net penalties of 2% or greater
1) Hospital-Acquired Condition Reduction Program, Hospital Readmissions Reduction Program. 2) Value-Based Purchasing. 3) Pay-for-Performance. Source: Rau J, “1,700 Hospitals Win Quality Bonuses From Medicare, But Most Will Never Collect,” Kaiser Health News, January 22, 2015, available at: kaiserhealthnews.org; Health Care Advisory Board interviews and analysis.
©2015 The Advisory Board Company • advisory.com • 30484
12
SGR Repeal Includes Additional Push Toward Risk Both Tracks Impose Greater Risk, Strong Incentives for Alternative Models PFS1 Payment Models Beginning in 2019
MIPS Performance Category Weights For 2021
1 Merit-Based Incentive Payment System (MIPS) • Consolidates existing P4P programs 2 • Score based on quality, resource use, clinical improvement, and EHR use • Adjustments reach -9% / +27% by 2022 • From 2019 through 2024, potential to share in $500M annual bonus pool
2
Quality
EHR Use 25%
30%
15% Clinical Improvement
30% Resource Use
Revenue at Risk Requirements for APMs Alternative Payment Models (APMs) • Provides financial incentives (5% annual bonus in 2019-2024) and exemption from MIPS • Requires that physicians meet increased targets for revenue at risk • APMs must involve downside risk and quality measurement
1) Physician Fee Schedule. 2) Meaningful Use, Value-Based Modifier, and Physician Quality Reporting System. 3) Includes risk-based contracts with Medicare Advantage plans. ©2015 The Advisory Board Company • advisory.com • 30484
Required for All Providers 2019 – 2020
25%
Option 1 2021– 2022
50%
2023 and on
75%
OR
Option 2 25%
50%
75% 25%
Medicare
All-Payer3
Source: The Medicare Access and CHIP Reauthorization Act of 2015; Health Care Advisory Board interviews and analysis.
13
Bundling Slated to Become Next Mandatory Program CMMI Program Would Require Orthopedic Bundling in Select Markets The Comprehensive Care for Joint Replacement (CCJR) Model Key Program Features
Program Timeline July 2015 Program announced; accepting comments through September 8th
Focus on joints
Comprehensive episode
Average expenditure varies from $16,500 to $33,000 by geography
Includes all related Part A and Part B services for 90 days post-discharge
January 2016 First performance year begins; no episode discount for first year
2017-2020 Downside risk incorporated; 1% discount in 2017, 2% for 2018 onward
Mandatory in 75 markets
Retrospective bundle
No application process; CAHs1 and BPCI2 Phase II participants exempt
CMS will pay each provider separately, conduct annual reconciliation process
$153M ESTIMATED SAVINGS TO MEDICARE OVER THE 5 YEARS OF THE MODEL
1) Critical Access Hospitals. 2) Bundled Payments for Care Improvement Initiative. ©2015 The Advisory Board Company • advisory.com • 30484
Source: Centers for Medicare and Medicaid Services; Health Care Advisory Board interviews and analysis.
14
MSSP1 Continues to Grow Despite Mixed Results 89 ACOs Join in 2015, Few Generating Shared Savings in First Year Medicare ACO Program Growth Continues
One-Quarter of MSSP ACOs Share in Savings
As of January 2015
First Performance Year2 420
401
Held Spending Below Benchmark, Earned Shared Savings 26%
46%
19 13 Pioneer ACO
31 MSSP ACO
44 Total Medicare ACOs
Did Not Hold Spending Below Benchmark
27%
Reduced Spending, Did Not Qualify for Shared Savings
Early MSSP Participants Completing Third Performance Year (PY) PY 1
April 2012 Cohort (27)
PY 1
July 2012 Cohort (87)
PY 1
Jan. 2013 Cohort (106) Jan. 2014 Cohort (123)
PY 2
PY 3
PY 2
PY 3
PY 2
PY 3
PY 1
PY 2
2014
2015
PY 1
Jan. 2015 Cohort (89) 2012 1) Medicare Shared Savings Program. 2) For the 2012 and 2013 cohorts; percentages may not add to 100 due to rounding. ©2015 The Advisory Board Company • advisory.com • 30484
2013
Source: Spitalnic P, “Certification of Pioneer Model Savings,” CMS, April 10, 2015; available at www.cms.gov; “Shared Savings Program Fast Facts,” CMS, April 2015, available at: www.cms.gov; CMS, “Fact Sheets: Medicare ACOs continue to succeed in improving care, lowering cost growth,” September 16, 2014, available at www.cms.gov; McClellan M et al., “Changes Needed to Fulfill the Potential of Medicare’s ACO Program,” Health Affairs Blog, April 8, 2015, available at www.healthaffairs.org/blog; Health Care Advisory Board interviews and analysis.
15
Pioneer ACO Meets Requirements for Expansion First-Ever CMMI Pilot Certification Expands Model to More Beneficiaries Pioneer ACOs Generate Sufficient Savings to Merit CMS Expansion Total Medicare Savings Generated by Pioneer ACOs, 2012-2013 $104.5M
$384.2M
2013
Total
$279.7M
2012
10
Pioneer ACOs generated statistically significant savings relative to their markets in both 2012 and 2013
©2015 The Advisory Board Company • advisory.com • 30484
The Actuary’s certification that expansion of Pioneer ACOs would reduce net Medicare spending, coupled with Secretary Burwell’s determination that expansion would maintain or improve patient care without limiting coverage or benefits, means that HHS will consider ways to scale the Pioneer ACO Model into other Medicare programs.” U.S. Department of Health & Human Services
Source: “Affordable Care Act Payment Model Saves More than $384 Million in Two Years, Meets Criteria for First-Ever Expansion,” HHS, May 4, 2015, available at: www.hhs.gov; Spitalnic P, “Certification of Pioneer Model Savings,” CMS, April 10, 2015, available at: www.cms.gov; L&M Policy Research, “Evaluation of CMMI Accountable Care Organization Initiatives: Pioneer ACO Evaluation Findings from Performance Years One and Two”, March 10, 2015, available at: www.cms.gov; Health Care Advisory Board interviews and analysis.
16
MSSP Program Now Offering Higher-Risk Track Track Three Incorporates Features of Pioneer ACO Model New Rule Offers Greater Flexibility for Providers
Track 1 • Option to renew for second three-year term • Savings rate kept at 50% for second term
Track 2 • Shared savings, loss rate remains at 60% based on quality performance • Revises MSR1 and MLR2 from fixed 2% to variable 2%-3.9% based on number of beneficiaries
Track 3 • Shared savings up to 75%, shared losses from 40%75% based on quality performance
• Fixed 2% MSR and MLR • Prospective assignment • Waiver of SNF 3-day rule
Benchmarking Methodology Adjusted to Account for Prior Performance •
Benchmarks will be rebased in subsequent agreement periods based on an ACO’s financial and quality performance during prior agreement periods
•
CMS plans to develop a regionally adjusted benchmark formula to take effect in 2017 or later
1) Minimum Savings Rate. 2) Minimum Loss Rate. ©2015 The Advisory Board Company • advisory.com • 30484
Source: Davis Wright Tremaine, “Keeping Track of the Tracks: Proposed ACO Regulations Alter MSSP Financial Models,” December 11, 2014, available at www.dwt.com; McDermott, Will & Emery, “CMS ACO Proposed Rule to Extend One-Sided Risk Track While Incentivizing Performance-Based Risk,” December 19, 2014, available at www.mwe.com; Health Care Advisory Board interviews and analysis.
17
CMMI’s Next-Gen ACO Will Test Full Performance Risk Model Significantly Expands Tools to Engage Patients, Control Utilization
Financial Model
Engagement Tools
Prospective benchmark using one year baseline historical spending, trended forward using regional factors
Beneficiary alignment through prospective attribution and voluntary beneficiary alignment
Risk arrangements include 80%-85% sharing rate or full performance risk
Coordinated care reward up to $50 annually for beneficiaries receiving at least 50% of care from ACO
Payment mechanisms include traditional FFS (with optional infrastructure payments), populationbased payments, or capitation
Benefit enhancements through payment and program waivers for telehealth, home health, and SNF admission
Source: CMS, “Open Door Forum: Next Generation ACO Model”, March 17, 2015, available at: www.innovation.cms.gov; Health Care Advisory Board interviews and analysis.
©2015 The Advisory Board Company • advisory.com • 30484
18
Medicare Advantage Continues Record Growth Penetration Varies by Geography MA Enrollment to Nearly Double by 2025
MA Penetration Varies by State
Total Enrollment and Percentage of Total Medicare Population
Total MA Enrollment as a Percent of Total Medicare Population
35
30.0M (40%)
30
Millions
25 17.3M (30%)
20 15 10
10.4M (13%)
5 0 2005
22%
2015
of newly eligible beneficiaries chose MA in 2011
©2015 The Advisory Board Company • advisory.com • 30484
2025
39
0%-13%
states currently have provider-led plans in their markets
14%-25%
69%
26%-38%
39%-51%
of provider-led plans offer MA coverage options
Source: KFF, “Medicare Advantage Fact Sheet,” May 1, 2014, available at: www.kff.org; CBO, “March 2015 Medicare Baseline,” March 9, 2015, available at: www.cbo.gov; KFF, “Medicare Advantage Enrollees as a Percent of Total Medicare Population,” 2014, available at: www.kff.org; Mark Farrah & Associates, “Medicare Advantage Tops 17 Million Members”, March 27, 2015, available at: www.markfarrah.com; Jacobson G et al., “At Least Half of New Medicare Advantage Enrollees Had Switched from Traditional Medicare During 2006-11,” Health Affairs, January 2015, available at www.healthaffairs.org; McKinsey & Co., “Provider-Led Health Plans: The Next Frontier—Or the 1990s All Over Again?”, January 2015, available at: healthcare.mckinsey.com; Health Care Advisory Board interviews and analysis.
19
Provider Interest Fueling MA Growth Ability to Customize Contracts, Maintain Narrow Network Key Differentiators Attractive Elements of MA Contracts Greater Control Over the Network 64% if beneficiaries choose HMO plans, offering improved utilization management and network control
Fewer Patient Identification Issues Providers can target patients who are enrolled in the plan with lower levels of churn than in MSSP
Greater Opportunity to Tailor Risk Carrier contracts can be structured to include varying levels of provider payment risk and quality incentives
Customized Cost Target Development Providers can determine the cost target as part of negotiations with the plan, perhaps using the MLR
White Paper: Why a Successful Population Health Strategy Must Include Medicare Advantage Highlights attractive elements of MA and offers strategies to incorporate it into population health strategy
70%
of new MA plans approved since 2008 are provider-sponsored
18%
of MA enrollees chose a provider-sponsored MA plan in 2014 (about 2.8M enrollees)
Source: James Gutman, “Tide of Rising Provider MA-Plan Sponsorship is Likely to Continue,” AIS Health, February 19, 2015, available at: www.aishealth.com; Kaiser Family Foundation, “Medicare Advantage Fact Sheet,” May 1, 2014, available at: www.kff.org; Health Care Advisory Board interviews and analysis.
©2015 The Advisory Board Company • advisory.com • 30484
20
CMS Charting a Path Toward Greater Risk Track 3, Pioneer and Next-Gen ACO Filling Out the Continuum Continuum of Medicare Risk Models
Pay-forPerformance • Hospital VBP Program • Hospital Readmissions Reduction Program • HAC Reduction Program
Bundled Payments • Comprehensive Care for Joint Replacement (CCJR) Model
Shared Savings • MSSP Track 1 (50% sharing)
Shared Risk • MSSP Track 2 (60% sharing) • MSSP Track 3 (up to 75% sharing)
• Bundled Payments for Care Improvement Initiative (BPCI)
• Next-Generation ACO (80-85% sharing)
Full Risk • Next-Generation ACO (optional full performance risk) • Medicare Advantage (providersponsored)
• Merit-Based Incentive Payment System Increasing Financial Risk
©2015 The Advisory Board Company • advisory.com • 30484
Source: Health Care Advisory Board interviews and analysis.
21
Future of Medicaid Expansion Less Clear Benefit of Expansion Clear for Hospitals, But Opposition Remains 30 States and DC Have Approved Expansion1 As of July 2015
Medicaid Expansion Positively Impacting Hospital Finances Medicaid Admissions increased 21% for investor-owned hospitals in expansion states
Self-Pay Admissions decreased by 47% for investor-owned hospitals in expansion states
Participating
Expansion by Waiver
Uncompensated Care costs reduced by $5 billion in expansion states in 2014
Not Currently Participating
11.7M
27% vs. 8%
Net increase in Medicaid, CHIP2 enrollment, July-Sept. 2013 to Feb. 20153
Growth in Medicaid, CHIP enrollment in expansion vs. non-expansion states, July-Sept. 2013 to Feb. 2015
1) Montana’s expansion requires federal waiver approval. 2) Children’s Health Insurance Program. 3) Excludes CT and ME. ©2015 The Advisory Board Company • advisory.com • 30484
Source: Kaiser Family Foundation, “Current Status of State Medicaid Expansion Decisions,” January 27, 2015, available at: www.kff.org; HHS, “Insurance Expansion, Hospital Uncompensated Care, and the Affordable Care Act”, March 23, 2015, available at: www.aspe.hhs.gov; PwC Health Research Institute, “The Health System Haves and Have Nots of ACA Expansion”, 2014, available at: www.pwc.com; CMS, “Medicaid & CHIP: February 2015 Monthly Applications, Eligibility Determinations and Enrollment Report”, May 1, 2015, available at: www.medicaid.gov; Health Care Advisory Board interviews and analysis.
22
Medicaid Risk-Based Payment Models Expanding Providers Expanding Care Management Infrastructure to New Populations
17 states stat st at have Medicaid ACO programs in place or are pursuing one
Oregon
Colorado
Minnesota
Coordinated Care Organizations
Regional Care Collaborative Organizations
Integrated Health Partnerships
•
16 organizations accountable for 90% of Medicaid and dual-eligibles
•
•
15 delivery systems participating in Medicaid ACO program
•
21% reduction in ED use, 52% increase in PCMH1 enrollment since 2012
Seven regional organizations that convene provider networks around PCMHs
•
•
Uses a hybrid of several payment strategies to shift to value
Shared savings in year one; shared risk in following years
On track to generate 2% PMPY2 savings 1) Patient-Centered Medical Home. 2) Per Member Per Year. ©2015 The Advisory Board Company • advisory.com • 30484
Generated $29-$33M in net savings, 2014
Generated $10.5M in savings in first year
Source: Center for Health Care Strategies, “Medicaid Accountable Care Organizations: State Update,” March 2015, available at: www.chcs.org; Colorado Department of Health Care Policy & Financing, “Accountable Care Collaborative 2014 Annual Report,” available at: www.colorado.gov; Oregon Health Authority, “Oregon’s Health System Transformation: 2013 Performance Report,” June 24, 2014, available at: www.oregon.gov; Minnesota Department of Human Services, “Integrated Health Partnerships (IHP) Overview,” 2015, available at: www.dhs.state.mn.us; Health Care Advisory Board interviews and analysis.
23
Expansion States Experimenting with Benefit Design States Using Waiver Flexibility to Redesign Benefits, Influence Behavior Medicaid Waivers Encourage Healthy Behavior, Personal Responsibility Demonstration Proposals Approved by CMS
Premium Assistance for QHPs1
Demonstration Proposals Rejected by CMS
Work requirements as condition of eligibility
Benefits Lockouts
Private Managed Care Plans
Mandated premiums for beneficiaries below 100% FPL2
Work Program Referrals
Premiums/ Monthly Contributions
Service Copays
Cost sharing exceeding amounts permitted under federal law
Healthy Behavior Discounts
1) Qualified Health Plans. 2) Federal Poverty Level.
Source: Kaiser Family Foundation, “The ACA and Recent Section 1115 Medicaid Demonstration Waivers,” November 24, 2014, available at: www.kff.org; Modern Healthcare, “CMS Gives Arkansas, Iowa More Leeway in Medicaid Expansion Waivers,” available at: www.modernheatlhcare.com, accessed January 5, 2015; Health Care Advisory Board interviews and analysis.
©2015 The Advisory Board Company • advisory.com • 30484
Volume and Value: Support Appropriate Utilization
24
Slow Shift to Risk Providers Still Have a Foot in Two Boats Growth in All Risk-Based Contracting Models Average Estimated Hospital Revenue Breakdown n = 88 100% 90%
Fee-for-Service
80% 70% 60%
Pay-for-Performance
50% 40%
Bundled Payment
30% 20%
Total Cost of Care
10% 0% Today
1
2
©2015 The Advisory Board Company • advisory.com • 30484
3
4
5
6
7
8
9
10 Years Source: Accountable Payment Survey; Advisory Board interviews and analysis.
25
Employers
Employer Health Cost Growth Slowing, but Enough? “Cadillac” Tax Motivating Quicker Action Good News and Bad News
3.9%
Refresher: The “Cadillac” Tax
Predicted growth in per-employee health benefit cost, 2015 (second lowest since 1997)
• 40% excise tax assessed on amount of employee health benefit exceeding $10,200 for individuals, $27,500 for families • Intended to encourage cost-effective benefits, offset ACA implementation cost • Threshold adjustments tied to consumer inflation, not health care inflation
1.7%
Annual consumer inflation, October 2014
©2015 The Advisory Board Company • advisory.com • 30484
• If employers make no changes to current benefit plans:
31%
51%
of all employers could incur tax in 2018
of all employers could incur tax in 2022
Source: Mercer, “Survey Predicts Health Benefit Cost Increases Will Edge Up in 2015,” September 11, 2014, available at: www.mercer.com; Hancock J, “Employer Health Costs Rise 4 Percent, Lowest Increase Since 1997,” Kaiser Health News, November 14, 2012, available at: www.kaiserhealthnews.com; Mercer, “Modest Health Benefit Cost Growth Continues as Consumerism Kicks into High Gear,” November 19, 2014, available at: www.mercer.com; Health Care Advisory Board interviews and analysis.
26
Employers Not Converging on a Single Strategy Spectrum of Options for Controlling Health Benefits Expense
•
•
“Activation”
“Delegation”
“Abdication”
Manage Proactively
Shift to Private Exchange
Drop Coverage
• Outsource administrative burden to third party
• Shift employees to public exchange
• Facilitate shift to defined contribution
• Trade Cadillac tax for employer mandate penalty
Offer and encourage uptake in care management, disease management, preventive care May involve direct partnerships with ACOs
• Encourage employee uptake of HDHPs1
1) High Deductible Health Plan. ©2015 The Advisory Board Company • advisory.com • 30484
Source: Health Care Advisory Board interviews and analysis.
27
Manage Proactively
Activist Employers Investing in a Range of Tools Four Primary Models for Controlling Employee Utilization Manage Costs at Point of Network Assembly
“The OneStop Shop”
ACO networks: Employer contracts with single delivery system based on promise of reduced cost trend
Manage Costs at Point of Referral, Point of Care
“The Accountable Physician”
Enhanced primary care: Employees directed to PCPs with proven ability to reduce utilization, refer responsibly
“The Neutral Third Party”
Personal health navigators: Guide employees through all health care related decisions, refer to high-value providers
“The Second Opinion”
Specialty carve-out networks: Employees evaluated against appropriateness of care criteria, sent to centers of excellence
©2015 The Advisory Board Company • advisory.com • 30484
Source: Health Care Advisory Board interviews and analysis.
28
Early Adopters of ACO Models Expanding Efforts Intel Extends Connected Care Model Established in New Mexico, 2013
Established in Oregon, 2014
Key Components of Connected Care Oregon •
Premium incentives to choose narrow network; both Kaiser and Providence networks set at $0 premium
•
Members assigned to PCMH
•
FFS payments tied to performance against cost, quality goals
Case in Brief: Intel Corporation • Large, multinational employer headquartered in Santa Clara, California
• In 2013, entered into narrow-network contract with Presbyterian Healthcare Services, an 8-hospital system in New Mexico, for employees at Rio Rancho plant • In 2014, implemented similar model in Oregon with Kaiser Permanente and Providence Health & Services
©2015 The Advisory Board Company • advisory.com • 30484
Source: Hayes E, “Intel Shares Details on Its New Providence and Kaiser Health Plans,” Portland Business Journal, October 24, 2014, available at: www.bizjournals.com/portland/blog; Health Care Advisory Board interviews and analysis.
29
Market Dynamics Slowing Broader Adoption Direct-to-Employer ACO Arrangements Remain Rare
Carrier, Broker Resistance • Little desire to disrupt stability of ESI1 marketplace • Hesitant to narrow networks for fear of jeopardizing provider relationships necessary for broad product offerings • Resistance from national employers to compete directly with regional ACOs • Fear that employer partners will bypass completely and partner directly with providers instead
Market Immaturity • Hesitance by employers to disrupt employee benefits without concrete proof of efficacy of ACO model • Lack of mature “plug and play” solutions means employers must invest significant time, energy into implementing ACO model • More interest from employers in models requiring incremental changes, rather than broad disruption to benefits
1) Employer-Sponsored Insurance. ©2015 The Advisory Board Company • advisory.com • 30484
Source: Health Care Advisory Board interviews and analysis.
30
Not Everyone Buying Into the Value of Systemness Innovators Looking to Unbundle the Delivery System Quality doesn’t happen at the system level. Quality happens at the individual physician level. If I steer my employees to a single delivery system, the one thing I can be certain of is that the quality of care that they’ll receive will be variable.” Director of Benefits, Large National Employer
©2015 The Advisory Board Company • advisory.com • 30484
Pushing for Two Levels of Unbundling Physician Level •
Aggregate level facility or procedural data not a guarantee of individual physician performance
•
Innovators looking to identify highperforming clinicians and ensure steerage to those individuals
Procedure Level •
Single health system may not be high-quality across all clinical areas
•
Innovators cherry-picking facilities based on quality and cost efficiency with specific procedures (e.g. heart surgery) Source: Health Care Advisory Board interviews and analysis.
31
Steering Employees to High-Performing Facilities Centers of Excellence Help Employers Reduce Procedural Spend BridgeHealth Offers Three Tiers of Service Targeting Surgery Spend Case in Brief: BridgeHealth Medical
SURGERY PATH • Web portal that helps guide employees when making surgery treatment decision
Scope of Services
• Offers shared decision-making and transparency tools
HIGH PERFORMANCE NETWORK • Care coordinators direct employees to hospitals in top quartile of quality ranking system • Offers case rates 15-40% below typical PPO payments
SURGERY BENEFIT MANAGEMENT Combines Surgery Path and High Performance Network offerings to maximize impact, increase employee decision support options
• Health care company based in Denver, CO; helps employers manage surgery spend • Identifies highperforming hospitals and surgical teams for key procedures and negotiates preset case rates • Uses care coordinators to guide employees through process of selecting facility for procedure, scheduling, and follow up
Source: BridgeHealth Medical, “Products,” available at: www.bridgehealthmedical.com/products, accessed May 8, 2015; Health Care Advisory Board interviews and analysis.
©2015 The Advisory Board Company • advisory.com • 30484
32
Incentivizing PCPs to Make Smart Referrals Shifting Risk onto the Primary Care Physician Identifying High-Value Referral Partners Case in Brief: Iora Health • Progressive medical group based in Cambridge, Massachusetts with 12 clinics throughout the U.S.
Eliminating High Spenders
Finding a Cultural Fit
• Refers selectively to highquality, cost-effective specialty partners
Use payer claims data to eliminate physicians who are drumming up volumes
Identify most collaborative partners (e.g. those willing to commit to curbside consults)
1
2
Giving PCPs Control of the Budget “In our initial arrangements, we were creating a lot of value, but not always sharing in it. Now, with broader shared risk, the incentives are more aligned.”
Zander Packard, COO, Iora Health
©2015 The Advisory Board Company • advisory.com • 30484
From Primary Care Capitation to Global Risk
Under original model, Iora receives PMPM fee for primary care services
New contracts with insurers include shared risk based on total cost
Source: Iora, available at: www.iora.com, accessed April 17, 2015; Health Care Advisory Board interviews and analysis.
33
Concierge Navigators Influencing Referral Patterns Compass Delivers Savings to Employers Through Premier Providers Premier Providers Chosen for HighQuality, Cost-Effective Care
High-Quality Physicians Reduce Employees’ Average Annual Health Care Spending
Compass reviews medical claims data, conducts interviews to identify top performers
$6,698
$4,903 annual savings $3,875
Providers must: • Maintain updated medical practices • Demonstrate compassion and concern for patients • Deliver care that reduces excessive visits and spending
$2,752
$1,795
Bottom 50%
Top 50%
Top 25%
Top 10%
Case in Brief: Compass Professional Health Services • Health navigation and transparency company based in Dallas, Texas • Markets a health activation platform to employers that provides cost and quality data, promotes wellness and prevention, and engages employees in care pathways using Compass Premier Providers • Clients include Southwest Airlines, Dillard’s, Michaels, and The Container Store Source: Compass, available at: http://www.compassphs.com/solutions/pathways/, accessed April 30, 2015; Health Care Advisory Board interviews and analysis.
©2015 The Advisory Board Company • advisory.com • 30484
34
Shift to Private Exchange
Other Employers Taking a More Hands-Off Approach Private Exchange Enrollment Continues to Grow Private Exchange Enrollment Doubles in 2015, But Lags Behind Initial Projections
Analysts Remain Bullish on Long-Run Growth Prospects
Projected Private Exchange Enrollment Among Pre-65 Employees and Dependents
More Big Names Making the Jump
40M
Newer Market Entrants Hitting Their Stride 22M
50%
12M
(800kà1.2M)
6M 3M 2014
2015
2013 Projection
Enrollment growth for Towers Watson’s exchange solutions, 2015
2016 Actual Enrollment
©2015 The Advisory Board Company • advisory.com • 30484
2017
2018 2015 Projection
500%
Enrollment growth for Mercer’s exchange solutions, 2015
(220kà1M)
Source: Accenture, “Private Health Insurance Exchange Enrollment Doubled from 2014 to 2015,” April 7, 2015, available at: www.accenture.com; Towers Watson, “Enrollment in Health Benefits Through Towers Watson’s Exchange Solutions Expected to Reach About 1.2 Million in 2015,” March 19, 2015, available at: www.towerswatson.com; Mercer, “Mercer Marketplace-the flexible private exchange-posts individual participant and client gains,” October 13, 2014, available at: www.mercer.com; Health Care Advisory Board interviews and analysis.
35
Many Still in Wait-and-See Mode Long-Run Impact Depends on Results, Broader Uptake Across Industries Employers Waiting to See Results, Watching Industry Peers Top Three Factors That Would Cause Employers to Consider a Private Exchange
Evidence that private exchanges can deliver greater value than current model
74%
The actions of other large companies in our industry
Inability to stay below the excise tax using our current approach
For us, the decision to move to the private exchange model was independent of the ACA. We had pulled all of the levers available to us as a self-insured employer— there was nowhere left to go from a cost-savings perspective. At the end of the day, the private exchange was a way to achieve more predictable cost savings.”
56%
36%
©2015 The Advisory Board Company • advisory.com • 30484
Tom Sondergeld, Senior Director of Health & Wellness, Walgreens Source: Towers Watson/National Business Group on Health, “Employer Survey on Purchasing Value in Health Care,” 2014, available at: www.towerswatson.com; Health Care Advisory Board interviews and analysis.
36
Exchanges Delivering on First-Order Savings Facilitating Shift to Defined Contribution, Encouraging HDHP Uptake Sears Exchange Model
Three Years In, Sears Continues to See Migration to HDHPs Grow Year-Over-Year Percentage of Sears Employees Selecting HDHP Option
Fully-insured
35% 27%
Defined contribution Multi-carrier
17% 3.5% Pre-Exchange
Year 1 Exchange
Year 2 Exchange
Year 3 Exchange
Case in Brief: Sears Holdings Corporation • Retail chain headquartered in Hoffman Estates, Illinois • One of earliest large employers to adopt private exchange model; implemented Aon Active Health Exchange in 2013 • Has held defined contribution steady over the last few years; future adjustments based on premium growth and business performance ©2015 The Advisory Board Company • advisory.com • 30484
Source: Health Care Advisory Board interviews and analysis.
37
Consumers
Consumers Continue to Flock to Public Exchanges Second Round of Enrollment Hitting Targets Second Open Enrollment Period Yields Over 10 Million Enrollees Total 2015 Plan Selections in the Marketplaces
Federal Exchanges Driving Most Enrollment
11.7 HHS1 Projection 9.0M-9.9M
10.2
2014 Enrollment 8M
8.8M
2.8M
Enrollment on federally facilitated exchanges, 2015
Enrollment on state run exchanges, 2015
Demographics Largely Unchanged
28% Total at end of OEP
2
Total as of April 2015
1) Health and Human Services. 2) Open Enrollment Period. 3) Drop-off due to individuals not paying premiums or voluntarily dropping coverage. ©2015 The Advisory Board Company • advisory.com • 30484
3
2015 enrollees aged 18-34 (compared to 28% in 2014)
Source: HHS, “Health Insurance Marketplace 2015 Open Enrollment Period: December Enrollment Report,” Dec. 30, 2014; HHS, “Health Insurance Marketplace 2015 Open Enrollment Period: January Enrollment Report,” Jan. 27, 2015; HHS, “Open Enrollment Week 13: February 7, 2015 – February 15, 2015, available at: http://www.hhs.gov/healthcare/facts/blog; HHS, “Open Enrollment Week 14: February 16, 2015 – February 22, 2015, available at: www.hhs.gov/healthcare/facts/blog; HHS, “Health Insurance Marketplaces 2015 Open Enrollment Period: March Enrollment Report,” March 10, 2015; CBO, January 2015 Baseline: Insurance Coverage Provisions for the Affordable Care Act, available at: www.cbo.gov; Washington Times, “Obamacare Official: 7.3 Million Americans Are Still Enrolled and Paid Up,” Sept. 18, 2014; available at: http://www.washingtontimes.com; Health Care Advisory Board interviews and analysis.
38
In Year Two, Premium Adjustments Abound Competitive Marketplace Driving Premium Changes Average Premium Increases Modest, but High Market-by-Market Variability Statewide Average Premium Changes for Benchmark Silver Plans, 2014 to 20151
<0%
0%
0%-5% 5.01%-10%
Average premium increase nationally
10.01%-15% >15% Limited/no data
Takeaways Competition Increased Number of carriers increased by 19%; number of products increased by 27% 1) For 40-year-old, non-smoker. ©2015 The Advisory Board Company • advisory.com • 30484
New Entrants Priced Competitively Over half of new price leaders were either recent or new entrants
Source: The Commonwealth Fund, “Analysis Finds No Nationwide Increase in Health Insurance Marketplace Premiums,” accessed May 1, 2015, available at: www.commonwealthfund.org; Health Care Advisory Board interviews and analysis.
39
Exchanges a More Fluid Marketplace Than Expected Avoiding Premium Increases the Primary Motivation for Shoppers Switching Rates Higher Than Expected
Most Continue to Select Silver, Bronze Plans Plan Selections on Healthcare.gov, 2014-2015
100%
0%
12%
29%
Average annual switching among active employees with FEHBP1 coverage
Returning federal exchange enrollees changing plans in 2015
Premium Increases the Primary Motivator
55% Switchers who cited rise in monthly premiums as among top three reasons for switching
Bronze
65%
67%
20%
22%
2014
2015
Silver
Gold
Platinum
Catastrophic
Source: The Advisory Board Company Daily Briefing, “More than 1 Million ACA Enrollees Changed Their Health Plans This Year,” March 2, 2015, available at: www.advisory.com; McKinsey & Co., 2015 OEP: Insight into Consumer Behavior, March 2015, available at: www.healthcare.mckinsey.com; HHS, Health Insurance Marketplaces 2015 Open Enrollment Period: March Enrollment Report, March 10, 2015, available at: www.aspe.hhs.gov; Health Care Advisory Board interviews and analysis.
1) Federal Employee Health Benefits Plan. ©2015 The Advisory Board Company • advisory.com • 30484
40
Despite Predictions, Networks Remain Narrow Insurers Betting Consumers Will Continue to Trade Choice for Price Narrow Network Plan Designs Continue to Dominate Exchange Marketplace
Narrow Network Premium Advantages Increasing Over Time
Network Breadth in Largest City of Each State
Median PMPM Difference For Products From the Same Payer and Product Type
22%
Ultra Narrow
21%
38%
Narrow
41%
40%
Broad
38%
2014
©2015 The Advisory Board Company • advisory.com • 30484
2015
11-17%
15-23%
Narrow network premium advantage in 2014
Narrow network premium advantage in 2015
Few Buying-Up to Broad Networks
17% Consumers with narrow-network plans for year one that switched to a broad-network plan in year two Source: McKinsey & Co., “Hospital Networks: Evolution of the Configurations on the 2015 Exchanges,” April 2015, available at: www.healthcare.mckinsey.com; Health Care Advisory Board interviews and analysis.
41
Trading Low Premiums for High Deductibles Average Public Exchange Deductibles by Tier, 2015
2015 Enrollees Favor Higher Deductibles Annual Deductibles as Percentage of All Individual Plans Selected on eHealth Platform, 2014-2015
Bronze:
$5,181
$5,081
2015
2014
39% 34%
34% 30%
Silver:
$2,927
$2,898
2015
2014
23% 16%
16%
Gold:
$1,198
$1,277
2015
2014
10%
Platinum:
$243
$347
2015
2014
<$1,000
$1,000-$2,999 $3,000-$5,999 2014
$6,000+
2015
Source: eHealth, “Health Insurance Price Index Report for the 2015 Open Enrollment Period,” March 2015, available at: www.news.ehealthinsurance.com; HealthPocket.com, “2015 Obamacare Deductibles Remain High but Don’t Grow Beyond 2014 Levels,” November 20, 2014, available at: www.healthpocket.com; Health Care Advisory Board interviews and analysis.
©2015 The Advisory Board Company • advisory.com • 30484
42
Majority Satisfied with Coverage So Far, Backlash Against Narrow Networks, HDHPs Not Widespread Exchange Enrollees Generally as Happy as Others with Health Coverage…
…And Particularly Satisfied with the Cost of Their Coverage
Ratings of Healthcare Coverage Quality, 2014
Ratings of Healthcare Coverage Cost, 2014
72% Good or Excellent
75%
Newly insured satisfied with cost of health care
61%
Satisfaction rate among all insured individuals
71%
27%
Fair or Poor 29%
All Insured
Newly-Insured Through Exchanges
©2015 The Advisory Board Company • advisory.com • 30484
Source: Gallup, “Newly Insured Through Exchanges Give Coverage Good Marks,” November 14, 2014, available at: www.gallup.com; Health Care Advisory Board interviews and analysis.
43
Higher Deductibles Driving Increased Price Sensitivity Consumers Increasingly Soliciting Pricing Information Many Americans Lack Cash Flow to Cover Potential OOP Costs
More Consumers Attempting to Find Pricing Information
Households Without Enough Liquid Assets to Pay Deductibles 35% 24%
1
Mid-range deductible
Higher-range deductible
2
A surprising percentage of people with private insurance…simply do not have the resources to pay their deductibles.”
56%
Consumers who have tried to find out how much they would have to pay before getting care
67%
Those with deductibles of $500 to $3,000 who have solicited pricing information
74%
Those with deductibles higher than $3,000 who have solicited pricing information
Drew Altman, President, Kaiser Family Foundation 1) $1,200 Single; $2,400 Family 2) $2,500 Single; $5,000 Family
Source: Altman D, “Health-Care Deductibles Climbing Out of Reach,” Wall Street Journal, March 11, 2015, available at: www.blogs.wsj.com; Health Care Advisory Board interviews and analysis.
©2015 The Advisory Board Company • advisory.com • 30484
44
Pricing Tools Currently Falling Short Few Consumers Have Actually Seen or Used Price Information
Majority Report Difficulty Finding Cost Information
Percentage of Consumers Who Have Seen or Used Price Information in Past 12 Months
Consumer Assessment of Difficulty Locating Pricing Information for Doctors and Hospitals Don’t Know
Very Easy
18% Health Plans 9%
Very Difficult 10% 29%
6%
Hospitals
23%
2%
Somewhat Easy 35%
6% Doctors 3%
Somewhat Difficult Saw Information
©2015 The Advisory Board Company • advisory.com • 30484
Used Information Source: Kaiser Family Foundation, “Kaiser Health Tracking Poll: April 2015,” April 21, 2015, available at: www.kff.org; Health Care Advisory Board interviews and analysis.
45
Transparency Goes Mainstream Tools Increasing in Accessibility, Sophistication Surprise Release Makes Pricing Information Available to General Public
Payers Pooling Pricing Information to Create More Accurate Datasets
Cost estimates are averages based on historical BCBSNC claims data Estimates vary based on plan network design (broad vs. narrow)
Case in Brief: BCBS North Carolina
Case in Brief: Guroo
• Not-for-profit health insurance company based in Chapel Hill, North Carolina
• Price transparency tool powered by the Health Care Cost Institute
• In January 2015, released new pricing transparency tool to general public
• Aggregates three billion insurance claims from over 40 million Americans Source: Munro D, “Could This Pricing Tool For Consumers Disrupt Healthcare?” Forbes, January 15, 2015, available at: www.forbes.com; Guroo, available at www.guroo.com, accessed May 1, 2015; Health Care Advisory Board interviews and analysis.
©2015 The Advisory Board Company • advisory.com • 30484
46
A Dizzying Array of Cost Control Efforts
Government MSSP
Pioneer ACO
Employers
BPCI Onsite clinics HospitalAcquired Condition Reduction Program
Employercentered medical homes
Consumers
Private exchanges
High-performance networks
PatientCentered Medical Home
Transparency tools
Narrow networks
Second opinion services HDHPs
IPPS payment reductions
Value-Based Purchasing
COEs
Personal health navigators
Reference-based pricing
DSH payment cuts
Readmissions Reduction Program
Site-neutral payments MIPS
Next-Generation ACO
©2015 The Advisory Board Company • advisory.com • 30484
Source: Health Care Advisory Board interviews and analysis.
47
Purchasers Pulling Four Distinct Cost-Saving Levers Goal is Clear, but Methods Vary Primary Focus of Public Payers
1
Primary Focus of Commercial Payers, Employers
2
3
4
Care Management
Network Optimization
Referral Management
Individual Accountability
•
High-risk care management
•
ACO networks
•
•
HDHPs
•
•
•
Disease management
Discount networks
At-risk primary care physicians
•
Value-based insurance design
•
•
Wellness/ prevention
High-performance networks
Second opinion services/COEs
•
Personal health navigator programs
Reference-based pricing
•
Price transparency
•
Approach to Value
Network Value: Delivering Through Integration ©2015 The Advisory Board Company • advisory.com • 30484
Episodic Value: Maximizing Per-Unit Efficiency Source: Health Care Advisory Board interviews and analysis.
48
All Signs Point to a Retail Market New Dynamics Unfamiliar in Health Care, But Not in Broader Economy
Traditional Market
Retail Market
Passive employer, price-insulated employee
1
Broad, open networks
2
Growing number of buyers
Activist employer, price-sensitive individual
Narrow, custom networks
Proliferation of product options No platform for apples-toapples plan comparison
3
Disruptive for employers to change benefit options
4
Constant employee premium contribution, low deductibles
©2015 The Advisory Board Company • advisory.com • 30484
Increased transparency
Reduced switching costs
5 Greater consumer cost exposure
Clear plan comparison on exchange platforms
Easy for individuals to switch plans annually
Variable individual premium contribution, high deductibles
Source: Health Care Advisory Board interviews and analysis.
49
Redefining the Value Proposition Delivering Desirable Network Attributes at Low Cost Four Imperatives for Health Systems Low Cost
Desirable Network Attributes
Competitive Unit Prices
Total Cost Control
Geographic Reach and Clinical Scope
Clinical and Service Quality
Strategic Imperatives:
Strategic Imperatives:
Strategic Imperatives:
Strategic Imperatives:
• Avoid reactive position vis-a-vis price cuts, transparency
• Develop population health model to control cost trend
• Match service portfolios, footprints to target purchasers
• Clearly communicate total cost advantage to potential purchasers
• Explore partnership strategies that strengthen market presence
• Present unimpeachable clinical credentials to wholesale buyers
• Radically restructure cost structures to sustain lower unit prices
©2015 The Advisory Board Company • advisory.com • 30484
• Emphasize access, experience advantages to individual consumers
Source: Health Care Advisory Board interviews and analysis.
50
Low Premiums Shaping More than Network Selection Care Choices, Network Assembly Dynamics Driven by Premium Pressure Consequences of Premium Sensitivity Price Sensitivity at Point of Care Premium Sensitivity at Point of Coverage Total Cost Scrutiny in Network Assembly
“Our price is now given by the market. Our business is changing from cost-based pricing to price-based costing.” Health Care Executive
©2015 The Advisory Board Company • advisory.com • 30484
Source: Health Care Advisory Board interviews and analysis.
51
Price Sensitivity at the Point of Care Cost-Conscious Behavior Affecting Pillars of Profitability Consumers Paying More Out-of-Pocket
MRI Price Variation Across Washington, DC
Fall within HDHP deductible2
$2,183 $730
$18K
Fall within PPO deductible3
$9K
$411
$6K $900 $2K $150 $275 $400
$900
$1K
$1,269
• Price-sensitive shoppers will be acutely aware of price variation • MRI prices range from $400 to $2,183 1) High-deductible health plan. 2) $2,086; based on KFF report of average HDHP deductible. 3) $733; based on KFF report of average PPO deductible.
Source: KFF, “2012 Employer Health Benefits Survey,” available at: www.kff.org; New Choice Health, “New Choice Health Medical Cost Comparison,” available at: www.newchoicehealth.com; Healthcare Blue Book, “Healthcare Pricing,” available at: www.healthcarebluebook.com; Kliff S, “How much does an MRI cost? In D.C., anywhere from $400 to $1,861,” Washington Post, March 13, 2013, available at: www.washingtonpost.com; Health Care Advisory Board interviews and analysis.
©2015 The Advisory Board Company • advisory.com • 30484
52
Walmart Bringing Everyday Low Prices to Health Care Low-Cost Access Potentially Just the Beginning Probably Worth Paying Attention
Care Clinic Model Pricing: Walmart $4 For employees
Walmart $40 For customers
Hours: Weekdays
Saturday
Sunday
8AM-8PM
8AM-5PM 10AM-6PM
Service: • Two nurse practitioners provide primary care services on site • Clinic refers to external specialists, hospitals as appropriate
©2015 The Advisory Board Company • advisory.com • 30484
“Our goal is to be the number one health-care provider in the industry.”
Labeed Diab President of Health & Wellness Walmart
130M
150M
Annual emergency department visits
Weekly visits to Walmart stores
Source: Canales MW, “Wal-Mart Opening Clinic in Cove,” Killeen Daily Herald, April 18, 2014, available at: www.kdhnews.com; Health Care Advisory Board interviews and analyais.
53
New Competitors Emerging in Ripest Markets Walgreens Entering the Care Management Industry 2013: Launches three ACOs; begins diagnosing and managing chronic disease
2009: Launches flu vaccine campaign Simple Acute Services
Vaccinations and Physicals
2007: Acquires Take Care Health Systems
Chronic Disease Monitoring
Chronic Disease Diagnosis and Management
2012: Offers three new chronic disease tests
”
Case in Brief: Walgreen Co.
Not Just a Drugstore
• Largest drug retail chain in the United States, with 372 Take Care Clinics
“Our vision is to become ‘My Walgreens’ for everyone in America by transforming the traditional drugstore into a health and daily living destination...”
• In April 2013, became first retail clinic to offer diagnosis and treatment of chronic diseases
©2015 The Advisory Board Company • advisory.com • 30484
Walgreen Co. Overview
Source: Japsen B, “How Flu Shorts Became Big Sales Booster for Walgreen, CVS,” Forbes, February 8, 2013, available at: www.forbes.com; “Take Care Clinics at Select Walgreens Expand Service Offerings,” Reuters, May 31, 2012, available at: www.reuters.com; Murphy T, “Drugstore Clinics Expand Care into Chronic Illness,” The Salt Lake Tribune, April 4, 2013, available at: www.sltrib.com, Walgreens, “Company Overview,” available at: www.walgreens.com; Health Care Advisory Board interviews and analysis.
54
Locate Walk-In Clinics in High-Need Areas Geisinger Bringing Convenient Care to Vulnerable Populations
Clinic Channel
Patient Population
Clinics located within retail shopping centers, adjacent to public transportation
Each clinic treats 7,000– 10,000 patients per year, targets high-risk families
Case in Brief: Geisinger Careworks • Walk-in medical clinics that treat low-acuity illnesses requiring immediate treatment • Operates clinics in 11 locations across Pennsylvania based in areas to increase service to low income residents • Geisinger opening between 20 and 25 new walk-in medical clinics ©2015 The Advisory Board Company • advisory.com • 30484
Space Requirements
Space needs range from 1,000 to 3,000 square feet to accommodate two exam rooms, onsite labs
Expanding Health System Geographic Reach
40% Careworks clinics’ patients that are new to Geisinger
Source: Geisinger Careworks, 2014, available at: www.careworkshealth.com/cwh/index.html; The Daily Item, “Geisinger to Open 20 to 25 Careworks Clinics, available at; www.dailyitem.com/0100_news/x766450074/Geisinger-to-open-20-25-Careworksclinics”, Facility Planning Forum interviews and analysis.
55
Broadening Our Concept of Cost Advantage Network Assemblers Looking at More Than Unit Price Two Cost-Focused Strategies for Appealing to Network Assemblers Low Unit Price
Total Cost Control
Price Cut
Trend Control
Improve efficiency to offer lower fee schedule
Implement care management to control cost growth trend
Degree of Cost Control
©2015 The Advisory Board Company • advisory.com • 30484
Source: Health Care Advisory Board interviews and analysis.
56
Creating Cost-Conscious PCPs CareFirst PCMH Total Cost Incentive Model Risk-adjusted PMPM1 Cost PMPM Cost Target
Actual PMPM Cost
“Virtual panel” of 10-15 PCPs Baseline
Year 1
1M
Members covered by PCMH program
80%
Eligible PCPs participating
29%
Average pay increase for PCPs receiving bonuses
• Not-for-profit health services company serving 3.4 million members in Maryland, D.C., and northern Virginia • In 2011, launched PCMH program providing opportunities for virtual panels of 10-15 PCPs to earn bonuses based on quality and total cost metrics • Provides PCPs with color-coded rankings of specialists based on risk-adjusted PMPM costs ©2015 The Advisory Board Company • advisory.com • 30484
Panel shares in savings if riskadjusted PMPM cost is below target
Year 2
Case in Brief: CareFirst BlueCross BlueShield
1) Per member per month.
Total cost target set by trending baseline risk-adjusted PMPM cost by average regional cost growth
Source: Overland D, “CareFirst Medical Home Saves More in Second Year,” FierceHealthPayer, June 7, 2013, available at: www.fiercehealthpayer.com; Health Care Advisory Board interviews and analysis.
57
Steering Care to Most Efficient Specialists Total Cost Transparency Key to Referral Changes Specialists Color-Coded By Total Cost
PCP Virtual Panels
Employed Specialist A (Red)
Employed Specialist B (Yellow)
Hospital A
Hospital B
Independent Specialist C (Green)
27%
Difference in risk-adjusted PMPM cost between topand bottom-quartile PCPs
66%
Percent of panels earning bonuses, 2012
$98M
Savings from PCMH program, 2012
“We’re seeing that [the data] changes the patterns. There’s a hubbub among the panels to see what their choices are, and what it Chet Burrell costs them.” President & CEO CareFirst BlueCross BlueShield
©2015 The Advisory Board Company • advisory.com • 30484
Source: Health Care Advisory Board interviews and analysis.
58
The Value of a Second Opinion Discerning When Not to Operate Large Employers and Hospitals Participating in Centers of Excellence Programs Pepsi Co.
Walmart In 2013, expanded Centers of Excellence program to cover cardiac, spine, and hip/knee replacement surgery
In 2011, offered employees free cardiac and complex joint replacement surgery at Johns Hopkins Medicine
Lowe’s In 2010, offered employees free heart surgery at Cleveland Clinic
30-50% Of referred patients do not undergo surgery
©2015 The Advisory Board Company • advisory.com • 30484
Source: The Advisory Board Company, “Commercial Bundled Payment Tracker,” October 9, 2013, available at: www.advisory.com; Health Care Advisory Board interviews and analysis.
59
Making the Case for Care Management Capabilities Assuring Employers of Ability to Manage Future Costs Powerful Ways to Signal Care Management Capabilities
Investment in Data Analytics
Clinical and Claims Data Integration
Demand for Out-ofNetwork Claims Data
Telehealth Platforms and Programs
Shows capability to assess patient risk and pinpoint interventions
Illustrates advantage over traditional health plan
Shows commitment to continuously manage care for attributed population
Demonstrates ability to keep low-acuity cases in most appropriate care site
“In our market, there is plenty of talk about ‘accountable care’, but we are differentiating with the organizational commitment and the infrastructure investment to sustain a new economic model.” Chief Marketing Officer Large Health System ©2015 The Advisory Board Company • advisory.com • 30484
Source: Health Care Advisory Board interviews and analysis.
60
Promising Total Cost Savings to Employers Savings Guaranteed Off Of Projected Costs Baseline spending projected using three years’ historical spending
Two Separate Products with Different Payer Partners
Guaranteed Savings
Employer Health Spending
2
Average savings guaranteed to employers over three years
©2015 The Advisory Board Company • advisory.com • 30484
Aetna Whole Health (Aetna) Blue Priority (Anthem Blue Cross and Blue Shield)
Roundy’s Supermarkets, Inc. was first large employer client
Time
10%
1
Case in Brief: Aurora Health Care • 15-hospital, not-for-profit health system based in Milwaukee, Wisconsin • Announced separate narrow network products with Aetna and Anthem Blue Cross and Blue Shield that offer employers guaranteed savings over three years Source: Commins J, “Aurora Health Offers Employers a Savings Guarantee,” HealthLeaders Media, July 30, 2012, available at: www.healthleadersmedia.com; Aurora Health Care, “Roundy’s Offers Employees Innovative Health Care Plan Through Anthem’s Blue Priority & Aurora Accountable Care Network,” October 24, 2012, available at: www.aurorahealthcare.org; Health Care Advisory Board interviews and analysis.
61
Recognizing the Importance of Timely Claims Data Incorporating Claims Data Stipulations in Contracts Covenant Health Requires Monthly Claims Data Feed to Drive Population Health Efforts
Population Health Management Analytics System
Contract stipulates full monthly claims data dump from health plan Health plan uploads full claims data dump to Covenant Health’s analytics system
Claims data provides Covenant Health with insights on attributed patient population
Case in Brief: Covenant Health • Three-hospital health system based in Lubbock, Texas • When negotiating population health contracts, requires health plans to agree to full monthly claims data dump to Covenant Health’s population health management analytics system • If health plan does not agree to data requirements, Covenant Health will not sign contract ©2015 The Advisory Board Company • advisory.com • 30484
Source: Health Care Advisory Board interviews and analysis.
62
Redefining the Value Proposition Delivering Desirable Network Attributes at Low Cost Four Imperatives for Health Systems Low Cost
Desirable Network Attributes
Competitive Unit Prices
Total Cost Control
Geographic Reach and Clinical Scope
Clinical and Service Quality
Strategic Imperatives:
Strategic Imperatives:
Strategic Imperatives:
Strategic Imperatives:
• Avoid reactive position vis-a-vis price cuts, transparency
• Develop population health model to control cost trend
• Match service portfolios, footprints to target purchasers
• Clearly communicate total cost advantage to potential purchasers
• Explore partnership strategies that strengthen market presence
• Present unimpeachable clinical credentials to wholesale buyers
• Radically restructure cost structures to sustain lower unit prices
©2015 The Advisory Board Company • advisory.com • 30484
• Emphasize access, experience advantages to individual consumers
Source: Health Care Advisory Board interviews and analysis.
63
Combining Geographies to Match Purchaser Footprint Addressing Individual Limits in Geographic Reach Partnering to Expand Geographic Reach
Cincinnati-based employers have employees living on both sides of river
Network in Brief: Healthcare Solutions Network TriHealth Ohio Kentucky
• Joint venture collaboration between Cincinnati, Ohiobased TriHealth and Edgewood, Kentuckybased St. Elizabeth Healthcare • Offers health insurers access to a unified, highquality, low-cost network that covers the entire Tristate region
St. Elizabeth Healthcare
Neither Organization Able to Offer Adequate Geographic Coverage Alone
©2015 The Advisory Board Company • advisory.com • 30484
• Both organizations offering the network to their current employees and dependents
Source: Health Care Advisory Board interviews and analysis.
64
Full Care Continuum Important for Payer Partners Four Reasons PinnacleHealth System Selected for Risk-Based Product Sample Clinical Services Primary Care
Favorable Pricing Structure
Comprehensive Clinical Scope
Pediatric Care Imaging
Cardiovascular Care Orthopedics Physical Therapy and Rehab
Broad Provider Geographic Footprint
6-12 Months’ Experience Under Performance Incentives
Inpatient Care
Case in Brief: CareConnect Point of Service • Accountable care narrow network plan for mid-sized employers, created around PinnacleHealth System and offered by Capital BlueCross in central Pennsylvania • Network is open for specialty and inpatient care but narrowed to PinnacleHealth System’s PCPs for primary care • Will be expanded to individual market in 2015 ©2015 The Advisory Board Company • advisory.com • 30484
Source: Health Care Advisory Board interviews and analysis.
Network Alignment: Allow for Timely & Appropriate Expertise
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The High Cost of Misalignment Inefficiencies Abound Across Care Continuum Average Risk-Adjusted Hospital Spending1 Total Episode of Care, Congestive Heart Failure Δ% $9,278
+20%
$1,986
+80%
$1,378
+64%
$7,756 $1,102
Readmissions Post-Acute
$842
Physician and Ancillaries
$975
$1,088
+12%
$4,837
$4,826
0%
Low-Cost Hospitals
High-Cost Hospitals
Hospital
1) Spending reflects national standardized payment rates for Medicare and does not reflect differences in the cost to the facility of providing services. Low-cost hospitals are in the bottom quartile of risk-adjusted episode spending, and high-cost hospitals are in the top quartile of risk-adjusted hospital spending. ©2015 The Advisory Board Company • advisory.com • 30484
Source: MedPAC, “Report to Congress: Reforming the Delivery System,” June 2008; McWilliams JM et al. “Outpatient Care Patterns and Organizational Accountability in Medicare;” Advisory Board interviews and analysis.
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Filling Gaps Across the Care Continuum Cedars-Sinai Enhanced Care Program Cedars-Sinai NP evaluates SNF patient within 24 hours post-discharge
Inter-facility transfer report sent to SNF, includes inpatient physician / nursing notes Inpatient Discharge
SNF Admission
NP Visit
Weekly Follow-Up
Cedars-Sinai NP visits SNF weekly to check patient
SNF medication list sent to Cedars-Sinai pharmacy team for medication reconciliation within 24-72 hours
Case in Brief: Cedars-Sinai • 850-bed hospital system in Los Angeles, CA • Cedars-Sinai analyzed readmission rates and found that patients at Skilled Nursing Facilities (SNFs) had a higher than average readmission rate • Cedars Sinai delivers care transitions services to 8 SNFs in their market free of charge to prevent readmissions; Cedars-Sinai Nurse Practitioner (NP) manages care between Cedars-Sinai, SNFs, and the attending MDs for each patient ©2015 The Advisory Board Company • advisory.com • 30484
25%
Reduction in readmissions from participating SNFs
50%
Participating patients with drugrelated issue identified
Source: Advisory Board interviews and analysis.
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Geographic and Clinical Demands Intertwined National and Hyper-Local Competition Reshaping Notions of Sufficiency Purchasers’ Geographic Preferences for Clinical Services Balancing an Increasing Demand for Convenience with an Increasing Willingness to Travel
Potential Differentiators
• Alternative access points (e.g. retail, urgent care)
• Disease management, care navigation
• Transplants
• E-visits, remote monitoring
• Digestive health • Women’s midlife
• Complex cardiac (e.g. TAVR1)
• Sports medicine
• Clinical trials
• Home health
• Midwifery
• Primary care • Pediatrics
Core Services
• Neurosurgery
• Emergency • Routine orthopedics • Dialysis
• Imaging
• Rehab
• SNF
• Ambulatory surgery
• Stroke
• Radiation therapy
• Cardiology
• Pediatric specialty
• Medical oncology
• OB/Gyn
• Cardiac surgery • Technologyintensive procedures
• Oncology
Regional/National Destinations
Local Offerings
Neighborhood Conveniences 1) Transcatheter Aortic Valve Replacement. ©2015 The Advisory Board Company • advisory.com • 30484
Source: Health Care Advisory Board interviews and analysis.
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Expanding Access at Both Ends of the Spectrum Outpatient Facility Models Moving in Two Directions Outpatient Facility Models Market Growth
Market Growth
“Hospital Without Beds”
Specialty Diagnostic and Treatment
Facility Square Footage
Retail Walk-In Clinic • Satellite clinic offering routine care, physicals, health screenings
Traditional Primary Care • Neighborhood center with basic primary care, limited labs, ancillaries
• Focused factory Full-Service Medical Office Building co-locating surgical specialties, labs, • Community facility advanced imaging with multispecialty care, onsite labs, imaging services
• Regional hub with full suite of services; serving expansive catchment area • 100,000-150,000 SF
• 50,000-100,000 SF
• 30,000-50,000 SF
• 10,000-15,000 SF
• 1,500-2,250 SF
Remote Access
©2015 The Advisory Board Company • advisory.com • 30484
Practice Integration
Source: Facility Planning Forum interviews and analysis.
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Redefining the Value Proposition Delivering Desirable Network Attributes at Low Cost Four Imperatives for Health Systems Low Cost
Desirable Network Attributes
Competitive Unit Prices
Total Cost Control
Geographic Reach and Clinical Scope
Clinical and Service Quality
Strategic Imperatives:
Strategic Imperatives:
Strategic Imperatives:
Strategic Imperatives:
• Avoid reactive position vis-a-vis price cuts, transparency
• Develop population health model to control cost trend
• Match service portfolios, footprints to target purchasers
• Clearly communicate total cost advantage to potential purchasers
• Explore partnership strategies that strengthen market presence
• Present unimpeachable clinical credentials to wholesale buyers
• Radically restructure cost structures to sustain lower unit prices
©2015 The Advisory Board Company • advisory.com • 30484
• Emphasize access, experience advantages to individual consumers
Source: Health Care Advisory Board interviews and analysis.
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“Quality” Means Different Things for Different People Quality Demands of Network Assemblers and Individuals
Network Assemblers
Individuals Network Selection
Facility-level clinical process, outcome measures
©2015 The Advisory Board Company • advisory.com • 30484
Network-level quality, access, service ratings
Care Decision
Actual ease of access, care experience
Source: Health Care Advisory Board interviews and analysis.
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Custom Network Builders Scrutinizing Performance Steering Care Toward High-Quality Providers Provider Evaluation Process at Imagine Health National Top Quartile Clinical Performance
Case in Brief: Imagine Health
Step 1: Evaluation of Clinical Performance Data 1
• Company based in Cottonwood Heights, Utah that builds custom, high-performance provider networks for self-funded employers • Selects participating provider systems using clinical performance data and an RFP process
Step 2: RFP Evaluation of Additional Factors
Per capita cost of care
Efficiency of care utilization
• Steers volumes to innetwork providers through benefit design and employee education
Care experience programs
1) Sample metrics include mortality rate, complication rate, and readmissions rate. ©2015 The Advisory Board Company • advisory.com • 30484
Source: Health Care Advisory Board interviews and analysis.
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Value Proposition: Enhance Customer Experience
Patient Experience is King Convenience Consistently Tops Patient Priorities Top Preferences for On-Demand Care n = 3,873 1
I can walk in without an appointment, guaranteed to be seen within 30 mins
2
If I need lab tests or x-rays, I can get them done at the clinic instead of going to another location
3
The provider is in-network for my insurer
4
The visit will be free
5
The clinic is open 24 hours a day, 7 days a week
Efficiency, Convenience Key
63%
Patients that indicate wait time “very” or “extremely” important
Redefining Value in Health Care “Retail medicine is changing how consumers view value within health care. Consumer focused delivery is helping redefine “high quality” as “convenient.” Moody's Investor Service Report, 2014
©2015 The Advisory Board Company • advisory.com • 30484
Source: Marty Stempniak, Hospital & Health Networks, “What, No Wait?”, November, 2013, available at: www.hhnmag.com/display/HHN-newsarticle.dhtml?dcrPath=/templatedata/HF_Common/NewsArticle/data/HHN/Magazine/2013/Nov/1113HHN_Coverstory ; Advisory Board interviews and analysis.
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Providers Must Also Deliver on Ease of Access Winning Contracts By Meeting Access Demands Boeing’s Access Requirements Case in Brief: Providence-Swedish Health Alliance • Alliance between Providence Health Systems, Swedish Health Services in Seattle, WA
q Same-day PCP appointment (acute conditions)
• Awarded contract to serve as Boeing’s narrow ACO network option
q 3-day PCP appointment (any condition)
q 10-day specialist appointment
“[Geographic] access is critical. But we can’t lose sight of the patient experience. Health care consumers need to see a positive change in how they are able to access healthcare.
Chris Gorey Chief Marketing Officer Providence Health Systems ©2015 The Advisory Board Company • advisory.com • 30484
q Extended hours of operations q Extended urgent care hours q Centralized 1-800 number at ACO level with care navigators for triage and advocacy q Member website q Phone apps
Source: Health Care Advisory Board interviews and analysis.
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Paying to Bolster Primary Care Access “Concierge-Lite” Practice Becomes Employer Offering One Medical Group Care Model Same-day appointment booking online through One Medical mobile app Physician email consultations for minor illnesses, ongoing health management Coordination of tests, treatments, specialist referrals, hospitalizations
Telehealth service through Google Hangouts Newest offering
Employer Subscribers Adobe, Doximity, Fitbit, NBCUniversal, On Deck Capital, Percolate, Quantcast, Sequoia Benefits, Uber, Wanelo ©2015 The Advisory Board Company • advisory.com • 30484
50% 40+
Growth in membership, 2013 Companies subscribing to enterprise offering
Case in Brief: One Medical Group • 90-physician network practicing in San Francisco, New York, Boston, Chicago, Los Angeles, and Washington, DC • $149 to $199 annual membership allows access to same-day appointments, email consultations, and online electronic medical records • Recently debuted enterprise offering for employers to offer as a perk Source: Rao L, “One Medical Group Raises $40M To Help Reinvent The Doctor’s Office,” TechCrunch, April 17, 2014; available at: www.techcrunch.com; Health Care Advisory Board interviews and analysis.
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Online Access Becoming the New Baseline An Expected Part of the Patient Experience Consumers Demanding Portal Features n = 1,000 U.S. Consumers 82%
77%
76%
KP.org Portal Key Features
74%
Access to Online Prescription Receiving Medical Appointment Refill E-Mail/Text Records Booking Requests Reminders
Communicate with physician
Assign proxy access
View medical record
Fill prescriptions
Schedule appointments
View lab results
Case in Brief: Kaiser Permanente Northern California • Nation’s largest not-for-profit health plan based in Oakland, California; serves 9 million members nationwide and 3.3 million in Northern California • Began offering online health services in 1996; fully deployed KP.org patient portal in 2007 ©2015 The Advisory Board Company • advisory.com • 30484
Source: Terry K, “Patients Seek More Online Access to Medical Records,” InformationWeek, September 17, 2013, available at: www.informationweek.com; Silvestre, et al., “If You Build It, Will They Come? The Kaiser Permanente Model of Online Health Care,” Health Affairs, March/April 2009: 334-344; Health Care Advisory Board interviews and analysis.
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Promising On-Demand Access at Network Selection Marketing “A New Kind of Insurance” Advertising Free “Televisits” To Potential Enrollees
Case in Brief: Oscar
SCREENSHOT: OSCAR
• Startup insurance company based in New York, New York that sells plans on New York’s public exchange
Promises response time of less than one hour
• Offers free “televisits”, free generic drugs, and a limited number of free PCP visits per year
7 min
$40
10.6K
Average “televisit” response time
Fee paid to physician for each “televisit”
Public exchange enrollees as of March 2014
©2015 The Advisory Board Company • advisory.com • 30484
Source: Creswell J, “Start-Up Health Insurer Finds Foothold in New York,” The New York Times, March 28, 2014, available at: www.nytimes.com; Health Care Advisory Board interviews and analysis.
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Welcome to the Renewals Business Patient Experience Vital For Securing Purchaser Choice Year Over Year Network Selection and Ongoing Experience
Annual network selection in fluid insurance market implies consistent reevaluation of network performance
Day 1 Day 365
Care Decision
Care Decision Patient Experience
Care Decision
Clinical interactions represent repeated opportunities to reinforce patient preference through superior experience
Care Decision
©2015 The Advisory Board Company • advisory.com • 30484
Source: Health Care Advisory Board interviews and analysis.
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Market Coalescing Around Two Broad Approaches Purchasers Pulling Us in Two (Potentially Opposite) Directions
1
Network Value: Delivering Through Integration
Episodic Value: Maximizing Per-Unit Efficiency
Betting on Wholesale Value
2
Unbundling the Health System
©2015 The Advisory Board Company • advisory.com • 30484
•
Purchasers prefer integrated, comprehensive solutions
•
Health systems win market share at organizational level through narrow networks, tiering
•
Providers bear much of risk for total cost of care
•
Purchasers prefer best-in-class point solutions; care coordination possibly outsourced to third parties
•
Health systems win market share at service line or patient level
•
Purchasers continue to bear risk for total cost of care
Source: Health Care Advisory Board interviews and analysis.
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“Systemness” Key to Proving Integration’s Value Systemness Confers Distinct, Compounding Advantages
Degree of Market Advantage
Operational Advantage
Product Advantage
Structural Advantage
• Centralized business functions
• Clinical standardization
• Footprint rationalization
• Supply chain efficiencies
• Solution-oriented product portfolio
• Optimal capital allocation
Transformational Advantage • Transition to population health identity
• Scalable process efficiencies
Can we recognize and pursue obviously beneficial economies of scale?
Can we take actions that benefit the system as a whole even when they may be unattractive to some of its parts?
Can we agree to work together toward difficult but common objectives?
Can we commit to change that is disruptive to all parts when that change is necessary for longterm success?
Degree of “Systemness”
©2015 The Advisory Board Company • advisory.com • 30484
Source: Health Care Advisory Board interviews and analysis.
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Consolidation on the March Search for Financial, Geographic Scale Driving Hospital M&A
Case in Brief: Advocate NorthShore Health Partners
$6.5B
• 16-hospital merger of Advocate Health Care, NorthShore University HealthSystem
Combined system’s expected annual revenue
• Creates strong clinical, geographic presence in Chicago area
Other Notable Hospital M&A Activity
“Combined, we will create economies of scale that will allow us to reduce the trend of rising health care costs.” Michele Richardson Advocate Board Chair
©2015 The Advisory Board Company • advisory.com • 30484
Baylor + Scott and White
Mount Sinai + Continuum Health Partners
Beaumont + Botsford + Oakwood
Source: “Advocate and NorthShore Combine to Create Preeminent Health Care System,” Northshore University Health System; Herman B, “Advocate-NorthShore merger continues trend toward regional supersystems,” Modern Helathcare, Spetember 12, 2014; Health Care Advisory Board interviews and analysis.
81
New Partnerships Aim at Integration Without M&A But Will Less-Intensive Arrangements Yield Sufficient Gains? Eight health care providers ally to form Integrated Health Network of Wisconsin
Four health systems form regional alliance Health Innovations Ohio
Seven systems in NY, NJ, MA, and PA form Allspire Network
Six hospitals form BJC Collaborative: Five health systems join Vanderbilt Health Affiliate Network
Four health systems ally to form Noble Health Alliance
14 systems ally to form Stratus Health Care
Two Systems form Georgia Health Collaborative
©2015 The Advisory Board Company • advisory.com • 30484
Five SC systems form cost saving Initiant Healthcare Collaborative
Source: Health Care Advisory Board interviews and analysis.
82
Aggregation Always Subject to Regulatory Scrutiny Policy Tensions Remain Between Integration, Competitiveness Allowances for Effective Coordination…
…But Market Power Still a Red Flag
Bundled payment programs open door to gainsharing with Medicare revenues
April 2014: U.S. Court of Appeals orders ProMedica to unwind its 2010 acquisition of St. Luke’s Hospital
Clinical Integration safe harbors allow joint contracting between independent physicians
January 2014: Federal judge blocks merger of St. Luke’s Health System and Saltzer Medical Group
CMS incentivizes, promotes ACO programs
January 2014: FTC rules CHS must divest two hospitals to complete HMA acquisition
©2015 The Advisory Board Company • advisory.com • 30484
Source: Health Care Advisory Board interviews and analysis.
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Strategic Advantage #2: Integration
Vivity Betting on Coordination over Consolidation Insurer, Seven Competing Systems Offer Market-Wide Solution
“What we are recognizing is that the most effective delivery model is an integrated delivery model. We can reduce waste, improve quality of care, provide people access to the top facilities in the nation, frankly, and do that in an integrated way.”
Pam Kehaly Anthem Blue Cross
©2015 The Advisory Board Company • advisory.com • 30484
Anthem Blue Cross UCLA Health
CedarsSinai Medical Center
PIH Health
• 7 health systems • 14 hospitals
Huntington Memorial Hospital
• 6,000 physicians
Torrance Good Memorial Samaritan Health Hospital MemorialCare Health System
Source: “Anthem, Seven California Health Systems Team Up To Form HMO,“ California Healthline, September 17, 2014; Commins J, “Anthem Blue Cross, 7 CA Health Systems Create New Challenger, Business Model,” HealthLeaders Media, September 18, 2014; Health Care Advisory Board interviews and analysis.
84
Strategic Advantage #3: Efficiency
The Community Hospital Resurgent? Born Out of Necessity, No-Frills Approach Suddenly Compelling Common Challenges
Potential Advantages Already managing to public-payer margins
The Community Hospital Initiative
Limited service portfolio
Fewer unjustifiable fixed costs
• Dedicated research and service effort included within Health Care Advisory Board membership
Physician shortages
Early experience with teambased care, telemedicine
• Focuses on issues facing
Medicare, Medicaidheavy payer mix
– Smaller organizations Rural or exurban setting
Labor costs lower than urban competitors
Smaller patient population
More focused patient engagement efforts
©2015 The Advisory Board Company • advisory.com • 30484
– Independent hospitals – Rural facilities • For more information, contact Ben Umansky at
[email protected]
Source: Health Care Advisory Board interviews and analysis.
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Our Leadership Challenge Delivering on the Promise of Systemness Core Competencies of a True System Cost Efficiency
Trend Control
•
Scale-enabled lean cost structure
•
•
Rationalized footprint
Care managers, navigators have system-wide perspective
•
Rightsized services portfolio
•
Cross-continuum assets are leveraged to send patient to appropriate care site
Integration
Standardization
•
Interconnected care infrastructure that enables patient flow
•
Uniform care processes to produce consistent clinical outcomes
•
Single IT infrastructure with seamless transfer of information
•
Ability to communicate best practices across a system
©2015 The Advisory Board Company • advisory.com • 30484
Source: Health Care Advisory Board interviews and analysis.
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Patients the Greatest Beneficiaries of True Systemness System Competency
Patient Benefit
System Benefit
Affordability
Cost Efficiency
Cost efficiency may be translated into market-facing unit price advantages
Quality
Trend Control
Reflective of an ability to effectively manage utilization Consumer Loyalty
Coordination
Integration
Interconnectivity creates seamless, stress-free experience Predictability
Standardization
©2015 The Advisory Board Company • advisory.com • 30484
Standardized outcomes, with a consistent experience, at a predictable price point
Source: Health Care Advisory Board interviews and analysis.
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