Healthcare provider transformationCreating a sustainable advantage

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We have passed a tipping point, and a few things are here to stay:

• The transition to value-based payments

• The need to take cost out of the system

• The increased need to balance cyber-security and full functionality of established and emerging technologies

• The consumerism of the industry

• The need to attract, train, retain and manage talent

It is critical to remember that, although the future of the Affordable Care Act is uncertain, other game-changing legislation is not. Take MACRA for example. Designed to set some parameters around physician fees, this legislation has been instrumental in advancing value-based care and payment reflective of quality.

Healthcare systems need to be agile, seeking to reduce wasted costs associated with supplies, equipment, space, diagnostic decision making, patient encounters, while evaluating mechanisms for growth. As stated by Gary Kaplan, Chairman and CEO of Seattle’s Virginia Mason Medical Center: “…the pathway to improving quality and safety is the same pathway to lowering cost, and that involves relentlessly taking waste and unnecessary variability out of our processes.”1

Healthcare organizations have already made significant IT investments over the past eight years. Therefore, they should optimize the existing functionality of the technology they have in place and find new ways to integrate these technologies in the service of value-based care. As organizations look forward, there are real opportunities to streamline and optimize back office functions using digital labor. Of course, as organizations pursue new technologies, they must also be vigilant about opening up potential attack vectors for cyber-criminals. In fact, cybersecurity and innovation have become so intertwined that it is virtually impossible to pursue one without the other.

A key driver disrupting the industry is consumerism. Consumers do not compartmentalize their lives: they demand from healthcare the same type of experience they have in retail, hospitality and transportation. Therefore, providers must offer the convenience and interactivity of digital channels – from telemedicine to wearables to mobile health – so that patients can engage with their preferred provider organizations in a much more consumer-centric manner. And to ensure preferred clinical outcomes and positive patient experiences, providers must dedicate themselves to providing continuity of care across all members of a patient’s healthcare team.

Finally, even as organizations increasingly rely on digital technologies, it is critical to remember that healthcare is a people-centric industry. Therefore, all staff – from doctors to nurses to support staff – must be educated and incented about the benefits of moving to a value-based system, minimizing costs, getting full functionality from new technologies, and having a closer relationship with consumers. In fact, many studies have shown that dealing with people and change is more important than technology investments when it comes to enterprise-wide efforts from cybersecurity to innovation.

The most important quality healthcare organizations must foster to enable transformation is agility. There will be significant change -- driven by everything from shifting demographics, to technology disruptors, to a wider variety of cyber-threats, to legislative uncertainty. Organizations can either buckle under the pressure, or harness that change for innovative action.

We understand the enormous complexity provider organizations face. Amid the uncertainty, however, we see significant opportunities for growth for those able to accept a new reality and take decisive action. Let us show you how.

In healthcare, uncertainty is the new normal. Despite ambiguity in Washington, the industry cannot afford to be in a state of paralysis. In fact, in the face of disruptive forces from declining reimbursement, to ground-breaking technologies, to empowered consumers; moving forward on key transformational initiatives has never been more important.

1 Robeznieks, A. (2014). Prospering by standardizing process and improving the patient experience, Modern Healthcare.

© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

As the lines between traditional players in the U.S. healthcare system blur and industry convergence is the reality, organizations across the continuum are seeking ways to create a sustainable advantage.

We believe that advantage will come from providers, health plans and life sciences organizations working together to refine the consumer experience, tap into disruptive technologies, envision new business models, effectively prepare for and manage risk, and create new partnerships that will ultimately underpin the next wave of transformation.

Key questions for consideration:

1 How do you achieve sustainable growth in a disrupted market?

2 In the midst of changing reimbursement mechanisms, how do you optimize your cost and quality position?

3 How do you exploit technology to the fullest advantage?

4 How will you remain competitive while meeting consumer demand for more accessible delivery channels, such as telemedicine, m-health and retail clinics?

5 Do your organization and strategic partners have the cyber-security and data protection programs in place to protect patient health information (PHI) and intellectual property across and beyond the enterprise?

Convergence

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We are the leading professional services firm in the healthcare sector, providing a wide range of audit, tax and advisory services to help our clients grow their businesses, enhance their performance and control their risks. We believe in inspiring confidence and empowering change.

Our professionals understand your business, your challenges, and the changing environment in which you operate. We combine this insight with our recognized track record in corporate transactions and restructuring, commercial model changes, cost take-out and operational improvements, regulatory compliance, and risk management to deliver practical solutions to the issues facing today’s healthcare providers.

We are different from other professional services firms because we take a solutions-based approach working shoulder-to-shoulder with our clients to solve their most complex challenges. Our independence and objectivity means that we are focused on making the best choices

for our clients as they transform. And our multi-disciplinary approach – bringing together best practices from across the KPMG network – ensures that we always take a 360-degree view of our clients’ challenges to help them understand the broader context of their business decisions.

Our commitment to the sector is clear. We have invested in developing a highly experienced global practice. We have carefully developed a strong approach to knowledge-sharing. And we have attracted professionals with decades of hands-on experience in the healthcare provider sector. Every day, we are continuing to make capital investments to help our clients thrive.

Most important in a rapidly changing world, our forward-thinking professionals focus on the horizon as well as the here and now, anchoring our experience in today’s realities while helping healthcare provider organizations anticipate and prepare for tomorrow’s possibilities. And that is why our clients consistently choose KPMG.

KPMG advantage

2 Healthcare Provider Transformation© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

KPMG by the numbers

– KPMG is one of the largest providers of professional services to healthcare and life sciences organizations throughout the world, and our international network operates in more than 150 countries globally.

– More than 4,500 global Healthcare and Life Sciences (HCLS)professionals, including:

• 2,800 U.S.-based partners and professionals

– We serve many of the world’s leading healthcare and life sciences organizations, including:

• Almost half of the top 200 healthcare provider systems

• Half of the academic medical centers and research hospitals

• 90% of the top health insurers

• 100% of the top 25 global life sciences companies

• 100% of the top 15 pharmaceutical companies

What others are saying about us

We have been recognized as HCLS leaders by influential analysts and media, including:

• Modern Healthcare ranked KPMG #3 of the 25 largest healthcare management consulting firms

• CFO Innovation crowned KPMG “Best in Risk Management Advisory” in 2016

• IDC Insights named KPMG a worldwide leader in Digital Enterprise Consulting and Business & Performance Consulting

• Forrester ranked KPMG #1 for Insights Service Providers and described our broad ecosystem as the gold standard.

• Black Book ranked KPMG #1 for Value-Based Strategy Consulting and Healthcare Operations Transformation Consulting

• ALM recognized KPMG as a “Vanguard Leader” in: Finance Excellence, Change Management, HR Transformation, Supply Chain Risk Consulting, and Cyber Security.

We are committed to serving our communities as well as our clients:

• Top 50 ranking for Diversity

• In Top 10 of Working Mother “100 Best Companies”

• Sustainable Firm of the Year

• Ranked #12 in Fortune’s “100 Best Companies to Work For”

• Top 100 IDEAL Employers for MBAs

• Top ranking for executive women

• Board representation on the Healthcare Businesswoman’s Association

3Healthcare Provider Transformation

4,500

2,800 100 %

© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Cost take-out and operational improvementHealthcare organizations have made unprecedented investments in information technology in the past five to 10 years. Now they are focused on optimizing the functionality of these investments, from EHRs to ERPs, as well as enabling more efficient processes across back, middle and front office. There is also a need to eliminate costly redundancies and medical errors, address operational inefficiencies, and reconcile incompatible systems.

Value-based outcomes Regardless of shifts in the regulatory environment, changing reimbursement models and uncertainty of Medicaid funding, driving efficient, cost-effective care is of paramount importance to the future state of the healthcare industry. Today’s most resilient provider organizations are focused on streamlining end-to-end patient throughput, eliminating unnecessary testing and procedures, better managing capacity and resources, and transforming healthcare across the care continuum. The most successful hospital systems in this new ecosystem will hold themselves to a higher standard comprising evidence-based guidelines, advanced case management processes, integration of physical and behavioral health teams, and fully functional healthcare IT.

The race for the customer As patients become more consumer-centric and shoulder higher premiums and out-of-pocket costs, they are demanding more choices, access and convenience than ever before. Further, ubiquitous reviews and commentary on social media gives consumers the power to choose not just between traditional healthcare organizations, but also between retail clinics, urgent care outlets and – increasingly – mobile and telehealth options.

Information protection and cybersecurity Cross-organizational collaboration, data sharing and digital technologies are key to superior care, improved outcomes and lower costs. There are significant cost savings when organizations store patients’ medical histories in the Cloud, use the Internet of Things to monitor medication adherence and vital signs, and allow patients with geographical and mobility issues to access care via telemedicine technologies. However, it is critical to remember that, for all the opportunities these technologies offer, they also come with significant security and privacy risks.

Human Capital Management/ People & ChangeHospitals today are facing historically high turnover and attrition rates. This issue is affecting every role from the C-suite to the operating room. The challenge is compounded by a shrinking talent pool as more hospital employees retire. Clearly, this challenge has a profound effect on organizations’ ability to pursue initiatives from evidence-based care to the race for the customer.

Key trends for healthcare providersWe have a long track record of helping healthcare providers create and implement practical solutions to their most complex challenges. Based on our experience in the sector, we want to highlight five major trends that are altering the business environment for healthcare providers.

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At KPMG, we don’t just work with leading healthcare providers, we help them shape their future. No matter what business challenge your organization is facing, KPMG has the capabilities, experience and insight to shed light on the issues and help you solve them.

Taking out cost & optimizing the operating model We help organizations use disruptive technologies, the Cloud and advanced data & analytics to tackle their most pervasive problems – from improving patient outcomes and population health management to enhancing relationships with health plans to securing cost reductions and operational efficiencies. As our clients gain maturity, many introduce disruptive technologies such as robotic process automation to handle routine administrative and communication tasks at a much lower cost than human capital. On the clinical front, cognitive automation and artificial intelligence are being paired with advanced analytics to dramatically reduce the cost and time involved in finding potential treatments and optimizing clinical care and reducing variability. Last, by hosting big data and solutions in the Cloud, we can help clients derive actionable insights in less time and for less investment, while housing protected health information in a secure environment.

Transforming to a value-based business model As customer, market and regulatory trends evolve, we help provider organizations anticipate disruption and seize opportunities to innovate. From optimizing the care continuum to adding digital delivery channels to evaluating strategic partnerships, our approach is focused on helping our clients secure sustainable value in both the short- and long-term. By helping physicians, nurses, case managers, and support service providers learn to work beyond silos, we help organizations deliver the highest level of care, in the most appropriate settings, while using the best practice standards for diagnostic testing, treatment and post-acute care. Strategically, we help providers manage transactions from the buy and sell side with an end-to-end approach that includes tax counsel, due diligence, internal restructuring, and post-acquisition integration.

Racing for the customer As provider organizations compete to win the loyalty of ever more discerning patients, we help them design and deploy new customer-centric models. Whether this includes improving patient access by integrating digital and mobile technologies into both communication and treatment mechanisms, leveraging analytics for scheduling optimization and identification of revenue leakage areas, or developing end-to-end transformation strategies and target operating models, KPMG puts together a customized team to work alongside you during the transition.

Managing risk KPMG knows that to achieve a true value-based healthcare system, organizations must be able to get full functionality from disruptive technologies and allow information to flow freely. KPMG helps clients transform their security, privacy and business continuity controls into business- and innovation-enabling platforms. We deliver integrated advice across the full lifecycle of risk and regulatory change. From compliance and monitoring of new regulations to working with regulators to understand future direction to advising companies on risk mitigation and remediation, we help healthcare providers continue to thrive in a complex environment.

Human Capital Management/ People & ChangeWhether it’s reacting to new regulations, adapting to new business and operational models, or learning to use disruptive technologies, healthcare personnel need guidance through the change. KPMG addresses people and change issues by helping clients analyze their existing culture, institute programs to overcome resistance, develop training programs, and effectively communicate across the organization.

Valuable solutions for healthcare providers

5Healthcare Provider Transformation© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Race for the customerA national for-profit hospital operator called on

KPMG to design and optimize how patients access care. With patients waiting more than eight days to be seen, and a 34 percent

cancellation/reschedule rate, management wanted to create a disciplined approach to

streamlining patient access and its supporting enablement capabilities.

With KPMG’s help, stood up their telemedicine and online scheduling, design thinking and leveraging technology to better serve patients, reduce wait times and cancellations, and increase throughput. As a result, the organization:

— Increased encounters per physician in target markets by up to 50 per month.

— Addressed patient access capability gaps

— Rationalized and harmonized technology supporting the function

— Designed center with focus on meeting the needs of multiple stakeholders

CybersecurityA large U.S.-based healthcare provider had evidence of an intrusion on one of their servers. Personal identifiable information (PII) and credit card information were potentially

compromised. A service provider was brought in to help resolve and answer technical questions

around this data breach. After nine days of limited progress, KPMG was asked to take over the investigation. Within 24 hours of being engaged, KPMG professionals deployed to the client location and were able to answer many urgent questions. Over the next several days, KPMG performed a thorough analysis of the data breach and provided corporate counsel and outside counsel with the information they needed to issue guidance to the clients who might have been exposed to the incident.

How we’ve helped Examples of client engagements

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HR model of the futureA healthcare system created through several

affiliations on the East Coast had a need for an HR services model that allowed for better support for new system-wide clinical

operations. In addition, they needed to be more efficient with HR operations and share

more HR resources across the system. Finally, the client was interested in exploring an HR call center model, more commonly known as an employee service center. Working with the organization’s HR leadership team, KPMG explored opportunities for a more efficient services model, which included leveraging enabling technologies such as an HR portal, case management tool, and knowledge base. KPMG created a future-state HR organizational model and identified key roles for a new employee service center and a system-wide approach for human resources.

Improved operating marginsAn East Coast health system wanted assurance

that the rates it negotiated with insurance companies were competitive. KPMG’s Data & Analytics Team evaluated and compiled

information and developed a customized tool for the client. The firm’s involvement included:

comparing the healthcare system’s current commercial rates for its largest payors with commercial rates for two markets in neighboring states; determining the volume and revenue trends for the system; assisting in the development of a number of pricing scenarios; identifying strategic pricing opportunities based on the current structure of the client’s contracts; developing a robust tool for use in future contract negotiations; and providing training for the tool and knowledge transfer to the client’s internal team so that they could interpret their own pricing scenarios and continue to improve their operating model.

Care continuum optimizationTo prepare for the future, a regional health

system engaged KPMG on a transformation project to improve operational, clinical and financial performance. A comprehensive team

of clinicians and operational leaders embarked on the project resulting in substantial changes to

the care delivery process. The outcome of the engagement was a process improvement plan, which will ultimately result in $200M in savings, and reengineered Care Management, Clinical Documentation Integrity (CDI), and Utilization Review (UR) departments. Further, the teams instituted Multi-Disciplinary Care Rounds, established Clinical Care Redesign for 12 Diagnosis Related Groups (DRG), instituted a new Clinical Governance model, and developed a data analytics program for opportunity, monitoring, and benefit dashboards.

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Our thought leadershipWe are not just business leaders, we’re also thought leaders. KPMG professionals invest significant time understanding trends, comparing methodologies and sharing best practices. Our people can frequently be found presenting at leading industry events and conferences and are often cited in both trade and mainstream media as experts in their field.

We continually invest in thought leadership, Centers of Excellence, research, and knowledge-share forums to help clients stay informed of industry, technical and regulatory challenges worldwide. Our industry white papers and research span a wide range of topics that have direct relevance to healthcare organizations.

For particularly complex business challenges and industries, KPMG sponsors numerous industry-focused institutes that provide a wealth of relevant information, including our:

• Healthcare and Life Sciences Institute

– kpmg-institutes.com/institutes/healthcare-life-sciences-institute.html

• KPMG Advisory Institute

– kpmg-institutes.com/institutes/advisory-institute.html

• Global Enterprise Institute

– kpmg-institutes.com/institutes/global-enterprise-institute.html

• Tax Governance Institute

– kpmg-institutes.com/institutes/tax-governance-institute.html

Relationship capital The path to profitable growth through patient loyalty and provider productivity

Hospitals and health systems have a renewed focus on profitable organic growth. After decades spent developing their physical assets, implementing systems, and making acquisitions, executives are asking how they can best get a return on these capital outlays.

The healthy approach to cyber security

For data-intensive healthcare, cyber security is integral to innovation. However, for

every step forward organizations take, cyber-criminals are progressing right alongside them with ever more aggressive means of system infiltration and data theft.

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Bots in the rev cycle - Hospitals increase revenue recovery with robotic process automation

What are hospitals to do to offset cost pressure and potential lost profitability? Some forward-thinking provider organizations are exploring robotics processing automation (RPA) in the revenue cycle. Explore what RPA could do you for your organization.

Are physicians ready for MACRA/QPP?

January 1, 2017 marked the beginning of the first performance year of the

Quality Payment Program (QPP) created by the Medicare Access and CHIP Reauthorization Act or 2015 (MACRA). This paper contains key findings from a KPMG-AMA survey of physicians involved in practice decision making.

What’s News in Tax - Taxes and the Better Care Reconciliation Act of 2017: Senate Discussion Draft

On June 22, the Senate released a discussion draft of the Better Care Reconciliation Act of 2017, a legislative development for healthcare reform. This article compares key tax provisions of the Better Care Reconciliation Act discussion draft with the Patient Protection and Affordable Care Act and the House-passed American Health Care Act.

9Healthcare Provider Transformation© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

To learn more about our Healthcare & Life Sciences practice and capabilities, visit us at http://www.kpmg-institutes.com/institutes/healthcare-life-sciences-institute.html.

Some or all of the services described herein may not be permissible for KPMG audit clients and their affiliates.

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The KPMG name and logo are registered trademarks or trademarks of KPMG International.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.

Contact us

Ed Giniat National Sector Leader, Healthcare & Life Sciences eginiat@kpmg.com 312-665-2073

Liam Walsh Advisory Line of Business Leader, Healthcare & Life Sciences lawalsh@kpmg.com 312-665-3066

Dion Sheidy Healthcare Advisory Industry Leader dsheidy@kpmg.com 615-248-5519

Monica Coakley National Healthcare Tax Leader mcoakley@kpmg.com 615-248-5639

Marc Scher National Healthcare Audit Leader mscher@kpmg.com 949-885-5402

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