Seizing The Opportunity Of Health Care Change · 29/10/2015 · American Health Care Cost Is...

Managed Care and Financial Strategies

Conference

October 29, 2015

Florida Hospital Association 1

Brian Klepper, PhD

Brian Klepper, PhD

October 30, 2015 Lake Mary, FL

How Health Care’s Cost Crisis and the Drive Toward A Value-Based

Marketplace Will Change Everything

Seizing The Opportunity Of Health Care Change

Did Health Care Think It

Could Hold Market Forces

At Bay Forever

Page 2 Brian Klepper, PhD

The Emergence of Health Care Markets

Market forces are influencing mainstream health care for the first time in decades.

This means health care vendors will ultimately need to appeal to purchasers on the basis of cost, quality and safety performance.


Conference

October 29, 2015



What Are Purchasers Thinking Now?


1. Crushing Cost/We’re Being Had

2. Half or More of All Cost is Inappropriate or Unnecessary.

3. Poor Management: Health Plans Haven’t Managed Care/Cost Like Businesses Manage Any Other Process

4. Opportunity To Apply A Range Of Management Principles.

Purchasers’ Perspective: Core Health Care Problems


Conference

October 29, 2015



Health Plans • Paying (and Passing Through Costs) For Services At Multiples of Market Rates • Primary Care Payment That Encourages Specialty Referral • Control and then Non-Management of High Cost Acute and Chronic Patients • Open, Performance-Neutral Networks

Physicians and Vendors • AMA RVS Update Committee

Pharma/Devices • Excessive Pricing Not Tethered To Anything Knowable • FDA Approvals Based On Surrogate Metrics Without Evidence of Impact

EHR Vendors • Slow Progress in Facilitating Seamless Exchange of Health Care Information

Institutionalized Excess in Care and Cost


Unnecessary/Inappropriate Care & Cost

“Our research found that wasteful spending in the health system has been calculated at up to $1.2 trillion of the $2.2 trillion (54.5%) spent in the United States.” “[R]edundant, inappropriate or unnecessary tests and procedures [were] identified as the biggest area of excess, followed by inefficient healthcare administration and the cost of care necessitated by conditions such as obesity, which can be considered preventable by lifestyle changes.”

The Price of Excess PricewaterhouseCoopers, 2008


Conference

October 29, 2015



Our Care & Cost Patterns Are Different


American Health Care Cost Is Absorbing Nearly ALL Economic Growth

Source: Auerbach DI and Kellermann AL, “A Decade of Health Care Cost Growth Has Wiped Out Real Income Gains for an Average U.S. Family,” Health Affairs, 30:9, 9/2011.

In the decade preceding 2009, 79% of all household income growth was siphoned off by health care.

http://content.healthaffairs.org/content/30/9/1630

http://content.healthaffairs.org/content/30/9/1630


Conference

October 29, 2015



Global Competitiveness

US Businesses Operating In International Markets

Must Overcome >9% Health Care Cost Disadvantage To Be On A Level Playing Field

With Competitors In Other Developed Nations

(e.g., Australia, Korea, Germany.


Structural Drivers of Excess Risk

• Lobbying

• Fee For Service Reimbursement

• Lack of Quality, Safety & Cost Transparency

• Subjugation of Primary Care


Conference

October 29, 2015



Sources of Excess Supply

• Overtreatment

• Egregious Unit Pricing

• Conventional Steerage

• Lack of Care Coordination


Incentives – Why Direct (Market-Based) Contracting by Purchasers?

• Everyone in Health Care (Except Primary Care) Is Typically Incentivized To Want Health Care To Cost More.

• Margins Are A Percentage of Total.

• Support for the Status Quo


Conference

October 29, 2015



Organizational Purchasers Are Demanding Better This Problem Cannot Be Finessed!

• Explosion in Worksite Clinic Market • Rapid Uptake of Transparency Tools • Transition To High Performance Networks • Growth of Purchaser Collaboratives

Purchasers Will Leverage Their Collaborative Heft, Favoring Organizations That Do Health Care Well and Withholding Favor From Those Who Don’t


The Challenge

• Reimbursement Likely Will Not Rise

• Best Growth Opportunities Are In • Mergers/Acquisitions • Increasing Market Share (at Competitors’

Expense)

• Doing That Will Demand Proving Outcomes & Cost Performance, Preferably With Your Own Employees.


Conference

October 29, 2015



Occupational

Health

Convenience/

Urgent Care

Primary Care

Medical Home

Management of

Full Continuum

Health Care Risk

+

+

Rx Dispensary

& Mgmt

Chronic Disease

& Lifestyle Mgmt

Referral Mgmt

Direct Contracting

+ +

Benefit Refinement

Utilization Review

High Performing

Narrow Networks

Case Management

Carrots & Sticks

Stop-Loss Arrangements

Telemedicine

Centers of

Excellence

Health IT


Emerging Competition – High

Performance Health Care

• Different Than Group Purchasing

• Unconventional Approaches

• Driving Appropriate Care/Cost

• Disrupting Institutionalized Excesses

• Very Strong Track Records of Improved

Performance


Conference

October 29, 2015



Common Characteristics

• Mission Driven & Passionate

• High Subject Matter Expertise

• Data/Evidence-Driven

• Deconstructed a Problem And Devised A

New Unconventional Solution

• Confident/Willing To Go At Risk For

Performance


Players In Nearly Every Major Health Care Niche

• Care Management

• Cardio-Metabolic

• Musculoskeletal

• Oncology

• Surgery

• Dialysis

• Rx Risk Management

• High Cost Diagnostics

• High Performance Networks

• Centers of Excellence

• Reference-Based Pricing

• 2nd Opinion


Conference

October 29, 2015



Questions

1. What Do You Do That Is Structurally Different And That Allows You To Get A Better Result In Your Niche?

2. Longitudinal Data Demonstrating Better Health Outcomes and/or Lower Cost?

3. Client Testimonials Affirming Performance + Attesting To Execution?

4. Scalable?

5. Enduring?

6. Willing To Go At Financial Risk For Performance?


High Value Risk Solutions

Five Examples:

• PBM Optimization

• Musculoskeletal Management

• Near Offshore Center of Excellence

• Oncology Management

• Hospital Cost Management


Conference

October 29, 2015



Evidence-Based Rx Risk Management

• 20+% of Total Spend • PBMs Notoriously Game Pricing, Drug Mix

1) Initiation Only Requires Vendor Access To Claims Data 2) Analysis To ID Spread and Then Negotiate Lower Pricing by Line Item = ~15% Reduction (Not Disruptive)

3) Evidence-Based Therapeutic Substitutions = ~15% Reduction (Slightly Disruptive) Savings = 5%-6% of Total Spend


Musculoskeletal Management

• 17%-30% of Total Spend

• Built On Mechanical Diagnosis and Therapy (MDT)

• Significantly Enhanced Industrial Platform for Scale • Advanced Clinical Guidelines • Rigorous Training To Performance Standard • Quality Management • Clinical Decision Support • Integration With Clinical Documentation Platforms

• Can Intervene in Approx. 80% of Cases.


Conference

October 29, 2015



Musculoskeletal Management

• Case Rates of $175 for Triage, $775 for Mgmt.

• Results Show Significantly Better Health Outcomes

• Half the Recovery Times.

• 50%-60% or Conventional Cost.

• Significant Drop in Volume/Intensity of Recidivism Events

• Major Clients > 3 Years – Capitol Heath Plan, General Dynamics, Michelin North Am.

• Savings = Immediate ~10% of Tot. Spend


Offshore High Cost Chronic/Acute Care

• English-Speaking, Safe, Direct Flights From Many US Cities

• Secondary/Tertiary Procedures at a Fraction of US Rates

• Documented High Quality

• Concierge Services, Including Transitions To & Coordination

With Local Clinicians


Conference

October 29, 2015




• Specialties

• Adult & Pediatric Cardiology

• Electrophysiology

• Adult & Pediatric Cardio-thoracic Surgery

• Adult & Pediatric Orthopedics/Sports Medicine

• Neuro & Spine Surgery

• Pediatric Endocrinology

• Pulmonology & Sleep Lab

• GI & Bariatric Surgery

• Medical/Surgical/Radiation Oncology

• Executive Health Checks

• Artificial Heart- LVAD



All Inclusive Bundled Pricing – Examples Savings by Procedure Can = 67+%

Sample Surgeries

Rack Rates

($US)

Contract Rate

($US)

Contract Rate BULK

($US)

CABG 44,000 31,700 25,000

Valve Replacement 43,000 31,000 24,500

Angioplasty 23,000 16,600 13,100

Hip Replacement 22,000 15,800 12,500

Knee Replacement 22,000 15,800 12,500

Shoulder Arthroscopy 22,000 5,750 4,500

Angiogram 4,500 3,200 2,500

RF Ablation 13,000 9,400 7,400

Gastric Bypass 24,500 17,600 13,900

Sleeve Gastrectomy 22,500 16,200 12,800


Conference

October 29, 2015



Oncology Management

• ¼ of US health systems opening

cancer centers.

• Oncology practice acquisitions allow

hospitals to charge almost double for

chemo.

• Cancer is typically about 12% of Total

Spend


Oncology Management

• Required Market Catchment of 20,000+ Lives

• 20% Reduction in Utilization/Cost

• 50% Decrease in Hospitalizations

• 40% Decrease in Emergency Visits

• 8x Increase in Hospice Conversions

• 2:1 ROI After 12 Months, 3:1 After 18 Months

• High Satisfaction With Patient Experience

• 2.5% Reduction in Total Spend


Conference

October 29, 2015



Hospital Reference-Based Pricing

• Multiple Vendors With Different Permutations of the

Approach

• Documented Savings As High As $1500 PEPY.

• Some Hospitals Responding By Refusing To Admit

Patients Covered Under These Arrangements.

• Programs Becoming Increasingly Popular. Could

Ultimately Prove Financially Harmful To Be

Uncooperative.


Hospital Reference-Based Pricing

• Vendor Built on Traditional Hospital Bill Audit Chassis,

But Becomes Co-Fiduciary on Self Funded Plan

• After Audit Adjustment, Ignores Billed Charges and

Discounts. Instead, Pays Based on Reference Pricing,

e.g.,

• 112% of Cost (Defined in Cost Report)

• 120% of Medicare Reimbursement

• Patient Balance Bill Protection

• Litigation Protection


Conference

October 29, 2015



Health Systems and Risk Management

• Health Systems Big Competitors Won’t Be Other Health

Systems, But Upstart Providers Who Far Outperform

You. A Winning Strategy May Include Them.

• The System is Changing Slowly, But It Is Changing.

Driving Appropriate Utilization and Fair Pricing Will

Increasingly Matter to Competitiveness.

• Many Players – Health Plans, Pharma, Device Mfgs,

EHR Vendors – Are Trying To Maintain Their Legacy

Positions At Other Players’ Expense. Driving Purchaser

Value Is The Most Competitive Strategy Long Term.


The Rewards

• More Market Share

• Competitive Market Advantage

• Lower Per Patient Revenues

• Sustainability


Conference

October 29, 2015



Brian R. Klepper, PhD is a health care analyst and commentator. He is CEO of Health Value Direct, a specialized benefits consultancy linking health care purchasers with high performance, high impact health care organizations. He is former CEO of the National Business Coalition on Health, representing 5,000 organizational purchasers and some 35 million lives. An active author and speaker, Dr. Klepper has been a health care commentator for CBS Evening News, the Wall Street Journal, the New York Times, and the Washington Post. He has published articles on Kaiser Health News, Medscape, Healthleaders, The New England Journal of Medicine, Modern Healthcare, Business Insurance and newspapers nationally. Brian is a columnist for Employee Benefits News and for Medscape. He is a regular contributor to The Doctor Weighs In, the Health Care Blog, the Health Affairs Blog, Kevin MD, Health Care Policy and Marketplace Review, and other expert health care blogs. Brian is a reviewer for Health Affairs and The Journal of Ambulatory Care Management. He is an Advisor to the Lundberg Institute and the Patient-Centered Primary Care Collaborative, which advocates for medical homes. In his spare time, Brian is an offshore sailor.

904.343.2921, [email protected] www.brianklepper.info

http://www.healthvaluedirect.com/

http://www.nbch.org/

http://www.nbch.org/

http://www.ebn.benefitnews.com/

http://www.medscape.com/

http://www.thedoctorweighsin.com/

http://www.thehealthcareblog.com/

http://healthaffairs.org/blog/

http://www.kevinmd.com/



http://www.healthcarepolicyandmarket.blogspot.com/

http://www.healthaffairs.org/

http://journals.lww.com/ambulatorycaremanagement/pages/default.aspx

http://www.lundberginstitute.org/

http://www.lundberginstitute.org/

http://www.pcpcc.net/leadership





http://www.brianklepper.info/

Seizing The Opportunity Of Health Care Change · 29/10/2015 · American Health Care Cost Is...

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