Succeeding in the Reform Era

www.sg2.com

Succeeding in the Reform Era

Jeff Moser, Vice President Sg2

August 2, 2012

What is this all about?How the industry is responding

Agenda

Confidential and Proprietary © 2011 Sg2 3

2012 Outlook: May You Live in Interesting Times

Market share is redefined and with it, intensified battles. Tiered/narrowed networks move markets overnight. Redesigned benefits = more bad debt Cost cutting yields to margin management. Patients expect Apple at Dollar General prices. IT implementation breaks the bank and drives

alliances. New market entrants and technology enablement

threaten incumbent dominance. Policy, politics, budgets keep the C-suite up at night.

IT = information technology.


At the Heart of Health Care Reform…

Waste30%

“Estimates suggest that as much as $700 billion a year in health care costs do not improve health outcomes.”

–Peter Orszag, Former Director of the Congressional Budget Office

Quality and SafetyProvider Error

Unnecessary Care

Readmissions

Avoidable Conditions

Lack of Care Coordination

Value70%

Source: Inskeep S. Budget chief: for health care, more is not better. National Public Radio. www.npr.org/templates/transcript/transcript.php?storyId=103153156. Published April 2009 on Morning Edition. Accessed June 2011.

EfficiencyWell-Defined Care Paths

Less Costly Sites of Care

Coordinated Care

Increased Access

Predictive Care Paths


Health Care Reform Accelerates the Need for Proving Performance

Medicare readmission penalties

HAC = hospital-acquired condition; VBP = value-based purchasing; PPACA = Patient Protection and Affordable Care Act.

Medicare Shared Savings Program

Hospital VBP Program

Payment adjustment for HACs

2008 2010 2012 2014 2016

Payment pilot programs

Health care reform highlights tension between increased access and cost control. Payers are piloting new models that reward coordination, quality and efficiency. Evidence-based multidisciplinary care that spans the care continuum is a required

competency for programs. Clinical practice research continues to uncover opportunities to improve care. Focus on decreasing inpatient costs continues as hospitals try to control staffing,

length of stay (LOS) and device costs.

PPACA passes

The Middle Game


While Growth Across the IP Business Is Flat, OP Opportunities Abound

Adult Outpatient ForecastUS Market, 2012−2022

Billions

20000000

25000000

30000000

35000000

40000000

Adult Inpatient ForecastUS Market, 2012−2022

2022 2022

+18%+9%

–4%–1%

Note: Forecast excludes ages 0–17, psychiatry and obstetrics service lines and the not assigned category. Sources: Impact of Change® v12.0; NIS; Pharmetrics; CMS; Sg2 Analysis, 2012.

2012

2013

2014

2015

2016

2017

2,500,000,0...

3,000,000,0...

3,500,000,0...

4,000,000,0...

4,500,000,0...

+28%+20%

+15%+7%

Millions 5 Year 10 Year 5 Year 10 Year

Sg2 IP Forecast Population-Based Forecast Sg2 OP Forecast


What Does This Mean for a Typical Health System?

Focused on inpatient business Strong physician referral channel ED as the “front door” for majority

of admissions Excels at revenue cycle, LOS

management Few System of CARE linkages Lots of inappropriate utilization and

readmissions CFO pushed 5% cost reduction

over the past 3 years

ED = emergency department; LOS = length of stay; CARE = Clinical Alignment and Resource Effectiveness.


Fast Forward 5 Years

CMS = Centers for Medicare & Medicaid Services; PCP = primary care physician; PAA = potentially avoidable admission.

Hospital is a success! Hospital is growing and

profitable. Physicians are happy. System wins best

employer award. Weaker aspects of

performance do not affect market or financial results.

2011 2016 CMS docks hospital

5% of revenues for PAAs, readmissions.

Hospital is excluded from private payers’ preferred tier networks.

Patients shop to manage their out-of-pocket liability.

PCPs redirect cases away to maximize their incentives/reduce penalty exposure.

Profitability and market share erode.


Start By Asking New Questions

Any volume is good.

Standard Thinking

MD? Has a pulse? Buy!

Grab share at all costs.

Readmits are revenue.

Worry later.

The economy is getting better. Volumes will

rebound

Value-Driven Thinking

How do I drive sustainable margin?

How do I optimize payer rates?

Who are my real competitors?

How can I backfill as readmissions drop?

How do we survive new payment models?

What is our product?

What is market share?

What is our value proposition?

What is appropriate future

demand?

How do we capture the System of CARE?

How do we perform?

What MDs do we want?


Future Payment Models Seek to Reward Coordinated, Quality Care

Objectives Decrease premiums and

slow spending growth Reduce spending variation Improve quality Find efficiency Improve care coordination

CM

MI I

nitia

tives

Med

ical

Hom

e M

odel

Bun

dled

Pay

men

t

AC

Os

Emerging Payment and Care Delivery Models

Out

-of-P

ocke

t


What New Economic Structures Will Enable Us to Redesign the Work?

Deg

ree

of C

ompl

exity

High

HighLow

Scope of Risk

Fee for service

Inpatient case rates (DRGs)

Bundled episodes (inpatient only)

Clinical integration program

ACO

Bundled episodes (pre- and post-care included)

Global capitation

P4P/Value-based purchasing

Disease-specific capitation


Actuarial Risk

Providers Will Be Asked to Be More Accountable and Take on More “Risk”…

Performance Risk

Cost = # Conditions × # Episodes × # Services × Cost Person Person Condition Episode Service

How many people have back pain?

How many acute

episodes do they have?

Conservative management vs. surgical intervention

Expensive implant or less-costly

implant

Source: Network for Regional Healthcare Improvement. From Volume to Value: Transforming Health Care Payment and Delivery Systems to Improve Quality and Reduce Costs. November 17, 2008. Available at Robert Wood Johnson Foundation Web site. www.rwjf.org/newsroom/product.jsp?id=36217. Accessed October 2010.

What is the cost per patient to manage back pain?


The Private Market Will Lead Innovation

CalPERS Pilot, Northern CA: 40,000 members, well-managed IPA

Carilion Clinic, Roanoke, VA: 17,000 employees beginning July 1, leading to cobranded insurance product

Piedmont Physicians Group, Atlanta, GA: 100 physicians, about 10,000 CIGNA members

Tucson Medical Center, Tucson, AZ: 50 to 60 PCPs

CalPERS = California Public Employees’ Retirement System; BCBS = Blue Cross and Blue Shield; IPA = independent practice association; CI = clinical integration; PCP = primary care physician. Source: Sg2 Interviews, 2011.

Advocate Health Care, BCBS, Chicago, IL:CI program evolved into ACO.

Norton, Louisville, KY:Partnership with Humana


Case Example: CalPERS ACO Pilot in Sacramento

Catholic Healthcare West, Hill Physicians, Blue Shield (CA)

42,000 lives “Virtual cooperation” model

Source: Sg2 Interview With CalPERS Pilot, July 2010.

Initial Critical

Success Factors

Experienced physician participants 3-way risk sharing and ongoing collaboration Upside for all participants “Teach back” program and daily rounds Public validation from payer

CalPERS Pilot (Northern CA)

http://www.worldatlas.com/webimage/countrys/namerica/usstates/counties/ca.htm


Year 1: Significant Savings…Mostly Due to Reduced Hospital Utilization

Exceeded target of $15.5 M in savings for the 42,000 member pilot 15% reduction in inpatient readmissions 15% reduction in average length of stay for inpatient admissions 14% reduction in inpatient days per thousand 50% reduction in inpatient stays per thousand of 20 or more days

Source: “A Community Model Case Study”, presented by Juan Davila and Rosaleen Derington at the America’s Health Insurance Plans Summit on Shared Accountability, Washington DC, October 2011.

“2010 was the easiest year that we’re going to have. After that, it will require real hardcore process re-engineering to be successful.”

- Rosaleen Derington, Chief Medical Services Officer, Hill Physicians Medical Group


Considerations in Defining the Right Timing for Your Strategy Evolution

SlowerOrganizational Issues

ED-driven inpatient strategy . . . . . . . . . . . . . . . . . . . . . . . . . . .

Limited IT infrastructure . . . . . . . . . . . . . . . . . . . . .

Market Issues

Highly fragmented splitter market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Dominant, conservative payers . . . . . . . . . . . . . . . . . . . . . . . .

Regulatory Issues

Game-changer 2012 election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Restrictive insurance exchange . . . . . . . . . . . . . . . . . . . . . . . .

System of CARE IssuesConstrained, fragmented sub-acute capacity . . . . . . . . . . . . . . . .

Poor integration, effectiveness . . . . . . . . . . . . . . . . . . . . . . . . .

Faster

Diversified System of CARE strategy

Well-integrated and pervasive EMR

Regionally consolidated

Competitive and/or innovative payers

Stay-the-course election

Flexible state regulatory environment

Robust System of CARE capacity

Strong integration and relationships

What is this all about?How the industry is responding

Agenda


In the Short-term, Focus on Protocols, Coordination, PreventionTop Strategies to Improve Quality, According to Health Plan Leaders

Employing PhysiciansTransparency/Public Reporting

ACOsRemote Patient Monitoring

Medical HomeComparative Effectiveness

Pay for PerformanceDecision Support Tools

Preventive Care and Patient EducationCommunication Among Physicians and Hospital

Care Coordination TeamsEHR and e-prescribing

Better Treatment Guidelines and Protocols

3 3.2 3.4 3.6 3.8 4 4.2 4.4

Score (Scale of 1–5)

EHR = electronic health record. Sources: HealthLeaders Media Intelligence. Industry Survey: Health Plan Leaders. HealthLeaders Media, 2011; Sg2 Analysis, 2011.


Care Redesign Will Offer a Framework to Help Execute on Value-Driven Strategy

Valu

e (Q

ualit

y/C

ost)

Execution Risk

Variance and Cost Reduction

UnnecessaryCare Reduction

ClinicalRestructuring

System Optimization

Elements of Care Redesign


The Tried and True: Variance and Cost Reduction

Variance and Cost Reduction: Improving operational efficiencies

ED = emergency department.

Sample Analytics Potential Hurdles Margin mix Labor effectiveness Supply cost analysis

Physician resistance Inadequate data capabilities Existing vendor relationships

Examples Minimizing orthopedics supply chain costs Decreasing turnaround time for chemotherapy chairs Standardizing clinical pathways for asthma patients in the ED Uncovering staffing and productivity opportunities

Valu

e

Risk


0 5 10 15 20 25 30 $-

$1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000

Duration (Weeks)

Reduce Variation in Rehabilitation Across Post-Acute Care Sites

SNF

Home Health

OP PTHH & OP PT

Note: Postdischarge claims were filed after the date of discharge. Excludes episodes with cost >$46,000. TJR = total joint replacement; HH = home health; OP = outpatient; PT = physical therapy. Source: Sg2 Analysis, 2011.

Sample Hospital TJR Rehab Cost per Patient, 2007–2009


Improve Access and Productivity Through Centralized Scheduling

WellSpan Health System, York, PA Centralized call center was

implemented to address patient and staff satisfaction.

40 employees, 3 supervisors work shifts 7 am–8 pm weekdays and 8 am–4 pm Saturdays.

Goal is to answer 80% of calls within20 seconds.

One practice increased the number of visits from 1.9 to 2.1 per hour.

Noise reduction in practices also is increasing employee efficiency.

Source: Sg2 Interview, 2011.


Prepare for Penalties and Tiered Networks by Reducing Unnecessary Care

Unnecessary Care Reduction: Decreasing avoidable, unproductive and

duplicative services

SNF = skilled nursing facility.

Sample Analytics Potential Hurdles Evidence-based clinical

criteria Readmission analysis

Lack of care coordination between providers Weak relationships with post-acute providers Slow development and diffusion of clinical

effectiveness research

Examples Daily blood draws on inpatients Readmissions for CHF patients discharged to SNFs Excessive or duplicative imaging studies between sites of care Prostate cancer screenings for elderly patients

Valu

e

Risk


Standardize Radiology Ordering Process to Improve Diagnostic UtilityInstitute for Clinical Systems Improvement, Bloomington, MN

ACR = American College of Radiology; ACC = American College of Cardiology; ACP = American College of Physicians; M = million. Sources: Institute for Clinical Systems Improvement (ICSI). ICSI News November 3, 2010. Accessed June 2011; Sg2 Expert Insight: Transforming How Radiology Studies Are Ordered in Minnesota, February 2, 2011.

Innovation: Standardized Orders Designed a clinical decision support system that grades

the tests being ordered based on information and purpose Decision support system approved by ACR, ACC and ACP. System offers evidence-based alternatives. Piloted by 5 medical groups completing more than 1 million

imaging tests per year between 2007 and 2010

Results Shorter radiology ordering and approval times 10% improvement in diagnostic utility Estimated savings of $84M No increase in claims for imaging


Accelerate Access for Unscheduled Visits

Sutter Medical Foundation—Sutter Health, Sacramento, CA Operates 3 urgent care centers; 4 more are planned. Integrated with retail care, occupational health and diagnostic centers Future plans to collaborate with FQHCs to manage new Medicaid enrollees Fast-track access for 10 diagnoses.

ED = emergency department; UTI = urinary tract infection; IV = intravenous; FQHC = Federally Qualified Health Center.Source: Sg2 Analysis, 2011.


Encourage level of Care Optimization Through Clinical Restructuring

Clinical Restructuring: Ensuring treatment occurs in the optimal

setting with the most appropriate provider level

Sample Analytics Potential Hurdles Site/level of care cost Capacity and access

modeling

Current regulations and benefit coverage limits Lack of human capital planning Physician resistance Poor access to primary care providers (PCPs)

Examples Early transfer from an IP to SNF bed Pharmacists managing all medications for patients with chronic diseases Partnerships with a local retail clinic to offer nonurgent, convenient care Palliative care/end of life in ICU/ED

Valu

e

Risk

IP = inpatient; ICU = intensive care unit.


Improve Quality of Care While Managing Costs

Source: California HealthCare Foundation, February 2010.

California Pacific Medical Center, San Francisco, CA

University of California, San Francisco

$2.2 million in annual savings and improved clinical outcomes: 33% decrease in mean daily

costs 30% decrease in mean LOS 14.5% lower costs when

compared to usual care patients 86% decrease in pain scores 64% decrease in dyspnea

scores 87% decrease in secretion

scores

$2,179 savings for patients who received palliative care (PC) services

CostsWithout

PCWith PC Savings

Pharmacy $793 $31 $762

Laboratory $138 $7 $131

Radiology $57 $2 $55

Room $837 $412 $425

Services $616 $16 $600

Supplies $230 $24 $206

Total Costs $2,671 $492 $2,179


Use OP Palliative Care to Reduce Utilization While Improving Outcomes

Selection criteria based on this question posed to physicians: “Would you be surprised if this patient died in the next 1 to 2 years?”

Background Multispecialty practice with 11 locations

Challenge High use of hospital services for end-of-life patients

Solution: Outpatient Palliative Care Program Patients are referred to palliative program by physicians. Program is run by nurses and assistants. Nurse provides ongoing

care management and filters appointments and medications. Nurses proactively call all 250 patients once per month.

Results 47% vs 62% hospital admit rate for patients who received palliative care vs those who did not Palliative care patients’ ALOS was 0.5 days fewer than nonpalliative patients. Reduced ED care and inpatient care utilization

Everett Clinic, Everett, WA

ALOS = average length of stay. Source: Szabo J. High-quality palliative care programs bring comfort to terminally ill patients. AHA News September 6, 2010. American Hospital Association.


Use Telehealth and Home Health to Redesign Acute Care Delivery Sentara Healthcare, Northern Virginia

Goals Improve compliance, bed capacity and patient satisfaction Reduce readmission, LOS and HAC

Innovation: Telehealth and Home Health Pilot project to identify and evaluate acute care patients appropriate for early discharge with

enhanced home health and telehealth services HF, pneumonia, COPD, SOB, respiratory failure, atrial fibrillation and MI patients qualify. Admission criteria meet Medicare homebound criteria: cognitively intact, home electrical and

telephone services. Patients are referred by nurse and hospital case manager; discussed with patient and hospitalist. Patients seen by home care on day of discharge; telehealth monitoring begins on admission visit. PCP notified of patient’s admission to home care for follow-up orders and plan of care.

Results Treated 83 patients under pilot project Decreased LOS by 0.49 days at one hospital and 1.14 days at a second hospital Decreased readmission rates for same diagnoses to 3.6%

SOB = shortness of breath. Source: Sg2 Interviews, 2011.


Manage Population Risk Through Integration and Prevention Strategies

System Optimization: Shifting focus to upstream, preventive care through clinical

integration and population health management

Sample Analytics Potential Hurdles Population health

analytics Lagging incentives for preventive care and care

coordination Significant capital investment for a coordinated

shared savings infrastructure Poor relationships with PCP networks

Examples Disease-based medical homes Patient engagement strategies using telehealth Disease registries

Valu

e

Risk


Patients Are Coming From Mars, Physicians Are Leaving for Venus

Dr Jones, I’m having knee pain. I can’t keep up with my child anymore.

Your blood pressure is high, and I am worried that you cannot walk up

a flight of stairs. Let’s have you come back

next week to talk about your knee.

The Complicated Universe of Ambulatory Care

I should schedule him for a treadmill in case he has silent ischemia with his diabetes.

How could they schedule this man for a

15-minute visit?

I hope she doesn’t tell me I am fat.

My wife is really unhappy that I

lost my job.


MDs Challenged With Aligning Patients’ Clinical Needs While Lowering Costs

MLP = midlevel provider.

Simple Visit Ambulatory ICU

Care Customization

Social ICU

Priority Delivery

Team MLPPhysician

PhysicianMLP

MLPSocial WorkerNurse Physician

Nurse Social WorkerMLPPhysicianBehavioralists

Setting Office Office Multispecialty practice

Multispecialty practice

Example Sprained ankle

Multiple issues, pick 1

Serious chronic condition(s)

Overweight smoker, uninsured


Preliminary Results From Boeing Ambulatory ICU Pilot Boeing Intensive Outpatient Care Program (IOCP), Puget Sound, WA Partnered with 3 clinics, incentivized through per-patient-per-month fee Focused on employees contributing to highest health care costs Care teams included RN care manager, IOCP physician, current PCP

Patient involved in development of personalized care plan Care team proactive outreach Education in disease self-management Team huddles to assess patient status, discuss follow-up plan

Source: Milstein A and Kothari P. Are higher-value care models replicable? Health Affairs Blog. http://healthaffairs.org/blog/2009/10/20/are-higher-value-care-models-replicable. Accessed October 2011.

Improved functional status, depression scores, patient and provider satisfaction

Met clinical quality metrics for diabetes care, high blood pressure, high cholesterol

Reduced per capita spending by 20%


Utilization and Behavioral Patterns Help Identify Social ICU Patients

Used medical billing data to explore health trends: 1% of Camden’s patients accounted for 30% of

costs Identified 2 most expensive blocks: a large

nursing home and a low-income housing tower Camden Coalition of Healthcare Providers

formed to provide a medical home for “super-utilizers” Rely on home visits, phone calls, urgent call

number to reach patients

Jeffrey Brenner, MD, Camden, NJ

ED = emergency department. Source: Gawande A. The hot spotters. The New Yorker January 24, 2011. www.newyorker.com/reporting/2011/01/24/110124fa_fact_gawande. Accessed June 2011.

“The people with the highest medical costs—the people cycling in and out of the hospital—were usually the people receiving the worst care.”

Results 40% reduction in ED

visits 56% reduction in

hospital bills


Background 12-hospital system, including 2 children’s hospitals and a medical group

Care Coordination: AdvocateCare Program Focused on 5 Aspects to Improve Care Enterprise care management

Enhance ED case management and OP care coordination Improved access

Expand PCP/clinic hours Build retail clinic relationship

Market share Target splitter docs and unassigned

patients in the ED Data analytics

OP care management system Prospective risk analysis

Post-acute care providers Preferred networks of providers Transition coaches SNF management with “SNFists”

Increase Retention and Improve Patient Outcomes With Care Coordination

Advocate…“could serve as a model for a new kind of accountable care organization, by demonstrating how to organize physicians into partnerships with hospitals to improve care, cut costs and be held accountable for the results.”

–Health Affairs January 2011

Advocate Health Care, Oak Brook, IL

Source: Shields MC et al. Health Aff (Millwood) 2011;30:161–172.


Extend Outreach to Capture Downstream Revenue

Direct Mail Phone Calls Web Presence

ThedaCare, Appleton, WIResults During 2.5-Month Campaign 10% of targeted patients scheduled and completed a colonoscopy. 28% increase in the average number of colonoscopies performed. ThedaCare is preparing to roll program out to other clinics and service areas.

Overall Increase in Screening Rate 21% increase to 73% between 2005 and 2010 (also due to disease management efforts)

Printed with permission of ThedaCare.

Printed with permission of ThedaCare.

Source: Sg2 Interview, 2011.


Where is the Venture Capital Going CareHubs (Beaverton, OR) is a healthcare enterprise social platform that offers

dynamic, innovative tools to help patients and healthcare providers better connect, coordinate and engage.

CareWire (Minneapolis, MN) is a patient engagement solution that utilizes automated patient text messaging to increase billable appointment yield, visualize patient satisfaction in near-real-time and improve provider performance.

DermLink (Atherton, CA) is a cloud-based, HIPAA compliant application that enables remote diagnosis of dermatology cases, dramatically reducing wait times for patients while driving increased revenue and flexibility for providers.

Iconic Data (Norcross, GA) delivers a cloud-based patient list manager solution that provides physicians access to near-real-time snapshots of clinical care episodes across disparate, non-integrated facilities, resulting in increased charge capture and reduced inefficiencies.

UnitedPreference (Princeton, NJ) offers a Tailored Spend™ payments network that improves member participation in preventative health initiatives via nationally accepted prepaid cards that can only be used to purchase goods and services pre-determined by health plans and employers.

Sample Of HealthBox 2012 Class


Successful Strategy Requires Management and Engagement

CARE = Clinical Alignment and Resource Effectiveness; IP = inpatient; OP = outpatient; SNF = skilled nursing facility.

Retail Pharmacy

Wellness and Fitness Center

Diagnostic/ Imaging Center

Urgent Care Center

HospitalAcuity

Community-Based Care

Acute Care

Post-Acute Care

Physician Clinics

Ambulatory Procedure Center

OP Rehab

IP Rehab

SNF

Preventive Care

Home

Home Care

Pt. ProfilingCare Managers

InformationSystems

Data Analytics

Disease MgmtTechnology


Sg2 provides business analytics for health care.

Our data-driven systems, business intelligence and educational programs deliver growth and performance

improvement solutions across the care continuum.

Chicago London www.sg2.com + 1 847 779 5300

Succeeding in the Reform Era

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