The Economics of Health Care ACC-OC May 2013. The Health Paradox America’s rampant health spending...
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Transcript of The Economics of Health Care ACC-OC May 2013. The Health Paradox America’s rampant health spending...
The Economics of
Health CareACC-OC
May 2013
The Health Paradox
America’s rampant health spending threatens its economic future. It also supports tens of millions
of jobs.
– The Economist, May 11, 2013
This Presentation
• Hospital infrastructure today
• Economics that will shape hospital infrastructure for the future
OC Hospitals Today
• 31 hospital facilities/ 10 hospital systems
• 3 Trauma centers, 2 Burn centers, 27 ERs, 11 designated psych facilities
• 33,000 jobs/over 9% of all OC payroll in OC (2010)
• Nearly 1 million ER visits
• Over 1 million inpatient days
• Over 3 million outpatient visits
Hospitals37,903
Nursing and Residential Care
Facilities21,007
Offices of Physicians and Other Practitioners
47,052
Outpatient and Other Ambula-
tory Health Care Services
5,806
Medical and Di-agnostic Labora-
tories6,073
Home Health Care Services
5,479
Employment by Industry (2010)
Source: CA EDD
FISCAL CONTRIBUTION OF
HOSPITAL INDUSTRY(2010)
Income taxes (including profits taxes)
Sales taxes
Property taxes
Fees and fines
Social insurance
Other taxes
Total
(millions)
$ 190.1
177.4
196.5
74.1
18.7
34.9
$ 691.9
Goals
• Triple Aim: Improving the experience of care, improving the health of populations, and reducing per capita costs of health care
• For hospitals:– Reduce hospital-acquired infections and improve health
outcomes– Reduce hospital days– Reduce readmission rates– Improve care transitions
The Hospital Tool Box
• Internal efficiency
• Care coordination
• System integration
• Bundled payments; hospital/physician relationships/affiliations
• Ruthless Competition
How are we doing so far?• Marketplace changes
• Hospital share of HC expenditures down 10% 1980-2009
• Utilization: below U.S. averages
• Transformational initiatives underway
– Quality of care
– Payment reform
– Billing reform/cost transparency
Hospital Care, 42.67% Hospital Care, 32.58%
Physician Services, 20.25%
Physician Services, 21.71%
Other Professional,(4) 7.1%
Other Professional,(4) 7.3%
Home Health Care, 1.01%Home Health Care, 2.93%
Prescription Drugs, 5.11%Prescription Drugs, 10.73%
Other Medical Durables and Non-durables, 5.88% Other Medical Durables and
Non-durables, 3.35%
Nursing Home Care, 6.48%Nursing Home Care, 5.88%
Other,(3) 11.4% Other,(3) 15.5%
1980 2009
Source: Centers for Medicare & Medicaid Services, Office of the Actuary. Data released January 6, 2011.(1) Excludes medical research and medical facilities construction.(2) CMS completed a benchmark revision in 2009, introducing changes in methods, definitions and source data that are applied to the entire time series
(back to 1960). For more information on this revision, see http://www.cms.gov/nationalhealthexpenddata/downloads/benchmark2009.pdf.(3) “Other” includes net cost of insurance and administration, government public health activities, and other personal health care.(4) “Other professional” includes dental and other non-physician professional services.
$235.6B $2,330.1B
Source: American Hospital Association
National Health Expenditures By Category
Consistently Lower Utilization Levels Have Been a Major Contributor to California’s
Healthcare Cost Advantage
Consistently lower utilization levels have been a major contributor to California’s healthcare cost advantage
468
294
92
1,388 2,108
614
412
114
Outpatient visits
Inpatient days
ER visits
Admission
Utilization rates in 2010 1 Number of encounters/days per 1,000 population
U.S. California
California ranking 2
2nd
7th
5th
13th
1 Data are for total population of community hospitals (85% of hospitals); Federal hospitals, long - term care
Coverage Goals
Enrollment goals for Medi-Cal and Covered California (subsidized/not):
• 2014: 2.8 Million
• 2015: 3.6 Million
• 2016: 4.4 Million
Knowns
• MSI losses today - $200 m
• Medicare cuts - $1.47 B
• Impact of cuts under consideration - $337.5 m
Profitability Challenges at Medicare Rates
While many hospitals report operating profits today, most will likely be unprofitable as reimbursement approaches Medicare rates
Pe
rce
nta
ge
of
Ca
lifo
rnia
Ho
sp
ita
ls
Source: OSPHD 2010, Deloitte Analysis
Methodology: Percentage of CA hospitals profitable under Medicare calculated using per episode Market Basket cost and revenue
A substantial proportion of the hospitals that are profitable todaywill not be profitable at Medicare rates
Covered CA
Income Subsidy Mo. Premium Max Out of pocket
Single mom, 3 kids
$35,000 $7,416 $114 $12,800
Married Indiv $40,000 $4,836 $276 $6,400
Single 40-yr old, no kids
$50,000 -- $332 $4,000 - $6,400
The Big Unknowns
• What trumps what: Cost or Choice?
• Shifting markets (MSI to Medi-Cal, etc.)
• Coverage attainment/the remaining uninsured
• Downward pressure of rates in public programs and commercial plans: Who survives?
• The effect of “efficiency” on jobs and local economies
