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KAUFMAN: Wisconsin Assoc Health Plans 091815 (DKB0908)
9/15/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 1
Data Knows BestStriving to be Differently Better
Nathan Kaufman, Managing DirectorKaufman Strategic Advisors, LLC11440 West Bernardo Ct., Suite 155San Diego, CA 92127(858) 487-9771N8@kaufmansa.comwww.Kaufmansa.com
Kaufman Strategic Advisors, LLCEvidence Based Consulting
Strategy Requires a Point of View (POV) Regarding Market Pace and Organizational Competencies
What will the local market look like in five years?‒ Show me the evidence!
What competencies do you need to succeed?‒ Do you possess them?‒ Realistically can you develop them?
What is the industry’s conventional wisdom, have we seen this movie before – how did it end?
“Investors Struggle to Evaluate
Population Health Strategies.”
~H&HN Daily, 05.28.15 by James M. Molloy
2
Are the physicians on board?
What are the financial implications (w/o heroics)?
© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
KAUFMAN: Wisconsin Assoc Health Plans 091815 (DKB0908)
9/15/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 2
Healthcare Policy and Financial Forecasting
HHS to Expand ‘Successful’ Pioneer ACO Program“Pioneer ACOs Anatomy of a Victory” Health Affairs
Where the Rubber Meets the Sky
ACOBundling OWA
• 70% MSSP ACOs Did Not Receive a Bonus• 45% Pioneers Dropped Out• 50% Dropout Rate - Bundled Payments
3
“The Major Benefit of Financial Forecasting Is That It Makes Astrology Look Respectable.”
~John Kenneth Galbraith
© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
Strategy orLemming Syndrome?
4© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
KAUFMAN: Wisconsin Assoc Health Plans 091815 (DKB0908)
9/15/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 3
Adjacency: The Trap of False Enthusiasm
Adjacency: The belief that an organization can sustain growth by entering into a market adjacent to it’s core business
Failure Rate: 75%
5
Failure Rate: 75%(Bain Analysis of 1,850 companies)
© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
M k t FMarket Forces
KAUFMAN: Wisconsin Assoc Health Plans 091815 (DKB0908)
9/15/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 4
Unsustainable Economic Trends in Government Spending
“Bundled payments, ACOs, and medical homes can reduce cost levels but not the overall growth rate... Medicare spending will grow faster than projected and
Medicaid spending will double to almost $919 billion in 2023 from $450 billion in 2013. (58% Mg care) ~CMS
grow faster than projected ...and Congress won’t be able to avoid changing course.” (31% MA)
~Richard S. Foster, Chief Actuary for CMS (Ret.) February 28, 2012
7Altarum’s Triangle of Painful Choiceshttp://www.youtube.com/watch?v=QrPaJBh01sE
© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
Commercial Coverage: The Math Does NOT Work
$51,000
8© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
KAUFMAN: Wisconsin Assoc Health Plans 091815 (DKB0908)
9/15/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 5
New Regulations and Market Forces Putting Pressure on Premiums
Premium Caps, Transparency, Aging, Cadillac Tax & Affordability
Health Plan
Profits$
Premiums
9
Benefits
Standard Benefits, Payer Tax & Universal Coverage
Impact of Rate Review in California- 2011
10© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
Could Rate Review Come to Wisconsin?What are the Implication?
KAUFMAN: Wisconsin Assoc Health Plans 091815 (DKB0908)
9/15/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 6
The Challenge on the Road to Provider-based Plan Pofitability
ACOs Will Make the Economics of Health Systems Worse for Most Providers!
Payer
50%
ACO
NoInstitutional
Savings
VolumeInfrastructure
Physicians
Savings
10%
50%
12
Price
Hospital
20%
20%
© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
KAUFMAN: Wisconsin Assoc Health Plans 091815 (DKB0908)
9/15/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 7
ACO: A Lemming Strategy?
Few ACOs Earned Bonuses:ACO Results in CA:
“The financial results came as a disappointmentbut we were not surprised.”
“The progress toward cost stabilization through ACO contracts from Medicare and commercial PPO has been modest at best ”
13
~National Association of ACOs (NAACOS)
been modest at best.”~Accountable Care in California: Imperatives and Challenges of Physician –Hospital Alignment, James Robinson Ph.D
© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
Capitation Could Make the Economics of Health Systems Worse!
Out of Network
D C t
Premium
Health System
Revenue
Volume
Drug Costs
ConsolidatedPhysicians
Flow of Funds
Hospital Revenues
14
Price
© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
Plan ‘Profits’
KAUFMAN: Wisconsin Assoc Health Plans 091815 (DKB0908)
9/15/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 8
Supply Costs
A Health System’s “Circle of Life”: **Access to Capital
Providing Value to Patients and Stabilizing
Physician Compensation Requires the
Negotiated Rates,
Government Reimbursement
& Volume
ROI on Physician Investment
q
Ability to Borrow
Revenue –Expenses
= Cash
Bond Rating:
Access to Capital (Credit Score)
Personnel
Costs
Capital SpendingService &
Access
15© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
What is the Primary Cause of Cost Differentiation?
Net Payment per Episode - Blue Cross
Hip Replacement Surgery:BCBS NC.com
Hip Replacement Surgery:• $17,910 to $73,987 in Massachusetts1
Angioplasty:• $15,951 to $49,604 in Chicago2
1California Healthline, January 22, 20152 Modern Healthcare, July 20 2015
$10,368 $32,242
$11,641 $48,091
Colonoscopy
CDD: $1,273Duke : $4,766
16© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
KAUFMAN: Wisconsin Assoc Health Plans 091815 (DKB0908)
9/15/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 9
Bureau of Labor StatisticsProducer Price Index: Hospital Component
Percent Change in Hospital Producer Price Index
3%
4%
5.8%
4.9%
3.8%4.4%
3.5%3.0% 3.0% 3.0%
2.1%2.5%
2.2%
1.3%2%
3%
4%
5%
6%
7%
17
0%
1%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
Possible Downside of Capitation and Provider-Based Health Plans
Reduced
$Reduced
Hospital & Physician
Rates
18
ReducedMedical Costs
If we pull this off we will eat like kings
© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
KAUFMAN: Wisconsin Assoc Health Plans 091815 (DKB0908)
9/15/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 10
Commercial Hospital Rates in Wisconsin
© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved 19
© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved 20
KAUFMAN: Wisconsin Assoc Health Plans 091815 (DKB0908)
9/15/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 11
Physicians are Seeking Shelter from the Storm
• ICD 10• Regulation• Cyber
Security• Deductibles• MGMA-wRVU
21
2014 Medicare Trustees Report, AMA
© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
Solution: Become the Differently Better
Value Based Delivery System
KAUFMAN: Wisconsin Assoc Health Plans 091815 (DKB0908)
9/15/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 12
Value= Benefit/Price(Differently better in the eyes of the customer)
Brand
23© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
Segmentation and Focus are Essential(skate to where the money is)
24
Courtesy of Brian Silverstein MD
Conclusion: Chronically ill patients whose primary care providers offer highly fragmented care more often experience lapses in care quality and incur greater healthcare costs.Am J Manag Care. 2015;21(5):355-362 - See more at: http://www.ajmc.com/journals/issue/2015/2015-vol21-n5/Care-Fragmentation-Quality-Costs-Among-Chronically-Ill-Patients#sthash.qtsMmUKF.dpuf
© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
KAUFMAN: Wisconsin Assoc Health Plans 091815 (DKB0908)
9/15/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 13
Designing an Optimal Delivery System for a Sub-Population
▪ Virtual
▪ Wearables and Implantables
▪ Primary Care MD Office
▪ Specialty MD Office
The Old Continuum of Care The New Continuum of Care
▪ Kiosk
▪ Pharmacy/Minute Clinic
▪ Primary care MD/NP office
▪ Specialty MD/PA office
▪ Ambulatory Ancillaries
S lli ED
▪ Specialty MD Office
▪ Ambulatory Ancillaries
▪ Urgent Care
▪ Hospital/ED
▪ SNF
▪ Satellite ED
▪ Hospital/ED
▪ SNF
▪ Hospice
25© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
The Value-based Network Test
A 2011 Stent Procedures• 50% appropriate, • 38% uncertain
If I had to reduce my message for achieving excellence to just a few
• 12% inappropriate~American College of Cardiology
26
How many different sets of
orders?
words, I'd say: it all has to do with reducing variation.”
~W.E Deming
© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
KAUFMAN: Wisconsin Assoc Health Plans 091815 (DKB0908)
9/15/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 14
Delivering High-Quality Cancer Care: Charting a New Course for a System in Crisis- IOM 2013
Findings point out a majorout a major quality issue for cancer patients who have no way of knowing how much their doctors' financial incentives i fl th i
27
influence their recommended course of care.
~Karen Hoffman, MDMD Anderson
JAMA IM,7/14/14Health Leaders, 7/17/2014
© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
Harvard Magazine
28© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
KAUFMAN: Wisconsin Assoc Health Plans 091815 (DKB0908)
9/15/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 15
The “Value Proposition" of a Traditional Health System
Your care will be noYour care will be no worse than that
provided by our least competent physician!*
29
*And we cannot guarantee that your care will be appropriate, efficient, state-of-the-art or meet the highest professional standards.
© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
The “Value Proposition” for Future Success
A Value-based Network (VBN) of providers th t i t tl d lithat consistently delivers:
‒ Superior service‒ Predictable reasonable cost per episode
and‒ Appropriate accessible standard care
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Appropriate, accessible, standard care based on the best science in medicine
© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
KAUFMAN: Wisconsin Assoc Health Plans 091815 (DKB0908)
9/15/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 16
Are the Consolidated“80 Percenters” on Board?
Hospital‐Based Phys.
New Delivery Models
Oncologists
ModelsCardiologists
Gastroenterologists
All Other Surgeons
Neurosurgeons
Orthopedic SurgeonsPCP
31© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
The Emergence of VirtualHealthcare
32
Mass General Pilots Cardiology E-Consults Published: Jun 8, 2015 Medpage Today
© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
KAUFMAN: Wisconsin Assoc Health Plans 091815 (DKB0908)
9/15/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 17
Telehealth Users*
© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved 33*American Well
Rate the Functionality of Your Delivery Network
CCSIA Coalition of
Competing
CA Kaiser Permanente
‘A’ Rating Leapfrog‘5 Star’ Medicare Advantage‘5 Star’ Medical Groups (CA)‘5 Star’ Health Plans (CA) Competing
Self Interests
Value FFS
5 Star Health Plans (CA)Top MA Plans – NCQAJD Powers Best Patient Sat.
34
• Organized broad geographic network• Transparent actionable analytics• Compliance w/ hundreds of clinical guidelines• Focus on team care & collective performance• Interconnected EHR• Full acute care continuum• Integrated health plan, physicians and hospitals
• Limited geographic network• Culture of optionality/autonomy/silos• Patients fend for themselves• Focus on individual compensation• Traditional medical staff-hospital disputes
over authority and money• Incomplete continuum of care
© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
KAUFMAN: Wisconsin Assoc Health Plans 091815 (DKB0908)
9/15/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 18
Who is Getting Medicare Advantage Right?
35
NCQA
© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
“Changing the payment system probably isn't enough to ensure that patient care will improve.”Effects of Alternative Payment on Physician Practices In the US, Rand Corporation, AMA, 3/19/15
Alternative payment models are increasing physician Alternative payment models are increasing physician workload but not income
Alternative payment models haven’t substantially changed the way physicians deliver care
Operational problems in new payment programs are frustrating the physician-participants impacting theirfrustrating the physician participants impacting their enthusiasm
36© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
KAUFMAN: Wisconsin Assoc Health Plans 091815 (DKB0908)
9/15/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 19
The Emergence of New Health Benefit Design
Tiered NetworksTier 1 - Preferred: Members pay the lowest cost shareTier 2 - Enhanced: Members pay a higher cost share Tier 3 - Standard: Members pay highest cost share
Direct Contracting, Narrow Networks & Balanced Billing
Private Exchanges (Expedia)Rapid adoption of
Transparency, High DeductiblesDeselection of Providers
Domestic Medical Tourism, & Bundled Payments
for Elective Centers of Excellence
Single Payer
37
Provider-Based Health Plans andCommercial Capitation (Risk)
Rapid adoption of “Population Health”Medicare and Medicaid
Increase in “Value“Value--based based Payments”Payments” Moving to Risk!
Comprehensive Care for Joint Replacement Model Announced
© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
Brought to You by United Healthcare
38© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
KAUFMAN: Wisconsin Assoc Health Plans 091815 (DKB0908)
9/15/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 20
Brought to You by United Healthcare
39© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
It Takes More Than Scale
Henry Ford being reviewed for credit downgrade ~MHC May 9, 2014
S&P downgraded CHI’s ratings after CHI lost $641 million for fiscal 2014 on $13.9 billion in revenue (1,500 layoffs) – Healthcare Finance 12/17/14
Partners HealthCare reported a $22 million loss on $11 Partners HealthCare reported a $22 million loss on $11 billion in revenue mainly due to their health plan which lost $110 million –Boston Globe 12/14/14
40© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
KAUFMAN: Wisconsin Assoc Health Plans 091815 (DKB0908)
9/15/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 21
Can We Count on “Wellness” Working
Industry Consensus: Wellness centers will become money-makers under population Health
Healthcare Finance 8/15/15
41
Empirical Research: “Wellness and weight loss programs aren’t saving money, reducing disease burden or helping people slim down.”
~Khanna, & Montrose American Journal of Managed Care 2/19/15
© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
The Key to Successful Strategic Transformation
You BecomeContinuous Measurement &
Strategy
You Become What You Measure:
■ Actionable clinical analytics
■ Accurate cost
Continuous Measurement & Incremental Improvement to Become Differentiated in the
Eyes of the Consumer
42
■ Accurate cost accounting
© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
KAUFMAN: Wisconsin Assoc Health Plans 091815 (DKB0908)
9/15/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 22
You Don’t Have to Agree with My POV
“The housing boom is soon to go bust. And it“Nate, Stop! soon to go bust. And it will affect everyone…”
~Gary Shilling, ForbesOctober 14, 2002
“All the doom and gloom forecasts are not only irresponsible but are downright wrong.”
~David Lereah
, pTake a look at what you have become.Look in the mirror, look hard,You are a real downer.Get a grip, rise above the hate!Really. Man up, money to be made.”
From an SVP @ FP Hospital Company 4/2014
43
David LereahChief Economist of NAR (2005)
From an SVP @ FP Hospital Company 4/2014
© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
Healthcare Strategy is All About the Bear Story
That’s OK. I I don’t
think we t just need to
outrun you!can outrun the bear!
Value-based Healthcare
44© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
KAUFMAN: Wisconsin Assoc Health Plans 091815 (DKB0908)
9/15/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 23
Funding the “Sloppy Transition” to New Competencies
Successful health systems will have to become the opposite of what they have been!
Competency: C i l R t
• Standardization• Actionable Analytics• Value-based Prices• Superior Outcomes/Service• Highly Efficient Cost Structure
“Value-based” Competencies Require a Significant
Investment
45
Commercial Rates(170+% Medicare)
Succeeding in theNew Market
© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
Behavior Change Requires a Compelling Reason to Leave Your Comfort Zone
Suits
MAKE IT EASY:MINIMAL WORKFLOW CHANGE
INCREMENTAL RESULTS LEAD TO CREDIBILITY
StatusQuo
ValueNetwork
Suits
Medical Staff
46
Data & Peer Leadership
© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
KAUFMAN: Wisconsin Assoc Health Plans 091815 (DKB0908)
9/15/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 24
Global Compliance With Standard Work Attracts Payer Collaboration
MHMD Physician Board of Directors
Clinical Programs Committee
H&V
Cardiology
CV Surgery
Neuro
Neurology
Neurosurgery
Woman/Child
Neonatal
OB/Gyn
Surgery
Anesthesia
Bariatrics
Medicine
Critical Care
Emergency
Oncology
Oncology
Contract
Imaging
Pathology
PCP
Peds
47
CV Surgery Neurosurgery OB/Gyn Bariatrics
Orthopedics
ENT
Emergency
Ad hoc
Hospital Medicine
Pathology
© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved
Catch Your Confirmation Bias“People can foresee the future only when it coincides with their own wishes. The most grossly obvious facts can be ignored when they g yare unwelcome.” ~George Orwell, 1945
“It is difficult to get a man to understand something, when his salary depends on
his not understanding it.”Upton Sinclair
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