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11Timothy Fitzgerald, CFA, FHFMA
Vice President, Treasury Management
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Geisinger Health SystemAn Integrated Health Services Organization
Physicians & Providers
$1.1 Billion~1,300 Physicians
~800 Advanced Practitioners
~520 Fellows
~425 Med Students
~215 clinic sites
Healthcare Facilities
$3.1 Billion7 Acute Hospitals
8 Surgery Centers
2 Nursing Homes
Home Health & Hospice
Managed Care
$2.4 Billion~500,000 members
Diversified Products
Public/Private Exchanges
~56,000 contracted providers
Budget Year 2016 $ & Statistics
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Geisinger Timeline
First employed physician – 1915 – 101 Years
Health insurer - pilot program – 1972 – 44 Years
Regional referral center designation – 1978
Air Ambulance – 1982
Received certificate to start an HMO – 1985
Medicare managed care – 1994
EPIC electronic health record install – 1996 – 20 Years
Integrated Data Warehouse – 2003 – 13 Years
Bundled Payments – 2005 – 11 Years
Medicaid Managed Care – 2013
Federal Insurance Exchange – 2013
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StrategyA Proven Patient Experience
Clinic:
– Deliver complex care close to the patient – “Right Care”– Large multispecialty, ambulatory sites capture increasing
outpatient activity
Hospitals:
– Grow high-acuity service lines – stop outmigration– Distill lower acuity to outpatient facilities or local community
hospitals
Health Plan:
– Change health outcomes with innovative care management –ex./ ProvenHealth Navigator® (advanced medical home)
– Differentiated from traditional arbitrage model of insurance– Efficient underwriting and product diversification
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Transforming Healthcare with Technology
Fully-integrated Electronic Health Record
Patient Portal: ~270,000 users (37% of patients)– Patient self-service
– Home monitoring integrated with Medical Home
“Outreach Health IT” to Non-Geisinger Providers– 10,221 users in 865 non-Geisinger practices
– Remote support for regional ICUs (eICU®)
– Telestroke services to regional EDs (eHealth)
Regional Health-Information Exchange (KeyHIE)– 22 hospitals, 175 practices, 1.1M patients
“Most Wired” for 13 consecutive years
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Genomics
Bio-bank - consented DNA samples 98,000 patients
Regeneron® partnership– World’s most comprehensive genotype-phenotype resource
– Goal: sequence 250,000 patients DNA (50,000 completed)
– Aid drug development and genomic medicine
– Sequenced at no cost to Geisinger
Data warehouse linked to EHR & health plan data
Stable market area population
MyCode® Community Health Initiative - health research
GenomeFIRST Medicine– Treatment and prevention before symptoms
– Physicians and counselors trained to act on results
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Geisinger GenomeFIRST Genomic Medicine
27 common conditions found in GenomeFIRST
Example– Familial Hypercholesterolemia (FH) early-onset coronary artery
disease and stroke
– Affects > 1 million people and <1% realize it
– Prevalence: 1 in 175, much higher in hereditary family
– 20-fold increase in heart attack, 20% of those before age 45
Goals– Diagnose: 500 cases in MyCode participants/family (1-3 years)
– Manage: Aggressive cholesterol management (1-3 years)
– Population Health: Sustainable decrease in heart attacks in people under 60 in our service area (10-15 years)
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ProvenCare® Acute Episodic Bundles
CAB and PCI
Bariatric Surgery
PerinatalSurgical Mgmt. of
Lung Cancer
Hip: Fragility Fracture or
Arthroplasty
Heart Failure
Lumbar Spine
• Clinical Best Practices
• Workflow Process Redesign
• Convener for CMMI Bundling Initiative (7 organizations)
• Corporate Destination Medicine Option
• Clinical Best Practices
• Workflow Process Redesign
• Convener for CMMI Bundling Initiative (7 organizations)
• Corporate Destination Medicine Option
COPDTotal Knee Arthroplasty
See Reference to New York Times Articles and other press coverage in Appendix, Exhibits A and D
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Population HealthProvenHealth Navigator®
Health Affairs: 4/26/2015.
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Innovations in Chronic Care ManagementSpecial Care CentersSM in an Urban Setting
Operates as a primary care medical home
Improves the experience of care
Improves the health of populations
Reduces per capita costs of health care
Results Reductions in heart failure cases,
Systolic BP and LDL-Cholesterol levels
Average savings of $170-$200 PMPMfor large groups and self-insured employers
20% reduction in pharmacy spend
Importing Best Practices from newly merged entities
Atlantic City
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Innovations in Anticoagulation Management
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Innovations in Paramedic Care
Wall Street Journal: August 18, 2015
Responders trained in chronic diseasemanagement, medication compliance andhome safety
Augments visiting nurse services and home care programs
Early results (March 2014-June 2015):
– Prevented 42 hospitalizations, 33 ER visits and 168 inpatient days
– In case of heart failure patients, hospital admissions and ER visits reduced by 50%, hospital readmissions <30 days fell by 15%
– Patient satisfaction scores 100%
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Proven Patient Experience
Best Practices Bundle
Rounding
Provider Transparency
Professional Appearances
Consistent Communication
ProvenExperience™ Mobile App
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Patient Satisfaction Transparency
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Mergers and Acquisitions Progress Report
Geisinger-Shamokin and Geisinger-Bloomsburg (2012)
– Low cost delivery platforms aligned with GMC
Geisinger-Community Medical Center (2/2012)
– Major facility expansion, completed
– Physician integration
Geisinger-Lewistown Hospital (11/2013)
– Extensive administrative/clinical integration
Holy Spirit Health System (10/2014)
– Integration and population health planning underway
AtlantiCare Health System (10/2015)
– Debt restructured
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Geisinger Clinical Enterprise
Geisinger Health Plan
Data Driven Care Redesign• Systems of Care• Bundles• Transitions of Care
Population Health Innovation
To improve quality and reduce total cost of care
The Geisinger “Sweet Spot”
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12%
47% 24%
35% 0%
19%
59% 38%
45% 22%
0%
10%
20%
30%
40%
50%
60%
38-County SATotal
Central Primary *NortheasternPrimary
WesternPrimary
**South CentralPrimary
Un
iqu
e P
atie
nts
as a
% o
f P
op
ula
tio
n
Market Penetration Trend:All Patients by Fiscal Year
FY 2010 Penetration FY 2015 Penetration
*Northeastern Primary = Luzerne and Lackawanna counties**South Central Primary = Cumberland and Perry counties
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187,952 149,906 133,893 125,321
67,70580,838 87,884 88,618
126,538 158,226 167,753
48,495 111,878121,383 122,768
429,135478,501
509,890 513,743
0
100,000
200,000
300,000
400,000
500,000
600,000
6/30/2013 6/30/2014 6/30/2015 12/31/15
Commercial Medicare Medicaid TPA CHIP Total
Geisinger Health Plans Membership
115,619
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6/30/2013 6/30/2014 6/30/2015 12/31/2015
Unique Patients 583,939 608,884 752,705 881,483
Geisinger Insurance Members 429,135 478,501 509,890 513,743
“Sweet Spot” Overlap(Both Patient & Member)
(182,739) (214,191) (235,937) (239,973)
Unique Population Managed 830,335 873,194 1,026,658 1,155,253
Unique Population ManagedA Better Measure of Healthcare Activity
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Strong, Consistent Revenue Growth
FY2015 y/y growth 14.8%
FY2008-FY2015: 13.4% compounded
Revenue mix premium vs. patient service
– FY2001 66% / 30%
– FY2015 48% / 49% $0$500
$1,000$1,500$2,000$2,500$3,000$3,500$4,000$4,500$5,000
FY
08
FY
09
FY
10
FY
11
FY
12
FY
13
FY
14
FY
15
Net Patient Service Premium Other
(millions)
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Operating Performance
Significant operating cash flow
Strong debt service coverage
4.9%
3.4%
3.5%
2.7%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6/30/2013 6/30/2014 6/30/2015 12/31/2015
Operating Margin (excl. int. exp.)
11.4
13.0
12.5
13.0
-
2.0
4.0
6.0
8.0
10.0
12.0
14.0
6/30/2013 6/30/2014 6/30/2015 12/31/2015
Debt Service Coverage
Strong revenue growth
Controlled expenses
Excess earnings benefit from sizeable investment returns
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Capital Expenditures
EBITDA > capital expenditures & debt service
“Best Practice” allocation system
Strong central controls
Capital expenditures / depreciation target = 1.5x
163%
222%
151%
124%
0%
50%
100%
150%
200%
250%
6/30/2013 6/30/2014 6/30/2015 12/31/2015
Capital Expenditures / Depreciation
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Liquidity
Cash on hand 250 days
Liquidity up > 300% since FYE 2005
251%
252%
233%
221%
0%
100%
200%
300%
6/30/2013 6/30/2014 6/30/2015 12/31/2015
Unrestricted Cash / Debt
271
267
250
256
0
100
200
300
6/30/2013 6/30/2014 6/30/2015 12/31/2015
Days Cash on Hand
Consistently strong liquidity
Unrestricted cash is over half of assets
Cash ~2.5 x debt
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Revenue Cycle Excellence
Customer Engagement• Adoption of Patient Friendly
Billing® Practices
• Patient Engagement Pre-Service to Billing (MyVisit Model)
• Pricing Transparency (MyEstimate®)
Value-Based Model•Employee Engagement
•End-to-End Revenue Cycle
•Performance Outcomes Incentive Program
Innovative Technology• Commitment to continuous
improvement
• Innovative Business Practices
• Leading Edge Technology
MAP: Measure . Apply . Perform
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Leverage
Moderate leverage debt/cap < 40% target
Debt/cash flow shows low use of debt
Low average age of plant, no deferred maintenance
32.2%
31.2%
32.8%
33.7%
0%
10%
20%
30%
40%
6/30/2013 6/30/2014 6/30/2015 12/31/2015
Debt to Capitalization
2.5
2.8
2.9
2.5
0.0
1.0
2.0
3.0
4.0
6/30/2013 6/30/2014 6/30/2015 12/31/2015
Debt to Cash Flow
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AtlantiCare Debt Restructuring
Purpose: Conform terms with all other Geisinger debt
Refinanced: $224 million, ARMC tax-exempt bonds– ARMC Series 2007 Bonds defeased to 7/2017 call date
– ARMC Series 2012A, 2012B & 2014 Bond refinanced
Funded by $339 million, Geisinger Series 2015 Bonds– No new proceeds
– Refinanced all ARMC Bonds
– Refinanced $115 million, Geisinger Series 2009 B & C Bonds
– All under Geisinger Master Trust Indenture
Other AtlantiCare debt of $29 million restructured or repaid
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Debt Mixas of 12/31/2015
$ in 000s
40.4%
47.4%
12.2%
Variable / Fixed Debt Mix
Effective Variable Natural Fixed
Synthetic Fixed
$342,300 , 23.7%$1,099,165 ,
76.3%
Committed Debt v Puttable$000’s
Puttable Committed
Liquid investments to puttable debt = 10.4x
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Investment PortfolioHighly Liquid – Highly Diversified
as of 12/31/2015
Monthly90%
Annual8%
> 1 Year2%
Liquidity
Equity56.9%
Fixed33.1%
Cash10.0%
Asset Allocation
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Concluding Comments
Success integrating acquisitions/scaling “sweet spot”
Proven quality with innovations and IT
Expanding products and market positions
Positioned for a “payment for value” environment
Strong management and Board
Strong balance sheet
Sustained performance from core operations
Thank you for your support