healthcare update 2013
DESCRIPTION
This presentation describes the current drivers of healthcare reform and the obstacles aheadTRANSCRIPT
HEALTHCARE 2013NEW DIRECTIONS
KENNETH J EDWARDS,M.D,FACS
THE BIG PICTURE!
Cost IssuesDemographicsQuality ChallengesAffordable Care ActImplications for PhysiciansChanges in Care DeliveryImmediate Challenges
US HEALTHCARE COSTS
2011 US HEALTHCARE
$2.7 TRILLION
$8680/PERSON
3.9% GROWTH
Per Capita Total Current Health Care Expenditures, U.S. and Selected Countries, 2010
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
0
1000
2000
3000
4000
5000
6000
7000
8000
US
NOR
SWIZ
NETH
CAN
DEN
GER
FR
SWE
AUS
UK
NZ
JPN
Average spending on healthper capita ($US PPP)
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
0
2
4
6
8
10
12
14
16
18
USNETHFRGERDENCANSWIZNZSWEUKNOR
Total expenditures on healthas percent of GDP
Hospital Spending per Discharge, 2009Adjusted for Differences in Cost of Living
US* CAN* NETH DEN SWIZ NOR** SWE AUS* NZ* OECD Median
FR GER0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
18,142
13,483 13,244
11,112 10,87510,441
9,870
8,350
7,1606,222
5,204 5,072
Dollars
* 2008.** 2007.Source: OECD Health Data 2011 (Nov. 2011).
WHY ARE US HEALTHCARE COSTS SO HIGH?
HIGHER PRICES FOR HEALTH CARE GOODS AND SERVICES
ADMINISTRATIVE OVERHEAD
HIGH UTILIZATION OF TECHNOLOGY
LEGAL CLIMATE AND DEFENSIVE MEDICINE
DRUG COSTS
More than $280 billion will be spent this year on prescription drugs in the U.S. If we paid what other countries did for the same products, we would save about $94 billion a year.
Gerard Anderson, a health care economist at the Johns Hopkins Bloomberg School of Public Health, says is the obvious and only issue: “All the prices are too damn high.”
IMPACT ON WORKING AMERICANS
Cumulative Increases in Health Insurance Premiums, Workers’ Contributions to Premiums, Inflation, and Workers’ Earnings, 1999-2012
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2012. Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April), 1999-2012; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey, 1999-2012 (April to April).
Average Annual Worker and Employer Contributions to Premiums and Total Premiums for Family Coverage
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2002-2012.
Proportion Of Nonelderly Adults Who Delayed Care Because Of Cost, By Coverage Status, 2000–10.
Kenney G M et al. Health Aff 2012;31:899-908
©2012 by Project HOPE - The People-to-People Health Foundation, Inc.
US DEMOGRAPHICS
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Source: U.S. Census Bureau, availableat: http://www.census.gov,accessed on September13, 2011; Kaiser FamilyFoundation,availableat:http://www.kff.org/medicare/h08_7821.cfm,accessed on September13,2011; Health Care Advisory Board interviewsand analysis.
Baby Boomer Surge Beginning
Medicare Rolls in Line to Increase Dramatically
2011 US Population Distribution By Age
75 M Baby Boomers
~7,000/dayNewly eligible Medicare
beneficiaries
23%Percentage of
population coveredby Medicare in 2030
Number of Elderly Will Double by 2030
Medicare Enrollment, 1966-2011
NOTES: Numbers may not sum to total due to rounding. People with disabilities under age 65 were not eligible for Medicare prior to 1972.SOURCE: Centers for Medicare & Medicaid Services, Medicare Enrollment: Hospital Insurance and/or Supplemental Medical Insurance Programs for Total, Fee-for-Service and Managed Care Enrollees as of July 1, 2008: Selected Calendar Years 1966-2008; 2009-2011, HHS Budget in Brief, FY2011.
Number in millions:
Percent Distribution of National Health Expenditures, by Type of Sponsor, 1987, 2000, 2010
Government Private1987 (Total = $519.1 billion)
Government Private
Government Private2000 (Total = $1,377.2
billion)
31.8%
68.2%
35.5%
64.5%
44.9%
55.1%
Federal Private Business State & Local Household Other Private Revenues
2010 (Total = $2,593.6 billion)
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Source: Health Care Advisory Board interviews and analysis.
52%
20%
27%
Moving Ever Closer to Single Payer
Medicare to Constitute Majority of Discharges by 2021
Inpatient Volume by Payer Class
Medicaid
Commercial
Medicare37%35%
22%
Medicaid
Commercial Medicare
2011
Self Pay
5%
2021
0.3% Self Pay
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Programs
17
Health Care Likely On the Chopping Block
But Little Agreement on How
Source: New York Times,availableat: http://www.nytimes.com/interactive/2010/02/01/us/budget.html,accessed September17, 2011; Health CareAdvisoryBoard interviews and analysis.
1) Includes spending for Medicare, Medicaid,CHIP, substance abuse and mental health services,National Institutes of Health, and Food and Drug Administration.
2) Includes spending for unemploymentinsurance programs, food stamps, militaryand federal civilianemployeeretirementand disability, and TemporaryAssistance for Needy Families(TANF) program.
24%
20%
20%
15%
14% Health Care1
Defense
Social Security
OtherSafety Net
2
Interest
on Debt 7%
Distribution of Spending in2011 Budget Proposal
Other
Possible Approaches toReducing Health Care Spending
Decreasedsupplemental payments
Eligibility changes Provider rate cuts
Payment model overhaul(i.e. voucher system)
Fraud, wastereduction
Cost shifting tobeneficiaries
“Medicare spent an estimated $4.4 billion in 2009 to care for patients who had been harmed in the hospital, and readmissions cost Medicare another $26 billion.”
Room for Improvement
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Our Inability to Execute on the Vision
Faced with an Unsustainable Status Quo
Public Insurance Financing Inadequate“The Medicare Hospital Insurance trust fund is now estimated to be exhausted in 2024, 5 year’s earlier thanwas shown in last year’s report and the fund is not adequately financed over the next 10 years.”
Board of TrusteesAnnual Report of Federal Hospital Insurance Trust Fund
April 2012
Rampant Delivery System Inefficiencies"Our healthcare system is fragmented, with amisalignment of incentives…that spawns inefficientallocation of resources [and] adversely impacts quality,cost, and outcomes. Eliminating waste … is crucial. . . .“
Alain C. EnthovenAmerican Journal of Managed Care
December 2009
A Cottage Industry Lacking Standardization“Our current health care system is essentially acottage industry of non-integrated, dedicatedartisans …Services are often highly variable,performance is largely unmeasured…andstandardized processes are regarded skeptically.…The gap between established science andcurrent practice is wide.” . . .
Stephen Swensen, Gregg Meyer et al.New England Journal of Medicine
January 2010
IMA
GE
CR
ED
IT: S
HU
TT
ER
ST
OC
K.
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Source: Health Care Advisory Board interviews and analysis.
An Industry Preparing For Fundamental Change
Coverage Expansion, Payment Reform Reshaping Health Care
Timeline of Health Reform Developments
VA AttorneyGeneral files firstlawsuit againstindividual mandate
CMS releasesproposed rule forMedicare SharedSavings Program
HHS releasesMeaningful Useregulations
Patient Protectionand Affordable CareAct (PPACA) passesHouse ofRepresentatives
PresidentObama repeals1099 reportingrequirementfrom PPACA
CMS issuesprovisions to HospitalReadmissionsReduction Program
HHS releasesMedicare Value-Based PurchasingProgram final rule
5
DONE DEAL!
Expand health insurance coverage
Improve coverage for those with health insurance
Improve access to and quality of care
Control rising health care costs
Goals for Health Reform
Promoting Health Coverage
Medicaid Coverage
(up to 133% FPL)
Employer-Sponsored Coverage
Exchanges(subsidies 133-
400% FPL)
IndividualMandate
Health Insurance
Market Reforms
Universal Coverage
Health Reform and Delivery System Changes
Promoting primary care and prevention
Improving provider supply
Developing new models for coordinating and delivering care
Making use of information technology
Reforming provider payments to promote quality
Improving Health Care Quality
• Development of a national quality strategy
• Coordinated care through medical homes and other models
• Quality-based payments for health care providers and improved information on provider quality
• Comparative effectiveness research to identify most effective treatments and interventions
• Enhanced data collection to address health care disparities
Health Reform Implementation Timeline
2010
• Some insurance market changes—no cost-sharing for preventive services, dependent coverage to age 26, no lifetime caps
• Pre-existing condition insurance plan
• Small business tax credits
• Premium review
2011-2013
• No cost-sharing for preventive services in Medicare and Medicaid
• Increased payments for primary care
• Reduced payments for Medicare providers and health plans
• New delivery system models in Medicare and Medicaid
• Tax changes and new health industry fees
2014
• Medicaid expansion• Health Insurance
Exchanges• Premium subsidies• Insurance market
rules—prohibition on denying coverage or charging more to those who are sick, standardized benefits
• Individual mandate• Employer
requirements
Health Insurance Coverage Among Young Adults, Ages 19–25 And 26–34, By Quarter, 2005–11.
Sommers B D et al. Health Aff 2013;32:165-174
©2013 by Project HOPE - The People-to-People Health Foundation, Inc.
Medicare Part A Trust Fund
Pre-health reform: 2017 projected insolvency date
Assets as a share of annual spending:
Post-health reform: 2029 projected insolvency date
Projection: Health reform legislation will extend the life of the Medicare Part A Trust Fund from 2017 to 2029
Rate of Medicare Spending Projected to Slow
NOTE: Estimates do not take into account future changes to the Sustainable Growth Rate formula to prevent reduction in fees.SOURCE: Medicare Baseline Spending before reform from CBO, March 2009 Baseline: MEDICARE; after reform from Kaiser Family Foundation analysis of CBO cost estimates of health reform legislation, March 20, 2010.
Medicare Baseline Spending(in $ billions)
Baseline Medicare Spending
Medicare Spending AFTER Health Reform
Congressional Budget Office Projections
Projected Savings
$50 b
illion
$100 billion
THE FUTURE FOR PHYSICIANS
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DeceleratingPrice Growth
• Federal, state budget pressuresconstraining public payer price growth
• Payments subject to quality,cost-based risks
• Commercial cost shiftingstretched to the limit
ShiftingPayer Mix
• Baby Boomers entering Medicare rolls
• Coverage expansion boostingMedicaid eligibility
• Most demand growth over the nextdecade comes from publiclyinsured patients
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Four Forces Shaping Future Margins
Financial, Clinical Profiles Shifting Dramatically
Continuing CostPressure
• No sign of slower cost growth ahead
• Drivers of new cost growth largelynon-accretive
DeterioratingCase Mix
• Medical demand from agingpopulation threatens to crowd outprofitable procedures
• Incidence of chronic disease,multiple comorbidities rising
Source: Health Care Advisory Board interviews and analysis.
TRADITIONAL RESPONSE
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Getting Paid Less to Do Less
New Payment Models Calling Old Imperatives Into Question
Accountable Payment Models
Performance Risk
Cost of Care
Bundled Pricing
• Bundled Payments for CareImprovement program
• Commercial bundledcontracts
Utilization Risk
Volume of Care
Shared Savings
• Medicare SharedSavings Program
• Pioneer ACO Program• Commercial ACO
contracts
Quality of Care
Pay-for-Performance
• Value-Based Purchasing• Readmissions penalties• Quality-based
commercial contracts
Source: Health Care Advisory Board interviews and analysis.
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Increased Provider Accountability Has Arrived
Value-Based Purchasing Represents First (of Newest) Pushes
Initiative
Value-BasedPurchasing
Description
• Mandatory pay-for-performance program
• Percentage of hospital inpatient paymentswithheld, earned back based on qualityperformance
Payment Timeline
• Withholds begin at 1% in 2013, grow to 2%by 2017
• Hospitals with greater than expectedreadmission rate subject to financial penalty
• Penalties capped at 1% of total DRGpaymentsin 2013,2% in 2014, and not to
Readmissions
BundledPayment
• Performance based on 30-day readmissionmetrics for three conditions in 2013,expanding in 2015 to include four others
• Payer disburses single payment to coverhospital, physician, or other servicesperformed during an inpatient stay orepisode of care
••••
exceed 3% in 2015 and beyond
Nov 4th: Letter of intent due for Models 2 to 4Q1 2012: Model 1 beginsH2 2012: Model 2-4 begins2013: National pilot on episodic bundling starts
Shared Savings
Medical HomeReimbursement
1) Center for Medicare and Medicaid Innovation.
• ACOs receive shared savingspayments ifspending per attributed beneficiary growsslower than national per beneficiary spending
• Two CMS pilots currently operational
• First ACO contracts to begin April 2012;contracts to last minimum of three years
• CMMI primary care pilot expected to launch inmid-20121
• CMS multi-payer advanced primary caredemonstration started in mid-2011
Source: Clinical Advisory Board interviews and analysis.
Mandatory
VoluntaryFor Now
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Source: Centers for Medicare and Medicaid Services, “CMS Issues Final Rule for First Year of HospitalValue-Based Purchasing Program,”April 29, 2011; Health Care Advisory Board interviewsand analysis.
1) In FY 2013, clinical care measures are weighted at 70 percentand patient experiencemeasures are weighted at 30 percent.
Picking Winners, Losers Based on Performance
Performance Scores Drive Payment Redistribution
Final Rule: Value-Based Purchasing Program Structure
Measure Performance
• CMS evaluates hospitals basedon achievement andimprovement on selectedclinical care, patientexperience measures
• Based on weighted average ofachievement and improvementscores, CMS calculates TotalPerformance Scores (TPS) foreach hospital1
Compare Hospitals
• Medicare ranks all hospitalsbased on TPS
• For achievement score,hospitals ranked below the 50thpercentile do not receive pointstowards TPS
• For improvement score,hospitals whose performancehas not improved relative to abaseline score do not receivepoints toward TPS
Adjust Payments
• Medicare converts TPS intoincentive payments
• Calculation will use linearexchange function
• Hospitals that receive higherTPS will receive higherincentive payments
• CMS to notify hospitals ofincentive payment for FY 2013on November 1, 2012
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Case in Brief: BCBS Hospital Choice Product
• Product spurred by Massachusetts regulation, which mandated that insurers inthe Connector network offer at least one tiered or limited network plan
• Product incents patients to choose low-cost, in-network providers by imposingfees for seeking care at 15 higher cost hospitals
• BCBS reports that the plan saves employers 5.5 percent; product the mostsuccessful in plan’s history
Source: Blue Cross Blue Shield, “Hospital Choice Cost Sharing,” availableat:http://www.bluecrossma.com/plan-education/pdf/hospital-list.pdf,accessed April 15,2011; Health Care Advisory Board interviewsand analysis.
Employers Increasingly Willing to Restrict Choice
Limiting Choice No Longer the Third Rail
Narrow Networks Making a Resurgence
Employer
Visits to higher-cost hospitals requirehigher out-of-pocket payment
Access to lower-cost hospitalsavailable at standard co-payment rates
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Case in Brief: WellPoint
• Insurer replacing traditional eightpercent annual rate increases withnew mandatory program that pays
increases only to hospitals withsufficient scores on 51 quality ofcare indicators
• WellPoint estimates that program willreduce annual inpatient cost growth bythree to five percentage points
55%35%
Satisfaction
10%
HealthOutcomes
PatientSafety
Quality Performance Risk Increasingly Prevalent
Private Insurers Raising the Stakes
WellPoint Tying Pay Increases to Quality Metrics
Quality Metric Weights
Patient
3-5%Estimated percentage
reduction in annualinpatient cost growth
Source: Adamy J., “WellPointShakes Up Hospital Payments,” The Wall StreetJournal,May 16, 2011; Health Care AdvisoryBoard interviewsand analysis.
NO PLACE TO HIDE
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Hospitals Facing Increased Transparency
CMS – Federal Level
MS-DRG 313 – Chest PainJanuary 2009 – December 2009
5
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Laser Focus on Individual PhysiciansOutcomes Matter
Source: http://www.vhi.org/hospital_region.asp
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Preparing for Physician Compare
Full Transparency at Your Fingertips
Source: www.medicare.gov
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NEW PAYMENT MODELS
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Redefining the Acute Care Episode: BUNDLED PAYMENTS
Driving Delivery System Integration
Bundled Payment Framework
Lump Sum Payments Drive IntegrationThrough Shared Accountability
Payer
PhysicianServices
HospitalServices
Post-AcuteServices
Program in Brief: Medicare’s BundledPayments for Care Improvement
• Program seeking voluntary participation infour bundled payment models
• Models 1-3 provide retrospectivereimbursement; Models 2 and 3 includepost-episode reconciliation; Model 4 offerssingle prospective payment
• Acute care hospitals, physician groups,health systems eligible for all models;post-acute facilities may participate withouthospitals in Model 3
• Physicians eligible for gainsharing bonusesup to 50 percent of traditional fee schedule
• For all models, applicants must proposequality measures, which CMS will use todevelop set of standardized metrics
Source: Centers for Medicare and Medicaid Services; Health CareAdvisoryBoard interviews and analysis.
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Program in Brief: Medicare SharedSavings Program
• Program begins April 1 or July 1, 2012;contracts to last minimum of three years
• Physician groups and hospitals eligible toparticipate, but primary care physicians mustbe included in any ACO group
• Participating ACOs must serve at least 5,000Medicare beneficiaries
• Bonus potential to depend on Medicare costsavings, quality metrics
• Two payment models available: one with no
downside risk, the second with downside riskin all three years
ACCOUNTABLE CARE ORGANIZATIONS
Applying Total Cost Accountability to Fee-for-Service Payments
Shared Savings Payment Cycle
AssignmentPatients assigned to ACO
Target Actual
based on terms of contract
BillingProviders bill normally, receivestandard fee-for-servicepayments
ComparisonTotal cost of care for assignedpopulation compared to risk-adjusted target expenditures
BonusBonuses or penalties leviedbased on variance of
1
2
3
4
5
expenditures from target
DistributionACO responsible for dividingbonus payments amongstakeholders
Source: Health Care Advisory Board interviews and analysis.
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(40%)
(14%)
(15%)
(24%)
90
PATIENT CENTERED MEDICAL HOME
PreventableAdmissions Drop Upon Improved Management
Central Aims of Medical Home Model
ComprehensiveCare
EnhancedAccess
PatientEngagement
CoordinatedCare
Community Care ofNorth Carolina
Source: Patient Centered PrimaryCare Collaborative,availableat:http://www.pcpcc.net/files/pcmh_evidence_outcomes_2009.pdf,accessedMay 3, 2011; Health Care Advisory Board interviews and analysis.
Percent Change in HospitalizationsResulting from Medical Home Models
Geisinger Health
System (ProvenHealthNavigator)
Genesee HealthPlan (HealthWorks)
HealthPartners MedicalGroup (BestCare)
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Fee-for-Service Accountable Care
Utilization
Maximization Optimization
ExpenseManagement
Cost per patient Cost per population
Quality andClinicalOutcomes
Hospital-based care Care across continuum
Shifting Economics Require Collaboration
Physician Engagement Fundamental to Accountable Care
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Source: Crossing the Quality Chasm: A New Health System for the21st Century, Institute of Medicine,2001
REDESIGNED CARE SYSTEM
Organizationsthat facilitate
work ofpatient-
centeredteams
High-performing
patient-centered
teams
•••••
REDESIGN IMPERATIVESReengineered care processesEffective use of information technologiesKnowledge and skills managementDevelopment of effective care teamsCoordination of care across patient conditions, services, sitesof care over time
An Inarguable Right Answer
A Redesigned Care System Centered on Value, Safety, and Outcomes
Recommendations from Institute of Medicine
Rules for Redesigning the Care System
1.
2.
Care is based on continuous healingrelationships
Care is customized to patient needs
3.
4.
5.
6.
and values
Patient is the source of control
Knowledge is shared and informationflows freely
Decision making is evidence-based
Safety is a system priority
7.
8.
9.
10.
Transparency is necessary
Needs are anticipated
Waste is continuously decreased
Cooperation among clinicians is apriority
OBSTACLES & QUESTIONS
ACCESS TO CARE
United States Has Low Physician-to-Population Level
30 Million People Live in FederallyDesignated Shortage Areas
The Physician Workforce Is Aging:250,000 Active Physicians Are Over 55
First-Year M.D. Enrollment per 100,000Population Has Declined Since 1980
Doctor Visits Are Sharply Higher forThose Over 65
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Productivity
79
Source: Health Care Advisory Board interviews and analysis.
Imperative #5: Redesign Inpatient Care Models
Migrating Toward Top-of-License Inpatient Care
Progress Must Continue Even in the Face of Practical Pressures
Single RN responsibleduring shift, but candelegate tasks toancillary staff
Yesterday
Time
Primary
Single RN responsiblefor patient’s careacross entire stay
Today
Hybrid
Tomorrow
Team-Based
TotalPatient Care
Single RN responsiblefor patient’s careacross nurse’s shift
Progress
RN leads team ofancillary staff jointlyresponsible for allassigned patients
Practical PressuresImpeding Productivity• Union pressure• Workforcestability/trainingrequirements
• Inadequatedelegation skills
Practical Pressure
ER LINES IN 2014????
ADDITIONAL QUESTIONS
TRUE COST OF IMPLEMENTING ACA
HEALTH EXCHANGE IMPLEMENTATION
INDEPENDENT PAYMENT ADVISORY BOARD
IS RATE SETTING THE ANSWER?
What sets our really expensive health-care system apart from most others isn’t necessarily the fact it’s not single-payer or universal. It’s that the federal government does not regulate the prices that health-care providers can charge.
An Emerging Conversation
“IT IS NOT THE STRONGEST OF THE SPECIES THAT SURVIVES,NOR THE MOST INTELLIGENT,BUT THE ONE MOST RESPONSIVE TO CHANGE”
Charles Darwin
Thank You