Healthcare 2015 Leadership Austin Program

April 24, 2015

Norman H. Chenven Founder & CEO

Austin Regional Clinic 512-231-5514

chenven@arcmd.com

1,250,000 patient visits

350,000 active patients 1,750 employees

335 physicians

21 locations

15 specialties

7 cities

3 counties

1 medical group

Austin Regional Clinic

HEALTH CARE REFORM

THE PATIENT PROTECTION AND AFFORDABLE CARE ACT

THE NATIONAL DEFICIT

THE POTENTIAL IMPACT OF DECISIONS MADE BY THE SUPREME COURT

OTHER IMPONDERABLES

And…..

And 17.5% of the GDP in

40 minutes…..

American Health Care The American way of health care is both reviled and praised, sometimes by the same people. It is expensive, but it is innovative. It is unequal , but it provides some of the best care in the world. Its cost is growing far too fast for individuals and businesses, but we want even more of it. There are intense debates concerning many areas of health care – scientific issues in medical practice, prescription drugs, and emergency room use, to name a few – and underlying most of this conflict is the unusual way we pay for health care in the United States. Our approach results in our spending much more than other industrialized countries for, statistically speaking, no better results.

Richard C. Leone, President The Century Foundation

Data source: MediaTrackers

Healthcare Costs are “Unsustainable”

The size of the federal budget deficit is unsustainable.

The annual increase in the Medicare budget is unsustainable.

The percentage of healthcare spending to GDP is unsustainable.

State Medicaid programs are unsustainable.

The continued transfer of costs to employers and consumers is unsustainable.

CBO Estimated Government Outlays and Revenues (% of GDP)

Heathcare Costs by Age

$-

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

0 10 20 30 40 50 60 70 80 90

Age

An

nu

al p

er c

apit

a h

ealt

hca

re c

ost

s

UKGermanySwedenUSSpain

U.S. is Spending Much More for Older Ages

Source: Fischbeck, Paul. “US-Europe Comparisons of Health Risk for Specific Gender-Age Groups,” Carnegie Mellon University; September, 2009.

50

55

60

65

70

75

80

85

1960 1970 1980 1990 2000 2010 2015

WomenMen

Meanwhile, Life Expectancy Has Dramatically Increased…

Data source: MediaTrackers

Questions:

• Why does medical care cost so much? • Why are there so many uninsured Americans & Texans? • Why are medical premiums going up by 5-7% a year? • Will we need to ration health care? • Why can’t we do a better job of preventive medicine? • Why are there predictions that Medicare will go broke?

My Answer:

Doctors

Insurers

Nursing Homes

Medicaid

CHIP

Specialties

Hospitals

Employers

Consultants

Medicare Pharmaceutical

Home Health

Brokers

T F R A G M E N T A I O N

Concierge Medicine

Workman’s Comp

Equipment Manufacturers

& Fee for Service

Q: Is It Really That Bad? A: Yes!

• Total health care costs = ~ 3 Trillion Dollars • US ranks 17th internationally in health care outcomes

but 1st in cost per citizen • 38 million uninsured Americans • 22% of Texans are uninsured - We’re #1 • Looming shortage of primary care physicians • 6 billion in uncompensated care (Texas Hospitals)

Is It Really That Bad (cont’d)

• 78 million baby boomers (1946-1964) • 65% of Americans are overweight. • Medicare funding will go negative in the next

decade. • Health care costs are the 2nd leading cause of

personal bankruptcy.

Cost of Health Care Per Individual

1997 2008 2015

$3,700

$7,500

$8,700

We Have an Unsustainable Situation

• Americans have an expectation that health care is a right. • If care isn’t funded then our safety net system picks up

the slack. • Government funded health care represents more than 50%

of all health care dollars. • Medicare alone is projected to create a 60 trillion national

debt by 2050.

What Drives the Increases in Cost? • Lifestyle choices - BAD • Improved technology - GOOD Imaging Pharmaceuticals Implants

• Aging of America - GOOD Baby boomers Geriatric population (Men – 77, Women 81)

• Retail features in a third party payer system - BAD Direct to consumer advertising

• Bureaucracy, paperwork and regulatory complexity – VERY BAD • Medical liability system – VERY, VERY BAD • Lagging information technology - BAD • Payment for piecework BUT not for good outcomes. - BAD

ACA (OBAMACARE) Patient Protection & Affordable Care Act

• Law signed in 2010 – phasing in through 2020

• More than half of the States have sued to declare portions of the law unconstitutional.

• The House of Delegates voted repeatedly to repeal the act.

• Senator Orrin Hatch introduced legislation to repeal the individual and employer mandate in the Senate.

• Judge Roger Vinson (Florida) ruled against the ACA and added that the lack of a severability clause required him to declare, “The whole act void”. Reversed by the Supreme Court.

• King vs. Burwell currently in the Supreme Court.

ACA is “Really” Three Bills (and probably more…)

• Health Insurance Reform

• Extension of coverage to larger percentage of the U. S. population.

• Creative payment reform and encouragement for improved quality (pay for value) via Medicare and Medicaid payment mechanisms.

Health Insurance Reform

• Elimination of lifetime limits

• 85% floor on health plan loss ratios

• Extension of family coverage to adult children

• Elimination of pre-existing condition coverage exclusions

• Preventive medicine benefit mandates

• Etc.

Extension of Coverage To More Citizens

• Expansion of Medicaid

• Individual mandates

• Employer mandates - delayed

• Establish health insurance exchanges

• Sliding scale premium subsidies for individuals and small businesses.

Estimated: 11 million newly covered Americans

Creative Payment Reform (encouraged by Medicare and Medicaid)

• Accountable Care Organizations (ACO)

• Bundled payments

• “Innovation Center” experiments

• Improve information systems and health care data gathering/analytics in the health care industry.

• Congress just reinforced these concepts with SGR bill language this month (April, 2015).

Diabetes Management Pilot

Initial program results have been excellent.

If Texas implemented a similar diabetes program with similar outcomes, Texas Medicaid could save $155 million/year.

75% 33%

Decrease in Inpatient Care

Decrease in Emergency Care

$2.85 benefit for every $1.00 spent

Redefining Value: Better Outcomes at Lower Cost

• 1% of the population accounts for more than 25% of health costs.

• 10% of the population account for 70% of health care expenditures.

• 95% of Medicare costs are spent on patients with two or more chronic illnesses.

• 78% of national health care expenditures can be attributed to chronic illness. On order of $2 trillion.

Follow the Money

30

Fee-for-Service Pay-for-Performance

Episodic Bundling

Global Payment

Full Risk / % of Premium

Episodic Cost Total Cost

Provider Accountability

Continuum of Payment Models

Patient Centered Medical Home Accountable Care Organization

Enter Reform

Geisinger Health System Medical Home Preliminary data show a 20% reduction in hospital admissions and a 7%

savings in total medical costs.

Group Health of Pugent Sound Medical Home Pilot By End of Year Two, total savings $10.30 pmpm

• Outpatient Primary Care up $1.68 pmpm

• Outpatient Specialty Care up $5.78 pmpm

• ER utilization down $4.02 pmpm

• Inpatient utilization down $14.18 pmpm

• Improved HEDIS measures

• Higher patient and provider satisfaction

Medical Home Successes

• Improve preventive care & wellness measures.

• Improve management of chronic conditions.

• Provide optimal service & access to ensure patient satisfaction.

• Reduce cost trend.

• Demonstrate provider commitment as an organized system of care to be accountable for the individual patient’s welfare and the health of the entire program population.

Goals of ACOs

Whole population, Well-managed

with chronic conditions

Chronic conditions needing attention

Catastrophic Cases

Complex Patients and Frequent

Utilizers

Types of Patients We Expect to See

The 4 Patient Groups

• Whole population: preventive screenings.

• Chronic disease: asthma, diabetics, CAD.

• Catastrophic: transplants, cancers, strokes, etc.

• High utilizers: frequent ER visits, seeing multiple specialists, poly pharmacy, behavioral, financial and/or social issues, etc.

• Increased informatics and prompting at point of care

• Patient Outreach unit to focus on care gaps for healthy patients and controlled chronic disease patients

• Extensivist team for complex, high-utilizing patients

High Level Strategy

Summary

• The cost of medical care in the U.S. is concentrated in a small subset of the population.

• Data analytics can identify many (not all) of the population at risk.

• The current FFS reimbursement methodology does not reward prospective identification of this population or care coordination.

• Large, integrated delivery systems have the ability to identify and direct resources to better manage the high risk population.

• You get what you pay for!

The Health Industry Forum

Last month Secretary Sylvia Matthews Burrell announced that HHS has adopted a goal of shifting half of Medicare payments from traditional fee-for-service to an alternative method by 2018. Despite many new Affordable Care Act initiatives, progress on payment reform around the country has been spotty. Most of the new payment initiatives provide financial incentives for quality or reward provider groups that control total spending below a budget target. But most of these programs place little financial risk on providers. It is not known whether these limited financial incentives are strong enough to drive meaningful delivery reforms nor is it know whether they will evolve into stronger arrangements.