navigating the waves of healthcare reform
DESCRIPTION
Cindy Johnson delivered a detailed presentation on “Navigating the Waves of Healthcare Reform” at the Chicago Health Executives Forum Boat event and how Navigant has become one of the preeminent healthcare consulting firms in the country. She touched on healthcare reform: what it is and what it means, as well as, a section focusing on the question of where do we go from here? Johnson also highlights other market perspectives.TRANSCRIPT
D I S P U T E S & I N V E S T I G A T I O N S • E C O N O M I C S • F I N A N C I A L A D V I S O R Y • M A N A G E M E N T C O N S U L T I N G
Navigating the Waves of
Healthcare Reform
Chicago Healthcare
Executive Forum
July 2011
Table of Contents
Section 1 » Navigant Overview
Section 2 » Market Context: How we got here
Section 3 » Reform Overview: What is it and what does it mean
Section 4 » Developing an Approach: Where we go from here
Section 5 » Market Perspectives: Views from the field
Section 1
Navigant Overview
Navigant
Business Description
Navigant is a specialized, independent
advisory firm that supports companies,
lenders, institutional investors, legal
counsel, and government agencies.
Headquartered in Chicago, IL, the
company focuses on entities and
industries facing the challenges of
uncertainty, risk, distress and
significant change, and on the issues
driving these transformations.
Navigant’s 1,800 professionals are
located in 40 cities throughout
North America, Europe and Asia
Ticker NCI (NYSE)
2009 Revenue $700+ M
Professionals 1,800
Headquarters Chicago, IL
Navigant’s Healthcare Practice
Navigant is one of the preeminent healthcare consulting firms in the country.
2009
Partnership
Our Strategy:» Comprehensive team of professionals
representing all disciplines» Acquisition of best of breed consulting firms» Integrated capabilities providing a
true end-to-end solution
2008
Physician Strategy
2006
Coding &
Documentation
The Result:» 500+ resources including healthcare
executives, clinicians, and physicians» Broad set of capabilities including
Enterprise Strategy, Physician Strategy, Operations Improvement,
and Financial Turnaround» Unique approach that incorporates
strategy and physician engagement to ensure sustainable results
2005
Strategy
2010
Physician Operations
Section 2
Market ContextHow we got here
Unsustainable Healthcare Costs
U.S. Healthcare Expenditures
1998 - 2008
Hea
lth
care
sp
end
as
a p
erce
nta
ge
of
U.S
. GD
PTo
tal ann
ual p
remiu
m
Rising from 13.5% to 16.3% of U.S. GDP, health care expenditures are reaching
an unsustainable level
$-
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
% of GDP
Total premiums for family, in employer-sponsored plans
Personal health care expenditures per capita
Medicare spending per enrollee
CAGR: 8.4%CAGR: 6.8%
CAGR: 5.3%
Core Systemic Issues Exist
The current U.S. healthcare system has major access and affordability gaps due to a fundamentally flawed foundation – rewarding volume and inefficiencies, with limited consequences for variation or quality related issues
Fee for Service payments
Push for New
Technologies
Administrative Complexities
Excess Capacity
Waste & Inefficiency
Silo Oriented
Lack of transparency
Transactional Service
Models
Low Consumer
Trust/Engagement
Providers Health Insurers Life SciencesMedical Device
Manufacturers
Section 3
Reform OverviewWhat is it and what does it mean
Welcome to Healthcare
Reform
Lots of Questions
» What’s required for each market
constituent?
» How will the industry structure change?
» How will the basis of competition shift?
» How will value be created?
» How will the roles and players across the
value chain change?
» Who are the winners and losers?
» How will the political and legislative
environment and activities influence further
changes?
Confused? Overwhelmed? You’re Not Alone
» Patient Protection and Accountable Care Act represents
more than 2,400 pages of legislation
» More than 400 separate rules….most of which remain
undefined with vague timetables
» 183 new agencies and departments formed and funded
Goals & Key Elements of Reform
Decrease Costs Increase Access Improve Quality
» Delivery system reform
» Investments in public
health, prevention and
wellness
» Payment constraint
provisions
› Hospital market basket
reductions
› Hospital productivity
adjustments
› DSH payment
reductions
» Coverage and benefit
requirements
› Elimination of
restrictions
› Mandates
› Essential benefits
› Dependent coverage
» Premium subsidies
» Expansion of Medicaid
» Increased choice and
competition through
exchanges
» Care delivery provisions
› Medical Home
› ACO
› Bundled payment pilots
› Incentives for quality
» Evidence based
guidelines
» Expanding use of IT
» Transparency provisions
» Quality provisions
› Readmission payment
reductions
› Hospital-acquired
condition penalties
“PPACA” Creates a New Starting Point
B. Establishes Direction and Accelerates Evolution of Payment Agenda
1. ACO (Shared Savings Model)
2. Bundling
3. Value-Based Reimbursement
4. Medical Home
5. Geographic Variation
“What got you here, won’t get you there!”
C. Potential Mitigators
1. Political response
2. State energy (or lack thereof)
3. Rapid economic improvement
4. Patient revolt
5. Not enough budget for CMS to implement / administer
Ahead of the curve, Massachusetts’ emerging
reform agenda includes:
» Reduce ED utilization
» Reduce high-end imaging utilization
» Promote generic prescribing/substitution
» Promote treatment in the lowest cost
setting/facility appropriate for care
A. Health Insurance Reform
1. Enroll 32M entrants into system
2. Eliminate “injustices” (e.g., preexisting conditions)
3. Reduced ability to pass on increases and cross
subsidize public payers
New Challenges for Leadership
» Volatility vs. Stability
» Limiting, skeptical capital market
» Consumers represent a wildcard (compliance, market response, etc)
» Expense not price is last step in budget
» Two curve problem
» Developing internal excitement regarding change
» Implementing a new economic model to support implementation
» Creating a new culture to sustain it
Section 4
Developing an ApproachWhere do we go from here
A Classic “Two Curve” Problem is Underway
Many organizations are facing a decision between a classic “two curve” planning scenario.
Curve 1: Most are very comfortable continuing to follow a path along Curve #1;” optimizing the current
environment and maintaining the strategic direction and tactics that have been successful in the past
Curve 2: While many organizations have begun piloting efforts on the second curve, few have the vision or
fortitude to trust a Curve #2 path right now; that is, proactively exploring growth alternatives today with
associated upfront costs that may negatively impact Curve #1 performance
Continue generating incremental
margins despite evolving negative
national, regional and local
dynamics
Recognizing the medium and long term implications
of the changing market dynamics, “jump” to the
emerging curve, positioning the organization for the
anticipated challenges of the future.
Making the jump requires:
1) a forward thinking leadership
2) a high degree of organizational disruption
How do we get there…..
Section 5
Market PerspectivesViews from the field
Reform Changes Everything;
BUT Competition Preempts Reform!
Although health reform is in the
spotlight, a significant amount of
the jockeying for strategic position
in U.S. healthcare – among payers,
providers, governments – was
happening before PPACA. While
PPACA has served to accelerate
certain competitive trends, such as
the move toward value-based
healthcare, it continues to be
competition and not reform that
drives many markets.
Paper vs. Reality
“Policy Land”:
Reform is the rage…
Reform is on the horizon,
what’s movement is happening in the market?
1. Reducing “waste” by addressing cost and utilization
differences…”avoidable care”
2. Demonstration projects
3. Achieving scale & driving value
4. Physicians organizing
5. Targeted/Specialty Population Focus
6. Payer-Provider Collaboration
7. Delivering Innovative Market Solutions
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