rt li h lthretooling health care: when resistance is futile 111115 kaufman.pdfrt li h lthretooling...

KAUFMAN: Indiana 111115 VAv3 (DKB1030) 11/3/2015

Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 1

R t li H lth CRetooling Health Care: When Resistance is Futile

Data Knows Best – It Will Bring You to Tiers! Nathan Kaufman, Managing DirectorKaufman Strategic Advisors, LLC11440 West Bernardo Ct., Suite 155San Diego, CA 92127(858) [email protected]

Kaufman Strategic Advisors, LLCEvidence Based Consulting

It’s Raining Acronyms - Hallelujah

“ Never ask a barber if you need a haircut!”

~Warren BuffetWarren Buffet

2© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved

“… the shift is occurring much slower than the hype….”



The “Black Swans”

CT St t H it l d ASC T ill t

What is the most significant current event in healthcare?

CT State Hospital and ASC Tax will cost hospitals $315M + $130M Medicaid Cuts.

A bottle of 500 doxycycline rose from $20 in October

Section 603, 2015 Budget Act: New off-campus outpatient services will not qualify as an HOPD


A bottle of 500 doxycycline rose from $20 in October 2013 to $1,849 in April 2014. ~NYT October 7 2014

Adventist Health to pay $118.7 million settlement over Stark, False Claims allegations.

Healthcare Policy Predications and Financial Forecasting

Where the Rubber Meets the Sky*

“Th M j B fi f Fi i l F i I

Where the Rubber Meets the Sky

ACOBundling OWA

• 45% MSSP ACOs cost Medicare more, 18% profitable• 45% Pioneers Dropped Out (HHS says Success!)• 9 Co-Ops have gone out of business• A’s: TSA, VA, ACO

4

“The Major Benefit of Financial Forecasting Is That It Makes Astrology Look Respectable.”

~John Kenneth Galbraith

© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved * 1) http://healthaffairs.org/blog/2015/06/19/medicares-rush-to-risk-confounding-theory-and-practice-leaving-acos-vulnerable/ 2) http://healthaffairs.org/blog/2015/06/18/pioneer-acos-anatomy-of-a-victory/3) http://content.healthaffairs.org/content/34/3/371.abstract



Strategy orLemming Syndrome?


Adjacency: The Trap of False Enthusiasm

Adjacency: The belief that an organization can sustain growth bysustain growth by entering into a market adjacent to it’s core business.

Failure Rate: 75%(Bain Analysis of 1,850 companies)


New Provider-base Plans:• CHI loses $23.7M on $377M • LIJ loses $12.4M• Piedmont/Wellstar exits Medicare Advantage• ~MHC 9/28/15



The “Doctor’s Dilemma”

What’s with all this doom and gloom? Right now, I f l t!

If you don’tchange your

lifestyle, there will bfeel great! be consequences.

Dr. Eric WestmanKetogenic Diet

"The combination of high caloric intake, obesity and lack of physical activity will surpass tobacco as the leading cause of cancer death within the next two decades.”

Oti B l MD CMO ACS


~Otis Brawley MD CMO ACS

“A tragedy resulting from the d l ti f h d fi it

Tragedy of the Commons:The Fundamental Flaw in the ACA

Who Will Volunteer for a Reduction in Income depletion of a shared finite resource

by individuals, acting independently and rationally according to each one's self-interest.”

a Reduction in Income• Pharma• Insurance Companies• Government• Health Systems• Suppliers• Physicians• Consultants & Lawyers• Employers

Garrett Hardin

8

Employers• Healthcare Workers• Unions• IT Companies• Patients



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


Per Physician Investment:

2004: $58,0002013: $176,000

~HFMA 12/8/14

No Regret Expectation: High Rates Driven by Market Power Will Rationalize Over Time

Net Payment per Episode

Hi R l t S (M )

• 70+% Institutional

• Researchers atHip Replacement Surgery (Mass):• $17,910 to $73,9871

Angioplasty (Chicago):• $15,951 to $49,6042

Mammogram (Dallas):• $150 to $1 0453

Researchers at Massachusetts General Hospital found a mistake or adverse event occurred during one out of every two surgeries and in five percent of drug

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• $150 to $1,0453

1 California Healthline, January 22, 20152 Modern Healthcare, July 20 20153 Castlight

© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved

administrations

Evaluation of Perioperative Medication Errors andAdverse Drug Events Anesthesiology Oct. 2015



Strategy Requires a Point of View (POV) Regarding Market Pace and Organizational Competencies

What will the local market look like in five years?

What competencies do I need to succeed in the future? What competencies do I need to succeed in the future? Realistically can I develop them?

What is the industry’s conventional wisdom, have we seen this movie before – how did it end?

What are the financial implications (w/o heroics)?

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Do the practicing physicians have a common understanding and commitment to ‘population health?’


Population Health d V land Value



Same Delivery Model?


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

▪ Hospitalists

▪ Ambulatory Ancillaries

▪ Specialty MD Office

▪ Ambulatory Ancillaries

▪ Urgent Care

▪ Hospital/ED

▪ SNFy

▪ Satellite ED

▪ Hospital/ED

▪ SNF

▪ Hospice 14© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved



n8’s Observations About Population Health and Other Related Topics

▪ Population health is a model for delivering care - it has nothing to do with economics.

▪ Every hospital has been subjected to risk and bundled payments▪ Every hospital has been subjected to risk and bundled payments since the 90’s -- most have underperformed

▪ Provider systems must manage to the probable future payment models i.e., Performance Risk NOT Actuarial Risk

▪ Effective management of a multi-facility system is a rare competency -- The farther you are away from the bedside the easier it is to create your own reality

▪ Those who deemphasize the importance of specialists will fail to▪ Those who deemphasize the importance of specialists will fail to impact cost and quality (i.e., value)

▪ Organizations are NOT strategies – A strategy is a series of choices that create measurably, differently better long term VALUE for your customers – rewarded with market share and profits

© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved 15

Value= Benefit/Price(Differently better in the eyes of the customer)

Brand




The Consolidated “80 Percenters” : 1) Essential to Value, 2) Likely to Demand Fee For Service, 3) May

Not Participate At AllHospital‐Based Phys.

New Delivery Models

Oncologists

ModelsCardiologists

Gastroenterologists

All Other Surgeons

Neurosurgeons

Orthopedic SurgeonsPCP


The Driver’s Test on the Road to Actuarial Risk

Inpatients

OutpatientsOutpatients

Office-based

Employees

High Risk

A+

Global Risk


B+



Is Wellness a Key Component of Population Health?

Industry Consensus: Wellness centers will become money-makers under population Health

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

~Healthcare Finance 8/15/15


“…wellness programs are having little if any immediate effects on the amount employers spend on health care.”

~Rand Corporation – based on 600,000 employee/7 employers and 10 year data from Fortune 100

18.1% GDP

Post ACA Annual Growth in Healthcare Spending

Anecdotes are NOT Evidence

ACA Exchangesg ACOs Minute Clinics PCMH Bundled Payments Value-based Care Wellness

2020

Clinical Integration Population Health




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

21Altarum’s Triangle of Painful Choiceshttp://www.youtube.com/watch?v=QrPaJBh01sE


Commercial Coverage: The Math Does NOT Work

$51,000

“28.2% of insured adults have unmet needs due to


affordability – prefer skipping care vs. shopping.”

~Healthexec Mobile 10/6/2015 Modern Healthcare 10/16/2015



The New Regulations Impacting the Commercial Insurance Industry will Eventually Impact Providers

Premium Caps, Transparency, Aging Cadillac Tax & Medicaid Expansion

POV: Lower

Revenue Growth Health

Plan Profits

$

Premiums

23

Benefits

Standard Benefits & Universal Coverage © Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved

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%

24

0%

1%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014




Volume to Value?

Pay for Conformance

Regional Market Power NOT VALUE is Driving

Payment Rates and Profitability

25


Insurance to ReinsurancePremium: $12,000Deductible: $2000/$4,000 (repriced)Co-pay: 30%

Strategy Requires Leaders to Adopt a Point of View (POV) Re: the Market



The Emergence of More Government Scrutiny – New Focus on Physicians

The OIG states that physicians who enter into “compensation arrangements such as medical directorships must ensure that those arrangements reflect fair market value for bona fide services the physicians actually provide.”

“Georgia system to pay up to $35M (MD to pay $425K) for paying

27

g y p y p $ ( p y $ ) p y ga physician excess salary, directorship, up-coding and self-referral.” ~MHC 9/5/15


“Broward County Hospital will pay the government $69.5 million to settle allegations that it illegally paid nine doctors for referrals.” ~MHC 9/15/15

Negotiated Rates: Colonoscopy

The Emergence of Price Transparency and Channeling

Negotiated Rates: Colonoscopy




The Emergence of VirtualHealthcare

29

Mass General Pilots Cardiology E-Consults Published: Jun 8, 2015 Medpage Today


Telehealth Users*

© Kaufman Strategic Advisors, LLC 2015 ~ All Rights Reserved 30*American Well



The Emergence of New Health Benefit Design

Domestic Medical Tourism,

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:

300% of Medicare

Private Exchanges (Expedia)Rapid adoption of

Transparency, High Deductibles, Reference Pricing

Deselection of Providers

Domestic Medical Tourism, & Bundled Payments

for Elective Centers of Excellence

Single Payer

31

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


Brought to You by United Healthcare




Brought to You by United Healthcare


Ever Increasing Percentage of Medicare Payments Tied to “Value”

Hospital Name

FY 2015 Estimated

ReadmissionsPenalty

FY 2015 ReadmissionsNet Revenue

Change

FY 2015 Final VBP

Adj. Factor

FY 2015 Estimated VBP

Incentive Payment

FY 2015 VBP Net Revenue

Change

FY 2015 Total P4P Impact

Inc. HAC

FY 2015 % P4P Impact

INOVA FAIRFAX HOSP ($39,645.56) -0.02% 0.9922 ($1,034,238.40) -0.51% ($3,072,601.62) -1.53%

VIRGINIAVIRGINIA HOSP CTR ($150,114.24) -0.18% 1.0069 $434,097.47 0.51% $283,983.23 0.34%

NORTH SHORE UNIV HOSP ($937,785.76) -0.37% 0.9993 ($117,815.36) -0.05% ($3,613,223.42) -1.41%

YALE-NEW HAVEN HOSP ($1,728,414.67) -0.41% 0.9961 ($945,908.23) -0.22% ($6,889,715.58) -1.62%

10 percent: Clinical process of care 25 percent: Patient experience of care (HCAHPS survey) 40 percent: Outcome (hospital mortality measures for acute

myocardial infarction, heart failure, and pneumonia, the central line-associated bloodstream infection measure the catheter associated


34

associated bloodstream infection measure, the catheter associated urinary tract infection measure, the surgical site infection strata, and the AHRQ PSI-90 Composite)

25 percent: Efficiency (Medicare Spending per Beneficiary measure)

Hospital-onset methicillin-resistant Staphylococcus aureus (MRSA) bacteremia and Clostridium difficile infection.

Clinical Care - Process measure: early elective deliveries (PC-01)



Whoops!

ACO: A Lemming Strategy?

Few ACOs Earned Bonuses:ACO Results in CA:

“The financial results came as a disappointmentbut we were not surprised.”

~National Association of ACOs (NAACOS)

“The progress toward cost stabilization through ACO contracts from Medicare and commercial PPO has been modest at best.” “Medicare Yet To Save Money

36

been modest at best.

~Accountable Care in California: Imperatives and Challenges of Physician –Hospital Alignment, James Robinson Ph.D, Integrated Healthcare Assn May 2015


Medicare Yet To Save Money Through Heralded [ACO] Medical Payment Model”

~Kaiser Health NewsBy Jordan Rau and Jenny Gold September 14, 2015



Strategy Requires Strategy Requires Leaders to Adopt a Point of View (POV) Re: Organizational CompetenciesAre you a value-based network?

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

38

How many different sets of

orders?

words, I'd say: it all has to do with reducing variation.”

~W.E Deming




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)19 Minute ED Wait in Sacramento Competing

Self Interests

Value FFS

JD Powers Best Patient Sat.

39

• 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


Who is Getting Medicare Advantage Right?

40

~NCQA




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!*

41

*And we cannot guarantee that your care will be appropriate, efficient, state-of-the-art or meet the highest professional standards.


The “Value Proposition” for Future Success

A Value-based Network (VBN) of providers that consistently delivers:y

‒ Superior service‒ Predictable reasonable cost per episode

and‒ Appropriate, accessible, standard care

b d th b t i i di i

42

based on the best science in medicine

VBNs are well-positioned for every payment methodologyif they are geographically indispensable





It Takes More Than Scale

Henry Ford being reviewed for credit downgrade

MHC M 9 2014~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 billion in revenue mainly due to their health plan which lost $110 million ~Boston Globe 12/14/14




Creating a Value-based D li N t kDelivery NetworkWhat’s the plan? How will you be differently better????

Most Health Systems Have the Same Strategic Plan

Optimize commercial rates

Clinically integrate with employed and independent physicians

Extensive use of protocols, EHR/IT to coordinate care Breakeven on p ,Medicare

Broad rational geographic coverage with a sufficient supply of primary care physicians and specialists

Shared savings relationships with payers

Benchmark financial performance

Top tier quality and patient safetyp q y p y

Service line strategies to drive revenue growth

Highly engaged employees

Operate as a high functioning health system with attractive, modern facilities




Physicians are Seeking Shelter from the Storm

• ICD 10• Regulation• Cyber Security• Deductibles• MGMA-wRVU

47

2014 Medicare Trustees Report, AMA


Finding the “Magic” in Physician Employment

"A system will not manage itself. Left to themselves,

CONSOLIDATION & DEEP MANAGEMENTtse e t to t e se es,

components become selfish, competitive, independent profit centers, and thus destroy the system.” ~W E Deming

Central, shared governance Compact: gives and asks Physician hierarchy w/performance

evaluation and routine reports Consolidation of offices. Common name & standard office systems Standard use of clinical guidelines

“The problem is management..It is management's job to direct the efforts of all

48

Referral management Blended comp. plan

direct the efforts of all components toward the aim of the system.”

~W E Deming




Strategic End Game■ You can demonstrate superior value PER EPISODE which attracts contracts

and market share (try to avoid per unit price reductions)

‒ Mechanism to rapidly implement appropriate care/optimal outcomes‒ Significant decline in employee health plan costs

Bonuses from Medicare and other value-based payment plans‒ Bonuses from Medicare and other value-based payment plans

■ You are geographically indispensable – in control of care delivery/payment

■ Multiple “Centers of Excellence” able to win competitive bids based on

quality and cost

‒ “If you are what you do but you don’t document it then you are not”

■ Payors seek out your network for collaborations e.g., for Medicare

49

Advantage, Tiered Networks etc.

■ ROI from investment in employed and contracted physicians

■ Capacity and services are consolidated and your portfolio of facilities is rationalized


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

50

Data & Peer Leadership




Then a Miracle Occurs:Leadership, Trust, Shared Vision


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

52

CV Surgery Neurosurgery OB/Gyn Bariatrics

Orthopedics

ENT

Emergency

Ad hoc

Hospital Medicine

Pathology




22 Hours of Mandatory In-service


54




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

55

David LereahChief Economist of NAR (2005)

From an SVP @ FP Hospital Company 4/2014


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




Rules of the Road To Value■ Healthcare is local

■ Develop tools to accurately measure and optimize appropriateness, outcomes, service, access and cost

■ Avoid the ‘lemming syndrome,’ rely on data not anecdotes

■ Don’t get ahead of your competencies

■ Eliminate waste (cost per episode)

■ Avoid using heroic assumptions

■ Explore opportunities to partner in the MA space

■ Measure success in terms of market share and profitability

■ Ensure that you are geographically indispensable

■ Don’t trade deep discounts for the promise of increasing market share

■ Organizations, consultants and buzzwords do not create value… value creation primarily requires physician leaders and their followers


Focus on the Cost of Everything!

We have heard the bed rental f

Norfolk Southern Railroad:2014 Net Income: $1.99 B

prediction before!

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