© Oliver Wyman

WHAT WE DO

HOW OLIVER WYMAN’S

HEALTH & LIFE SCIENCES TEAM MAXIMIZES VALUE FOR SUCCESS IN TODAY’S NEW HEALTH MARKET

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© Oliver Wyman

• Oliver Wyman supported the client across four different dimensions: – Developed an overarching and integrated

view of its network and provider strategy – Developed a three-year roadmap

articulating necessary changes to the network (at the individual provider entity level), including “quick wins”

– Provided a detailed strategy playbook in order to ensure successful implementation

– Provided detailed structures of three provider risk arrangements and designed glidepaths to move providers to risk

• A non-profit payer operating in a highly competitive regional market was facing rising medical costs

• The majority of the payer’s facility contracts were up for renewal, providing a unique opportunity to negotiate better terms and expedite migration to value-based reimbursement

• The client engaged Oliver Wyman to develop a three-year network strategy and roadmap to reduce medical expenses across all lines of business and migrate to value-based reimbursement

Oliver Wyman approach Client situation

Network Strategy and Roadmap Oliver Wyman helped a regional payer develop a three-year network strategy and roadmap to reduce medical expenses

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Network Strategy and Roadmap Oliver Wyman helped a regional payer develop a three-year network strategy and roadmap to reduce medical expenses

• Recommended initiatives projected to generate medical cost savings across all lines of business of $60–100MM annually, or up to 8% of medical costs

• Identified additional savings beyond the scope of work that would accelerate the client’s medical cost reduction goal

• Designed risk models that are expected to guide client’s execution of several risk arrangements by end of year of engagement

Key impacts achieved

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• Oliver Wyman developed a new operational model and organization structure: – Identified overlapping functions by

interviewing leaders – Proposed a streamlined organization

structure that emphasized and centralized product functions

– Facilitated workshops that guided leaders to design organization within Oliver Wyman guidelines and operational vision

– Tracked employee moves and their financial impacts

• Client is a department of a leading, diversified health services company facing increased profitability pressure and seeking opportunities to drive cost savings

• A history of growth through acquisition and the need to hedge against underperformance of cross-company partners had resulted in operating inefficiencies

• Oliver Wyman was asked to restructure the client organization – Increase organizational focus while

streamlining costs by eliminating redundancies

– Identify necessary investments to position for future growth and foster innovation

Oliver Wyman approach Client situation

Organizational Redesign Oliver Wyman helped a health services company create a product-centric organization structure to reduce operational costs

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Organizational Redesign Oliver Wyman helped a health services company create a product-centric organization structure to reduce operational costs

• Redesigned organization with a dedicated focus on product development and integrated “solutions” – Clearly defined roles and responsibilities and

partnership expectations to empower a narrower scope and deeper expertise for each team

• Aligned client Executive Team on the implementation pathway, equipped with tools to measure success of the redesign

• Line of sight to $20–25MM in annual profitability increases through workforce restructuring

Key impacts achieved

Illustrative: Key Deliverables

Org Charts and Employee Mappings

Day 1 Manager Packs to support implementation

Operating Model

Leader Roles and Responsibilities

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• Oliver Wyman conducted a benchmarking analysis, identified areas of over and understaffing, and quantified the potential savings if the system took steps to align their staffing model with best-in-class health system

• Benchmarking analysis activities included: – Collecting and analyzing client staffing,

financial, and operational data – Mapping client data to benchmark

dataset and conducting comparative analysis at the system, teaching hospital, and regional hospital levels

• Client is a private, not-for-profit health system with one flagship hospital, one community hospital, and other ambulatory care facilities

• Client has a strong brand and presence in the market but has higher‐than-desired operational costs, specifically tied to managerial staffing

• Client sought to understand how managerial staffing levels were affecting financial performance by identifying specific areas of the organization where managerial staffing levels were notably higher or lower than similar departments at comparable organizations

Oliver Wyman approach Client situation

Health System Managerial Staffing Oliver Wyman helped a mid-sized, regional health system understand how changes to its staffing model could drive significant cost savings

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Health System Managerial Staffing Oliver Wyman helped a mid-sized, regional health system understand how changes to its staffing model could drive significant cost savings

• The organizational redesign approach Oliver Wyman recommended could drive run-rate costs savings of more than $30MM, which represents almost 2× 2013 operating income

Key impacts achieved

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© Oliver Wyman

• Provided a prostate cancer landscape assessment that included epidemiology, current treatment paradigms, competitor analysis, and key future events and uncertainties

• Generated several alternative strategies through internal and external interviews and workshop facilitation; included generation of draft clinical trial designs and target product profiles

• Performed financial valuation of each of the alternative strategies and highlighted the potential trade-offs that led to the recommended optimal strategy

• Client recently acquired a novel prostate cancer drug, necessitating a review of the development strategy now that they had a “portfolio” of two agents

• An existing development plan had been created to support acquisition of the asset but it was unclear that this strategy had been optimized to extract full value from the portfolio as opposed to just the individual assets

• Looking into the future, client also recognized that the prostate cancer landscape was changing rapidly due to competitors and scientific developments, necessitating a forward-looking strategy to solidify their market leadership beyond development of their existing assets

Oliver Wyman approach Client situation

Prostate Cancer Portfolio Strategy For a top 5 pharma company, Oliver Wyman generated an alternative strategy to extract an additional ~$500MM portfolio value

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Prostate Cancer Portfolio Strategy For a top 5 pharma company, Oliver Wyman generated an alternative strategy to extract an additional ~$500MM portfolio value

• Oliver Wyman identified an alternative portfolio development strategy that: – Increased total cumulative revenues by ~$3BN

(relative to the existing development plan) – Increased risk-adjusted Net Present Value (NPV) of

the portfolio by ~$500MM (increased development cost of ~$175MM)

• Oliver Wyman also proposed pursuit of a fixed dose combination formulation of the two drugs to increase cumulative revenues and risk-adjusted NPV by $1.4BN and $450MM, respectively

Key impacts achieved

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• Oliver Wyman supported the client across four different dimensions: – Extensivist clinic design: Facilitated detailed

design of de novo extensivist clinics for polychronic Medicare patients

– Future clinical model design: Designed a process for identifying and piloting new clinical models

– Medicare risk adjustment improvement: Provided recommendations and quantified opportunity for improving Medicare risk adjustment process

– Product launch strategy and preparation: Recommended enhancements to product strategy

• A large non-profit healthcare provider has recently made decisions on its product and contracting strategy that have created an opportunity for managing a significantly increased portfolio of risk products in 2016

• The client engaged Oliver Wyman to ensure it was commercially, financially, and clinically prepared for assuming additional risk in 2016

Oliver Wyman approach Client situation

Population Health Management Roadmap Oliver Wyman helped a large non-profit healthcare provider develop a roadmap for its population health management strategy

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Population Health Management Roadmap Oliver Wyman helped a large non-profit healthcare provider develop a roadmap for its population health management strategy

• Extensivist clinics have the potential to reduce the cost of the sickest Medicare patients by 15–25% through a significant reduction in utilization

• Medicare risk adjustment improvement has the potential to impact Medicare Advantage-associated financials by ~$17MM (on a base of ~40K members)

Key impacts achieved