KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015 Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 1 A Crucial Conversation A Crucial Conversation about Healthcare Acquired Inflections Nathan Kaufman, Managing Director Kaufman Strategic Advisors, LLC 11440 West Bernardo Ct., Suite 155 San Diego, CA 92127 (858) 487-9771 [email protected]www.Kaufmansa.com Kaufman Strategic Advisors, LLC Evidence Based Consulting It’s Raining Acronyms - Hallelujah “ Never ask a barber if you need a haircut Warren Buffet Warren Buffet 2
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KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 1
A Crucial Conversation A Crucial Conversation about Healthcare
Acquired Inflections
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: Houston ACHE 060415 (DKB0522) 5/22/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 2
A Health System’s “Circle of Life”: Access to Capital
Providing Value to Patients and Stabilizing
Supply Costs
Patients and Stabilizing Physician Compensation
Requires the
Ability to Borrow
Revenue –Expenses =
Bond Rating:
Access to Capital (Credit Score)
Negotiated Rates &
Government Reimbursement
Physician Investment
& Buy-In
Personnel
Costs
Capital Spending
3
N8 Kaufman –Comfortable with Strategy
Why Smart People Struggle With StrategyRoger Martin HBR
4
KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 3
All Businesses are Susceptible to Inflections
▪ 1981: Kodak’s research concluded that digital was inevitable but not for 10
1975
years ▪ Status Quo
▪ 1988: Bought Sterling Labs ▪ Adjacency, Synergy
▪ 1996: Created Advantix Hybrid CameraG Thi k ▪ Group Think
“The true sign of intelligence is not knowledge but imagination.” ~ Albert Einstein
5
Strategy Requires a Point of View (POV) Regarding Market Pace and Organizational Competencies
Where is our market really moving?‒ How fast will it happen here?
What competencies do we need to succeed?‒ Do we have them?‒ Realistically can we develop them?‒ How long will it take?
Have we seen this movie before – how did it end?
6
Are the physicians on board?
How will this impact our financials (w/o heroics)?‒ Will we be able to ‘pay the mortgage’?
KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 4
The Key to Successful Strategic Transformation for Healthcare Providers
You Become
Strategy
You Become What You Measure:
■Actionable clinical analytics
■Accurate cost
7
■Accurate cost accounting
Population Health: Shifting from a Provider-Centric to a Subpopulation-Centric Model of Care
Global Risk for Managing the Health of the General Population
AHA Guidelines reduced telemetry use by 70% without any harm to patient care. WSJ Sept. 22 2014
JAMA Internal Medicine
Geisinger: 2.4% of its diabetic patients visiting PCPs were getting appropriate care.
KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 5
Segmentation and Focus are Essential
9
Courtesy of Brian Silverstein MD
Conclusion: Chronically ill patients whose primary care providers offer highly fragmented care more often experience lapses in care quality and incur greater healthcare costs.Am J Manag Care. 2015;21(5):355-362 - See more at: http://www.ajmc.com/journals/issue/2015/2015-vol21-n5/Care-Fragmentation-Quality-Costs-Among-Chronically-Ill-Patients#sthash.qtsMmUKF.dpuf
Are The Physicians “Engaged” in Your Population Health Strategies?
What’s with all this doom and gloom? Right
If you don’tchange your
lifestyle, there will gloom? Right now, I feel great! be consequences.
“There are almost no human behaviors in which we take the long-term future into account.” ~ Dan Ariely
Dr. Eric WestmanKetogenic Diet
account. ~ Dan Ariely
1010
KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 6
“Changing the payment system probably isn't enough to ensure that patient care will improve.”Effects of Alternative Payment on Physician Practices In the US, Rand Corporation, AMA, 3/19/15
Physicians are affiliating to maintain status quo
Alternative payment models are increasing physician workload but not income
Alternative payment models haven’t substantially changed the way physicians deliver care
Operational problems in new payment programs are frustrating the physician participants impacting theirfrustrating the physician-participants impacting their enthusiasm
40% of doctors choose fines over quality reporting compliance
I f 0 5% i h f th t f Increase of 0.5% in each of the next four years
Participation in “alternative-payment systems” e.g., ACO, PCMH results in a 5% bonuses from 2020 to 2024
Merit based Incentive Payment System (MIPS) based
12
Merit-based Incentive Payment System (MIPS) based on ‘quality’, IT and VBP will provide penalties and incentives from -4% to 4% in 2018 increasing to -9% to 9% by 2021
KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
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Strategy Requires Leaders to Adopt a Point of View (POV) Re: the Market
“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. ~CMS
grow faster than projected ...and Congress won’t be able to avoid changing course.”
~Richard S. Foster, Chief Actuary for CMS (Ret.) February 28, 2012
14Altarum’s Triangle of Painful Choiceshttp://www.youtube.com/watch?v=QrPaJBh01sE
KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 8
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Where Are the Savings?
Net Payment - Blue Cross Negotiated Prices for Hip Replacement Surgery:Prices for Hip Replacement Surgery:
• $23,696 to $47,386 in San Diego• $17,910 and $73,987 in Massachusetts
California Healthline, January 22, 2015
16
KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
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Volume to Value?
Pay for Conformance
Market Power Continues to Drive Payment Rates
17
y
Strategic Advantage forDominant Regional Systems
NOT National Systems
Has Customer Value Been The Driving Force Behind Healthcare Delivery Design?
Payer Profits
Beware of Health Plans that offer to “collaborate”!
Payer Profits
Provider Profits
Physician Comp.
Preference
Precedence
Providers Payers
2016 Requested Rate Increase
• NM: BC - 51%• TN: BC - 36%• MD: CF - 30%• VA: BC – 13%• OR: MO – 25%
Phacilities
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“We understand –but you don’t!”
KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
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Who is the Sponsor?
19
Negotiated Rates: Colonoscopy
20
KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
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Does the Data Support the Growth in Consumerism
"We always yoverestimate the change that will occur in the next two years and underestimate the change that will occur in the next 10. Don't let yourself be lulled into inaction." ~Bill G t Th R d Ah d 1996
21
Gates, The Road Ahead,1996
New Health Benefit Design
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
Private Exchanges (Expedia)Rapid transition to “REAL Value-
based Commercial Pa ments”
Reference Pricing & Transparency& High Deductibles
Domestic Medical Tourism & Bundled Payments
for Elective Centers of ExcellenceSingle Payer
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Private Exchanges (Expedia)
Provider-Based Health Plans andCommercial Capitation (Risk)
based Commercial Payments” and “Population Health”
Medicare and Medicaid “Value“Value--based Payments”based Payments” &
Risk!
KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
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There is a Fine Line Between a Vision and a Hallucination
Risk: To Put Oneself in Danger Anecdotes are not data – FFS with a 5% bonus is neither a
“risk-based” nor “value-based” contract
■ The vast majority of hospitals don't have anything close to the systems and infrastructure necessary to take on risk successfully [and most who have tried have not succeeded]succeeded].
■ Managed care plans have been at this for 20-30 years and still make big mistakes on a fairly regular basis.
23~Carl McDonald
More than a third of Americans are obese, with another third classified as overweight
Brought to You by United Healthcare
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KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
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“Negative revenue and cost pressures continue to outweigh the positive impact of mergers, acquisitions and ACA-driven coverage expansion.” S&P 3/2015
The New Math of Population Health M tManagement
KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 16
ACOs Will Make the Economics of Health Systems Worse for Providers!
Payer
50%
ACO
10%
Institutional Revenue
100%
VolumeInfrastructure
Physicians
Savings
10%
50%10%
Minimal
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Price
Hospital
20%
20%80%
0%
Strategy Requires St ategy equ esLeaders to Adopt a Point of View (POV) Re: Organizational CompetenciesAre you a value-based network?
KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
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Value= Real and Perceived Benefit /Price
-----------------Output-----------------
Value = (A x (O + S + Ac))/ W)/Price
A: Appropriate care based on the best medical scienceO: OutcomesS: Service
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Virginia Mason Quality Formula
Ac: AccessW: Waste (optimizing the efficiency of care)
Authenticity, the Key to Earning Long Term Brand Loyalty and Avoiding Commoditization
Strategy:
Provide Value that
An airline for the common man: We exist to connect people to what’s important in their lives through friendly, reliable, and low-cost air travel.
Provide Value that is Sustainably
Differently Betteras defined by
the Patient(Measurement)
Employees and Affiliates
Do it:
To achieve best-in-class safety performance, flyer friendly, customer first!
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Leadership Defines How to
Behave and What to Do
KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
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The Value-based Network Test
A 2011 study: about 50% of stent procedures were appropriate, 38% were
If I had to reduce my message for achieving excellence to just a few
uncertain, and 11.6% were inappropriate,
American College of Cardiology
35
How many different sets of
orders?
words, I'd say: it all has to do with reducing variation.”
~W.E Deming
How About This?
May 18 2015
Risks Are High at Low-Volume HospitalsPatients at thousands of hospitals face greater risks from common operations, simply because the surgical teams don't get enough
May 18,2015
36
Leapfrog and Castlight 2014
g gpractice.
KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
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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!*
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*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
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based on the best science in medicine
VBNs are well-positioned for every payment methodologyif they are geographically indispensable
KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
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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) Competing
Self Interests
Value FFS
5 Star Health Plans (CA)Top MA Plans – NCQAJD Powers Best Patient Sat.
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• Organized broad geographic network• Transparent actionable analytics• Compliance w/ hundreds of clinical guidelines• Focus on team care & collective performance• Integrated health plan, physicians and hospitals• Interconnected EHR• Full acute care continuum
• 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
KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
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It Takes More Than Scale
Henry Ford being reviewed for credit downgrade reporting net income of $27.8 million, up from a $12reporting net income of $27.8 million, up from a $12 million loss in 2013 ~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)
Partners HealthCare reported a $22 million loss on $11Partners HealthCare reported a $22 million loss on $11 billion in revenue mainly due to their health plan which lost $110 million
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Creating a Value-based Delivery N t kNetworkWhat’s The Plan & Will It Work?
KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 22
Most Health Systems Have the Same Strategic Plan
Clinically integrate with employed and independent physicians
Extensive use of protocols, EHR/IT to coordinate care Breakeven on MedicareBreakeven on 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 safety
Service line strategies to drive revenue growth
Highly engaged employees
Operate as a high functioning health system with attractive, modern facilities
43
Eliminate Waste (W)
■ Optimize performance of key systems: e.g., Revenue Cycle, IT,
Staffing, Case Management, Cost Accounting, Supplies, etc.
‒ Consider getting outsiders to ‘kick the tires’
■ Develop an aggressive goal for cost reduction. Use a
systematic approach – LEAN and Activity-Based Costing (ABC)
■ If you are a system, develop your ‘standard way’ and
consolidate functions and services
■ Optimize the investment in employed and contracted
physicians and promote the use of ‘mid-levels,’ and virtual
medicine
44
KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
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Warning: Payers Are Targeting the Physician Employment Paradigm
Hospital ownership of physician practices leads to higher prices.
~Vertical Integration, Hospital Ownership of Physician Practices, Lawrence C. Baker et. Al. Health Affairs,
33 756-763
MedPAC recommends that hospitals be paid at the same rates they pay physician offices.
45
Investment in Physician Employment
RaiseRates &
Convert to HOPPS!
Physicians are Seeking a Safety Net
Pure wRVU Compensation
Incentivizes patient hording and over utilizationutilization
Disincentive to focus on overall success of the system
Signals physicians that patient satisfaction, safety, access appropriateness and expense control (i.e. value) are extra
Disincentive to recruit
Inaccurately valued wRVUs my be a disincentive to do the right thing
46
2014 Medicare Trustees Report, AMA
KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
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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
47
Referral management Blended comp. plan
direct the efforts of all components toward the aim of the system.:
~W E Deming
Promote Appropriate Care (A)
■ Develop clear lines of accountability and performance expectations for hospital-based physicians‒ Hospitalist, ED physicians, Case managers
■ Implement a process for physicians to develop clinical guidelines and measure and encourage compliance‒ Quality Committee of Board creates a quality compact with the
medical staff
‒ CI Network
■ Extensive use of EMR and ensure accurate clinical documentationdocumentation
Eliminate optional low volume services/facilities
■ Create disease management programs for high risk populations and companionate palliative care program
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KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
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Redesigning Care Delivery
84 Year Old Female “Problem List”:
1. Type II diabetes with neuropathyyp p y2. Iron deficiency anemia2. Breast cancer3. Coronary artery disease4. Peptic ulcer disease5. Osteoarthritis6. Hypertension7. Glaucoma 8 D ti
$88.31*
8. Dementia
Taking 12 medications, seeing 8 physicians
49
*GXXXC APC 0634
Wellness vs. Disease Management
Researchers have combed through all of the most recent wellness evidence and concluded that wellness and weight loss programs aren’t saving money, reducing disease burden or helping people slim
50
helping people slim down.
~American Journal of Managed Care 2/19/15
KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 26
Strategic End Game■ You can demonstrate superior value PER EPISODE which attracts
contracts and market share (try to avoid per unit price reductions)
‒ Significant decline in employee health plan costsB f M di d th V l b d t‒ Bonuses from Medicare and other Value-based payments
■ Become geographically indispensable possibly through merger/51% JV
■ 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
51
Advantage, Tiered Networks etc.
■ Affiliated physicians are recognized as a premier network in the region
■ Capacity and services are consolidated and your portfolio of facilities is rationalized
Behavior Change Requires a Compelling Reason to Leave Your Comfort Zone
AnalyticalReason
(Long Term)
APPEAL TO EMOTIONS AND MAKE IT EASY
INCREMENTAL RESULTS LEAD TO CREDIBILITY
StatusQuo
Change
Behavior Based on Training
and Perceived Short Term
Benefit
52Switch: How to Change Things When Change Is Hard Chip and Dan Heath
KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 27
Behavior Change Requires a Compelling Reason to Leave Your Comfort Zone
Suits
APPEAL TO EMOTIONS & MAKE IT EASY
INCREMENTAL RESULTS LEAD TO CREDIBILITY
StatusQuo
ValueNetwork
Suits
Medical Staff
53
Peer Leadership
Then a Miracle Occurs:Leadership, Trust, Shared Vision
54
KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
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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
55
CV Surgery Neurosurgery OB/Gyn Bariatrics
Orthopedics
ENT
Emergency
Ad hoc
Hospital Medicine
Pathology
56
KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
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You Don’t Have to Agree with My POV
“Nate, Stop! Take a look at what you have become.Look in the mirror, look hard, look honestly.You are a real downer.Get a grip rise above the hate!Get a grip, rise above the hate!Really. Man up, money to be made.”
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
58
KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 30
How Are You Going to be Perceived as Differently Better in the Eyes of a
Cost Conscious Customer?
Become a Learning Organization
59
Volume and Value are Not Mutually Exclusive!
Why: To provide affordable, accessible, high quality healthcare services that improve the health of your patientsthe health of your patients.
How: Minimize optionality Define and measure quality Define and measure service Measure outcomes Take action on results Focus on cost and redesign to
VOLUME Value
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Focus on cost and redesign to eliminate waste
Hire for attitude Decisions driven by the needs of
patients
KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 31
Don’t let this be your “Kodak
The future is here; it’s just
unevenly
Hope is NOT a StrategyYou can’t bolt a population
health platform onto a dysfunctional health system
chassis and expect to be
Thank You for
Kodak moment!”
unevenly distributed.
chassis and expect to be successful
Become “Differently Better”
Listening Sign up to receive our blog at
www.kaufmansa.com
Don’t let this be your “Kodak
The future is here; it’s just
unevenly
Hope is NOT a StrategyYou can’t bolt a population
health platform onto a dysfunctional health system
chassis and expect to be
Thank You for
Kodak moment!”
unevenly distributed.
chassis and expect to be successful
Listening Sign up to receive our blog at
www.kaufmansa.com
KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 32
▪Extra Slides
63
64
KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
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Does Healthcare Reform Drive to Value:The Massachusetts Experience
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KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 34
SGR “Fix” Will Force Consolidation
Increase of 0.5% in each of the next four years
Payment rates would then hold flat for six years
Physicians who qualify for the alternative-payment system e.g., ACO, PCMH will receive 5% bonuses from 2020 to 2024
Merit-based Incentive Payment System (MIPS) starts in 2018—penalties and incentives from -4% to 4% in 2018 Those rewards
67
penalties and incentives from -4% to 4% in 2018. Those rewards or penalties would range from -9% to 9% by 2021. – Quality, IT, VBP
Instability and Poor Financial Returns are Rampant in Medicare ACOs
Source: Outpatient Care Patterns and Organizational Accountability in Medicare, McWilliams MD et. Al. JAMA Internal Medicine, April 21, 2014
Shared Savings ACO Moneyball:• Memorial Hermann generated almost 10% of the shared savings for the program!• Thirty-two (32) of the ACOs generated 80% of the savings.• Of the 203 ACOs reporting results 150 (73%) received no shared savings
payments. • The 203 ACOs reporting data spent in excess of $400 Million on infrastructure
and received a collective shared savings payout of $300 Million.
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Thirteen of Thirty-Two Pioneer ACOs Have Dropped Out of the Program.
KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
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Risk is Not Just a Four Letter Word
■ The vast majority of hospitals don't have anything close to the systems and infrastructure necessary to take on risk successfully [and most who have tried have not succeeded]
Exposure to chance of injury or loss; to put oneself in danger
successfully [and most who have tried have not succeeded]
■ Managed care plans have been at this for 20-30 years and still make big mistakes on a fairly regular basis
69
~Carl McDonald, Citigroup
Most of the Cost Savings Will Come From Reducing Hospital Utilization/Revenue
Medicare Population: 5,000Medicare FFS Total Provider Payments: $30,000,000Calculates to: $500 PMPM
Risk Bearing Entity: Health Plan, Medical Group, Health System
Or Some Combination
Hospital
Entity Profits$41,010
Hospital Rev.$200,440
Hospital Rev. $109,320
Medical Management
and Non-institutional
Services e.g., Home Care20 Receives
$10,022LOS:
5.5 Days
15 Adm.DRG871
Entity to PayHospital
$1,822/day
Hospital Receives
LOS:Days
$7,288
($10,022/5.5 = $1,822/Day)4
Adm.DRG871
Medicare Pays
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KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
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A Health System’s “Circle of Life”: Access to Capital
Providing Value to Patients Requires
Supply Costs
qAbility to Borrow
Bond Rating:
Access to Capital (Credit Score)
R
Balance Sheet
i.e., CASH
Negotiated Rates
Physician Investment &
Buy-In
Services &
Growth
Revenue –Expenses =
Net IncomePersonnel
Costs & Efficiency of
Care
Capital Spending
71
A Health System’s “Circle of Life”: Access to Capital
Providing Value to Patients and Stabilizing
Physician Compensation
Supply Costs
Physician Compensation Requires the
Ability to Borrow
Bond Rating:
Access to Capital (Credit Score)
R
Balance Sheet
i.e., CASH
Negotiated Rates
Physician Investment &
Buy-In
Services &
Growth
Revenue –Expenses =
Net IncomePersonnel
Costs & Efficiency of
Care
Capital Spending
72
KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
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2015 Guidance
It’s Not All Bad – NFPs continue to expect ongoing physician integration to drive supply savings and savings per episode of care
It’s Not All Bad – NFPs continue to expect ongoing physician integration to drive supply savings and savings per episode of care.
Hospitals with Negative Operating Margins
73
2011 2013
13% 25%
Operating Margins
You Become What You Measure -Job 1: Develop Actionable Analytics &
Accurate Cost Accounting
Value = (A x (O + S)/ W)/ PriceA: Appropriate care based on the best medical scienceO: OutcomesS: ServiceW: Waste (optimizing the efficiency of care)
-------------Output-------------
74
W: Waste (optimizing the efficiency of care) Virginia Mason Definition of Quality
KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
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Job 1A: Organize Physicians into a Clinically Integrated Network (CIN) Practice on System Employees
Triple Aim 1. Improve the patient experience of care2. Improve the health of populations3. Reducing the per capita cost of health care
Triple Gain 1. Improve income2. Improve work-life3. Reducing work load
Value-based Care Volume-based Care
g p p g
CI AnatomyCI Physiology
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• Interoperable EMR• Aligned purpose and work• Compliance with a large number of guidelines• Actionable analytics• Physician performance evaluation• Market share gains• Measurably improved quality (not core measures)• Decreasing cost/episode
• CI Staff• CI Governing Board• New IT Systems• A few protocols developed but not universally used• Physicians sign up
Confront the Brutal facts“You must never confuse faith that you will prevail in the end with the discipline to confront the most brutal facts of your current reality.”
~ Admiral James Stockdale“We can no longer tolerate a healthcare industry that markets non-existentindustry that markets non-existent excellence …that allows clinicians to use outdated treatments and/or perform procedures even when they lack
adequate training.”
~Dr. Marty Makary, Johns Hopkins Pancreatic Cancer Surgeon, Author of Unaccountable
▪ Believing you or your market is different or that you are too big to fail
▪ Promoting new, exciting strategies but failing to create competitive advantage
Avoid Self Delusion & Hubris:
“ At Virginia Mason… we understand that healthcare is impeded not facilitated by
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▪ Pursuing big mergers and acquisitions that deliver scale and bold headlines but not long term value
~Fighting Corporate Hubris, BCG June 6, 2013
the notion of physician autonomy.”
~Dr. Gary Kaplan MD, CEO Virginia Mason, January 11, 2014
“If you are what you do but you don’t document it properly, then your not!”
KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 39
AGGREGATION
Disparate office systems
Is Your Employed Physician Group a “Group Practice” or a “Group of Practices?”
CONSOLIDATION & DEEP MANAGEMENT
Consolidation of locations
Offices are not rationally consolidated Pure productivity–based comp. No code of conduct Escalating investment No hierarchical structure
“I do my part seeing patients. In return, the system needs to support me and my
Central, shared governance and values Hierarchy w/performance evaluation and
routine reports Common name & standard office systems Blended comp. plan Standard use of clinical guidelines Referral management
income. Finding the resources to do so is their problem.”
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“My role is to see patients and support system initiatives so the system has enough resources to support me and my income.”
Expect Perpetual Negotiation!
Aggregation“I do my part seeing
Is Your Employed Physician Group a “Group Practice” or a “Group of Practices?”
Integration“I th t
Consolidation“M l i t “I do my part seeing
patients. In return, the system needs to
support me and my income. Finding the
resources to do so is their problem.”
“I am the system, my income depends on
the collective performance of me
and my colleagues.”
“My role is to see patients and support system initiatives so
the system has enough resources to support me and my income.”
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KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 40
A Health System’s Circle of Life: Access to Capital
Ability to Provide Value to Patients
Revenue –Expense =
Net Income
Investment in New & Old
Infrastructure
Balance Sheet
Bond Rating:
Access & Cost of Capital
(Credit Score)
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KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015
Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 41
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“Limited Effects of Care Management forHigh Utilizers on Total Healthcare Costs”
Healthcare organizations implementing care management programs should expect low or no total cost savingscost savings.
In contrast to many current explicit or implied claims to the contrary, estimates of total cost savings from care management in randomized trials are consistently low or none.
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Dr. Brent Williams MD, MPH, Medical Director University of Michigan Complex Care Management Program. American Journal of Managed Care, Vol 21