HealthCare in Detroit: Preview of the Impending National Crisis Mark A. Kelley Executive Vice President Henry Ford Health System.

HealthCare in Detroit: HealthCare in Detroit: Preview of the Impending Preview of the Impending

National CrisisNational Crisis

Mark A. KelleyMark A. Kelley

Executive Vice PresidentExecutive Vice President

Henry Ford Health SystemHenry Ford Health System

Wolverines, Red Wings…..

And Tigers !!

Henry Ford and Detroit - 1915

Henry Ford and Detroit - 1915• Explosive growth in auto

production 1913-15

• 300,000 cars annually = 1/3 of the world’s production

• Recruited employees from immigrants and the South

• Large new plant on outskirts of town Highland Park – first major assembly line

GDP per Capita to % GDP Spent on

Health Care: OECD CountriesSource: Anderson, Health Affairs 22:2003

0

2

4

6

8

10

12

14

$0 $10,000 $20,000 $30,000 $40,000

A Variation Problem

Dartmouth Atlas of Healthcare

Medicare “Value” by State

Big Three Approach to Big Three Approach to Health Care – 1980-90sHealth Care – 1980-90s

• Predictable costs without labor strifePredictable costs without labor strife• HMO prepayment attractive for:HMO prepayment attractive for:

Population-based preventionPopulation-based prevention Community-based premiumCommunity-based premium Little cost to employeesLittle cost to employees

• Arms length relationship with health care, Arms length relationship with health care, except in the workplaceexcept in the workplace

This strategy, fueled by managed This strategy, fueled by managed competition paradigm, worked well—for a competition paradigm, worked well—for a whilewhile

OOPs—Health Costs Rising !OOPs—Health Costs Rising !

11.7%

18.2%17.7%

13.2%

10.4%

8.1%

6.5%

-0.4%-0.5%

2.1%3.2%

5.7%

9.0%

11.0%

13.5%14.0%

12.0%

10.0%

8.0%

-2.0%

3.0%

8.0%

13.0%

18.0%

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

2001E

2002E2003E

2004E

2005E2006E

Annualpremiumincreases

Source: Salomon Smith Barney Research estimates based on data from CMS, Milliman USA, AAHP, KPMG.

Premium “Roller Coaster”Premium “Roller Coaster”Premium “Roller Coaster”Premium “Roller Coaster”

MD

I/P

Rx

HMO Premium vs. HMO Cost Increases 1988 - 2006

USA Health Expenditures USA Health Expenditures Annual Percentage GrowthAnnual Percentage Growth

Source: Health Affairs 2006Source: Health Affairs 2006

-2

0

2

4

6

8

10

12

14

16

1988 1998 2000 2002 2004 2006

NHE

Hosp

MDs

Drugs

GDP

Big Three Pays $1000 More for Big Three Pays $1000 More for Health Care per VehicleHealth Care per Vehicle Reasons:Reasons:

• Rich post-retirement Rich post-retirement benefits for aging benefits for aging workforceworkforce

• Workers retire well Workers retire well before age 65before age 65

• First $ coverage for First $ coverage for most hourly workersmost hourly workers

• No national policy on No national policy on limiting technology limiting technology or drugsor drugs

Big Three’s Challenges Reflect Those of the Nation

Big Three could Big Three could notnot predict or control: predict or control:• improved life expectancyimproved life expectancy

• technology and pharmacy proliferationtechnology and pharmacy proliferation

• American health care consumerismAmerican health care consumerism

Big Three Big Three shouldshould have predicted effects of: have predicted effects of:• the baby boomer workforcethe baby boomer workforce

• life time health care benefitslife time health care benefits

• rich pharmacy benefitsrich pharmacy benefits

These very same issues are hitting Medicare!These very same issues are hitting Medicare!

UAW 2007 NegotiationsUAW 2007 Negotiations

• Ron Gettelfinger Ron Gettelfinger (UAW): (UAW):

““No Deal, No No Deal, No ChryslerChrysler””

• Tom Lasorda Tom Lasorda (Chrysler):(Chrysler):

““No Deal, No Jobs, No Deal, No Jobs, No UAW !!”No UAW !!”

The 2007 UAW Contract:The 2007 UAW Contract:The Great Escape !!The Great Escape !!

• UAW examined books of auto companies (especially GM)– Without concessions, bankruptcy was certain,

jeopardizing pensions and contracts (e.g. Delphi, Northwest Airlines)

• Rank and File would not strike over health care—too much at risk – Poor credibility: this workforce has paid

little in health care cost (<10% vs. >30%)– Pensions and jobs are too important

2007 Contract: UAW Assumes 2007 Contract: UAW Assumes Legacy Retiree CostsLegacy Retiree Costs

• Big Three Pay into VEBA for future Big Three Pay into VEBA for future actuarial costsactuarial costs– Long-term liability comes off their booksLong-term liability comes off their books– UAW becomes huge benefits company for UAW becomes huge benefits company for

at least 30 yearsat least 30 years

• RisksRisks– Did the actuaries get it right?Did the actuaries get it right?– Assumes 9% annual return; 5% inflationAssumes 9% annual return; 5% inflation– Will Medicare benefits be Will Medicare benefits be reducedreduced ? ?

““Near Death” ConcessionsNear Death” Concessions

• UAW retirees:UAW retirees:– $10-21 monthly premiums$10-21 monthly premiums– $150-300 deductibles and higher co-pays$150-300 deductibles and higher co-pays– UAW workers putting $2000 increases into retiree UAW workers putting $2000 increases into retiree

fund (essentially deferred benefits)fund (essentially deferred benefits)

• White Collar workers:White Collar workers:– 33% increase in deductibles33% increase in deductibles– Health Savings Accounts (poorly understood)Health Savings Accounts (poorly understood)– Retiree benefits frozen foreverRetiree benefits frozen forever

Sources: Detroit Free Press, USA Today 12/15/05Sources: Detroit Free Press, USA Today 12/15/05

Health Care in DetroitHealth Care in Detroit

--Population aging and shrinking --Population aging and shrinking • Young, healthy workers leaving the region and Young, healthy workers leaving the region and

increasing community-based risk poolincreasing community-based risk pool

– Most Detroit city hospitals have closed Most Detroit city hospitals have closed – With job loss, Medicare and Medicaid With job loss, Medicare and Medicaid

assuming major roles as payersassuming major roles as payers– 50% of Detroit City population uninsured 50% of Detroit City population uninsured

or underinsuredor underinsured

Detroit Region Hospital SystemsDetroit Region Hospital Systems

• Local SystemsLocal Systems– Henry Ford (7 hospitals)Henry Ford (7 hospitals)– University of Michigan (1)University of Michigan (1)– Beaumont Hospital (3)Beaumont Hospital (3)– Detroit Medical Center (7)Detroit Medical Center (7)– Oakwood (5)Oakwood (5)

• National SystemsNational Systems– St. John’s (Ascension) (5)St. John’s (Ascension) (5)– Trinity (2)Trinity (2)

Profile of HFHSProfile of HFHS

• 93 y.o. hospital-based health system with:93 y.o. hospital-based health system with:– 7 hospitals - flagship (HFH) in 7 hospitals - flagship (HFH) in

downtown Detroit downtown Detroit – Health Alliance Plan - 500,000 HMO Health Alliance Plan - 500,000 HMO

members members – Employed physician practice (HFMG) - Employed physician practice (HFMG) -

1100 physicians1100 physicians

Profile of HFMGProfile of HFMG

– 2 million outpatient visits2 million outpatient visits– 650,000 patients 650,000 patients (150,000 capitated)(150,000 capitated)– 24 satellite locations in 30 mile radius24 satellite locations in 30 mile radius– 700 GME trainees 700 GME trainees – $57 million in research - $57 million in research - 4 NIH program 4 NIH program

projectsprojects– Major affiliation with Wayne State School Major affiliation with Wayne State School

of Medicineof Medicine

Detroit’s Unhealthy EnvironmentDetroit’s Unhealthy Environment

Public Funding Is PrecariousPublic Funding Is PrecariousStateState: less tax base, more Medicaid: less tax base, more MedicaidMedicare:Medicare: ? Cuts to GME, prof. fees ? Cuts to GME, prof. feesCity of DetroitCity of Detroit: financial/moral crisis: financial/moral crisis

Employer Funding Is ShrinkingEmployer Funding Is Shrinking Layoffs, benefits reduction Layoffs, benefits reduction

Detroit Environment (cont.)Detroit Environment (cont.)

Malpractice Is a Runaway CostMalpractice Is a Runaway Cost– Michigan tort reform helpsMichigan tort reform helps– Physicians move to deep pocket Physicians move to deep pocket

hospitals/systemshospitals/systems

Quality Is an Unfunded MandateQuality Is an Unfunded Mandate– Pressures from JCAHO, CMS, Pressures from JCAHO, CMS,

Insurance companiesInsurance companies– Pay for Performance for hospital (and Pay for Performance for hospital (and

physicians)physicians)

Detroit Environment (cont.)Detroit Environment (cont.)

““Technology Arms Race”Technology Arms Race”

Eroding Physician CompensationEroding Physician Compensation– Flat reimbursement, higher overheadFlat reimbursement, higher overhead

– Need technical fees from hospitalNeed technical fees from hospital

Competition to Recruit PhysiciansCompetition to Recruit Physicians

HFHS StrategiesHFHS Strategies

• Consumerism to Balance Loss of CapitationConsumerism to Balance Loss of Capitation

• Quality as DifferentiatorQuality as Differentiator

• Re-Engineer Systems to SurviveRe-Engineer Systems to Survive– Payment/Risk IssuesPayment/Risk Issues– Pay for PerformancePay for Performance– Primary Care Re-designPrimary Care Re-design

HAP HFMG Membership TrendHAP HFMG Membership Trend

-

50,000

100,000

150,000

200,000

250,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Commercial

Sr +

Primary Care

63.3%

65.0%

50.0%

55.0%

60.0%

65.0%

70.0%

75.0%

Actual

Target

Linear (Actual)

Good

Specialty Care

51.3%

60.0%

45.0%

50.0%

55.0%

60.0%

65.0%

Actual

Target

Linear (Actual)

Good

Access To Appointments - Percent of Providers

With Time to Third Available Appointment ≤ 14 Day

Access To Appointments - Percent of Providers

With Time to Third Available Appointment ≤ 14 Day

Better Appointment AccessBetter Appointment Access

HFH IPD Patient Satisfaction

74.0

76.078.0

80.0

82.0

84.086.0

88.0

Current Month =83.8Target = 84.2

Good

Medical Group Patient Satisfaction

84.085.086.087.088.089.090.091.092.093.0

A-0

5

J-05

O-0

5

J-06

A-0

6

J-06

O-0

6

J-07

A-0

7

J-07

Current Month =88.6

Good

Better Patient Better Patient SatisfactionSatisfaction

Quality and Safety in DetroitQuality and Safety in Detroit

• Pushed very hard by auto companiesPushed very hard by auto companies

““Save Lives, Save Dollars”Save Lives, Save Dollars”

• Pioneering Achievements:Pioneering Achievements:– Standardized MI treatmentStandardized MI treatment– Reduced ICU and surgical infectionsReduced ICU and surgical infections– Electronic PrescribingElectronic Prescribing– HEDIS measuresHEDIS measures– Chronic Disease ManagementChronic Disease Management

3Q2006 - 2Q2007 Mortality for MI Hospitals (Normalized Data)

-8.00 -6.00 -4.00 -2.00 0.00 2.00 4.00 6.00 8.00 10.00 12.00

Michigan Hospitals HFMH-W HFHHFWH HFMH-W 2004 HFH 2004HFWH 2004 HF Macomb

Significantly Better than Expected

Significantly Worse than Expected

Change from 2004 Change from 2004Goodod

Hospital Outcomes Are Hospital Outcomes Are PublicPublic

HFH Combined ICU Bloodstream Infection Rate

0.0

1.0

2.0

3.0

4.0

5.0

6.0

1Q04

2Q04

3Q04

4Q04

1Q05

2Q05

3Q05

4Q05

1Q06

2Q06

3Q06

4Q06

1Q07

2Q07

3Q07

4Q07In

fect

ion

s p

er 1

000

Lin

e D

ays

Rate Ave NNIS 90th Percentile

ICU Blood Stream Infections – ICU Blood Stream Infections – Detroit Leads the Nation !Detroit Leads the Nation !

Network ER Use Rate vs. Percentage Network ER Use Rate vs. Percentage ER Zero Dollar Co-pay (bubble size ER Zero Dollar Co-pay (bubble size

denotes network size)denotes network size)

125

175

225

275

325

375

20 25 30 35 40 45 50 55

Network Percentage of Zero Dollar ER Copay

Net

wo

rk E

R U

se R

ate

Per

'000

Series1 Poly. (Series1)

Heart FailureHeart Failure Readmission Rates far above averageReadmission Rates far above average

Primary Care Practice in TroublePrimary Care Practice in Trouble

• Non-Revenue Patient DemandsNon-Revenue Patient Demands——phone calls, results, forms, social servicesphone calls, results, forms, social services

• Higher Co-pays = Fewer Office VisitsHigher Co-pays = Fewer Office Visits• Flat (or Worse) ReimbursementFlat (or Worse) Reimbursement• Insurance Company IssuesInsurance Company Issues

– Quality, P4PQuality, P4P– Pre-AuthorizationPre-Authorization– Shifting Patient BenefitsShifting Patient Benefits

Current Payment System is Current Payment System is Killing Primary Care PracticeKilling Primary Care Practice

• Driving factorsDriving factors– Hospital DRGS designed for immediate problem, Hospital DRGS designed for immediate problem,

resulting in “touch and go” admissionsresulting in “touch and go” admissions– Most chronic patients rebound back to hospitalMost chronic patients rebound back to hospital

• Consequences: Consequences: – Sick patients land with primary care physician Sick patients land with primary care physician

who has no financial supportwho has no financial support– Typical PCP sees 25 patients daily, interacts with Typical PCP sees 25 patients daily, interacts with

75 others75 others– Quality mandates ALONE = 20 hrs/weekQuality mandates ALONE = 20 hrs/week

Primary Care Redesign IssuesPrimary Care Redesign Issues

• Patient Consumer DemandsPatient Consumer DemandsSolutionSolution: E-visits, results, messages /Flex Hours: E-visits, results, messages /Flex Hours

• Higher Co-pays/Chronic CareHigher Co-pays/Chronic CareProblemProblem: how to provide care beyond the office ?: how to provide care beyond the office ?

• Flat (or Worse) ReimbursementFlat (or Worse) ReimbursementSolutionSolution: Tap into hospital revenue by employment: Tap into hospital revenue by employment

• Insurance Company Challenges Insurance Company Challenges SolutionSolution for Quality, P4P: EMR and registriesfor Quality, P4P: EMR and registriesProblemsProblems::

• Pre-AuthorizationPre-Authorization• Shifting Patient BenefitsShifting Patient Benefits

Return on Investment – Diabetes Self-Return on Investment – Diabetes Self-Management EducationManagement Education

Activity from 10/1/2005 – Activity from 10/1/2005 – 9/30/20079/30/2007

DSMEDSME HFMG: All HFMG: All diabetes pts.diabetes pts.

Total costs PMPM HAP Comm.Total costs PMPM HAP Comm.

Total costs PMPM HAP Sr. PlusTotal costs PMPM HAP Sr. Plus

Combined Savings: $179 PMPMCombined Savings: $179 PMPM

$ 736$ 736

$1,004$1,004

$1,740$1,740

$ 780$ 780

$1,139$1,139

$1,919$1,919

IPD Days/1000 HAP CommIPD Days/1000 HAP Comm..

IPD Days/1000 HAP Sr. PlusIPD Days/1000 HAP Sr. Plus

Admits/1000 HAP CommercialAdmits/1000 HAP Commercial

Admits/1000 HAP Sr. PlusAdmits/1000 HAP Sr. Plus

ED Visits/1000 HAP Comm.ED Visits/1000 HAP Comm.

ED Visits/1000 HAP Sr. Plus ED Visits/1000 HAP Sr. Plus

OPD visits/1000 HAP Comm. OPD visits/1000 HAP Comm.

OPD Visits/1000 HAP Sr. PlusOPD Visits/1000 HAP Sr. Plus

880880

940940

142142

262262

386386

244244

23,18323,183

31,56031,560

1,0641,064

1,9231,923

214214

380380

450450

450450

17,02217,022

24,54224,542

HEDIS Measures - HFMGHEDIS Measures - HFMGDiabetes

HbA1c Performed

Poor Control (HbA1c >9.0 and untested patients)

Retinal Eye Exam

LDL performed

LDL < 100

2005

84

34

74

93

4

2006

94 21

60

83

44

2006 90th %ile

93

19

71

88

51

2007

Maintain

75th 90th

50th 90th

50th 90th

50th 90th

CAD

LDL screening

LDL < 100

2004*

74

57

83

68 92

68

50th 90th

Maintain

Depression Medical Management

Practice contacts (3 visits in 90 days)

Acute Tx. Med Mgmt.

Continuation Tx. Med Mgmt

28

79

33

26

79 37

31

70

53

75th 90th

Maintain <25th 50th

Asthma

Medication management ages 18-56 89 100 50th 75th

Good News Story: E-PrescribingGood News Story: E-Prescribing

• ChallengeChallenge: GM to Henry FordGM to Henry Ford: Thou shallThou shall reduce medication errors by reduce medication errors by electronic prescribing for ambulatory electronic prescribing for ambulatory patients !patients !

• IssuesIssues::– How would this innovation help patients?How would this innovation help patients?– Cost of IT investment ?Cost of IT investment ?– Would it disrupt the practice?Would it disrupt the practice?

Good News Story: E-PrescribingGood News Story: E-Prescribing

• ProcessProcess HFMG HFMG physiciansphysicians led pilot sites : designed and led pilot sites : designed and

continuously refined the processcontinuously refined the process

• Value PropositionValue Proposition– PatientsPatients: safety, efficiency, no hassles: safety, efficiency, no hassles– PhysiciansPhysicians: refills easy, med inventory, : refills easy, med inventory, no time no time

savingssavings– Office staffOffice staff: freed up 0.5 FTE in phone calls: freed up 0.5 FTE in phone calls

Good News Story: E-PrescribingGood News Story: E-Prescribing

• Widespread Acceptance in SE Michigan:Widespread Acceptance in SE Michigan:

Since 2005, $1M investment for 6.2M prescriptions to Since 2005, $1M investment for 6.2M prescriptions to date; 2500 physicians participatingdate; 2500 physicians participating– Electronic alerts common:Electronic alerts common:

• Formulary in 40%Formulary in 40%• Drug interactions 33%Drug interactions 33%

• CMS Jumps on the Bandwagon !CMS Jumps on the Bandwagon !– Incentive proposed for participating docsIncentive proposed for participating docs– Penalty for non-participation in 2011?Penalty for non-participation in 2011?

50%

55%

60%

65%

70%

75%

All HAP

Target

HFMG

Good

2007 Target = 73%

Generic Use Rate Generic Use Rate SoaringSoaring

Detroit Issues = National IssuesDetroit Issues = National Issues

• Systems of Care—Doctors and Hospitals Systems of Care—Doctors and Hospitals must be aligned with common:must be aligned with common:– Information systemsInformation systems– Financial incentivesFinancial incentives– Quality/cost agendasQuality/cost agendas

• Primary Care Morale at Crisis LevelsPrimary Care Morale at Crisis Levels – will be melt down w/out redesignwill be melt down w/out redesign– chronic care needs system approachchronic care needs system approach

• Technology Proliferation Unchecked Technology Proliferation Unchecked

Who will rescue the Federal Who will rescue the Federal Government from its Legacy Costs?Government from its Legacy Costs?

• ““Baby Boomer Tsunami” will flood Medicare for the Baby Boomer Tsunami” will flood Medicare for the next 30 yearsnext 30 years

• By 2030, Medicare expenditures will double (to By 2030, Medicare expenditures will double (to $600B) under every reasonable scenario$600B) under every reasonable scenario– Driven by demographics, chronic diseases and technology Driven by demographics, chronic diseases and technology

proliferationproliferation

• Like the Big Three, The Federal Government has an Like the Big Three, The Federal Government has an unsustainable entitlementunsustainable entitlement

Source: Health Affairs 24: Supp. 2 ; 2005Source: Health Affairs 24: Supp. 2 ; 2005

Where Did Autos Fail to Control Where Did Autos Fail to Control Costs?Costs?

• Little Consumer Skin in the Game—first Little Consumer Skin in the Game—first $ coverage$ coverage

• No curb on technology except CONNo curb on technology except CON

• Costly new therapies and preventionCostly new therapies and prevention

• Failure to manage care to improve Failure to manage care to improve efficiencyefficiency

• Retirees beat the actuarial curve—Retirees beat the actuarial curve—prevention works!!prevention works!!

Same Liabilities for MedicareSame Liabilities for Medicare

• Entitlement for life Entitlement for life

• No policy on new therapies or No policy on new therapies or technology; no pharmacy contractingtechnology; no pharmacy contracting

• No systems of care to improve quality No systems of care to improve quality safety, efficiencysafety, efficiency– Payment system dysfunctionalPayment system dysfunctional– No electronic connectivityNo electronic connectivity– Average practice size is 1.5 physicians!Average practice size is 1.5 physicians!

Copyright ©2007 by Project HOPE, all rights reserved.

Patricia Neuman, Juliette Cubanski, Katherine A. Desmond, and Thomas H. Rice, How Much 'Skin In The Game' Do Medicare Beneficiaries Have? The Increasing Financial Burden Of Health Care Spending, 1997 2003, Health Affairs, Vol 26, Issue 6, 1692-1701

Henry Fords’ Medicare Henry Fords’ Medicare Experience: Profitable (so far)Experience: Profitable (so far)

20,000 full risk capitated patients20,000 full risk capitated patients• Emphasis on continuity of care:Emphasis on continuity of care:

– Team medicine practice with prevention, Team medicine practice with prevention, chronic disease mgtchronic disease mgt

– Focus on inpt/outpt. continuumFocus on inpt/outpt. continuum

• Cost ContainmentCost Containment– Opportunities to reduce re-workOpportunities to reduce re-work– Unknowns: new meds, technology, Unknowns: new meds, technology,

mandates, consumerismmandates, consumerism

CMS Group Practice CMS Group Practice Demonstration ProjectDemonstration Project

MethodMethod– 10 large groups capitated 2005-200710 large groups capitated 2005-2007– All had EMRs, hospital alignmentAll had EMRs, hospital alignment– Bonus paid for exceeding 2% cost savingsBonus paid for exceeding 2% cost savings

ResultsResults– Only 2 groups received a bonus because Only 2 groups received a bonus because

of infrastructure investments !of infrastructure investments !

Health Care’s “Closed Box”

Health $$

Employee

Company

Govt

Health Providers