Redesigning Health Systems for Quality and Value Driven Outcomes: An Innovation Journey Walter H. Ettinger, MD, MBA March 7, 2015.

Redesigning Health Systems for Quality and Value Driven Outcomes: An

Innovation Journey

Walter H. Ettinger, MD, MBAMarch 7, 2015

Health Care Consumes An Ever Increasing Proportion Of Our Economic Output

2

Projected Spending and Revenues as Percentage of GDP

3

Source - CBO 2013

SOURCE: 2013 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds.

Medicare Enrollment in Millions: 1970-2035

SOURCE: Congressional Budget Office (CBO) Medicare Baseline, May 2013.

Projected Medicare Spending(billions):2013-2023

Premiums for Family Coverage, by State, 2013

Source: 2013 Medical Expenditure Panel Survey–Insurance Component.

U.S. average = $16,029

People age 55 and over account for about half of total health spending

Share of total health spending by age group, 2012

Source: Kaiser Family Foundation analysis of Medical Expenditure Panel Survey, Agency for Healthcare Research and Quality, U.S. Department of Health and Human Services

Medicare Per Capita Spending For Traditional Medicare Beneficiaries Over Age 65, By Age And Survival Status, 2011.

Neuman P et al. Health Aff doi:10.1377/hlthaff.2014.1371

Medicare Per Capita Spending For Traditional Medicare Beneficiaries Over Age 65, By Type Of Service, 2011.

Neuman P et al. Health Aff doi:10.1377/hlthaff.2014.1371

Cost-Related Access Barriers and Out-of-Pocket Costs in the Past Year

Percent

Experienced cost-related access problem*

Spent $1,000 or more out-of-pocket

Source: 2013 Commonwealth Fund International Health Policy Survey in Eleven Countries.* Did not fill/skipped prescription, did not visit doctor with medical problem, and/or did not get recommended care.

Excess Cost of U.S. Health Care---30%

Countries spend more on health care as their wealth increases. Health care spending in the United States is far above the expected level, even after adjusting for wealth.

Source; McKinsey

Why Does U.S. Healthcare Cost so Much More Than Expected?

• Technology

• Prices are higher

• Supply-driven demand of services

• Price insensitivity to end consumer

• Judgment based nature of physician care—practice variation

• Our values and culture

Fueled by Fee-for-Service Payment System

Estimated Costs of Unnecessary Care are $700 Billion

13

Source: “Where can $700 billion in Waste Be Cut Annually From the U.S. Healthcare System?” – Robert Kelley, Vice President, Healthcare Analytics Thompson Reuters

Ove

r-U

tiliz

atio

n

64 % or roughly $450 billion spent on Over-Utilization

Events O

ver-

Util

iza

tion

• Flat or declining payment rates

• Hard-hitting utilization management

• Increase in transparency about cost and quality CastLight and other companies provide online cost information

CareFirst ranks Maryland specialists Red-Yellow-Green on cost of care

• Insurance products that put more of the financial burden on the patient

High deductible benefit plans Tiered/narrow networks Reference pricing

• Shift to risk based payments Patient Centered Medical Home Rewards/Penalties for quality Bundled payments/global budgets/shared savings/capitation

14

The Payers’ Response

New Companies Increase Transparency in HealthCare

Castlight Health IPO Soars 149% in Debut

CareFirst Ranking of Specialistsby Cost

Voice of the PatientOur Health System Must Improve This

17

No doctors ask me what my goals are

I can’t afford to fill my prescriptions if I buy these groceries

Whose doctorscan I trust?

My dad is not safe to be at home any longer

My neighbor recommended a

specialist. Is she any good?

I am confused about what to do

next

How will I manage when I get home?

I feel fine. Why worry about my

health?

Do these people even talk to each

other???

Percentage of Covered Workers Enrolled in a Plan with a General Annual Deductible of $1,000 or More for Single Coverage, by Firm

Wage Level, 2012

*Estimate for many workers are lower-wage is statistically different from estimate for many workers are higher-wage (p<.05).

NOTE: Firms with many lower-wage workers are ones where 35% or more of employees earn $24,000 or less. Firms with many higher-wage workers are ones where 35% or more of employees earn $55,000 or more. Wage cutoffs are the inflation adjusted- 25 th and 75th percentile of national wages according to the National Compensation Survey: Occupational Earnings in the United States, 2010. 1% of covered workers are in firms which are both high income and low income, excluding these firms does not change the estimates or significance testing.

SOURCE: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2012. National Compensation Survey: Occupational Earnings in the United States, 2010. http://www.bls.gov/ncs/ocs/sp/nctb1489.pdf.

Focus is Shifting to the Total Cost of Care

Proprietary and Confidential

Cost----------Person

Episodes-------------

Person

Processes-------------Episode

Cost-------------Process

XX=

From G. Poulsen, Intermountain Health

Total Cost of Care = Number of People X Cost/ Person

20

How the Insurance Premium Dollar is Spent

Hospital/Outpatient costs = $0.35 cents of the total premium

21

Near Term: Capture More of the Premium $

Position to capture $0.87/premium dollar

The 70/10 Rule

Source: Thomson Reuters Marketscan Database

Population Health Management: Assumptions

• Care can be improved and costs reduced by creating better care systems for the sickest patients

• Physicians must organize and take a leadership role in designing and implementing new systems of care

• Care teams are the most effective way to care for the patients with chronic disease and disability

• Population Health Management concepts are simple but successful implementation of programs is difficult

Population Health Management: Definition

• A group of physicians (often in collaboration with other providers) takes responsibility for the health care of a population of patients, with the triple aim of improving the care of individual patients, improving the health of the population and reducing the per capita cost of care.

• Simultaneously, the provider takes risk based payments from the payer that reward both improvements in quality and lower costs

Population Health Management: Core Elements

• “Population” of patients Those receiving all hospital services---HSCRC Government insured: Medicare Advantage, Medicaid, Dual

Eligible, Medicare (MSSP) Commercially insured (small business, ACA exchanges) Self-insured (large employers)

• Risk based payment, based on quality and cost of care Global budget for hospitals---HSCRC Risk for total cost of care

Capitated payment Shared savings

Risk for an episode of care---bundled payment for physician, hospital and post-acute care

Population Health Management: Core Elements

• A healthcare delivery system to manage the care Led by physicians Clinically integrated and share accountability Care programs that improve quality, experience and are the

least expensive alternatives---especially for the “10%.” For whom is the delivery system caring?---Understand the model

for attribution

• The key physicians that manage the population For general populations, primary care with wrap around

programs Specialists who deliver high value care

Population Health Management: Tools

• Maximizing standardization and efficiency of care• Reducing unnecessary utilization of diagnostic

and therapeutic interventions• Avoiding use of the hospital when care can be

provided elsewhere• Using the least expensive equivalent when there

is no perceived difference in quality • Building and using alternative systems of care • Practicing team based care • Engaging patients in shared decision making

What is the role of physical therapists in the new paradigm?

Population Health Management: Medical Management Infrastructure

23

Population Health Management:Hospitalist Programs

Multiple Components of Population Health Management

High Risk and Palliative Care – Provides 1:1 physician, nurse & case mgmt.

for highest risk population. As risk is reduced, patient transferred to Level 2.

Physicians & care managers are integrated into community resources, physician offices,

or clinics.

Complex Care & Disease Mgmt – Provides whole person care enhancement for the population using a multidisciplinary team approach. (Diabetes, COPD, CHF,

CKD, Depression, Dementia, Organ transplant and Cancer)

Quality Care Assessment – Continuous care assessment and patient

population management system that allows physicians to accurate identify and

document their treatment plan for patients to improve quality and cost outcomes

Home Care/Extended Services – Provides in-home (or dialysis bedside)

medical care management by specialized physicians, nurse care managers and social

workers for chronically frail or ESRD patients that have physical, mental, social

and financial limitations.

Sub Acute Care – Ensures excellent quality of step-down facility and physician

care is available outside the hospital facility to bring rehabilitative care to a new level of excellent, as both an alternative to acute care, as well as a better solution for post-

acute services.

Technology Infrastructure –a physician portal to delivery actionable point of care solutions, accurate priority work lists and reports, powered by user-

friendly software modules (such are STAR and care management) and robust data

mining and analytics.

Payer and Network Contracting – provides services to client’s contract mgmt. to help define, negotiate & manage payer agreements around population health, as

well as support in development of specialty, hospital, and ancillary delivery networks.

Process & Change Mgmt – provides assistance in structuring

compensation & incentive programs, training & education and process redesign

and change management.

Hospitalists/Care Transitions – Improves quality of care throughout the stay starting at the ED evaluation and

continuing through discharge to optimize inpatient care and make all transitions hand

offs most effective.

Ad

ditio

nal M

edical M

anag

emen

t Infrastru

cture C

osts (p

er patien

t treatm

ent p

er mo

nth

)

ES

RD

Medical H

ome

Home Care ManagementProvides in-home medical care management by specialized physicians, nurse care managers and social workers for chronically frail seniors that have physical, mental, social and financial limitations. Chronically disabled patients receive specialized integrated home care programs

Complex Care and Disease ManagementProvides long-term whole person care enhancement for the population using a multidisciplinary team approach.Diabetes, COPD, CHF, CKD, Depression, Dementia, Organ transplant and Cancer.

Self Management, PCPProvides self-management for people with chronic disease and prevention services.

High Risk Clinics and Care ManagementProvides one-on-one physician /nurse, and case management for highest risk population. As risk is reduced, patient transferred to Level 2. Physicians and care managers are integrated into community resources, physician offices, or clinics. Chronically mentally ill are directed to specialized medical clinics

Hospice/Palliative Care

Hos

pita

list a

nd S

NFi

st

Matching the Patient to the Care They Need

Distribution of Cancer Care Costs by Phase of Illness

Monthly Costs of Colon Cancer for Different Survival Rates*

Proportion of Costs byPhase of Care for Major Cancers**

• Cancer costs can be divided into three phases: Diagnosis and Initial Treatment , Continuing Care and Recurrence and End-of-Life Care

• The first and third phases are associated with very high PMPM costs but the PMPM during continuing care is much higher than the general population

• There are significant opportunities in all three phases to reduce unnecessary costs. For example 65% of costs in the last year of life are due to hospitalizations. Many of these episodes can be avoided with effective advanced care planning and palliative care

Integrated Cancer Care Clinical Model to Enhance Quality, Patient Experience and Reduce Cost

Model Element

Description

Challenge Addressed

Quality Patient

ExperienceCost

Adherence to Evidence Based Protocols

Compliance with 74 evidence- based treatment protocols developed by CCE to reduce practice variation in and encourage value-based therapies. Additional protocols being built

End-to-End Patient Care Navigation

Oncologist/team to coordinate patient care across care spectrum (including non-cancer care needs) for the highest priority patients through investment in Care Coordinators and Navigators

Enhanced After Hours Care

After hours protocol driven program to treat symptoms and expanded office hours to mitigate unnecessary ED/ IP visits

Advanced Care Planning and Palliative Care

Advanced care planning and palliative care for all patients who have failed first line therapy, aligning goals of the patient with the care plan

Optimized Lab / Imaging Utilization

Approach for identifying/reducing unnecessary or redundant events. Use of lowest cost equivalent services

33

34

20-30% efficiency by focusing on

the areas that account for over 60%

of the total population spend.

Inpatient Admissions / Readmissions10-25%

Radiology Management4-6%

ER Visits2-4%

Lab2-4%

Care Coordination / High Risk Management

100% Care Plans

Intensive Readmission Prevention

100% Patient Follow-up

100% Compliance with Physician

Visits within 1 week

Physician Governance Standards

EMR Workflow/Alerts

Same Day Scheduling

After Hours Access

EMR Workflow / Alerts

Care Coordination Follow-up

Rx1-3%

Patient Education

Generics

Value is Created by Reducing Unnecessary Utilization

Reductions in Utilization Reduce Revenues More Than Costs

$800$820$840$860$880$900$920$940$960$980$1,000

81828384858687888990919293949596979899100

$000#Patients

Cost & Revenue Changes With Fewer Patients

Revenues

Costs

20% reduction in volume

7% reduction in cost

20% reduction in revenue

Adapted From Harold Miller

• Healthcare costs are unsustainable

• Utilization and unit price will decrease

• Patients will become more price sensitive

• Transparency of price and quality will increase

• Providers will be at risk for clinical and financial performance

• Innovation is necessary to reduce the cost of caring for the “10%”

Conclusions

• Embrace the “Stockdale Paradox”

• Optimize decision making: “Be nimble and adaptable”

• Determine where you add value

• Move services to lower cost settings and closer to the patient

• Use the intellectual capital to innovate in health care delivery especially for the “10%”

• Use technology as an enabler of care

The Imperatives for All Health Care Providers

“You must maintain unwavering faith that you can and will prevail in the end, regardless of the

difficulties, AND at the same time have the discipline to confront the most brutal facts of your current reality, whatever they might be.”

The Stockdale Paradox

“The best way to predict the future is to invent it.”

- Bill Gates