3Bending the Cost Growth Curve Spending TrendsBending the Cost Growth CurveHealth Care Spending Growth Continues To SlowPercent Increase in National Health Care SpendingMedicare Spending Growth per BeneficiarySource: Centers for Medicare and Medicaid, “National Health Expenditure Accounts”, 2013, available at: Reports/NationalHealthExpendData/Downloads/tables.pdf; Department of Health and Human Services, “Growth in Medicare Spending Per Beneficiary Continues to Hit Historic Lows”, January, 2013, available at: Marketing and Planning Leadership Council interviews and analysis.
4Hospital Volume Growth Remains Sluggish Volume PerformanceHospital Volume Growth Remains SluggishHospital Volume Growth RatesSource: “US Not-for-Profit Healthcare Outlook Remains Negative for 2013,” Moody’s Investors Service, January 22, 2013
5Modest Growth Anticipated for the Near Term Volume PerformanceModest Growth Anticipated for the Near TermInpatient and Hospital Based Outpatient Volume ProjectionsInpatient Volume, CAGR1Hospital-Based Outpatient Volume, CAGR13.1%(2.3%)Let’s talk about the state of growthAnd it’s not pretty:Across the course of our calls, we’re finding that volume growth—especially high-margin inpatient volume growth—is pretty hard to findWe need this growth—we’re dependent on it to subsidize unprofitable, mission-driven services and to continue to invest in facilities, technologies, and, increasingly, physiciansAnd yet many institutions are hoping to just toe the line: as we’ve asked about the growth targets that people are setting, many are saying that if they could maintain their existing inpatient business, they’d be happy; they just want to avoid declineThat’s a far cry from ten years ago when many were seeing inpatient growth of 2-4 percentAnd it becomes even bleaker—and noticeably unsustainable—if we examine what’s happening to the existing book of businessGiven decelerating reimbursement growth, a case mix shift toward medical cases, and weakening payer mix, this is a time when we need more growth than everCompound Annual Growth RateSource: Advisory Board Inpatient and Outpatient Market Estimators; Advisory Board research and analysis.
6Persistent Outpatient Shift Volume PerformancePersistent Outpatient ShiftOutmigration a Long-Established TrendMedicare Volume GrowthAll Payer Volume Growth Projections1Cumulative Percent Change34%(8%)20042011Cardiac ServicesVascular ServicesOrthopedicsNeurosurgeryCEO 2013 SOU CEO A FINALOutpatient services represent entire market regardless of site of service (includes hospital-based settings, ASCs, other freestanding providers and physician offices)Source: “Report to the Congress: Medicare Payment Policy,” MedPAC, March 2012, available at: Marketing and Planning Leadership Council interviews and analysis.
7ACA Includes Hospital Reimbursement Cuts Reimbursement TrendsACA Includes Hospital Reimbursement CutsLaw Reduces Annual Payment Increases Across Ten YearsMedicare Fee-for-Service Payment CutsReductions to Annual Payment Rate Increases1$415B in total fee-for-service cuts,$260BHospital payment rate cuts,$56BReduced Medicare and Medicaid DSH2 payments,Includes hospital, skilled nursing facility, hospice, and home health services; excludes physician services.Disproportionate Share Hospital.Source: CBO, “Letter to the Honorable John Boehner Providing an Estimate for H.R.6079, The Repeal of Obamacare Act,” July 24, 2012, available at: Marketing and Planning Leadership Council interviews and analysis.
8RAC Audits Spur Increase in Observation Reimbursement TrendsRAC Audits Spur Increase in ObservationShift from Inpatient to Observation Status a “Stealth” Price CutMedicare Payment RatesBreakdown of RAC DenialsPotential Chest Pain Treatment PathsHospital Overpayments Recovered, 2011$152M$648MInappropriate One-day StaysAll Other Reasons1.6M69%745KObservation stays nationwide, 2011Increase in number of Medicare beneficiaries under observation,Hospital observation visits exceeding 24 hours, 2011Recovery Audit Contractor.Source: The Advisory Board Company Daily Briefing, “Clement: What Medicare is doing to limit observation status,” May 28,2013, Washington, DC; Jaffe S, “Medicare Seeks to Limit Number of Seniors Placed In Hospital Observation Care,” Kaiser Health News, May 3, 2013, available at: Gengler A, “The Painful New Trend in Medicare,” CNN Money, August 7, 2012, available at: money.cnn.com; Marketing and Planning Leadership Council interviews and analysis.
9Medicaid Expansion Uncertain Coverage ExpansionMedicaid Expansion UncertainStates Diverge Over Choice to Expand Medicaid EligibilityState Participation in Medicaid ExpansionAs of September 2013ParticipatingUndecidedWill Not ParticipateSource: Health Care Advisory Board interviews and analysis.
10Will Individuals Shop on the Exchanges? Coverage ExpansionWill Individuals Shop on the Exchanges?Low Awareness, Weak Penalties May Dampen EnrollmentIndividuals’ Awareness of ExchangesPenalties for Non-complianceHow Much Respondents Have Heard About Their State’s Health Insurance ExchangeYearPenalty12014$95 or 1% of income2015$325 or 2% of income2016$695 or 2.5% of incomen=1,204Nothing at AllA LotSomeSample PenaltiesOffice WorkerIncome: $30,000Real Estate AgentIncome: $190,000Only a LittleWho Are The Enrollees?$1,900$3,800$4,75070%56%33In good to excellent healthEmployed full-timeMedian ageHigher of the two values.Source: Kaiser Family Foundation, “Kaiser Health Tracking Poll,” March 2013, available at: kff.org; PwC, “Health Insurance Exchanges: Long on Options, Short on Time,” October 2012, available at: Health Care Advisory Board interviews and analysis.
11Impact of Coverage Transitions Coverage ExpansionBracing for the ChurnSignificant Crossover Expected Between Medicaid, ExchangesPercentage of Future Enrollees with Change in Eligibility Between Medicaid, Exchange1Impact of Coverage Transitionsn=19,248Fluctuations in plan design, resulting in variable levels of benefits, premiums, and cost-sharingPlan BenefitsPotential disruption of existing provider networks, steering enrollees to new care sitesProvider Networks28 MLikely increase in hospital reimbursement with shift from Medicaid to commercial insurance on state exchangeAdults projected to undergo shift in eligibility across Medicaid-exchange market within one year2Payment RateSource: Benjamin D. Sommers and Sara Rosenbaum, “Issues In Health Reform: How Changes in Eligibility May Move Millions Back and Forth Between Medicaid and Insurance Exchanges”, Health Affairs, 30, no.2 (2011): ; Marketing and Planning Leadership Council interviews and analysis.Among adults with family incomes below 200 percent of the federal poverty lineUsing 133% of the federal poverty level as the eligibility threshold
12Payment Reform Pay-for-Performance Bundled Payments Accountable Care Organizations
13Health Reform Seeks to Change Provider Incentives Accountable Payment Models13Health Reform Seeks to Change Provider IncentivesOverview of Accountable Payment ModelsKey AttributesBundledPaymentsValue-Based PurchasingAccountable CareOrganizations (ACOs)DefinitionPurchaser disburses single payment to cover certain combination of hospital, physician, post-acute, or other services performed during an inpatient stay or across an episode of care; providers propose discounts, can gainshare on any money savedPay-for-performance program differentially rewards or punishes hospitals (and likely ASCs and physicians in coming years) based on performance against predefined process and outcomes performance measuresNetwork of providers collectively accountable for the total cost and quality of care for a population of patients; ACOs are reimbursed through total cost payment structures, such as the shared savings model or capitationPurposeIncent multiple types of providers to coordinate care, reduce expenses associated with care episodesCreate material link between reimbursement and clinical quality, patient satisfaction scoresReward providers for reducing total cost of care for patients through prevention, disease management, coordinationAdvisory Board AssessmentIncreases accountability for cost and quality within episodes of care without removing FFS volume incentive; new lever for financial alignment between independent specialists and hospitalsWithhold-earnback model will put significant dollars at risk for all providers, force immediate focus on quality and experience metricsLong-range goal of CMS to migrate to risk contracting; will spark industry-wide investment in primary care infrastructure to establish narrower networksRole of CMMI1Accepting providers’ proposals to test four different bundled payment models, including one without inpatient careDedicating $500M to Partnership for Patients, targeting hospital-acquired infections, readmissionsAccepting providers’ proposals to test various payment systems, including both shared savings and partial capitationCenter for Medicare and Medicaid Innovation.Source: Marketing and Planning Leadership Council interviews and analysis.
14New Responsibilities of Accountable Care Accountable Payment ModelsNew Responsibilities of Accountable CareCategorization of Risk-Based Payment ModelsPerformance RiskUtilization RiskCost of CareQuality of CareVolume of CareBundled PricingBundled Payments for Care Improvement programCommercial bundled contractsPay-for-PerformanceValue-Based PurchasingReadmissions penaltiesQuality-based commercial contractsShared SavingsMedicare Shared Savings ProgramPioneer ACO ProgramCommercial ACO contractsSource: Health Care Advisory Board interviews and analysis.
15Components of Value-Based Purchasing 123Payment WithholdQuality Performance AssessmentRedistribution of PaymentLowest performerHighest performerPayment withhold applies to base operating DRG paymentWithhold applies only to roughly 3,100 hospitals meeting VBP inclusion criteriaProvision assesses performance on 12 process of care measures and 8 patient experience of care measuresScored on achievement relative to national benchmarks and improvement compared to historical baselineQuality measure scores combined to form single figure Total Performance Score (TPS)Payment directly proportional to Performance ScoreRoughly half of hospitals earn back more than withhold, others earn back lessSource: Marketing and Planning Leadership Council interviews and analysis.
16Readmissions Penalties in Brief Penalty-Only Program Means No Upside for High PerformersProgram in Brief: Hospital Readmissions Reduction ProgramReadmissions IncentivesPercentage of Inpatient Medicare Revenue at RiskCMS to reduce payments for hospitals exceeding risk adjusted national averages for readmissions for heart failure, AMI and pneumoniaPenalties based on all-condition readmissionsPenalties to equal payments for readmissions above national averagePenalty to reach up to 3% of Medicare inpatient revenue in 2015 and remain capped at that levelSource: Marketing and Planning Leadership Council interviews and analysis.
17Medicare’s Largest Payment Innovation Program Bundled PaymentsMedicare’s Largest Payment Innovation ProgramMore than 450 Providers Participating in BPCI1BPCI1 Participation by State1-19 providers20-49 providers>50 providers0 providers450+Total Number BPCI Participants as of February 2013Bundled Payments for Care Improvement.Source: Centers for Medicare and Medicaid Services; Health Care Advisory Board interviews and analysis.
18Redefining the Acute Care Episode Bundled PaymentsRedefining the Acute Care EpisodeBundled Payments Drive Delivery System IntegrationBundled Payment FrameworkProgram in Brief: Medicare’s Bundled Payments for Care ImprovementLump Sum Payments Drive Integration Through Shared AccountabilityCMMI1 initiative offering four voluntary bundled payment models; more than 450 providers selected to participateModels 1-3 provide retrospective reimbursement; Models 2 and 3 include post-episode reconciliation; Model 4 offers single prospective paymentAcute care hospitals, physician groups, health systems eligible for all models; post-acute facilities may participate without hospitals in Model 3Physicians eligible for gainsharing bonuses up to 50 percent of traditional fee scheduleFor all models, applicants must propose quality measures, which CMS will use to develop set of standardized metricsPayerPhysician ServicesHospital ServicesPost-Acute ServicesCenter for Medicare and Medicaid Innovation.Source: Centers for Medicare and Medicaid Services; Health Care Advisory Board interviews and analysis.
19BCPI Participants Favoring Longer Episodes Bundled PaymentsBCPI Participants Favoring Longer EpisodesParticipation by Model TypeHospital Inpatient ServicesHospital and Physician Inpatient andPost-Discharge ServicesHospital and Physician Inpatient ServicesSource: Centers for Medicare and Medicaid Services; Health Care Advisory Board interviews and analysis.
20Not Just a Medicare Program Bundled PaymentsNot Just a Medicare ProgramPrivate Sector Bundling Pilots Emerging NationwideReimbursing for “Baskets of Care”Exploringcardiac bundlingParticipating in Prometheus PilotBundling for obstetricsDeveloping orthopedic bundlingBundling for CABG1Participating in Prometheus PilotBundling for cardiac surgeryBundling joint replacements, procedures with “defined outcomes”Bundling total knee replacementBundling total joint replacementFour physician groups bundling for orthopedic surgeryACE Demo SitesCoronary Artery Bypass Graft.Source: Health Care Advisory Board interviews and analysis.
21Total Number of Operating ACOs Accountable Care OrganizationsACOs Off and RunningACO Presence Steadily Extending NationwideTotal Number of Operating ACOsSeptember 2013Widening Reach of ACOs1April MSSP1 CohortJuly MSSP CohortPrivate Sector ACOsPioneer ACO ModelTotalJan MSSP CohortPioneers switching to MSSPPortion of U.S. population living in a primary care service area with an ACO52%Portion of U.S. population treated by an ACO14%Medicare FFS beneficiaries treated by an ACO4MCEO 2013 SOU CEO A FINALAs of February 2013.Source: Muhlestein D, “Continued Growth of Public and Private Accountable Care Organizations,” Health Affairs Blog, February 19, 2013; Oliver Wyman, “Accountable Care Organizations Now Serve 14% of Americans,” February 19, 2013; Leavitt Partners, “Growth and Dispersion of ACOs,” August 2013; Health Care Advisory Board interviews and analysis.
22Where the Medicare ACOs Are Accountable Care OrganizationsWhere the Medicare ACOs Are23 Pioneer and 228 Shared Savings Program ACOsAugust 2013Source: Centers for Medicare and Medicaid Services; Health Care Advisory Board interviews and analysis.
23Mechanics of the Medicare Shared Savings Program Accountable Care OrganizationsMechanics of the Medicare Shared Savings ProgramApplying Total Cost Accountability to Fee-for-Service PaymentsShared Savings Payment CycleProgram in Brief: Medicare Shared Savings ProgramShared Savings PaymentBonuses or penalties levied based on variance of expenditures from target4DistributionACO responsible for dividing bonus payments among stakeholders5AssignmentPatients assigned to ACO based on terms of contract1ComparisonTotal cost of care for assigned population compared to risk-adjusted target expenditures3BillingProviders bill normally, receive standard fee-for-service payments2Cohorts launched April 2012, July 2012, and January 2013; contracts to last minimum of three yearsPhysician groups and hospitals eligible to participate, but primary care physicians must be included in any ACO groupParticipating ACOs must serve at least 5,000 Medicare beneficiariesBonus potential depends on Medicare cost savings, quality metricsTwo payment models available: one with no downside risk, the second with downside risk in all three yearsSource: Health Care Advisory Board interviews and analysis.
24Three Primary Levers for ACOs to Reduce Spending Accountable Care OrganizationsThree Primary Levers for ACOs to Reduce SpendingACOs Targeting Total Cost of CareOptions for Risk-Bearing ProvidersExample:High-risk patient care management (e.g., medication management, care transitions management)1Prevent Utilization through Medical ManagementExample:Cost incentives to encourage in-network imaging referrals2Retain Utilization Within NetworkPopulation Health ManagerDirect Unavoidable Utilization to Low-Cost, High-Quality PartnerInpatient, outpatient proceduresSelect inpatient medical careExample:Volume steerage to high-value acute care providers3Source: Health Care Advisory Board interviews and analysis.
25First Year Pioneer ACO Results Are In Accountable Care OrganizationsFirst Year Pioneer ACO Results Are InStrong Quality Performance, Uneven Financial ResultsYear One Financial ResultsYear Two Participation DecisionsBeneficiary Cost Growth, 2012Gross savings: $87.6MMoving to MSSP1Opting Out EntirelyStaying in Pioneer ACO ModelFirst Year Pioneer ACO Results13Earned bonuses, totaling $76M2Incurred losses, totaling $4M25Generated lower risk-adjusted readmission rates32Successfully reported quality measuresMedicare Shared Savings Program.Source: Centers for Medicare and Medicaid Services; Health Care Advisory Board interviews and analysis.
26Provider Market Mergers and Acquisitions Partnerships and Affiliations Physician MarketImaging CentersAmbulatory Surgery CentersRetail Clinics
27Health Systems Increasingly the Norm Mergers and AcquisitionsHealth Systems Increasingly the NormHospital Mergers and AcquisitionsM&A Plans for the next months1n=189No M&A Activity PlannedNumber of Hospitals Part of a Health SystemExploring Potential DealsCompleted Deals UnderwayMPLC 2013 SOU: Speech A FINALIrving Levin Associates has released summary data on health care M&A activity during Deal volume for hospitals showed an uptick of 2.2% over 2011 — 94 deals, up from 92 in However, dollar value of the deals declined 77.2%, from $8.3 billion in 2011 to $1.9 billion in In the health services market overall, the number of deals was up 8.9%, but total dollar value was down 31.5%.January 2012.Source: AHA Hospital Fast Facts, available at Healthleaders Media 2011 Industry Survey, available at: Levin Associates, “Hospital Mergers and Acquisitions”, available at: Advisory Board interviews and analysis.
28Growth Goals for Partnerships Partnerships and AffiliationsP&A: The New M&A?Partnerships and Affiliations On the Rise2011: Medium-sized academic medical center partners with smaller rival to fill cath lab service deficiencies2011: Allina and HealthPartners affiliate to create a “testing lab” for accountable care2011: Large academic medical center signs preliminary partnership agreement with six rival hospitals to better compete with bigger systems2011: Duke Health, Lifepoint form community hospital joint venture to explore joint affiliation optionsGrowth Goals for Partnerships2010: Nebraska Medical Center, Methodist Hospital agree to accountable care alliance2011: Large medical center agrees to sell CON-approved open-heart surgery suite to competitorAmbulatory footprintAccess to new regionsNew clinical programBrand equitySource: The Advisory Board Company, “Cardiovascular Regionalization and Network Strategy”, Washington, DC; Duke-Lifepoint Healthcare, “Duke University Health System and LifePoint Hospitals Partner to Create Innovative Options for Community Hospitals,” available at: accessed May 3, 2011; Accountable Care Alliance, Omaha, NE; Crosby J, “HealthPartners, Allina form a 'lab' for health reform,” StarTribune, available at accessed November 5th, 2011;Marketing and Planning Leadership Council interviews and analysis.
29The New Purpose of Partnership Partnerships and AffiliationsThe New Purpose of PartnershipIntent of Partnerships and Affiliations Rapidly EvolvingScaleScopeReachFinancialOperationalClinicalGeographicConsolidate local positionCentralize supply purchasingMerge back office functionsIncrease operational efficiencyIntegrate services across care continuumDevelop care management competenciesStake regional footprintEstablish national network“New Market” Partnership ValueObjectives of PartnershipSource: Marketing and Planning Leadership Council interviews and analysis.
30A Host of Available Affiliation Approaches Partnerships and AffiliationsA Host of Available Affiliation ApproachesPartnership Models Addressing Existing, Emerging ChallengesPartnership ModelDescriptionJoint PurchasingHospital organizations band together to form group purchasing organizations centered on vendor negotiations in order to cut supply costsBest-Practice SharingJoint forums among hospitals to discuss clinical protocols, operational initiatives that have been successfully implementedRegional Clinical NetworksCollaboration among hospitals to steer patients with acute conditions (i.e. STEMI, AAA) to most appropriate siteService OutreachHospital sends physicians to outlying partner sites, sets up outreach clinics on a temporary basis in order to reach more patients, grow volumesQuality Assurance ReviewHospital medical staff review medical protocols, outcomes of partner hospital, then advise on protocols to drive quality gainsEquipment SharingHospital loans medical equipment, facility space to affiliated partnerShared Physician StaffingPartner hospitals loan or share physicians with one another in order to fill gaps in service coverage, usually for more advanced proceduresJoint Program ManagementHospital provides administrative, operational oversight of CV program at partner siteJoint Program DevelopmentHospital serves in advisory capacity for another hospital seeking to build up a new program; support may cover clinical, legal, HR, marketingSource: Health Care Advisory Board interviews and analysis.
31Physician MarketHow Are We Growing?Physician Employment, Medical Group Ownership Continue to RiseHospitals Employing or Affiliating with PhysiciansMedical Group Ownershipn=46 Hospitals and Health Systems44.8%Physicians currently employed or under contract70%Hospitals reporting increase in physician employment requestsMPLC 2013 SOU: Speech A FINALRetitle, split?Source: Advisory Board Survey on Physician Employment Trends; MGMA Physician Compensation and Production Survey, available at: mgma.com; Advisory Board interviews and analysis.
32Physician Groups Finding Unlikely Partners Physician MarketPhysician Groups Finding Unlikely PartnersDaVita, HealthCare Partners Join Forces for ScaleDaVita Acquires Experienced Population ManagerHealthCare PartnersJoint StrategyDaVitaExperience thriving under value-based payment modelsActive in successfully acquiring physician groups across the countryFiscally savvy, generating $7B in annual revenueEffective in successfully scaling businesses across diverse marketsExpand, acquire physician groups outside of existing marketsFranchise value-based physician groups across United StatesCase in Brief: DaVita HealthCare Partners984In May 2012, dialysis chain DaVita acquired California-based HealthCare Partners for $4.42 billionDeal presents new revenue stream for DaVita, opportunity to capitalize on physician-risk modelNewly acquired physicians since merger1Through acquisition of ABQ Health Partners and Arta Health Network.Source: Mathews AW, “Dialysis Firm Bets on Branching Out,” Wall Street Journal, May 21, 2012, available at: Lee J, “HealthCare Partners Acquires N.M. Medical Group,” Modern Physician, September 11, 2012, available at: Dunn L, “HealthCare Partners Acquires Two Independent Practice Networks in California,” Becker’s Hospital Review, September 12, 2012, available at: Health Care Advisory Board interviews and analysis.
33Imaging Center Market Dips After Years of Growth Imaging CentersImaging Center Market Dips After Years of GrowthFirst Decline Since 2009Total Number of Imaging Centers in the U.S.Net percent growth from previous year2007200820092010201120122013Source: Radiology Business Journal, “Imaging-center Growth Hits the Wall in 2013; Volumes Plummeted in 2011,” August 30, 2013; Marketing and Planning Leadership Council interviews and analysis.
34ASC Growth Continues to Slow Ambulatory Surgery CentersASC Growth Continues to SlowTotal Number of Medicare-Certified ASCs7.3%5.6%5.9%4.4%2.4%1.9%1.3%Net percent growth from previous yearSource: “Report to the Congress: Medicare Payment Policy,” MedPAC, March 2012; Marketing and Planning Leadership Council interviews and analysis.
35Meet Your New Competitors Retail ClinicsMeet Your New CompetitorsWalgreens Aims to Become the Premier Health Destination2013: Launches three ACOs; begins diagnosing and managing chronic disease2009: Launches flu vaccine campaignSimple Acute ServicesVaccinations and PhysicalsChronic Disease MonitoringChronic Disease Diagnosis and Management2007: Acquires Take Care Health Systems2012: Offers three new chronic disease testsCase in Brief: Walgreen Co.”Not Just a DrugstoreLargest drug retail chain in the United States, with 372 Take Care ClinicsIn April 2013, became first retail clinic to offer diagnosis and treatment of chronic diseases“Our vision is to become ‘My Walgreens’ for everyone in America by transforming the traditional drugstore into a health and daily living destination...”Walgreen Co. OverviewSource: Japsen B, “How Flu Shorts Became Big Sales Booster for Walgreen, CVS,” Forbes, February 8, 2013, available at: “Take Care Clinics at Select Walgreens Expand Service Offerings,” Reuters, May 31, 2012, available at: Murphy T, “Drugstore Clinics Expand Care into Chronic Illness,” The Salt Lake Tribune, April 4, 2013, available at: Walgreens, “Company Overview,” available at: Health Care Advisory Board interviews and analysis.
36Walmart Eying the Health Care Industry Retail ClinicsWalmart Eying the Health Care IndustryMoving Beyond Basic Retail ClinicsPotential Evolution of Health Care ProductsBasic Retail ClinicFull Primary CareHealth Insurance ExchangeScope of Services”“That’s where we’re going now: full primary care services in five to seven years.”Vice PresidentHealth and Wellness Payer Relations33%Estimated portion of the US population that visits Walmart every week4,600+Number of Walmart stores in the United StatesMedian distance between a residence and Walmart4.2 milesSource: Holmes TJ, “The Diffusion of Wal-Mart and Economics of Density,” May, 2006; Zimmerman A and Hudson K, “Managing Wal-Mart: How U.S.-Store Chief Hopes to Fix Wal-Mart,” The Wall Street Journal, April 17, 2006, available at: Aboraya A, “Wal-Mart Plans to Offer Primary Care in 5-7 Years,” Orlando Business Journal, January 11, 2013, available at: Aboraya A, “Exclusive: Wal-Mart Exploring Private Health Insurance Exchange for Small Biz,” Orlando Business Journal, January 11, 2013, available at: Health Care Advisory Board interviews and analysis.
38Commercial Payers Demanding More Value Taking Measures to Keep Employers in the GameExamples of Commercial Payer Cost Control InitiativesPrice Transparency ToolsBundled PaymentNarrow Networks, SteerageHealth Care Service Corp. Benefits Value Advisor programUnitedHealthcare’s myHealthcare Cost EstimatorBCBS of Western NY, Kaleida Health cardiac surgery bundleConnectiCare, St. Francis Hospital hip and knee replacement bundleHarvard Pilgrim Focus NetworkAnthem BCBS Compass SmartShopper ProgramBenefits Value Advisor.Source: Hostetter M and Klein S, “Health Care Price Transparency: Can It Promote High-Value Care?”, The Commonwealth Fund, April/May 2012, available at: Appleby J, “HMO-Like Plans May Be Poised to Make Comeback in Online Insurance Markets,” Kaiser Health News, January 22, 2013, available at: Health Care Service Corporation, “Health Care Consumers Realize Significant Cost Savings Through Benefits Value Advisor Program,” April 17, 2013, available at: Health Care Advisory Board interviews and analysis.
39Doubling Down on Steerage Commercial PayersDoubling Down on SteerageAnthem Paying Consumers to Pick Low-Cost ProvidersAnthem’s Compass SmartShopper ProgramMember works with referring physician to switch to lower-cost provider or location for serviceMembers receiving care at a low-cost provider from the list receive financial rewardBefore Scheduled ProcedureFollowing ProcedureMember accesses list of low-cost providers through toll-free number or websiteUpon receipt of claim, Anthem identifies member access of low-cost provider list476$250K$100Participating members of SmartShopper pilot programHealth care costs avoided over two year pilot programTypical incentive paid to participants choosing lower-cost providersSource: Andrews M, “Cash rewards for thrifty health consumers,” The Washington Post, March 26, 2012; Compass Smartshopper, available at: Advisory Board interviews and analysis.
40Trading Price for Volume on the Public Exchanges Commercial PayersTrading Price for Volume on the Public ExchangesExpect Lower Provider Payment Rates, Less Patient ChoiceAnticipated Provider Reimbursement Rates for Exchange PlansAetna’s Planned Reduction in Exchange Network Size25%-50% reduction in exchange network size, compared to networks for typical commercial productsWellPoint Inc.Between Medicare and Medicaid ratesCatholic Health Initiatives Modest discounts from commercial ratesMillern Medical Center120% below commercial ratesMeyers Health110% above Medicare ratesCase in Brief: Aetna Inc.Health insurer planning to sell narrow network exchange products in 14 statesSearching for providers agreeing to lower rates in narrow network productsPlans for rates to fall closer to Medicare than commercial reimbursementTenet Healthcare Up to 10% below commercial ratesMeriwether Hospital15% below commercial ratesPseudonym.Source: Mathews AW and Kamp J, “Another Big Step in Reshaping HealthCare,” Wall Street Journal, February 28, 2013, available at: Hancock J, “Aetna Cuts Predictions for Obamacare Enrollment,” Kaiser Health News, April 30, 2013, available at: Health Care Advisory Board interviews and analysis.
41Employers Already Scaling Back Coverage Erosion of Employer-Sponsored Coverage Well UnderwayIndividuals Covered by ESI1Contribution to Insurance PremiumsNon-elderly PopulationCoverage for Family of Four11.5M fewer individuals20022012EmployerWorker95% growth102% growth23%Employers planning to offer CDHP2 as only plan option, 201425%Insured non-elderly adults with deductibles $1,000 or higher, 2012Employer-sponsored insurance.Consumer-directed health plan.Sources: Sonier J, et al., “State-Level Trends in Employer-Sponsored Health Insurance,” Robert Wood Johnson Foundation, April 2013, available at: Collins R, et al., “Insuring the Future,” The Commonwealth Fund, April 2013, available at: Towers Watson, “Reshaping Health Care,” 2013, available at: Health Care Advisory Board interviews and analysis.
42Concerns for Long Term Liability of Health Benefits EmployersConcerns for Long Term Liability of Health BenefitsEmployers “Very Confident” Health Benefits Will Be Offered At Their Organization a Decade From Now2011PPR SOU Speech ASource: Towers Watson “Health Care Changes Ahead Survey 2012;” Advisory Board interviews and analysis.
43Mounting Pressure on Employer-Sponsored Benefits Will Defined Contribution Emerge as Funding Strategy?Percentage of Employers Offering Private ExchangesCompany Health Benefits Strategy for Active Employees Over Next DecadeTowers Watson Survey, n = 583Employee Benefit Research Institute, 2011UndecidedDiscontinue health coverageConsider shift to defined contributionContinue offering defined benefit plans32%8.7%Increase in Employer Spending on Health Benefits Relative to 5-yrs PriorGrowth in Employees’ Share of Premium Costs BetweenMPLC 2013 SOU: Speech A FINALSource: Employee Benefit Research Institute, Private Health Insurance Exchanges and Defined Contribution Health Plans: Is It Déjà Vu All Over Again?”, July, 2012, no. 373;Towers Watson, “18th Annual Towers Watson Employer Survey on Purchasing Value in Health Care”, 2013, available at: Marketing and Planning Leadership Council interviews.
44Real Movement in Exchange Plan Selection EmployersReal Movement in Exchange Plan SelectionSears, Darden Exchange-Style Model in Year One2013 Health Insurance Offerings at Sears, Darden RestaurantsConsumer Preferences on Sears-Darden Exchange1Employer offers employees fixed credit to select health care coverage2Employee selects coverage from menu of plans in online marketplace3If selected plan cost exceeds credit, employee pays balance12Case in Brief: Sears, Darden RestaurantsSelf-insured large employers redesigning employee benefits to reduce health spend through defined contribution strategyOffering employees lump sum credit to choose coverage from Aon Hewitt’s online marketplaceMPLC 2013 SOU: Speech A FINALPreferred Provider OrganizationHealth Maintenance OrganizationSource: Mathews AW, “To Save, Workers Take On Health-Cost Risk,” Wall Street Journal, March 17th, 2013; Marketing and Planning Leadership Council interviews and analysis.
45Most Employers Running to High(er) Deductibles Select Employers Moving to CDHP1Percent of Firms Offering HDHP/SO2 by Number of Employees201140 percent CDHPMoving to 100 percent CDHP100 percent CDHP100 percent CDHPPPR SOU Speech AConsumer Directed/Driven Health Plans.High-deductible health plan with savings option, defined as a health plan with a deductible of at least $1,000 for single coverage and $2,000 for family coverage.Source: Towers-Watson & National Business Group on Health, “Employer Survey on Purchasing Value in Health Care,” available at: Castlight Health, “Castlight Health and Life Technologies to Discuss Employee Engagement in Health Care at IHC FORUM East,” available at: “Mini-Microsoft”, available at: Claxton et al. “Employer Health Benefits: 2011 Annual Survey,” Kaiser Family foundation and Health Research & Educational Trust, Exhibit 4.3.; Advisory Board interviews and analysis.
46Self-Insured Looking for New Solutions EmployersSelf-Insured Looking for New SolutionsEmployers Bearing More Risk, Turning to Providers as AlliesPercentage of Self-Insured EmployersPartially or Completely Self-InsuredEmployer Interest in Provider-Oriented StrategiesAdopt new accountable payment modelsContract directly with hospitals, physicians, ACOsOffer incentives for care coordinationOffer performance- based paymentsIn Place in 2013Planned for 2014Source: Kaiser Family Foundation, “2012 Employer Health Benefits Survey,” available at: Towers Watson, “18th Annual Towers Watson Employer Survey on Purchasing Value in Health Care,” 2013, available at: Health Care Advisory Board interviews and analysis.
48Specialist, Hospital Choices Driven by Physicians Strong Referrals Management Still CriticalInformation Sources Used to Select a Specialist Physician1Information Sources Used to Select a Facility for a Procedure120082008n=13,500n=13,50058% rely solely on referral from PCP69% rely solely on referring doctorSurvey respondents given option to “select all that apply.”Source: Tu HT and Lauer JR, “Word of Mouth and Physician Referrals Still Drive Health Care Provider Choice,” Center for Studying Health System Change, December 2008; Health Care Advisory Board interviews and analysis.
49The Logic of Physician Choice PhysiciansThe Logic of Physician ChoiceHospital Choice Driven by Service, CultureFactors Driving Independent Physician Referral DecisionsWorkshop of ChoiceCutting-edge technology, facilitiesEfficient operating rooms, ICUsAccess to preferred schedule slotsClinical QualityHigh-quality nursing staffSupportive and knowledgeable physician networkPositive patient-reported experiencesService QualityRapid access to lab, imaging resultsPrompt resolution of complaints and issuesNon-disruptive IT, EMR systemsContractual RelationshipsParticipation in management, operationsAligned incentivesCulture of PartnershipOpen communication channelsPhysician- oriented leadershipSource: Health Care Advisory Board interviews and analysis.
50Medical Home Incentives Influencing Referrals PhysiciansMedical Home Incentives Influencing ReferralsMedical Home Practice Changing Referral Priorities, Partner ExpectationsNCQA1 PCMH2 recognition requires:Hospital partner must offer:“Whole-person” careComprehensive care servicesCoordinated, integrated care across care systemHealth information system interoperability; care management resourcesHigh-quality performanceEvidence-based care protocolsTeam-based careStaff communication protocols, interdisciplinary care team meetingsNCQA PCMH Model Widely AdoptedApproximate number of clinicians practicing in certified medical homes5,000+NCQA-certified medical homes26,000National Committee for Quality Assurance.Patient-centered medical home.Source: NCQA, “PCMH Eligibility,” “NCQA and Pfizer Publish Strategies For Becoming A Patient-Centered Medical Home,” both available at: Health Care Advisory Board interviews and analysis.
51Anticipating the “Activated” Patient PatientsAnticipating the “Activated” PatientConsumer Role in Decision Making Increasingly ImportantHigh-Deductible Health Plan EnrollmentConsumer Viewpoint on Role in Care Decision Making26%Individuals with Deductible of $1000 or Moren=2,071Doctor is completely in charge of treatment decisionsDoctor makes the decisions with some input from patientDoctor and patient make a join treatment decisionPatient makes final decision with some input from their doctorPatient is completely in charge of treatment decisions43%33%Decline in proportion of individuals with a deductible under $5001Respondents age 25 to 34 preferring fully active role in care decision makingFrom 2003 to 2012.Source: Collins R, et al., “Insuring the Future,” The Commonwealth Fund, April 2013, available at: Altarum Institute, “Altarum Institute Survey of Consumer Health Care Opinions,” Fall 2012, available at: Health Care Advisory Board interviews and analysis.
52Factors Influencing Patient Decisions Expanding PatientsFactors Influencing Patient Decisions ExpandingKey Drivers of Consumers’ Health Care DecisionsCommunicationEducation During VisitSocial Media PresenceOnsite AmenitiesPatient PortalCare Navigation ServicesBrand, ReputationCoordination with Other ProvidersPhysician RecommendationCompetitive PricingClinical QualityExperience, Service QualityConvenience, AccessSource: Health Care Advisory Board interviews and analysis.