Tom Emerick Emerick Consulting Why Employers Should Stay in the Game Minnesota Health Action Group Employer Leadership Summit February 21, 2013 Tom Emerick, Emerick Consulting LLC (479) Blog:

Not Pretty for US Corporations Emerick Consulting  Will cover health financing challenges corporations facing  How view of US health care is evolving  Where the puck is going in five years 2

Not Just Bottom Lines Emerick Consulting  85% of growth in Consumer discretionary spending went to health costs last 10 years  Corporate top lines under attack 3

Health Costs Threaten Top Lines Emerick Consulting Sharp Says Its Future Is at Risk WSJ November 4, 2012 Dell reported an 18 percent drop…August an 18 percent drop 4

More Health Spending Woes HP sales drag, July 2012 Intel's Warning Flags PC Woes, September 7, 2012 Harvard says health care costs are growing at an ‘unsupportable’ rate, Boston Globe Nov. 1, 2012 (irony) 5

Corporations Looking for New Solutions  Old costs controls not working  Shrinking outlier group  PPOs failing  Gross variation in care for outliers 6

First PPO Obsolescence Shrinking outlier population 6-8% = 80% of health plan dollars Most outliers have complex health needs

Time to Move on  Wellness and prevention has has been a noble effort  Failed to curtail costs sustainably  Distracts from real issues 8

More on Outliers 10-20% misdiagnosed 40% have flawed treatment plans A source of huge waste Extreme variation in how clinics and hospitals handle this population (recent Dartmouth study)

Corporations Taking Notice  PBS Story Feb 2012  One Doctor in Texas…accused of $374M in Medicare fraud over six years 10

News Corporations See  Reuters News March “Unnecessary cancer treatment in men on the rise”  Washington Post March ” There is a simple reason health care in the United States costs more than it does anywhere else: The prices are higher.” (Sort of correct) 11

Coronary: A True Case of Medicine Gone Awry by Stephan Klaidman…Scribner Press > Tenet’s Redding Hospital---millions of dollars in settlements for heart surgeries on patients with healthy hearts and arteries > Doctors barred from heart surgery 12

News Corporations See > New York Times, Jun-11. "Medicare Claims Show Overuse for CT Scanning" Hundreds of hospitals across the country performed multiple scans in succession putting patients in danger from overradiation. Some hospitals performed at least two scans in succession over 80 percent of the time. > Wall Street Journal, Jun-11. "Senators Request Probe of Surgeons" A group of Senators is examining physician-owned distributorships that allow doctors to make money by purchasing their own devices for spinal fusion surgeries. A conflict of interest is apparent since more surgeries means more distributorship profits. > Wall Street Journal, Jul-11. "Heart Treatment Overused" Of the 600,000 annual $20,000 angioplasty procedures nationwide 15 percent are either deemed unnecessary or inappropriate according to a study. This comes out to a total unnecessary cost of 1.8 billion dollars per year. 13

News Corporations See > Bloomberg, Dec-10. “Highest Paid U.S. Doctors get Rich with Fusion Surgery" The highest paid doctors in the U.S. get rich off spinal fusion surgeries. Spinal fusion surgeries doubled to 413,000 between 2002 and The surgeries remain highly ineffective, and doctors’ motives for performing the surgeries remain in question. > Burton Report, Jul-11. "Unnecessary Spine Fusions: a Full Time Employment Opportunity" This report discusses how economics, not patient health, is the primary incentive for the $150 billion spinal fusion industry. 14

News Corporations See: Excerpt from WSJ on March 29, 2011… Secrets of the System  Medicare Records Reveal Troubling Trail of Surgeries  Dr. Vishal James Makker…  A Medicare database analyzed by The Wall Street Journal …data show highest rate of refusions in the nation among surgeons who performed spinal fusions on 20 or more Medicare patients during those two years. 15

Opportunity Rich Environment 16  Where? Outlier management  Again: 6-8% = 80% of plan dollars  Again: 10-20% completely misdiagnosed  Again: 40% flawed or suboptimal treatment plans

Micromanaging Outliers Next Frontier  Company Sponsored COE  Stellar results: 20-40% decrease in targeted surgeries  Employee get better quality, save money, plan saves money  No losers  Revolutionary and sustainable 17

Needed: New Definitions  Quality  Ethics 18

Quality Definition Old definition: Is care delivered to a gold standard? New definition: First is the care needed and appropriate, then is it delivered to a gold standard?

Ethics Definition Current definition: If something may help, let’s try it New Definition: First determine the desired patient outcome, then use the safest, least invasive way to achieve it. Huge Difference 20

Comparative Ethics and Quality Defs.  US stands alone among English speaking countries  Stands nearly alone among “peer” countries 21

US vs. UK  US spends about 2X per capita  US 10% more obese  UK smokes 6% more  UK drinks booze like no tomorrow  UK life expectancy up relative to US Source: OEDC report 22

Customized Centers of Excellence Seeking these solutions today: Pepsi, Walmart, Lowes, Boeing, many more Huge shift coming 23

COE Model Can Avoid Extreme Variations Heart surgery Valve surgery Cancer Care Spine surgery Much more 24

COE Design model Plan pays for travel for patient and companion Employees get better quality of care Employees save $ out of pocket Plan save money No losers ers 25

Hospitals Worst of 24 Reported (ranked by DAHC Hospital Care Intensity HCI Index)* Cedars-Sinai Medical Center 2.06 NYU Langone Medical Center 1.73 Mount Sinai Medical Center 1.50 Ronald Reagan UCLA Medical Center 1.48 New York-Presbyterian Hospital 1.37 US Average 1.00 * Dartmouth Health Care Atlas 26

The Best of 24 Reported U. of Washington Medical Center0.78 Stanford Hospital and Clinics 0.78 St. Mary's Hospital, Mayo Clinic0.70 Scott & White Memorial Hospital 0.62 University of Utah Health Care

Centers of Excellence Employers Use Virginia Mason 0.74 * Geisinger 0.65 * St. Mary's Hospital, Mayo Clinic 0.70 Scott & White Memorial Hospital 0.62 St John’s Mercy Springfield, MO 0.67 * Cleveland Clinic 1.12 *

Comparison UCLA vs. Virginia Mason  1.48 (UCLA ) /.74 (VM)= 2 or 200%  Advantage: Virginia Mason  UCLA booted out by employers in CA  Employers/ees winners 29

New COE Model  Saves lives  Gives employees: better quality care  Saves employees out-of-pocket dollars  Best care = most cost-effective  A rising tide… 30

Desperately Needed  Focused Health Care Factories  They are coming  Will be Revolutionary 31

New COE Model Impact on Hospitals  Winners  Losers  Rush to CSCOEs on today  Five year prediction: Many 32

Stay in Game  Why stay in game? CSCOEs  Transformational  Drive real reform  Bad guys won’t quit until they lose patients  Feds will never figure this out 33

Cracking Health Costs  My blog read globally: Cracking Health Costs   Book coming soon: Cracking Health Costs, Wiley Press  Early Buy: 34

Questions Comments 35