1. Healthcare Innovations: Trends, Transitions, Technology, and Talent Ricardo Martinez, MD, FACEP Chief Medical Officer North Highland Company, North Highland Worldwide

2. It Starts… Care given at home People paid out of their pockets directly Hospitals largely for poor or travelers without a home -run by charities and religious orders. Physicians started many of todays hospitals to deliver advances in medicine. In the 1920-30s, health insurance started by hospitals and doctors to help people pay for hospital and physician care. Then… 2...it went nuts.

3. Putting the Fun in Dysfunction…. Common Characteristics of Current Healthcare System Expensive, with hidden prices Activity-based rather than performance Fragmented and uncoordinated Insular Difficult to access and to use. Not user-friendly Inefficient Ineffective Highly variable Autonomous and insular thinking Slow to adopt and change 3 Market Failure – Widespread Demand For Improvement

4. What is Innovation? Innovare; "to renew or change Steps to Innovation Curiosity Discovery Invention Innovation The Nature of Innovation Unique, not just new. Must be definably valuable Must be worthy of exchange – of time, money or effort

5. Four Types of Innovation Transformational –A paradigm shift that changes society Category –Building new industry within transformation Marketplace –Builds or expands markets, reach new customers Operational –Redesign to improve business processes and customer experience

6. The Innovators Dilemma Great companies fail for doing the right things. Too much emphasis on current customer needs and fail to adopt new technology or business models Stuck in a value network Examples: computers, steel minimills Healthcare?

8. The Big Trends Financial Social Technological Political 8

9. Market drivers toward Value Based Care = Quality/Costs Responds when patient need arises Centered around provider practice and schedules Independent practices Highly variable practice Systems designed for commercial rates to be profitable Large administrative burden Volume-based High utilization = revenue Margins dependent upon reimbursement Patients finds access points and navigates fragmented system Identifies unmet needs and responds proactively Centered around patient needs and schedules Integrated network Highly repeatable practice Systems designed for Medicaid rates to be profitable Frictionless healthcare Value-based Utilization = costs Margins dependent upon costs Patients ushered to appropriate access point and navigated thru integrated health system Drivers of HealthCare Trends Activity-Based Care Fading Away Future Value-Based Care Rapidly Emerging Positioning Enterprises for Success. Social Financial Technology Consumerism Aging population Chronic Disease Shortage of staff Limited Reimbursement Financial Risk Sharing Consumer as payment source Rapid growth health IT Mobile devices Telehealth Cloud and exchanges Healthcare enterprises must change or die. Health Reform Increased Medicaid Insurance and Data Exchanges Payment reform Current

10. Financial Crest Reimbursement peaking Move toward Pay for Value – Quality/$$ Shift away from high fixed costs Move toward risk sharing models Greater scrutiny from payers and public Growth of defined contribution benefits Increasing patient co-pays makes them a payer source Value-based insurance design 10

12. Building capability requires a phased approach Decrease Costs Current State Phase 2: Enhanced Phase 3: Advanced Phase 1: Foundational 12 Road Map of Future Shifts in Reimbursement Models

13. Just cut the fat out and youll be fine…

14. Social Waves Aging of population Growth of chronic diseases Shortage of physician and healthcare workers Increasing consumerism Shift from Independence to Interdependence [Systems Thinking] 14

16. 16

17. Source: The Economist: Into the Unknown. November, 2011 http://www.economist.com/node/17492860 I think Im going Japanese…

18. http://socioecohistory.wordpress.com/2010/05/18/japan-the-sleeping-sovereign-debt-crisis-giant/

19. Growth of Chronic Disease 5% of population accounts for ~ 50% of total health expenditures The 15 most expensive health conditions account for 44% 25% of US have one or more of 5 major chronic conditions –Mood disorder, diabetes, heart disease, asthma, hypertension Rise in population treated with 7 of top 15 conditions, rather than rising treatment costs per case, accounted for greatest part of spending growth. And obesity continues to climb – which causes hypertension, diabetes, heart disease and hyperlipemia. 19

21. Shortage of Physicians and Health workers US has 3 specialists for each generalists, the inverse of other countries. Geographic maldistribution of healthcare resources Leads to difficulties and delays in access to care Each state has different laws on scope of practice of various Will only get worse

22. Started in the US in the 1960s Systems Thinking accelerated with The 5 th Discipline, 1990s Most other industries adopted and reengineered Relatively new concept to Healthcare Physicians taught autonomy often without skills needed for success in systems. Shift From Independence to Interdependence

24. Increasing Consumerism Want more control and choice in health relationship Desire more convenient access to care Think they own their medical information Increasingly cost conscious Can collaborate with others with the same disease Want access to medical information Desire personalized experience 24

25. Technological Waves Rapid growth and implementation of Health IT across healthcare allows capture and exchange of clinical data. Expansion of wireless broadband increase flow of information Rise of digital sensors and imaging that can provide information and be shared Boom of mobile devices for collaboration and information retrieval, including consumers. 25

27. https://www.ecri.org/Documents/Secure/Health_Devices _Top_10_Hazards_2013.pdf

28. What is the Road Ahead ? 28 Patient-centered, physician-directed teams Value-driven: high quality at lowest cost Connected and integrated – culturally and digitally Delivers measurable quality health care (meaningful metrics, dashboards) Data-driven performance, with Business Intelligence – constantly learning

29. Opportunity Knocks.

36. Maintaining Margin Depends on Lowering Costs Decrease Costs Road Map of Future Shifts in Reimbursement Models Current State Phase 2: Enhanced Phase 3: Advanced Phase 1: Foundational 36

37. The Medicaid Paradox 37 Decrease Costs Recalibrating the system for Medicaid rates will increase margins for other payers. Source: Hospital and Physician Cost Shift: Payment Level Comparison of Medicare, Medicaid, and Commercial Payers. Milliman. December 2008.

38. Controlling Cost Per Unit Service Ways to decrease costs of care delivery: Provider substitution Diagnostic/treatment substitution Setting Substitution Process redesign: Eliminate steps and processes Add missing steps and processes Re-engineer process Offload costs to patient and family 38

39. Cost Per Unit Service Concept

40. Progressive strategies build in a cost-effective manner

41. 41 Value requires matching patient need with the lowest cost access point… Care Continuum Consistent Quality and Connectivity / Culture Ambulatory Surgery Center Cost of Care Ease of Access …while maintaining consistent quality

43. Hiring the Patient Patient Empowerment and Activation –Self-monitoring and feedback self quantification – Nike? –Patient health portals, shared with caregivers –Healthcare Gamification –Home testing and diagnostics –Disease-specific communities of care –Decision support –Informed Consent

44. Redesigning the Process And Patient Experience Delivery process re-engineering –RFID, Real-time Locations Systems, Kiosks Care Coordination across spectrum Care Navigators and health coaches Focused factories and value streams Health malls Cost transparency Patient compliance tracking

46. Setting substitution Home diagnostics, with wireless connectivity Retail clinics, expanding into chronic care Urgent care, tightly affiliated with networks Telemedicine/teleheath Hospital At Home programs for >100 DRGs Home-based chronic care Online/email consultations

47. Diagnostics/therapeutics substitution Utilization management programs Consumer decision-support and Intelligent Virtual Assistants Online/telemedicine –Behavioral health, neurology, wound care, cardiology, chronic care, EM Decentralized lab and testing - POC Computer-guided diagnostics Sleep testing and therapy

48. Provider Substitution Generalist over Specialist – Medical Home MLP or Associate Provider over MD Nurse over Associate Provider LPN over Nurse Tech over LPN Community Worker over Tech Do it yourself

49. Emerging Big Data – drowning in it –Money Ball Analytics –Predictive Modeling –Integrated dashboards Cloud-based solutions Crowd sourced solutions and epi Computer-assisted diagnostics

51. These interconnected competencies drive successful transformation.

52. What talent attributes are needed now? Leadership Teamwork Systems thinking

53. Three Generations of Reform

55. In The Road Ahead… Leadership Counts Thanks!! Ricardo.Martinez@northhighland.com 404-975-6192