1. U.S. Healthcare System Overview in 90 minutes or less Stakeholders Major challenges

2. STAKEHOLDERS Patients/clients/customers General Public Employers Governments Insurance Plans Providers

3. CHANNEL OF DISTRIBUTION INPATIENT SURGERY CONSUMER INSURER PCP SURGEON HOSPITAL EMPLOYER

4. PER CAPITA HEALTH EXPENDITURES

5. HEALTH CARE TRIANGLE COST QUALITY ACCESS

6. Total U.S. Health Expenditures

7. STAKEHOLDERS: THE PUBLIC Potential patients Taxpayers Purchasers of other goods and services Expectations? –Is health care a right like public education or police protection? When do they show interest?

8. Projected Growth in U.S. Population Age 65 and Older

9. STAKEHOLDERS: EMPLOYERS Pay most of the private insurance premiums Taxpayers Competing for workers Competing globally for markets >10% premium increases How are they coping?

10. STAKEHOLDERS: GOVERNMENTS DOMINANT PAYER (ABOUT 50%) –Medicare, Medicaid, VA HUGE REGULATOR –Federal, State, Local DIRECT PROVIDER –VA –State hospitals, clinics, health departments –County/City hospitals, clinics, health departments POLITICS

11. STAKEHOLDERS: INSURANCE PLANS EVOLUTION 1930’s—Blue Cross POST WW2—Rapid growth of employer based plans 1980’s—Managed Care Integrated networks

12. STAKEHOLDERS: INSURANCE PLANS FUNCTIONS Develop coverage plans Contract with providers Market the plans Underwrite Manage utilization, quality, cost Administer claims

13. STAKEHOLDERS: INSURANCE PLANS STATUS Cyclical profit and loss Return to rapid premium increases Consolidation Backlash against controls –Consumers –Politicians –Courts

14. STAKEHOLDERS: INSURANCE PLANS KEY ISSUES Control total cost –Number of services used –Cost per unit of service Manage (shift) the risk Satisfy consumers, regulators, courts

15. STAKEHOLDERS: PROVIDERS HOSPITALS OUTPATIENT CENTERS PHYSICIANS OTHER CLINICIANS LONG-TERM CARE MENTAL HEALTH PUBLIC HEALTH

16. HOSPITALS HISTORY 1873 178 1909 4,300 1946 6,000 1970’S7,200 2000’S<4,000

17. HOSPITALS STATUS Losing money Upward pressure on costs –Critical staff shortages –Legislative/judicial mandates –Insurance premiums Increasing inpatient volume Competition for outpatients

18. Inpatient Admissions in Community Hospitals

19. HOSPITALS CHALLENGES Reposition philosophy, organization, facilities –Emergency, Critical Care, outpatient services Re-establish partnerships with physicians Continue to invest in technology Employer of choice, again Public accountability and confidence Advocate national health policy: fix payment syst.

20. OUTPATIENT CENTERS START WITH: GP’s office, Hospital indigent clinics, Hospital ER’s, public health clinics ADD: Group practices, Hospital outpatient departments, specialty clinics NOW: Freestanding centers –Primary care, urgent care, surgery, imaging, eye treatment, gastro-intestinal, and on and on

21. OUTPATIENT CENTERS STATUS Burgeoning volume (Why?) Diverse ownership Increasing regulatory and insurance plan scrutiny

22. OUTPATIENT CENTERS CHALLENGES Anticipate technology changes Maintain quality and public confidence Maintain profitability with lower payments Increasing competition

23. PHYSICIANS EVOLUTION: Doc-in-a-buggy to Doc-in-a-box Solo practice Group Multi-specialty group Employee

24. PHYSICIANS STATUS 60 to 70% Specialists, most clustered around Academic Medical Centers Not enough Primary Care in many places Dramatic decline in payments Baby boomers retiring: shortages ahead? Lost power to insurance plans Cost pressure: labor, insurance premiums, regs

25. PHYSICIANS CHALLENGES Re-establish control of patient care Negotiate better payments/contracts Reform malpractice liability system Anticipate changes in technology and competition; establish long-term position Replace retiring colleagues

26. LONG-TERM CARE EVOLUTION Mom and Pop rest homes Neglect and abuse scandals: regulation Corporate owned skilled nursing facilities Diversity in settings and types of patients

27. LONG-TERM CARE STATUS SNF’s –Declining occupancy last 15 years Older adults healthier Vast increase in options Federal prospective payment –Will reverse with dramatic increase in numbers of “super-elderly” over next 25 years –Medicaid is largest payer

28. LONG-TERM CARE Assisted living –Rapid growth: expect to double by 2025 –Often part of retirement community –Private pay Adult Day Care –Another option; small but growing –Private pay

29. LONG-TERM CARE Home care –Fastest growing segment of U.S. health –Mix of long and short-term –Medicare is largest payer, cutting payments Hospice –Offered in many settings –Growing recognition of value –Medicare pays

30. LONG-TERM CARE CHALLENGES Demographics: over 65 will double from year 2000 to 2030; over 85 will increase more rapidly Family changes: career women, or 70 year old “child” unable to care for 90 year old parent Technology: extends life, diversifies care options

31. LONG-TERM CARE CHALLENGES (continued) More sophisticated consumers: aware of options Government scrutiny: pressure for high quality; budget crunches Labor shortages: traditionally lower pay and benefits than hospitals and outpatient centers

32. MENTAL HEALTH HISTORY: Grim and grimmer Locked in asylums (or worse) 1930’s to early 60’s: development of shock therapies and first effective drugs increased ability to manage inpatients 60’s to 80’s: Community mental health centers; reduced funding for inpatients; marketing competition for private dollars

33. MENTAL HEALTH STATUS Tremendous capabilities to specifically diagnose and effectively treat most forms of severe mental illness Only half of severe and persistent mentally ill receive treatment Insurance coverage significantly limited

34. MENTAL HEALTH CHALLENGES Stigma, misperceptions Unresolved public policy debate: maintaining mental health VS. treating severe and persistent illness Insurance limitations resulting from above Patient compliance with treatment

35. PUBLIC HEALTH EVOLUTION Sanitary reform Epidemic control Prevention, education, immunization Unable to compete with M & M for funds Renewed interest because of terrorism, new viruses

36. PUBLIC HEALTH STATUS Less than 1% of U.S. health dollars are spent for public health Greatly increasing public demand for management of new diseases, water supply, food supply, and more

37. PUBLIC HEALTH CHALLENGES Strong cultural bias favoring cure of the individual over promotion of the general health of the population Convert current public concerns into political clout for increased funding