1. Increasing the Affordability of Health Care Revised 7/20071

2. Total National Health Expenditures, 1980 – 2005(1)
Spending on health care is on the rise.
Total National Health Expenditures, 1980 – 2005(1)
Source: Centers for Medicare & Medicaid Services, Office of the Actuary. Data released January 8, 2007.
(1) CMS completed a benchmark revision in 2006, introducing changes in methods, definitions and source data that are applied to the entire time series (back to 1960). For more information on this revision, see
(2) Expressed in 1980 dollars; adjusted using the overall Consumer Price Index for Urban Consumers. 2

3. However, hospitals are a shrinking share of the growing spending pie.
National Expenditures for Health Services and Supplies(1) by Category, 1980 and 2005(2)
$234.0B
$1,860.9B
Source: Centers for Medicare & Medicaid Services, Office of the Actuary. Data released January 8, 2007.
(1) Excludes medical research and medical facilities construction.
(2) CMS completed a benchmark revision in 2006, introducing changes in methods, definitions and source data that are applied to the entire time series (back to 1960). For more information on this revision, see
(3) “Other” includes net cost of insurance and administration, government public health activities, and other personal health care.
(4) “Other professional” includes dental and other non-physician professional services. 3

4. The U.S. is the only country where health care accounts for more than 13 percent of the GDP, spending 16.5% in 2006. 4

5. Fifty percent of adults with incomes less than $50,000 have experienced problems paying for insurance in the past two years…
Percent of Adults Facing Serious Problems Paying for Insurance in the Past Two Years, by Income Level, 2006
50%
47%
38%
34%
23%
Note: Percent values on the top of each bar reflect the sum of the values within each bar.
Source: The Commonwealth Fund (2006) Public Views on Shaping the Future of the U.S. Health Care System 5

6. …and may small businesses do not even offer coverage.
Percent of Firms Offering Health Benefits, 2002 and 2006
Source: “Employer Health Benefits 2006 Annual Survey,” (#7527), The Henry J. Kaiser Family Foundation and Health Research and Educational Trust, September 2006 6

7. These factors contribute to a growing number of uninsured.
Number and Percent Uninsured, 1985 – 2005
Source: US Census Bureau, Income, Poverty, and Health Insurance Coverage in the United States: Data released August 2006.
Table 8. People With or Without Health Insurance Coverage by Selected Characteristics: 2004 and 2005.
Link:
(1) 2004 and 2005 figures reflect revised estimates released by the Census Bureau on March 23, 2007. 7

8. Increased spending is linked to several factors.
Increased demand for care
Demographics
Health status
Technology: health care can do more things for more people
Rising costs to provide care
Labor shortage
Technology
Regulatory burden
For private sector, government underfunding 8

9. Drivers of Demand Demographics9

10. The aging of the population is driving up demand for health care.
US Population Trends and Projections by Age,
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
85 and over
Thousands
0 - 19
1980
1990
2000
2010
2020
2030
2040
2050
Source: US Census Bureau 10

11. With the aging of the Baby Boomer population, hospital admissions of Boomers will more than double…
Number of hospital admissions
* Projected.
1 Non-Boomer adults indicates non-Boomers over the age of 15.
Source: “When I’m 64”, American Hospital Association, May FCG projections based on National Center for Health Statistics, National Hospital Discharge Survey 2004, May 2006 11

12. Total Hospital Admissions in 2004 Total Hospital Admissions in 2030*
…leading to a majority of hospital patients being over 65.
Total Hospital Admissions in 2004
35 Million
Total Hospital Admissions in 2030*
49 Million
* Projected.
Source: “When I’m 64”, American Hospital Association, May FCG projections based on National Center for Health Statistics, 2004 National Hospital Discharge Survey, May 2006 12

13. Physician office visits for adults will number more than one billion by 2020.
Number of Physician Office Visits
* Projected.
1 Non-Boomer adults indicates non-Boomers over the age of 15.
Source: “When I’m 64”, American Hospital Association, May FCG projections based on National Center for Health Statistics, National Ambulatory Care Survey 2004, June 2006 13

14. INSERT YOUR DATA HERE
INSERT ANY AGING OR DEMOGRAPHIC CHANGES YOU ARE EXPECTING IN YOUR COMMUNITY 14

15. Drivers of Demand Health Status15

16. We have a rising number of people with chronic conditions.
Number and Percent of Americans with Chronic Medical Conditions,* 1995 – 2030
Percent of Total Population
Millions of People
*Values for 2005 to 2030 are projections.
Source: Adapted from Partnership for Solutions, Johns Hopkins University, Chronic Conditions: Making the Case for Ongoing Care, December 2002 16

17. Lifestyle factors are contributing to the rising levels of chronic illness.
Prevalence of Diabetes(1) and Obesity(2), U.S. Population,
Source: Centers for Disease Control and Prevention.
Diabetes is age-adjusted prevalence from the National Diabetes Surveillance System.
Obesity is median % of individuals 18 years or older reporting body mass index greater than 30 kg/m2 in states, DC, and the U.S. territories reporting data to the Behavioral Risk Factor Surveillance System. 17

18. By 2030, 37 million Boomers will be managing more than one chronic disease.18

19. On average, the cost of health care for an individual with more than 5 chronic conditions is nearly 15 times that of an individual with no chronic conditions. 19

20. INSERT DATA ON CHRONIC CONDITIONS SPECIFIC TO YOUR COMMUNITY.
INSERT YOUR DATA HERE
INSERT DATA ON CHRONIC CONDITIONS SPECIFIC TO YOUR COMMUNITY.
In addition to your own internal data that can be gleaned from the medical records, visit for state level data on chronic disease from the BRFSS survey. 20

21. Drivers of Demand Technology: Health care can do more things for more people21

22. Each year we can do more things for more people, but innovations are costly.
Projected Annual Costs of Recent Technology Related Medicare Coverage Expansions
Technology
Medicare Costs
Drug-eluting coronary stents
$2 – 4 B
ICD for sudden death prophylaxis
$1 – 3 B
PET for Alzheimer’s disease
$1 B
Verteporfin for macular degeneration
$750 M
Left-ventricular assist devices
$1 – 7 B
Source: Adapted from Neumann PJ, Medicare National Coverage Decisions: How is CMS Doing? Presented at National Health Policy Conference, February 2005 22

23. People demand innovations in care because they save lives.
Mortality from Heart Attacks in Relation to Advances in Care
1980s
1990s
2000s
CABG
Metal stents
Drug-eluting stents
Death Rate per 100,000
Blood Thinners
Beta Blockers
Thrombolytics
Implantable defibrillators
Statins
ACE inhibitors
Source: The Value of Investment in Health Care 23

24. Rising Costs of Providing Care Labor Shortage24

25. Percent of Hospital Costs(1) by Type of Expense, 3Q06
Health care is very labor intensive, but…
Percent of Hospital Costs(1) by Type of Expense, 3Q06
(2)
Source: AHA analysis of Centers for Medicare and Medicaid Services data, using base year 2002 weights.
(1) Does not include capital.
(2) Includes postage and telephone expenses. 25

26. …hospitals also face workforce shortages in key care-giving professions…
Vacancy Rates for Selected Hospital Personnel, December 2006
116,000 RN
Vacancies*
Source: 2007 AHA Survey of Hospital Leaders
Note: 116,000 vacancies is a national estimate created by extrapolating the vacancy rate to all 5,000 community hospitals in ST: Speech Therapist, OT: Occupational Therapist, PT: Physical Therapist. 26

27. National Supply and Demand Projections for FTE RNs, 2000 – 2020
A continuing and growing workforce shortage is a key driver of the increased costs of RNs…
National Supply and Demand Projections for FTE RNs, 2000 – 2020
Shortage of over 1,000,000 nurses in 2020
Source: National Center For Health Workforce Analysis, Bureau of Health Professions, Health Resources and Services Administration, Link: 27

28. …as well as physicians. Physician Shortage for Select Specialties 28
* Projected.
Sources: Physician Supply and Demand: Projections to 2020, HRSA, October 2006
“Research Shows Rapid Decline in Geriatric Medicine Students,” Press Release, University of Cincinnati, April 4, 2007“Aging Boomers Face a Doctor Shortage,” CBS News, March 28

29. Rising Costs of Providing Care Technology, Regulatory Burden and Government Underfunding29

30. Hospitals face significant increases in the costs of caring for patients…
Percent Change in Hospital Expenses for Pharmaceuticals and Medical Supplies/Devices, 2004 to 2005
Source: AHA 2006 Survey of Hospital Leaders 30

31. …driven in part by new technology that increases costs for providing the same service.
Stents: The Rising Costs of Technological Development
Source: University HealthSystem Consortium 31

32. Regulatory burden contributes to rising costs for hospitals and the system as a whole.
WHO REGULATES HOSPITALS
IRS
EPA
FTC
FCC
FBI
HHS/HRSA
HHS/NIOSH
JCAHO
NRC
DOL
SEC
OPO ’ s
FAA
DEA
Regional Home Health
Intermediaries
DME Regional
Contractors
Treasury
DOJ
OSHA
DOT
FDA
Regional
Offices
Carriers
PRO
PRRB
Medicare Integrity
Program Contractors
Congress
Federal Circuit Courts
Supreme Court
Departmental
Appeals
OIG
State
Survey &
Certification
Courts
Attorneys General
Medicaid
Health Boards
Medical Boards
Local Governments
Licensure
Hospitals
CMS 32

33. For the private sector, government underfunding adds to costs…
Hospital Payment Shortfall Relative to Costs Medicare and Medicaid, 1997 – 2005, (in billions of dollars)
1997
1998
1999
2000
2001
2002
2003
2004
2005
Billions of Dollars
Medicare
Medicaid
Total 2005 Medicaid and
Medicare Shortfall of $25.4 Billion
Source: AHA Annual Survey 33

34. …as do rising levels of uncompensated care, contributing to…
Aggregate Hospital Uncompensated Care Costs,
(in billions)
Source: AHA Annual Survey 34

35. Source: AHA Annual Survey
…decreasing hospital margins…
Total, Operating and Patient Care Margins,
1997 (pre-BBA) vs. 2005
Total Margin
Operating Margin
Patient Care Margin
Source: AHA Annual Survey 35

36. Operating Margins of the Top Insurers, 2003 – 2005
…while margins of top insurers are in the double digits.
Operating Margins of the Top Insurers, 2003 – 2005
(1)
Source: Hoovers. Data from January Link:
(1) operating margin data for WellPoint include both pre- and post-merger data for the merger with Anthem in November 2004 36

37. “More can and should be done to make care more affordable.
With costs of caring on the rise and demand increasing in an ever changing environment we must seize opportunities to make care more affordable.” 37

38. A New Lens is Needed… 38

39. CBO Issues Warning on Rising Health Care Costs
The increase in spending on health care is a frequent topic of debate, but the value of this investment is seldom part of the discussion.
                           
CBO Issues Warning on Rising Health Care Costs
Senate Republicans in Albany Eye Big Medicaid Cuts
                                                
…but little talk about the value we get for our health care dollar.
This study is designed to foster a more balanced dialogue about our health care system. We commissioned this study to bring the issue of value to the forefront—to take a rigorous look at the return on America’s investment in health care.
It is important to note what this study isn’t:
This study is not an attempt to argue for a blank check for providers and technology manufacturers.
Nor does this study say we couldn’t do it better.
Medicare Revamp Fails to Cure Angst Over Costs 39

40. Health gains of $2.40 to $3.00 per dollar invested
Research indicates significant health gains have accompanied increased spending.
Since 1980, per capita expenses up $2,254, but:
Overall death rate down 16%
Life expectancy from birth up by 3.2 years
Disability rates down 25% for people over 65
56% fewer days spent in the hospital
[REVIEW FINDINGS AS ON CHART]
[FYI: if questions come up: ALL parts of study used the same assumption about the value of an additional year of life--$100,000.
Figure derived from an extensive literature—particularly Bureau of Economic Analysis.
Figure used routinely by government agencies to conduct cost/benefit analysis of regulation—USDA and food safety, EPA for pollution controls
Also widely used in medical literature for technology assessment.
For the overall analysis the value is calculated by figuring out how many additional years of life were gained for the population as a whole (just for the year 2000) and applying a value for each life-year gained. The overall analysis is conservative because it does not account for improvements in quality of life.]
Health gains of $2.40 to $3.00 per dollar invested 40

41. Advances in health care have lead to fewer deaths and less disability.
Where we would be in 2000 without advances since 1980?
470,000
more
deaths
206
million
more
days in
hospital
2.3
million
more
disabled
persons
To put this in more concrete terms—if we hadn’t spent $2254 more per person on health care, where would we be? Just in the year 2000, we would have experienced 470,000 more deaths, 2.3 million more disabled people, and 206 million more days in the hospital.
[FYI: this is a ONE year number] 41

42. Death rates for key diseases have declined dramatically.
Death Rates for Key Conditions Studied
345.2
249.6
186.9
20.7
96.2
65.3
60.8
18.1
25.2
25.4
31.8
32.3
1980
1990
2000
Heart Attack
Stroke
Type 2
Diabetes
The Findings: Improved Outcomes
With the transformation in care, we see dramatic improvements in outcomes.
Heart attack mortality has been cut in half, stroke by a third and breast cancer by more than 20%. The rising incidence of diabetes—with rising obesity—means we have rising mortality but our ability to treat diabetes has improved markedly.
Breast
Cancer
Source: Health, United States 2002 42

43. America’s health care system is at a crossroads, and hospitals are part of the solution.43

44. Key opportunities exist to increase affordability.
Focus on wellness
Go beyond the medical model of care to look at wellness and prevention
Better manage chronic disease
Anticipate the wave of the Boomers and the growing incidence of chronic disease
Improve care delivery
More demand for services requires new approaches to care delivery
Increase transparency of quality performance
Better understand and reduce duplication of services
Speed adoption of IT 44

45. Promote preventive services Reward personal participation
Focus on Wellness
Promote preventive services
Reward personal participation
Reward healthy behaviors 45

46. More employers are investing in wellness.
Individuals with healthy lifestyles typically are:
More productive
File fewer medical claims
Have lower medical costs
Research shows a $3 to $1 return on investment
Prevention/detection demonstrates success in
cancer and heart disease 46

47. Research has shown that a focus on wellness is cost effective.
Average Percent Change in Employers’ Costs Resulting from Workplace Health Promotion and Wellness Programs
Source: Chapman, L. (2003). Meta-evaluation of Worksite Health Promotion Economic Return Studies. Art of Health Promotion Newsletter, 6(6). 47

48. Employers also believe financial incentives could work.
Do you believe that providing financial incentives to employees for participating in healthy lifestyle programs will reduce your company’s health care costs?
“Money is not enough so employers must build something into the plan such as tools and health coaches.” – Midwest Business Group on Health.
Source: PricewaterhouseCoopers Management Barometer Survey 48

49. INSERT INFORMATION ON THE WELLNESS PROGRAMS YOU ARE INVOLVED IN…
Focus on wellness
INSERT INFORMATION ON THE WELLNESS PROGRAMS YOU ARE INVOLVED IN…
For additional examples or ideas, visit 49

50. Better manage chronic disease
INSERT INFORMATION ON YOUR EFFORTS TO MANAGE CHRONIC DISEASE IN YOUR COMMUNITY
Its helpful to include data that show results. (i.e. lower admissions of asthma or improved lab results of those participating in a program) 50

51. INSERT INFORMATION ON YOUR EFFORTS TO IMPROVE CARE DELIVERY
Its helpful to include data that show results. (i.e. wait times in the ED, faster discharge times, quicker bed turn over)
Demonstrated improved patient satisfaction levels (i.e. survey results) 51

52. Increase transparency of quality performance
INSERT INFORMATION ON YOUR HQA QUALITY SCORES or OTHER BENCHMARK DATA YOU USE TO ASSESS YOUR QUALITY PERFORMANCE 52

53. Better understand and reduce duplication
Following care guidelines and protocols, clinicians could help reduce readmission rates to hospitals and lessen complications.
INSERT INFORMATION ON WAYS YOUR ORGANIZATION IS ADDRESSING THIS GOAL 53

54. INSERT INFORMATION ON WAYS YOUR ORGANIZATION IS ADDRESSING THIS GOAL
Speed adoption of IT
Today’s health care system is choked with paper. Health care will be more affordable if we spend more time at the bedside and less on paperwork.
INSERT INFORMATION ON WAYS YOUR ORGANIZATION IS ADDRESSING THIS GOAL 54

55. Broadening of the digital backbone in healthcare
“Widespread adoption of electronic medical records and other health information technology is estimated to save $162 billion a year by improving care management, reducing preventable medical errors, lowering death rates from chronic diseases, and reducing the number of employee sick days.”
Payer benefits
Drops in administrative costs
More accurate forecasting
Provider benefits
Reduced duplicate testing
Reduced adverse drug reactions 55
Source: Pricwaterhouse Coopers, June 2007

56. We can and must do this together!
Keeping health care affordable will involve every segment of the health care system – insurers, hospitals, business, physicians, nurses, employers and individuals.
We can and must do this together! 56