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Top Trends For 2009 Noblis Webinar Presentation

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1. Top Trends for 2009 Webinar: December 9 and 18, 2008 Presented by: Peggy Cella Amy MacNulty Senior Principal Senior Principal Peggy.cella@noblis.org…
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  • 1. Top Trends for 2009 Webinar: December 9 and 18, 2008 Presented by: Peggy Cella Amy MacNulty Senior Principal Senior Principal Peggy.cella@noblis.org amy.macnulty@noblis.org 678.728.6747 781.482.4072 Center for Health Innovation © 2008 Noblis, Inc.
  • 2. Noblis Center for Health Innovation – Top Trends for 2009 Changing Consumer Demands Budgets Trimmed - Investments Delayed Continued Consolidation Workforce in Transition Health Reform on Many Levels quot;The future will be determined in part by happenings that it is impossible to quot;The future will be determined in part by happenings that it is impossible to foresee; it will also be influenced by trends that are now existent and observable.quot; foresee; it will also be influenced by trends that are now existent and observable.quot; Emily G. Balch -- American economist and sociologist. Honorary president of the Women's International League for Emily G. Balch American economist and sociologist. Honorary president of the Women's International League for Peace. Peace. 1
  • 3. Top Trend #1: Consumer Demands will Continue to Change Utilization Trends will be stable or even decline in all but strongly growing markets Consumer will continue to seek medical information/knowledge via Web resources Increased Medical Travel Hospitals and physicians that continue to focus on improving and measuring quality, safety, and operating efficiencies will be best positioned for the future 2
  • 4. Despite Historical Trends – Utilization will Be Stable or Decline in All But Strongly Growing Markets US Population (298.8M) grew by 16% Discharges (39.5M) grew by 28% Between 1993 and Discharge/1,000 population (116.9) declined by 3% 2006 ALOS (4.8) declined by 20% led by largest decline in 65 &> population (to 5.5 having declined by 29%) Discharges to Home Health grew by 53% Medicaid discharges grew by 36% Between 1997 and Medicare discharges grew by 17% 2006 No change in private insurance discharges Share of admissions through EDs increased from 38% to 44% 3
  • 5. Once Thought to Be Recession Proof – Health Care is Feeling the Effect of the Downturn HCA with 160 hospitals reported flat HCA with 160 hospitals reported flat A survey of 112 nonprofit hospitals found that A survey of 112 nonprofit hospitals found that AHA 2008 Survey of admissions for the three months admissions for the three months overall inpatient admissions were down 2 to 3 overall inpatient admissions were down 2 to 3 more than 700 CEOs in ended 9/20/08 compared to the percent compared with a year earlier. More than ended 9/20/08 compared to the percent compared with a year earlier. More than late 2008 reported that 60 percent reported flat or declining admissions. previous year. 60 percent reported flat or declining admissions. previous year. 31% of hospitals September 2008 Survey by Citi Investment September 2008 Survey by Citi Investment surveyed had experienced a decrease “The possibility of putting off an expensive “The possibility of putting off an expensive The University of Pittsburgh Medical Center The University of Pittsburgh Medical Center surgery or other major procedure has not surgery or other major procedure has not in elective procedures in has not seen a drop in patient admissions but has not seen a drop in patient admissions but become a frequent topic of conversation become a frequent topic of conversation the past three months. reports that growth is tailing off. with patients.” reports that growth is tailing off. with patients.” Robert A DeMichiee, CFO Robert A DeMichiee, CFO In addition, 38% of Dr. Ted Epperly, family practice Boise, Idaho Dr. Ted Epperly, family practice Boise, Idaho hospitals surveyed Shands Health Care cited the poor Shands Health Care cited the poor reported a decrease in Hospital admission growth for Hospitals in Hospital admission growth for Hospitals in economy and lower patient demand economy and lower patient demand admissions during the the State of Florida in 2007 was the lowest in the State of Florida in 2007 was the lowest in when it announced in October that it same period. when it announced in October that it years with a growth of only 0.4%, accounting years with a growth of only 0.4%, accounting would shutter one of its eight hospitals. would shutter one of its eight hospitals. for just over 9,000 new admissions in the for just over 9,000 new admissions in the DATABANK’s entire state. entire state. preliminary 3rd quarter 2008 data (557 “More than half of chronically ill patients in the “More than half of chronically ill patients in the hospitals) reported 3rd U.S. reported at least one cost-related access U.S. reported at least one cost-related access “The numbers are down in the “The numbers are down in the quarter patient visits problem, such as not filling prescriptions, problem, such as not filling prescriptions, past month, there’s no question past month, there’s no question (discharges, surgeries, skipping doses, not visiting a physician when skipping doses, not visiting a physician when about it.” about it.” ED visits) as flat or sick, or not getting recommended care. sick, or not getting recommended care. declining relative to the Health Affairs, doi: 10.1377/hlthaff.28.1.w1(Survey conducted Health Affairs, doi: 10.1377/hlthaff.28.1.w1(Survey conducted Dr. Richard Friedman, Beth Israel Medical Dr. Richard Friedman, Beth Israel Medical in 2008 and Published online November 13, 2008) in 2008 and Published online November 13, 2008) same quarter of 2007. Center Center Source: “Hospitals See Drop in Paying Patients, NY Times, November 6, 2008; Modern Healthcare’s Daily Dose, November 13, 2008, FHA Eye on the Market: Hospital Utilization Report, October 2008. AHA Report on the Economic Crisis: Initial Impact on hospitals, November 2008. DATABANK is a licensed product of the Colorado Hospital Association. 4
  • 6. Consumers Will Continue to Redefine Value to Include Communication, Information, Access, and Outstanding Service During Before After What Patients/Families Expect in Inpatient & Outpatient Care Timely Ease of navigation Same day reports appointments/ Minimum uncertainty/ Painless billing short wait times worry A “fair” price Convenient access Communication Confidence in excellence of care Source: “Many Americans open to care at retail-based health clinics,” Wall Street Journal, October 26, 2005; “For these startups, patients are a virtue,” San Francisco Chronicle, October 2, 2007 and Harris Poll Shows Number of quot;Cyberchondriacs,“ Harris Interactive website (July 31, 2007). 5
  • 7. Consumers Seeking Knowledge and Information Via Web Resources 6
  • 8. Consumers Seeking Knowledge, Information, and Services Via Websites Marketing Direct to the Consumer Patientsville.com - Your #1 Source for all the latest prescription and off-the-shelf medications side effect information. A Health Expert wants to answer your question. “Pinnacle Care takes the notion of VIP services to a whole new level” Washington Post Waterfront Media To Merge With Revolution Health Network Establishing The Everyday Health Network As The Preeminent Online Health Destination 7
  • 9. Consumers Seeking Information – Via Websites Marketing Genotyping, Record Storage, Genetic Counseling deCODEme is an anonymous deCODEme is an anonymous information service. It is not a medical information service. It is not a medical service, nor a genetic test, and it is service, nor a genetic test, and it is not designed for medical decision not designed for medical decision making. Therefore it is not covered by making. Therefore it is not covered by health insurance companies. health insurance companies. 1. Order a kit ($399 USD) 2.Claim your kit, spit into the 3.CLIA-certified lab analyzes 4.Log in and start exploring your tube, and send it to the lab. your DNA in 4-6 weeks genome. 8
  • 10. Medical Travel Medical Tourism: “process of “leaving home” for treatments and care abroad or elsewhere domestically” Deloitte 2008 Survey of 3,000 Americans: − 2007 estimated 750,000 Americans traveled abroad, projected to increase to 6 million in 2010 Turkey − “expected to experience explosive growth over next 3-5 year Check your Midnight − “Outbound” - 39% would go abroad for elective procedure to Express stereotypes at the door - this is a rapidly save money modernizing country with Gen Y 51.1%, Boomers 36.7%, Seniors 29.1% one foot in Europe and one in the Middle East. Medical Tourism Association – Three Tenets: It's not all oriental − Transparency, Communication and Education splendor, mystery, intrigue and whirling − 2nd World Medical Tourism & Global Health Congress dervishes but it is a spicy October 26th – 28th, 2009 in Los Angeles, CA California maelstrom of history knocking up against a Medical Tourism Facilitators pacy present. Source: Medical Tourism, Consumers in Search of Value, The Deloitte 2008 Survey of Health Care Consumers, Deloitte Center for Health Solutions. 9
  • 11. Primary Reasons for Medical Travel Driver* Explanation Cost of procedure is much less than in the patient’s home country (e.g., Cost Savings United States). Waiting times for procedure can be much longer in home country, Improved Access especially for those with National Health Insurance or Health Service, such as Canada or the United Kingdom. Certain medical procedures are still considered experimental, not yet Procedure Not Available approved, or in clinical trials in the patient’s home country. Some patients value the exotic destinations or luxurious Tourism/Vacations accommodations in the destination country. Privacy and Some patients (especially celebrities) may be concerned about their Confidentiality privacy if the procedure is performed in their home country. Wellpoint soon will offer some medical travel benefits Starting in January, Wellpoint will offer employees of Wisconsin-based Serigraph Inc. the option of traveling to India for nonemergency procedures such as joint replacement surgery. Serigraph will waive the insurance deductible and coinsurance for employees who agree to go, paying all medical costs as well as travel expenses for the patient and a companion. quot;This is a leap of faith, obviously, to say if you go to India, we'll pay for the whole shebang,quot; said Linda Buntrock, Serigraph's senior vice president of human resources. quot;But the cost difference is so monumental.“ Knee replacement surgery that costs between $60,000 and $70,000 in the United States can be done in India for $8,000 to $10,000, said Jill Becher, a Wellpoint spokeswoman. Source: CHEN MAY YEE, Star Tribune,November 13, 2008 * Source: “Medical Travel – Threat or Opportunity for U.S. Providers? It Depends on Your Perspective”, J. Vitalis and G. Milton, Horizons: Journal of the Center for Health Innovation, Winter 2009. 10
  • 12. Shared Concerns to Improve Patient Experience Improving and measuring quality and safety Physician Concerns Hospital Concerns Achieving operating efficiencies Creating a positive work environment Bridging Generational differences Leveraging capabilities with medical technologies Fostering alternative care settings to improve access (walk-in clinics) 11
  • 13. Balancing Act Balancing Act, InsideHealthcare (formerly HealthExecutive), September 2008 − Employment alone will not achieve alignment − Early involvement in decision making critical to alignment − Key areas of engagement: Improve the quality of services and clinical outcomes, ensuring consistent excellence across the system. Strengthen collaboration among physicians on the medical staffs to enhance their understanding of the qualities and skills of their colleagues and improve communication and patient care. Enhance physician leadership development efforts to build a strong core of physicians who can determine future success requirements, ably represent their peers, and collaborate effectively with hospital AHA Economic Crisis Report, Nov. 2008 reported that 56% of hospitals experienced an increase in physicians seeking financial support from hospitals and % physicians seeking: − 83% - increased payment for on-call or other services − 69% - employment − 31% - to sell their practice − 23% - to partner on equipment purchase 12
  • 14. IHI Framework for Engaging Physicians in Quality and Safety Discover Common Purpose “To bring these two worlds Reframe Values and Beliefs into alignment, both parties have to be interested in Segment the Engagement Plan making good-faith efforts to understand each other’s Use “Engaging” Improvement Methods point of view and needs.” Show Courage Source: Healthcare Executive, Medical Staff Source: Healthcare Executive, Medical Staff Collaboration, Communication Strategies that Get Collaboration, Communication Strategies that Get Results, July/Aug 2006 Results, July/Aug 2006 Adopt an Engaging Style Source: IHI Innovation Series 2007, Engaging Physicians in a Shared Quality Agenda, J. Reinertsen, MD, A.Gosfield, JD, W. Rupp, MD, J. Whittington, MD. 13
  • 15. Focus: What strategies are being used to strengthen physician-hospital alignment, and which strategies are most effective? Hospital Perspective Physician Perspective Disconnect between Similar leadership leadership and practicing disconnect physicians Information systems critical Of the 10 most effective strategies, half involved employing physicians Source: Noblis/AHA, Strategies for Strengthening Physician-Hospital Alignment: A National Study, 2006; ACPE Member Survey 2008 14 14
  • 16. What Satisfies Physicians? #1 priority: how the administration responds to the ideas and needs of physicians 4 of 5 top priorities deal directly with doctors’ relationships with administrators One way the administration can build their relationships with physicians is to make it easier for doctors to care for their patients Physicians are most satisfied with hospitals in their first 5 years and after 20 years on staff Physicians employed by the hospital are more satisfied than non- employed physicians 2008 Press Ganey Hospital Check-Up Report - Physician Perspectives on 2008 Press Ganey Hospital Check-Up Report - Physician Perspectives on American Hospitals American Hospitals 15
  • 17. Physician Employment Trends Healthcare Industry is consolidating rapidly while significant physician shortages are projected − Substantial economic advantages for systems that integrate payers, hospitals and physicians New wave of employment different than late ’80s and early ’90s: − Primary care and specialty physicians − Willingness to trade off autonomy for economic security − “Cornerstone strategy” for large integrated systems, e.g., Aurora, WI, Advocote, IL, Senatara, VA − Many hospitals and health systems find themselves with no other choice, need to view as “fundamental strategic asset” − Payers shifting to “Pay for Performance” and “Medical Homes” − New generation of physicians seeking improved work/life balance − Greater emphasis on developing physician leadership and systemized physician engagement “This is the beginning of a fundamental restructuring of how “This is the beginning of a fundamental restructuring of how physicians function in the health care system.” physicians function in the health care system.” William Jessee, MD, President of the Medical Group Management Association. William Jessee, MD, President of the Medical Group Management Association. Source: “Employing Physicians”, D. Beckham, HHN, 9/07 16
  • 18. The What and Why of P4P What is P4P… A program for aligning incentives to support the delivery of high-quality care Government-sponsored projects—Annual Payment Update (APU), Premier demo, MedPac recommendation, Value-Based Purchasing (VBP), Physician Group Practice (PGP) demo, State Medicaid Programs Private payer initiatives (LeapFrog Group, Bridges to Excellence, IHA, individual insurers) Why P4P… CMS: “The right care for every person every time” Imperative to improve quality Institute of Medicine (IOM) reported that 98,000 lives lost due to medical errors Public reporting of health care organization performance Institute for Health Improvement (IHI) 100,000 Lives Campaign (and now 5 Million Lives Campaign) Imperative to control costs Consumer-driven focus on reducing their out-of-pocket costs for health care Employer focus on reducing health care insurance costs 17
  • 19. Providers Will Have to “Earn” What They Make…. Medicare’s Shifting Priorities and Other Payers Seeking Value Change Effect Coding for Severity of Illness Eliminates Skew Toward Less Complicated Cases Cost-Based Weights Equitable Reimbursement for Cost of Care Overhauling of ASC Payments Alters the Competitive Landscape P4P & Never Events Emphasizes Safety and Quality of Care Bundled Payments Rewards improvements in quality of care and efficiency Source: “HFMA’s Healthcare Finance Outlook,” HFMA, January 2007 and 2008. 18
  • 20. Top Trends #2: Budgets will be Trimmed and Capital Investments Delayed Margins will decline The economic downturn will force most hospitals to trim their operating budgets in 2009. The credit market will tighten further and bond ratings will fall. Great pressure will exist to maintain cash on the balance sheet. New technology capital expenditures that do not meet quality and safety mandates or do not improve the bottom line in the short term will be delayed, scaled back, or cancelled. The recent health care construction boom will continue but at a much slower rate. 19
  • 21. In Uncertain Economic Times, Strong Financial Performance Is Crucial With healthcare industry credit ratings declining for a majority of the past decade, it will be increasingly important for hospitals to maintain a strong financial performance − Hospitals with strong financial performance and good credit will have a much easier time accessing capital and bond insurance Hospitals should focus on two key measures of financial performance Measure Target Reason Patient Care Margin Greater than 0.0 percent If hospital cannot earn profit on patient care services, it must rely on non-patient care sources of funding EBITDA Margin At least 4.0 percent Minimum level of profit needed to re-invest in capital expenditures Source: “The outlook for capital access and spending,” HFMA, August 2006; “Hospital insolvency: the looming crisis,” Alvarez & Marsal, March 2008 20
  • 22. Economic Crisis: Impact on Hospitals AHA Report on Impact of Economic Downturn on Patients and Hospitals, 11/19/08 Survey of 736 hospitals and DATABANK a web-based hospital reporting system used in 30 states 30% reported moderate to significant decline in patients seeking elective procedures 40% reported drop in admissions overall Uncompensated care up 8% from July to September vs. same period last year. Negative 1.6% total margins in 3rd quarter of 2008 vs. positive Hospitals feel the pain of recession 6.1% same quarter last year. By Richard Pizzi, Editor , 11/01/08 Investment losses…. As economy slows, tax receipts Cutback made or considered: − Administrative costs (60%) decrease both at federal and state − Reducing staff (53%) levels. − Reducing services (27%) All states will have issues, some hit harder than other: Florida and Interests payments increased on average by 15% California some of the hardest hit. Facility investments reconsidered or postponed − Plans to increase capacity (56%) Survival in economic downturn will − Delay purchase of clinical technology or equipment (45%) depend on gaining operational − Put off investments in new IT (39%) efficiency in the near time. 21
  • 23. Subprime Mortgage Crisis Creates Perfect Storm for Tax-Exempt Bond Auction Market Tax-exempt rates are likely to be higher Rating agencies to use more stringent assumptions Debt must be increasingly collateralized and/or backed by bank letters of credi
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