October 24, 2013Layton Lang

Chief Administrative OfficerCIVA- Dallas

Federal Healthcare Reform has energized the ongoing debate on quality and cost of

healthcare.

What Does Quality Care Really Mean?Government’s Perspective:

National Strategy for Quality Improvement in Healthcare Better Care: Reliable, accessible, and safe care. Healthy People/Healthy Communities: Improve the

health of the U.S. population through an emphasis on prevention.

Affordable Care: Develop cost effective care by spreading new health care delivery models.

What Does Quality Care Really Mean?Patient’s Perspective

Encountering a kind, compassionate medical staff

Having more face-time with your physicianReceiving timely appointmentsProgram that emphasizing preventative care

and screeningDartmouth study suggests exceedingly high

utilization of care increases patient satisfaction.

What Does Quality Care Really Mean?Healthcare Provider’s Perspective

Proven care that provides a good clinic outcome or result.

Reduce medical errors.Reduce hospital acquired infections.Meeting outcomes benchmarks. 

Many Opportunities to Deliver Care at a Lower Cost

Some hospitals paid 10x as much for CHF admits as others.

$2,200Variation in Average Costs of Drug Eluting Stents in Hospitals

$16,000 Variation in Avg Costs of Defibrillators Across Hospitals

Culprit Behind the Exponential Health-Care Cost Growth: Fee-for-Service

A patient who enters the facility is a revenue-generating event for the medical enterprise. The higher the intensity and frequency of care, the greater the financial reward.

The Health Care Cost Equation

MEDICARE SPENDING =# of Seniors Eligible X # of Covered Services X

Rate of Service Utilization X

Provider Payment Per Service X% Paid by Seniors

Medicare Cost Containment: Federal Policy Choices

MEDICARE SPENDING =

# of Seniors Eligible X

# of Covered Services X

Rate of Service Utilization X

Provider Payment Per Service X

% Paid by Seniors

Raise the Eligibility Age for Medicare

Cut Benefits for Seniors

Make Seniors Pay More

Medicare Cost Containment: Federal Policy Choices

MEDICARE SPENDING =

# of Seniors Eligible X

# of Covered Services X

Rate of Service Utilization X

Provider Payment Per Service X

% Paid by Seniors

Increase Utilization Review/ Approval

Cut Payment to Providers

Medicare Cost Containment: Better Policy Choices MEDICARE SPENDING =

# of Seniors Eligible X

# of Covered Services X

Rate of Service Utilization X

Provider Payment Per Service X

% Paid by Seniors

Redesign Care for Lower Costs

Create Better Payment Systems

Big Win-Win for Both Physicians and Payers By Eliminating Waste

Instead of Starting With How to Limit Care for Patients…

Contributors to Healthcare Costs

How Do We Limit:

>New Technologies

>Higher-Cost Drugs

>Potentially Life- Saving

Treatment

We Should Focus First on How to Improve Patient Care

Contributors to Healthcare Costs

How Do We Help: How Do We Limit: >Patients Stay Well >New Technologies >Avoid Unnecessary Surgery >Higher-Cost Drugs and Other Hospitalizations >Eliminate Errors and Safety Problems >Potentially Life- Saving

Treatment>Reduce Costs of Procedures >Reduce Readmissions

Government has Identified Areas of ImprovementProblem: Waste in duplication of services,

coordination of care and accountability of outcomes

Solution: Accountable Care OrganizationProblem: Better management of patients

with chronic disease and wellness careSolution: Patient Centered Medical HomeProblem: Variance in treatment patterns for

procedures and surgeries Solution: Bundled Payments

Accountable Care OrganizationThe ACO is an organization comprised of primary

care providers, some specialist and a hospital that are accountable to patients and payors for the quality, appropriateness, and efficiency of healthcare provided.

Establish appropriate use and evidence-based treatment protocols and measure the performance.

ACOs are responsible for distributing bonuses when targets are met and levy penalties when targets are missed.

Primary payment methodology is episode-of-care.

ACO Requirements Under the Bill Define processes to promote care quality, report on costs

and coordinate care.Develop a management and leadership structure for

decision making.Develop a formal legal structure that allows the organization

to receive/distribute bonuses to participating providers. ACO must manage at least 5,000 Medicare beneficiaries.Provide CMS with a list of participating PCPs and

specialists.Have contracts in place with a core group of specialist

physicians.Participate for a minimum of three years.

Metric ExamplesBe uniformed in ordering medical devices:

group selects one prosthesis brand of knee replacement to reduce hospital inventory.

Establish metric as to when patient should be rounded on to reduce inpatient stays. Evaluation daily before 8:30 a.m.

Establish clinic pathways and education for patient discharge to reduce unnecessary readmission for Congestive Heart Failure. < 50% of National Average.

Reduce ER visits to 25% of baseline.

Case Study 1. Virginia MasonHospital was on the verge of losing an Aetna

contract due to high utilization. Hospital met with Aetna’s largest client,

Starbucks, and learned about its employee’s common medical complaint: Back Injuries.

Applied Toyota Lean Manufacturing Principles: cut waste and optimize efficiency to create value for the customer.

Current Workflow for Back Injury CarePatient calls for appointment with orthopedic surgeon: 1-2 week wait time.Every patient, no matter the acuity of the

back injury, would undergo an MRI.After work-up, patient underwent surgery or

sent for conservative treatment: physical therapy.

Conducted a Benefit Analysis of the Current Treatment Workflow

85% of patients suffered form uncomplicated back pain.

90% of the resources provided in the current model provided little value.

Evidence showed these patients required physical therapy early on to relieve the back pain.

Reengineered WorkflowEvery patient is seen by Physical

Therapist/Medicine Physician team during initial visit.

Patient receives some physical therapy for pain relief.

The team determines if patient requires an Orthopedic consultation.

Utilized other imaging services and established evidence based criteria as to when to order an MRI.

Prescription medication was reduced by 32%.

Virginia Mason Production System Reduced initial weight times from 31 days to same

day access.Reduced medical waste by 50%

Cutting expensive MRIsCutting need to see specialist.

Patient received relief within 48 hours of visit. 94% were returned to work by the next day.

Hospital was able to align a delivery system to market place needs instead of the needs of the hospital.

Hospital’s department was now overstaffed.

Patient- Centered Medical HomePrimary care office financially incentivized to

manage a population’s health beyond the traditional office examination.

ScreeningCase Management of the overall healthSteering patients to cost effective health Patient entry point into an ACO

Cigna’s Medical Home ProgramCigna Insurance has been promoting this model in the

metroplex. They recently signed with their third primary care group called Village Health. Cigna’s Medical home model was able to reduce healthcare expenditures by almost 5% with other primary care groups.

Financial bonuses to manage the health of the patients. Incentive to not communicate only with the patient when they are sick, but to manage their overall health.

Coordinating care with other providers beyond traditional face time with the physician.

Case managers employed to communicate with patients regarding screening and preventative care.

Case Study 2. Arizona Primary Care AssociatesGroup established a medical home model-

responsible for the health of 15,000 lives.Risk contract that paid bonuses on healthcare costs.Group began to track and manage its chronic

patient population to assess why this group’s health was not improving.

Group’s goal was to eliminate barriers to care beyond what they could control in the office. Focus was to do whatever it took to become more engaged with

their patients.

Bundled Payments-Medical Tourism Medical tourism is choosing to travel outside

of your local area for medical services.Interstate and international tourism being

utilized by large self -funded groups.ACOs and groups will utilize bundled pricing to

attract exclusive contracts from other payors around the country. Bundled payment is a single episode-of- care payment that covers the hospital and physician services. Payments may also come with a post-operative guarantee period.

Case Study 3. Scott and White HospitalInterstate Medical TourismWal-Mart established a Center of Excellence

program to direct its employees to 6 leading hospitals around the country.

Contract is for heart, spine and transplant services.

Wal-Mart provides travel and housing assistance for employees.

Patients will be traveling from New Mexico, Kansas. Oklahoma, Louisiana, Alabama and Florida.

Incentives to Access Interstate CareFinancial incentives for employee to choose

this treatment option.No out of pocket costs for employee and

caregiver.Items covered

Co-insurance Travel Lodging Food

Hospital is paid on each episode of care.

Dallas Healthcare Market Patients have become precious commodities.Alliances and delivery systems are morphing.Major hospital systems are building empires

across the entire care continuum while being cloaked under Federal Healthcare Reform.

More and more new entrants appearing in the marketplace.

Health & Well-Being

ACOPrimary

Care Providers

Acute Care

Transitional Care

Non Providers Entering the Dallas Market to Gain Share

Health & Well-Being

ACO Transitional Care

Acute Care

Primary Care

Providers

Channel Administrators

ACAP Health represents 80,ooo members of various self-funded employers.

Developing bundled payment contracts with providers and hospitals for key high–end procedures.

Compass Health steers patients to cost- effective entities and providers due to price variances.

Hospital vs. Physician OfficeCardiac Nuclear Study

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800

2006 2007 2008 2009 2010 2011

Hospital

Physician Office

Dallas Healthcare BubbleAcute Care Hospitals

Inpatient volume has been flat for over five years.American Hospital Association’s 2010 survey:

national average is 2.6 beds per 1,000. Dallas is at 4.4 beds.

Bed census is at 59%. < 60% is difficult to sustain.In the next two years, the number of beds will

increase by 11%.Dallas hospital catchment areas are declining.If hospitals are operating at full capacity, why are

there so many hospital billboard ads around the city?

Dallas Healthcare BubblePhysicians

Many specialties are experiencing surpluses; not shortages.

Cardiology: 137 physicians, market can support 78. Other areas: General Surgery and Urgent Care

CentersHospitals continue to saturate markets by recruiting

more physicians based on flawed manpower assumptions and the need to control referrals to the hospitals.

Current physicians are skill mismatched. Physicians not seeing enough patients in their area of expertise.

Current Results of the Market Being OverbuiltIncrease in the frequency and intensity of careIncrease in unnecessary careHospitals employing physician practices are

increasing medical costs.Employed physician FFS contracts are 10- 30%

higher than independent physician contracts.Provider-based billing for imaging is two to three

times higher than independent physician contracts

Health plans will take advantage of the situation and try to slash FFS fee schedules.

Tipping PointUninsured patients coming on the Federal Exchange

may not be financially viable for providers.Patients ability to pay out-of-pocket expensesExchange health plans will demand price concessions

from providers 663,878 are uninsured: Of the 2,139,366 people under age 65 in

Dallas County, 31 percent are uninsured. The county is ranked the 72311,893 women are uninsured : In Dallas County, 29.1 percent of

women under age 65 are uninsured354,433 young people are uninsured: In Dallas County, 44.9

percent of young people ages 18 to 39 lack health insurance, placing it in the worst four percent among all counties

311,288 uninsured are eligible for subsidies or tax credits: In Dallas County, 34.6 percent.

Tipping PointAnnual decreases in FFS and Risk fees. In

order to remain viable, the medical enterprise will have to process even more patients.

Conversely, the focus of Federal Healthcare reform is to reduce wasteful care.

Health Plans and ACOs steering patients into narrow networks, which will eliminate competition.

Medical enterprises’ roles will change under Healthcare Reform.