The Changing Health care Landscape: Actions You Can Take Now

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Corey Peters
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1 The Changing Health care Landscape: Actions You Can Take Now Physician Partners and Scripps Mercy Medical Staff San Diego, California October 3, 2013

2 Costly Care Projected Federal Spending for Major Healthcare Entitlements Over the Coming Decade $1.50 Trillion $1.25 $1.00 $0.75 $899 billion $0.50 $0.25 $0.00 Medicare Medicaid $592 billion Source: Congressional Budget Office The Wall Street Journal THE CAMDEN GROUP 6/17/2013 1

3 Paying for Coverage Estimated Average Annual Worker and Employer Contributions to Premiums for Family Coverage Worker Contribution Employer Contribution $- 0 $2 $4 $6 $8 $10 $12 $14 thousand Source: Kaiser Family Foundation/HRET survey of employer-sponsored health benefits THE CAMDEN GROUP 6/17/2013 2

4 Fewer California Firms Offer Health Insurance % Employers Offering Health Insurance % 60% 170.0% 31.5% State Inflation Cost of Health Insurance Source: California Healthcare Foundation THE CAMDEN GROUP 6/17/2013 3

America spends 40 percent more on healthcare than it needs to. Expand roles and scopes of practice for nonphysicians.

5 Entering a New Era: Dr. Don Berwick That stuff involves grasping the extent of the industry s greed, ignorance, excess, overutilization, and waste, Berwick admonished. America spends 40 percent more on healthcare than it needs to. Expand roles and scopes of practice for nonphysicians. We need to support new models of care that provide expanded roles for non-physicians. However, he says, the legacy payment systems don t encourage these changes. Source: Berwick Names 11 Monsters Facing Hospital Industry HealthLeaders Media, July 29, 2013 Donald Berwick, M.D. THE CAMDEN GROUP 6/17/2013 4

6 Institute for Healthcare Improvement: The Triple Aim The Triple Aim TM set forth by the Institute for Healthcare Improvement: n Optimal care delivery within and across the continuum Population Health n Focused on improving the health of the population and cost of care n Right care, Right place, Right time Experience of Care Triple Aim Per Capita Costs Source: THE CAMDEN GROUP 6/17/2013 5

7 Healthcare Reform: Insurance Exchange Health Plans (Choice) American Health Benefits Exchange Flexible Benefits 4 Options Varies Premium Established 4-5% Profit Margin None Negotiated Provider Payment Negotiated THE CAMDEN GROUP 6/17/2013 6

8 Health Plan Activities: 2013 n Use their huge cash reserves n Buy health plans (Medi-Cal, Medicare) n Acquire: medical groups, retail: hearing aids, eye wear, DME n Health plans are diversifying: 85 percent medical loss ratio ( MLR ) will impact profit margins n Market individuals in anticipation of the exchanges Build BRAND n Partner with hospitals/medical groups Accountable Care (joint risk sharing) Narrow network delivery systems Be the data supplier/infrastructure Who is going to manage the population s healthcare? THE CAMDEN GROUP 6/17/2013 7

Covered California Quick Facts n 19 regions n 33 plans submitted letters of intent 13

contracts are executed for 1 year n 4 tiers of pricing/coverage, at least 1 choice in

Approximately 5 million will qualify for insurance or Medi-Cal n Approximately 2.

9 Covered California Quick Facts n 19 regions n 33 plans submitted letters of intent 13 Qualified Health Plans selected Average of 4 plans to choose from in each region QHP contracts are executed for 1 year n 4 tiers of pricing/coverage, at least 1 choice in each tier n Catastrophic high-deductible plan for under 30 year old Invincibles n Approximately 5 million will qualify for insurance or Medi-Cal n Approximately 2.6 million will be subsidized Source: Covered California, Kaiser Family Foundation THE CAMDEN GROUP 6/17/2013 8

10 Covered California n Subsidy-eligible Californians by Ethnicity Percent of Subsidy-eligible Californians 2.7% Latino (1,190,000) 33.5% 45.8% Asian (370,000) African American (100,000) White (870,000) 3.8% 14.2% Other (70,000) Source: Covered California Note: Subsidy-eligible individuals are those at or below 400% of the FPL. THE CAMDEN GROUP 6/17/2013 9

11 Covered California 2013 (In Development) Medicare Medi-Cal Privately Insured Uninsured = Approximately 500,000 Lives = Dually eligible Medicare-Medi-Cal = Undocumented Source: Covered California, CalSIM, KFF, CA Department of Finance THE CAMDEN GROUP 6/17/

12 Covered California 2014 (Individual Mandate) Medicare Medi-Cal Privately Insured Uninsured Subsidized Premium Tax Credit Subsidized Premium Tax Credit + Cost Sharing Subsidy Medi-Cal Bridge Plan ( % FPL) Employed, Subsidized Premium Tax Credit Non-Subsidized (includes Catastrophic Health Plan) Small Employers (< 50 employees) Opens 2014 Source: THE CAMDEN Covered GROUP California, 6/17/2013 CalSIM, KFF, CA Department of Finance 11

13 Covered California 2015 (Employer Mandate) Medicare Medi-Cal Privately Insured Uninsured Subsidized Premium Tax Credit Subsidized Premium Tax Credit + Cost Sharing Subsidy Medi-Cal Bridge Plan ( % FPL) Employed, Subsidized Premium Tax Credit Non-Subsidized (includes Catastrophic Health Plan) Small Employers (< 50 employees) Source: THE CAMDEN Covered GROUP California, 6/17/2013 CalSIM, KFF, CA Department of Finance 12

14 Covered California 2016 Medicare Medi-Cal Privately Insured Uninsured Subsidized Premium Tax Credit Subsidized Premium Tax Credit + Cost Sharing Subsidy Medi-Cal Bridge Plan ( % FPL) Eligibility & Enrollment through Covered CA Employed, Subsidized Premium Tax Credit Non-Subsidized (includes Catastrophic Health Plan) Small Employers (< 100 employees) Source: THE CAMDEN Covered GROUP California, 6/17/2013 CalSIM, KFF, CA Department of Finance 13

15 Covered California 2016 Medicare Privately Insured Uninsured Medi-Cal Subsidized Premium Tax Credit Subsidized Premium Tax Credit + Cost Sharing Subsidy Medi-Cal Bridge Plan ( % FPL) Eligibility & Enrollment through Covered CA Employed, Subsidized Premium Tax Credit Non-Subsidized (includes Catastrophic Health Plan) Small Employers (< 100 employees) Source: THE CAMDEN Covered GROUP California, 6/17/2013 CalSIM, KFF, CA Department of Finance 14

16 Covered California 2017 Medicare Privately Insured Uninsured Medi-Cal Subsidized Premium Tax Credit Subsidized Premium Tax Credit + Cost Sharing Subsidy Medi-Cal Bridge Plan ( % FPL) Eligibility & Enrollment through Covered CA Employed, Subsidized Premium Tax Credit Non-Subsidized (includes Catastrophic Health Plan) Small Employers (< 100 employees) Large Employers?? Source: THE CAMDEN Covered GROUP California, 6/17/2013 CalSIM, KFF, CA Department of Finance 15

17 Covered California: San Diego Example n 193,000 subsidy-eligible individuals in Regions 19 n Rates for 40 year-old, single individual for Silver Plan Plan 150% FPL 200% FPL 250% FPL 400% FPL Health Net (HMO) Federal Subsidy Anthem (EPO) Federal Subsidy Kaiser Permanente (HMO) Federal Subsidy Molina Healthcare (HMO) Federal Subsidy SHARP Health Plan (HMO, Co-pay) Federal Subsidy Blue Shield (PPO) Federal Subsidy SHARP Health Plan (HMO, coinsurance) Federal Subsidy Anthem (HMO) Federal Subsidy $18 $251 $57 $251 $65 $251 $66 $251 $68 $251 $70 $251 $83 $251 $85 $251 $81 $187 $121 $187 $128 $187 $129 $187 THE CAMDEN GROUP 6/17/ $131 $187 $133 $187 $146 $187 $148 $187 $153 $115 $193 $115 $200 $115 $201 $115 $203 $115 $205 $115 $218 $115 $220 $115 $269 $0 $308 $0 $316 $0 $316 $0 $319 $0 $320 $0 $333 $0 $336 $0

18 Covered California Cost Sharing By Plan Type Share Of Cost Paid By Plan Share Of Cost Paid By Individual/ Consumer Max Out of Pocket (for individual) Max out of Pocket (for family) Platinum 90% 10% $4,000 $8,000 Gold 80% 20% $6,400 $12,800 Silver 70% 30% $6,400 $12,800 Bronze 60% 40% $6,400 $12,800 Catastrophic 50% 50% - - n Monthly premiums determined by level, age, location, n Community ratings versus individual historical experience n Guaranteed Issue: health plans must offer the same premium to all applicants of the same age and geographical location regardless of health status, medical conditions, gender or other factors Source: Covered California THE CAMDEN GROUP 6/17/

19 Will People Use the Exchange? Yes? n More comprehensive benefits n Pre-existing conditions n Older and Sicker n Subsidized premium n Under 30 catastrophic n Bridge Plan in/out of Medi-Cal No? n Younger n Healthier n Penalty is low n Middle income no subsidy n My doctor/hospital is not there THE CAMDEN GROUP 6/17/

20 SHOP Health Plans n San Diego Region HMO (copay); PPO (coinsurance) HMO (copay); HMO (coinsurance); HMO (HSA) HMO (copay); HMO (coinsurance); HMO (HSA) PPO (coinsurance) THE CAMDEN GROUP 6/17/

21 SHOP Health Plans n San Diego Region: Averages for 40-year-old Employee 2014 Lowest Silver Plan 2014 Second- Lowest Silver Plan 2014 Third- Lowest Silver Plan 2014 Average of Three Lowest-Priced Silver Plans Average of 2013 Comparable Small Group Plans Difference Between Average Silver Plans & Comparable Small Group Plans Kaiser Permanente HSA $263 Sharp HSA $288 Health Net PPO $320 $290 $324 12% Note: When there were multiple rates from one plan, lowest cost rate was taken and other rates were excluded from comparison. For example, Sharp has three rates that took low positions, therefore Health Net s PPO was chosen as thirdlowest. THE CAMDEN GROUP 6/17/

22 Do-it-yourself Health Plans n Insurers are offering smaller companies a chance to try self-funded health plans. n Cigna Corp. (25 workers) n UnitedHealth Group, Inc. (10 workers) and Humana (26 workers) targeting small employers n Why? Tax on administrative costs vs. premium Fewer benefits Healthier employees? Alternative renew health benefits/plans early and delay a year impact States seeking to limit stop loss coverage amounts Percentage of U.S. companies that self-fund health plans, by number of workers. Less than ,000-4,999 5,000 and up THE CAMDEN GROUP 6/17/ % Note: 2012 data Source: Kaiser Family Foundation The Wall Street Journal 52% 78% 93%

23 Implications: In General Income Level of individual/family will drive selection of subsidized benefit plan (metal health plan) Selection Is there adverse selection? Screenings/Assessments Will identify more diseases at an earlier stage? Cost impact? Short term vs. longterm? Market Individual, non-exchange health plans n Target self-funded products (smaller employers) n Target small employer market (SHOP) Services Is there pent up demand? Employers Some will move to self-funded benefits n Fewer benefits n Healthier employee and dependent base n States may limit reinsurance amounts (CAP) n Avoid tax on premiums (only administrative cost) Benefits and Pricing QHP in the Exchange will not greatly impact offerings outside the Exchange due to benefit differential, mandatory coverage, and community rating n Exchange taps into lower end network at a lower price with enhanced benefits THE CAMDEN GROUP 6/17/

24 Implications: Medical Groups Groups/ IPAs Groups/IPAs with extensive experience with managed care for Medi-Cal/Medicaid and commercial will have an advantage Requires care management infrastructure Will telehealth be effective? Medical groups over IPAs Greater use of NPs? Support scope of practice expansion? Stimulate more consolidation of physician organizations Patient Population Consider starting slow, get familiar with the patient population: Clarify stop-loss program Clarify the risk adjustment How sick is the population? Rates Analyze and evaluate impact Health Net pays at 80 percent of Medicare equivalent o o o Group pays claims/manages care Maybe under bid at a low premium Assumes low cost delivery network Platinum rates/plan are most like current rates and cost sharing!! Can Bronze and Silver patients really afford the co-pay? Need aggressive collection policy up front THE CAMDEN GROUP 6/17/

25 Implications: Medical Groups Physician Organization More consolidation of physician organizations (big get bigger) Concentrate in geographic pockets Target medical groups/ipas with Medi-Cal experience and infrastructure Health Plan Own a health plan (P2P) Plans Determine impact of Medi-Cal expansion and significant enrollment in Bronze and Silver Plans Adult-style Medi-Cal with different healthcare needs Spanish necessary THE CAMDEN GROUP 6/17/

26 Implications: Medical Groups Growth Groups that do not currently do Medi-Cal will get little population growth Track Record No patient track record with this socioeconomic group Kaiser Did they intentionally bid high? Covered CA Those not in Covered California networks need to continue to monitor insurance uptake, utilization, and cost trends in geographic regions to evaluate and refine strategy THE CAMDEN GROUP 6/17/

27 Implications: Hospitals/Health Systems n Include inpatient/outpatient and post-acute care services Do not participate if you are at full capacity Do not participate if premiums too low or payment too low Hospital does not participate if affiliated doctors are excluded/ non-participating At least Medicare equivalent rates Aggressive up front collection policy on co-pay and deductible n Advantage to low cost hospitals Due to service mix? Due to low acuity patient? Is it due to true low costs (most hospitals in GPO, staffing standards, older facilities, etc.)? In other words, salary, wages, and benefit plans, teaching programs, underperforming assets, and payer mix will really matter. n Own a health plan (P2P) THE CAMDEN GROUP 6/17/

28 Physician-Hospital Integration: Driving the Value Proposition High Impact on Value COE/Specialty Institutes Bundled Payments Managed Care Shared Risk Medical Home Specialty Co-management Accountable Care Clinical Integration IDN/ Health Plan Medical Foundation Physician Employment RHC, FQHC, Community Clinics Low Limited Integration Full THE CAMDEN GROUP 6/17/

29 The Traditional Primary Care Practice Model Is Changing Past Single or small group practice primary care clinic no longer economically sustainable. Future Patient Centered Medical Home THE CAMDEN GROUP 6/17/

30 Plan to Plan Health Plan (BC, BS, Aetna, United, etc.) Retain 15-20% Your Health Plan Hospitals Ambulatory Services Post-acute Services Physicians Pharmacy Facilities THE CAMDEN GROUP 6/17/

31 Accountable Care: How Do You Generate Savings n Population management n Well care n Chronic disease management n Effective use of appropriate clinicians n Medical home n Bundled payment 50% Care Management 15-20% Lower Cost Site 15-20% Throughput (Volume) 15-20% Post-acute, outpatient, ER use Extended hours, higher occupancy, narrower network Generic use, GPO, standardization Appropriate Economic Indicators THE CAMDEN GROUP 6/17/

costs and quality Care Management Hospitalists and Intensivists CMO Disease management Clinical protocols Advanced analytics and modeling

32 ACO Structure Infrastructure (Provided or Contracted ACO Operations) Information Technology EMR, CPOE, PACS Data warehouse Reporting HIE Web portal n ACO responsible for: Clinical care management (clinical integration) Capture data for continuum of care Measure and monitor costs and quality Care Management Hospitalists and Intensivists CMO Disease management Clinical protocols Advanced analytics and modeling Call center Utilization management Knowledge management Health Network Delivery network Financial/Payment Systems THE CAMDEN GROUP 6/17/

33 Pioneer Results: 669,000 Medicare Beneficiaries n Of the 32 Healthcare Systems Chosen As Early ACO Models 32 improved quality of patient care 18 achieved some cost savings 32 rated highly on patient satisfaction scores Savings to Medicare $140 million in total savings by Pioneers $76 million in shared savings to be return to 13 Pioneers $52.4 million in total losses by Pioneers $33 million in net savings for Medicare Trust Funds Source: Centers for Medicare & Medicaid Services and The Camden Group THE CAMDEN GROUP 6/17/

34 Accountable Care Organizations: Current State n Pioneer Accountable Care Organizations ( ACOs ) original 32, now 23 Nine left, seven moving to Medicare Shared Savings Program ( MSSP ) ACO n Reasons for leaving Poor and untimely data Centers for Medicare & Medicaid Services quality measure changes for year 2 Patient provider choice outside the ACO network (open access) The ACO had poor or non-existent managed care experience Lack patient incentives to stay in network/aco n ACOs Pioneer 23 (over 600,000 beneficiaries) MSSP 250+ (over 4 million beneficiaries) Commercial 200+ (unknown beneficiaries) THE CAMDEN GROUP 6/17/2013 Copyright 2013 by The Camden Group. All rights reserved. 33

35 Paradigm for Success Quaternary Tertiary Community Hospital Surgical Specialists Medical Specialists Primary Care Access Points (UCC, FQHCs, ED, Health Plans, Physician Offices, Retails Clinics, etc.) Defined Population Commercial CMS Dual Eligibles Medi-Cal n HMO n PPO n Direct to Employers n Covered California n Bundled Payment n Risk products n ACO-MSSP n Pioneer ACO n Medicare Advantage n Bundled Payment n HMO n HMO n Fee-for-service THE CAMDEN GROUP 6/17/

36 Accountable Care Potential Market Segments Enlarging the Pie Accountable Care (IDN) Medicare Medicaid Commercial Self Funded FFS MA FFS HMO HMO PPO (tiered) Benefit Employees Community Employers THE CAMDEN GROUP 6/17/

Transparency n Quality will be tracked more vigilantly and quality scores will be readily available to the consumer Hospital Consumer Assessment of Healthcare Providers and Systems (

37 Transparency n Quality will be tracked more vigilantly and quality scores will be readily available to the consumer Hospital Consumer Assessment of Healthcare Providers and Systems ( HCAHPS ) Measures CAHPS Clinician and Group Surveys ( CG-CAHPS ) Physician Quality Reporting System ( PQRS ) Outcome Measures CMS Measures/Hospital Compare THE CAMDEN GROUP 6/17/

38 Southern California Activity n Daughters of Charity to Ascension n Verdugo Hospital acquired by USC Hospital n Tarzana to Providence n Hoag with St. Joseph Health System Orange (Covenant) n HCP acquired by DaVita n Facey acquired by Providence (PMI and CI, LLC) n Arta acquired by HCP n United/Optum acquires Monarch, other small IPAs n WellPoint acquires CareMore n AltaMed, Adventist Health and HCP pursuing a Knox-Keene License (Health Plan) THE CAMDEN GROUP 6/17/

39 Southern California Activity n UCLA acquiring small IPAs and groups, creating ambulatory sites n Optum acquires NAMM n Saint John s Santa Monica joins Providence Health n Presbyterian Intercommunity acquires Downey Regional n MemorialCare buys a health plan (Seaside) n MemorialCare acquires Bristol Park and Greater Newport Physician THE CAMDEN GROUP 6/17/

40 What Should We Do?

41 Strategy: Guiding Principles n Move to population health n Strong primary care base (need numbers) Use nurse practitioners Use telehealth/it n Move to risk payment/global payment n Move to expanded access points (capture the population) n Improve quality (top decile) n Reduce cost (target Medicare) n Transparency n Be pluralistic All payers: narrow networks? Multiple providers to the hospital (separate risk performance) Shared risk pools to link with physician organizations THE CAMDEN GROUP 6/17/

The Environment Around You n Hospitals consolidating: Fewer will remain acute care o Focus on geographic markets Repurpose some to post acute and ambulatory facilities Inpatient utilization: flat to

42 The Environment Around You n Hospitals consolidating: Fewer will remain acute care o Focus on geographic markets Repurpose some to post acute and ambulatory facilities Inpatient utilization: flat to down o Big getting bigger Reimbursement not keeping up with costs o Organized labor, staffing ratios o DSH Funding and Medi-Cal reduction o Deteriorating payer mix o Capital intensive n Strategies Medical Foundation P2P Geographic concentration THE CAMDEN GROUP 6/17/

43 The Environment Around You n Health plans Selecting payer markets to compete (Covered CA, self-funded employers, Medicare Advantage, Medi-Cal, duals) Growing through acquisition Will consolidate more Diversifying into the MLR (e.g., hearing aides, DME, eyewear, physicians) n Reimbursement Medicare: Sequestration, SGR, new models (MSSP, Pioneer) Medi-Cal: Reduction in pay expansion in enrollment Covered California: Lower pay expanded benefits Duals: Less 10 or 15 percent? n Shortage of primary care physicians Improve physician throughput/production THE CAMDEN GROUP 6/17/

Opportunities n Medi-Cal expansion n Dual eligible managed care n Covered California Individual Small employers Large employers n Health plan ownership (P2P)

44 Opportunities n Medi-Cal expansion n Dual eligible managed care n Covered California Individual Small employers Large employers n Health plan ownership (P2P) Employees and dependents Self-funded employers Medicare n Health plan partnership Own employees/dependents Self-funded employers THE CAMDEN GROUP 6/17/

Execution Check List n Care management Effective hospitalist program Adherence to care protocols Reduce variation in care Effective case/care management (hand-offs,

45 Execution Check List n Care management Effective hospitalist program Adherence to care protocols Reduce variation in care Effective case/care management (hand-offs, transitions) n Use of performance metrics n Information technology Enterprise data warehouse Population health analytics E-visits TeleHealth THE CAMDEN GROUP 6/17/

continuum of care Post acute Acute care hospitals/health systems n Grow lives Same store New markets?

46 Strategic Focus n Geographic concentration By payer segment n Primary care a priority Specialists: Medical then surgical Nurse practitioners n Risk model payment More global payment in the future Medicare to bundled payment n Partnering: the continuum of care Post acute Acute care hospitals/health systems n Grow lives Same store New markets? Criteria to enter THE CAMDEN GROUP 6/17/

47 Evolving From à To From To Pay for procedures Fee-for-service More facilities/capacity Physicians/Hospitals acting independently Physicians and Hospitals working in parallel Hospital centric Treat disease/episode of care Pay for value Case rates/budgets/capitation Better access to appropriate settings Physicians/Hospitals collaboration: global risk Physicians and Hospitals working in a highly integrated manner Continuum of Care (Population centric) Maintain health THE CAMDEN GROUP 6/17/

COVERED CALIFORNIA: THE GOOD, THE BAD & THE UNDEFINED FOR CHILDREN WITH SPECIAL HEALTH CARE NEEDS

1 COVERED CALIFORNIA: THE GOOD, THE BAD & THE UNDEFINED FOR CHILDREN WITH SPECIAL HEALTH CARE NEEDS Ann-Louise Kuhns President & CEO California Children s Hospital Association Health Care Reform: The Basics