Healthcare Trends & Implications Part 1. July 2018

Transcription

1 Healthcare Trends & Implications Part 1 July 2018

2 PART I Trends #1 - #5

3 Top 10 Trends 1. Efforts aimed at disrupting traditional approaches and models in healthcare are seemingly coming from every direction. 2. The increase in alternative settings of care has resulted in the emergence of non-traditional competitors. 3. Digitally transforming the patient experience is quickly becoming a critical competitive differentiator. 4. Health delivery organizations are continuing to try and achieve scale through mergers, acquisitions, and strategic partnerships. 5. Financial challenges and reimbursement uncertainty are forcing providers to make difficult business and IT decisions. 3

4 Top 10 Trends continued 6. The lack of interoperability between enterprise EHRs remains one of the single biggest barriers to unlocking the full potential of IT. 7. Hospitals and health systems are facing increasingly sophisticated cyber attacks, with connected medical devices possibly being the next big target. 8. Cumbersome IT regulations and frequently changing timelines are taking a toll on both providers and vendors. 9. Hospitals and health systems are starting to embrace digital health and IT innovation but at vastly different paces. 10. After years of buzz and hype, emerging technologies are finally starting to be put to the test in healthcare. 4

5 Trend # Efforts aimed at disrupting traditional approaches and models in healthcare are seemingly coming from every direction. 5

6 Attempts at Disruption Large, influential organizations are increasingly trying to disrupt traditional models and approaches in healthcare. Recent announcements notable due to sheer size, market share, and/or technology assets of organizations Disruption attempts coming from inside and outside of healthcare: Large employers Big tech firms Commercial payers Actual disruption not guaranteed, but attempts unlikely to stop any time soon Clear that key stakeholders not going to stay idle and wait for change to happen Disruption attempts even coming from providers themselves. In early 2018, four large health systems (Intermountain, Ascension, SSM and Trinity Health) announced plans to create a not-for-profit generic drug company to make generic drugs more available and affordable. 1 1 Modern Healthcare, 1/18/18 6

7 Attempts at Disruption: Employers Rising employee healthcare costs are driving many large employers to look at alternative strategies. Employer healthcare costs expected to increase 5.5% in 2018, up from a 4.6% increase in Range of responses from large employers Direct contracting arrangements with providers, onsite health clinics, partnerships for group purchasing, potential PBM alternatives, etc. Amazon / Berkshire Hathaway / JPMorgan Chase partnership (January 2018) Initial focus will be on technology solutions to provide employees with simplified, high-quality and transparent healthcare at a reasonable cost 1 22nd Annual Willis Towers Watson Best Practices in Healthcare Employer Survey, Jan

8 Attempts at Disruption: Big Tech Big tech firms are aggressively trying to gain traction in healthcare. Interest that big tech companies have long shown to get into healthcare is finally translating into tangible investments, partnerships, and products Approaches vary but leverage core business strengths: Apple (patient-facing products and data) Google (Big data and AI) Microsoft (online storage and analytics) Amazon (drug and medical supplies ordering) 8

9 Attempts at Disruption: Commercial Payers Large commercial payers are looking to expand beyond the traditional role played by health insurance companies. Significant activity of late on a number of fronts 9

10 Attempts at Disruption: Implications Why Does It Matter? Increasing attempts to disrupt healthcare are creating a degree of uncertainty for providers due to a number of unknowns: Will any attempts actually be successful? If so, what level of disruption will actually be achieved? Represents an opportunity for provider organizations to partner with influential disrupters Large employers, big tech firms, progressive payers, etc. What to Watch For: Disruption attempts that actually gain traction particularly from organizations with the size, market share, or technology assets to drive fundamental changes Level of involvement by providers in disruption attempts bystanders or active participants? 10

11 Trend # The increase in alternative settings of care has resulted in the emergence of nontraditional competitors. 11

12 Alternative Care Settings There has been a steady shift towards more distributed and less expensive settings of care. Premium on convenience and access Range of alternative care settings gaining traction, including: Retail clinics Urgent care centers Onsite employer clinics As care settings have evolved, nontraditional competitors have emerged Pharmacy chains, retail stores, even employers and payers Walk in Clinic Usage 1 (% saying they have used a walkin clinic, i.e., retail or urgent care) 14% 18% 30% Boomers Gen X Millennials 1 Employee Benefit Research Institute, March 5,

13 Alternative Care Settings: Retail Clinics Retail clinics compete on convenience, cost, and brand recognition. Roughly 2,000 retail clinics in the U.S. 1 Treatment of minor health problems (sore throat, earache, etc.) Some also offer vaccinations and health screenings Typically staffed by NPs CVS is by far the biggest player, with 52% of the market 1 Retail Clinic Market Share, Walmart, 3% Target, 4% Others, 10% Kroger, 11% Walgreens, 19% CVS, 52% 1 Drug Channels Institute, 3/6/18 13

14 Alternative Care Settings: Urgent Care Centers Urgent care centers offer convenient access to treatment for serious (but not life-threatening) health problems. Over 8,000 urgent care centers in the U.S. 1 X-rays, wound treatment, blood tests Staff typically includes an onsite physician Mix of ownership models Payers, hospitals, MDs Hospitals and health systems are also investing in urgent care centers in response to walk-in clinics from pharmacy chains and retail stores. Urgent Care Center Ownership 1 Entity % Corporate entity* 39% Joint venture with a hospital 16% Hospital-owned 15% Two or more physicians 14% Single physician 10% Non-physician investors 3% Physician investors 2% Other 1% *i.e., insurance company, private equity or shareholder owned Urgent Care Association Benchmarking Report 14

15 Alternative Care Settings: Onsite Employer Clinics Large employers are increasingly looking at offering onsite (or near-site) health clinics for their employee population. Located onsite at the employer (or at a nearby location) Offers employees quick access to inexpensive (or free) care Multi-employer clinics also gaining traction Among Large Employers 1 (1,000+ employees) Offer an onsite health clinic (e.g., a clinic that provides preventive, primary, and urgent care) 20% 3% 11% 34% Offer a near-site or multi-employer health clinic 8% 3% 15% 26% Action taken / tactic used in 2017 Planning for 2018 Considering for nd Annual Willis Towers Watson Best Practices in Healthcare Employer Survey, Jan

16 Alternative Care Settings: Onsite Employer Clinics continued Onsite employer clinics can include a range of services and management models. Focus on wellness and prevention Some onsite clinics have also expanded into primary care Mix of management models Contract with a dedicated third-party vendor to operate clinic Partnership with a local health system or physician practice Operated directly by the employer (i.e., employer hires their own full time clinical employees to run the clinic) In early 2018, Apple announced AC Wellness, an independent medical practice dedicated to delivering compassionate, effective healthcare to the Apple employee population. (Source: acwellness.com) 16

17 % of claim lines % of claim lines Alternative Care Settings: Utilization Recent analysis of private insurance claims show an increase in utilization of alternative care settings. 60% Claim lines with retail clinic usage, [Note: sum of % below equals 100%] 40% Claim lines with urgent care center usage, [Note: sum of % below equals 100%] 40% 20% 20% 0% % '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Note: estimate only; adapted from FAIR Health White Paper, March 2018 Actual nature of utilization important to monitor though Study in Health Affairs found almost 60% of retail clinic visits represented new utilization (as opposed to a substitute for more expensive care) 2 1 FAIR Health White Paper, March Health Affairs, March

18 Alternative Care Settings: Implications Why Does It Matter? Increased competition for providers but from new kinds of stakeholders Many have inherent advantages: deep pockets, brand recognition, technology assets Pressure on providers to find innovate ways to differentiate their brand and services Compete on convenience and access Focus on clinical expertise, depth of services, patient-provider relationship What to Watch For: Degree to which utilization cuts into traditional primary care (new utilization vs. substituted utilization); potential impact on care coordination Efforts by non-traditional competitors to expand reach even further 18

19 Trend # Digitally transforming the patient experience is quickly becoming a critical competitive differentiator. 19

20 Transforming the Patient Experience Patients are quickly becoming more discerning consumers of healthcare. Growth of high deductible plans and more patient financial responsibility for costs Through September 2017, 43% of U.S. adults* were enrolled in a high deductible health plan, up from just 25% in 2010 (CDC, Feb 2018) Patient expectations for digital tools and mobile apps in healthcare are based on experiences in other service industries Almost 60% of consumers expect their healthcare digital customer experience to be similar to retail. (NTT DATA, March 5, 2018) *adults under 65 years of age with private insurance 20

21 Transforming the Patient Experience: Healthcare Lags Behind Other Industries HEALTHCARE Portal, EHR centric Fragmented; one application at a time Difficult to use; not intuitive Insufficient context to make informed decisions Limited value (as defined by patients) OTHER SERVICE INDUSTRIES Mobile; cloud-based Cohesive; brand-driven User-centered design Use of analytics to understand customers and personalize the digital experience Growing value 21

22 Transforming the Patient Experience: Wide Range of Approaches There are a number of ways that leading organizations are using digital tools to transform the patient experience. Improving self service capabilities Patient-facing mobile apps / tools Scheduling, registration, payment Advanced wayfinding Increasing access to on demand services e-visits and patient-provider video consults OpenTable model for appointments Apps for on-demand house calls Providing context to help patients make decisions Price transparency / single bill Navigating and understanding online rating and review sites Source: Zocdoc website 22

23 Transforming the Patient Experience: Telehealth The term telehealth actually encompasses many different models across a variety of different care settings. Range of both patient-provider and provider-provider use cases Patient-provider video visits Virtual provider-provider consultations Secure messaging Remote patient monitoring Telehealth quickly becoming a key differentiator in competitive markets Expand reach and differentiate the brand On demand primary / urgent care, online second opinions, etc. Consumer interest in Telemedicine 1 (% saying telemed option is extremely or very important) 19% 27% 40% Boomers Gen X Millennials 1 Employee Benefit Research Institute, 3/5/18 23

24 Transforming the Patient Experience: Telehealth continued Leading health systems continue to look for ways to expand and grow their telehealth offerings. Starting to see leaders put more structure around telehealth, centralizing different programs under one roof Penn Medicine Center for Connected Care Represents one of the largest telehealth hubs in the country 1 Intermountain Connect Care Pro One of the nation s largest virtual hospital services 2 NewYork-Presbyterian (NYP) announced a partnership with Walgreens to make the NYP OnDemand suite of telehealth tools and services available at self-service kiosks in local drug stores as well as through the Walgreens website. 1 Penn Medicine, 2/13/18 2 Intermountain Healthcare, 2/28/18 24

25 Transforming the Patient Experience: Implications Why Does It Matter? Growing need to compete for and retain patients Premium on convenience, access, and value (as defined by patients) Increasing amount of information available to patients; ability to provide context is critical Digital experience in healthcare needs to at least approach what patients have come to expect in other service industries Opportunity for healthcare organizations to be a fast follower Proven approaches, platforms, and tools exist in financial services, retail, hospitality, and travel industries What to Watch For: Partnerships between providers and IT vendors from other industries Aggressive expansion of telehealth and virtual health programs, especially in highly competitive regions 25

26 Trend # Health delivery organizations are continuing to try and achieve scale through mergers, acquisitions, and strategic partnerships. 26

27 Mergers, Acquisitions, Partnerships Mergers, acquisitions, and partnerships among health delivery organizations continue. Priority on achieving size and scale Improving clinical integration and care coordination also a factor Activity across all sectors of health delivery Hospitals, physician practices, long term care sites, rehab facilities, etc. Significant differences by region Unique competitive dynamics Highly concentrated markets vs. markets with many pockets of independence Per Irving Levin Associates, sectors that experienced an increase in number of deals last year included: Physician Medical Groups (+27%) Labs, MRI, & Dialysis (+22%) Behavioral Health Care (+17%) Rehabilitation (+7%) Source: Irving Levin Associates, 3/8/18 27

28 Mergers, Acquisitions, Partnerships: Activity in hospital and health system M&A deals announced in 2017 Activity included 10 mega-deals* the largest number ever recorded Hospital and Health System M&A Activity, Source: 2017 in Review: The Year M&A Shook the Healthcare Landscape, Kaufman Hall, Jan 2018 *Mega deals are transactions [that] involve sellers with net revenues of $1 billion or greater 28

29 Mergers, Acquisitions, Partnerships: Financial Objectives What are the financial objectives of your merger, acquisition, and/or partnership planning or activity? (n = 190 health delivery executives) Achieving scale and increasing market share Improve financial stability Improve operational cost efficiencies Increase market share within our geography Improve position for payer negotiations Expand geographic coverage Expand position in care continuum Improve access to capital Improve access to operational expertise Improve access to financial management Other 3% 19% 25% 35% 63% 61% 60% 59% 55% 48% Source: Adapted from Mergers, Acquisitions, and Partnerships, HealthLeaders Media, April

30 Mergers, Acquisitions, Partnerships: Care Delivery Objectives What are the care delivery objectives of your merger, acquisition, and/or partnership planning or activity? (n = 190 health delivery executives) Improving clinical integration and care coordination Achieving scale and increasing market share Improve position for care delivery efficiencies Improve clinical integration Improve position for pop health management Gain care delivery cost efficiencies through scale Expand into new care delivery areas Expand position in care continuum Improve or enhance clinical talent 65% 55% 54% 53% 49% 49% 42% Divest to sharpen strategic mission 12% Other 3% Source: Adapted from Mergers, Acquisitions, and Partnerships, HealthLeaders Media, April

31 Mergers, Acquisitions, Partnerships: Significant Shift in Employment of PCPs Percentages of primary care physicians working in organizations, by ownership type Source: Brent D. Fulton; Health Affairs 2017;36:

32 Mergers, Acquisitions, Partnerships: Implications Why Does It Matter? Mergers, acquisitions, and partnerships all but certain to continue the need for size and scale is not going away Providers facing constant uncertainty due to ongoing activity Uncertainty for organizations directly involved in an M&A event, but also uncertainty for those left out Actually achieving intended goals of a merger, acquisition, or partnership not guaranteed; significant work required Success (or failure) to align cultures, integrate IT systems, and standardize processes likely to shape competitive dynamics in many markets 32

33 Mergers, Acquisitions, Partnerships: Implications continued What to Watch For: M&A activity and trends at the regional level Fall of pockets of independence Actual fallout from recent M&A announcements Which organizations are investing the time and resources needed? Which organizations are struggling? Indicators of alignment other than formal mergers or acquisitions Particularly EHR extension programs from large health systems 33

34 Trend # Financial pressures and reimbursement uncertainty are forcing providers to make difficult business and IT decisions. 34

35 Financial Pressures Financial pressures (both near term and long term) have put a premium on cost containment, value, and efficiency. Providers are facing a variety of financial pressures right now Medicare / Medicaid reimbursement, bad debt, rising costs, etc. Situation further complicated by the slower than expected transition to value-based payment Operating in a part FFS / part value-based system is not easy or efficient Growing acknowledgement from providers that healthcare is a business Increasing interest and investment in ERP and CRM, as well as more robust enterprise analytics tools Recognition among leading providers about need for greater operational discipline and business unit accountability 35

36 Financial Pressures: Current Concerns Financial challenges are by far the top concern of hospital CEOs right now Top 10 Most Pressing Issues Cited by Hospital CEOs in ISSUE (n=299) (n=299 community hospital CEOs) Average Rank (1-10) Financial challenges 2.0 Governmental mandates 4.2 Personnel shortages 4.5 Specific concerns cited under financial challenges included: Medicaid reimbursement (71%) Increasing costs for staff, supplies, etc. (64%) Reducing operating costs (57%) Government funding cuts* (56%) Bad debt (54%) *other than reduced reimbursement for Medicaid or Medicare Patient safety and quality 4.9 Patient satisfaction 5.5 Physician-hospital relations 5.9 Access to care 5.9 Technology 7.0 Pop health management 7.3 Reorganization (e.g., M&A) American College of Healthcare Executives, February 1,

37 Financial Pressures: Impact on IT Budgets IT departments are facing pressure to deliver the same or more amid budget and resource constraints. Projected change in IT operating budget for the next fiscal year 1 (n=224 provider organizations) Don t know (13%) Decrease (43%) Increase (24%) No change (21%) Staffing issues also pose a significant challenge for IT departments. Per a 2018 HIMSS survey, more than half of hospitals said their organization had to either scale back an IT project or put an IT project on hold altogether in the past year due to a workforce challenge HIMSS U.S. Leadership and Workforce Survey 37

38 Financial Pressures: Realizing Value From the EHR There remains a considerable opportunity in most organizations to realize more value from the enterprise EHR. Pressure growing to realize tangible financial and clinical value from significant EHR investment Operational engagement and leadership in optimization is critical Functionality EHR promised but did not deliver 1 Better pop health mgmt tools Better patient satisfaction Better physician satisfaction (n=100 healthcare executives) Lower costs 76% 64% 64% 60% Per a Harris Poll of office-based PCPs: 49% think using an EHR detracts from their clinical effectiveness 71% agree that EHRs greatly contribute to physician burnout 59% think EHRs need a complete overhaul ( How Doctors Feel About EHRs, Harris Poll, June 2018) 1 Getting to Value-Based Care: Are EHRs up to the task? Sage Growth Partners, Feb

39 Financial Pressures: Slow Transition to True Value-Based Payment The transition from volume to value is taking much longer than most anticipated especially when it comes to risk. Value-based payment models are becoming more prevalent Proportion of Business Aligned with Payment Models 1 (n=120 payer organizations) Fee-For-Service 37.2% Capitation, Global Payment 17.0% Pay For Performance Prospective Bundled Payment Population Based Payment Retrospective Bundled Payment Other 0.7% 15.2% 10.4% 10.2% 9.4% Among surveyed private payers, pure fee-for-service accounted for only 37% of reimbursement in 2018, down from 52% in but the level of financial risk providers are taking on is still relatively low 1 Adapted from Finding the Value: The State of Value- Based Care in 2018, Change Healthcare, 6/18/18 39

40 Financial Pressures: Current Capabilities for Value-Based Care Hospitals have justified concerns about the capabilities in place to successfully take on risk under value-based models. Hospital Financial Executives Perspective on Their Organization s Current Capabilities to Support Value-Based Payments (n=117 hospital financial executives) Not capable Somewhat capable Highly capable Extremely capable External Interoperability 24% 59% 15% Assessing ROI 23% 46% 29% Chronic Care Mgmt 11% 57% 25% 7% Real-Time Data Access 10% 54% 30% 5% Care Standardization 8% 59% 31% Business Intelligence 5% 51% 39% 4% Post-Discharge Follow Up 4% 52% 37% 6% Interoperability 57% 33% 8% Eligibility Verification 28% 63% 9% Source: HFM Magazine, Feb % 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 40

41 Financial Pressures: Implications Why Does It Matter? In the near term, financial pressures are forcing IT to do more with less Premium on efficiency, enterprise system optimization, and thoughtful cost reductions Sooner rather than later providers will need to take on significantly more financial risk for performance Will require more robust analytics tools and risk management capabilities than currently in use today New processes, workflows will need to be established No substitute for real experience with value-based payment models Voluntary federal programs Pilots through partnerships with commercial payers 41

42 Financial Pressures: Implications continued What to Watch For: EHR optimization initiatives supported by a strong governance structure and highly engaged operational leaders Investments in enterprise ERP and/or CRM systems Partnerships between providers and payers to test new valuebased payment models Increases in the level of financial risk providers are taking on 42

43 PART 2 COMING NEXT MONTH! PART II Trends #6 - #10