#1 Trend For Healthcare = The National and Global Economy

Transcription

1 Endgame: The Beginning of the Bursting of the U.S. Healthcare Bubble Maureen Swan MedTrend #1 Trend For Healthcare = The National and Global Economy 1

2 TWO BASIC ISSUES WITH THE NATIONAL AND GLOBAL ECONOMY: DEBT + The 2 D s DEMOGRAPHICS Aging and Longevity: A Catastrophic Success Retirement is now a well paid, long term occupation 65 set in 1880s Average Medicare couple pays in $109K takes out $343K We pay $30,000/ year per 65+ citizen --- the bill all wrapped in the diapers of our grandchildren The hands of too many elderly reaching into the pockets of fewer and less well off youth 2

3 The Great Debt Super Cycle* EASY, EXCESS Money + Psychology = Rising Prices/Spending DEBT PRICES/ SPENDING= Higher GDP Housing Consumer Spending College Tuition Healthcare Government Spending *Term coined by Tony Boeck of Bank Credit Analyst Co-linked bubbles The Housing Bubble Price bid up that exceeds value 210 Fueled by Cheap, easy money: debt Increase in home prices 1898 to 1996 = 1996 to 2006 Source: Robert Shiller 3

4 /17/2013 The Great Debt SuperCycle: Employers and Consumers Maxed Out $ in Billions $ in Billions Household Debt Business Debt $15,000 $10,000 $5,000 $0 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 Source: Bloomberg, Federal Reserve 2010 U.S. Economic Growth Since 1971 Has Been Built on Exponential Debt Growth Can it double again in the next 8 years? 29 Source: Federal Reserve *household, financial, government Nov 2012: $50.9T World GDP 2011 = $65T 4

5 The Great Debt Super Cycle We Can t Keep the Same Game Going Why Debt? Declining Wages as a % of GDP 5

6 US Debt Bad but not the worst Declining National Incomes and Household Net Worth National incomes 2007: $52, : $49,445 7% decline Median household net worth DOWN 30% from 2007 Source: Star Tribune, Falling Incomes Rip a Hole in Middle Class March 5,

7 U.S. Household Deleveraging: 1/3 to 1/2 of the Way There? Source: McKinsey Consulting, January 2012 Total Expenditures The U.S. Healthcare Bubble $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2, : Population has grown 1.8X, healthcare expenditures 88.9X Price built up that exceeds value $0 $2,811 $4,780 $8,935 $1,100 $148 $ PerCapita Costs $13,111 Reality?? Healthcare has grown on the back of a debt fueled economic boom. Debt is now at levels where it is a DRAG on the economy. 7

8 /17/2013 Will the Bubble Keep Growing? X 51% Commercial Premiums for a Family of 4 % of Median HH Income X X 40% $30,000 X 35% X X $25,000 X 30% $21,015 $20,000 X X X X 25% X X $15,000 X $13,557 20% X $10,659 $10,000 X $6,826 15% $5,200 X X X X 10% $5,000 5% $0 Source: Kaiser Family Foundation, MedTrend analysis,pricewaterhouse Coopers The Question for Healthcare If debt can t continue to grow at the same rate, what will fund our bubble? 50%+ of your funding= government 44% of 2012 federal government spending funded by DEBT 8

9 The Good News The Bad News GOOD OR BAD? The US can likely grow federal debt to 150%+ of GDP before the bond markets revolt Means we might have 4-5 years to continue to kick the can down the road but the consequences at that point become Greek-like (huge austerity, tax hikes, riots, etc.) GOOD OR BAD? The ONLY way we become fiscally healthy is to cut spending Medicare and Medicaid MUST be cut U.S. Debt Deal: Deadlocked Commission and S&P Downgrade Deadlock = $1.2Trillion automatic cuts 2% cut to providers every year The resolution is?? 9

10 Deficit Reduction Plan Proposals: Late Spring 2011 Won t This All Go Away? Supreme Court upheld the ACA law Republicans in Congress don t like FFS either The debt problem doesn t change healthcare will be a big target 10

11 The End Game is Clear The core implication to hospitals and doctors is the same : The Market Washington and Employers are saying ENOUGH The Economy WILL NOT allow continued growth at past rates The healthcare growth bubble will burst. Pressures to Re-design Delivery to Reduce Utilization and Costs and Improve Value: It s The 2 D s Marketplace Changes 11

12 Top Trends Impacting Healthcare Lower Unit Reimbursement STRATEGIES New Methods of Reimbursement Today s Fee For Service Healthcare World: Volume Based First Curve Paid per procedure, admission, test Specialty/ hospital care pays more No true financial risk (pass on costs/failures) Incentive : do more --build specialty/hospital products Typical Hospital Payer Mix: Payer Revenue/ $1 Cost Commercial (BCBS) $1.30 Medicare $0.85 Medicaid $

13 FFS Payments Getting Cut Presentation to American College of Surgeons 2011 Republican Senator Mark Kirk (IL): Every group that relies on federal funding should expect a 10-20% drop in that funding. Dr. Britt, president of ACS replied This could put providers in a tailspin. Kirk s reply: The tailspin is the U.S. economy. There is a new audience at play. (bond market.) The judgments they render are swift and severe. Current Medicare Economics -2% in FFS every year ? VPB: 1% growing to 2% withholds = +/- up to 2% reduction in ALL DRGs Re-admission penalties: 0-2% Typical 400 bed hospital= $8-10M 13

14 Everyone Gets It Now: Make Money on Medicare Majority of hospitals/ systems plan to cut costs 15-20% from their cost structure Recognition of inability to cost shift losses to commercial payers who expect no more than CPI Challenge of reducing unit cost in a hospital: 80%+ of operating costs in labor, supplies, cost of capital Average hospital margin on Medicare = (13.9%) Source: Sg2, 2010 The Golden Days of Fee for Service Are Behind Us. (New Methods of Reimbursement) 14

15 Enormous Variability in Healthcare: and now payers know it Rates of cardio-bypass: 1.9/1000 to 8.9/1000 (Brownlee et al 2011) Rates of mastectomy versus lumpectomy.4/1000 to 2.7/1000 (same) MDs with financial interest refer to medical imaging 2.48 times as much (Fischer 2011) Clinical guidelines say NO stent in post heart attack patient within 24 hours: but 54% get one. (Cortez 2011) Healthcare Law Payment from FFS to payment based on outcomes/ quality: value based purchasing Payment from FFS to payment that is bundled/ global, putting providers at risk: accountable care 15

16 Degree of Shared Risk 1/17/2013 Transitions Private Practice Medical home / care system ACO Fee-forservice Negotiated FFS Total-cost-ofcare The Journey to Accountability Uncertainty of Pace, Not Direction Capitation Pay for Performance Capitation/ Shared Savings/ TCOC Models Hospital- Physician Bundling Episode Bundling Hospital-MD Bundling: Single payment A,B Demonstration in place Look for cost savings together Need tight ties with proceduralists Episode Bundling: Pilots already in place Law adds one more Shared Savings: ACOs/ in the new law as voluntary FFS Source: HCAB Care Continuum Capitation/ Risk: Not in law Pilots by Healthplans GAMC 16

17 Back Pain Example Medicare patient with back pain: TODAY Visit primary care doctor : $$ Visit orthopedist: $$ Visit physical therapist : $$ Visit primary care doctor: $$ Visit spine surgeon: $$ Spine surgery: $$ Visit surgeon post op : $$ PT care : $$ Back Pain under New Payment (TCOC): Total cost budget for population Incented to keep out of hospital get back 50% of cost savings Bundled: CMS: 3 days prehospitalization to 30 days post discharge ACO Update 26 Pioneer ACOs: 3 in Minnesota ACO participation has more than doubled in last year CMS just announced 102 new ACOs MD Led Most Common** ACO Participation Among Healthcare Organizations 35% 30% 25% 20% 15% 10% 5% 14% 31% 0% Healthcare Intelligence Survey, July

18 Commercial Payment Experiments Well Underway Commercial payers moving to contracts with total cost of care savings components or bundled payments and are expanding the amount of dollars at risk Still focused on large players/ systems Limited conversations with rural/ CAH Generally only 5-10% of total revenue under TCOC But could be 25% of any payer s total contract with the system Savings returned ranges from 50-75% Commercial Payment Experiments Well Underway Large employers going after high cost procedures: Heart Orthopedics Direct contracting for bundled payment Cleveland Clinic Lowes (heart) Johns Hopkins Pepsico UPS- general surgery Target: spine surgery protocol? 18

19 Challenge of Feeding the Beast Need $2-$8B revenue to survive? Protocols on best care up stream can dramatically reduce tertiary revenue downstream Low back care. Spine surgery Diabetes/ CHF/ Chronic care. Admissions The right thing to do But immediate impact on tertiary models More Consolidation Ahead Percentage of stand-alone hospitals in US Accelerated movement to align with systems or integrate with doctors 60% 50% 40% 30% 51% 42% 31% 2011 and 2012 deals broke previous records 20% 10% 13% 0% Source: AHA 19

20 Culture Re-Alignment 1/17/2013 Minnesota Consolidation Stillwater Medical Group HealthPartners Park Nicollet HealthPartners Likely 3-4 systems in Metro (HP, Allina, FV) Outstate hospitals move to systems: New Prague: Mayo Red Wing: From FV to Mayo Monticello to CentraCare Multiple northern hospitals to Essentia; southern to Mayo Top Trends Impacting Healthcare The Macro-Economy: DEBT AND DEMOGRAPHICS Lower Unit Reimbursement New Methods of Reimbursement STRATEGIES Grow PC share & create leverage with payers Reach for Scale and Efficiency Redesign Processes & Care Models to Improve Value Provider Alignment/ Consolidation/ System Affiliation capital IT and Measurement Infrastructure 20

21 An Accountability World Players paid FFS Independence can work No/ low coordination Hospital as a revenue center Specialty/ hospital driven Culture of production rewarded for more Bundled/ global/ value based Integration required Coordination a MUST Hospital is a cost center Primary care driven Culture of quality Question for Chiro Providers How can you provide measurable, clinically proven improvements at a better value to employers and health plans? Can t just say it must prove it What role do you want to play in the chronic care and wellness space? 21

22 Realities: Maureen s view only If you go after MD business, expect a fight Better to go to employers/ plans Measureable improvements in value (cost/ quality) MUST be demonstrated You need IT infrastructure to do this The hospital system controls the payment Expect them to try to commoditize you; no pmpm from them Boston Consulting Group s View: The Likely Business Environment Overall low growth of the economy Much higher economic volatility, leading to increased risk of more recessions Constant intervention by government to fix things Acceleration in the restructuring of industries Healthcare = Venture capital; consolidations/ mergers; business model change Employees will extend their working lifetimes Increased tensions between countries, including protectionism Broader social unrest Eventually, significant inflation Source: Boston Consulting Group, Stop Kicking The Can Down the Road, David Rhodes, Daniel Stelter, August

23 Healthcare Disruption Personalized Genomic Medicine Federal/ State/ Consumer Debt Location Based Care: Cost and Outcome Hi tech Dx Surgery ICU Personal Technologies: imedicine mhealth Payment Reform Aging demographics Personal Health Maintenance: Value and Convenience Remote monitoring E-visits Health apps Healthcare : The Beginning of the END of the Bubble 23