Under Construction: At the Crossroads of Volume and Value Session PCM1, February 19, 2017 David Smith, Chief Development Officer, Leavitt Partners
2 Introduction David Smith Chief Development Officer Leavitt Partners Consulting
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Value Trends
Number of ACOs 10 ACO Growth 1000 28.6 Million Lives 30 900 841 847 857 868 800 761 783 25 730 738 700 600 572 592 600 624 635 20 500 448 460 421 15 400 306 323 300 10 207 200 81 100 157 85 102 5 0 0 Q2 2011 Q4 2011 Q2 2012 Q4 2012 Q2 2013 Q4 2013 Q2 2014 Q4 2014 Q2 2015 Q4 2015 Q2 2016 Q4 2016 Number of Lives Covered (Millions) # of ACOs # of Covered Lives Source: Leavitt Partners Center for Accountable Care Intelligence
11 Number of Payment Arrangements Contract Growth Outpacing ACO Growth Source: Leavitt Partners Center for Accountable Care Intelligence 1400 1200 1031 105310801128 1199 12301254 1266 1000 891 855 803 770 800 841 847 857 868 640 730 738 761 783 591 536 558 600 592 600 624 635 374 391 521 400 421 448 460 203 254 # of ACOs 306 200 323 81 83 95 # of Payment Arrangements 207 157 0 81 85 102 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 72% 15% 6% 3% 2% 1% 1% 0 1 2 3 4 5 >5 # of Payment Arrangements per ACO
Payment Arrangements Source: Leavitt Partners Center for Accountable Care Intelligence 12 ACO Growth by Payer Payment Arrangement Growth by Payer Type ACO Lives Per Payer 1266 (in Millions) 1400 1200 1000 2.5 800 600 400 707 474 8.8 17.5 200 0 85 Total Medicare Commercial Medicaid
% of Physicians Source: Leavitt Partners Center for Accountable Care Intelligence 22.5% 19.8% 17.6% 15.5% 12.7% 11.8% 8.7% 8.7% 8.8% 9.1% 17.0% 19.7% 12.6% 15.4% 13 Change in Physician Group Sizes 23% 25% -12.1% 21% 19% 17% 15% 13% 20% 15% 10% -11.9% -7.3% +0.2% +3.3 % +15.3 % +22.5 % 11% 9% 5% 7% 0% 2013-2014- 2015-2015- 2015-06-27 04-24 01-23 05-15 12-17 0 to 2 3 to 9 10 to 24 25 to 49 50 to 99 100 to 499 500 + 0 to 2 3 to 9 10 to 24 25 to 49 50 to 99 100 to 499 June, 2013 December, 2015 500 +
14 Where are they forming? ACOs by State ACOs by Referral Region
15 ACO Penetration of lives over time Source: Leavitt Partners Center for Accountable Care Intelligence
16 COMMERCIAL ACO PROGRAMS AETNA CIGNA UNITED HEALTHCARE Source: Leavitt Partners Center for Accountable Care Intelligence 16
Value Projections
Lives Covered (Millions) Lives Covered (Millions) Lives Covered (Millions) Lives Covered (Millions) 18 Projected ACO-Covered Lives 200 180 160 140 120 100 80 60 40 20 200 180 160 140 120 100 80 60 40 20 BASELINE SCENARIO 105 Million 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 FINANCIAL FAILURE SCENARIO 41 Million 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Predicted 200 180 160 140 120 100 80 60 40 20 200 180 160 140 120 100 80 60 40 20 0 Actual BASELINE SCENARIO WITHOUT MACRA WIDESPREAD SUPPORT SCENARIO 177 Million 68 Million 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 1 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: Leavitt Partners Center for Accountable Care Intelligence
Value Transition Determinants
20 Challenges to Value Transformation Cost of investing in additional staff Inconsistent/high volume of VBP quality measures Engaging patients/consumers to support new VPM models Clinical cooperation across and within networks Administrative burden (Contract creation & maintenance) Negative results from current VPM models Payer/provider alignment on current VPM models Insufficient data sharing/technology Cost of investing in technology & analytics Payer/provider market power Capital constraints (Reserve requirements, etc.) Navigating divergent and overlapping VBP models 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Not at all concerned Slightly Concerned Somewhat Concerned Moderately Concerned Extremely Concerned Source: Health Care Transformation Task Force 2016 Membership Survey
21 Catalysts Impediments Government Action Commercial Economic Interests Information Asymmetry & Lag Regulation Interoperabili ty Patient Engagement Coverage Convergence & Predictability Consolidatio n
22 Catalysts Impediments Government Action Commercial Economic Interests Information Asymmetry & Lag Regulation Interoperabili ty Patient Engagement Coverage Convergence & Predictability Consolidatio n
23 HHS: Better, Smarter, Healthier Goal #1: Tie 30% of all Medicare provider payments to value through alternative payment models by the end of 2016 (achieved March, 2016); 50% by 2018. Goal #2: Tie 85% of all Medicare FFS payments to quality and value by 2016; 90% by 2018. Source: healthit.gov
24 Goal #1: Achieved Through APMs Major APM Categories 2014 2015 2016 2017 2018 * MSSP started in 2012, Pioneer started in 2012, BPCI started in 2013, CPC started in 2012, MAPCP started in 2011, Maryland All Payer started in 2014 ESRD PP
25 Catalysts Impediments Government Action Commercial Economic Interests Information Asymmetry & Lag Regulation Interoperabili ty Patient Engagement Coverage Convergenc e & Predictabilit y Consolidatio n
26 Catalysts Impediments Government Action Commercial Economic Interests Information Asymmetry & Lag Regulation Interoperabili ty Patient Engagement Coverage Convergenc e & Predictabilit y Consolidatio n
27 Catalysts Impediments Government Action Commercial Economic Interests Information Asymmetry & Lag Regulation Interoperabili ty Patient Engagement Coverage Convergenc e & Predictabilit y Consolidatio n
28 Catalysts Impediments Government Action Commercial Economic Interests Information Asymmetry & Lag Regulation Interoperabili ty Patient Engagement Coverage Convergenc e & Predictabilit y Consolidatio n
29 Catalysts Impediments Government Action Commercial Economic Interests Information Asymmetry & Lag Regulation Interoperabili ty Patient Engagement Coverage Convergenc e & Predictabilit y Consolidatio n
30 Catalysts Impediments Government Action Commercial Economic Interests Information Asymmetry & Lag Regulation Interoperabili ty Patient Engagement Coverage Convergenc e & Predictabilit y Consolidatio n
31 Health Plan Enrollment Source: KFF 2016 Employer Health Benefit Survey
Percent of Population 32 Insured Population 60% 50% 40% 30% 20% 10% 0% Percent of Population by Insurance Coverage Type in 2014
33 Catalysts Impediments Government Action Commercial Economic Interests Information Asymmetry & Lag Regulation Interoperabili ty Patient Engagement Coverage Convergenc e & Predictabilit y Consolidatio n
34 Change in Physician Group Sizes % of Physicians Source: Author analysis of Medicare Physician Compare 22.5% 19.8% 17.6% 15.5% 12.7% 11.8% 8.7% 8.7% 8.8% 9.1% 17.0% 19.7% 12.6% 15.4% 23% 21% 19% 17% 15% 13% 25% 20% 15% 10% -12.1% -11.9% -7.3% +0.2% +3.3 % +15.3 % +22.5 % 11% 9% 5% 7% 2013-06-27 2014-04-24 2015-01-23 2015-05-15 2015-12-17 0 to 2 3 to 9 10 to 24 25 to 49 50 to 99 100 to 499 500 + 0% 0 to 2 3 to 9 10 to 24 25 to 49 50 to 99 100 to 499 June, 2013 December, 2015 500 +
35 Change in Group Size by Specialty Percent Change 24.8% 19.1% 13.1% 12.1% 9.8% 9.9% 8.6% 8.6% 11.1% 10.6% 21.2% 23.9% 11.4% 15.9% 21.0% 19.9% 18.1% 16.3% 13.3% 12.6% 9.0% 9.2% 8.2% 8.5% 16.5% 18.4% 14.0% 15.1% 30% Primary Care Physicians Specialists 25% -29.8% +11.5% 25% -5.6% 20% 15% 10% - 8.8% +0.4% - 0.6% - 4.4% +28.3% 20% 15% 10% -11.5% -5.9% +2.6% +3.8% 10.8% +7.7% 5% 5% 0% 0 to 2 3 to 9 10 to 24 25 to 49 50 to 99100 to 499 500 + 0% 0 to 2 3 to 9 10 to 24 25 to 49 50 to 99 100 to 499 500 + June, 2013 December, 2015
36 Current Hospital Consolidation Number of Announced Mergers Announced Hospital Mergers & Acquisitions, 1994-2014 200 180 160 140 120 100 80 60 40 20 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
37 National Variability Concentration of Hospitals at the State Level Concentration of Hospitals at the Hospital Referral Region Level Darker = More Concentrated
38 Non-Ownership Partnerships are Expanding Few mergers have been explicitly created to form riskbearing provider organizations Instead, hospitals and health systems are choosing nonownership affiliations It is more beneficial for both parties to work together to achieve mutual objectives.
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