Three Steps to Staying Relevant in the New Era of Health Reform

Three Steps to Staying Relevant
in the New Era of Health Reform
and Population Health
IDN Summit
Orlando, Florida
April 20, 2015
Mark D. Dixon, President
The Mark Dixon Group, LLC
Meet Mark Dixon
Ø  Mark D. Dixon, R.Ph, M.H.A., FACHE, leads The Mark Dixon Group, LLC
which provides integrated delivery networks and medical suppliers
consultative assistance. He specializes in providing services for C-suite
perspective, Accountable Care Organization implementation, physician
clinical integration, and improving service delivery effectiveness.
Ø  Prior Experience
•  Regional President for the South Region of Fairview Health Services
in Minneapolis, Minnesota from 2008 - 2011.
•  President/CEO of Community Hospitals of Indiana, part of the
Community Health Network in Indianapolis, Indiana from 2003 - 2008.
•  Chief Executive of Abbott Northwestern Hospital and other roles with the
Allina Health in Minneapolis, Minnesota from 1984 – 2002.
•  Lectures at national meetings on relevant topics for health care
administrators, physicians, and suppliers. He has also served on
numerous other not-for-profit and for-profit boards of directors.
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Overview of Presentation
1.  Understand the impact on IDNs with the industry
move from volume to value
•  What is health reform, and is it here to stay?
•  How is it Impacting Providers?
2.  Understand the perspectives and implications for
the C-Suite of Integrated Delivery Networks (IDNs)
and their hospitals
•  Six Key Healthcare Trends for IDNs
3.  Winning strategies for proactively addressing
your IDN customer requirements
3
What are the Major Changes
Occurring with Healthcare
Reform and How is it Impacting
Providers?
4
Macroeconomic Drivers of the U.S.
Economy and of Healthcare
America cannot afford our healthcare system and cannot compete in
a world economy if it keeps spending more on healthcare
•  Total healthcare and hospital expenditures have nearly doubled in
the last decade; Now 17.9% of GDP, projected to grow to 19.6% in
20211
•  If growth rate stays constant, average cost of a family health
insurance premium will equal 50% of the household income by the
year 2021 2
The average Medicare couple (dual-earner couple each earning
$43,500 and retiring in 2011) pays $119,000 into the program and gets
$357,000 in benefits out, according to the Urban Institute 3
The governmental debt crisis only deepens this issue – we cannot
borrow our way out of this. Our economy is going through a major
“re-set”.
1. CMS, “National Health Expenditure Projections 2011-2021”, 2012.
2. Young, DeVoe. Ann Fam Med 2012;10:156-162.
3. Steuerle, Rennane. “Social Security and Medicare Taxes and Benefits Over a Lifetime.” The Urban Institute. June 2011.
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2009
2010
2013 to 2022
$260+ billion
in reduced
Medicare payments
The Mark Dixon Group, LLC
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Healthcare Reform is Accelerating
and is Here to Stay
The Patient Protection and Affordable Care Act (ACA)
of 2010 are having a major impact on the entire U.S.
Health Care System
• 
• 
• 
• 
The Health Information Technology for Economic and Clinical Health
(HITECH) Act
Value-based purchasing
Accountable Care Organization (ACO)
Insurance reform – coverage for all, insurance regulation
•  Over 2013 to 2022, drastic Medicare payment reductions4
• 
• 
• 
$260 billion in Medicare hospital payment cuts
$ 56 billion reduced Medicare and Medicaid DSH payments
$151 billion decrease due to sequestration/2013 budget bill
•  The vast majority of industry growth will be Medicare patients
•  Reform is designed to achieve the “Triple Aim” of reduced
cost and improved quality/patient experience
4. Source: CBO, “Letter to the Honorable John Boehner Providing an Estimate for H.R.6079, The Repeal of Obamacare Act,” July 24, 2012; CBO,
“Estimated Impact of Automatic Budget Enforcement Procedures Specified in the Budget Control Act,” September 12, 2011; CBO, “Bipartisan
Budget Act of 2013,” December 11, 2013, all available at: www.cbo.gov;
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ACA’s Overarching Goals
•  Healthier communities
•  Better health care
•  Lower costs
Population
Health
Experience
of Care
Better Health
Better
Care
Per Capita
Cost
Lower Cost
5. Berwick, Nolen et al. The Triple Aim: Care, Health, And Cost. Health Affairs, 27, no.3 (2008):759-769.
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Improve Quality
And Patient Experience
Reduce
Readmissions
Reduce Hospital
Acquired Conditions
MANDATORY
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Accountable Care Organization (ACO) Definition 8
•  Leading the “Volume to Value”
movement
•  Designed to create value for Medicare
•  Achieve the triple aim – Population health costs,
quality and patient experience
•  ACOs are a group of providers that will
work together to:
•  Coordinate care for the patients they serve
•  Deliver seamless, high quality care
•  Create patient-centered organizations where the
patient and providers are true partners in care
decisions
8. From Volume to Value. Repertoire, May 2013.
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Accountable Care Organization (ACO)
Development and Implementation
•  Currently 626+ ACOs in the US 9
• 
• 
• 
• 
• 
An estimated 20.5 million governmental and commercial lives covered by ACOs
52 percent of US population living in a primary care service area with an ACO
Medicare Pioneer ACO – 32 initially; 19 remaining 10
Medicare Shared Savings Program (MSSP) – 405 enrolled as of January 2014 11
•  Growth in covered Medicare lives from 4.9 to 7.2 million lives
Most IDNs are trying this with their employees first
•  Common attributes of ACOs
• 
• 
• 
Measured outcomes
•  Improve the individual experience of care
•  Improve population health
•  Reduce the cost of health care for populations
Process-level care management
•  Coordinate the provision of clinical care across the continuum of health
services
•  Invest in and learn to use appropriate IT to manage population health
Aligned financial incentives
9.  Peterson M and others. Growth and dispersion of accountable care organizations: June 2014 update. Leavitt Partners, June 2014.
10. Evans, M. “Medicare's Pioneer program down to 19 ACOs after three more exit.” Modern Healthcare September 25, 2014.
11. Evans, M. “89 ACOs will join Medicare Shared Savings Program in January”. Modern Healthcare December 22, 2014
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Rich Umbdenstock (AHA President & CEO)
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Perspectives and Implications for the
C-Suite of Integrated Delivery
Networks (IDNs) and their Hospitals
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Six Key Healthcare Trends for IDNs
1. 
2. 
3. 
4. 
Healthcare consumerism is here
Population Health: Volume to value
Physician employment and integration
Scale will win: Continued industry
consolidation
5.  Changing IDN decision-making on product
selection: Moving from holding company to
operating company business models
6.  A relentless focus to reduce total cost of care
– the new normal
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1. Healthcare Consumerism is Here
High Deductible Products Have Already Grown 4X Since 2006
Median Deductible in the 2014 Public Exchanges is $2,500
All Firms
Small Firms
70%
% Covered Workers with $1K Deductible
60%
58%
50%
46%
40%
35%
30%
20%
10%
0%
27%
16%
10%
2006
50%
34%
38%
18%
2008
2010
2012
2013
Source: Kaiser Family Foundation,
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2. Population Health: Volume to Value
Creating Accountable Care Organizations, population
health capabilities, and new models of care
•  Fundamental care model changes with triple aim focus
•  Care bundles, pathways, care coordinators, care
management, and more
•  Patient-centered medical home
•  Evidence-based medicine incorporated into care models
•  Clinically integrated networks of physicians
•  Significant attention and resources towards the creation of ACOs
•  New Financing models
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2. Population Health: Volume to Value
What does a population health strategy look
like from the inside of an IDN?
• 
It’s All About Creating Enhanced Value for
Those We Serve
• 
We are being asked to deliver greater value.
• 
• 
• 
Improved clinical outcomes
Improved experience
Lower costs
• 
We are being asked to improve the health of
defined populations.
• 
We are confident that our efforts to create
enhanced value will be recognized by those
who pay for care.
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IDN Response: Create Enhanced
Value for Those We Serve
Journey to transform healthcare – moving from volume to value
Change Care
Provider
Consumer
Patient
Activation and
Consumer
Engagement
Creating Value
and Outcomes
Value
Change Experience
Employer /
Plan
Change Payment
Realizing
Economic
Return for New
Value
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It is Truly a Journey…
Care Delivery
Valuedriven
coordinated
care
Volumedriven
fragmented
care Discounted
Today
Episode
fee for service payment
X
Shared savings Partial
Global
models
capitation payment
Payment
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IDN Executives Expect Revenue Sources to
Shift in the Coming Years
Less FFS and More Pay-for-Value Revenue
2014 2015 Fee-­‐for-­‐Service 2016 Quality Incen<ve 2017 2018 Shared Savings 21
IDN Medical Group Change Care
Consumer
Provider
Other Health Systems Value
Change Experience
Employer /
Plan
Clinically Integrated Network Independent Physicians Change Payment
Create Value
Other System’s Independent Physicians Cover More Lives
Improve More Lives
§  Improved clinical outcome
§  Grow provider network
§  Health status
§  Exceptional experience
§  Improve “keepage”
§  Well-being
§  Reduced total cost of care
§  Attract new “members”
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3. Physician Employment and Integration
Physician consolidation/employment to achieve
alignment and engagement
•  Primary care, specialists, and all others – potential for
alignment (more then 50% of MDs are employed14)
•  Physicians are also consolidating into larger groups –
sometimes very disruptively
•  Clinically integrated physician network development
•  Alignment with large systems
•  Many different forms - PHOs; Foundation models;
some loose, some tight
•  Alignment is dramatically changing physician roles in
enterprise product decision-making
•  The doctor is the deal! Especially primary care!
14. Kocher, Robert, and Nikhil R. Sahni, “Hospitals’ Race to Employ Physicians—The Logic Behind a Money-Losing Proposition,” New England
Journal of Medicine, Vol. 364, No. 19 (May 12, 2011).
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4. Scale Will Win:
Continued Industry Consolidation
2020 Provider Landscape Dominated by
100+ Super Regional Mega Systems
SIZE Na<onal Mega System ACO Small IDN Independent Hospital $10B+ of Revenue 30+ Hospitals 300+ Clinics TO MANAGE Standalone AMC ABILITY TO MANAGE RISK LOW HIGH 24
5. IDNs – Moving from Holding Company to
Operating Company Business Models
•  More decision making regarding capital, supplies, and
operations is centralized across an entire enterprise,
less local decision-making
•  Consolidated large IDN system service lines emerge
•  CV, Oncology, Ortho, and Mom’s/Kids most often
•  Changing decision-makers and influencers
•  System level “C” roles will make more decisions with less local
decision-making; System-wide VAC/P&T Committee
•  Different sectors of IDNs are going to behave differently
•  Academic Medical centers, rural hospitals, children’s hospitals,
large integrated systems, and physician-led organizations
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Minimally Integrated versus Strategically Integrated IDNs
Minimally Integrated IDNs
Strategically Integrated IDNs
Medical Supplier has overall
pricing agreement with the
IDN’s GPO
Medical Supplier has overall
pricing agreement with the
IDN’s GPO
High Capital Approval Limits at
Hospital Level
All Major Capital Approvals
Move to IDN Level
Each hospital and its local
physicians negotiate separate
purchase agreements
IDN Value Analysis Committee
and supply chain negotiate a
system purchase agreement
Price Selling
Total Cost of Care, EvidenceBased Outcomes, Value Creation
Clinical Demand
Economic and Clinical Demand
(IDN/Payer playing a larger role)
Selling Features and Benefits
Understanding IDN Business
Strategy and Aligning Value with
the IDN Strategy
GPO achieves low compliance;
purchasing leverage is low
GPO role is driving higher
compliance and better pricing
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6.  A Relentless Focus to Reduce the Total Cost
of Care: The New Normal
•  Radical operational performance improvement –
make money on Medicare pricing
•  Reduce costs and improve operating margin to make money on
Medicare; cut costs 15 – 25+ percent.
•  Average 2013 Medicare margin projected to be negative 6% 14
•  Key areas of focus
• 
• 
• 
• 
• 
• 
• 
Cutting direct costs (FTEs, Drugs, Services)
Reducing variation of care is KEY
Leveraging size to negotiate better pricing
Increasing operational efficiencies
Value-based purchasing – improving quality and experience
Physician engagement
Creating value through population health management
15. Hackbarth et al. Report to the Congress: Medicare Payment Policy. Medicare Advisory Payment Commission, March 2013.
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Key questions from the C-suite
•  How can we make money on Medicare reimbursement?
•  Growth
•  Expense management – Labor, non-labor (drugs, supplies,
other purchased services), physician services
•  Reducing clinical variation in clinical practice – reduce LOS
•  Revenue cycle management
•  Achieving value-based purchasing targets
•  How can we change the care model with largely independent
physicians?
•  How fast should we design and implement the new care
model and the new payment systems that recognize value?
•  Does our hospital/system have enough scale to succeed?
Implications for suppliers: Find a connection between your
product and the strategic goals of the Hospitals and IDNs.
Understand and align/solve their strategic problems!
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Despite All This Change, There Will Be Winners
Winners will prosper from these changes and have:
Ø  A relentless focus in all areas of their IDN to reduce cost – the new normal
Ø  Most efficient cost model with evidence-based care/significant reduction in variation
Ø  Elimination of readmissions and unnecessary surgeries/care
Ø  Improve throughput
Ø  People and processes a key focus (50 percent of IDN spend!)
Ø  Growth
Ø  The creation of value – clinical outcomes, experience and total cost of care leaders – will
position IDNs to be successful under multiple payment models
Ø  An ability to accept and manage risk
Ø  Integrated clinical and financial data across populations of patients – big data
Ø  Proactive and reactive care coordination solidly in place. It’s how we do it here.
Ø  Actively pursuing population health ACO deals
Ø  Engaged physicians and employees
Those health systems that remain traditional will likely be absorbed into Megasystems or slowly lose market share/close
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Cost cutting initiatives are in place at every IDN
and health system in the U.S.
How do you stay relevant and in the game?
Ø  You must provide “value”, not just a product
Ø  Become a “growth/earnings” partner for the IDN – common interest!
Ø  Identify operating mechanisms in the system and which hospital is
responsible for key initiatives of the system
Ø  Understand the elements impacting value of your product in your
system
Ø  Leverage relationships beyond your target department to include the
VP of System Departments and other CXOs
Ø  Understand the balanced scorecards of your hospitals and IDNs
Accessing large healthcare systems will become more
challenging for sales reps who don’t understand the inside
processes and bring value (as seen by the IDN) to the systems
they call on.
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How Processes and Systems Work in IDNs
C - Suite
Decision
Makers
Managers
and VPs
Decision
Makers
Front Line
Clinicians and Staff
Decision
Influencers
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Which Level are you at with your Major Customers?
Source: Miller Heiman
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Value Story Changes at Different Levels
•  Value is defined differently at the enterprise level of
the organization versus the local hospital/department
•  Features and benefits versus enterprise-wide strategic levers
•  New elements of strategic value
• 
• 
• 
• 
Decreasing inappropriate care or care variation
Increasing keepage/decreasing leakage
Moving care to the lowest cost setting of care; Ambulatory is key!
Determining strategies that work in today’s world AND tomorrow’s
world
•  Acquiring physician practices to strategically create value and
often to rationalize capacity in a system
•  Hospital based-pricing (facility) versus office based proving
•  Significant differences today, belief it will narrow over the next
3 – 5 years
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Identifying Hospital System Types
A CEO’s Perspective
•  How integrated and durable is the System?
•  Are product decisions made locally or system level?
•  How much influence do your customer contacts have?
•  Do your reps have access to the hospital?
•  How advanced is the system ACO strategy?
•  Do they have enough scale to succeed?
•  How much do you know about the System strategic
platform? Google and The MAX are is your friends!
•  How is the hospital/system performing financially?
•  Categorize your systems and develop different
approaches to different categories of systems
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A Message That Resonates - Outcomes + Economics Makes the Difference
A CEO’s Perspective
•  Link your organization’s product/value proposition to
one or more of the IDN strategies
•  What do Economic Buyers value?
•  Decreased cost of patient care
•  Improved staff productivity
•  Decreased length of stay that increases margins per DRG
•  Tangible quality improvements, value-based purchasing
•  What don’t EB’s value?
•  Product presentations, feature and benefit discussions that
relates to what User and Technical Buyer values
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Differentiate Yourself - How to Impress Beyond Your Product
A CEO’s Perspective
What are Executives who make Buying Decisions
Thinking about Suppliers?
§  Too many sales people are just trying to push product
§  They tell us how great their products are
§  Sales people rarely do their homework to understand our issues
and challenges
§  Rarely are their incentives aligned with mine
Your emphasis should always be on business
problems that you help your IDN clients solve. Care
more about the executives then yourself!
•  Suppliers who understand their economic buyer’s issues and
strategies will significantly differentiate themselves from
competitors
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Final Advice
•  Be part of the solution! Link your products and business model
to your customer’s needs and challenges
•  Become a true growth/earnings partner!
•  Help me achieve the triple aim of cost, quality, patient experience
•  Help your customers achieve a 15 – 20 percent reduction in cost
both in today’s and tomorrow’s world
•  Quantify the beneficial results of your products
•  Suppliers need to add true measureable value – measureable is the key
adjective here!
•  Quantify what is best practice (cost, quality, experience) for your products
and bring that process improvement to me
•  Transform clinical leadership – help clinician leaders and
directors/VPs become ACO leaders
•  ACOs, bundling, and shared savings/capitation arrangements
will impact medical suppliers – be ready!
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Overview of Presentation
1.  Understand the impact on IDNs with the industry
move from volume to value
•  What is health reform, and is it here to stay?
•  How is it Impacting Providers?
2.  Understand the perspectives and implications for
the C-Suite of Integrated Delivery Networks (IDNs)
and their hospitals
•  Six Key Healthcare Trends for IDNs
3.  Winning strategies for proactively addressing
your IDN customer requirements
39
Thank you!
The Mark Dixon Group, LLC
Minneapolis, Minnesota
E-mail: [email protected]
Phone: 952.303.6649 office 952.454.2662 cell
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Questions and Dialogue
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