Consumer demands are changing as people seek more information, access, and value. Utilization trends are stable or declining except in growing markets as the economy impacts healthcare. Providers are focusing on quality, safety, and efficiencies. Physician and hospital alignment is strengthening through employment and addressing physician satisfaction, which centers around administration being responsive to their needs and ideas. Medical travel is emerging for cost savings while consumers also use the internet for health information and services.
2. Noblis Center for Health Innovation – Top Trends for 2009
Changing Consumer Demands
Budgets Trimmed - Investments Delayed
Continued Consolidation
Workforce in Transition
Health Reform on Many Levels
quot;The future will be determined in part by happenings that it is impossible to
quot;The future will be determined in part by happenings that it is impossible to
foresee; it will also be influenced by trends that are now existent and observable.quot;
foresee; it will also be influenced by trends that are now existent and observable.quot;
Emily G. Balch -- American economist and sociologist. Honorary president of the Women's International League for
Emily G. Balch American economist and sociologist. Honorary president of the Women's International League for
Peace.
Peace.
1
3. Top Trend #1: Consumer Demands will Continue to Change
Utilization Trends will be stable or even decline in all but strongly
growing markets
Consumer will continue to seek medical information/knowledge via Web
resources
Increased Medical Travel
Hospitals and physicians that continue to focus on improving and
measuring quality, safety, and operating efficiencies will be best
positioned for the future
2
4. Despite Historical Trends – Utilization will Be Stable or Decline
in All But Strongly Growing Markets
US Population (298.8M) grew by 16%
Discharges (39.5M) grew by 28%
Between
1993 and
Discharge/1,000 population (116.9) declined by 3%
2006
ALOS (4.8) declined by 20% led by largest decline in 65 &>
population (to 5.5 having declined by 29%)
Discharges to Home Health grew by 53%
Medicaid discharges grew by 36%
Between
1997 and Medicare discharges grew by 17%
2006
No change in private insurance discharges
Share of admissions through EDs increased from 38% to 44%
3
5. Once Thought to Be Recession Proof – Health Care is
Feeling the Effect of the Downturn
HCA with 160 hospitals reported flat
HCA with 160 hospitals reported flat A survey of 112 nonprofit hospitals found that
A survey of 112 nonprofit hospitals found that
AHA 2008 Survey of
admissions for the three months
admissions for the three months overall inpatient admissions were down 2 to 3
overall inpatient admissions were down 2 to 3
more than 700 CEOs in
ended 9/20/08 compared to the percent compared with a year earlier. More than
ended 9/20/08 compared to the percent compared with a year earlier. More than
late 2008 reported that 60 percent reported flat or declining admissions.
previous year. 60 percent reported flat or declining admissions.
previous year. 31% of hospitals September 2008 Survey by Citi Investment
September 2008 Survey by Citi Investment
surveyed had
experienced a decrease
“The possibility of putting off an expensive
“The possibility of putting off an expensive
The University of Pittsburgh Medical Center
The University of Pittsburgh Medical Center
surgery or other major procedure has not
surgery or other major procedure has not in elective procedures in
has not seen a drop in patient admissions but
has not seen a drop in patient admissions but
become a frequent topic of conversation
become a frequent topic of conversation
the past three months.
reports that growth is tailing off.
with patients.”
reports that growth is tailing off.
with patients.”
Robert A DeMichiee, CFO
Robert A DeMichiee, CFO
In addition, 38% of
Dr. Ted Epperly, family practice Boise, Idaho
Dr. Ted Epperly, family practice Boise, Idaho
hospitals surveyed
Shands Health Care cited the poor
Shands Health Care cited the poor
reported a decrease in
Hospital admission growth for Hospitals in
Hospital admission growth for Hospitals in
economy and lower patient demand
economy and lower patient demand
admissions during the
the State of Florida in 2007 was the lowest in
the State of Florida in 2007 was the lowest in
when it announced in October that it
same period. when it announced in October that it
years with a growth of only 0.4%, accounting
years with a growth of only 0.4%, accounting
would shutter one of its eight hospitals.
would shutter one of its eight hospitals.
for just over 9,000 new admissions in the
for just over 9,000 new admissions in the DATABANK’s
entire state.
entire state.
preliminary 3rd quarter
2008 data (557 “More than half of chronically ill patients in the
“More than half of chronically ill patients in the
hospitals) reported 3rd U.S. reported at least one cost-related access
U.S. reported at least one cost-related access
“The numbers are down in the
“The numbers are down in the quarter patient visits problem, such as not filling prescriptions,
problem, such as not filling prescriptions,
past month, there’s no question
past month, there’s no question (discharges, surgeries, skipping doses, not visiting a physician when
skipping doses, not visiting a physician when
about it.”
about it.” ED visits) as flat or sick, or not getting recommended care.
sick, or not getting recommended care.
declining relative to the Health Affairs, doi: 10.1377/hlthaff.28.1.w1(Survey conducted
Health Affairs, doi: 10.1377/hlthaff.28.1.w1(Survey conducted
Dr. Richard Friedman, Beth Israel Medical
Dr. Richard Friedman, Beth Israel Medical in 2008 and Published online November 13, 2008)
in 2008 and Published online November 13, 2008)
same quarter of 2007.
Center
Center
Source: “Hospitals See Drop in Paying Patients, NY Times, November 6, 2008; Modern Healthcare’s Daily Dose, November 13, 2008, FHA Eye on the
Market: Hospital Utilization Report, October 2008. AHA Report on the Economic Crisis: Initial Impact on hospitals, November 2008. DATABANK is a
licensed product of the Colorado Hospital Association.
4
6. Consumers Will Continue to Redefine Value to Include
Communication, Information, Access, and Outstanding Service
During
Before After
What Patients/Families Expect in Inpatient & Outpatient Care
Timely Ease of navigation Same day reports
appointments/ Minimum uncertainty/ Painless billing
short wait times worry A “fair” price
Convenient access Communication
Confidence in excellence
of care
Source: “Many Americans open to care at retail-based health clinics,” Wall Street Journal, October 26, 2005; “For these startups, patients are a virtue,”
San Francisco Chronicle, October 2, 2007 and Harris Poll Shows Number of quot;Cyberchondriacs,“ Harris Interactive website (July 31, 2007).
5
8. Consumers Seeking Knowledge, Information, and Services
Via Websites Marketing Direct to the Consumer
Patientsville.com - Your #1 Source for all the
latest prescription and off-the-shelf medications
side effect information.
A Health Expert wants to answer your question.
“Pinnacle Care takes the notion of VIP services
to a whole new level”
Washington Post
Waterfront Media To Merge With Revolution Health Network Establishing The
Everyday Health Network As The Preeminent Online Health Destination
7
9. Consumers Seeking Information – Via Websites Marketing
Genotyping, Record Storage, Genetic Counseling
deCODEme is an anonymous
deCODEme is an anonymous
information service. It is not a medical
information service. It is not a medical
service, nor a genetic test, and it is
service, nor a genetic test, and it is
not designed for medical decision
not designed for medical decision
making. Therefore it is not covered by
making. Therefore it is not covered by
health insurance companies.
health insurance companies.
1. Order a kit ($399 USD) 2.Claim your kit, spit into the 3.CLIA-certified lab analyzes 4.Log in and start exploring your
tube, and send it to the lab. your DNA in 4-6 weeks genome.
8
10. Medical Travel
Medical Tourism: “process of “leaving home” for treatments and
care abroad or elsewhere domestically”
Deloitte 2008 Survey of 3,000 Americans:
− 2007 estimated 750,000 Americans traveled abroad,
projected to increase to 6 million in 2010
Turkey
− “expected to experience explosive growth over next 3-5 year Check your Midnight
− “Outbound” - 39% would go abroad for elective procedure to Express stereotypes at
the door - this is a rapidly
save money modernizing country with
Gen Y 51.1%, Boomers 36.7%, Seniors 29.1% one foot in Europe and
one in the Middle East.
Medical Tourism Association – Three Tenets: It's not all oriental
− Transparency, Communication and Education splendor, mystery,
intrigue and whirling
− 2nd World Medical Tourism & Global Health Congress dervishes but it is a spicy
October 26th – 28th, 2009 in Los Angeles, CA California maelstrom of history
knocking up against a
Medical Tourism Facilitators pacy present.
Source: Medical Tourism, Consumers in Search of Value, The Deloitte 2008 Survey of Health Care Consumers, Deloitte Center for Health Solutions.
9
11. Primary Reasons for Medical Travel
Driver* Explanation
Cost of procedure is much less than in the patient’s home country (e.g.,
Cost Savings
United States).
Waiting times for procedure can be much longer in home country,
Improved Access especially for those with National Health Insurance or Health Service,
such as Canada or the United Kingdom.
Certain medical procedures are still considered experimental, not yet
Procedure Not Available
approved, or in clinical trials in the patient’s home country.
Some patients value the exotic destinations or luxurious
Tourism/Vacations
accommodations in the destination country.
Privacy and Some patients (especially celebrities) may be concerned about their
Confidentiality privacy if the procedure is performed in their home country.
Wellpoint soon will offer some medical travel benefits
Starting in January, Wellpoint will offer employees of Wisconsin-based Serigraph Inc. the option of traveling to India for
nonemergency procedures such as joint replacement surgery. Serigraph will waive the insurance deductible and coinsurance
for employees who agree to go, paying all medical costs as well as travel expenses for the patient and a companion.
quot;This is a leap of faith, obviously, to say if you go to India, we'll pay for the whole shebang,quot; said Linda Buntrock, Serigraph's
senior vice president of human resources.
quot;But the cost difference is so monumental.“ Knee replacement surgery that costs between $60,000 and $70,000 in the United
States can be done in India for $8,000 to $10,000, said Jill Becher, a Wellpoint spokeswoman.
Source: CHEN MAY YEE, Star Tribune,November 13, 2008
* Source: “Medical Travel – Threat or Opportunity for U.S. Providers? It Depends on Your Perspective”, J. Vitalis and G. Milton,
Horizons: Journal of the Center for Health Innovation, Winter 2009.
10
12. Shared Concerns to Improve Patient Experience
Improving and measuring quality and
safety
Physician Concerns
Hospital Concerns
Achieving operating efficiencies
Creating a positive work environment
Bridging Generational differences
Leveraging capabilities with medical
technologies
Fostering alternative care settings to
improve access (walk-in clinics)
11
13. Balancing Act
Balancing Act, InsideHealthcare (formerly HealthExecutive),
September 2008
− Employment alone will not achieve alignment
− Early involvement in decision making critical to alignment
− Key areas of engagement:
Improve the quality of services and clinical outcomes, ensuring consistent
excellence across the system.
Strengthen collaboration among physicians on the medical staffs to enhance
their understanding of the qualities and skills of their colleagues and improve
communication and patient care.
Enhance physician leadership development efforts to build a strong core of
physicians who can determine future success requirements, ably represent
their peers, and collaborate effectively with hospital
AHA Economic Crisis Report, Nov. 2008 reported that 56% of hospitals experienced
an increase in physicians seeking financial support from hospitals and % physicians
seeking:
− 83% - increased payment for on-call or other services
− 69% - employment
− 31% - to sell their practice
− 23% - to partner on equipment purchase
12
14. IHI Framework for Engaging Physicians in Quality and Safety
Discover Common Purpose
“To bring these two worlds
Reframe Values and Beliefs into alignment, both parties
have to be interested in
Segment the Engagement Plan making good-faith efforts to
understand each other’s
Use “Engaging” Improvement Methods
point of view and needs.”
Show Courage Source: Healthcare Executive, Medical Staff
Source: Healthcare Executive, Medical Staff
Collaboration, Communication Strategies that Get
Collaboration, Communication Strategies that Get
Results, July/Aug 2006
Results, July/Aug 2006
Adopt an Engaging Style
Source: IHI Innovation Series 2007, Engaging Physicians in a Shared Quality Agenda, J. Reinertsen, MD, A.Gosfield, JD, W. Rupp, MD, J. Whittington, MD.
13
15. Focus: What strategies are being used to
strengthen physician-hospital alignment,
and which strategies are most effective?
Hospital Perspective Physician Perspective
Disconnect between Similar leadership
leadership and practicing disconnect
physicians
Information systems critical
Of the 10 most effective
strategies, half involved
employing physicians
Source: Noblis/AHA, Strategies for Strengthening Physician-Hospital Alignment: A National Study, 2006; ACPE Member Survey 2008
14
14
16. What Satisfies Physicians?
#1 priority: how the administration responds to the
ideas and needs of physicians
4 of 5 top priorities deal directly with doctors’
relationships with administrators
One way the administration can build their relationships with
physicians is to make it easier for doctors to care for their patients
Physicians are most satisfied with hospitals in their first 5 years and
after 20 years on staff
Physicians employed by the hospital are more satisfied than non-
employed physicians
2008 Press Ganey Hospital Check-Up Report - Physician Perspectives on
2008 Press Ganey Hospital Check-Up Report - Physician Perspectives on
American Hospitals
American Hospitals
15
17. Physician Employment Trends
Healthcare Industry is consolidating rapidly while significant
physician shortages are projected
− Substantial economic advantages for systems that integrate payers, hospitals and
physicians
New wave of employment different than late ’80s and early ’90s:
− Primary care and specialty physicians
− Willingness to trade off autonomy for economic security
− “Cornerstone strategy” for large integrated systems, e.g., Aurora, WI, Advocote, IL,
Senatara, VA
− Many hospitals and health systems find themselves with no other choice, need to view
as “fundamental strategic asset”
− Payers shifting to “Pay for Performance” and “Medical Homes”
− New generation of physicians seeking improved work/life balance
− Greater emphasis on developing physician leadership and systemized physician
engagement
“This is the beginning of a fundamental restructuring of how
“This is the beginning of a fundamental restructuring of how
physicians function in the health care system.”
physicians function in the health care system.”
William Jessee, MD, President of the Medical Group Management Association.
William Jessee, MD, President of the Medical Group Management Association.
Source: “Employing Physicians”, D. Beckham, HHN, 9/07
16
18. The What and Why of P4P
What is P4P…
A program for aligning incentives to support the delivery of high-quality care
Government-sponsored projects—Annual Payment Update (APU), Premier demo,
MedPac recommendation, Value-Based Purchasing (VBP), Physician Group
Practice (PGP) demo, State Medicaid Programs
Private payer initiatives (LeapFrog Group, Bridges to Excellence, IHA, individual
insurers)
Why P4P… CMS:
“The right care for every person every time”
Imperative to improve quality
Institute of Medicine (IOM) reported that 98,000 lives lost due to medical errors
Public reporting of health care organization performance
Institute for Health Improvement (IHI) 100,000 Lives Campaign (and now 5 Million
Lives Campaign)
Imperative to control costs
Consumer-driven focus on reducing their out-of-pocket costs for health care
Employer focus on reducing health care insurance costs
17
19. Providers Will Have to “Earn” What They Make….
Medicare’s Shifting Priorities and Other Payers Seeking Value
Change Effect
Coding for Severity of Illness Eliminates Skew Toward Less Complicated Cases
Cost-Based Weights Equitable Reimbursement for Cost of Care
Overhauling of ASC Payments Alters the Competitive Landscape
P4P & Never Events Emphasizes Safety and Quality of Care
Bundled Payments Rewards improvements in quality of care and efficiency
Source: “HFMA’s Healthcare Finance Outlook,” HFMA, January 2007 and 2008.
18
20. Top Trends #2: Budgets will be Trimmed and Capital
Investments Delayed
Margins will decline
The economic downturn will force most hospitals to trim their operating
budgets in 2009.
The credit market will tighten further and bond ratings will fall.
Great pressure will exist to maintain cash on the balance sheet.
New technology capital expenditures that do not meet quality and safety
mandates or do not improve the bottom line in the short term will be delayed,
scaled back, or cancelled.
The recent health care construction boom will continue but at a much slower
rate.
19
21. In Uncertain Economic Times, Strong Financial Performance
Is Crucial
With healthcare industry credit ratings declining for a
majority of the past decade, it will be increasingly important
for hospitals to maintain a strong financial performance
− Hospitals with strong financial performance and good
credit will have a much easier time accessing capital
and bond insurance
Hospitals should focus on two key measures of financial
performance
Measure Target Reason
Patient Care Margin Greater than 0.0 percent If hospital cannot earn profit on patient care services,
it must rely on non-patient care sources of funding
EBITDA Margin At least 4.0 percent Minimum level of profit needed to re-invest in capital
expenditures
Source: “The outlook for capital access and spending,” HFMA, August 2006; “Hospital insolvency: the looming crisis,” Alvarez & Marsal, March 2008
20
22. Economic Crisis: Impact on Hospitals
AHA Report on Impact of
Economic Downturn on
Patients and Hospitals, 11/19/08
Survey of 736 hospitals and DATABANK a web-based
hospital reporting system used in 30 states
30% reported moderate to significant decline in patients
seeking elective procedures
40% reported drop in admissions overall
Uncompensated care up 8% from July to September vs.
same period last year.
Negative 1.6% total margins in 3rd quarter of 2008 vs. positive
Hospitals feel the pain of recession
6.1% same quarter last year.
By Richard Pizzi, Editor , 11/01/08
Investment losses….
As economy slows, tax receipts
Cutback made or considered:
− Administrative costs (60%) decrease both at federal and state
− Reducing staff (53%) levels.
− Reducing services (27%) All states will have issues, some hit
harder than other: Florida and
Interests payments increased on average by 15%
California some of the hardest hit.
Facility investments reconsidered or postponed
− Plans to increase capacity (56%) Survival in economic downturn will
− Delay purchase of clinical technology or equipment (45%) depend on gaining operational
− Put off investments in new IT (39%) efficiency in the near time.
21
23. Subprime Mortgage Crisis Creates Perfect Storm for Tax-Exempt
Bond Auction Market
Tax-exempt rates are likely to be higher
Rating agencies to use more stringent assumptions
Debt must be increasingly collateralized and/or backed by bank letters of credit
Lessons learned:
− Incorporate assumptions about tighter markets and volatile interest rates
− Update projections done to support projects in recent years
− Expect more focus on the underlying credit of borrower
− Diversify financing sources to minimize cost at an acceptable level of risk
− For strong credits, may make sense to refund and go forward without
insurance cost or to buyback debt in short-term and refinance later
Source: Deborah Kolb-Collier, Scott Clay, and Peter Bruton, “What Hospital Systems Can Do to Ride Out the Financial Market Turbulence,”
HealthLeaders Media, March 17, 2008; “The credit crunch squeezes municipal bonds,” U.S. News, February 28, 2008.
22
24. The Capital Crisis
The availability of capital is generally limited and uncertain, but the need for capital
The availability of capital is generally limited and uncertain, but the need for capital
is constant and seemingly boundless.
is constant and seemingly boundless.
Capital Availability Capital Needs
Construction of new health
About one-quarter of all
care facilities expected to
community hospitals
reach $60 billion by 2010.
continue to operate “in the
red.”
Most CFOs expect their
Negative patient margins
hospital’s capital spending
are being supplemented by
to increase in the next 4
other sources (e.g.,
years. The top 3 most
investment income,
commonly cited capital
philanthropy, etc.).
projects all focused on IT:
The capital markets view - Digital Radiology Systems
healthcare with increasing - CPOE Systems
scrutiny. - Major IT Systems
Sources: The Lewin Group Analysis of the American Hospital Association Annual Survey data, 1991 – 2004.
Baltimore Business Journal, “Rx for Hospital Design,” January 19, 2007.
FutureScan Healthcare Trends and Implications, 2005 – 2010.
23
25. Prior to Recent Economic Crisis:
Factors Driving the Boom in Hospital Construction
At the end of 2005, construction of Key Drivers
new hospitals and clinics was valued
Aging facilities
at $22 billion
Increasing patient
By 2010, construction of new
volumes
healthcare facilities expected to
reach $60 billion New technology
Need for single rooms
Percentage of Hospital’s Capital Budget Allocated
to Construction Projects in 2008 (Projected)
Changing patient populations
Increasing competition
24% New
Construction
Hospital-physician alignment
Facility
51% Modernization
Consumerism
Other
25%
Source: “Healthcare construction and capital implications,” HFMA, February 2008; “Health construction rolls right along,” H&HN, March 2008.
24
26. Need for Capital Will Continue
In March 2007, Wall Street Journal article stated that $200 Billion will be
spent on rebuilding or replacing aging hospitals over the next decade.
What now?
Short-Term Focus
Median Average Age of Plant
1990 - 2006
Delay implementing
12
master plans
9.7 9.8 9.8 9.8 9.9 9.7
9.2 9.4
10 9.3
8.9 9.2
8.6 8.8
8.4 Essential renovations
7.9 8.0 8.2
8
and technology
6
Maximize capacity with
improved efficiency
4
Longer horizon for
2
most projects
0
Re-phasing and re-
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06
prioritizing
Source: The Almanac of Hospital and Financial Operating Indicators, 1994, 1997, 2006, 2008
25
27. Organizations Will Need to Consider a Variety of Options to
Finance Construction
How Organizations Are Financing
Construction Projects
46%
33%
29% 28%
21%
Existing Cash Tax-Exempt Operations Philanthropy Other Debt
Reserves Bonds
Source: “Health construction rolls right along,” H&HN, March 2008.
26
28. Top Trend #3: The Industry Will Consolidate Even Further
Hospitals that have historically relied on investment income, municipal
funding of indigent and charity care, and low interest rate credit lines to
offset operating losses will be hardest hit
Small hospitals and rural hospitals are most at risk in a downturned
economy
27
29. ANK ‘s
DATAB itals
sp
557 Ho a 3rd
d
reporte tal
QTR to rgin
n g ma
operati 6%)
of (1.
red to
compa e 3rd
r th
6.1% f o 07
QTR ’
Financial challenges again ranked as the top concern for
hospital chief executive officers, according to a yearly survey by
the American College of Healthcare Executives. Providing care
to uninsured patients placed second, followed by hospitals’
relationships with physicians, according to the survey results.
DATABANK
also report
ed an 8%
increase in
(January 7, 2008)
uncompen
sated care
for the sam
e period.
Source: AHA, Report on the Economic Crisis: Initial Impact on Hospitals, November 2008 (Callouts). Note: DATABANK is a licensed product of the Colorado
Hospital Association.
28
30. Uncertainty: Impact of Economy on Total Margin in 2009
Economy?
There are “winners” and “losers” in every kind of market
Industry Perspective
U.S. Hospital – Total Margin
10.0%
What model will work
in 2009?
8.0%
6.0%
4.0%
2.0%
0.0%
-2.0%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
75th Percentile Median 25th Percentile
Source: “Almanac of Hospital Financial and Operating Indicators,” Ingenix, 1998-2007.
29
31. And Many Hospitals Are Not Surviving – A Few Examples
Since 1992 a total of 24 hospitals in New Jersey closed and five hospitals filed for bankruptcy protection
in less than two years.
− The New Jersey Hospital Association reported that nearly half of the state’s hospitals posted losses,
three hospitals closed, and five filed for bankruptcy in 2007.
− In the first eight months of 2008, five more hospitals in New Jersey closed.
The Pennsylvania Health Care Cost Containment Council report identified that 24 percent of the 170
general acute care hospitals stateside lost money in 2007.
In a ten day period in August of this year, at least 10 hospitals closed or filed for bankruptcy protection.
Date Hospital Status
Muhlenberg Regional Medical Center Ceased all inpatient services citing mounting financial losses in the face of
August 13, 2008
Plainfield, NJ decreased federal and state funding
Trinity Hospital Competing bids for assets from Restoration Health Care, Erin, Tennessee,
August 19, 2008
Erin, Tennessee and a subsidiary of Rural Healthcare Developers, Plantersville, MS
August 21, 2008 Renaissance Hospitals (5 Hospitals) Filed Chapter 11, cost overruns and the collapse of capital markets drained
August 26, 2008 Texas the system’s resources
Century City Hospital Medical Center
August 22, 2008 Closed on August 27, 2008
Los Angeles, CA
North Oakland Medical Center
August 26, 2008 Proposed sale to newly formed physician-owned for-profit company
Pontiac, Michigan
Hawaii Medical Center
August 29, 2008 Restructuring, seeking to emerge from bankruptcy
Honolulu, Hawaii
Source: Modern Healthcare reporting. Modern Healthcare, September 22, 2008, page 10.The Birmingham, News, October 23, 2008; Chicago Tribune,
September, 20, 2008, NorthJersey.com, November 25, 2008; Pittsburgh Business Times, April 18, 2008; 2008 Update: The Crisis Deepens,
new Jersey Hospital Association,.
30
32. What Steps are Hospitals Taking to Avoid Closure
Did NY State get
Did NY State get
it right by
it right by
Staying on top of finances
proactively
proactively
− Delaying capital projects and equipment purchases addressing
addressing
− Targeting cash flow efforts overbedding and
overbedding and
− Converting indigent to Medicaid payment – but will access in their 2006
access in their 2006
Recommendations
Recommendations
State coffers support the expected increased demand? to reform Hospitals
to reform Hospitals
− Aggressively managing bad debt and Nursing
and Nursing
− Auctioning hospital debt Homes?
Homes?
Staff Reductions – Few Hospitals have avoided some staff reductions this year
− Freezing vacancies
− Layoffs – initial efforts targeted to avoiding direct care/nursing positions
− Leaner management level
Service discontinuation/reduction
Lobbying legislature to protect Medicare/Medicaid payments
Exploring merger/consolidation options
31
33. In a Nut Shell
Limited Options
No More Money No Super Hero
MERGER
32
34. Top Trend #4: The Workforce Will Be in Transition
Physician responses to their own financial uncertainties will vary
There will be a shift in the mix of care providers with greater use of mid-
levels
Nursing vacancies may lessen somewhat
Union activity will increase
33
35. Physician Responses to Their Own Financial Uncertainties will
Vary
As many as 2/3 of workers
As many as 2/3 of workers
may delay retirement due to
may delay retirement due to
According to a 2007 Merritt Hawkins Survey:
According to a 2007 Merritt Hawkins Survey:
the downturn in the economy
the downturn in the economy
49% of physicians aged 51+ years indicated that
49% of physicians aged 51+ years indicated that
they plan to make a change in their practice in the
they plan to make a change in their practice in the
Physician
next one to three years
next one to three years
Population is
Plan to retire 14%
Aging Plan to retire 14%
Plan to seek a medical job in a 7%
Plan to seek a medical job in a 7%
47% of
47% of non-clinical setting
non-clinical setting
physicians are
physicians are Plan to seek a job or business 3%
Plan to seek a job or business 3%
over age 50
over age 50 in a non-medical field
in a non-medical field
Plan to work on a temporary basis 4%
Plan to work on a temporary basis 4%
36% of
36% of
Plan to work part-time 7%
Plan to work part-time 7%
physicians are
physicians are
Plan to close their practice to new 8%
Plan to close their practice to new 8%
65 or older
65 or older
patients
patients
Plan on taking a combination of the 7%
Plan on taking a combination of the 7%
above steps
above steps
Source: 2007 Survey of Physicians 50 to 65 Years of Age, Merritt Hawkins & Associates, 2007
34
36. Declining Utilization – Little Relief for the Current Shortage
Physician Shortage is a Result of Both Increasing
Demand and Shrinking Supply
Increasing Demand Shrinking Supply
Aging population Aging physician
Physician
Physician
workforce
Shortage
Shortage
Growing population
Changes in practice
patterns
Longer life spans
Education system
constraints
Prevalence of
Need for
chronic disease
Physician
Workforce
Planning
35
35
37. Part-time Medicine and Nursing while Popular May Provide Relief
Between 2005 and 2007, there was a 46% increase Women represent
in the number of physicians working part-time 50 percent of US
medical students
% of All Physicians Practicing Part-time
18.1%
17.2%
14.5% 14.5%
14.0%
13.1%
24% of female
physicians of age
8.6%
less than 50 years
7.6%
work part-time
vs.
2% of male
29 or 30 – 34 35 – 39 40 – 44 45 – 49 50 – 54 55 – 59 60+
physicians
less
Age Groups
MEN – Unrelated professional or personal pursuits
Top Reason to
Work Part-time WOMEN – Family responsibilities (including pregnancy)
Source: 2007 Physician Retention Study, Cejka Search and AMGA; “Will There be Enough Doctors”, HealthLeaders, October 2007.
36
38. A Shift in the Mix of Care Providers with Greater Use of Mid-
Levels – Constraints on Medical Education will Force Changes
Qualified applicants continue to far outnumber available slots.
While the American Association of Medical Colleges has
called for an increase in Medical School enrollment of 30
percent (approx. 5,000 more each year), even if achieved, will
take 11 years before number of practicing MDs will increase.
Residency program caps continue to pose a problem.
U.S. Medical School Applicants & Graduates
50,000
40,000
30,000
Applicants
20,000
Graduates
10,000
0
1995 1995 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Source: AAMC Statement on the Physician Workforce, June 2006. Data Warehouse: Applicant Matriculant File as of 10/27/06, 2008 aamc.org 5/12/08.
http://www.naahp.org/PDFs/HealthProfPDFs/AAMC.pdf.
37
39. Greater Use of Mid-Levels Driven by Many Factors
PAs, NPs, and Dr. Nurse – Should Help In Filling a Growing Gap
The supply of Physician Assistants is projected to increase by
up to 50% over the next decade potentially partially filling the
ever widening gap in primary care.
The primary care physician shortage has rapidly increased
interest and planning for a new kind of “mid-level” - The “Dr. Nurse”.
− More than 200 nursing schools are in some level of planning or
development of a “doctorate of nursing practice” - to equip graduates that
some schools say are equivalent to primary care physicians.
− Advanced practice nurses with national certification in an advanced
practice nursing specialty, and a Doctor of Nursing Practice degree, are
eligible to sit for certification. The exam is derived from the test pool
of the USMLE Step 3 exam for MD licensure candidates. Successful DNP
candidates will be designated as Diplomats in Comprehensive Care by the
newly established American Board of Comprehensive Care.
Sources: AAPA website, http://www.aapa.org/research/index.html; Wall Street Journal, April 2, 2008, HealthLeaders, Making room for
‘Dr. Nurse’, December 2, 2008
38
40. Outlook for Nursing Gets Brighter
After a net loss of more than 10,500 nurses in 2004 and 2005,
we are now seeing gains in nurse workforce.
The recent economic downturn and rocky housing market are driving nurses into
the workforce .
Despite recent increase in nurses, projected gap in supply and demand remains.
Despite these gains, the American Association of College of Nursing reported
growth in new enrollment at undergraduate nursing programs stagnated in 2008,
while growth in graduate nursing and research doctorate programs either slowed
to a crawl or did not show any growth.
Nurses Added to the Healthcare Workforce Projected Shortage of Nurses in 2020
2003 vs. 2008
84,200
765,000
285,000
18,700
2003 2008
2006 2007
Source: “The nurse staffing outlook gets brighter,” Modern Healthcare, May 1, 2008.
39
41. Nursing Vacancies May Lessen Somewhat During the Downturn
As reported in the WSJ, Jane Llewellyn, vice president of clinical nursing affairs
at Rush University Medical Center in Chicago, said, quot;We are seeing a temporary
lessening of the nursing shortage,quot; but, quot;as soon as the economy turns up, we'll
see them staying home again.quot;
The Washington Post examined how hospitals across the U.S. have begun
addressing nursing shortages quot;by introducing technology to dramatically reduce
paperwork, offering more flexible hours, reducing caseloads, paying for
advanced training and giving [nurses] more authorityquot; instead of using financial
incentives to lure nurses.
In 2007, the number of open nursing jobs in the U.S. reached 116,000. Although
the vacancy rate has dropped slightly because of the quot;dismal economyquot; –
nurses are working longer hours to make up for unemployed spouses,
according to the Post – hospitals are quot;bracing for 2025 when retirements and
other factors are projected to push the number of open jobs to as many as one
million, just when Baby Boomers will require more nursing care,quot; the Post
reports.
Source: Kaiser Daily Health Policy Report Hospitals Offering Better Working Conditions Instead of Financial Incentives To Address Nursing Shortages.
September 15, 2008. Wall Street Journal, Economic Downturn Prompts Many Nurses To Work More Shifts, Helps Address Nursing Shortage.
May 07, 2008 .
40
42. Union Activity will Increase
With a new administration favorable to Unions coupled with significant layoffs in jobs most effected by the
downturn, efforts to unionize health care workers are expected to increase.
− The Employee Free Choice Act of 2007, co-sponsored by Obama, would require employers to
recognize unions if a majority of employees sign union-authorized cards. The bill was blocked in the
Senate by Republicans.
− Also expected to pass if reintroduced is the 2007 Re-Empowerment of Skilled and Professional
Employees and Construction Trades Workers (RESPECT Act) was introduced in March 2007 by
Democrats Senator Chris Dodd and Representative Rob Andrews.
− Beneficial to unions, the free choice act would eliminate the 45-day election period in which
employers can offer educational sessions to workers on the pros and cons of unions.
The Sisters of St. Joseph of Orange are
The Sisters of St. Joseph of Orange are quot;The results of this election
quot;The results of this election
By forming the national healthcare union, we will
By forming the national healthcare union, we will
clashing with a union that wants to will determine whether we'll
clashing with a union that wants to will determine whether we'll
become the recognized voice of front-line healthcare
become the recognized voice of front-line healthcare
organize at a chain of hospitals the nuns be able to grow the union
organize at a chain of hospitals the nuns be able to grow the union
workers everywhere, fueling our ability to help members
workers everywhere, fueling our ability to help members
for nurses or whether we'll
operated throughout California. SEIU- for nurses or whether we'll
operated throughout California. SEIU-
win by uniting more and more workers in our union.
be on the defensive. “ win by uniting more and more workers in our union.
West hopes to unionize more than 8,000 be on the defensive. “
West hopes to unionize more than 8,000
Betsy Marville, RN
Betsy Marville, RN
caregivers, cafeteria works and X-ray
caregivers, cafeteria works and X-ray SEIU Healthcare Website
SEIU Healthcare Website
SEIU Website
SEIU Website
technicians at five hospitals.
technicians at five hospitals.
“Hospitals are aware that unions have
“Hospitals are aware that unions have
“Nurses are excited that we have opportunities with the
“Nurses are excited that we have opportunities with the
targeted health care as fertile ground for
Democrats in power. Issues related to workers’ rights and safety targeted health care as fertile ground for
Democrats in power. Issues related to workers’ rights and safety
all will be part of a more progressive agenda in this county”.
all will be part of a more progressive agenda in this county”. organizing”
organizing”
John Carebian, Executive Director
John Carebian, Executive Director Lori Latham, VEEP Michigan Health and Hospital Association
Lori Latham, VEEP Michigan Health and Hospital Association
Michigan Nurses Association
Michigan Nurses Association
Source: Crain’s Detroit Business, November 9, 2008. HealthLeaders Media August 8, 2008. SEIU website.
41
43. Top Trend #5: Health Reform Will Not be Universal;
But it Will be Everywhere
Health reform will be a high priority on a national level although
significant national system reform is unlikely in the short term.
Hospitals will increase efforts to fund care for their uninsured patients.
42
44. Reform as a National Priority: Stars are Aligning
Altman’s Law
Reform Challenges:
“Most Every Constituent Group Supports
First Step: Cost, Coverage or Both Some Form of National Health Insurance—
But If Its Not Their Version of The Plan
Coverage: Comprehensive or Universal Their Second Best Alternative Is To
Maintain The Status Quo.”
Insurance Plans: Private, Public or Both Stuart H. Altman, Heller School for Social Policy and
Management, Brandeis University
− Expand Medicare and/or Medicaid
− Institute Government-Run Insurance Plan (Obama’s National Health Plan)
Requirements: Employer Pay or Play, Individual Mandate Beyond Children
Alignment of Payments to Health Goals
− Prevention, Chronic Care, Outcomes, Quality, Value
Top Down, Bottom Up, Both
− Federal and State Initiatives
Financing the Plan - $50b+ annually?
43
45. Reform Initiatives on Many Fronts
Economy first priority. Connect improving economy with health reform. Greater public responsibility for health care.
Many lessons learned from the past – need for compromise.
Obama Policy
Key Themes: 1) Improve access to care and coverage for all; 2) Control costs, and 3) Improve Quality.
“Meaningful” coverage
Baucus (D-MT) Higher quality/greater value
Reduce waste
Wyden (D-OR) The Healthy Americans Act
Portable, affordable, high quality private health care guaranteed for all.
Bennett (R-UT)
Expected in January 2009, call for universal health care
Kennedy (D-MA)
Formation of 3 Senate working groups to align leadership
Pelosi (D-CA) House Speaker has indicated plans to pass legislation requiring physicians nationwide to adopt HITs.
Thomas A. Daschle, Obama’s choice for HHS Secretary. HHS accounts for one-quarter of all federal spending,
HHS second only to defense. Daschle will take on expanded role to “shepherd” health reform legislation through
Congress in 2009.
“As CBO Director, Peter Orszag has practically been the ‘bionic man’ when Congress has needed budget guidance
CBO Director to
on everything from stimulating the economy to fixing health care. With all the economic challenges now facing the
Head White country, there is no one better qualified than Peter Orszag to provide the solid numbers and sound advice that the
House OMB president will need to solve the current crises and get our economic future on track.” Senators Wyden and Bennett
Sources: Susan Berson, Esq. “ A Glimpse Into the Future: Predicting the Health Care Landscape in 2009”, Mintz Levin; “HHS Will be Shepherding
Health-Care Reform”, washingtonpost.com, 12.5.08; Late News, Modern Healthcare, 12.1.08
44
46. Proposed Principles for Payment Reform
The HFMA report proposes five basic principles for reform:
Payments reward high-quality care and discourage medical
Quality
Quality
errors and ineffective care.
Payment incentives are aligned among all stakeholders to
Alignment
Alignment
maximize the efficiency and coordination of health services.
Payment systems sufficiently balance the needs and
Fairness/
Fairness/
concerns of all stakeholders.
Sustainability
Sustainability
Payment systems are simplified, standard, and transparent.
Simplification
Simplification
The resources needed to support societal benefits of the
Societal
Societal
healthcare system are identified and paid for explicitly.
Benefit
Benefit
Source: Healthcare Payment Reform: From Principles to Action; Healthcare Financial Management Association, 2008.
45
47. Health Reform in Massachusetts
Significant recognition as a model for reform
“Near Universal” coverage “roughly 97% of MA residents are now covered”,
lowest in the US
Principals of Reform
− Build upon the existing base: fill in gaps
− “Shared responsibility”
The Connector in Massachusetts:
Individuals
The “Travelocity” of Health Insurance
Employers
Government Indiv.& Families Section 125 plans
− Shift financing from “opaque bulk Young Adults Small Biz.
payments” to safety net providers
to health insurance for individuals
Individual Mandate
− All adult residents
− Minimum Creditable Coverage
− Enforced through state tax system
2008 Penalties: $210 - $912 5
Sources: Nancy Trumbull, Professor, Harvard School of Public Health; “Mass. Model of healthcare reform, hurdles, boston.com, 11.6.08.
46
48. Preventive Care – Medicare Demonstration Projects
Name Description Implemented
Tests a variety of care coordination models to reduce
hospitalizations, improve health status, and reduce
Medicare
overall healthcare costs for chronically ill
Coordinated
2002
beneficiaries.
Care
Demonstration Fifteen organizations receive monthly fees to
coordinate care and provide disease management.
Provider-directed model to manage care of high-cost
and high-risk beneficiaries including those with
Care
chronic conditions.
Management for
2005
High-Cost CMS will test a variety of models including structured
Beneficiaries chronic care programs, increased provider
availability, and flexibility in site settings.
Three-year medical home demo in up to 8 states
Medicare which will pay care management fees to physicians Under
Medical Home overseeing implementation of care plan for persons Development
with multiple chronic illnesses.
47
49. Episode of Care Payment – Medicare Demonstration Projects
Medicare Participating Heart Bypass Demonstration Project (1990s)
Four hospitals (Ann Arbor, Atlanta, Boston, Columbus) each received a
single payment covering hospital and physician services for CABG.
Payments negotiated to be 10% - 37% below normal payment levels.
All parties benefited: physicians reduced LOS and hospital costs, post-
discharge costs (not included) also decreased, patients had only one co-pay.
Medicare Acute Care Episode Demonstration (ACE) 2009
Five-year demonstration project to make global payments for hospital/
physician services for cardiac care (OHS, defibrillators, pacemakers, etc.)
and orthopedic care (hip and knee replacements).
One system in each market (Texas, Oklahoma, New Mexico, and Colorado)
will be chosen based on price and quality/approach.
48
50. Episode of Care Payment – Private Sector Pilots
Geisinger Health System – ProvenCareSM System
Geisinger provides a “warranty” that covers any follow-up care needed for
avoidable complications within 90 days at no additional charge.
Currently used for CABG with plans to expand to hip replacement, cataract
surgery, angioplasty and other areas.
PROMETHEUS Payment, Inc.
Currently developing episode of care payment system for a variety of
conditions including AMI, hip and knee replacements, CABG, bariatric
surgery, and hernias.
Full episode of care payments for all providers will be based on actual
historical cost and estimated costs using evidence-based care with
adjustments based on quality performance.
49
51. Noblis Center for Health Innovation – Top Trends for 2009
Changing Consumer Demands
Utilization will be stable or even decline in all but strongly growing markets.
Consumers will continue to seek medical information/knowledge via web resources.
Increased medical travel.
Hospitals and physicians that continue to focus on improving and measuring quality, safety, and
operating efficiencies will be best positioned for the future.
Budgets Trimmed - Investments Delayed
Margins will decline.
The economic downturn will force most hospitals to trim their operating budgets in 2009.
The credit market will tighten further and bond ratings will fall.
Great pressure will exist to maintain cash on the balance sheet.
New technology capital expenditures that do not improve the bottom line in the short term will be delayed, scaled back, or cancelled.
The recent health care construction boom will continue but at a much slower rate.
Continued Consolidation
Hospitals that have historically relied on investment income, municipal funding of indigent and charity care, and low interest rate credit lines to offset
operating loses will be hardest hit.
Small hospitals and rural hospitals are most at risk in a downturned economy.
Workforce in Transition
Physician responses to their own financial uncertainties will vary.
There will be a shift in the mix of care providers with greater use of mid-levels.
Nursing vacancies may lessen somewhat.
Union activity will increase.
Health Reform on Many Levels
Health reform will be a high priority on a national level although significant national system reform is unlikely in the short term.
Hospitals will increase efforts to fund care for their uninsured patients.
50
52. Center for Health Innovation at a Glance
SERVICES
STAFF LOCATIONS
Denver, CO
Atlanta Area
Strategy Development Service Line Planning
303.954.8644 (voice)
404.231.4422 (voice)
Strategic and business plans Service line business plans and
312.751.8782 (fax)
404.231.4423 (fax)
Strategic thinking facilitation structures
Affiliation planning Demand/financial modeling
Portland, OR
Ann Arbor, MI Portfolio assessments Physician linkages
Marketing plans & market assessments
312.751.4173 (voice)
734.944.7524 (voice)
Financial Assessment
312.751.8782 (fax)
734.944. 7534 (fax) Governance Acquisition, divestiture & merger
Defining governance roles analyses
St. Louis, MO
Austin, TX Governance structure and best practices Multi-year financial projections
Board education and development Financial feasibility studies
512.784.8616 (voice) 314.726.4879 (voice)
Determination of financial capability
512.301.9466 (fax) 314.721.8695 (fax) Regulatory Planning Capital allocation assistance
CON/DON assistance
Virginia Beach, VA Expert testimony
Boston Area Performance Innovation
757.284.1177 (voice) Labor productivity
781.482.4050 (voice) Post-Acute Strategy
800.420.5295 (fax) Clinical resource management
781.863.5657 (fax) Strategic planning
Margin improvement
Operational improvement/turnaround
Hospital acquired conditions avoidance
Compliance
Washington DC Area
Chicago, IL Customer service/patient satisfaction
703.610.1001 (voice) Small hospital turnkey assessments
Physician Strategy
312.751.8800 (voice)
703.610.2453 (fax)
312.751.8782 (fax) Physician-hospital alignment
Facility Planning
Medical staff development planning
Master facility planning
Physician practice/organization planning
West Springfield, MA
Cleveland, OH Concept of Operations
Functional/operational space
216.789.0041 (voice) 413.732.3366 (voice)
programming
216.932.1852 (fax) 413.732.7711 (fax)
Capacity and throughput planning
www.noblis.org
http://www.noblis.org/hc/HealthInnovation.asp
51
