The Future of Healthcare:The Quest for Value for All Americans: The Future of Healthcare: The Quest for Value for All Americans Ian Morrison www.ianmorrison.com


Outline: Outline Models of Change The Transformation Context The Quest for Value Scenarios and Implications


Models of Change: Models of Change Pearl Harbor A sudden crisis causes fundamental change The Tipping Point Pressures build to an inflection point of change Glacial Erosion Steady growth of grinding, inexorable, and hard to resist pressures Aging Technology Unaffordability Disparities Tiering


What has Changed in the last two years?: What has Changed in the last two years? The Transformation Agenda More evidence More stakeholders Transparency is growing Presidential approval of transparency Leavitt’s transparency agenda More measurement and reporting P4P P4P is evolving Non Payment for Non Performance (Never Events) P4P step on a path of reimbursement reform Cooling Ardor for Consumer-Directed Healthcare GASB 45 Evidence-Based Benefit Design The rising burden of Specialty pharmaceuticals


What is Emerging?: What is Emerging? Potential meltdown of “rust belt” employers Health Reform at the State Level to Cover the Uninsured Massachusetts California Many others to follow Universal Health Care as Democratic platform A Huge War on Physician Transparency Granularity of measurement Accountable care systems versus individual reporting Technology Assessment and NICE Lite Personal Health Records and new entrants like Google Disruptive Innovators: Wal-Mart, Minute Clinics, Offshore competitors


What has Stayed the Same: What has Stayed the Same Continued cost-shifting to consumers Yet, little movement in consumer behavior measures Continued financial success of “Pimp My Ride” healthcare delivery Doctors are still depressed Patients are still getting older, fatter, and crankier one year at a time Health IT continued slow progress The Future of Healthcare only exists on Powerpoint


The Transformation of Health Care: The Transformation of Health Care Large Vertically-Integrated Systems Medical Groups based on interdisciplinary teams High Use of Nurse Practitioners and auxiliary health professionals Capitated reimbursement systems Practice Guidelines and conformity IT enabled decision support Greater emphasis on primary care over specialty care Thoughtful and scientifically defensible introduction of new technology Universal coverage Community rated, risk adjusted financing Horizontal Cartels Doctors still in onesies and twosies Teams and groups in only a a few high performing environments that nobody wants to go to voluntarily (except Mayo) Hamster Care everywhere: Medicare, managed care and especially Medicaid Passive, aggressive resistance to measurement and management of quality EMR as a PET Expensive Technology excessively and aggressively applied to affluent and well-insured Rising uninsured Consumer payment, adverse selection, cream skimming and moral hazard What We Expected in 1990 What We Got by 2006


The Holy Trinity: The Holy Trinity Cost Quality Access (Security of Benefits)


Defining Value of Health Services: Defining Value of Health Services Value = (Access+Quality+Security) Cost


Health Care Spending per Capita in 2004 (Adjusted for Differences in the Cost of Living): Health Care Spending per Capita in 2004 (Adjusted for Differences in the Cost of Living) Source: OECD Health Data Published in Health Affairs Volume 26:5 2007


International Health Comparisons, 2004-05: International Health Comparisons, 2004-05 Source: OECD 2002-2007


International Health Comparisons, 2004-05: International Health Comparisons, 2004-05 Source: OECD 2002-2007


Premium Increases Compared to Other Indicators, 1988-2007: Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2006; KPMG Survey of Employer-Sponsored Health Benefits: 1988, 1993, 1996, 1998; Bureau of Labor Statistics, 2000. ^ Premium Increases Compared to Other Indicators, 1988-2007


Health Care Costs and Consequences: Health Care Costs and Consequences For the Uninsured: Rising from 45 million today to 56 million in 2013 For the Working Poor: In 1970 health benefits cost 10% of the minimum wage, today it is 100% For the Median Household: Health benefits are 20% of median compensation will rise to 60% by 2020 if trends continue For Retirees: A couple on retirement at 65 needs $200,000 in cash to pay for lifetime out of pocket costs for medical care For Small Businesses: Only 60% of firms offer insurance in 2005 down from 69% in 2000 For Big Business: Delphi goes bankrupt, Big Auto renegotiates because corporate healthcare costs surpasses the net profit of all business For Big Labor: UAW, SEIU, AFL-CIO conflicts, challenges and opportunities for strife


Quality Shortfalls: Getting it Right 50% of the Time: Quality Shortfalls: Getting it Right 50% of the Time Adults receive about half of recommended care 54.9% = Overall care 54.9% = Preventive care 53.5% = Acute care 56.1% = Chronic care Source: McGlynn EA, et al., “The Quality of Health Care Delivered to Adults in the United States,” New England Journal of Medicine, Vol. 348, No. 26, June 26, 2003, pp. 2635-2645


Quality of Care Today: We are Worse than Shaq from the Line: Quality of Care Today: We are Worse than Shaq from the Line


Slide17: Quality and Efficiency Vary Widely By State Health Affairs April 7, 2004


Enormous Variations in Practice and Spending: Enormous Variations in Practice and Spending Coronary Artery Bypass Graft Surgery Age-sex-race adjusted rate per 1000 enrollees in 2003 Source: Dartmouthatlas.org courtesy Elliot Fisher MD


Supply-Sensitive Care Can Be Measured for Specific Providers: Supply-Sensitive Care Can Be Measured for Specific Providers Physician Visits During the Last Six Months of Life Source: Dartmouthatlas.org


If Quality has Improved, Doctors and Patients Have Not Noticed: If Quality has Improved, Doctors and Patients Have Not Noticed Has quality of care gotten better or worse in the past 5 years, or has it stayed about the same? Note: Percentages do not add to 100 because “not sure” answers are not included. * Has the quality of medical care that you and your family receive gotten better or worse in the last 5 years, or has it stayed about the same? Worse Better Stayed about the same Source: Harris Interactive, Strategic Health Perspectives 2005, 2006


The Progressive Transformation Story: The Progressive Transformation Story Cost and Quality are correlated inversely Utilization is not based on need and doesn’t create outcomes Measurement matters Transparency on cost and quality will: Embarrass providers to improve Motivate payers to differentially pay Motivate consumers to change providers Steer business to the high performance providers Do all of the above given enough time Re-engineering of delivery system will ensue Value gains will make healthcare more affordable and of much higher reliability and quality


The Battle for Quality:  IOM versus “Pimp My Ride”: The Battle for Quality: IOM versus “Pimp My Ride” The IOM Vision of Quality: Charles Schwab meets Nordstrom meets the Mayo Clinic The Prevailing Vision of Quality in American Healthcare: “Pimp My Ride”


The Battle for Quality:  IOM versus “Pimp My Ride”: The Battle for Quality: IOM versus “Pimp My Ride” Really Bad Chassis Unbelievable amounts of high technology on a frame that is tired, old and ineffective Huge expense on buildings, machines, drugs, devices, and people at West Coast Custom Healthcare People who own the rides are very grateful because they don’t have to pay for it in a high deductible catastrophic coverage world It all looks great, has a fantastic sound system, and nice seats but it will break down if you try and drive it anywhere


Pimp My Ride in Redding: Pimp My Ride in Redding Fee-for-service payment rewards: Volume Fragmentation High margin services Growth Source: Dartmouthatlas.org courtesy Elliot Fisher MD


Pimp My Ride in Redding: Pimp My Ride in Redding Fee-for-service payment rewards: Volume Fragmentation High margin services Growth Source: Dartmouthatlas.org courtesy Elliot Fisher MD Clinical Intervention The FBI Arrived


International Obesity 2003 Percent of Population over 15 with BMI >30: International Obesity 2003 Percent of Population over 15 with BMI >30 Source: OECD, 2005


Don’t Look Down on Him: Middle Age Americans are not as Healthy as the English: Don’t Look Down on Him: Middle Age Americans are not as Healthy as the English US White population in late middle-age is less healthy than the equivalent English population for, diabetes, hypertension, heart disease, MI, stroke and cancer Steep gradient by SES in both countries: It’s good to be rich But, the poorest third of Brits are healthier than richest third of Americans for diabetes, hypertension, all heart disease, and cancer Source: Banks, J. et al. JAMA 2006;295:2037-2045.


HONDAS: HONDAS Hypertensive Obese Non-Compliant Diabetic Alcoholic or All Systems Failing or both Source: Connie Blackstone MD, Primary Care Physician, Greenville, SC


The Future of Healthcare in the OECD: The Future of Healthcare in the OECD Fat People meet Skinny Benefits


Consumer Use of Quality Ratings Remains Low: Consumer Use of Quality Ratings Remains Low Considered a change based on these ratings Seen information that rates... Actually made a change Physicians Health plans Hospitals Source: Harris Interactive, Strategic Health Perspectives 2001-2006


Slide31: Primary Care Practices with Advanced Information Capacity * Count of 14: EMR, EMR access other doctors, outside office, patient; routine use electronic ordering tests, prescriptions, access test results, access hospital records; computer for reminders, Rx alerts, prompt tests results; easy to list diagnosis, medications, patients due for care. Percent reporting seven or more out of 14 functions* Source: 2006 Commonwealth Fund International Health Policy Survey of Primary Care Physicians.


Slide32: Capacity to Generate List of Patients by Diagnosis Percent reporting very difficult or cannot generate Source: 2006 Commonwealth Fund International Health Policy Survey of Primary Care Physicians.


Slide33: Percent reporting any financial incentive* Primary Care Doctors’ Reports of Any Financial Incentives Targeted on Quality of Care * Receive of have potential to receive payment for: clinical care targets, high patient ratings, managing chronic disease/complex needs, preventive care, or QI activities. Source: 2006 Commonwealth Fund International Health Policy Survey of Primary Care Physicians.


What We Have to Change….Not Much Except………: What We Have to Change…. Not Much Except……… Our values Our Strategic Focus: From Pimp my Ride to Primary Care and Prevention Our Reimbursement System Our Delivery System Our Individual and Collective Behavior Our Expectations Our Business Models Our electronic infrastructure to support it all


Key Driving Forces: Political: Key Driving Forces: Political Presidential election year where candidates are focusing on change Many Republican incumbents in house and senate not seeking re-election Possible big turn out of youth: The Echo Boom can’t drink yet, but they can vote Health care number one domestic issue (or will it be the economy by June?) among Democrats and Independents Growing sense of anti-corporatism even among Republican candidates (Huckabee and McCain) Possibility of a large Democratic victory


Key Driving Forces: Economic: Key Driving Forces: Economic Economic Slowdown in 2008-2009 seems likely Continued involvement in Iraq short term means big government deficits Little government opportunity for big expansion in short run Sub-prime mess lingers and perhaps worsens, declining consumer confidence, weakening dollar, continued high energy prices Business sees profit squeeze after long run up and high performance expectations from investors


Key Driving Forces: Health Reform: Key Driving Forces: Health Reform Health Reform Options are in a narrow range (Democrats positions are right of Richard Nixon’s) New American Compromise of shared sacrifice and incremental expansion of coverage is favored by all Democratic presidential candidates and some Republicans at state level Focus is on coverage expansion for an anxious middle class not wholesale transformation of health care but….. Healthcare Glitterati homing in on elements of a compromise (Commonwealth Fund 15 is a good starting list of cost containment options) Unlikely Coalitions are forming: e.g. SEIU, Wal-Mart Big actors are staking positions near and around the New American Compromise for example the AHA, AHIP, Mayo Clinic, Committee on Economic Development, and Others Big business not as ready to bail out of healthcare as some pundits think Seniors are satisfied with Medicare (including Part D) and are not pressing for health reform of Medicare, yet but how will Part D play in 2008? Doctors are cranky and depressed


Most Employers are Ideologically Opposed to Massive Exit in a Tight Labor Market with a Strong Economy: Most Employers are Ideologically Opposed to Massive Exit in a Tight Labor Market with a Strong Economy Source: Harris Interactive, Strategic Health Perspectives 2007 N=20* Pacific Business Group on Health , July 2007 Retreat % Answering Describes My Company Well


Physician Dissatisfaction with Practice at Historic Highs: Physician Dissatisfaction with Practice at Historic Highs Physician Satisfaction with Current Practice Situation % Satisfied % Dissatisfied Source: Harris Interactive, Strategic Health Perspectives 1995-2007


The Commonwealth Fund 15: The Commonwealth Fund 15 Promoting Health Information Technology Center for Medical Effectiveness and Health Care Decision-Making Patient Shared Decision-Making Public Health: Reducing Tobacco Use Public Health: Reducing Obesity Positive Incentives for Health Hospital Pay-for-Performance Episode-of-Care Payment Strengthening Primary Care and Care Coordination Limit Federal Tax Exemptions for Premium Contributions Reset Benchmark Rates for Medicare Advantage Plans Competitive Bidding Negotiated Prescription Drug Prices All-Payer Provider Payment Methods and Rates Limit Payment Updates in High-Cost Areas


Covering the Uninsured:Who Pays? Who Gets? Who Cares?: Covering the Uninsured: Who Pays? Who Gets? Who Cares? Who Pays? American healthcare financing is regressive Single Payer is a massive transfer of income from rich to poor Making $20,000 earners buy a $15,000 health care policy is problematic Who Gets? Having a card doesn’t guarantee getting care Growing use of ER, Minute Clinics, and Off-shore options even by the insured population Who Cares? How much reimbursement goes with the card? Do we need coverage or do we need care? Are the insured getting the right care?


Number of Uninsured 2005: Number of Uninsured 2005 Source: KFF, 2006


Payment to Cost Ratio (Illustrative): Payment to Cost Ratio (Illustrative) Source: Morrison Estimates, in other words a good guess


Payment to Cost Ratio (Illustrative): Payment to Cost Ratio (Illustrative) Source: Morrison Estimates, in other words a good guess Single Payer Schwarzenegger


Why I Like Australia: Why I Like Australia Everyone is covered Tax financed universal ambulatory care Clear bargain on hospitals: Free Hospital care with no provider choice and no high amenity versus Private hospital, or higher amenity public hospital and provider choice if you have private insurance 50% have private insurance (43% for hospitals) but you still pay in to the base system Flat 30% subsidy Incentives to sign up young No involvement of employers PBS works to control costs “Where the bloody hell are you?” Australian Tourist Board


Slide46: Minor Delivery System Reform Major Delivery System Reform Four Scenarios for US Health Care 2005-2015 Tiers R’Us National Rational Healthcare Bigger Government by Request 50% 20% 10% 20%


Scenario 1: Tiers R’ Us: Scenario 1: Tiers R’ Us SUVing of healthcare Continued disparities and tiers High end providers do well, low end suffers Probability over 10 years: 50%


Scenario 2: Bigger Government by Request: Scenario 2: Bigger Government by Request Baby Boom Backlash against cost-shifting Democrats run on shoring up and expanding Medicare for middle aged and elderly Government regulates healthcare even more Slowing innovation, reducing provider payment, and limiting profiteering Probability over 10 years: 20%


Scenario 3: Disruptive Innovation: Scenario 3: Disruptive Innovation Cheapo plans proliferate (high deductibles and retail primary care) forcing cheaper delivery models to emerge New disruptive competitors emerge at a lower price point e.g. Revolution Health, Wal-Mart, Kaiser Lite Almost as good, and a lot cheaper Probability over 10 years: 10%


Scenario 4: National Rational Healthcare: Scenario 4: National Rational Healthcare Mandatory universal individual insurance is passed National policy commitment to restructure healthcare financing and delivery True managed health care Focus on public health and prevention Probability over ten years: 20%


Scenario 4: National Rational Healthcare Impact on the Healthcare System: Scenario 4: National Rational Healthcare Impact on the Healthcare System Health Plans Health plans are active agents for health delivery transformation A focus on prevention and wellness Sources of innovation in DSM and new reimbursement models Get smart or get out Pharmaceuticals Reference-pricing and cost-effectiveness criteria for new technology True clinical innovation is rewarded Side by Side clinical trials for new product launches National Technology Assessment System continuously monitors technologies in use Providers Chronic Care management done right: innovation in community based chronic care New reimbursement systems “Daughter of Capitation” force market leaders into fundamental clinical system redesign Acute care is evidence-based and standardized Innovation concentrated in designated centers of excellence P4P means better payment and earns the provider the right to serve Health IT RHIOs are interoperable and standardized and at the core of new chronic care paradigm HIT is funded through special national health infrastructure tax


Common Themes: Common Themes High end patients and providers will always do well Generics will grow in almost any scenario True cost reducing technologies will always have appeal True clinical breakthroughs that are radically better than existing modalities and therapies will always be rewarded but the bar for new technologies will be raised to demonstrate value Beware of the Fallacy of Excellence Healthcare is a superior good and will take a larger share of national wealth But who pays for what and how will be central difficult questions for business, government, and households around the world forever Healthcare pharma, technology and supply industry will consolidate even further


Implications: Implications Chronic Care needs will grow because of aging and obesity We are ill-prepared because of our reimbursement system, technology, infrastructure, and delivery systems We need simple solutions based on familiar components We need to innovate in business models We need to implement what we already know We need to move from Dumb Cost-Shifting to Intelligent Consumer Engagement We need to focus on prevention


Implications: Implications No matter what, we will need better value measures and more transparency of measures Value based purchasing will become more prevalent and have a powerful influence on providers and vendors Consumers will become more engaged in value decisions but we cannot rely on them absolutely The systems of healthcare need to be continuously improved to deliver greater value Will require clinical skills, process skills, use of cutting edge technology and big-time capabilities Most of all, it will require leadership