Federal Healthcare Reform's influence on the healthcare delivery system

1. October 24, 2013
Layton Lang
Chief Administrative Officer
CIVA- Dallas

2. Federal Healthcare Reform has energized the
ongoing debate on quality and cost of
healthcare.

3. What Does Quality Care Really
Mean?
Government’s Perspective:
 National Strategy for Quality Improvement in
Healthcare



Better Care: Reliable, accessible, and safe care.
Healthy People/Healthy Communities: Improve the health of
the U.S. population through an emphasis on prevention.
Affordable Care: Develop cost effective care by spreading new
health care delivery models.

4. What Does Quality Care Really Mean?
Patient’s Perspective
Encountering a kind, compassionate medical staff
Having more face-time with your physician
Receiving timely appointments
Program that emphasizing preventative care and
screening
Dartmouth study suggests exceedingly high utilization
of care increases patient satisfaction.

5. What Does Quality Care Really Mean?
Healthcare Provider’s Perspective
Proven care that provides a good clinic outcome or
result.
Reduce medical errors.
Reduce hospital acquired infections.
Meeting outcomes benchmarks.

6. Many Opportunities to Deliver Care at a
Lower Cost
Some hospitals paid 10x as much for CHF admits as others.

7. $2,200Variation in Average Costs of
Drug Eluting Stents in Hospitals

8. $16,000 Variation in Avg Costs of
Defibrillators Across Hospitals

9. Culprit Behind the Exponential HealthCare Cost Growth: Fee-for-Service
A patient who enters the facility is a revenuegenerating event for the medical enterprise.
The higher the intensity and frequency of care,
the greater the financial reward.

10. The Health Care Cost Equation
MEDICARE SPENDING =
# of Seniors Eligible X
# of Covered Services X
Rate of Service Utilization X
Provider Payment Per Service X
% Paid by Seniors

11. Medicare Cost Containment:
Federal Policy Choices
MEDICARE SPENDING =
# of Seniors Eligible X
# of Covered Services X
Raise the Eligibility Age for
Medicare
Cut Benefits for Seniors
Rate of Service Utilization X
Provider Payment Per Service X
% Paid by Seniors
Make Seniors Pay More

12. Medicare Cost Containment:
Federal Policy Choices
MEDICARE SPENDING =
# of Seniors Eligible X
# of Covered Services X
Rate of Service Utilization X
Provider Payment Per Service X
% Paid by Seniors
Increase Utilization Review/
Approval
Cut Payment to Providers

13. Medicare Cost Containment: Better
Policy Choices
MEDICARE SPENDING =
# of Seniors Eligible X
# of Covered Services X
Rate of Service Utilization X
Redesign Care for Lower
Costs
Provider Payment Per Service X
Create Better Payment
Systems
% Paid by Seniors

14. Big Win-Win for Both Physicians and
Payers By Eliminating Waste

15. Instead of Starting With How to Limit
Care for Patients…
Contributors to Healthcare Costs
How Do We Limit:
>New Technologies
>Higher-Cost Drugs
>Potentially Life- Saving
Treatment

16. We Should Focus First on How to
Improve Patient Care
Contributors to Healthcare Costs
How Do We Help:
>Patients Stay Well
>Avoid Unnecessary Surgery
and Other Hospitalizations
>Eliminate Errors and Safety Problems
>Reduce Costs of Procedures
>Reduce Readmissions
How Do We Limit:
>New Technologies
>Higher-Cost Drugs
>Potentially Life- Saving
Treatment

17. Government has Identified Areas of
Improvement
Problem: Waste in duplication of services,
coordination of care and accountability of outcomes
Solution: Accountable Care Organization
Problem: Better management of patients with
chronic disease and wellness care
Solution: Patient Centered Medical Home
Problem: Variance in treatment patterns for
procedures and surgeries
Solution: Bundled Payments

18. Accountable Care Organization
The ACO is an organization comprised of primary
care providers, some specialist and a hospital that are
accountable to patients and payors for the quality,
appropriateness, and efficiency of healthcare
provided.
Establish appropriate use and evidence-based
treatment protocols and measure the performance.
ACOs are responsible for distributing bonuses when
targets are met and levy penalties when targets are
missed.
Primary payment methodology is episode-of-care.

19. ACO Requirements Under the Bill
Define processes to promote care quality, report on costs and
coordinate care.
Develop a management and leadership structure for decision
making.
Develop a formal legal structure that allows the organization
to receive/distribute bonuses to participating providers.
ACO must manage at least 5,000 Medicare beneficiaries.
Provide CMS with a list of participating PCPs and specialists.
Have contracts in place with a core group of specialist
physicians.
Participate for a minimum of three years.

20. Metric Examples
Be uniformed in ordering medical devices: group
selects one prosthesis brand of knee replacement to
reduce hospital inventory.
Establish metric as to when patient should be
rounded on to reduce inpatient stays. Evaluation daily
before 8:30 a.m.
Establish clinic pathways and education for patient
discharge to reduce unnecessary readmission for
Congestive Heart Failure. < 50% of National Average.
Reduce ER visits to 25% of baseline.

21. Case Study 1. Virginia Mason
Hospital was on the verge of losing an Aetna contract
due to high utilization.
Hospital met with Aetna’s largest client, Starbucks,
and learned about its employee’s common medical
complaint: Back Injuries.
Applied Toyota Lean Manufacturing Principles: cut
waste and optimize efficiency to create value for the
customer.

22. Current Workflow for Back Injury Care
Patient calls for appointment with
orthopedic surgeon: 1-2 week wait time.
Every patient, no matter the acuity of the back injury,
would undergo an MRI.
After work-up, patient underwent surgery or sent for
conservative treatment: physical therapy.

23. Conducted a Benefit Analysis of the
Current Treatment Workflow
85% of patients suffered form uncomplicated back
pain.
90% of the resources provided in the current model
provided little value.
Evidence showed these patients required physical
therapy early on to relieve the back pain.

24. Reengineered Workflow
Every patient is seen by Physical Therapist/Medicine
Physician team during initial visit.
Patient receives some physical therapy for pain relief.
 The team determines if patient requires an
Orthopedic consultation.
Utilized other imaging services and established
evidence based criteria as to when to order an MRI.
Prescription medication was reduced by 32%.

25. Virginia Mason Production System
Reduced initial weight times from 31 days to same day
access.
Reduced medical waste by 50%
Cutting expensive MRIs
Cutting need to see specialist.
Patient received relief within 48 hours of visit. 94%
were returned to work by the next day.
Hospital was able to align a delivery system to market
place needs instead of the needs of the hospital.
Hospital’s department was now overstaffed.

26. Patient- Centered Medical Home
Primary care office financially incentivized to manage
a population’s health beyond the traditional office
examination.
Screening
Case Management of the overall health
Steering patients to cost effective health
Patient entry point into an ACO

27. Cigna’s Medical Home Program
Cigna Insurance has been promoting this model in the
metroplex. They recently signed with their third primary
care group called Village Health. Cigna’s Medical home
model was able to reduce healthcare expenditures by
almost 5% with other primary care groups.
Financial bonuses to manage the health of the patients.
Incentive to not communicate only with the patient when
they are sick, but to manage their overall health.
Coordinating care with other providers beyond
traditional face time with the physician.
Case managers employed to communicate with patients
regarding screening and preventative care.

28. Case Study 2. Arizona Primary Care
Associates
Group established a medical home model-
responsible for the health of 15,000 lives.
Risk contract that paid bonuses on healthcare costs.
Group began to track and manage its chronic patient
population to assess why this group’s health was not
improving.
Group’s goal was to eliminate barriers to care beyond
what they could control in the office. Focus was to do
whatever it took to become more engaged with
their patients.

29. Bundled Payments-Medical Tourism
Medical tourism is choosing to travel outside of your
local area for medical services.
Interstate and international tourism being utilized by
large self -funded groups.
ACOs and groups will utilize bundled pricing to
attract exclusive contracts from other payors around
the country. Bundled payment is a single episode-ofcare payment that covers the hospital and physician
services. Payments may also come with a postoperative guarantee period.

30. Case Study 3. Scott and White
Hospital
Interstate Medical Tourism
Wal-Mart established a Center of Excellence program
to direct its employees to 6 leading hospitals around
the country.
Contract is for heart, spine and transplant services.
Wal-Mart provides travel and housing assistance for
employees.
Patients will be traveling from New Mexico, Kansas.
Oklahoma, Louisiana, Alabama and Florida.

31. Incentives to Access Interstate Care
Financial incentives for employee to choose this
treatment option.
No out of pocket costs for employee and caregiver.
Items covered
Co-insurance
 Travel
 Lodging
 Food

Hospital is paid on each episode of care.

32. Dallas Healthcare Market
Patients have become precious commodities.
Alliances and delivery systems are morphing.
Major hospital systems are building empires across
the entire care continuum while being cloaked under
Federal Healthcare Reform.
More and more new entrants appearing in the
marketplace.

33. Health &
Well-Being
ACO
Primary
Care
Providers
Acute Care
Transitional
Care

34. Non Providers Entering the Dallas Market to Gain Share
Health &
Well-Being
ACO
Primary
Care
Providers
Acute Care
Transitional
Care

35. Channel Administrators
ACAP Health represents 80,ooo members of various
self-funded employers.
Developing bundled payment contracts with
providers and hospitals for key high–end procedures.
Compass Health steers patients to cost- effective
entities and providers due to price variances.

36. Hospital vs. Physician Office
Cardiac Nuclear Study
800
700
600
500
Hospital
400
Physician Office
300
200
100
0
2006
2007
2008
2009
2010
2011

37. Dallas Healthcare Bubble
Acute Care Hospitals
Inpatient volume has been flat for over five years.
American Hospital Association’s 2010 survey: national
average is 2.6 beds per 1,000. Dallas is at 4.4 beds.
Bed census is at 59%. < 60% is difficult to sustain.
In the next two years, the number of beds will increase
by 11%.
Dallas hospital catchment areas are declining.
If hospitals are operating at full capacity, why are there
so many hospital billboard ads around the city?

38. Dallas Healthcare Bubble
Physicians
Many specialties are experiencing surpluses; not
shortages.
Cardiology: 137 physicians, market can support 78.
Other areas: General Surgery and Urgent Care Centers
Hospitals continue to saturate markets by recruiting
more physicians based on flawed manpower
assumptions and the need to control referrals to the
hospitals.
Current physicians are skill mismatched. Physicians not
seeing enough patients in their area of expertise.

39. Current Results of the Market Being
Overbuilt
Increase in the frequency and intensity of care
Increase in unnecessary care
Hospitals employing physician practices are
increasing medical costs.
Employed physician FFS contracts are 10- 30% higher
than independent physician contracts.
Provider-based billing for imaging is two to three times
higher than independent physician contracts
Health plans will take advantage of the situation and
try to slash FFS fee schedules.

40. Tipping Point
Uninsured patients coming on the Federal Exchange
may not be financially viable for providers.
Patients ability to pay out-of-pocket expenses
Exchange health plans will demand price concessions
from providers
 663,878 are uninsured: Of the 2,139,366 people under age 65 in
Dallas County, 31 percent are uninsured. The county is ranked the 72
 311,893 women are uninsured : In Dallas County, 29.1 percent of
women under age 65 are uninsured
 354,433 young people are uninsured: In Dallas County, 44.9 percent
of young people ages 18 to 39 lack health insurance, placing it in the
worst four percent among all counties
 311,288 uninsured are eligible for subsidies or tax credits:
In Dallas County, 34.6 percent.

41. Tipping Point
Annual decreases in FFS and Risk fees. In order to
remain viable, the medical enterprise will have to
process even more patients.
Conversely, the focus of Federal Healthcare reform is
to reduce wasteful care.
Health Plans and ACOs steering patients into narrow
networks, which will eliminate competition.
Medical enterprises’ roles will change under
Healthcare Reform.