Addressing Current and Future Industry Imperatives 1. Understand the business and regulatory drivers impacting health care organizations and the state of the IT industry’s capability to respond 2. Explore the different levels of interoperability and understand why they matter 3. Understand why change management is the most critical factor in technology adoption

1. Health Care IT Suite
State of the Health Care IT Union
Addressing Current and Future Industry Imperatives
IHT2 Health IT Summit
August 22, 2012 • Seattle, WA
©2012 THE ADVISORY BOARD COMPANY • ADVISORY.COM

2. Health Care IT Suite
Contributing Analysts
Jim Adams
Ernie Hood
Mike Davis
Ken Kleinberg
Peter Kilbridge, MD
Robin Raiford
Design Consultant
Hillary Tisdale
Senior Advisor
Dave Garets
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3. Health Care IT Suite
State of the
Health Care IT Union
Addressing Current and Future Industry Imperatives
©2012 THE ADVISORY BOARD COMPANY • 25191A
6
Road Map
1 Drivers of Change in Health Care IT
2 State of the Industry
©2012 THE ADVISORY BOARD COMPANY • 25191A
3 Where We’re Headed

4. Drivers of Change in Health Care IT 7
The Reform Paradox
Giving More Care to More People, and Paying Less for It
Raise taxes?
How do we How do we
Reallocate spending?
maximize afford
Cut benefits?
©2012 THE ADVISORY BOARD COMPANY • 25191A
access to expanded
Cut reimbursement?
care? access?
Delivery system change?
Source: Advisory Board analysis.
Drivers of Change in Health Care IT 8
Beginning of a Fundamental Transformation
Legislation Only One Part of Health Care Reform
Delivery System Reform Timeline
HAC Medicaid
reimbursement
Acute Care stops - 2012
Episode Coverage ICD-10
Core Demonstration Expansion Readmissions Conversion
Measures 2010 2010-2014 Program - 2012 2014
SGR1
1997 2016
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Never Physician Group Meaningful Shared Bundled
Events Practice Use Savings Payment
Campaigns Demonstration 2011-2015 Program Program
2005 2012 2013
1) Sustainable growth rate. Source: Advisory Board analysis.

5. Drivers of Change in Health Care IT 9
Toward Accountable Care
New Incentives, Greater Risk Characterize Industry Transformation
Strategic and Operating Imperatives
Management Fee for Accountable
Imperative Service Care
Optimize performance within the Optimize performance across settings
Accountability
facility and time
Redirect acute-care utilization to lower
Utilization Maximize acute-care utilization
acuity settings
Physician Align economically to drive Align economically to manage shared
Partnerships acute-care volumes risk
Technology Win clinical technology “arms Wire the health system for
Investments race” coordination and collaboration
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Centralize and co-locate acute- Widely distribute primary care and
Facility Strategy
care services preventive services
Invest in only as an “avoidable Develop high-performance partner
Care Coordination
losses” strategy network across continuum
Manage inpatient cost trend
Expense Management Drive care to lowest-cost setting
below revenue growth trend
Source: Advisory Board analysis.
10
Road Map
1 Drivers of Change in Health Care IT
2 State of the Industry
©2012 THE ADVISORY BOARD COMPANY • 25191A
3 Where We’re Headed

6. 11
Second of Three Increasingly Complex Stages
Data Capture and Sharing Advanced Clinical Processes Improved Outcomes
Stage 1 Stage 2 Stage 3
• Increase implementation and • Increase exchange of health • Drive use of real-time data at the
adoption of electronic health information point of care
record (EHR) systems • Demonstrate care coordination • Use outcomes-focused clinical
• Capture structured data across sites of care quality measures
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• Empower patients with health • Utilize clinical decision support
information for prevention, disease
management, and safety
Source: HITPC Meaningful Use Workgroup, Stage 3 Subgroups; Medicare and Medicaid
Programs; Electronic Health Record Incentive Program-- Stage 2 Proposed Rule at
http://www.ofr.gov/OFRUpload/OFRData/2012-04443_PI.pdf; IT Strategy Council analysis.
State of the Industry – Acute Care EMR Adoption 12
Stages of EMR Adoption
HIMSS Analytics EMR Adoption Model, Q1 2012
Percent of
Stage Description Hospitals At
Stage
Q3 Q2
2009 2012
Complete EMR; CCD transactions to share data; Data warehousing; Data
7 0.5% 1.7%
continuity with Emergency Dept, ambulatory, Outpatient venues
Physician documentation (structured templates) on one inpatient unit, full clinical
6 1.2% 6.5%
decision support (variance and compliance), full radiology PACS
5 Closed loop medication administration fully implemented on one inpatient unit 4.8% 11.5%
4 CPOE and clinical decision support implemented in at least one inpatient unit 4.1% 13.3%
©2012 THE ADVISORY BOARD COMPANY • 25191A
Nursing/clinical documentation (flow sheets) on one inpatient unit, clinical decision
3 40.4% 42.4%
support (error checking in pharmacy), image access outside radiology dept.
Clinical data repository, controlled medical vocabulary, clinical decision support
2 29.8% 11.7%
capability, may have document imaging; HIE capability
1 All three ancillary systems installed 7.1% 5.1%
0 Not all ancillary systems (lab, radiology, pharmacy) installed 12.1% 7.9%
Source: HIMSS Analytics™

7. State of the Industry – Health Information Exchange 13
Towards Higher Levels of Interoperability
”
Definition of Interoperability
“In health care, interoperability is the ability of different information technology
systems and software applications to communicate, to exchange data accurately,
effectively and consistently, and to use the information that has been exchanged.”
NAHIT, 2005
Process
• Assumes Semantic
interoperability
Semantic • Includes shared process
• Assumes Syntactic interoperability definitions and inter-participant
Degree of Difficulty
• Requires participants to use the workflow orchestration
same reference terminologies
• Requires mapping to a reference
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information model
Syntactic
• Based on agreement on how to parse the content exchanged
• Generally sufficient for human use of the exchanged content
• Computer use requires a mapping between the terminologies used by the
participants – this acknowledges the (very real) possibility of different meanings
associated with mapped terms (semantic ambiguity)
Increased Usefulness of Interoperability
Source: NAHIT, 2005 and Advisory Board research and analysis.
State of the Industry – Health Information Exchange 14
HIE Market: Everyone Wants to Get into the Act!
Representative
Category Strengths Challenges
Examples
Established client base of IDSs, Competing EMR vendors
Acute EMR Epic, Allscripts,
some experience with ambulatory, will not play in the
Vendors Cerner, GE…
lab and payer integration “sandbox”
CareFx, Covisint,
Built for HIEs, have connectors and Often reliant on grants
dbMotion, ICA,
adapters to most ambulatory and and government-based
HIE Vendors Intersystems,
lab systems, support for non-sustainable funding
MobileMD, Orion,
centralized and federated models sources
RelayHealth
Knows networking and Lack of clinical HIE
Carriers Verizon, AT&T
communications experience
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Existing extensive national
Fee structures not
Specialty Surescripts, Emdeon backbone connectivity with
popular for HIE
providers, payers
Experienced with transaction
United Health/Axolotl, Payer “parents” not
Payers networks/clearinghouses – now
Aetna/Medicity trusted by providers
extending into provider space
Source: Advisory Board research and analysis.

8. State of the Industry – Health Information Exchange 15
Direct Project – Information Sharing
Incremental Improvements
”
Today’s Technology –
FAX Direct Project Announcement
from ONC
“The Direct Project specifies a simple,
secure, scalable, standards-based way
Direct Project -
for participants to send authenticated,
E-mail Attachments encrypted health information directly to
known, trusted recipients over the
Internet.”
©2012 THE ADVISORY BOARD COMPANY • 25191A
Connect Project –
XDS Documents The Direct Project Overview,
11 October 2010
Source: Advisory Board research and analysis.
State of the Industry – Protected Health Information Breaches 16
More Than Just Incentives At Stake
Breaches Are Costly and Destroy Trust
Quintuple Whammy from a Breach
Redspin’s 2011 Report on Breaches
385 breaches of protected health information (PHI)
19,016,894 patient health records affected
$??? M $1,000 per patient seems to
be the metric for lawsuits
49,396 average # of patient records per breach in 2011, Maximum annual penalty
an 80% increase over 2010
59% of all breaches involved a business associate
$1.5 M from HHS due to HIPAA
violations
39% occurred on a laptop or other portable device
Cost to solve single case
25% occurred on a desktop PC or server
60% resulted from malicious intent (theft, hacking)
$20,663 of medical identity theft*
97% increase in total records breached, 2010-2011 Potential loss of Meaningful
76% increase in records breached involving a business
associate, 2010-2011
$??? M Use money due to HIPAA
violation
525% growth in records breached due to loss 2010-2011
” $??? M Cost to your reputation
©2012 THE ADVISORY BOARD COMPANY • 25191A
Daily Disclosures of Breaches are Becoming Alarming – It’s “When,” not “If”
Some of the latest include Stanford Hospital and Clinics (20,000 patients’ data posted to the
web; sued for $20M), Tricare (SAIC – 4.9M patients’ data lost; sued for $4.9B), Fairview Health
Services and North Memorial Health System (Accretive Health – 16,800 total patients data
stolen), Nemours (1.6M total individuals’ data lost); UCLA Health System (16,288 total patients'
data stolen).
*Miliard, M, “Medical Identity Theft on the Rise,” Healthcare IT News,
March 15, 2011, available at:
Redspin Breach Report 2011, Protected Health Information, http://www.healthcareitnews.com/news/medical-identity-theft-rise
www.redspin.com (accessed 17 February 2012 (accessed March 30. 2011)

9. State of the Industry – ICD-10 17
ICD-10 versus ICD-9
Explosion of Granularity
Diagnosis Procedure
72,000
69,000
14,300 12,500
3,800
0
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ICD-9-CM
” ICD-10-CM ICD-10 (WHO) ICD-9-PCS ICD-10-PCS ICD-10 (WHO)
ICD-10 CFO Survey respondents who expect to lose revenue
through transition:
• 28 % predict revenue loss between 6% and 10%1
• 23 % anticipate revenue losses to last one to two years1
1) Shaw, HealthLeaders Media, 7/26/11.
State of the Industry – Use of Mobile Technologies 18
Mobility-Enabled Business Process Management
Who is waiting on what from who?
Patients and
Physician Families
Nurse
When can we pick up Mother?
When will I get When will I get that order
those lab results?  Medication reconciliation from the physician to give
this pain medication?
 Medication administration
 Discharge processing
 Bed management
 Billing
©2012 THE ADVISORY BOARD COMPANY • 25191A
Pharmacist
Transport
What shall we do about When can I wheel this
this medication conflict? cranky old man to the
Administration pick-up area?
When can we
get this bill out?
Source: Care Advisory Board interviews and analysis.

10. State of the Industry – Electronic Data Warehousing 19
Business Intelligence Framework
Business Intelligence is key to developing a
thoughtful system of care out of the organic,
ad hoc processes that we have today.
3
2 Prescriptive:
What should we do?
Degree of Difficulty
Beware the Predictive:
False Summits! 1 What might happen? Analyze the Actions
• Mathematic Models
Descriptive: Analyze the Future
What happened? • Linear Programming
• Statistical models
• Constraint Programming
Analyze the Past • Correlation Analysis
• Reports and graphs •
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Forecasting
• Dashboards • Simulations
Three levels of BI maturity with
• Drill down/around each level more difficult and
more advantageous than the last.
Degree of Competitive Advantage
State of the Industry – Movement in the Market 20
State of the Enterprise Vendors
You Win Some, You Lose Some…
Number of Hospitals Gained/Lost, 2005–2011
458 204
160 41
©2012 THE ADVISORY BOARD COMPANY • 25191A
15
56 57
Source: HIMSS Analytics Database.

11. 21
Road Map
1 Drivers of Change in Health Care IT
2 State of the Industry
©2012 THE ADVISORY BOARD COMPANY • 25191A
3 Where We’re Headed
Where We’re Headed – IT Budgets Going UP 22
Spending Up, But Return Down
Where We’re Headed—IT Budgets Going UP
IT as a Percentage of Total Breakdown of Capital Spending
Capital Spending
In Thousands
Moody’s-Rated Hospital,
In Thousands
• Remote computing
• Edge solutions
$34,824
• Image storage
Liquidating
• Outsourcing the asset
Total IT D&A Expenses
$33,249 Costs
Return on Invested Capital
©2012 THE ADVISORY BOARD COMPANY • 25191A
40%
8%
12%
6.6%
2008 2009
2008 2009
Source: Moody’s Preliminary Medians for Not-for-Profit Hospitals,
April 2010; Advisory Board analysis.

12. Where We’re Headed - The Great Risk Shift 23
Toward Accountable Payments
Building Accountability Through Experiments in Payment
Capitation/Shared-Savings Models
Episodic Bundling
Degree of
Shared Risk Hospital-Physician
Bundling
Pay-for-
©2012 THE ADVISORY BOARD COMPANY • 25191A
Performance
Care Continuum
Source: Health Care Advisory Board interviews and analysis.
Where We’re Headed – It’s All About Change 24
Emphasis on Change Management Is Essential
Under-Adoption, Under-Utilization, Sabotage Not Desirable Options
Technology Adoption ”
The application of human Change
Management principles to technical
projects, such as Electronic Medical
Records or ICD-10 implementation.
Claire McCarthy
It’s Always About People
• Only 1/3 of change initiatives
©2012 THE ADVISORY BOARD COMPANY • 25191A
Human
achieve success. Users determine
Change + success or failure of project.
Management Process • Change is messy. People start
where they are, not where we
want them to be. Get to hearts
+ EMR and minds to develop willingness
and ability.

13. Where We’re Headed 25
The Intelligent Enterprise
Prescriptive Predictive
Models Models
Operational
Data Store Exploration,
Rules Engine
Real-Time Update visualization,
and analysis tools
Active Archive Data Marts
Detailed data
Data Warehouse
Processing-Oriented
Operational Systems
Fact and
RCM Dimension
Tables Detailed
Transaction
EMR data Summarized
Information
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Extract Detailed data Fact and
HIE Snapshot
Dimension
Fact and Tables Metadata
CMS Dimension
Systems
External
Tables
CIN
Cleaned Standardized, Consistent
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