Disruptive Innovative Healthcare Business Models

Report
Healthcare Financial Management
Association Autumn Institute
Dayton, Ohio
“Innovative Disruptive Healthcare
Business Models-Are you Ready?”
Jon Burroughs, MD, MBA,
FACHE, FACPE
September 25, 2014
Thought leaders who have paved the way…
O.D. Fjeldstad, Norwegian School of
Management
Charles Stabell, GeoKnowledge
Regina Herzlinger, Harvard Business School
Clayton Christensen, Harvard Business School
Jerome Grossman, Harvard Kennedy School of
Health Care Delivery/Policy
Jason Hwang, Innosight
What’s the problem and what is the root cause?
• We spend almost twice as much as every other
industrialized nation ($9,200 per capita) with relatively
weak quality metrics to show for it (37th in overall health,
39th infant mortality, 36th life expectancy* etc.)
• We tolerate an unacceptable variation in quality, safety,
service, and cost (up to 1000%)
• Our national debt is $15.2 trillion with a virtual debt of $65
trillion (24% SS, 16% interest on debt, 14% Medicare, 9%
Medicaid)
• GAO: To balance the budget by 2040-cut federal spending
by 60% or raise taxes 2.5 times
*Source: NEJM 2010: 362:98-99.
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 E.A., 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.
Life expectancy at birth and health spending
per capita, 2011 (OECD)
Life expectancy in years
1.1.3. Life expectancy at birth and health spending
per capita, 2011 (or nearest year)
85
CHE
ITA
JPN
ISL
AUS
ESP
ISR
SUE
FRA
AUT
PRT
KOR
NZL
GRC
80
GBR
NLD
NOR
LUX
CAN
FIN
DEU
IRL
SVN
BEL
DNK
USA
CHL
CZE
POL
EST
SVK
75
TUR
HUN
MEX
BRA
CHN
70
IDN
65
Information on data for Israel:
http://dx.doi.org/10.1787/888932315602.
Source: OECD Health Statistics 2013,
http://dx.doi.org/10.1787/health-data-en; World Bank for nonOECD countries.
RUS
IND
0
1000
2000
3000
4000
5000
6000
Health spending per capita (USD PPP)
7000
8000
9000
R² = 0.51
Unsustainable Costs…
• IOM: $765 B in waste ($310 B inefficient delivery,
$210 B unnecessary services, $190 B excess
administrative, $55 B missed prevention
opportunities)
• Healthcare costs up 28% over past five years for large
employers
• >25% of family income will go to healthcare (2015)
• >75% of healthcare spending from chronic diseases
based upon behavioral issues (50%)(exercise, eating,
smoking, drinking, compliance with EBPs)
Disproportionate Costs…
• Top 1% make up 23% of healthcare costs
(critical care and dying)
• Top 5% make up 49% of healthcare costs
(multiple chronic diseases)
• Top 10% make up 64% of healthcare costs
(chronic diseases)
• Bottom 50% make up 3% of healthcare costs
(healthy population)
What is the essence of healthcare
reform? World Class Quality and
Low Cost!
• Global competition for world class quality,
safety, service at the lowest possible cost
•
Medical Tourism is the fastest growing
industry in healthcare (2006-2012: $20 billion
to $120 billion and expected to double every
two years)
•
Resources: Woodman, Josef, “Patients
Beyond Borders: Everybody’s Guide to
Affordable World Class Medical Travel”, 2013,
www.patientsbeyondborders.com
Typical story:
Paul H., Texas: Executive needing meniscus
surgery of knee. Couldn’t find facility to do it
under $32,000 or with epidural. Went to JCI
accredited hospital in Monterrey, Mexico and
paid $6,200 (including first class
travel/accommodations/nursing) for Texas
trained surgeon/anesthesiologist to perform
procedure under epidural
What do you consider your service area?
Iowa/Illinois, the Mid-West, or the world?
Large employers are moving
forward:
1. Greater cost sharing from defined benefit to defined
contribution towards purchase on public/private
insurance exchanges
2. Create and contract through narrow/tiered networks for
high quality/low cost providers
3. Provide disease management programs for high risk
pool and health wellness programs for all to reduce
costs and enhance productivity
4. Reference based prices for high cost procedures/care
5. Utilize navigators/registries to guide employees
through the system
6. Create and contract through ‘centers of ‘excellence
bundled payment program
Domestic medical tourism:
Walmart’s “Centers of Excellence” for all
heart, spine, and transplant surgeries for its 2.2
million associates ($466.1 billion in revenues):
1. Cleveland Clinic, Cleveland, OH
2. Geisinger Medical Center, Danville, PA
3. Mayo Clinic in Rochester, MN/Scottsdale,
AZ/Jacksonville, FL
4. Mercy Hospital Springfield, Springfield, MO
5. Scott and White Memorial Hospital, Temple,
TX
6. Virginia Mason Medical Center, Seattle, WA
Is there a difference in performance
when physicians and staff work
together?
Measurement MHMD CI
Physicians
LOS
4.52 (5%)
Crimson-All
Hospitals
4.74
HAIs
0.68% (91%)
7.56%
General
1.24% (66%)
Complications
30 Day
5.92% (43%)
Readmissions
Mortality
1.95% (23%)
2.82%
10.38%
2.52%
Third party payers are moving
forward
What AETNA did when it saw this data:
1. Requested to negotiate a new contract with
MHMD
2. Offered a 8% increase in FFS payment with a
guarantee of 3% next year minimum
3. With 10% movement of ‘share’ to the system,
committed $7.5 million to physician pool and
$8.0 million to system pool in bonuses
4. Committed to invest in a comprehensive
marketing program to compete with United and
BCBS
Third party payers are partnering
with healthcare organizations
• Models of Partnership between Healthcare Systems
and Insurers:
Full ownership (e.g. Geisinger Health System)
Partial ownership (e.g. Baystate Health + Health New
England)
Partnership (e.g. North Shore Long Island Jewish
Health System + United Health Group)
Contractual arrangement (e.g. Bronx-Lebanon
Hospital Center + Healthfirst)
• United Health will increase payments contingent on
quality and cost-effectiveness from $20 B to $50B
within the next five years
How third party payers incentivize
beneficiaries:
Anthem Blue Cross and Blue Shield
Compass Smart Shopper 800 Line (NH):
CT of the abdomen with contrast ($750-$2,839)
MRI of the knee ($681-$3,597)
Digital mammography ($231-$818)
Ultrasound of the pelvis ($177-$741)
Pick a low cost option, Aetna pays the
beneficiary $75-$150
Pick a higher cost option, beneficiary pays the
total cost up to the deductible/co-payment
How third party payers incentivize
beneficiaries:
Anthem Blue Cross and Blue Cross Site of
Service Benefit (NH):
Get surgery at an ambulatory surgical center
(ASC), the beneficiary pays $75-$100 total
Get surgery at a hospital, the beneficiary pays
the cost up to the deductible and co-payment
Get laboratory services at Quest
Diagnostics/LabCorp/Converge Diagnostic
Services/NorDx, the beneficiary pays $10
Get laboratory services at a hospital, the
beneficiary pays the cost up to the deductible
and co-payment
What’s the challenge? People generally seek to
protect the ‘status quo’-Everett Rogers, “The
Dissemination of Change” (1962)
• 2.5% innovators (outsiders open to new ideas)
• 13.5% early adopters (insiders open to new
ideas)
• 33.5% early majority (imitators of new ideas
that work)(the tipping point)
• 33.5% late majority (resistors that must go
along)
• 17% laggards (‘Holy Crusaders’)
The Pace of Change
Pace of Change
120%
100%
80%
60%
40%
20%
0%
Time
2054 (singularity)
Source: Peter Russell, “Waking Up in Time: Finding Inner Peace in Times of
Accelerating Change (Origin Press, 1998)
The Doubling Time of Healthcare
Information:
1900: 150 years
1950: 50 years
1960: 10 years
1975: 7 years
2010: 3 years
2020: 0.2 years
Current doubling: every 18 months; hence the
transition from ‘eminence’ to ‘evidence based’
healthcare
Clayton Christensen: The
Disruptive Innovation Model
1. The cost of innovation (‘high quality and high
cost’) outpaces the public’s ability and
willingness to pay
2. Less demanding customers find lower cost
and simpler options with easier access that
are ‘good enough’
3. “Good Enough” services diffuse throughout the
system and become the new norm, displacing
the original service
What are the major enablers of disruptive
innovation?
Major Enablers of Disruptive
Innovation
1. Technology to simplify rule based processes
that once required intuitive experimentation
2. Business Model Innovations to provide 24/7
access to high quality/low cost services that
generate a healthy margin (understand the job,
not the product or service)
3. Value Based Network that links
interdependent commercial enterprises to
provide a viable economic model
What do these Disruptive Enablers
Require? The evolution of
healthcare from…..
A. Intuitive Medicine (Expert) (medical problem
solving through intuitive experimentation and
pattern recognition) to….
B. Empirical Medicine (Process) (patterns
emerge to provide credible guidance to
manage more predictably) to….
C. Precision Medicine (Outcome)(evidence
based rules that provide an optimum outcome)
Intuitive Medicine requires
“Solution Shops”
•
Business model that supports the evaluation
and diagnosis of unstructured problems
• Coordinated access to ‘experts’ who solve
complex and intuitive problems based upon
subtle pattern recognition
• Diagnosis results in the creation of
recommended ‘solutions’
What is the problem with the way that
hospitals and physicians traditionally organize
‘solution shops?’
20th Century “Solution Shops”
•
•
•
•
•
Independent autonomous physician model with
hospital as ‘workshop’
Lack of integration and alignment between
specialties with fragmentation and inefficiencies
Lack of integrated information network
Expensive, cumbersome, with high probability
of error (e.g. multiple hand-offs) and delayed
diagnosis/treatment
Reimbursement based upon units of service or
cost (volume)
21st Century “Solution Shops”
•
•
Integrated and organized healthcare network
Completely aligned physicians working in
collaborative multispecialty teams
• Evidence based approaches and processes
(Watson decision analysis support)
• Lower cost with high reliability and more rapid
and efficient development of diagnostic plan
(e.g. solution)
• Reimbursement based upon a cost effective
and successful ‘solution’/plan (value)
Examples: Mayo Clinic (coherent solution shop)
and Cleveland Clinic (clinical institutes)
Precision Medicine requires
“Value Added Processes (VAPs)”
•
•
•
Solutions require an evidence based process to
optimize outcomes
All elements of a VAP are standardized with the
prerogative of physicians to customize when
‘necessary’ (always audited)
Reimbursement based upon a predictable and
optimum outcome
20th Century “Value Added
Processes (VAPs)”
•
•
•
Each physician provides a unique customized
approach to manage a given diagnosis
(solution)
‘Preference cards’ with wide variation in cost,
quality, and outcomes (value)
Institutional tolerance for significant variation
based upon need for volume/revenue
21st Century “Value Added
Processes (VAPs)”
•
One collaborative and standardized evidence
based approach for every significant diagnostic
and therapeutic entity
• Value analysis committee (multidisciplinary) to
minimize and simplify vendors, suppliers, and
technology
• Emergence of new information, evidence,
innovation, technology stimulates real time
collaborative modification of the VAP
Example: London Hernia Center, Heart Center
(Cleveland Clinic)
The Exponential Rise of Chronic
Diseases
•
•
•
•
Intuitive and empirical diseases (undefined) are
acute by definition
Diseases rapidly evolve to ‘chronic’ once they
can be diagnosed and treated with greater
precision (e.g. diabetes, asthma, hypertension)
Chronic diseases increase significantly with
extended life (90% of elderly) (e.g. dementia,
chronic pain)
75% of direct medical costs in US
The Current Healthcare Business
Model cannot support the care of
Chronic Diseases
•
•
•
•
•
FFS codes (ICD-9/10, CPT) are based upon
sicknesses
There are NO codes for clinical improvement,
wellness, or health
Solution shops are not relevant (pre-diagnosed)
VAPs don’t address the majority of
care/interventions needed and are expensive
Most chronic diseases require significant
behavioral change/motivation (non-dependence
on a practitioner)
Chronic Diseases require
“Facilitated Networks”
•
•
•
•
Participants with a common clinical condition
who share information, guidance, and support
(e.g. AA, weight watchers etc.)
Rely heavily on behavioral modification (e.g.
smoking, eating, exercise, medications etc.)
Business model based upon facilitation and
operation of the network with membership fees
(e.g. capitation)
The traditional hospital/physician based
practice counter productive
Innovative “Facilitated Networks”
•
•
•
•
Websites (dLife for diabetes, WEBMD, weight
watchers with personal caloric calculators)
Self-insured employer sponsored disease
management contracts with OptumHealth,
Healthways etc.
Integrated fixed fee providers (Kaiser,
Geisinger) that provide peer based networks
Ingenix health scores with modulated premiums
based upon adherence to evidence based
approaches
Components of a Value Based
Network (commercial ecosystem)
•
•
•
•
•
•
•
Hospitals and independent physician practices
(limited)
Comprehensive ‘solution shops’
Outpatient VAP venues
Facilitated patient networks (chronic diseases)
Integrated networks (capitated fee providers)
HIEs with personal electronic health records
High deductible policies with health savings
accounts
What must the ‘Hospital’ do to
survive?
• De-couple its diagnostic solution shops (high cost),
•
•
•
•
therapeutic VAPs (moderate cost), and health
maintenance facilitated networks (low cost) to focus on
value through ‘focused factories’ (business within a
business)
Lower overhead burden rate = overhead cost/direct labor
cost (focus on the JOB!)
Manage costs (labor, supply chain, direct variable) in real
time through business analytics
Focus on domestic and international medical tourism
(market share for high quality/low cost)
Take the solution to the patient!
80% of Healthcare Services
will be Cloud Based!
For $49, a doctor will see you now –
online (Boston Globe, December 6,
2013)
American Well unveils a new service
that connects consumers directly to
physicians through their mobile devices
for advice -- and sometimes even for
diagnoses and prescriptions.
Laboratory Testing:
Theranos Laboratory Testing (“We
require less of you”)
One drop of blood at any Walgreens Wellness
Center with immediate on line reporting of results
to patient and any requested practitioner.
Sample costs:
1. CBC with diff and smear = $5.35
2. Fasting Glucose = $2.70
3. Complete electrolytes = $4.82
4. Cholesterol = $2.99
5. Lipid panel = $9.21
Most of healthcare will take place at
home:
•
•
•
•
Wireless monitoring (vital signs, key laboratory
values) to centralized facility
Implantable monitoring devices (heart, glucose,
respiratory,
Web based services (24/7)
Behavioral psychology (diet, exercise,
nicotine/alcohol dependence, compliance with
evidence based recommendations)
APNs follow evidence based protocols and
algorithms for home based visits and referrals
Patient Centered Care will get very
personal!
•
•
•
Genomic testing with screening for specific
genetic markers
Proteomic testing with screening for specific
cell proteins
Microbiomic testing with screening for specific
micro-organism profiles
Result: A customized healthcare maintenance and
prevention program based upon an individual’s
unique biologic profile.
What must the Physician Based
Practice do to survive?
•
•
•
•
Leverage the physician’s license! (Overhead
burden rate)
Mid-level practitioners for solution shop with
simple algorithms and VAPs
Cloud based technology for transactional
services and facilitated networks
Outsource behavioral based interventions
(chronic diseases) to existing facilitated
networks (www.PatientsLikeMe.com)
Everyone will be Disrupted!
•
•
•
•
•
•
•
Hospitals to ambulatory VAPs and retail outlets
(e.g. MinuteClinic)
Physicians (specialists to generalists) to midlevel practitioners and web-based services
US based services to international medical
tourism
Commercial indemnity carriers to captive/self
insurance programs with private exchanges
Low end to high end disruption
Centralized to decentralized (home based telemonitoring wireless care)
Patient/consumer centered and driven with
24/7 on demand access
Segmented Services for
Different Populations:
1.
2.
3.
4.
5.
6.
Healthy individuals with transactional healthcare
issues: on line services
Healthy individuals with minor acute issues: 24/7
retail clinics staffed by APNs (50,000 by 2020)
Individuals with chronic medical conditions:
PCMHs to facilitated networks and home based
tele-health monitoring services
Individuals with complex undiagnosed problems:
Integrated solution shops
Individuals with significant conditions: Evidence
based VAPs
Terminally ill individuals: Outpatient palliative care
Are you ready for “revolution”
rather than “evolution”?
•
•
•
Leaders with clinical, operational, and financial
vision working together
Separate solution shops, VAPs, and facilitated
networks and rebuild into a value based
network
Reformulate and renegotiate ALL payment
contracts based upon solutions (diagnosis),
optimized outcomes (evidence based VAPs),
and the optimization of health (membership
fees)
A sobering thought….
“If you don’t like change, you are going to
like irrelevance even less.”
----General Eric Shinseki,
Former Chief of Staff, US Army and
Secretary of Veteran Affairs, VA Hospital
System
Questions and Discussion
Thank You for Joining Us!
Jon Burroughs, MD, MBA, FACHE, FACPE
[email protected];
603-733-8156

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