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Slide 1: Top Trends for 2009 Webinar: December 9 and 18, 2008 Peggy Cella Senior Principal Peggy.cella@noblis.org 678.728.6747 Presented by: Amy MacNulty Senior Principal amy.macnulty@noblis.org 781.482.4072 Center for Health Innovation © 2008 Noblis, Inc.
Slide 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 "The future will be determined in part by happenings that it is impossible to "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." foresee; it will also be influenced by trends that are now existent and observable." 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
Slide 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
Slide 4: Despite Historical Trends – Utilization will Be Stable or Decline in All But Strongly Growing Markets US Population (298.8M) grew by 16% Between 1993 and 2006 Discharges (39.5M) grew by 28% Discharge/1,000 population (116.9) declined by 3% 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 2006 Medicare discharges grew by 17% No change in private insurance discharges Share of admissions through EDs increased from 38% to 44% 3
Slide 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 admissions for the three months admissions for the three months ended 9/20/08 compared to the ended 9/20/08 compared to the previous year. previous year. “The possibility of putting off an expensive “The possibility of putting off an expensive surgery or other major procedure has not surgery or other major procedure has not become a frequent topic of conversation become a frequent topic of conversation with patients.” with patients.” Dr. Ted Epperly, family practice Boise, Idaho Dr. Ted Epperly, family practice Boise, Idaho AHA 2008 Survey of more than 700 CEOs in late 2008 reported that 31% of hospitals surveyed had experienced a decrease in elective procedures in the past three months. In addition, 38% of hospitals surveyed reported a decrease in admissions during the same period. DATABANK’s preliminary 3rd quarter 2008 data (557 hospitals) reported 3rd quarter patient visits (discharges, surgeries, ED visits) as flat or declining relative to the same quarter of 2007. A survey of 112 nonprofit hospitals found that A survey of 112 nonprofit hospitals found that overall inpatient admissions were down 2 to 3 overall inpatient admissions were down 2 to 3 percent compared with a year earlier. More than percent compared with a year earlier. More than 60 percent reported flat or declining admissions. 60 percent reported flat or declining admissions. September 2008 Survey by Citi Investment September 2008 Survey by Citi Investment The University of Pittsburgh Medical Center The University of Pittsburgh Medical Center has not seen a drop in patient admissions but has not seen a drop in patient admissions but reports that growth is tailing off. reports that growth is tailing off. Robert A DeMichiee, CFO Robert A DeMichiee, CFO Hospital admission growth for Hospitals in Hospital admission growth for Hospitals in the State of Florida in 2007 was the lowest in the State of Florida in 2007 was the lowest in years with a growth of only 0.4%, accounting years with a growth of only 0.4%, accounting for just over 9,000 new admissions in the for just over 9,000 new admissions in the entire state. entire state. Shands Health Care cited the poor Shands Health Care cited the poor economy and lower patient demand economy and lower patient demand when it announced in October that it when it announced in October that it would shutter one of its eight hospitals. would shutter one of its eight hospitals. “The numbers are down in the “The numbers are down in the past month, there’s no question past month, there’s no question about it.” about it.” Dr. Richard Friedman, Beth Israel Medical Dr. Richard Friedman, Beth Israel Medical Center Center “More than half of chronically ill patients in the “More than half of chronically ill patients in the U.S. reported at least one cost-related access U.S. reported at least one cost-related access problem, such as not filling prescriptions, problem, such as not filling prescriptions, skipping doses, not visiting a physician when skipping doses, not visiting a physician when sick, or not getting recommended care. sick, or not getting recommended care. Health Affairs, doi: 10.1377/hlthaff.28.1.w1(Survey conducted Health Affairs, doi: 10.1377/hlthaff.28.1.w1(Survey conducted in 2008 and Published online November 13, 2008) in 2008 and Published online November 13, 2008) 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
Slide 6: Consumers Will Continue to Redefine Value to Include Communication, Information, Access, and Outstanding Service Before Timely appointments/ short wait times Convenient access During After What Patients/Families Expect in Inpatient & Outpatient Care Ease of navigation Minimum uncertainty/ worry Communication Confidence in excellence of care Same day reports Painless billing A “fair” price 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 "Cyberchondriacs,“ Harris Interactive website (July 31, 2007). 5
Slide 7: Consumers Seeking Knowledge and Information Via Web Resources 6
Slide 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
Slide 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 tube, and send it to the lab. 3.CLIA-certified lab analyzes your DNA in 4-6 weeks 4.Log in and start exploring your genome. 8
Slide 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 − “expected to experience explosive growth over next 3-5 year − “Outbound” - 39% would go abroad for elective procedure to save money Gen Y 51.1%, Boomers 36.7%, Seniors 29.1% Medical Tourism Association – Three Tenets: − Transparency, Communication and Education − 2nd World Medical Tourism & Global Health Congress October 26th – 28th, 2009 in Los Angeles, CA California Medical Tourism Facilitators Turkey Check your Midnight Express stereotypes at the door - this is a rapidly modernizing country with one foot in Europe and one in the Middle East. It's not all oriental splendor, mystery, intrigue and whirling dervishes but it is a spicy maelstrom of history knocking up against a pacy present. Source: Medical Tourism, Consumers in Search of Value, The Deloitte 2008 Survey of Health Care Consumers, Deloitte Center for Health Solutions. 9
Slide 11: Primary Reasons for Medical Travel Driver* Cost Savings Explanation Cost of procedure is much less than in the patient’s home country (e.g., United States). Waiting times for procedure can be much longer in home country, 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 approved, or in clinical trials in the patient’s home country. Some patients value the exotic destinations or luxurious accommodations in the destination country. Some patients (especially celebrities) may be concerned about their privacy if the procedure is performed in their home country. Improved Access Procedure Not Available Tourism/Vacations Privacy and Confidentiality 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. "This is a leap of faith, obviously, to say if you go to India, we'll pay for the whole shebang," said Linda Buntrock, Serigraph's senior vice president of human resources. "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
Slide 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
Slide 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
Slide 14: IHI Framework for Engaging Physicians in Quality and Safety Discover Common Purpose Reframe Values and Beliefs Segment the Engagement Plan Use “Engaging” Improvement Methods Show Courage Adopt an Engaging Style “To bring these two worlds into alignment, both parties have to be interested in making good-faith efforts to understand each other’s point of view and needs.” 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 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
Slide 15: Focus: What strategies are being used to strengthen physician-hospital alignment, and which strategies are most effective? Hospital Perspective Disconnect between leadership and practicing physicians Of the 10 most effective strategies, half involved employing physicians Physician Perspective Similar leadership disconnect Information systems critical Source: Noblis/AHA, Strategies for Strengthening Physician-Hospital Alignment: A National Study, 2006; ACPE Member Survey 2008 14 14
Slide 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 nonemployed 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
Slide 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 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 New wave of employment different than late ’80s and early ’90s: − − − − − − − 16
Slide 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… 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 CMS: “The right care for every person every time” 17
Slide 19: Providers Will Have to “Earn” What They Make…. Medicare’s Shifting Priorities and Other Payers Seeking Value Change Coding for Severity of Illness Effect 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
Slide 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
Slide 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 Patient Care Margin EBITDA Margin Target Greater than 0.0 percent At least 4.0 percent Reason If hospital cannot earn profit on patient care services, it must rely on non-patient care sources of funding 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
Slide 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 6.1% same quarter last year. Investment losses…. Cutback made or considered: − Administrative costs (60%) − Reducing staff (53%) − Reducing services (27%) Interests payments increased on average by 15% Facility investments reconsidered or postponed − Plans to increase capacity (56%) − Delay purchase of clinical technology or equipment (45%) − Put off investments in new IT (39%) Hospitals feel the pain of recession By Richard Pizzi, Editor , 11/01/08 As economy slows, tax receipts decrease both at federal and state levels. All states will have issues, some hit harder than other: Florida and California some of the hardest hit. Survival in economic downturn will depend on gaining operational efficiency in the near time. 21
Slide 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
Slide 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 About one-quarter of all community hospitals continue to operate “in the red.” Negative patient margins are being supplemented by other sources (e.g., investment income, philanthropy, etc.). The capital markets view healthcare with increasing scrutiny. Capital Needs Construction of new health care facilities expected to reach $60 billion by 2010. Most CFOs expect their hospital’s capital spending to increase in the next 4 years. The top 3 most commonly cited capital projects all focused on IT: - Digital Radiology Systems - CPOE Systems - 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
Slide 25: Prior to Recent Economic Crisis: Factors Driving the Boom in Hospital Construction At the end of 2005, construction of new hospitals and clinics was valued at $22 billion By 2010, construction of new healthcare facilities expected to reach $60 billion Percentage of Hospital’s Capital Budget Allocated to Construction Projects in 2008 (Projected) Key Drivers Aging facilities Increasing patient volumes New technology Need for single rooms Changing patient populations Increasing competition 24% 51% 25% New Construction Facility Modernization Other Hospital-physician alignment Consumerism Source: “Healthcare construction and capital implications,” HFMA, February 2008; “Health construction rolls right along,” H&HN, March 2008. 24
Slide 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? Median Average Age of Plant 1990 - 2006 12 10 8 6 4 2 0 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 9.3 8.9 9.2 8.6 8.8 8.4 7.9 8.0 8.2 9.2 9.4 9.7 9.8 9.8 9.8 9.9 9.7 Short-Term Focus Delay implementing master plans Essential renovations and technology Maximize capacity with improved efficiency Longer horizon for most projects Re-phasing and reprioritizing Source: The Almanac of Hospital and Financial Operating Indicators, 1994, 1997, 2006, 2008 25
Slide 27: Organizations Will Need to Consider a Variety of Options to Finance Construction How Organizations Are Financing Construction Projects 33% 29% 28% 21% 46% Existing Cash Reserves Tax-Exempt Bonds Operations Philanthropy Other Debt Source: “Health construction rolls right along,” H&HN, March 2008. 26
Slide 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
Slide 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 uncompen sated care for the sam e period. (January 7, 2008) 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
Slide 30: Uncertainty: Impact of Economy on Total Margin in 2009 Economy? There are “winners” and “losers” in every kind of market U.S. Hospital – Total Margin 10.0% Industry Perspective What model will work in 2009? 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% 1996 1997 1998 1999 2000 2001 Median 2002 2003 2004 2005 75th Percentile 25th Percentile Source: “Almanac of Hospital Financial and Operating Indicators,” Ingenix, 1998-2007. 29
Slide 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 August 13, 2008 August 19, 2008 August 21, 2008 August 26, 2008 August 22, 2008 August 26, 2008 August 29, 2008 Hospital Muhlenberg Regional Medical Center Plainfield, NJ Trinity Hospital Erin, Tennessee Renaissance Hospitals (5 Hospitals) Texas Century City Hospital Medical Center Los Angeles, CA North Oakland Medical Center Pontiac, Michigan Hawaii Medical Center Honolulu, Hawaii Status Ceased all inpatient services citing mounting financial losses in the face of decreased federal and state funding Competing bids for assets from Restoration Health Care, Erin, Tennessee, and a subsidiary of Rural Healthcare Developers, Plantersville, MS Filed Chapter 11, cost overruns and the collapse of capital markets drained the system’s resources Closed on August 27, 2008 Proposed sale to newly formed physician-owned for-profit company Restructuring, seeking to emerge from bankruptcy 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
Slide 32: What Steps are Hospitals Taking to Avoid Closure Staying on top of finances − Delaying capital projects and equipment purchases − Targeting cash flow efforts − Converting indigent to Medicaid payment – but will State coffers support the expected increased demand? − Aggressively managing bad debt − Auctioning hospital debt Did NY State get Did NY State get it right by it right by proactively proactively addressing addressing overbedding and overbedding and access in their 2006 access in their 2006 Recommendations Recommendations to reform Hospitals to reform Hospitals and Nursing and Nursing 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
Slide 33: In a Nut Shell No More Money No Super Hero Limited Options MERGER 32
Slide 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 midlevels Nursing vacancies may lessen somewhat Union activity will increase 33
Slide 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 the downturn in the economy the downturn in the economy According to a 2007 Merritt Hawkins Survey: According to a 2007 Merritt Hawkins Survey: 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 next one to three years next one to three years Plan to retire 14% Plan to retire 14% Plan to seek a medical job in a 7% Plan to seek a medical job in a 7% non-clinical setting non-clinical setting Plan to seek a job or business 3% Plan to seek a job or business 3% 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% Plan to work part-time 7% Plan to work part-time 7% Plan to close their practice to new 8% Plan to close their practice to new 8% patients patients Plan on taking a combination of the 7% Plan on taking a combination of the 7% above steps above steps Physician Population is Aging 47% of 47% of physicians are physicians are over age 50 over age 50 36% of 36% of physicians are physicians are 65 or older 65 or older Source: 2007 Survey of Physicians 50 to 65 Years of Age, Merritt Hawkins & Associates, 2007 34
Slide 36: Declining Utilization – Little Relief for the Current Shortage Physician Shortage is a Result of Both Increasing Demand and Shrinking Supply Increasing Demand Aging population Growing population Longer life spans Prevalence of chronic disease Physician Physician Shortage Shortage Shrinking Supply Aging physician workforce Changes in practice patterns Education system constraints Need for Physician Workforce Planning 35 35
Slide 37: Part-time Medicine and Nursing while Popular May Provide Relief Between 2005 and 2007, there was a 46% increase in the number of physicians working part-time % of All Physicians Practicing Part-time 18.1% 17.2% 14.0% 14.5% 13.1% 14.5% Women represent 50 percent of US medical students 7.6% 8.6% 24% of female physicians of age less than 50 years work part-time vs. 29 or 30 – 34 35 – 39 40 – 44 45 – 49 50 – 54 55 – 59 less 60+ 2% of male physicians Age Groups Top Reason to Work Part-time MEN – Unrelated professional or personal pursuits WOMEN – Family responsibilities (including pregnancy) Source: 2007 Physician Retention Study, Cejka Search and AMGA; “Will There be Enough Doctors”, HealthLeaders, October 2007. 36
Slide 38: A Shift in the Mix of Care Providers with Greater Use of MidLevels – 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 20,000 10,000 0 1995 1995 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Applicants Graduates 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
Slide 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
Slide 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 84,200 Projected Shortage of Nurses in 2020 2003 vs. 2008 765,000 18,700 285,000 2006 2007 Source: “The nurse staffing outlook gets brighter,” Modern Healthcare, May 1, 2008. 2003 2008 39
Slide 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, "We are seeing a temporary lessening of the nursing shortage," but, "as soon as the economy turns up, we'll see them staying home again." The Washington Post examined how hospitals across the U.S. have begun addressing nursing shortages "by introducing technology to dramatically reduce paperwork, offering more flexible hours, reducing caseloads, paying for advanced training and giving [nurses] more authority" 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 "dismal economy" – nurses are working longer hours to make up for unemployed spouses, according to the Post – hospitals are "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," 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
Slide 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 results of this election "The results of this election will determine whether we'll will determine whether we'll be able to grow the union be able to grow the union for nurses or whether we'll for nurses or whether we'll be on the defensive. “ be on the defensive. “ Betsy Marville, RN Betsy Marville, RN SEIU Website SEIU Website − − The Sisters of St. Joseph of Orange are The Sisters of St. Joseph of Orange are clashing with a union that wants to clashing with a union that wants to organize at a chain of hospitals the nuns organize at a chain of hospitals the nuns operated throughout California. SEIUoperated throughout California. SEIUWest hopes to unionize more than 8,000 West hopes to unionize more than 8,000 caregivers, cafeteria works and X-ray caregivers, cafeteria works and X-ray technicians at five hospitals. technicians at five hospitals. By forming the national healthcare union, we will By forming the national healthcare union, we will become the recognized voice of front-line healthcare become the recognized voice of front-line healthcare workers everywhere, fueling our ability to help members workers everywhere, fueling our ability to help members win by uniting more and more workers in our union. win by uniting more and more workers in our union. SEIU Healthcare Website SEIU Healthcare Website “Nurses are excited that we have opportunities with the “Nurses are excited that we have opportunities with the Democrats in power. Issues related to workers’ rights and safety 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”. John Carebian, Executive Director John Carebian, Executive Director Michigan Nurses Association Michigan Nurses Association “Hospitals are aware that unions have “Hospitals are aware that unions have targeted health care as fertile ground for targeted health care as fertile ground for organizing” organizing” Lori Latham, VEEP Michigan Health and Hospital Association Lori Latham, VEEP Michigan Health and Hospital Association Source: Crain’s Detroit Business, November 9, 2008. HealthLeaders Media August 8, 2008. SEIU website. 41
Slide 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
Slide 44: Reform as a National Priority: Stars are Aligning Reform Challenges: First Step: Cost, Coverage or Both Coverage: Comprehensive or Universal Insurance Plans: Private, Public or Both − Expand Medicare and/or Medicaid Altman’s Law “Most Every Constituent Group Supports Some Form of National Health Insurance— But If Its Not Their Version of The Plan Their Second Best Alternative Is To Maintain The Status Quo.” Stuart H. Altman, Heller School for Social Policy and Management, Brandeis University − 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
Slide 45: Reform Initiatives on Many Fronts Obama Policy Economy first priority. Connect improving economy with health reform. Greater public responsibility for health care. Many lessons learned from the past – need for compromise. Key Themes: 1) Improve access to care and coverage for all; 2) Control costs, and 3) Improve Quality. “Meaningful” coverage Higher quality/greater value Reduce waste The Healthy Americans Act Portable, affordable, high quality private health care guaranteed for all. Expected in January 2009, call for universal health care Formation of 3 Senate working groups to align leadership 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, 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 on everything from stimulating the economy to fixing health care. With all the economic challenges now facing the country, there is no one better qualified than Peter Orszag to provide the solid numbers and sound advice that the president will need to solve the current crises and get our economic future on track.” Senators Wyden and Bennett Baucus (D-MT) Wyden (D-OR) Bennett (R-UT) Kennedy (D-MA) Pelosi (D-CA) HHS CBO Director to Head White House OMB 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
Slide 46: Proposed Principles for Payment Reform The HFMA report proposes five basic principles for reform: Quality Quality Payments reward high-quality care and discourage medical errors and ineffective care. Payment incentives are aligned among all stakeholders to maximize the efficiency and coordination of health services. Payment systems sufficiently balance the needs and concerns of all stakeholders. Alignment Alignment Fairness/ Fairness/ Sustainability Sustainability Simplification Simplification Payment systems are simplified, standard, and transparent. Societal Societal Benefit Benefit The resources needed to support societal benefits of the healthcare system are identified and paid for explicitly. Source: Healthcare Payment Reform: From Principles to Action; Healthcare Financial Management Association, 2008. 45
Slide 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 − Shift financing from “opaque bulk 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 Indiv.& Families Section 125 plans Young Adults Small Biz. 5 Sources: Nancy Trumbull, Professor, Harvard School of Public Health; “Mass. Model of healthcare reform, hurdles, boston.com, 11.6.08. 46
Slide 48: Preventive Care – Medicare Demonstration Projects Name Description Tests a variety of care coordination models to reduce hospitalizations, improve health status, and reduce overall healthcare costs for chronically ill beneficiaries. 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 chronic conditions. 2005 CMS will test a variety of models including structured chronic care programs, increased provider availability, and flexibility in site settings. Three-year medical home demo in up to 8 states which will pay care management fees to physicians overseeing implementation of care plan for persons with multiple chronic illnesses. Under Development Implemented Medicare Coordinated Care Demonstration 2002 Care Management for High-Cost Beneficiaries Medicare Medical Home 47
Slide 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, postdischarge 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
Slide 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
Slide 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
Slide 52: Center for Health Innovation at a Glance STAFF LOCATIONS Atlanta Area 404.231.4422 (voice) 404.231.4423 (fax) SERVICES Strategy Development Strategic and business plans Strategic thinking facilitation Affiliation planning Portfolio assessments Marketing plans & market assessments Denver, CO 303.954.8644 (voice) 312.751.8782 (fax) Service Line Planning Service line business plans and structures Demand/financial modeling Physician linkages Ann Arbor, MI 734.944.7524 (voice) 734.944. 7534 (fax) Portland, OR 312.751.4173 (voice) 312.751.8782 (fax) Governance Defining governance roles Governance structure and best practices Board education and development Financial Assessment Acquisition, divestiture & merger analyses Multi-year financial projections Financial feasibility studies Determination of financial capability Capital allocation assistance Austin, TX 512.784.8616 (voice) 512.301.9466 (fax) St. Louis, MO 314.726.4879 (voice) 314.721.8695 (fax) Regulatory Planning CON/DON assistance Expert testimony Boston Area 781.482.4050 (voice) 781.863.5657 (fax) Virginia Beach, VA 757.284.1177 (voice) 800.420.5295 (fax) Performance Innovation Labor productivity Clinical resource management Margin improvement Hospital acquired conditions avoidance Customer service/patient satisfaction Small hospital turnkey assessments Post-Acute Strategy Strategic planning Operational improvement/turnaround Compliance Chicago, IL 312.751.8800 (voice) 312.751.8782 (fax) Washington DC Area 703.610.1001 (voice) 703.610.2453 (fax) Physician Strategy Physician-hospital alignment Medical staff development planning Physician practice/organization planning Facility Planning Master facility planning Concept of Operations Functional/operational space programming Capacity and throughput planning Cleveland, OH 216.789.0041 (voice) 216.932.1852 (fax) West Springfield, MA 413.732.3366 (voice) 413.732.7711 (fax) www.noblis.org http://www.noblis.org/hc/HealthInnovation.asp 51
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