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<p>Major Forces Affecting Healthcare 11 Basics: Why Healthcare is Different, and Complicated Healthcare is different from most other industries because the supplier of the product sets the demand for the product. IE, the MD tells the patient that he/she needs a lab test, a MRI, a THA, etc. So you don't have those simple independent demand and supply curves that economists love so much. It is if you went into McDonald's and the voice on the drive thru speaker told you your order as opposed to you telling them. 12 Affordable Care Act ("ACA" aka "Obamacare") Risk, Value and Transparency Political Power of Key Players Baby Boomer Demographics Four Forces of Flight Forces Affecting Healthcare (that I'm qualified to speak to. Excludes clinical aspects: clinical advancements in care, gene therapy, shift to outpatient, etc.) 13 Political Power = Unequal Playing Field Pharmaceutical companies: Medicare is forbidden to negotiate the price it pays for Rx Medicare pays 40% more on average than the V.A. for the same Rx We pay $450 wholesale per dose for Synvisc One, could buy it over the counter from Canada for $150 retail. Insurance companies got all they wanted out of the ACA Plenty of $ to be made at 80% loss ratio Hospitals: Blocking specialty hospitals and slowing move to outpatient surgical setting. CON laws are antiquated and stifle innovation. In what Econ 101 model does restricting supply not raise cost? MD's: Fragmented and academic vs. private practice conflict = no real effective voice at the table. Descending Order of Power14 A quick digression: Pharmaceutical Companies Drug Goes From $13.50 a Tablet to $750, Overnight http://www.nytimes.com/2015/09/21/business/ahugeovernightincreaseinadrugspriceraises protests.html?ref=business The drug, called Daraprim, was acquired in August by Turing Pharmaceuticals, a startup run by a former hedge fund manager. Turing immediately raised the price to $750 a tablet from $13.50, bringing the annual cost of treatment for some patients to hundreds of thousands of dollars. Cycloserine, a drug used to treat dangerous multidrugresistant tuberculosis, was just increased in price to $10,800 for 30 pills from $500 after its acquisition by Rodelis Therapeutics. Scott Spencer, general manager of Rodelis, said the company needed to invest to make sure the supply of the drug remained reliable. He said the company provided the drug free to certain needy patients. In August, two members of Congress investigating generic drug price increases wrote to Valeant Pharmaceuticals after that company acquired two heart drugs, Isuprel and Nitropress, from Marathon Pharmaceuticals and promptly raised their prices by 525 percent and 212 percent respectively Pigs get fat, hogs get slaughtered? "During his campaign for president, Donald Trump sounded a lot like Bernie Sanders on one policy issue: He promised to implement sweeping government reform to lower drug prices and called Big Pharma executives "disgusting" for profiting off lifesaving medication" No, we just got fooled again: News Item: President Trump's plan to lower prescription drug prices, a key issue during his 2016 election campaign, may end up being friendly to drug companies, according to a new report. Politico reports that the Trump administration is struggling to make progress on an executive order related to drug pricing and that the order will not allow the government to negotiate drug prices or allow importing of cheaper drugs from other countries, both solutions Trump proposed during his campaign. Analysts who follow politics for investment banks see the struggles as signs that a broad shift in government policy towards drug pricing is not coming, which would be good for the drug industry. 15 Political Power = Unequal Playing Field Takeaway: The less political power, the more at risk 16 Key 1.inpatient prospective payment system (IPPS) 2.outpatient prospective payment system (OPPS) 3.ambulatory surgical center (ASC) 4.clinical laboratory fee schedule (CLFS) 5.Physicians (MPFS) The Monster: the Baby Boomers 17 Baby Boomer Effect: Orthopedics CMS has never been really able to control utilization in a meaningful way. 1965 1985: cost plus reimbursement of hospitals meant that the marginal revenue curve and marginal cost curve never crossed, the incentive was to increase costs. Politically they can't address the Takeaway: Longterm unfunded obligations in Medicare and Social Security alone reached nearly $49 trillion, adding to the national debt of $20.4 trillion, or more than $160,000 for every person in the U.S. 18 ACA: Two big flaws 19 1. Penalty for failure to enroll in the plans was not high enough to induce young healthy people to enroll to offset the sick people brought into the ACA with elimination of preexisting conditions and life time limits 1. High Deductible Plans combined with Health Savings Accounts will lead to smart shoppers! Lower premium would fund a health savings account (H.S.A. Plan) H.S.A plan leads to price comparison and focus on preventative care So what if the young people didn't enroll? 20 DK answer: how many skinny Cosby Kids (healthy young people) does it take to balance out Fat Albert (one sick person) on the teeter totter? So what if the young people didn't enroll? 21 Therese: "ahem, Cosby Kids, no longer politically correct" DK answer: "Ok, prepare for graphs Normal vs. PreACA Market 22 Imposing preexisting condition restrictions and life time limits, lopped off the right hand side of the curve. So, costs were managed by excluding the people who needed it most from the market. My buddy, and the cancer survivor at the town hall ACA Theory vs. PreACA Market 23 Healthy young lowcost people are going to offset the high cost preexisting and lifetime limit people and H.S.A.'s and other innovations will lower the overall height of the curve saving $$$!! ACA Theory vs. Reality 24 Healthy young lowcost people are going to offset the high cost preexisting and lifetime limit people and H.S.A.'s and other innovations will lower the overall height of the curve saving $$$!! The Death Spiral 25 Take Away: some data shows the market stabilizing, but if Trump starves the program by refusing to fund the subsidies, the ACA will collapse: see following The Death Spiral 26 ACA: High Deductible/H.S.A Theory 27 High Deductible/H.S.A Reality: 28 29 As an employer: My employer raised the deductible from $2,500 to $5,000 but lowered the premium $200 per month, or $2,400 Dave was so proud: Dave: "Dear Employees if you take that $2,400 in premium savings and fund a H.S.A. plan, you get that H.S.A. $2,400 pretax, so you save the taxes on $2,400. And if you don't spend the $ in the Health Savings account, you can use it next year. I am a hero!!!" Employees: "you raised my deductible!" Dave: "but if you you take that $2,400 in premium savings and fund a H.S.A. plan, you get that H.S.A. $2,400 pretax, so you save the taxes on $2,400. See, here is the math Employees: "you raised my deducible" Reality: employees took the $200 per month premium savings and spent it on other things. As a provider: Trying to get patients to pay their deductibles is like prying teeth Dave's Experience Take Away: Increased deductibles = hidden tax on providers, and employees have very short term thinking when they have short term bills to pay 30 9/23/15 New York Times: Insurance Deductibles Outpacing Wage Increases, Study Finds http://www.nytimes.com/2015/09/23/business/healthinsurancedeductiblesoutpacing wageincreasesstudyfinds.html?ref=todayspaper&_r=0 But the steady upward creep in health insurance deductibles has easily outpaced the average increase in a worker's wages over the last five years, according to a new analysis released on Tuesday by the Kaiser Family Foundation. Kaiser, a health policy research group that conducts a yearly survey of employer health benefits, calculates that deductibles have risen more than six times faster than workers' earnings since 2010 But asking employees to cover more of their medical bills through high deductibles raises questions about whether some workers, especially those with expensive, chronic conditions, are being discouraged from seeking the care they need.* Some are making difficult choices about what care they can afford. About two years ago, Beth Landrum, a 52yearold teacher, who is insured through her husband's job as an engineer, saw the deductible on her family's plan increase to $3,300 a year. Ms. Landrum decided to delay having the M.R.I. her doctor recommends she get every three years. Ten years ago, she had a noncancerous brain tumor that required surgery and radiation. "My doctor's really mad at me because I haven't had the M.R.I.," she said, but she and her husband say they need to save toward the cost (*Note to economists: people do not act rationally. Public Policy PHD's: please note real world results vs. your perceptions.) Rising Deductibles and Effect on Pt. Behavior Take Away: If delayed care is more expensive care in the long run, then what effect will this have on ACA savings projectons? 31 From the great Mike Royko ACA Takeway Risk, Value and Transparency: but First a History Lesson 32 History of Reimbursement Hospitals: 1965 to early 1980's: Feds: we'll pay you "Cost Plus 5%" ("aren't we clever!") Economist: "production expands until marginal cost = marginal revenue, therefore if you set revenue as a function of cost, the marginal cost curve and marginal revenue curve never cross and production expands indefinitely" Hospitals: "hey, the more I spend, the more $ the government gives me" Result: An expansion of healthcare beds and costs beyond anyone's wildest estimates Hospitals: Mid 1980's 2010 Feds: DRG (episode of care) payment for inpatient care replaces (largely) Cost Plus, with carve outs (I/P rehab, SNU, other) Hospitals: Good results: reduce length of stay, admits per 1,000 reduction Not so good results: cut costs (nursing aids replace RN's), earlier discharge = readmission issues, cost shifting: I/P rehab, SNF 33 History of Reimbursement CMS to SNF's: "We are only going to pay at the higher rate if your patients are getting lots of physical therapy." Result: In an August 16 article, the Wall Street Journal published an analysis it conducted showing that the use of the ultrahigh category of rehabilitative therapy under Medicare's reimbursement system for skilled nursing facilities increased sharply from 2002 to 2013. Although the article acknowledges that many patients do require this level of care, it also demonstrates how some nursing homes inappropriately use the ultrahigh category to maximize reimbursement from Medicare, without considering the needs of the patients or the clinical judgment of the therapists See more at: http://www.aota.org/Publications News/AOTANews/2015/AOTAAPTAASHARepond WSJArticleTherapyUtilizationNursing Homes.aspx#sthash.oB8w4m5E.dpuf 34 For MD's: CMS Just Cuts the Rate RVU Conversion Rate: 35 Historical Reimbursement: Takeaway Like antibiotic resistant bacteria, providers have mostly countered every effort by CMS to manage cost and utilization. Enter: Risk, Value and Transparency.. 36 Orthopedic Bundled Payment Hinsdale Ortho starting a BP program July 1 "Anchor admit" is hospital DRG = fixed price = limited rist So, all good for implant costs as they are not on our radar screen since it doesn't affect the DRG p All the savings is in SNF, Readmits, and inpatient rehab 37 Orthopedic Bundled Payment Hinsdale Ortho starting a BP program July 1 "Anchor admit" is hospital DRG = fixed price = limited rist So, all good for implant costs as they are not on our radar screen since it doesn't affect the DRG p All the savings is in SNF, Readmits, and inpatient rehab 38 Accountable care =toothless tiger Insurance companies will basically outsource the insurance risk to providers I leave 39 Episodic Risk: Bundled Payments Hinsdale Ortho starting a BP program July 1, 2015 "Anchor admit" is hospital DRG = fixed price = limited risk All the savings are in SNF, Readmits, and inpatient rehab, readmission Benchmark relative cost per episode of care: THA 40 HOASC Results 29% 3% 68% Overall SNF/IRF Admissions: Current SNF IRF HH or Home 43% 14% 43% Overall SNF/IRF Admissions: 2014 CMS SNF IRF HH or Home SNF Performance 12.91 37.5 0 10 20 30 40 CURRENT 2014 CMS DATA Total SNF Length of Stay (all facilities) 10.24 15.15 8.79 0 0 5 10 15 20 PREFERRED NON PREFERRED Preferred vs. Non Preferred Performance Less Fx/Trauma All Cases SNF Selection: For those patients who admit to SNF: 39% Non Preferred Providers (n=24) 61% Preferred Providers (n=37) LOS is down significantly, but data is early (small N) and comparison is against a year's average in 2014 *4 cases of fx/trauma to outside providers with data unavailable on LOS Preferred providers are managing to the expectations set forth 43 Bundled Payments.. 44 Next Horizon for Providers: Modifiable Risk Factors 45 Next Horizon for Providers: Modifiable Risk Factors 46 Next Horizon for Providers: Modifiable Risk Factors 47 Could such a high risk screen have avoided these costly cases? Collectively, the overwhelming outliers for all MD's are related to cognition or psychosis. There are several pts with cardiac surgeries and at least 3 who required gallbladder removal surgeries. Real life cases: Total Episode Cost: $146,445. Patient with history of Myasthenia Gravis, who had a flare up following surgery. Resulted in 2 readmissions, ICU admission, IRF, SNF, HH, and significant OP Medicare Part B medical costs. Total Episode Cost: $79,717. Patient had no orthopedic complications from the THA surgery, but postop required 3 readmissions for a cardiac stent placement, pancreas/gallbladder disorders, and gallbladder infection/removal. Total Episode Cost: $67,134. Preop, patient had abnormal EKG, but was still cleared for surgery by PCP. (No documentation of stress test, chest xray was negative). Had an acute STEMI with cardiac catheterization POD 1. Required significant inpatient/ICU costs followed by IRF. Total Episode Cost: $51,438. Elective TKA with history of psychosis had 3 readmissions related to depression and psychosis following surgery. No orthopedic complications of the TKA, but all additional costs related to depression and drug abuse. Multiple examples of patients with episode costs >$50,000 directly related to dementia or cognitive status deficits, requiring prolonged SNF stays due to increased fall risk or inability to safely return home or to memory care units. Next, Next Horizon on Value Based Reimbursement As we (my group) think about commercial bundle applications, we are looking at these concepts and how they might come into play. Research VBID: not new, but applicable https://en.wikipedia.org/wiki/ValueBased_Insurance_Design Research Block Chain applications in healthcare: obvious application in managing information needed to manage risk: https://www.ted.com/talks/don_tapscott_how_the_blockchain_is_changing_mon ey_and_business?utm_campaign=ios share&utm_medium=social&source=email&utm_source=email https://hbr.org/2017/03/thepotentialforblockchaintotransformelectronic healthrecords 48 Risk TakeAways Need to transition from a fee for service or "butts in beds" skillset to a "management of risk" skillset (at an episode level and/or population level) Just a few years away Health Plans provide actuarial, customer services, provider network, and claims payment services Providers in PHO/Clinical Integration structures take on the insurance risk But, will a decentralized block chain care model fundamentally alter healthcare in ways we can't imagine today? 49 Value Employers/CMS: "What are we getting for our healthcare $'s?" DK definition of Value = Outcomes dived by cost However, since we still have a long way to go to define and measure outcomes, we have quality measure surrogates: Alphabet soup of "quality measures": MU2, MU3, PQRS, etc: Pro: can't manage what you can't measure Con's: patient care may suffer as providers manage the measures instead of patient care Out of step measures: From: http://healthaffairs.org/blog/2015/06/23/thecorequality measurescollaborativearationaleandframeworkforpublicprivatequalitymeasurealignment/ "Today, however, these measures still focus on processes, such as whether a person with diabetes had their hemoglobin A1c (a person's average blood sugar level over the past three months) measured. Although process measures provide some insight into the provider's provision of care, they do not answer the most important question: did the care result in an optimal health outcome? Instead of quantifying the percentage of people with diabetes who had their hemoglobin A1c measured, the focus should be on the percentage of people with diabetes who effectively control their disease and complications. In a health care ecosystem where patients are responsible consumers, outcomes measures must provide needed transparency and serve as the most effective tool for quality comparisons" Crudeness of the data gathering: Foot and Ankle MD mortality rate example 50 Value Employers and CMS: What are we getting for our healthcare $? 51 Outcomes Linked to Patient Experience 52 Value TakeAways: Current measures may be flawed, but you are being measured will continue to be so Transparency Alphabet soup of "quality measures": MU2, MU3, PQRS, etc: TakeAway's: At best: somewhat misguided attempt to enforce a once size fits all chronic care management measures on all providers: what is relevant for chronic diabetic care is not relevant for orthopedics. Middle ground: more )(&*()%% government regulatory b/s Cynical view: concerted attempt to impose a 5% to 7% price reduction in the guise of impossible to meet "quality measures" At worst: patient care may suffer as providers manage the measures instead of patient care. Bottom line = more downward pressure on reimbursement 53 Transparency: Price Pew MD complication rates and dr. vargo mortality case study Internet ratings Outcomes. Registries Accountable care vs. medicare advantage 54 Transparency: Price Pew MD complication rates and dr. vargo mortality case study Internet ratings Outcomes. Registries Accountable care vs. medicare advantage 55 Transparency: Price Pew MD complication rates and dr. vargo mortality case study Internet ratings Outcomes. Registries Accountable care vs. medicare advantage 56 Transparency: Price Pew MD complication rates and dr. vargo mortality case study Internet ratings Outcomes. Registries Accountable care vs. medicare advantage 57 Transparency: Regulatory Pt. Satisfaction 58 Aside: Angry lady story Transparency: Internet Ratings 59 Transparency: Internet Ratings 60 Transparency: Internet Ratings 61 Transparency: Public Policy Groups https://projects.propublica.org/surgeons/ Internet ratings Outcomes. Registries Accountable care vs. medicare advantage 62 Value, Transparency Takeaway's If Value is a Outcomes divided by Cost then improving outcomes or reducing costs will increase value. Which do you think is easier? Which do you think Payors care more about? DK: if providers don't fight for outcomes over cost reduction, than who will? 63 Questions.. 64 Appendix 65 Something to subscribe to: 66 One Word: Blockchain 67 1 As we think about commercial bundle R VBID: not new, but applicable https://en.wikipedia.org/wiki/ValueBased_I Research Block Chain applications in healthcare: obvious application in managing information: https://www.ted.com/talks/don_tapscott_how_the_blockchain_is_changing_mon ey_and_business?utm_campaign=ios share&utm_medium=social&source=email&utm_source=email https://hbr.org/2017/03/thepotentialforblockchaintotransformelectronic healthrecords One word: "blockchain" </p>
