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DAVID BURIK
APRIL 6, 2016
2016 HEALTH SYSTEM
“CONSUMERISM” CHECKLIST
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1
2
3
Do trends in “major industries with highest
employment” matter?
Can a typical Health System C Suite trust their
gut when it comes to consumer behavior?
Do you think UBER may have greater impact on
your health system beyond getting patients to the
hospitals?
Let’s triangulate on our topic through the discussion of three questions
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Q1 DO TRENDS IN MAJOR INDUSTRIES WITH HIGHEST
EMPLOYMENT MATTER?
MAJOR INDUSTRIES WITH HIGHEST EMPLOYMENT, BY STATE - 1990
http://www.bls.gov/opub/ted/2014/ted_20140728.htm
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MAJOR INDUSTRIES WITH HIGHEST EMPLOYMENT, BY
STATE - 1992
http://www.bls.gov/opub/ted/2014/ted_20140728.htm
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MAJOR INDUSTRIES WITH HIGHEST EMPLOYMENT, BY
STATE - 2002
http://www.bls.gov/opub/ted/2014/ted_20140728.htm
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MAJOR INDUSTRIES WITH HIGHEST EMPLOYMENT, BY
STATE - 2012
http://www.bls.gov/opub/ted/2014/ted_20140728.htm
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WHAT ARE THE RAMIFICATIONS OF THIS SITUATION?
Over the long haul, can a service sector be funded at richer levels than the sectors
it serves?
Requires increasing government subsidy or increasing proportion of
household income
Commercial insurance and cross subsidy was built on the back of solid, well paid,
benefit-rich manufacturing jobs. That foundation appears greatly diminished.
How can state and local governments continue to have their largest employers NOT
pay taxes?
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Q2 CAN A TYPICAL HEALTH SYSTEM C SUITE TRUST THEIR
GUT WHEN IT COMES TO CONSUMER BEHAVIOR?
How many of you drive
Toyota Camry
Toyota Corolla
Honda Accord
Nissan Altima
Honda Civic
Ford Fusion
Hyundai Elantra
http://www.caranddriver.com/flipbook/10-most-cars-here-are-the-bestselling-cars-in-america-for-2015
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Q3 DO YOU THINK UBER MAY HAVE GREATER IMPACT ON YOUR
HEALTH SYSTEM BEYOND GETTING PATIENTS TO THE HOSPITAL?
Page 9
Interface Companies Are The Fastest Growing, Most Profitable Companies In History
“Own” valuable customer relationships
Low operating costs
Exploit “market inefficiency”
Used with permission from Dave Johnson 4sight Health
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LIKE MANY DISRUPTIVE INNOVATIONS, INTERFACE
COMPANIES ARE SLOW TO TACKLE US HEALTHCARE
But recognize private equity abounds to fund companies like:
Ignore vs make vs buy-
These firms typically seek to
serve nationally. Can you
compete with a home grown
app serving only your region?
Should you partner? Invest?
http://www.beckershospitalreview.com/hospital-management-administration/25-disruptive-healthcare-companies-to-watch.html
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US CONSUMERS, IF GIVEN THE OPPORTUNITY…
Will interface companies,
exchanges, Medicaid managed
care, Medicare Advantage put
this information in usable forms
for consumers at the
time of purchase?
1
2
… generally respond to
price and quality data /
perception
… generally respond to
a favorable experience
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Sources: See Navigant’s Retail Health Issue Brief
RETAIL HEALTH IS A $900 BILLION SECTOR AND GROWING
Cost
Accessibility
Transparency
Lifestyle
Industry Acceptance
+67% Deductible
increase 2010-2015
$4.4bAnnual savings,
shifting 27% ER
visits to clinics
Convenient locations, online
scheduling, walk-in visits
Pricing is transparent and simple
Whole-person wellness is mainstream
http://kff.org/report-section/ehbs-2015-summary-of-findings/
http://content.healthaffairs.org/content/29/9/1630.full
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ARE THERE CONTRARIANS HERE AMONG US?
• First $ coverage is coming back!
• Folks don’t want to use their handhelds
for something like healthcare!
• People do not shop on price for their
healthcare or health insurance
• That healthy lifestyle stuff is a fad for
the privileged few!
• Payers and employers are starting to
see the benefit of shouldering double
digit health insurance expense
increases
• You just can’t measure good
healthcare!
Samuel Brannon“The real money’s in
the shovels, not the gold”
San Francisco, 1849
Copernicus“It’s the Sun I tell you"
King Camp Gillette“Sell the razors cheap
and the blades dear”
Henry Ford“The airplane takes
off against the wind,
and not with it”
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SO LET’S DRIVE DEEPER INTO THE NEW HEALTH CARE
“CONSUMERISM” FROM A PRAGMATIC PERSPECTIVE
Section
1Section
2Section
3
Managed care is embracing Medicare and
Medicaid and is intending greater consolidation
than providers
Medical consumers have skin in the game, but
there are conflicting signals of the impact of that
Primary care is the focus of great innovation
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PROFESSIONALS MAY INITIALLY VIEW CONSUMERISM AS A
WAY TO BUILD VOLUME RATHER THAN RECOGNIZE IT AS A
CHALLENGE TO THEIR FRANCHISE
Eric Topol, M.D. is professor of
genomics and holds the Scripps
endowed chair in innovative medicine.
He is the director of the Scripps
Translational Science Institute in La
Jolla, California. Previously, he led the
Cleveland Clinic to its #1 ranking in
heart care, started a new medical
school, and led key discoveries in heart
disease.
John Koster, M.D. recently retired as
the CEO of Providence Health &
Services (33 hospitals, 5 states). He
was selected as one of Modern
Healthcare’s 50 Most Influential
Physician Executives
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Sources: See Navigant’s Retail Health Issue Brief
9 IMPACT ZONES OF RETAIL HEALTH
• Preference
Driven Tests &
Procedures
• Fitness & Health
Coaching
• Probiotics &
Nutrition
• Complementary
Health
• Medication &
Vitamins
• Core:
Information &
Social Networks
• Retail Primary
Care
• Individual
Insurance
• Payment
Services
• Personalized
Diagnostics
Today’s Focus
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MANAGED CARE IS TAKING OVER GOVERNMENT-FUNDED
HEALTHCARE
Medicaid Managed Care Today: A Most Unlikely “Market Maker”
Data as of September 2015
http://kff.org/other/state-indicator/medicaid-enrollment-by-mco/#
State Medicaid MCOTotal Medicaid
MCO Enrollment
Arizona 11 Plans 1,461,410
California 22 Plans 9,866,313
Florida 18 Plans 3,071,647
Hawaii 5 Plans 338,477
Illinois 12 Plans 1,592,118
Indiana 3 Plans 1,006,759
Kentucky 5 Plans 1,153,063
Louisiana 5 Plans 975,289
Massachusetts 6 Plans 841,361
Michigan 12 Plans 1,610,382
Minnesota 9 Plans 758,054
Mississippi 2 Plans 498,108
Missouri 3 Plans 444,526
New Mexico 4 Plans 649,606
New York 24 Plans 4,665,309
Ohio 5 Plans 2,337,645
Oregon 16 Plans 948,388
Pennsylvania 9 Plans 2,076,361
South Carolina 7 Plans 697,378
Tennessee 4 Plans 1,460,130
Texas 19 Plans 3,499,476
Washington 6 Plans 1,379,840
West Virginia 4 Plans 364,481
Wisconsin 20 Plans 755,261
24 States
&
42.5 million
Enrollees
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MEDICARE IS SERIOUS ABOUT THE VALUE TRANSITION
January 26, 2015 HHS announced explicit goals for alternative payment models
and value-based payments
In March 2016, it reached the 30% APM goal - - nearly 1 year ahead of schedule
http://www.hhs.gov/about/news/2016/03/03/hhs-reaches-goal-tying-30-percent-medicare-payments-quality-ahead-schedule.html
2014($362 B)
2015($380 B)
2016(Est. $386 B)
2018(Est. $401 B)
FFS Actual
(%)
FFS Actual
($)
FFS Actual
(%)
FFS Actual
($)
FFS Goal
(%)
FFS Goal
($)
FFS Goal
(%)
FFS Goal
($)
Using
Alternative
Payment
Models
20% $72 B 30% $117 B 30% $116 B 50% $201 B
FFS
Payments
with Quality
Component
80% $290 B N/A N/A 85% $328 B 90% $361 B
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NATIONAL PAYER LANDSCAPE COULD CHANGE
DRAMATICALLY
“Anthem Raises Offer for Cigna; Aetna
Bids for Humana”
June 2015 -- ….Anthem Inc. taking its $47.5 billion bid to buy Cigna in a
contentious move that shows the pressure the big health insurers are under to
quickly find merger partners.
Anthem has offered $184 a share in cash and stock for Cigna. Cigna said it rejected
the offer, calling it “inadequate and not in the best interests of Cigna’s shareholders.”
A key point of contention involves who would run the combined firm.
Anthem’s pursuit of Cigna comes as Cigna as well as Aetna size up Humana, which
has privately offered itself for sale. Aetna in the past few days made a takeover
proposal to Humana, which has a market value of $30 billion, said people familiar
with the overture. UnitedHealth Group Inc., meanwhile, recently made a takeover
approach to Aetna.
The five big managed-care companies are jockeying for deals that will enable them to
become more efficient and better respond to changes in the health-care landscape in
the U.S. brought on by the Affordable Care Act and other developments. Analysts say
it is likely regulators will allow only one or two such combinations, so the firms are
racing to be the first ones to find merger partners.
Sources: “Anthem Raises Offer for Cigna; Aetna Bids for Humana” June 21, 2015, WSJ.
Consolidation of National Payer Entities Will Impact Many Markets
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ALLOW SOME GENERALIZATIONS OF WHAT MANAGED CARE
IS BUILDING
Controlling Pharmacy costs is a major focus
Offer insurance products across the board, moving
from groups to individuals, private and public
Lead providers to value contracts
Develop non insurance businesses (e.g. analytics,
care management) to drive profitable growth and an
ongoing consumer connection.
“My goal is the transformation of the healthcare model in
this country to make it more person-focused and
economically sustainable.”
Mark Ganz
CEO Cambia Health Solutions
Chair, America’s Health Insurance Plans
Modern Health 2/16/15, P. 30
http://www.forbes.com/sites/stevenbertoni/2016/02/22/oscar-health-gets-400-million-and-a-2-7-billion-valuation-from-fidelity/
In 2016 Oscar Health
Insurance received a
$400m investment, at a
$2.7b valuation
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MEDICAL CONSUMERS HAVE SKIN IN THE GAME, BUT THEY
DON’T KNOW WHAT TO DO
Number on exchanges and split gold/bronze, etc.
Interest in private exchanges is growing, by end of 2015, 3% of large employers will provide
their active employees with health insurance through a private exchange while 35% said
they are considering doing so for 2016 or beyond.
o Meantime, 14% of respondents are partnering with a private exchange for their retirees, an
increase from 10% last year. Another 7% are planning to move retirees to private exchanges next
year.
Marketplace Enrollees by Metal Level
https://www.businessgrouphealth.org/pressroom/pressRelease.cfm?ID=234
https://aspe.hhs.gov/sites/default/files/pdf/187866/Finalenrollment2016.pdf
https://aspe.hhs.gov/sites/default/files/pdf/83656/ib_2015mar_enrollment.pdf
https://aspe.hhs.gov/sites/default/files/pdf/76876/ib_2014Apr_enrollment.pdf
Total
Enrollees
Bronze
Plans
Silver
Plans
Gold
Plans
Platinum
Plans
Catastrophic
Plans
2016 12,681,874 23% 68% 6% 2% 1%
2015 11,688,074 22% 67% 7% 3% 1%
2014 8,019,763 20% 65% 9% 5% 2%
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Sources: See Navigant’s Retail Health Issue Brief
441
2007 2009 2011 2013 2015
FOR MANY HOSPITALS, RETAIL CLINICS ARE THE TIP OF
CONSUMER ICEBERG
2,150 Retail
Clinics 10.5m retail clinic
visits
2% of primary care
encounters
100 partnerships
between retail clinics
and health systems
linking care settings,
expanding after-hours
care options and
providing patients with
alternatives to
emergency departments
Trends
https://newsroom.accenture.com/news/number-of-us-retail-health-clinics-will-surpass-2800-by-2017-accenture-forecasts.htm and
http://www.rwjf.org/content/dam/farm/reports/issue_briefs/2015/rwjf419415
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MEDICAL CONSUMERS HAVE SKIN IN THE GAME, BUT THERE
ARE CONFLICTING SIGNALS
Increase in payer responsibility
The percentage of Americans who receive health insurance through employers has fallen
significantly over the last decade—from 68 percent nationwide in 2000 to just 57 percent in
2015, according to a report by the Kaiser Family Foundation
o The report finds that the average total annual premiums for employer-sponsored family coverage
in 2015 is $17,545, up from $6,438 in 2000 ($6,251 and $2,471 for individuals, respectively)
o Of those, the worker’s total annual contribution for family coverage is $4,955 in 2015, up from
$1,619 in 2000 ($1,071 and $334 for individual coverage, respectively)
o 63% of all covered workers in 2015 have a deductible over $1,000, up from 16% in 2006
http://kff.org/health-costs/report/2015-employer-health-benefits-survey/
It’s not just about HC as a % of GDP anymore.
With incomes trending flat, while patient
responsibility trending up, what % of household
income are we heading for?
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PERCENTAGE OF HOUSEHOLD INCOME SPENT ON
HEALTHCARE, TREND 2010-2013
What are included in the Healthcare Expenditure?
Consumer Expenditure health care data are payments (after reimbursement) made directly to
the providers of care, such as hospitals, and payments to third parties, such as insurance
companies, for private group and individual health insurance coverage. Payments to the Federal
Government for Medicare Part B and Part D coverage are also included.
Absolute Value Trend
Year 2010 2011 2012 2013
Percent
Change
2010-11
Percent
Change
2011-12
Percent
Change
2012-13
Household Income before taxes $62,481 $63,685 $65,596 $63,784 1.9% 3.0% -2.8%
Total Household Expenditure $48,109 $49,705 $51,442 $51,100 3.3% 3.5% -0.7%
Healthcare $3,157 $3,313 $3,556 $3,631 4.9% 7.3% 2.1%
% of Pre-tax Income spent on
Healthcare 5.1% 5.2% 5.4% 5.7%
% of Total Expenditure spent on
healthcare6.6% 6.7% 6.9% 7.1%
BLS Consumer Expenditure Survey (2013), Published February 2015. http://www.bls.gov/cex/csxann13.pdf Page 2
http://www.bls.gov/cex/nhe_compare_200710.pdf Page 1
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Sources: See Navigant’s Retail Health Issue Brief
EXCHANGES FOSTER GROWTH IN INDIVIDUAL INSURANCE
Health insurance coverage for those under 65 years old, not purchasing
through an employer or through Medicaid
Trends
+4.7m 12.7m enrolled in
Marketplace coverage
+9.4m 20m with individual
market insurance
Incumbents
Disruptors
http://aspe.hhs.gov/sites/default/files/pdf/83656/ib_2015mar_enrollment.pdf
http://kff.org/private-insurance/issue-brief/data-note-how-has-the-individual-insurance-market-grown-under-the-affordable-care-act/
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Sources: See Navigant’s Retail Health Issue Brief
HIGH DEDUCTIBLES FOSTER GROWTH IN PAYMENT SERVICES
The institutional structures through which patients finance their care
Trends
+6m 43m Americans with
medical debt
+5m27m Americans
contacted by a
collections agency
+22%51% uninsured have
trouble paying medical
bills vs 29% insured
Incumbents
Disruptors
http://www.consumerfinance.gov/newsroom/cfpb-takes-action-against-medical-debt-collector/
http://www.commonwealthfund.org/~/media/files/publications/issue-brief/2015/jan/1800_collins_biennial_survey_brief.pdf?la=en
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STATE OF THE STATE OF HOSPITAL QUALITY METRICS:
EVERYONE WINS!
“No hospital was rated as a high performer by all four national rating systems. Only
10% of the 844 hospitals rated as a high performer by one rating system were rated
as a high performer by any of the other rating systems. The lack of agreement among
the national hospital rating systems is likely explained by the fact that each system
uses its own rating methods, has a different focus to its ratings, and stresses different
measures of performance… Hospital rating systems use a variety of methods for
distinguishing “high” performers from “low” performers, often creating the paradox of
hospitals’ simultaneously being considered best and worst depending on the rating
system used. For example, 43% of hospitals classified as having below-average
mortality by one risk-adjustment method were classified as having above-average
mortality by another method”
Austin et al “National Hospital Ratings Systems Share Few Common Scores And May Generate Confusion Instead of Clarity” Health Affairs March 2015 vol. 34 no. 3423-430
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Sources: See Navigant’s Retail Health Issue Brief
INFORMATION & SOCIAL NETWORKS ARE ACTIVE
The online and in-person communities that allow people to exchange health
and wellness information
Trends
+11% 64% adults own a
smartphone
+10%62% used phone to
research health
condition
+10% 65% adults use a
social networking site
Incumbents
Disruptors
http://www.pewinternet.org/2015/04/01/us-smartphone-use-in-2015/ and http://www.pewinternet.org/files/old-media/Files/Reports/2012/PIP_MobileHealth2012_FINAL.pdf
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PRIMARY CARE INNOVATION:
MEDICAL HOME IS BECOMING ESTABLISHED FOR PATIENTS
NEEDING MUCH CARE
“The PCMH is a model of primary care in which a team of clinicians offers
accessible first-contact care that is personalized, coordinated and comprehensive
and meets most or all of a person's health care needs, including behavioral health”
Rapid adoption of an innovation
http://www.ncqa.org/Portals/0/Events/BehindtheEnhancements_FINAL.pdf
http://www.ncqa.org/Portals/0/Programs/Recognition/PCMH/PCMH-2014_Brochure-web-1.pdf
2013
44 States
20.76 million patients
34,492 clinicians
6,762 sites
2009
18 States
4.95 million patients
1,976 clinicians
383 sites
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PRIMARY CARE INNOVATION:
VIRTUAL MEDICINE IS COMING OF AGE
By 2018, 22 million households will use virtual care solutions, up from less than a
million in 2013.
Average visits among these adopter households will increase from 2 per year in
2013 to 6 per year in 2018, which include both acute care and preventive follow-up
services in a variety of care settings—at home, at retail kiosk or at work.
A majority of money spent in the healthcare industry (75%) is spent on the
treatment of chronic diseases. The National Health Council notes that
approximately 133 million Americans currently have a chronic disease, and the
number continues to increase year by year. Virtual care provides physicians an
easier way to continue monitoring and engaging with chronic care patients while
reducing these costs. Solid link to medical homes.
http://www.forbes.com/sites/ciocentral/2014/04/03/virtual-health-care-visits-will-revolutionize-the-industry-if-we-let-it/
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Sources: See Navigant’s Retail Health Issue Brief
PERSONALIZED DIAGNOSTICS GROWING
Wearable devices, monitors, sensors, and patient-directed medical testing
are a solid link to medical homes
Trends
+46m 72m wearables shipped
worldwide
+$18b$60b targeted
therapeutics and
companion diagnostic
market (est.)
Incumbents
Disruptors
https://newsroom.accenture.com/news/number-of-us-retail-health-clinics-will-surpass-2800-by-2017-accenture-forecasts.htm and
http://www.rwjf.org/content/dam/farm/reports/issue_briefs/2015/rwjf419415
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IHA, one of Michigan’s most recognized multi-specialty physician groups, answers this
question by partnering with Zipnosis:
IHA, will soon launch a profoundly simple online diagnosis and treatment service for people
with straightforward health problems in the Michigan area. This service will connect patients
to IHA clinicians online to receive prompt, high-quality virtual care for common medical
conditions, such as sinus infections, female bladder infections, pink eye, colds and flu—all
for a flat fee payable online.
PRIMARY CARE INNOVATION:
WILL “TRADITIONAL” PROVIDERS (AND PAYERS) “OUT
ACCESS” RETAIL?
How can you give your patients convenient access to mainstream medicine?
• Founded in 2008
• “virtual care solution to empower health care systems with the technology and methodology
to launch their own virtual care service line”
• 90-Day Implementation Guaranteed
Your clinicians, your patients, your brand.
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PRIMARY CARE INNOVATION:
RETAINER-BASED MEDICINE
A typical employed primary care provider might have 2,500 patients, while a
"medium-fee" concierge practice could have 400 to 600 patients.
The number of physicians practicing some form of concierge medicine increased
from 2,400 in 2010 to 3,500 in 2011, according to the American Academy of Private
Physicians.
0.4% of the 817,850 U.S. physicians in 2011
500 patients per concierge physician = 1,635,700 patients = 0.5% of US population use
concierge medicine
42% of Concierge Care Practices are Internal Medicine/Primary Care
27% of Concierge Care Practices are Family Medicine
17% of Concierge Care Practices are Osteopathic Medicine
14% of Concierge Care Practices are Specialty Physicians
Includes pediatric concierge care; neurology; cardiology; urgent care; chiropractic; anti-aging
and hormone replacement; acupuncture; gynecology; dentistry and addiction recovery
medicine
http://www.advisory.com/research/health-care-advisory-board/primers/concierge-care
https://conciergemedicinenews.files.wordpress.com/2013/03/2014-specialty-concierge-medicine-today.pdf
https://www.aamc.org/download/263512/data/statedata2011.pdf4.
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A. Most of us started our careers in a world where integrated physicians were the EXCEPTION.
o Clinic club member
o Faculty practice plans
Independent physicians were the key for most health systems.
Successful management teams were effective in working with successful independent
physicians.
B. Then in the majority of markets albeit due to unique
market factors, physicians increasingly sought
an employment option; and health systems increasingly
became the chosen option. In a fee-for-service (Curve 1)
world, successful management teams were those that were
effective in getting physicians to sell their practices to their system.
C. Then the Curve 2, Value agenda emerged. This “shift upon shift”,
integrate with physicians while going from Curve 1 to Curve 2
is the Journey. Several clients have suggested that doing
both while doing an EHR install/refinement represents a third doll.
Completing these in a patient focused way becomes a fourth doll.
PRIMARY CARE INNOVATION:
PHYSICIANS AND HEALTH SYSTEMS ARE IN A COMPLEX
CHANGE ARENA
The architecture of physician organization is in a generational transition
Patient
FocusedCurve 2EHR Employment
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ALWAYS USEFUL TO PUT US HEALTHCARE IN A STRATEGIC
CONTEXT
D. Increasingly payers are looking to “maintain physician independence” by providing
advantages to contract directly with them (vs. ACO, CIN, PHO etc.) and to many physicians
a good, old fashioned better fee schedule and other economic considerations may be more
attractive than playing with Russian dolls.
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CONSUMERISM IS NOT
Adding a patient hospitality layer to an ineffective & costly delivery system
Implementing an additional loss leader distribution systems to feed inpatient care
IT IS all about making care more accessible (ease of use, affordability) in a
sustainable business model with an ongoing consumer connection. Bear in mind that
at any given time, many of these consumers consider themselves healthy, even if they
regularly take meds requiring a prescription and physician visit.
Competition is at a new level: Who will succeed?
Ongoing
Consumer
Connection
Web/Cloud based
Retail-basedPayor based
Your Health System
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QUESTIONS A DISCUSSION OF CONSUMERISM SHOULD
TRIGGER FOR A HEALTH SYSTEM
1. DO YOU HAVE A MARKET-LEADING PRIMARY CARE MODEL
1b. Are your PCPs generally an adequate “ongoing consumer connection”
1c. What is your system’s virtual care /
mHealth / retail approach?PCP
PCD
?
190M visits/month (more than physician visits)
Economist 10/17/15 p.74
1a. How many people in your community have a PCP?
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QUESTIONS A DISCUSSION OF CONSUMERISM SHOULD
TRIGGER FOR A HEALTH SYSTEM (CONT.)
2. Do your unit costs and imputed pmpms effectively compete for consumers
making individual decisions?
2a. What is your bundling /
packaged price experience?
2b. What is your Exchange
strategy?
2c. Is it time to (re) consider your position of (co)
owning a Health Plan? Or partnering with
a Health Plan?
THE MORE RISK YOU TAKE THE MORE IMPORTANT Q1 BECOMES BECAUSE
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QUESTIONS A DISCUSSION OF CONSUMERISM SHOULD
TRIGGER FOR A HEALTH SYSTEM (CONT.)
3. What consumer segmentation work beyond “Payer Mix” is your health
system experienced with ? e.g.
CHRONICALLY
ILL
FOCUSED
FACTORYACTIVE &
HEALTHY
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SUMMARY:
2016 HEALTH SYSTEM “CONSUMERISM” CHECKLIST
Market-leading Primary Care Model
Ongoing consumer connection
Bundling with service line plan behind it
Exchange strategy
Position on Health Plan ownership/partnership
Defined consumer segments being managed and reported against
Active Medical Home for the appropriate patients