Kayla Sutton Managing director, economic outlook Healthcare’s Economic Outlook.

Kayla SuttonManaging director, economic outlook

Healthcare’s Economic Outlook

2 PROPRIETARY & CONFIDENTIAL – © 2013 PREMIER INC.

Imperative to bend cost curve

Advanced data analytics

Comparative effectivenessresearch

Utilization of productsand services

Employer health benefits/insurance exchanges

Consolidation amonghealth systems

Uncompensated care

Health IT requirements

New care delivery models

Reimbursement cuts

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0%6.8%

7.5%

10.8%

16.5%

16.8%

20.5%

24.3%

28.0%

68.8%

Spring 2012 Fall 2012 Spring 2013 Fall 2013

Source: Premier’s fall 2013 Economic Outlook, Population health: Unlocking the value of healthier communities


Healthcare cost drivers


Health

care

legis

lation

Labo

r cos

ts

Misa

lignm

ent o

f qua

lity a

nd p

aym

ent i

ncen

tives

Overu

tiliza

tion

Lack

of c

linica

l coo

rdina

tion

of c

are

Patien

t dem

and

Health

info

rmat

ion te

chno

logy

Pharm

aceu

ticals

Unjust

ified

varia

tion

in ca

re

Med

ical d

evice

s

New c

linica

l tec

hnolo

gy/e

quipm

ent

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

Fall 2013

Spring 2013

Fall 2012

Spring 2012


Market response from ACA

Provider consolidation

Payer consolidation and information technology acquisitions

Physician groups creating ACOs

Private payer, federal and state payment reforms

New collaborations and partnerships

Changes in employer and employee coverage practices

4Source: Premier’s fall 2013 Economic Outlook, Population health: Unlocking the value of healthier communities


Patient forecasting

5.0%

22.3%

32.7%

32.7%

7.2%

Inpatient forecast

Increase by more than 5%Increase by up to 5%No changeDecrease by up to 5%Decrease by more than 5%

13.2%

47.8%24.6%

10.7%

3.6%

Outpatient forecast

Increase by more than 5%Increase by up to 5%No changeDecrease by up to 5%Decrease by more than 5%



Creating or adopting ACOs

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%26.6%

7.2%

21.0%

11.5% 10.6%

23.1%21.9%

14.3%

18.0%

9.7% 9.7%

26.5%

Fall 2013Spring 2013



Potential ACO Impact

1. Reduced utilization and costs due to incentives

2. Greater demand for proven effectiveness and value analysis of new products

3. Suppliers need to demonstrate value through cost, quality and experience

4. Value will be measured not just at the site of delivery but across the continuum of care

5. Purchasing

6. Supply chain innovation (by-product)



Partnerships for population health management

Other

External hospitals, health systems or non-acute providers at a national level

Public payors (Medicare, Medicaid)

External hospitals, health systems or non-acute providers at a local level

Private payors (commercial)

Large local employers

Local public health or health departments

Health and wellness-focused community groups

Physician and provider leadership within your organization

0.0% 20.0% 40.0% 60.0% 80.0%

3.0%

11.0%

39.0%

39.4%

46.6%

46.6%

51.3%

52.5%

74.2%



Resource dedication for population health

Lifest

yle/w

ellness

coach

ing

Home h

ealth

Transit

ional a

nd/or e

nd-of-l

ife c

are

Patient-c

entere

d medica

l hom

es

Partnerin

g with

payo

rs

Patient r

isk s

tratifi

catio

n

Virtual c

are/te

lem

edicine

Inte

grate

d clin

ical, s

upply ch

ain a

nd financia

l data

Patient r

egistrie

s0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

66.7%

56.1% 54.5% 51.2%

40.2% 39.0% 38.2% 38.2%31.7%



Approaches to using data

Inte

gratin

g clin

ical a

nd cla

ims

data

Predict

ive a

nalytics

Using a

n inte

grate

d data

solu

tion to

reduce

silo

s

Inte

gratin

g supply

chain

and c

linica

l data

Oth

er0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0% 63.8%

44.8% 43.7%36.2%

1.7%



Factors with the greatest influence on supply chain decisions

Other

Commodity prices

Medical device prices

Drug shortages

Comparative effectiveness/value analysis research

Implementing healthcare IT

Integrating the supply chainacross the continuum of care

Reductions in overutilization/variation in care

Cost savings' goals

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%

2.2%

3.9%

7.8%

8.4%

8.9%

7.8%

12.0%

21.8%

27.1%



Medicare Breakeven

$- $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 $160,000 $180,000 0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

140.0%

160.0%

180.0%

200.0%

Average cost per case

Per

cen

t o

f co

st

cove

red

by

CM

S p

aym

ent



Willingness to try non-branded PPI

19.3%

48.1%

29.7%

2.7% 0.3%

Definitely wouldProbably wouldMight or might notProbably would notDefinitely would not



Transradial intervention (TRI) versus transfemoral intervention (TFI) for PCI procedures

In U.S., 10-11% of PCI done using TRI; 50-70% in Europe

Using Premier data, researchers showed benefits from TRI, including:

• Higher patient satisfaction• Increased comfort• Early ambulation

Benefits from TRI allow for safer shift to same-day discharge

Clinical innovation in percutaneous coronary intervention (PCI)


PCI shift to outpatient care

2009 2010 2011 20120%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Percent of PCI Cases Coded as Inpatient or Outpatient

Inpatient Outpatient


Trends impacting supply chains

TrendsFall2013

Spring2013

Fall2012

Increased physician-health system engagement across clinical and supply chain operations

24.8% 29.6% 38.4%

Supply chain integration to align with clinical care, revenue capture and IT across facility/health system

20.1% 10.7% 6.3%

Focus on waste management (e.g., resource utilization,as a means to reduce supply cost)

13.9% 21.4% 17.3%

Comparative effectiveness/value analysis research N/A

10.3% n/a n/a

Centralized purchasing N/A 15.0% n/a n/a

Use of new supply chain metrics/processes

N/A 5.0% n/a n/a

Population health management and care coordination across the continuum

5.6% 7.8% 4.8%

Location and product identification standardization (e.g., GLN and GTIN)

5.3% 1.5% 2.7%



Standardization receiving most resources

IT investments – non-EHR-specific

Data standardization

Comparative effectiveness/value analysis research

Reducing costs for commoditiesproducts

Reducing costs for physicianpreference products

Building relationships withphysicians and clinicians

IT investments – EHR-specific

Product standardization

0.0% 10.0% 20.0% 30.0% 40.0% 50.0%

Fall 2012Spring 2013Fall 2013



Device purchases from multiple vendors

Reliance on line-item versus system pricing

Substantial price difference for devices•Tiered pricing

Little association between volume ordered and pricing of devices

Cardiac rhythm management (CRM) Collaborative


Number of vendors by facility

8%17%

39%

33%

3%

1 Vendor2 Vendors3 Vendors4 Vendors5 Vendors


3 facilities with a cath lab

12 physicians performing CRM implantation (5 of whom employed by health system• Physician champion • Open communication with physicians• Cost & utilization review once per month• Vendor code of conduct:

»Vendor rep with largest volume allowed in lab once per week

»All other vendors allowed in lab once per month

CRM case study


Program to assist smaller facilities in building greater supply chain and operational efficiencies

Improvement in operational efficiency and supply-related revenue capture

Decrease in medical-surgical supply expenses

Facility 1: • 30-bed skilled nursing facility• Decrease in 32% of matched items• 3.27% reduction in annual supply expense

Facility 2: • 75-bed skilled nursing facility • Price decrease in 29% of supply items• 4.89% reduction in total supply expense

E-procurement case studies


Centralized purchasing

46.5%

41.8%

11.7%Yes - we have the capabil-ity and have fully imple-mented centralized pur-chasing across acute and alternate sites

Yes - we have the capabil-ity, but have not fully im-plemented centralized purchasing across acute and alternate sites

No - we do not have the capability for centralized purchasing across acute and alternate sites

Source: Premier’s fall 2013 Economic Outlook, Population health: Unlocking the value of healthier communities22


BARRIERS

Incentives and Barriers to Clinical Integration

Source: Premier healthcare alliance spring 2013 member survey

INCENTIVES► Outcomes-based

measurements (74%)

► Bonuses contingent on achievement of quality outcomes (68%)

► Penalties for readmissions and infections (33%)

► Lack of willingness on part of physicians (29%)

► Difficulties in implementation of cross- continuum EHR (21%)

► Lack of budget to create integration (15%)

► Need for greater incentives to encourage participation (15%)


Supply Mix Index


Premier Hospital - CY11

MSDRGFacility Ave.

Cost per Case Facility Case

Count Premier Top

Quartile

Member Variance to 1st Quartile

Potential Savings

Opportunity 227CARDIAC DEFIBRILLATOR IMPLANT W/O CARDIAC CATH W/O MCC $ 25,711 136 $ 25,152 $ 559 $ 76,008

Tota

l Cos

t

247PERC CARDIOVASC PROC W DRUG-ELUTING STENT W/O MCC $ 11,650 504 $ 9,125 $ 2,526 $ 1,272,891 460SPINAL FUSION EXCEPT CERVICAL W/O MCC $ 22,654 89 $ 18,899 $ 3,755 $ 334,208 470MAJOR JOINT REPLACEMENT OR REATTACHMENT OF LOWER EXTREMITY W/O MCC $ 11,571 581 $ 12,558 $ (987) -

227CARDIAC DEFIBRILLATOR IMPLANT W/O CARDIAC CATH W/O MCC $ 20,447 136 $ 16,634 $ 3,813 $ 518,579

Supp

ly C

ost

247PERC CARDIOVASC PROC W DRUG-ELUTING STENT W/O MCC $ 5,747 504 $ 3,560 $ 2,187 $ 1,102,006 460SPINAL FUSION EXCEPT CERVICAL W/O MCC $ 13,499 89 $ 9,976 $ 3,523 $ 313,519 470MAJOR JOINT REPLACEMENT OR REATTACHMENT OF LOWER EXTREMITY W/O MCC $ 4,940 581 $ 5,500 $ (560) -227CARDIAC DEFIBRILLATOR IMPLANT W/O CARDIAC CATH W/O MCC $ 344 136 $ 161 $ 183 $ 24,920

Phar

mac

y Co

st247PERC CARDIOVASC PROC W DRUG-ELUTING STENT W/O MCC $ 582 504 $ 631 $ (49) -460SPINAL FUSION EXCEPT CERVICAL W/O MCC $ 723 89 $ 426 $ 297 $ 26,458 470MAJOR JOINT REPLACEMENT OR REATTACHMENT OF LOWER EXTREMITY W/O MCC $ 507 581 $ 339 $ 168 $ 97,347

Targeting cost opportunity with clinical data

Premier Regional - CY11

MSDRGFacility Ave.


Count Premier Top

Quartile


Potential Savings


Tota

l Cos

t

247PERC CARDIOVASC PROC W DRUG-ELUTING STENT W/O MCC $ 11,934 611 $ 9,125 $ 2,810 $ 1,716,656 460SPINAL FUSION EXCEPT CERVICAL W/O MCC $ 28,479 548 $ 18,899 $ 9,580 $ 5,250,060 470MAJOR JOINT REPLACEMENT OR REATTACHMENT OF LOWER EXTREMITY W/O MCC $ 16,122 198 $ 12,558 $ 3,564 $ 705,760 227CARDIAC DEFIBRILLATOR IMPLANT W/O CARDIAC CATH W/O MCC $ 18,942 149 $ 16,634 $ 2,308 $ 343,910

Supp

ly C

ost

247PERC CARDIOVASC PROC W DRUG-ELUTING STENT W/O MCC $ 4,196 611 $ 3,560 $ 635 $ 388,211 460SPINAL FUSION EXCEPT CERVICAL W/O MCC $ 16,271 548 $ 9,976 $ 6,294 $ 3,449,331 470MAJOR JOINT REPLACEMENT OR REATTACHMENT OF LOWER EXTREMITY W/O MCC $ 6,136 198 $ 5,500 $ 636 $ 125,861 227CARDIAC DEFIBRILLATOR IMPLANT W/O CARDIAC CATH W/O MCC $ 439 149 $ 161 $ 278 $ 41,434

Phar

mac

y Co

st247PERC CARDIOVASC PROC W DRUG-ELUTING STENT W/O MCC $ 863 611 $ 631 $ 233 $ 142,225 460SPINAL FUSION EXCEPT CERVICAL W/O MCC $ 842 548 $ 426 $ 417 $ 228,461 470MAJOR JOINT REPLACEMENT OR REATTACHMENT OF LOWER EXTREMITY W/O MCC $ 612 198 $ 339 $ 273 $ 54,027

Premier Memorial - CY11

MSDRGFacility Ave.


Count Premier Top

Quartile


Potential Savings

Opportunity 227CARDIAC DEFIBRILLATOR IMPLANT W/O CARDIAC CATH W/O MCC $ 34,900 10 $ 25,152 $ 9,748 $ 97,478

Tota

l Cos

t

247PERC CARDIOVASC PROC W DRUG-ELUTING STENT W/O MCC $ 13,701 166 $ 9,125 $ 4,576 $ 759,647

460SPINAL FUSION EXCEPT CERVICAL W/O MCC $ 27,723 343 $ 18,899 $ 8,825 $ 3,026,817 470MAJOR JOINT REPLACEMENT OR REATTACHMENT OF LOWER EXTREMITY W/O MCC $ 13,989 1,023 $ 12,558 $ 1,431 $ 1,464,219 227CARDIAC DEFIBRILLATOR IMPLANT W/O CARDIAC CATH W/O MCC $ 27,798 10 $ 16,634 $ 11,165 $ 111,645

Supp

ly C

ost

247PERC CARDIOVASC PROC W DRUG-ELUTING STENT W/O MCC $ 7,006 166 $ 3,560 $ 3,446 $ 572,043 460SPINAL FUSION EXCEPT CERVICAL W/O MCC $ 16,984 343 $ 9,976 $ 7,007 $ 2,403,494 470MAJOR JOINT REPLACEMENT OR REATTACHMENT OF LOWER EXTREMITY W/O MCC $ 6,922 1,023 $ 5,500 $ 1,422 $ 1,454,665 227CARDIAC DEFIBRILLATOR IMPLANT W/O CARDIAC CATH W/O MCC $ 345 10 $ 161 $ 184 $ 1,839

Phar

mac

y Co

st247PERC CARDIOVASC PROC W DRUG-ELUTING STENT W/O MCC $ 2,524 166 $ 631 $ 1,893 $ 314,214 460SPINAL FUSION EXCEPT CERVICAL W/O MCC $ 672 343 $ 426 $ 246 $ 84,498 470MAJOR JOINT REPLACEMENT OR REATTACHMENT OF LOWER EXTREMITY W/O MCC $ 407 1,023 $ 339 $ 68 $ 69,700

Premier Medical Center - CY11

MSDRGFacility Ave.


Count Premier Top

Quartile


Potential Savings


Tota

l Cos

t

247PERC CARDIOVASC PROC W DRUG-ELUTING STENT W/O MCC $ 14,225 360 $ 9,125 $ 5,100 $ 1,836,080 460SPINAL FUSION EXCEPT CERVICAL W/O MCC $ 23,618 213 $ 18,899 $ 4,719 $ 1,005,125 470MAJOR JOINT REPLACEMENT OR REATTACHMENT OF LOWER EXTREMITY W/O MCC $ 13,626 215 $ 12,558 $ 1,068 $ 229,576 227CARDIAC DEFIBRILLATOR IMPLANT W/O CARDIAC CATH W/O MCC $ 11,620 68 $ 16,634 $ (5,013) -

Supp

ly C

ost

247PERC CARDIOVASC PROC W DRUG-ELUTING STENT W/O MCC $ 3,926 360 $ 3,560 $ 366 $ 131,634 460SPINAL FUSION EXCEPT CERVICAL W/O MCC $ 12,569 213 $ 9,976 $ 2,593 $ 552,324 470MAJOR JOINT REPLACEMENT OR REATTACHMENT OF LOWER EXTREMITY W/O MCC $ 4,332 215 $ 5,500 $ (1,168) -227CARDIAC DEFIBRILLATOR IMPLANT W/O CARDIAC CATH W/O MCC $ 458 68 $ 161 $ 297 $ 20,197

Phar

mac

y Co

st247PERC CARDIOVASC PROC W DRUG-ELUTING STENT W/O MCC $ 1,269 360 $ 631 $ 639 $ 229,936 460SPINAL FUSION EXCEPT CERVICAL W/O MCC $ 644 213 $ 426 $ 218 $ 46,446 470MAJOR JOINT REPLACEMENT OR REATTACHMENT OF LOWER EXTREMITY W/O MCC $ 488 215 $ 339 $ 149 $ 31,934

4 Premier member hospitals identified over

$17m in savings opportunities in 4 high cost / high volume MS-

DRGs


Capital budget forecasts

Incr

eased b

y 30%

or m

ore

Incr

eased b

y 10%

to 2

9%

Incr

eased b

y 1%

to 9

%

No Change

Decrease

d by

1% to

9%

Decrease

d by

10% to

29%

Decrease

d by

30% o

r more

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Fall 2013Spring 2013 Fall 2012 Spring 2012Fall 2011


Areas of capital investment

Other

Laboratory equipment

Other clinical equipment

Imaging equipment

Surgical suites/equipment

Infrastructure (e.g., construction)

IT and telecommunications

0.0% 10.0% 20.0% 30.0% 40.0% 50.0%

Fall 2011Spring 2012Fall 2012Spring 2013Fall 2013


Inflation estimates

2006 2007 2008 2009 2010 2011 2012 2013 2014

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

CPI - U, Medical care CPI, and IPPS marketbasket rates (2006- 2013)

CPI-U Medical care CPIMedicare marketbasket - inpatient hospital

An

nu

al p

erce

nt

chan

ge


TRJ/CRB index 2008-2013

1/3/

2008

2/28

/200

8

4/24

/200

8

6/19

/200

8

8/14

/200

8

10/9

/200

8

12/4

/200

8

1/29

/200

9

3/26

/200

9

5/21

/200

9

7/16

/200

9

9/10

/200

9

11/5

/200

9

12/3

1/20

09

2/25

/201

0

4/22

/201

0

6/17

/201

0

8/12

/201

0

10/7

/201

0

12/2

/201

0

1/27

/201

1

3/24

/201

1

5/19

/201

1

7/14

/201

1

9/8/

2011

11/3

/201

1

12/2

9/20

11

2/23

/201

2

4/19

/201

2

6/14

/201

2

8/9/

2012

10/4

/201

2

11/2

9/20

12

1/24

/201

3

3/21

/201

3

5/16

/201

3

7/11

/201

30

50

100

150

200

250

300

350

400

450

500

Currently 38% below 2008 peak and 42% above 2009 floor


U.S. monetary policy/quantitative easing

Strength of U.S. dollar compared to other currencies

Resiliency of European Union

Demand from China and emerging markets

Suppliers identified energy, labor and plastic resins as the top cost drivers of raw materials

Major factors impacting 2014 commodity prices


Commodities highlights

Commodity Last monthchange

Last yearchange

What to Watch

Copper -1.00% -14.00% 678,225 metric tons of surplus; decreasing demand for metals

Cotton -2.88% 14.55% Rise in global demand and decreased production in US due to drought expected to increase prices

Natural Gas -1.91% 2.42% Report on June 6th showed largest inventory gain in four years; winter weather expected to raise prices in 2014

Oil -5.83% 11.43% Increasing global demand combined with increase in non-OPEC fuels production; China second-largest consumer of oil


Food price volatility


Questions?

Contact:

[email protected]

www.premierinc.com/economicoutlook

mailto:[email protected]

http://www.premierinc.com/economicoutlook

Date post:	26-Dec-2015
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Kayla Sutton Managing director, economic outlook Healthcare’s Economic Outlook.

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