The health of healthcare June 2011 Jerry Brimeyer Wealth Management Research Senior Equity Research...

The health of healthcareJune 2011Jerry BrimeyerWealth Management ResearchSenior Equity Research AnalystThis report has been prepared by UBS Financial Services, Inc.Analyst certification and required disclosures begin on page 28.

GEN0190n.ppt

gopalvi [printed: ____] [saved: ____] Presentation1

The health of healthcare

US Healthcare reform Uncertain regulatory changes European austerity measures Lower healthcare utilization Pricing/reimbursement pressures Sparse new product innovation

Diagnosis: Poor health!

The 2010 Healthcare Diagnosis

GEN0190n.ppt



2010 S&P 500 Sector Performance

Source: Bloomberg

GEN0190n.ppt

Chart4

0.029

0.055

0.102

0.122

0.141

0.151

0.19

0.205

0.223

0.267

0.278

Sheet1

Country1930111525

Democrats31441294

Republicans1428131728

Independents81362053

Very FavorableSomewhat FavorableNeitherSomewhat UnfavorableVery Unfavorable

Republicans8%13%6%20%53%1

Independents12%28%13%17%28%0.98

Democrats31%44%12%9%4%1

Country19%30%11%15%25%1

None of the above67%

Improve quality of care4%

Reduce growth of costs4%

Expand access to specialty care3%

Expand access to primary care8%

Expand insurance coverage14%

100%

2010 total return

Healthcare-0.3%Healthcare2.9%

Technology5.6%Utilities5.5%

Energy2.9%Technology10.2%

Utilities1.8%Financials12.2%

Financials1.1%Consumer Staples14.1%

S&P50015.1%

Materials7.9%Telecom19.0%

Consumer Staples8.0%Energy20.5%

Telecom5.9%Materials22.3%

Consumer Discretionary18.0%Industrials26.7%

Industrials14.3%Consumer Discretionary27.8%

Patient Visits for Influenza-Like Illness June 2009-May 2010

WeekTotal ILITotal Patients% Unweighted ILI% Weighted ILIWeekFlu-like Patients %

35170526120173.4153.47512.8%

36179496034123.7134.0623.0%

37205196901843.7924.24833.0%

38192186552733.7244.18942.9%

39219166568274.2594.86953.3%

40471288368585.6326.07665.6%

41556598436476.5977.02876.6%

42662278819077.517.68887.5%

43643148801547.3077.51497.3%

44546868755386.2466.615106.2%

45411078378654.9065.194114.9%

46314858311173.7884.041123.8%

47220326393023.4463.517133.4%

48216307990522.7072.731142.7%

49187017577742.4682.471152.5%

50161897067742.2912.332162.3%

51137645191662.6512.577172.7%

52150755651962.6672.563182.7%

1139147025631.981.881192.0%

2135237477801.8081.848201.8%

3140737420681.8961.857211.9%

4143977601831.8941.945221.9%

5152527446132.0482.064232.0%

6148797345942.0252.073242.0%

7143257335461.9531.899252.0%

8157517890831.9961.937262.0%

9143117623691.8771.907271.9%

10140377505361.871.874281.9%

11124347191751.7291.749291.7%

12110187248141.521.545301.5%

13100066875211.4551.501311.5%

1481896923611.1831.218321.2%

1579926956391.1491.166331.1%

1674156632891.1181.063341.1%

1775716642921.141.078351.1%

1869016206231.1121.058361.1%

1963075749761.0971.047371.1%

2049324732721.0420.95381.0%

IndemnityHMOPPOPOSHDHP/SO

20101%19%58%8%13%

20091%20%60%10%8%

20082%20%58%12%8%

20073%21%57%13%5%

20063%20%60%13%4%

20053%21%61%15%0%

20045%25%55%15%0%

20035%24%54%17%0%

20024%27%52%18%0%

20017%24%46%23%0%

20008%29%42%21%0%

199910%28%39%24%0%

199627%31%28%14%0%

199346%21%26%7%0%

198873%16%11%0%0%

Source: Kaiser 2010 Survey of Employer Health Benefits

Number of Households on COBRA Subsidy

1Q0924,774

2Q09351,508

3Q09715,072

4Q091,092,505

1Q101,100,000

2Q101,067,731

3Q10e750,000

4Q10e375,000

Department of the Treasury and UBS estimates

Med Tech-Big Cap-13%20Med Tech-Big Cap-6%-13

Diagnostics-12%19Pharma-Big Cap-4%-7

Assisted Living-8%17Generic drugs3%-4

Laboratories-6%18Laboratories4%-7

Dental Equipment-1%16Biotech-Big Cap6%-2

Pharma-Big Cap-1%5Healthcare IT6%10

PBMs1%14Diagnostics7%2

HCIT1%12Dental Equipment8%5

Generic drugs3%11Managed Care9%5

Hospitals4%16Medical Distribution10%0

Biotech-Big Cap4%15Alt. Site Providers12%0

Drug Distribution5%4Drug Distribution12%10

Medical Distribution5%9Contract Research Orgs12%7

Managed Care7%13Med Tech-Mid Cap14%4

CROs7%8Pharmacy Benefit Mgers14%9

Alt. Site Providers10%7Assisted Living16%9

Med Tech-Mid Cap12%3Pharma-Specialty-Mid23%13

Pharma-Specialty-Mid16%6Hospitals24%9

Biotech-Mid Cap18%2Biotech-Mid Cap27%19

Pharma-Specialty-Sm21%1Pharma-Specialty-Sm32%27

Healthcare Sector1.5%

Med Tech-Big Cap-5%Life Sci-Consumables40%

Pharma-Big Cap-3%Pharma-Specialty-Sm32%

Laboratories4%Biotech-Mid Cap27%

Generic drugs4%Hospitals24%

Managed Care7%Pharma-Specialty-Mid23%

Biotech-Big Cap7%Life Sci-Instruments22%

Diagnostics8%Assisted Living16%

Dental Equipment8%PBMs14%

CROs11%Med Tech-Mid Cap14%

HCIT11%CROs12%

Alt. Site Providers12%Drug Distribution12%

Medical Distribution12%Alt. Site Providers12%

Drug Distribution12%Medical Distribution10%

PBMs16%Managed Care9%

Med Tech-Mid Cap16%Dental Equipment8%

Assisted Living18%Diagnostics7%

Hospitals24%HCIT6%

Pharma-Specialty-Mid25%Biotech-Big Cap6%

Biotech-Mid Cap29%Laboratories4%

Pharma-Specialty-Sm38%Generic drugs3%

Pharma-Big Cap-4%

Med Tech-Big Cap-6%

Med Tech-Big Cap-6%

Pharma-Big Cap-4%

Generic drugs3%

Laboratories4%

Biotech-Big Cap6%

HCIT6%

Diagnostics7%

Dental Equipment8%

Managed Care9%

Medical Distribution10%

Alt. Site Providers12%

Drug Distribution12%

CROs12%

Med Tech-Mid Cap14%

PBMs14%

Assisted Living16%

Pharma-Specialty-Mid23%

Hospitals24%

Biotech-Mid Cap27%

Pharma-Specialty-Sm32%

Sheet1

Medical Community and Health Care Reform

Sheet2

YTD Stock Performance

Sheet3

Week

Flu-like Illness (%)

Patient Visits for Flu-like Illnesses June 2009-May 2010

Indemnity

HMO

PPO

POS

HDHP/SO

Healthcare Membership by Plan Type (%)


US Healthcare Subsector 2010 Performance*

Very Favorable

Somewhat Favorable

Neither

Somewhat Unfavorable

Very Unfavorable

Reform Views by Political Affiliation

Indemnity

HMO

PPO

POS

HDHP/SO




2010 US Healthcare Subsector Performance

Source: Factset

GEN0190n.ppt

Chart5

-0.0603729513

-0.0358482482

0.0251457118

0.0353140952

0.0570023807

0.0644095942

0.0724551283

0.0756290852

0.0881104257

0.096006132

0.1163273497

0.1175094969

0.1195914967

0.1355908714

0.1410439602

0.1616543878

0.2300841205

0.2430237464

0.2666410237

0.3165998867


Sheet1

Country1930111525

Democrats31441294





Independents12%28%13%17%28%0.98

Democrats31%44%12%9%4%1

Country19%30%11%15%25%1







100%

2010 total return






S&P50015.1%








35170526120173.4153.47512.8%

36179496034123.7134.0623.0%

37205196901843.7924.24833.0%

38192186552733.7244.18942.9%

39219166568274.2594.86953.3%

40471288368585.6326.07665.6%

41556598436476.5977.02876.6%

42662278819077.517.68887.5%

43643148801547.3077.51497.3%

44546868755386.2466.615106.2%

45411078378654.9065.194114.9%

46314858311173.7884.041123.8%

47220326393023.4463.517133.4%

48216307990522.7072.731142.7%

49187017577742.4682.471152.5%

50161897067742.2912.332162.3%

51137645191662.6512.577172.7%

52150755651962.6672.563182.7%

1139147025631.981.881192.0%

2135237477801.8081.848201.8%

3140737420681.8961.857211.9%

4143977601831.8941.945221.9%

5152527446132.0482.064232.0%

6148797345942.0252.073242.0%

7143257335461.9531.899252.0%

8157517890831.9961.937262.0%

9143117623691.8771.907271.9%

10140377505361.871.874281.9%

11124347191751.7291.749291.7%

12110187248141.521.545301.5%

13100066875211.4551.501311.5%

1481896923611.1831.218321.2%

1579926956391.1491.166331.1%

1674156632891.1181.063341.1%

1775716642921.141.078351.1%

1869016206231.1121.058361.1%

1963075749761.0971.047371.1%

2049324732721.0420.95381.0%


20101%19%58%8%13%

20091%20%60%10%8%

20082%20%58%12%8%

20073%21%57%13%5%

20063%20%60%13%4%

20053%21%61%15%0%

20045%25%55%15%0%

20035%24%54%17%0%

20024%27%52%18%0%

20017%24%46%23%0%

20008%29%42%21%0%

199910%28%39%24%0%

199627%31%28%14%0%

199346%21%26%7%0%

198873%16%11%0%0%



1Q0924,774

2Q09351,508

3Q09715,072

4Q091,092,505

1Q101,100,000

2Q101,067,731

3Q10e750,000

4Q10e375,000
































HCIT11%CROs12%







Hospitals24%HCIT6%




Pharma-Big Cap-4%

Med Tech-Big Cap-6%

Med Tech-Big Cap-6%

Pharma-Big Cap-4%

Generic drugs3%

Laboratories4%

Biotech-Big Cap6%

HCIT6%

Diagnostics7%

Dental Equipment8%

Managed Care9%




CROs12%

Med Tech-Mid Cap14%

PBMs14%

Assisted Living16%


Hospitals24%

Biotech-Mid Cap27%


Sheet1


Sheet2


Sheet3

Week



Indemnity

HMO

PPO

POS

HDHP/SO




Very Favorable

Somewhat Favorable

Neither


Very Unfavorable


Indemnity

HMO

PPO

POS

HDHP/SO




Better healthcare utilization? Stable pricing/reimbursement? Clarification of reform regulations? Stabilization in Europe? Product/service innovations? More stable political environment?

Prognosis: Not lookin so good!

The 2011 Healthcare Prognosis

GEN0190n.ppt



2011 Year-to-date S&P 500 Sector Performance

Source: Bloomberg

GEN0190n.ppt

Chart1

-0.058

-0.0178

-0.0177

0.0261

0.0269

0.0374

0.0392

0.0601

0.0655

0.0749

0.1203

Sheet1

Country1930111525

Democrats31441294





Independents12%28%13%17%28%0.98

Democrats31%44%12%9%4%1

Country19%30%11%15%25%1







100%

2010 total return

Healthcare-0.3%Financials-5.8%

Technology5.6%Materials-1.8%

Energy2.9%Technology-1.8%

Utilities1.8%Telecom2.6%

Financials1.1%S&P 500 Index2.7%

Consumer Discretionary3.7%

Materials7.9%Industrials3.9%

Consumer Staples8.0%Utilities6.0%

Telecom5.9%Consumer Staples6.6%

Consumer Discretionary18.0%Energy7.5%

Industrials14.3%Healthcare12.0%



35170526120173.4153.47512.8%

36179496034123.7134.0623.0%

37205196901843.7924.24833.0%

38192186552733.7244.18942.9%

39219166568274.2594.86953.3%

40471288368585.6326.07665.6%

41556598436476.5977.02876.6%

42662278819077.517.68887.5%

43643148801547.3077.51497.3%

44546868755386.2466.615106.2%

45411078378654.9065.194114.9%

46314858311173.7884.041123.8%

47220326393023.4463.517133.4%

48216307990522.7072.731142.7%

49187017577742.4682.471152.5%

50161897067742.2912.332162.3%

51137645191662.6512.577172.7%

52150755651962.6672.563182.7%

1139147025631.981.881192.0%

2135237477801.8081.848201.8%

3140737420681.8961.857211.9%

4143977601831.8941.945221.9%

5152527446132.0482.064232.0%

6148797345942.0252.073242.0%

7143257335461.9531.899252.0%

8157517890831.9961.937262.0%

9143117623691.8771.907271.9%

10140377505361.871.874281.9%

11124347191751.7291.749291.7%

12110187248141.521.545301.5%

13100066875211.4551.501311.5%

1481896923611.1831.218321.2%

1579926956391.1491.166331.1%

1674156632891.1181.063341.1%

1775716642921.141.078351.1%

1869016206231.1121.058361.1%

1963075749761.0971.047371.1%

2049324732721.0420.95381.0%


20101%19%58%8%13%

20091%20%60%10%8%

20082%20%58%12%8%

20073%21%57%13%5%

20063%20%60%13%4%

20053%21%61%15%0%

20045%25%55%15%0%

20035%24%54%17%0%

20024%27%52%18%0%

20017%24%46%23%0%

20008%29%42%21%0%

199910%28%39%24%0%

199627%31%28%14%0%

199346%21%26%7%0%

198873%16%11%0%0%



1Q0924,774

2Q09351,508

3Q09715,072

4Q091,092,505

1Q101,100,000

2Q101,067,731

3Q10e750,000

4Q10e375,000
































HCIT11%CROs12%







Hospitals24%HCIT6%




Pharma-Big Cap-4%

Med Tech-Big Cap-6%

Med Tech-Big Cap-6%

Pharma-Big Cap-4%

Generic drugs3%

Laboratories4%

Biotech-Big Cap6%

HCIT6%

Diagnostics7%

Dental Equipment8%

Managed Care9%




CROs12%

Med Tech-Mid Cap14%

PBMs14%

Assisted Living16%


Hospitals24%

Biotech-Mid Cap27%


2010 total return

FinancialsFinancials-7.9%

MaterialsMaterials-3.5%

TechnologyTechnology-3.1%

TelecomTelecom0.3%

S&P 500 IndexS&P 500 Index0.6%

Consumer DiscretionaryConsumer Discretionary1.0%

IndustrialsIndustrials1.3%

UtilitiesUtilities3.8%

Consumer StaplesConsumer Staples4.5%

EnergyEnergy5.4%

HealthcareHealthcare9.9%

Sheet1


Sheet2


Sheet3

Week



0.010.190.580.080.13

0.010.20.60.10.08

0.020.20.580.120.08

0.030.210.570.130.05

0.030.20.60.130.04

0.030.210.610.150

0.050.250.550.150

0.050.240.540.170

0.040.270.520.180

0.070.240.460.230

0.080.290.420.210

0.10.280.390.240

0.270.310.280.140

0.460.210.260.070

0.730.160.1100

Indemnity

HMO

PPO

POS

HDHP/SO


24774

351508

715072

1092505

1100000

1067731

750000

375000


-0.0603729513

-0.0358482482

0.0251457118

0.0353140952

0.0570023807

0.0644095942

0.0724551283

0.0756290852

0.0881104257

0.096006132

0.1163273497

0.1175094969

0.1195914967

0.1355908714

0.1410439602

0.1616543878

0.2300841205

0.2430237464

0.2666410237

0.3165998867


Very Favorable

Somewhat Favorable

Neither


Very Unfavorable


0.010.190.580.080.13

0.010.20.60.10.08

0.020.20.580.120.08

0.030.210.570.130.05

0.030.20.60.130.04

0.030.210.610.150

0.050.250.550.150

0.050.240.540.170

0.040.270.520.180

0.070.240.460.230

0.080.290.420.210

0.10.280.390.240

0.270.310.280.140

0.460.210.260.070

0.730.160.1100

Indemnity

HMO

PPO

POS

HDHP/SO


-0.079

-0.0345

-0.031

0.003

0.0062

0.0099

0.0125

0.0377

0.0454

0.0542

0.0993


The health of healthcareBehavioral changes: higher patient deductibles and copayments less discretionary healthcare consumption more patient price shoppingDecision maker changes: more physicians employed by hospitalsshifting in some healthcare decisions (e.g., vendor selection) from physicians to cost-conscious hospital administratorsReform changes: recent reform was mostly insurance company and coverage reformalmost certain to be additional reform measures, such as tort/malpractice reformWhats changed?

GEN0190n.ppt


The health of healthcareUtilization trends are weakUS Physician Office VisitsFewer hospital admissionsDeclining physician office visitsLower medical device utilizationLower prescription drug use

Reasons for low utilizationLower flu incidenceCOBRA roll-offWeak economyChanging insurance benefit designs

Source: IMS

Behavioral changes

GEN0190n.ppt

Chart3

-0.0630.025-0.053

-0.0560.079-0.041

-0.0850.0140.073

0.002-0.101-0.013

-0.0560.022-0.047

-0.116-0.072-0.011

-0.019-0.022-0.019

0.0240.052-0.016

0.008-0.063-0.001

-0.042-0.149-0.056

-0.021-0.136-0.037

-0.067-0.185-0.082

Office Based

Hosptal Based

Total Patient Visits

Sheet1

2Q-103Q-104Q-101Q-112Q-11

May-10Jun-10Jul-10Aug-10Sep-10Oct-10Nov-10Dec-10Jan-11Feb-11Mar-11Apr-11

Office Based-0.063-0.056-0.0850.002-0.056-0.116-0.0190.0240.008-0.042-0.021-0.067

Hosptal Based0.0250.0790.014-0.1010.022-0.072-0.0220.052-0.063-0.149-0.136-0.185

Total Patient Visits-0.053-0.0410.073-0.013-0.047-0.011-0.019-0.016-0.001-0.056-0.037-0.082

Sheet1

Office Based

Hosptal Based


% Change Yr/Yr

IMS Monthly Patient Visit Trend (Last 12 Months)

Sheet2

Office Based

Hosptal Based


Sheet3

Office Based

Hosptal Based


% Change Yr/Yr

IMS Monthly Patient Visit Trend (Last 12 Months)



Source: Kaiser 2010 Survey of Employer Health Benefits; HDHP High Deductible Health Plan; SO Savings OptionChanging insurance benefit designs

GEN0190n.ppt

Chart1

0.010.190.580.080.13

0.010.20.60.10.08

0.020.20.580.120.08

0.030.210.570.130.05

0.030.20.60.130.04

0.030.210.610.150

0.050.250.550.150

0.050.240.540.170

0.040.270.520.180

0.070.240.460.230

0.080.290.420.210

0.10.280.390.240

0.270.310.280.140

0.460.210.260.070

0.730.160.1100

Indemnity

HMO

PPO

POS

HDHP/SO


Sheet1

Country1930111525

Democrats31441294





Independents12%28%13%17%28%0.98

Democrats31%44%12%9%4%1

Country19%30%11%15%25%1







100%

2010 total return






S&P50015.1%








35170526120173.4153.47512.8%

36179496034123.7134.0623.0%

37205196901843.7924.24833.0%

38192186552733.7244.18942.9%

39219166568274.2594.86953.3%

40471288368585.6326.07665.6%

41556598436476.5977.02876.6%

42662278819077.517.68887.5%

43643148801547.3077.51497.3%

44546868755386.2466.615106.2%

45411078378654.9065.194114.9%

46314858311173.7884.041123.8%

47220326393023.4463.517133.4%

48216307990522.7072.731142.7%

49187017577742.4682.471152.5%

50161897067742.2912.332162.3%

51137645191662.6512.577172.7%

52150755651962.6672.563182.7%

1139147025631.981.881192.0%

2135237477801.8081.848201.8%

3140737420681.8961.857211.9%

4143977601831.8941.945221.9%

5152527446132.0482.064232.0%

6148797345942.0252.073242.0%

7143257335461.9531.899252.0%

8157517890831.9961.937262.0%

9143117623691.8771.907271.9%

10140377505361.871.874281.9%

11124347191751.7291.749291.7%

12110187248141.521.545301.5%

13100066875211.4551.501311.5%

1481896923611.1831.218321.2%

1579926956391.1491.166331.1%

1674156632891.1181.063341.1%

1775716642921.141.078351.1%

1869016206231.1121.058361.1%

1963075749761.0971.047371.1%

2049324732721.0420.95381.0%


20101%19%58%8%13%

20091%20%60%10%8%

20082%20%58%12%8%

20073%21%57%13%5%

20063%20%60%13%4%

20053%21%61%15%0%

20045%25%55%15%0%

20035%24%54%17%0%

20024%27%52%18%0%

20017%24%46%23%0%

20008%29%42%21%0%

199910%28%39%24%0%

199627%31%28%14%0%

199346%21%26%7%0%

198873%16%11%0%0%



1Q0924,774

2Q09351,508

3Q09715,072

4Q091,092,505

1Q101,100,000

2Q101,067,731

3Q10e750,000

4Q10e375,000
































HCIT11%CROs12%







Hospitals24%HCIT6%




Pharma-Big Cap-4%

Med Tech-Big Cap-6%

Med Tech-Big Cap-6%

Pharma-Big Cap-4%

Generic drugs3%

Laboratories4%

Biotech-Big Cap6%

HCIT6%

Diagnostics7%

Dental Equipment8%

Managed Care9%




CROs12%

Med Tech-Mid Cap14%

PBMs14%

Assisted Living16%


Hospitals24%

Biotech-Mid Cap27%


Sheet1


Sheet2


Sheet3

Week



Indemnity

HMO

PPO

POS

HDHP/SO



0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0


S&P 500 2010 Sector Performance*

Very Favorable

Somewhat Favorable

Neither


Very Unfavorable


Indemnity

HMO

PPO

POS

HDHP/SO



The health of healthcareBiggest winnerHealth insurers/MCOs

Biggest losers HospitalsPhysiciansLabs/DiagnosticsMedical supplies and devices

Moderate losersPharmaceuticalsBiotechnologyDrug distribution

Winner and losers of low healthcare utilization

GEN0190n.ppt


The health of healthcareCosts/reimbursement pressure physiciansHigh cost of physician practicesContinually constrained reimbursementNew payment schemes (e.g., bundling)More physician alliances with hospitals Greater physician employment by hospitalsMore hospital acquisition of physician practicesHospital-physician affiliations to coordinate care and lower costsPreparing for ACOs and new payment schemes (e.g., bundling)ImplicationsGradual decision maker shift from physician to cost-conscious hospitalsMore pricing pressure (devices, pharmaceuticals, medical supplies)Tougher vendor selection (orthopedic implants, cardiovascular devices)Hospitals to allocate new payment schemes (decides who gets paid for bundled services)Possibly more coordinated and efficient carePossibly more standardized care (cookbook medicine?)Decision makers changes

GEN0190n.ppt



Source: US Renal Data System (USRDS) and UBS estimates

Dialysis bundled payment

GEN0190n.ppt

Chart1

0.66743504110.19607908620.05751118830.0789746844

0.98Bundled PricingBundled PricingBundled Pricing

Services

EPO

Laboratory

Other Drugs & Injectables

Sheet1

PPPY CostsWhiteAfrican-AmericanOverallPPPY Costs

Services$19,88768.4%20082.1165%$19,984.3467%Services$19,984.3467%

Laboratory$1,7376.0%17076%$1,722.006%ESA$5,871.0020%

IV Iron$7142.5%7522%$733.002%Laboratory$1,722.006%

ESA$5,46518.8%627720%$5,871.0020%Other Drugs and Injectables$2,364.668%

IV Vitamin D$1,0243.5%18246%$1,424.005%Total$29,942.00100%

Antibiotic&Other236.430.8%178.891%$207.661%

Total Costs$29,063100.0%30821100%$29,942.00100%

222w+166(1-w)=194

56w28

0.5

Sheet2

PPPY CostsServicesEPOLaboratoryOther Drugs & Injectables

Composite Rate (services)$19,984.34Current Reimbursement67%20%6%8%

ESA$5,871.00Bundled Pricing98%

Laboratory$1,722.00

Other Drugs and Injectables$2,364.66

Total$29,942.00

Medicare dialysis reimbursement

Sheet2

Services

EPO

Laboratory

Other Drugs & Injectables

Sheet3


The health of healthcareShift in balance of power away from vendors to hospital purchasersHospital consolidationHospital-physician affiliationsPhysician employment by hospitalsHospital consolidation of vendors Reimbursement constraintsLack of meaningful innovationNew payment schemes (bundling)Balance of power changing

GEN0190n.ppt


The health of healthcare2010 reformLargely coverage and insurance company reformsInsurers gain more power via reform32 million potential enrollees via insurance exchangesInsurers squeeze providersMLR (medical loss ration) effect; MLR = medical expenses/premiumsReform mandates: 80% MLR for individuals and small groups; 85% MLR for large groups and Medicare AdvantageReform encourages insurers to squeeze physicians and hospitalsHospitals and physicians react to insurance company pressuresHospitals and physicians squeeze vendors (medical supplies/devices, etc.)Providers create integrated networks and alliances to fend off insurer/government pressuresMore pricing competition for medical vendors (supplies, devices, labs, pharma, biotech)Hospitals and physicians pressure vendors for greater price concessionsMore pricing pressure on medical devices, labs, pharma, biotech, etc.Healthcare reform changes

GEN0190n.ppt


The health of healthcareHospital payment-to-cost by payer 1988-2008*

Source: Avalere Health analysis of American Hospital Association Annual Survey data; Community hospitals 2008Commercial reimbursement key to covering healthcare costs

GEN0190n.ppt

Chart4

0.9420.791.217

0.9210.7881.244

0.8940.8011.278

0.8850.8191.308

0.890.8951.318

0.8990.8961.301

0.9690.9371.244

0.9940.941.24

1.0240.9491.216

1.0370.961.175

1.0190.9661.158

10.9571.151

0.9910.9451.157

0.9840.9581.165

0.9790.9611.19

0.9530.9231.223

0.9190.8991.289

0.9230.8711.294

0.9130.8581.303

0.9060.8791.322

0.910.891.28

Medicare

Medicaid

Private Payer

Sheet1

1987198819891990199119921993199419951996199719981999200020012002200320042005200620072008

Medicare98.3%94.2%92.1%89.4%88.5%89.0%89.9%96.9%99.4%102.4%103.7%101.9%100.0%99.1%98.4%97.9%95.3%91.9%92.3%91.3%90.6%91.0%

Medicaid83.0%79.0%78.8%80.1%81.9%89.5%89.6%93.7%94.0%94.9%96.0%96.6%95.7%94.5%95.8%96.1%92.3%89.9%87.1%85.8%87.9%89.0%

Private Payer119.8%121.7%124.4%127.8%130.8%131.8%130.1%124.4%124.0%121.6%117.5%115.8%115.1%115.7%116.5%119.0%122.3%128.9%129.4%130.3%132.2%128.0%

Hospital payment-to-cost by payer 1988-2008

Source: Avalere Health analysis of American Hospital Association Annual Survey data

* Community hospitals 2008

Sheet1

Medicare

Medicaid

Private Payer

Sheet2

Sheet3

MBD05B4FB1D.unknown


The health of healthcareNear-term losers:Pharmaceuticals and managed care organizations face significant reform costs prior 2014Mixed effect:Most healthcare subsectors will have a mixed effect due to reform, including biotechnology, medical technology and hospitalsLong-term winners:Cost cutters: generic drugs, pharmacy benefit managers (PBMs), drug distributors, dialysis providersEfficienatos: healthcare IT, robotics, new service models (vertically integrated healthcare) etc.Innovators: select companies within med tech, pharma, biotech, but also MCOs, hospitals, other health services, new technologies, Effect of healthcare reform by subsector

GEN0190n.ppt


The health of healthcarePharmaceuticalsIncreased Medicaid rebates (starts 2010); New Medicare discounts (starts 2011); Reform fees (starts 2011)Implications: All brand drug companies and some biotechs take an earnings hit approx. 1-6% in 2010 and 2-10% in 2011; generics, PBMs and distributors relatively untouched by benefit in 2014BiotechnologyFollow-on biologics: Reform legislation permits generic-like follow-on biologics; 12 years of exclusivityImplications: Similar to pharmaceutical companies, depending on level of innovation and competitionMedical devicesBeginning in 2013, 2.3% excise tax on sales of medical devices;Implications: EPS impact on medical device companies varies considerable depending on geographic mix, product mix, profit margins (tax is based on revenues, not profits; lower margins, higher EPS impactGeneric drugsSlightly higher Medicaid rebates, but far offset by increased drug useImplications: Generic drug mfgs, PBMs and drug distributors benefitEffect of healthcare reform by subsector

GEN0190n.ppt


The health of healthcareHealthcare insurance/MCOsMinimum medical loss ratios (MLRs; starts 2011): Reform mandated 80% for individuals and small groups; 85% for large groups and Medicare AdvantageNew insurance enrollees: ~32m over 2014-19; 16m Medicaid expected enrollees; 16m additional other enrolleesGuarantee issue (starts 2014)Individual and Employer mandates (starts 2014)Implications: Insurers likely to wield more power in rates/reimbursement negotiations with hospitals and physiciansHospitalsReform payments of $155bn (2014-19): $110bn Medicare payment rate reductions; $36bn DSH (disproportionate share hospital) reductions; $7bn hospital readmission reductionsLower bad debts: Roughly 70% of hospital bad debts are associated with uninsured patients; healthcare coverage for more Americans should considerably reduce hospital bad debt expensesImplications: Higher utilization/volumes, lower bad debts but significant reform costs and likely increased payer pressure (commercial insurers, Medicare, Medicaid)Effect of healthcare reform by subsector

GEN0190n.ppt


The health of healthcareIn the US, pricing pressure taking many formsInsurer pricing pressure (resulting from new MLRs)Hospital pricing pressure (low utilization, reimbursement, balance of power)Government pricing pressure (reimbursement in Medicare, Medicaid, etc)Generic drugs ($100bn of brand drugs coming off patent)Alternative payment systems (e.g., dialysis bundled payments Jan. 2012)

In Europe: European austerity measures hurts pricing:Branded drug prices down ~5-7%Generic drug prices down ~15-20%Medical device prices down ~3-5%Healthcare pricing pressure

GEN0190n.ppt


The health of healthcareBetter coordination of careProviders (hospitals, physicians, etc.) coordinating individual patient healthcare Coordination essential to lower costs, especially with increase demand from MedicareBundled provider payments (away from fee-for-service)Electronic health records (EHRs) for allLots more IT (for clinical intelligence, decision support; payment reform, care coordination)

Population of Americans age 65 and over, in millions

Source: US Census BureauThe decade ahead

GEN0190n.ppt

Chart4

35.0612472000

35.3088632001

35.5516512002

35.8783412003

36.251162004

36.6959042005

37.1961672006

37.8496722007

38.6901692008

39.4816662009

40.2437130

41.1210532.737692

42.5513886.008123

43.9729259.246928

45.34011712.406172

46.79072715.621458

48.20233918.767247

49.69410821.960163

51.25602525.187879

52.88186728.441436

54.63189131.779159

56.3424835.03693

58.10872438.308257

59.90897241.568193

61.66765444.738461

63.52373247.955199

65.25812346.85069

66.90631545.690258

68.48788344.474034

70.02599443.20082

71.45347141.870175

72.59335540.484718

73.58574839.046084

74.52829937.556158

75.51155636.018428

76.64141534.436823

77.65540432.816147

78.43185531.16255

79.02234229.482941

79.51233727.784447

80.04963426.076072

80.5129324.367961

81.0020922.668482

81.54985820.985297

82.18165419.328456

82.95931217.707654

Americans 65+

Baby boomers 65+

Fig. 1

Fig. 1: US healthcare spending will steadily increase

US healthcare expenditures, in trillions of USD

2001$1.469

2002$1.602

2003$1.735

2004$1.855

2005$1.981

2006$2.113

2007$2.241

2008$2.379

2009$2.509

2010$2.624

2011$2.770

2012$2.931

2013$3.111

2014$3.313Source: Centers for Medicare & Medicaid Services

2015$3.541

2016$3.790

2017$4.062

2018$4.353

1000

Fig. 1

Fig. 2

Fig. 2: US spends more on healthcare than any other countryMexico5.9

Healthcare spending as a share of GDP, in %, 2008Japan8.1

Australia8.5

UK8.7

Spain9

Sweden9.4

Denmark9.7

Netherlands9.9

Canada10.4

Germany10.5

Switzerland10.7

France11.2

US16

Source: Organization for Economic Cooperation and Development

Fig. 2

Fig. 3

Fig. 3: Physician shortage will increase in the decade ahead

Projected supply and demand of full-time physicians, in thousands

Note: Excludes residents.

Source: Association of American Medical Colleges

2025

7612000

8593000

Fig. 3

20052005

680.5680.5

684.5256758326688.9069823118

688.575166604697.4178255371

692.6486131978706.0338127865

696.746157331714.7562430226

700.8679415588723.5864312553

705.0141092798732.5257087404

709.184804741741.5754231803

713.3801730426750.7369389268

717.6003601434760.0116371875

721.8455128653769.4009162332

726.1157788991778.9061916094

730.4113068091788.5288963492

734.7322460385798.2704811897

739.0787469148808.1324147906

743.4509606544818.1161839555

747.8490393686828.2232938564

752.2731360684838.45526826

756.7234046699848.8136497582

761.2859.3

Supply

Demand

Fig. 4

In MillionsFig. 4: Number of Americans age 65+ will double by 2030

Americans 65+Baby Boomers 65+YearAmericans 65+Baby boomers 65+Population of Americans age 65 and over, in millions

2000350612470200035.06

2001353088630200135.31

2002355516510200235.55

2003358783410200335.88

2004362511600200436.25

2005366959040200536.70

2006371961670200637.20

2007378496720200737.85

2008386901690200838.69

2009394816660200939.48

2010402437130201040.240.00

2011411210532737692201141.122.74

2012425513886008123201242.556.01

2013439729259246928201343.979.25Source: US Census Bureau

20144534011712406172201445.3412.41

20154679072715621458201546.7915.62

20164820233918767247201648.2018.77

20174969410821960163201749.6921.96

20185125602525187879201851.2625.19

20195288186728441436201952.8828.44

20205463189131779159202054.6331.78

20215634248035036930202156.3435.04

20225810872438308257202258.1138.31

20235990897241568193202359.9141.57

20246166765444738461202461.6744.74

20256352373247955199202563.5247.96

20266525812346850690202665.2646.85

20276690631545690258202766.9145.69

20286848788344474034202868.4944.47

20297002599443200820202970.0343.20

20307145347141870175203071.4541.87

20317259335540484718203172.5940.48

20327358574839046084203273.5939.05

20337452829937556158203374.5337.56

20347551155636018428203475.5136.02

20357664141534436823203576.6434.44

20367765540432816147203677.6632.82

20377843185531162550203778.4331.16

20387902234229482941203879.0229.48

20397951233727784447203979.5127.78

20408004963426076072204080.0526.08

20418051293024367961204180.5124.37

20428100209022668482204281.0022.67

20438154985820985297204381.5520.99

20448218165419328456204482.1819.33

20458295931217707654204582.9617.71

Source: US Consus Bureau

http://www.flickr.com/photos/grjenkin/2752862261/

Will Zhang's original data

The number of Americans 65+ doubles from 2000 to 2030200035.11

Americans 65+ population (mil.)200135.35

200235.60

200335.93

200436.29

200536.72

200637.19

200737.81

200838.62

200939.39

201040.1240.23

201140.99

201242.40

201343.80

201445.14

201546.57

201647.96

201749.43

201850.97

201952.57

202054.3054.8032.31

202155.99

202257.73

202359.51

202461.25

202563.08

202664.79

202766.40

202867.95

202969.45

203070.8472.0942.97

203171.93

203272.88

203373.76

203474.69

203575.75

203676.70

203777.40

203877.92

203978.33

204078.7781.2427.57

204179.14

204279.53

204379.97

204480.49

204581.15

204681.83

204782.44

204883.04

204983.60

205084.2088.558.74

Fig. 4

Fig. 5

Americans 65+

Baby boomers 65+

Fig. 6

Fig. 5: Healthcare costs rise significantly with age

Total Per Capita Healthcare Spending by AgePer capita healthcare spending by age group, in USD, 2004

0-18$2,650

19-44$3,370

45-54$5,210

55-64$7,787

65-74$10,778

75-84$16,389

+85$25,691

Source: Centers for Medicare and Medicaid Services

Fig. 6

HC by Top Spenders

Fig. 6: US government funds a large share of healthcare

US healthcare coverage, in %

Medicare3812%

Dual eligible93%

Medicaid/other government4113%

Private insurance145%

Uninsured5016%

Employer sponsored15951%

3111

Source: Kaiser Family Foundation, UBS estimates

Medicare4513%

Dual eligible93%

Medicaid/other gov't5717%


Uninsured5015%


334

HC by Top Spenders

Sheet4

Not designated as a chart for report

Nearly half of all healthcare dollars are spent on less than 5% of the US population

Concentration of US healthcare spending, in %, 2007

Top 1%22.9

Top 5%49.5

Top 10%65.2

Top 15%74.6

Top 20%81.2

Top 50%97

Bottom 50%3

Source: Kaiser Family Foundation

100

Sheet4

Sheet 5

200520062007200820092010201120122013201420152016201720182019202020212022202320242025

Supply680.5684.5256758326688.575166604692.6486131978696.746157331700.8679415588705.0141092798709.184804741713.3801730426717.6003601434721.8455128653726.1157788991730.4113068091734.7322460385739.0787469148743.4509606544747.8490393686752.2731360684756.7234046699761.2

Demand680.5688.9069823118697.4178255371706.0338127865714.7562430226723.5864312553732.5257087404741.5754231803750.7369389268760.0116371875769.4009162332778.9061916094788.5288963492798.2704811897808.1324147906818.1161839555828.2232938564838.45526826848.8136497582859.3

1000

2025

7612000.446959415

8593000.4562206785

Sheet6

Healthcare spending by age group2004

0-18206,02513.3%

19-44368,73423.8%

45-54217,24214.0%

55-64227,79214.7%

65-74197,10812.7%

75-84208,90913.5%

85+125,4438.1%34.3%

1,551,253

Source: Centers for Medicare and Medicaid Services; 2004 data

Total Per Capita Healthcare Spending by Age

2001$1,469

2002$1,602

2003$1,735

2004$1,855

2005$1,981

2006$2,113

2007$2,241

2008$2,379

2009$2,509

2010$2,624

2011$2,770

2012$2,931

2013$3,111

2014$3,313

2015$3,541

2016$3,790

2017$4,062

2018$4,353


The health of healthcareMajor physician shortageShort 90,000 by 2020; half primary care physicians (PCPs) and half specialistsPrimary provider becomes physician assistant (PA) or nurse practitioner (NP)Physicians provide more of a consulting roleLots more IT (for clinical intelligence, decision support; payment reform, care coordination) Greater use of robotics, especially for more common operating procedures

Projected supply and demand of full-time physicians

Source: Association of American Medical Colleges; in thousandsThe decade ahead

GEN0190n.ppt

Chart3

20052005

680.5680.5

684.5256758326688.9069823118

688.575166604697.4178255371

692.6486131978706.0338127865

696.746157331714.7562430226

700.8679415588723.5864312553

705.0141092798732.5257087404

709.184804741741.5754231803

713.3801730426750.7369389268

717.6003601434760.0116371875

721.8455128653769.4009162332

726.1157788991778.9061916094

730.4113068091788.5288963492

734.7322460385798.2704811897

739.0787469148808.1324147906

743.4509606544818.1161839555

747.8490393686828.2232938564

752.2731360684838.45526826

756.7234046699848.8136497582

761.2859.3

Supply

Demand

Fig. 1

Fig. 1: US healthcare spending will steadily increase

US healthcare expenditures, in trillions of USD

2001$1.469

2002$1.602

2003$1.735

2004$1.855

2005$1.981

2006$2.113

2007$2.241

2008$2.379

2009$2.509

2010$2.624

2011$2.770

2012$2.931

2013$3.111

2014$3.313Source: Centers for Medicare & Medicaid Services

2015$3.541

2016$3.790

2017$4.062

2018$4.353

1000

Fig. 1

Fig. 2

Fig. 2: US spends more on healthcare than any other countryMexico5.9

Healthcare spending as a share of GDP, in %, 2008Japan8.1

Australia8.5

UK8.7

Spain9

Sweden9.4

Denmark9.7

Netherlands9.9

Canada10.4

Germany10.5

Switzerland10.7

France11.2

US16


Fig. 2

Fig. 3

Fig. 3: Physician shortage will increase in the decade ahead

Projected supply and demand of full-time physicians, in thousands

Note: Excludes residents.

Source: Association of American Medical Colleges

2025

7612000

8593000

Fig. 3

20052005

680.5680.5

684.5256758326688.9069823118

688.575166604697.4178255371

692.6486131978706.0338127865

696.746157331714.7562430226

700.8679415588723.5864312553

705.0141092798732.5257087404

709.184804741741.5754231803

713.3801730426750.7369389268

717.6003601434760.0116371875

721.8455128653769.4009162332

726.1157788991778.9061916094

730.4113068091788.5288963492

734.7322460385798.2704811897

739.0787469148808.1324147906

743.4509606544818.1161839555

747.8490393686828.2232938564

752.2731360684838.45526826

756.7234046699848.8136497582

761.2859.3

Supply

Demand

Fig. 4

In MillionsFig. 4: Number of Americans age 65+ will double by 2030

Americans 65+Baby Boomers 65+YearAmericans 65+Baby boomers 65+Population of Americans age 65 and over, in millions

2000350612470200035.06

2001353088630200135.31

2002355516510200235.55

2003358783410200335.88

2004362511600200436.25

2005366959040200536.70

2006371961670200637.20

2007378496720200737.85

2008386901690200838.69

2009394816660200939.48

2010402437130201040.240.00

2011411210532737692201141.122.74

2012425513886008123201242.556.01


20144534011712406172201445.3412.41

20154679072715621458201546.7915.62

20164820233918767247201648.2018.77

20174969410821960163201749.6921.96

20185125602525187879201851.2625.19

20195288186728441436201952.8828.44

20205463189131779159202054.6331.78

20215634248035036930202156.3435.04

20225810872438308257202258.1138.31

20235990897241568193202359.9141.57

20246166765444738461202461.6744.74

20256352373247955199202563.5247.96

20266525812346850690202665.2646.85

20276690631545690258202766.9145.69

20286848788344474034202868.4944.47

20297002599443200820202970.0343.20

20307145347141870175203071.4541.87

20317259335540484718203172.5940.48

20327358574839046084203273.5939.05

20337452829937556158203374.5337.56

20347551155636018428203475.5136.02

20357664141534436823203576.6434.44

20367765540432816147203677.6632.82

20377843185531162550203778.4331.16

20387902234229482941203879.0229.48

20397951233727784447203979.5127.78

20408004963426076072204080.0526.08

20418051293024367961204180.5124.37

20428100209022668482204281.0022.67

20438154985820985297204381.5520.99

20448218165419328456204482.1819.33

20458295931217707654204582.9617.71






200235.60

200335.93

200436.29

200536.72

200637.19

200737.81

200838.62

200939.39

201040.1240.23

201140.99

201242.40

201343.80

201445.14

201546.57

201647.96

201749.43

201850.97

201952.57

202054.3054.8032.31

202155.99

202257.73

202359.51

202461.25

202563.08

202664.79

202766.40

202867.95

202969.45

203070.8472.0942.97

203171.93

203272.88

203373.76

203474.69

203575.75

203676.70

203777.40

203877.92

203978.33

204078.7781.2427.57

204179.14

204279.53

204379.97

204480.49

204581.15

204681.83

204782.44

204883.04

204983.60

205084.2088.558.74

Fig. 4

Fig. 5

Americans 65+

Baby boomers 65+

Fig. 6

Fig. 5: Healthcare costs rise significantly with age

Total Per Capita Healthcare Spending by AgePer capita healthcare spending by age group, in USD, 2004

0-18$2,650

19-44$3,370

45-54$5,210

55-64$7,787

65-74$10,778

75-84$16,389

+85$25,691

Source: Centers for Medicare and Medicaid Services

Fig. 6

HC by Top Spenders

Fig. 6: US government funds a large share of healthcare

US healthcare coverage, in %

Medicare3812%

Dual eligible93%

Medicaid/other government4113%


Uninsured5016%


3111

Source: Kaiser Family Foundation, UBS estimates

Medicare4513%

Dual eligible93%



Uninsured5015%


334

HC by Top Spenders

Sheet4



Concentration of US healthcare spending, in %, 2007

Top 1%22.9

Top 5%49.5

Top 10%65.2

Top 15%74.6

Top 20%81.2

Top 50%97

Bottom 50%3


100

Sheet4

Sheet 5

200520062007200820092010201120122013201420152016201720182019202020212022202320242025

Supply680.5684.5256758326688.575166604692.6486131978696.746157331700.8679415588705.0141092798709.184804741713.3801730426717.6003601434721.8455128653726.1157788991730.4113068091734.7322460385739.0787469148743.4509606544747.8490393686752.2731360684756.7234046699761.2

Demand680.5688.9069823118697.4178255371706.0338127865714.7562430226723.5864312553732.5257087404741.5754231803750.7369389268760.0116371875769.4009162332778.9061916094788.5288963492798.2704811897808.1324147906818.1161839555828.2232938564838.45526826848.8136497582859.3

1000

2025

7612000.446959415

8593000.4562206785

Sheet6


0-18206,02513.3%

19-44368,73423.8%

45-54217,24214.0%

55-64227,79214.7%

65-74197,10812.7%

75-84208,90913.5%

85+125,4438.1%34.3%

1,551,253



2001$1,469

2002$1,602

2003$1,735

2004$1,855

2005$1,981

2006$2,113

2007$2,241

2008$2,379

2009$2,509

2010$2,624

2011$2,770

2012$2,931

2013$3,111

2014$3,313

2015$3,541

2016$3,790

2017$4,062

2018$4,353


The health of healthcarePersonalized medicineChanges diagnosis, drug discovery, treatments, etcGenetic analysis with periodic physicalsBetter predict disease predispositionTailor healthcare to individual geneticsNew treatment regimes (e.g., gene therapy, RNA interference)Possible cures for various cancers, viral infections, etc.The decade ahead

GEN0190n.ppt


The health of healthcarePolitical changeMore reform still to comeHealthcare as percent of GDP: 18% in 2011; 20% in 2018US healthcare costs could approach USD 5 trillion by end of decade


The decade ahead

GEN0190n.ppt

Chart7

0.059

0.081

0.085

0.087

0.09

0.094

0.097

0.099

0.104

0.105

0.107

0.112

0.16

Nat's health expend

Fig. 1The steadily increasing dollars spending on healthcare

National Health Expenditures ($bn)

2001$1,469

2002$1,602

2003$1,735

2004$1,855

2005$1,981

2006$2,113

2007$2,241

2008$2,379

2009$2,509

2010$2,624

2011$2,770

2012$2,931

2013$3,111

2014$3,313

2015$3,541

2016$3,790

2017$4,062

2018$4,353

Source: Centers for Medicare & Medicaid Services

Nat's health expend

HC % of GDP

Fig. 2The US spends more on healthcare than any other countryMexico5.9%

Healthcare spending as % GDP, 2008Japan8.1%

Australia8.5%

UK8.7%

Spain9.0%

Sweden9.4%

Denmark9.7%

Netherlands9.9%

Canada10.4%

Germany10.5%

Switzerland10.7%

France11.2%

United States16.0%

Source: Organization for Economic Cooperation and Development, OECD Health data, 2008

HC % of GDP

Physician Shortage

Fig. 3Physician shortage to increase sharply this decade

Projected Supply and Demand, FTE Physicians, 2006-2025

Source: Association of American Medical Colleges; FTE=Full Time Employee

200520062007200820092010201120122013201420152016201720182019202020212022202320242025

Supply680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500

Demand680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500

2025

7612000.0059157617

8593000.0123541254

Physician Shortage

20052005

680500680500

684525.675832565688906.982311817

688575.166604012697417.825537067

692648.613197844706033.812786495

696746.157330996714756.243022558

700867.94155877723586.431255256

705014.109279788732525.70874039

709184.804740986741575.42318026

713380.17304263750736.93892685

717600.360143363760011.63718752

721845.512865287769400.916233237

726115.778899067778906.191609384

730411.306809072788528.896349171

734732.246038541798270.481189676

739078.746914785808132.414790569

743450.960654414818116.183955521

747849.0393686828223.293856366

752273.13606837838455.268260018

756723.404669925848813.649758199

761200859300

Supply

Demand

Physicians (exclud. residents)

Elderly

In MillionsFig. 4The number of Americans 65+ doubles from 2000 to 2030

Americans 65+Baby Boomers 65+YearAmericans 65+Baby Boomers 65+Americans 65+ population (mil.)

2000350612470200035.060.00

2001353088630200135.310.00

2002355516510200235.550.00

2003358783410200335.880.00

2004362511600200436.250.00

2005366959040200536.700.00

2006371961670200637.200.00

2007378496720200737.850.00

2008386901690200838.690.00

2009394816660200939.480.00

2010402437130201040.240.00

2011411210532737692201141.122.74

2012425513886008123201242.556.01

2013439729259246928201343.979.25

20144534011712406172201445.3412.41

20154679072715621458201546.7915.62

20164820233918767247201648.2018.77

20174969410821960163201749.6921.96

20185125602525187879201851.2625.19

20195288186728441436201952.8828.44


20215634248035036930202156.3435.04

20225810872438308257202258.1138.31

20235990897241568193202359.9141.57

20246166765444738461202461.6744.74

20256352373247955199202563.5247.96

20266525812346850690202665.2646.85

20276690631545690258202766.9145.69

20286848788344474034202868.4944.47

20297002599443200820202970.0343.20

20307145347141870175203071.4541.87

20317259335540484718203172.5940.48

20327358574839046084203273.5939.05

20337452829937556158203374.5337.56

20347551155636018428203475.5136.02

20357664141534436823203576.6434.44

20367765540432816147203677.6632.82

20377843185531162550203778.4331.16

20387902234229482941203879.0229.48

20397951233727784447203979.5127.78

20408004963426076072204080.0526.08

20418051293024367961204180.5124.37

20428100209022668482204281.0022.67

20438154985820985297204381.5520.99

20448218165419328456204482.1819.33

20458295931217707654204582.9617.71






200235.60

200335.93

200436.29

200536.72

200637.19

200737.81

200838.62

200939.39

201040.1240.23

201140.99

201242.40

201343.80

201445.14

201546.57

201647.96

201749.43

201850.97

201952.57

202054.3054.8032.31

202155.99

202257.73

202359.51

202461.25

202563.08

202664.79

202766.40

202867.95

202969.45

203070.8472.0942.97

203171.93

203272.88

203373.76

203474.69

203575.75

203676.70

203777.40

203877.92

203978.33

204078.7781.2427.57

204179.14

204279.53

204379.97

204480.49

204581.15

204681.83

204782.44

204883.04

204983.60

205084.2088.558.74

Elderly

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

HC by Age

Americans 65+

Baby Boomers 65+

Population (mil.)

US HC Coverage

Fig. 5Healthcare use rises significantly with age

Total Per Capita Healthcare Spending by AgePer capital healthcare spending by age group, 2004

0-18$2,650

19-44$3,370

45-54$5,210

55-64$7,787

65-74$10,778

75-84$16,389

+85$25,691


US HC Coverage

Age group

Per capita spending

HC by Top Spenders

Fig. 6Federal and state government controls an ever increasing piece of the healthcare pie

US healthcare coverage

Medicare3812%

Dual eligible93%



Uninsured5016%


3111

Source: Kaiser Family Foundation and UBS estimates

Medicare4513%

Dual eligible93%



Uninsured5015%


334

HC by Top Spenders

0

0

0

0

0

0

Employer sponsored159 million(51%)

Uninsured50 mil. (16%)

Private insurance14 mil. (5%)

Medicaid/Other Gov't41 mil. (13%)

Medicare38 mil. (12%)

Dual eligible9 mil. (3%)

Sheet4



Concentration of healthcare spending in the US, 2007

Top 1%22.9%

Top 5%49.5%

Top 10%65.2%

Top 15%74.6%

Top 20%81.2%

Top 50%97.0%

Bottom 50%3.0%


Sheet4

0

0

0

0

0

0

0

Population ranked by healthcare spending

Healthcare spending (%)

Sheet 5

200520062007200820092010201120122013201420152016201720182019202020212022202320242025

Supply680500684525.675832565688575.166604012692648.613197844696746.157330996700867.94155877705014.109279788709184.804740986713380.17304263717600.360143363721845.512865287726115.778899067730411.306809072734732.246038541739078.746914785743450.960654414747849.0393686752273.13606837756723.404669925761200

Demand680500688906.982311817697417.825537067706033.812786495714756.243022558723586.431255256732525.70874039741575.42318026750736.93892685760011.63718752769400.916233237778906.191609384788528.896349171798270.481189676808132.414790569818116.183955521828223.293856366838455.268260018848813.649758199859300

2025

7612000.0059157617

8593000.0123541254

Sheet6


0-18206,02513.3%

19-44368,73423.8%

45-54217,24214.0%

55-64227,79214.7%

65-74197,10812.7%

75-84208,90913.5%

85+125,4438.1%34.3%

1,551,253



2001$1,469

2002$1,602

2003$1,735

2004$1,855

2005$1,981

2006$2,113

2007$2,241

2008$2,379

2009$2,509

2010$2,624

2011$2,770

2012$2,931

2013$3,111

2014$3,313

2015$3,541

2016$3,790

2017$4,062

2018$4,353


The health of healthcarePolitical changeNeed for more reforms: cost reforms (Medicaid, Medicare), structural reform (public plan?), tort/malpractice reform

Source: Centers for Medicare and Medicaid Services; 2004 dataThe decade ahead

GEN0190n.ppt

Chart13

2650

3370

5210

7787

10778

16389

25691

Age group

Per capita spending

Nat's health expend



2001$1,469

2002$1,602

2003$1,735

2004$1,855

2005$1,981

2006$2,113

2007$2,241

2008$2,379

2009$2,509

2010$2,624

2011$2,770

2012$2,931

2013$3,111

2014$3,313

2015$3,541

2016$3,790

2017$4,062

2018$4,353


Nat's health expend

HC % of GDP



Australia8.5%

UK8.7%

Spain9.0%

Sweden9.4%

Denmark9.7%

Netherlands9.9%

Canada10.4%

Germany10.5%

Switzerland10.7%

France11.2%

United States16.0%


HC % of GDP

Physician Shortage




200520062007200820092010201120122013201420152016201720182019202020212022202320242025

Supply680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500

Demand680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500

2025

7612000.0059157617

8593000.0123541254

Physician Shortage

20052005

680500680500

684525.675832565688906.982311817

688575.166604012697417.825537067

692648.613197844706033.812786495

696746.157330996714756.243022558

700867.94155877723586.431255256

705014.109279788732525.70874039

709184.804740986741575.42318026

713380.17304263750736.93892685

717600.360143363760011.63718752

721845.512865287769400.916233237

726115.778899067778906.191609384

730411.306809072788528.896349171

734732.246038541798270.481189676

739078.746914785808132.414790569

743450.960654414818116.183955521

747849.0393686828223.293856366

752273.13606837838455.268260018

756723.404669925848813.649758199

761200859300

Supply

Demand


Elderly



2000350612470200035.060.00

2001353088630200135.310.00

2002355516510200235.550.00

2003358783410200335.880.00

2004362511600200436.250.00

2005366959040200536.700.00

2006371961670200637.200.00

2007378496720200737.850.00

2008386901690200838.690.00

2009394816660200939.480.00

2010402437130201040.240.00

2011411210532737692201141.122.74

2012425513886008123201242.556.01

2013439729259246928201343.979.25

20144534011712406172201445.3412.41

20154679072715621458201546.7915.62

20164820233918767247201648.2018.77

20174969410821960163201749.6921.96

20185125602525187879201851.2625.19

20195288186728441436201952.8828.44


20215634248035036930202156.3435.04

20225810872438308257202258.1138.31

20235990897241568193202359.9141.57

20246166765444738461202461.6744.74

20256352373247955199202563.5247.96

20266525812346850690202665.2646.85

20276690631545690258202766.9145.69

20286848788344474034202868.4944.47

20297002599443200820202970.0343.20

20307145347141870175203071.4541.87

20317259335540484718203172.5940.48

20327358574839046084203273.5939.05

20337452829937556158203374.5337.56

20347551155636018428203475.5136.02

20357664141534436823203576.6434.44

20367765540432816147203677.6632.82

20377843185531162550203778.4331.16

20387902234229482941203879.0229.48

20397951233727784447203979.5127.78

20408004963426076072204080.0526.08

20418051293024367961204180.5124.37

20428100209022668482204281.0022.67

20438154985820985297204381.5520.99

20448218165419328456204482.1819.33

20458295931217707654204582.9617.71






200235.60

200335.93

200436.29

200536.72

200637.19

200737.81

200838.62

200939.39

201040.1240.23

201140.99

201242.40

201343.80

201445.14

201546.57

201647.96

201749.43

201850.97

201952.57

202054.3054.8032.31

202155.99

202257.73

202359.51

202461.25

202563.08

202664.79

202766.40

202867.95

202969.45

203070.8472.0942.97

203171.93

203272.88

203373.76

203474.69

203575.75

203676.70

203777.40

203877.92

203978.33

204078.7781.2427.57

204179.14

204279.53

204379.97

204480.49

204581.15

204681.83

204782.44

204883.04

204983.60

205084.2088.558.74

Elderly

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

HC by Age

Americans 65+

Baby Boomers 65+

Population (mil.)

US HC Coverage



0-18$2,650

19-44$3,370

45-54$5,210

55-64$7,787

65-74$10,778

75-84$16,389

+85$25,691


US HC Coverage

Age group

Per capita spending

HC by Top Spenders



Medicare3812%

Dual eligible93%



Uninsured5016%


3111


Medicare4513%

Dual eligible93%



Uninsured5015%


334

HC by Top Spenders







Sheet4




Top 1%22.9%

Top 5%49.5%

Top 10%65.2%

Top 15%74.6%

Top 20%81.2%

Top 50%97.0%

Bottom 50%3.0%


Sheet4



Sheet 5

200520062007200820092010201120122013201420152016201720182019202020212022202320242025

Supply680500684525.675832565688575.166604012692648.613197844696746.157330996700867.94155877705014.109279788709184.804740986713380.17304263717600.360143363721845.512865287726115.778899067730411.306809072734732.246038541739078.746914785743450.960654414747849.0393686752273.13606837756723.404669925761200

Demand680500688906.982311817697417.825537067706033.812786495714756.243022558723586.431255256732525.70874039741575.42318026750736.93892685760011.63718752769400.916233237778906.191609384788528.896349171798270.481189676808132.414790569818116.183955521828223.293856366838455.268260018848813.649758199859300

2025

7612000.0059157617

8593000.0123541254

Sheet6


0-18206,02513.3%

19-44368,73423.8%

45-54217,24214.0%

55-64227,79214.7%

65-74197,10812.7%

75-84208,90913.5%

85+125,4438.1%34.3%

1,551,253



2001$1,469

2002$1,602

2003$1,735

2004$1,855

2005$1,981

2006$2,113

2007$2,241

2008$2,379

2009$2,509

2010$2,624

2011$2,770

2012$2,931

2013$3,111

2014$3,313

2015$3,541

2016$3,790

2017$4,062

2018$4,353


The health of healthcarePolitical changeGovernment funding one-third of healthcare (Medicare, Medicaid, other)Government will fund nearly half of all healthcare by 2020

Source: Kaiser Family Foundation and UBS estimatesThe decade ahead

GEN0190n.ppt

Chart14

38

9

41

14

50

159







Nat's health expend



2001$1,469

2002$1,602

2003$1,735

2004$1,855

2005$1,981

2006$2,113

2007$2,241

2008$2,379

2009$2,509

2010$2,624

2011$2,770

2012$2,931

2013$3,111

2014$3,313

2015$3,541

2016$3,790

2017$4,062

2018$4,353


Nat's health expend

HC % of GDP



Australia8.5%

UK8.7%

Spain9.0%

Sweden9.4%

Denmark9.7%

Netherlands9.9%

Canada10.4%

Germany10.5%

Switzerland10.7%

France11.2%

United States16.0%


HC % of GDP

Physician Shortage




200520062007200820092010201120122013201420152016201720182019202020212022202320242025

Supply680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500

Demand680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500680500

2025

7612000.0059157617

8593000.0123541254

Physician Shortage

20052005

680500680500

684525.675832565688906.982311817

688575.166604012697417.825537067

692648.613197844706033.812786495

696746.157330996714756.243022558

700867.94155877723586.431255256

705014.109279788732525.70874039

709184.804740986741575.42318026

713380.17304263750736.93892685

717600.360143363760011.63718752

721845.512865287769400.916233237

726115.778899067778906.191609384

730411.306809072788528.896349171

734732.246038541798270.481189676

739078.746914785808132.414790569

743450.960654414818116.183955521

747849.0393686828223.293856366

752273.13606837838455.268260018

756723.404669925848813.649758199

761200859300

Supply

Demand


Elderly



2000350612470200035.060.00

2001353088630200135.310.00

2002355516510200235.550.00

2003358783410200335.880.00

2004362511600200436.250.00

2005366959040200536.700.00

2006371961670200637.200.00

2007378496720200737.850.00

2008386901690200838.690.00

2009394816660200939.480.00

2010402437130201040.240.00

2011411210532737692201141.122.74

2012425513886008123201242.556.01

2013439729259246928201343.979.25

20144534011712406172201445.3412.41

20154679072715621458201546.7915.62

20164820233918767247201648.2018.77

20174969410821960163201749.6921.96

20185125602525187879201851.2625.19

20195288186728441436201952.8828.44


20215634248035036930202156.3435.04

20225810872438308257202258.1138.31

20235990897241568193202359.9141.57

20246166765444738461202461.6744.74

20256352373247955199202563.5247.96

20266525812346850690202665.2646.85

20276690631545690258202766.9145.69

20286848788344474034202868.4944.47

20297002599443200820202970.0343.20

20307145347141870175203071.4541.87

20317259335540484718203172.5940.48

20327358574839046084203273.5939.05

20337452829937556158203374.5337.56

20347551155636018428203475.5136.02

20357664141534436823203576.6434.44

20367765540432816147203677.6632.82

20377843185531162550203778.4331.16

20387902234229482941203879.0229.48

20397951233727784447203979.5127.78

20408004963426076072204080.0526.08

20418051293024367961204180.5124.37

20428100209022668482204281.0022.67

20438154985820985297204381.5520.99

20448218165419328456204482.1819.33

20458295931217707654204582.9617.71






200235.60

200335.93

200436.29

200536.72

200637.19

200737.81

200838.62

200939.39

201040.1240.23

201140.99

201242.40

201343.80

201445.14

201546.57

201647.96

201749.43

201850.97

201952.57

202054.3054.8032.31

202155.99

202257.73

202359.51

202461.25

202563.08

202664.79

202766.40

202867.95

202969.45

203070.8472.0942.97

203171.93

203272.88

203373.76

203474.69

203575.75

203676.70

203777.40

203877.92

203978.33

204078.7781.2427.57

204179.14

204279.53

204379.97

204480.49

204581.15

204681.83

204782.44

204883.04

204983.60

205084.2088.558.74

Elderly

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

HC by Age

Americans 65+

Baby Boomers 65+

Population (mil.)

US HC Coverage



0-18$2,650

19-44$3,370

45-54$5,210

55-64$7,787

65-74$10,778

75-84$16,389

+85$25,691


US HC Coverage

Age group

Per capita spending

HC by Top Spenders



Medicare3812%

Dual eligible93%



Uninsured5016%


3111


Medicare4513%

Dual eligible93%



Uninsured5015%


334

HC by Top Spenders







Sheet4




Top 1%22.9%

Top 5%49.5%

Top 10%65.2%

Top 15%74.6%

Top 20%81.2%

Top 50%97.0%

Bottom 50%3.0%


Sheet4



Sheet 5

200520062007200820092010201120122013201420152016201720182019202020212022202320242025

Supply680500684525.675832565688575.166604012692648.613197844696746.157330996700867.94155877705014.109279788709184.804740986713380.17304263717600.360143363721845.512865287726115.778899067730411.306809072734732.246038541739078.746914785743450.960654414747849.0393686752273.13606837756723.404669925761200

Demand680500688906.982311817697417.825537067706033.812786495714756.243022558723586.431255256732525.70874039741575.42318026750736.93892685760011.63718752769400.916233237778906.191609384788528.896349171798270.481189676808132.414790569818116.183955521828223.293856366838455.268260018848813.649758199859300

2025

7612000.0059157617

8593000.0123541254

Sheet6


0-18206,02513.3%

19-44368,73423.8%

45-54217,24214.0%

55-64227,79214.7%

65-74197,10812.7%

75-84208,90913.5%

85+125,4438.1%34.3%

1,551,253



2001$1,469

2002$1,602

2003$1,735

2004$1,855

2005$1,981

2006$2,113

2007$2,241

2008$2,379

2009$2,509

2010$2,624

2011$2,770

2012$2,931

2013$3,111

2014$3,313

2015$3,541

2016$3,790

2017$4,062

2018$4,353


The health of healthcareMajor changes underwayBehavioral changes, decision maker changes, recent reforms, affecting utilization, pricing, vendor selection, etc.Costs still out of controlHealthcare estimated at 18% of US GDP in 201132 million more Americans entering the insurance market 2014-19Healthcare possibly greater than 20% of GDP by 2018Major changes still to come in the decade aheadCoordinated care, physician shortage, personalized medicine, political changesMore reform likelyCurrent reform is coverage reform; does not address costs or delivery of careCost reform? Medicare reform? Medicaid reform? Tort reform?Republican led: more market-driven reformsDemocrat led: more likely government controlChanges lead to threat & opportunitiesChange is a treat to those that do not adaptChange is an opportunity for those that lower costs, create efficiencies or innovateLower costs/efficiencies: generic drug companies, pharmacy benefit management companies, dialysis companies, healthcare ITInnovators: innovative

Date post:	11-Jan-2016
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The health of healthcare June 2011 Jerry Brimeyer Wealth Management Research Senior Equity Research...

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