Financial Turmoil In the Healthcare Industry
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Financial Turmoil In the Healthcare Industry Presented by: Larry Heydon, President/CEO of Johnson Memorial Health IOA Meeting-May 2, 2014. Version 2 -2/8/13. Financial Turmoil In the Healthcare Industry Two Concerning Factors Simultaneously at Play- A “Double Whammy”

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Financial turmoil in the healthcare industry presented by

Financial Turmoil In the Healthcare Industry

Presented by:

Larry Heydon, President/CEO of Johnson Memorial Health

IOA Meeting-May 2, 2014

Version 2 -2/8/13


Financial turmoil in the healthcare industry presented by

Financial Turmoil In the Healthcare Industry

Two Concerning Factors Simultaneously at Play- A “Double Whammy”

Partial Healthcare Reform (ObamaCare)

Volume Erosion (Consumerism/Redirection)


Financial turmoil in the healthcare industry presented by

1. Partial Healthcare Reform “SOME” Targeted Objectives of the Patient Protection and Affordable Care Act and Other Healthcare Reform Measures (Obamacare)

  • For US Citizens In General

    • Reduce Medicare spending (to protect program for future generations)

  • For Uninsured or Underinsured

    • Allow for universal health insurance coverage for all via Medicaid expansion at state level and sliding scale insurance exchanges (market plans)

  • For Insured (via private coverage or employer sponsored health plans)

    • Allow for transparency in pricing and reduced spending

    • Expand eligibility/reduce restrictions in coverage

    • Over time, allow for reduced costs per encounters

  • For Healthcare Providers

    • Allow for decrease in Medicare reimbursement

    • Reduce levels of “free” care via universal health insurance coverage

    • Emphasis on quality management

In general, hospitals supported these objectives


Financial turmoil in the healthcare industry presented by

Impact of Partial Reform-An Overview

Uninsured/ Underinsured

Commercial and Self Pay

New Exchanges

Medicaid

Medicare

Medicare

No Medicaid Expansion

Medicaid Expansion

Estimated 10%+ cuts over a 10 year period for hospitals

Commercial Plans including employer sponsor plans adjusts to lower exchange rates

Average Rate

Average Rate

Average Rate

Reimbursement Scale

“Free”

“Retail”

Costs

Current

Reform “Promise”

Partial Reform


Financial turmoil in the healthcare industry presented by

2. Volume Erosion – “Consumerism”

Historical Commercial Plans

Reaction to High Costs

“Commercial” Box from Previous Slide

Patient Paid –

Co Pays/Deductibles

Patient Paid-

Co Pays/High Deductibles/Health Savings Plans

Insurance Paid

  • Private Insurance Policies

  • Employer Sponsored Plans

Insurance Paid


Financial turmoil in the healthcare industry presented by

2. Volume Erosion – “Consumerism”


Specific comments on what hospitals are doing

Specific Comments on What Hospitals are Doing

  • Increased competition against each other (to steal market share….friendly neighbors era is over)

  • Competitive pricing on key lab and radiology ancillary services to combat niche providers.

  • Short term participation in Exchange/Market Plans and other key narrow network plans to protect volume.

  • Long term creation of regional insurance network plans (ACOs and ACCs) to redirect volume, better manage care and save the middleman premium charged by insurers.

  • Short term fierce physician integration steps followed by long term re-evaluation of physician specialty needs and compensation…simply can not afford to carry too high of a level of subsidization for employed physicians.

  • Unavoidable focus on decreasing labor costs while still meeting regulatory requirements.

  • Potential elimination of non-core services lines that are subsidized…causing a movement towards specialty centers and a general decrease in access to care

  • Significant list of other expense control initiatives (supplies, outsourcing, etc)

  • Paradigm shift from fee for service (FFS) reimbursement to fixed capitated payment where lower volume equates to higher financial reward (less is better).


Financial turmoil in the healthcare industry presented by

A comment on healthcare professionals, current and future

Thank You and Q&A


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