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Why Health Care Will Change

Why Health Care Will Change. How Health Care’s Cost Crisis and the Drive Toward A Health Care Market Will Change Everything. The Human Resource Management Conference at the University of Alabama. October 18, 2012 Brian Klepper, PhD.

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Why Health Care Will Change

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  1. Why Health Care Will Change How Health Care’s Cost Crisis and the Drive Toward A Health Care Market Will Change Everything The Human Resource Management Conference at the University of Alabama October 18, 2012 Brian Klepper, PhD Did health care think it could hold back market forces forever?

  2. Opportunity: Hospitals’ Dilemma • Procedural Volumes Are Down • $30 billion/year Medicare cuts for the next decade • Commercial Health Plans Will Squeeze Too • Medicare’s Financial Penalties For Too Many Readmits Their Challenge: Maintain/Grow Revenue & Margin Solution: Grow Market Share Requirement: Prove Better Care at Lower Cost

  3. Opportunity: Advanced Images • Lafayette, IN • WeCare TLC’s Volume-Based Contract • MRI w/Reading - $450/Each • Clients had been Paying $1,750-$3,200 • 18K Covered Lives • More than 100 images/month • This is Doable in Many Areas: e.g., Amb Surgery, Pain Mgmt • Question: Why Aren’t Health Plans Doing This?!

  4. Relative To Other Developed Nations, US Health Care’s Quality is Sketchy & Its Value Is Lowest of Industrialized World

  5. Average Annual Health Insurance Premiums and Worker Contributions for Family Coverage, 2008-2012

  6. Cumulative Increases in Health Insurance Premiums, Workers’ Contributions to Premiums, Inflation, and Workers’ Earnings, 1999-2011 Premium has grown 4x inflation for more than a decade. Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2011. Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April), 1999-2011; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey, 1999-2011 (April to April).

  7. 5% Drop in Employer Coverage in 3 Years 11/11/11 – Gallup/Healthways Survey of 90,000 American Adults

  8. Projected Annual Total Household Compensation and Compensation Net of Health insurance Premiums

  9. American Health Care Cost Is Absorbing Nearly ALL Economic Growth In the decade preceding 2009, 79% of all household income growth was siphoned off by health care. Source: Auerbach DI and Kellermann AL, “A Decade of Health Care Cost Growth Has Wiped Out Real Income Gains for an Average U.S. Family,” Health Affairs, 30:9, 9/2011.

  10. Impact on Family Income If health care costs tracked general inflation over the past 15 years, average family income would have been $8,410 (13.9%) higher in 2010 than it was. ($68, 805 vs. 60,395) Young and Devoe Family Medicine, Oct 2012

  11. Health Care’s Growing Burden on Federal Budget Crowds Out Other Needs, Like Education and Infrastructure Replacement Source: White House Council of Economic Advisors

  12. Health Care As A Percentage of the US Economy Over Time Source: White House Council of Economic Advisors

  13. US Health Care Unit Pricing Is Much Higher Source: International Federation of Health Plans, Cited in NYTimes, 1/22/12

  14. And Lucrative Pricing Drives Higher Utilization

  15. And Lucrative Pricing Drives Higher Utilization

  16. Unnecessary/Inappropriate Care & Cost “Our research found that wasteful spending in the health system has been calculated at up to $1.2 trillion of the $2.2 trillion (54.5%) spent in the United States. [R]edundant, inappropriate or unnecessary tests and procedures [were] identified as the biggest area of excess, followed by inefficient healthcare administration and the cost of care necessitated by conditions such as obesity, which can be considered preventable by lifestyle changes.” The Price of Excess PricewaterhouseCoopers, 2008

  17. Perspective • In 2012 dollars, 54.5% of health care spending providing no value would equal almost $1.5 trillion annually. • Congressional Super Committee was charged with identifying/saving $1.2 trillion over 10 years. (They failed.)

  18. Unintended Consequence of Reform/Exchanges • Cost Reduction Unlikely • More Cost-Shifting to Individuals • Individual Coverage More Costly to Administer • Transition from Self-Funding To Insurance – Less Flexibility, Required Adherence to Mandates • Exchanges will mark a movement away from defined benefit to defined contribution. Really about health care costing more than employers can bear. May not be helpful.

  19. Barriers To Health Care Quality/Value • Regulatory Capture • Fee-For-Service Reimbursement • Lack of Pricing/Quality/Safety Transparency • Compromise of Primary Care

  20. Regulatory Capture (Lobbying For The Special Interest) • In 2009 (during the reform proceedings), health care organizations spent $1.2 billion to lobby Congress.* • 4,525 lobbyists participated: 8 for every member of Congress.* • In other words, policy is developed to favor the special rather than the public interest. • *Sources: • Open Secrets, The Center for Responsive Politics • Eight Healthcare Lobbyists for Every Member of Congress, Fierce Healthcare, 2/25/10.

  21. The AMA’s Relative Value Scale Update Committee (RUC) • 31 physicians - 26 specialists & 5 PCPs • CMS’ sole advisors on medical services valuation • Secret proceedings, sham survey methods, composition unrepresentative of physicians in market, financially conflicted • CMS has historically accepted 90% of recommendations • Commercial health plans typically follow Medicare’s payment lead

  22. Real World Impacts of RUC Influence Over-values specialty services while under-valuing PC Inhibits PC’s moderating influence and accountability function over specialty services. Creates systemic incentives to perform more services, and more expensive services. (Specialists “practicing to the codes.”) Payment disparities between PC and specialties. Crisis-level PC shortage now.

  23. FFS Reimbursement Fee-For-Service fosters “Merchant Medicine.” Every product/service produces a margin, creating incentives to provide more care and more expensive care, independent of quality.

  24. FFS Reimbursement - Procedural Volumes “Medicare spends a fortune each year on procedures that have no proven benefit and should not be covered.” “When a procedure…is not supported by evidence, …taxpayers should have no obligation to pay for it.” Rita Redberg, MD Editor, Annals of Internal Medicine “Squandering Medicare’s Money” NY Times, 5/25/11

  25. FFS Reimbursement - Procedural Volumes • Lucrative procedures encourage specialists • To “practice to the codes.” • Physicians who own advanced imaging order up to 6x more than those who don’t • Stents are no more effective than “optimal drug therapy” and lifestyle changes, and they introduce significant risk/cost. Medicare spends $1.6 billion annually on drug-eluting stents. • Endless examples.

  26. Cost/Quality Performance Transparency • Medicare physician data is locked. • Hospital procedure base fees are often unknown until billing. Recent Health Affairs California appendectomy study showed 3 day LOS pricing $1,529 - $186,955, a 122x difference. • Health care markets don’t work except for the most aggressive commercial enterprises. • Providers/Vendors under little external pressure to improve.

  27. Primary Care - Cases Increasingly Referred to Specialists • Typical 2012 Established Primary Care Office Visit Duration = 7.5-12 Min. 30 Years Ago, It Was 20-25 • PCPs Paid By Visit, So May Refer Time-consuming Problems • Most Specialists Profit From Procedures • Result: Huge Increases In Specialty Visits, Outpt Diagnostics, Procedures

  28. Primary Care - Specialty Payment Disparities • Compare Primary Care Office Visit (99214) and Cataract Extraction with Intra-Ocular Lens Implant • 99214 – 25 Minutes and 3 Different Problems. Could be anything. Palette is all medical knowledge. Medicare pays $111.36 • Cataract Extraction & Intra-Ocular Lens Implant – 15 minutes. Restores sight! 50 year old, low risk, repetitive procedure. Medicare pays $836.36. • Hourly rate of Ophthalmologist pay is 12.5x PCP pay. • PCP’s job is arguably more complex/challenging. Klepper & Kibbe, Rethinking the Value of Medical Services, Health Affairs Blog, 8/1/11.

  29. Winners & Losers • Winners • Nearly Everyone in the Health Industry (Except Primary Care) • Losers • Patients – Unnecessary Care and Risk of Harm • Purchasers (Employers, Taxpayers, Individuals) – Immense Unnecessary Cost • Primary Care Physicians

  30. Acting In All Our Interests • Health Care Organizations Comprise Almost 1/5 of the US Economy and 1/10 of US Jobs. • Only One Group is Larger, With the Influence to Overpower Health Care in Policy: • The Non-Health Care Business Community

  31. The Prospects Haven’t Been Good • Employers haven’t meaningfully mobilized to date • Many seem resigned or are fleeing • Appears to be no larger sense of enlightened self-interest

  32. Inescapable Conclusions Health Care’s Excesses Threaten The Stability Of The Larger US Economy. Policy Formulation Has Been “Captured” By The Health Care Industry, So The Greatest Promise For Change Lies In Market-based Reforms.

  33. Market-Based Approaches

  34. The Inflection Point • The Convergence Of: • Policy Paralysis • Overwhelming Cost • Excess Capacity Attacking Waste Becomes A Powerful Market Opportunity

  35. Market-Based Reforms • Over the past 20 years, employers (& health plans) have: • Significantly increased co-pays for “steerage.” • Introduced generic drugs and mail-order. • Introduced wellness, disease mgmt, lifestyle coaching programs • Introduced incentives • Renegotiated network discounts. • Given employees “more skin in the game.”

  36. Market-Based Reforms But we mostly haven’t Managed the care process, like businesses would.

  37. Market-Based Approaches That Work • Collaborative Benefits Management • Paying To Manage Process • Empowering Primary Care • Large Case Management • Domestic Medical Destinations • Analytics for Risk Identification • Care Gap Analyses

  38. Market-Based Approaches That Work – Large Case Mgmt.

  39. Market-Based Approaches That Work • Analytics of Provider Performance • Data Collaboratives • New Technologies (e.g., Minimally Invasive Procedures, Genomics) • Incentives/Patient Engagement • Direct Volume-Based Purchasing • Rx Step Therapies • Lifestyle Management/Obesity Step Therapies

  40. Cost/Quality Performance Transparency Vegas Physicians Source: Jerry Reeves MD, Culinary Fund Heatlh Plan, 2005

  41. The Development of Health Care Markets Mainstream health care is becoming part of a market for the first time in decades. This means health care vendors will need to appeal to purchasers on the basis of cost, quality and safety performance.

  42. Brian R. Klepper, PhD is a health care analyst and commentator. He is Chief Development Officer for WeCare TLC, LLC, an onsite primary care clinic and medical management firm based in Longwood, FL, and Managing Principal of Healthcare Performance Inc., a consulting practice based in Atlantic Beach, FL. An active author and speaker, Dr. Klepper has provided health care commentary to CBS Evening News, the Wall Street Journal, the New York Times, and the Washington Post. He has published articles on Kaiser Health News, Medscape, Healthleaders, The New England Journal of Medicine, Modern Healthcare, Business Insurance and newspapers nationally. Brian is a columnist on Business of Medicine and Primary Care for Medscape, the most-read medical site. He is an editor for The Doctor Weighs In, an online professional health care magazine, and a regular contributor to the Health Affairs Blog, Kevin MD,Health Care Policy and Marketplace Review, and other expert health care blogs. With his wife, he also maintains Elaine’s Journey, which details their struggle against primary peritoneal (Ovarian) cancer. Brian serves on the American Academy of Family Physicians’ Primary Care Services Valuation Task Force, and is a reviewer for Health Affairs and The Journal of Ambulatory Care Management. He is an Advisor to the Lundberg Institute, the Patient-Centered Primary Care Collaborative, which advocates for medical homes, and the Center for Value Health Innovation, which helps business identify and implement approaches proven to improve quality while reducing cost. In January 2011, with David Kibbe MD, he began a campaign, Replace the RUC!, that focuses on the most important driver of inappropriate health care cost. That effort resulted in a lawsuit by six Augusta, GA primary care physicians against the US Centers for Medicare and Medicaid Services (CMS) over its longstanding inappropriate relationship with the AMA’s Relative Value Scale Update Committee (RUC). 904.395.5530 (o), 904.343.2921 (c), bklepper@gmail.com www.brianklepper.info

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