James I. Ausman, M.D., Ph.D. Editor SURGICAL NEUROLOGY Professor of Neurosurgery

1. James I. Ausman, M.D., Ph.D.Editor SURGICAL NEUROLOGYProfessor of Neurosurgery UCLA &University of Illinois at ChicagoClinical Healthcare Consultant Navigant Consultants, Inc; Strategic Planning and Market Research for the Healthcare Industry Medical Expert KMIR 6 TV

3. What your Future will be Like And How to Plan for It

4. What is the likelihood that what we are doing today in Medicine and Neurosurgery will be the same at the end of the 21st century? NONE

5. The World We Live In: Present and Future

6. The Future of Healthcare • We are in a wartime economy- will last for years • Our GNP will grow at 3% / year not 7% • Healthcare is 16% of the GNP in the USA-2006 • Health insurance premiums went up >7% this year • In 2015 it will be 20% of the GNP • 2 trillion dollars will be spent on healthcare this year • The Government controls 45% of healthcare expenditures; this % will rise to 49% • Others bill at Medicare or % of Medicare rates • There will be no more money available for doctors or hospitals

8. The Future of Healthcare • How will you make money in this environment? • Cut costs • Larger group • Efficient operation • Volume with good payers • Find other ways to generate revenue

9. The Economy in the Future • We are in a global economy • What is happening in Industry? • Mergers and acquisitions • Large corporations • Multinational corporations • Competition on the basis of price; companies need to survive; have become larger, global • Healthcare costs increasing to industry • Employees have larger copays • Healthcare costs are going up; no one likes it • Companies are cutting retirement benefits

10. The Economy in the Future • Healthcare • Has large players: Government, Insurance Co, Hospitals • Physicians • 50% solo or small group (3 or less) • Disunited • How can you play effectively in this market? • Failing business strategy

11. The Economy in the Future • How do you survive in this market? • Become larger for greater market power • Greater market share • More political power • What are you doing to help the community in this time of limited funds?

12. Neurosurgery: The national picture • 3000 neurosurgeons in the USA • Few specialized • Most selling the same products • Most in major cities • Competition • Interventional neuroradiology- advancing technology • Ortho, plastic, vascular surgery: spine, peripheral nerve, vascular • Because less pay from payers • Increased volume • No time for R&D • No chance to advance • Where are you going to be in 10 years with this strategy?

13. Neurosurgery: The national picture • This is a formula for certain business failure • No R&D • No new products • No differentiation from competitors • Solution: • Merge with others • R&D • New strategy: larger group

14. Neurosurgery: The case market • 17,000 new primary brain tumors ( 5/ neurosurgeon/ year) • 100,000+ metastases (33/ neurosurgeon/ year) • 700,000 new strokes per year • 25,000 SAH , aneurysms & AVMS • 200,000 carotid endarterectomies • Epilepsy: 2,000,000 +people • 1-2% have Parkinsons’s • Back pain most common cause of loss of work • only 10% need surgery • Pain is the most common symptom of patients

15. Neurosurgery: The case market • Solutions: • Concentrate on large volumes in market • Expand market share: Provide full service • Need to have a larger group to do this • Need time for R&D • Subspecialize • What neurosurgeons are doing with the figures above • If you choose a niche, be a “Focused Factory”

16. Physicians: A psychological analysis • Intelligent, Individualistic • Ego driven • Know it all • “Do what I tell you” • Cannot work together • Unwilling to change • Politically naïve • Poor negotiators and business mentality • Used to arguing • Risk Averse

17. Your business adversary: A psychological analysis • Goal Directed • Intelligent • Ego driven • One leader speaks, the rest follow • Have a strategy • Organized, work as a team • Will change to gain market share and succeed • Politically savvy • Good negotiators and business mentality • Work as a team (I pay your salary: do what I say) • Risk Takers

18. Which of these two opponents will win at the negotiating table?

19. Your business adversary: A psychological analysis • The world you compete in is a business world not the OR • Learn the RULES

20. Physicians: A psychological analysis • Solutions • Hire people who believe as you do • Those who do not fit don’t hire or fire • Change your way of dealing with people • Get a Strategic Plan

21. How to negotiate to get what you want • Physicians say, “ Do what I say now” (no negotiation)

22. “Be happy with half-victories and come back for the rest later”- Lyle French, M.D. As he went from Chairman of Neurosurgery to VP of Health Sciences

24. What your patients think of your service • Hard to get an appointment; Automated answering service • Waits to see doctor; patient’s time is not valuable • Fragmented care; specialized care; go to multiple doctors; lost time & $ • “96,000 patient deaths per year caused by doctors” • Doctors make too much money; (look at the cars they drive) • Expectations are unlimited • Press; doctors; self-centered generation (boomers) • Patients do not want to pay co-pays • But rather spend on VCR, golf or etc • They understand some of the system problems affecting you

25. What your patients think of your service • Solutions: • You must deal with patients’ perceptions, not reality! The customer is right! • Change your way of doing business • Better PR: locally, nationally • Academic Centers are the worst at service • can only leverage their unique treatments • You must work like you never have enough business (Avis) • Do you have an unlisted phone number? • Is your office phone automated? • YOU ARE IN THE SERVICE INDUSTRY; PROVIDE SERVICE!

26. The Future: Nursing and other paramedical professions • Nursing • Shortage now • Worse in the Future • Nurses seeking other careers with better respect, pay and independence • Climbing pay • Paramedical Professions • Growth industry • Climbing pay

27. What did you learn from analyzing your business from the available information today?

28. Solutions so far • Healthcare environment • Cut costs; larger group; efficient operation; volume- payer • Global Economy • Larger group for market and political power • Neurosurgery: national market place • Present formula is a business failure; Differentiate yourself from your competition • Merge; R&D; larger group • Neurosurgery: case market • Concentrate on large volume: Tumors: mets and others; pain and spine; Movement disorders; epilepsy; vascular disease; need larger group

29. Solutions so far • Physician personality • Hire people who believe as you do • changeyour behavior • Get advice and strategic plan • Opponent’s personality • You are playing in a business marketplace not the OR; Learn the rules • How to negotiate • Be happy with 1/2 victories and come back for the rest later; Change; learn to negotiate • What do your patients (customers) think of your business? • Change; PR; Customer focus; You are in the Service Business

30. What about your own Personal Future?Do you have enough money to retire?If you retire at 65 and live to 90sHow much money will you need to allow you to live the way you want for 30 years?At least 10 million dollars in the bank at retirement or more

31. The Future: Trends in Neuroscience Research Where research is leading us

32. Where Neuroscience Research Is Taking Us • Neurosurgery: • Less invasive approaches to neurosurgical diseases • Aneurysms, AVMs, pituitary tumors, some spine • Successful molecular treatments for neoplastic diseases • CML, medulloblastoma, meningioma, ALL • Will eliminate skull base surgery for tumors, and other grossly invasive approaches for neoplasms • Imaging indicating functional significance of every part of brain. • damage to cognitive brain functions by standard neurosurgical procedures • Will change neurosurgery to a minimally invasive technical specialty

33. Where Neuroscience Research Is Taking Us • Neurosurgery: • Understanding molecular level dynamic genetic and biochemical processes • Will need constant evaluation and changes in treatment • Trauma, ischemia, spinal cord injury, spinal cord repair • Care of the Recovering and Injured Brain • Neurointensive Care. • Will overlap interests of neurologists who will be treating different diseases similarly • Neurosurgeon will become less surgical. Will there be a neurosurgeon?

34. Where Neuroscience Research Is Taking Us • Neurology: chronic and progressive diseases • Will have genetic and molecular bases • Imaging will reveal causes of these • Neurology and Neurosurgery will overlap • Pain: Genetic differences; Fiber tract differences • Will require knowledge of psychiatrist, neurologist, neurosurgeon and rehabilitationist to treat patient successfully

35. Where Neuroscience Research Is Taking Us • Psychiatry: • Cognitive & Functional Diseases will have a genetic basis. • These disorders will be understood in molecular terms. • Imaging will reveal basis for cognitive and functional disorders • Psychiatry and Neurology will merge with Neurosurgery

36. Where Neuroscience Research Is Taking Us • Neurosurgery, Neurology and Psychiatry: • We are all looking at the same brain • INTERDISCIPLINARY RELATIONSHIP • In academic centers, Basic Neuroscientists will join clinical neuroscientists • Grants will be awarded to teams of neuroscientists • Examples at present: • Stroke • Pain • Epilepsy (MINCEP) • Movement Disorders

37. The Future: The Neurosciences Market

38. The Neurosciences Market Is Large But Diffuse Estimated Prevalence in U.S. (in thousands) Total = 15 million – 90 million(with cognitive, functional and behavioral disorders contributing 75 million 1 /3 of the population)

39. Value of a Neurosurgeon Average Hospital Inpatient and Outpatient Revenue Generated Annually (millions)

41. Inpatient Care Is More Concentrated at Teaching Hospitals Percent of U.S. Discharges at Teaching Hospitals All Discharges = 22% 1

42. Neurosurgery Supply Neurosurgeons Practicing in U.S. Available U.S. Neurosurgical Positions Demand Market Realities: Emerging Physician Shortages • Supply and Demand Shortages Continue for Other Specialists • Spurred by declines in specialty residencies, demand for select specialists are expected to rise (1994 vs. 1999) • Orthopedic residents declined 9% • Radiology residents declined 13% • Oncology residents declined 63% Source: AANS Bulletin; Winter, 2003; Too Many? Too Few?

43. Neurosurgeon Wanted February 3, 2005 • $600,000 salary 1st year (maybe higher) • 1 in 5 call • Southern Ohio metro city Two Neurosurgeons Wanted February 10, 2005 • $650,000 base salary • $50,000 sign-on bonus • 18 months to partnership • No managed care • Team support and group approach in the OR • Located in Midwest Market Realities:A Sellers Market • How Competitive Is Your Market/Organization?

44. ED Coverage Forcing the Issue % Hospitals Naming Specialty Among Hardest to Secure ED Coverage (n=1,501) #1 For facilities with resident coverage, this situation has been particularly problematic due to new residency work week limits Source: Tiber Group analysis; AHA and The Lewin Group TrendWatch (March, 2001); Governance Institute

45. Less Hospital-Physician Competition Distribution of Physicians by Group Size (2001) Capital Cost of Neuroscience Equipment

46. Baby Boomers today Aging Populace Requires More Hospitalization Rate Per 1,000 Population 50% of Today’s Population Source: National Hospital Discharge Survey, Center for Disease Control and Prevention, 1998

48. 1999 1991 1989 1981 1983 1985 1987 1995 1997 1993 Expect Long-Term Rise in U.S. Hospital Admissions U.S. Hospital Admissions (Millions)

50. The Neuroscience Market-Summary • There is a large volume of people with neurological and functional disorders- 90 million • The number of neurosurgeons and neurologists is decreasing • Many in solo or small group (<3) group practice • Neuroscience is “expensive-equipment intensive” • Complex neurological conditions seen more at academic or major centers • Neurosurgery is big IDP revenue generator, second to cardiac; hospitals need to find other sources of revenue • Baby boomers will increase demand for services in the next 20 years; neurosciences will benefit • People are living longer with chronic diseases • Research dollars are increasing • Neuroscience is next big area for hospital program growth