Hospitalists and the Future of Healthcare: The Quest for Value for All Americans

1. Hospitalists and the Future of Healthcare:The Quest for Value for All Americans Ian Morrison www.ianmorrison.com

2. Outline • Models of Change • The Transformation Context • The Quest for Value • Scenarios and Implications

3. Models of Change • Pearl Harbor • A sudden crisis causes fundamental change • The Tipping Point • Pressures build to an inflection point of change • Glacial Erosion • Steady growth of grinding, inexorable, and hard to resist pressures • Aging • Technology • Unaffordability • Disparities • Tiering

4. The Holy Trinity • Cost • Quality • Access • (Security of Benefits)

5. Defining Value of Health Services (Access+Quality+Security) Value = Cost

6. Health Care Spending per Capita in 2004 (Adjusted for Differences in the Cost of Living) Source: OECD Health Data Published in Health Affairs Volume 26:5 2007

7. International Health Comparisons, 2004-05 Source: OECD 2002-2007

8. International Health Comparisons, 2004-05 Source: OECD 2002-2007

9. Premium Increases Compared to Other Indicators, 1988-2007 ^ Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2006; KPMG Survey of Employer-Sponsored Health Benefits: 1988, 1993, 1996, 1998; Bureau of Labor Statistics, 2000.

10. Health Care Costs and Consequences • For the Uninsured: Rising from 45 million today to 56 million in 2013 • For the Working Poor: In 1970 health benefits cost 10% of the minimum wage, today it is 100% • For the Median Household: Health benefits are 20% of median compensation will rise to 60% by 2020 if trends continue • For Retirees: A couple on retirement at 65 needs $200,000 in cash to pay for lifetime out of pocket costs for medical care • For Small Businesses: Only 60% of firms offer insurance in 2005 down from 69% in 2000 • For Big Business: Delphi goes bankrupt, Big Auto renegotiates because corporate healthcare costs surpasses the net profit of all business • For Big Labor: UAW, SEIU, AFL-CIO conflicts, challenges and opportunities for strife

11. Quality Shortfalls: Getting it Right 50% of the Time Not Getting the Right Care at the Right Time Adults receive about half of recommended care 54.9% = Overall care 54.9% = Preventive care 53.5% = Acute care 56.1% = Chronic care Source: McGlynn EA, et al., “The Quality of Health Care Delivered to Adults in the United States,” New England Journal of Medicine, Vol. 348, No. 26, June 26, 2003, pp. 2635-2645

12. Quality of Care Today: We are Worse than Shaq from the Line IRS Phone-in Tax Advice Phil Mickelson putting from 6 feet Overall healthcare Quality in U.S.(Rand Study 2003) Airline baggage handling Defects per million US Airline flight fatalities/US Industry Best of Class NBA Free-throws Fair Reliability High Reliability 1 (69%) 2 (31%) 3 (7%) 4 (.6%) 5 (.002%) 6 (.00003%) ∑level (% Defects) Sources: Courtesy A. Milstein modified from C. Buck, GE; Dr. Sam Nussbaum, Wellpoint; & Mark Sollek, Premera

13. Quality and Efficiency Vary Widely By State Health Affairs April 7, 2004

14. Enormous Variations in Practice and Spending Coronary Artery BypassGraft Surgery Age-sex-race adjustedrate per 1000 enrollees in 2003 Source: Dartmouthatlas.org courtesy Elliot Fisher MD

15. Supply-Sensitive Care Can Be Measured for Specific Providers 80.0 NYU Medical Center 76.2 70.0 Cedars-Sinai Medical Center 66.2 60.0 Mount Sinai Hospital 53.9 50.0 UCLA Medical Center 43.9 NY Presbyterian Hospital 40.3 Mass. General Hospital 38.8 40.0 Brigham & Women's Hospital 31.9 Boston Medical Center 31.5 Beth Israel Deaconess 29.2 UCSF Medical Center 27.2 Stanford University Hospital 22.6 30.0 20.0 10.0 Physician Visits During the Last Six Months of Life Source: Dartmouthatlas.org

16. If Quality has Improved, Doctors and Patients Have Not Noticed Has quality of care gotten better or worse in the past 5 years, or has it stayed about the same? Better Stayed about the same Worse Source: Harris Interactive, Strategic Health Perspectives 2005, 2006 Note: Percentages do not add to 100 because “not sure” answers are not included. * Has the quality of medical care that you and your family receive gotten better or worse in the last 5 years, or has it stayed about the same?

17. The Progressive Transformation Story • Cost and Quality are correlated inversely • Utilization is not based on need and doesn’t create outcomes • Measurement matters • Transparency on cost and quality will: • Embarrass providers to improve • Motivate payers to differentially pay • Motivate consumers to change providers • Steer business to the high performance providers • Do all of the above given enough time • Re-engineering of delivery system will ensue • Value gains will make healthcare more affordable and of much higher reliability and quality

18. The Battle for Quality: IOM versus “Pimp My Ride” The IOM Vision of Quality: Charles Schwab meets Nordstrom meets the Mayo Clinic The Prevailing Vision of Quality in American Healthcare:“Pimp My Ride”

19. The Battle for Quality: IOM versus “Pimp My Ride” • Really Bad Chassis • Unbelievable amounts of high technology on a frame that is tired, old and ineffective • Huge expense on buildings, machines, drugs, devices, and people at West Coast Custom Healthcare • People who own the rides are very grateful because they don’t have to pay for it in a high deductible catastrophic coverage world • It all looks great, has a fantastic sound system, and nice seats but it will break down if you try and drive it anywhere

20. Pimp My Ride in Redding • Fee-for-service payment rewards: • Volume • Fragmentation • High margin services • Growth Source: Dartmouthatlas.org courtesy Elliot Fisher MD

21. Pimp My Ride in Redding • Fee-for-service payment rewards: • Volume • Fragmentation • High margin services • Growth Clinical Intervention The FBI Arrived Source: Dartmouthatlas.org courtesy Elliot Fisher MD

22. International Obesity 2003 Percent of Population over 15 with BMI >30 Source: OECD, 2005

23. Don’t Look Down on Him: Middle Age Americans are not as Healthy as the English • US White population in late middle-age is less healthy than the equivalent English population for, diabetes, hypertension, heart disease, MI, stroke and cancer • Steep gradient by SES in both countries: It’s good to be rich • But, the poorest third of Brits are healthier than richest third of Americans for diabetes, hypertension, all heart disease, and cancer Source: Banks, J. et al. JAMA 2006;295:2037-2045.

24. HONDAS • Hypertensive • Obese • Non-Compliant • Diabetic • Alcoholic or All Systems Failing or both Source: Connie Blackstone MD, Primary Care Physician, Greenville, SC

25. Primary Care Practiceswith Advanced Information Capacity Percent reporting seven or more out of 14 functions* * Count of 14: EMR, EMR access other doctors, outside office, patient; routine use electronic ordering tests, prescriptions, access test results, access hospital records; computer for reminders, Rx alerts, prompt tests results; easy to list diagnosis, medications, patients due for care. Source: 2006 Commonwealth Fund International Health Policy Survey of Primary Care Physicians.

26. Capacity to Generate List of Patients by Diagnosis Percent reporting very difficult or cannot generate Source: 2006 Commonwealth Fund International Health Policy Survey of Primary Care Physicians.

27. Primary Care Doctors’ Reports ofAny Financial Incentives Targeted on Quality of Care Percent reporting any financial incentive* * Receive of have potential to receive payment for: clinical care targets, high patient ratings, managing chronic disease/complex needs, preventive care, or QI activities. Source: 2006 Commonwealth Fund International Health Policy Survey of Primary Care Physicians.

28. What We Have to Change….Not Much Except……… • Our values • Our Strategic Focus: From Pimp my Ride to Primary Care and Prevention • Our Reimbursement System • Our Delivery System • Our Individual and Collective Behavior • Our Expectations • Our Business Models • Our electronic infrastructure to support it all

29. AHA 2006 Survey • 2,188 (44%) of 4,936 community hospitals have hospitalists • Grew by 40% over 3 year period 2003 - 2006 • That translates into >2,500 hospitals with hospitalists in 2007 • Hospitalists Now at Hospitals that Represent >70% of total National Hospital Beds • Prevalence of Hospitalists at Most Larger (>200 beds) Hospitals • 8.8 physician hospitalists per Hospital Medicine Group • >19,000 hospitalists at community hospitals • Grew 50% over 2 year period 2003 - 2006 • 21,000 – 23,000 hospitalists is a reasonable estimate for 2007 Source: Larry Wellikson MD, 2008; AHA, 2007

30. Hospitalists: A Large Specialty Specialty Numbers (except Hospital Medicine) from AMA’s Physician Characteristics and Distribution in the US, 2005 edition Source: Larry Wellikson MD, 2008; AMA, 2005

31. Impact on Hospitalists • Inpatient Care is where the rubber hits the road • Rising pressure of demand from increasingly complex and co-morbid patients • Increased reimbursement pressure and managerial pressure to improve value for patients: • Safety • Improved outcomes • Increased efficiency • Reliability • Measurement and documentation of performance • Demand rising for hospitalists • Training and credentialling issues • Alternate models of hospitalist organization • Clinical Reengineering puts hospitalists at the very center of the needed transformation in healthcare delivery

32. Key Driving Forces: Political • Presidential election year where candidates are focusing on change • Many Republican incumbents in house and senate not seeking re-election • Possible big turn out of youth: The Echo Boom can’t drink yet, but they can vote • Health care is number two domestic issue (behind the economy) among Democrats and Independents • Growing sense of anti-corporatism even among Republican candidates (Huckabee and McCain) • Possibility of a large Democratic victory

33. Key Driving Forces: Economic • Economic Slowdown in 2008-2009 seems likely to continue • Continued involvement in Iraq short term means big government deficits • Little government opportunity for big expansion in short run • Sub-prime mess lingers and perhaps worsens, declining consumer confidence, weakening dollar, continued high energy prices • Business sees profit squeeze after long run up and high performance expectations from investors

34. Key Driving Forces: Health Reform • Health Reform Options are in a narrow range (Democrats positions are right of Richard Nixon’s) • New American Compromise of shared sacrifice and incremental expansion of coverage is favored by both Democratic presidential candidates and some Republicans at state level • Focus is on coverage expansion for an anxious middle class not wholesale transformation of health care but….. • Healthcare Glitterati homing in on elements of a compromise (Commonwealth Fund 15 is a good starting list of cost containment options) • Unlikely Coalitions are forming: e.g. SEIU, Wal-Mart • Big actors are staking positions near and around the New American Compromise for example the AHA, AHIP, BCBSA, Divided We Fail, Mayo Clinic, Committee on Economic Development, and Others • Big business not as ready to bail out of healthcare as some pundits think • Seniors are satisfied with Medicare (including Part D) and are not pressing for health reform of Medicare, yet but how will Part D play in 2008? • Doctors are cranky and depressed

35. Most Employers are Ideologically Opposed to Massive Exit in a Tight Labor Market with a Strong Economy % Answering Describes My Company Well Source: Harris Interactive, Strategic Health Perspectives 2007 N=20* Pacific Business Group on Health , July 2007 Retreat

36. Physician Dissatisfaction with Practice at Historic Highs Physician Satisfaction with Current Practice Situation % Satisfied % Dissatisfied Source: Harris Interactive, Strategic Health Perspectives 1995-2007

37. The Commonwealth Fund 15 • Promoting Health Information Technology • Center for Medical Effectiveness and Health Care Decision-Making • Patient Shared Decision-Making • Public Health: Reducing Tobacco Use • Public Health: Reducing Obesity • Positive Incentives for Health • Hospital Pay-for-Performance • Episode-of-Care Payment • Strengthening Primary Care and Care Coordination • Limit Federal Tax Exemptions for Premium Contributions • Reset Benchmark Rates for Medicare Advantage Plans • Competitive Bidding • Negotiated Prescription Drug Prices • All-Payer Provider Payment Methods and Rates • Limit Payment Updates in High-Cost Areas

38. Covering the Uninsured:Who Pays? Who Gets? Who Cares? • Who Pays? • American healthcare financing is regressive • Single Payer is a massive transfer of income from rich to poor • Making $20,000 earners buy a $15,000 health care policy is problematic • Who Gets? • Having a card doesn’t guarantee getting care • Growing use of ER, Minute Clinics, and Off-shore options even by the insured population • Who Cares? • How much reimbursement goes with the card? • Do we need coverage or do we need care? • Are the insured getting the right care?

39. Number of Uninsured 2005 Source: KFF, 2006

40. Payment to Cost Ratio (Illustrative) Source: Morrison Estimates, in other words a good guess

41. Payment to Cost Ratio (Illustrative) Single Payer Schwarzenegger Source: Morrison Estimates, in other words a good guess

42. Individual Government Disruptive Innovation Four Scenarios for US Health Care 2005-2015 Bigger Government by Request Tiers R’Us Minor Delivery System Reform 50% 20% National Rational Healthcare Major Delivery System Reform 10% 20%

43. Scenario 1: Tiers R’ Us • SUVing of healthcare • Continued disparities and tiers • High end providers do well, low end suffers • Probability over 10 years: 50%

44. Scenario 2: Bigger Government by Request • Baby Boom Backlash against cost-shifting • Democrats run on shoring up and expanding healthcare for middle aged and elderly • Government regulates healthcare even more • Slowing innovation, reducing provider payment, and limiting profiteering • Probability over 10 years: 20%

45. Scenario 3: Disruptive Innovation • Cheapo plans proliferate (high deductibles and retail primary care) forcing cheaper delivery models to emerge • New disruptive competitors emerge at a lower price point e.g. Revolution Health, Wal-Mart, Kaiser Lite • Almost as good, and a lot cheaper • Probability over 10 years: 10%

46. Scenario 4: National Rational Healthcare • Mandatory universal individual insurance is passed • National policy commitment to restructure healthcare financing and delivery • True managed health care • Focus on public health and prevention • Probability over ten years: 20%

47. Scenario 4: National Rational Healthcare Impact on the Healthcare System • Health Plans • Health plans are active agents for health delivery transformation • A focus on prevention and wellness • Sources of innovation in DSM and new reimbursement models • Get smart or get out • Pharmaceuticals • Reference-pricing and cost-effectiveness criteria for new technology • True clinical innovation is rewarded • Side by Side clinical trials for new product launches • National Technology Assessment System continuously monitors technologies in use • Providers • Chronic Care management done right: innovation in community based chronic care • New reimbursement systems “Daughter of Capitation” force market leaders into fundamental clinical system redesign • Acute care is evidence-based and standardized • Innovation concentrated in designated centers of excellence • P4P means better payment and earns the provider the right to serve

48. Common Themes • High end patients and providers will always do well • Generics will grow in almost any scenario • True cost reducing technologies will always have appeal • True clinical breakthroughs that are radically better than existing modalities and therapies will always be rewarded but the bar for new technologies will be raised to demonstrate value • Beware of the Fallacy of Excellence • Healthcare is a superior good and will take a larger share of national wealth • But who pays for what and how will be central difficult questions for business, government, and households around the world forever • Healthcare pharma, technology and supply industry will consolidate even further

49. Implications • Chronic Care needs will grow because of aging and obesity • We are ill-prepared because of our reimbursement system, technology, infrastructure, and delivery systems • We need simple solutions based on familiar components • We need to innovate in business models • We need to implement what we already know • We need to move from Dumb Cost-Shifting to Intelligent Consumer Engagement • We need to focus on prevention

50. Implications • No matter what, we will need better value measures and more transparency of measures • Value based purchasing will become more prevalent and have a powerful influence on providers and vendors • Consumers will become more engaged in value decisions but we cannot rely on them absolutely • The systems of healthcare need to be continuously improved to deliver greater value • Will require clinical skills, process skills, use of cutting edge technology and big-time capabilities • Most of all, it will require leadership