Trends%202006:%20Top%20Trends%20Every%20Healthcare%20Executive%20Should%20Know

1
Trends 2006Top Trends Every Healthcare
Executive Should Know

• Maureen M. Swan
• The MedTrend Group
• Minneapolis, MN

2
What Will The Future Bring?

• Even the experts have a hard time predicting the
  future
• Who the hell wants to hear actors talk?
• Harry Warner of Warner Brothers
• That little black box will never amount to
  anything.
• Louie B Meyer, MGM
• Everything that can be invented has been
  invented.
• US Patent Worker, early 1900s
• The only reason someone would buy a PC is to
  hook it up to a mainframe.
• IBM Executive, 1985

3
1 Return to Rising Premiums/ Rising Healthcare
Costs
4
Return to Rising Premiums
Annual Change in Average Health Benefit Cost
13-20
RECORD LOWS
Source William M. Mercer, 2006
5
Why the Rise in Healthcare Costs?
What made up the 13.7 increase in premiums
between 2001 -2002?
PriceWaterhouseCoopers Study, April 2002
6
How long can workers afford it?
Growing gap in worker earnings increases to
healthcare premium Increases.more workers strike.
3.4
1.6
Source Kaiser Family Foundation HRET, 2003
7
What Healthcare Costs in America 2005

• Annual family premiums 10,880
• More than the gross earnings for a full time
  minimum wage earner
• Average worker paid 2715, or 26 of the premium
  costs

Source The 2005 Employer Health Benefits
Survey, September 2005
8
Brutal Facts

• 46.2 of all personal bankruptcies are due to
  medical costs of an illness
• Current cost increases would cause healthcare
  costs to double every five years
• We have the most expensive system in the world
• US residents paid 5267 per person for health
  care, 53 more than any other industrialized
  country
• With average results
• And Americans are getting fatter and less healthy
  by the week
• 72 of Americans are overweight
• Growing number of obese/ overweight kids

Sources Health Affairs, July/August 2005.
9
How long can companies afford it?

• Healthcare costs are killing us.
• General Motors Chair, May 2005
• 1525/ car in healthcare costs- more than the
  cost for the steel
• 1 concern of benefit managers
• Controlling health care costs (Deloitte, 1/05)
• Primary reason for labor strikes healthcare
  benefits
• 79 of business owners say they are concerned
  about their employees ability to shoulder the
  projected increases in health costs.

Source Robert Wood Johnson Foundation,
September, 2005 Wall Street Journal, May 2005.
10
Rising Number of Uninsured
2009 Estimate 48M 61M if recession
Estimate
At least 16M estimated to be underinsured in 2003
Percentage
Millions of Individuals
Source US Department of Commerce, Economics and
Statistics Administration, Bureau of the Census,
1998 National Coalition on Healthcare, 2002,
Commonwealth Fund, 2005 The Commonwealth Fund,
2005.
11
Lack of Coverage

• 6 Million additional uninsured adults 2000 -
  2004
• 35 of U.S. adults ages 19-64 had either no
  insurance, sporadic coverage or insurance that
  exposed them to catastrophic costs during 2003
• 19 of working adults ages 18-64 had no insurance
  in 2004
• The percentage with employer based insurance fell
  from 69 in 2000 to now 59.8 in 2005.

Source The Commonwealth Fund, 2005 The Center
on Budget And Policy Priorities, September 2005.
12
Implications for Hospitals

• You might have more uninsured or underinsured
  over the coming years
• Your own healthcare benefits costs will rise
• Growing concerns among your customer patients
  regarding costs and possibly willingness to
  look for less expensive alternatives

13
Healthcares Perfect Storm

• Aging, demanding, increasingly unhealthy
  consumers
• Exploding, expensive medical technologies that
  the consumer wants
• Financial model that shields the consumer from
  the true costs

SUSTAINABILITY??
14
Consumers View Today

• Cost of a doctor visit 10 - 15
• Cost of a prescription 5 - 15
• Cost of a hospitalization 100

Is this sustainable over the next ten years?
15
Consequences to the Industry

• Employers try new benefit models
• Reimbursements get squeezed further growing
  concerns for providers
• Not enough beds mini-construction boom in urban
  areas
• Not enough staff workforce shortage
• Discontented doctors
• Aggressive new competitors

16
2 The Consumer Revolution
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2 The Consumer Revolution

• Waning consumer confidence in the system

18
Waning Consumer Confidence
Percentage of Americans who
Think there is something seriously wrong with the
system

Have heard some disturbing stories about medical
care and mistakes that hurt or even killed people

Feel that quality healthcare is almost
unaffordable for the average person

Feel that quality care is often compromised to
save money

Source National Coalition on Health Care, 1997
Survey
19
Todays Consumers Are Better Educated and Have
More Money
Americans Over 25 Who Have Attended College
U.S. Households with 50K Incomes (in constant
1995 dollars)
58
45
48
39
28
28
18
Source Institute for the Future, 1998 U.S.
Bureau of the Census, 1996.
20
Consumers See Themselves asIn Charge of Health
Care Decisions
Influencing Healthcare Decisions
Who InfluencesToday?
Who ShouldInfluence?

• Insurer 3.30
• Self 1.88
• Doctor 1.74
• Employer 1.20
• Government 1.08
• Hospital 0.60

Self 5.44 Doctor 2.44 Insurer 0.72 Hospital 0.62 G
overnment 0.48 Employer 0.30
SourceVHA, 1997
21
Baby Boomers Driving Demand
Approximate Age Distribution of Baby Boomers
1990
Source U.S. Census Bureau, HCAB 2002
22
The Age of Transparency

• Consumer reports
• INFORMATION to drive my decision making
• Qualitycounts
• Healthgrades
• Leapfrog
• U.S. News
• And soon real pricing information

23
Insert their healthgrades data
24
Healthcare Report CardsVery Early in Adoption
Curve

• 26 of consumers say they have seen data on
  hospital quality. Only 1 acted on that
  information
• 22 say they have seen information on health plan
  quality. Less than 1 said they made a change
  based on the data.
• 10 have viewed quality information on
  physicians. Less than 1 used that information
  to make a change.

Source Strategic Health Perspectives, Harris
Interactive Poll 2003.
25
Ratings Changing Decisions
Do They Influence Behaviors ?
If your hospital or physician received low
ratings
Source Solucient, 2003
26
Industry Responds Opportunities

• Open access, same day scheduling
• Extended clinic hours
• Clinical centers of excellence
• Healing environments
• Integrated alternative and traditional care
• Boutique practices

Consumers are driving product development- ARE
YOU LISTENING TO THE CUSTOMERS IN YOUR MARKET?
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COST 44
28
Implications for Hospitals

• Being there isnt enough
• Customers are increasingly shopping for
  healthcare
• Customers will leave town (or your market area)
  for care
• You have to market to the consumers in your
  market why should they use your hospital?

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3 The Age of Digital Health
30
Internet Creating New Industries, Companies and
Products
Internet Growth (millions of adult users)
Source American Internet User Survey, FIND/SVP
31
Consumer Healthcare Information Resources
Source Rynne Marketing Group, 2001
32
Internet Use

• Consumers trust the internet more than other
  media sources
• 65 of consumers use the internet to research
  important health topics before and after they
  visit a doctor
• Internet shopping
• Medical tourism
• National market for complex/ life threatening
  procedures

33
Medicineonline.com
34
Yourdiagnosis.com
35
The e-provider

• E-enabled doctors
• 20 of office visits could be eliminated
• MDs may spend 1/3 of time on the net by 2010
• 86 of doctors will be using e-prescribing
  (Forrester Research, 2005)
• Only 17 of doctor offices have electronic
  medical records (CDC, 2/05)
• 90 of online adults want the following
  capabilities with their physician
• Ask questions without a visit
• Fix appointments
• Receive medical test results

Source Cyber Dialog, Inc. 2001, Market Drivers
Strategy Briefing On e-Healthcare, 2003 CDC,
2005.
36
3 The Age of Digital Health

• Increasing pipes (broadband and fiber optics)
  -- integrated video, voice, imaging, data
• Radiology, tele-health
• Clinical information databases and artificial/
  expert systems applied to medicine
• Markets no longer local or regional

37
Implications

• Having a value added web strategy matters
• Lock in the desktop of your customers
• Electronic Medical Records are a requirement to
  stay competitive
• Data reporting
• Quality improvements
• (Rural) Stay on top of technologies that you can
  keep local or that allow you to connect to
  tertiary providers

38
4 The Medical Technology Revolution
39
Technology TrajectorySmallerEasier to
UseFasterCheaperEarlier in the Disease
CycleLess InvasiveOut of the hospital
40
4 The Medical Technology Revolution

• Pharmaceutical and device development accelerates
• Faster pace
• Replacing surgeries
• Drug coated stents versus CABG (30 declines)

41
Coming at Us at a Faster Pace
Number of New DrugsBrought to Market in U.S.
Number of FDA Applications For New Medical Devices
Source Bryant-Friedland, A Costly
Prescription, The Florida Times-Union, June 1,
1998 NIHCM Foundation/ American Institute of
Research, 2002 Abbott Labs, Hospital Of the
Future, 2003 HCAB 2003.
42
Direct-to-Consumer Advertising Booms
2004 Ad 4.2 Billion
Pharmaceutical Advertising
3.5B
1.3B
Source Media WatchMulti-Media Service, 1999
43
Pharmaceutical Biotech Development Escalates
Pharmaceutical Research Dollars
45B
Source Pharmaceutical Research Manufacturers
of America, Wash. DC, 1998 Price
WaterhouseCoopers
44
Enormous, expensive pipeline

• In development
• 316 drugs for cancer
• 15.3 growth in costs for cancer/transplant drug
  treatments in 2004- related to just 2 new drugs
• 25.9 growth in costs for cancer overall in 2004

45
4 The Medical Technology Revolution

• Human stem cell development
• Growth of human tissues and organs
• Human genome
• Nano-technologies come to medicine
• Nano-delivered drug devices
• Nanorobots repairing tissue without surgery

46
Technology Innovation Place Disruption
Case Acuity
Trauma Brain Complex Oncology
Cardiac Total Joint
Backs
Hysterectomy Shoulder
Hernia
Hand Arthroscopy
ENT
ASC with overnight stay
Urology
Ophthalmology
Later ASC
Oral
Cosmetic
Gastroenterology
Early ASC
Location of Surgery
Dermatology
Doctors Office
Surgery Center
Hospital
Source National Surgical Hospitals, Inc.
47
Provider Disruption

Sub-specialists
More care will be able to be provided at lower
levels in the pyramid
Specialists
Primary Care Doctors
PAs- RNs
Med Techs
Consumers
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Implications

• What is done by the primary doctor/ nurse might
  get disrupted to lower settings
• Pregnancy testing
• Blood glucose monitoring
• But what is done at the high end can move closer
  to the physician and mid-level provider over time
• Oncology care
• Radiology
• Etc.
• What new care can you do locally?
• Where do you want to compete in the pyramid?

49
Perfect Storm Consequences to the Industry

• Employers try new benefit models
• Reimbursements get squeezed further growing
  concerns for providers
• Not enough doctors
• Discontented doctors
• Not enough staff- growing workforce shortage
• The rural/ urban difference

50
Employers Experiment with Benefit Models(The
million dollar question)
51
Rising Costs Shift to Employees
2005 78 will shift cost to employees
Source Fourth Annual Survey on Purchasing Value
in Health Care.Washington business Group
Watson Wyatt, March 1999
52
What are Consumer Directed Health Plans?
OUR DEFINITION...

• A health plan designed to get the consumer to
  care about costs at more than just the point of
  picking their health plan
• Some fixed from employer
• Employee picks from multiple plan options
• Employee pays or pockets the difference
• Plan design and tools create incentive for
  employee to care about cost of provision of care
• Based on the notion that consumers are RATIONAL

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Is this REAL?

• McKinsey Consulting
• This is the most significant change in healthcare
  since the introduction of the HMO
• Tipping point Jan 2006
• HSAs adding 50,000 per month
• As of April 2005, 22 of employers now offer a
  CDP but only 2.6 offer it with a HSA
• 50 of those not offering a CDP/HSA plan to in
  the future

54
HSAsGetting to the Tipping Point

• 90

12 Year Period
90
Percentage of Members in an MSA/ HSA Plan

• 50

50
12 Year Period

• 10

10

• 5

.1
1994 2004 2014 2024
2006
Following the standard S curve adoption rate
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Impact of CDHPs

• Definity Health data suggests that defined
  contribution results in a 8-10 reduction in
  utilization rates under the deductible
  (1500-2000)
• Members appear to use more generics
• Premium cost increases at 3.4 versus 9.6 for
  other plans in 2005.
• REDUCED PHYSICIAN AND INPATIENT DEMANDNet result
  to future demand????

56
Future Model?
Employer Sponsored 401(K) and HSA
Means Tested Means Tested Medicare
200,000 IRA
100,000 HSA
My Money
FIDELITY HEALTH
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The rural/ urban difference
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The rural/urban difference

• Urban
• Economies of scale
• Service specialization
• Broad array of services
• Potential for continuity of care when tertiary
  care needed
• Greater capital pools
• Easy ability to recruit providers/ staff
• More likely to be in a system- less control over
  their destiny at the hospital level

59
The rural/ urban difference

• Rural
• Community challenges
• Troubled local economies
• More elderly more chronic health issues
• Smaller tax base
• Exacerbated workforce shortage issues
• More difficulty recruiting physicians
• More difficulty retaining local students for
  staff, nursing positions- wanting to leave town

60
The rural/ urban difference

• Financial challenges
• Greater proportion of uninsured
• Higher dependence on Medicare/ government 50
• Lower margins, lower capital pools investing in
  new technologies more difficult
• Size challenges
• Economies of scale smaller patient base to
  spread costs
• More sensitive to policy changes

61
Urban versus Rural

• Strength of the local communities hospital
  strength depends on community strength
• Every 2 of revenue generated by the health care
  industry will generate an additional .80 of
  revenue in other industries in rural counties
• Every 2 jobs created in rural counties by health
  care will cause the number of jobs in other
  sectors to increase (or decrease by one job.

Source Rural Wisconsin Health Cooperative, 2005.
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But Rural Opportunities

• More services can stay local
• Tele-medicine and other technologies can provide
  real time linkages to secondary and tertiary care
  sites
• In general patients dont want to leave town and
  go to the big city convenience still carries
  strong weight as a value proposition
• Caring small town care matters
• Critical access designation provides a financial
  life line from 500K - 1M per year for a
  typical hospital

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How You Might Feel
64
Top Implications

• Demonstrate measurable quality and outcomes
• Leverage IT namely EMR- in order to track and
  report measurable results
• Become efficient to compete on value work flow
  and IT critical
• Develop abilities to report transparent pricing
  data
• Days of the small physician practice are numbered
• Develop consumer friendly service and web-based
  tools
• Get ready for a more retail-like market