Transcript NHE and the Healthcare Economy

Brown University - Rhode Island Hospital
COMPETITIVE THREATS
TO THE
FUTURE OF DIAGNOSTIC
IMAGING
[email protected]
Agenda
1. Economic Backdrop
2. Financial Backdrop
3. Medicare
4. Threats
5. My opinion
Economic Backdrop
•
Overall Economy is near capacity
– Increasing concerns of rich/poor disparities and returns to
capital as opposed to labor
– But – overall GDP growth is teetering; unemployment is low
(historical basis), but growing; and industry utilization is at the
upper end of the range (inflationary pressures)
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Inflation, while of concern, is not high by historical standards
– Energy cost inflation may work its way into the pipeline but its
effect on the economy would tend to ameliorate its effect on
gross inflation
– Biggest current risk may be the decline in the US Dollar. Our
goods will cost less overseas (thus, avoiding recession?), but
(ex-China, which is quasi-linked to our dollar), most other
international goods are more expensive and remove pricing
pressure for domestic-US firms
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Economic Backdrop
• Risks of Recession are real, but HIGHLY dependent on
consumer
– Thus far, very resilient
– Equity markets reflect overall optimism
• Biggest threat to economy is housing bubble
– Takes several years to (retrospectively) learn how bad it was.
– Worst case scenario (increasing inflation, declining growth,
and, thus, further declines in our dollar)
• Declining consumer spending
• Greater unemployment
• Greater uninsured problem
• Housing deflationary spiral in the setting of high leverage: yielding
sustained slowdown
• Spillover effects to equity markets
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Healthcare Finance Backdrop
• Historical spending (other than a few brief periods) has
always been above GDP growth
• We prefer to spend our increasing disposable income
on improving our health
– Income elasticity of demand for healthcare is greater than
unity
• Growth in healthcare spending is a fact/given
– Where that growth is greatest is a big issue
• PhRMA for a while
• Medical Devices
• Imaging and Cardiovascular interventions
– Fastest growth will always draw the attention of the
media, the public, and both political parties
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Health Care Spending (NHE) 2005:Highlights
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$1.99 Trillion up by 6.9 % (down from 9.1%, 8.1%, and 7.2%
in three preceding years) from prior year. $6697 per capita up
by 5.9 %
GDP (nominal) growth 6.3 %
16 % of GDP (highest ever, grew by 0.1% this year): Healthcare, as
percent of GDP, has been growing since 1997, after a slight
decline during the mid 1990s
Private spending grew at a 6.3% rate and public spending at
7.7% (45.4% of NHE are PUBLIC; up from 43.9% in 1999)
Public Expenditures (per capita)
– Overall $3041
– Federal $ 2169
– State and Local $873
– Total U.K. (Public and Private): < $3000 (2003 data was
$2317)
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National Expenditures for Health Services and Supplies(1) by Category,
1980 and 2005(2)
$234.0B
$1,860.9B
Other(3), 9.4%
Other (3), 13.8%
Nursing Home Care, 8.1%
Other Medical Durables and Non-durables, 5.8%
Prescription Drugs, 5.1%
Home Health Care, 1.0%
Other Professional(4), 7.2%
Nursing Home Care, 6.5%
Other Medical Durables and Non-durables, 3.1%
Prescription Drugs, 10.8%
Home Health Care, 2.5%
Other Professional(4), 7.7%
Physician Services, 20.1%
Physician Services, 22.6%
Hospital Care, 43.2%
Hospital Care, 32.9%
1980
2005
Source: Centers for Medicare & Medicaid Services, Office of the Actuary. Data released January 8, 2007.
(1)
Excludes medical research and medical facilities construction.
(2)
CMS completed a benchmark revision in 2006, introducing changes in methods, definitions and source data that are applied to the entire time
series (back to 1960). For more information on this revision, see http://www.cms.hhs.gov/NationalHealthExpendData/downloads/benchmark.pdf.
(3)
“Other” includes net cost of insurance and administration, government public health activities, and other personal health care.
(4)
“Other professional” includes dental and other non-physician professional services.
Percent Change in National Expenditures for Health Services and
Supplies(1) by Category, 2004 – 2005(2)
12%
11.1%
Percent Change
10%
8%
7.9%
7.5%
7.0%
All Health Services &
Supplies, 7.0%
6.9%
6.0%
6%
5.8%
5.7%
3.9%
4%
2%
0%
Ho me Health Ho spital Care
Care
Other
P hysician
Services
Other
P ro fessio nal
Nursing
Ho me Care
P rescriptio n
Drugs
A dmin. & Net Other M edical
Co st o f
Durables and
P rivate
No n-durables
Health
Insurance
Source: Centers for Medicare & Medicaid Services, Office of the Actuary. Data released January 8, 2007.
(1)
Excludes medical research and medical facilities construction.
(2)
CMS completed a benchmark revision in 2006, introducing changes in methods, definitions and source data that
are applied to the entire time series (back to 1960). For more information on this revision, see
http://www.cms.hhs.gov/NationalHealthExpendData/downloads/benchmark.pdf.
(3)
“Other” includes government public health activities and other personal health care.
(4)
“Other professional” includes dental and other non-physician professional services.
HI-Medicare Part A
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Hospice care (since 1982)
Inpatient Hospital services
Skilled nursing facility care (after a 3 day hospital stay)
22% of beneficiaries actually received HI services in 2002
(slight increase from 1993, when figure was ~ 20%)
• Average expenditure per enrollee increased by 3.3 %;
Now $4410 (2006)
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Medicare: Financing Part A
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1.45% Payroll tax on total income, matched by employer
– No limit
– Money flows into trust fund
There are no restrictions on spending (from current income
and trust fund)
– Changes in medical practice may result in huge increases (or,
theoretically decreases) in spending which have no influence on
budgeting of any given year
– In theory, no access to any funds other than trust fund and
current payroll tax revenue
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TR, 2007
Medicare Part B - Supplemental Medical Insurance
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Physician services
Home Healthcare
Durable medical equipment (DME)
Outpatient medical services
– Clinical lab tests; Imaging
– PT/OT
– Emergency Room service
Ambulance;
Hep B, Flu, Pneumococcal vaccines
Screening: Pap smear, mammography, colon;
cholesterol; Diabetes; Glaucoma; Prostate cancer
Prescription drugs which can not be selfadministered including certain anti-cancer drugs
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TR, 2007
Medicare: Current State of Affairs
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DRA – outpatient facility and multi-part examination reimbursement
reductions
– Not evidence based, but easy to enact
CMS revisions
– CMS revises RBRVS-based fees on a 5 year basis
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Reductions in practice expenses are included in last (2007) round
Med PAC
– Very thoughtful organization
– Recommendations carry a lot of weight
– Would reverse some DRA changes
– But would probably offset the effect by reducing technical
reimbursement due to archaic assumptions (11% cost of capital and 50%
utilization rate for imaging equipment)
BBA 1997/ Sustainable growth rate legislation
– Will dramatically reduce all physician fees
– Could have ripple effects
– SCHIP renewal
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Medicare: The future
• Reduced spending growth must be achieved
for HI (Part A), SMI (Part B) and PDPs(Part D)
• Likely accompanied by tax and cost-sharing
increases
• Most effective tools for reduced spending
require some combination of empowering
consumers, introducing market mechanisms
into the program, and removing distorting
incentives
• But easiest tools are reimbursement
reductions
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Competitive Threats
• 9 most terrifying words in the English language
• Managed Care – Benefit design
• Threats from outsourcing and competition
• Turf and external threats
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Government
• Primarily Medicare
• Ripple effects to all other payers
• SGR – Sustainable Growth Rate Legislation
• Physician Quality Reporting Initiative
• Competitive Bidding demonstration project
– Wheelchairs versus Chest X-Rays
• Spot (and futures?) market for reads?
– A la David Brailer
• Medicare Advantage
– Further concentration of buying power in the
hands of (larger) entities
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Managed Care – Benefit Design
• Pre-authorization/pre-certification
• Increasing use of RBMs
– In-house and outsourced
• AIM purchased by Wellpoint
• RIA purchased by Magellan
• Co-pays and Co-insurance
– Previously not used for imaging and laboratory testing
– Highly effective in Pharmacy Benefit Management
• # 1 Statin?
• Back to tighter networks with POS plans?
– Offer every provider, but no co-pays with preferred (i.e.,
low cost)
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Outsourcing Threats
• The opportunity for Nighthawk (as a specific
firm, and generically) is Final Reads
• Right now, company has small share of tiny
market (less than $200 million in annual
revenue against a backdrop of $40 Billion (??)
in opportunity)
• If they can penetrate final read market (and
this obviously applies to all domestic-based
competitors) - - real concern!
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Extra-Radiology Threats
• As a specialty, we have always dealt with (and
thrived during) turf battles
• Stark Rules and self-dealing concerns
• Gain-sharing
– Great opportunity for managed care and
Medicare
– Could be the greatest, ultimate, threat to
continued high growth in imaging
– Emergency Imaging; Oncologic Imaging;
Musculoskeletal Imaging
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Where do we go from here?
• Price Pressures may increase
– Low cost providers will be best-positioned
– Competition is no longer local
• If a practice makes too high a demand on local market
(managed care or even facility), there are real
alternative options
• Count on increasing volume, but plan for
slower growth
– Do not over-hire
– Put a premium on a flexible workforce
– Use of RAs, PAs, etc.
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Where do we go from here (continued)?
• Deal with local turf issues
– Based on quality, ability, and competence
– Do NOT attempt to deal with turf on the basis
of title (Radiologist)
– Hire strategically
• Cardiac imaging
• PET Imaging
• Orthopedic Imaging
– Staff strategically
• Do NOT allow outsourcing of any imaging, unless it is
absolutely necessary (short term losses may be
acceptable)
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Strategic Planning
• PQRI – Participate and plan for future
– Next likely steps
– Increases in reimbursement will be tied to some
metric of quality
• Reporting times?
• Reporting information?
• Outcomes reporting? – not that far off (think MQSA)
• Contemplate open-bidding and what it will
mean for your practice
– Scenario analysis
• Choose (sub)specialty with an eye to the
consumer
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Good News
• For many reasons, our trainees have been
top-caliber for a long time
– Field is populated with intelligent, ambitious,
and technologically adept physicians
– The pipeline is strong
• Direct relationships between Radiologists and
clinical peers make outsourcing, by fiat,
unlikely
– In fact, most outsourcing is from the Radiology
Groups, themselves, at this point
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Good News
• Since the first dire warnings of our demise (15
years ago), our incomes have (with brief
exception) grown faster than all other
physician specialties
• We are highly adept at using novel
technologies and will continue to do so
• Passivity will not be rewarded; Stay focused
on consumer and payers when making
decisions
• Future of specialty is not in doubt. Make-up of
job will always be changing - be prepared to
change with it….
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Questions
………?
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