Transcript Health insurance

PREPARING FOR HEALTH
CARE REFORM
DR. WM. MARTY MARTIN
PATIENT CARE PROTECTION AND
AFFORDABLE CARE ACT IN A NUTSHELL
 Incenting prevention
and primary care.
 Aligning incentives in
payment.
 Increasing
transparency.
 Increasing efficiency
and investments in IT.
 Rewarding valuebased services.
Source: Rooney (2011). Is Your Supply Chain Ready to Survive Health Care Reform?
Journal of Healthcare Contracting.
HEALTH INSURANCE
2010
 Several new
provisions
already
implemented.
 2011
 Innovation
Center for CMS
established.
 Prohibits federal
Medicaid
payments to
states for services
related to HAI
conditions.
TIMELINE (2012-2013).
 2012
 Establishment of non-profit




insurance co-ops to compete
with commercial plans.
Penalty on hospitals with high
rates of preventable
readmissions by cutting
Medicare payments.
Medicare Value-Based
Purchasing (VBP) program
begins.
Medicaid bundled payment
demonstration project begins.
Comparative effectiveness
research fee begins.
 2013
 Financial relationship
disclosure required
between providers and
drug manufacturers and
suppliers.
 Medicare bundled
payment demonstration
project begins
 Medical device tax of 2.3
percent.
TIMELINE (2014-2020)
 2014
 Individual and employer
mandates begin.
 Health insurance state
based exchanges begin.
 Independent Payment
Advisory Board (IPAB)
submits first
recommendation on
reducing Medicare
spending growth.
 Reduction in states’ DSH
allotment.
 2015
 Reduce Medicare
payments for HAI
conditions.
 2018
 A new “Cadillac tax” on
employer sponsored
insurance.
 2020
 The Medicare “doughnut
hole” will officially be
closed.
IS THIS PREDICTION PLAUSIBLE?
“To make economies of scale work in an environment featuring
lower reimbursement, I predict that the healthcare supply
chain will feature further consolidation at every level.
In addition, vendors will need to
rethink how their products
fit into the new processes being developed for disease
management and care coordination (page 35).”
Source: Rooney (2011). Is Your Supply Chain Ready to Survive Health Care Reform?
Journal of Healthcare Contracting.
INDUSTRY CHALLENGES & RESPONSES
Environmental
Uncertainty
Strategy
Performance
Goal
Incongruence
• Leveraging volume
• Local SC capabilities
• Process improvement
• New entrants
•E-commerce solutions
•Distribution services
•Other new services
WHAT IS BEING MANAGED?
THE ENTERPRISE-WIDE SUPPLY CHAIN
Evaluate, Contract
Select
Customer
Order
Pick
Ship
Manufacturer
Distributor
Receive Inventory
and
and
Store
Pay
Pick
Customer
Deliver to
Point of
Use
Use
SUPPLY CHAIN PERFORMANCE OUTCOMES
Cost
Safety
Sustainability
Assets
Outcomes
Customer
Satisfaction
Responsive
ness
Reliability
Revenue
Hospital – Physician Concerns
Concerns
TopPhysician
Physician Concerns
Hospital
CEO
Concerns
Top
Hospital
Concerns
78%
Medicare Professional Reimbursement Changes
Private Payer Professional Reimbursement Changes
Overhead / Expense Management
32%
Practice Growth
28%
Malpractice Costs
27%
Pay for Call
22%
Hospital Relations
Regulatory Changes
Quality Reporting
Workload
17%
15%
14%
74%
71%
Financial
Challenges
78%
43%
Patient Safety and Quality
41% Care for the Uninsured
32%
Hospital / Physician Relations
30%
Personnel Changes
Healthcare Reform
26%
22%
Patient Satisfaction
16%
Capacity
9%
2%
Technology
Malpractice
10
Source: Sg2 2009 | ACHE 2009
IS YOUR PLAN ALIGNED WITH THE CONCERNS OF
PHYSICIANS AND HOSPITAL CEOS?
HOSPITAL – PHYSICIAN ALIGNMENT
Hospitals
Ceding the Market
Complex/
Unprofitable
Cases
Head-On Battle
Splitting the Market
Recruited or
Employed
Physicians
Complex/Comorbid Cases
Working Together
Putting Them
on Salary
Physicians
Co-Management
Employment /
Foundation
Joint Venture
Independent
Practice
Surgery, Imaging,
Ancillary Services
Surgery, Imaging,
Ancillary Services
Independent
Practice
12
Source: Advisory Board 2008
CLINICAL SUPPLY CHAIN AND PPI
PRESENT A GREAT SAVINGS OPPORTUNITY
• A typical 400+ bed hospital spends about $56M
annually on Physician Preference Items (PPI)
• On average, $6-10M (10-20%) could be saved on
these items on an annual basis.
PHYSICIAN PREFERENCE ITEMS
INTENSIFY CHALLENGE
• 30-40% of supply expense are
• physician preference items
• 6–10% of operating expense
• Preference items may or may not…
• be linked to outcomes/ performance
• have associated contracted purchase price
• be fully reimbursed
“We had our first
physician preference
contract negotiations to
narrow the number of
vendors down and
guarantee 95% utilization
of one vendor through
engaging the physicians,
resulting in an annual
savings of $300,000.”
- Mid Sized Hospital
Survey Respondent
PHYSICIAN ENGAGEMENT STRATEGY
•
•
•
•
Value of Time
Don’t Compromise on Quality
Show Tangible Results of Their Efforts
Recognize….
HOSPITAL–PHYSICIAN ALIGNMENT
Integration / Employment Trends
Hospital and health
systems acquire
primary care practices.
Degree of Integration
Employment of
hospital based
specialists.
1980
1985
1990
Growing interest in alignment
and willingness to partner
with physicians.
Many hospitals divest of
primary care practices,
refocus on core
business.
1995
2000
2005
Employment of
specialists and PCPs will
become more common.
2010
2015
Source: Sg2 2008
CHART 4.1: PERCENTAGE OF HOSPITALS WITH
NEGATIVE TOTAL AND OPERATING MARGINS, 1995 – 2007
45%
40%
Negative Operating Margin
35%
30%
25%
20%
Negative Total Margin
15%
10%
5%
0%
95
96
97
98
99
00
01
02
03
04
05
Source: Avalere Health analysis of American Hospital Association Annual Survey data, 2007, for community hospitals.
06
07
Total Supply Chain Expense as a Percentage of Total
Hospital Expense
Other
Hospital Operating
Expense
55% to
70%
Source: Sargent & Smith-Daniels
Supply Chain
Management
Expense
35% to
45%
WHAT ARE YOU THINKING IF YOU ARE
THE CFO, CEO OR BOARD?
To a tipping point size slice: >50% of
the budget
Total Cost Incurred by Hospitals
15%
15%
25%
Clinical &
General
Labor,
Other
45%
Logistics &
Distribution
Supplies
Others
100%
Total
Supply Chain
Management
* Figures based on HFMA estimates. Labor cost includes salaries, wages and benefits based on average of leading hospitals in the U.S. and Others
is inclusive of profits to the hospitals. Source: S&P Industry Surveys: Healthcare Facilities; HFMA; industry reporting; Pipal Research analysis.
Source: Sargent & Smith-Daniels
SUPPLY EXPENSE MANAGEMENT
STRATEGIES
• Reduce product pricing
•
•
•
•
Leverage total volume with single supplier
Utilization/renegotiation of corporate contracts
Assessment/reduction of value add costs
Utilization of bid process
• Increase inventory turns
• Par Levels
• Ordering frequency, volume
• Product standardization
• Fewer items
• Leverage to sole source
• Increase budgetary accountability at department level
SUPPLY EXPENSE MANAGEMENT
STRATEGIES (CONTINUED)
• Product utilization review…Physician Preference
Items (PPI)
•
•
•
•
Use of clinical pathways
Quantity of items used
Type of items used
Alternative procedure
• Utilize a Value Analysis approach for product
selection
• Based on matching (not exceeding) the quantity and
quality of resources to the required outcome
TOTAL SUPPLY EXPENSE DRIVERS
IMPACT, MANAGEABILITY
• Patient acuity
• Procedure volume
• Patient care protocols/clinical paths
• Technology
• Product quality
• Product brand
• Price inflation
• Procurement proficiency
’08: Improving Profitability By
Supply Chain
APPROACHES CONSIDERED or TAKEN
to IMPROVE PROFITABILITY
• Enhancing collaboration with physicians in supply
standardization and expense reduction
1
1
• Identifying appropriate metrics to benchmark the
organization’s supply chain performance
2
5
• Decreasing direct/off-contract ordering
3
6
• Initiating a value analysis process
7
2
• Achieving minimum total expense for specialty/physician
preference supplies (e.g., stents)
6
3
AHRMM Survey 2008
Source: Sargent & Smith-Daniels
PREPARING FOR HEALTH CARE REFORM
RECOMMENDATIONS FOR ACTION
1. Read the actual law in a PDF format and search for terms
that are relevant to materials management like value-based
purchasing.
2. Draw out a timeline of when specific provisions impact your
work.
3. Develop a concrete action to address each provision
outlined the health care bill.
4. Identify your stakeholders by formulating a stakeholder map
and ask the question: How will the healthcare law impact
our key stakeholders?
5. Formulate at least three scenarios for your materials
management function including the following:
A.
B.
C.
The Ideal Case
The Most Probably Case
The Nightmare Case
RECOMMENDATIONS FOR ACTION
6. View your action plan as a change management
initiative using Kotter’s Model of Change.
7. Be sure that materials management is positioned not
only as a cost-center but also as a center of value.
8. Innovate your organizational structure, work processes,
administrative processes, supply chain processes, and
business model.
9. Persuade the CEO to have a board committee on
strategic supply chain.
10. Enlist clinicians to advocate for the value of materials
management but be prepared to give up some
control for enlisting clinicians.
KOTTER’S CHANGE MODEL
• 1) Establishing a sense of urgency
• 2) Creating the guiding coalition
• 3) Developing a vision and strategy
• 4) Communicating the change vision
• 5) Empowering broad-based action
• 6) Generating short-term wins
• 7) Consolidating gains and producing more
change
• 8) Anchoring new approaches in the culture
DO YOU HAVE CAREER INSURANCE?