Why Only Non-Health Care Business Can Save America From the Health Care Industry

1. Why Only Non-Health Care Business Can Save America From the Health Care Industry National Association of Health Underwriters Atlanta June 24, 2013 Brian Klepper

2. Business’ Perspective • Oct 2012 Adecco Employee Benefits Survey •  55% of 501 Senior Execs Across Business Sectors Say Health Benefits Are Biggest Current Business Challenge. • Up from 35% in 2007. • Most reported lower profits in past year. Most expect no profit growth in coming year. • Small business leaders more optimistic than large • Respondents Were 75% Republicans • Most Believe Reform Law Will Raise Cost.

3. Opportunity: Cost/Quality Performance Of Vegas Physicians Source: Jerry Reeves MD, Culinary Fund Heatlh Plan, 2005

4. How Bad Is It?

5. How Bad Is It? Health Care Is Destroying the American Dream and Pulling the Larger US Economy Off A Cliff. It Is Very Important To Us But Dangerously Out of Control

6. Unnecessary/Inappropriate Care & Cost “Our research found that wasteful spending in the health system has been calculated at up to $1.2 trillion of the $2.2 trillion (54.5%) spent in the United States.” “[R]edundant, inappropriate or unnecessary tests and procedures [were] identified as the biggest area of excess, followed by inefficient healthcare administration and the cost of care necessitated by conditions such as obesity, which can be considered preventable by lifestyle changes.” The Price of Excess PricewaterhouseCoopers, 2008

7. US Health Care’s Quality is Sketchy & Has The Lowest Value In Industrialized World Source: Mary Meeker, USA, Inc., Page 111

8. Avg Annual Health Insurance Premiums and Worker Contributions for Family Coverage, 2008-2012

9. Growth in Key Premium Growth Metrics, 1999-2012 Cumulative Increases in Health Insurance Premiums, Workers’ Contributions to Premiums, Inflation, and Workers’ Earnings, 1999-2012 Premium has grown 4.5x inflation for more than a decade. Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2012. Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April), 1999-2012; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey, 1999-2012 (April to April).

10. A 13% Enrollment Drop In Private Coverage Enrollment Between 2000-2011 SHADAC Analysis of CPS 1988-2012 data

11. Projected Annual Total Household Compensation & Compensation Net of Health insurance Premiums

12. American Health Care Cost Is Absorbing Nearly ALL Economic Growth In the decade preceding 2009, 79% of all household income growth was siphoned off by health care. Source: Auerbach DI and Kellermann AL, “A Decade of Health Care Cost Growth Has Wiped Out Real Income Gains for an Average U.S. Family,” Health Affairs, 30:9, 9/2011.

13. Impact on Family Income If health care costs tracked general inflation over the past 15 years, average family income would have been $8,410 (13.9%) higher in 2010 than it was. ($68, 805 vs. 60,395) Young and Devoe Family Medicine, Oct 2012

14. Health Care’s Growing Burden on Federal Budget Crowds Out Other Needs Source: White House Council of Economic Advisors

15. Health Care Has Thrived During the Recession Source: Bureau of Labor Statistics, Cited 12/07/12 on WashPostWonkBlog

16. Impact on US Business • US Business’ Competing in International Markets Carry a 9+% Disadvantage in Health Care Cost Compared To Businesses In Other Industrialized Nations. • Our Workforce Is Not As Healthy, and Our Productivity Lags.

17. US Health Care Unit Pricing Is Much Higher Source: International Federation of Health Plans, Cited in NYTimes, 1/22/12

18. And Lucrative Pricing Drives Higher Utilization

19. And Lucrative Pricing Drives Higher Utilization

20. Structural Supports Of The Health Care Cost Crisis

21. The Multi-Headed Cost Monster • Need for Care (Illness, Congenital Conditions • & Injury) • Lifestyle Behaviors • Inappropriate Care Patterns • Overtreatment • Egregious Unit Pricing • Conventional Steerage • Lack of Care Coordination • Lack of Patient Engagement • Mis-Aligned Incentives/Benefit Design • Catastrophic Events (Poor Health, Bad Luck)

22. Current Structural Supports of the Cost Crisis – Market and Policy • Other Key Drivers • Excessive Unit Pricing/Utilization • Out-Of-Pocket Costs • Inappropriate Patient Financial Incentives • No IT Interoperability, So Poor Care Coordination • Unnecessary Complexity • Yellow Pages Networks • Most Important • Lobbying & Regulatory Capture • Fee-For-Service (Conflicted) Reimbursement • Little Quality/Safety/Cost Data (Transparency) • Subjugated Primary Care

23. Cost/Quality Performance Transparency • Medicare Physician Data Is Locked. • Hospital Procedure Base Fees Are Often Unknown Until Billing. Recent Health Affairs California Appendectomy Study Showed 3 Day LOS Pricing $1,529 - $186,955, A 122x Difference. • Health Care Markets Don’t Work Except For The Most Aggressive Commercial Enterprises. • Providers/Vendors Under Little External Pressure To Improve.

24. AMA Relative Value Scale Update Committee (RUC) • 31 Physicians - 26 Specialists & 5 Pcps • CMS’ Sole Advisors On Medical Services Valuation • Secret Proceedings, Sham Survey Methods, Composition Unrepresentative Of Physicians In Market, Financially Conflicted • CMS Has Historically Accepted 90% Of Recommendations • Commercial Health Plans Typically Follow Medicare’s Payment Lead

25. Real World Impacts of RUC Influence Over-values Specialty Services While Under-valuing PC Inhibits Pc’s Moderating Influence And Accountability Function Over Specialty Services. Creates Systemic Incentives To Perform More Services, And More Expensive Services. (Specialists “Practicing To The Codes.”) Payment Disparities Between Pc And Specialties. Crisis-level PC Shortage Now.

26. Increasing Primary Care Referrals To Specialists • Typical 2012 Established Primary Care Office Visit Duration = 7.5-12 Min. 30 Years Ago, It Was 20-25 • PCPs Paid By Visit, So May Refer Time-consuming Problems • Most Specialists Profit From Procedures • Result: Huge Increases In Specialty Visits, Outpt Diagnostics, Procedures

27. Primary Care - Specialty Payment Disparities • Compare Primary Care Office Visit (99214) and Cataract Extraction with Intra-Ocular Lens Implant • 99214 – 25 Minutes and 3 Different Problems. Could be anything. Palette is all medical knowledge. Medicare pays $111.36 • Cataract Extraction & Intra-Ocular Lens Implant – 15 minutes. Restores sight! 50 year old, low risk, repetitive procedure. Medicare pays $836.36. • Hourly rate of Ophthalmologist pay is 12.5x PCP pay. • PCP’s job is arguably more complex/challenging. Klepper & Kibbe, Rethinking the Value of Medical Services, Health Affairs Blog, 8/1/11.

28. Winners & Losers • Winners • Nearly Everyone in the Health Industry (Except Primary Care) • Losers • Patients – Unnecessary Care and Risk of Harm • Purchasers (Employers, Taxpayers, Individuals) – Immense Unnecessary Cost • Primary Care Physicians

29. Market-Based Solutions

30. Market-Based Reforms • Over The Past 20 Years, Employers (& Health Plans) Have: • Significantly Increased Co-pays For “Steerage.” • Introduced Generic Drugs And Mail-order. • Introduced Wellness, Disease Mgmt, Lifestyle Coaching Programs. • Introduced Incentives. • Renegotiated Network Discounts. • Given Employees “More Skin In The Game.”

31. Market-Based Reforms But We Mostly Haven’t Managed The Care Process, Like Businesses Would.

32. How Have We Attacked It? • True, Advanced Primary Care “Medical Home.” • Platform For Full-Continuum Management of Health Care Clinical, Financial and Administrative Risk.

33. Primary Care Medical Homes • A Place Patients Always Feel They Can Turn To For Health Care, Guidance & Information. • A Place That’s Thinking About Patients Whether Or Not They’re Standing In Front Of The Doctor or Nurse Practitioner. • Elements • Wide-ranging, Team-based Care; • Whole Person, Patient-Centered Orientation; • Care Coordinated Across The Health Care System And The Patient's Community; • Access To Care Using Alternative Methods Of Communication; • A Systems-based Approach To Quality And Safety 

34. But PCMH Isn’t Enough • So Far No Credible Study Data Showing A Correlation Between NCQA PCMH Credentialing & Cost Reduction or Quality Improvement. The PCMH holds promise for improving the experiences of patients and staff and potentially for improving care processes, but current evidence is insufficient to determine effects on clinical and most economic outcomes. Jackson et al, The Patient-Centered Medical Home: A Systematic Review, Annals of Internal Medicine, 2/05/13. Doesn’t Mean They Can’t Be Effective, But Most Probably Don’t Adhere To Required Principles.

35. 6 Broad Management Approaches Comprehensive, Advanced Primary Care Medical Home Onsite, Face-to-Face Wellness/Prevention/DM Avoid Unnecessary Care Ensure the Appropriateness of Necessary Care Cost-Effective Acquisition of High Value Products/Services Revise Benefit Structure and Process To Favor Patient Adherence/Vendor Accountability

36. Market-Based Approaches That Work • Collaborative Benefits Management • Paying To Manage Process • Empowering Primary Care • Large Case Management • Domestic Medical Destinations • Analytics for Risk Identification • Care Gap Analyses

37. Market-Based Approaches That Work • Analytics of Provider Performance • Data Collaboratives • New Technologies (e.g., Minimally Invasive Procedures, Genomics) • Incentives/Patient Engagement • Direct Volume-Based Purchasing • Rx Step Therapies • Lifestyle Management/Obesity Therapies

38. Benefit Designs That Trade Adherence For Lower Cost* Narrow Networks, Based On Performance Data Access to Specialist Requires Referral, With Results Back to PCP Prescriptions/Tests Require Adherence After-Hours Urgent Care Coverage Only Health Coaching/Mgmt Mandatory If Identified as At-Risk Three Strikes Rule – Failure To Comply Has Consequences * Thanks to Jerry Reeves MD, Healthcare 21.

39. Where Do Savings Come From? • Replace Higher Network Costs With Lower Primary Care Costs • Aggressively ID/Manage Chronic/Acute Conditions • Change Care Patterns - Collaborate On & Influence Downstream Care & Cost • Buy Products/Services More Cost-Effectively • Restructure Benefit Design/Incentives • Occupational Health: Workers’ Comp, Disability Mgmt, HR Testing, Retention/Recruitment, Lost Productivity

40. Policy-Based Solutions

41. Acting In All Our Interests • Health Care Organizations Comprise Almost 1/5 of the US Economy and 1/10 of US Jobs. • Only One Group is Larger, With the Influence to Overpower Health Care in Policy: • The Non-Health Care Business Community

42. The Prospects Aren’t Good • Employers haven’t meaningfully mobilized to date • Many seem resigned or are fleeing • Appears to be no larger sense of enlightened self-interest

43. Collaborate: Marketplace and Policy

44. Collaborate Through A New Entity • Collaborate For Scale/Strength • Include Business of All Sizes • Policy • Monitoring • Health Care Lobbying • Market • Benefit Design • On Tactics • Requirements • Processes (RFPs) • Networks • Data

45. He Should Know “How many businesses do you know that want to cut their revenue in half? That’s why the healthcare system won’t change the healthcare system.” Rick Scott Governor of FloridaFormer CEO, Hospital Corporation of America

46. Brian R. Klepper, PhD is a health care analyst and commentator. He is Chief Development Officer for WeCare TLC, LLC, an onsite primary care clinic and medical management firm based in Longwood, FL, and Managing Principal of Healthcare Performance Inc., a consulting practice based in Atlantic Beach, FL. An active author and speaker, Dr. Klepper has provided health care commentary to CBS Evening News, the Wall Street Journal, the New York Times, and the Washington Post. He has published articles on Kaiser Health News, Healthleaders, The New England Journal of Medicine, Modern Healthcare, Business Insurance and newspapers nationally. Brian is a columnist on Business of Medicine and Primary Care for Medscape, the most-read medical site. He is an editor for The Doctor Weighs In, an online professional health care magazine, and a regular contributor to the Health Affairs Blog, Kevin MD,Health Care Policy and Marketplace Review, and other expert health care blogs. With his wife, he also maintains Elaine’s Journey, which details their struggle against primary peritoneal (ovarian) cancer. Brian served on the American Academy of Family Physicians’ Primary Care Services Valuation Task Force, and is a reviewer for Health Affairs and The Journal of Ambulatory Care Management. He is an Advisor to the Lundberg Institute, the Patient-Centered Primary Care Collaborative, which advocates for medical homes, and the Center for Value Health Innovation, which helps business identify and implement approaches proven to improve quality while reducing cost. In January 2011, with David Kibbe MD, he began a campaign, Replace the RUC!, that focuses on the most important driver of inappropriate health care cost. That effort resulted in a lawsuit by six Augusta, GA primary care physicians against the US Centers for Medicare and Medicaid Services (CMS) over its longstanding inappropriate relationship with the AMA’s Relative Value Scale Update Committee (RUC). 904.395.5530 (o), 904.343.2921 (c), bklepper@gmail.com www.brianklepper.info