Harvard Kennedy School of Government Outcome-Driven Innovation Program Results – Providers – January 2004

1. Harvard Kennedy School of Government Outcome-Driven Innovation Program Results – Providers – January 2004

2. What is the goal of this project? • The goal is to provide: • Suppliers • Insurers • Regulators • Service providers • and others with the market insight that is needed to direct resources and speed progress toward health care reform and market and product innovation.

3. What are the challenges? There are many constituents - suppliers, insurers, regulators, service providers and patients - all of whom have conflicting desired outcomes … … but to create improvement, value must be defined through the eyes of the customers – mainly the patient and the provider.

4. What are the project objectives? • Understand what patients and providers are trying to get done – i.e., jobs, outcomes and constraints • Prioritize opportunities for improvement • Identify groups of providers and patients who are best suited to create an effective health care model • Use this information to formulate an innovative solution to health care • Create a framework in which idea generation for a new health care delivery model can be objectively assessed for its impact on patients and providers

5. Patient Outcomes Provider Outcomes Inputs Refine against Outcomes Refine against Constraints The Components Of Success New Delivery Model Idea Generation Optimized Solution

6. What steps have we taken? • Phase I: Understand patients as a customer set • Phase II: Understand providers as a customer set • Find opportunities for an innovative health care model that satisfies the outcomes of the providers and the patients

7. Patients: How was Phase I accomplished? • Identify Customer Outcomes • In May 2002, we conducted interviews with 70 males and females of all ages and income levels. The interviews were conducted in Miami, FL and Minneapolis, MN. • 72 jobs and 42 outcomes were identified in this stage. • Prioritize Inputs • Between August and October 2002, we surveyed 270 individuals that represented an accurate sample of the US population across age and gender. • Identify Broad Market Opportunity • Opportunity scores of 12.0 or higher are considered significant areas of opportunity.

8. What opportunities exist among the patient population – for Maintaining Health? Opportunity scores of 12 or greater represent significant opportunities for improvement.

9. What opportunities exist among the patient population – for Seeking Health Care?

10. What unique patient segments exist based on the Jobs for Maintaining Health? This segment manages health from the inside-out as they address issues related to food consumption, nutrient absorption and food processing. “You are what you eat.” This segment manages health from the mind, as they are intent on keeping it clear and focused and free from stress. “Healthy mind, healthy body”. 21% 21% Segment 1: Food Centric Segment 3: Healthy Minded This segment manages health from the outside-in, as they are focused on maintaining weight, muscle tone and joint flexibility - as well as managing anxiety. “Look good - feel good”. This segment feels their health is pre-destined and acts to prevent or control diseases to which they believe they are genetically disposed. 34% 24% Segment 2: Body Basics Segment 4: Genetically At Risk

11. Segment 1: Food Centric / Self Reliant • This group wants to take charge of their own health. They focus on what goes into their bodies, are more concerned with what to eat, nutrient imbalances, toxins and toxic effects and food absorption and processing. They are also concerned with overburdening any internal organs and making sure they are working properly. Memory is also a key issue. • When obtaining health care, they seem to have a strong mistrust of the doctors. They are more concerned with the doctor’s qualifications, questionable tests and procedures, questionable ‘follow up’ visits, with costs for non-standard treatments and with treatment plans that do not work. They make more doctor visits than average and feel they should have better access to premium services. • This segment contains a higher population of women (64%) and people under 5’6’’. They tend to have lower than average incomes, come from the Northeast or Northwest and have more children between 1 and 5. They have a greater concern for their health, are more likely to have government paid insurance and to be unsatisfied with their primary physician. 21%

12. Segment 2: Body Basics / Pay As You Go • Individuals in this segment manage health from an external perspective. They are concerned with maintaining muscle tone, body weight and joint mobility as well as maintaining concentration and focus and managing anxiety. They are also concerned with preventing the recurrence of a disease as well as preventing a genetically disposed disease. • When obtaining health care they are especially concerned with the out of pocket costs for standard treatments and much less satisfied in many areas of seeking care. They are concerned with the time it takes insurance companies to approve requested treatments and second opinions along with them denying treatments and dragging their feet when paying charges. This segment is also concerned with the cost of prescription drugs. • The individuals in this segment tend to be less educated and contain a higher percentage of smokers (25%) and people without insurance (15%). They are more likely to be between 20 - 34 and 65 - 80 and to use the web to diagnose problems, find alternative treatments and to validate diagnoses. 34%

13. Segment 3: Healthy Minded • Individuals in this segment believe that a healthy mind means a healthy body. They want to maintain a positive attitude, stay mentally alert, get the proper amount of sleep and maintain focus and concentration. They want to remain free from pain and relieve physical stress. They are also concerned with contracting and spreading disease and with unwanted drug interactions. • This group wants to minimize the chances of mis-diagnoses and receiving the wrong treatment along with reducing the negative side-affects from the treatment. • Individuals in this segment tend to be middle age (35 - 54), more educated, have higher incomes and older children at home. They are less concerned about health care issues although most have insurance (97%). They are more satisfied with their insurance company and with their primary physician and are more likely to believe that only those that can afford superior health care should get it. They are more likely to be from the Northwest and to search the web using Google and “other” methods - but not for diagnosis information. 21%

14. Segment 4: Genetically At Risk • Individuals in this segment are trying to determine if any genetic defects exist, to prevent the onset or reoccurrence of a genetically disposed disease and/or to learn to control a disease or problem once diagnosed. They are strongly concerned with the toxin levels in their body and if their senses and internal body parts are overburdened or functioning improperly. Relieving mental stress is also a key issue. • When obtaining health care they want to obtain care quickly in the event of an emergency and to reduce the cost of long term disability insurance. They are very concerned with many aspects of diagnosis including ensuring accuracy and reducing the time it takes to determine the extent or seriousness of the problem. They want to ensure that needed diagnostic tests are covered as well as needed treatments and procedures. • This segment tends to be somewhat older, more educated and to have higher incomes. They are the least satisfied with their health care coverage, most likely to use alternative treatments and to believe that everyone should have the same care - regardless of what they can afford. They are more likely to use the web (Web MD) and to live in the upper mid west. 24%

15. Patient confidence is still high • Barely 25% of patients expressed a high degree of distrust in the system • Less than 20% think they can do better than their doctors • Over 60% want more choice over how they spent the money employers contribute to their healthcare (supporting voucher and MSA’s) • Patients (86%) want to play a more active role in managing their health

16. Providers: How was Phase II accomplished? • Identify Customer Outcomes • In July 2003, we conducted interviews with approximately 55 providers, including primary care physicians, specialists, nurses and alternative care providers. • 109 outcomes and constraints were identified through this process • Prioritize Outcomes • In July and August 2003, we surveyed 180 healthcare providers, that represented a sample of the target population and included the same types of providers listed above. • Identify Broad Market Opportunity • Opportunity scores of 12.0 or higher are considered significant areas of opportunity.

17. What opportunities exist among the provider population – practicing medicine? Opportunity scores of 12 or greater represent significant opportunities for improvement.

22. What opportunities exist among the patient population – managing medicine? Note: The opportunity scores seen for this group are unlike any others – they are substantially higher than what we find in any free market environment.

27. What constraints do providers have on a health care model? Opportunity scores of 12 or greater represent significant opportunities for improvement.

29. What can we conclude about the constraints? • A new healthcare model must address the misalignment of incentives of both patient and physician • A new healthcare model must be willing to put more responsibility on the patient for their health • The cost structure of the new model must be equivalent or better than the current one

30. Future Health Care Model Ideas

31. Role of Insurers Contrary to expectations … … we also found that only 35% of the providers believed that ‘insurance companies add no value’.

32. Provider’s Natural Segmentation 35% This segment is concerned with managing the long term health of their patients. They prefer to interact with patients in person, focus on preventative medicine, and are very concerned with referrals. This segment wants to spend more time educating and diagnosing patients – working with them. They want to conduct accurate diagnoses and minimize patient complications. 34% Segment 3: Patient Conscious Perfectionists Segment 1: Total Health Managers 9% This segment consists of health care providers who are very crunched for time. They don’t like redundancy, don't want to spend excessive time with patients, and are very concerned with the cost of managing the practice. This segment consists of providers who are focused on getting a patient taken care of in an efficient manner, without wasting extra time or effort. They are also uniquely concerned with limiting workload. 22% Segment 2: Time Constrained Segment 4: Efficiency Minded

33. Segment 1: Total Health Managers This substantial segment wants to spend time working with their patients for their long-term health. They are very open to alternative care programs and emphasize preventative care. Because they are often the first line of care, they need to have a solid referral base on which to draw as well as good tools to identify needed specialists. This group has a much higher percent of NP’s, PA’s and Chiropractors than the total market. This group is younger than the average, and is more likely to be female, in practice less than 10 years, and more likely to be in the bottom income range (< $100,000 per year). This group is also much more dissatisfied with their income. Regarding the future of healthcare, this group strongly resists email or phone visits with patients, reimbursement based on performance, real-time electronic monitoring of patients, and insurance companies. They are however, the strongest advocates of patients playing a more active role in their own care. 34%

34. Segment 2: Time Constrained This group represents the high patient-load, managed care oriented physician. They see many more patients per week than the average and have higher incomes. They have a disproportionate share of male PCPs and Specialists in large group practices and partnership models with the majority of reimbursement coming from managed care. They want ready access to patient’s medical history and want to reduce the time it takes to evaluate treatment options, collaborate with other providers about the patient’s care, and monitor drug effectiveness when formularies require change in medication. They are highly concerned with all aspects of labor costs and the issues surrounding working with multiple insurance carriers. This group is also concerned with over-utilization of services and ordering duplicate services This group is very receptive to technology-enabled efficiencies. They strongly agree with email and phone ‘visits’ and real-time monitoring of patients. They also disproportionately believe that insurance companies DO add value and like the idea of reimbursement based on performance and severity adjusted bundled rates in exchange for autonomy in practicing medicine. They also strongly believe the consumer self-choice model will work. 22%

35. Segment 3: Patient Conscious Perfectionists This segment wants to spend more time diagnosing patients, educating them and working with them. Their primary concerns are conducting an accurate diagnosis, minimizing patient complications and making sure patients have access to the care they need. They are not concerned with high labor costs or insufficient referral networks. This could be due to the higher proportion of providers in this segment that work for a managed care organization or a specialized hospital system that provides a substantial infrastructure and specialist base. This group has a higher representation of specialists and surgeons and a higher portion of indemnity reimbursement. They are more likely to have worked for all three types of provider models (independent, salaried, and partnership). They are older than average (55 years and older), are twice as likely to be satisfied with their income, and have a higher propensity to want to mentor and partner with patients than the average. This group likes the idea of different types of patient visits (email and phone) as well as remote monitoring of the patient’s condition. They are not as enthusiastic about performance-based reimbursement, nor do they believe the consumer self-choice model will work. 35%

36. Segment 4: Efficiency Minded This segment is a small set of the population that seeks to provide solid care to their patients but doesn’t want to waste time or work too many hours. They want to make it easier to collaborate with other providers that are involved in the patient’s care and be able to benchmark against best practices. Their specific concern with limiting the hours worked is twice that of the general population makes them a good group to approach with a salaried provider model with traditional work hours. This group is much more concerned with reducing the number of visits necessary to diagnose patients and the time spent collaborating with other health care providers regarding the patient’s condition. They also want to reduce the time it takes to obtain pertinent information from the patient and the time it takes the patient to accept a treatment plan. This group contains over twice the percentage of nurses than the market as a whole. It also contains much more seasoned professionals (over 20 years in practice) who see less patients per week. They are much more likely to work in a general hospital or government / university hospital. This group strongly opposes email or phone visits as well as severity adjusted bundled rates. 9%

37. What can we conclude about Provider inputs? • Providers are naturally segmented by how they want to practice medicine – no other variables accurately reflect how they differ • The segment a provider is in dictates the type of health care environment in which he/she will be most comfortable working • Health care organizations can use this information to better attract the types of physicians that will work well in the type of environment they are trying to create

38. Tying It All Together

39. Personal trainers • Gyms • Food supplements • Nutritionist counseling • Diagnostic preventative tests • Experimental Treatment • Infertility • LTC Patients already pay significantly – to stay healthy … $70 Billion Annually Patient Pays Insurance Pays Healthy Sick

40. Personal trainers • Gyms • Food supplements • Nutritionist counseling • Diagnostic preventative tests • Experimental Treatment • Infertility • LTC • Hospitalizations • X-Rays • Laboratory • Prescription Drugs • Transplants • Chronic Diseases • Restorative Care • Well checkups • Immunizations But they expect to pay nothing when they’re sick … Patient Pays Insurance Pays Healthy Sick

41. How do you create a marketfor traditional health care?Follow the dynamics of market creation that the upper quadrants have done …… by creating a health care model that can better meet the outcomes of the segment of patients you want to target.

42. S2: Time Crunched S4: Efficiency Minded S1: Total Health Managers S1: Food Centric S2: Body Basics S3: Healthy Minded S3: Patient Conscious Perfectionists S4: Genetically At Risk Match Provider outcomes to Patient outcomes to create maximum value Provider Segments Patient Segments

43. Healthy Minded Patient Self-Choice Rationale: A combination of Total Health Managers and Patient Conscious Perfectionists would be ideal for two of the larger patient segments – by providing care how and when they want it. With such a combination, the Total Health Managers will be available for common ailments and well visits. The Patient Conscious Perfectionists will be there to assist when more specialized care is needed. These two patient segments tend to focus heavily on their own care and health and seek care only when needed. Food Centric Total Health Managers Patient Conscious

44. S2: Time Crunched S4: Efficiency Minded S1: Total Health Managers S1: Food Centric S2: Body Basics S3: Healthy Minded S3: Patient Conscious Perfectionists S4: Genetically At Risk Tying it All Together Provider Segments Patient Segments

45. Body Basics Kaiser Model – Provider/Payor Rationale: This combination of providers will be a highly efficient group who will welcome technology that will increase their capacity. Because the Time Constrained group is used to handling large workloads, the addition of more Total Health Managers to their practice would make them even more efficient and provide better care to the patient. The Food Centric - Self Reliant will likely enjoy this model as they will be able to gain trust in the system as a whole instead of having to evaluate each doctor they come into contact with. This model should also reduce their suspicion about unnecessary visits and financial motivations for doctor recommendations. The Body Basics - Pay As You Go group is likely to be attracted to this type of practice’s lower out of pocket costs. This group is also likely to be lower utilizers due to their age and demographics and will therefore financially benefit the provider model. Food Centric Total Health Managers Time Constrained

46. S2: Time Crunched S4: Efficiency Minded S1: Total Health Managers S1: Food Centric S2: Body Basics S3: Healthy Minded S3: Patient Conscious Perfectionists S4: Genetically At Risk Mayo Model Provider Segments Patient Segments

47. Rationale: This group of providers wants to provide high level specialized care. They want to ensure plenty of time is spent with patients to make the most accurate diagnosis. This model would be attractive to the Healthy Minded group who wasn’t as concerned with paying more for premium services. While this group of patients is likely to seek care, when they do, they will want full attention and top physicians. The Genetically Pre-disposed group will benefit from the expertise of this model and will likely seek pre-emptive care and predictive tests – even at out of pocket costs. Genetically at Risk Mayo Model Healthy Minded Patient Conscious Perfectionists

48. S2: Time Crunched S4: Efficiency Minded S1: Total Health Managers S2: Body Basics S1: Food Centric S3: Healthy Minded S3: Patient Conscious Perfectionists S4: Genetically At Risk Single-Payor Model Provider Segments Patient Segments

49. Rationale: This group of providers will do well in an environment paid by salaries with managed workloads. This group would also benefit from giving NP & PA’s more responsibility for the care of the patient’s basic needs. The Body Basics - Pay As You Go group is likely to be the best patient target for such facilities as they want care to be as inexpensive as possible. Single-Payor Model Total Health Managers Body Basics Efficiency Minded

50. Next Steps to Consider • How do the Outcome-based Segments apply to your organization? • What provider and or patient segments are most suited to your organization? • Are these segment differences reflected in your provider base and if so, do you modify their patient load accordingly? • Are there ways in which you can target a specific outcome-based patient group to be more profitable? • Are there ways that your organization can address the outcomes that patients are trying to achieve in maintaining health?