420 likes | 542 Views
Designing and Implementing Healthcare Solutions That Work New York Business Group on Health Ken Shachmut – Executive Vice President Brad Wolfsen – Vice President Safeway Health LLC. March 16, 2010. Agenda. Healthcare trends in the U.S. and at Safeway – Stark contrast
E N D
Designing and ImplementingHealthcare Solutions That WorkNew York Business Group on HealthKen Shachmut – Executive Vice PresidentBrad Wolfsen – Vice PresidentSafeway Health LLC March 16, 2010
Agenda • Healthcare trends in the U.S. and at Safeway – Stark contrast • Key factors for Safeway success • Introducing Safeway Health
Healthcare costs consume a growing share of GDP Healthcare % of GDP Annual Growth1980 - 2007
Safeway stands alone in holding healthcare costs flat – for several reasons • As a low margin business, we are highly motivated to control rising healthcare expenses • We have an extraordinary track record and culture of cost control • As a long-standing operating company, we are very good at seamless and detailed execution • We are great believers in the efficiency of markets . . . and saw an opportunity to create a market . . . where none existed
We expect Safeway’s per-capita healthcare costs to remain flat for another five years* Index 2005 = 100 CAGR Business as Usual 8.4% 0.0% New Plan * Per-capita expenses for Safeway non-union EEs moving to new behavior-based plan from former PPO plan Per-capita expenses are all-inclusive – Safeway contribution + EE premium + EE out-of-pocket expense
Safeway Healthcare Savings Against Baseline Savings vs. BAU in $ Millions Lives Covered 10,100 18,000 27,900 28,000 31,000E
Potential Healthcare Savings – Typical Organization Healthcare Spending – 10,000 Employees ($ Millions) Business as Usual: CAGR = 7.0% $36 Cumulative Savings Value 2011-20152015 $103 $36 New Plan: CAGR = 0.0% Assumes current per employee all-inclusive cost (ER contribution + EE premium + EE OOP) = $9,000
Escalating healthcare costs are the result of four root causes Proposed Solution Align Interests Increase Personal Accountability Create a Market Public Policy • Employer and employee interests are often not tightly aligned • Employees lack sufficient personal accountability and have inadequate “skin in the game” • Little or no information available to help employees make informed decisions about prospective care • An abundance of uncompensated and under-compensated care
Cost escalation will continue under healthcare reform as proposed currently • Proposed legislation focuses on increasing access, and does not address cost control • Increased access is achieved through a coverage mandate and broad-based subsidies for low income wage earners • These increased costs will be financed largely by new taxes and Medicare cuts • The result will be higher total healthcare costs borne by the private sector – through increased cost-shifting and higher taxes
Net Savings $75 True healthcare reform can be totally self-financing Annual Values for Total U.S. - $ Billion
Agenda • Healthcare trends in the U.S. and at Safeway – Stark contrast • Key factors for Safeway success • Introducing Safeway Health
Safeway achieved its savings by transforming healthcare ownership and delivery • We focused on making our employees healthy and gave employees and their families the tools needed for personal success • We aligned the interests of employees with the company, motivating them to take personal ownership of healthcare decisions • We had the will to navigate the narrow path between HIPAA and ADA • We implemented aggressive changes with broad employee support
Healthy Employees Safeway employees know that behavior matters Non-Compliant Behavior is Common Unhealthy Behaviors are Expensive % Non-Compliant with Recommended Care 2008 Incremental Cost Obese Overweight/Obesity Smoking Obesity Lack of Exercise Uncontrolled Hypertension UncontrolledCholesterol HighCholesterol CoronaryArteryDisease Hyper-tension ColorectalCancer Asthma Diabetes Source: Elizabeth McGlynn, et al, The Quality of Health Care Delivered to Adults in the United States, NEJM, Vol. 348:2635-2645 June 26, 2003 (No. 26); NHANES 2005-06
Safeway’s program features voluntary biometric screenings - Healthy Measures • Key biometric screenings are offered to all employees • Biometrics are based on major healthcare cost drivers • Underlying conditions are individually controllable through behavior change • Incentives motivate healthy behavior change • Participation can earn the lowest healthcare premium • Voluntary • Employees and spouses
Safeway Obesity Challenge – One Year Results Obesity Reduction = 5 ppt 2008 Overweight Reduction = 1 ppt 37% 34% 17% 7% 1% 4% 2009 0 +6 -1-2 -2 -1 36% 40% 15% 1% 3% 5% Underweight Normal Weight Overweight Obese Class I Obese Class II Obese Class III
Lose Weight - Create a Favorable Energy Imbalance Three Ways to Lose 1 Pound per Week • Reduce calories in by 3,500 / week • Increase calories out by 3,500 / week • Combine both tactics • Reduce calories in by 1,750 per week • Increase calories out by 1,750 per week Best Approach The more you move, the more you can eat
1,750 Less Calories In per Week Many ways to achieve the goal – 250 / day 1 less Café Latte Handful of raisins instead of candy Replace 1-traditional dressing with very low cal dressing Cutting 1,750 cals/wk One less chocolate chip cookie Substitute 2 diet soda for 2 reg soda Keep the volume and taste, not the calories
1,750 More Calories Out per Week Many ways to achieve the goal – 250 / day 1.2 hours pacing while on the phone 5 days / week 45 minutes walking at 4 mph 6 days / week 40 minutes circuit weight training 4 days / week Burning 1,750 cals/wk 65 minutes shopping at Safeway 7 days / week 4.5 hours playing golf walking (w/o cart) per week Add activities incremental to normal movement
Safeway’s ability to influence lifestyle and reduce cost is unprecedented Percent of Participants Passing in 2009 who Failed in 2008 Employees and Spouses Failed 2008 3,283 1,106 684 4,640 Passed 2009 1,326 336 118 746
Safeway is building a culture of health and fitness with an holistic program • Behavior-based plan structure • Wellness services and programs • Built around major disease cost drivers • But focus is on getting healthy, not controlling costs • Results are excellent across the board • Support services and programs • Education • Care support • Cancer concierge service • Personal decision support tools
Aligned Interests Safeway’s healthcare plan creates a “market” • We increased employee responsibility – largely through a behavior-driven model • We ensured that employees have adequate “skin in the game” • Employees begin to think of all healthcare spending as their money • They make smart, cost-effective decisions • They respond logically to financial incentives • We created sophisticated wellness programs to support our culture of health and fitness • We produced immediate cost savings with our behavior-based model, contrary to conventional wisdom • We introduced elements of transparency
Lack of transparency enables a wide range in provider prices Cost Per Procedure - Greater SF Bay Area MSA 4:1 8:1 16:1 10:1 High Cost : Low Cost Multiple
Colonoscopy - Diagnostic Cost Per Procedure – Greater SF Bay Area MSA Diagnostic Colonoscopy Providers
Colonoscopy - Diagnostic Cost Per Procedure – Greater SF Bay Area MSA Diagnostic Colonoscopy Providers Note: Representative sample: 8 out of 47 facilities
MRI - Spine Cost Per Procedure – Greater SF Bay Area MSA MRI Providers
CT Scan – Abdomen Cost Per Procedure – Greater SF Bay Area MSA CT Scan Providers Note: Representative sample: 8 out of 30 facilities
Knee Arthroscopy Cost Per Procedure – Greater SF Bay Area MSA Knee Arthroscopy Providers Note: Representative sample: 8 out of 16 facilities
Safeway Chronic Med Switching Experience Distribution of Scripts 100% 100% 100% Lowest-cost generic Other generics Brands Pre Launch Rx Count Post Launch Rx Count Post Launch Rx Employer Cost
HIPAA and ADA Safeway navigates HIPAA and ADA effectively • Our programs were designed after extensive legal analysis • Our views on HIPAA were strongly endorsed by the U.S. Senate during the healthcare reform debate • The “Safeway amendment” would raise HIPAA limits to 30% • Overwhelming endorsement by HELP and Finance Committees • Healthy Measures was reviewed and praised by U.S. Department of Labor representatives – meets “the letter and the spirit” of HIPAA
Employee Support Employees love the Safeway healthcare plan • Our Healthy Measures program is voluntary and yet boasts a 76% participation rate • When participants were surveyed . . . 78% rated the program good, very good or excellent • When asked, 76% of participants suggested more incentives to encourage healthy behavior • We have had no significant complaints about any element of our plan in 110,000+ member years
Agenda • Healthcare trends in the U.S. and at Safeway – Stark contrast • Key factors for Safeway success • Introducing Safeway Health
Safeway Health was formed in 2009 to commercialize the Safeway experience • We are confident that Safeway’s experience is completely transportable to other organizations • Existing healthcare players are not well equipped to deliver the Safeway results • Transformational change often comes from outside the sector
Safeway Health complements traditional service providers – who perform critical roles • Insurance companies • Process claims • Provide basic healthcare plans that may have been moderately tailored • Provide a broad network and “negotiate” rates with healthcare providers • Healthcare benefits consultants • Review healthplan options available in the market • Provide actuarial analysis of alternative plans and elements • Estimate costs and set employee premiums and out-of-pocket rates • Pharmacy Benefits Managers (PBM) • Provide a pharmacy network and “negotiate” drug reimbursement rates • Establish co-pay and co-insurance levels
Our business model is a shared savings model • Safeway Health receives 25% of the shared savings against a business-as-usual baseline • Program improvements are added every year to enhance savings – with Safeway serving as the beta site for new ideas • Safeway Health services are comprised of analysis, plan design, implementation, and continuous improvement - using • Behavior incentives, • Existing medical transparency vehicles, and • Our proprietary drug transparency tool • Our contract term is five years, and will deliver value for 10 years
Potential Healthcare Savings – Typical Organization Healthcare Spending – 10,000 Employees ($ Millions) Business as Usual: CAGR = 7.0% Cumulative Annuity Savings Value 2011-20152016-2020 $103 $36 Total Value (10 yrs) = $283 ($103 + 5 x $36) Ann Val $36 New Plan: CAGR = 0.0% Assumes current per employee all-inclusive cost (ER contribution + EE premium + EE OOP) = $9,000
Why a 5-Year Contract? • During the 5-year contract, the client team will become self-sufficient and should not require further core Safeway Health services • Safeway Health’s value delivered is very high - $283 mil / 10,000 EEs • $103 during 5 year contract • $180 total annuity value over the next 5 years - $36 million / year • Other (potential) contract terms are not appropriate • 10 years would ignore the principle of self sufficiency at 5 years • 3 years unfairly constrains Safeway Health’s opportunity • New programs are still being implemented • Over 60% of total value is delivered in years 4 and 5 • Safeway Health’s total fees over 5 years are only 9% of the total value delivered over a 10-year cycle
Five elements of cost savings define our scope and holistic approach 5 Year Cost Savings Against Baseline Projection Not yet captured by SWY
Safeway Health delivers high value plan design . . . with no client commitment Implementation • Best in class • High value • Fee – fraction of savings Contract Plan Design YES • Behavior • Transp’cy • Wellness • Value for client & staff • Team assigned • Analysis • Scenarios Client Decision No Engagement NO • No implemen- tation • No client commitment • No fee
Safeway Health - your partner in “private healthcare reform” • Safeway stands alone in reducing costs while improving benefits • Safeway implementation expertise • Renown for implementing effective cost reduction programs across the business • Proven healthcare solutions with implementation templates • No complaints in 110,000+ member-years • Client retains full control • Safeway Health proposes changes . . . and advocates aggressively • Client makes the final decision • Favorable economics – shared savings model aligns incentives
Safeway Health Contact Information • Ken Shachmut – Executive Vice President (925) 467-3426 ken.shachmut@safewayhealth.com • Brad Wolfsen – Vice President (925)-467-2164 brad.wolfsen@safewayhealth.com • Dale Tyerman (925)-738-1218 dale.tyerman@safewayhealth.com • Safeway Health LLC 5918 Stoneridge Mall Road Pleasanton, CA 94588-3229 Fax (925) 738-1213