Bridging the Value Gap —A New Paradigm for Corporate Medicine

1. Bridging the Value Gap—A New Paradigm for Corporate Medicine South Carolina Business Coalition on Health Annual Meeting May 8, 2012

2. The Benfield Group • Based in St. Louis with Offices in Chicago, Atlanta and Philadelphia • Research, Strategy and Communications Focused on Helping the Healthcare Supply Chain Create More Value for Employers • Sources of Information and Insight • Syndicated Research • Custom Research (Rx, Devices, MC, Pt/Consumer) • Strategy and Tactical Support of Employers • Networking

3. The Value Gap: Imagine a Google Map…

4. Zooming In…..

5. The Value Gap • Employer Purchasers on one side…Providers on the other…Plans intermediating… Patients stuck in the middle • Lost in the Gap • Cash • Health • Productivity • Equity • Forces of Erosion • Misaligned Incentives • Lack of Communication • Lack of Transparency • Lack of Trust

6. Who is This Man?

7. Building a Bridge from His Side of the Value Gap…and Getting Punished for It

8. Bridging the Value Gap Strategic Supply Chain Management Driving the VIA Cycle Implications for Stakeholders

9. Simplified Supply Chain—Employer as Focal Company Health Benefits and Programs

10. Strategic Supply Chain Management • Goal: End-to-end focus on value creation • Steps 1 2 3 4 5 Achieve consensus on what “value” is Focus on high priority opportunities Engage stakeholders who are key to value creation Manage priority customer and supplier relationships Leverage success to other value opportunities

11. What is Value?

12. Value Benefits Cost Value =

13. “Value” is a Matter of Perspective • A $125 bottle of wine • A degree from a Community College • Buying iPads for employees • A PSA test for prostate cancer • Bariatric surgery • Incentives for HRA completion • Providing health-related benefits and programs for employees

14. Core Issue: What is “Value”? View of government Payers, Plans and price-focused Employers Value of Investments in Health Improved Clinical Outcomes + Lower Safety Risk (+ Reduced Total Medical and Pharmacy Spending) Price = View of value-focused employers and company shareholders Improved Clinical Outcomes + Lower Safety Risk + Reduced Total Medical and Pharmacy Spending + Less Time Away from Work + Faster Return to Function/Return to Work + Improved Work Capacity + Improved Work Safety + Increased Employee Satisfaction Price Value of Investments in Health =

15. Focusing on High Priority Opportunities • Fundamental Strategies 1 2 3 Keep the Healthy People Healthy Manage and Restore Health to People with Chronic Diseases Focus on the Highest Risk/ Highest Cost Pareto

16. Engage Stakeholders who are Key to Success in Value Creation • Who in Your Supply Chain is in the Best Position to Help with: 1 2 3 Keep the Healthy People Healthy Manage and Restore Health to People with Chronic Diseases Focus on the Highest Risk/ Highest Cost Pareto

17. Manage Customers and Suppliers as Partners • Clear Mission • Collaborative Problem-Solving • Shared Investment in Value Creation • Clear Responsibilities and Accountabilities • Rewards • Consequences • Metrics

18. Stakeholder Collaboration is Emerging • Value-Based Insurance Design • Centers of Excellence • Pay for Performance • Support for Medical Homes • Support for ACO Formation All these things can be done well, or done poorly. When done well, they are value-creating, sustainable and game-changing.

19. Three Case Studies of Regional Multi-Stakeholder Collaborations

20. Key Lessons From the Case Studies • Place the central focus on improving quality and value • Build a complete ‘bridge’ to health care value • Think big, but start small • Pursue real ‘win/win’ partnerships with other stakeholders • Engage strong leaders to drive the initiative

21. The Power of Collaboration Jointly, health benefit stakeholders can impact all key levers to increase value.

22. A Value-Information-Action (VIA) Cycle is Starting to Spin Employers Demanding More Value for Dollars Spent on Healthcare Information about Healthcare Cost and Quality is Improving Employers Becoming More Adept at Pulling Levers to Get Better Value • Global competition • Aging workforce • High healthcare cost structure • Increasing demand for productive human capital • HIT Proliferation via private and government investments • Consumerism-driven cost and quality transparency • Medicare data (?) • Comparative Effectiveness Research • Wellness Incentives • Value-Based Insurance Design • Prescription benefits • Medical benefits • Centers of Excellence • Pay for performance and never events • Worksite clinics and services

23. You Can’t Stuff the Info-Genie Back in the Bottle…

24. …Even for a Beloved Physician, a Popular Hospital or Powerful Plans

25. Employer Priorities for Improving System Sustainability Desire for Value and Information

26. Employer Policy Prescriptions Focus on Information and Systems of Care

27. Specialties for Which Employer or Medical Plan Carrier/TPA Designates Centers of Excellence NA

28. Number of Specialties for Which Centers of Excellence are Designated Per Employer 2011 n=114 2012 n=120

29. Employer Promotion of Centers of Excellence among Employee Population n=90

30. Types of Employer Support for Pay-for-Performance Initiatives (Percentage of those employers participating or planning to participate in such initiatives) *Other includes coalition activity(3), collaborate with health plan to support pay for performance initiatives, collaborate with multi-stakeholder organizations, focus on medical home.

31. Implications of the VIA Cycle • Employers • Be clear about Value you want to buy • Drive availability of information you need • Work with collaborators to take action • High Quality Providers • Drive Value discussion • Drive Information transparency • Leverage opportunity for differentiation • Recognize price will be on the table • Plans • Establish proposition by helping purchasers understand and take action on differentiated value

32. Discussion