The Four R s Halverson Alli… · Bangalore, India --$12,000. 7 We need health care reform in...
Transcript of The Four R s Halverson Alli… · Bangalore, India --$12,000. 7 We need health care reform in...
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Reengineer, Repackage, Reprice and Re-activate --
A Strategy to Reduce Health Care Costs in America
Alliance of CEOs
George C. HalvorsonChairman and CEO
Nov. 11, 2011
The Four R�s --
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U.S. Health Care generates$2.8 trillion in annual revenues.
Health care is the fastest growing segment of our economy.
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By itself, the American Health Care Expenditure Level is larger than the total
economies of all but five countries --including the United States:
Only China, Japan, India, and Germany have total economies larger than
U.S. health care all by itself.
Source : CIA Source book, 2009 est. https://www.cia.gov/library/publications/the-world-factbook/rankorder/2001rank.html
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Average family premiumin the U.S. -- $16,000
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Minimum wage for a full-time worker in the U.S. --
$14,000
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Complete salary and benefitsfor a Systems Engineer in
Bangalore, India -- $12,000
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We need health care reformin America becausewe need much more
affordable care.
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Four Key Components of Basic Reform
1) Coverage
2) Care
3) Cost
4) Health
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We need to focus our
attention on achieving
affordability by making care
better and smarter.
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There is more than enough
money in American health
care now -- it is not efficiently
and effectively used.
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We should reengineer and
reprice care to get increases
in care costs down to CPI
in four years.
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Agriculture used to involve
thirty percent of our workforce and food
consumed forty percent of a family�s cash flow.
Now agriculture involves less than two percent
of the work force and consumes less than ten
percent of the average family budget.
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We can�t get to CPI cost
increase levels in one year or
with one change in practice.
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-- But --
We can get there in several years if
we reengineer care, make care
safer, connect care, reprice care,
computerize care data, and regulate
a few key pieces of care.
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Kaiser Permanente
1) Vertically Integrated (All Major Care
Components)
2) Prepaid
3) Relevant Size
-- 8.8 million members
-- 180,000 workers
-- $45 billion in revenue
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1) Fully electronic care support
2) Ten million medical records
3) Thirty million electronic contacts
4) Largest electronic medical library for
care support
Kaiser Permanente
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KP Current Electronic Medical Library
1) Medical Journals / Papers / Text Books / Research Resources
2) Key Protocols
3) Best Practices
4) Real Time Access � Point of Care
5) Instantaneous Revision
6) Order Tests / Prescribe Drugs
7) Patient Information Print Outs
8) Continuous Improvement (6th Generation)
(Only Kaiser Permanente physicians have this tool kit.)
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Basic Premise --
1)All / All / All
2) Make The Right Thing Easy To Do
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Success Levels --
� HIMMS Wins (35 �Stage Seven� Awards)
� HEDIS Wins (21 Best In Country Scores)
� Leapfrog Group Wins (16 Hospitals)
� System Availability Uptime Institute Wins (6)
� JP Power -- Best Health Plan for Service
� HIMSS Organizational Davies Award
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Success Levels (cont�d) � (�Star Wars�)
-- 459 Health Plans Were Rated by Medicare --
Nine Health Plans received five stars
Five Kaiser Permanente regions won five
stars and the other three Kaiser Permanente
regions received 4.5 stars.
(Service, Quality, Satisfaction Levels and Process Functionality)
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Care Improvement Performance Successes
� Fewer heart attacks
� Fewer asthma complications
� Fewer broken bones
� Shift change error reduction
� Zero reportable pressure ulcers
� Sepsis deaths cut in half
(Care can be reengineered)
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Chronic Care
75%
Major Cost Drivers For The Country
Acute Care 25%
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Population Cost
1% 30%
Cost Distribution of Care
-- Costs are not evenly distributed --
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U.S. Population U.S. Care Costs
10% 80%
Huge Opportunity for Focus
Care improvement should focus on high leverage interventionsand high impact preventions.
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Chronic care is a
team sport.
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Teams Need --
1) Identity
2) Function
3) Captains
4) Connectivity and Tools
(Medical Homes -- ACO�s -- Basic Care Teams)
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Prepayment and package prices can
empower and enable both process
engineering and continuous
improvement / reengineering.
We Need The Right Payment Model --
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Fee For Service As a Payment Model(Traditional Payment Mechanism)
1) Perverse incentives
2) Focus on process vs. outcomes
3) Rewards entire categories of errors, bad
care and mistakes
4) Cripples innovation and process
redesign and process improvement
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KP does nine key things to reduce
broken bones by roughly half --
six of the nine KP steps are not billable
for either Medicare or Commercial
Insurance
Packaged Payments Allows Innovation and Process Engineering to Happen
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Reengineering has huge
upside potential for reducing
the costs of care.
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-- Fifteen Million E-Visits
-- Twenty Million Follow-up Lab Visits
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Thirty-five million visits that would
be individually billed in a
non-connected, fee-for-service
care environment.
(Patients love e-visits)
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Fee-For-Service Issues
� 1.7 million hospital infections
� Sepsis as number one case of death
� Growing pressure ulcers
� 1.9 million medication errors
(Fee-For-Service Payment Models Reward Caregivers for those deficiencies)
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Reengineering Wins --
� Sepsis deaths reduced by half
� Pressure Ulcers reduced by half
� Shift change error rate reduced by half
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3 R�s of Direct Cost Mitigation
1) Reengineer
2) Regulate
3) Reprice
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We need business model
changes to accomplish all
three of those agendas.
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America Needs a New Business Model for Care That Creates --
A) Safety
B) Better Care
C) Better Outcomes
D) Better Prices
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Business Model Cash Flow Enhancements
1) Prepayment
2) Packages of care
3) French model of price-relevant benefit design
4) Focus on team care � value based benefit design that
steers patients with co-morbidities to team care.
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We very much need to look at care prices in America.
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We have the highest unitprices for care in the world.
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Normal Delivery (US$)
Physician Fees:
$2,380
$324 $503
$1,336
$2,997
$4,848
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
Spain Canada France USA Fee Range
USA Low USA Average USA 95th Percentile (Actual Payments)
(95th percentile)
(Average)
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Scans and Imaging Fees:Angiogram (US$)
$117 $134 $187 $245 $287
$153
$682
$2,160
$-
$500
$1,000
$1,500
$2,000
$2,500
Spain Switzerland UK France Germany USA FeeRange
(95th percentile)
(Average)
USA Low USA Average USA 95th Percentile (Actual Payments)
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Scans and Imaging Fees:CT Scan: Head (US$)
$117$179 $187
$287$360
$82$65
$464
$1,430
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
Canada Spain France UK Germany Switzerland USA FeeRange
(95th percentile)
(Average)
USA Low USA Average USA 95th Percentile (Actual Payments)
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Average Cost Per Hospital Day (US$)
Hospital Charges:
USA Low USA Average USA 95th Percentile (Actual Payments)
$554 $617 $909 $1,041$1,595$470
$3,612
$14,306
$-
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
Spain Germany Switzerland France Canada USA FeeRange
(95th percentile)
(Average)
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Bypass Surgery (US$)
Total Hospital and Physician Costs:
$11,618 $13,998 $15,802 $16,325 $19,180 $22,212 $27,237$37,793
$59,770
$126,182
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
Switzer
land UK
Spain
Franc
e
Nether
lands
Canada
Germ
any
USA Fee Ran
ge
(95th percentile)
(Average)
USA Low USA Average USA 95th Percentile (Actual Payments)
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Nexium (US$)
Drug Prices:
USA Low USA Average USA 95th Percentile (Actual Payments)
$167$136
$69$50$35$32$30$30
$186
$339
$-
$50
$100
$150
$200
$250
$300
$350
$400
UK France Canada Netherlands Spain Switzerland Germany USA FeeRange
(95th percentile)
(Average)
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-- Compare Canada to the U.S.-- If we delivered all of the care we deliver today in this country -- every single visit, scan, prescription, surgery, medical procedure and hospital admission -- and if we simply repriced each piece of American care at Canadian levels -- we would drop our percentage of the GDP spent on care�
From roughly 18%--To less than -- 12%
We cannot continue to ignore prices and fees as a cost driver for care in this country.
How Important Are Fee Levels To The Total Cost Of Care in the U.S.?
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French Model
1) Prices are relevant.
2) High priced vendor choices by
patients don�t increase premiums
for other patients.
3) Consumers get 1st dollar coverage
for key services.
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Premiums Are Now The Average Cost of Care
ACA Loss Ratio Law
(Focus will shift to provider costs and prices)
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Fee Horror Stories Now Relevant --
� $30,000 Ultrasounds
� $27,000 ER Activation Fees
� $25,000 Delivery Fees
� Proctological Exam-- $400 to $4,000
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Ultrasound at $59,490 Spurs Aetna Outrage in Suit Naming Doctors Aetna Inc. (AET) is suing six New Jersey doctors over
medical bills it calls �unconscionable,� including
$56,980 for a bedside consultation and $59,490 for an
ultrasound that typically costs $74.
Payer Backlash Beginning --
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$10 drug now $1500 after FDA grants monopoly �A progesterone hormone injection, used to prevent preterm labor, used to be $10 a shot. Now that the FDA has assigned an exclusive right to create the easily-made formula to one company, KV Pharmaceuticals, the price has risen to $1500.�
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We need to buy packagesof care at an affordable price
(including prepayment for a complete package of care).
Or
We need to put fees in frontof consumers at
the point of care and make them relevant to the patient.
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-- Package prices allow providers
to reengineer.
-- Price relevance brings prices
down.
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Lasik Eye Surgery
$2,000 per eye
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Lasik Eye Surgery
$2,000 per eye
$1,500 per eye
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Lasik Eye Surgery
$2,000 per eye
$1,500 per eye
$1,000 per eye
$500 per eye
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Care Was Reengineered
� New anesthetic
� New portable eye laser
� New recovery setting
� Better diagnostic scanner
� Leaner staffing model
� Better care and better care measurement
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-- Heart Transplants
-- Ninety-Day Guarantees
Other Business Model Evolution Wins
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Fees Are a Huge Opportunity Area
1) All invented
2) No inherent legitimacy for any fee
3) Huge variation today
4) Untapped resource for cost mitigation
5) Major fees are invisible to consumer
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Next Steps
� Private buyers should coordinate safety agenda with CMS
� Prepayment wherever possible
� Packaged care for appropriate services
� Channel patients to team care
� Full data on process, outcomes, and cost
� Cap cost shift
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We also need to improve health.
Chronic care drives nearly eighty percent of total care costs in the U.S.
(over half for the world)
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Chronic care needs are created
by individual behaviors --
food intake, weight, smoking
and physical inactivity.
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We need to help people
eat better (and less) and
become physically active.
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Physical activity is easier to achieve
than weight loss. Activity creates
positive neurochemicals instead of
negative neurochemicals -- so it is
much easier to both improve activity
levels and sustain them over time then
it is to lose weight and keep it off.
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Fit Beats Fat
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Benefits of WalkingDaily Walking has huge value
� Prevents and manages diabetes� Prevents heart disease and strokes� Prevents and treats depression and anxiety� Helps manage asthma� Lowers the rate of some cancers
A Moderate Amount of Walking Has a Huge Impact
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Walking 30 minutes a day, five days a week can cut new
cases of diabetes in half. (Losing ten pounds as well can cut the rate of new diabetics by
nearly two thirds.)
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The best news is we can achieve the 30 minutesa day in two 15-minute time periods
-- It doesn�t have to be a continuous half hour. ---- We can achieve health goals with two 15's. --
www.everybodywalk.org
Two Fifteens Will Do The Trick
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From a purely practical perspective --
Walking is our best hopeand our best strategy.
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Walking is the best, most accessible, and most likely to succeed health improvement
option for most people.
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We Need Affordable Health Care
1) Better care
2) Price competitive care
3) Buying care by the package and not by the piece
4) Proactive prevention to reduce the need for care
-- Walking is a great next step.
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www.everybodywalk.org