The Next Triple Aim: Innovation, Transformation … Next Triple Aim: Innovation, Transformation and...

© Oliver Wyman

Confidential Discussion Document

The Next Triple Aim: Innovation, Transformation and Partnerships

April 2014

Confidential Discussion Document 2 2 © Oliver Wyman

Introduction to Oliver Wyman Oliver Wyman Group is a consulting firm with more than 3,000 staff in over 50 offices in the Americas, Europe, Asia and the Middle East

NERA Economic Consulting

LIPPINCOTT Brand

Strategy and Design Consulting

Delta

Communications, Media &

Technology (CMT)

Consumer & Industrial Value Transformation

(C&IVT)

Health & Life Sciences

(HLS)

Financial Services

(FS)

Manufacturing, Transportation

& Energy (MTE)

Leadership Development

Actuarial


Oliver Wyman’s Health & Life Sciences (HLS) practice overview

Industries •  Provider

–  Integrated Delivery Networks

–  Academic Hospitals –  Government Organizations

•  Health Services –  Payers –  Healthcare IT –  Retail services

•  Life Sciences –  Pharmaceutical Companies –  Biotech –  Medical Devices –  Public Health Organizations

Platforms and Key Capabilities •  Healthcare Reform

–  Our ground-breaking analysis informed the debate on healthcare reform on the Hill and is now part of our analytic toolbox. We use scenario planning, strategic realignment, and transition management to help clients reposition themselves.

•  Integrated Health Management (IHM) –  Our IHM framework is a comprehensive, holistic approach to care management and

delivery. With IHM, companies can compete on the cost and quality of care and participate in the PCMH and ACO transformations.

•  Strategic Growth Services –  Oliver Wyman’s depth of knowledge and state-of-the-art analytics have helped

organizations pick high-growth markets and build winning capabilities. We focus on competitive differentiation, shifts to retail, and strategic repositioning.

•  Bio-Pharma Ecosystems –  The end of the blockbuster era calls for a dramatic shift in thinking. We have created a

new strategic framework that maps the evolution of medicines markets, and how the various ‘ecosystems’ are becoming more different than similar.

•  Reinventing R&D –  We enable bio-pharma companies to advance fundamental transformations in R&D—

challenging R&D rules of thumb more appropriate for yesterday’s portfolio, integrating the ‘health value’ frame in R&D processes, and building for tomorrow.

•  Market Access / Economic Value –  Payer influence is growing in today’s market, setting pharma up for a large paradigm

shift. Our integrated payer and pharma practice is designed for this new marketplace.


Our HLS practice focuses on ideas for transforming healthcare

Confidential Discussion Document

Waves of Change

Confidential Discussion Document 6 © Oliver Wyman 6

When will the markets tip? When will business models need to solidify?

$0

$0.5 T

$1.0 T

$1.5 T

$2.0 T

$2.5 T

$3.0 T

$3.5 T

$4.0 T

2010 2015 2020 2025

Managed Medicaid MA Duals Innovative Employers Individuals & Exchange

Solidification

$268B

$1.5T

$578B

$1.2T

$231B

Value Market Opportunity by Funding Source 2010-2025

Net New Spend CAGR

$231B 17%

$1.0T 14%

$578B 21%

$1.4T 25%

$253B 21%

$3.7T in 2025 (70% of total spend)

Value market tops 30% of the total

Value market to grow from $232 B to $3.7T by 2025

TIPPING POINT Value market tops 50% of the total


What is the evolutionary path that organizations will follow?

Formation Value enhancement Accountable care

Impa

ct o

n Q

ualit

y, A

cces

s, a

nd C

ost

Time

Physician – hospital clinical integration Adoption of full financial risk

Historical fee-for-service

“disconnected” model

Formation of partnerships,

alignment with physicians, and integration of technology

First steps to value:

efficiencies, alignment, and

service coordination

Efficient episode

management

Integrated condition

management

Population health

management

Integrated value

transformation

Current areas of network development focus:

important but low value yield

Empowering and incenting networks to advance quality and reduce cost through

elimination of variation and adoption of EBM

True accountability and value delivery


Is total population health management a fad?

ACOs are quickly emerging across the nation… …and we anticipate a broad shift to value-based models over the next decade

Projected acute provider model evolution % of systems with FFV components in operating model

ACO prevalence by primary care service area

Source: OW Analysis (updated Aug 2012)

Population in PCSA

With ACOs

Without ACOs

<100K 100K-250K 250K-500K 500K+

OR ID

UT NV

WA

CA

OK

CO KS

TX

MT

SD

ND

NE

WY

MN

IA

WI MI

TN AR

LA

MS

IL

AL

IN

MO

FL

GA

SC

NC

WV KY VA

OH

DC

NJ

MD DE

MA

PA

VT

RI CT

NH

ME

NY

AZ NM

AK

45% of the US population lives in

markets with at least one ACO arrangement

Risk-taking systems

0%

20%

40%

60%

80%

100%

2010 2015 2020 Fee for service Mixed value models Total population health risk

% of Systems ~15% ~50% ~80%

# of Systems ~525 ~1,600 ~2,600


What will drive innovation, transformation and partnership?


What are the emerging business models?

Health and Engagement Enablers

Population Managers

Specialty Centers of Excellence

Infrastructure Services

Health management •  Monitoring

•  Medication management •  E-health (web services)

•  Coaching •  Prevention/early

intervention •  Multi-skilled teams

Consumer engagement •  Life advocates

•  Wellness/fitness •  Consumer apps

•  Social networks & gaming •  Consumer decision tools

•  Behavioral/social engagement

•  Mobile monitoring

•  Health information technology

•  Health exchanges •  Intelligent workflow

systems •  EBM/cloud

•  Population risk management

•  Big data analytics •  Cloud

•  Consumer science •  Social network

infrastructure •  Open architecture

infrastructure •  Consumer health

information transparency

•  Surgical factories •  Acute care •  Specialists

•  Skilled nursing •  Rehab

•  Hospice •  Routine/ convenience

care •  Retail/ specialty

pharmacy •  Emergent/ Trauma

•  Imaging/ Labs •  Oncology •  Dialysis •  ASCs

Business model archetypes

2

1a

2a

3a 3b 1


How much capital will be invested in the transformation?

Maturity to Accountability

Expanded value proposition (integrating financial services)

•  Partnership formation

•  Physician acquisition

Effective value

capture

•  Space optimization

•  Technology integration

•  Efficiency focus

•  Service line

alignment

•  Efficient episode mgmt

• Assumption of risk

•  Population health mgmt •  Integrated

condition mgmt

Transformation Stages

Description Build the necessary organizational foundation and integration

Clinical redesign and capabilities build to shift toward quality, efficiency and pop. mgmt.

Adoption of full financial risk and accountability for care

Total Expected Provider Spending on

Transformation (2011-16)1

~$72BN ~$91BN ~$80BN

Assembly Value Enhancement Accountable Care Organization

Transformation Value Proposition

1Based on Oliver Wyman estimates for the total cost of a provider transforming into a full ACO


Six BIG questions every health system leader

should be considering


Patient volume

Consumer value

PBM’s and retail

pharmacies

Partnerships

Acquisitions

Partnerships

Partnerships

Health plans

Consolidation

Health plans

Consolidation

Health plans

Physician organizations

Health systems

Offense or defense?

1. Are we playing offense or defense?


•  Delivered via ecosystem •  Open architecture •  Relentless innovator •  Information enabled

and predictive •  Total health and wellness focus •  Always engaged •  100% available and social •  Magnetic for consumer •  Superior results •  Strong brand •  Culture centered around a

service mentality •  Vibrancy

Retailers/e-Retailers Social Media Companies

HIT/Service Companies Health Plans

Health assessment

Personalized, adaptive

Navigation

Convenient access

Analytics

Prevention services

Mobile/social

Connectivity

Cloud

EBM

Monitoring/ tracking

Performance management

Product/ distribution

Value-based pricing

Care teams

Coaching/ engagement

Shopping/ delivery

Rewards and loyalty

Consumer transparency

Support systems

Information management

2. Do we know where our capability gaps are and how to close them?

Do we know what the most important !value-added activities are?

Are we ruthlessly objective about what will take?


3. Do we really have the consumer in focus?

My value chain

Collaborative consumer value chain

Heart patient

Consumer mindshare

Consumer loyalty

Consumer timeshare

Consumer engagement

Consumer wallet share

Consumer life share

Whole consumer

Today’s world Tomorrow’s world

1.  Scope and scale of consumer engagement?

2.  Value and power of the integrated consumer value chain – 1 + 1 = ?

3.  Likely value chain organizers – what will it take – who will be trusted?

4.  Dimensions of competition – anywhere, anytime, personalized?

5.  Role of health status and benefits coverage in shaping value chain leadership?

Big data

Health Apps Crowd

Source

EBM Treatment


4. Are we prepared to play in a multi-chain world?

From To Solo-sport orientation Ecosystem-based Wholesale Retail Sickness Total health & wellness Reactive Predictive/preventative Body part or diagnostic code Whole person Physical Virtual/anywhere/real-time Transactional Relational One-size-fits-all Personalized Opaque Transparent Individual/expert Crowd

My value chain Collaborative consumer value chain

Big data

Health Apps

Crowd Source

EBM Treatment


Health retailers and e-retailers

Tech, consumer goods and services

Providers

Health plans

5. Have we really considered the compete or converge question?

Extra-industry players

Race to capitalize on higher value consumer relationships

Traditional healthcare players

Consumer mindshare

Consumer loyalty

Consumer timeshare

Consumer wallet share

Consumer biodata share


•  Is the cost of inaction on the rise? •  Is there an inflection point where we can’t

catch up to the leaders of the pack? •  If one of these models entered our

markets, could we respond?

6. Are we moving fast enough?

The leader advantage is expanding, fueled by new technology, capital markets, and hare earned lessons

Today-player questions

Today’s Volume Players

Org

aniz

atio

nal s

ophi

stic

atio

n

Value creation

2nd Generation Leaders

1st Generation Leaders

The Next Triple Aim: Innovation, Transformation … Next Triple Aim: Innovation, Transformation and...

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