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					The DNA of
Consumer-Driven
Healthcare:
Positioning Your Organization
for Success

T27

          Michael A. Petrochuk, MHA, DBA, FACHE
       Director of Planning, Strategy, & Market Research
Change not just on the outside…




                                  2
…we’re talking radical change!




                                 3
DNA of Consumer-Driven Healthcare

    Consumer-Driven
    Healthcare Drivers
                           Consumer-Directed
                           Health Plans

  Price and Quality
  Transparency           Expanding the
                         Retail Philosophy
 Case Study—Mini
 Clinic Explosion

                          Doctors in the Fray


  Final Success Steps
                            Questions & Comments


                                                   4
Major Drivers of Influence


 •   World economy.
     – Disseminated and overseas
     – Decreased manufacturing costs
     – Global providers (I.e., China, India, etc.)
 •   Baby boomers are retiring.
     – 2011…1.5 million turning 55 for 20 years




                                                     5
Healthcare and Societal Drivers


 •   Increased personal responsibility.
 •   Explosion of self-help and self-care.
 •   Convenience of portability.
 •   Emergency of a “transparent” sector.
 •   Continued empowerment of consumers.
 •   Acceptance of individual ownership.



                                             6
The Healthcare Lifecycle



1960-70’s      1980-90’s   2000-10’s
 Sick          Managed     Health
 Care          Care        Care
Provider-      Payer-      Consumer-
Driven         Driven      Driven


                                       7
Marketing 101: Consumer Drivers




 • Access.               • Accessible.    • Structure.
 • Mass customization.   • Predictable.    -Image vs. Function.

 • Time.                 • Fair.          • Process.
                                           -Substance vs. Style.
                                          • Outcome.
                                           -Actual vs. Perceived.



                                                                    8
Battle of the Titans—Price & Service




  Consumer-Driven                   The Experience
  Healthcare                        Economy
  • Give employees incentives.      • Examine the customer participation.
  • Offer insurance choices.        • Understand customer connections.
  • Let providers set prices.       • Theme the experience.
  • Provide relevant information.   • Affirm the positive encounters.




                                                                            9
DNA of Consumer-Driven Healthcare

    Consumer-Driven
    Healthcare Drivers
                           Consumer-Directed
                           Health Plans
  Price and Quality
  Transparency
                         Expanding the
                         Retail Philosophy
 Case Study—Mini
 Clinic Explosion

                          Doctors in the Fray


  Final Success Steps
                            Questions & Comments


                                                   10
Evolution of Consumer-Driven Healthcare

1960    Federal health benefits program incentive-based
          program.

1977    Alain Enthoven’s “regulated competition” model.

1993    Abortive Clinton Health Care Reform.

1996    Medical savings accounts (MSA).

1997    Minnesota coalition pioneers offers program of
           choice, based upon price and patient satisfaction
           information.

1998    Herzlinger’s “Market-Driven Healthcare.”


                                                               11
Primer on CDHP’s


 • Consumer-Directed Health Plans (CDHP).
 • Healthcare reimbursement accounts (HRA’s).
 • Medicare Prescription Drug Improvement and
   Modernization Act (MMA) of 2003.
     – Portable, employee-owned, tax-advantaged.
 • Healthcare spending accounts (HSA’s).
 • Defined benefit (managed care) vs. defined
   contribution.
 • High-deductible spending accounts.

                                                   12
Nuts and Bolts of HRA’s and HSA’s

  Plan Specifics            HRA Features                  HSA Features
  Annual Deductible           $750 / $1,500                 $1,050 / $2,100
  (Single/Family)

  Annual Contribution           $375 / $750             ER and EE contributions
                           (only ER’s may contribute)   can’t exceed 1x annual
                                                               deductible
  Employee-Paid Portion      10% (in network)              10% (in network)
                           30% (out of network)          30% (out of network)
  Preventive Care           100% (in network)             100% (in network)
  Coverage                 30% (out of network)          30% (out of network)
  Annual Out-of-Pocket      $2,400 (in network)           $2,500 (in network)
  Max                     $3,500 (out of network)       $5,000 (out of network)
  Lifetime Max                   $2 million                    $2 million



                                                                                  13
We’re facing a paradigm shift… Bet you’ve never heard that
                               phrase before!




Managed Care:                Consumer-Directed Health Plan:




                             •   Drive subscribers to appropriate
•   Managed care networks.       plan.
•   Utilization controls.    •   Cost-sharing incentives.
•   Emphasis—Supply side.    •   Emphasis—Demand side.



                                                                    14
…or said another way!

  Managed Care:         Consumer-Directed Health Care:




     “Just wait until        “Show me the money!”
    your father gets
        home!”


                                                    15
Employers Offering CDHP’s

          Source: NGBH Business Insurance; AHIP, and Atlantic Information Services
  60%
                                                                                              52%

  50%


  40%
                                                                                      29%

  30%


  20%                                                                      13%

                                                     7%
  10%     3%                  4%


  0%
        2002             2003                  2004                  2005            2006   2007


                                                                                                    16
Total Covered Lives of CDHP’s

                   Source: NGBH Business Insurance; AHIP, and Atlantic Information Services
           6.0
                                                                                                        4.9

           5.0
Millions




           4.0                                                                                  3.2

           3.0
                                                                       2.1
                                             1.6
           2.0

                    0.6
           1.0


           0.0
                 2002                   2003                      2004                        2005    2006


                                                                                                              17
Evolution of Consumer-Directed Plans

 Summary –                1st Generation          2nd Generation 3rd Generation                   4th Generation
                               CDHC                    CDHC           CDHC                             CDHC
 A peek into the
 future of                                                                                           Personalized
                             Focus on                 Focus on             Integrated
                                                                                                      Health &
 Consumerism                Discretionary             Behavior              Health &                 Healthcare
                             Spending                 Changes             Performance
                                           Activity & Compliance Indiv. & Group Corporate         Specialized Accts,
   Personal Accounts         Initial              Rewards                  Metric                 Matching HRAs,
                          Account Only                                    Rewards                  Expanded QME
                                            Web-based behavior         Worksite wellness,    Genomics, predictive
 Wellness/Prevention       100% Basic         change support          safety, stress & error    modeling push
    Early Intervention   Preventive Care         programs                   reduction             technology
                                            Compliance Awards,       Population Mgmt, IHM, Wireless cyber –support,
 Disease Management       Information,        disease specific      Integrated Back-to-Work  cultural DM, Holistic
                          health coach          allowances                                            care
                          Passive Info      Personal health mgmt, Health & performance info, Arrive in time info and
        Information       Discretionary     info with incentives to integrated health work data services, information
                            Expenses                 access                                            therapy
     Decision Support
                                              Zero balance acct, Non-health corporate metric Personal development
                          Cash, tickets,   activity based incentives     driven incentives      plan incentives, health
 Incentives & Rewards       Trinkets                                                                status related

    Source:


                                                                                                                          18
Hopping on the bandwagon…


• HSA’s nearly tripled from September 2004 to
  March 2005.
• By 2009, 14 million HSA debit cards will
  account for:
    – $18 billion in healthcare spending.
•   By 2013, 25 million HSA’s expected:
    – $55 to $75 billion in revenue.
    – $5 to $7 billion in profit.


                                                19
 Employers & HSA’s — Finding a cure?

  Engage employees more in managing their health                                                         75%                                 20%         5%



                                    Shift costs to employees                                        65%                               28%                7%


Make employer contributions into an account-based
                                                                                                   61%                               32%                 7%
                 arrangement

                            Expand options for employees                                           60%                           29%                 11%



        Lower healthcare costs, including premiums                                     32%                             49%                     19%


                                                                        0%

                                                                                 10%

                                                                                             20%

                                                                                                   30%

                                                                                                           40%

                                                                                                                 50%

                                                                                                                         60%

                                                                                                                               70%

                                                                                                                                       80%

                                                                                                                                                   90%

                                                                                                                                                           100%
                                                                                         Agree                   Mixed                Disagree

      Source: Managing Healthcare Costs in a New Era, Watson Wyatt Worldwide, 2005.




                                                                                                                                                              20
Tonik Health—The GenX Health Plan




                                    21
Providers Joining the CDHP Dance


 •   Price transparency—Alegant.
 •   Provider education—Humana.
 •   Healthcare credit cards—Via Christi.
 •   Spa Services—Elite Med Spa Development.
 •   Online Consultations—Aetna.
 •   High-end CRM systems—Inova.
 •   ID and credit card—Kaiser Permanente.
 •   Retail clinics—More on that later…

                                               22
Fallout—Consumer-Directed Plans


 •        Cost-shifting—No
          relationship between cost
          and price.

 •        High-deductible health
          plans may result in greater
          bad debt for providers.

 •        Federal intervention in the
          uninsured may result in
          decreased charity care.
     Source: Quality, Cost, & Service Transparency; Sg2, 2006.

                                                                 23
Fallout—Consumer-Directed Plans (Cont’d)


 •        Use rates may decline as
          consumers use discretion
          (and save their money).

 •        Providers will compete
          head-to-head for patients
          and volumes.

 •        Financial vulnerability for
          those already operating
          “on the edge.”
     Source: Quality, Cost, & Service Transparency; Sg2, 2006.

                                                                 24
                  Success Steps


•   Really understand costs.
•   Position to differentiate pricing.
•   Proactively manage quality.
•   Full-service vs. “only what we can afford.”
•   Face it—More reimbursement cuts to come!
•   Invest in clinical technology.
    – CPOE
    – EMR, etc.

                                                  25
               Success Steps (Cont’d)


•   Deliver high service to everyone.
    –   Payors
    –   Customers
    –   Physicians
    –   Vendors, etc.
•   Focus on operational improvements.
    – Revenue cycle
    – Inventory management
    – Materials management

                                         26
DNA of Consumer-Driven Healthcare

    Consumer-Driven
    Healthcare Drivers
                           Consumer-Directed
                           Health Plans
  Price and Quality
  Transparency
                         Expanding the
                         Retail Philosophy
 Case Study—Mini
 Clinic Explosion

                          Doctors in the Fray


  Final Success Steps
                            Questions & Comments


                                                   27
Transparency is the new buzzword

          Current Situation                                               Future
 •       Quality Transparency:
            – Pay for performance                                – Mandatory reporting at
              program with 3.7% bonus                              federal, state, and local
              (CMS).                                               level.
            – Private payors offering                            – Convergence of quality
              similar programs.                                    measurements.
 •       Cost Transparency:
            – Call Centers offer prices                          – Price information very
              on procedures (MRI) and                              easily accessible.
              services (Hip or Knee).                            – Rising out-of-pocket will
            – Payors providing cost                                drive consumer price
              information for providers.                           negotiations.
     Source: Quality, Cost, & Service Transparency; Sg2, 2006.

                                                                                               28
Transparency is the new buzzword (Cont’d)

          Current Situation                                              Future
 •       Service Transparency:
            – Same-day appointments                              – Differentiate on ease of
              for routine tests.                                   access, same-day care,
            – Organizations targeting                              and shorter waiting times.
              waiting times.                                     – Service standards
 •       Market Collaboration:                                     guaranteed in contracts.
            – Providers, payors, and
              employers will collaborate                         – Commitment to quality and
              all all levels (state, local,                        safety will be judged via
              etc.) to provide quality                             their participation in
              and performance                                      performance improvement
              reporting.                                           initiatives.
     Source: Quality, Cost, & Service Transparency; Sg2, 2006.

                                                                                            29
Just a few sources of information…




                                     30
Hospital Transparency — Quality Data




                                       31
Hospital Transparency — Pricing Data




                                       32
Airlines and the Future of Hospital Pricing




                                              33
In the not-to-too-distant future…


             Displayed here are
            the lowest available
                                                Colonoscopy
             procedure charges




                  Hospital


             West Side Center


             East Side Center

 These fees do not include physician charges.




                                                              34
                                                       Success Steps


•        Transparency will be complicated and
         challenging.
•        Differentiate quality with performance
         reporting.
•        Compare performance locally and nationally.
•        Secure senior leadership support.
•        Use cost differentiation to build patient loyalty.
•        Begin transparency initiatives now—don’t wait.
    Source: Quality, Cost, & Service Transparency; Sg2, 2006.

                                                                       35
                                           Success Steps (Cont’d)


•        Create a systematic process for managing
         price requests.
•        Initiate cost reporting to address consumerism.
•        Differentiate services—information systems
         data.
•        Offer real-time information on waiting times.
•        Benchmark with others to drive improvements.
•        Lead performance reporting standards.
    Source: Quality, Cost, & Service Transparency; Sg2, 2006.

                                                                    36
DNA of Consumer-Driven Healthcare

    Consumer-Driven
    Healthcare Drivers
                           Consumer-Directed
                           Health Plans
  Price and Quality
  Transparency
                         Expanding the
                         Retail Philosophy
 Case Study—Mini
 Clinic Explosion

                          Doctors in the Fray


  Final Success Steps
                            Questions & Comments


                                                   37
Creating demand works…




                         38
Retail usually gets a bad rap…




                                 39
Crystal Ball of Healthcare Retailing…
The Sky is the Limit!

•   Costco:
    –   Health insurance on the shelves.
    –   Piloted in Southern California.
    –   5% to 20% cheaper.
    –   Linked with PacifiCare.




                                           40
Health Insurance on the shelves…




                                   41
Crystal Ball of Healthcare Retailing…
The Sky is the Limit!

•   Costco:
    –Health insurance on the shelves.
    –Piloted in Southern California.
    –5% to 20% cheaper.
    –Linked with PacifiCare.
• TelaDoc:
   – Medical care by phone.
   – Targets uninsured.
   – $18 to join and $4.25 per month.
   – $35 for each doctor call.

                                        42
Doctor only a phone call away…




                                 43
Next Generation of “TelaDoc”…


 • Wheels of Zeus—Global positioning system
   that monitors Alzheimer’s patients.
 • Bluetooth technology to send blood pressure
   data from cuffs and pillboxes to a call center.
 • Samsung’s cell phone that can check and
   send glucose levels to a centralized center.
 • Toilets that notify your primary care physician
   whenever you have diarrhea.


                                                     44
DNA of Consumer-Driven Healthcare

    Consumer-Driven
    Healthcare Drivers
                           Consumer-Directed
                           Health Plans
  Price and Quality
  Transparency
                         Expanding the
                         Retail Philosophy
 Case Study—Mini
 Clinic Explosion

                          Doctors in the Fray


  Final Success Steps
                            Questions & Comments


                                                   45
This time it’s OK !




                      46
                How much is that ED visit
                        in the window?


Hospital     ED—Sinus Infection       Time on Phone

Hospital A     “Can’t give price”       16 minutes

Hospital B           $500               3 minutes

Hospital C   “No pricing available”     2 minutes

Hospital D         “No idea”             1 minute

Hospital E           $396               3 Minutes

Hospital F           $300               5 minutes

Average              $398               5 minutes



                                                      47
Healthcare Mini-Clinic


•   CVS & Target Stores—Minute Clinic.
    – BC/BS of Minnesota reduced or eliminated co-pays.
    – Why?—$60 for Strep Test (vs. $300 in a hospital ED).
    – Minute Clinic CEO is former president of Arby’s, KFC, Helene
      Curtis, and Proctor & Gamble!
    – 225,000 patients in 22 centers with 99% satisfaction rate.




                                                                     48
Pricing Up Front




                   49
Healthcare Mini-Clinic (Cont’d)


•   Walgreens, Rite Aid, & Eckert—Take Care Clinic.
    –   Take CareHave 1,300 clinics opened by end of 2007.
    –   CEO is former President of AMEX Travel.
    –   Touch screen will assist NP in diagnosis.
    –   Automatically create an EMR.
•   Wal-Mart—InterFit Health.




                                                              50
Healthcare Mini-Clinic (Cont’d)


•   Quick Clinic comes to Akron!
    – Three in area
    – Discussions with pharmacies and grocery stores




                                                       51
Imitation is the sincerest form of flattery!




                                               52
Retail Clinics: Survey says…


 •   59% would use a retail clinic.
     Source: Public Opinion Strategies; October, 2005.




 •   7% of adults have used retail clinics.
 •   Convenience—92% satisfied.
 •   Quality of care—89% satisfied.
 •   Staff qualifications—88% satisfied.
 •   Cost—80% satisfied.
      Source: Wall Street Journal; Harris Interactive; 2006.




                                                               53
Price Elasticity is “Real”
Price
                                   Salt                      Elasticities differ by setting…
                                   PE = 0.1
                                   InelasticLittle            0.17 to 0.22              0.19 to 0.32
                                   impact on use
                                                                 Inpatient               Outpatient



        Foreign Travel                   Healthcare          Effect of $5 Co-Pay on Physician
        PE = 4.0                         PE = 0.17 to 0.22   Office Utilization (1990)
        ElasticGreatest
        impact on use                                         Physical Exams              Reduced 14%

                                            Demand            Primary Care Visits         Reduced 10%

  …every 1% increase in price (to patient)
                                                              Specialty Care Visits       Reduced 3%
  results in 17%-22% decrease in services
  used.
                                                              Source: Rand Results; NEJM (1995).
   Source: Rand Insurance Experiment.



                                                                                                        54
Mini-Clinic Economics


• Revenue per visit          $50 to $60
• Breakeven visits per day   15 to 20

•   Annual visits            10,950
•   Annual revenues          $273,750

•   Mature visits per day    30
•   Mature annual revenues   $547,500



                                          55
Points to Ponder


•   Competitive opportunity.
    – First-to-market provides leverage.
•   Physician acceptance and support.
    – Competition, “coopetition,” or collaboration.
•   Information systems infrastructure.
    – EMR? Common registration platforms?
•   Geographic opportunities.
    – Offensive vs. defensive.




                                                      56
Benefit is downstream…
                      • Annual volumes—10,950.
                      • Referral rate—10%.




         • Annual referrals—1,095.
         • Downstream vs. initial transaction.
         • You do the math…

                                                 57
Weighing the Pro’s & Con’s


Pro’s:                       Con’s:
• Convenient.                • Undermine continuity of care.
• Walk-ins welcome.          • Limited to minor illnesses.
• 15-minute ALOS.            • No on-site physician.
• Price list posted.         • Patient self-diagnosis.
• Prescriptions filled.      • Using clinic as “PCP.”
• EMR allows access.         • Forced to use pharmacy.
• Records faxed to PCP.      • False readings on tests.
• Referrals to providers.    • Money over quality.
• Access to those in-need.

                                                          58
Prediction: Win—Win—Win


• Sustainable trend of retailers.
• “Create” new non-physician business.
• Screenings will add to patient volumes.
• Co-branding opportunities with retailers.
• Greatest opportunities with “local” retailers.
• Concept “screams” for local provider linkage.




                                                   59
DNA of Consumer-Driven Healthcare

    Consumer-Driven
    Healthcare Drivers
                           Consumer-Directed
                           Health Plans
  Price and Quality
  Transparency
                         Expanding the
                         Retail Philosophy
 Case Study—Mini
 Clinic Explosion

                          Doctors in the Fray


  Final Success Steps
                            Questions & Comments


                                                   60
Dr. Welby would be shocked!

                  Consumer-Driven Healthcare
                  Impacts Physician Practices:
                  •   Collect fees at the time of service.
                  •   Or…get paid now or you won’t get paid
                      later.
                  •   Learn art of collections.
                  •   Savvy with “swipe” technology.
                  •   On-line bill paying.
                  •   Know and share the price.
                  •   Consumers will vote with their feet.
                  •   Embrace marketing.
                  •   Practices must link to patients through
                      websites and demonstrate value.



                                                                61
                               Success Steps


•   Keep nurse practitioners happy.
•   Be innovative.
•   Talk with your patients.
•   Get onto their referral list.
•   Become the supervising physician.
•   Buy your own clinic.



                                           62
DNA of Consumer-Driven Healthcare

    Consumer-Driven
    Healthcare Drivers
                           Consumer-Directed
                           Health Plans
  Price and Quality
  Transparency
                         Expanding the
                         Retail Philosophy
 Case Study—Mini
 Clinic Explosion

                          Doctors in the Fray


  Final Success Steps
                            Questions & Comments


                                                   63
Consumer-Driven Pressures to Continue




 •Aging Society.
 •Advances in Technology.
 •Employers Costs.
 •Pressures from Private Sector.
 •Reimbursement Declines.
 •Slow-Growing Economy.




                                        64
Capturing the Opportunity


 •   Internal:         •   External:


       Focus on…             Focus on…

     – People               – Pricing

     – Systems              – Promotion

     – Execution            – Access



                                          65
Success Steps

                     Define your
                      value to
                     consumers


     Invest in new                 Embrace price
     care delivery                  and quality
        models                     transparency


                     Re-engineer
                        your
                       patient
                     experience    Source: Consumer-Driven Healthcare Briefing; Sg2, 2003.




                                                                                             66
Success Steps (Cont’d)


                  Define your                   •   Low-cost.
                   value to
                  consumers
                                                •   High value.
                                                •   Convenient.
  Invest in new                                 •   Cutting-edge
                                Embrace price
  care delivery                   and quality       technology.
     models                      transparency   •   Education and
                                                    research.
                  Re-engineer                   •   Recognized disease
                     your
                    patient                         centers.
                  experience                    •   Make your value
                                                    proposition reality and
                                                    not your dreams.



                                                                              67
Success Steps (Cont’d)


                  Define your                   •   True transparency.
                   value to
                  consumers
                                                •   Quality data.
                                                •   Price data.
  Invest in new                                 •   Drive the data before
                                Embrace price
  care delivery                  and quality        others drive it for you.
     models                     transparency    •   Know what’s already
                                                    there.
                  Re-engineer                   •   Align price with value.
                     your
                    patient                     •   Explore package
                  experience                        pricing.
                                                •   Know and tell your
                                                    story.



                                                                               68
Success Steps (Cont’d)


                  Define your                   •   Convenience.
                   value to                          –   Near home.
                  consumers
                                                     –   Way-finding.
                                                •   Waiting time.
  Invest in new                 Embrace price        –   Will I wait?
  care delivery                   and quality
     models                                          –   Turnaround.
                                 transparency
                                                •   Service landscape.
                  Re-engineer                        –   EMR?
                     your                            –   Services integrated.
                    patient                          –   Service culture.
                  experience
                                                •   Personal touch.
                                                     –   Patient satisfaction.
                                                     –   Service culture.




                                                                                 69
Success Steps (Cont’d)


                  Define your                   •   Disease-focused
                   value to                         services.
                  consumers
                                                •   Realize that outpatient
                                                    care IS the future.
  Invest in new                 Embrace price
  care delivery                   and quality
                                                •   Become operational
     models                      transparency       leader.
                                                •   Focus on service
                  Re-engineer                       leadership.
                     your                       •   Bigger isn’t better.
                    patient
                  experience                    •   Improve accessibility to
                                                    services region-wide.




                                                                               70
Summary — Success Steps

•   Thinking: Consumer vs. land-locked commodity.
•   Reconfigure ambulatory pricing.
•   Compete on price basis (narrow gross-net gap).
•   Position for HSA’s—package pricing.
•   Extend “mentality” of consumer-driven healthcare to delivering
    exemplary service.
•   Focus on the 4 P’s of marketing.
•   Reach out to patients.
•   Embrace the reality—healthcare will no longer be “local.”
•   Expand organizations to serve as business incubator.



                                                                     71
Contact Information


  Michael A. Petrochuk, MHA, DBA, FACHE

  Director of Planning, Strategy, & Market Research
  Akron General Health System
  400 Wabash Avenue
  Akron, OH 44307
  PH: (330) 344-6984
  EM: mpetrochuk@agmc.org


                                                      72

				
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