UCSB Economic Forecast Project Outlook Seminar for SLO County by kimbrozic

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									UCSB Economic Forecast Project
Outlook Seminar for SLO County
CEO Perspective:
The State of Healthcare

PRESENTED       B Y:


Lloyd Dean                November 18, 2005
President/CEO
Today’s Agenda



• Healthcare Issues for SLO County and Beyond
• Behind the Crisis – Rising Costs
• What is Being Done Today
• The Way Forward – Cooperation




                                                2
Catholic Healthcare West: Who We Are

•   A mission driven, not-for-profit healthcare system
     – One of the largest in the western U.S.
     – 40,000 employees; more than 7,500 physicians
     – More than 4 million patient visits annually
•   Values and faith based
     – Dignity, Collaboration, Justice, Stewardship, Excellence
     – Provider to uninsured and underserved
•   First hospital founded in 1856
     – Today, hospitals rank among finest in nation
•   Faith with science, compassion with sound business practices
     – Completed historic turnaround over three years
     – Recent upgrades to A level by S&P, Moody’s, and Fitch
     – FY 2005 revenue: $6 Billion



                                                                   3
        Catholic Healthcare West: Where We Are

                            Serving California’s Central Coast

• French Hospital Medical Center,
  San Luis Obispo

• Arroyo Grande Community
  Hospital

• Marian Medical Center,
  Santa Maria




                                                                 4
San Luis Obispo County’s Healthcare Challenges


• A Need for Greater Access
   –   Shortage of primary care physicians
   –   Growing migrant worker population
   –   Growing number of elders
   –   Significant uninsured population


• A Need for Outreach
   – Multilingual services
   – Prevention services




                                                 5
A National Challenge – Greater Access


                                                                 46 million
                                                                 uninsured
                                                                  people
      Number of people in America
         without insurance *




        38 million
        uninsured
         people




          1999       2000    2001         2002         2003         2004
                            * Source: U.S. Census Bureau, “Health Insurance Data”


                                                                                    6
A National Challenge – Disparities in Healthcare



• Each year, the U.S. loses $130 billion due to poor
  health and early deaths of the uninsured.*
• Minorities in the U.S. are less likely than whites to
  receive needed services. **


                                * Source: The Advisory Board Company (2004)
                                ** Based on IOM review of 100 healthcare studies,
                                   holding constant insurance status and income




                                                                                    7
Catholic Healthcare West’s Principles of Reform


• The current healthcare system cannot be
  sustained
• Any reform proposal should embrace:
  – Universal Access
  – Stable Financing
  – Improved Quality
  – Improved Accountability




                                                  8
     Healthcare: America’s Competitive Disadvantage



                                      Cost per Capita:
                                                            Developed
                              U.S.                          World (Avg.)
                             $5,267                           $2,193

U.S. Spending Per Capita                                                              Highest



U.S. Infant Mortality Rate                                                            Highest



U.S. System Responsiveness       Lowest



U.S. Patient Satisfaction        Lowest



U.S. Life Expectancy             Lowest




                                           Source: World Health Organization, 2000               9

                                                   “The Moral Hazard Myth” New Yorker, 8/29/05
    The Cost Drivers in Healthcare




                            Healthcare
                              Costs
   Shifting Socio-                                           Technological
   Demographics                                                Advances
         Age                                                     Pharma
       Ethnicity                                                    I.T.
       Poverty                                                 New Models
                                                                 of Care



Labor Costs/ Workforce                                        Consumer
      Shortages                                              Expectations

                           Governmental Actions
                         (Regulations + Unfunded Mandates)
                                                                             10
Current State of Health Insurance Coverage


• Spending on healthcare represents more than
  15% of the U.S. economy (and growing).
• Premiums in California grew by 15.8% in 2003,
  11.4% in 2004; four consecutive years of double-
  digit premium increases.
• General Motors healthcare costs add $1,400 per
  car cost.




                                                     11
Employer Responses to Rising Costs


• Elimination of coverage
• Increased employee contributions
• High deductible/limited benefit plan offerings
• Increased use of “contingent” workforce without
  benefits
• Added hurdles to coverage (e.g., longer waiting
  times for eligibility)




                                                    12
Falling Coverage Rates




                         13
“Hidden Tax” Imposed by Public Sector Underfunding


                        July 2003 to July 2004
              Financial Results for Blue Shield Hospitals
                             ($ in Billions)
   Payor                        Revenue                  Cost                 Margin

   Medicare                      $13.1                  $15.3                  -$2.2

   MediCal/Indigent                $6.4                  $8.0                  -$1.6

   Comm/Other Payor              $20.2                  $15.2                      $5.0

   Total                         $39.7                  $38.5                      $1.2


   Source: Blue Shield of California and Office of Statewide Health Planning and
           Development (OSHPD)




                                                                                          14
Emerging Themes in Health Coverage


• Consumer engagement
   – e.g., consumer directed health plans

• Provider accountability
   – Pay-for-performance

• Quality and cost transparency
• Elimination of high-cost providers
   – e.g., CalPERS action in No. California

• Specialized networks for certain services
   – e.g., cardiology, bariatric surgery, orthopedic surgery



                                                               15
Government’s Response to Rising Costs


• For the uninsured
   – HSAs & Health Tax Credits

• Medical Tort Reform
• Medicare Reform and Prescription Drugs
• Medicaid Reform




                                           16
Potential Limitations of Consumer Directed Health Plans

• Lack of compliance impacting health status
    – Chronically ill more likely to defer care due to cost
    – Growing concern over worker productivity
• CDHPs may attract healthier population, undermining risk
  distribution and potentially destabilizing small group market
• Little benefit for lower income and chronically ill populations
    – Higher out-of-pocket expenses adversely impact lower income
      population
• Raises hospital bad debt and overhead cost
• Likely one-time savings opportunity: can’t predict year-over-year
  improvement
• Complexity of administration




                                                                      17
Impact of Cost-Shifting to Individuals


• A study by the California Healthcare Foundation
  reveals:
   – Healthcare is increasingly unaffordable, even for the
     insured
   – A chronically ill individual earning $29,458 with a
     limited PPO plan could face costs of nearly 40% of his
     or her income




                                                              18
We Must All Be Part of the Solution


• A dilapidated healthcare infrastructure is
  everyone’s issue
• We can begin to solve it through collaboration,
  public/private partnerships
    – Shared risk among providers, patients, employers and
      insurers
    – Shared responsibility for implementing effective, safe
      and efficient healthcare
    – Shared rewards of a system that works for everyone




                                                               19
Final Thoughts – A Question For All of Us



What sort of future healthcare system
do we want ...
• For society?
• For colleagues, employees, friends?
• For our families?
• For ourselves?




                                            20

								
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