healthcare overview
Post on 15-Jan-2016
56 Views
Preview:
DESCRIPTION
TRANSCRIPT
Healthcare OverviewHealthcare Overview
Association ofAssociation of
Healthcare Internal AuditorsHealthcare Internal Auditors
John P. McGuireJohn P. McGuire
May 7, 2008May 7, 2008
TOPICSTOPICS
Healthcare Economics Payment Systems Profitability Assessment Business Strategies Performance Measures Future Opportunities
Chart 1.4: National Health Expenditures as a Percentage of Gross Domestic Product, 1980 – 2005(1)
Source: Centers for Medicare & Medicaid Services, Office of the Actuary. Data released January 8, 2007.(1) CMS completed a benchmark revision in 2006, introducing changes in methods, definitions and source data that
are applied to the entire time series (back to 1960). For more information on this revision, see http://www.cms.hhs.gov/NationalHealthExpendData/downloads/benchmark.pdf.
9.1% 9.4% 10
.2%
10.3
%
10.2
%
10.4
%
10.6
%
10.8
%
11.2
%
11.6
%
12.3
%
13.0
%
13.4
%
13.7
%
13.6
%
13.7
%
13.7
%
13.6
%
13.6
%
13.7
%
13.8
%
14.5
%
15.3
%
15.8
%
15.9
%
16.0
%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05
Per
cent
age
of G
DP
=37.4%
Chart 1.5: National Expenditures for Health Services and Supplies(1) by Category, 1980 and 2005(2)
Hospital Care, 32.9%Hospital Care, 43.2%
Physician Services, 22.6%
Physician Services, 20.1%Other Professional(4), 7.7%
Other Professional(4), 7.2% Home Health Care, 2.5%Home Health Care, 1.0% Prescription Drugs, 10.8%Prescription Drugs, 5.1%
Other Medical Durables and Non-durables, 3.1%Other Medical Durables and Non-durables, 5.8%
Nursing Home Care, 6.5%Nursing Home Care, 8.1%
Other(3), 13.8%Other(3), 9.4%
1980 2005
Source: Centers for Medicare & Medicaid Services, Office of the Actuary. Data released January 8, 2007.(1) Excludes medical research and medical facilities construction.(2) CMS completed a benchmark revision in 2006, introducing changes in methods, definitions and source data that are applied to the entire time
series (back to 1960). For more information on this revision, see http://www.cms.hhs.gov/NationalHealthExpendData/downloads/benchmark.pdf.
(3) “Other” includes net cost of insurance and administration, government public health activities, and other personal health care.(4) “Other professional” includes dental and other non-physician professional services.
$234.0B $1,860.9B
Four Myths Four Myths of Health Care Costsof Health Care Costs
1. Healthcare costs are driven by greed.
2. Healthcare costs are driven by waste.
3. We can’t keep spending more on our health.
4. Other countries get the same for less.
Source: Ira Ellman - Arizona State University
Another viewpoint on theAnother viewpoint on thecause of health care costscause of health care costs
The increase in morbidity rates is due to good medicine. The expanding concept of health. The seduction of technology and the deception of marketplace
models. The American Character and appetite.
Source: Willard Gaylin, M.D.
Chart 4.2: Aggregate Total Hospital Margins, (1) Operating Margins, (2) and Patient Margins,(3) 1991 – 2005
Total Margin
Operating Margin
Patient Margin
-6%
-4%
-2%
0%
2%
4%
6%
8%
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05
Source: Avalere Health analysis of American Hospital Association Annual Survey data, 2005, for community hospitals. (1) Total Hospital Margin is calculated as the difference between total net revenue and total expenses divided by total
net revenue.(2) Operating Margin is calculated as the difference between operating revenue and total expenses divided by
operating revenue.(3) Patient Margin is calculated as the difference between net patient revenue and total expenses divided by net
patient revenue.
Chart 4.6: Aggregate Hospital Payment-to-Cost Ratios for Private Payers, Medicare, and Medicaid, 1981 – 2005
Source: Avalere Health analysis of American Hospital Association Annual Survey data, 2005, for community hospitals. (1) Includes Medicaid Disproportionate Share payments.
Medicare
Medicaid(1)
Private Payer
70%
80%
90%
100%
110%
120%
130%
140%
81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05
Medicaid Payment Remains Under Pressure
Medicaid Affects Every Hospital
Reduced benefits/service level caps
Provider payment cuts
Spillover to neighboring hospitals “If something cannot go on forever, it will stop.”
Herb Stein, economist
Missouri:
90,000 cut
Tennessee:
300,000 cut
Employment Drives the Prevalence and Richness of Health Coverage
3%
4%
5%
6%
7%
8%
1987 1990 1993 1996 1999 2002
58%
60%
62%
64%
66%
68%
70%
Cause and Effect: US Unemployment Rate vs. the Percentage of the Non-Elderly Population with Employment-Based Coverage
Employment-Based
Coverage
Unemployment Rate
Secondary Impact: Less competitive labor markets enable firms to shift more health care costs to employees—in the form of premium-sharing, deductibles, copays and coinsurance.
Source: Bureau of Labor Statistics
Unemployment Rate
Non-Elderly With Employment-Based
Coverage
The Long-Term Trend of Consumers Paying Less Is Reversing
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1930 1940 1950 1960 1970 1980 1990 2000 2010
Consumer Out-of-Pocket Share of Personal Health Care SpendingUS Market, 1930-2010
Medicare and Medicaid
CDHC reverses decline in consumer share of costs
Sources: Milliman & Robertson, Bureau of Labor Statistics, Sg2 forecast
Adoption of Consumer-Driven Plans Continues to Accelerate
500,0001,000,000
3,000,000
6,000,000
trace120,000
Enrollment in Consumer-Driven Health Plans
2001–2006
Sources: Inside Consumer-Directed Health Care; Wall Street Journal; Sg2 Analysis, 2005.
GM auto worker
I fully expect to pay some share of my health care somewhere down the road. Would I like it? No. Would I understand it? Yes.
The Access Projecthttp://www.accessproject.org/downloads/Hospital_Finance.pdf
Contrary to Popular Belief, Health Care Is Not Recession-Proof
“We feel we are aiding society in this regard, while availing ourselves of the financial opportunities afforded by the one industry, health care, that has historically been recession-proof.”
—CEO’s Annual Report Letter
The government will always be there.
People will always get sick.
People don’t pay for health care.
Health care always grows.
Yes, But
They can, and do, defer care.
Employers do, and increasingly their employees do as well.
Remember the 1990s?
Not always, and Medicare and Medicaid usually pay less.
Consolidation and Retrenchment
The Health Care Industry Moves in Cycles . . . Like Everything Else
Sources: U.S. Department of Health and Human Services
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Phase IBack to the Future
Phase IIThe Party Doesn't Last
Phase IIIGrowth Returns
Projected Average
Growth in Total Health Care Expenditures
Yearly Growth Rate
The Next 10 Years: A Mostly Flat Inpatient Market
US Market % Growth
Discharges 10%
Patient Days 3%
ALOS –7%
Med/Surg Inpatient Discharges*US Market, 2005–2015
*Excludes neonate, normal newborns, obstetrics and psychiatry.
25,000,000
30,000,000
35,000,000
2005 2007 2009 2011 2013 2015
Sg2 Forecast
10%
Population-Based Forecast 16%
Sources: Impact of Change v4.0; NHDS; Sg2 Analysis, 2005.
Key Strategic Challenge: Finding Profitable Growth in a Flat Market
?
Technology Leadership
Service Portfolio Expansion
Service/Quality Breakthroughs
Efficiency Breakthroughs
Geographic Expansion
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
-20% -15% -10% -5% 0% 5% 10% 15% 20% 25%
Oncology
Cardiology–Medical
NeurosurgeryGeneral Medicine
Neurology Gastro-enterology
Cardiology–Interventional
Cardiac SurgeryOrthopedics
Vascular Services
Pulmonary
General Surgery
*Bubble size represents DRG volumes in 2005. †Excludes neonates, normal newborns, obstetrics and psychiatry.
% Change in Discharge Volumes
Service Line Landscape*†
Relationship Between Percent Change in Days and Discharges US Market, 2005–2015
% Change in Days
IP Growth Areas Include Interventional Cardiology, GI and General Surgery
Source: Impact of Change v4.0; NHDS; Sg2 Analysis, 2005.
Ambulatory Services Are the Growth Market in Health Care
9.8%
13.9%
27.5%
19.2%
Cancer Orthopedics
Factors Driving Growth inOutpatient Services
Technology
Patient preference
Physician preference Higher case volume
Control over care process
Revenue opportunity
Proliferation of outpatient care
options/players
Cost reduction imperative
Inpatient and Outpatient Volume Growth for Cancer and Orthopedic Service LinesUS Market, 2004–2014
Inpatient
Outpatient
Chart 4.3: Distribution of Outpatient vs. Inpatient Revenues, 1981 – 2005
Gross Outpatient Revenue
Gross Inpatient Revenue
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05
Per
cent
age
of R
even
ue
Source: Avalere Health analysis of American Hospital Association Annual Survey data, 2005, for community hospitals.
Who Is Making Money in Health Care?
0%
5%
10%
15%
20%
2002 2003 2004
Hospitals
Health Plans
Pharmaceutical & Biotechnology
Medical Device
Profitability Across Health Industry Subsectors, 2002-2004
Notes: Profitability measured as operating income of a select group of publicly-traded companies in each sector. Decline for hospitals in 2004 is almost entirely driven by the negative performance of Tenet.
A Big Construction Pipeline Is Still Working Its Way Through the System
0
10,000
20,000
30,000
40,000
50,000
60,000
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Completed
Broke Ground
Designed1998: Turning point for new projects initiated
2004: Turning point for new projects completed
Acute Care Bed Construction at Different StagesU.S. Market, 1993 - 2004
There Is More Good Technology than Any Institution Can Buy
BrainLab = $8 million
DaVinci robot = $1.5 million
64-Slice CT = $1.5 – 2 million
ICDs = $30,000 each
““There is no more delicate matter to take in hand, There is no more delicate matter to take in hand, nor more dangerous to conduct, nor more dangerous to conduct, nor more doubtful of success, nor more doubtful of success, than to step up as a leader in than to step up as a leader in the introduction of changes. the introduction of changes.
For he who innovates For he who innovates will have for his enemies will have for his enemies all those who are well off all those who are well off
under the existing order of things, under the existing order of things, and only lukewarm supporters and only lukewarm supporters
in those who might be in those who might be better off under the new.”better off under the new.”
~ ~ Niccolo MachiavelliNiccolo Machiavelli
Measuring Performance in Health Care Is Ambitious, Complex and Divisive
Measures of Performance for Carotid Stent Procedure
Outcomes Successful Deployment of Stent Residual Stenosis Follow-up (Long-Term) Stenosis Procedure Mortality Procedure Stroke Procedure MI Vascular Complications Bleeding at Axis Duration of Recovery Successful Deployment of Stent Protection Device Residual Diameter Stenosis: # with 50% Increase (6 months later) Mortality and Morbidity % of Ipsilateral Strokes TIAs <24 Hours Activities of Daily Living
Satisfaction Patient satisfaction
Return to Work Duration of
Convalescence Quality of Life – Living at
Home Convenience Patient Perception of
Outcome Physician Satisfaction
Scheduling Equipment / Staffing Efficiency
Process Candidate Screening/Selection
Proper AMI Stroke High-risk for Surgery U/S, CT and/or MRI Informed Patient Consent Procedure Time-out
Correct Patient Correct Side
Post-Procedure Care: Dosage of Aspirin and Plavix Neuro Exam Follow-up
Efficiency Length of Stay (LOS) Procedure Time Expendable Supplies Post-Procedure Time Post-Discharge Care (<30-
Day Repeat IP) Episodic Cost
Hospital Patient Payer
Longitudinal Cost
Infrastructure / Credentialing Interventional Lab: Road-mapping (fluoroscopy/digital flat-
panel/high resolution/real-time) Staffing
Nurses trained in dealing with slow heart rate, low BP, stroke, bleeding, etc.
X-ray tech Physicians
Cognitive: Patient Selection; Credentialing Experience: Minimum # of Volumes Complications Management
Performance Improvement Program Tracking M & M Conferences Corrective Actions Improvement
Patients See Performance Differently
39%
35%
34%
32%
7%
Doctor communicationskills
Responsiveness ofhospital staff
Comfortable and cleanroom
Nurse/hospital staffcommunication
Pain management
What Medicare Hospital Patients Care About Most
Source: Centers for Medicare and Medicaid Services, Wall Street Journal
Affordability= Quality
Affordability is the most often cited (14%) measure of how Americans judge
health care quality
Top Ten Issues for the Top Ten Issues for the Healthcare IndustryHealthcare Industry
1. Medicare and the Medicare Drug Plan
2. Care and Coverage of the Uninsured
3. Rise of the Health Care Consumer
4. Focus on Prevention
5. Patient Safety Issues Driving IT Investments
6. Diminishing Drug Pipeline
7. Pay for Performance
8. Report Card Fever
9. Technology Backbone
10. Labor Shortages
Source: PricewaterhouseCoopers
Recommendations of the Committee Recommendations of the Committee on the Costs of Medical Careon the Costs of Medical Care
1. Both preventive and therapeutic services. Organized groups of health professionals. Hospital based but with home and office care. Preserve physician and patient relationship.
2. Extension of all basic public health services to entire
population based upon need. Can be provided by government or non-government
agencies.
Recommendations of the Committee Recommendations of the Committee on the Costs of Medical Careon the Costs of Medical Care
3. Costs of medical care be group based through insurance
and/or taxes. Individuals can continue fee basis as addition.
4. Medical services are important functions for every state and
local community. Coordination of rural and urban services requires special
attention.
Recommendations of the Committee Recommendations of the Committee on the Costs of Medical Careon the Costs of Medical Care
5. Professional Education Physicians - greater emphasis on health and prevention of disease.
Greater attention to the social aspects of medicine. Dentists - broader education. Pharmacists - more stress on opportunities for public service. Training for nurse midwives and nursing aides and attendants be
provided. Systematic training for hospital and clinic administrators. Nurses - remolded to provide well-educated and well-qualified
registered nurses.
Source: Report of Committee on the Costs of Medical Care - 1933
Recommendations of the Committee Recommendations of the Committee on the Costs of Medical Careon the Costs of Medical Care
““Never make predictions, Never make predictions, especially about the future”especially about the future”
Yogi Berra
Reference MaterialReference Material
A Community Leader’s Guide to Hospital Finance The Access Project http://www.accessproject.org/downloads/Hospital_Finance.pdf
TrendWatch Chartbook American Hospital Association http://www.aha.org/aha/research-and-trends/chartbook
Health Care Costs – A Primer Kaiser Family Foundation http://www.kff.org/insurance/upload/7670.pdf
top related