INSPIRED CARING: A Culture of Innovating For Health and

ValueA COMMUNITY HEALTH SYSTEM’S 10 YEAR

JOURNEYMark Herzog, FACHE

President & CEO

Laura Fielding,Administrative Director

Organizational Development

HFM’s Silos…2001HFM…Today

EVOLUTION OF OUR ORGANIZATION

• Strategy & Structure

• Business Plans & Facilities

2001

• Systems & Processes

• Quality/ Outcomes/ Safety

• Innovation Incubation

• Performance Improvement/VIP

2004

• Culture & Achievement

• Open Innovation, Flexibility

• Adaptation

2008

• Reform Readiness• Organizational

Repositioning• Proactive

Transformation

TODAY

First-Curve to Second-Curve MarketsHOW WILL HOSPITALS SUCCESSFULLY NAVIGATE THE SHIFT FROM FIRST-CURVE TO SECOND-CURVE ECONOMICS?

4

• Fee-for-Service Reimbursement• High Quality Not Rewarded• No Shared Financial Risk• Acute Inpatient hospital focus• IT Investment Incentives Not

Seen by Hospital• Stand-Alone Care Systems Can

Thrive• Regulatory Actions Impede

Hospital-Physician Collaboration

VOLUME Based• Payment Rewards Population

Value: Quality & Efficiency• Quality Impacts Reimbursement• Partnerships with Shared Risk• Increased Patient Severity• IT Utilization Essential for

Population Health Management• Scale Increases in Importance• Realigned Incentives,

Encouraged Coordination

VALUE Based

THE GAP

AHA “Hospitals & Care Systems of the Future” Fall 2011

Core Beliefs DRIVING HFM’S CARE SYSTEM DESIGN

RIGHT CARE - The most effective evidence based approach possible.

RIGHT SETTING - The most cost effective, safest, highest quality and greatest value.

RIGHT OUTCOME - Achieve the greatest long term benefit to the patient and society while minimizing physical and financial risk .

“Moving care to the right” is what makes HFM’s process, outcomes and value unique.

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THE PRICE IS RIGHT QUIZ!

An outpatient procedure?

6

How much might you pay, on average, for each of the following (match the service with the estimated price):

A doctors office visit?

A hospital stay?

$20,000

$2,000

$200

Which of these is a cornerstone of Population Health?

Doctor’s Office Visit

5K

3K

4K

2011

2009

2007200520032001

INPATIENTVOLUME

OUTPATIENT VOLUME

Total Charges (less price increases)

18% Decrease Since 2001 8% Increase

Since 2001

43% Decrease Since 2001

$35M

$45M

$55M

$65M

HFM Inpatient & Outpatient Volume TrendsRELATED TO CHARGES

10/11/12

25% Reduction in Inpatient & Outpatient Market Volume

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0%

60%

20%

40%

201120092007200520032001

HFM

Aurora TR

Inpatient Market Share FOR THE TOTAL SERVICE AREA (HFM Transformation had minimal market impact)

2.9% Market Share Increase Since 2002

0.1% Market Share Decrease Since 2002

4.8% Market Share Decrease Since 2002

22% REDUCTION IN INPATIENT MARKET VOLUME SINCE 2002

Aurora BayCare

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Nationally recognized for Safety, Innovation & Thought Leadership

Focus on Wellness

& Prevention

90 Employed Providers

2001

90 bed hospital

35 Employed Physicians

Focus on the Sick

Population

HOSPITAL PHYSICIANS & NP/PA

MISSION FOCUS

RECOGNITION

10 Senior Leaders

SENIOR LEADERS

Locally Recognized

35 bed hospital

5 Senior Leaders

2012 HFM Care System Design

9

2001 2006 2012

5749

44

106 5

Leadership Senior Leaders

Leading in new ways

▪ Conscious effort to flatten the organization

• Overall Reduced: -Network leadership by 27%-Senior leadership by 50%• Annual savings of $3.1 million from reduction• Role of outside eyes

5K

3K

4K

201120092007200520032001

INPATIENTVOLUME

OUTPATIENT VOLUME

Gain From Operations (%)

8% Increase Since 2001

43% Decrease Since 2001

-2.0%

0.0%

2.0%

4.0%

HFM’s Margin While Transforming to a Second Curve Delivery Model

Source: WHA11

6.0%

Days Cash on Hand

12

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

$60

$80

$100

$120

$140

$160

$180

$200

$220HFM

Aurora

While Competitors Talk This Game, only HFM Walks the Talk Locally!

“Cost-Per-Episode vs. Unit PriceToo many health care purchasers focus on unit price, seeking to save money with the lowest cost provider for X-rays, office visits or surgical procedures. These initial “savings” are deceiving because they don’t take into account the most significant piece of the health care cost equation – how health care services are utilized. Low unit-price providers can actually increase employer costs if they order unnecessary tests or provide inefficient care that delays healing or causes a relapse.” 13

As stated on a competitor’s website.

2K

5K

3K

4K

2011

2009

2007200520032001

INPATIENTVolume

OUTPATIENTVolume

Total Charges (less price increases)

70% Increase Since 2001

87% Increase Since 2001

1% Decrease Since 2001

Inpatient vs. Outpatient Volume Trends AURORA –TR & BAYCARE FOR TOTAL SERVICE AREA

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6K

$30M

$40M

$50M

$60M

$70M

10/11/12

201120092007200520032001

Local Service Area

Brown County

Regional Hospital Market Comparison HFM’s leadership has kept the lid on the cost of high utilization

30% Market Volume Increase Since 2001

39% Market Volume Increase Since 2001

8% Market Volume Increase Since 2001

Outagamie County

15

80K

60K

40K

20K

2011

2009

2007200520032001

Outagamie

Total Service Area

110% Increase Since 2001

148% Increase Since 2001

$100M

$300M

$500M

$700M

Total Hospital Gross Charges 2001-2011For the Total Service Area, Brown, and Outagamie Counties

217% Increase Since 2001

12/19/12 Source - WHA

$900M

Brown

2011

2009

2007200520032001

Holy Family Memorial

89% Increase Since 2001

Total Hospital Gross Charges 2001-2011For HFM and Aurora TR + BayCare in the Total Service Area

173% Increase Since 2001

12/19/12 Source - WHA

$30M

$50M

$70M

$90M

$110M

Aurora TR & BayCare

Excludes Open Heart

If HFM Were the Only Choice UNCOVERING COST SAVINGS FOR MANITOWOC COMMUNITY

Amount our Community Spent

on Hospital CareIf Manitowoc

used HFM ONLY

$283 Million

- $255 Million

$28 MILLION!Reduced Cost for our Community

Assuming all hospital services were provided to Total Service Area residents by HFM from 2001 - 2011

That’s the power of “moving care to the right”!!

50%

75%

100%

25%

0%

HFM’s CMS Value Based Purchasing

▪ Total Performance Score: 57

▪ Estimated Net Revenue Change: 0.1%

▪ Percentile Rank: 61

Source: The Advisory Board Company

50%

75%

100%

25%

0%

HFM’s CMS Readmission Performance

▪ Estimated Penalty Percentage: 0%

▪ Estimated Net Revenue Change: $0

Source: The Advisory Board Company

Hospitals subject to 1% Penalty Cap

Hospitals subject to Penalty between 0% and 1%

Hospitals Not Subject to Any Penalty

UW Population Health Model

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Policies & Programs

Health Factors

Health Outcomes

Health Behaviors (30%)

Clinical Care (20%)

Social & Economic Factors

(40%)Physical

Environment (10%)

RANKINGS BASED ON THE FOLLOWING:

FOUR TYPES OF HEALTH FACTORS MEASURED:

1. Access to Care2. Quality of Care

Source: Robert Wood Johnson Foundation and the University of Wisconsin Population Health Institute County Health Rankings model 2012

Manitowoc County Clinical Care RankPOPULATION HEALTH

Manitowoc’s Clinical Care Rank out of 72 WI Counties:

▪ 2010: 31

▪ 2011: 23

▪ 2012: 18

22Source: Robert Wood Johnson Foundation and the University of Wisconsin Population Health Institute

Health Behaviors (30%)

Clinical Care (20%)

Social & Economic Factors (40%)

Physical Environment (10%)

42% Improveme

nt Since 2009!

At 21st & Franklin Street, Sept. 2012

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Where bars trump grocery stores

24Source: flowingdata.com

More Bars

More Grocery Stores

Measuring “Quality” in Healthcare

Key Thoughts:1. Purchasers, providers or patients who make a major

decision on solely one data source are not making a fully informed decision.

2. Two types of quality measurement firms:I. Independent & objective, or II. Aligned with purchasers as a negotiating tool

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One thing is clear: Today there is no universal defining methodology or vendor

that purchasers, providers and patients agree on! Data quality & reporting vary greatly. Oversimplifying is risky.

HIGH DEDUCTIBLE = CONSUMER DRIVEN

• Employers offer High Deductible Health Plans:

• Nationally 17% of employers offer HDHP; Deductibles range $3000 - $4000 (Futurescan 2012)

• Locally 60+% of large local employers & nearly all small employers offer HDHP, Deductibles range $5,000 - $10,000

• Insured population beset by the triple whammy of high deductibles, stagnant wages, and fear of job loss

• Result is, they prefer “not to know”

• How will insurance exchanges fill the role of care coach for policy-shopping consumers? Will they value provider continuity?

• Wellness/Prevention benefits dependent on employer HR leaders

High Deductible= Consumer Driven

Employers offer High Deductible Health Plans: • Nationally 17% of employers offer HDHP; Deductible range

$3000 - $4000 (Futurescan 2012)

• Locally 60+% of large local employers & nearly all small employers offer HDHP; Many deductibles now range $5,000 - $10,000

Insured population beset by the triple whammy of high deductibles, stagnant wages and fear of job loss.

• Result; they prefer “not to know”.

How will insurance exchanges fill the role of care coach for policy-shopping consumers? Will they value provider continuity?

Wellness/Prevention benefits dependent on employer HR leaders.

An HDHP Word of Caution

▪ HDHP are generally effective if properly designed and reflect an employee’s ability to fund the deductible, and they are educated about and compliant with wellness & preventive benefits.

▪ Considerable evidence exists that HDHP, combined with a soft economy, frequently mean important care & prevention forgone (mammo)

▪ Sign of the future: HFM’s Community Care program wrote off nearly $450,000 to insured patients, almost all with HDHP. (applied to bills to be written off because of economic hardship)

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HFM Employee Right Care Results

292008 2009 2010 2011 2012

72.273.6

74.5

72.6

74.6

Health Improvement - HRA Scores

Avg Age 46 85% Female

Avg Age 47 84% Female

Avg Age 47 84% Female

Avg Age 48 85% Female

Avg Age 48 85% Female

HFM Employee Right Care Results

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2008 2009 2010 2011 20120%

1%

2%

3%

4%

5%

6%

7%

% of Plan Population Requiring Hospitalization and Premium Im-

pact

No premiumincrease

No premiumincrease

No premiumincrease

No premiumincrease

Average of 1,500 participants

HFM Employee Right Care Results

Inpatient stays in 2002Inpatients stays in 2012 33

- 91

$660k Saving

s

Average Hospital

Stay=$20k

124

Fewer Inpatient Stays

Inpatient stays by individuals covered under HFM’s health plan

Recent Recognition

▪ REGIONAL RECOGNITION▪ 2010 New North Excellence in the Workplace▪ 2009 Manitowoc Chamber Business of the

Year

▪ TOP 2% NATIONALLY▪ Solucient 100 Top Performance Improvement

Leaders▪ Top 25 Most Wired – Small & Rural Hospitals▪ Healthcare Information & Management

Systems – Society Stage 6 ▪ 4x Recipient of HealthGrades Excellence in

Patient Safety

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THANK YOU!QUESTIONS