The document discusses how the US healthcare system is currently pre-industrial and will undergo disruption through industrialization. It argues that healthcare costs are unsustainably high and increasing faster than wages or inflation. As consumers face higher deductibles and premiums, consumerism will drive changes in the system. The document also notes several problems including the instability of Medicare and Medicaid funding, an aging population increasing demand, and significant issues with patient safety. It believes elements of value-based care and payment reform show signs of an emerging industrialized, more efficient healthcare model in the US.

1. Don
McDaniel
The
Coming
Industrializa4on
In
Healthcare:
A
360°
View

2. Hypothesis:
The
US
Healthcare
business
is
Pre-­‐Industrial
and
will
be
disrupted.
Revenue
redistribu4on
will
be
the
catalyst.

3. Pre-­‐Industrial
Symptoms
High
Degree
of
Variability
Lack
of
Transparency
–
lots
of
informa:on
asymmetries
Opportunis:c
Innova:on
Limited
Division
of
Labor
Marginal
Quality
Health
Status
Inequality

4. How
we
got
here
-­‐
IMHO
The
“Great
Society”
created
“Great
Gaming”
Fee-­‐for-­‐Service
has
driven
a
volume
mentality
Third
Party
Insurance
and
a
lack
of
consumer
sovereignty
have
kept
the
watchdog
at
bay
“Fourth-­‐Party”
-­‐
Employers
have
been
complicit
—
“Out
to
Lunch?”
Government’s
growing
role—Provider,
purchaser,
payer,
regulator,
educator,
trainer,
insurer—has
created
a
feeding
frenzy
without
accountability

5. Industrializa4on
The
extensive
reorganiza:on
of
an
economy
–
in
every
sector
Investment
gets
redirected
(therapeu:cs
vs
diagnos:cs)
and
efficiency
drives
growth
–
the
$1T
arbitrage
opportunity
The
supply-­‐side
will
have
less
influence
on
demand

6. Don’t
Confuse
Industrializa4on
with
Protec4onism
It’s
NOT
Consolida:on
to
drive
prices
or
control
access
Ins:tu:ng
cookie
cuYer
medicine
A
mechanism
to
force
physicians
to
the
employment
of
hospitals
An
inhibitor
to
Innova:on

7. Intractable
Problems
Demography
Economics
Technology
Societal

8. 17.2%
17.6%
17.6%
17.7%
17.8%
17.9%
18.1%
18.4%
18.7%
19.0%
19.3%
PROBLEM
#1
-­‐
Health
Expenditures
as
a
Percentage
of
GDP
NHE
as
a
Share
of
GDP:
SOURCE:
Kaiser
Family
Founda7on
calcula7ons
using
NHE
data
from
Centers
for
Medicare
and
Medicaid
Services,
Office
of
the
Actuary,
Na7onal
Health
Sta7s7cs
Group,
at
hFp://www.cms.hhs.gov/Na7onalHealthExpendData/
(see
Projected;
NHE
Historical
and
projec7ons,
1965-­‐2023,
file
nhe65-­‐23.zip).
$2,895
$3,057
$3,207
$3,386
$3,579
$3,797
$4,042
$4,307
$4,578
$4,862
$5,159
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023

9. Is
the
Juice
Worth
the
Squeeze?

10. PROBLEM
#2:
Consumerism
is
Coming!
SOURCE:
Kaiser/HRET
Survey
of
Employer-­‐Sponsored
Health
Benefits,
1999-­‐2014.
Bureau
of
Labor
Sta7s7cs,
Consumer
Price
Index,
U.S.
City
Average
of
Annual
Infla7on
(April
to
April),
1999-­‐2014;
Bureau
of
Labor
Sta7s7cs,
Seasonally
Adjusted
Data
from
the
Current
Employment
Sta7s7cs
Survey,
1999-­‐2014
(April
to
April).
AND
131%
191%
72%
127%
212%
17%
38%
54%
13%
28%
43%
0%
50%
100%
150%
200%
250%
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Health
Insurance
Premiums
Workers'
Contribu4on
to
Premiums
Workers'
Earnings
Overall
Infla4on

11. Rapidly
Increasing
High
Deduc4bles
4%
5%
8%*
8%
13%*
17%*
19%
20%
20%
0%
5%
10%
15%
20%
25%
2006
2007
2008
2009
2010
2011
2012
2013
2014
*
Es7mate
is
sta7s7cally
different
from
es7mate
for
the
previous
year
shown
(p<.05).
SOURCE:
Kaiser/HRET
Survey
of
Employer-­‐Sponsored
Health
Benefits,
2006-­‐2014.
AND

12. We
aren’t
good
healthcare
consumers

13. Problem
#3:
The
En4tlements
are
Under-­‐Water
Source: Avalere Health analysis of American Hospital Association Annual Survey data, 2013, for community hospitals.
(1) Includes Medicare Disproportionate Share payments.
(2) Includes Medicaid Disproportionate Share payments.

14. Medicaid
Enrollment
and
Expenditures

15. PROBLEM
#4:
The
Demographic
Tsunami
In
1950,
people
65
and
older
represented
8.1%
of
the
total
U.S.
popula:on.
By
2050
the
percentage
is
projected
to
reach
20.2%.

16. Problem
#5:
US
Health
System
is
Not
Safe

17. Face
the
Brutal
Facts
1
in
25
hospital
pa7ents
has
at
least
one
healthcare-­‐
associated
infec7on
Yearly
210K
–
440K
hospital
pa7ents
suffer
preventable
harm
that
contributes
to
their
death.
About
75K
hospital
pa7ents
with
HAIs
died
during
their
hospitaliza7ons
Over
2
Million
adverse
drug
reac7ons
(ADR)
>100K
Deaths
yearly–
4th
leading
cause
of
death

18. Problem
#6:
Opera4ng
on
Razor-­‐thin
Margins

19. Hospitals
won’t
disrupt
themselves!

20. Some
Bright
Spots
Emerging:
Evidence
of
Industrializa4on

21. The
VBC
Lens

22. The
Two
Canoes
Collided!

23. Medicare
Funding
Chronic
Care?
Prac44oner
•
Perform
(and
bill
separately
for)
-­‐
Ini7al
Preven7ve
Physical
Exam
-­‐
Annual
Wellnesss
Visit
-­‐
Evalua7on
&
Management
Service
•
Obtain
WriFen
consent
Care
Plan
(electronic)
Updated
at
least
annually)
Care
Team
(licensed
clinical
Staff
and
Prac77oner)
Other
Providers
Medicare
Administra4ve
Contractor
•
Coordinate
referrals
•
Iden7fy
appropriate
providers
•
Capable
of
sharing
electronic
care
plan
and
electronic
summary
care
record
•
Medica7on
reconcilia7on
•
Communicate
to/from
community-­‐based
providers
Payment
=
80%
Applicable
fee
schedule
rate
Step-­‐by-­‐Step
Chronic
Care
Management*
Cer4fied
EHR
•
Generate
-­‐
Demographics
-­‐
Medica7on/Medica7on
Allergies
•
Record
-­‐
Pa7ent
Consent
-­‐
Delivery
of
Care
Plan
-­‐
Communica7on
to/from
home
&
community-­‐based
providers
•
Obtain
WriFen
consent
Copy
(paper
or
electronic)
•
>20
minutes
CCM/month
•
24/7
access
for
urgent
needs
•
Telephone
and
asynchronous
consulta7on
•
Post-­‐discharge
TCM
•
ER
follow-­‐up
Co-­‐Payment
20%
of
applicable
fee
schedule
rate
(Medicare
Supplemental)
Beneficiary
Bill
CCM
Code
99490
Monthly
©2015
Pershing
Yoakley
and
Associates,
PC.
*This
infographic
does
not
cons7tute
legal
advise.
It
is
offered
for
illustra7ve
purposes
only.
Revised
March
2015
For
more
informa7on,
contact
Mar7e
Ross
(mross@pyapc.com)
or
Lori
Foley
(lfoley@pyapc.com)

24. Employers:
Part
of
the
problem
or
solu4on?
Shihing
hires
to
where
they
receive
the
greatest
HC
value
Paradigm
shih
“HC
as
a
benefit
to
HC
as
a
cost
driver”
Recognize
the
power
of
voluntary
transparency
Built
2nd
opinion
program–findings
were
startling
Built
COE
for
joints
and
CV
Savings?
Outcomes?
Alarmed
@
variability
in
cost
of
joints
Built
reference
pricing
program
Drama:c
reduc:on
in
prices
for
joints

25. Supply-­‐induced
Demand?
Walmart
discovered
most
expensive
pa:ents
were
transplants
Began
to
offer
to
pay
to
send
the
pa:ent
and
a
caregiver
to
the
Mayo
Clinic
or
other
hand-­‐selected
ins:tu:ons
for
a
second
opinion
and
—
if
the
employee
chose
—
treatment
Found
that
40%
of
the
transplants
recommended
to
the
employees
were
unnecessary
In
those
cases,
experienced
transplant
physicians
and
specialists
recommended
other,
far
less
invasive
and
less
painful
treatments.

26. Source:
hFp://healthaffairs.org/blog/2014/04/02/the-­‐payment-­‐reform-­‐landscape-­‐price-­‐transparency/
CalPERS
decided
to
cap
payments
for
knee
and
hip
replacement
surgeries
at
$30,000
for
its
Anthem
Blue
Cross
members
because
the
pension
fund
was
paying
anywhere
between
$15,000
and
$110,000
for
such
procedures.
The
average
price
for
the
knee
and
hip
replacements
at
higher-­‐priced
hospitals
in
the
state
decreased
by
37%.
In
addi7on,
the
use
of
preferred
hospitals
among
CalPERS
members
increased
by
21%
between
2010
and
2012.
Pricing
Power

27. Disrup4ve
Delivery
–
Top
of
License
Site
Pharmacy
Medical
Total
MinuteClinic
$28
$75
$104
ED
$27
$356
$383
Physician’s
Office
$32
$127
$159
Urgent
care
facility
$30
$124
$154
Source:
hFp://content.healthaffairs.org/content/27/5/1283/T1.expansion.html

28. The
Original
Focused
Factory?
Founded
in
1945,
Shouldice
Hospital
is
the
world’s
leading
center
of
excellence
in
abdominal
wall
hernia
repair.
Designed
exclusively
to
meet
the
needs
of
hernia
pa:ents,
Shouldice
is
a
fully
licensed,
89-­‐bed
surgical
hospital.
Specially
trained
surgical
teams
perform
over
7,000
hernia
repairs
every
year
Most
general
surgeons
will
repair
20
to
30
hernias
in
a
year.
Shouldice
surgeons
average
over
700
cases
a
year

29. “The
Henry
Ford
of
Hearts”

30. Distributed
Diagnos4cs
Radiofrequency
wireless-­‐enabled
devices
Diagnoses
asymptoma:c
atrial
fibrilla:on
same-­‐day
Study
found
that
follow-­‐up
on
the
network
was
associated
with
a
50%
rela:ve
reduc:on
in
the
risk
of
death

31. Implica4ons
for
Post-­‐Industrial
Ac4ons
Desperately
need
Business
Model
transforma:on
Entrepreneurs
are
important—Physician
entrepreneurs
are
REALLY
important
Embrace
Transparency
and
Drive
Communica:on
Payment
models
so
Cri:cal
-­‐
Wake
up
employers
and
Payers!
Get
capital
into
the
hands
of
entrepreneurs
Never
been
a
beYer
:me
to
“Do
Good
and
Do
Well”

32. Contact:
Sage
Growth
Partners
3500
Boston
Street,
Suite
435
Bal:more,
Maryland
21224
410.534.1161