2014 usnwr hot greg sorensen presentation final

11. Why 1980: Data suggests that hospital productivity improved since the introduction of DRGs in 1980 Average Length of Stay – Global Comparison Japan Russian Fed. Germany Switzerland China Canada United Kingdom OECD Average Spain Australia France United States Norway 12 10 8 6 4 2 <65 yrs 65-74 75-84 yrs >85 yrs Restricted © Page 10 Siemens AG 2014 All rights reserved. (2010) 9.7 9.7 8.6 7.7 7.7 6.9 6.7 6.0 4.9 4.6 4.5 4.3 3.9 5.6 7.2 13.6 18.5 Italy Mexico -32% Israel Turkey Average Length of Stay in U.S. Over Time 0 1980 1985 1990 1995 2000 2005 ALOS (Days)

12. Defining Productivity Productivity is measure of output per unit of input. It is a measure of efficiency of production. Productivity = Output Input Improving productivity implies “doing more with less” Restricted © Page 11 Siemens AG 2014 All rights reserved.

13. In healthcare, USA’s productivity lags that of other countries: We spend a lot more for similar (or worse) outcomes 90 80 70 60 MEX JPN ISR FRA ESP ISL NZL NOR KOR LUX EST DEU NLD DNK PRT CZE FIN RUS POL SVN SVK HUN GRC IRL IDN IND 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500 6,000 6,500 7,000 7,500 8,000 8,500 Restricted © Page 12 Siemens AG 2014 All rights reserved. USA GBR CHN CHL CAN BRA BEL AUT AUS TUR CHE SUE Life Expectancy at Birth Health Spending per Capita

14. Typically, USA is one of the leading countries in overall productivity – and continues to lead in productivity growth Restricted © Page 13 Siemens AG 2014 All rights reserved. 27 31 41 40 47 47 47 44 48 48 53 52 51 58 55 61 60 59 67 81 Ireland Norway Czech Republic Rep. of Korea Spain Australia Finland Austria Singapore Japan Italy Canada United Kingdom Sweden Denmark Germany France Netherlands Belgium United States Real GDP per Hour Worked (USD, 2011) Source: BLS

15. Labor productivity in healthcare is lagging (1 of 8) Health care Education Information & Technology Manufacturing Construction Mining Agriculture Restricted © Siemens AG 2014 All rights reserved. 2002 – 2005 Industry Output Change High Output Growth Page 14 Less efficient More efficient Low Employment Efficiency Source: BLS 2002 – 2005 Employment Efficiency Change

16. Labor productivity in healthcare is lagging (2 of 8) Health care Information & Technology Agriculture Education Restricted © Siemens AG 2014 All rights reserved. Manufacturing Construction Mining 2002 – 2006 Industry Output Change High Output Growth Page 15 Less efficient More efficient Low Employment Efficiency Source: BLS 2002 – 2006 Employment Efficiency Change

17. Labor productivity in healthcare is lagging (3 of 8) Restricted © Siemens AG 2014 All rights reserved. Manufacturing Construction Mining Agriculture Health care Education Information & Technology High Output Growth Page 16 Less efficient More efficient Low Employment Efficiency 2002 – 2007 Employment Efficiency Change 2002 – 2007 Industry Output Change Source: BLS

18. Labor productivity in healthcare is lagging (4 of 8) Information & Technology Agriculture Health care Education Restricted © Siemens AG 2014 All rights reserved. Manufacturing Construction Mining High Output Growth Page 17 Less efficient More efficient Low Employment Efficiency 2002 – 2008 Employment Efficiency Change 2002 – 2008 Industry Output Change Source: BLS

22. Labor productivity in healthcare is lagging (8 of 8) Agriculture Health care Restricted © Siemens AG 2014 All rights reserved. Education Information & Technology Manufacturing Construction Mining 2002 – 2012 Industry Output Change High Output Growth Page 21 Less efficient More efficient Low Employment Efficiency Source: BLS 2002 – 2012 Employment Efficiency Change Start End

23. Productivity improvements could positively impact medical spending growth $2.9T 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Restricted © Page 22 Siemens AG 2014 All rights reserved. 3.0 2.5 2.0 1.5 0.0 $2.0T $T $1.8T National Health Expenditure (2000 – 2013) Source: CBO, BLS, Siemens analysis NHE Actual NHE with U.S. average productivity NHE with Manufacturing productivity -30% -40%

24. Key Question: How can we improve productivity in healthcare? Restricted © Siemens AG 2014 All rights reserved. Page 23 Productivity Growth in Healthcare Less efficient More efficient High Output Growth Low Employment Efficiency Future ? Recent

25. Variation in quality and outcomes in our healthcare system should be an opportunity for improving productivity 90 80 70 60 MEX FRA ESP ISL NZL NOR LUX KOR JPN ISR EST DEU NLD DNK PRT CZE FIN RUS POL SVN SVK HUN GRC IRL IDN IND 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500 6,000 6,500 7,000 7,500 8,000 8,500 Restricted © Page 24 Siemens AG 2014 All rights reserved. USA GBR CHN CHL CAN BRA BEL AUT AUS TUR CHE SUE Sources: WHO, quickfacts.census.gov, kff.org, healthmetricsandevaluation.org, NBC News NBC News – “People in the U.S. could be as healthy as their counterparts in Switzerland or Japan, or as unhealthy as people in Algeria or Bangladesh” Fairfax, VA Marin, CA Tunica, Miss McDowell, WV RUS JPN Life Expectancy at Birth Health Spending per Capita

26. We have observed variation in use of our imaging technologies (1 of 2) Variation in MR Utilization (n=2,000 sampled from Siemens U.S. Installed Base) Restricted © Page 25 Siemens AG 2014 All rights reserved. Variation in CT Utilization (n=2,000 sampled from Siemens U.S. Installed Base) Min: 3 Max: 7619 Mean: 2470 Min: 1 Max: 29729 Mean: 4963

27. We have observed variation in use of our imaging technologies (2 of 2) Health System A 1,476 3,864 5,261 2,194 n = 6 3,702 8,070 14,558 Health System B Health System C 1,461 849 579 3,438 5,959 n = 6 MR 1,041 6,972 23,202 Restricted © Page 26 Siemens AG 2014 All rights reserved. CT n = 5 4,339 1,367 7,604 Annual Exams per Machine (Min – Average – Max) CT MR CT MR n = 5 n = 13 n = 6

28. Key Question: How can we improve productivity in healthcare? Reducing variation is one way to improve productivity. What are other possible solutions? How to Improve Productivity in Healthcare? Recent Less efficient Future ? More efficient High Output Growth Low Employment Efficiency Restricted © Page 27 Siemens AG 2014 All rights reserved.

29. Apply business principles to improve productivity in healthcare High Output Growth Restricted © Page 28 Siemens AG 2014 All rights reserved. Leverage the power of economic incentives Define products broadly and reduce regulatory barriers Allow for innovation and flexibility in the system Source: McKinsey and Company How to Improve Productivity in Healthcare? Less efficient More efficient Low Employment Efficiency Future ? Recent

30. Example: Leverage the power of economic incentives Early and accurate diagnosis brings significant clinical and economic value • 5% - 15% of diagnoses in the U.S. are incorrect • 5% - 10% of autopsy results show patient had been misdiagnosed and new findings could have changed outcome • 9% of strokes are connected to an error in diagnosis • 35% of cranial CTs read by emergency department physicians are misread • 40,000 to 80,000 deaths each year are due to misdiagnosis4 and are preventable Develop incentives for early and accurate diagnosis, similar to Readmissions program Medicare Readmission Rate 18.5% 17.9% 19.0% 19.1% 19.2% 19.0% 18.9% Beginning of Medicare Readmissions Program Restricted © Page 29 Siemens AG 2014 All rights reserved. 19.2 18.8 18.4 18.0 0.0 2007 2008 2009 2010 2011 2012 2013 2013 data YTD 8 December 2013

31. Example: Reduce/eliminate regulatory barriers, allow markets to define healthcare products broadly “Working top of license” will increase leverage and overall productivity Number of Practitioners 770K 275K 192K 97K Specialists Primary Care Physicians Nurse Practitioners Physician Assistants Investments in high-yield capabilities such as Telemedicine will improve productivity Geographic Reach Restricted © Page 30 Siemens AG 2014 All rights reserved. Benefits of Telemedicine Remove barriers to care provided by NPs and PAs Patient Access Source: Advisory Board Cost Avoidance Improved Outcomes Telemedicine Solves Provider Concerns 30% 93% Decrease in Reduction in ED utilization use for Centura for VA remote Health monitoring monitoring participants patients with hypertension $10.3M Savings across seven years from remote monitoring program at Partners HealthCare

32. Example: Allow for experimentation and flexibility in the system while preserving quality Adopt high-leverage care settings for many routine needs… … while breaking through care silos using secure information exchange $400 $350 $300 $250 $200 $150 $100 $50 $0 70% 60% 50% 40% 30% 20% 10% 0% Quality vs. Cost in Alternative Care Settings $370 55% Emergency Room 61% $106 Primary Care Provider 63% Quality of Care Average Visit Cost $103 Urgent Care Center 64% $66 Retail Clinic Percent of Physicians Any exchange inside the organization 35% Providers inside the office/group 28% Affiliated hospitals 28% Any exchange outside the organization 14% Source: RAND, Siemens analysis Quality measure includes 14 indicators expressed as percentages Source: ONC, Health Affairs, Siemens analysis Restricted © Page 31 Siemens AG 2014 All rights reserved. 13% Providers outside the office/group Unaffiliated hospitals 5% Exchange Inside the Organization Exchange Outside the Organization

33. Key Takeaways Apply business principles to improve productivity in healthcare Recent Less efficient Future ? More efficient High Output Growth Low Employment Efficiency Measure improvements by ranking all hospitals, care settings, and providers Restricted © Page 32 Siemens AG 2014 All rights reserved. Care Settings Retail Clinics Urgent Care Centers Medical Groups Care Providers Nurse Practitioners Physician Assistants PCPs Specialists 1 2 Hospitals Complex Care Routine Care

2014 usnwr hot greg sorensen presentation final

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