Preparing for Popula.on Health. Key Drivers of Change and Cri.cal Success Factors for Supply Chain Leaders

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1 Preparing for Popula.on Health Key Drivers of Change and Cri.cal Success Factors for Supply Chain Leaders

2 Agenda Introduction What is Population Health? Cause of Problems or Cure for Them? Key Underlying Drivers of Change Anticipated Impact on Healthcare Providers Trend Watch: 2014 Thesis 2

3 What Is Popula.on Health Really? The health outcomes of a group of individuals including the distribu.on of outcomes within the group (Kindig & Stoddart, 2003) Improving the health of popula.ons, enhancing the pa.ent experience and reducing the per capita costs of care for specific popula.ons (Berwick et al., 2008) BeHer health by encouraging healthier lifestyles in the en.re popula.on including increased physical ac.vity, beher nutri.on, avoidance of behavioral risks, and wider use of preventa.ve care. 3

4 Core Concepts Underlying Various Defini.ons 1. Applica.on of care delivery and measurement methodologies to a group of people 2. Increased emphasis on coordina.on across the care con.nuum and accountability for outcomes 3. Holis.c viewpoint encompassing preventa.ve care, acute care, and lifestyle management 4. Applica.on of appropriate management tac.cs should help reduce dispari.es and inequi.es within a given popula.on as well as across popula.ons 4

5 Visualizing Popula.on Health Popula'on Breakdown Spending Breakdown 2% 8% 13% 11% 46% 24% 10% 27% 20% 39% End of Life/Long- term Care Frail Elderly or Severe Mental Illness Chronic (Early Stage - Poly Chronic Complex) Early Stage Behavioral Risk Generally Healthy End of Life/Long- term Care Frail Elderly or Severe Mental Illness Chronic (Early Stage - Poly Chronic Complex) Early Stage Behavioral Risk Generally Healthy 5

6 What if we don t take ac.on to change? Current State Popula'on* People PMPY Total Spend End of Life/Long- term Care 4.7 $33,259 $158 Frail Elderly or Severe Mental Illness 20.6 $18,622 $383 Chronically Ill (Early Stage to Poly Chronic) 62.5 $8,802 $550 Early Stage Behavioral Risk 51.3 $2,929 $150 Generally Healthy $1,520 $185 Total $5,465 $1,426 Source: Oliver Wyman Health InnovaEon Center *Does not include acute episodic care. (AEC expenditures BN annually) 6

7 What if we don t take ac.on to change? Future State Scenario Popula'on* People (MM) PMPY Total Spend (BN) End of Life/Long- term Care 7.7 $33,259 $256 Frail Elderly or Severe Mental Illness 27.4 $18,622 $510 Chronically Ill (Early Stage to Poly Chronic) 78 $8,802 $687 Early Stage Behavioral Risk 57.8 $2,929 $169 Generally Healthy $1,520 $157 Total $6,485 $1,779 Even if popula-on subset PMPY remains constant, the gradual shi; of early stage and moderate risk popula-ons into more complex, high risk, chronic popula-ons would add hundreds of billions of dollars of annual cost into the healthcare system. *Does not include acute episodic care. 7

8 Popula.on Health Management Cause or Cure? Cause Changing economic and incen.ve models Shifing volumes Cultural requirements Workforce development and educa.on Technology and infrastructure requirements Precedence and risk Changing delivery models Regulatory pressure and rate of change Cure BeHer pa.ent care and pa.ent outcomes Improved pa.ent and caregiver experience Improved pa.ent and caregiver sa.sfac.on Lower per capita and aggregate costs BeHer health and associated downstream benefits to society 8

9 Key Drivers of Change Costs (Micro vs. Macro) Incentive alignments Stakeholder Experience Legislation & Risk Management 9

10 Healthcare Cost Trends Micro Macro 10

11 Incen.ve Alignments & Stakeholder Experience Incen'ves Stakeholders Consump.on of Care Provision of Care Culture & Lifestyle 3 rd Party Payers Lack of Transparency Culture & Perspec.ve 3 rd Party Payers Physician Rela.onships Legisla.ve Pressure Pa.ents and Families Physicians, Nurses, and Other Care Providers Administra.ve, Support, and Research Staff You and Me 11

12 Legisla.on & Risk Management Affordable Care Act: 7 3 Sharing the Risks Bonus Payment Popula'on Cost Shared Risk Models Market Share Baseline Revenue 12

13 An.cipated Impact on Providers Convergence Theory Stages of Market Progression A Look Ahead from Now to 2025 Cost Distribution and Resource Allocation 13

14 Convergence Theory Convergence Market Progression Consumer Driven New Delivery Models Lifestyle Focused C u r r e n t P r o v i d e r M o d e l Pa.ent Centered Value Based Shared Risk Stage 1: Pa.ent- Centered Care Stage 3: Focus on Preven.on Stage 2: Consumer Engagement

15 Cost and Resource Paradigm Shif Current Alloca'on Future Alloca'on Acute Care Acute Care Specialty Care Specialty Care Primary Care Primary Care Preven.on Preven.on 15

16 Where Do We Go From Here: Trends to Watch Expanding SCO Span of Control Creating a Clinically Engaged Supply Chain Promoting a Culture of Sustainability Managing Clinical and Operational Variability Navigating Mergers, Acquisitions and Expansions 16

17 Trending Now: Expanding SCO Span of Control Span of Control Engage in new aspects of procurement, inventory, and opera.ons management across con.nuum of care Integrate with depts. To manage costs, compliance and inventory: OR IT Pharmacy Addi.onal scope and focus areas: Outpa.ent Services Physician Offices Post Acute Care Home Health Lifestyle Management 17

18 Trending Now: Clinical Engagement Clinician Engagement 40% of organiza.ons surveyed have both RN and MD engagement in supply chain opera.ons Of the 30% that are not clinically integrated 67% are working toward it Only 10% of the total respondents are not working toward clinical integra.on 80% 70% 60% 50% 40% 30% 20% 10% 0% Clinician Integra'on into the Supply Chain 18

19 Trending Now: Sustainability Sustainability 90% of organiza.ons surveyed had at least one sustainability ini.a.ve in place Large medical device manufacturers are aligning with third- party SUD reprocessors, offering expanded access to cost and waste reduc.on Grassroots campaigns and staff Green Teams are becoming commonplace at healthcare organiza.ons, influencing many execu.ve decisions in favor of sustainability programs 100% 80% 60% 40% 20% Supply Chain Sustainability Program Adop'on 0% SUD Reprocessing Limited Paper/Digital Procurement Recycling Sustainable Conversa.ons (Staff/Vendor/GPO) EPP Mercury/PVC/DEHP- free Products Other Vendor Sustainability Ques.onnaire 19

20 Trending Now: Managing Variability Managing Variability Eliminate variability in price, u.liza.on, and revenue management. Cost, charge, and reimbursement variability can exceed 300% Iden.fy outliers and create systems to cleanse and maintain data to reach source of truth Look at variability in context of resource availability, where Value is a func.on of Need / Scarcity 20

21 Trending Now in Opera.ons Management: The M&A FronEer The M&A Fron'er Q3 of 13: 267 deals were announced (Source: Becker s Hospital Review) 2013 As of 8/1 Hospital Deals in U.S. (Source: NY Times) M&A creates both opportunity and complexity for hospital supply chains Opportunity Areas: Due Diligence Contract Evalua.on Integra.on Standardiza.on Vendor Management For- Profit Buyer Non- Profit Buyer 21

22 Timothy Lantz Managing Director HBI Supply Chain Academy

23 References Delbanco, S. F., Anderson, K. M., Major, C. E., Kiser, M. B., & Toner, B. W. (2011). PROMISING PAYMENT REFORM: RISK- SHARING WITH ACCOUNTABLE CARE ORGANIZATIONS. The Commonwealth Fund. Guerin- Calvert, M., & Israilevich, G. (2011). Assessment of Cost Trends and Price Differences for U.S. Hospitals. Compass Lexecon. Compass Lexecon. Oliver Wyman. (2013). Convergence: Consumer and PaEent- Centered Business Designs. Health & Life Sciences. Chicago: Oliver Wyman Health Innova.on Center. Sanders, D. (2014). A Landmark, 12- Point Review of PopulaEon Health Management Companies. Health Catalyst. Stoto, M. A. (2013). PopulaEon Health in the Affordable Care Act Era. Academy Health. 23

24 Appendix NOTE TO ATTENDEES While The has attempted to ensure the accuracy of the research and information provided within this presentation, the information has been obtained from numerous sources, and The Academy cannot guarantee its accuracy. The Academy does not provide organizations with legal, clinical, or other professional advice, and this presentation should not be regarded as such under any particular circumstances. Attendees should not rely on any legal commentary in this presentation as a basis for action, or assume that all practices within are legally permitted. The is not liable for any claims or losses that arise from any errors or omissions in the presentation. This presentation has been developed by The and contains proprietary information belonging to The Academy. Therefore attendees are expected to maintain the information provided in strictest confidence and not disclose any of it to third parties. If you do not agree with this obligation, please immediately return the presentation materials to The.

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