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2013 MARKET OVERVIEW Kansas City Updated: November 2013 HealthLeaders-InterStudy, A Decision Resources Group Company Copyright © 2013 n Copyright Strictly Enforced • Z O O M Z O O • Z O O M • ZO M O M • • OM ZO OM ZO • • Z O O M Z O O M • • O M ZO Z O O M • • O O O M Z O M Z • OM ZO • • Z O O M • ZO OM KANSAS CITY MARKET OVERVIEW Kansas City Counties Covered: Bates, Caldwell, Cass, Clay, Clinton, Jackson, Lafayette, Platte, and Ray in Missouri; Franklin, Johnson, Leavenworth, Linn, Miami, and Wyandotte in Kansas Key Cities Covered: Blue Springs, Independence, and Kansas City in Missouri; Kansas City, Leavenworth, Olathe, Overland Park, and Shawnee in Kansas Population: 2,052,676 Contents 3 Updates: Key Market Events 4 Executive Summary 6 Kansas City Market 10 Health Systems & Hospitals 27Physicians HealthLeaders-InterStudy Staff Kansas City Analyst Jenny Kerr [email protected] 34 Health Plans 42Medicaid/Medicare/Uninsured 45Pharmacy 47Legislation 49Employers Market Analyst Jenny Kerr Sales Vice President Paul Holloway Market Access Insight Products Vice President Carolyn McMeekin Key Account Directors Matt Hanvey, Jolayne Perry, Bob Fucile Market Access Insight Products Director Renée Burnham Assistant Directors Josh Kelley, Dave Raiford Manager Holly Fults Content/Editorial Advisers Taylor Holliday, Carly Stewart, Keith Wagner Customer Experience Vice President Carol Barry CORPORATE OFFICE One Vantage Way, B-300 Nashville, TN 37228 Toll free: 1-855-380-4850 www.hl-isy.com Design and Production Stephen Benton Except where otherwise indicated, information in this product is from analysis of HealthLeaders-InterStudy data, interviews with local experts, news sites, and industry reports. Published November 2013. Copyright © 2013 HealthLeaders-InterStudy, A Decision Resources Group Company. All Rights Reserved. Reproduction, distribution, display, transmission, or creation of derivative works, of this report in any form, in whole or in part, is prohibited, without the prior written permission of HealthLeaders-InterStudy. Selling or otherwise providing this report to third parties, in whole or in part, violates the contractual agreement under which this report is provided and is a violation of federal copyright statutes. Violation of federal copyright law is punishable by fines up to $100,000. This report is intended for the sole use of a HealthLeaders-InterStudy Named Authorized User or for those who have received this Report with the consent of HealthLeaders-InterStudy. Questions regarding use of this product should be directed to HealthLeaders-InterStudy, One Vantage Way, B-300, Nashville, TN 37228; 615.385.4131. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 2 BACK TO CONTENTS Updates: Key Market Events November 2013 - HCA Midwest Health signs agreement to acquire Carondelet Health System Updated Carondelet Health will sell St. Joseph and St. Mary’s medical centers and become part of the HCA Midwest Health System. The transaction is expected to be completed by the end of the year after it receives regulatory approvals. The acquisition plans fall in line with a trend toward hospital consolidation in Kansas City, where HCA will now increase its market share lead. November 2013 - HealthLeaders-InterStudy publishes data update This update provides new HealthLeaders-InterStudy enrollment and pharmacy data for health plans in the Kansas City area; enrollment updates include new information on commercial plans, Medicaid, Medicare, and the uninsured. (For further information, see the Health Plans section of this report.) February 2013 - HealthLeaders-InterStudy publishes annual Market Overview for Kansas City The annual report provides data and analysis of several sectors of the Kansas City healthcare market, including hospitals and health systems, physicians, health plans, Medicaid, Medicare, the uninsured, pharmacy, legislation, and employers. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 3 BACK TO CONTENTS Executive Summary Market Outlook Consolidation in all sectors of the Kansas City healthcare market is reshaping market dynamics, especially in the physicians segment where independent physicians are banding together to form new networks and reimbursement arrangements in order to compete with large health systems. The market’s smaller hospitals and health systems, though profitable, are concerned about healthcare reform and declining reimbursements from Medicare and are seeking shelter in their larger counterparts. All the changes are likely to transform an unconsolidated market into a moderately consolidated one in the next several years. Kansas City is just beginning to move into population-based contracts after a group of 13 independent physician practices became the market’s first Medicare Shared Savings Program accountable care organization in January 2013. Medical homes have been growing here, and large employers are now using incentives to encourage their employees to choose providers that offer medical homes, so expect these arrangements to grow. Highlights: » » Smaller, two-hospital system Carondelet Health is seeking to merge with a larger health system and is currently in negotiations with the market’s largest system, HCA Midwest Health System. Carondelet said that it wants to pursue a merger while it is profitable and before it takes big hits from declining government reimbursements. Another profitable and popular hospital, city-owned North Kansas City Hospital, is potentially up for sale as city officials look for an affiliation to help it compete in the future. But hospital officials have sued, saying the city doesn’t have the right to sell the hospital. If this hospital does end up on the auction block, expect it to have plenty of suitors. » » Health systems have been acquiring physician groups at a rapid pace in the Kansas City market, as in many markets around the country. The most recent large acquisition was 60-physician College Park Family Care Center by Midwest Physicians, which is affiliated with HCA Midwest. But expect this trend to slow in the coming year as most large groups in the market have been purchased, and independent physicians are banding together to form their own large network called the Kansas City Metropolitan Physicians Association to compete for value-based and population-based contracts. A subset of that group has launched Kansas City’s first ACO, a Medicare Shared Savings Program. » » Aetna’s acquisition of the market’s third-largest insurer, Coventry Health Care, closed in May 2013. The takeover makes Aetna the second-largest MCO in the market, based on total number of lives, and the largest managed Medicaid plan in the area. Aetna has accountable care arrangements with Mosaic Life Care (formerly known as Heartland Health) in St. Joseph, Mo.—just north of Kansas City—so watch for ACO contracts to come to Kansas City now that Aetna has Coventry’s networks. Blue Cross and Blue Shield of Kansas City will remain the market’s top insurer, leading the way in medical-home pilots and value-based contracts with Saint Luke’s Health System; expect such contracts to increase. » » The first commercial ACO in the Kansas City market has launched. Cigna and Meritas Health, a physician network owned by North Kansas City Hospital, are operating the ACO. The program is estimated to include 5,300 Cigna members. » » Physicians received a jolt when the Missouri Supreme Court ruled in July 2012 to eliminate a $350,000 cap on non-economic damages in medical malpractice cases. A few months later, the Kansas Supreme Court upheld a similar cap, leaving questions over whether physicians will move their practices to the Kansas side of the city to escape what will likely be rapidly rising malpractice insurance premiums in Missouri. Expect the Missouri General Assembly to try to pass another cap that will not be found in violation of the state’s constitution. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 4 BACK TO CONTENTS » » Employers in the market now have the option of buying insurance through BCBS of Kansas City’s private insurance exchange, which features defined-contribution plans available to both small and large employers. While still new, employers in Kansas City may prefer a private exchange over the public ones that will launch in 2014, since they will feature different rules and plans in the two states. A strong and innovative employer coalition in Kansas City has found success with value-based insurance design and now has five large employers that are encouraging employees to choose physicians who operate medical homes. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 5 BACK TO CONTENTS Kansas City Market Market Indicators Table 3-2: Market Stage: Developing* Market » Limited consolidation/integration of physician groups » Limited consolidation/integration of health systems/hospitals » Health plans experimenting with cost/quality controls over physicians/hospitals » HMO and PPO benefit options about equally prevalent *For definitions of other market stages, see the Market Overview Product Manual. Source: HealthLeaders-InterStudy, 2013. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 6 BACK TO CONTENTS Table 3-4: Situation Analysis by Segment + Health Systems and Hospitals O Physicians O Health Plans O Pharmacy + Employers Table 3-5: Positive for health systems and hospitals. Look for increased patient volumes and improved profitability. Neutral for physicians. Look for earnings to remain stable. Neutral for health plans. Look for stable health plan enrollments and/or profitability. Neutral for pharmaceutical sales. Expect unchanged PMPM costs for health plans and/or overall stability in the use of branded drugs. Positive for employers. Expect healthcare premiums to increase at a slower rate or decline, with increased efforts at healthcare cost containment. Market Consolidation Hospital segment Physician segment Health plan segment » » High: 2 or 3 organizations control about 80% of the market. Moderate: 4 or 5 organizations control about 70% of the market. Low: More than 5 organizations control about 70% of the market. » Leading Organizations & Health Plans Table 3-7: Health Systems/Hospitals Name Total # of Hospitals Total # of Beds Market Share* HCA Midwest Health System 8 1,206 22% Saint Luke’s Health System 7 801 16% The University of Kansas Medical Center 2 595 10% *Based on inpatient discharges. Sources: HealthLeaders-InterStudy, 2013; based on data from Billian’s HealthDATA, 2012. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 7 BACK TO CONTENTS Table 3-8: Physician Organizations Name Total # of Physicians HCA Midwest Comprehensive Care >2,000 University of Kansas Physicians 647 Saint Luke’s Care >600 Source: HealthLeaders-InterStudy, 2013. Table 3-9: Total Enrollment* Plan Enrollment Market Share Blue Cross and Blue Shield of Kansas City 419,174 28% Aetna 297,524 20% UnitedHealth Group 268,300 18% Enrollment Market Share 103,721 30% Blue Cross and Blue Shield of Kansas City 55,663 16% Centene 46,545 14% Enrollment Market Share Blue Cross and Blue Shield of Kansas City 363,511 48% Aetna 174,347 23% 73,569 10% Enrollment Market Share UnitedHealth Group 199,130 54% Cigna 131,188 35% 22,850 6% *All HMO, PPO, POS, indemnity, Medicaid, and Medicare products. Source: HealthLeaders-InterStudy, as of Jan. 1, 2013. Table 3-10: HMOs* Plan Aetna *All HMO products, including Medicaid and Medicare. Source: HealthLeaders-InterStudy, as of Jan. 1, 2013. Table 3-11: PPOs* Plan WellPoint *Includes fully and self-insured commercial and Medicare PPO. Source: HealthLeaders-InterStudy, as of Jan. 1, 2013. Table 3-12: POS* Plan WellPoint *Includes fully and self-insured point-of-service plans. Source: HealthLeaders-InterStudy, as of Jan. 1, 2013. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 8 BACK TO CONTENTS MCO-Managed Medicaid* Table 3-13: Plan Enrollment Market Share Aetna 74,551 36% Centene 46,545 22% WellPoint 31,959 15% Enrollment Market Share Humana 37,140 44% Aetna 30,600 36% UnitedHealth Group 15,291 18% *Includes Title 19, CHIP, and other managed Medicaid lives. Source: HealthLeaders-InterStudy, as of Jan. 1, 2013. MCO-Managed Medicare* Table 3-14: Plan *Includes HMO, PPO, PFFS, and other managed Medicare lives. Source: HealthLeaders-InterStudy, as of Jan. 1, 2013. Major Employers Table 3-15: Name # of Employees Federal government 34,729 The University of Kansas 16,936 Wal-Mart Stores 11,599 Johnson County 7,568 City government 7,360 FirstGroup 7,221 State government 6,907 Hallmark Cards 6,586 Sources: HealthLeaders-InterStudy, 2013; January 2012 Employer Vantage. Table 3-16: Pharmacy Chains Name Costco, CVS/pharmacy, Hy-Vee, Kmart, Osco Pharmacy, Price Chopper, Rite Aid, Sam’s Club, Stark Pharmacy, The Medicine Shoppe, Walgreens, Wal-Mart Source: HealthLeaders-InterStudy, 2013. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 9 BACK TO CONTENTS Health Systems & Hospitals Table: Situation Analysis + THIS SECTOR IS: POSITIVE Sector Outlook The Kansas City hospital sector is in a state of flux as independent hospitals feel pressure to merge with larger systems to gain efficiencies and try to protect themselves from declining government reimbursement rates. As a result, Kansas City’s unconsolidated hospital sector is likely to become more consolidated. In addition, North Kansas City has a new health system entrant, St. Joseph–based Mosaic Life Care (formerly known as Heartland Health). At the same time, the University of Kansas Medical Center is pursuing a joint pediatrics program with Children’s Mercy Hospital & Clinics in an effort to share resources instead of competing. Also expect health systems to enter into accountable care arrangements or other alternative payment models. Highlights: » Market composition: The Kansas City hospital sector is unconsolidated, with no single health system or hospital dominating. The largest health system is for-profit HCA Midwest Health System, which operates eight hospitals in the Kansas City market and accounts for 22 percent of inpatient admissions. That system, however, has agreed to acquire Carondelet Health’s two hospitals in a deal that would bring its market share to nearly 30 percent. Nonprofit, locally owned Saint Luke’s Health System comes in second, with seven hospitals and a 16 percent market share. The region’s academic medical center, University of Kansas Medical Center, received National Cancer Institute designation in 2012 for its cancer center, fulfilling a seven-year-long goal to grow research, funding, and clinical trials in the Kansas City area. Truman Medical Centers are the city’s healthcare safety-net hospitals. » Hospital makeup: The 15-county Kansas City market has 39 acute-care hospitals (excluding VA Eastern Kansas Health Care System and Kansas City VA Medical Center), with an estimated 245,569 inpatient discharges annually and 5,800 total acute-care beds. The average daily occupancy rate is 45.3 percent, and the average length of stay is 5.1 days. Medicare and Medicaid account for an average 34 percent and 10 percent, respectively, of the area’s acute-care discharges (based on the most recent federal Medicare hospital statistics from Billian’s HealthDATA). » Financial performance: Patient volumes remain soft at Kansas City–area hospitals, an insider reports. Hospitals are not meeting targets on inpatient volumes as patients delay care in a languishing economy. One exception to this is The University of Kansas Hospital, where inpatient volumes set a record in 2012. » Value-based purchasing: The Centers for Medicare & Medicaid Services is operating two programs that use payment rewards and penalties to drive hospital quality improvements. Hospitals can gain up to 1.25 percent of their Medicare payments or lose up to 3.25 percent for the program’s second year, which began Oct. 1, 2013. The Hospital Readmissions Reduction Program penalizes hospitals deemed to have too many readmissions of patients who were originally admitted for a heart attack, heart failure, or pneumonia. Medicare hospital reimbursements for patient stays are being reduced by up to 2 percent. In Missouri, hospitals 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 10 BACK TO CONTENTS are receiving an average penalty of 0.39 percent, compared to the national rate of 0.38 percent (Kaiser Health News analysis of CMS data). In Kansas, the average penalty is 0.25 percent. Penalties for individual hospitals in the Kansas City market include 0.67 for St. Mary’s Medical Center in Blue Springs, 0.40 percent for Saint Luke’s Hospital of Kansas City, 0.37 percent for Liberty Hospital, 0.24 percent for North Kansas City Hospital, and 0.21 percent for The University of Kansas Hospital. Beginning in October 2014, reimbursements will be reduced by up to 3 percent, and CMS plans to begin penalizing hospitals for readmissions of patients with additional conditions, such as chronic lung disease. CMS is also using the Hospital Value-Based Purchasing Program to give hospitals financial penalties or bonuses based on how well they follow clinical guidelines, their performance in patient survey ratings, and their mortality rates for heart attack, heart failure, and pneumonia patients. The most a hospital can gain or lose is 1.25 percent, which will incrementally increase each year to 2 percent by 2016. In Missouri, hospitals are losing an average of 0.1 percent, compared with a loss of 0.03 percent nationally (Kaiser Health News analysis of CMS data). In Kansas, hospitals are gaining an average of 0.04 percent. » NCI designation: In July 2012, KU Medical Center attained its long-awaited status as a National Cancer Institute–designated cancer center, putting the hospital in line for additional research dollars and access to clinical trials available only to patients at NCI-designated centers. The new status should also aid KU Medical Center in attracting top physician-scientists and boost the hospital’s goal of becoming a leading cancer-care provider in the region. The Kansas City healthcare industry expects the NCI designation to open more opportunities for early-stage clinical trials and be a boon for research firms in the area. » Cancer research: In September 2012, four hospitals—The University of Kansas Hospital, Children’s Mercy Hospital & Clinics, Truman Medical Centers, and Stormont-Vail Healthcare—said they would increase their contributions to the Midwest Cancer Alliance from $500,000 to $1 million each. The alliance is a regional network of 18 hospitals, universities, and patient organizations that collaborate with The University of Kansas Cancer Center on clinical trials and cancer research. Hospital involvement allows their patients to have access to trials. Truman Medical Centers is expanding the availability of clinical trials to underserved communities. » Merger and acquisition activity: HCA Midwest Health System has agreed to acquire Carondelet Health’s St. Mary’s and St. Joseph medical centers. The acquisition will give HCA nearly a third of local market share, growing its influence and network in the market. North Kansas City Hospital appeared to be on the market earlier in 2013, but North Kansas City officials have stated they have no intention of selling the hospital. » Expansions: Despite soft patient volumes, Kansas City health systems have not slowed expansions. HCA Midwest is planning a new tower at its Overland Park Regional Medical Center and six new urgent care centers in the city. Saint Luke’s Health System is adding a five-story expansion at its Saint Luke’s East-Lee’s Summit hospital and upgrading its Neuroscience Institute. The University of Kansas Medical Center built its first inpatient facility outside of its main campus in 2012 and added 84 new beds to its main facility to meet its rising patient volumes. It also opened a new facility for clinical trials. » New competitor: Mosaic Life Care (formerly known as Heartland Health) in St. Joseph, which is just north of the local market, is pushing its way into the Kansas City area by opening two clinics in affluent areas of Parkville and the Burlington Creek area of Kansas City. The Parkville clinic offers primary care, while the Burlington Creek location is a multispecialty clinic. Hospitals in Kansas City say Mosaic Life Care is trying to funnel insured patients into its St. Joseph hospitals, which have a high percentage of Medicare and 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 11 BACK TO CONTENTS Medicaid patients. This could provide competition for providers such as North Kansas City Hospital. The Parkland clinic is equipped with iPads for patients as they wait in the lobby while a chef gives cooking demonstrations. Mosaic’s entrance into the market could also put more pressure on Kansas City systems to take the leap into an ACO since Mosaic already operates two ACOs in St. Joseph—one with Aetna and one Medicare Shared Savings Program ACO for oncology patients. » Pediatric alliance: Children’s Mercy Hospital & Clinics is teaming with The University of Kansas Hospital and The University of Kansas Medical Center to form a single pediatric program. The alliance will be complex, with two hospitals in two states with their own contracts and payers as well as two medical schools and a physician group. A similarly complex proposed affiliation between KU Medical Center and Saint Luke’s Health System five years ago did not happen. KU and Children’s Mercy have worked together in the past on developing an experimental heart valve and training cardiothoracic surgeons. Such collaborations make sense as systems face shrinking reimbursements and greater demands for more efficient care. » Physician relationships: As elsewhere in the country, Kansas City health systems and hospitals are increasingly seeking to align themselves with physician groups. Midwest Physicians, the physician group affiliated with HCA Midwest Health System, purchased 60-physician College Park Family Care Center in January 2013. In 2011, The University of Kansas Medical Center acquired Kansas City Cancer Center, merging the center’s assets and 27 oncologists with its own cancer services. » Information technology initiatives: A 2012 survey by the Missouri Hospital Association found that hospitals in Missouri received more than $67 million in Medicare electronic health records incentive payments and $46 million in Medicaid incentive payments. EHR-system adoption continues to increase, with 65 percent of hospitals reporting that they own a system. Among Missouri hospitals, those in the Kansas City area had the highest adoption of EMR systems. In March 2012, Overland Park Regional Medical Center and Shawnee Mission Medical Center received $691,807 and $842,623, respectively, from the Medicaid Electronic Health Records Incentive Program for switching to electronic health records. » Drug shortages: A May 2012 survey by the Missouri Hospital Association found that 82 percent of the 53 acute-care hospitals in the state reported having daily drug shortages in the previous six months. Another 17 percent reported at least weekly shortages. Carondelet Health said the shortage was requiring extra hours by staff to properly administer the replacement medications and monitor shortages. The University of Kansas Hospital, which has the pharmacists and equipment needed to make medicines itself, has purchased raw materials and compounded some medications such as fluids in intravenous bags. HCA said it had not experienced shortages because it purchases nationally and can fall back on the chain’s 160 hospitals. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 12 BACK TO CONTENTS HCA Midwest Health System Table 4-1 Local hospitals: Local hospital beds: Physicians employed: Physicians affiliated: PBM: GPO: 8 1,206 N/A >2,000 N/A Premier, HealthTrust Purchasing Group Acute-care hospitals: » Research Medical Center, Kansas City, Mo., 388 beds » Overland Park Regional Medical Center, Kan., 244 beds » Centerpoint Medical Center, Independence, Mo., 221 beds » Menorah Medical Center, Overland Park, Kan., 158 beds » Belton Regional Medical Center (formerly Research Belton Hospital), Mo., 71 beds » Lee’s Summit Medical Center, Mo., 64 beds » Cass Regional Medical Center, Harrisonville, Mo., 35 beds » Lafayette Regional Health Center, Lexington, Mo., 25 beds Major outpatient centers: » Research Medical Center Brookside Campus, an outpatient center in Kansas City, Mo. Physician groups: » HCA Midwest Comprehensive Care, a physician/hospital organization with more than 2,000 physicians » Midwest Physicians, a multispecialty practice with 341 physicians Other details: » Midwest Cancer Care, a comprehensive cancer center on the campus of Research Medical Center » Five local outpatient surgery centers » One acute-care hospital outside the local market: Allen County Hospital, Iola, Kan. Sources: HealthLeaders-InterStudy; based on data from Billian’s HealthDATA. Description Kansas City’s largest health system, for-profit HCA Midwest Health System, leads the market in inpatient discharges. It accounts for 22 percent of inpatient discharges and 21 percent of total acute-care beds (most recent federal Medicare hospital statistics). The average occupancy rate is 43 percent, and the average length of stay is 4.7 days. Medicare and Medicaid account for an average 29 percent and 6 percent, respectively, of acute-care discharges. The system’s largest hospital is Research Medical Center, a tertiary-care facility in south Kansas City that specializes in cardiovascular and pulmonary diseases, neurology and orthopedics. The hospital has a Level I trauma center and Level III neonatal intensive-care unit. Midwest Cancer Care at Research Medical Center includes the Liver and Pancreas Institute of Kansas and the Multi-Disciplinary Thoracic Clinic. Overland Park Regional Medical Center offers the only trauma center and Level III NICU in affluent Johnson County. It also offers the Human Motion Institute for musculoskeletal diagnosis and treatment. Menorah Medical Center, also in Overland Park, has an accredited comprehensive cancer program, an accredited chest-pain center and a certified primary stroke center. Its cancer center includes the Sarcoma Institute, which focuses on the treatment of bone and soft-tissue tumors and is led by Howard G. Rosenthal, M.D. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 13 BACK TO CONTENTS Centerpoint Medical Center, in Independence, Mo., has a Level II trauma center, cardiovascular services (including an accredited chest-pain center) and a Level III NICU. Lee’s Summit Medical Center offers diabetes care and cardiology and has a certified stroke center. The system has two other hospitals south of Centerpoint: Belton Regional Medical Center (formerly Research Belton Hospital) and Cass Regional Medical Center. Its other hospital, Lafayette Regional Health Center, is on the east side of the market in Lexington, Mo. Research Medical Center Brookside Campus is a 37-acre campus in south Kansas City for outpatient services. The system also runs a psychiatric facility in Kansas City. HCA Midwest was created in 2003 when HCA Inc. bought the struggling Health Midwest system for $1.3 billion. News and Analysis HCA Midwest plans to acquire Carondelet Health’s two hospitals, St. Mary’s and St. Joseph medical centers, in the Kansas City market. The acquisition is awaiting regulatory approvals and is expected to be completed by the end of the year. The acquisition will increase the local market share of HCA, which is likely to encounter more scrutiny from the Federal Trade Commission if it tries to purchase additional hospitals in Kansas City. The acquisition will also give Carondelet patients better access to specialists, especially oncologists and neurologists. HCA’s strategy in this acquisition could be to reduce competition because Menorah Medical Center, Overland Park Regional Medical Center, and Centerpoint Medical Center are located within minutes of the Carondelet hospitals, and both systems have established heart programs. Blue Springs citizens have formed a campaign to keep St. Mary’s Medical Center open after the HCA purchase. HCA hospitals in the market have also undergone numerous expansions, reflecting the health system’s nationwide strategy to increase surgery volumes, especially in the areas of orthopedics and neurology. Emergency department volume: HCA Midwest officials reported that emergency department visits at Research Medical Center and at the freestanding ER on the Brookside Campus have been increasing. Neurosurgical and stroke volumes also are up at HCA Midwest, as is utilization of its high-risk obstetrics program (Kansas City Business Journal). Expansions: HCA’s hospitals have been in continual expansion mode, with the largest expansion, at Overland Park Regional Medical Center, expected to launch in 2013: » Overland Park Regional Medical Center is launching a $121 million expansion of the hospital, which received city approval in February 2012. Construction of the 72-bed tower for private medical and surgical acute care, critical care and orthopedic, neuroscience and trauma patients is expected to begin in spring 2013. The project also includes an expanded emergency department, a cardiac catheterization lab, neuro-interventional services and new endoscopy suites. » Belton Regional Hospital completed a $39 million expansion in October 2012 that more than doubled the size of the emergency department and added new operating suites. The ED increased from nine to 15 rooms. Formerly called Research Belton Hospital, the hospital changed its name effective April 1, 2012, to reflect the changes. The hospital opened a medical office building in July 2012. Urgent care: HCA Midwest Health System has partnered with Tennessee-based CareSpot to bring six urgent care centers to the area in 2013. Locations include Overland Park, Raytown, Parkville, and south Kansas City. Officials say there is a need for more urgent care centers. Wait times for the centers will be posted online. Two of the six planned centers opened their doors as of July 2013. The first opened in Overland Park, Kan., and the second opened in Raytown, Mo. Accountable care organization: HCA Midwest’s chief medical officer has said the system is considering setting up an ACO but is not yet committed to the idea. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 14 BACK TO CONTENTS Physician relationships: Midwest Physicians announced in January 2013 that it will purchase College Park Family Care Center, which has 10 locations in Johnson County, Kan. The 60-physician group said the affiliation will help it “navigate upcoming healthcare changes.” The acquisition brings HCA Midwest’s multispecialty group practice to 341 physicians in 146 locations in the Kansas City market. College Park already had a standing relationship with HCA’s Overland Park Regional Medical Center. College Park will retain its staff and name but will gain additional funds to expand clinics and upgrade its health information technology. A newly formed College Park Management Council, consisting of four College Park physicians and four representatives from HCA Midwest, will oversee the practice. A College Park physician also will serve on the HCA Midwest Physician Executive Council. College Park is the second-largest group to affiliate with HCA’s Physician Services. Telemedicine: Research Medical Center launched a telemedicine program in late 2011 that provides rural community hospitals with 24-hour access to stroke specialists and emergency-department acute-stroke consultation using real-time videoconferencing. Courts: HCA was ordered to pay $162 million to the Health Care Foundation of Greater Kansas City—which was formed when HCA purchased nonprofit Health Midwest in 2003 to form HCA Midwest—after a judge ruled that the system failed to make improvements to existing hospitals it agreed to improve. The lawsuit claimed that HCA hadn’t spent what it promised in capital improvements and that it had not met its charitable healthcare commitments. HCA had agreed to make $450 million in capital improvements to the existing hospitals, which were nonprofit and needed upgrades. A lawyer for the foundation said the ruling was a victory for the uninsured who use those facilities as a safety net. HCA said it planned to appeal. Restructuring: HCA consolidated the Kansas City system in September 2011 with a division of eight hospitals in Louisiana and Mississippi. The renamed HCA MidAmerica remains based in Kansas City, and the HCA Midwest moniker remains intact for the Kansas City system. HCA said merging the divisions improves efficiencies by bringing together two of the company’s smallest divisions. Parent company earnings: Nashville, Tenn.-based HCA Inc. is the nation’s largest private hospital company, with 162 hospitals and 112 freestanding surgery centers. HCA reported earnings of $2.47 billion for the year ended Dec. 31, 2011, compared with $1.21 billion for 2010, and revenues of $29.68 billion, compared with $28.04 billion for year-end 2010. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 15 BACK TO CONTENTS Saint Luke’s Health System Table 4-2 Local hospitals: Local hospital beds: Physicians employed: Physicians affiliated: PBM: GPO: 7 801 325 1,436 N/A VHA Mid-America, VHA Inc., Novation Acute-care hospitals: » Saint Luke’s Hospital of Kansas City, Mo., 395 beds » Saint Luke’s Northland Hospital, with campuses in Kansas City, Mo., and Smithville, Mo., 130 beds » Saint Luke’s East-Lee’s Summit, Mo., 113 beds » Saint Luke’s South, Overland Park, Kan., 104 beds » Saint Luke’s Cushing Hospital, Leavenworth, Kan., 53 beds » Saint Luke’s Cancer Institute, Kansas City, Mo., 6 beds Physician groups: » Saint Luke’s Care, a physician organization with more than 600 voluntary members who use system-wide best-practice clinical guidelines » Saint Luke’s Medical Group, an employed group of 85 primary-care and specialty physicians Other details: » Saint Luke’s Mid America Heart Institute, a partnership with Saint Luke’s Cardiovascular Consultants » Cabot Westside Health Center, a Spanish-language primary-care center in Kansas City, Mo. » Kansas City Orthopaedic Institute, a joint venture with orthopedic providers in Leawood, Kan. » Three acute-care hospitals outside the Kansas City market: Anderson County Hospital, Garnett, Kan.; Hedrick Medical Center, Chillicothe, Mo.; Wright Memorial Hospital, Trenton, Mo. Sources: HealthLeaders-InterStudy; based on data from Billian’s HealthDATA. Description The nonprofit, faith-based Saint Luke’s Health System is locally owned. Its flagship Saint Luke’s Hospital is the third-busiest hospital in the market (Billian’s inpatient discharge data). Saint Luke’s Health System accounts for 16 percent of inpatient discharges and 14 percent of total acute-care beds (most recent federal Medicare hospital statistics). The average occupancy rate is 35 percent and the average length of stay is 4.9 days. Medicare and Medicaid account for an average 39 percent and 11 percent, respectively, of acute-care discharges. Saint Luke’s Hospital is nationally recognized for its heart institute, which has the largest team of cardiologists and surgeons in the region, as well as for its Brain and Stroke Institute. Its Saint Luke’s Cancer Institute is the only hospital licensed by Missouri and Kansas specifically for cancer services, and it has more than 130 clinical trials under way. Saint Luke’s Hospital is the primary teaching hospital for the University of MissouriKansas City School of Medicine and is the home of Saint Luke’s College of Nursing. Saint Luke’s other five hospitals surround the city. Saint Luke’s Northland Hospital has a location in Kansas City, with a sleep-disorders center and an ear, nose and throat center. Its companion on the city’s northeastern side is in Smithville, with services for rehabilitation and behavioral health. Cushing Memorial Hospital, in the northwest corner of the market, offers women’s health and substance-abuse treatment. Saint Luke’s East-Lee’s Summit is in the southeastern quadrant, offering a Level II NICU, a sleep-disorders center and a diabetes center. Saint Luke’s South specializes in cardiac diagnostic testing and includes the Goppert Center for Breast Care. It also offers diabetes care and outpatient surgery. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 16 BACK TO CONTENTS News and Analysis Saint Luke’s Health System’s new CEO, Melina Estes, says the system is focused on providing high quality care in a cost-effective way to prepare the system to move toward population-based care in the future. The system has been piloting a value-based contract with Blue Cross and Blue Shield of Kansas City as its first foray into alternative reimbursement models. Expect it to lead the way in the market in alternative payment models as it’s the first health system in the area to join a value-based contract. In other initiatives, Saint Luke’s Focus 2015 effort charges teams of employees with finding ways to cut costs and create efficiencies, and the system is expanding its Saint Luke’s East-Lee’s Summit campus with a new five-story building. Value-based contract: In April 2012, Saint Luke’s Health System signed a new value-based contract with Blue Cross and Blue Shield of Kansas City. The first of its kind in the Kansas City market, the Collaborative Value Program builds on BCBS’ patient-centered medical home program with primary-care physicians and extends the reimbursement model to the hospital environment. Saint Luke’s 11 hospitals, including all seven in the Kansas City market, and the health system’s employed physicians will form a fully integrated delivery system that shares patient information and claims data with the goals of improving care, expanding access and lowering costs. Incentives paid by BCBS will be based on goals such as avoiding unnecessary procedures and reducing hospital admissions, readmissions and emergency room visits. The health plan said it anticipates reducing costs about 5 percent per patient, savings which will be split between the insurer and the health system. Saint Luke’s said the implementation of the program has been time intensive and that it will evaluate performance on both cost and quality in the first quarter of 2014. Financial performance: The health system is working to cut $100 million in spending through its Focus 2015 internal campaign. So far, the system plans to automate lab tests to save money and create a floating nursing pool to assign nurses to understaffed facilities (Kansas City Business Journal). Expansion plans: Saint Luke’s Hospital capped a five-year, $330 million expansion and renovation project in late 2011 when it opened its new heart center, the Mid America Heart Institute. A major expansion project at Saint Luke’s East is now under way: » » An expansion of Saint Luke’s East-Lee’s Summit, launched in June 2011, will add a fifth floor to the existing hospital and include construction of a new, five-story building with a larger emergency department and operating rooms. In June 2012, the project was expanded to an $80 million price tag by adding medical and radiation oncology services to the patient-services building. The emergency department expansion was completed in 2012, adding 10 beds. The patient services building is scheduled for completion in late 2013 and will include Saint Luke’s East Cancer Center on the first floor. The second floor is completed and includes a new 12-bed Level III NICU. The fourth floor will hold a new 16-bed ICU, equipped with Saint Luke’s eICU, and will open in March 2013. The fifth floor will be the new and expanded home of the Saint Luke’s Cancer Institute, providing all services in one space. After all expansions are complete in 2014, the hospital will have 171 beds with a full build-out capacity for 209 beds. » » Saint Luke’s opened its expanded Neuroscience Institute with $32 million in upgrades in January 2013. The expansion provides facilities for new programs like the minimally invasive spine center. It includes four neurological operating rooms, 13 recovery beds, three neuro-interventional suites, an expanded epilepsy monitoring unit, an 18-bed neuroscience intensive care unit and 68 private patient rooms. » » In July 2013, Cushing Memorial Hospital changed its name to Saint Luke’s Cushing Hospital. The name also comes with plans for $20 million in upgrades to facilities and services. The upgrades include expansion of the maternity center’s nursery from five to eight beds, an emergency department expansion, renovations to the medical-surgical unit, a new ICU, and expanded outpatient capacity through a remodel of the Medical Plaza Building (Saint Luke’s press release, accessed August 2013). Partnership: Saint Luke’s has partnered with three hospital systems in the Midwest to improve buying power and share staff expertise in order to combat rising costs and declining government reimbursements. The partnership includes St. Louis behemoth BJC HealthCare, CoxHealth in Springfield, Mo., and Memorial Health System of Springfield, Ill. The alliance is called the BJC Collaborative LLC and is modeled on a part- 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 17 BACK TO CONTENTS nership of three major systems in Maryland, North Carolina and Virginia. Those systems, MedStar, Novant Health and Sentara Healthcare, formed MNS Supply Chain Network LLC to better leverage buying power. The BJC alliance will focus its efforts on group purchasing, contracted services, information technology and clinical engineering. Cancer care: In September 2012, Saint Luke’s launched a cancer survivorship program, designed to help patients recover from the physical and emotional side effects of cancer therapy. Transplant program: Saint Luke’s Hospital resumed its liver transplant program in December 2011 after an 18-year hiatus. The hospital will compete with KU Hospital, which has had a liver transplant program since 1990. Saint Luke’s also expanded its heart and kidney transplant programs in 2011. Information technology initiatives: Saint Luke’s Health System offers RelayHealth, an online communication tool developed by McKesson that allows patients to schedule appointments, refill prescriptions, request lab or test results and maintain a personal health record from a computer. The system’s webVisit feature, which is covered by most insurance plans, allows patients to consult with a physician via the Web for the cost of a normal office-visit copay. In 2010, Saint Luke’s became one of 15 provider organizations using RelayHealth’s Connected Orders solution, which automates the test-ordering process among ambulatory-care physicians, hospitals, freestanding labs and imaging centers. Grant: Saint Luke’s received a grant in early 2012 from the March of Dimes to study the medical results of delivering babies early in order to reduce this practice. Quality programs: GE Healthcare designated Saint Luke’s its first-ever “healthymagination” stroke solution site in 2012 after evaluating hospital statistics. Saint Luke’s patients have a 50 percent higher likelihood of going home after discharge compared to patients of other stroke centers and spent 27 percent less time in the hospital (Kansas City Business Journal). Clinical trials: Saint Luke’s Cancer Institute’s clinical research department enrolls patients in nearly 100 National Cancer Institute trials, along with nine drug trials sponsored by pharmaceutical compa-nies. Cancer studies include blood and marrow transplants, breast cancer, chemotherapy, gynecological oncology and pharmaceutical agents. Contracting: In December 2012, Saint Luke’s Health System renewed its contract with Cayman Islands National Insurance Co., the largest public insurer in the Cayman Islands with more than 13,000 members, as its preferred provider for non-urgent heart care. Saint Luke’s physicians travel from Kansas City to the Cayman Islands about three times a month to see patients at the Heart Health Centre on Grand Cayman. Patients in need of more specialized services are referred to Saint Luke’s in Kansas City. Key personnel changes: Melinda Estes became the new CEO of Saint Luke’s Health System in September 2011. Estes is a neuropathologist and former CEO of Fletcher Allen Health Care. Estes replaced Richard Hastings, who retired after 15 years as CEO. Saint Luke’s hired Leonardo Lozada, M.D., as its chief physician executive in November 2012. Lozada will oversee alignment and integration strategies, and replaces retired Dr. George Pagels. Lozada came from Riverside Methodist Hospital in Columbus, Ohio. Awards: Saint Luke’s Hospital ranked No. 2 in the metro area for best hospital and ranked for high-performing specialties in ear, nose and throat, nephrology and gynecology (U.S. News & World Report). Saint Luke’s Hospital is recognized as a Magnet facility by the American Nurses Credentialing Center, the credentialing arm of the American Nurses Association. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 18 BACK TO CONTENTS The University of Kansas Medical Center Table 4-3 Local hospitals: Local hospital beds: Physicians employed: Physicians affiliated: PBM: GPO: 2 595 N/A 647 Caremark N/A Acute-care hospitals: » The University of Kansas Hospital, Kansas City, Kan., 576 beds » The University of Kansas Hospital – Indian Creek Campus, Overland Park, Kan., 19 beds Major outpatient centers: » KU MedWest, an urgent care, breast imaging, primary care and occupational health center in Shawnee, Kan. Physician groups: » University of Kansas Physicians, 647 physicians Other details: » The Richard and Annette Bloch Cancer Care Pavilion, Westwood, Kan. » Four urgent care locations in Shawnee, Kan., Gladstone, Mo., Westwood, Kan., and Kansas City, Kan. » Women’s Health Specialty Center in Overland Park, Kan. Sources: HealthLeaders-InterStudy; based on data from Billian’s HealthDATA. Description The University of Kansas Medical Center owns and operates The University of Kansas Hospital, which is a semi-private healthcare organization affiliated with—but independent from—The University of Kansas School of Medicine and School of Nursing and the state of Kansas. It is the primary teaching hospital for the university’s School of Medicine. KU Medical Center accounts for 10 percent of inpatient discharges and 10 percent of total acute-care beds (most recent federal Medicare hospital statistics). The average occupancy rate is 73 percent and the average length of stay is 6.0 days. Medicare and Medicaid account for an average 29 percent and 16 percent, respectively, of acute-care discharges. KU Medical Center offers a Level I trauma center and is known for its Richard and Annette Bloch Cancer Care Pavilion, its Center for Advanced Heart Care and its Mark A. Asher, M.D., Comprehensive Spine Center. The hospital also is nationally known for its treatment of neurological disorders, as well as its Comprehensive Epilepsy Center. It houses the region’s only burn center. KU opened its first inpatient facility outside of the main campus in 2012, the University of Kansas Hospital– Indian Creek Campus, which offers surgeries and imaging. KU Medical Center’s physician practice, University of Kansas Physicians, is one of the largest in the state and offers more than 200 specialties. News and Analysis The University of Kansas Hospital continues to set patient volume records, leading it to open Indian Creek Campus, its first inpatient facility outside of its main campus, in June 2012, and add 84 new beds at the main hospital. Its newest undertaking is an agreement to share a pediatric alliance with Children’s Mercy Hospital & Clinics, a move the community has applauded as an effort to share specialists instead of creating more 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 19 BACK TO CONTENTS competition. The hospital’s biggest news, however, was its cancer program realizing its long-sought goal of becoming a National Cancer Institute–designated center, which will increase clinical trials and federal funding. Financial performance: The University of Kansas Hospital reported revenue of $1 billion for fiscal year 2012, up 22 percent from the previous year. The increase is partly due to the inclusion of the first full year of revenue from the hospital’s merger with Kansas City Cancer Center. The hospital spent $41.8 million on uncompensated care. In April 2012, it laid off 80 administrative employees. The University of Kansas Hospital continues to set patient volume records. Inpatient discharges in fiscal year 2012 reached 28,331, up from 26,998 in 2011. The number continues to steadily rise. Outpatient volumes rose more than 45 percent to 530,918 encounters compared to 365,223 in 2011. Both Fitch and Standard and Poor’s have confirmed the hospital’s A+ bond rating, reflecting a stable future and positive outlook for the growth of the hospital. Pediatric partnership: Competitive pressures from other health systems have spurred The University of Kansas Hospital, The University of Kansas Medical Center and University of Kansas Physicians to develop a pediatric alliance with Children’s Mercy Hospital & Clinics. While such a partnership had been viewed as positive for the community for a long time, politics and obstacles such as the hospitals being in different states with different Medicaid and malpractice insurance laws kept it from happening. The partners plan to improve services across the market and have the new combined pediatric network in action by late 2013. Two catalysts for the alliance were the contributions Children’s Mercy made to help KU secure National Cancer Institute designation and a $20 million Clinical and Translational Science Award. National Cancer Institute designation: In July 2012, KU Medical Center became the country’s 67th NCIdesignated cancer center. Attaining designation had been a top priority of the hospital since 2005 and required an investment of more than $350 million to build laboratory space, expand research capacity and recruit top-tier researchers. Central to the hospital’s NCI application was its recent merger with Kansas City Cancer Center, which created one of the largest academic cancer-treatment programs in the country. With its application approved, KU Medical Center is in line for additional federal research dollars and access to clinical trials available only to patients at NCI-designated centers. Me rger: As the result of KU Cancer Center’s merger with Kansas City Cancer Center in June 2011, the cancer treatment program has 52 physicians and 12 outpatient locations serving up to 10,000 patients annually. The merger provides the larger patient population needed to recruit subjects for cancer-drug clinical trials. It also prevents KU Medical Center from having to further expand its Richard and Annette Bloch Cancer Care Pavilion in Westwood. Kansas City Cancer Center’s nonphysician staff became employees of KU Hospital under the merger, while the center’s oncologists, hematologists and radiation oncologists became faculty members of The University of Kansas School of Medicine. U.S Oncology, the for-profit management company that previously owned Kansas City Cancer Center, continues to supply cancer drugs and computer services and is keeping its research studies open to KU patients. The combined program has 216 clinical trials of new drugs and treatments. In March 2012, The University of Kansas Cancer Center named Terance T. Tsue its first physician-in-chief. Tsue is an otolaryngology head and neck surgeon who will lead clinical oversight of the cancer program. Tsue has been on the KU School of Medicine faculty since 1996. Expansions: KU is planning future construction on undeveloped land near its main campus. Other clinical expansions include: » » The hospital added 84 new beds and three new floors in summer 2012 to accommodate growing patient volume. Officials said there have been times when the hospital was completely full. The project cost $57 million. The expansions added beds for heart, neuroscience and ear, nose and throat patients and a 20-bed ICU. The hospital is asking the state to increase its licensed limit from 620 to 745 adult beds. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 20 BACK TO CONTENTS » » KU Hospital opened its first inpatient treatment facility outside its main campus by acquiring an Overland Park building that was previously occupied by Heartland Surgical Specialty Hospital. The renamed Indian Creek Campus opened in June 2012. The 42,000-square-foot facility has seven operating rooms, 19 inpatient beds and offers diagnostic imaging. Under the deal, KU Hospital absorbed more than 130 of the specialty hospital’s employees. Heartland’s 32 physicians were not part of the transaction and plan to relocate their facility. KU Hospital has seen double-digit growth in surgeries and needed more space for treatment. Six inpatient specialties are available there: orthopedic surgery, plastic surgery, general surgery, urology surgery, interventional radiology and pain management. Two satellite clinics also have opened on the new campus: the Center for Sports Medicine and the Comprehensive Spine Center. » » The system opened the Clinical Research Center in Fairway in January 2012 to provide KU with a place to conduct Phase 1 clinical trials. The $19 million project will help KU Medical Center’s Cancer Center expand its portfolio of drug studies. The center will start out with 10 Phase 1 trials and grow to 25 or 30 trials involving 300 or more patients. That volume would place KU among the top clinical research centers in the country. » » In March 2012, KU Hospital opened a women’s heart health center on the first floor of the Center for Advanced Heart Care. » » In an effort to bring more physicians to the area, KU is requesting $25 million from a FICA refund and $15 million in tax dollars to aid in building a new $75 million health education building. The proposed seven-story building would offer new technology to train physicians. The new building would also help KU increase its number of medical students from 175 to 225. The proposed plan was introduced in the 2013 state budget but was eventually sidelined. Gov. Sam Brownback will reintroduce the budget request in the 2014 legislative session (Lawrence Journal World, accessed August 2013). Heart transplant program: KU Hospital said in April 2012 that it is planning to renew its heart transplant program, putting it in direct competition with Saint Luke’s Hospital. KU closed its heart transplant program in 1995 after problems with the program were reported in the local newspaper. The hospital has since upgraded its facilities and personnel. Observers have questioned the need for two heart transplant programs in one market, but KU officials say the demand for heart transplants is growing. In 2009, 18 Kansas residents received new hearts. That number grew to 32 in 2010. Physician relationships: The majority of physicians affiliated with KU Medical Center are employed by University of Kansas Physicians Inc., a nonprofit entity of The University of Kansas School of Medicine. The only physicians that KU Medical Center directly employs are in the emergency and cardiology departments. KU Medical Center and KU Physicians have been working toward clinical integration for several years, and physicians are closely involved in the hospital’s strategic planning, including recruitment of physicians for growing clinical service lines such as the transplant program and oncology. Telemedicine: KU Medical Center’s Center for Telemedicine and Telehealth provides clinical telemedicine services in 42 Kansas counties with a particular focus on behavioral and mental health. Clinical trials: KU Medical Center joined the Network for Excellence in Neuroscience Clinical Trials, or NeuroNEXT, in October 2011. Using a $2 million, seven-year grant, KU Medical Center will test new medications and therapies for patients with neurological conditions, including neuropathy, seizures, strokes and spinal muscular atrophy. The hospital also will collaborate with Children’s Mercy Hospital & Clinics and The University of Kansas’ Life Span Institute and Child Development Center in Lawrence. Information technology initiatives: KU Medical Center uses electronic medical records from Epic Systems Corp. and is working on complete connectivity to all its physician offices and clinics. Technology: KU Hospital is using a GPS-like technology for certain cardiac procedures called MediGuide. The technology exposes patients to less radiation. KU Hospital is the first to use the technology in the U.S. (Kansas City Business Journal). 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 21 BACK TO CONTENTS Grants: In 2012, KU Med received a $100,000 grant for ovarian cancer research from the Mary Kay Foundation. Key personnel changes: Dr. Douglas Girod will assume leadership of The University of Kansas Medical Center in February 2013 as its executive vice chancellor. Girod succeeds Barbara Atkinson, who retired in June 2012. Awards: The University of Kansas Hospital was named the best hospital in the Kansas City area. It is a top-ranking facility in Kansas City for cancer, diabetes and endocrinology, gastroenterology, nephrology, pulmonology, cardiology and heart surgery, ear, nose and throat, geriatrics, neurology and neurosurgery and urology (U.S. News & World Report). KU Medical Center is recognized as a Magnet facility by the American Nurses Credentialing Center, the credentialing arm of the American Nurses Association. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 22 BACK TO CONTENTS Other Health Systems and Hospitals Truman Medical Centers’ two hospitals, Truman Medical Center Hospital Hill and Truman Medical Center Lakewood, are the area’s safety-net hospitals and provide about a third of uncompensated care in the metro area. Truman Medical Centers accounts for 8 percent of inpatient discharges and 10 percent of total acute-care beds in the local market. The average occupancy rate is 47 percent and the average length of stay is 5.0 days. Medicare and Medicaid account for an average 15 percent and 31 percent, respectively, of acute-care discharges (based on the most recent federal Medicare hospital statistics from Billian’s HealthDATA). CEO John Bluford estimated that about 10,000 to 15,000 of his hospitals’ uninsured patients would qualify for Medicaid under healthcare reform expansion, adding about $20 million to $50 million in revenue to the system over seven years (The Kansas City Star). Truman Medical Center Lakewood has opened a temporary clinic in western Independence called Fairmount Family Medical Care while it builds a $2 million facility in the area. The system will receive about $5 million over three years through a grant for safety-net providers from the Center for Medicare and Medicaid Innovation. The money will be used to create healthcare teams to work in Kansas City neighborhoods to prevent emergency room visits and hospital stays. A McDonald’s restaurant inside Truman’s Hospital Hill location closed in November 2012 as the system endeavored to send a message about healthy eating. In October 2011, the Lakewood hospital expanded its labor and delivery department. Truman Medical Centers uses an electronic system developed by Cerner for monitoring and treating patients with bedsores. If a bedsore is present, the condition is noted in a patient’s electronic medical record, which automatically triggers regular examinations depending on the risk and severity. Networked computer systems at nurses’ stations and at patients’ bedsides also issue reminders when a patient needs to roll over. Between June 2010 and May 2011, bedsores among Truman patients dropped 32 percent for an estimated savings of $1.4 million (The Kansas City Star). Shawnee Mission Medical Center is a nonprofit member of the Seventh-day Adventist Church’s Adventist Health System, the nation’s largest Protestant healthcare system. Shawnee Mission operates the busiest emergency department in Johnson County and also delivers the most babies in Kansas City, with nearly 4,000 births annually. Its 54-acre campus includes an outpatient surgery center, a community health education building and six physician office buildings. Shawnee Mission Medical Center also operates a walk-in clinic in a Hy-Vee store and has a cancer facility on its campus that it opened in 2009 with Kansas City Cancer Center. Shawnee Mission Urgent Care in Lenexa is a partnership with CorporateCare Lenexa, offering urgent-care and occupational health services. In May 2011, Shawnee Mission Medical Center broke ground on a $42 million expansion of its birthing center. Scheduled to open in March 2013, the new birthing center will include 26 labor and delivery rooms, 43 private postpartum rooms and 24 private Level III NICU beds to provide single-family NICU rooms for mothers and their babies. The expansion will add three floors and 76,000 square feet to the hospital’s birthing unit, which will accommodate up to 5,000 births annually. Shawnee Mission Medical Center opened the final phase of a $114 million critical care tower in March 2011 that increased the hospital’s bed count from 383 to 504 beds. The hospital is pursuing adding a three-story medical office building in 2013. It also has land in Johnson County for future expansion. Shawnee Mission Medical Center launched a fully integrated electronic medical records system in August 2011 that allows for computerized provider order entry. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 23 BACK TO CONTENTS In March 2012, the hospital named Ken Bacon its new CEO. He was previously at Littleton Adventist Hospital in Colorado. CEO Sam Turner retired in December 2011. North Kansas City Hospital is profitable, but city officials are concerned that it will have trouble competing as an independent hospital in the future. Hospital officials filed suit against the city in summer 2012 to stop a potential sale to HCA, claiming that the city lacks the legal authority to sell the hospital. The city council has since denied any plans to sell the hospital. The hospital has been expanding its ER to accommodate up to 80,000 patients annually, which hospital officials say is needed because of healthcare reform. The hospital also has a subsidiary, Meritas Health Corporation, which has launched a commercial ACO with Cigna. Meritas is a network of 82 physicians. Carondelet Health is expected to have its two hospitals in the market, St. Joseph Medical Center (which includes Carondelet Heart Institute) and St. Mary’s Medical Center, acquired by HCA Midwest Health. An official agreement has been signed that will allow the two hospitals to join HCA by the end of 2013. Carondelet is a faith-based system and member of St. Louis–based Ascension Health. The Children’s Mercy Hospital has two hospitals, Children’s Mercy Hospital & Clinics and Children’s Mercy South. Children’s Mercy Hospital & Clinics is recognized as a Magnet facility by the American Nurses Credentialing Center. Children’s Mercy Hospital & Clinics is aligning its pediatric program with The University of Kansas Hospital through a partnership that will eventually share one network of pediatricians. (See The University of Kansas Medical Center profile for more details.) Children’s Mercy spent $177 million in 2011 on charity and uncompensated care. The hospital is currently performing about 100 clinical trials for pediatric cancers and continues to pursue the goal of developing a pediatric heart transplant program. Other news includes: » In January 2013, Children’s Mercy became the first area hospital to ban the sale of sugary drinks as part of a program to eliminate childhood obesity. » In December 2012, Time magazine named Children’s Mercy Hospital & Clinics to its list of top medical breakthroughs for its development of rapid genome sequencing. The process takes 50 hours and allows physicians to diagnose a critically ill child faster than standard genetic testing. » In May 2012, Children’s Mercy signed a deal with Zhujiang Hospital in Guangzhou, China, for telemedicine consultations. The 2,500-bed hospital lacks specialization in pediatric radiology, so Children’s Mercy will perform five to 10 pediatric radiology consultations a week and ultimately swap physicians and radiology technicians between the two hospitals for training. Children’s Mercy also provides telemedicine services in Cape Girardeau and St. Joseph. » In January 2012, Children’s Mercy opened an urgent care clinic in Overland Park to replace the one it closed when Children’s Mercy South opened the Tom Watson Emergency Department. Liberty Hospital opened an outpatient clinic in August 2012 adjacent to its hospital campus with 39 exam rooms to accommodate patient demand. The clinic houses the hospital’s 16-physician primary-care group, The Liberty Clinic, and offers an electronic medical record system. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 24 BACK TO CONTENTS Table 4-6: Kansas City Hospitals Name The University of Kansas Hospital City Kansas City, Kan. North Kansas City Hospital North Kansas City, Mo. 407 Saint Luke’s Hospital Kansas City, Mo. 395 Research Medical Center Kansas City, Mo. 388 Shawnee Mission Medical Center Shawnee Mission, Kan. 353 Truman Medical Center Lakewood Kansas City, Mo. 315 Children’s Mercy Hospital & Clinics Kansas City, Mo. 263 Truman Medical Center Hospital Hill Kansas City, Mo. 262 Liberty Hospital Liberty, Mo. 251 Overland Park Regional Medical Center Overland Park, Kan. 244 St. Joseph Medical Center (includes Carondelet Heart Institute) Kansas City, Mo. 238 Olathe Medical Center Olathe, Kan. 228 Centerpoint Medical Center Independence, Mo. 221 Excelsior Springs Medical Center Excelsior Springs, Mo. 170 Menorah Medical Center Overland Park, Kan. 158 Providence Medical Center Kansas City, Kan. 158 St. Mary’s Medical Center Blue Springs, Mo. 131 Saint Luke’s Northland Hospital (Barry Road and Smithville campuses) Kansas City, Mo., and Smithville, Mo. 130 Saint Luke’s East-Lee’s Summit Lee’s Summit, Mo. 113 Saint Luke’s South Overland Park, Kan. 104 Belton Regional Medical Center (formerly Research Belton Hospital) Belton, Mo. 71 Lee’s Summit Medical Center Lee’s Summit, Mo. 64 Bates County Memorial Hospital Butler, Mo. 60 St. John Hospital Leavenworth, Kan. 59 Children’s Mercy South Overland Park, Kan. 54 Cameron Regional Medical Center Cameron, Mo. 53 Heartland Spine & Specialty Hospital Overland Park, Kan. 48 Ransom Memorial Hospital Ottawa, Kan. 47 Cass Regional Medical Center Harrisonville, Mo. 35 Saint Luke’s Cancer Institute Kansas City, Mo. 30 Lafayette Regional Health Center Lexington, Mo. 25 Ray County Memorial Hospital Richmond, Mo. 25 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company Beds 576 25 BACK TO CONTENTS The University of Kansas Hospital – Indian Creek Campus Overland Park, Kan. 19 Miami County Medical Center Paola, Kan. 18 Doctors Hospital Leawood, Kan. 10 Kansas City Orthopaedic Institute (alliance between area orthopedic providers and Saint Luke’s Hospital) Leawood, Kan. 9 The Institute for Advanced Bariatric Surgery Lenexa, Kan. 9 Saint Luke’s Cancer Institute Kansas City, Mo. 6 VA Eastern Kansas Health Care System Leavenworth, Kan. N/A Kansas City VA Medical Center Kansas City, Mo. N/A Sources: HealthLeaders-InterStudy, 2013; based on data from Billian’s HealthDATA, 2012. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 26 BACK TO CONTENTS Physicians Table: Situation Analysis O THIS SECTOR IS: NEUTRAL Sector Outlook Despite the dominance of health systems in Kansas City, independent physicians have taken matters into their own hands and beaten health systems to the goal of launching Kansas City’s first accountable care organization. Independent physicians heard rumblings that multiple payers and influential hospital systems were forming exclusive networks—networks that could threaten the already precarious bottom line of independent practices. Through the Kansas City Metropolitan Physicians Association, a partnership of independent physicians, they aligned to form the first Medicare Shared Savings Program ACO in the market, announced in January 2013. Such foresight and boldness by independent physicians in order to compete with health systems is unusual, so expect this move to pay off for independent physicians in this market in the future and perhaps even ensure their survival. Missouri’s independent physicians suffered a setback in October 2012 when Missouri’s Supreme Court overturned the state’s economic damages cap in medical malpractice cases. This means premiums for physicians on the Missouri side of the market could rise dramatically until a new law can be passed, possibly forcing some physicians to move to the Kansas side. Hospitals will likely pick up the higher tab for employed physicians, which now make up more than half of the market. Expect Missouri lawmakers to find some path to a new law to reinstate the cap. Highlights: » Market composition: More than half of Kansas City’s physicians are now employed by health systems. The largest groups in the market are affiliated with health systems: HCA Midwest Comprehensive Care, Saint Luke’s Care, University of Kansas Physicians and Midwest Physicians. Independent physicians are joining together to compete in the market through a partnership called Kansas City Metropolitan Physicians Association. » Consolidation: Consolidation in this sector has been rapid over the past several years. HCA-affiliated Midwest Physicians purchased 60-physician College Park Family Care Center in January 2013 in one of the largest acquisitions to date. In 2011, The University of Kansas Medical Center made a splash in the market and the region as a whole when it acquired Kansas City Cancer Center, merging the center’s assets and 27 oncologists with its own cancer services. That same year, 20 independent trauma, orthopedic and spinal surgeons partnered with North Kansas City Hospital under a co-management model that rewards physicians for meeting quality measures. There are signs that the pace of consolidation may be slowing, however, as most of the large groups that can be acquired have been acquired. While hospitals still report getting calls weekly from physicians wanting to integrate, most of these are now small practices. There’s evidence too that the pendulum is swinging back toward autonomy, as some practices are actually spinning off from health systems as they realize they’ve lost some critical autonomy they want back. » Physician supply: The Kansas City market has an ample supply of primary-care and specialty physicians. However about 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 27 BACK TO CONTENTS 40 percent of Kansas City physicians expect to retire within the next decade, fueling concerns that a shortage is looming (Metropolitan Medical Society of Greater Kansas City). To address the issue, the medical society has partnered with local professional and civic groups to create KCMedNet, a regionspecific, physician-recruiting website that promotes Kansas City’s quality of life and serves as a repository for clinical research studies. The medical society says KCMedNet had a successful year in 2012, placing about 10 to 15 physicians in the market. Recruitment will continue to be a central function of the area’s medical society. » Accountable care organizations: Kansas City’s first ACO was launched in early 2013 by a group of 202 independent, mostly primarycare physicians. It is one of the new participants in the Medicare Shared Savings Program announced in January 2013. The ACO, KCMPA, is made up of 13 independent physician practices, three of which are designated patient-centered medical homes by the NCQA. The remaining practices are pursuing medical-home recognition. The ACO covers 11,880 lives in the Kansas City region in both Kansas and Missouri. Physician practices are located in six counties: Jackson, Johnson, Wyandotte, Miami, Clay and Platte. Some of the market’s independent primary-care physicians joined together a few years ago to form the Kansas City Metropolitan Physicians Association with the goals of attaining better leverage in negotiations with health plans and hospitals and moving toward alternative payment models. The group started with 77 primary-care physicians but eventually opened to specialists. When KCMPA realized that area hospital systems and payers were planning to form exclusive networks, a group of 13 practices from the association decided to be in the forefront of the movement and apply for the MSSP ACO. The group was accepted as an Advanced Payment ACO, meaning the group is given upfront money that it will later repay to be used to set up the infrastructure to implement an ACO. Physician AJ Delaney with Clay Platte Family Medicine, one of the groups in the ACO, said the physician practices are implementing a Cerner system to connect the electronic medical records systems of the 13 practices and provide data analysis for the ACO. The funding also will be used to hire pharmacists for the ACO, who will monitor medication adherence and encourage generic prescribing. Case managers, care coordinators and a chief medical officer of the ACO will also be hired. The 13 practices include: Blue Springs Family Care in Blue Springs, Mo.; Blue River Medical Group in Independence, Mo.; Primary Care Plus in Lee’s Summit, Mo., and Leawood, Kan.; Cobblestone Family Health in Liberty, Mo.; Stephanie M. Revels M.D. in Overland Park, Kan.; Spring Hill Family Medicine in Spring Hill, Kan.; Midtown Family Medicine, Clay Platte Family Medicine, Landmark Medical Center, Shoal Creek Family Medicine and Allergy, Barry Pointe Family Care, and Northland Family Care in Kansas City, Mo.; and Sunflower Medical Group with five locations in the metro area. » Medical homes: About 35 Kansas City-area physician practices are participating in the second wave of a medical-home pilot coordinated by TransforMED, a subsidiary of the American Academy of Family Physicians, on behalf of Blue Cross and Blue Shield of Kansas City. Under the pilot, launched with 13 practices in November 2009, BCBS of Kansas City pays practices a care-management fee to provide such services as open-access scheduling, extended hours and coordination of care, including the monitoring of patients’ adherence to prescription drug treatments. Another aspect of the payment structure that encourages practices to achieve recognition as patient-centered medical homes from the National Committee for Quality Assurance is being rolled out in phases. In June 2012, TransforMED received $21 million from the federal government to create patient-centered medical homes in Kansas and 10 other states. » Medical liability: In October 2012, the Kansas Supreme Court upheld a $250,000 cap on pain and suffering damages. In July 2012, the Missouri Supreme Court overturned the state’s $350,000 cap on noneconomic dam- 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 28 BACK TO CONTENTS ages by ruling the cap infringes on an individual’s right to a jury trial. Physicians are concerned that rates will rise in Missouri as insurers try to protect themselves from higher jury awards. The Missouri Insurance Coalition said medical malpractice premiums fell 28 percent in Missouri between 2004 (the year before the cap was put in place) and 2010. With the new differences in state law, Missouri physicians may consider moving their practices across state lines to Kansas to garner lower rates, which has happened in the past. Before Missouri instituted the cap, several hundred physicians left the state’s licensing rolls. While independent practices will have to endure rate increases or move, health systems are likely to bear the brunt of increases since many of the market’s physician groups are now employed. Missouri lawmakers appeared to make the issue a priority in the 2013 legislative session. Legislators promised to reinstate the cap in a constitutionally sound way, thought the bill died in committee. Expect to see the issue resurface in the 2014 session. Lawmakers are also pursuing a constitutional amendment to reinstate the cap, but it would be November 2014 before the amendment could get on the ballot. » Information technology: Numerous efforts are under way in both Kansas and Missouri to build health information ex-changes, but many have hit roadblocks. In September 2012, board members of the Kansas Health Information Exchange voted to dissolve the organization and transfer its duties to the Kansas Department of Health and Environment by October 2013. The move comes less than a year after the HIE hired former Blue Cross and Blue Shield of Kansas executive Bill Wallace as the group’s first CEO. The HIE is using federal funds, slated to expire in September 2013, to create policies for regulating regional HIEs already in operation. They include the Lewis and Clark Information Exchange, which serves providers in four states including Saint Luke’s Health System and Shawnee Mission Medical Center; the Kansas Health Information Network; the Wichita Health Information Exchange; and KC Carelink. In October 2011, Kansas Health Information Network merged with Kansas City-area exchange eHealthAlign, which shut down a month earlier after less than a year in operation. The two exchanges used systems developed by the same technology provider, allowing for a standardized approach across Kansas and western Missouri. The public-private Missouri Health Connection tapped North Kansas City-based Cerner Corp. to build Missouri’s statewide health information exchange. The exchange is being funded with the help of a $13.8 million federal grant. In August 2012, Missouri Health Connection named its first CEO, Mary Kasal. It chose InterSystems Corp. in July 2012 to provide the Internet platform. » Retail/urgent care: Retail clinics are proliferating in the Kansas City market. CVS Caremark’s MinuteClinic operates 18 clinics, while Walgreens’ Take Care Clinics has 17 locations in the market. The chains compete with numerous urgent-care clinics operated by local healthcare systems and hospitals, as well as with physician offices offering after-hours and weekend hours. In 2013, HCA Midwest Health System expects to open six urgent-care centers in the market with Tennessee-based CareSpot, saying there’s demand for more urgent-care facilities. Shawnee Mission Medical Center also operates a walk-in clinic inside a local Hy-Vee store. » Direct primary care: Austin, Texas-based WhiteGlove Health offers a membership-based service to employers in the Kansas City market that includes employee access to medical care at home or work (seven days a week, 8 a.m. to 8 p.m.); continuity of care across WhiteGlove service areas; and referrals to specialists. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 29 BACK TO CONTENTS HCA Midwest Comprehensive Care Table 5-1 Type: PHO Internal Guidelines: Yes Total Physicians: >2,000 Medical Management: Yes Primary-Care Physicians: 725 Clinical IS: Yes HCA Midwest Comprehensive Care is Kansas City’s largest physician/hospital organization. Founded in Kansas City, Mo., in 1986, the organization is a messenger-model PHO that acts as the contracting vehicle for several self-insured employers and small health insurance companies operating in Kansas City. Its network has more than 2,000 primary-care and specialty physicians and is affiliated with HCA Midwest Health System hospitals as well as other area hospitals, ambulatory surgery centers, physical/ occupational therapy clinics, hospice agencies, imaging centers and home healthcare services. HCA Midwest Comprehensive Care’s PHO network service area encompasses Johnson, Leavenworth and Wyandotte counties in Kansas and Cass, Clay, Jackson, Lafayette, Platte and Ray counties in Missouri. HMCC administers three independent physician associations with more than 1,200 primary-care and specialty physicians. Those groups are Eastern Jackson County Physicians Comprehensive Health Care, Johnson County Physicians Comprehensive Health Care and Midwest Physicians Comprehensive Health Care (separate from Midwest Physicians, profiled below). MPCHC includes about 100 primary-care physicians and 130 specialists. The group has 58 physician practices covering 77 locations. University of Kansas Physicians Table 5-2 Type: Academic Internal Guidelines: Yes Total Physicians: 647 Medical Management: Yes Primary-Care Physicians: N/A Clinical IS: Yes Founded in 1996, University of Kansas Physicians is The University of Kansas Medical Center’s physician practice and the largest multispecialty group in Kansas, representing more than 200 specialties. The group has clinical practice policies, services and systems, and maintains a formal relationship with the university and the KU School of Medicine through an affiliation agreement. Physicians practice at The University of Kansas Medical Center and KU MedWest, a satellite outpatient center offering same-day surgery in Shawnee, Kan. Saint Luke’s Care Table 5-3 Type: Quality-based Internal Guidelines: Yes Total Physicians: >600 Medical Management: No Primary-Care Physicians: 236 Clinical IS: Yes Saint Luke’s Care is a physician-led organization of more than 600 primary-care and specialty physicians affiliated with Saint Luke’s Health System. Participation is voluntary, although members must be active staff members at a Saint Luke’s Health System facility and commit to using evidence-based medicine in their practices as well as participate in clinical data collection and review. Physicians are organized into “best practice teams,” specialty-specific groups responsible for developing best-practice 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 30 BACK TO CONTENTS guidelines that are shared throughout the organization. To date, Saint Luke’s Care’s 10 best-practice teams have developed and deployed throughout the organization more than 150 standardized order sets, nursing guidelines and physician education modules. Saint Luke’s Care physicians use RelayHealth, a secure online communication tool that allows patients to schedule appointments, refill prescriptions and connect with a physician online without an appointment. Saint Luke’s Care is led by a governing board that reports to the Saint Luke’s Health System board of directors. More than 60 percent of Saint Luke’s Health System staff physicians are members of Saint Luke’s Care, one-third of which are employed by the health system. Midwest Physicians Table 5-4 Type: Group practice Internal Guidelines: N/A Total Physicians: 335 Medical Management: N/A Primary-Care Physicians: 153 Clinical IS: N/A Midwest Physicians is a group practice of 335 primary-care and specialty physicians affiliated with HCA Midwest Health System. The group’s physicians provide care at 105 locations in the Greater Kansas City metropolitan area. Although Midwest Physicians is separate from Midwest Physicians Comprehensive Health Care, an IPA managed by HCA Midwest Comprehensive Care, its physicians also participate in the HCA Midwest Comprehensive Care PHO. Midwest Physicians announced in January 2013 that it would purchase College Park Family Care Center, which has 10 locations in Johnson County, Kan. The 60-physician group said the affiliation would help it “navigate upcoming healthcare changes.” College Park already had a standing relationship with HCA’s Overland Park Regional Medical Center. College Park will retain its staff and name but will gain additional funds to expand clinics and upgrade its electronic medical records technology and telecommunications. A newly formed College Park Management Council, consisting of four College Park physicians and four representatives from HCA Midwest, will oversee the practice. A College Park physician will also serve on the HCA Midwest Physician Executive Council. College Park bills itself as a “Christ-centered medical practice” and received a commitment from HCA to support its mission trips. College Park is the second-largest group to affiliate with HCA, and HCA says it now has the largest group of primary-care physicians in the area. University Physician Associates Table 5-5 Type: Academic Internal Guidelines: N/A Total Physicians: >180 Medical Management: N/A Primary-Care Physicians: 56 Clinical IS: N/A Founded in 1972 as a nonprofit corporation, University Physician Associates is the teaching faculty organization for the University of Missouri-Kansas City School of Medicine. The group conducts most of its teaching of students and residents at Truman Medical Centers and serves patients in five locations. UPA manages and directs the compensation and benefit programs and generates physician fee billings. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 31 BACK TO CONTENTS Additional Physician Organizations » Olathe Medical Services: Olathe Medical Services is the physician group of Olathe Health System, which has two hospitals in the Kansas City market. It includes 98 active staff physicians providing services at Olathe Medical Center and Miami County Medical Center and 37 freestanding clinics. The group’s primary focus is family care, however it also offers specialty clinics for cardiovascular care, orthopedics and occupational medicine. The group operates as a patient-centered medical home. » Anesthesia Associates of Kansas City: With 89 physicians, Anesthesia Associates of Kansas City is the largest anesthesiology practice in the Kansas City market. The group provides anesthesiology, pain management and critical care services at eight hospitals, three surgery centers and private clinics in Missouri and Kansas. Its physicians also staff the pediatric intensive-care unit and the intermediate-care unit at The Children’s Mercy Hospital in Kansas City. » Saint Luke’s Medical Group: Saint Luke’s Medical Group is the employed physician group of Saint Luke’s Health System. It includes 85 primary-care and specialty physicians who practice at 14 clinic locations in the Kansas City area. The group has clinical practice guidelines developed through evidence-based research and uses Allscripts for its electronic medical records. The group is participating in a new value-based reimbursement program involving Saint Luke’s Health System and Blue Cross and Blue Shield of Kansas City. Launched in April 2012, the Collaborative Value Program extends BCBS’ patient-centered medical home program to the hospital setting. Saint Luke’s hospitals and employed physicians will form an integrated delivery network that shares patient information and claims data with the goals of improving quality and lowering costs. Any savings generated by the program will be shared between Saint Luke’s and BCBS. » Meritas Health: Meritas Health Corporation, a wholly owned subsidiary of North Kansas City Hospital, is composed of 82 physicians including specialties in family practice, internal medicine, pediatrics, obstetrics/gynecology, cardiology, surgery, ENT, integrative medicine, and occupational medicine. Meritas Health announced in April 2013 that it is partnering with Cigna to bring the first commercial ACO to Kansas City. Physicians are paid using a value-based model with targets for improving quality and lowering medical costs (Cigna press release, accessed August 2013). » Shawnee Mission Physicians Group: Shawnee Mission Physicians Group has 71 physicians partnered with Shawnee Mission Medical Center to serve patients in Johnson County. It offers six primary-care practices, one after-hours clinic, three specialty-care practices and six specialty clinics. Through NextMD, a free online portal, patients can ask medical questions, request appointments, refill prescriptions and review their medical records. » Kansas City Internal Medicine: KCIM is the region’s largest independent physician practice with 32 physicians, 14 mid-level providers and five locations that all offer urgent care. The practice is accredited as a NCQA Level 3 patient-centered medical home, the highest designation. It achieved its medical-home status through Blue Cross and Blue Shield of Kansas City’s medical-home pilot program. The group was created in 1980 when three internal medicine groups merged. It is located at Research Medical Center with in-office laboratory and imaging. In July 2012, KCIM acquired Weight Management Medical Center, an Overland Park-based practice that offers physician-supervised weight-loss programs. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 32 BACK TO CONTENTS » Signature Medical Group: This St. Louis-based multispecialty practice entered the Kansas City market in October 2011 with the addition of nine-physician Kansas City Bone & Joint Clinic and eight-physician Carondelet Orthopaedic Surgery. Signature has 101 physicians offering orthopedic, obstetrics/gynecology, gastrointestinal, allergy and dermatology services. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 33 BACK TO CONTENTS Health Plans Table: Situation Analysis O Table 6-1: THIS SECTOR IS: NEUTRAL Local & State Enrollment Commercial HMO: Commercial PPO: Commercial POS: Indemnity: Managed Medicaid: Managed Medicare: Local 84,064 718,309 371,269 12,772 209,405 84,024 State 123,067 1,739,708 1,103,328 39,958 418,381 261,598 Source: HealthLeaders-InterStudy, as of Jan. 1, 2013. Sector Outlook The Kansas City health plan sector is consolidating. Aetna acquired the market’s third-largest insurer, Coventry Health Care, and divested it of its Medicaid plan Missouri Care in order to operate Coventry’s larger Health Care USA. Aetna is now the second-largest insurer in the Kansas City market, trailing only Blue Cross and Blue Shield of Kansas City. Aetna also leads the local market in managed Medicaid enrollment, and Kansas’ expansion of managed Medicaid is an opportunity for MCOs to gain new enrollees in Kansas City. Blue Cross and Blue Shield of Kansas City will continue to lead the market in enrollment and in innovation, with its medical-home pilots and value-based contract with Saint Luke’s Health System that started in spring 2012. But Aetna’s new market share gives it more clout in contract negotiations and could result in more accountable care organizations, which Aetna already has in nearby St. Joseph, just north of the Kansas City market. Expect interest in BCBS of Kansas City’s defined-contribution plans to grow, and look for more alternative payment models coming from insurers. Highlights: » Market composition: The Kansas City health plan sector is moderately consolidated, with four managed care organizations accounting for 77 percent of local enrollment. Nonprofit Blue Cross and Blue Shield of Kansas City is the largest insurer, with a 28 percent market share. Aetna is second, with 20 percent of enrollment following its acquisition of Coventry. UnitedHealth Group comes in third, with 18 percent of enrollment, 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 34 BACK TO CONTENTS the bulk of which is in stand-alone point-of-service plans. Cigna is the fourth-largest MCO, with 10 percent of enrollment. » Acquisitions: In May 2013, Aetna finalized the purchase of Coventry Health Care for $5.7 billion, adding a total of 3.6 million medical lives and 4.6 million pharmacy lives to Aetna’s membership. The Coventry purchase makes Aetna the top insurer by total lives in Missouri and the second-largest insurer by total lives in Kansas. The acquisition also boosts Aetna’s presence in Medicaid and Medicare. In the Kansas City market, Aetna is now the second-largest MCO by total enrollment. Brokers say the downside of the acquisition is the loss of competition, leaving only four main insurance carriers for small groups. Aetna completed the sale of its Missouri Medicaid Plan, Missouri Care, to WellCare Health Plans in April 2013. Missouri Care has 26,821 members in the Kansas City market (HealthLeaders-InterStudy data). Aetna sold the Medicaid plan because of its acquisition of Coventry. The combination of Missouri Care and Coventry’s Health Care USA exceeded a membership maximum for Missouri Medicaid contracts. Health Care USA has 74,551 members in the Kansas City market (HealthLeaders-InterStudy data). » Private exchanges: BCBS of Kansas City continues to expand its defined-contribution products through a private exchange that is operated by the insurer. BCBS began offering defined-contribution products to small groups and individuals in January 2012 and expanded them to large-group clients in early 2013. The insurer partnered with Benefitfocus to set up its private insurance exchange. The defined-contribution option allows employers to offer their employees up to 10 different plan designs through the insurer’s private exchange. Plans offered include traditional PPO products (Preferred Care Blue) and those that can be paired with health savings accounts or health reimbursement arrangements, with deductibles for individuals ranging from $500 to $5,000. The BCBS of Kansas City Exchange also offers a plan called AffordaBlue that includes generics-only coverage with a $12 copay (HealthLeaders-InterStudy). The reception in the small-group market has been lukewarm, brokers say, but it’s possible large employers might find the plans more enticing. So far the plans do not offer large enough savings for employers to make the switch from defined benefit. Despite the slow reception, defined-contribution options sold via private exchanges are likely to grow in Kansas City due to the complications of operating a public exchange that must meet different laws in two states. The market will soon see additional private exchanges. Benefits firm Mercer, which has an office in Kansas City, announced in January 2013 that it was starting one. » Managed Medicaid: Three new Medicaid managed care contracts in Missouri became effective July 1, 2012. The three insurers that won the contracts are: Missouri Care, a subsidiary of Aetna (which is selling the plan to WellCare); Health Care USA, a subsidiary of Coventry Health Care; and Centene Corp. BCBS of Kansas City lost its Missouri Medicaid contract, representing about 31,000 members. The loss resulted in the layoff of 21 employees. Molina Healthcare, which had provided Medicaid coverage in Missouri for more than a decade, also lost its Medicaid contract. The state capped the contracts at three although five companies had been chosen in the past. The contracts are scheduled to last one year and could be renewed for two one-year periods. » Accountable care organization: Meritas Health, a physician network owned by North Kansas City Hospital, and Cigna have partnered to form an ACO that involves an estimated 5,300 Cigna members who currently receive care from Meritas physicians. The 82 physicians practice in 23 Kansas City locations. Individuals in the ACO 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 35 BACK TO CONTENTS will continue to see their current primary-care physicians and will be automatically enrolled in the program. Those who decide to enroll with Cigna health plans can later choose to seek care from a Meritas physician and will have access to the benefits of the program. Meritas Health nurses will serve as clinical care coordinators and help patients with chronic conditions navigate through the healthcare system. The coordinators are partnered with a team of Cigna case managers who keep track of the degree of collaboration between the provider and insurer. The physicians will receive value-based care payments determined by targets for improving quality and lowering medical costs (Cigna press release, accessed August 2013). » Medical loss ratio: In Missouri insurers rebated more than $60.6 million by Aug. 1, 2012, for 2011 premiums, averaging about $173 per family. In Kansas, insurers sent out rebates of about $15.3 million. BCBS of Kansas City did not issue rebates in the large-group market, but did in small group. UnitedHealthcare issued rebates in Missouri but not in Kansas. » Health insurance exchanges: In November 2012, Missouri voters approved a measure that would prohibit the governor or the state insurance department from implementing a health insurance exchange without legislative approval. As a result, Missouri’s health insurance exchange is managed by the federal government. The benchmark plan is Anthem Blue Cross and Blue Shield of Missouri’s Blue Access Choice PPO Medical Option 4 Rx Option D. In Kansas, Republican Gov. Sam Brownback decided to let the federal government run the state’s insurance exchange. The benchmark plan for essential health benefits is the state’s largest small-group plan, which is the Blue Cross and Blue Shield of Kansas City Comprehensive Plan. In Missouri, some of the state’s larger health plans—Cigna and UnitedHealthcare—have opted out of joining the federally run exchange. Cigna does not currently write individual policies in Missouri, and both carriers’ primary business is in the large group market. However, the plans have not ruled out joining the exchange after 2014 (St. Louis Post-Dispatch, accessed August 2013). Three health plans are offering coverage through the exchange in Kansas: Blue Cross and Blue Shield of Kansas, Aetna’s Coventry Health Care of Kansas, and Blue Cross Blue Shield of Kansas City, which offers coverage in two Kansas counties, Johnson and Wyandotte. » Retail insurance stores: In August 2013, Blue Cross and Blue Shield of Kansas City opened its first retail location in the Zona Rosa development of Kansas City. The surrounding area has around 300,000 uninsured individuals, and the Blue plan expects a new retail location will enroll some of those people. The primary focus of the store is to act as a wellness and education center. The 4,000 square-foot-location also has areas for fitness classes. The site will be staffed with sales professionals to aid current and potential customers through healthcare reform. BCBS of KC expects to open a second location in Prairie Village in fall 2013 (Kansas City Business Journal, accessed August 2013). Humana operates a retail insurance store, MarketPOINT, in Overland Park, Kan. MarketPOINT stores have been part of Humana’s national business model since 1997. At the stores, consumers meet with Humana representatives about individual health plans, Medicare, and other health insurance products. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 36 BACK TO CONTENTS Blue Cross and Blue Shield of Kansas City Table 6-3: Commercial Enrollment Fully Insured HMO: Self-Insured HMO: Fully Insured PPO: Self-Insured PPO: Fully Insured POS: Self-Insured POS: Indemnity: Local 55,663 0 233,821 129,690 0 0 0 Statewide 58,488 0 185,872 147,587 0 0 0 >>> Source: HealthLeaders-InterStudy, as of Jan. 1, 2013. Table 6-4: Government-Sponsored Enrollment Managed Medicaid: Medicare HMO: Medicare PPO: Medicare PFFS: Other Medicare: Local 0 0 0 0 0 Statewide 0 0 0 0 0 >>> Source: HealthLeaders-InterStudy, as of Jan. 1, 2013. Nonprofit Blue Cross and Blue Shield of Kansas City has the largest enrollment in Kansas City, accounting for 28 percent of the market. It has the largest PPO and second-largest HMO enrollment. BCBS of Kansas City’s Medicaid contract with Missouri was not renewed for July 2012, and it no longer has managed Medicaid enrollment. BCBS of Kansas City serves commercial members in 32 Missouri counties around Kansas City and St. Joseph, as well as two Kansas counties, Wyandotte and Johnson. It sells HMOs, PPOs, Medicare supplement and a consumer-driven product with a health savings account called BlueSaver. BCBS contracts with UMB Healthcare Services to provide the HSAs for its BlueSaver CDHP. In April 2012, BCBS of Kansas City signed a value-based contract with Saint Luke’s Health System, the second-largest health system in the Kansas City market. The Collaborative Value Program takes BCBS’ patient-centered medical-home program launched with primary-care practices in 2009 and expands the coordinated-care model into health systems with the goals of improving patient care, expanding access and lowering costs. BCBS expects the two-year program to save anywhere from $3 to $10 per member, per month, which it will share with Saint Luke’s hospitals and its employed physicians. Officials have said they are in discussions about implementing similar contracts with other health systems, although the program could differ by hospital. BCBS of Kansas City has rewarded physicians who operate patient-centered medical homes since 2009. It partners with TransforMED to operate a patient-centered medical-home pilot in the Kansas City market. About 35 physician practices are participating in the second wave of the pilot, which first launched in November 2009 with 13 practices. (See more detail about this initiative in the Physicians section of this report.) Blue Cross redesigned its incentives program, Points to Blue, in late 2012 after federal prosecutors filed charges against six Kansas City public employees and one Jackson County public employee for defrauding the insurance carrier through the wellness program. The employees allegedly claimed more than $300,000 in cash rewards for participating in activities such as races that they didn’t actually do. The new program, which started Jan. 1, gives points for verifiable activities such as getting blood pressure checks, completing a survey, participating in seminars and working with a health coach. BCBS of Kansas City is expanding its employer health and wellness program to include a wider range of services, including biometric screening scheduling, incentive tracking and redemption, worksite wellness classes and health management campaigns and competitions. The insurer has offered its wellness program, called A Healthier You, to large-group members since 2005. The expanded program, launched in January 2013, is a partnership with health management solutions company HealthFitness. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 37 BACK TO CONTENTS In November 2011, BCBS of Kansas City launched a private health insurance exchange, named BCBS of Kansas City Exchange, which allows individuals and small-group employers to choose from up to 10 different plan options. Benefit offerings range from those with richer coverage, such as a plan with a $500 deductible and branded-drug coverage, to high-deductible medical plans with drug coverage of only generics. Depending on how much an employer contributes, employees can use any remaining money after premium deductions to purchase additional benefits such as dental or vision. Or, if the plan they choose costs more than the employer contribution, employees can have the difference deducted from their paycheck. In January 2013, defined-contribution plans became available to large groups. BCBS of Kansas City is among a group of Blue plans nationwide that was questioned in 2011 by federal authorities for stifling competition in their markets through most-favored-nation clauses with providers. Such contracting provisions set a floor for how much the insurer will reimburse hospitals, ensuring that their competitors will not get better pricing. BCBS received a civil investigation demand from the Justice Department to provide information on its use of these provisions in contracts with hospitals and providers. BCBS of Kansas City partnered with Blue Cross and Blue Shield of North Carolina in January 2012 to consolidate back-office operations supporting both insurers’ individual and small-group plans. The jointly owned company, called Topaz Shared Services, oversees billing, claims processing and enrollment. Blue Cross and Blue Shield of Kansas City named Ravi Govila, M.D., as chief medical officer in October 2012. Govila came from BJC HealthCare in St. Louis, where he was system medical director. Govila replaced Blake Williamson, who retired. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 38 BACK TO CONTENTS Aetna Table 6-5: Commercial Enrollment Fully Insured HMO: Self-Insured HMO: Fully Insured PPO: Self-Insured PPO: Fully Insured POS: Self-Insured POS: Indemnity: Local 13,193 3,009 53,340 103,375 13,180 3,192 3,084 Statewide 29,938 6,689 187,198 269,863 35,219 25,083 8,950 >>> Source: HealthLeaders-InterStudy, as of Jan. 1, 2013. Table 6-6: Government-Sponsored Enrollment >>> Local Statewide Managed Medicaid: Medicare HMO: Medicare PPO: Medicare PFFS: Other Medicare: 74,551 12,968 17,632 0 0 253,489 56,735 19,184 0 0 Source: HealthLeaders-InterStudy, as of Jan. 1, 2013. After its acquisition of Coventry, Aetna has the second-largest total enrollment in the market, including the largest HMO and managed Medicaid membership. The carrier also has the second-largest PPO and managed Medicare enrollments. Aetna completed its $5.4 billion acquisition of Maryland-based Coventry Health Care in May 2013, and its executives plan a three-year staged integration of the two companies’ operations. For 2014, Aetna will continue the Coventry-branded commercial and Medicare products to maintain continuity and retain its customers as much as possible. Coventry-branded products are offered on the Missouri and Kansas state health insurance exchanges. Coventry will continue its PBM contract with Express Script’s Medco Health until it expires in 2014. Reflecting the importance of Missouri and Kansas to Coventry’s business, the insurer instituted a secondyear rate guarantee program for groups of two to 99 members in selected counties, guaranteeing that those groups’ second-year premium increases are capped at 9.9 percent. Coventry and Medco have a pilot initiative in the Kansas City and St. Louis markets that targets beneficiaries likely to be hospitalized and seeks to intervene before their symptoms require hospitalization or readmission. The pilot, called Coventry Outcomes Study of Seniors, includes 2,150 Coventry Advantra Medicare Advantage members. Coventry also sells individual policies, including high-deductible plans with health savings accounts. Some Coventry plans provide disease management services to members with chronic conditions such as diabetes, asthma, and coronary heart disease. Hartford, Conn.–based Aetna Inc. reported net income of $1.66 billion in 2012, a 17 percent decrease from $1.99 billion in 2011. Total revenue in 2012 was $35.54 billion, a 6 percent increase from revenue of $33.61 billion the prior year. Aetna had 18.2 million medical members (including 2.6 million members in consumerdriven health plans) nationwide as of Dec. 31, 2012, according to its annual report. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 39 BACK TO CONTENTS UnitedHealth Group Table 6-7: Commercial Enrollment >>> Local Statewide Fully Insured HMO: Self-Insured HMO: Fully Insured PPO: Self-Insured PPO: Fully Insured POS: Self-Insured POS: Indemnity: 618 0 12,560 5,142 43,129 156,001 6,030 9,542 18 65,118 15,015 183,653 466,612 21,771 Source: HealthLeaders-InterStudy, as of Jan. 1, 2013. Table 6-8: Government-Sponsored Enrollment >>> Local Managed Medicaid: Medicare HMO: Medicare PPO: Medicare PFFS: Other Medicare: 29,529 9,237 5,874 180 0 0 50,333 30,401 5,598 0 Statewide Source: HealthLeaders-InterStudy, as of Jan. 1, 2013. UnitedHealth Group is the third-largest managed care organization in Kansas City, where it is the leader in stand-alone POS membership and has the third-largest managed Medicare enrollment. UnitedHealthcare of the Midwest is the insurer’s HMO organization for Missouri, Kansas and southern Illinois. In February 2012, UnitedHealthGroup acquired Baltimore-based XLHealth, a provider of Medicare Advantage plans in 12 states including Missouri, where plans were offered under the Care Improvement Plus brand. XLHealth provides health plans for Medicare enrollees who have special needs, chronic illnesses, or are dual-eligible for Medicare and Medicaid. About 90 percent of XLHealth’s 117,000 members are in its Medicare Advantage Special Needs Plan. UnitedHealthcare completed a yearlong pilot program in 2011 with Kansas City Cancer Center that tested a new way to pay for oncology care. Under the pilot, which was focused on breast, colon, and lung cancers, UnitedHealthcare paid physicians a bundled payment for the entire course of a patient’s treatment regimen. OptumHealth, a subsidiary of UnitedHealthcare, is testing a new service in the Kansas City market that allows consumers to find a physician, schedule appointments and get medical advice for free. The program, called Curo, launched in December 2011 and could be expanded to other markets. OptumHealth contracts with local physicians, who are evaluated based on quality of care and cost, and then connects them with consumers based on their insurance plan, location and availability (Kansas City Business Journal). The Minnetonka, Minn.–based UnitedHealth Group reported net earnings of $5.14 billion for calendar year 2011, up from $4.63 billion in 2010. Revenues were $101.86 billion, up from $94.16 billion in 2010, while the operating margin was 8.3 percent, down slightly from 8.4 percent the previous year. At year-end 2011, the company had 39.4 million medical members (including stand-alone Medicare Part D enrollment), a 5 percent increase from 37.5 million medical members in 2010. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 40 BACK TO CONTENTS Table 6-11: Health Plans and Pharmacy 2-tier Design% 3-tier Design% 4-tier Design% $Rx Generic Copay $Rx Preferred Brand Copay $Rx Nonpreferred Brand Copay N/A 100% N/A $10.00 $50.00 $80.00 Aetna 8% 70% 10% $10.00 $35.00 $50.00 UnitedHealthcare 0% 89% 9% $10.00 $35.00 $60.00 Health Plan Blue Cross and Blue Shield of Kansas City Source: HealthLeaders-InterStudy, January 2013 Pharmacy Benefit Evaluator. Tier design is national company data for all Rx benefits; copay data is for the most typical plan offering. Table 6-12: Health Plans and Pharmacy Management Health Plan PBM(s) Blue and Cross Blue Shield of Kansas City Company Managed (Retail, Mail Order) CuraScript, Walgreens (Specialty) Aetna Pharmacy Management (Retail, Mail Order, Specialty) Aetna Accredo and Freedom Fertility (Specialty) UnitedHealthcare OptumRx (Retail, Mail Order) PBM Provides Formularies or Formulary Consultation? PBM Provides Consultations on Benefit Design? No No No No No No Source: HealthLeaders-InterStudy, January 2013 Pharmacy Benefit Evaluator. National company data. Table 6-13: Health Plans and Generics Percent Spent on Generics Percent Spent on Preferred Brands Percent Spent on Nonpreferred Brands Blue Cross and Blue Shield of Kansas City N/A N/A N/A Aetna 23% 54% 23% UnitedHealthcare 23% 43% 35% Health Plan Source: HealthLeaders-InterStudy, January 2013 Pharmacy Benefit Evaluator. National company data for all Rx benefits. Note: For more information about health plans and pharmacy benefits, please contact HealthLeaders-InterStudy about purchasing access to the Pharmacy Benefit Evaluator. Additional coverage includes indicators of commercial, Medicaid, and Medicare business opportunity; indicators of branded drug coverage; indicators of access to biological drugs; drug expenditures by therapeutic class; and indicators of plans’ ability to control Rx benefit. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 41 BACK TO CONTENTS Medicaid/Medicare/ Uninsured Table 7-1: Medicaid Total Beneficiaries: Percent of Population: MCO-Managed Title 19 Medicaid: MCO-Managed CHIP: Other MCOManaged Medicaid: Total MCO-Managed Medicaid:* Local 255,073 12% 183,946 25,459 0 82% State 861,632 14% 373,265 45,116 0 49% *Represents percentage of total beneficiaries. Source: HealthLeaders-InterStudy, as of Jan. 1, 2013. After its acquisition of Coventry, Aetna now leads Missouri’s managed Medicaid market. However, the merger of the two companies required Aetna to sell its existing Missouri Medicaid business to WellCare. The acquisition of the Medicaid account results in WellCare gaining close to 100,000 lives in the state’s managed Medicaid program, MO HealthNet. Aetna gained 267,000 Medicaid members from Coventry. Aetna now has 36 percent of managed Medicaid enrollment in the Kansas City market. Missouri’s Medicaid program, MO HealthNet, provides healthcare access to low-income individuals who are elderly, disabled, members of families with dependent children, low-income children, uninsured children, pregnant women, refugees and children in state custody. Fifty-five percent of MO HealthNet beneficiaries choose from three MCO options; the remainder are in fee for service. MO HealthNet manages its own pharmacy benefits for FFS members and managed care beneficiaries. The state has been adding health and wellness programs to MO HealthNet. In Kansas, Medicaid is in transition as KanCare, the state’s expanded Medicaid managed care program, began operation on Jan. 1, 2013. Amerigroup, Centene and UnitedHealthcare are managing the care of most of the state’s nearly 400,000 Medicaid beneficiaries. Managed care is mandatory for all Kansas Medicaid beneficiaries except the developmentally disabled, who are expected to be rolled into managed care in 2014. Managed care organizations administering KanCare, the state’s full transition to managed Medicaid, have announced the selection of pharmacy benefit managers. Amerigroup picked Caremark to administer drug benefits; Centene, which operates as Sunflower State Health, picked US Script; and UnitedHealthcare will use its own PBM, OptumRx (Kansas Health Institute website, accessed Oct. 8, 2012). The state will retain its preferred drug list instead of letting the MCOs create their own drug formularies. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 42 BACK TO CONTENTS Table 7-2: Medicare Total Beneficiaries: Percent of Population: Medicare HMO: Medicare PPO: Medicare PFFS: Other Managed Medicare: Total MCOManaged Medicare:* Local Medicare 311,553 15% 49,516 32,742 1,068 698 27% State Medicare 1,071,556 18% 173,642 66,885 19,814 1,257 24% *Represents percentage of total beneficiaries. Source: HealthLeaders-InterStudy, as of Jan. 1, 2013. Table 7-3: Prescription Drug Plan MA-PDP: Stand-alone PDP: Total PDP Penetration:* Local PDP 78,785 130,329 67% State PDP 246,003 496,391 69% *Represents percentage of total beneficiaries. Source: HealthLeaders-InterStudy, as of Jan. 1, 2013. Missouri and Kansas are single regions for stand-alone Medicare Part D drug plans, joining with Arkansas and Oklahoma, respectively, to form regions for Medicare Advantage plans with attached prescription drug benefits. Humana leads managed Medicare enrollment in the market. Humana’s largest Medicare plan in Kansas, the Gold Plus HMO product, was expanded into the Kansas City area for 2013 to be offered in Franklin, Jefferson, Leavenworth and Shawnee counties. The plan’s monthly premiums increased from $20 to $21 for 2013, but the primary care physician cost share remains at a $10 copay. The specialist copay increased from $35 to $40. Beginning in 2012, federal reimbursement for Medicare Advantage plans is tied to a plan’s star rating, which reflects performance in five primary categories: preventive screenings, chronic condition management, health plan responsiveness and care, health plan member complaints and appeals and telephone customer service. New measurements added for 2013 reimbursement include clinical performance, medication review and functional status review. In Missouri, the most popular MA plans received star ratings of 3.5 stars to 4.5 stars. The highest rated plan in the state is Essence Healthcare’s HMO. UnitedHealthcare has an HMO plan with 3.5 stars, while Humana has an HMO plan with 4 stars. Coventry has HMO plans with 3.5 stars and 4 stars. Kansas City ranks in the bottom third of the country for per-capita Medicare spending among major hospital referral regions (Dartmouth Atlas). Costs are growing at 2.9 percent, which is slower than the national rate of 3.5 percent. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 43 BACK TO CONTENTS Table 7-4: Uninsured Uninsured: Percent of Population: Local 267,209 13% State 806,792 13% 49,262,628 16% National Source: HealthLeaders-InterStudy, as of Jan. 1, 2013. Rising unemployment and stagnant Medicaid eligibility thresholds have increased the ranks of the uninsured in Kansas City in recent years. However the market still fares better than either Missouri or Kansas as a whole. Missouri operates two high-risk pools, one with more than 4,000 members that was formed in 1991 and the other started through federal healthcare reform with an $81 million grant. In August 2011, Missouri cut rates for its high-risk health insurance pool by 23 percent for new and existing policyholders. Officials said premiums had ranged from $137 to $601 a month. To be eligible, participants must be Missouri residents, have pre-existing medical conditions and be uninsured for six months. Kansas also operates its own high-risk pool to comply with healthcare reform. The Health Partnership Clinic in Overland Park, which serves the uninsured, received $596,000 in 2012 from the Center for Medicare and Medicaid Innovation to expand services to the uninsured through the Affordable Care Act. A dentist shortage in Kansas has hurt access to dental care for the uninsured. In February 2012, more than 2,100 patients were treated in Kansas City during a two-day free dental clinic. Only about a quarter of the state’s roughly 1,400 dentists accept Medicaid, making the problem worse. Lawmakers killed a bill in 2012 aimed at creating a midlevel provider who could perform some duties that dentists do in order to expand access. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 44 BACK TO CONTENTS Pharmacy Table: Situation Analysis O THIS SECTOR IS: NEUTRAL Missouri residents’ poor health status and propensity for prescription drug use bode well for pharmaceutical sales in the Kansas City market, as do medical home efforts and the market’s first ACO, which both emphasize medication adherence. However the ACO is instructing its pharmacists to switch patients to generics when possible, which could erode sales of branded drugs. The market’s strong adoption of consumer-driven health plans also stands to curb overall utilization as patients must pay for their drugs out-of-pocket until they meet their deductible. Kansas City employers’ willingness to experiment with value-based insurance designs, which encourage preventive care and chronic disease management, are a potential opportunity for pharma. As of July 1, 2012, Medicare Advantage PDP and stand-alone PDP enrollees combined for a market penetration of 61 percent in the Kansas City market, versus 64 percent nationwide (HealthLeaders-InterStudy). Factors that are favorable to pharmaceutical sales include the following: » Kansas City’s largest insurers, Blue Cross and Blue Shield of Kansas City and UnitedHealth Group, have seen their per-member, per-month pharmacy costs rise between 2010 and 2011. BCBS of Kansas City’s pharmacy spend rose to $28 PMPM from $26, while UnitedHealth Group’s increased to $59 from $58. » Missouri ranks 42nd among states when it comes to health status in 2012, down from the 40th spot in 2011. Challenges include a high prevalence of smoking, high incidence of infectious disease, high prevalence of sedentary lifestyle and obesity and low immunization coverage. Kansas moved up to 24th in the rankings, from 25th in 2011, with challenges that include low per-capita public health funding, limited availability of primary-care physicians and a high occupational fatalities rate (United Health Foundation’s America’s Health Rankings). » The Missouri Rx pharmaceutical assistance program bridges the benefit gap for qualified Medicare Part D beneficiaries, paying 50 percent of members’ out-of-pocket costs for prescription drugs. » Medicare Advantage plans in the Kansas City market are working to improve their star ratings in order to qualify for lucrative reimbursement bonuses from the Centers for Medicare & Medicaid Services. Plans will be focused on increasing adherence to blood pressure drugs, oral diabetes drugs and cholesterol drugs. Also, since CMS likely will be measuring how well medication therapy management programs perform, drug adherence for patients with chronic conditions will be more important than ever for MA plans. » Missouri pharmacists can participate in medication therapy management and administer vaccines (including flu, shingles, pneumonia and meningitis) as part of the state’s Pharmacy Practice Act. » Kansas City is a promising area for market expansion in treating asthma and psoriasis, based on estimates that show relatively high percentages of untreated patients and residents with prescription drug benefits in 2011 (Decision Resources’ PatientFinder database). » About 84.0 million prescriptions were filled in Missouri at a total value of $4.59 billion in 2010 (analysis of data by the Kaiser Family Foundation). About 14.0 prescriptions were filled per capita, versus the national average of 12.0, ranking the state 12th in the nation on that measure. » Missouri has generally good medication adherence, according to a CVS Caremark report on medication adherence. The state’s biggest opportunities for improvement are in depression Medication Possession Ratio and diabetes first fill persistency. Missouri also ranks well for generic and mail-order dispensing rates. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 45 BACK TO CONTENTS Factors that are unfavorable to pharmaceutical sales include the following: » Kansas City has been a strong and early adopter of consumer-directed health plans, which can erode pharmaceutical sales because patients have to pay out-of-pocket until they meet a high deductible. » Kansas’ Medicaid program limits members to four branded drugs per month and restricts the first supply of a branded drug to a 15-day maximum supply. Certain optional over-the-counter drugs also are no longer covered by Medicaid, such as cough and cold treatments. Prior authorization is required for all drugs classified as nonpreferred no matter what their drug class. » The American Medical Student Association gives The University of Kansas School of Medicine a grade of B concerning the school’s conflict-of-interest policies for the pharmaceutical industry. AMSA said the school has “exemplary policies” regarding gifts, consulting relationships and industry support of educational events. While pharmaceutical samples are restricted, the group said the policy could be strengthened by limiting who receives them and not allowing them in outpatient clinics. » Beginning December 2011, Coventry Health Care limited immunoglobin therapy to Gammaplex unless a different therapy is approved through prior authorization. » The average cost per prescription filled in Missouri in 2010 was $54.63, the 37th highest in the nation, versus the national average of $59.49 (analysis of data by the Kaiser Family Foundation). 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 46 BACK TO CONTENTS Legislation The state budget battle in Missouri in 2013 revolved around whether or not to expand Medicaid under federal healthcare reform. Hospitals are lobbying lawmakers to expand Medicaid, making the case that they will lose billions of dollars in payments if they do not expand it. This will be an uphill battle in Missouri, as most representatives are adamant that they will not support an expansion. Since the close of the Missouri legislative session on May 30, 2013, there have been several House committee sessions looking to craft proposals for the 2014 legislative session. Providers will continue to lobby for the passage of legislation to reinstate the cap on economic damages in medical malpractice cases in Missouri. The cap, originally passed in 2005, was struck down by the state Supreme Court in 2012, as it was deemed unconstitutional. The issue will likely be a major topic of discussion during the next legislative session. If the cap is not reinstated, expect to see the cost of care rise as well as a large number of physicians leaving Missouri to practice across the state line in Kansas. The regular session of the Missouri General Assembly convened on Jan. 9, 2013, and ended on May 30, 2013. The Kansas session convened on Jan. 1, 2013, and ended April 29, 2013. Table 9-1: Summary of Recent Legislation Bill Name and Number Description Status and Date Reimbursement for Physical Therapy Services (HB 29) Would have required health plans to reimburse physical therapists the same regardless of place of treatment Failed in committee Physical Therapy Services Cost Shares (HB 30) Would have prohibited the variation of copays, coinsurances, and deductibles for physical therapy services based on place of treatment Failed in committee Medical Malpractice (HJR 6) Would have created a constitutional amendment allowing the General Assembly to cap noneconomic damages in medical malpractice cases Failed in committee Medical Malpractice (SJR 1) Would have granted the General Assembly the power to limit by statute jury awards for noneconomic damages Failed in committee Medicaid Expansion (SB 131) Would have provided for the expansion of MO HealthNet services beginning Jan. 1, 2014 Failed in committee Prescription Drug Monitoring (SB 146) Would have established an electronic prescription drug monitoring program to track prescription drug sales in order to curb prescription drug abuse; Missouri is one of only a few states that does not have a monitoring program Failed in committee Nurses (SB 167) Would have modified the laws regarding licensing requirements and services provided by nurses Failed in committee Would have limited the certificate-of-need requirement to only long-term care facilities Failed in committee Would have prohibited the creation of a state-run health insurance exchange unless voters approve a referendum, the General Assembly passes a law, or an initiative petition provides authorization Failed in committee Missouri Certificate of Need (SB 194) Prohibition on Creating a Health Insurance Exchange (SB 464) 2013 Market Overview › CITY: KANSAS CITY May 2013 May 2013 May 2013 May 2013 May 2013 May 2013 May 2013 May 2013 May 2013 Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 47 BACK TO CONTENTS Kansas State Employee Health Benefits (HB 2466) Would have given state employees who retired on or after Jan. 10, 2011, and before Aug. 2, 2011, the choice between receiving continued health insurance benefits or a one-time, lump-sum payment Died in committee June 2012 Interstate Health Care Compact (HB 2520/SB 373) Would have demanded that Congress return tax dollars used to fund Medicare, Medicaid, and the Children’s Health Insurance Program to the states so that they might manage the programs themselves Died in committee June 2012 Source: HealthLeaders-InterStudy, 2013. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 48 BACK TO CONTENTS Employers Table: Situation Analysis + THIS SECTOR IS: POSITIVE Sector Outlook Employers in Kansas City have been enthusiastic adopters of consumer-directed health plans, and the growth of onsite clinics among large employers has accelerated in the market. A new initiative with the local business coalition and five large employers will encourage employees to use providers who operate medical homes. If this effort proves successful, employers may look for more high-performing networks that produce better outcomes and lower costs, causing a switch in the market that could lead to resurrecting narrow networks. So far employers haven’t been willing to accept smaller networks, but as new health insurance exchanges increasingly offer them, we expect them to take off in this market in the next several years. With its two large health systems, Kansas City is certainly positioned to offer products that use only HCA Midwest or Saint Luke’s Health System. The tipping point will ultimately be the cost for employers and any potential savings they see from utilizing medical homes or accountable care organizations. Highlights: » Economy: Employment growth has accelerated in Kansas and Missouri, leading to falling unemployment rates. Kansas City led both states in job growth at the end of 2012. Labor market indicators suggest continued improvement in 2013 (The Midwest Economist by the Federal Reserve of Kansas City, 4th Quarter 2012). While the market suffered in the recession, economists forecast continued job growth in the area in 2013 and a rise in personal income. The Kansas City market is home to three Fortune 500 companies, including telecommunications giant Sprint Nextel (No. 67), transportation and logistics provider YRC Worldwide (No. 396) and H&R Block (No. 493). The market’s largest employment segments include trade, transportation and utilities; government; and professional and business services (Bureau of Labor Statistics). The unemployment rate in Kansas City was 6.6 percent in June 2013, compared with 6.8 percent the same month a year earlier. Kansas City’s rate was lower than the national unemployment rate in June 2012 of 7.6 percent. » Plan design/premiums: A Mercer survey of 50 Kansas City-area employers in 2012 found employers saw their premiums rise 4.3 percent. The average per-employee cost of health benefits in Kansas City is $10,180, lower than the national average of $10,558. Employers said they keep cost increases low by changing plan design or insurers. Without such changes, employers estimated costs would have increased 6.7 percent in 2012 (Mercer’s 2012 National Survey of Employer-Sponsored Health Plans). Anecdotally, brokers say employers in the region have seen increases in the 4 percent to 6 percent range after plan-design changes took effect. » On-site clinics/wellness initiatives: On-site clinics are proliferating in the Kansas City market. Brokers and employer coalitions report that more employers instituted such clinics in 2012. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 49 BACK TO CONTENTS Wellness programs also continue to grow. Kansas City employers with innovative wellness programs include Sprint Nextel, which recently contracted with third-party wellness provider OptumHealth (a subsidiary of UnitedHealth Group) to assign a dollar value to smoking-cessation programs offered to employees. At American Century, an investment management firm, employees can reduce singlecoverage premium costs by $120 and spouse or family coverage by $240 for completing health-risk assessments (Kansas City Star). Kansas City-based Cerner Corp. is recognized as having one of the nation’s most comprehensive employee wellness programs in the country, with an on-site clinic, pharmacy, fitness center and health coaches. It also contributes money to employees’ health reimbursement arrangements for taking such steps as completing a health assessment or health screening, seeing an optometrist or getting a colonoscopy. Largely as a result of the program, Cerner says its average premium increase over the past four years has been about 3.5 percent and that it has raised its deductible only once in the past five years (Kansas City Star). » Value-based insurance design: The Mid-America Coalition on Health Care, based in Overland Park, Kan., is applying the lessons learned from a three-year value-based insurance design pilot to create a “tool kit” for coalition members to help them evaluate their employees’ health risks. The coalition is using data from the pilot, called the Kansas City Collaborative, to create a baseline against which employers can measure such factors as employees’ participation rates in health savings accounts and biometric health screenings. Value-based insurance design lowers out-of-pocket costs for critical medical services, such as copays for maintenance drugs, in an effort to improve care for chronic illnesses while reducing acute health episodes. The Kansas City Collaborative was successfully replicated in six other metro areas through the National Business Coalition on Health. Of the original 14 companies that participated in the collaborative, nine reported results, representing more than 56,000 employees. Together, the companies reported saving an estimated $194 per employee, or about $11 million a year, by the third year of the pilot. Pfizer provided technical and financial assistance for the collaborative, which included participation by the American Academy of Family Physicians, American Century Investments, Blue Cross and Blue Shield of Kansas City, BlueScope Steel, Cerner, Children’s Mercy Hospital & Clinics, the city of Kansas City, H&R Block, Hallmark Cards, JE Dunn Construction Group, Kansas State Employee Health Benefit Plan, Lockton Cos., Saint Luke’s Health System, Sprint and The University of Kansas Hospital Authority. » Medical home pilot: As an outgrowth of the VBID initiative, five large employers in the Mid-America Coalition on Health are launching a patient-centered medical home pilot with Blue Cross and Blue Shield of Kansas City in early 2013. Some participating employers are introducing copay differentials and premium reductions to encourage employees to select a medical home. Others are beginning a campaign to educate employees on medical homes and encourage them to use physicians with PCMH status. Those employers will implement copay differentials and premium discounts in 2014. The coalition, which did not disclose the names of the participating employers, says employers see the promise of the model and hope it provides results. The number of medical homes in the market is likely to grow as the coalition works with primary care physicians in Kansas City to achieve recognition for diabetes care from the National Committee for Quality Assurance. » Consumer-driven health plans: Kansas City has been an early and strong adopter of consumer-driven health plans, and brokers say employers continue to switch to them. Mercer’s study showed 54 percent of Kansas City employers offered a CDHP, compared to only 22 percent nationally. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 50 BACK TO CONTENTS Blue Cross and Blue Shield of Kansas City saw a 30 percent increase in 2011 in its high-deductible plan, BlueSaver. In 2010 the adoption rate rose 60 percent. BCBS of Kansas City says half of its large employers now offer an account-based plan with an HSA or HRA. » Legislation: Missouri lawmakers overrode Gov. Jay Nixon’s veto of a bill that will allow employers to refuse to provide health insurance coverage for birth control. Employers do not have to provide coverage for contraception if is against religious beliefs. Employees will have to pay out-of-pocket for it. Business Coalitions Kansas City’s active and innovative business coalition is the Mid-America Coalition on Health Care, a nonprofit that brings employers, providers and insurers together to address the rising costs of healthcare. The coalition is composed of employers that have an average of 4,000 employees each, and most offer some form of wellness program. The Mid-America Coalition on Health’s new initiative in 2013 is a toolkit created to help employers increase healthy food options in their vending machines in partnership with the Kansas City Health Department. The coalition has begun holding meetings on the topic with employers. The first meeting had 40 employers represented. In May 2012, the coalition offered a program on specialty pharmacy to employers to raise awareness of the growth in these expensive drugs. Employers in Kansas City will be offered a toolkit in 2013 through the Midwest Business Group on Health to help employers partner with specialty drug vendors for contracting and patient management. The coalition’s Building a Healthier Heartland campaign is a collaboration with community groups that is aimed at preventing and reducing obesity by advancing policies and programs that promote healthy eating and active living. Partners include more than 160 community groups, school systems, hospitals, healthcare providers, employers, health plans, health departments and faith-based groups. The Mid-America Coalition on Health Care is a member of the National Business Coalition on Health, which includes 54 coalitions across the United States representing more than 7,000 employers and about 25 million employees and their dependents. In November 2011, the NBCH launched a valuebased purchasing initiative that uses adjusted cost and quality measures to assess the value of hospital services for employer contracting. National CooperativeRx has a presence with self-insured employers in Missouri and Kansas, along with eight other states. The coalition is a subsidiary of WisconsinRx, a nonprofit, member-owned cooperative of employers and labor organizations. National CooperativeRx was created when employers and labor organizations collaborated to control overall drug spending, make better decisions with improved data, and gain access to transparent information about their pharmacy management. National CooperativeRx has 450 private employers, labor coalitions and public plans as members. 2013 Market Overview › CITY: KANSAS CITY Copyright © 2013 | HealthLeaders-InterStudy, A Decision Resources Group Company 51