Download The Art of Competition

Rethinking Healthcare As
Usual
Arizona City/County
Management Association
February 3, 2012
Rethinking business as usual
Healthcare
• Complex national problem
• U. S. does not have the best, just some of
the most expensive
• Costs have been soaring for decades
– 1980: 9% of GDP
– 2001: 14.1% of GDP
– 2012: 17.7% of GDP (estimated)
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Healthcare Perspective
• 45 million Americans without health
insurance
• Uninsured & poor often can only access
the system through hospital ERs
– No wellness or disease management
• System a contrast of high technology on
the treatment side little technology on the
administrative side
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Example: Handwritten
Prescriptions
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What Really Happened
• Correct Drug: Metadate ER 10 mg
tablets. Metadate is a drug used in the
treatment of Attention Deficit
Hyperactivity Disorder (ADHD).
• Dispensed Drug: Methadone. A
morphine based drug used to treat
addicts.
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Healthcare Perspective
2000-2009
• According to United Nations report
comparing international healthcare:
– Male life expectancy slid from 18th to 24th
– Female life expectancy slid from 28th to 35th
– Birth to age 5 infant mortality is in the 30’s
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Reform Efforts
• Most everyone agrees the system must be
changed
• Many people involved have vested
interests in keeping the status quo
• Like many public policy designs, people in
power make policy to solve problems they
do not experience
– Consumer Driven Healthcare
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Local Government Perspective
• Employee healthcare expenses are
among the largest expenditures of
employers
– Growing out of control & we accept it
– Reluctant to upset employees with changes
– Don’t want workload to change
– In our organizations we have employees who
cannot afford our group health coverage or
deductibles
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Local Government Perspective
• Easy to think
– This is a national problem
– We are too small to impact
– Federal government will fix
– Our costs are following national trends
• There are things we can do to reduce
costs without cutting quality
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Traditional Approach
• Hire benefit consultant
– Often they work for “free” taking a commission
• Each government entity designs their
unique program
• City/County seeks individual bids
• Many confusing bids received, some too
good to be true
– They are too good to be true
10
Traditional Approach
• If a vendor does not win the bid in one
city/county, they have chance in another
one
• No one bid has enough significance to
make a big difference on company bottomline
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Example—City of Carrollton
• 775 Employees = 1686 insurable lives
• Hired consultant for flat fee
– Contractually restricted from taking
commissions, fees, rebates, kick-backs, etc.
– Many area cities used the “free” consultants
• Modified benefits…but not too much
• “We could save $600k but it would be a lot
of work & disruptive. You don’t want that!”
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Example—City of Carrollton
• If bidder didn’t win our business they could
get Plano’s, Frisco’s, Irving’s, etc.
• Costs continued to escalate but they
tracked national trends
• Businesses understand how we think
based on years of experience
13
Reality Check!
THERE IS POWER
IN NUMBERS!!
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Quantity Buying Common
• Arizona League of Cities—U.S.
Communities
• Arizona Risk Retention Pool: 74 members
• Arizona Public Employees Health Pool: 19
Members
15
• The Public Employee Benefits Alliance (PEBA)
was created by a group of Texas Government
leaders working together for over a year to
develop strategies to manage the rising costs of
healthcare benefits.
• Their efforts have resulted in the creation of a
purchasing alliance designed to provide political
subdivisions the leverage required to effectively
negotiate with benefit vendors and continue to be
sensitive to the service requirements of public
employees.
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• PEBA’s mission is to support the individual members by
providing:
– Negotiation services to manage the spiraling cost of
healthcare and related benefits.
– Working together through the alliance procurement
model to purchase healthcare and related benefits at
a competitive price.
– The contractual negotiation will include vendor
service accountability requirements.
• Committed to negotiate affordable, high-quality
healthcare & related benefits and services.
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Administrative Fee Schedule
Annual
Membership
Fees
Employer
0-100 Lives
101-500 Lives
2006 2007 2009 2010
2011
2011
Out of
Texas
2012
2012
Late
Out of
Fee
Texas
$150 $150 $150 $150
$150
$250
$150
$250 $250
$300 $300 $300 $300 $300
$450
$300
$450 $250
501-1000 Lives $500 $500 $500 $500
$500
$750
$500
$750 $250
1,001-5,000 Lives $700 $700 $700 $700
$700
$900
$700
$900 $250
$750
$1,250
$750
$1,250 $250
5,001-15,000
Lives
15,001-25,000
Lives
$1,000 $3,000 $1,000 $3,000 $250
>25,000
$1,750 $3,500 $1,750 $3,500 $250
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• Post Sixty-five Medicare Advantage Plans
•
•
•
•
•
•
•
•
TML IEBP Pre Sixty-five
Wellness Benefit Option
Pharmacy Benefit Management
Clinical Results Drug Management
International Medicine
TASC Section 125, FMLA, COBRA, PayDirect
Life/LTD/STD & Dental
Employee Assistance Program
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Pharmacy Benefit Manager (PBM)
Services
• Offered plans from two different vendors
• Since first bid in 2006 costs reduced 15%+
• Oct. 2010—Sept. 2011 more than
$3 million saved
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Clinical Results Drug Management
• Clinical formulary plan created to enhance PBMs for self-insured plans
• Offers formulary model that focuses on Evidence-Based research &
lowest net-cost calculations
• Joint-Venture with the University of Arkansas for Medical Science & the
College of Pharmacy
• Provider call center staffed with physicians & pharmacists
• Between 2004-08 saved over $100mm for state employees & Medicaid
• Over 900,000 lives utilize service today
• Savings average 10%-15% total pharmacy payout
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Clinical Results Case Study
Carrollton, Texas
Per Member Per Month Cost
$90.00
$80.00
$70.22
$70.00
$66.64
$67.39
$61.50
$60.05
$60.00
$57.87
$61.67
$51.79
$52.50
$57.53
$47.36
$45.02
$50.00
$42.51
$45.57
$40.00
$38.08
$30.00
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City of Carrollton
Clinical Results Savings
Avg Total PMPM
Q4-2010
(avg. 1,625
members)
Avg Brand Rx Cost
Avg Generic Rx Cost
Avg Patient Pay Per Rx
% Generic Rxs
$
$
$
$
63.08
50.47
12.91
16.67
68.0%
Q1-2011
$
$
$
$
44.96
21.77
5.88
14.70
74.2%
Q2-2011
$
$
$
$
Projected Annual Savings:
$328,456
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48.47
23.45
6.49
12.51
75.7%
International Medicine
– Cost savings of 40%-80% over U.S. pricing
– No PEPM premiums
– Savings but not at the expense of Quality
– Ultimate consumer-choice in health care
– Responds to needs of culturally diverse workforce
– Quality of care comparable to leading U.S.
hospitals and their physicians
– Non-covered procedures affordable for employees
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Savings to Plan Sponsor
Hip Replacement
United States (includes M.D. & Hospital)
$60,000
Satori Global Network*
$20,000
Gross Savings
$40,000
Patient Share for U.S hospitalization (co-pay)
$5,000
$35,000
Net Savings to Plan Sponsor
*Price Includes:
All Hospital &
Physician Fees
17-day stay at
Intercontinental
Hotel for Patient
& Companion
Airfare for Patient &
Companion
In Country
Transportation
for Patient &
Companion
Personal Accident
Policy, Related to
Medical Travel &
Procedure & Stop Loss
Policy
Company
Overhead &
Profit
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Quality Assurance Program
• All acute care hospitals are Joint Commission
International (JCI) accredited and must meet
established U.S. standards of excellence
• Many hospitals have affiliations with Harvard Medical,
Johns Hopkins, Cleveland Clinic and others
• Physicians speak English and have demonstrated
competency in their specialty and their specific
procedure
• No deductibles; all expenses paid from take-off to
return
• Expenses for companion covered
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Procedures
• Cardiac
–
–
–
–
CABG
Valve Replacement
Pacemaker
Defibrillator
– Cardiac Ablation
• Orthopedic
– Hip Replacement
– Hip Resurfacing
– Knee Replacement, Partial
• Weight Loss/Bariatric
― Gastric Bypass
― Lap Band
― Gastric Sleeve
• Women/Men
– Hysterectomy
– Prostatectomy
• Plastic/Cosmetic
• Dental
• Other Procedures - 55
– Knee Replacement, Total
– Shoulder Replacement
• Spine
― Cervical Discectomy w/ Fusion
― Lumbar Laminectomy
― Lumbar Laminectomy w/Fusion
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Employee On-Site Health Clinic
• This was a strategic goal of the City Council
• Process took approximately 2 years –
reviewed every possible model
• Received 7 proposals-Interviewed 4
• Conducted multiple site visits (Tulsa, OK &
Humble, TX)
Our Model
• Selected a management company
• Rented a building in a shopping center –
across the street from City Hall
• 1696 covered lives, including dependents
• The clinic is open for 23 hours per week
• 1 Doctor & 2 Medical Assistants
• Pay per hour and direct pass through on
supply, utilities, rent, etc., costs
• Partnership with QuikTrip convenience
stores
CareATC
•
•
•
•
Focus on wellness and preventive care
Chronic disease management
Pharmaceutical – generics and antibiotics
Personal Health Assessments– follow up by
physicians
• Increased utilization
• Decreased sick leave and lost productivity –
employee and dependent care
• Lower long-term health plan costs for the
City and the employees
Cost
• Average cost of visit to primary care Physician vs.
Average cost of Health Clinic Visit
• Cost of giving free generics vs. filling prescriptions –
increase utilization of generics
• Number of visits
• Flu shots
• Lab costs
• Retention & recruitment
• Time away from work
– Employees receive 4 hours of “clinic” time in addition
to sick leave
• The immeasurable – a big catch
$$$$$$$$$$$
• $500 per hour/ $156 per visit
• 3.2—3.5 visits per hour
• Includes
– Staff
– All supplies, including generic drugs
– Personal Health Assessment
– Laboratory work
– Rent, utilities, equipment
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Dr. Patricia Lesczynski, M.D.
" Working in the Carrollton
Clinic setting allows the doctor
to take time during office visits
for focusing solely on patient
care and prevention of disease
versus the traditional clinic
setting where physicians at
times struggle with balancing
good healthcare while still
meeting the demands of
insurance companies. I believe
that this environment
encourages a more consistent
follow-up that in turn helps
maximize the overall health of
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patients."
Best Advice & Lessons Learned
• This is a big commitment, it would be very hard to
take away!
• Pick a management company with a Medical
Director, or get a medical degree
– Company has two Medical Directors
• Be prepared to actually hear “thank you” from
employees
• But, still be prepared for a bit of “entitlement”
mentality
• Administrative Directives – sick leave policy needs
to be reviewed
• Use of generic drugs increased 9.5% FIRST YEAR
Clinic Outcomes
• Explored options never explored
– Fire Fighter & employee physicals
– Partner with local business, it doesn’t have to be a
public sector partnership (QuikTrip Convenience
Stores)
• If you have a diverse employee population, give serious
consideration to a bilingual Physician or staff members
• Compliment a Clinic with a Wellness Program
• Greatly reduced time away from work for doctor visits
• Disease management improved substantially
• Diagnosed brain tumor, stroke & other illnesses early
Fee For Service vs. Negotiated
Price Per Procedure
•
•
•
•
Traditional Model: Fee For Service
Networks negotiate discount off UCR
Reverse incentive to control costs
No guarantee for work done
– Auto mechanic pokes hole in seat they pay
– Surgeon pokes hole in innards you pay
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Fee For Service vs. Negotiated
Price Per Procedure
• Negotiated fee for procure incentivizes
provider to do it right the first timeCHEAP
• Readmissions within X days are at the
expense of the provider
• If the provider makes a mistake they eat
the extra cost
• Much cheaper than fee for service
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Negotiated Price Variations Across
In-Network Providers
CT Scan
• Networks and providers
focus on the average
discount, disregarding
the base rate
• Result: individual prices
vary significantly
GI Scan
Knee Surgery
• PCP and patient make
decisions without
pricing transparency
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Price + Process Variation Results in
Significant Episode Cost Variation
DRG 470 Hip & Knee Replacement Procedure Costs
Hospital /
Systems
Before
During
After
Total
A
$1,470
$39,088
$3,216
$43,774
B
$1,306
$39,989
$2,442
$43,738
C
$2,630
$37,397
$2,864
$42,891
D
$793
$37,848
$1,715
$40,356
E
$1,277
$37,020
$1,797
$40,094
F
$2,013
$29,408
$2,633
$34,054
G
$1,041
$27,207
$1,332
$29,579
Hospital G inpatient
flat rate
$2,033
$14,690
$1,176
$17,899
$24,398 (vs. A
hospital cost)
Negotiated Case
Rate with warranty
Included
Included
Included
$20,500
$23,274 (vs. A
all inclusive)
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Savings
Health Insurance Dependent Audit
• Required employees with dependent
coverage to prove dependent eligibility
• Results
– One employee admitted their “spouse” was
not their “spouse”
– 2 employees removed ex-spouses
– 2 removed children who were no longer
dependent
– 10 employees did not respond; coverage
dropped
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Questions?
Leonard Martin
City Manager, Carrollton, Texas
CEO, Martin Management
Carrollton, Texas
[email protected]
214-783=2783
Rethinking business as usual
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