WHITE PAPER

ONSET OF HEALTHCARE REFORM: MANAGING NEW DEMANDS

DENNIS DUNN, PHD LINDA MACCRACKEN, MBA SEPtEMBER 2011

TAbLE OF CONTENTS
INTRODUCTION 4 Figure 1: Six Steps to Manage the Onset of Healthcare Reform ...................................................................... 5 FINDINGS 5

STARTING WITH THE VOICE OF THE CONSUMER ......................................................................................... 5 Physicians are central to the consumer definition of quality ................................................................... 5 Figure 2: Percentage of Adults Who Look for Healthcare Quality Information Figure 3: Top Three Definitions of Quality Healthcare by Adult Generation Figure 4: Definition of Quality Healthcare by Adult Generation MANAGING DEMAND NECESSITATES PLANNING FOR CAPACITy IN EACH MARkET ................................7 Figure 5: The Uninsured by Percentage of Population, 2010 Medicaid growth will come from newly insured and currently eligible, yet unenrolled, individuals ...... 8 Figure 6: Medicaid Growth in Enrollment, 2010-2020 Increased numbers of young adults (21-26 years) will stay enrolled on parents insurance .................. 8 Figure 7: Percentage Affected by Extended Coverage for Ages 21-26, 2010-2020 Many individuals will be insured through Health Exchanges, based on state programs ....................... 9 Figure 8: Health Exchange Share: 2010-2020 Medicare growth will ensue, based on aging Baby Boomers increased use of services ......................... 9 Figure 9: Medicare Growth in Enrollment, 2010-2020 STRATEGIZE WITH PHySICIANS TO DEVELOP CARE DELIVERy MODELS AND PLAN STAFFING ............10 Figure 10: Increase in Primary Care, 2010-2020 Physician demand growth varies by market ...............................................................................................11 Figure 11: Primary Care Physician Demand Growth, 2010-2020 Figure 12: Percent Growth in Demand by Specialty Recruiting physicians is not a one-for-one replacement ratio................................................................... 12 Figure 13: Adult Primary Care Provider Productivity by Physician Age Group Prepare to deliver new care models based on community service use and anticipated need ................. 13 Table 1: Use Rates by Market for Both Inpatient and Outpatient Procedures SHIFTING TO POPULATION HEALTH MANAGEMENT ................................................................................... 13 Engage patients to manage their health ................................................................................................... 13 There is a growing need for a focused physician and care delivery model ............................................... 14 Figure 14: Preventive Care Improvements After One year of Personalized Health Messaging CONCLUSION REFERENCES CONTRIBUTORS 15 15 15

INTRODUCTION
the biggest shift that healthcare reform will bring about is the change from fee-for-service provider-driven care to fee-for-value consumer-driven care. this new focus starts with estimating the extent of the impact. Under the traditional fee-for-service system, increases in demand are easier to plan for and manage. In this new era, providers will need to stay ahead of the issues and take the opportunity to develop a team approach to care.
Creating new care models calls for aligned care that reduces unnecessary duplication, develops care teams led by a trusted clinician, and integrates distributed care settings with outcomes tied to population health results. This paper explores ways healthcare providers can prepare for the opportunities and avoid challenges in responding to unique community needs in their local market. 1) Engage consumers. Understand how consumers view quality healthcare as they take a more active role in managing their own healthcare. Physicians skills and affordability are central to their definition of quality healthcare. 2) Plan capacity. Anticipate increased service demand that will arise from the newly insured (mostly projected growth in Medicaid) and the aging Baby Boomers (projected growth in Medicare). 3) Strategize with physicians. Demand for physician-provided primary care services and other drivers will take off in 2014 and will require changes to care delivery teams. These changes invite the crucial step to rethink the physician strategy as partners and providers. 4) Deliver new care models. Design and implement effective and efficient care delivery models while providing an equivalent quality of care to consumers. 5) Manage population health. Find connections within multiple systems to develop approaches that respond to the needs of the population. Utilize personalized message delivery to help providers manage population health in a timely and cost-efficient manner. 6) Connect information. Connect patient care and market data sources to pull the insights necessary to drive improvement for care delivery.

4 Onset of Healthcare Reform: Managing New Demands

Figure 1: Six Steps to Manage the Onset of Healthcare Reform

PLANNING CAPACITy ENGAGING CONSUMERS TO MANAGE HEALTH RETHINkING PHySICIAN STRATEGy

CONNECTING INFORMATION MANAGING POPULATION HEALTH

DELIVERING CARE UNDER NEW BUSINESS MODELS

FINDINGS
StaRting witH tHE vOiCE OF tHE COnSuMER

Physicians are central to the consumer definition of quality Quality information is increasingly important to healthcare consumers. Adults across all age groups are researching their healthcare decisions and determining their own definition of what constitutes quality healthcare. Most importantly, physicians, and the affordability of the care they provide, are central to consumers definition of healthcare quality. One in four adults now looks for healthcare quality information an increase from one in five reported in 2006.1 Since four out of five adults say quality information (outcomes and ratings) influences a healthcare decision, the increase in searching behavior underscores growing consumer activation in their own care over the last four years. Among the four adult generations currently consuming healthcare today2, the younger generations are the more active quality information searchers.
Figure 2: Percentage of adults who Look for Healthcare Quality information
35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 1 - Silent Generation 2 - Baby Boomers 3 - Generation X 4 - Millennials

n 2010 n 2006

Source: Thomson Reuters PULSE Healthcare Survey

Onset of Healthcare Reform: Managing New Demands 5

One in three adults identifies good physicians and nurses as the leading factor defining healthcare quality (Figure 3).
Figure 3: top three Definitions of Quality Healthcare by adult generation
60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 3 - Generation X 2 - Baby Boomers 1 - Silent Generation 4 - Millennials Total

n Choice of Physicians n Affordable n Good Physicians/Nurses

Source: Thomson Reuters PULSE Healthcare Survey

Among older (and more frequent service user) generations Silents, Boomers, and GenXers the leading quality definition revolves around physician skill. Affordability is the next priority. The youngest generation, the Millennials, by contrast cite clinicians ability and affordability as equally important in defining quality, followed by a more personal view of good health and good service (Figure 4).
Figure 4: Definition of Quality Healthcare by adult generation
40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% Good Physicians/Nurses Good Hospitals Treatment Options Affordable Good Health Choice of Physicians Good Service 0.0%

n 1 - Silent Generation n 2 - Baby Boomers n 3 - Generation X n 4 - Millennials

Source: Thomson Reuters PULSE Healthcare Survey

6 Onset of Healthcare Reform: Managing New Demands

Managing DEManD nECESSitatES PLanning FOR CaPaCity in EaCH MaRkEt

Healthcare reform will insure many Americans who currently do not have healthcare coverage. As of 2010, the uninsured, by percentage of population, varied quite drastically by region (Figure 5). For example, in areas of the South and Southwest, 20 percent or more of the population is uninsured, while areas of the Midwest and Northeast have below 10 percent uninsured.
Figure 5: the uninsured by Percentage of Population, 2010

Below 10% 14% 18%

10% 12% 18% 20%

12% 14% 20% plus

Source: Thomson Reuters Insurance Coverage Estimates

There are various conditions that will drive the newly insured to demand healthcare services, but the increased demand for these services will come primarily from four groups: Medicaid enrollees, young adults, health exchange participants, and new Medicare enrollees.

Onset of Healthcare Reform: Managing New Demands 7

Medicaid growth will come from newly insured and currently eligible, yet unenrolled, individuals Medicaid program growth will come from both the newly insured and entry of the currently eligible, yet unenrolled, local residents. The anticipated growth varies by state from less than 12 percent to more than 50 percent over the next decade (Figure 6). As the following chart illustrates, each state and region will feel the effects of this demand differently. For example, Texas is projected to see 50 percent or more growth in Medicaid enrollment between 2010 and 2020, while Wisconsin is projected to see less than 12 percent growth in Medicaid enrollment during the same timeframe. These differences will affect how providers plan for capacity and recruit new care providers.
Figure 6: Medicaid growth in Enrollment, 2010-2020

Below 12% 30% 40%

12% 20% 40% 50%

20% 30% 50% plus

Source: Thomson Reuters Insurance Coverage Estimates

Increased numbers of young adults (21-26 years) will stay enrolled on parents insurance There are also young adults who may now be covered as dependents through age 26 on individual plans and in small businesses. Both married and unmarried children qualify for this coverage. This rule applies to plans in the individual market, new employer plans, and existing employer plans, unless the adult child has another offer of employer-based coverage (such as through his or her job). Beginning in 2014, children up to age 26 can stay on their parents employer plan even if they have another offer of coverage through an employer. The percent of young adults expected to take advantage of this opportunity for continued coverage varies greatly by state. It is anticipated that Minnesota, Connecticut, and Massachusetts will see the greatest impact at 14 percent plus (Figure 7).
Figure 7: Percentage affected by Extended Coverage for ages 21-26, 2010-2020

0% 6% 10% 12%

6% 8% 12% 14%

8% 10% 14% plus

Source: Thomson Reuters Insurance Coverage Estimates

8 Onset of Healthcare Reform: Managing New Demands

Many individuals will be insured through Health Exchanges, based on state programs State Health Exchanges will cover many consumers. This provision calls for states to establish an American Health Benefit Exchange that (1) facilitates the purchase of qualified health plans and (2) provides for the establishment of a Small Business Health Options Program (SHOP Exchange) designed to assist qualified small employers to facilitate employee enrollment in small group, market-qualified health plans. The impact of State Health Exchanges will vary greatly by state, with Texas and New Mexico having the greatest share of participation (Figure 8).
Figure 8: Health Exchange Share, 2010-2020

0% 3% 6%

4% 8%

5%

Source: Thomson Reuters Insurance Coverage Estimates

Medicare growth will ensue, based on aging Baby Boomers increased use of services The fourth factor will be Medicare growth, which covers the aging Baby Boomers now eligible for Medicare. Boomers will drive up demand for healthcare services since they have the highest utilization rates. The impact on the growth of Medicare enrollment shown in Figure 9 at a state level ranges from 20 percent to more than 40 percent.
Figure 9: Medicare growth in Enrollment, 2010-2020

Below 20% 30% 35%

20% 25% 35% 40%

25% 30% 40% plus

Source: Thomson Reuters Insurance Coverage Estimates

Onset of Healthcare Reform: Managing New Demands 9

StRatEgizE witH PHySiCianS tO DEvELOP CaRE DELivERy MODELS anD PLan StaFFing

A physician-engaged strategy is key to developing cost-efficient, quality outcomes related to care delivery models and staff planning. Top-performing hospital CEOs report that it is important to build relationships with quality physicians and staff who embrace organizational goals and work with management to develop and plan quality standards. Making great physician relationships a priority is a resounding theme across the top CEOs.3 Demand for physician-provided primary care services and other drivers will launch in 2014 and will require changes to care delivery teams. These changes invite the crucial step to rethink the physician strategy as partners and providers face pending payment and delivery changes, establish care team models, reduce costs, and develop success factors to drive success under bundled payment and population health initiatives. The first line approach comes from reviewing market changes with physicians to plan the care for the enlarged patient base. Most physicians believe that the newly insured Americans will require the greatest amount of care, which will increase the scarcity of primary care providers and their extender associates.4 At the current service levels, there is a need for between 10 percent and 70 percent more primary care providers, depending on the local market (Figure 10).
Figure 10: increase in Primary Care, 2010-2020

Growth 10% 20% Growth 40% 50%

Growth 20% 30% Growth 50% plus

Growth 30% 40%

Source: Thomson Reuters Physician Demand Estimates

10 Onset of Healthcare Reform: Managing New Demands

Physician demand growth varies by market Detailed growth projections are required, since each markets demand depends on: Service growth in the local market The physician specialists needed to care for the population The local provider base The forecasted growth in demand for primary care physicians in specific markets is illustrated in Figure 11. key drivers are based on population and payer changes in each market ranging from Bostons 20 percent growth to Atlantas or Dallas 50 percent or more growth in demand over the next decade. Each market must be individually assessed for the likely impact of future demand, followed up with a plan for providing a timely response to meet those needs.
Figure 11: Primary Care Physician Demand growth, 2010-2020

50.0% 40.0% 30.0% 20.0% 10.0%

Atlanta-Sandy SpringsMarietta, GA Dallas-Fort WorthArlington, TX Boston-CambridgeQuincy, MA Detroit-WarrenLivonia, MI Chicago-JoiletNaperville, IL New york et al, Ny-NJ-PA Philadelphia-CamdenWilmington, PA-NJ-DE
Onset of Healthcare Reform: Managing New Demands 11

0.0%

Source: Thomson Reuters Physician Demand Estimates, 2010

Figure 12 shows the changing need for physician care based on three illustrative specialties: ophthalmology, pediatrics, and obstetrics. There are different timing and demand sensitivities that need collaborative preparation depending on the local market. This chart clearly demonstrates the need to forecast and prepare for increased demand at the specialty level, since each specialty varies dramatically.
Figure 12: Percent growth in Demand by Specialty
45% 40% 35%

Percent Growth

30% 25% 20% 15% 10% 5% 0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Pediatrics
Source: Thomson Reuters Physician Demand Estimates

Ophthalmology

OB/GYN

Steady growth in older adult populations drives demand for ophthalmologists. The increasing demand for obstetricians, forecasted from 2014-2016, is based on the newly insured whose coverage will begin in 2014. The demand for pediatricians is similar to obstetrics, although less dramatic since children are generally already covered in many markets under Medicaid. Recruiting physicians is not a one-for-one replacement ratio Recruitment plans that rely on replacing retiring or departed physicians should include consideration of additional factors to manage staffing replacement. Physician practice productivity depends on physician age, full-time employee equivalence, and practice maturity all of which would impact the medical staff development plan (Figure 13). Older, mid-career physicians have higher productivity, which is rarely equaled when they are replaced by younger practitioners who are launching their practices and have different volume and success targets that would impact medical staff need forecasts. Medical staff plans are well-served to use volume replacement targets versus full-time equivalent targets when planning medical staff replacements.
Figure 13: adult Primary Care Provider Productivity by Physician age group
4,000 3,500 3,000

visits/yR

2,500 2,000 1,500 1,000 500 0 30-34 40-44 50-54 60-64 35-39 45-49 55-59 65-69

ages
Source: Thomson Reuters Physician Demand Estimates, 2011

12 Onset of Healthcare Reform: Managing New Demands

Prepare to deliver new care models based on community service use and anticipated need Estimating future utilization starts with local use rates, scenario models based on use rates from other markets, and consideration of care-setting redistribution. New care model targets illustrate the impact of redirecting point of care to new providers and new settings from inpatient to outpatient, hospital to outpatient setting, physician office to clinic setting, and clinical setting to home or virtual setting. Preparation for this care-setting shift will require modeling volume targets for each local market. Service forecasting around benchmark indicators from similar or target markets allows consideration of service use using higher or lower utilization, or hero markets. The two examples provided below for sample inpatient and outpatient utilization rates provide a launching point for considering alternate service specific use rates that could be leveraged in similar markets (Table 1). Specifically, alternative market or payer use rate scenario development allows teams to revisit their delivery patterns and re-examine their delivery plans.
table 1: use Rates by Market for Both inpatient and Outpatient Procedures
tyPE OF vOLuME Outpatient Procedures/ 1000 population1 Inpatient Discharges/ 1000 population2
Sources: 1) Thomson Reuters, Outpatient Estimates Procedures (excludes drugs, visits, labs, and injections) 2) Thomson Reuters, The Market Planner Plus, Inpatient Estimates

natiOnaL avERagE 59 113

HigH uSE RatE 75 (New york metro market) 141 (Philadelphia metro market)

LOw uSE RatE 50 (Chicago metro market) 86 (Seattle metro market)

Market challenges will drive new care delivery approaches. This starts with a clear view of the local community and marketplace and estimating the impact on possible care models. Following those care models focuses on population health an approach to care delivery that calls for consumer activism, transparency, and care coordination.
SHiFting tO POPuLatiOn HEaLtH ManagEMEnt

Creating incentives for providers to manage the health of the population will require new care delivery and payment models. Population management is a strategy to address national health needs, which will be a key component in addressing the healthcare challenges of quality and cost. Since the most important feature is the application of modern and culturally competent patient engagement and communication strategies that promote self-care, these service line strategies represent customer engagement opportunities for preventive care, chronic care or condition management, or entire care setting management.5 Engage patients to manage their health During this transition phase, providers are finding that developing strong patient engagement strategies to build loyalty and repeat business, while improving the health of the patients, will prepare them well for the future. Connecting the health system directly with the patient creates a channel to boost market share, while engaging patients directly about their care compliance and condition management without jeopardizing current fee-for-service payment rewards. For example, tailored messaging has led to smoking cessation, underscoring the impact of health behavior change with personalized health messaging.6 As shown in Figure 14, a 7 percent improvement in preventive care adherence occurred in just one year among employers and payers using this approach. Personalized messaging includes physician-enabled reminders, care direction, prevention, and chronic care reminders. These reminders present a significant opportunity to shift healthcare delivery costs, enhance service touch points, deepen engagement, enhance loyalty, and ensure greater compliance. Providers can use this capability in the short term to build their brand while preparing for long-term shifts in pay-for-value reward systems.

Onset of Healthcare Reform: Managing New Demands 13

Figure 14: Preventive Care improvements after One year of Personalized Health Messaging
80% 70% 60% 50% 40% 30% 20% 10% 0% 17.5% 51.9%

n Baseline n After 12 Months of Personalized Messaging

59.3% 49.4% 39.2% 28.2% 25.0% 33.3% 46.4% 63.0% 57.8%

67.7%

Total

Colorectal Cancer Screening

Influenza Vaccination (Ages 50+)

Cholesterol Screening (High-Risk)

Osteoporosis Screening (Normal)

Breast Cancer Screening

Source: Thomson Reuters Consumer Advantage

There is a growing need for a focused physician and care delivery model Preparing the physician network relies on assumptions of timing. First, increased utilization of physician services tied to payer-mix changes calls for focused physician recruitment and alignment initiatives. The changing community demand will drive a clear need for more physician specialists, spurring additional competition for providers. The key to managing future capacity is to balance new modes of delivering care against this increased physician demand and emergency department demand growth. Currently U.S. hospital emergency departments show that 72 percent of visits are urgent care.7 This is supported under fee-for-service payment models whereas under a fee-for-value payment system, a great proportion would be redirected to lower cost settings. Patient redirection to the most appropriate, skilled, and cost-effective care settings will change care delivery. New care models based on prevention, routine screening for early diagnosis, and managing chronic care will contribute to new ways to increase the health of the patient population. New primary care strategies are likely to leverage non-physician providers, physician-directed care teams, and physician enabled patient messaging to augment physician delivered treatment. New care delivery and payment models that reward population health management and maximize the use of preventive care reminders are needed to transfer care management accountability to the patients themselves. Directing patients to the appropriate site of care supports efficient care delivery with personalized, relevant message content and delivery mechanisms mail, email, and text. This allows personalized patient direction and care management to ensure compliance, enable self-care management, and help patients navigate effectively through the healthcare system.

14 Onset of Healthcare Reform: Managing New Demands

CONCLUSION
Planning for the local community needs will require collaboration between leadership and clinicians in taking these steps: 1) Engage consumers. Identify current and likely consumers in the local market place through population planning and customer segment assessment and understand their needs. 2) Plan capacity. Community need shifts will reflect changes in payer coverage, service access, and new kinds of care delivery providers. Create scenarios using assumptions about patient demographics, payer mix, and provider service use. 3) Strategize with physicians. Find ways to develop medical staff/clinical teams to serve the new community need and provide the right staffing complement taking productivity into consideration. 4) Deliver new care models. Plan for the most appropriate care delivery setting (inpatient vs. outpatient, office-based vs. home-care-based) and touch point (call managed vs. personalized message managed, leveraging the new medical home model and related approaches). 5) Manage population health. Profile service use by preventable, chronic, or high-cost disease to identify cost efficiencies, duplication reduction, or early-stage intervention options. Consider including direct consumer support tools to enable more self-care. 6) Connect information. Provide integrated community need profile with total market and patient information to pull the insights necessary to drive improvement for care delivery. The connection between quality care and future demand is inherently linked to a better understanding of community needs and collaboration with physicians to provide high-quality care in a changing delivery environment. Extensive future demand calls for clinician staffing in a time-sensitive care setting. Each market will face unique challenges in adapting care delivery, driven by local payer mix, demographics, and provider capabilities. These market profiles underscore the need for changing care models, which include clinician care teams, the use of physician guided clinicians, and personalized patient engagement. This sets the table to prepare each provider to respond to unique community needs.

REFERENCES
1 2 3 4 5 6

MacCracken L. The Quest for the Quality Driven Consumer. Thomson Reuters 2007. MacCracken L. Matching the Market. Thomson Reuters 2006. 100 Top Hospitals CEO Insights: keys to Success and Future Challenges. Thomson Reuters 2011. 2011 National Physicians Survey, HCPlexus and Thomson Reuters: http://hcplexus.com/survey. Nash DB, Resifnyder J, Fabius RJ, Pracilio, VP. Population Health: Creating a Culture of Wellness 2011. Chua, HF, et al. Self-related neural response to tailored smoking-cessation messages predicts quitting Nature NeuroScience 2011. Thomson Reuters Outpatient Market Profiles

CONTRIbUTORS
The following individuals contributed to the development of this white paper. Ray Fabius, MD, Chief Medical Officer, Thomson Reuters kent Francis, Solution Executive, Thomson Reuters John Froehlich, MPH, VP Strategy Services, Thomson Reuters Peter Green, Director, Product Management, Thomson Reuters Janet Guptill, FACHE, Consulting Manager, Senior Consulting Manager, Thomson Reuters George Popa, Research Scientist, Thomson Reuters

Onset of Healthcare Reform: Managing New Demands 15

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