How do we incentivize innovative, patient-centered care?

by Mitch Morris, MD, Vice Chair and Health Care Provider Global Leader, Deloitte Consulting LLP

For many years there has been criticism of physicians who racked up larger incomes because reimbursement has been based on volume (the number of visits and procedures) rather than value (whether patients got better).

In the U.S. health care system, emerging payment and health care delivery models emphasize good outcomes. Outcomes tend to be measured based on the entire group of patients under the physician’s (or health system’s) care rather than what happens to an individual patient. But in a recent New York Times op-ed piece, “How Medical Care is Being Corrupted,” Drs. Pamela Hartzband and Jerome Groopman at Harvard Medical School stoked the fears of consumers by suggesting that measures used by regulators and insurers in these models were designed to “coerce” physicians into providing inappropriate care driven by evidence-based practice.1 Concern about new models is also something found in Deloitte’s 2014 Survey of U.S. Physicians; most physicians (78 percent) prefer to stick with the traditional payment approaches.2

How many patients can I see today? How many knees can I replace in a week? How many stents can I insert this month? In general, the health care industry in the U.S. seems to be taking baby steps in its evolution from traditional fee-for-service payments to more payments based on value. Today, physicians are sometimes judged by the ambiance of the waiting room instead of the quality of their work. Today, the traditional approach to reimbursement is doing little to reward good outcomes.

While I believe that hard work should be rewarded, I also believe the industry could do a better job of rewarding good outcomes. If a physician takes care of people with diabetes, it is reasonable that he or she be measured by how many of those patients have good control of their blood sugar as measured by a simple blood test. And physicians who care for women with breast cancer could be gauged by how often the patient receives the treatment that randomized studies demonstrate could be their best chance for a cure.

The best care may be based on the individual patients’ needs in the context of what is most likely to result in the best outcome. And many physicians agree: Deloitte’s 2014 Survey of U.S. Physicians found that seven out of 10 physicians acknowledge the importance of being capable of closely integrating clinical care, data analytics and consumer engagement to improve patient health.3

We know that a middle-aged man with high cholesterol and who is overweight, smokes and does not take low-dose aspirin has a far higher chance of having a heart attack than one who has a healthy weight and doesn’t smoke. I would argue that it’s not wrong to provide an incentive to motivate doctors and health systems to put in place approaches to care that lower the risk of heart attacks. Of course, I also believe that people are responsible for their good health. We are beginning to see health plans try new ways (e.g., lower insurance premiums for those who do not smoke) to financially incentivize people into changing their behavior.

Historically, physicians have not been held financially accountable for the health of their patients and outcomes of their treatments. I believe it is time to change that, but acknowledge that the devil is in the details.

Both the private sector – health providers and health plans – and the Centers for Medicare and Medicaid Services (CMS) are focused on those details. Across the industry, stakeholders are actively working to develop new approaches to rewarding physicians and health systems for care can enable good health for Americans.

Physicians are aware that the shift to value-based care is happening and inevitable. The physician respondents to the survey predicted that value-based payment models will equal about 50 percent of their total compensation in 10 years. But just as patients have needs and preferences about the physicians that care for them, physicians also have needs and preferences for how they practice medicine. And most of them have opinions about what skills they need to navigate in an industry based on value. Physicians were asked which skills they need to possess to successfully practice medicine in the future, and they reported the following as important:

Deloitte infographics

But most (78 percent) physicians remain concerned that value-based payment models may penalize them for factors out of their control and not capture quality improvements achieved outside of performance goals.4 To boost their comfort level and help ease the transition somewhat, physicians say they need expanded clinical support capabilities, comprehensive health IT, access to non-physician staff, managerial expertise and business knowledge and possibly most importantly, fairly structured value-based payment models to support their participation in value-based care efforts.

Transparency is important but I suggest that stakeholders should consider focusing on better understanding which approaches result in the healthiest populations because the old model may not work much longer. Ultimately, incentivizing innovative, patient-centered care by providers and greater engagement by consumers could drive better health outcomes.

Read the entire Health Care Current here and subscribe at: www.deloitte.com/centerforhealthsolutions/subscribe.

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1 Pamela Hartzband and Jerome Groopman, New York Times, “How Medical Care Is Being Corrupted,” November 18, 2014, http://www.nytimes.com/2014/11/19/opinion/how-medical-care-is-being-corrupted.html?smprod=nytcore-ipad&smid=nytcore-ipad-share&_r=0
2 The Deloitte 2014 Survey of U.S. Physicians, a nationally representative sample of the U.S. physician population, assesses value-based care (VBC), future of medicine, impact of health reform, and health information technology (HIT). Publications can be found at www.deloitte.com/centerforhealthsolutions. The Deloitte 2011 and 2013 Surveys of U.S. Physicians can also be found at www.deloitte.com/centerforhealthsolutions.
3 Physicians responding “very important”/”important” when asked which physician capabilities will be important in the next 1-3 years as the practice of medicine evolves.
4 Physicians responding “agree”/“strongly agree” when asked about risk-based compensation agreements.

Mitch Morris, MD, Vice Chairman and National Healthcare Provider Lead, Deloitte LLP

 Mitch Morris is the National Leader for the Health Care Provider sector at Deloitte including Consulting, Audit, Tax, and Financial Advisory Services. Dr. Morris has more than 30 years of health care experience in consulting, health care administration, research, technology, education, and clinical care.


Infographic: 2015 global life sciences outlook

The extended nature of life sciences product development mandates that sector stakeholders adopt a long-term approach to strategic planning, portfolio management, and market expansion. However, organizations must also prepare for and react to near-term challenges and opportunities. Four major trends are expected to capture the sector’s attention in 2015: searching for innovation and growth; changing regulatory and risk environment; preserving and building shareholder value; and preparing for the “next wave.” The resulting challenges and opportunities can be both global and market-specific.

Check out top life sciences sector issues for 2015 in the inforgraphic below.

Click here to download a copy of the infographic and full report.

Deloitte | DeloitteHealth |2015 Global Life Sciences Outlook | #CHSBlog



Optimism in an era of major transformation for global life sciences

by Reynold W. (Pete) Mooney, Deloitte Touche Tohmatsu Limited (DTTL), Global Managing Director, Life Sciences and Health Care

Railroads were a game-changing innovation in the U.S. during the early 1800s. As the industry began to boom, new players joined the game as they rivaled for competitive positioning. The potential seemed limitless.

There were questions and concerns about the new industry’s scope, scale, viability and cost. It was difficult for investors to determine which competitors would succeed and which would fail; investing in these ventures was risky.

One thing was abundantly clear to investors though—it was time to get out of the horse business.

This analogy was raised by a life sciences sector investor and panelist who participated in the recent Financial Times/Deloitte Pharmaceutical and Biotechnology Conference in London. It was also particularly apt given the theme of this year’s conference – Predictions 2020 – which focused on what life sciences could look like in the future.

Deloitte’s annual conference with The Financial Times brings together many of the finest minds and boldest thinkers from the broader life sciences community. Setting the tone for this year’s conference theme was new research from the Deloitte UK Centre for Health Solutions, “Health care and life sciences predictions 2020: A bold future?,” which reveals a series of predictions and projects a vision for the life sciences and health care industry over the next five years. A lot of that prognosticating was about how innovation in life sciences is being transformed.

I had three main takeaways from the conference:

First, the room was generally optimistic for perhaps the first time since Deloitte has been conducting the conference. Our previous conferences have not been particularly optimistic affairs. Top industry leaders and thinkers wrung their hands about the patent cliff, weak pipelines, over regulation, poor industry reputation and the most recent global economic meltdown. However, this year’s conference had a different tone: the patent cliff is largely behind us, pipelines have improved and for the first time in many years, blue skies are visible beyond the clouds of economic doom and gloom, despite some lingering economic worries across Europe and Asia. The traditional industry is feeling pretty good about itself.

This year, the general sense of optimism was coupled with a consensus that the industry is at the cusp of dramatic and important change. An interesting thought was that much of the change will be driven by non-traditional players and new entrants to the industry. This made me ask, as I looked around the room, “which of these folks are in the horse business?”

My second takeaway was that the traditional life sciences industry seems to be in the midst of a major realignment. The volume of mergers and acquisitions in the sector has been staggering; yet there was a perspective that most of these deals were not about consolidation. In fact, the gross market share of the top 10 pharmaceutical companies has barely moved over the last 10 years. Rather, we are seeing companies realign their asset base – in some cases, swapping whole operating units – to focus on core competencies and areas where they believe they could have a competitive advantage.

There was a very real sense that focus is key. The technologies that have been talked about since the genome was cracked finally seem to be coming into their own. For example, use of biomarkers and companion diagnostics, gene expression and targeted therapies and target-based versus phenotypic screening all seem to have entered the common lexicon and become part of “business as usual.” Moreover, these technologies are now much more accessible than they ever have been. Much of the innovation is now coming from smaller players looking at problems from a unique perspective.

Finally, solving problems in health care is attracting many new entrants with non-traditional technologies, significant capital, unique perspectives and a creative approach different from that of the traditional life sciences companies. It seemed obvious to attendees that information technology and analytics techniques will be de rigueur to solving our most challenging health care issues; companies with these competencies are already entering the health care market. It also seemed clear that many other technologies are realizing some of their promise and they could dramatically impact the industry over the next several years. These technologies include nanotechnology, additive manufacturing, regenerative medicine, wearable devices and electroceuticals—just to name a few.

A topic of interest on a number of the panels was aging, perhaps spurred by Aubrey de Grey’s famous quote that the person who will live to 1,000 is alive today. This topic captures the imagination of many as it represents one of the quintessential health care “problems.” Significant resources are being directed at aging research – much of it by the non-traditional entrants into life sciences – and de Grey’s quote is not as far-fetched as it seems. The topic further illustrates the apparent optimism in the industry – an industry that is taking on some of the biggest issues out there and has the potential to make real progress against them.

But, it also illustrates the implied threat that was identified at the conference.

Even as many of the attendees seemed to believe that the innovation and new models being talked about for the last decade are finally at the cusp of realization, many also wondered whether the traditional pharmaceuticals players had the imagination and creativity to take this on. Glances were exchanged across the room as attendees tried to determine which of their neighbors were still in the horse business and which had moved on.

Read the entire Health Care Current here and subscribe at: www.deloitte.com/centerforhealthsolutions/subscribe.

Pete Mooney

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PS. I encourage you to check out our new forecast of emerging trends, “Health care and life sciences predictions 2020: A bold future?” It helped set the tone for the conference and give it a perspective on the future.


Reynold W. (Pete) Mooney, Deloitte Touche Tohmatsu Limited Global Managing Director, Life Sciences and Health Care Reynold W. (Pete) Mooney is the Managing Director for the Global Life Sciences and Health Care Industry Practice of Deloitte Touche Tohmatsu Limited. He is a corporate strategy consulting professional with an extensive background in manufacturing and operations in process industries. Over the thirty years of his international consulting career, he has assisted senior executives take advantage of growth opportunities in business segments undergoing dramatic change, transition and globalization.


Feeling the pinch: The impact of rising out-of-pocket health care spending

by Sarah Thomas, Research Director, Deloitte Center for Health Solutions, Deloitte Services LP

It’s the time of the year again when calendars are filled with social events as friends and families gather at dinner tables and attend holiday parties. It’s also a time of year when cost and spending are top-of-mind for many families – the cost to prepare the Thanksgiving meal, the cost to travel to see family and friends, the cost to prepare for other holiday activities and gift giving. Amid this holiday spending, many expenditures sneak up that were not part of the planned budget: additional meals at the airport, paying for overnight shipping so a gift arrives in time and that last minute gift for the cousin you always forget to include on your list. At the end of the holiday season, you’ve exceeded your initial budget due to these “hidden costs” not originally planned for.

This unexpected spending reminds me of a similar issue faced by health care consumers. The issue of cost and out-of-pocket (OOP) liability in health care is a significant one, even for people who have insurance through Medicare or their employer. This shouldn’t be surprising; Deloitte’s 2013 Survey of U.S. Employers found that employers who experienced increased health care costs in the last three years estimate they passed on around 26 percent of the total increase to employees through cost-sharing mechanisms.1 Some individuals who are obtaining insurance coverage through the health insurance marketplaces are seeing higher deductibles than those in employer-sponsored plans.2 At a meeting I recently attended, one of the participants pointed out that because many of the marketplace plans have large deductibles, some employers are using this as “cover” to add or increase deductibles in their own benefits packages.

The Deloitte Center for Health Solutions recently took a deep dive into the topic of OOP spending in our report, “Dig deep: Impacts and implications of rising out-of-pocket health care costs.” This analysis found that OOP spending for traditional medical services (i.e., those captured in the National Health Expenditure Accounts) is only the beginning. Consumers also encounter high cost-sharing for services like nutritional supplements and complementary and alternative medicine—services that are generally covered less frequently by insurance. Even during the recession, when overall health care spending slowed, spending for these types of services continued to rise.

This analysis of “hidden costs” also calculated how much time people spend caring for loved ones (often older adults and children) that need help with activities of daily living; this can also add significantly to consumers’ spending on health care or add to debt.

When you add these hidden costs together, the number is substantial: as much as $672 billion (19 percent of total health care spending) is estimated to be hidden from the National Health Expenditure Accounts.

Hidden cost graphics

Click here to view the full infographic

This is clearly affecting consumers in a real way. Deloitte’s 2013 Survey of Health Care Consumers found that nearly half (48 percent) of all consumers experienced an increase in their OOP spending for health care. And nearly 40 percent of respondents had financial difficulty paying for their health care expenses in the previous 12 months. Only one in five consumers felt that they are financially prepared for the future health care costs they might face.3

Will health care return to days of broader benefits? On the one hand, I think that if value-based care can fulfill the promise of bending the cost curve and if incentives like value-based benefit design that reduce cost sharing to increase adherence and improve outcomes work, payers might be a bit more open to considering it. On the other hand, shifting more of the cost sharing to employees can be effective at lowering employers’ health care spending.

Consumers’ increasing exposure to cost sharing is also having profound effects on the health care industry.

Hospitals are now investing in ways to inform patients with scheduled procedures of both the expected costs of and ways to pay for the most expensive types of hospital services. In the past, patients with insurance coverage could expect their policies to cover most of their costs and the amount of cost sharing that the patient would be billed after the fact was relatively small. Now, with increasingly large deductibles, the amount of revenue at stake is large enough for hospitals to invest in technology and human capital that help patients pay for their share of their bills.

Life sciences companies are feeling the pinch as well. Both deductibles and cost sharing – which can be especially high for specialty drugs – can make consumers unable or unwilling to use these therapies. Currently, many drug companies offer help in paying for drugs through coupons and other programs. Looking around the corner, life sciences companies could begin offering drugs in packages with other services (e.g., disease management) to get to better outcomes. If life sciences companies are able to show high value through these packages, it may increase the likelihood of more comprehensive coverage by payers.

Health plans are offering high deductible benefit designs in response to demands from employers to lower costs and in public marketplaces due to cost-sharing structure requirements. Many of the major health plans offer directories and tools to help enrollees navigate network rules and benefit design to find good value, but these tools are in relatively early stages. Network directories can be hard to keep up to date when physicians can decide on a weekly basis whether they want to take more of a particular plan’s patients. Figuring out what prices apply for a particular plan and benefit design can also be challenging, especially when the particular set of services a patient will end up getting is not always entirely predictable.

Every few weeks I hear about new companies that are rising to the challenge of creating products and programs that hold some promise of supporting consumers who are savvy and active purchasers of health care. These stories make me optimistic that technology, data transparency and usability of search tools will improve so that people can make the best choices about how to spend their own money and get the best care for the money they spend. Wider use of decision aids could go beyond finding the best price for a given service. I hope that these tools will not only help people find the best price for a given treatment but will also help them better understand the potential risks and benefits and the full array of treatment options available to them.

Read the entire Health Care Current here and subscribe at: www.deloitte.com/centerforhealthsolutions/subscribe.

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1 Deloitte Center for Health Solutions, 2013 Survey of U.S. Employers
2 HealthPocket, “2015 Obamacare Deductibles Remain High But Don’t Grow Beyond 2014 Levels,” November 20, 2014
3 Deloitte Center for Health Solutions, 2013 Survey of Health Care Consumers

Sarah Thomas, Director of Research, Deloitte Center for Health Solutions, Deloitte LLPSarah Thomas is a director with Deloitte Services LP and the director of research for Deloitte's Center for Health Solutions. Sarah has experience in public policy, ranging from reimbursement to addressing issues such as quality in Medicare, Medicaid and the private health insurance market, including health insurance exchanges and marketplaces.She has more than 13 years of government experience.


Lessons learned from the Ebola outbreak: A Q&A with Drs. Gordon and Green

Dr. Randy Gordon is a Deloitte Consulting LLP director in the Life Sciences and Health Care  practice, focusing on health care transformation and clinical care improvement, and leads the Global Health Services Activation solution.

Dr. Charles Bruce Green, former 20th Air Force Surgeon General, is a Deloitte Consulting LLP director who serves as chief medical officer for Deloitte’s Federal Health practice.

Recently, they sat down to discuss the Ebola outbreak in West Africa, its potential ramifications for public health in the U.S., and what changes the health care industry should be considering in training health care workers, preparing medical facilities, working with policy makers, and preparing a rapid and effective response to Ebola and other public health emergencies.

Q: What is the health care industry in the U.S. learning about Ebola in terms of how to prepare and respond to an outbreak?

Dr. Green: One of the things the health care industry is learning is that while we are familiar with universal precautions to prevent the spread of disease, Ebola has created a need for a protection beyond the norm. The industry has been dealing with new guidelines from the U.S. Centers for Disease Control and Prevention, and there has been some angst within hospital organizations since some health care workers who thought they were protected have tested positive. The reality is that many hospitals may have been comfortable with their level of training, but they’ve had to reevaluate that.

Dr. Gordon: The first lesson on the preparedness side is that when there is such a threat to our health, there needs to be scenario planning and proper training. Problems like Ebola are going to come through the emergency room, which means unless preparation and response is 100-percent effective, organizations shouldn’t rest. That’s the first lesson of preparedness. The second is risk communications. Being prepared with appropriate risk communication techniques is important, and organizations should be prepared to do a thorough job of communicating the risks to the public and to staff. The third lesson is about coordination – coordinating well with other hospitals, patients, and caregivers, and most importantly with government authorities is critical in these situations.

Q: What are some of the biggest potential threats to the health care industry’s ability to monitor and treat Ebola?

Dr. Gordon: In my opinion, the biggest threat is the eventuality of a decrease in vigilance. By which I mean, once Ebola fades from the headlines, we shouldn’t let our guard down. The story will be replaced by other medical situations and news, but we will continue to see an occasional case get through screening to arrive in this country. The U.S. authorities and health care organizations have to continue to be vigilant. It could show up in a small Midwestern town out of the blue, and the organizations in that town will need to be prepared.

Dr. Green: Besides vigilance, the other thing we’ve learned is there is a need for focused training and specialized teams. Even though the decontamination process for Ebola is relatively straightforward and not unlike that for other afflictions like the flu, the reality is there is a high rate of mortality associated with Ebola. Stakeholders have to think about how the mortality rate will affect the concerns of the “worried well.” Health care professionals should work with their teams to reassure the public that they know how to deal with this. That will likely increase their level of comfort.

Q: What have been some of the difficulties in communicating with the public about Ebola?

Dr. Green: One of the difficulties in getting the word out to the public was that the story was being combined with what was going on in West Africa. So you had people learning about the high transmission rates in West Africa, where there are inadequate sanitation and public health systems. Here in the U.S., there have been two imported cases, including one death, and two locally acquired cases in health care workers. 

Q: Some public officials have called for a travel ban or tougher quarantine policies, positions that may be at odds with scientific assessments. Can governmental agencies and public health officials get on the same page? And if so, how?

Dr. Gordon: That’s a public policy issue. Public policy is probably never going to be scientifically pure, nor should it be. The industry continues to develop the science, and it’s the policy makers that have to balance the science with economic considerations, public opinion and everything else. Public policy doesn’t necessarily come up with the best answer in balancing all the perspectives. I’m not saying these policies you mentioned are good or bad but most of them haven’t been implemented – we’re not banning travel, or keeping people quarantined in their homes for 21 days or more. The scientific community pushed back on it.

Q: How are federal agencies responding to Ebola, particularly the Department of Defense (DoD) and the Veterans Administration (VA), with its management of the network of VA hospitals?

Dr. Green: The DoD has been very aggressive with planning, both in its response to West Africa and how they are going to manage any positive cases presenting to military facilities here in the U.S. VA leadership has run scenarios, emphasized travel histories in emergency departments, and established specialty centers where they are training their teams to manage any positive Ebola cases.

Q: Are the industry and public health agencies doing a good job of communicating?

Dr. Green: My impression is that they actually did a good job of communicating the threat. They were talking about training and risk precautions. But there are always things that happen outside the norm. Health care organizations should try to make sure they don’t over-promise, but they still have to reassure the public. The industry is learning more about how the public feels about the 21-day observation periods, what happens when people exposed develop a fever, and realities of transmission of a blood-borne illness.

Q: How do you think this issue – the potential spread of Ebola globally, the potential impact in this country -- will eventually play out?

Dr. Gordon: My general feeling is that Ebola will be contained in West Africa. All of the predictive modeling of the spread of an epidemic is catastrophic, meaning that there is exponential spread to tens of thousands, to hundreds of thousands, of cases. I think there may be some natural order of restraint. Maybe it is just learning how to better deal with the disease. I think it might burn out in six, 12, maybe 18 months. And there’s a hope that someone will develop a vaccine to help treat the current epidemic and stop future transmission of the disease. I anticipate some sort of treatment protocol developing that could help improve the chances of survival for those afflicted, and that it may develop over the next few months.

Dr. Green:  I don’t want to predict what will happen in West Africa, but I believe it will burn itself out. In this country, I think we’ll continue to see sporadic cases of people infected, but I don’t think we’ll see an outbreak. The industry and other stakeholders will be working to develop new immunizations. Our public health infrastructure is strengthening bonds with the treatment facilities. It’s very unusual for us to track people for 21 days. I think this threat could lead to better tracking and better collaboration among the public health agencies.

 For more on this topic, read The Ebola outbreak: A call to action for a translational approach to R&D and Ebola outbreak: Turning fear into action.


From linear to exponential thinking: How will your organization activate innovation?

by Jason Girzadas, Principal, National Managing Director, Life Sciences & Health Care, Deloitte Consulting LLP

Digital manufacturing and nanotechnology…Synthetic biology…Artificial intelligence and advanced robotics…Crowd-sourcing…Incentive competitions…Health and medicine are not immune from the rapid change of technology. Moore’s Law is at work with exponential improvements in performance and a corresponding drop in cost, making innovations possible like never before. The question is, “What impact will these exponential changes have on organizations’ businesses and ecosystems? And, what new business models will the technologies create?”

Earlier this month, Deloitte Consulting LLP’s Life Sciences and Health Care practice worked with the Deloitte Consulting Innovation (DCI) team on a unique collaboration with one of our newest strategic partners – Singularity University – to host Exponential Medicine 2014. Exponential Medicine is a global workshop of more than 400 thinkers, innovators, entrepreneurs, scientists and executives across health care and medicine. These experts are dedicated to helping leaders understand and explore the profound impact of a wide array of rapidly evolving next generation technologies on the future of the industry.

Afterward, Deloitte invited event participants to join in a reflective discussion around the conference and, more importantly, to wrestle with questions like, what do they do next? The conference and discussion highlighted several key issues which health care organizations and stakeholders should consider:

Developing depth and mastery in exponential technologies, and creating and living with exponential organizations
Health care organizations should consider developing a fluency and working understanding of the major areas of exponential technology that are playing out across all of society and business. Examples include:

  • Advances in information technology related to abundant bandwidth and ubiquitous connectivity that are enabling mass dissemination of data and pervasive communications globally. 
  • The world of robotics and how it is impacting areas from surgery to behavioral health.
  • Digital manufacturing whereby the reality of 3D printing is making possible the printing of implants and someday even organs. 
  • Advances in biotechnology that are rapidly occurring and making it possible to target disease and re-write human genes. 
  • Big data applications and use cases that are improving exponentially, with innovations in database design and analysis tools that make gleaning insights from massive data sets possible; eventually this could lead to transformation in research/development, prevention, personal empowerment and treatment dimensions of health.

Mastering exponential technologies and embracing their transformational impact also means creating new competencies. These include increasing organizational agility, strengthening organizational learning capabilities and evolving into learning networks, embracing open talent networks, leveraging prize-based competition and gamification, rethinking traditional organizational metrics and building new “muscles” in ecosystem development.

Planning for living within ecosystems
Exponential Medicine 2014 underscored the fact that innovating in an exponential world requires that organizations do not go it alone. In fact, the world of exponential change might require that organizations get comfortable with finding and developing new types of partnerships and collaborations. New relationships could be instrumental not only to build depth and exposure to the exponential technologies themselves but also to innovate and execute at the required pace. More broadly, the conference demonstrated that the future solutions and innovations are cross-functional and cross-disciplinary in nature – answers to the big challenges could come from broad industry collaborations.

An example of this new ecosystem thinking was highlighted in the industry-wide discussion with Dr. Craig Venter and Dr. Peter Diamandis and their most recent venture. Participants in this dynamic discussion identified industry-wide opportunities to leverage advances in genetic and microbiome sequencing.

Understanding the importance of platforms versus apps
Is Uber a car service app or, is it a platform for urban logistics? Uber recently piloted an offering to connect nurses to consumers that need flu shots. What makes an app company a platform?

There is a proliferation of apps in health and medicine (over 10,000); these are both analytical in nature and focused on the consumer or mobile world. Yet, advances in exponential technologies present new opportunities and imperatives to leverage emerging and highly scalable platforms. These platforms, made possible by cheaper storage, more powerful algorithms and ubiquitous connectivity, could enable the integration of disparate data sets and broad-based collaboration across industry boundaries. Instead of silos of applications, emerging platforms could support patient engagement, clinical insight development and population health.

Creating a game plan for activating innovation
Exponential technologies are powerful tools, but how do they become even more impactful enablers of innovation? This challenge of activating innovation is faced by organizations across health and medicine. Organizations need a framework and vocabulary for how an organization can discuss innovation and its portfolio of initiatives; ‘core,’ ‘adjacent’ and ‘transformational’ innovations can impact a range of markets and customers as well as a range of existing to new products and assets. A powerful first step in making the shift from linear to exponential thinking is to have a framework and nomenclature that an organization can leverage to become aligned and focused on its innovation priorities.

Exponential Medicine 2014 presented a window into the future – not only for health and medicine, but for society. The rapid changes in technology could foster new solutions to today’s problems and allow for greater innovation and the creation of new business models. But embracing exponential thinking and the power of these emerging technologies may not come naturally to everyone or all organizations. The inertia of our day-in-day-out linear world is powerful. Nevertheless, industry leaders should consider the question, “Is your organization willing to embrace the exponential wave of change and be in position to leverage its transformational impact for the better?” Activating innovation starts with taking that first step.

Read the entire Health Care Current here and subscribe at: www.deloitte.com/centerforhealthsolutions/subscribe.

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Jason Girzadas, Principal, National Managing Director, Life Sciences & Health Care, Deloitte Consulting LLP

Jason Girzadas uses his nearly 20 years of experience to help many of the nation’s top health care organizations navigate challenges including industry reform, implementing the latest technology, creating operating efficiencies and improving performance. Jason is the industry leader for Deloitte Consulting’s $1.2B LS&HC practice, ranked #1 by Kennedy and also serves as Deloitte’s relationship leader for Kaiser Permanente, where he is responsible for the full range of Deloitte’s advisory and technology implementation services.


A tale of two patients: Making the case for lifestyle-based analytics in health care

By Chris Stehno, Director, Deloitte Consulting LLP

Beth and Sarah* are both 45 and single, with good jobs and active social lives. On the surface, their careers and personal lives seem quite similar.

Dig deeper, however, and discrete patterns emerge. Sarah is physically active, enjoys healthy food choices and is less sedentary than Beth, who regularly consults weight-loss books and brochures, but spends several hours in front of the television and has a fondness for fast-food restaurants.

Both Sarah’s and Beth’s profiles are readily available to health care planners and practitioners. It tells them that Beth is susceptible to diabetes, cardiovascular events, and other obesity-related conditions. Her lifestyle, dietary preferences, the materials she reads, and other personal indicators send up a red flag. For the healthier Sarah, her lifestyle choices indicate that she is less susceptible to diabetes.

The combination of lifestyle-based data and medical data creates a far more detailed overall picture of an individual's health risk, and can help establish a targeted action plan for Beth, one that might help her avert the prospect of diabetes. Diabetes afflicts an estimated 29 million Americans, and experts believe that 1 in 4 of them probably don’t even know they have it. Therefore, we are potentially missing a large number of our targets by evaluating medical data alone.

This tale of two patients illustrates a growing opportunity, and challenge, for the health care industry and how it gets in front of chronic diseases. The Centers for Disease Control estimates that lifestyle-based chronic illnesses account for more than 75 percent of annual U.S. medical care costs.

Evidence suggests that preventive measures to improve lifestyle activity and behavior before the onset of serious illness could prevent approximately 33 percent of all U.S. deaths each year. That comes to about 800,000 lives lost annually because of unhealthy or poor lifestyle choices.

With so much poor health in the U.S. directly connected to lifestyle choices and patterns of behaviors, interest from health care organizations in leveraging analytics as a powerful predictive and treatment tool is growing. Using non-traditional, non-medical data to help map courses of treatment for vulnerable populations before they become ill is an idea whose time is coming, if slowly, to the health care industry.

Policies in the Affordable Care Act that reward providers and health plans for better quality and outcomes have raised organizational interest in improving clinical, operational, and financial performance. Value-based payment that creates financial incentives to reduce total cost of care has stimulated interest in investments into analytics that have the potential to reduce spending and eliminate service redundancies. The big data revolution can make it possible for the health care industry to tap a huge array of information sources – including purchasing data, medical claims, and social media – to market services and products and develop personalized targeted care plans more accurately than they did a decade ago.

Some industries have grabbed the ball and run with it. We’re well aware that major retailers are continually learning as much as they can about their customers in order to promote specific products, many of which can lead to poor diet and exercise habits. Historically, the health care industry has lagged behind other industries in their use of  data mining and predictive analytics as a mechanism to improve population health and deliver preventive care. 

Of course, there are legitimate concerns about wide dissemination of an individual's medical history and lifestyle preferences. There’s an emotional element to sharing private medical data. It’s not just a technology consideration. This is our most personal, intimate information, and the idea that anyone can collect it easily and at any time, for purposes that often aren’t well-explained, can be worrisome.

During a recent Deloitte Dbriefs webcast, we asked participants what they viewed as the biggest challenge of lifestyle-based data collection; 53 percent responded that privacy and security of data was number one, more than double the level of concern over data accuracy.

Still, if the industry is to meet rising demand for more effective health care services, develop innovative products and treatments, and achieve significant cost savings, we’re going to need to be able to balance the constructive use of lifestyle and behavioral data and analytics to slow certain chronic illnesses in their tracks, against making sure that data is not misused.

When these interests and incentives are aligned, lifestyle and behavioral analytics could become a central strategy in building new business models. When thinking about the use of big data as a preventive tool, consider the following: Think big, start small, fail fast, scale quickly. Once that happens, it won’t be a matter of lifestyle, but a strategy for business success.

*Data depicted here is for example only and does not represent actual individuals

Chris Stehno, Director, Deloitte Consulting LLPChris Stehno is a director with Deloitte Consulting LLP and has more than 15 years of experience working with major insurance and health care organizations. Chris specializes in predictive modeling and the use of alternative datasets and their business implications and applications in the life insurance and health care industries. His work includes the use of data mining and predictive modeling applications to enhance underwriting decisions and new business processes, to identify individuals for disease management and wellness initiatives, to enhance risk-based sales, marketing and retention efforts, to optimize distribution strategies, to develop customer-lifetime value, and to establish cost-reduction applications through advanced analytical analysis.


Infographic: Dig deep: Uncovering the hidden costs of health care

Total health care spending is greater than officially reported. Health care spending in the United States consists of that reported in the National Health Expenditure Accounts (NHEA) and the "hidden costs of health care" - spending that occurs outside of the NHEA that is not routinely or completely captured.

By taking a broad view of direct and indirect costs, as well as specific items such as alternative medicines, functional foods, and the imputed cost of providing supervisory care to a family member or friend, Deloitte has developed a more comprehensive estimate of U.S. spending on all health-related goods and services.

Click here to download a copy of the infographic.

  Deloitte | DeloitteHealth |Hidden Costs of Health careInfographic | #CHSBlog

Click here to read more about the methodology.


Marketplace open enrollment forecast for year two: Six of one, half a dozen of the other?

by Greg Scott, Principal, National Health Plans Sector Leader, Deloitte Consulting LLP

I may be mistaken, but I don’t think that the results of the upcoming public health insurance marketplace open enrollment period will achieve the Congressional Budget Office’s (CBO) forecast for 2015. And as of yesterday, I seem to be in good company, because the U.S. Department of Health and Human Services (HHS) provided modest expectations well below the CBO estimates.

Approximately 7 million individuals were covered by Affordable Care Act (ACA) marketplace products as of October.1 Until yesterday, the CBO enrollment forecasts have been the de facto benchmark against which actual results have been measured. The CBO projected earlier this spring that in 2015, 13 million people will be covered by insurance products sold through state-based (SBM) and federally-facilitated marketplaces (FFM).2 Monday, November 10, HHS announced lower expectations, projecting that enrollment would reach a net of around 9 to 9.9 million in 2015.3

In my opinion, there are at least six reasons that could help explain why HHS lowered its projections and why the second open enrollment period might come up short:

  1. Narrower window. The open enrollment season for year two and beyond is only three months in duration, compared to six months in the inaugural year. A shorter season is likely to produce shorter results.
  2. Scant awareness and declining publicity. Survey research from a variety of sources demonstrates that many Americans continue to lack awareness of ACA mandates, benefits and concepts.4 Compared to year one, media coverage of ACA topics seems much more sporadic and subdued, so the public attention to the ACA could remain more modest this time around. This season, there is likely to be substantially less paid advertising and marketing, whether from the government or advocacy organizations’ budgets. As the ACA becomes less prominent in the national conversation outside of political diatribe, it’s likely to become more challenging to raise awareness about coverage mandates, the open enrollment process and schedule and other action-motivating topics.
  3. Challenging demographics. The uninsured disproportionately fall into demographic segments that are more challenging to reach and motivate to enroll in health insurance coverage (even if that coverage is at no or little cost). In 2014, 10 million previously-uninsured Americans joined the ranks of the insured, primarily as a result of marketplace subsidies and Medicaid expansion.5 In general, the 2015 “remaining uninsured” could be more challenging to enroll than the “class of 2014” was.
  4. Personal politics. “Obamacare” continues to be highly unpopular among many Americans.6 There could be a significant number of individuals and families (including many who would qualify for tax-subsidized marketplace coverage) that choose to not enroll in a marketplace product or program because of their personal views about “Obamacare.” I continue to be amazed that the Administration decided to embrace the term “Obamacare,” which is, in my opinion, not an effective brand among many segments of the population.
  5. Tight finances. Many Americans continue to experience financial challenges and find the cost of health insurance (and health care overall) to be unaffordable. Our survey of young adults and health insurance found that 66 percent of individuals age 19 to 34 who remained uninsured after the last open enrollment season did so because they found health insurance to be unaffordable. Only 55 percent of individuals were aware that the federal government offers money to individuals with lower incomes in the form of tax subsidies.7
  6. Likely attrition and high complexity. Some 2014 marketplace enrollees will choose not to re-enroll for 2015. There are many reasons why individuals and families might not continue to participate, and confusion may be one of them. While personal opinions about the ACA vary widely, there is one thing that everyone should be able to agree upon: the ACA is incredibly complex. Many Americans who would benefit from enrolling in a marketplace product might not because they were confused and/or frustrated by the sheer complexity of program rules, eligibility requirements, product choices, benefit designs, provider networks, enrollment processes, websites and customer service experience.

On the other hand, there are at least half a dozen good reasons why enrollment results could be better than HHS’s latest projections for year two:

  1. Improved technology. The HealthCare.gov website and other related enabling technology should be much improved this year. And many state websites should be far better prepared for this year’s open enrollment period than they were last year.
  2. New choices. There is a 25 percent increase in the number of issuers offering products on the marketplaces this year.8 This includes new offerings from some of the industry’s most well-known brands, such as Aetna, Blue Cross Blue Shield, Cigna, and United Healthcare.
  3. Good deals. Tax credit subsidies remain an attractive financial proposition for those who qualify (and who know about them). Even those who don’t qualify for federal subsidies may find cost-effective coverage on the marketplaces.
  4. Penalty avoidance. In 2015 the penalty for not having insurance will increase to $325 or 2 percent of income per single adult, whichever is greater.9 This is a significant increase over the penalty for 2014 and could motivate a number of uninsured individuals to shop for marketplace coverage.
  5. Employer retrenchment. Employers both large and small continue to scale back group health insurance coverage of employees, retirees and dependents. An increasing number of Americans who no longer enjoy employer plans could enroll in individual commercial insurance, including marketplace products.
  6. Lessons learned. Experience is the best teacher. The sometimes painful experience of the first open enrollment offered many lessons to government agencies, technology companies, advocacy groups, health plans, network providers, agents and brokers and individuals and families. Year two enrollment performance will likely be improved to some degree by the lessons learned during year one.

I hope that I’m wrong in my projection. Subsidized insurance products offered through the marketplaces – in combination with expanded Medicaid eligibility – offer by far the best available opportunity to reduce the nation’s (unacceptably) high number of uninsured.

On a personal level, I think a successful enrollment period would be good for our society, good for our economy, good for our industry, good for Deloitte’s clients and good for a lot of individuals and families who suffer the health, financial and emotional consequences of having no health insurance. Please join me in rooting for a great open enrollment…



Read the entire Health Care Current here and subscribe at: www.deloitte.com/centerforhealthsolutions/subscribe.

Greg Scott_Sig

Email | LinkedIn

1 Wall Street Journal, “Obama Administration Says 7.3 Million Who Picked Health Plans on Exchanges Have Paid Premiums,” September 18, 2014, http://online.wsj.com/articles/obama-administration-says-7-3-million-who-picked-health-plans-on-exchanges-have-paid-premiums-1411058425
2 CBO, “Updated Estimates of the Effects of the Insurance Coverage Provisions of the Affordable Care Act, April 2014,” http://www.cbo.gov/sites/default/files/cbofiles/attachments/45231-ACA_Estimates.pdf
3 Elise Viebeck, The Hill, “HHS lowers ObamaCare enrollment expectations,” November 10, 2014, http://thehill.com/policy/healthcare/223525-hhs-lowers-obamacare-enrollment-expectations
4 Kaiser Family Foundation, “Kaiser Health Tracking Poll: October 2014,” October 21, 2014, http://kff.org/health-reform/poll-finding/kaiser-health-tracking-poll-october-2014/
5 Finegold, Kenneth and Gunja, Munira Z. U.S. Health and Human Services, ASPE, “Survey Data on Health Insurance Coverage for 2013 and 2014, October 31, 2014
6 Politico, “Exit Polls: Don’t care for Obamacare,” November 4, 2014
7 Deloitte Center for Health Solutions, “Young Adults and Health Insurance: Not Invincible – But Perhaps Convincible,” 2014
8 HHS, “New Report: Health Insurance Marketplace will have 25 percent more issuers in 2015,” September 23, 2014, http://www.hhs.gov/news/press/2014pres/09/20140923a.html
9 Kaiser Family Foundation, “Individual mandate,” http://kff.org/health-reform/faq/health-reform-frequently-asked-questions/#question-whats-the-penalty-if-i-dont-have-coverage

Greg Scott, National Sector Leader, Health Plans, Deloitte Consulting LLPGreg Scott was recently named national sector leader of Deloitte’s Health Plans Practice. He not only has an extensive background in professional services but also as a corporate executive and policy leader given prior positions at Anthem and the Health Care Financing Administration (now the Centers for Medicare and Medicaid Services).


What does the election mean for providers, health plans, and life sciences companies?

by Sarah Thomas, Research Director, Deloitte Center for Health Solutions, Deloitte Services LPTwitter

On Tuesday, November 4, both chambers of the U.S. Congress became controlled by the Republican party. Governors’ races and races in the state legislatures resulted in increases in Republican control as well. As is the case following every election, there is the potential for a change in policy that could provide new opportunities or threats to the status quo for stakeholders in the health care industry.

Despite the change in power and the focus on repealing the Affordable Care Act (ACA) that continued to be an issue featured in some Republican advertisements and stump speeches, pundits largely agree that the ACA is likely to continue for at least another two years despite this change in power. This is the case even though analysis from surveys shows that the country continues to be deeply divided on its views of this law, with a strong number of Republicans not supporting it.

We could see legislation to repeal the ACA (as we have seen in past sessions of Congress), but what will likely be different this time is that the Senate Republicans, now a majority, may have enough votes to support a repeal. However, the President has already indicated his willingness to veto any such legislation.

Might the Congress and the President agree to “fix” unpopular parts of the law? It is possible – there certainly is general dislike of provisions like the employer mandate, the tax on medical devices and the tax on insurance companies. Lawmakers on both sides of the aisle have hinted at being willing to consider changes, Hillary Clinton joining in most recently. And, if the Congress put together legislation to repeal these sections, it might be politically difficult for the President to veto these. That said, cutting provisions that raise revenue (as the medical device and insurance tax provisions do) would probably need to be paired with an offset to keep the effect on the budget deficit neutral. Finding such an offset might be politically challenging. If the financing issue were addressed and the legislation were passed, a policy change along these lines might be to the advantage of both employers and medical technology companies.

Aside from the ACA, the Congress is expected to act in several areas of health care policy over the next several months:

  • The budget: The Continuing Resolution that is currently funding the government is set to expire on December 11, before the new Congress is in office. There are several ways that the current Congress (in its “lame duck” session) might resolve this issue, and that is likely to play out over the next several weeks and months.
  • The perennial physician payment issue in Medicare: This will either be addressed in the lame duck Congress or will likely be one of the first legislative items that the new Congress will need to deal with. Current legislation only extends the ‘patch’ that prevents large cuts to physician payment under Medicare through March 2015. Last year, the Congress tried to enact major reform to this payment system, but in the end was unable to find the funding to support the policy changes. Even so, the legislation that enacted the patch became a veritable Christmas tree of policy, as it was one of the few pieces of health legislation to be enacted. Especially salient to many stakeholders was the delay in implementation of ICD-10 that was included in that legislation.
  • 21st Century Cures: Another policy stakeholders have been watching closely is this initiative, which focuses on “accelerating the pace of new cures and treatments.” With stronger Republican presence in both houses, prospects are more likely for legislation to bring life sciences products to market more quickly.

So, what do election outcomes for gubernatorial and state legislature candidates mean for stakeholders? Out of the myriad decisions states face on health care issues (see Decision time: Prioritizing state health care agendas), two have surfaced as major issues:

  • Health insurance marketplaces: While most of the states that opted to operate their own marketplaces had Democratic governors, even many Democratic-led states decided not to make the investment into their own marketplaces, possibly due to the technical complexity. The election is unlikely to overcome the financial and political challenges of standing up a state marketplace for 2016.
  • Medicaid expansion: Will we see more in the next two years? After the election results, it looks unlikely, except perhaps in Alaska. And in one state, Arkansas, a change in the administration could mean that current efforts to expand the program are reversed or reduced. I would expect many providers to view Medicaid expansion is a good thing, helping to reduce bad debt and charity care for low income patients.

Even as we consider the results of the elections on health care policy, a very significant threat to the ACA – one that could be more significant than any action that could be taken by Congress in the next two years – comes from the U.S. Supreme Court. On Friday, only days after the election, the judicial branch announced it would take up the question of whether the premium subsidies made available to people buying coverage through the federally facilitated marketplace (also known as an exchange) can continue to be legal. If the Supreme Court does not find this to be legal, the impact on the marketplace would likely be profound: low income consumers may find coverage too expensive, and the plans serving those markets would be likely to have lower enrollment as a result.

Before you know it, we will start to see discussion about what these midterm elections mean for the next Presidential election. A Republican president would certainly be in the position to sign legislation to repeal or replace the ACA if Congress remains Republican-led in both houses. But repealing the whole law would likely be tricky as some of the policies covered by that law – for example many that affect Medicare – have been long enacted and could be expensive from a budgetary perspective to undo. Figuring out which pieces to repeal and what (if any) policies to add to replace them is no small challenge given the complexity and vested interests behind many provisions.

I look forward to watching closely the change in political power and learning more about the agendas of our new leaders.

Sarah Thomas, Director of Research, Deloitte Center for Health Solutions, Deloitte LLPSarah Thomas is a director with Deloitte Services LP and the director of research for Deloitte's Center for Health Solutions. Sarah has experience in public policy, ranging from reimbursement to addressing issues such as quality in Medicare, Medicaid and the private health insurance market, including health insurance exchanges and marketplaces.She has more than 13 years of government experience.

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