The New Consumer Imperative by Crain's Detroit Business

Health Care Advisory Board

The New Consumer Imperative Health Care Strategy in an Era of Informed, Accountable, and Empowered Shoppers

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Health Care Advisory Board

The New Consumer Imperative Health Care Strategy in an Era of Informed, Accountable, and Empowered Shoppers

Health Care Providers Serving Two Masters Public, Private Markets Demanding Different Value in Different Ways

Purchaser Approach to Value:

Public Sector

Provider Approach to Value:

“Public Utility” • Rate setting • Regulation • Accountability controls

“Market Commodity” • Market dynamics • Consumer preference

• Medicare, Medicaid • High cost per capita • Chronic illness, comorbidities

Population-level Focus • Total cost control • Care management

• Rising share of population

Private Sector • Insurers, employers, individual consumers • Generally healthy with episodic care needs • Access, experience, convenience paramount

End-user Focus • Unit cost control • Consumer-oriented innovation

• Large share-of-wallet opportunity

Source: Health Care Advisory Board interviews and analysis.

Moving from Zero-Sum to Positive-Sum Competition Value-Seeking Agents Catalyzing New Market

Employers

Consumers

Competition at the wrong level has been exacerbated by the pursuit of the wrong objective: reducing cost…The right goal is to improve value (quality of health outcomes per dollar expended).” Michael Porter, 2004

Source: Michael Porter and Elizabeth Teisberg, “Redefining Competition in Health Care.” Harvard Business Review, 2004 82(6):64-76, accessible at https://hbr.org/2004/06/redefining-competition-inhealth-care; Health Care Advisory Board interviews and analysis

Employer Decisions Driving Consumer Accountability Providers Have a Strong Interest in Keeping Benefits Affordable Spectrum of Options for Controlling Health Benefits Expense

“Activation”

“Delegation”

“Abdication”

Manage Proactively

Cost Shifting

Drop Coverage

• Bear risk through selffunding

• Convert to defined contribution

• Send employees to public exchange

• Steer employees to preferred providers

• Encourage uptake of high deductible plans

• Trade Cadillac tax for employer mandate penalty

• Necessary Condition: Compelling provider value proposition

• Necessary condition: Plausible sustained reduction in expense trend

• Necessary condition: Functional public exchange safety net

Source: Health Care Advisory Board interviews and analysis.

Onboarding Risk, then Offloading to Employees Employers Increasingly Turning to High-Deductible Plans ESI Average Deductible for Single Coverage1

Percentage of Covered Workers with Annual Deductible of $2,000 or More3

By Plan Type, 2006-2015

By Firm Size, 2006-2015 40%

$1,318

$1,400

36%

35%

$1,200

$1,025

30%

$1,000

25% $958

$800 $600

15%

$400

10%

$200

HMO

PPO

All Plans

19%

20%

12%

3-199 Workers All Firms 200 or more workers

1) Among covered workers with a general annual health plan deductible. 2) Includes HDHP/SO. 3) For single coverage. Source: Kaiser Family Foundation and Health Research & Educational Trust, “Employer Health Benefits 2015 Annual Survey; Health Care Advisory Board interviews and analysis.

Bringing 401(k) Expertise to Health Care Fidelity Moving into the Private Exchange Business Case in Brief: Fidelity

Fidelity Health Marketplace’s Centralized Benefits Management Model Health Insurance Benefits

• Launched centralized benefits management platform January 2016 after 2015 pilot • Offers bundled benefits options to small- and mid-size businesses traditionally served by independent brokers • Acts as benefits broker; also provides technology platform, record-keeping, and account management

Medical

Dental

Vision

HSA, HRA, FSA

Health Management Support

Other Employer Benefits

Telemedicine

Life, AD&D1 Insurance

Wellness coaching

Short, Long-Term Disability Commuter Programs

Fidelity Enjoying a Head Start with Customers

25M

22.8M

$5.1T

Individual investors

Brokerage accounts

Total customer assets

Source: Fidelity Health Marketplace, available at https://www.fidelityhealthmarketplace.com/; Ryan G, “Fidelity moves deeper into health care space with new exchange,” Boston Business Journal January 26, 2016; Fidelity, “Fidelity by the Numbers,” https://www.fidelity.com/about-fidelity/fidelity-by-numbers/overview; Health Care Advisory Board interviews and analysis.

Expressing a Preference for Low-Cost Coverage Consumers Electing to Bear Very High Cost Exposure Average Deductible for Exchange-Sold Health Plans

Exchange Enrollment, by Metal Tier

2014-2016

2015

Bronze

20%

$2,907 $2,927 $3,117

Silver

69%

$1,277 $1,198 $1,165

Gold

Platinum

Platinum 4% Gold 7%

$5,081 $5,181 $5,731

Silver

$347 $243 $233

Nearly 90% of exchange enrollees are in bronze or silver plans 2014

2015

2016

1) Federal Employee Health Benefits Plan. Source: HealthPocket.com, “2015 Obamacare Deductibles Remain High but Don’t Grow Beyond 2014 Levels,” November 20, 2014, available at: www.healthpocket.com; Health Care Advisory Board interviews and analysis.

Higher Deductibles Driving Increased Price Sensitivity Consumer Responses Generally Dangerous for Provider Economics

Forgo Care? Spending Reductions Following Implementation of High-Deductible Health Plans

25% Reduction in physician office spending

Households Without Enough Liquid Assets to Pay Deductibles

Shop Carefully?

56%

35%

Consumers searching for price information before getting care

24%

18% Reduction in ED spending

Fail to Pay?

Mid-range deductible

Higher-range deductible

74% Consumers with deductibles higher than $3,000 who have solicited pricing information

Source: Brot-Goldberg Z et al., “What Does a Deductible Do? The Impact of Cost-Sharing on Health Care Prices, Quantities, and Spending Dynamics,” The National Bureau of Economic Research, October 2015, available at: http://www.nber.org; Altman D, “Health-Care Deductibles Climbing Out of Reach,” Wall Street Journal, March 11, 2015, available at: www.blogs.wsj.com; Health Care Advisory Board interviews and analysis.

Living Under a Microscope Consumers Have Access to More Information than Ever Before Transparency Comes to California

Sample Transparency Sites

September 21, 2015

Attention Shoppers: New Calif. Website Details Costs, Quality of Medical Procedures Where You Live Matters What you pay may differ based on where you live County Price Average for Total Knee Replacement

Monterey Coast Average Estimate: $46,568 High Estimate: $86,483

San Joaquin Valley Average Estimate: $24,614 High Estimate: $62,375

Source: Ostrov BF, “Attention Shippers: New Calif. Website Details Costs, Quality of Medical Procedures,” Kaiser Health News, available at: http://khn.org/news/attention-shoppers-new-calif-websitedetails-costs-quality-of-medical-procedures; Health Care Advisory Board interviews and analysis.

Consumers Turning to New Sources for Info on Quality Crowdsourced Reviews Getting More Reliable “Now the millions of consumers who use Yelp… will have even more information at their fingertips when they are in the midst of the most critical life decisions, like which hospital to choose for a sick child or which nursing home will provide the best care for aging parents.” Jeremy Stoppelman, CEO Yelp Acclaimed news source partners with review website with more than 85 million monthly users Incorporates Medicare data on more than 25 thousand facilities, including 4,600 hospitals

ProPublica compiles and provides Yelp with Hospital Compare metrics on ER wait time, doctor communication and room noise levels “Yelp’s Consumer Protection Initiative: ProPublica Partnership Brings Medical Info to Yelp” Yelp, Official Blog, August 5, 2015; https://www.yelpblog.com/2015/08/yelpsconsumer-protection-initiative-propublica-partnership-brings-medical-info-to-yelp; Health Care Advisory Board interviews and analysis.

Innovations Crowding Onto the Field Disruptive Services and Tech for Consumer Use (Existing and In Development) Inexpensive, rapid care at a ‘provider’ site

Retail Clinics

Physician hailing

Remote diagnosis and link to clinicians

• Opternative: iPhone eye exam, e-mail RX

• SmartChoice MRI

• Walgreens

• Pager.com

• CVS Health

• Heal

• Right Care

• Wal-Mart

• Dispatch Health

• PediaQ • Mend

• MedZed (pediatric housecalls)

• OrthoNow

25%

• Iodine’s Start app: Tracks depression symptoms and • Google contact lens: drug efficacy glucose monitoring • OneDrop: • EpiWatch: predicts diabetes tracker seizures • ACC’s Statin intolerance selfchecker

• MoleMapper: cancerous mole screening • Iphone-directed walk tests, cognition, fine motor skill, tremor evaluations

Patient apps for condition selfmanagement

Source: Oliver Wyman, “The New Front Door to Health Care Is Here,” 2016, available at http://www.oliverwyman.com/content/dam/oliverwyman/global/en/files/insights/health-life-sciences/2016/The%20new%20front%20door%20to%20healthcare%20is%20here.pdf; Health Care Advisory Board interviews and analysis

Today’s Consumer Overwhelmed with Choice Connected Platforms Reduce the Risk of Fragmentation

Retail Clinic Primary Care

“I need a Rx refill”

Urgent Care “I need a flu shot”

Telephone Consult “My child has a fever”

“Where do I go?”

Loyalty Platform “Do I need stitches?”

“Am I healing after surgery?”

“Is this mole a serious problem?”

E-Visit

Emergency Department

Asynchronous Consult

Source: Health Care Advisory Board interviews and analysis.

Harnessing Experience to Secure Patient Loyalty Aspiring Toward Durable, Enduring Relationships 2

Convenient Access

• Expanded capacity

• Enterprise scheduling

• Convenient sites

• Virtual channels

Consumer Experience

Transparent Search • Pricing

Positive Encounter • Navigable facilities

• Compatibility

• No-wait visits

• Reviews

• Respectful interactions

• Availability

• Easy payment

Durable Relationship • Information continuity • Personalization • Care coordination

• Comprehensive services

Source: Health Care Advisory Board interviews and analysis.

#1: Transparent Search

Automated, Customized Price Quotes a Differentiator Online, Personalized Estimates Facilitate Shopping Payer contract information

Provider charge list

Patient benefit coverage

Personalized Out-of-pocket expense estimate For high volume, non-emergent shoppable procedures

Case in Brief: ProMedica • 13-hospital health system in the Midwest • Partnering with Recondo to provide automated out-of-pocket price estimates based on patient benefit design • Users input insurance information and system provides a customized response for each patient’s financial obligation

20%

Of final price (range of accuracy of automated price estimate)

Source: Health Care Advisory Board interviews and analysis.

#2: Convenient Access

Not Your Father’s Urgent Care Consumer Demands are the Center of the Zoom+ Universe Illness visits start at $145, specialty at $200 for self-pay patients Most clinics open until midnight on weekdays, more limited hours on weekends

Scheduling, e-visits, bill pay can all be accomplished via mobile app

Case in Brief: Zoom+

Establishing a Loyal Base

• Private network of consumer-oriented clinics based in Hillsboro, Oregon; founded in 2006 as Zoomcare • Low prices, evening and weekend hours, and co-located services appeal directly to consumers • Currently offering primary, specialty, and urgent care services at more than 25 locations; multiple tiers of coverage through Zoom+ Performance Health Insurance ©2016 The Advisory Board Company • advisory.com • 32572A

250K

Annual Zoom users, 2014 (before rebrand, expansion)

Source: Portland Business Journal, “ZoomCare inks investment deal with Endeavour Capital,” July 8, 2014; Chase D, “I’ve Seen the Future of Health Care. I Like What I See,’ Forbes, November 23, 2015, available at: http://www.forbes.com/sites/davechase/2015/11/23/ive-seen-the-future-ofamerican-healthcare-i-like-what-i-see/#6567e0135178; Health Care Advisory Board interviews and analysis.

Growing A Health System From A Very Different Seed Zoom+ Services

Zoom+Super for “nearemergency” needs, open 20 hours a day

On-Site pharmacy, labs, and imaging

Zoom+Performance “Olympic-level” coaching, neuro-agility, body composition analysis

Expansion Plan

Pediatric primary, specialty, and wellness care

Specialty care, including cardiology, dermatology, orthopedics, and ENT

Wellness coaching including food and movement-as-medicine

2 3

Adds

Specialist Services • Employs common specialists • Partners with local health systems for others

Incorporates

Insurance Plan First sold on Oregon exchange in 2015

Expands to new

Markets • Expanding into California

• New clinics opening in Portland, Boise, Seattle

Source: Portland Business Journal, “ZoomCare inks investment deal with Endeavour Capital,” July 8, 2014; Chase D, “I’ve Seen the Future of Health Care. I Like What I See,’ Forbes, November 23, 2015, available at: http://www.forbes.com/sites/davechase/2015/11/23/ive-seen-the-future-of-american-healthcare-i-like-what-isee/#6567e0135178; Health Care Advisory Board interviews and analysis.

#3: Positive Encounter

Redefining the Primary Care Experience Integrated Technology Transforms the Primary Care Visit at Kaiser Health Hub Clinic Design Transforms Waiting Room Experience

Use of Technology Improves Visit Efficiency

Thrive Bar provides walk-up exercise and nutrition counseling

Air Traffic Control System tracks clinic activity to room patients as quickly as possible

Innovation in Brief: Kaiser Health Hub

Public gardens and walking paths open the care space to nature

Onsite lab and pharmacy provide one-stop care

Digital member card for remote check-in and oneswipe kiosk registration

KAISER PERMANENTE

‘Public Squares’ eliminate traditional waiting room

Text notifications for wait time, doctor availability, and Rx pickup

• Newly redesigned MOB in KP’s Southern CA region • Currently offering complete family medicine services • Planned offerings include orthopedics and dermatology

In-room tele-consults with specialists minimize need for repeat visits

• 8 planned by end of 2017

Source: Chu B, “Taking Innovation to Scale,” Presented at National Healthcare Innovation Summit, June 2015; “Kaiser Permanente South Bay Begins Construction on Manhattan Beach Medical Offices,” Kaiser Permanente Press Release, June 30, 2015, available at: www.share.kaiserpermanente.org; Health Care Advisory Board interviews and analysis.

UCLA Aims For a Reliable Experience System-Wide “Golden Fifteen” Delivers a Positive Experience at Scale UCLA Identifies Interaction Points Throughout Care Experience for Standardization Operations

Branding Customer Service

1. Scheduling 2. Check-in process 3. Communication of delays 4. Clinical processes 5. Check-out process 6. Patient safety concerns

7. Consistent use of customer service procedures 8. Managers’ monitoring of service behaviors 9. Training needs

Management 10. Uniforms, badges, personal appearance 11. Waiting room materials 12. Standard postings 13. Overall practice appearance

14. Practice management 15. Use of metric

Case in Brief: UCLA Health • Five-hospital health system with 155 clinics based in Los Angeles, California • Created 107 standards within 15 categories as a way of creating consistent, positive experience

• Five-person change management team works with practice managers to implement standards • Experience scores rose 38% in first 45 days; CG-CAHPS scores rose 10% in first year ©2016 The Advisory Board Company • advisory.com • 32572A

Source: Health Care Advisory Board interviews and analysis.

#4: Durable Relationship

Reward Consumers for Being Good Patients Wealth from Health® Rewards Program Attend appointments

Complete educational courses

Complete barriers to care stratification tool1

Healthy Behaviors

Case in Brief: Jersey City Medical CenterRWJBarnabas Health

Self-manage chronic care

• 300-bed urban safety net hospital in Jersey City, NJ • Implemented Wealth from Health® reward program which provides gift cards for completing short term tasks associated with chronic disease selfmanagement, appropriate use of community resources, and medication management

Observed Benefits to System2

Benefits to Consumer Gift card

41%

Fewer inpatient admissions

Products, retail discounts

$5M

Reduced costs from admissions

Improved health outcomes

39%

Reduction in cost associated with observation stays

• Partners with 60+ local vendors for discounted services to enrollees

1) Tool completed every six months, and quantifies barriers related to socioeconomics, disease burden, cultural beliefs, personal likes and dislikes, access to healthy choices. 2) Six months post enrollment in program. ©2016 The Advisory Board Company • advisory.com • 32572A

Source: Health Care Advisory Board interviews and analysis.

Learning from the Best in Class Amazon’s Platform Eliminates Common Barriers to Commerce Ease of Use a Hallmark of Amazon’s Platform Complete

Accessible

Wide array of products from internal and external vendors

Connected

Multiple channels give consumers many methods of interaction

Intelligent interface recommends products and stores information

Easy to Use

One-click shopping secures choice, reliable shipping finalizes transaction

Avoid Barriers That Push Consumers Away Cart Abandonment Rates in the E-Commerce Industry

37% During checkout login

21%

20%

36%

46%

Upon entering Upon entering At reaction billing shipping to shipping costs address address

Frictionless Consumer Platform

At the point of payment

Source: Meola, Andrew, “E-Commerce retailers are losing their customers because of this one critical mistake,” Business Insider, March, 2016; Health Care Advisory Board interviews and analysis.

A New Lens on Health Care Provider Strategy

Competitor-centric Strategy

Strategic Benchmark: Closest competitor’s performance Financial Metric: Share of existing market Executive Focus: Stewardship of community asset

Consumer-centric Strategy

Strategic Benchmark: Maximum consumer value Financial Metric: Share of wallet, lifetime loyalty Executive Focus: Ongoing drive for improvement

[I have a] passion to figure out customer-focused strategies as opposed to, say, competitor-focused strategies. If you’re competitorfocused, you tend to slack off when your benchmarks say that you’re the best. But if your focus is on customers, you keep improving. Jeff Bezos

Source: Kirby J and Stewart TA “The Institutional Yes,” Harvard Business Review, October 2007; Health Care Advisory Board interviews and analysis.

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