CF CFA S Societ ety Th Thursday, Fe February 7, 7, 2013 2013 Har arry R R. Jac . Jacob obson, M M.D .D.
Costs are too high and rising too fast (Despite the fact that cost reduction has been a central goal for over 20 years!) Quality problems are pervasive – medical errors occur at high rates. There is an amazing gap between what we know and what we do. Variability in practice is huge. Proven medical advances take years to be widely implemented.
3 $2.70 Trillion 2.5 $2.42 Trillion $1.98 Trillion 2 rillions $1.35 Trillion 1.5 $ Trilli 1 $714 Billion 0.5 $253 Billion 0 1980 1990 2000 2005 2007 2011 9% 9% 12% 12% 13% 13% 15% 15% 16% 16% 17. 17.9% 9% GDP GDP GDP GDP GDP GDP Source: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group; U.S. Department of Commerce, Bureau of Economic Analysis, and U.S. Bureau of the Census . 3
2002 – 2012 8.6% average annual growth rate in Medicare spending. Enrollment growth only 2% annually 2012 – 2020 5.9% average annual growth with enrollment (Forecast) growth of 3% annually (probably too optimistic) Why? • Non-physician provider payment reductions (this money will go towards expanded government coverage so no overall budget savings) • Physician payment reduction from SGR in the BBA of the 90’s (this will not happen) • Reduction in payments to Medicare Advantage Plans (Doesn’t address the 75% of Medicare beneficiaries that are in fee-for-service)
Price e Providers ers Charg rge Salaries/Incomes of Health Care Workers (Doctors) • Costs for Prescription Drugs, Devices, Equipment, etc. • Uncompensated Care • “O “Over erhea ead” Ref eflected in n Pri rice e Prov rovider ers Cha harge Administrative Costs for Billing, Collecting, Compliance, etc. Embedded in Providers • Readiness Factor – Cost of Building, Owning, Maintain Certain Infrastructure – Level 1 Trauma • Centers, etc. Cost of “Over Capacity” • Malpractice • “Overh rhead” ” Elsew ewhere here Administrative Costs Within Insurers • Volum ume Lack of Evidence-Based Decision Making • Variability in Practice • Overuse, Misuse, Underuse of Resources •
Insurer er GAP GA Provider Vol Volume me / / Varia riabili lity Overhead Pric rice ($600B) ($300B) ($100B) Europe, U , U.K., ., U.S. S. Can Canada
Development of: • Prospective payment systems • Payment mechanisms No Significant • Managed care plans Impact • Consumer-driven health plans • Medical savings accounts • Accountable Care Organizations - ?
Traverse City, MI 50.1% Fort Lauderdale, FL 41.8% Birmingham, AL 32.0% Columbia, SC 19.6% Dartmouth Atlas of Healthcare 1999 12
Elyria, OH 16.9 Jonesboro, AR 15.0 Ashville, NC 2.6 York PA 2.5 Dartmouth Atlas of Healthcare 1999 13
Redding, CA 11.5 Bloomington, IL 9.8 Santa Rosa, CA 3.6 Albuquerque, NM 3.1 Dartmouth Atlas of Healthcare 1999
McAllen, TX $ 9,033 Miami, FL $ 7,783 San Luis Obispo, CA $ 3,553 Lynchburg, VA $ 3,074 Dartmouth Atlas of Healthcare 1999
Source: Data from The Dartmouth Atlas of Health Care, www.dartmouthatlas.org
Variation in practice results in: • Excessive cost • Under intervention • Over intervention • Poor outcomes Variation results from: • Poor information sharing • Lack of agreed upon standards • “Cookbook” medicine opposition
6712 Individuals in 12 Cities Only 54.9% received recommended care Only 54.9% received recommended preventive care Only 53.5% received recommended acute care Only 56.1% received recommended chronic care Examples: Hip Fracture 22.8% (Range 6.2-39.5%) Atrial Fibrillation 24.7% Depression 57.2% Senile Cataract 78.7% (Best performance) E.A. McGlynn, et. al., NEJM, June 26, 2003
Screening Prevention Education Routine Acute Care Serious Acute Care Management of Chronic Illness Rehabilitation Senior Care End-of-Life Care
The New Paradigm Innovative Service Delivery SCIENCE OUTCOMES Tools: drugs, Workforce Quality devices, diagnostics Cost Supporting Knowledge: Process Right care, right Technology evidence place, right time Venue Healthcare Services Demand Modules Education/ Chronic Serious Routine Screening Prevention Behavior Illness Rehab Elder Care End of Life Care Acute Care Modification Mgmt 2 2 1 1 4 - 5 2 3 1 - 2 4 - 5 Performance: 5 = Outstanding, 1 = Poor Innovation in the Delivery of Healthcare 20 Services
In 2011 12 million jobs in health care (1 out of every 11 workers; 5.5 million hospital jobs) 7 of the 20 fastest growing occupations are health care related Health care creates 250-300,000 new jobs a year
Hospitals, outpatient facilities, 1. Service Providers specialty groups, etc. Aetna, Cigna, United, Anthem, 2. Payors/Insurers Blue Cross Blue Shield, etc. Merck, Pfizer, Lily, Novartis, 3. Pharmaceutical etc. Medtronic, Boston Scientific, 4. Medical Devices Stryker, etc. 5. Information Technology McKesson, Cerner, Eclipsys, etc. 6. Biotechnology Amgen, Biogen, Genentech, etc.
ADMINISTRATORS/WATCHDOGS Media Regulators Professional Societies/ Insurers INNOVATORS Special Interests Academic Pharma BioTech Medicine Accrediting Employers Agencies HCIT Device SERVICE PROVIDERS Hospitals BIOTECH Outpatient Long Term Allied Health Facilities Care Professionals CAM DM Physicians CONSUMERS
Advances in science are creating unprecedented opportunities to create diagnostics and therapeutics that can improve quality of care, make care more individualized, and bring true value (better outcomes at a lower cost) to care. 24
Advances in Medical Technology – The Opportunity Genomics P ERSONALIZED M EDICINE Proteomics Pharmacogenomics Biomedical Engineering Physics N EW D IAGNOSTIC AND T HERAPEUTIC D EVICES Chemistry Nano-Science Chemical Biology Structural Biology N EW S MALL M OLECULE AND B IOLOGIC T HERAPEUTICS Pharmacology Biotechnology The marriage of Physics, Chemistry, Biology, Mathematics 25
Sir William Osler (Circa 1910) was not the last man to think he knew everything there was to know – he was just the last man to be right about it Ignorance has increased as information has exploded Informatics – the science that deals with the structure, acquisition, and use of information – it’s not about recording things o a computer but about the tough job of orchestrating an ever changing evidence based toward the goal of efficiently improving health outcomes
At its core the maintenance of health and the restoration of health depends on making the right decisions based on the best evidence. Health care is an information dependent service business – the right information, in the right setting, at the right time. When this fails, we get variability in practice, overuse and misuse of resources, and suboptimal outcomes (including medical errors). 27
All investments focused on healthcare All portfolio companies should improve patient care The funds: ◦ TriStar I – TNINVESCO-$500,000-$1.5 million ◦ TriStar II - $500,000 - $2.5 million ◦ Medcare - $5 million - $150 million ◦ Epiphany – Startup - $50 million Only invests in service innovation
Port ortfoli lio C Comp ompany Fund Fund BioStable 2 Cerebrotech 2 Cobra Stylet 2 Device Innovation Group 1 Diabetes Care Group (DCG) 1 & 2 Diagnovus 1 Goba 1 MedCenterDisplay 1 & 2 Molecular Sensing 1 OnFocus Healthcare 1 Pathfinder 1 VenX 1
Ambulatory Services of Informatics America (ASA) Corporation of America (ICA) BioNumerik MedSolutions Cardiovascular Care Group (CCG) Outpatient Imagining Affiliates (OIA) CeloNova Biosciences Quality Health Care Diabetes Care Group International (QHCI) (DCG) Refocus Group digiChart Seno Medical G-Con
Sector tor R&D as D as % of Revenue nues Revenue nues Pharma $200 Billion 12-14% Biotech $75 Billion 15-20% Medical Technology $140 Billion 10-12% Services (hospitals, clinics, extended $1.6 Trillion Almost nothing** care facilities, physicians) * U.S. total R & D spending as % of GDP – 2.62% ** AHCs should be the R&D engine for the service sector just like they participate in R&D in the other sectors
Healthcare Services Innovation U.S. Healthcare Expenditures: 2010 Services are largest system cost Conduit for biotech, devices and IT innovation Source: Centers for Medicare and Medicaid Services. Outdated governance and business models Healthcare VC Investment by Sector 1995 – 2011 ($ billions) Biotech Med Device & Equip Healthcare Services $7.0 Inefficient coordination, collaboration and consistency $6.0 $5.0 $4.0 Sub-optimal use of diagnostics, $3.0 therapeutics and evidence-based medicine $2.0 $1.0 Starved for innovation capital $0.0 1995 2000 2005 2010 Source: PriceWaterhouse and National Venture Capital Association MoneyTree Report.
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