CF CFA S Societ ety Th Thursday, Fe February 7, 7, 2013 2013 - - PowerPoint PPT Presentation

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CF CFA S Societ ety Th Thursday, Fe February 7, 7, 2013 2013 - - PowerPoint PPT Presentation

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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!)

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CF CFA S Societ ety Th Thursday, Fe February 7, 7, 2013 2013 Har arry R

  • R. Jac

. Jacob

  • bson, M

M.D .D.

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 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.

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$253 Billion $714 Billion $1.35 Trillion $1.98 Trillion $2.42 Trillion $2.70 Trillion

0.5 1 1.5 2 2.5 3 1980 1990 2000 2005 2007 2011 $ Trilli rillions

3 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.

9% 9% GDP 17. 17.9% 9% GDP 16% 16% GDP 15% 15% GDP 12% 12% GDP 13% 13% GDP

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2002 – 2012 8.6% average annual growth rate in Medicare

  • spending. Enrollment growth only 2% annually

2012 – 2020 (Forecast) 5.9% average annual growth with enrollment 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
  • f 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)

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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
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GA GAP

Pric rice

Overhead

Vol Volume me / / Varia riabili lity

Insurer er Provider

U.S. S. Europe, U , U.K., ., Can Canada

($100B) ($300B) ($600B)

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 Development of:

  • Prospective payment systems
  • Payment mechanisms
  • Managed care plans
  • Consumer-driven health plans
  • Medical savings accounts
  • Accountable Care Organizations - ?

No Significant Impact

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Traverse City, MI 50.1% Fort Lauderdale, FL 41.8% Birmingham, AL 32.0% Columbia, SC 19.6%

12

Dartmouth Atlas of Healthcare 1999

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Elyria, OH Jonesboro, AR Ashville, NC York PA 16.9 15.0 2.6 2.5

13

Dartmouth Atlas of Healthcare 1999

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Redding, CA 11.5 Bloomington, IL 9.8 Santa Rosa, CA 3.6 Albuquerque, NM 3.1

Dartmouth Atlas of Healthcare 1999

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McAllen, TX $ 9,033 Miami, FL $ 7,783 San Luis Obispo, CA $ 3,553 Lynchburg, VA $ 3,074

Dartmouth Atlas of Healthcare 1999

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Source: Data from The Dartmouth Atlas of Health Care, www.dartmouthatlas.org

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 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
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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

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 Screening  Prevention  Education  Routine Acute Care  Serious Acute Care  Management of Chronic Illness  Rehabilitation  Senior Care  End-of-Life Care

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The New Paradigm

Innovation in the Delivery of Healthcare Services

Innovative Service Delivery

Healthcare Services Demand Modules

Screening Prevention Education/ Behavior Modification Routine Care Serious Acute Care Chronic Illness Mgmt Rehab Elder Care End of Life

OUTCOMES

  • Quality

Cost

  • Right care, right

place, right time

SCIENCE

  • Tools: drugs,

devices, diagnostics

  • Knowledge:

evidence

2 1 1 4 - 5 4 - 5 2 3 2 1 - 2 20 Workforce Process Venue Supporting Technology

Performance: 5 = Outstanding, 1 = Poor

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 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

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  • 1. Service Providers

Hospitals, outpatient facilities, specialty groups, etc.

  • 2. Payors/Insurers

Aetna, Cigna, United, Anthem, Blue Cross Blue Shield, etc.

  • 3. Pharmaceutical

Merck, Pfizer, Lily, Novartis, etc.

  • 4. Medical Devices

Medtronic, Boston Scientific, Stryker, etc.

  • 5. Information Technology McKesson, Cerner, Eclipsys, etc.
  • 6. Biotechnology

Amgen, Biogen, Genentech, etc.

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BIOTECH

INNOVATORS ADMINISTRATORS/WATCHDOGS SERVICE PROVIDERS

Physicians

HCIT

Pharma Device Hospitals Outpatient Facilities Insurers Regulators

Long Term Care

BioTech Professional Societies/ Special Interests Accrediting Agencies DM Employers CAM Media

Academic Medicine

CONSUMERS

Allied Health Professionals

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Advances in science are creating unprecedented

  • pportunities 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

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Genomics Proteomics Pharmacogenomics Biomedical Engineering Physics Chemistry Nano-Science Chemical Biology Structural Biology Pharmacology Biotechnology

Advances in Medical Technology – The Opportunity

25

The marriage of Physics, Chemistry, Biology, Mathematics NEW SMALL MOLECULE AND BIOLOGIC THERAPEUTICS NEW DIAGNOSTIC AND THERAPEUTIC DEVICES PERSONALIZED MEDICINE

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 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

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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

  • utcomes (including medical errors).

27

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 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

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Port

  • rtfoli

lio C Comp

  • mpany

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

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 Ambulatory Services of

America (ASA)

 BioNumerik  Cardiovascular Care

Group (CCG)

 CeloNova Biosciences  Diabetes Care Group

(DCG)

 digiChart  G-Con  Informatics

Corporation of America (ICA)

 MedSolutions  Outpatient Imagining

Affiliates (OIA)

 Quality Health Care

International (QHCI)

 Refocus Group  Seno Medical

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Sector tor Revenue nues R&D as D as % of Revenue nues Pharma $200 Billion 12-14% Biotech $75 Billion 15-20% Medical Technology $140 Billion 10-12% Services (hospitals, clinics, extended care facilities, physicians) $1.6 Trillion Almost nothing**

* 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

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Healthcare Services Innovation

 Services are largest system cost  Conduit for biotech, devices and IT innovation  Outdated governance and business models  Inefficient coordination, collaboration and consistency  Sub-optimal use of diagnostics, therapeutics and evidence-based medicine

 Starved for innovation capital

Source: Centers for Medicare and Medicaid Services.

U.S. Healthcare Expenditures: 2010

Source: PriceWaterhouse and National Venture Capital Association MoneyTree Report.

Healthcare VC Investment by Sector 1995 – 2011 ($ billions)

Biotech Med Device & Equip Healthcare Services $1.0 $0.0 1995 2000 2005 2010 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0

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Investment Process

STAGE 1: CONCEPT DEVELOPMENT

  • Identification
  • Risk / Return Assessment
  • Preliminary Research
  • 20+ Concepts

STAGE 2: CONCEPT VALIDATION

  • Management Team Identification
  • Preliminary Business Plan
  • Initial Investment Committee Review

STAGE 3: INITIAL SEED FUNDING

  • Management Team Engaged
  • Detailed Market Research
  • Multi-year Strategy and Capital Plan
  • Approximately 7 Companies
  • Average Investment of $750k per Company

STAGE 4: INVESTMENT COMMITTEE REVIEW

  • Assessment of Viability and Return Potential

LAUNCH FUNDING

  • Proof of Concept Phase
  • Approximately 5 companies
  • Equity Financing of $2.0 - $3.0 MM

EXPANSION CAPITAL

  • Commercialization Phase
  • Approximately 4 Companies
  • Equity Financing of Up to $10.0MM

GROWTH CAPITAL

  • 3 to 4 Companies
  • Equity Financing of $30.0 - $40.0 MM

EXIT

  • Sale to Private Equity Firm
  • Strategic Sale
  • Initial Public Offering
  • Growth Recapitalization

Estimated 90%+ of investable capital deployed to most successful companies Estimated 4-6 year cycle per company that achieves exit

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Co Costs o

  • f

f Di Diabe betes

$ 4,400 Average annual health care costs / person without diabetes. $11,700 Average annual health care costs / person with diabetes. $20,700 Average annual health care costs / person with diabetes and complications.

____________________________ Based on data from 10 million United Healthcare members. “The United States of Diabetes: Challenges and Opportunities in the Decade Ahead” United HealthGroup Center for Health Reform & Modernization, November 23, 2010.

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Back ckground

  • Diabetes Care Group’s clinical model:
  • enables individuals with diabetes and related metabolic

disorders to manage the disease

  • allows health plans and self-insured employers to eliminate or

reduce the preventable medical costs of diabetes and its related complications

  • Developed as a prototype in a single market, the business model

has proven cost-effective, portable, reproducible, and scalable within the market.

  • The clinical model is the functional equivalent of a medical home

for individuals with metabolic disorders and is translatable to other disease states and populations.

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Econo nomics of D DCG Mo G Model

“The essence of the DCG model is its proven ability to improve A1c levels among

  • diabetics. A clinician looking at the results

… understands the importance of what has been achieved. The economic analyses are designed to provide a full context for what these clinical results mean for third party payers, employers, and society.” DCG Outcomes / Economic Consequences

Actual twelve month outcomes for DCG patients with severely

  • ut of control diabetes (A1c > 9.0)

Donald H. Taylor, Jr., Ph.D. Sanford School of Public Policy Duke University Virtually all medical costs associated with the preventable complications of diabetes and other metabolic disorders are preventable, and prevented, by the timely application of the DCG program.