Economic Forecast Breakfast April 10, 2015 Member FDIC. Member - - PowerPoint PPT Presentation

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Economic Forecast Breakfast

April 10, 2015

Roy Nascimento

President, North Central Massachusetts Chamber of Commerce

Welcome

Ed Manzi

Chairman & CEO, Fidelity Bank

Introductions

John Merrill

President & COO, Fidelity Bank

Survey Review

Direct Survey Method

• Conducted by Princeton Research Associates
• Data collected over last 4 weeks
• Phone surveys
• 200 consumers
• 200 businesses
• All respondents within the North Central MA

footprint

5

Survey Results

Consumer

Consumer Survey Demographics

7

45% 28% 6% 19% 2%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Full time Part time Unemployed Retired Other

Thinking about Massachusetts overall, over the next 12 months how do you think the economy will be in comparison to today?

8

25% 48% 16% 4% 3% 4%

0% 10% 20% 30% 40% 50% 60%

Much better Somewhat better About the same Somewhat worse Much worse Don't know

Thinking about North Central Mass., over the next 12 months how do you think the economy will be in comparison to today?

9

18% 45% 28% 2% 3% 4%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Much better Somewhat better About the same Somewhat worse Much worse Don't know

Thinking only about your job opportunities

• r security, over the next 12 months how do

you think they will be in comparison to today?

10

19% 35% 25% 5% 5% 11%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Much better Somewhat better About the same Somewhat worse Much worse Don't know

Thinking only about your advancement

• pportunities at work or in a new job, over the

next 12 months how do you think they will be in comparison to today?

11

19% 27% 29% 4% 6% 15%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Much better Somewhat better About the same Somewhat worse Much worse Don't know

Which of the following best describes your personal spending plan in 2015?

12

12% 43% 30% 12% 6% 1%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Significant increase Slight increase No change Slight decrease Significant decrease Don't know

What do you think is the top challenge facing your region?

13

20% 16% 12% 12% 10%

0% 5% 10% 15% 20% 25% 30% 35%

Employment / job creation Quality of public education Corporate and personal taxes Cost of health care Cost of fuel & energy

How would you rate your town or city’s snow removal efforts over the past winter?

14

Excellent 29% Good 41% Not so good 13% Poor 16% Don't know 1%

Survey Results

Business

Business Survey Demographics

16

24% 10% 34% 20% 12%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Principal owner or partner President / CEO Senior management Middle management Other

Thinking about Massachusetts overall, over the next 12 months how do you think the economy will be in comparison to today?

17

9% 51% 31% 4% 2% 3%

0% 10% 20% 30% 40% 50% 60%

Much better Somewhat better About the same Somewhat worse Much worse Don't know

Thinking about North Central Massachusetts,

• ver the next 12 months how do you think the

economy will be in comparison to today?

18

12% 46% 31% 3% 4% 4%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Much better Somewhat better About the same Somewhat worse Much worse Don't know

Thinking only about your business, over the next 12 months how do you think the economy will be in comparison to today?

19

46% 29% 20% 2% 2% 1%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Much better Somewhat better About the same Somewhat worse Much worse Don't know

Which of the following best describes your hiring plan for this region in 2015?

20

9% 46% 38% 2% 1% 4%

0% 10% 20% 30% 40% 50% 60%

Significant increase Slight increase No change Slight decrease Significant decrease Don't know

Which of the following best describes your business’s spending plan for this region in 2015?

21

13% 21% 40% 8% 9% 9%

0% 10% 20% 30% 40% 50% 60%

Significant increase Slight increase No change Slight decrease Significant decrease Don't know

Thinking about your business, what is the most challenging issue you expect to face in the next two years?

22

18% 13% 10% 9% 8%

0% 5% 10% 15% 20% 25%

Transportation / infrastructure Corporate and personal taxes Real estate prices / market Cost of healthcare Availability of skilled labor

What do you think is the top challenge facing this region?

23

15% 10% 10% 10% 8%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%

Corporate and personal taxes Transportation / infrastructure Quality of public education International Competition Cost of fuel & energy

What effect did this season’s snow fall have on your business?

24

Negative 29% No Effect 40% Positive 31%

Survey Takeaways - Overall

• Both consumers and businesses continue to have a very

favorable outlook on both the North Central MA and greater MA regions and this outlook continues to improve.

• Both consumers and businesses plan to increase

spending in 2015. 55% of consumers and 34% of businesses to at least “slightly increase.”

• Consumers and businesses showing positive trending
• utlooks on employment. Consumer concerns fading

and businesses planning to hire.

25

Survey Takeaways - Consumer

• Top concern still employment but trending positive.
• Quality of public education spiked as a major concern

with 16% citing it as top challenge - up from 9%.

• Cost of fuel and energy concerns faded with only 10%

indicating it as a top challenge – down from 22%.

• Concerns over the cost of health care faded slightly to

12% from 20%.

26

Survey Takeaways - Business

• Transportation and infrastructure a growing concern for region and

businesses.

• Commitment to hiring continued, with 55% stating at least a “slight

increase” in their hiring plan.

• Concern for availability of skilled labor subsiding with only 8% citing it as

top challenge – down from 18%.

• Concern over taxes decreased dramatically from 23% to 13%
• Quality of public education spiked as a major concern for the region.
• Concerns grew regarding real estate and the market from only 3% in 2014

to 10%.

27

Economic Forecast Panelists

• Lt. Governor Karyn Polito

Commonwealth of Massachusetts

Jeff Fuhrer

EVP & Sr. Policy Advisor, Federal Reserve Bank of Boston

Deborah Weymouth

President & CEO, HealthAlliance Hospital

• Lt. Governor Karyn Polito

Commonwealth of Massachusetts

Jeff Fuhrer

Executive Vice President & Senior Policy Advisor

Federal Reserve Bank of Boston

North Central MA Chamber of Commerce Economic Breakfast April 10, 2015

Jeff Fuhrer, EVP and Senior Policy Advisor Federal Reserve Bank of Boston

X

Not this lady

X

Not this guy

32

• 1. Unprecedented depth and duration of recession
• 2. Extraordinary policy responses
• 3. Complications going forward as a consequence

0.90 0.95 1.00 1.05 1.10 1.15 1.20 1.25 0 8 16 24 32 40 48 56 64 72 80

Months after recession onset

Employment, recession start=1.0

Current (2007-present)

1 2 3 4 5 6 0.5 1 1.5 2 2.5 3 3.5 4 4.5

2006:Jan 2006:Sep 2007:… 2008:Jan 2008:Sep 2009:… 2010:Jan 2010:Sep 2011:… 2012:Jan 2012:Sep 2013:… 2014:Jan 2014:Sep Funds rate, percent $ trillions

Federal Reserve Assets ($ trillions)

Agency and MBS CB Swaps CPFF TAF Treasuries

Funds rate

Range of all Average of all postwar Sources: Bureau of Labor Statistics (employment), Board of Governors of the Federal Reserve H.4.1, Haver Analytics 0.0 1.0 2.0 3.0 4.0 5.0 6.0

2006:Jan 2006:Jul 2007:Jan 2007:Jul 2008:Jan 2008:Jul 2009:Jan 2009:Jul 2010:Jan 2010:Jul 2011:Jan 2011:Jul 2012:Jan 2012:Jul 2013:Jan 2013:Jul 2014:Jan 2014:Jul 2015:Jan

Funds rate

6+ YEARS Of ZERO INTEREST RATES…

(and counting)

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• 2
• 1.5
• 1
• 0.5

0.5 1 1.5 2

2 4 6 8 10 12 14 16 18 20 22 Quarters into recovery

Contribution of government spending and investment to GDP growth Average, 1947-2006 Current recovery

Sources: Bureau of Economic Analysis, Haver Analytics

1. Subtracting near zero in 2015 2. Taxes, transfers less contractionary in 2015 3. Less craziness improves confidence, reduces uncertainty

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 By household income

growth (4% after inflation over past 12 mos.)

 By increases in net

worth

 By lower oil prices

 We’ll talk more in a

minute

 Confidence has

improved

35 of 16

Sources: Bureau Economic Analysis (spending, income, saving rate), Flow of Funds Accounts (HH wealth), Core Logic (house prices), Board of Governors H.15 release (mortgage rates), Haver Analytics

• 6
• 4
• 2

2 4

20 40 60 80 100

2004:Jan 2006:Jan 2008:Jan 2010:Jan 2012:Jan 2014:Jan

Consumer confidence and spending

Consumer sentiment Consumer spending growth

• 1.0

1.5 2011:Q1 2012:Q1 2013:Q1 2014:Q1 $ Billions

Increase in Household Net Worth

Housing assets Stock market assets

4 5 6 7 8 9 10 11

• 1000
• 800
• 600
• 400
• 200

200 400 2007:Nov 2008:Nov 2009:Nov 2010:Nov 2011:Nov 2012:Nov 2013:Nov 2014:Nov Thousands

Employment growth (3-month average)

Total nonfarm Private nonfarm Unemployment rate (right)

Sources: Bureau of Labor Statistics, Haver Analytics

… and lots of progress on unemployment

Mar 3-mo Emp. 126 197 Unemp 5.5

• 0.1

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• Broader measures of slack have also improved
• But are not quite back to normal yet

 Holy mackerel!

 Effects on US spending

 Adds 0.5 ppt?

 Effects on inflation

 Subtracts 0.2 ppt, core

 Effects on US oil production

 Hurts US producers’ income more than in previous years

 Effects on Russia/financial stability

40 50 60 70 80 90 100 110

20140101 20140423 20140813 20141203 20150325

US $ per barrel

Oil price per barrel, WTI

37 of 16

 Capital goods orders

have weakened

 Effects of the stronger

dollar have contributed

 Housing—even

adjusting for weather— is weaker than we’d like

 Foreign economies

 Pushing the dollar up  But keeping rates low  Their recovery will help

us

 Weather?

69000 69500 70000 70500 71000 71500

2014:Oct 2014:Nov 2014:Dec 2015:Jan 2015:Feb 2015:Mar

Capital goods

Mfrs.' orders of capital goods 550 600 650 700 750

2014:Oct 2014:Nov 2014:Dec 2015:Jan 2015:Feb 2015:Mar

Housing

Housing starts Housing permits

Weather?

38 of 16

• 1.5
• 1
• 0.5

0.5 1 1.5 2 2.5 3 3.5

2009:Jan 2010:Jul 2012:Jan 2013:Jul 2015:Jan

Inflation: persistently below 2%

Core PCE inflation (12-mo.) Total PCE inflation

• 1.0

0.0 1.0 2.0 3.0 4.0 5.0 6.0

2007:Q2 2009:Q2 2011:Q2 2013:Q2

Wages, compensation (4-qtr. growth)

ECI Average hourly earnings Nonfarm compensation

FOMC inflation goal Sources: BEA (PCE inflation, profit share), Bureau of Labor Statistics and CBO (unemployment gap, chained core CPI, import prices, labor costs), Haver Analytics (Treasury inflation expectations)

2%

All three measures: No wage pressures

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 Underpinnings for spending are good

 Employment and income growth strong to date  Wealth increases significant (housing and financial)  Low oil prices help  Strong consumer confidence readings

 Tepid growth in housing, capital equipment  Some risks from foreign economic and geopolitical

activity

 Inflation persistently low

40 of 16

• 1. Inflation below the Fed’s target usually implies a weak

economy

• 2
• 1

1 2 3 4 5 6 1990:I 1991:II 1992:III 1993:IV 1995:I 1996:II 1997:III 1998:IV 2000:I 2001:II 2002:III 2003:IV 2005:I 2006:II 2007:III 2008:IV 2010:I 2011:II 2012:III 2013:IV 2015:II Bad times (high unemployment) Good times (low unemployment) Inflation gap (Actual inflation - Fed target)

So low inflation is in part a sign that the economy hasn’t fully recovered yet

41 of 16

• 2. When times are normal, other things equal, lower

inflation=lower interest rates (and vice versa)

2 4 6 8 10 12 14 16 18 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014

Interest rates and inflation, 1960-present

BAA Corporate rate 30-yr. Mortgage rate 10-year Treasury yield Federal funds rate Inflation (PCE)

High inflation years Low inflation years Low inflation years

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 So low interest rates limit our ability to respond to and

• ffset recessions (more room to lower rates)

 This mattered A LOT in the recent recession  Hence our use of “non-traditional” policies 1 2 3 4 5 6 1 2 3 4 5 6 7 8 9 10

Starting interest rates at different rates of inflation

Inflation=3% Inflation = 2% Inflation = 1%

Recession hits

43 of 16

• 3. Too close to deflation?

 Deflation increases incentive to save/postpone consumption  Can be both a symptom of and a contributor to a very weak

economy

• 4. Wage adjustments during recessions are more difficult

 Historically, workers do not like outright wage cuts  But have accepted slower wage growth, especially slower

than inflation

 Harder to do if prevailing inflation is very low or negative

44 of 16

 NOT a restrictive monetary policy  Going from a hugely expansionary policy to a highly

expansionary policy

0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 1 2 3 4 5 6 7 8 9 Fed balance sheet ($ trillions) 30-year mortgage rate 10-year Treasury rate Federal funds rate

45 of 16

 Recovery still in train

 Some recent weak data makes me cautious, but still

• ptimistic

 Inflation is lower than desired

 We discussed why anyone might want higher inflation!

 “Lift-off” does not mean restrictive monetary policy

46 of 16

Deborah Weymouth

President & CEO HealthAlliance Hospital

Health Care in our Community Deborah Weymouth

HealthAlliance Hospital

About HealthAlliance

HealthAlliance Hospital is a not-for-profit, full service, acute care hospital that serves the communities in North Central Massachusetts and Southern New Hampshire. As a member of UMass Memorial Health Care, HealthAlliance Hospital offers you direct access to the advanced medical technology and specialty services that are part of the region’s academic medical center. The HealthAlliance system includes:

• 122-bed community hospital with services on two campuses in Leominster

and Fitchburg

• More than 1,300 Employees
• Over 250 Physicians
• Providing 40+ Health Care Specialties
• 200 Volunteers

“Delivering confide dence and d compassion in every health care experience”

Questions??

11th Largest Employer in Worcester Co.

Why Did We Need Reform?

Cost Quality

17.9%

• f GDP

Summary of Health Care Reform

“Federal health reform — the Affordable Care Act (ACA) — became law in

March 2010, and the implementation is reshaping the American health care system.”

Trends to Watch……

• Value-Based Purchasing Models
• Health Insurance Reform
• Integrated Systems of Care
• Health Insurance Exchanges
• Medicaid Expansion and Flexibility
• Information Technology

Reform Implications

“Volume” to “Value”

• Bundled Payments for Episodes of Care
• Population Health Status Critical
• Consumerism Increasing
• Quality Transparency Increasing
• Patient Engagement in Care
• Resources/Payments Decreasing
• Risk Shifting to Providers

Care Shifts and Payer Shifts

Care Moving to Outpatient Baby Boomers Dominate

Medicare Impact

IMF Report: Cost of Life Expectancy

Where does my premium dollar GO?

Cost Shifting

Why doesn’t it work now like it used to??

COST DRIVERS

Common Causes Prescription Drugs

Medicare

Source: CBO, “Letter to the Honorable John Boehner Providing an Estimate for H.R.6079, The Repeal of Obamacare Act,” July 24, 2012; CBO, “Estimated Impact

Includes hospital, skilled nursing facility, hospice, and home health services; excludes physician services; annual reductions rounded. Disproportionate Share Hospital.

1)Medicare Payment Cuts Continue

($4B) ($14B) ($21B) ($25B) ($32B) ($42B) ($53B) ($64B) ($75B) ($86B) 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

ACA’s Medicare Fee-for-Service Payment Cuts

Reductions to Annual Payment Rate Increases1

$415B in total fee- for-service cuts, 2013-2022

$260B

Hospital payment rate cuts, 2013-2022

$56B

Reduced Medicare and Medicaid DSH2 payments, 2013-2022

$151B

Reduced Medicare payments due to sequestration and 2013 budget bill

61

Current Financial Results

Pay for PERFORMANCE Value Based Purchasing: Demand Side Strategy Safety 20% Efficiency 25% Patient Experience 25% Outcomes 25% Process 5%

65 89 95 98 2010 2011 2012 2013

Mergers/Acquisitions Continue to Rise

Source: AHA Hospital Fast Facts, il bl t h GE C it l

Mergers and Acquisition

September 2013.

Hospital Mergers and Acquisitions

M&A Plans for the Next 12 Months1

Number of Hospitals Part of a Health System

2000-2012

2000 2003 2006 2009 2012 2542 2626 2775 2921 3100 88% 12%

n=189

No M&A Activity Planned Planning to Pursue M&A Within the Next 12 Months

63

Will Employers Maintain Coverage, and How?

Employers

Source: Health Care Advisory Board interviews and analysis.

1)Traditional Employer Coverage Eroding

“Activation” “Abdication” Convert to Self-Funding

Pros:

• Close control over

network design

• Exemption from

minimum benefits requirements Cons:

• Greater financial risk
• Network assembly

challenging

Shift to Private Exchange

Pros:

• Responsiveness to

employee preference

• Predictable, defined

contributions Cons:

• Disruption to benefit

design

• Risk employees may

underinsure

Spectrum of Options for Controlling Health Benefits Expense

Drop Coverage

Pros:

• Escape from cycle of

rising premium costs Cons:

• Employer mandate

penalty

• Labor market

disadvantage

64

Employers

Source: Herring B and Lentz LK: “What Can We Expect from the ‘Cadillac Tax’ in 2018 and Beyond?” Inquiry, 48(4):322-37;

Full-time equivalents.

1)Employers’ Alternatives to Providing Coverage

Average Cost of 2014 Employer- Sponsored Insurance

$5,884 $16,351 Single Family

Penalty per employee for failing to provide qualifying health coverage

$2,000

Several Strategies to Avoid ACA Mandate Penalties…

Cut jobs to remain under 50 FTEs1 Convert full-time employees to part-time status Hire all new employees at part-time status Split into smaller companies with fewer than 50 FTEs

…Though Some May Consider Penalty a More Economical Option

65

Commercial Payers

Source: Breakaway Policy Strategies, “Eight Million and Counting: A Deeper Look at Premiums, Cost Sharing and Benefit Design in the

1)Public Exchange Participants Choosing High Deductibles

Annual Deductibles of Individual Plans Selected on eHealth

13% 3% 11% 5% 30% 39%

$6,000+ $3,000-$5,999 $2,000-$2,999 $1,000-$1,999 $500-$999 < $500

October 2013 – March 2014

66

A Growing Network of Immediate Access Choices

Markets Responding to Unmet Needs

Source: Mehrota A et al, "Visits To Retail Clinics Grew Fourfold From 2007 To 2009, Although Their Share Of Overall Outpatient Visits Remains Low," Health Affairs, August 2012; Health Care Advisory Board interviews and analysis.

Primary Care Network

Traditional Access Points Consumer- Oriented Access Points

Retail Clinic Urgent Care Center Virtual Visit Primary Care Office Low Acuity High Acuity Emergency Department

Consumer-Oriented Service Delivery Sites Filling the Gap Driving Provider Questions:

• Should we partner to establish retail clinics?
• Should we build or expand our urgent care footprint?
• Is virtual care something that we should provide?
• When should we enter into partnerships to meet patient demands?

67

Access Strategy for the Future

Unprecedented Competition

Primary Care for 130 Million

Increasingly Sophisticated

Vision Exam App

ZocDOC

Provide Alternatives and Create Capacity

Urgent Care:

• Convenient
• Lower Cost vs. ED
• High Quality

Opened Jan. 5th

http://www.urgentcareleominster.com/

Partnership including:

HealthAlliance Hospital Heywood Health Care

Community Health Connections

Joint Coalition on Health Montachusett Public Health Network

GOAL: Provide information and analyses relative to health status, issues, concerns and assets of North Central MA

Community Health Needs Assessment

• 14 Focus Groups
• 17 Community Partners
• 21 Interviews with Key informants
• Other Sources:

MassCHIP, MPHN Community Assessment, Athol Community Assessment, North Quabbin Community Assessment, Ma Health Aging Report, Ma Dept of Edu, Ma Dept. of Workforce Dev., Ma Dept of Corrections, CDC Behavioral Risk Factor Surveillance System, US Census/American Community Survey

• Facilitator: Joanne Calista, Central MA AHEC, Inc.

Quantitative Data: Sources

• The Study Area population is generally older than that of the Commonwealth

which is a change from the last assessment. Our area reports 52% are older than 50 years of age compared to 33.5% in the State

• Unemployment rates have dropped similar to the Commonwealth (8.9%)

with the exception of Orange which is still high at 10.6%

• The % of families living below 100% of poverty level in the State is 14.9%

while Gardner, Shirley, Royalston and Fitchburg all reported above 24%.

• According to 2014 HUD data, there were 158 individuals experiencing

homelessness in our Study Area and majority were adults and 33% were under the age of 18

• Latinos largest racial/ethnic minority group in the study area, more than

twice the state percentage

Socio-Demographic Data

Our Region is HIGHER than the State Averages in…

Suicide Mortality Rates Behavioral Health Hospitalizations Alcohol/Substance Abuse Rates Mortality Rates Diabetes Obesity Tobacco Use in Women Lung Cancer Mortality Cerebro-vasular Disease Rates Chronic Liver Disease Mortality

Our Region is on PAR with the State Averages in….

Tobacco Use in Men High Blood Pressure Cancer Mortality

Our Region is LOWER than the State Averages in….

Breast Cancer Mortality

Key Findings

Common Themes

• Substance Use and lack of treatment

–Includes drugs, alcohol and tobacco use

• Mental Health –inadequate treatment

resources

• Transportation
• Cost of Health Care (copays/insurance limits)
• Obesity – cost of healthy food
• Shortage of clinicians/primary care/specialists

HealthAlliance Behavior Health Population

Diagnosis Group # Visits # Patients Alcohol and Drug Induced Psychoses 32 30 Dementia 1 1 Intellectual Disabilities 21 13 Mental Disorders Diagnosed in Childhood 166 136 Mood Disorders 584 449 Neuroses 320 278 Organic Psychotic Conditions 36 33 Other Non-Organic Psychoses 157 133 Other Nonpsychotic Mental Disorders 699 547 Paranoid States 51 46 Personality Disorders 29 23 Psychosexual Disorders 2 2 Psychotic Disorder 9 9 Pyschoses Associated with Childhood 21 17 Schizophrenia 146 83 Substance Use Disorders 714 517 Grand Totals 2988 2317

The data is based on patients with a coded Primary Dx in one of the above Dx groups from Jan 1, 2014 through Nov 30, 2014

The shape represents the SA category + pts with-drawning from alcohol and/or drugs

CHART II Investment in HealthAlliance Health Policy Commission

• 25 Single & Joint Awards were distributed

amongst 28 Community Hospitals

• HealthAlliance received $3.8 million

– Second H Highest Si Single le Hos

• spital

Award

• Combined with the joint award between

Heywood, Athol & HealthAlliance our region received $6 million investment for our Behavioral Health Patients

CHART Phase II – AIM Statement & Primary Drivers

The CHART Phase II Initiatives will reduce ED revisits and ED LOS, for patients with a Primary and/or Secondary Behavioral Health (BH) diagnosis, by 15% and 31% respectively by the end of the 2-year period

• f performance.

Improve the quality and efficiency of care provided to BH patients presenting to HealthAlliance Hospital Provide integrated, collaborative, holistic care to BH patients across all care settings Leverage technology to simplify administrative complexity and support across settings of care

P1 P2 P3

We are all in this together…

Deborah Weymouth 978.466.2000 yhc@healthalliance.com

Questions