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Five Zeros How would we deal with a flat line budget February 26, 2013

Who I am
Will Falk Managing Partner Healthcare, PwC Canada Executive Fellow, Mowat Centre for Policy Innovation Adjunct Professor, Rotman School of Management william.f.falk@ca.pwc.com Twitter: @willfalk

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Why I was invited to speak today: Shifting Gears Health

2nd of 3 Papers by Mowat Centre and School of Public Policy & Governance

www.mowatcentre.ca
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Disclaimer: This document may contain some forward looking statements! It is intended to provoke thought and discussion among emerging health leaders. The solutions and scenarios presented are What if scenarios not policy recommendations.

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The Straight Line of Death

Unsustainable Projected Health Spending Drummond Underscores This!

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Unpacking the Straight Line

Actual vs. 1991 (and prior 12-year period) Straight-Line Projected Health Expenditure
250000 Public Expenditure on Health (in 000s)

200000

150000

100000

50000

Year Extrapolation based on 1992 data 1991 data Actual Spending

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Actual spending

billion
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billion
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Projected spending

This is an alternative view

"The seven years of abundance in Egypt came to an end, and the seven years of famine began, just as Joseph had said.
-(Genesis 41:53-54)

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 They become self-fulfilling prophesies Anchor inflation expectations for managers and workers Set the context for federal/provincial negotiations (and set them at 6%)

What are the results of these missed projections?

These straight lines have dominated federal/provincial discussions and set the contexts for the Federal and Ontario elections. But post-Drummond, Flahertys December Surprise looks generous.
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The Demographic Challenge is Another Form of Straight Line

Health costs by 2030
8.0 7.0

2010 2030

6.0

$Billions

5.0

$24 billion

4.0

3.0

2.0

1.0

10-14

15-19

20-24

25-29

30-34

30-34

35-39

40-44

45-49

50-54

55-59

60-64

65-69

70-74

75-79

80-84

20

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85-89

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90+

<1

1-4

5-9

Selected Financial Indicators Ontario mid- 90s and Now

1995/96
Deficit Deficit as a % of Total Rev. Deficit as a % of Prov. GDP Net Debt as a % of Prov. GDP Accumulated Debt P.D.I. Average Interest Rate Health Expense Health as % of Total Expense $8.8 bn 17.7% 2.8% 32.4% $89 bn $8.7 bn 9% $17.6 bn 31%

2012/13 (forecast)
$14.4 bn 12.8% 2.2% 39.5% $ 279 bn $10.6 bn 4.2% $48.4 bn 38.3% 41.8%

Health as % of Program Expense 37%

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DIGITISA TION

1. Agreement that there really was a problem (Hitting the Wall!) 2. Tough Decisions to roll-back costs per unit (usually wages). In the 1990s this was The Social Contract (includes caps and clawbacks on MD compensation) 3. Tough decisions to exclude services from the basket. In the 1990s this was delisting 4. Major technological changes that had been going accruing gains for some time 5. Structured intervention to capture gains for the system.

What did it take in the 1990s

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Disruptive Innovation in the 1980s and 90s changed care delivery systems dramatically

Change in Inpatient Hospital Days Continued Ontario: 95/96 to 04/05 = 0.75 per capita to 0.5 per capita = 33% reduction

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But realizing the savings from the technological change was difficult on people

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Impact of Health Services Restructuring Commission Work from the 1990s

Amalgamation of 44 hospitals to form 14 new organizations Takeover of 4 hospitals by other hospital corporations Directed closure of 33 public, 6 private and 6 psychiatric hospital sites 27 of public hospitals closed Now 150 hospital corporations, down from 225 in 1989-90 Creation of 14 JECs to provide shared governance to multiple organizations Creation of 18 rural/northern hospital networks Establishment of a variety of regional and/or provincial networks (child health, rehab, FLS)
Riding the third rail: the story of Ontario's Health Services Restructuring Commission, 1996-2000 http://books1.scholarsportal.info/viewdoc.html?id=37973
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But It Did Work....

Health Costs per capita 1975-2009
(Ontario Govt.)
$4,000

Health Services Restructuring Commission begins hospital bed closures and restructuring Reduction in hospital funding over 3 years Caps and clawbacks on physician compensation Social Contract Barer-Stoddart report reductions in medical school spaces Recession begins

$3,500

$3,000

$2,500

$2,000

Steeper rate of growth than pre-recession

$1,500

$1,000

$500

$2008f 2009f 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

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Ontario Hospital Efficiency Dividend, 2012

1,850 1,812 1,800 Expenditure per Capita ($) 1,750 1,700 1,650 1,600 1,550 1,500 Ontario 1,736

Ontarios hospitals are among the most efficient in Canada Hospital efficiency dividend = $ 2.6 Billion Ontario spends approximately 10.5% less per capita than other provinces in Canada

1,621

Rest of Canada Canada* Source: National Health Expenditure Database, 1975-2012, CIHI *Rest of Canada: BC, AB, SK, MB, QC, NB, NS, PE, NL, NWT, Nun
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Even Fraser puts Ontario First! The Best Median Wait Times in Canada, 2012
Weeks waited from Referral by GP to Treatment

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Post ECFAA: With Declining HSMR scores

Ontario Average HSMR FY 2008 99 FY 2009 96 FY 2010 92 FY 2011 88

115 110 105 100 95 90 85 80 75 70 65

Source: HSMR Region Results Ontario, 2011, CIHI

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This Time We Hit the Wall in 2009 Ontario Government Budget Deficit Projections as of October 15, 2012
Actual Projected
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

0 -5 $ Billions

2008-09

2009-10

0.0 -4.2 -6.4 -7.8 -10.1 -13.0 -14.0 -19.3 -14.4 -12.8

-10 -15 -20 -25

Sources: Ontario Economic Outlook and Fiscal Review p. 85, 104 (Released Oct. 15/12. ) 2012 Ontario Budget, p. 6.

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Selected Financial Indicators The situation has stabilized somewhat

1995/96
Deficit Deficit as a % of Total Rev. Deficit as a % of Prov. GDP Net Debt as a % of Prov. GDP Accumulated Debt P.D.I. Average Interest Rate Health Expense Health as % of Total Expense $8.8 bn 17.7% 2.8% 32.4% $89 bn $8.7 bn 9% $17.6 bn 31%

2009/10
$19.3 bn 18.4% 3.3% 33.3% $212 bn $8.9 bn 4.6% $43.1 bn 36.6% 39.5%

2012/13 (forecast)
$14.4 bn 12.8% 2.2% 39.5% $ 279 bn $10.6 bn 4.2% $48.4 bn 38.3% 41.8%

Health as % of Program Expense 37%

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And Spending has Started to Come Down (CIHI: Total Health Exp. % of GDP)

Source: National Health Expenditure Database, 1975-2012, CIHI

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Ontario Public Sector Spending Growth Rates: Now and Before we Hit the Wall
Growth rate from prior year 2009 vs. 2012 (forecast)
9.0 8.0 7.0 6.0 % 5.0 4.0 3.0 2.0 1.0 0.0
Other Professionals $0.6 , 1%
Administration

Public Health, $4.8 , 9% Capital, $2.7 , 5%

$0.8, 1%

Other Health Spending, $3.0 , 6%

Hospitals, $18.6 , 35% Drugs, $4.8 , 9% Physicians, $12,254.5, 23% Other Institutions, $6.1 , 11%

2009 2012 f

Hospitals

Physicians

Drugs

Other

Source: National Health Expenditure Database, 1975-2012, CIHI

(In billions of dollars and percentage share)

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DIGITISA TION

1. Agreement that there really was a problem (Hitting the Wall!). Yes, but still a lot of stimulus thinking. 2. Tough Decisions to roll-back costs per unit (usually wages). Aggressive actions on wages, OMA Negotiations, and Drug costs. 3. Tough decisions to exclude services from the basket. Not much yet 4. Major technological changes that had been going accruing gains for some time. Yes but we are unaware 5. Structured intervention to capture gains for the system. Inadequate for the challenge
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So, Where are We Against our List of Five Actions?

Quality-Based Procedures: Continued Pressure on per Unit costs in the Acute Care Sector
Year 1 (2012/13) Hips & Knees CKD Cataracts Year 2 (2013/14) Chemotherapy COPD Congestive Heart Failure Stroke Coronary Artery Disease with SI Cardiovascular Surgery GI Bowel Surgery Phase 2 Orthopaedics Kidney Disease Year 3 (2014/15) Other Transplants and related disorders Respiratory Disorders Pneumonia Hepatobiliary Liver & Pancreas Cancer Neurosurgery Cardiovascular other Gastrointestinal Disorders Coronary artery disease Gastrointestinal Surgery
HBAM Inpatient Groups (HIG) breakdown further Sector Hospitals
(% of ABF Hospital Base)

Phase 1 April 2012

Quality Groupings Rate* x Volume HBAM Global Funding

Phase 2 April 2013 15% 40% 45%

Phase 3 April 2014 30% 40% 30%

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5% 40% 55%

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Quality-Based Procedures: Implementation Considerations

April 2012

5%

40% 55%

QBP HBAM Global

Clinical integration and partnerships bundled payments and commercial partnerships Service portfolio analysis core services and secondary services Leveraging innovative solutions virtual care environments Financial viability alignment of cost & funding Quality & outcomes framework for implementation, reporting & monitoring Board assurance leading indicators
Do Dont

April 2014

30%

30%

QBP HBAM Global

40%

Incentivize efficiency and quality Use normative profiles to reflect changes in clinical practice Use dynamic costing to harness efficiencies and allows targeted investments Use pathways to reduce variation in practice
RSM 2016

Make it too complex Use historic costs to promote efficiency Use it to increase unnecessary procedures Cream skim leading to access issues Rely on population-based models to embed impact of prevention
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(Modern and Appropriate Evidence-Based Delisting)

DIGITISA TION

How can physicians and patients have the important conversations necessary to ensure the right care is delivered at the right time? Choosing Wisely aims to answer that question. An initiative of the ABIM Foundation, Choosing Wisely is focused on encouraging physicians, patients and other health care stakeholders to think and talk about medical tests and procedures that may be unnecessary, and in some instances can cause harm. To spark these conversations, leading specialty societies have created lists of Things Physicians and Patients Should Question evidence-based recommendations that should be discussed to help make wise decisions about the most appropriate care based on a patients individual situation. Consumer Reports is developing and disseminating materials for patients through large consumer groups to help patients engage their physicians in these conversations and ask questions about what tests and procedures are right for them. More than 35 specialty societies have now joined the campaign, and 17 unveiled new lists on February 21, 2013
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Virtual Health Care: Major Technological Shift for our era

1992
More people leave hospital after procedure than remain overnight

Virtual Care Outpatient Care

202X?
More virtual visits than physical visits

Inpatient Care

Each transition involved people, process, and technology changes. Major shifts in how we organize our care delivery services and assets
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Modernization through the Virtualization of care is most advanced in imaging (broadly defined)
Derm Opth Path ECG DI
Nighthawk services for coverage. Move the image to higher quality Time, Quality, and Price Auctions of Image Interpretation Eventually price-baseddoptions Starts as an interpretation aid but eventually Moores Law takes over and we see automated diagnosis

Direct Visualization

Marie Curie dies of cancer because she looked at patients Reading pathology, ECG. Still the standard for Derm and Ophth Film comes early to DI (see above), Path slides, printed ECG Can stay in this phase for a long time Harder work to acquire images in some modalities Many images are still not here

Hard Copy of the Image

Digitization of the Image

Movement of the Image Among Starts happening with hard copies but combersome Digital images become obvious Centers Industrialization
Centralization & decentralization both occur. Provider Substitution QA/QI, Industrial techniques, process improvements, efficiency

Artificial Intelligence

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Provider to Provider: The Future Referring Clinician Consulting Clinician

eReferral 4. eConsult (ask a question)

Primary Care Family Health Teams Community Hospitals Cancer Centres First Nations Communities Psychiatric Hospitals CCACs Mental Health Facilities Federal and Provincial Prisons Rural Nurse Practitioners Long-Term Care Homes

3. eConsult (full assessment) 2. Clinical Videoconference 1.Face-to-Face

Specialists Offices Regional Hospitals On-Call Emergency Physicians Public Health Units
Mental Health and Addiction Treatment Centres

A Possible Future is to use our drug systems for Apps Apps Pharmacy not Apps Store
Tech Rx

Take 2 Apps and Call Me in the Morning

Apps Formulary
AliveCor Withings
UK (Cambridge Healthcare): Europes First HealthApp Store developing certification process for apps it sells. US (Happtique): market-leader in health apps published set of standards to certify apps operability, privacy, security, content reliability
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Cardiac Blood Pressure Diabetes Pain Mgmt Crohns Disease

bant Pain Squad MyIBD

http://healthydebate.ca/opinions/techrx-building-the-apps-pharmacy
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Book Review: The Creative Destruction of Medicine: How the Digital Revolution Will Create Better Healthcare : http://www.longwoods.com/content/23053

Virtualization: The Future is Now

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http://mowatcentre.ca/Fellows/Will-Falk/BreakfastWChiefsTheVirtualDoctorIsIn20121115.pdf

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Virtualization: But How do we benefit and who shares the gains (Infoway Radiology Example on twitter)
The value of a 2-3% reduction in unnecessary duplicate exams results in $47-71M of value, or annual avoidance of 0.8-1.3 million unnecessary exams for the Canadian health system A 25-30% improvement in Radiologists productivity results in $169-203M of value, or 450-540 Radiologists delivering 9-11 million exams, for the Canadian health system on an annual basis Improving Technologists efficiency and productivity by 25-30% produces $122-148M of value, or the equivalent of 2,400-2,900 Technologists, or 8-10 million exams, for the Canadian health system

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Of course, the structural question remains.

LHINs, CCACs, Health Links, and even Health Hubs may not be enough. There is a remarkable consistency and repetition in the findings and recommendations for improvements in all the information we reviewed. Current submissions and earlier reports highlight the need to place greater emphasis on primary care, to integrate and coordinate services, to achieve a community focus for health and to increase the emphasis on health promotion and disease prevention. The panel notes with concern that well-founded recommendations made by credible groups over a period of fifteen years have rarely been translated into action. Ontario Health Review panel 1987 (Evans Report)

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Structural Question: the notion of 1% and 5% frequent flyers is now central in policy discussions
Figure 1. Health Care Cost Concentration:
Distribution of health expenditure for the Ontario population, by magnitude of expenditure, 2007
Ontario Population 0% 10% 20% 30% $33,335 40% 50% 60% 79% 70% 80% 99% 90% 100% $181 $3,041 50% 66% $6,216 1% 5% 10% 34% Health Expenditure Expenditure Threshold (2007 Dollars)

Source: ICES

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DIGITISA TION

1. New models like QBP and Bundled Pricing run against established payment models 2. Health Links are an interim silobusting measure to get us through a Minority legislature. What is the permanent structure for bundling across silos 3. Do we need HSRC-2 for hospitals? For hospital hubs? 4. Can HQO/OHTAC be leveraged to process all of the technology substitution questions associated with Virtualization of Care? 5. Is Regionalization in our future?

Structural Questions Still Need Resolution

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Closing Comments:
http://mowatcentre.ca/fellows.php?action=view&fellowID=11

william.f.falk@ca.pwc.com @willfalk
This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. 2012 PricewaterhouseCoopers LLP, an Ontario limited liability partnership. All rights reserved. PwC refers to the Canadian member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

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