Provider Strategic Responses to the Affordable Care Act

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SERC Doctoral Fellows Forum 2014 Provider Strategic Responses to the Affordable Care Act

Zhongyuan (Annie) Yu & Dr. William B. Rouse Healthcare Industry Proposed Strategies

― Invest in improved efficiency and integration of delivery processes to both lower costs and increase quality ― Invest in population health offerings, e.g., ACOs, where providers are paid PMPM fees per patient plus bonuses on savings due to reduced ED visits and IP admissions ― Invest in highly profitable diseases groups, while also moving away from marginally profitable disease groups or money losers in general ― Invest in acquisition of other providers and physician groups to gain access to greater market share, achieve economies of scale, gain capabilities to address more profitable disease groups, etc. ― Invest in developing health plans to become both provider and payer Interactive Visualization Demo

― How interactive visualization facilitate decision making process?

• Creating referrals, exchanging best practices • Seeking economies of scale • Drawing on a partner’s unique clinical or management strength • Gaining geographic strength Modelling Framework

MA Strategies Historical Merger & Acquisition Data Choose ― Competing DRGs ― Complementary DRGs Validate (Target/Buyer involved Hospitals) ― Lucrative DRGs ― High Return on Investment • Target and Buyer ― Overhead Efficiency ― Turn Around Criteria • Deal value ………

Hospitals in NYC . MOUNT SINAI HOSPITAL Determine MA Deal Offer . MONTEFIORE MEDICAL CENTER Acquirer ― Historical M&A offers Affect . NEW YORK EYE AND EAR INFIRMARY Initiates MA ― Target Estimates . NEW YORK PRESBYTERIAN HOSPITAL ― Competitiveness . LENOX HILL HOSPITAL . MEMORIAL HOSPITAL FOR CANCER AND ALL Being . STATEN ISLAND UNIVERSITY HOSPITAL Evaluated . BETH ISRAEL MEDICAL CENTER Target Received Offers . LONG ISLAND JEWISH MEDICAL CENTER Accept/Decline MA (Offers, Potentials, Estimated Value) ………………… Model Update each Round Hospitals and Physician Groups Information Hospital Balance Sheet Attributes Hospital Operation Efficiency . Name and Address . Number of Beds . Total Patient Revenue . Personnel . Total Operating Expense . Admissions . Net Income (from Service to Patients) . Outpatients Visits . Inpatient/Outpatient Charges Hospital Quality . Other Costs (e.g., General and Physicians/Physician Groups . Patient Recommendation data from Hospital Administrative Cost) . Physician Groups Consumer Assessment of Healthcare . Physicians ID, Specialty, Group Hospital Service Providers and Systems (HCAHPS) Practice and Hospital Affiliation . Operation Quality data Agency for Healthcare DRG Names and Number of Inpatients Research and Quality (AHRQ) State Average of Total Cost Total Cost is from http://www.cms.gov/Research-Statistics-Data-and- NY 4.11E+08 Systems/Files-for-Order/CostReports/Hospital-2010-form.html download MA 2.68E+08 file: CT 2.63E+08 HOSPITAL2010-REPORTS(Supplemental files and counts) ND 2.56E+08 Table: CSTS_CHRGS2011 (data is available from 2010 to 2013)

NJ 2.52E+08 Detailed Cost Report is from http://www.cms.gov/Research-Statistics- WA 2.38E+08 Data-and-Systems/Files-for-Order/CostReports/Cost-Reports-by-Fiscal- AK 2.32E+08 Year- RI 2.22E+08 Items/HOSPFY2011.html?DLPage=1&DLSort=0&DLSortDir=descending download file: HOSPITAL 2010 FY 2012 data files MI 2.13E+08 Table: hosp10_2012_NMRC MN 2.12E+08 Where we could get detailed cost, e.g., General and Administrative cost FL 2.08E+08 and Emergency cost from table A. (data is available from 1996-2009, and 2010-2013) National Average 1.7E+08

GA 1.1E+08 IA 1E+08 Hospital Name County GA Cost Capital Cost TX 1E+08 NE 1E+08 ST. LUKES ROOSEVELT HOSPITAL CENTER NEW YORK 1.13E+08 92326076 LA 9.4E+07 HI 8.3E+07 NEW YORK DOWNTOWN HOSPITAL NEW YORK 29591043 19388002 TN 8.3E+07 AR 8E+07 NEW YORK EYE AND EAR INFIRMARY NEW YORK 22843576 7976916 AL 7.8E+07 NEW YORK PRESBYTERIAN HOSPITAL NEW YORK 3.76E+08 3.06E+08 MS 7.6E+07 KS 6.8E+07 BETH ISRAEL MEDICAL CENTER NEW YORK 1.33E+08 87772963 OK 5.9E+07 WY 2.8E+07 SD 2.7E+07 Average of Average of State Reimbuse_Rate_Inp Reimburse_Rate_Outp VT 61.35% 31.37% Rate of Reimbursement for Inpatient and Rate of MA 53.69% 32.23% Reimbursement for Outpatients are derived from http://www.cms.gov/Research-Statistics-Data- ND 51.19% 59.30% and-Systems/Statistics-Trends-and- HI 46.38% 26.95% Reports/Medicare-Provider-Charge- ME 45.72% 40.90% Data/Inpatient.html download file: MI 44.37% 26.94% Inpatient Charge Data, FY2011, Comma WV 43.80% 25.65% Separated Values (CSV) version NY 43.55% 33.30% The data provided here include hospital-specific AL 43.32% 20.69% charges for the more than 3,000 U.S. hospitals CT 43.11% 27.51% that receive Medicare Inpatient Prospective MS 42.68% 21.30% Payment System (IPPS) payments for the top 100 MN 41.92% 31.38% most frequently billed discharges, paid under OR 40.80% 31.52% Medicare based on a rate per discharge using the Medicare Severity Diagnosis Related Group (MS- National Average 34.61% 22.15% DRG) for Fiscal Year (FY) 2011. These DRGs SC 29.72% 19.34% represent almost 7 million discharges or 60 DC 28.81% 23.33% percent of total Medicare IPPS discharges. And AZ 28.00% 18.61% Outpatient Charge Data, CY2011, Comma PA 27.02% 17.89% Separated Values (CSV) version CA 22.27% 17.60% data is available only for 2011 FL 21.72% 16.91% NV 19.10% 15.78% NJ 16.64% 18.06% Death from serious A wound that Accidental treatable Collapsed lung Serious blood splits open cuts and tears complications due to medical clots after after surgery from medical Serious Hospital Name County Name after surgery treatment surgery F treatment Complications No Different No Different No Different No Different Worse than No Different than U.S. than U.S. than U.S. than U.S. U.S. National than U.S. MOUNT SINAI HOSPITAL NEW YORK National Rate National Rate National Rate National Rate Rate National Rate No Different No Different Worse than No Different No Different No Different than U.S. than U.S. U.S. National than U.S. than U.S. than U.S. ST LUKE'S ROOSEVELT HOSPITAL NEW YORK National Rate National Rate Rate National Rate National Rate National Rate Better than Worse than Worse than No Different No Different Worse than U.S. National U.S. National U.S. National than U.S. than U.S. U.S. National NYU HOSPITALS CENTER NEW YORK Rate Rate Rate National Rate National Rate Rate No Different No Different No Different No Different No Different No Different than U.S. than U.S. than U.S. than U.S. than U.S. than U.S. BETH ISRAEL MEDICAL CENTER NEW YORK National Rate National Rate National Rate National Rate National Rate National Rate No Different No Different No Different No Different No Different No Different than U.S. than U.S. than U.S. than U.S. than U.S. than U.S. BELLEVUE HOSPITAL CENTER NEW YORK National Rate National Rate National Rate National Rate National Rate National Rate

No Different No Different Worse than No Different No Different Worse than than U.S. than U.S. U.S. National than U.S. than U.S. U.S. National LENOX HILL HOSPITAL NEW YORK National Rate National Rate Rate National Rate National Rate Rate

Operation Quality data is from https://data.medicare.gov/data/hospital-compare Updated: Dec 11, 2013, Table: Agency for Healthcare Research and Quality, Data is available from 2010-2013 for data collected for previous year

Hospital Database (Hospitals in NYC)

PENINSULA HOSPITAL CENTER KINGSBROOK JEWISH MEDICAL CENTER JAMAICA HOSPITAL MEDICAL CENTER KINGS COUNTY HOSPITAL CENTER NY COMMUNITY HOSP OF BROOKLYN BELLEVUE HOSPITAL CENTER MOUNT SINAI HOSPITAL NYU HOSPITALS CENTER RICHMOND UNIVERSITY MEDICAL CENTER WYCKOFF HEIGHTS MEDICAL CENTER ST. LUKES ROOSEVELT HOSPITAL CENTER BROOKDALE HOSPITAL NEW YORK HOSPITAL OF QUEENS NEW YORK METHODIST HOSPITAL - ACUTE THE BROOKLYN HOSPITAL CENTER HOSPITAL FOR SPECIAL SURGERY MONTEFIORE MEDICAL CENTER LUTHERAN MEDICAL CENTER NEW YORK DOWNTOWN HOSPITAL NEW YORK WESTCHESTER SQUARE MEDICAL CENTER LINCOLN MEDICAL&MENTAL HEALTH CENTER UNIVERSITY HOSPITAL OF BROOKLYN NEW YORK EYE AND EAR INFIRMARY FOREST HILLS HOSPITAL NEW YORK PRESBYTERIAN HOSPITAL NORTH CENTRAL BRONX HOSPITAL LENOX HILL HOSPITAL INTERFAITH MEDICAL CENTER JACOBI MEDICAL CNTER ST. BARNABAS HOSPITAL ELMHURST HOSPITAL CENTER CALVARY HOSPITAL MEMORIAL HOSPITAL FOR CANCER AND ALL GOLDWATER MEMORIAL HOSPITAL STATEN ISLAND UNIVERSITY HOSPITAL COLER MEMORIAL HOSPITAL BETH ISRAEL MEDICAL CENTER TERENCE CARDINAL COOKE HEALTH CARE FLUSHING HOSPITAL MEDICAL CENTER THE NY GRACIE SQUARE HOSPITAL MAIMONIDES MEDICAL CENTER HOLLISWOOD HOSPITAL LONG ISLAND JEWISH MEDICAL CENTER BRONX-LEBANON HOSPITAL CENTER

Hospital Database (Clusters)

― How competitors could affect decisions? MONTEFIORE BETH ISRAEL MEDICAL CENTER MEDICAL CENTER

885 - PSYCHOSES Hospital’s DRG Market Share Heatmap (Based on Total Charges)

470 - MAJOR JOINT REPLACEMENT OR REATTACHMENT OF LOWER EXTREMITY

NEW YORK-PRESBYTERIAN HOSPITAL HOSPITAL FOR SPECIAL SURGERY MOUNT SINAI MONTEFIORE STATEN ISLAND NORTH CENTRAL HOSPITAL MEDICAL CENTER UNIVERSITY HOSPITAL BRONX HOSPITAL Hospital’s DRG Overlapping Heatmap

HOSPITAL FOR SPECIAL SURGERY

NEW YORK- LENOX HILL PRESBYTERIAN HOSPITAL HOSPITAL FOR SPECIAL SURGERY HOSPITAL Mount Sinai Hospital has 100% DRGs of what NYU Hospitals Center has

NYU Hospitals Center has 98% DRGs of what Mount Sinai Hospital has

Modelling Framework

Input: Stability of the Market Input: Reimbursement Rate Growth rate and volatility for each attribute A way to vary negotiation power between insurance Input: Economic Situation companies Affect incomes from e.g., interest rate

Input: Inertia Output: MA Deals Distribution ― Inertia determines probability of taking an action ― Frequently targeted hospitals ― Mutual learning suggests if more agents take an ― Frequently acquiring hospitals action, greater chance others follow ― Frequently appearing pairs ― Hospitals that never acquire or be acquired

Input: Vary M&A Strategies for each Hospitals Output: Future Market Structure ― Competing DRGs ― Complementary DRGs ― Number of hospitals ― Lucrative DRGs ― High Return on Investment ― Market share allocation ― Overhead Efficiency ― Turn Around Criteria Simulation

Input: Emphasis on Quality Black Box ― Bonus for High Quality (as a percentage of Input & Output: Add an Artificial Hospital Income from Service to Patient) ― No DRG ― Bonus for Improved Quality (as percentage of ― Sufficient funds Income from Service to Patient) ― Market share redistribution based on Quality

Input: Emphasis on Preventive Care Output: Hospitals Info ― Inpatient reduction vs. Outpatient increase ― Incomes ― Revenues ― Preventive Cost (range) ― Number of patients ― Quality ― Bonus

Simulation Results

― Number of hospitals in the last stage under different strategies Simulation Results

― Top five hospitals regarding net patient revenue market share under different strategies during each simulation round Simulation Results

― Bidding and realized acquisitions Simulation Results

― Frequent acquirers and pairs Simulation Results

― Sensitivity Analysis Transactions

Companies & Distributions

Companies’ Financials

Companies’ News & Types