1. THE HEALTHCARE ENVIRONMENT MERGERS AND CONSOLIDATION William S. Custer, Ph.D. April14, 2016

2. National Health Expenditures Total & as a Percentage of GDP How We Got Here

4. National Health Expenditures Total & as a Percentage of GDP How We Got Here

7. Source: James C. Robinson, “More Evidence Of The Association Between Hospital Market Concentration And Higher Prices And Profits” NICHM Issue Brief, November, 2011

9. How We Got Here

10. Key Drivers of Integrated Health Care Patient Protection and Affordable Care Act State Health Insurance Exchanges Medicaid Expansion Pay for Performance Changes the way Providers are paid Bundled Payment Mental Health Parity

11. Continuum of Health Services in the U.S. http://www.kurtsalmon.com/US/vertical-insight/Bringing-Certainty-to-Uncertain-Times?vertical=healthcare&id=383&popup=1&language=en- us#.UlwooFDkvkU

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13. P4P - Definition 1: The hope is that linking pay to performance will either 1. create a more fair payment system, 2. improve outcomes, or 3. prod providers to create added efficiency and therefore stretch financial resources. (Safavi, CMO of Solucient) Where We Are Going

14. P4P- Definition 2: “ Use of incentives to encourage and reinforce the delivery of evidence- based practices and health care system transformation that promote better outcomes as efficiently as possible.” Kongstvedt Where We Are Going

15. Shifting Risk Low Pay for Performance Episodic Payments Pay for Coordination Shared Savings CapitationFee for Service Additional per capita payment based on ability to manage care Reform: Primary Care Medical Home Payments tied to objective measures of performance Reform: -Value Based Purchasing Payment based on delivery of services within a given timeframe Reform: - Bundled Payment Shared savings from better care coordination and disease management Reform: - ACO’s Providers share savings from better care coordination and disease management High Paid for each unit of service w/o constraint on spending Degree of Population Risk Transferred to Provider by Payment System Where We Are Going

16. Payment Methods and Organization Are Interrelated Need Incentives and Systems for Organized Care Integrated system capitation Global DRG fee: hospital, post- acute, and physician inpatient Global DRG fee: hospital only Global ambulatory care fees Global primary care fees Blended FFS and medical home fees FFS and DRGs Continuum of Payment Bundling Small MD practice; unrelated hospitals Hospital System Integrated Delivery System Continuum of P4P Design Outcome measures; large % of total payment Preventive care; management of chronic conditions measures; small % of total payment Care coordination and intermediate outcome measures; moderate % of total payment Less Feasible More Feasible Source: Shih et al. Organizing the U.S. Health Care Delivery System for High Performance, The Commonwealth Fund, August 2008 Primary care MD group practice Multi- specialty MD groups