2. The New Health Economy – one path or two? Consumers faced with higher marginal costs Who is the customer? Technology Big data Alternative payment models Bigger is better? Healthcare Brands De Novo entrants Markets for Information Incentives Supply-Side vs Demand-Side

3. Merger Mania Spreading and Shifting Risk New financial models give incentive to get big Population Health or other capitation payments require Horizontal and Vertical consolidation Mergers, affiliations, joint ventures, partnerships

4. Merger Mania Insurers following suit Operating Efficiencies? Bargaining Power? Big data opportunities From Big 5 to Big 3? How should DOJ/FTC Respond?

5. Creative Destruction of Medicine? Putting the Patient at the Center? Schumpeter (creative destruction) to Christensen (disruptive innovation) Primary Care and Chronic Disease Management Otoscopes, activity trackers, scales, algorithm symptom trackers, e-visits, ECG monitors, etc. In a FFS world, much of this doesn’t make sense But if the patient really is the center… Lots of entrepreneurialism here

6. New Shoppers for Consumers Markets for information are arising From the health systems’ perspectives, it isn’t just about having a big footprint. Need to be the selected provider Beyond narrow networks Note this is very different from “population health”

7. No other industry is as clueless about what their good or service costs as the health service industry That (hopefully) is changing Health care has never really experienced cost pressure – until now. Note both supply- and demand-side pressures are pushing this Capitation New shoppers demand value Profit = Total Revenue – Total Cost

8. Behavioral Health Traditionally Behavioral Health was mostly ignored Low reimbursement due to difficulty in diagnosis Health system very focused on Acute Episodes Siloes in health care meant providers had no incentive Social stigma Capitated payment models change incentives Mental Health – essential health benefit in ACA Employers recognize costs Addressing the shortage of mental health clinicians Integrating behavioral health with primary care Telepsych

9. Is the Medical Center Vanishing? Historically, systems had no incentive to keep patients out of high cost settings that focused on the convenience of physicians Capitation and increased consumerism are changing this More attention to get patients in the appropriate setting More efficient use of high acuity facilities Builds referral network

10. Vanishing Medical Center? Bedless Hospitals Tenet’s Detroit Medical Center expects to open Children’s Hospital of Michigan Specialty Center in February -- $44 million 63,00 Sq ft facility has an ED, ORs, and specialty facilities for cardiology, neurology, and oncology – but no inpatient beds. Built with modules that can be modified easily to provide new services as the market evolves. Tenet’s deal with USPI makes them poised to become the largest ambulatory surgery provider. CHI Building hub and spoke model with St. Luke’s in Houston? Virtual care Centers Free Standing EDs Urgent Care Facilities?

11. Big Data 2012: 500 Petabytes of health care Data 2020: 25,000 Petabytes – 500 billion file cabinets What is big data? Volume Massive amounts of storage, flexible, easily accessible Variety Structured and unstructured EHRs, Images, social media, mobile aps Velocity Real time analysis

12. Big data in 2016 Non-relational databases Natural language processing Pulling information out of physician notes Consumers must be willing to share information

13. The danger of all that data Cybersecurity is huge

14. Drug prices Prices increases for branded drugs outpaced inflation since 2006 Generic Drugs increased 9% in 2014 Specialty drugs Under traditional insurance not a big deal But as costs are sifted to consumers….

15. Biosimilars Near substitute for an original brand drug Derived from living organisms Lower Costs Expected to bring disruption to the industry

16. What does the future look like? Big integrated systems? Required for population health Supplier has the incentive to manage care – does the shopping What if the consumer or some advocate for the consumer can do the shopping? Now the incentives are on the demand side May not see large integrated systems, but rather specialized “focused factories” could emerge? Could still operate in fee for service (like most of the world)