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Originally presented April 2010
AGENDA Speaker Background
Purpose
Market Definition & Rationale
Analysis Techniques Utilization
Market Share
Market Segmentation
Market Competitiveness/Concentration
Market Attractiveness
Referral Source Trends
Referral Source Market Share
Managed Care
Conclusions
PURPOSE
To discuss quantitative techniques that can be used to better understand the local market for a post-acute healthcare organization using data specific to its market
To demonstrate the possible marketing strategies for the organization, based on the analysis of its local market
SPEAKER BACKGROUND
Over 20 years in home care
Over 35 years of marketing & planning experience
MBA from Mass. Inst. Of Technology Sloan School
President, Healthcare Market Resources—a market intelligence company providing customized local market research for home health agencies & hospices
MARKET DEFINITION & RATIONALE Post acute market is defined by those healthcare
organizations to which a patient can be referred upon discharge from a hospital for additional medical care
Usually includes skilled nursing facilities, home health agencies, hospices and rehab and LTAC hospitals
Will likely be able to participate in the Medicare post acute bundling demonstration mandated under the recent healthcare reform legislation
Only data on Medicare patients is readily available
UTILIZATION
Usually defined as % of Medicare fee-for-service enrollees, who use the Medicare home health or nursing home benefit in a given year
For hospice, it can be defined as % of Medicare enrollees using the benefit or % of Medicare enrollees who die on the hospice service
Level of utilization can determine how much effort an organization puts forth to find new sources of patients
Utilization can be leading indicator of future market potential
NEW CUSTOMER OPPORTUNITY
*Weighted Utilization=Pts Served/Medicare FFS Eligible
NEW CUSTOMER OPPORTUNITY ANALYSIS
• Highest state(FL) has a utilization rate that is more than 6 times larger than the lowest state’s(HI)
• Variation at county level likely to be as large
• As long as your geography is NOT in the Quartile 1(below 10.3%), there is an opportunity to find new patients
• If it is easier for a referral source to give you a new patient than to take one away from another agency
NEW CUSTOMER OPPORTUNITY
0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0% 3.7%
0.6%
2.5%
1.9%2.4% 2.3%
Hospice Utilization
Hospice Utilization
** Unweighted ***Weighted Utilization=Pts Served/Medicare Eligible
MARKET SHARE
Market is the percentage of sales of a service in a given region that is controlled by a company
It is the best measure of competitive strength in a sector as compared to other organizations in that sector.
It allows for comparison on a year to year basis
In the post acute market, it is the geography that the organization serves—counties vs. zip codes
MEASUREMENT OF MARKET SHARE
Observations Market Share Metrics Overall market share can be
measured in various ways
Higher market share on one metric vs. another can reflect organization’s market strategy
Revenues are ultimate measure, since we take $$ to the bank
Market share cannot be ‘bought’ because of reimbursement rules
Patients Volume $
HomeHealth
Discharges Episodes Revenues
Hospice Discharges Days Revenues
SNF Discharges Days Revenues
MARKET SEGMENTATION A market segment is a sub-set of the market made up of
customers sharing one or more characteristics that causes them to demand similar services, based on attributes, such as price or function
A true segment Is distinct from other segments(different common needs)
Is homogeneous within the segment(exhibits common needs)
Responds simi9larly to a market stimulus
Can be reached by a market intervention
Many firms focus on a given market segment as a means of differentiating themselves from their competition
KEY MARKET SEGMENT QUESTIONS
How big is it?
Is it distinct?
Can it be targeted/identified?
Is it attractive/profitable?
MARKET SEGMENTS
Home Health Primary Diagnosis
Age
Race/Ethnic Background
Source of Referral(Captive)
Hospice Primary Diagnosis
Site of Care
Race/Ethnic Background
Source of Referral(Captive)
HOW COMPETITIVE IS MY MARKET?
Competitive Market Metric
Agencies/100K Medicare Patients by State
MARKET COMPETITIVENESS CALCULATION EXAMPLE
There are 7 meaningful home health agencies in a 4 county area with 22,000 Medicare patients
Competitiveness factor = 7/2.2 or 3.2
There is a moderate level of competition in this market
RULE OF THREE Professors Sheth & Sisodia studied over the evolution of 200
industries and saw the development of 2 types of firms Full Line Generalists
Product/Market Specialists Hospital based or local VNA – market specialist
Ortho agency – product specialist
Over time, 3 full line generalists grow to 70%-90& of the share
Increased share results in better performance for the full line generalists, but weaker results for the specialists
UNDERLYING ASSUMPTION: The more concentrated a market is, the more difficult it is to gain market share
HOW CONCETRATED IS MY MARKET?
Market Concentration Metric based on “Rule of Three”
It infers prospects for future success.
Once referral source have “locked in” a preference, it requires a greater degree of differentiation to get their attention and gain trial
Referrals to captive agencies by parent organization employees are not a “free market” situation.
MARKET CONCENTRATION CALCULATION
Segment market between facility-based/affiliated agencies & freestanding agencies
Very difficult to take market share away from a facility-related agency(unless the rules of the game change)
Focus on freestanding market segment Combine market share of three largest freestanding
providers If combined market share is above 65-70%, this is a
concentrated market This means that referral sources have “locked in” their
agencies and it will be very difficult to get trial, unless the agency can create a very meaningful difference.
MARKET CONCENTRATION CALCULATION EXAMPLE
Agency Episodes Overall Mkt Share
Freestanding Market
Freestanding Mkt Share
Medical Ctr 650 32.5%
Community Hospital
350 17.5%
Local VNA 275 13.75% 275 27.5%
Nat’l Chain 225 11.25% 225 22.5%
Independent 150 7.5% 125 15.0%
Regional Chain 225 11.25% 225 22.5%
Mom & Pop 125 6.25% 100 10.0%
Overall Market – Unconcentrated(63.8%); Freestanding – Concentrated(72.5%)
MARKET ATTRACTIVENESS Market concentration levels below the “Rule of Three”
barrier means that referral sources are more likely to try a different provider
Relative low levels of utilization means that there are many new sources of patients to be developed
Plotting utilization and concentration levels in a geographic market can guide marketing strategy
Hospice Utilization Quartile
100 Quadrant III Quadrant IV
Focus on both gaining market share through diiferentiation DIVERSIFY
High Utilization High Utilization
Unconcetrated Concetrated
75
Focus on both gaining market share through Find new sources or types
differentiation and finding new sources or of patients
types of patients
50
Low/Moderate Utilization Low/Moderate Utilization
Unconcetrated Concetrated
25
0 Quadrant I Quadrant II
65
Market Concentration (%)
MARKET ATTRACTIVENESS MODEL
HOSPITAL REFERRAL TRENDS Hospital referral practices post-discharge are influenced by
several factors Availability of resources within the community
Historic MD practices
Competing sites of care under indirect or direct hospital control
Measure of success has been SILENCE; decentralized decision-making has been the norm
Focus on readmission in healthcare reform legislation will change success metric to a quantifiable one-readmission rate C-suite involvement will be coming when hospital finances
are at risk
Will likely change provider market share at the hospital
MEDICARE HOSPITAL DISCHARGES
Top 5 = RI, VT, MA, DE & NH Bottom 5 = PR, HI, WY, SD & MT
HOSPITAL MARKET SHARE Identify total Medicare referrals to home health,
hospice or SNF
Identify total Medicare discharges
Identify Medicare discharges for your service area
Your market potential= Svc Area Discharges x Total HH/Hos/SNF Discharges
Total Discharges
Your market share = Your Referrals
Your Market Potential
• Visit our Resource page for our article on “Getting a Bigger Share of Referrals”
Provider Name Provider Type Provider Address Provider City State Discharges
Days per
Discharge
Charges per
Discharge
WYOMING MEDICAL CENTER Acute Care 1233 EAST 2ND ST CASPER WY 311 4.9 20,473
PLATTE COUNTY MEMORIAL HOSPITAL - CAH Short Term Acute Care 201 14TH STREET WHEATLAND WY 310 2.8 5,839
MEMORIAL HOSP OF CONVERSE COUNTY - CAH Short Term Acute Care 111 SOUTH 5TH STREET PO BOX 1450 DOUGLAS WY 277 3.4 11,993
UNITED MEDICAL CENTER Acute Care 214 EAST 23RD STREET CHEYENNE WY 131 6.2 32,725
POUDRE VALLEY HOSPITAL Acute Care 1024 S LEMAY AVE FORT COLLINS CO 42 9.6 43,810
IVINSON MEMORIAL HOSPITAL Acute Care 255 N 30TH LARAMIE WY 26 6.3 32,339
REGIONAL WEST MED CENTER Acute Care 4021 AVE B SCOTTSBLUFF NE 16 5.4 14,877
UNIVERSITY OF COLORADO HOSP AUTHORITY Acute Care 4200 E 9TH AVE DENVER CO 6 5.7 38,645
RAPID CITY REGIONAL HOSPITAL Acute Care 353 FAIRMONT BLVD RAPID CITY SD 6 6.7 25,424
CAMPBELL COUNTY MEMORIAL HOSPITAL Acute Care 501 S BURMA AVE/PO BOX 3011 GILLETTE WY 5 4.2 8,323
BANNER BAYWOOD MEDICAL CENTER Acute Care 6644 BAYWOOD AVE MESA AZ 4 4.5 27,401
PRESBYTERIAN/ST LUKE'S MEDICAL CTR Acute Care 1719 E 19TH AVE DENVER CO 4 20.8 139,735
UNIVERSITY OF UTAH HOSPITAL Acute Care 50 N MEDICAL DR SALT LAKE CITY UT 4 11.0 44,709
SAINT FRANCIS HOSPITAL, INC Acute Care 6161 SOUTH YALE & 4818 E 67TH STREET TULSA OK 3 12.3 36,409
WYOMING BEHAVIORAL INSTITUTE Psychiatric Hospital 2521 EAST 15TH STREET CASPER WY 3 15.3 11,447
YUMA REGIONAL MEDICAL CENTER Acute Care 2400 AVENUE A YUMA AZ 2 3.0 10,297
WESTERN ARIZONA REGIONAL MEDICAL CTR Acute Care 2735 SILVER CREEK ROAD BULLHEAD CITY AZ 2 6.5 49,545
EISENHOWER MEDICAL CENTER Acute Care 39-000 BOB HOPE DRIVE RANCHO MIRAGE CA 2 7.0 52,159
CENTURA HLTH/PENROSE ST FRANCIS HOSP Acute Care 2215 N CASCADE AVE COLORADO SPRINGS CO 2 13.0 48,263
NORTH COLORADO MEDICAL CENTER Acute Care 1801 16TH STREET GREELEY CO 2 5.0 32,062
EXEMPLA LUTHERAN MEDICAL CTR Acute Care 8300 W 38TH AVE WHEAT RIDGE CO 2 4.0 40,552
MCKEE MEDICAL CENTER Acute Care 2000 BOISE AVE LOVELAND CO 2 3.0 27,049
DESERT SPRINGS HOSPITAL Acute Care 2075 EAST FLAMINGO ROAD LAS VEGAS NV 2 3.0 37,399
MEMORIAL HOSPITAL OF UNION COUNTY Acute Care 500 LONDON AVE MARYSVILLE OH 2 2.5 10,785
BAPTIST ST ANTHONYS HS BAPTIST CAMPUS Acute Care 1600 WALLACE BLVD AMARILLO TX 2 6.0 12,239
DIXIE REGIONAL MEDICAL CENTER Acute Care 544 SOUTH 400 EAST ST GEORGE UT 2 4.0 15,732
MEMORIAL HOSPITAL OF SHERIDAN COUNTY Acute Care 1401 W 5TH ST SHERIDAN WY 2 5.0 9,574
WEST PARK HOSPITAL DISTRICT Acute Care 707 SHERIDAN AVE CODY WY 2 3.5 15,508
ST JOHNS HOSPITAL Acute Care 625 E BROADWAY, PO BOX 428 JACKSON WY 2 7.0 25,532
ST JOSEPH'S HOSPITAL MEDICAL CENTER Acute Care 350 WEST THOMAS ROAD PHOENIX AZ 1 19.0 260,016
DEL E WEBB MEMORIAL HOSPITAL Acute Care 14502 WEST MEEKER BLVD SUN CITY WEST AZ 1 2.0 9,871
HAVASU REGIONAL MEDICAL CENTER Acute Care 101 CIVIC CENTER LANE LAKE HAVASU CITY AZ 1 8.0 19,788
LOMA LINDA UNIVERSITY MEDICAL CENTER Acute Care 11234 ANDERSON ST LOMA LINDA CA 1 1.0 6,141
UNIV OF CALIFORNIA SAN DIEGO MED CTR Acute Care 200 WEST ARBOR DRIVE SAN DIEGO CA 1 13.0 17,084
SUTTER ROSEVILLE MEDICAL CENTER Acute Care ONE MEDICAL PLAZA ROSEVILLE CA 1 1.0 21,684
ST JOSEPH HOSPITAL Acute Care 2700 DOLBEER ST EUREKA CA 1 1.0 6,682
JOHN F KENNEDY MEMORIAL HOSPITAL, INC Acute Care 47-111 MONROE ST INDIO CA 1 2.0 44,713
CENTURA HEALTH-ST ANTHONY CENTRAL HOSP Acute Care 4231 W 16TH AVE DENVER CO 1 4.0 21,666
CENTURA HEALTH-AVISTA ADVENTIST HOSP Acute Care 100 HEALTH PARK DR LOUISVILLE CO 1 4.0 38,228
KINDRED HOSPITAL DENVER Long Term Acute Care 1920 HIGH ST DENVER CO 1 26.0 61,853
SPALDING REHABILITATION HOSPITAL Rehabilitation Hospital 900 POTOMAC STREET AURORA CO 1 5.0 12,649
SOUTH BAY HOSPITAL Acute Care 4016 STATE ROAD 674 SUN CITY CENTER FL 1 4.0 19,109
MERCY MEDICAL CENTER-SIOUX CITY Acute Care 801 5TH ST BOX #316B SIOUX CITY IA 1 1.0 4,992
CLOUD COUNTY HEALTH CENTER Acute Care 1100 HIGHLAND DR CONCORDIA KS 1 5.0 11,359
CLOUD COUNTY HEALTH CENTER Short Term Acute Care 1100 HIGHLAND DRIVE CONCORDIA KS 1 5.0 11,359
ROCHESTER METHODIST HOSPITAL Acute Care 201 W CENTER ST ROCHESTER MN 1 5.0 12,681
COMMUNITY MEMORIAL HOSPITAL Acute Care 855 MANKATO AVENUE, PO BOX 5600 WINONA MN 1 5.0 15,416
FAIRVIEW LAKES REGIONAL MEDICAL CENTER Acute Care 5200 FAIRVIEW BLVD WYOMING MN 1 8.0 23,526
JACKSON MEDICAL CENTER Short Term Acute Care 1430 NORTH HIGHWAY JACKSON MN 1 2.0 2,120
ST JOHNS REGIONAL HEALTH CENTER Acute Care 1235 E CHEROKEE SPRINGFIELD MO 1 1.0 1,997
ST VINCENT HEALTHCARE Acute Care 1233 N 30TH ST PO BOX 35200 BILLINGS MT 1 3.0 13,399
GOOD SAMARITAN HOSPITAL Acute Care 10 E 31ST STREET P O BOX 1990 KEARNEY NE 1 2.0 5,329
GREAT PLAINS REGIONAL MEDICAL CENTER Acute Care 601 W LEOTA ST NORTH PLATTE NE 1 5.0 18,881
VALLEY HOSPITAL Acute Care 223 N VAN DIEN AVE RIDGEWOOD NJ 1 3.0 68,125
DEACONESS HOSPITAL Acute Care 5501 NORTH PORTLAND AVENUE OKLAHOMA CITY OK 1 17.0 95,940
OKMULGEE MEMORIAL HOSPITAL Acute Care 1401 MORRIS DRIVE, P O BOX 1038 OKMULGEE OK 1 1.0 1,964
SAINT FRANCIS HOSPITAL AT BROKEN ARROW Acute Care 3000 SOUTH ELM PLACE BROKEN ARROW OK 1 12.0 20,941
GEORGE NIGH REBABILITATION CTR Rehabilitation Hospital 900 EAST AIRPORT ROAD OKMULGEE OK 1 11.0 10,595
SAINT VINCENT HEALTH CENTER Acute Care 232 WEST 25TH STREET ERIE PA 1 7.0 43,147
SIOUX VALLEY HOSPITAL Acute Care 1100 S EUCLID AVE SIOUX FALLS SD 1 4.0 11,391
FALL RIVER HOSPITAL - CAH Short Term Acute Care 209 N 16TH ST HOT SPRINGS SD 1 4.0 8,447
SUMMIT MEDICAL CENTER Acute Care 5655 FRIST BLVD HERMITAGE TN 1 7.0 27,217
LAVACA MEDICAL CENTER Acute Care 1400 NORTH TEXANA STREET HALLETTSVILLE TX 1 5.0 5,129
LDS HOSPITAL Acute Care 8TH AVENUE & C STREET SALT LAKE CITY UT 1 9.0 47,221
DAVIS HOSPITAL AND MEDICAL CENTER Acute Care 1600 WEST ANTELOPE DRIVE LAYTON UT 1 10.0 19,249
OVERLAKE HOSPITAL MEDICAL CENTER Acute Care 1035-116TH AVE NE BELLEVUE WA 1 1.0 2,826
ST JOSEPHS HOSPITAL Acute Care 611 ST JOSEPH AVENUE MARSHFIELD WI 1 2.0 4,990
MEMORIAL HOSPITAL SWEETWATER COUNTY Acute Care 1200 COLLEGE DR/PO BOX 1359 ROCK SPRINGS WY 1 2.0 11,091
EVANSTON REGIONAL HOSPITAL Acute Care 190 ARROWHEAD DR EVANSTON WY 1 1.0 5,474
Zip Codes: 82224; 82229; 82633; 82637; 82222; 82225; 82227; 82242; 82201; 82210; 82213; 82214; 82215
MEDICARE HOSPITAL DISCHARGES
Converse, Platte & Nobriara Counties Wyoming
MANAGED CARE TRENDS Medicare managed care is generally a less attractive
payor than traditional Medicare fee-for-service
Managed care generally pays less per unit of service, more closely monitors length of stay, has a higher risk of denial and requires more administrative effort than Medicare FFS
Knowing Medicare managed care levels is key in assessing market attractiveness and sales rep performance
STATE:CHOSEN
MANAGED MANAGED MANAGED MANAGED
MEDICARE CARE MEDICARE CARE MEDICARE CARE MEDICARE CARE
STATE COUNTY ELIGIBLE ENROLLEES % ELIGIBLE ENROLLEES % ELIGIBLE ENROLLEES % ELIGIBLE ENROLLEES %
ADAIR 3,309 3,298 3,298 3,309
ALLEN 3,144 3,174 3,172 3,219
ANDERSON 2,751 2,756 2,737 13 0.47 2,773 18 0.65
BALLARD 2,047 2,042 2,051 2,061
BARREN 7,216 7,246 7,304 7,343
BATH 2,186 12 0.55 2,173 12 0.55 2,165 20 0.92 2,182 20 0.92
BELL 6,522 190 2.91 6,549 179 2.73 6,592 172 2.61 6,602 173 2.62
BOONE 11,139 1082 9.71 11,275 1153 10.23 11,342 1181 10.41 11,565 1226 10.60
BOURBON 3,241 3,257 3,274 3,293
BOYD 10,854 160 1.47 10,811 148 1.37 10,762 149 1.38 10,707 152 1.42
BOYLE 5,240 5,259 5,265 13 0.25 5,306 13 0.25
BRACKEN 1,558 1,550 1,545 1,571
BREATHITT 3,019 11 0.36 3,026 12 0.4 3,022 13 0.43 3,036 11 0.36
BRECKINRIDGE 3,440 3,447 3,447 12 0.35 3,434 17 0.50
BULLITT 6,776 135 1.99 6,829 223 3.27 6,898 230 3.33 6,980 256 3.67
BUTLER 2,098 2,112 2,120 2,140
CALDWELL 2,797 38 1.36 2,798 50 1.79 2,802 48 1.71 2,829 50 1.77
CALLOWAY 6,097 13 0.21 6,142 11 0.18 6,153 11 0.18 6,183 11 0.18
CAMPBELL 13,191 2046 15.51 13,196 2091 15.85 13,171 2083 15.82 13,174 2079 15.78
CARLISLE 1,169 1,157 1,167 1,156
CARROLL 1,755 1,758 1,773 1,781
CARTER 5,037 32 0.64 5,035 35 0.7 5,040 35 0.69 4,927 39 0.79
CASEY 2,814 2,798 14 0.5 2,796 13 0.46 2,806 12 0.43
CHRISTIAN 8,786 31 0.35 8,826 39 0.44 8,812 43 0.49 8,847 44 0.50
CLARK 5,573 39 0.7 5,613 46 0.82 5,618 56 1 5,689 63 1.11
CLAY 4,051 4,074 4,164 4,219
CLINTON 2,268 2,272 2,287 2,300
CRITTENDEN 1,844 1,860 1,873 1,883
CUMBERLAND 1,642 1,637 1,634 1,642
DAVIESS 16,696 50 0.3 16,776 56 0.33 16,794 50 0.3 16,932 48 0.28
TOTAL 148,260 3,839 2.59 148,746 4,069 2.74 149,078 4,142 2.78 149,889 4,232 2.82
MEDICARE MANAGED CARE PENETRATION- 2002-2005
2005 2004 2003 2002
SAMPLE
POST-ACUTE BUNDLING• Medicare Axiom-”That which gets done is that which is
paid for”—will be broken eventually. Silos will be destroyed.
Hospice services, excluded from the voluntary pilot, could be a “gaming” opportunity
Need to understand what are “best practices” to minimize overall expenditures for the ACO(Accountable Care Organization) over the first 30 days Post-acute setting costs + hospitalization and emergent
care costs will provider selection
CONCLUSIONS
Process to analyze a post-acute market is similar
Market Size Market Growth
Market Utilization Market Share
Market Segmentation Market Competitiveness
Market Concentration Market Attractiveness
Referral Source Trends Market Share by Referral Source
Managed Care Trends
CONCLUSIONS
SNF, Home Health and Hospice Silos will divide into two segments over next 5-10 years—Post-Acute & Chronic
Post-acute market will be characterized by centralized decision-making regarding patient care & co-ordination
Chronic segment will be more ill-defined with less accountability and co-ordination
HOW WILL YOUR ORGANIZATION PLAY IN BOTH SEGMENTS?
CONTACT INFORMATIONRich Chesney
President, Healthcare Market Resources
215.657.7373
215.657.0395(f)
www.healthmr.com
