Steve Moye | President | Catholic Health Initiatives Virtual Health Initiatives

Virtual Health Services April 2013

VirtualHealthServices

Innovation inHealthcareSteve MoyePresident, CHI VHS

VHS 3.0 Governance discussion

Virtual Health Services | Steve Moye, President


Innovation inHealthcare

Objectives:•Define a future-state governance model •Identify and prioritize revenue generating opportunities•Design a future-state business and operating model to pursue the new opportunities•Describe the steps necessary to operationalize the new model through an implementation roadmap

Engagement Overview

Status and finding to-date per work stream:•Governance Framework: Identified key CHI and VHS governance issues. Drafted recommended solutions to be refined after revenue generating opportunities are finalized•Revenue Generating Opportunities: Identified and prioritized revenue generating opportunities based on evaluation criteria•Business and Operating Model: In process of drafting future-state business and operating model

Objectives Progress

Objectives for the project are to identify revenue generating opportunities, and then define and align the governance, and business and operating models to best position VHS to achieve its’ goals

Copyright © 2013 Accenture All Rights Reserved.

CHI and VHS Virtual Health Capabilities –related but unique

From a CHI enterprise perspective, three capabilities support virtual health programs across MBOs. While related, the competencies are different with unique resource and capabilities requirements.VHS’ strategy and resources are focused on achieving the third. The best path to address the first two is yet to be defined.

Industry trends monitoringü Primary and secondary research and analysis to remain abreast of new approaches that support

CHI’s mission and may be considered by MBOs (similar to Gartner or other industry analysis)

Consulting servicesü Advisory services to MBOs that help evaluate potential services or manage existing servicesü Technology advising and support specific to virtual health platforms

Operational entityü Creating and delivering virtual health services relevant to both MBOs and the market as a for-

profit, successful business venture


CHI and VHS Virtual Health Capabilities –related but unique

From a CHI enterprise perspective, three capabilities support virtual health programs across MBOs. While related, the competencies are different with unique resource and capabilities requirements. VHS’ strategy and resources are focused on achieving the third. The best path to address the first two is yet to be defined.

Industry trends monitoringü Primary and secondary research and analysis to remain abreast of new

approaches that support CHI’s mission and may be considered by MBOs (similar to Gartner or other industry analysis)

Consulting servicesü Advisory services to MBOs that help evaluate potential services

or manage existing servicesü Technology advising and support specific to virtual health platforms

Operational entityü Creating and delivering virtual health services relevant to both MBOs and

the market as a for-profit, successful business venture

VHS Focus

(as a for-profit)


✓Prioritize limited number of core offerings

✓Only take-on activities that are profitable

✓Focus and commit resources to for-profit activities

✓Avoid the trap of being all things to everyone

Focus on for-profit

opportunities

VHS’ Core Directive from the Board: Within five years, VHS is to be financially independent, able to obtain external funding and success in the market place

VHS Future State

How can VHS get there?


✓Be driven by an innovative operating model that provides its portfolio offerings at scaleBe driven by an innovative business model that redesigns care delivery to unlock and reduce healthcare labor intensity

Be driven by Innovative

Models


VHS Future State



✓Achieve a unique market positionRetainearnings to fund future growthPosition for success with VC and other investorsBuild services that combine enabling technologies and services

VHS Future State

Position itself for success



Copyright © 2013 Accenture All Rights Reserved.Copyright © 2013 Accenture All Rights Reserved.

High-level Timeline

What the next three years will look like as VHS establishes creditability, grows its customer base and takes the opportunities to the external market


Preliminary Concept for Discussion


An Overlooked Industry Opportunity Offers a UniquePosition for VHS

Situation Opportunity§ Industry strategies for healthcare cost reduction

are focused on utilization management and quality strategies

§ Of the $2.6 trillion spent in 2010 on health care in the United States, 56% consisted of wages for health care workers

§ Bending the cost curve hinges on reducing the cost of labor per unit of service

§ Yet unlike virtually all other sectors of the U.S. economy, health care has experienced no gains in labor productivity over the past 20 years

§ At the same time, health care labor is becoming more expensive more quickly than other types of labor

§ Labor cost innovation approaches are a whitespace opportunity in the U.S. health sector

§ Virtual healthcare delivery models provide significant advantages for labor cost savings over traditional in-person care models

§ With a focus on labor cost innovation VHS’ value to CHI will complement existing initiatives to reduce costs through population health management and best quality practices

§ Developing a portfolio focused on labor cost innovation services VHS will be attractive to both external investors and have a compelling value proposition for external customers


Source: Kocher R, Sahni N. Rethinking Health Care Labor. N Engl J Med 2011; 365:1370-1372. October 13, 2011. DOI:10.1056/NEJMp1109649

An Overlooked Industry Opportunity Offers a UniquePosition for VHS

Rethinking Health Care Labor


BioPharma as a customer

BioPharma’s are becoming more interested in whole person / patient treatment. Virtual health solutions can help them more fully understand the complete patient lifecycle and the value chain of their product


How the Labor Intensity Organizing Principle relates to Growth Opportunities

Telepharmacy 2.0b combines Telepharmacy 1.0 with medication management services. These services would focus on management, compliance and adherence, and would include: patient coaching, medication adherence, and patient support.

Remote consultation, assessment or intervention by a specialist in which provisions of mental/behavioral health services are provided to patients.

Provide remote monitoring of patients with chronic conditions (e.g. asthma, COPD, CHF, hypertension, diabetes, obesity) and care management services. Additional support services can be on-line social networks and behavioral change tools.

Identify and design optimal workflows for each virtual health service, combining both administrative and clinical processes for end-to-end optimization. Co-develop software and analytics platforms that support Business Process Management (BPM) optimization. Create and brand virtual care delivery training programs for clinicians.

Telepharmacy 2.0b

Telemental Health

Chronic DiseaseManagement

Intellectual Property (IP) Portfolio

Description Labor Intensity Levers

Increases physician productivity by allowing pharmacists to focus on treatment of patients, automates processes around medication management and allows adherence of treatments to be self managed by patients or lower cost clinical resources (e.g., technicians, call support staff)

Increases physician productivity by allowing clinicians to virtually consult with patients across multiple geographies, maximizes staff by leveraging clinical social workers, counselors, retired therapists, and enables self-driven programs

Increases physician productivity by allowing clinicians to focus on treatment of patients, increases capacity by enabling group visits, automates processes around management of chronic diseases and allows adherence of treatments to be self managed by patients or lower cost clinical resources

Increases physician productivity by optimizing administrative and clinical workflows

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Rules of Engagement

Defining a comprehensive and transparent process for how virtual health opportunities are communicated, evaluated, and pursued is key for VHS to meet its objectives

Innovation strategies need to be supported by the appropriate, coherent innovation governance model ...

Innovative governance models and pros and cons (1 of 3)

• A mature business generates value by running business as usual. To drive innovation, these companies can establish distinct units that work independently using their own resources, processes and KPIs

• These units can be either complete business units where the complete process from idea generation to market penetration is developed or Ventures within an established business unit (e.g. a business unit that has R&D department plus venture unit)

• To plan and manage innovation, a governing body with internal and external members is formed

• Members come from different business units within the company (usually senior management) and are external advisors with market and industry knowledge

• The Venture Board defines the overall innovation strategy, manages the innovation portfolio and overlooks the “innovation performance”

Venture Board

Growth Incubator

New Venture

Drive innovation within a mature business

Drive innovation based on strategic leadership

Ambidextrous Organizations

Venture Boards

• Autonomous structure makes innovation is less influenced by standard organizational KPIs and performance metrics

• Idea generation takes place only in the respective business unit

• Know-how transfer and communication between BU is limited

• Mgmt and coordination of innovation happens from a global perspective across all BU

• Ideas of external advisors can be integrated

Pros (+) and Cons (-)

• A bottom-up approach does not exist

• Innovation is imposed from a senior mgmt board

• Know-how transfer and communication between BU is limited

... which should foresee a specific positioning at organizational level ...


• The Innovation Council consist of a small senior management group, that manages innovation or awards budget across several business units and facilitates decisions across functions, businesses and geographiesThe council prioritizes projects and aligns resourcesIn contrast to a Venture Board, the Innovation Council is more operational while the Venture Board is more focused on the overall innovation strategy

• CoP are interest groups of key actors from inside and outside the company that interact on a regular basis to share implicit knowledge for a certain areaCoPs work without formal meetings and project management tools and provide an environment to share knowledge freelyEstablishing CoP shapes the organizational culture and helps to leverage internal knowledge


Innovation Council

CoP

CoP

CoP CoP

CoP

à Coordinate innovation between business units

à Create a collaborative environment and leverage innovation best practices

Innovation Council (Advisory Committee)

Communities of Practice (CoP)

• A more operative team can allocate resources and support innovation

• Management collaborates across business units

• New ideas are less likely to be generated in this organizational board

• CoP is an effective method to transfer knowledge and best practices

• Codification and storage of knowledge is difficult

• Knowledge transfer does not necessarily lead to generation of new ideas and innovation

... and the right level of participation in the innovation process


• R&D is no longer a closed entity within the business, it is open to ideas from outside the companyExternal parties like universities, research institutes or the government can improve the R&D process by generating new ideas and expertiseThe invention does not necessarily need to come from inside the company to profit from it

• Employees engaged with innovative topics should enter company external networks to avoid being stuck with only ideas grown within the company and missing out new white spaces, external knowledge and insights are requiredPotential network candidates can come from academia, industry consultants or even customers etc.Furthermore, these sources are connected to own networks which further facilitate the generation of new ideas


Company

Consumers / CustomersManufacturers

/ Suppliers ...

Consultants

Academia (Universities and Research

Institutes)

Regulatory Authorities

Financial Institutes

Industry Organizations

Other organizations

Company

Customers

Universities

à Access external networks to capture ideas

à Structurally exploit external networks for innovationOpen Innovation Network

Thought Leader Resource Networks • Firm gets access of external

knowledge• Firm gets advices for the

generation of new ideas

• There must be mechanism in place to capture and manage knowledge to be successfully used for innovation

• Internal knowledge gets disclosed to a certain degree

• Networks ease access to new ideas and expertise

• Revenue of marketed innovation might need to be shared

• Internal knowledge gets disclosed to a certain degree

• Limited development of internal innovation practices


Business Development

• Site Visits• Marketing Plan• eICU Analysis

Site Meetings Conducted

Region

Type of Site CO FHS Iowa KY NE The Division Total

National Office 1 1 2

Health System Offices 1 1 1 1 2 6

Subsidiaries / Partners 2 1 3

TeleHealth Programs 1 1 1 1 4

Hospitals / Clinics 5 5 10

Total 1 9 2 3 8 2 25

Note: VHS has also given updates to the CHI Strategy Executive Group, Mercy Health Network CEOs and are planning to attend the North Dakota Minnesota Division CEO meeting in June.

Business Development

VHS has actively engaged CHI and non CHI partners to collaborate and provide current services across various geographies.


Current VHS TelePharmacy Sites

In Operation

13 CHI SitesLisbon Area Hospital – Lisbon, ND

St. Joseph’s Hospital – Dickinson, ND

Mercy Hospital of Devil’s Lake – Devil’s Lake, ND

Carrington Health Center - Carrington, ND

Mercy Medical Center – Williston, ND

Oakes Community Hospital – Oakes, ND

Mercy Hospital of Valley City – Valley City, ND

LakeWood Health Center – Baudette, MN

St. Francis Medical Center – Breckenridge, MN

Unity Family Healthcare – Little Falls, MN

Albany Area Hospital – Albany, MN

St. Joseph’s Health Services – Park Rapids, MN

St. Catherine Hospital – Garden City, KS

7 Non CHI SitesLutheran/Jamestown Regional – Jamestown, ND

LifeCare Medical Center – Roseau, MN

St. Mary’s Innovis Health Center – Detroit Lakes, MN

Madison County Memorial – Winterset, IA

Davis County Hospital – Bloomfield, IA

Manning Regional Healthcare – Manning, IA

Van Diest Medical Center – Webster City, IA



TelePharmacy Key Metrics

169,603 12,628



TelePharmacy Key Metrics

59,435 3,840



TelePharmacy Errors Prevented

40



TelePharmacy Growth



Growth Initiatives

VHS Business Model & Status

Acute Care Bundle

Customer:•Acute Care Facilities

Customer Value:•Access, Relationships, Cost, Quality

Services:•telePharmacy, eED, teleHospitalist, teleConsultations, teleDiagnostics

Risk Factors:•Adoption, Low Margin•Limited Market



TeleHealth

the way of the future…

Health & Medicine

Steve Moye | President | Catholic Health Initiatives Virtual Health Initiatives