Jay Zdunek D.O., M.B.A.

Chief Medical Officer Austin Regional Clinic

The ARC Story

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Started 1979 as a HMO clinic as a part of the PruCare Network

Left managed care in 1999

Has been in fee for service since 1999

About 9 years ago ARC started to get back into value based care

January 1, 2019 will be journeying back into Medicare Advantage full risk.

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Independent physician group

320 physicians multispecialty group, 70% primary care.

470,000 patients of which 250,000 are in some form of value based care.

Cover 3 counties with 26 soon to be 30 clinics.

But despite size we were faced with same issues all independent groups are faced with…

Need for capital continues to be the number one issue all groups have to deal with.

Capital for growth, infrastructure for value based care, risk contracting, and stabilization of physician compensation.

Human capital in the form of expertise and skill sets necessary for risk contracting.

Why and how did this happen?

Need for capital continues to be the number one issue all groups have to deal with

Capital for growth, infrastructure for value based care, risk contracting, and stabilization of physician compensation

Why and how did this happen?

Historically physicians have existed in FFS and have offset cost increases with increased volume.

Health care costs continued to rise with health care approaching 18-19% of GDP.

Employers, payors and government agencies argued the lack of sustainability of the existing system.

Medicare Advantage came out of the Medicare Modernization Act (MMA)of 2003 but has it’s roots to 1970 HMOs.

The concept of value based care (managed care) started to be promoted again.

We were being hit with multiple acronyms concerning health care payment all in an effort to avoid the 4 letter word! HMO!

Quality

Cost effective

Patient Experience

Cost effective

QualityPatient Experience

Growth in Medicare Advantage (MA) has grown from 6.9 million in 1999 to 19 million in 2017.

This is 1/3 of Medicare population.

Two largest payors in the MA market account for 41% of the enrollment in 2017

Of the total MA enrollment 63% are enrolled in an HMO model and 26% in PPO model.

Of the 26% of MA enrollees in PPO 70% are in a group plan, which is usually sponsored by employers and unions.

66% of the MA enrollees are in 4 star+ plans.

35% are in narrow physician networks and narrow site networks.

The Affordable Care Act (ACA) of 2010 resulted in the creation of Alternative Payment Models (APMs).

This was the signaling of a substantial change from FFS to Value payment system.

This resulted in the creation of 32 original CMS Pioneer ACOs.

In January of 2018 there were 656 Medicare ACOs serving 10.5 million people.

2013 feedback from the Pioneer ACOs brought the creation of Medicare Shared Savings Program (MSSP).

The MSSPs resulted in 4 options or tracks with varying degree of shared savings and risk bearing.

Most started with one sided risk and eventually progressed to two sided risk. Track 1 is upside risk, Tracks 1+, 2, and 3 have upside and downside risk (two sided risk)

2016 saw the implementation of Next Generation ACO Model ( NextGen) and the Comprehensive ESRD Care Model (CEC).

Late 2016 CMS indicated they were moving away from FFS to value over the next several years!

History has told us whatever CMS does the commercial payors follow suit.

The road to Hell is paved with good intentions!

Early HMO models failed to create lasting delivery system reform.

Early HMO’s under pressure of financial risk started limiting access to services and certain care creating consumer backlash.

This consumer backlash delayed true innovation pushing us back to FFS for a long time.

We also learned early IT systems were incapable of producing data which was meaningful or actionable.

The goals of providing lower cost appropriate care, quality care, and improved patient experience was a difficult challenge.

Of the original 32 Pioneer ACOs more than 13 have left the model due to dissatisfaction with program requirements and less favorable results than expected.

Only 22% of MSSP ACOs qualified for Share savings payments in year one of the program.

The expected savings from the ACOs model has only been realized by a minority of participating organizations.

Both the Brookings Institute and Leavitt Partners on studying ACOs found the majority of ACOs are able to realize quality improvements, but reducing costs is more difficult. And doing both while maintaining the customer experience is much more difficult.

Consolidation, Consolidation, Consolidation◦ Optum, Cigna-Express Scripts, Aetna-CVS, BSW-

Herman, Highmark-WestPenn Allegheny

Private Equity and Wall Street involvement◦ Berkshire Hathaway, Amazon, JP Morgan

Retailers entering the market◦ Amazon, HEB, Wal-Mart

Increased confusion of how to stay viable.◦ How to stay profitable in FFS world

Increased physician burnout.◦ EHRs, increased time at work, decreased

empowerment. >400 physician suicides last year

Increased movement from private practice to employed models.

Increased number of seasoned physicians exiting practice for retirement or other ventures

Two years ago decided we needed additional capital and expertise to continue down value road.

Spent two years searching for a partner.

Our main goal was to remain independent.

Not give up governance.

Not be part of a health care system.

We recognized our roots were in managed care.

We met with many Private Equity (PE) companies and venture capitalists.

We met with health care systems.

We met with large management systems.

We found one partner who met all of our requirements, agilon health.

We needed capital for infrastructure, analytics and stabilization of physician compensation while transitioning to risk.

We had experience in commercial risk contracting from our origins. Managed care was in our DNA.

We looked for a partner who was willing to build out a new model of managed care and had expertise in managed care risk contracting.

agilon health was a new risk management company backed by a well capitalized PE company looking at independent primary care as a vehicle to drive a redesign of the delivery system.

Reinvent the partnership model with PCPs in transition to MA global risk. ◦ Allow for independence, brand integrity, sustain

long-term independence

◦ Focus investment in future state rather than legacy FFS platform.

Driven by belief that PCPs and physicians can maintain independence, but require a different type of partnership model to capture the opportunity created by this changing environment. ◦ Transition slowly from FFS to Global Risk

◦ Realize the need for upfront investment before financial outcome is realized

◦ Align the various competencies of all partners

◦ Function as an integrated independent delivery system

Global risk economics incremental to FFS economics, no requirement to own PCPs, FFS economics or the physician group.

A Partnership and Economic Model that creates alignment around driving outcome not additional services was what was required

Many local physician-centric organizations have the defining community brand

Strong physician organizations can maintain independence and thrive

Premium dollar is incremental, definable and growing addressable market for physicians, creating the vehicle for physician independence and a joint venture partner

agilon health represented those beliefs!

Austin has a couple other large primary care groups and we sought to be inclusive and were successful at recruiting another group (Premier FP) to join the partnership.

We asked other groups who had varying degrees of interest.

Some want to take a wait and see position.

Because what we were building, it was not exclusive.

We were looking for a way to help independent physicians stay independent.

We wanted to harness the power these groups had and leverage it into a different delivery model while remaining independent.

We were not merging practices, but building a risk bearing entity, which allows for us to take global risk.

Long-term partnership

Unique governance model of a Risk Bearing Entity (RBE)

Independent but aligned. ARC and Premier maintain physician group ownership, but align with agilon for long-term investment in RBE and risk contracting

Partnership model driven through aligned incentives and shared governance: Focus on collaboration!

Created CSCA to run as a separate new line of business

CSCA Payor MA

ARC/Premier

agilon health

Full risk contracts With delegated services

Admin &select clinical MSO services

Professional services & select clinical services

Built on premise of bringing best-in-class people, process and technology into market to support local leadership in building a MA Line of Business.

agilon health is responsible for providing the “Intel Inside”, human capital, strategic direction, required breadth of services and capital

ARC and Premier bring their foundational clinical capabilities and resources to partnership

WHO KNOWS?

YOU DO!

Know who you are and what you want to be when you grow up.

Understand your core values.

Know your tolerance for risk.

Look past the dollars and look to structure, philosophy, governance, and evidence of long-term outlook.

Why would your medical group choose to partner with anyone?◦ More predictable stream of income

◦ Source of capital, skill sets, and expertise

◦ Access to better payor agreements

◦ Improved life style

◦ Reduction of overhead costs

◦ Greater access to referrals

◦ Less call coverage

Are you certain that any of that will happen?

Organizational structure Governance Rights Contract Rights Physician Self-Referral Laws Federal & State Anti-Kickback Statutes Civil Monetary Penalties Act Antitrust Network Exclusion Privacy ERISA Tax Corporate Practice/Fee-Splitting

Your independence Your retirement program Your ability to contract with payors of your

choice Interference with practice management by your

new partner Loss of referral sources Control of your practice in new quality/value

based purchasing compensation methods Would the culture be collegial or adversarial? Would I be an employee? Would I have to change my practice style? What about non competes?

You have two options◦ Do nothing and hope this goes away

◦ Look for business partners who have the same vision you do.

◦ Is what we did right for you?

Only you know!!!

***Know who you are and what you want before going to look for investors and or partners!***