Maximizing the Financial Performance of Employed Physicians Presented by: Health Directions, LLC

Sabrina Burnett, Vice President HFMA Kentucky Chapter – Summer Institute, July 24, 2014

A premier healthcare consulting firm that delivers a national perspective to regional provider organizations

• Assists healthcare organizations in improving their financial performance, physician satisfaction, health IT optimization, and strategic positioning

• Delivers a range of health care consulting services through an experienced team of professionals ACO Strategy and Development Managed Care Strategy Clinical Integration EMR Implementation & Optimization

About Health Directions, LLC

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Health Information Technology Physician On-Boarding and

Enrollment Strategic Planning

• Provide an overview of the industry trends and physician integration strategies

• Introduce a “concierge approach” for successfully onboarding physicians

• Present key performance indicators for employed physicians

• Provide an overview of value-based contracting

Today’s Objectives

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Healthcare Trends and Challenges

• Aging demographics• Chronic disease: 75% of healthcare spending

– Preventable Diseases consume 80% of spending

• Rising costs• Consumer demands• Technologic Advances

Trends and Challenges

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• Payment Reform– Fee-for-service versus Pay-for-performance

• Healthcare Technology– Drives connected care

• Accountable Care– Growth of ACOs accelerates

• Patient Satisfaction– Patient-provider communication and relationship critical

to economic success

Changing Healthcare Landscape

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From To

Silo Care Management Enterprise Care Management

Episodes of Care Coordination of Care

Hospital Centric Patient Centric

Episodic Reimbursement Financial Incentives based on outcomes and care coordination

Discharges Transitions

Utilization Management Proactive care at the right place, right time

Caring for the sick Focus on prevention and wellness

Production (volume) Performance (value)

Fundamental Shifts in Care Delivery

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Options For Physicians & Organizations

Physician’s Level of Collaboration

Organization’s Level of Collaboration

Do Nothing• Maintain FFS Model• Negotiate contracts under

current strategy• Tolerate fee schedule

reductions

Create Provider-Driven Medical Home Model

• Coordinate care within practice ‘s population

• Establish value around chronic disease outcomes

• Use outcomes to create value with payers

High

Low High

Develop Hospital Coordinated Care Model

• Focus on cost reduction• Invest in health information

technology • Connect providers to acute

care setting

Clinically Integrate Care• Track quality across

continuum• Establish a patient

longitudinal record• Prepare for value-based

contracting

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Physician Integration

Strategy Becomes Your First Filter

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• Positive hospital/physician relationships

• Increased referrals

• Market positioning

• Services and payer mix

• Enhanced managed care contracting

• Positioning for healthcare reform

– Developing an integrated care network

Objectives of the Hospital

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• Employment• Co-Management• Clinically Integrated Network• Practice Support Services (i.e., MSO, EHR)• Payor Contracting

Physician Integration Models

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Employed Physicians

Source: “Clinical Transformation: New Business Models for a New Era in Healthcare,” Accenture, Oct. 31 (link)

Hospitals are employing physicians: Out of 193 surveyed hospitals, 94% have employed physicians (Modern Healthcare and Press Ganey)

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• 87% - business expenses• 61% - managed care• 53% - EHR requirements• 53% - maintaining and managing staff• 39% - number of patients required to break even

Top Concerns for Physicians Considering Employment

Source: “Clinical Transformation: New Business Models for a New Era in Healthcare,” Accenture, Oct. 31 (link)

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• Control over practice decisions/autonomy• Protection of staff• Job security (termination, covenant)• Personalities• Entrepreneurship• Outside income sources• Locations and hours of work• Relationship with patients

Reasons Physicians Stay Independent

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• Identifying the value that the physician practices bring– Specialty network – Patient longitudinal record– Comprehensive managed care contracting

• Identifying ROI and/or minimizing the losses• Managing a physician practice is different than managing a

hospital – Managed care contracts / Revenue cycle management / Business

metrics– IT support systems

Challenges for Hospital Leaders

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• Start with Strategy as first line filter– Ensure prospect aligns with organizational goals

• Create a sound financial pro forma of practice– Evaluate data carefully

• Use industry metrics and benchmarks for evaluation

• Interview/evaluate for culture fit—soft costs

Measure Twice, Employ Once

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4 Key Pro-Forma Areas

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• Better performing practices generate greater than 15% ofphysician income from ancillary revenue

• Average physician collects $50,000 in ancillary services

• Growth of vertically integrated group practices

Ancillary: Revenue Growth

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• Compensation plans need to be based on productivity

Understand the guarantee or short-term incentives

• Evaluate work RVUs and bonus incentives• What makes sense for one specialty may not

make sense across the board (strategy)• Evaluate Employment vs. Provider Services

Agreement based on strategy• Benchmark comparisons: “apples to apples”

Compensation: Link between Productivity and Pay

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• Evaluate system compatibility and interoperability and current use

• Overhaul practice workflows • Perform Meaningful Use and other Clinical Data

Gap Analysis

Technology: Strike a Balance on EHR

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• Staffing model in current state• Skill sets of existing team members• Duplication of effort in consolidated model (too

many office managers?)

Staffing: Evaluate the Internal Team

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BenchmarkFY13 FY14 FY15 FY16 MGMA

FTE Physician FTEsSupport FTEsTOTAL PRACTICE FTEs 0 0 0 0Physician WRVUs

REVENUEGross RevenueContractual AllowancesNet Patient Service Revenue -$ -$ -$ -$ TOTAL NET REVENUE -$ -$ -$ -$

EXPENSESDIRECT EXPENSESStaffi ngBenefitsPharmaceuticalTotal OccupancySupplies/Medical & Offi cePurchased ServicesProfessional and General LiabilityInformation Technology LocalDepreciation and AmortizationOtherTOTAL DIRECT EXPENSES -$ -$ -$ -$ -$

PHYSICIAN PERFORMANCEBEFORE PROVIDER EXPENSES -$ -$ -$ -$ -$

PROVIDER EXPENSESPhysician CompensationPhysician Benefit ExpenseTOTAL PROVIDER EXPENSES -$ -$ -$ -$ -$

PHYSICIAN PERFORMANCEBEFORE OVERHEAD EXPENSES -$ -$ -$ -$ -$

OVERHEAD EXPENSESSystem and Local Expense Allocation

TOTAL EXPENSE -$

TOTAL -$

• Complete due diligence and qualification process• Create 1-page employment summary prior to the

employment agreement• Illustrate compensation, bonus and benefits

using formula• Negotiate terms, then draft employment

agreement • Encourage involvement of legal counsel…early• Execute agreement and deploy on-boarding plan

Employment Process

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Physician On-Boarding

“Concierge services are offered to those who need assistance whether it be for pleasure or out of necessity. From hotel guests who want a specific meal not listed on the menu to senior citizens who need companionship, concierge services are available to take care of specific needs.”

During the employment transition cycle, physicians have specific needs that a hospital organization structure may not address.

Why a Concierge Approach?

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On-boarding Program

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Phase 1: Discovery Checklist

TaskPoint

Person/Dept Duration

Status / Completion

Date TriggerConfidentiality Agreement PM 15 days

Pro-Forma Preparation Planning 15 daysSigned Confidentiality Agreement

IT/IS Discovery Assessment

IT15 days

Discovery PMO after Signed Conf Agrmt

Operational/Practice Assessment

Operations Director 15 days

Signed Confidentiality Agreement

Valuation of Assets 30 daysSigned Confidentiality Agreement

Physician Interviews TBD

DECISION TO HIRE PM 30 - 60 days

Proforma, Executive Sign Off, Physician Data Sheet and CV required before moving to Phase II

Physician Data Sheet, CV

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Sample

Discovery

Checklist

Task Point Person/Dept Duration

Status / Completion

DatePlan for IT Installation/Implementation IT/IS Telecom 90 daysPractice Start-Up Checklist Project Manager 5 daysEmployment Letter Legal 30 daysOffer Letter HR 30 daysPosition Posted in Position Mgmt Operations Director 10 daysCredentialing Checklist/Intro Package Business Office 15 daysContracting Contracting Dept 60 daysHospital Privileges Med Staff 30 daysMalpractice Risk Management 30 daysCost center, Banking Finance 60 daysCollateral Development Marketing 45 daysStaff Offer Letters Human Resources 30 daysEHR Templates IT 60 daysMedical Malpractice Risk Management 30 daysOffice Furniture Facilities 60 daysHospital Tours Physician Relations 30 daysCredit Card Machine CBO 30 days

Phase 2 Checklist

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Sample

Phase II

Checklist

Provider Enrollment

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45-180 Days

Provider Enrollment Tools

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• Credentialing Software– Manages credentialing status

– Populates applications, forms and letters

– Reporting Tool

– Tracking Module

– Alert System

– Imaging Module

Benefits of Centralized Credentialing

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• Improved Provider Relationships• Staffing Cost Reduction• Service Improvement• Revenue Cycle Optimization

Final Transition (Duration: 7 – 30 days)

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• Practice Acquisition Checklist• Acquisition Document Requests• Pro-forma Methodology—tied to strategy• Practice Project Plan Checklist• On-boarding Tracking Tool (summary of

milestones)• Department Work Plans – leverage your existing

infrastructure to support physician employment

Prepare a Toolkit

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Key Performance Indicators

• Financial and outcome indicators help define practice priorities and evaluate success

• Evaluate performance based on strategy (value proposition of why we became partners)

• Incorporate dashboard reports that are simple and easily understood by managers, physicians and staff

Continuous Success Requires Measurement

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Physician Key Performance Indicators

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The Revenue Cycle

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Measure Best Practice

Front-end edits 1-3%Office charge lag <1 dayHospital charge lag 1-3 daysCo-pay collection % 90%-98%Time-of-service payments 85%

Percentage of cancellations / no shows 5%

Front-End Key Indicators

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Measure Best Practice

Charge Capture Rate 100%

Claim Submission Frequency 1 day

Edit Rate 4%

Denial Rate 5%

Days in A/R 37

Bad debt 1.5%

Patient AR over 120 days 7%

AR over 120 days 9%

Back-End Key Indicators

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• Allows you to measure and track performance against peers– Gives you “what’s reasonable as well as what’s possible

scenarios

• Helps to quickly identify issues and proactively address them

• Insight into what others in the industry are doing

Value of Benchmarking

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“If you can’t measure it, you can’t manage it.”-Norton & Kaplan

• Financial metrics are important to running a successful business, but there is a next generation of indicators that involve clinical performance, quality, patient satisfaction/engagement and cost of care– Meaningful Use Dashboard

– Clinical quality scorecard

• Value of connectivity and data

New Generation KPIs

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Meaningful Use Dashboard

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ACO Measure Title1 Patient Experience Survey2 Patient Experience Survey3 Patient Experience Survey4 Patient Experience Survey5 Patient Experience Survey6 Patient Experience Survey7 Health Status Survey8 Hospital readmissions9 Ambulatory Sensitive Conditions Admissions: Chronic obstructive pulmonary disease

10 Admissions: congestive heart failure11 % of all PCPs meeting stage 1 of meaningful use12 Post Discharge: 65 and older medication reconciliation13 Falls: Screening for Fall Risk14 Influenza Immunization15 Pneumococcal Vaccination16 Adult Weight Screening and Follow-up17 Tobacco Use Assessment and Tobacco Cessation Intervention18 Depression Screening19 Colorectal Cancer Screening20 Mammography Screening21 Blood Pressure Measurement22 Diabetes Composite Hemoglobin A1c23 Diabetes Mellitus: Low Density Lipoprotein Control in Diabetes Mellitus24 Diabetes Mellitus: High blood pressure control in diabetes mellitus25 Diabetes Composite: Tobacco Non Use26 Diabetes Mellitus: Aspirin Use27 Diabetes Mellitus: Hemoglobin A1c Poor Control28 Hypertension: blood pressure control29 Cholesterol Management for Patients with Cardiovascular Conditions30 Ischemic Vascular Disease: Use of Aspirin31 Heart Failure: Beta-blocker therapy for left ventricular systolic dysfunction32 Coronary Artery Disease (CAD): Drug Therapy for Lowering LDLCholesterol33 Coronary Artery Disease (CAD): LDL level < 100 mg/dl

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ACO

Mea

sure

s

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Sample Provider Scorecard

• Review key information monthly– Production vs. Goals

– Financials vs. Goals

– Billing Performance vs. Goal

– Practice improvement initiatives

– Clinical quality reporting

– Industry trends and future considerations (i.e., PCMH, ICD-10)

Meeting with Physicians

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1. Present information that they will understand (for example, number of visits)

2. Establish monthly goals and compare to actual

3. Use graphics as opposed to spreadsheets

4. Share what is applicable to them and their practice

5. Create rapport and encourage open discussion

6. Co-develop an action plan for practice improvement

Presenting to Physicians

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Value-Based Contracting

Understand….• What Do You Have to Offer• Where Are You on Your Roadmap to Value-Based

Contracting• Know the Healthcare Needs in Your Market• Existing and Needed Technology• Full Cost of Care• Financial Implications of New Reimbursement

Methods

Organizational Self-Assessment

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• Payer Concentration in Market Limits Opportunities

• Existing Quality Programs

• Earning Incentive(s) Existing Contract(s)

• Potential Partnership Opportunity

• Narrow Network & Commercial HMO Risk Products

Market Background Assessment

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Payer Market Concentration

• Blue Cross/Blue Shield (23%)• Commercial PPO & HMO Combined

• Humana Medicare Advantage (10%)• United (7%)• Aetna/Coventry (3.3%)• Cigna (2.3%)• Medicaid Managed Care (3.3%)

• 5 Payers Combined

Sample

Value-Based Payment Models

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FFS with Quality

Incentives

FFS with Quality

IncentivesShared SavingsShared Savings

Narrow NetworksNarrow

NetworksPartial

CapitationPartial

CapitationFull/Global CapitationFull/Global Capitation

Level of RiskLow High

Two Diverging Payment Paradigms

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• Lack of Quality Indicators

• Volume Driven• Fragmented Care

Fee For Service • Quality Driven• Performance

Payments for Chronic Care Management

• Goal to Reduce Fragmentation

Steps in Building the Payer Contracting Approach

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• Lack of Quality Indicators

• Volume Driven• Fragmented Care

Fee For Service • Quality Driven• Performance

Payments for Chronic Care Management

• Goal to Reduce Fragmentation

• Build Preferred Contracting Strategy and Approach– Patient Population– Scope of Risk

• Assess Health Plans in Your Market– Know the Different Care Delivery Needs– Existing Payers, Products, Value-Based Programs– Emerging Opportunities

• Leveraging CIN Value• Build a “Value Proposition” with Payers• Based on Conversations with Payers, Begin to Build

Comprehensive Program Measure Database

Steps in Building the Payer Contracting Approach (Cont.)

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• Lack of Quality Indicators

• Volume Driven• Fragmented Care

Fee For Service • Quality Driven• Performance

Payments for Chronic Care Management

• Goal to Reduce Fragmentation

• Development of Clinical Programs and Outcomes is Foundation of Direct Contracting with Employers

• Build Model Language for “Value-Based” Contract Components

• Create a Financial Model Template to Help Organizational Leaders Understand the Potential Cost and Opportunities

• Identify Physician, PHO (if applicable) & Hospital Contracting Concerns & Considerations

Illustration: Identifying Opportunity

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• Lack of Quality Indicators

• Volume Driven• Fragmented Care

Fee For Service • Quality Driven• Performance

Payments for Chronic Care Management

• Goal to Reduce Fragmentation

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• Lack of Quality Indicators

• Volume Driven• Fragmented Care

Fee For Service • Quality Driven• Performance

Payments for Chronic Care Management

• Goal to Reduce Fragmentation

Comparison of Quality MeasuresMeasure Title HUMANA BCBS NQF # PQRS4 ACO6 MU5 HEDIS7 Specialty

CountDiabetes Mellitus: Low Density Lipoprotein (LDL-C) Control Yes Yes 729 2 23 Menu Yes 5

Diabetes Mellitus: Hemoglobin A1c Control (<8%) Yes Yes 729 NA 22 Menu Yes 0Preventive Care and Screening: Breast Cancer Screening Yes 31 112 20 Menu Yes 7Diabetes Mellitus: Medical Attention for Nephropathy Yes 62 119 NA Menu Yes 5

Preventive Care and Screening: Colorectal Cancer Screening Yes 34 113 19 Menu Yes 5

Diabetes Mellitus: Dilated Eye Exam Yes 55 117 NA Menu Yes 5Glaucoma Screening Yes NA NA NA Yes 0Mail Order Usage Yes NA NA NA NA 0

Preventive Care and Screening: Tobacco Use: Screening and Cessation Intervention Yes 28 226 17 Menu Yes 16

Ischemic Vascular Disease (IVD): Use of Aspirin or Another Antithrombotic Yes 68 204 30 Menu Yes 7

Ischemic Vascular Disease (IVD): Complete Lipid Panel and Low Density Lipoprotein (LDL-C) Control Yes 75 241 29 Menu Yes 7

Hypertension (HTN): Controlling High Blood Pressure Yes 18 236 NA Core Yes 6

Diabetes Mellitus: High Blood Pressure Control Yes 729 3 24 Menu Yes 5Ischemic Vascular Disease (IVD): Blood Pressure Management Yes 73 201 NA Menu Yes 4Use of Emergency Care Yes NA NA NA Yes 0Generic Drug Dispensing Rate Yes NA NA NA NA 0Low Back Pain: Use of Imaging Studies Yes 52 NA NA Menu Yes 0

• Keep the “WHY” in the forefront of your plan to evaluate potential physician candidates

• Understand the importance of a concierge approach to onboarding to ensure long-term physician success

• Identify and track key performance indicators that are aligned with your strategy

• Understand the impact of healthcare reform

Summary

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Sabrina BurnettVice PresidentHealth Directions, LLC8310-1 Capital of Texas Hwy N., #390Austin, TX 78731Phone: 512-795-5500sburnett@healthdirections.com www.healthdirections.com

@HDirections

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