new models for care delivery in the reform era 9.27.2012
TRANSCRIPT
New Models for Care Delivery in the Reform
Era 9.27.2012
1. Key Challenges of the Reform Era
2. Hospital and Physician Alignment Drivers
3. New Models of Care Delivery
4. Co-Management – A Transitional Model
1
2
3
Agenda
2
4
Key Challenges of the Reform Era
US National Debt at $15.9 Trillion
4
• Unless the U.S. government fixes the budget, US National debt (credit card bill) will topple $16 trillion this fall and rise to $22.1 Trillion within 4 years.
• US national debt passes 20% of the entire world’s combined GDP.
Each pallet equals $100 million dollars, full of
$100 dollar bills
A New Dialog
5Source: “U.S. Healthcare Costs” KaiserEDU.org
Annual IncreaseTotal Spend: 7.0%Medicare Spend: 6.8%Private Insurance Spend: 7.1%November 16, 2010
Federal Programs Going BROKE!
6
Social Security• Projected to be insolvent by 2033
Medicare• 2012 – 50 million people (80 million by 2030)• In the red in its largest fund in 2024• Trust fund that pays for disability benefits is projected to run
out of money in just 4 years
Cost-cutting steps have been successful and growth in Medicare spending per person has slowed markedly in recent years, but the situation is dire unless changes are made.
Source: Chicago Tribune – “Trustees Warn of Looming Insolvency for Social Security, Medicare” (4/25/12)
Source: OECD Health Data 2009
Spending Not Related to Quality or Value
7
84
82
80
78
76
74
72
Lif
e E
xp
ecta
nc
y in
Ye
ars
Health Spending Per Capita (USD PPP)
0 2,000 4,000 6,000 8,000
Reform Initiatives
8
PPACA / HCERA
Center for Medicare/Medicaid Innovation (CMI)
CMS Payment Cuts & Penalties
CMS Triple Aim
Pilots and Demonstrations
Legislative Battles and Reform Funding
• Physician Alignment• Provider Integration• New Model Adoption• Electronic Health Records
• Adopt New Models of Care Delivery• Shift Accountability and Risk to Providers• Redirect and Shrink the Dollars• Provide Coverage for the Uninsured
• Improve Quality• Increase Access• Reduce Costs
PREREQUISTES
OBJECTIVES
GOALS
PPACA (March 2010)
Legislative Reform Defining New Paradigms
9
Supreme Court Clearing the Way for Reform
10Source: Advisory Board
High Court Decision Ends Constitutional Uncertainty
Three Key Decisions Arguments Supporting Individual Mandate
Constitutional Discussion
Individual Mandate:Can the federal government compel individuals to purchase health insurance?
Medicaid Expansion:Is the ACA’s Medicaid expansion a violation of states’ rights?
Severability:Should the remainder of the ACA stand if a portion is struck down?
Supreme Court Decision
Upheld under Congress’ power to impose taxes
Medicaid expansion upheld; federal government may not withhold existing Medicaid funds if states forgo expansion
The remainder of the law can stand
Constitutional Authority Supreme Court Decision
Commerce Clause
Necessary and Proper Clause
Power to Tax and Spend ✓
“would reduce Medicaid spending by $771B over 10 years and $30B from Medicare” p6
11
Early On, Revenue Implications….
12
Readmission
Reductions
2010 2011 2012 2013 2014 2015 2016
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
Revision of Certain Market Basket Updates
Medicare Advantage Payments
Hospital Readmissions Reduction Program
Medicaid Disproportionate Share (DSH)
Medicare Disproportionate Share (DSH)
Payment Adjustment for Conditions Acquired in Hospitals
Program in place
Reductions
Readmission
Then, Delivery Implications
13
2010 2011 2012 2013 2014 2015 2016
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
Establish of CMMI
Medicare Shared Savings Program
Independence at Home Demonstration Project
Hospital Value-Based Purchasing Program
National Pilot Program on Payment Bundling
Value-Based Payment Modifier Under the Physician Schedule
Additional Requirements for Charitable Hospitals
Program in place Pilot or Demonstration Period
ACO’s
Value Based
Bundling
Integration Accelerating Across the Continuum
14Source: Sg2
Insights from the Front Lines of Change. . .
15
Payor Strategic Plan
Comprehensive Cardiology Alignment
Clinical Integration
Clinical Co-Management
(Spine & Transplant)
Orthopedic Institute
Hospital Efficiency Program
Training Directorship
Access Point Strategy
Safety Net Hospital
Crisis
Women’s Services Co-Management
Hospital and Physician Alignment Drivers
350
300
250
2002000 2005 2010 2015 2020
267
282
298
316
337
215229
244
260
271
Demand
Supply
Caregiver Supply Not Meeting Demand
17Source: SHP/VHA 2009 | Merritt Hawkins 2007
PCP Supply vs. Demand (in thousands)
2020 Deficits … PCP = 66,000 Specialist = 79,000
Caregiver Supply Not Meeting Demand
18
National Supply and Demand Projections for FTE Registered Nurses (2000 – 2020)
Source: Bureau of Health Professions, RN Supply & Demand Projections
3,000,000
2,500,000
2,000,000
1,500,000
1,000,0002000
Demand
Supply
20202006 2012
INPATIENT DISCHARGES
OUTPATIENT VISITS
MEDICAL ADMISSIONS
SURGERIES
Projected Ten Year Volume Growth With and Without Reform
With Reform
Without Reform
Volume Growth Widening the Gap
19Source: Sg2
8.5%
8.1%
7.4%
7.3%
11.2%
10.2%
23.1%
19.1%
Oct 2010 2020
Value-Based Purchasing
30-Day Readmissions
Hospital Acquired Conditions
1% 2% 3%
2011 2012 2013 2014 2015 2016 2017 2018 2019
1%
1% 2%
TOTAL 2% 3% 6%5%
Source: Sg220
Hospital Margins At Risk
Reimbursement At Risk
Hospital Drivers for Alignment
21
Lower Costs“The biggest potential income streams for both hospitals and physicians may reside in sharing savings from providers. To do that, hospitals and physicians must manage care together.” – PwC
“Physician orders are directly responsible for 80% of U.S. healthcare spending.” – Deloitte Center for Health Solutions
Better Quality“Better quality will finally pay off for hospitals but they need physicians to deliver it.” – PwC
New Payment Systems“Hospitals need to partner with physicians as a means of participating in ACO’s and other new payment arrangements.” – PwC
Expand Base, Increase Volume, Grow Market Share“High end expensive procedures are at risk unless we can expand the referral base.” – Michael Sachs, Sg2
$
Source: PricewaterhouseCoopers | Deloitte | Sg2
Operating Expense
Administrative Burden
Assessment / Audit Risk
Alignment with Hospitals
Physician Drivers for Alignment
22
Professional Fees
Ancillary Revenue
Leverage with Payors
Profitability & Personal Income
Source: Physician Compensation and Production Survey, MGMA, 2003-2009
80
60
40
20
0
2002 2004 2006 2008 2010
U.S
. Phy
sici
an P
racti
ce O
wne
rshi
p (%
) Physician-owned
Hospital-owned
Percentages of U.S. Physician Practices Ownedby Physicians and by Hospitals, 2002-2010
Practice Trends
23
Payment Reform Models Emerging
24
High
LowScope of Risk
Deg
ree
of
Co
mp
lexi
ty
Source: Sg2
Fee for service
Inpatient case rates (DRGs)
P4P/value-based purchasingBundled episodes (inpatient only)
Bundled episodes (pre- and postcare included)
Disease-specific capitation
Clinical integration program
ACO
Global capitation
Insurance product
High
New Models of Care Delivery
The Old Model
26
The New Model
27
Market Dynamics Accelerating New Models
28
More Care (32M uninsured, Baby Boomers, Chronic Disease)
Higher Quality (P4P, Shared Savings, Core Measures)
Less Money ($240B Cuts, $90B Penalties)
“Bottom line, if you attempt to use the same care delivery model moving forward, faced with the magnitude of reductions in forecasted revenue, you will go out of business.” Michael Sachs, Sg2
Consumers Employers
Health Plans Government Payors
Physicians Medical Groups
Hospitals Other Providers
Risk Shift
Bundled Payments
Value-Based Purchasing
Global Payments / Capitation
Pay-for-Performance
SharedSavings
FFSReimbursementCuts
Source: PricewaterhouseCoopers | DHG
Shifting Risk
29
Payment Reform Accelerating New Models
Source: PricewaterhouseCoopers 30
AccountabilityIndependent IntegrationAlignment
All Providers
Payers
Bundled Payments
Value-Based Purchasing
Global Payments / Capitation
Pay-for-Performance
SharedSavings
FFSReimbursementCuts
Variety of Alignment Options
31
High
Low Level of Integration
Co
mp
lexi
ty a
nd
Du
rab
ilit
y
Source: Sg2 2012
Voluntary model
Medical directorshipsCall coverage agreements
Next-generation PSA
IPA
MSOIT subsidy
Traditional PHO
GainsharingJoint Ventures
High
Co-management
Traditional Employment
Clinical integration PHO
Foundation Models
Full Integration
Clinic Model
~75% or more of the medical staff
~50% of the medical staff
~25% of the medical staff
Small (<10% of the medical staff)
% of Medical Staff Involved
Hospitals and Health Systems React
32
Question Posed of 279 Hospital and Health System Leaders:Which of the following initiatives is your organization likely to be pursuing within three years?
Source: Health Leaders Media ,September 2012
Primary Care
PhysiciansSpecialists
Acute Care Hospital
Post-Acute Care
PCMH CIN
Patient Centered Medical Home (PCMH):Primary care approach that supports comprehensive, team based care, improved patient access and engagement; serves as “hub” of care coordination; focuses on chronic disease management
Clinical Integration Network (CIN):Acute care hospital, multispecialty physician network and other providers committed to quality and cost improvement, with support from joint negotiated commercial contracts
Accountable Care Organization (ACO):Model to promote accountability for a patient population by improving care coordination, encouraging investment in infrastructure, and redesigning the care continuum around quality
Readmission Risk/Penalties
Proposed ACO Structure
Proposed Bundled Payment Initiatives
$
$
Other Providers
(CAH)
Clinically Integrated Models
33Source: The Advisory Board
Co-Management: Model to align physician incentives around quality, cost and satisfaction with fair market compensation
Co-Management
Clinically Integrated Network (CIN or IPN)
Health System
Ambulatory Care Centers
Hospitals
CI Entity
Employee Health Plan
Private Practice
Physicians
Employed Medical Group
34
CIN is commonly defined as an integrated health network using proven protocols and measures to improve patient care, decrease cost, and demonstrate value to the market. After demonstrating value, the CIN negotiates with payers and large employers to support the network with incentives based on demonstrated value and achieved results.
CIN Components
35
CIN InfrastructureThe CIN is a Separate Business Entity with …
• Distinct leadership structure and staff• Independent budget and financial statements• Participating agreements with providers• Sustainable source of revenue
$ $
$
Clinically Integrated Network
36
Health System Investment/
Dues
Physician Investment/
DuesMarket Sources
(Payers, Employers)
CIN Legal Structures
PHO IPA Health System Subsidiary
Health System
Participating Physicians
Payers /Employers
PHO50% 50%
Health System
Payers /Employers
IPAParticipatingAgreement
100%
Participating Physicians
Health System
Payers /Employers
ParticipatingAgreements
100%
Participating Physicians
Subsidiary
37
Hospital Efficiency Program (HEP)
38
HEP Agreement
services
Validate Savings from HEP Performance
• Clinical Supply and Pharmacy• Medical Claims per Employee • Throughput and Average LOS
Define Fair Market Value Compensation for HEP Initiatives
• Base Fee (administration)• Incentive Component
(performance)
Design Compensation Methodology for Participating Physicians
Health System
Physician Org.(PHO, IPA, Sub)
CIN / HEP Benefits
39
• Defined in pilot programs in 44 states
• Built on 7 fundamental principles
• Focuses on comprehensive patient management
• Focuses on treatment and management of chronic conditions
• Manages expense of high cost, perpetual patients (Diabetes, COPD, Hypertension, Asthma)
• Increases access by leveraging physician extenders
• Qualifies for additional incentive based payments
Cornerstone of Accountable Care Organizations
Patient Centered Medical Home (PCMH)
Safety and Quality
CoordinatedCare
PersonalPhysician
Enhanced Access
Whole Person Orientation
Payment for Added Value
PhysicianDirectedPractice
40
Patients make appointments
Patients’ chief symptoms or reasons for visit determine care
Care is determined by today’s problem and time available today
Care varies by provider
Patients are responsible for coordinating their own care
Acute care is delivered during the next available appointment and to walk-ins
Patient must tell caregiver what happened
Operations center on physician’s schedule
Patients are registered in the medical home
PCMH systematically assesses all patient health needs to plan care
Care is determined by a proactive plan to meet patient’s needs (with our without an office visit)
Care is consistent with evidence-based guidelines
A prepared team of professionals coordinates all patient care
Acute care is delivered by open-access and non-visit contacts
PCMH tracks tests, consultations, ED visits, hospital visits and follow-up care
A multidisciplinary team works to serve patients
Source: Central Ohio PCMH Project
PCMH Care RedesignTraditional PCMH
41
PCMH Benefits and Risks
The PCMH is a health care approach that facilitates partnerships between patients, their families and personal physicians (and/or extenders). The PCMH follows a set of standards around care coordination and data monitoring that leads to demonstrated quality outcomes at reduced costs.
• Increases quality and reduces cost of chronic patient care
• Enhances access and continuity of care
• Aligns PCP physicians around care delivery
• Focuses on integrated care management
• Patient survey results help drive quality improvement
• Presents opportunity for enhanced reimbursement
• Creates possible competitive advantage
• ROI uncertain and difficult to measure
• Demands increased administrative support
• Requires (significant) IT investment
• Creates significant change in culture and practice patterns
• Requires progressive use of technology and other models of patient interaction
Benefits
Risks
Source: NCQA, 2011 42
Hospital
Payer
Employer
Community
Government
Primary Care
Provider
OtherCaregivers
PharmaceuticalManufacturer
Nurse
Specialists
Social Worker
Patient
Payer: Improved member satisfaction, lower costs, opportunity for new business models
Hospital: Lower admissions and re-admissions; more appropriate use of ED; integration with physicians; enhanced reimbursement(?)
Specialists: Increased level of integration with PCPs, increased efficiency, focus on reducing re-admissions
Government: Lower healthcare costs, healthier population
Employer: Lower costs, more productive workforce, improved employee satisfaction
Primary Care Provider: Increased focus on patient health, greater access to information, increased use of quality metrics, better reimbursement,
Patient: Less costly, more convenient care; coordinated services, productive long-term relationship with all physicians
Accountable Care Organization (ACO)
43
ACO Structure
44
Component Rule
Legal Structure
• Legal entity under state and federal law• Capable of receiving / repaying shared savings / losses• Separate legal entity if 2 or more independent participants
Governance
• Defined governance structure in ACO application• ACO participants must control 75% of board• Beneficiaries must be included in governance
Leadership and Management
• ACO must have operations manager under control of board• ACO clinical management by of one of ACO physicians• QA / PI initiatives and protocols must be defined
Mid-Cycle Structural Changes
• New participants may be added to ACO during period• Must notify CMS of any changes within 30 days
IT Initiatives
• Percent of PCPs qualifying for EHR incentive program weighted heavily in scoring of quality measures
• ACO required to promote evidence based medicine, report internally on quality and cost metrics and coordinate care
Source: CMS
ACO Participants
45
What is an ACO Professional?• MD or DO• Practitioner (PA, nurse practitioner, clinical nurse specialist)
Who Can Participate in an ACO?• ACO professionals in group practice arrangement• Networks of individual practices of ACO professionals• Partnerships between hospitals and ACO professionals• Hospitals employing ACO professionals• Critical Access Hospitals (CAHs) that bill under Method II*• Federally Qualified Health Centers (FQHCs)• Rural Health Clinics (RHCs)
*Under Method II a CAH bills for both facility and professional services, which provides CMS with the data needed to perform various programmatic functions
Source: CMS
Assignment
• > 5,000 Beneficiaries• Preliminary Prospective Assignment• Retrospective Reconciliation• Unrestricted Provider Choice
Billing• Providers Bill Normally• Receive FFS
Comparison• Total Cost Incurred Compared to Target
Expenditures• Compare to Defined Targets
Bonus• Dependent on Savings and Quality
Metrics• Size Determined by Selected Model
Distribution• Determined by ACO Participants• Defined Governance Structure
ACO Mechanics
46
1
2
3
4
5
Source: CMS
Key Imperatives for Success
47
• Develop and utilize ambulatory network
• Appropriately utilize pre and post acute care providers
• Reduce preventable acute care episodes
• Avoid unnecessary readmissions
Manage Utilization Risk
Maintain Exceptional Quality
Operate Under Elevated Transparency
• Develop quality care standards
• Create care pathways across providers
• Coordinate care across sites of care, over time
• Adopt IT systems that allow for data capture and use
• Continue to provide data to ACO partners and CMS
• Develop communication strategy amongst participants
Source: The Advisory Board Company
ACO Care Redesign
48
Patient base split among multiple providers with competing interests
Organization is physician-led system of care encompassing all patient services
Responsibility for patient care transitioned from one provider to the next
Organization is held accountable for overall clinical results, cost and efficiency
System designed to react to acute events rather than focus on prevention
Population served receives prevention and wellness services
Current payment system supports specialist services over primary care
Core of organization is primary care supported by specialists
Non-clinical demands on physicians time increasing diverting physicians attention from providing medical services
Physicians supported by practice teams that increase practice efficiency and quality
Technology adoption and use varies among PCP, specialists and hospitals
IT infrastructure coordinated to measure and report standardized metrics focused on quality
Fee-for-service delivery system rewards non-coordinated care throughout system
Delivery system capable of coordinating care across all settings
Source: AMGA
Traditional ACO
Where the ACOs Are
Source: The Advisory Board Company 49
Co-Management
Co-Management Objectives
51
• Integrate physicians’ clinical expertise into hospital’s management competencies
• Align incentives and enhance clinical, operational and satisfaction outcomes
• Improve quality and increase access, regionalization and standardization of services
• Position both hospital and physicians for healthcare payment reform (bundled payments, P4P, etc.) in either / or an employed physician or independent physician scenario
• Provide legal, FMV to physicians for their time, effort, expertise, and results
• Create a successful recruitment platform for high-quality physicians
Co-Management
52
• Committee Involvement• Day-to-Day Management• Strategic Plan Development• Clinical Care Management• Quality Improvement• Staff Oversight• Materials Management• Budget Development
• Clinical Outcomes• Patient Safety• Satisfaction• Operational Processes• Financial Performance
Physician LLC
Physician LLC
Equipment*Staffing*Supplies
Hospital
FMV Compensation
Management Services
Management Fee Distributions
Investment
Performance Metrics
Fixed Duties
Governance Committees
Physicians
*Only one of two may be included
Co-Management Fundamentals
53
Valuation •In return for provision of management services, physicians receive compensation at Fair Market Value (ie, commensurate with what a full-time, 3rd party manager of CV services would command)
Fixed Duties •Physicians are tasked with specific, non-clinical duties that further the goals of the service line and are paid for their time and effort
Performance Metrics •Physicians are expected to improve upon historical hospital performance in key areas such as clinical outcomes, quality, efficiency and satisfaction and are paid according to their level of success in achieving pre-determined targets
Governance •The physicians form a physician LLC that contracts with the hospital and they, in turn, organize themselves in committees to effectively manage the hospital’s service line and accomplish the fixed duties and performance metric goals
Invasive Labs 1 Chair +
2 Members + Hospital Staff
Governance - Sample
LLCLLC
Hospital
Heart and Vascular Executive Committee
4 CPM Managers + Hospital Staff
Finance & Capital 1 Chair +
2 Members + Hospital Staff
Quality & Clinical 1 Chair +
4 Members
Medical Directors (7)
CHF Disease
Chest Pain
Hospital Coord (2)
Non-Invasive
IT Implementation
Cardiac RehabCommittee Structure• The Heart and Vascular Executive Committee will report to the VP• The LLC Managers will be the 4 physicians on the HVEC• Hospital representatives will set on the Finance & Capital and Invasive
Labs Committees to assist the physicians in business management
Hospital Representation
Physician Only
Board4 LLC Managers
Board4 LLC Managers
4 LLC Managers3 Committee Chairs8 Committee Members7 Medical Directors
54
Sample Metrics List
Development of Performance Incentives and Supporting Metrics Fosters Hospital/Physician-Manager Collaboration
SAMPLE: Sample Cardiology Metrics
Clinical Outcomes (35%)Patients given ACE inhibitor/ARB for LVSDSTEMI patients receiving PCIPatients receiving aspirin w/in 24hrs of arrivalPatients with Beta Blockers at discharge
Patient Safety (35%)Lead dislodgement in patients with pacer/ICDPneumothorax in patients with pacer/ICDPCI in-hospital risk-adjusted mortality rate
Operational (20%)On-Time Catheterizations (All Cases)Turnaround Time
Satisfaction (10%)Increase in PG “Overall Communication with Doctors”Increase in PG “Would Recommend”
55
Sample Metric
56
Development of Performance Incentives and Supporting Metrics Fosters Hospital/Physician-Manager Collaboration
SAMPLE: Median fluoro time (PCI Only). Measures the length of radiation exposure to patients during the PCI.
REFERENCE: ACC-NCDR PCI Metric
CURRENT PERFORMANCE: 11.8 Minutes
The following table sets forth the targeted levels of performance and the compensation associated therewith:
Range Floor Range Ceiling Annual Payout
> 8.3 Minutes > 6.5 Minutes
> 10.0 Minutes
≤ 10.0 Minutes
≤ 8.3 Minutes
$0
$20,000
$40,000
≤ 6.5 Minutes - $60,000
• Facilitates collaboration between hospital and physicians on service line improvement
• Creates platform for improved quality, reduced cost and enhanced access in preparation for pay for performance and bundled payments
• Provides reasonable and stable financial return to physicians for new and existing management functions
• Requires minimal capital investment by physicians or hospital
• Minimizes regulatory risk due to favorability with CMS and OIG
• Arrangement is reversible if it fails to achieve results
• May lead to decreased costs based on physician engagement
• Positions hospital and physicians for future integration models
Co-Management Benefits
57
Questions
Reform Challenges
59
Paralyzed by Confusion
Embracing the Opportunities
Existing in Denial
Resigned to Acceptance
High
Resiliency
Low
Low Understanding High
Reform Challenges our Personal Paradigms
Appendix
Physician Alignment Process
61
Hospital
Employed Physicians
Affiliated Physicians
Physician LLC
JV Cath LabPhysician Equity (X)
Co-ManagementCall CoveragePanel Reads
FMV CompensationCo-Management Fee
Fixed DutiesPerformance MetricsCall PaymentPanel Reads
EmploymentReverse MSO Practice LeaseNon Inv. Imaging Acquisition
Non Inv. Imaging Acquisition Investment
No Investment: Call/Panel Participation
Independent Physicians
Investment
Hospital Equity (Y)
$ Based on equity & effort
$ Based on equity & effort
$ Based on effort only
Comprehensive Cardiology Alignment Model
62
Who We Are – DHG Healthcare Consulting
David Petrel – Sr. ManagerHudson, OH(330) 650-1752Michael Lutkus – Sr. AssociateHudson, OH(330) 620-0740
Degree of Alignment
Reso
urce
s
High
LowTactical Strategic Transformational
Foundation
InstituteIndividual Employment Contracts
PSA
MSO
Recruitment Support / Income Guarantee
PHO
Volunteer Medical Staff
IT Deployment
Directorship / Pay for Call
PCMH
Physician Enterprise
Clinical Integration
ACO HIZ
Co ManagementJoint Venture
Bundled Payments
Source: Sg2
Physician Alignment Models
64
"To avoid large and ultimately unsustainable budget deficits, the nation will ultimately have to choose among higher taxes, modifications to entitlement programs such as Social Security and Medicare, less spending on everything else from education to defense, or some combination of the above . . .
These choices are difficult, and it always seems easier to put them off -- until the day they cannot be put off anymore . . .
unless we as a nation demonstrate a strong commitment to fiscal responsibility, in the longer run we will have neither financial stability nor healthy economic growth."
Ben Bernanke – Federal Reserve ChairmanSpeech to Dallas Regional Chamber 4/7/10
A Growing Crisis . . .
65
Family Practice
Internal Medicine
Pediatrics
Geriatrics
Colon and Rectal Surgery
Endocrinology
Neurology
Gastroenterology
Critical Care
Psychiatry
Immunology
Emergency Medicine
Oncology
Orthopedic Surgery
Urology
Cardiology
Radiology
-6% -4% -2% 0% 2% 4% 6% 8%
7%
5%
5%
5%
1%
1%
1%
0%
0%
0%
0%
-1%
-1%
-1%
-2%
-3%
-4%
Proposed PFS Reimbursement Changes
66Source: Beckers, 2012
Critical Success Factors
Trust
Communication & Transparency
Change Management
No “One Off Deals”
Physician Leadership
Adapt Guiding Principles/Physician Compact
67
1
2
3
4
5
6
5 Key Issues
Does the hospital have sufficient urgency?
Is there enough trust between the hospital and physicians?
Can we measure and document what we are good at and not so good at?
Do we fully understand the legal and tax issues associated with true Physician Alignment?
Do we have the infrastructure and the ability to finance the alignment strategy? !
68
1
2
3
4
5
GI Interest in Employment Moderate to Low
20.00%
25.00%
30.00%
35.00%
40.00%
45.00%
50.00%
55.00%
60.00%
65.00%
70.00%
Specialty Level of Interest in Hospital Employment
aLeast Interested in Employment Interested in Employment Most Interested in Employment
GI
Radiol-ogy
Oncology
Pulmonology
Anesthesia
PCP
Cardiology
Ob-Gyn
Orthopedics
Source: PwC 2010, DHG 2012
Surgery
Neurology
Family Medicine
69
Physician-Hospital Organization (PHO)
Joint Venture between the Health System and Physicians.
Allows physicians to maintain ownership of their practices while agreeing to accept manage care patients
Ownership interests dictate board structure, investment, and distribution methodology
70
50%
Payers
50%PHO
Health System Physicians
Professional Services Agreement (PSA)
71
Physicians HospitalClinical ServicesManagement Services
FMV Compensation
Billing and Collection for Technical and Professional Component of IR Procedures
PSA
Ownership
Pros Cons
Better professional reimbursement Possible time away from clinical work
Increases economic feasibility for program growth
Possible coverage constraints
Dedicated and fairly compensated
Maintain autonomy
$
Employment Models
72
Physician Practice Responsibility
wRVU Model
Bump Model
Practice Management Model
Net Income Model
Low High
Model Pros Cons
wRVU Model• Easy to understand model• Incents physician for productivity• Payor blind• Quality incentives incorporated into model
• Limited incentive for expense management• No payor risk to physician
Bump Model• Incents physician equally above defined baseline for all
wRVU’s• Payor blind• Quality incentives incorporated into model
• Limited incentive for expense management• No payor risk to physician
Practice Management Model
• Incents physicians to manage practice expenses• Payor blind• Quality incentives incorporated into model
• No direct allocation of centralized costs• No payor risk to physician
Net Income Model
• Maintains physicians commitment to practice success• Most similar to private practice• Adjusted frequently to reflect practice changes• Quality incentives incorporated into model
• Physician assumes allocation of centralized costs• Hospital must be able to deliver data quickly and
accurately to assist physician in practice management
Health System Physicians
Win | Win Criteria
Payers
Quality Membership Contracting Information Technology
Care Redesign
Clinical Integration Program
Health System Patients & Communities Physicians
• Enhanced Reimbursement for Demonstrated
Quality
• Transformational Care Redesign (System of
Care)
• Co-leadership with Physicians
• Reduction in Operating Costs (Waste)
• Demonstrated Quality
• Improved coordination of care, resulting in
higher patient satisfaction and demonstrated
quality of care that is cost efficient
• Enhanced Reimbursement for Demonstrated
Quality
• Long-term Viability of Private Practice
• Position for Physicians in Governance
• Improved Network Coordination
• Enhanced Patient Care and Satisfaction
The Value of Clinical Integration to…
Clinical Integration
73
Models of Group Alignment
74
Merger of existing independent practices into large practice with defined governance, management, billing and income distribution
Physician buy into ASC (or other facility) that provides efficient workshop and supplemental income with limited management responsibility
Degree of IntegrationLow High
Independent practices align under Association guidelines for purposes of joint contracting
Physicians (and other providers) align around health management and accountability of defined Medicare beneficiary population. Shared Savings drive compensation
IPA ASC Investment Group Practice Consolidation ACO
Independent Physician Association (IPA)
75
IPA is a owned by the Physicians and contracts with health systems and payers as one network for services.
Creates a large network of providers that retain control, ownership and the financial accountability over medical decision-making
100%
Payers / Employers
Participating PhysiciansHealth System
IPAParticipating Agreement
ASC Investment
76
Health SystemJoint Venture
Employed &Independent
Physicians
Payers
Joint Ventures contract with Health Systems and Payers as one network for services
Employed and Independent Physicians buy into ASCs or other facilities that provide supplemental income with little management responsibility.
Ownership interests dictate Board Structure, Investment, and Distribution Methodologies.
Group Practice Consolidation
Multi-Specialty Group• Advantages of SSG … plus …• Greater Coordination of Care• Internal Referrals• Market Presence
Single-Specialty Group• Information Sharing• Economies of Scale• Negotiating Leverage• Support for Ancillaries• Shared Cost of Technology and
Practice Overhead
Control Over Referral Sources
Combined Interests & Talents
Payor Relationships
Enhanced Market Access
Risk Sharing
Peer Consultation / Review
Pooled Capital
Merger or Acquisition Into a Larger
Medical Group
ADVANTAGES
77
78Source: Sg2
Co-Management
Source: Sg2 79
Source: Sg2 80
81Source: Sg2
82Source: Sg2
83Source: Sg2
84Source: Sg2
85Source: Sg2
86Source: Sg2
Hospital Margins At Risk
87
2013-2015Hospital
Readmissions Penalties Phased-in
2014Disproportionate Share Hospital
Payment Reductions
Phase-in Begins
2015Acquired Hospital Infection Penalties Phase-in Begins
Cumulative Impact of Market Basket Update and Productivity Factor ReductionsCumulative Impact of Market Basket Update and Productivity Factor Reductions
Source: AHA, MedPAC, PPACA & assorted documents
2010 2011 2012 2016 2017 2018 20192013 2014 2015
-0.25-0.50
-2.00
-3.50
-5.20
-7.80
-9.40
-11.55
-13.70
-15.85
-13.70
-11.55
-9.40
-7.80
-5.20
-3.50
-2.00
-0.50
-0.25-0.25
-1.50 -1.50-1.70 -1.60 -1.60
-2.15 -2.15 -2.15
50 MillionNo Coverage
27 MillionNo Coverage
21 MillionNo Coverage
18 MillionNo Coverage
Payment Models Shifting Risk
88
Payors Ratcheting Up Performance Risk to Target Inefficiencies
Performance Risk Utilization Risk
Quality of CareCost of Care Volume of Care
Bundled Pricing
• Episodic Efficiency
• Readmission Reduction
• Care Standardization
Pay-for-Performance
• Process Reliability
• Clinical Quality
• Patient Experience
Shared Savings
• Chronic Care Management
• Care Substitution
• Disease Prevention
Source: The Advisory Board
Provider Coordination Required
89Source: Sg2
Source: Sg2 2009 | ACHE 2009
Private Payor Professional Reimbursement Changes
Overhead / Expense Management
Practice Growth
Malpractice Costs
Pay for Call
Hospital Relations
Regulation
Quality
Workload
78%
74%
71%
32%
28%27%
22%17%
15%
14%
78% Financial Challenges
Patient Safety and Quality
Care for the Uninsured
Physician Alignment
Personnel Changes
Healthcare Reform
Patient Satisfaction
Capacity
Technology
Malpractice
43%
41%
32%
30%
26%
22%
16%
9%2%
Top Hospital ConcernsTop Physician ConcernsPhysician Concerns Hospital CEO Concerns
Medicare Professional Reimbursement Changes
Hospital-Physician Concerns
90
Employment Trends
1980 1985 1990 1995
Deg
ree of In
tegratio
n
2000 2005 2010 2015
Employment of hospital based specialists.
Hospital and health systems acquire primary care practices.
• Expansion of hospitalist model• Refocus on primary care strategy and referring physician relationships• Employment of
Specialists
Many hospitals divest of primary care practices, refocus on core business.
Growing interest in alignment and willingness to partner with physicians.
Some ‘New’ Models Not So New
Source: Sg2 2008 91
Reform: Impact on Providers
92
Vo
lum
e
Reim
bu
rsemen
t
Acco
un
tability
& R
isk
Pro
viders
An
alytics• Insured +32M
• Inpatient +5%
• Outpatient +4%
• Medicare Cuts
• $240 B
• Hospital Consolidations
• Physician Owned
Hospitals and ancillaries
• Communication
• Performance Tracking
• CMS Reporting
• $90B in penalties
• P4P/Bundling
• Shared Savings
Payment Reform Shifting Risk
93
Performance Risk Utilization Risk
Cost of Care Quality of Care Volume of Care
Bundled Pricing• Episodic Efficiency• Readmission
Reduction• Care Standardization
Pay-for-Performance• Process Reliability• Clinical Quality• Patient Experience
Shared Savings• Chronic Care Management• Care Substitution• Disease Prevention
Source: The Advisory Board
Shifting Risk to Providers
Clinically Integrated Models Emerging
Source: Sg2 94
Degree of Alignment
System Resources Required
High
LowIndependent Strategic Alliance Integration
Paying for Call
Voluntary Medical Staff
Spectrum of Alignment Models
Venture Arrangement
RelocationSupport/IncomeGuarantee
Gainsharing
Directorships
Co-marketing
Co-Management
PCMH
CIN or IPN
HEP
ACO
EmployedPhysician Enterprise
March 2010PPACA Made
Law
95
$2.64 Trillion$2.64 Trillion17.4%
96Source: Congressional Budget Office
Healthcare as a Percentage of Gross Domestic Product
82.6%
Per capita = $7,960
Rising Costs Bankrupting System
Integrating Across the Care Continuum
Strategic Focus at the Speed of Change
#1 Cost Reduction/Payer Leverage
#2 Physician Alignment and Clinical Integration
#4 Service Line Optimization
#5 Developing Networks and Integration Across the Continuum
#3 Geographic Coverage, Access, and OP
#6 New Payment Models and Trials
97
Organizational Change
98
Strategic Readiness
Physician “Real Income” Declining
99Source: Health Leaders 2011
50%
40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%
-50%2001 2006 2011 2016
Practice Cost Increase(MEI Estimates)
SGR1 MedicarePhysician Payment Updates
60% GapIncrease
Gap Increase Between Practice Cost Increase, Payment Updates
Practice Consolidation Accelerating
100
Physician Distribution by Practice Setting2
1998/1999 vs. 2008
N=4,700
37.4%
32.0%
9.6%
14.5% 14.2%
19.4%
3.5%6.1%
Solo/2-Physician
Practices
3-5 Physician Practices
6-50 Physician Practices
50+ Physician Practices
1998-99
2008
Source: PwC 2010
Improved Quality Outcomes
Sample Hospital 1 – CABG Mortality Rates
Source: Thomson Reuters 2009 | Advisory Board 2009
Pre-Adoption
Year 1
1%
4.2%
Year 2 Year 3
2%1%
Co-Management Benefits
Pre-Adoption
Year 1
13.2%
15.1%
Year 2 Year 3
10.7%
11.1%
Sample Hospital 1 – CABG Complication Rates
Effect on Top 100 Hospital RankingsTop Quintile (1
Years)
Top Quintile (3 Years)
32%
68%
Physician-Led ManagementAdministrative Management
92%
8%
101
Physician Engagement
Sample Hospital 4 – Number of Active Staff Surgeons
Source: Beckers ASC 2010 | HFMA 2009 | DHG Client 2010
OR Utilization
Sample Hospital 2 – OR Utilization Rate and %
Volume of Budget
1
2
3
4
5
6
Before After
141%
60%
Num
ber
of
OR
s at
Capaci
ty
Co-Management Benefits
10 20 30 40 50 60
Before
After
76
40
70 80
Service Line Excellence
Sample Hospital 3 – Quality and Volume
After one year….
Quality
Ranked the #1 provider of overall orthopedic care in Ohio
Volume
Experienced an increase of 1,000 cases per year
102