James (Jim) M. Daniel Jr., JD, MBA Hancock, Daniel, Johnson, & Nagle, PC www.hdjn.com

Strategies for Cardiologist Contract Renegotiation

November 22, 2014

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Disclosure: Nothing to Disclose

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Understanding the Landscape •  Unprofitable hospital-sponsored groups are being

trimmed down –  BUT… doctors still flocking to health systems

•  Culture Shift – New physicians aren’t even considering private practice –  Too expensive: 2007-2012, physician offices added over

170,000 new workers (most admin) despite 10% decline in patient visits

–  Economics of office-based practice will probably continue to deteriorate, cementing this trend

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Data shows that expenses are increasing above reimbursement

Net Income Model Issues

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Cardiology Compensation Decreasing •  “After years of steady increases, cardiology compensation

overall dropped by nearly 8% from 2012” – MedAxiom 2014 Provider Compensation and Production Survey

•  Cardiology compensation decrease of 2% according to Medscape 2014 “Physician Compensation Report” based on 2013 data.

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Our Question Today

Q: How do we thrive in renegotiation in this climate?

A: Make your case for value

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How do you pay your physicians? • Most physician employers (84%) use incentive-based pay: 80% to 85% salary and 15% to 20% incentive

Most Common Incentive Measures Today

Compensation Models

Productivity Non-Productivity wRVUs (71%) Quality (74%) Net Income (29%) Patient Satisfaction

(70%) Collections (33%) Alignment with Org.

Objs. (33%) Patient Visits (17%) Citizenship (25%)

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Payer Movement to Value-Based Payment Models

A Survey of the Commercial Payer Community Increasing Portion of Business

Supported By Value-Based Models

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Which Service Lines Will You Focus On

Over Next 12-18 Months

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Current Landscape

*The Multifactor Productivity Adjustment is an estimate generated by the CMS Office of the Actuary **DCA, also known as the behavioral offset, shown here does not show the future affects of these cuts on baseline spending. Estimates FY 2014-FY 2017 impact of the American Taxpayer Relief Act of 2012 *** If Congress has not adopted the Joint Committee’s report to reduce the deficit by at least $1.2 trillion, the 2% cut will be implemented April 2013

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Steady Shift Toward Risk-Based Payment More  Mandatory,  Op7onal  Risk  Programs  On  the  Horizon  

Source:  The  Advisory  Board  Company,  “Mortality  Rates  Are  Only  One  of  Many  VBP  Changes  to  Come,”  December  4,  2013,  available  at:  www.advisory.com;  CMS,  “Request  for  Informa7on  on  Specialty  Prac77oner  Payment  Model  Opportuni7es,”  February  2014,  available  at:  www.innova7on.coms.gov;  Health  Care  Advisory  Board  interviews  and  analysis.  

Clinical  Process  

Pa-ent  Experience  

Outcomes  of  Care  

Efficiency  

Medicare  VBP1  Program  Domain  Weights  

Medicare  revenue  at  risk  from  mandatory  pay-­‐for-­‐performance  programs2,  FY  2017  

6%  

Two  New  Bundled  Payment  Ini>a>ves  in  CMS  RFI3  

Bundled  Payment  for  Outpa>ent  Specialty  Procedures  

May  include  radiology,  diagnos7cs,  drugs,  and  facility  payments  

Bundled  Payment  for  Complex,  Chronic  Disease  Management  

Would  incen7vize  specialists  to  manage  a  beneficiary's  care  over  a  long-­‐term  period  

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What current payment cuts can you control? Value  Based  Purchasing  

1.5%  at  risk  2015  

HAC  Reduc>on    1%  at  risk  2015  

Readmission  Reduc>on    3%  at  risk  2015  

•  AMI •  Heart Failure •  Pneumonia •  Hips and Knees •  COPD

What is being

evaluated now for

payment?

•  Evidence Based Care •  Patient Experience •  Mortality •  Efficiency •  HAC ( 2016)

•  Pressure Ulcer •  Iatrogenic

Pneumothorax •  CLABSI •  PO Hip FX •  PO sepsis •  Wound Dehiscence •  Accidental puncture &

laceration •  CAUTI •  SSI Colon and •  Hysterectomy •  MRSA •  CDI

Facili-es  must  have  both  great  best  prac-ce  ideas  from  leading  organiza-ons  across  the  country  as  well  as  internal  capabili-es  to  drive  change  in  mul-ple  areas….  

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Medicare Physician Pay for Quality – CY 2016

•  2014 data, submitted in 2015 applies to payment in 2016 •  Must report at least 3 measures across 1 domain measure to avoid PQRS penalty, and

avoid VM penalty (if group 10+) •  Must report at least 9 measures across 3 domains including at least 1 outcomes measure

for PQRS bonus •  Can satisfy PQRS/MU through the same submission

1.5%  penalty  

2.0%  penalty  

Physician  Quality  Repor>ng  System  2.0%  penalty  begins  in  2016  and  con7nues  therea_er  

2.0%  penalty  

Value-­‐based  Payment  Modifier  2.0%  penalty  in  2016,  out  years  not  yet  proposed.    

4.0%  proposed  penalty  

1.0%  penalty  

Meaningful  Use  2.0%  penalty  in  2016  possibly  reaching  as  high  as  5%  in  2019.    

1.0%  penalty  

2.0%  penalty  

3.0%  penalty  

≤4.0%  penalty  

≤  5.0%  penalty  

???  

   2015            2016              2017          2018            2019  12  

Taking Inventory •  Complete a thorough evaluation

–  Evaluate initial performance during the initial contract period –  Know your numbers

•  Assemble a negotiating team – Cross section of practice partners

•  Level headed individuals –  Expert legal counsel

•  Lay out a bold, compelling vision for the future –  Be proactive with quality incentive programs

•  Relationships with the health system matter

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Group Self-Introspection & Evaluation •  Benchmarking

–  MGMA (small #, self reported), MedAxiom (larger #) –  Invasive vs. noninvasive vs. EP –  Academic vs. private vs. hospital-owned

•  Quality –  PQRS, Top 50, US News Best Hospitals, STS 3 Star, etc –  Program centers of excellence –  D2B times

•  Finances –  Profitability of service line compared to pre-integration

•  Net positive for health system???? –  Success in cost reduction for service line –  Regionalization (contribution margins)

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Assembling an Effective Negotiating Team

•  Perspective –  Long term perspective – see the bigger picture

•  Team Demographics –  Young, mid career, and older providers –  Invasive, noninvasive, and EP

•  Legal Counsel –  Experienced in medical practice integration

•  Knowledgeable about national trends and other deals •  Educate

–  Learn about various compensation models out there •  Communication

–  Nothing outside the confines of the negotiating committee •  Avoid sending mixed messages which can undermine the goals laid out

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Laying Out A Bold Agenda •  Regionalization / Outreach

–  Define plans to increase market share –  Develop a performance dashboard as a “blueprint for success”

•  Quality –  Shift from “services” to “centers of excellence” –  Improve coding / documentation to optimize “case mix index” –  Be able to demonstrate quality (PQRS / ACTION / Mission Lifeline / Top Hospital

Designation) •  Practice Operations

–  Develop performance dashboard for all aspects of the practice –  Use MedAxiom benchmarking to optimize staff ratios and flow –  Create opportunities to increase new patient visits

•  Finance –  Set ambitious, but achievable service line profitability goal –  Create a physician incentive bonus based on leadership, citizenship, productivity,

quality, patient satisfaction, and peer reviews

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Preparing for Success

•  Renegotiation starts when you sign a contract – Plan ahead to be competitive in future negotiations – Procrastinating is costly

•  Prove your value – This takes time – Show that you can be trusted and are an indispensable

piece of the entity’s product – Take leadership positions

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Knowledge is Power

•  Fair Market Value – Can’t accurately value your group if you don’t know this – Consult with experts

•  Reimbursement Trends – Understand the hospital’s bottom line

•  Keep track of successes – Specifics trump generalities for proving value in

negotiations – Quantifiable value is essential

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Taking the Temperature

•  Green Light –  Indicators that physician value is appreciated – Weak non-compete clauses – Open and respectful dialogue

•  Red Flags – Entity complaints about losing money on employed

physicians – Hard-line negotiating – Refusal to negotiate with physician group as unit

Source:  Mike  Valen7ne,  MD,  “Nego7a7ng  and  Renego7a7ng  Successful  Tac7cs,”  Feb.  2013.  

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Practical Pointers

•  Get Good Advice – Consult integration experts, lawyers, and market value

analysts to get best overall understanding •  Band Together

– Presenting a united front works better •  Start Early

– Don’t be time-pressured into a bad deal – Starts discussion on your terms rather than waiting

passively Source:  Mike  Valen7ne,  MD,  “Nego7a7ng  and  Renego7a7ng  Successful  Tac7cs,”  Feb.  2013.  

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•  Tie 10-30% of Total Compensation to: –  Clinical Quality/ Outcomes –  Clinical / Program Efficiency –  Patient Satisfaction –  Referring Physician Satisfaction –  Successful recruitment and retention –  New Program Development / Enhancement

Balanced Scorecard Component

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Jim Daniel Jr., JD, MBA

Hancock, Daniel, Johnson, & Nagle, PC www.HDJN.com

QUESTIONS?

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