evaluating physician affiliation &
network integration:
a conversation for boards & administration
Kevin Locke / Dixon Hughes Goodman
Tim Hewson / Nexsen Pruet
Matthew Roberts / Nexsen Pruet
agenda
 Drivers
 Models
 Lessons Learned
 What hasn’t worked?
 What’s working now?
 Action Planning
drivers
 Market Dynamics
 Regulatory and Payment Reform
 Continuum of Care
market dynamics
accelerating physician affiliation and network integration
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
payment reform
accelerating physician affiliation and network integration
Fee for Service
Independent
Pay-forPerformance
Alignment
Value-Based
Purchasing
Bundled
Payments
Integration
Accountability
All Providers
Payers
Source: PricewaterhouseCoopers
Shared
Savings
Global
Payments /
Capitation
continuum of care
accelerating physician affiliation and network integration
Source: Sg2
potential models for physician integration
 Employment
 Direct
 Through wholly owned subsidiary or affiliate entity
 Exclusive Contracts/Independent Contractor
Agreements
 Co-Management/Medical Director Agreements
 Clinically Integrated Networks
one size does not fit all…
 Situational strategies must be developed.
 Hospital and physicians must understand the
collective strategic objective and the type of
integration must incentivize attempts to
achieve that objective.
 Lower cost/improved quality are objectives
that are supported by the federal government
and private payors.
broad spectrum of models to consider
ACO
High
CIN or IPN
PCMH
System
Resources
Required
HEP
Employed
Physician Enterprise
Relocation
Support/Income
Guarantee
Gainsharing
Paying
for Call
Co-Management
Co-Marketing
Directorships
Voluntary
Medical Staff
Low
Independent
Strategic Alliance
Venture Arrangement
Degree of Alignment
Source: Sg2
Integration
clinically integrated models are accelerating
Proposed ACO Structure
Readmission Risk/Penalties
Co-Management
$
Primary
Care
Physicians
PCMH
Specialists
Other
Providers
Acute Care
Hospital
Post-Acute
Care
$
CIN
Proposed Bundled Payment Initiatives
Patient Centered Medical
Home (PCMH):
Clinically Integrated
Network (CIN):
Accountable Care
Organization (ACO):
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
Acute care hospital, multispecialty
physician network and other providers
committed to quality and cost
improvement, with support from joint
negotiated commercial contracts
Model to promote accountability for a
patient population by improving care
coordination, encouraging investment
in infrastructure, and redesigning the
care continuum around quality
Co-Management: Model to align physician incentives around quality, cost and satisfaction with fair market compensation
Source: The Advisory Board | Dixon Hughes Goodman
what hasn’t worked?




Make physicians an offer they can’t refuse
One-sided arrangements
Command control management style
Lack of physician participation in strategic planning
process
 Lack of physician engagement and/or leadership
 Failure to educate physician on compliance and
business objectives
 Failure to define and measure quality improvements
or cost reductions
what’s working now?
 Include physician in governance and
management
 Transparency in affiliation and integration
 Continuing education of physicians of what
hospitals can and will do vs can’t and won’t do
 Joint strategic plan which physicians buy into,
understand, and are responsible for
implementing
what’s working now?
 Cultural integration
 Clear definition of goals, metrics
and expectations
 IT systems to track, measure and
report performance
 Clinical/financial accountability
 Customizing/aligning compensation
to organizational goals
 Developing physician leadership
co-management model
Governance Committees
Management Fee
Distributions
FMV Compensation
Physician
LLC
Hospital
Physicians
Management
Services
Investment
Performance
Metrics
Fixed Duties
•
•
•
•
•
•
•
•
Committee Involvement
Day-to-Day Management
Strategic Plan Development
Clinical Care Management
Quality Improvement
Staff Oversight
Materials Management
Budget Development
Equipment*
Staffing*
Supplies
*Only one of
two may be
included
Source: Dixon Hughes Goodman
•
•
•
•
•
Clinical Outcomes
Patient Safety
Satisfaction
Operational Processes
Financial Performance
clinically integrated network (CIN)
Payers and
Employers
Private
Practice
Physicians
Health
System
CIN
Employed Medical Group
Employee Health Plan
ONE Network
that can
Demonstrate
Value
Hospital
Ambulatory
Facilities
Hospital
clinically integrated network (CIN)
 Clinically Integrated Network (CIN) is commonly defined as
a health network working together, using proven protocols
and measures, to improve patient care, decrease costs and
demonstrate value to the market
 Generally, the FTC considers a program to be clinically
integrated if it performs the following:
 Establishes mechanisms to reduce cost and improve quality
(enhance value) of healthcare services
 Selectively chooses network physicians who are likely to further
the value objectives
 Invests human and financial capital to accomplish defined
objectives
CIN key components
Legal Structure &
Governance
Flow of
Funds
Contracting
Infrastructure
Clinically
Integrated
Network
Information
Technology
Participation
Criteria
Performance
Objectives
Physician
Leadership
CIN value proposition
Health System
Clinical Integration (CI) Network
Physicians
Payers
Quality
Membership
Contracting
Information
Technology
Care
Redesign
The Value of Clinical Integration to…
Health System
•
•
•
•
•
Enhanced reimbursement for
demonstrated quality
Transformational care
redesign
Co-leadership with
physicians
Reduction in operating costs
and waste
Demonstrated quality
Source: DHG
Patients &
Communities
•
•
•
•
Improved coordination of
care
Higher patient satisfaction
Improved quality and
outcomes
Enhanced cost efficiency
Physicians
•
•
•
•
•
Enhanced reimbursement for
demonstrated quality
Long-term viability of private
practice
Role in leadership and
governance
Improved network
coordination
Enhanced patient care and
satisfaction
managing risk
 Parties must discuss business risk
 To hospital
 To physician
 Parties must discuss legal/compliance
 Risk is equally shared
forecasting future developments
 Role of medical staff
 Employed versus independent physicians
 Changes in laws to make integration easier
 New reimbursement methodologies
 New and integrated alignment models
action planning for your leadership team
 Strategic, cultural, and economic assessment
of your market
 Clear definition of objectives and win-win
criteria
 Thoughtful consideration of alternative models
 Disciplined plan and process for integration