New Models for Care
Delivery in the Reform
Era
9.27.2012
Agenda
1
1.
Key Challenges of the Reform Era
2
2.
Hospital and Physician Alignment Drivers
3
3.
New Models of Care Delivery
4
4.
Co-Management – A Transitional Model
2
Key Challenges of the
Reform Era
US National Debt at $15.9 Trillion
Each pallet equals $100
million dollars, full of
$100 dollar bills
•
•
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.
4
A New Dialog
Annual Increase
Total Spend: 7.0%
Medicare Spend: 6.8%
Private Insurance Spend: 7.1%
November 16, 2010
Source: “U.S. Healthcare Costs” KaiserEDU.org
5
Federal Programs Going BROKE!
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)
6
Spending Not Related to Quality or Value
84
Life Expectancy in Years
82
80
78
76
74
72
0
2,000
4,000
6,000
8,000
Health Spending Per Capita (USD PPP)
Source: OECD Health Data 2009
7
Reform Initiatives
PPACA / HCERA
Center for Medicare/Medicaid Innovation (CMI)
CMS Payment Cuts & Penalties
CMS Triple Aim
Pilots and Demonstrations
Legislative Battles and Reform Funding
8
Legislative Reform Defining New Paradigms
PPACA (March 2010)
GOALS
OBJECTIVES
PREREQUISTES
• Improve Quality
• Increase Access
• Reduce Costs
• Adopt New Models of Care Delivery
• Shift Accountability and Risk to Providers
• Redirect and Shrink the Dollars
• Provide Coverage for the Uninsured
• Physician Alignment
• Provider Integration
• New Model Adoption
• Electronic Health Records
9
Supreme Court Clearing the Way for Reform
High Court Decision Ends Constitutional Uncertainty
Three Key Decisions
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?
Arguments Supporting Individual Mandate
Supreme Court
Decision
Constitutional Authority
Upheld under
Congress’ power to
impose taxes
Medicaid expansion
upheld; federal
government may
not withhold existing
Medicaid funds if
states forgo expansion
Supreme Court Decision
Commerce
Clause
Necessary and Proper
Clause
Power to Tax and Spend
The remainder of the
law can stand
Source: Advisory Board
10
“would reduce Medicaid spending by $771B over
10 years and $30B from Medicare” p6
11
Early On, Revenue Implications….
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
Reductions
Reductions
Readmission
Readmission
Medicaid
Disproportionate
Share (DSH)
Medicare
Disproportionate
Share (DSH)
Payment Adjustment
for Conditions Acquired
in Hospitals
Program in place
12
Then, Delivery Implications
2010
2011
2012
2013
2014
2015
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3
2016
4 1 2 3 4
Establish of CMMI
Medicare Shared
Savings Program
ACO’s
Independence at Home
Demonstration Project
Hospital Value-Based
Purchasing Program
Value Based
National Pilot Program
on Payment Bundling
Bundling
Value-Based Payment
Modifier Under the
Physician Schedule
Additional
Requirements for
Charitable Hospitals
Program in place
Pilot or Demonstration Period
13
Integration Accelerating Across the Continuum
Source: Sg2
14
Insights from the Front Lines of Change. . .
Access Point
Strategy
Hospital
Efficiency
Program
Orthopedic
Institute
Payor Strategic
Plan
Clinical
Integration
Women’s
Services CoManagement
Comprehensive
Cardiology
Alignment
Training
Directorship
Clinical CoManagement
(Spine &
Transplant)
Safety Net
Hospital
Crisis
15
Hospital and Physician
Alignment Drivers
Caregiver Supply Not Meeting Demand
PCP Supply vs. Demand (in thousands)
350
337
2020 Deficits … PCP = 66,000
Specialist = 79,000
316
298
300
282
271
267
260
250
244
229
215
Demand
200
2000
2005
2010
2015
2020
Source: SHP/VHA 2009 | Merritt Hawkins 2007
Supply
17
Caregiver Supply Not Meeting Demand
National Supply and Demand Projections for FTE Registered Nurses
(2000 – 2020)
3,000,000
2,500,000
Demand
2,000,000
Supply
1,500,000
1,000,000
2000
2006
2012
2020
Source: Bureau of Health Professions, RN Supply & Demand Projections
18
Volume Growth Widening the Gap
Projected Ten Year Volume Growth With and Without Reform
8.5%
INPATIENT DISCHARGES
8.1%
23.1%
19.1%
7.4%
OUTPATIENT VISITS
MEDICAL ADMISSIONS
7.3%
11.2%
SURGERIES
10.2%
With Reform
Without Reform
Source: Sg2
19
Hospital Margins At Risk
Reimbursement At Risk
Oct
2010
2011
2012 2013
Value-Based
Purchasing
30-Day
Readmissions
2014 2015
2016 2017 2018
1%
1%
2%
2%
3%
Hospital
Acquired
Conditions
TOTAL
2019 2020
1%
2%
3%
5%
Source: Sg2
6%
20
Hospital Drivers for Alignment
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
21
Physician Drivers for Alignment
Professional Fees
Operating Expense
Ancillary Revenue
Administrative Burden
Leverage with Payors
Assessment / Audit Risk
Profitability &
Personal Income
Alignment with Hospitals
22
Practice Trends
Percentages of U.S. Physician Practices Owned
by Physicians and by Hospitals, 2002-2010
U.S. Physician Practice Ownership (%)
80
Physician-owned
60
40
Hospital-owned
20
0
2002
2004
2006
2008
2010
Source: Physician Compensation and Production Survey, MGMA, 2003-2009
23
Payment Reform Models Emerging
Degree of Complexity
High
Insurance product
Global capitation
ACO
Clinical integration program
Disease-specific capitation
Bundled episodes (pre- and postcare included)
Bundled episodes (inpatient only)
P4P/value-based purchasing
Inpatient case rates (DRGs)
Fee for service
Low
Scope of Risk
Source: Sg2
High
24
New Models of Care
Delivery
The Old Model
26
The New Model
27
Market Dynamics Accelerating New Models
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
28
Shifting Risk
FFS
Reimbursement
Cuts
Pay-forPerformance
Consumers
Employers
Health Plans
Government Payors
Value-Based
Purchasing
Bundled
Payments
Risk Shift
Shared
Savings
Global
Payments /
Capitation
Physicians
Medical Groups
Hospitals
Other Providers
Source: PricewaterhouseCoopers | DHG
29
Payment Reform Accelerating New Models
FFS
Reimbursement
Cuts
Independent
Pay-forPerformance
Alignment
Value-Based
Purchasing
Global
Payments /
Capitation
Shared
Savings
Bundled
Payments
Accountability
Integration
All Providers
Payers
Source: PricewaterhouseCoopers
30
Variety of Alignment Options
High
% of Medical Staff Involved
Clinic Model
Small (<10% of the medical staff)
Complexity and Durability
Full Integration
~25% of the medical staff
Foundation Models
~50% of the medical staff
Clinical integration PHO
~75% or more of the medical staff
Traditional Employment
Co-management
Traditional
PHO
Joint Ventures
Gainsharing
MSO
IT subsidy
IPA
Next-generation PSA
Call coverage agreements
Medical directorships
Voluntary model
Low
Level of Integration
Source: Sg2 2012
High
31
Hospitals and Health Systems React
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
32
Clinically Integrated Models
Proposed ACO Structure
Readmission Risk/Penalties
Co-Management
$
Primary
Care
Physicians
PCMH
Specialists
CIN
Other
Providers
(CAH)
Acute Care
Hospital
Post-Acute
Care
$
Proposed Bundled Payment Initiatives
Patient Centered Medical
Home (PCMH):
Clinical Integration 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
33
Clinically Integrated Network (CIN or IPN)
Private
Practice
Physicians
Health
System
CI Entity
Employed Medical Group
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.
Employee
Health Plan
Ambulatory
Care Centers
Hospitals
34
CIN Components
IPN
Infrastructure
Payer and
Employer
Contracting
Communication
and Education
Legal
Structures
Clinically Integrated
Network
Information
Technology
Performance
Objectives
Physician
Leadership
35
CIN Infrastructure
The 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
$
$
Physician
Investment/
Dues
Health
System
Investment/
Dues
$
Market Sources
(Payers,
Employers)
Clinically
Integrated
Network
36
CIN Legal Structures
PHO
Participating
Physicians
Health
System
50%
IPA
PHO
50%
Payers /
Employers
Participating
Physicians
Health
System
Participating
Agreement
Health System Subsidiary
IPA
100%
Payers /
Employers
Health
System
100%
Participating
Physicians
Subsidiary
Participating
Agreements
Payers /
Employers
37
Hospital Efficiency Program (HEP)
Health System
services
HEP
Agreement
Physician Org.
(PHO, IPA, Sub)
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
38
CIN / HEP Benefits
39
Patient Centered Medical Home (PCMH)
• Defined in pilot programs in 44
states
• Built on 7 fundamental principles
• Focuses on comprehensive patient
management
Safety and Quality
Coordinated
Care
Personal
Physician
Whole Person
Orientation
Enhanced
Access
Physician
Directed
Practice
Payment for Added Value
Cornerstone of
Accountable Care Organizations
• 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
40
PCMH Care Redesign
Traditional
PCMH
Patients make appointments
Patients are registered in the medical home
Patients’ chief symptoms or reasons
for visit determine care
PCMH systematically assesses all patient health
needs to plan care
Care is determined by today’s problem
and time available today
Care is determined by a proactive plan to meet
patient’s needs (with our without an office visit)
Care varies by provider
Care is consistent with evidence-based guidelines
Patients are responsible for coordinating
their own care
A prepared team of professionals coordinates all
patient care
Acute care is delivered during the next
available appointment and to walk-ins
Acute care is delivered by open-access and nonvisit contacts
Patient must tell caregiver what
happened
PCMH tracks tests, consultations, ED visits,
hospital visits and follow-up care
Operations center on physician’s schedule
A multidisciplinary team works to serve patients
Source: Central Ohio PCMH Project
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.
Benefits
Risks
• Increases quality and reduces cost of
chronic patient care
• Enhances access and continuity of care
• ROI uncertain and difficult to measure
• Aligns PCP physicians around care
delivery
• Demands increased administrative
support
• Focuses on integrated care
management
• Requires (significant) IT investment
• Patient survey results help drive quality
improvement
• Presents opportunity for enhanced
reimbursement
• Creates significant change in culture
and practice patterns
• Requires progressive use of
technology and other models of
patient interaction
• Creates possible competitive advantage
Source: NCQA, 2011
42
Accountable Care Organization (ACO)
Specialists:
Increased level of
integration with PCPs,
increased efficiency,
focus on reducing readmissions
Primary Care
Provider: Increased
focus on patient health,
greater access to
information, increased
use of quality metrics,
better reimbursement,
Hospital
Community
Primary
Care
Provider
Social
Worker
Other
Caregivers
Nurse
Employer
Patient: Less costly,
more convenient care;
coordinated services,
productive long-term
relationship with all
physicians
Payer
Specialists
Patient
Pharmaceutical
Manufacturer
Government
Hospital: Lower
admissions and
re-admissions;
more appropriate
use of ED;
integration with
physicians;
enhanced
reimbursement(?)
Payer: Improved
member satisfaction,
lower costs,
opportunity for new
business models
Government: Lower
healthcare costs,
healthier population
Employer: Lower
costs, more
productive workforce,
improved employee
satisfaction
43
ACO Structure
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
44
ACO Participants
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
45
ACO Mechanics
1
2
3
•
•
Assignment
•
•
> 5,000 Beneficiaries
Preliminary Prospective Assignment
Retrospective Reconciliation
Unrestricted Provider Choice
• Providers Bill Normally
• Receive FFS
Billing
• Total Cost Incurred Compared to Target
Comparison
Expenditures
• Compare to Defined Targets
• Dependent on Savings and Quality
Metrics
• Size Determined by Selected Model
4
Bonus
5
Distribution
• Determined by ACO Participants
• Defined Governance Structure
Source: CMS
46
Key Imperatives for Success
Manage Utilization
Risk
Maintain Exceptional
Quality
• Develop and utilize
ambulatory network
• Develop quality care
standards
• Appropriately utilize
pre and post acute
care providers
• Create care pathways
across providers
• Reduce preventable
acute care episodes
• Avoid unnecessary
readmissions
• Coordinate care
across sites of care,
over time
Operate Under
Elevated Transparency
• 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
47
ACO Care Redesign
Traditional
ACO
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
48
Where the ACOs Are
Source: The Advisory Board Company
49
Co-Management
Co-Management Objectives
• 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
51
Co-Management
Governance Committees
Management Fee
Distributions
FMV Compensation
Physician
LLC
Hospital
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
Physicians
Equipment*
Staffing*
Supplies
*Only one of
two may be
included
•
•
•
•
•
Clinical Outcomes
Patient Safety
Satisfaction
Operational Processes
Financial Performance
52
Co-Management Fundamentals
Valuation
Fixed Duties
• 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)
• 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
53
Governance - Sample
LLC
Hospital
Board
4 LLC Managers
Heart and Vascular Executive
Committee
4 LLC Managers
3 Committee Chairs
8 Committee Members
7 Medical Directors
4 CPM Managers + Hospital Staff
Finance & Capital
Invasive Labs
Quality & Clinical
1 Chair +
2 Members +
Hospital Staff
1 Chair +
2 Members +
Hospital Staff
1 Chair +
4 Members
Committee 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
Medical
Directors (7)
Cardiac Rehab
CHF Disease
Chest Pain
Hospital Coord (2)
Non-Invasive
IT Implementation
54
Sample Metrics List
Development of Performance Incentives and Supporting Metrics
Fosters Hospital/Physician-Manager Collaboration
SAMPLE:
Clinical Outcomes
(35%)
Patients given ACE inhibitor/ARB for LVSD
Sample Cardiology Metrics
STEMI patients receiving PCI
Patients receiving aspirin w/in 24hrs of arrival
Patients with Beta Blockers at discharge
Patient Safety
(35%)
Lead dislodgement in patients with pacer/ICD
Pneumothorax in patients with pacer/ICD
PCI 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
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
56
Co-Management Benefits
• 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
57
Questions
Reform Challenges
Reform Challenges our Personal Paradigms
High
Paralyzed by
Confusion
Embracing the
Opportunities
Existing in
Denial
Resigned to
Acceptance
Resiliency
Low
Low
Understanding
High
59
Appendix
Physician Alignment Process
61
Comprehensive Cardiology Alignment Model
FMV Compensation
Co-Management Fee
Fixed Duties
Performance Metrics
Call Payment
Panel Reads
Physician Equity (X)
JV Cath Lab
Hospital
Hospital Equity (Y)
Employment
Reverse MSO Practice Lease
Non Inv. Imaging Acquisition
Co-Management
Call Coverage
Panel Reads
Employed Physicians
Non Inv. Imaging Acquisition
Independent Physicians
Affiliated Physicians
Physician LLC
Investment
$ Based on equity &
effort
Investment
$ Based on equity &
effort
No Investment: Call/Panel Participation
$ Based on effort only
62
Who We Are – DHG Healthcare Consulting
David Petrel – Sr. Manager
Hudson, OH
(330) 650-1752
Michael Lutkus – Sr. Associate
Hudson, OH
(330) 620-0740
Physician Alignment Models
ACO
PCMH
High
Foundation
IT Deployment
Resources
HIZ
Bundled Payments
Physician Enterprise
Institute
Individual Employment Contracts
PSA
PHO
Clinical Integration
Co Management
Joint Venture
MSO
Directorship / Pay for Call
Recruitment Support /
Income Guarantee
Volunteer Medical Staff
Low
Tactical
Source: Sg2
Strategic
Transformational
Degree of Alignment
64
A Growing Crisis . . .
"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 Chairman
Speech to Dallas Regional Chamber 4/7/10
65
Proposed PFS Reimbursement Changes
Radiology
-4%
Cardiology
-3%
Urology
-2%
Orthopedic Surgery
-1%
Oncology
-1%
Emergency Medicine
-1%
Immunology
0%
Psychiatry
0%
Critical Care
0%
Gastroenterology
0%
Neurology
1%
Endocrinology
1%
Colon and Rectal Surgery
1%
Geriatrics
5%
Pediatrics
5%
Internal Medicine
5%
Family Practice
-6%
7%
-4%
-2%
0%
2%
Source: Beckers, 2012
4%
6%
8%
66
Critical Success Factors
1
Trust
2
Communication & Transparency
3
Change Management
4
No “One Off Deals”
5
Physician Leadership
6
Adapt Guiding Principles/Physician Compact
67
5 Key Issues
1
Does the hospital have sufficient urgency?
2
Is there enough trust between the hospital and physicians?
3
Can we measure and document what we are good at and not so
good at?
4
Do we fully understand the legal and tax issues associated with true
Physician Alignment?
5
Do we have the infrastructure and
the ability to finance the alignment strategy?
!
68
GI Interest in Employment Moderate to Low
Specialty Level of Interest in Hospital Employment
70.00%
Cardiology
65.00%
60.00%
55.00%
Ob-Gyn
Surgery
Anesthesia
50.00%
Pulmonology
45.00%
PCP
Family
Medicine
40.00%
Neurology
35.00%
30.00%
25.00%
20.00%
Orthopedics
Oncology
GI
Radiology
Least Interested in Employment
a
Interested in Employment
Source: PwC 2010, DHG 2012
Most Interested in Employment
69
Physician-Hospital Organization (PHO)
Health System
Physicians
50%
PHO
50%
Payers
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
Professional Services Agreement (PSA)
Physicians
Clinical Services
Management Services
Hospital
Ownership
PSA
$
Billing and Collection for Technical and Professional
Component of IR Procedures
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
71
Employment Models
Physician Practice Responsibility
Low
wRVU
Model
Model
High
Bump
Model
Practice Management
Model
Pros
Net Income
Model
Cons
wRVU Model
•
•
•
•
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
•
•
•
•
• Physician assumes allocation of centralized costs
• Hospital must be able to deliver data quickly and
accurately to assist physician in practice management
Easy to understand model
Incents physician for productivity
Payor blind
Quality incentives incorporated into model
Maintains physicians commitment to practice success
Most similar to private practice
Adjusted frequently to reflect practice changes
Quality incentives incorporated into model
• Limited incentive for expense management
• No payor risk to physician
72
Clinical Integration
Win | Win Criteria
Health System
Physicians
Clinical Integration Program
Quality
Membership
Contracting
Payers
Information
Technology
Care
Redesign
The Value of Clinical Integration to…
Health System
•
•
•
•
•
Enhanced Reimbursement for
Demonstrated Quality
Transformational Care Redesign
(System of Care)
Co-leadership with Physicians
Reduction in Operating Costs (Waste)
Demonstrated Quality
Patients & Communities
•
Improved coordination of care,
resulting in higher patient satisfaction
and demonstrated quality of care that is
cost efficient
Physicians
•
•
•
•
•
Enhanced Reimbursement for
Demonstrated Quality
Long-term Viability of Private Practice
Position for Physicians in Governance
Improved Network Coordination
Enhanced Patient Care and Satisfaction
73
Models of Group Alignment
Low
IPA
Independent
practices align under
Association
guidelines for
purposes of joint
contracting
Degree of Integration
ASC Investment
Group Practice
Consolidation
Physician buy into
ASC (or other facility)
that provides
efficient workshop
and supplemental
income with limited
management
responsibility
Merger of existing
independent
practices into large
practice with defined
governance,
management, billing
and income
distribution
High
ACO
Physicians (and other
providers) align
around health
management and
accountability of
defined Medicare
beneficiary
population. Shared
Savings drive
compensation
74
Independent Physician Association (IPA)
Health System
Participating
Agreement
Participating Physicians
IPA
100%
Payers / Employers
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
75
ASC Investment
Payers
Health System
Joint Venture
Employed &
Independent
Physicians
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.
76
Group Practice Consolidation
Merger or Acquisition
Into a Larger
Medical Group
Single-Specialty Group
• Information Sharing
• Economies of Scale
ADVANTAGES
• Negotiating Leverage
Control Over Referral Sources
• Support for Ancillaries
Combined Interests & Talents
• Shared Cost of Technology and
Practice Overhead
Payor Relationships
Multi-Specialty Group
Enhanced Market Access
• Advantages of SSG … plus …
Risk Sharing
• Greater Coordination of Care
• Internal Referrals
Peer Consultation / Review
• Market Presence
Pooled Capital
77
Source: Sg2
78
Co-Management
Source: Sg2
79
Source: Sg2
80
Source: Sg2
81
Source: Sg2
82
Source: Sg2
83
Source: Sg2
84
Source: Sg2
85
Source: Sg2
86
Hospital Margins At Risk
Cumulative Impact of Market Basket Update and Productivity Factor Reductions
2013-2015
Hospital
Readmissions
Penalties
Phased-in
-15.85
-13.70
50 Million
No Coverage
-13.70
-11.55
-11.55
-9.40
2014
-9.40
-7.80
Disproportionate
Share Hospital
Payment
Reductions
Phase-in Begins
27
Million
No
Coverage
-7.80
-5.20
18 Million
No Coverage
-5.20
-3.50
-3.50
2015
Acquired Hospital
Infection Penalties
Phase-in Begins
21 Million
No Coverage
-2.00
-2.00
-0.50
-0.50
-0.25
-0.25
-0.25
2010
-1.70
-1.50
2011
-1.50
2012
2013
2014
-2.15
-1.60
2015
-2.15
-2.15
-1.60
2016
2017
2018
Source: AHA, MedPAC, PPACA & assorted documents
2019
87
Payment Models Shifting Risk
Payors Ratcheting Up Performance Risk to Target Inefficiencies
Performance Risk
Utilization Risk
Quality of Care
Cost of Care
Volume of Care
Bundled Pricing
Shared Savings
• Episodic Efficiency
• Chronic Care
Management
• Readmission
Reduction
• Care Substitution
• Care Standardization
• Disease Prevention
Pay-for-Performance
• Process Reliability
• Clinical Quality
• Patient Experience
Source: The Advisory Board
88
Provider Coordination Required
Source: Sg2
89
Hospital-Physician Concerns
TopPhysician
PhysicianConcerns
Concerns
Hospital Concerns
CEO Concerns
Top Hospital
78%
Medicare Professional Reimbursement Changes
Private Payor Professional Reimbursement Changes
Overhead / Expense Management
74%
71%
Financial Challenges
78%
Malpractice Costs
28%
Pay for Call
27%
32%
Quality
Workload
Physician Alignment
30%
Personnel Changes
26%
Hospital Relations 22%
Regulation
Care for the Uninsured
41%
32%
Practice Growth
Patient Safety and Quality
43%
22%
17%
Healthcare Reform
Patient Satisfaction
Capacity
16%
15%
9%
Technology
2% Malpractice
14%
Source: Sg2 2009 | ACHE 2009
90
Some ‘New’ Models Not So New
Employment Trends
Hospital and health
systems acquire
primary care practices.
Degree of Integration
Employment of
hospital based
specialists.
1980
1985
1990
Growing interest in alignment
and willingness to partner with
physicians.
Many hospitals divest
of primary care
practices, refocus on
core business.
1995
2000
2005
Source: Sg2 2008
• Expansion of hospitalist
model
• Refocus on primary care
strategy and referring
physician relationships
• Employment of Specialists
2010
2015
91
Reform: Impact on Providers
•$90B in penalties
•Communication
•Inpatient +5%
•P4P/Bundling
•$240 B
•Outpatient +4%
•Shared Savings
•Performance
Tracking
•CMS Reporting
Providers
Reimbursement
Analytics
Accountability
& Risk
Volume
•Insured +32M
•Medicare
Cuts
•Hospital
Consolidations
•Physician Owned
Hospitals and
ancillaries
92
Payment Reform Shifting Risk
Shifting Risk to Providers
Utilization Risk
Performance Risk
Cost of Care
Bundled Pricing
• Episodic Efficiency
• Readmission Reduction
• Care Standardization
Quality of Care
Volume of Care
Pay-for-Performance
• Process Reliability
• Clinical Quality
• Patient Experience
Source: The Advisory Board
Shared Savings
• Chronic Care Management
• Care Substitution
• Disease Prevention
93
Clinically Integrated Models Emerging
Spectrum of Alignment Models
ACO
High
CIN or IPN
PCMH
System
Resources
Required
HEP
Employed
Physician Enterprise
Relocation
Support/Income
Guarantee
Co-Management
Gainsharing
Paying
for Call
Co-marketing
Directorships
Voluntary
Medical Staff
Low
Independent
Strategic Alliance
Venture Arrangement
Integration
Degree of Alignment
Source: Sg2
94
March 2010
PPACA Made
Law
95
Rising Costs Bankrupting System
Healthcare as a Percentage of Gross Domestic Product
82.6%
$2.64 Trillion
17.4%
Per capita = $7,960
Source: Congressional Budget Office
96
Strategic Focus at the Speed of Change
#1
#4
Cost
Reduction/
Payer
Leverage
Service Line
Optimization
Integrating Across the Care Continuum
#5
#2
Developing
Networks and
Integration
Across the
Continuum
Physician
Alignment and
Clinical
Integration
#6
#3
Geographic
Coverage,
Access, and OP
New Payment
Models and
Trials
97
Organizational Change
Strategic Readiness
98
Physician “Real Income” Declining
Gap Increase Between Practice Cost Increase, Payment Updates
50%
40%
Practice Cost Increase
(MEI Estimates)
30%
20%
10%
60% Gap
Increase
0%
-10%
SGR1 Medicare
Physician Payment Updates
-20%
-30%
-40%
-50%
2001
2006
2011
Source: Health Leaders 2011
2016
99
Practice Consolidation Accelerating
Physician Distribution by Practice Setting2
1998/1999 vs. 2008
N=4,700
37.4%
32.0%
19.4%
14.5%
14.2%
9.6%
6.1%
3.5%
Solo/2-Physician
Practices
3-5 Physician
Practices
6-50 Physician
Practices
50+ Physician
Practices
1998-99
2008
Source: PwC 2010
100
Co-Management Benefits
Improved Quality Outcomes
Sample Hospital 1 – CABG Mortality Rates
Effect on Top 100 Hospital Rankings
Top Quintile (1 Years)
4.2%
8%
2%
1%
Pre-Adoption
Year 1
1%
Year 2
92%
Year 3
Sample Hospital 1 – CABG Complication Rates
Top Quintile (3 Years)
15.1%
32%
13.2%
10.7%
Pre-Adoption
Year 1
Year 2
11.1%
Year 3
68%
Physician-Led Management
Administrative Management
Source: Thomson Reuters 2009 | Advisory Board 2009
101
Co-Management Benefits
OR Utilization
Service Line Excellence
Sample Hospital 2 – OR Utilization
Rate and % Volume of Budget
Sample Hospital 3 – Quality and Volume
After one year….
Number of ORs at Capacity
Quality
Ranked the #1 provider of overall orthopedic care in Ohio
6
141%
5
Volume
Experienced an increase of 1,000 cases per year
4
Physician Engagement
Sample Hospital 4 – Number of Active Staff Surgeons
3
10
2
1
60%
Before
Before
After
After
20
30 40
50
60 70
80
40
76
Source: Beckers ASC 2010 | HFMA 2009 | DHG Client 2010
102