TRENDS IN HOSPITAL-PHYSICIAN
INTEGRATION
August 20, 2010
Kevin M. Hilvert
Schottenstein, Zox & Dunn
250 West Street
Columbus, OH 43215
khilvert@szd.com
(614) 462-4921
TRENDS IN HOSPITAL-PHYSICIAN INTEGRATION
• Introduction
– Drivers of Integration
– Types of Integration
•
•
•
•
•
Professional Service Arrangements
Clinical Co-Management
Call Coverage & QI Programs
Employment
ACOs
FACTORS CONTRIBUTING TO HOSPITAL-PHYSICIAN
INTEGRATION
• Common interest in meeting the community’s
medical needs
• Decrease in physician revenue, increase in cost
of providing care
• Increased competition over income streams that
traditionally “belonged” to hospitals
• Consolidation of medical practices
• Emergence of “new” hospital-physician
collaborations
FACTORS CONTRIBUTING TO HOSPITAL-PHYSICIAN
INTEGRATION (cont’d)
• Call coverage problems are becoming widespread
• Retirement of baby boom generation of doctors –
specialty shortages
• Changing practice preferences of a new generation
• Assistance in obtaining the capital to keep pace with new
technology
• Hospital willingness and desire to give physician’s a seat
at the table
FACTORS CONTRIBUTING TO HOSPITAL-PHYSICIAN
INTEGRATION (cont’d)
• Current environment requires a new paradigm
• Focus on quality and a health care delivery
mechanism that rewards quality and not
utilization
• Moving away from FFS – not a matter of if, but
when
WHAT ARE YOU TRYING TO ACHIEVE THROUGH
YOUR INTEGRATION STRATEGY?
•
•
•
•
•
Improve service quality and efficiency
Improve business performance
Defensive move in response to competition
Offensive move in anticipation of competition
Encourage physician participation in
management and direction of service
• Provide a platform for future strategies, greater
integration
OVERVIEW OF INTEGRATION MODELS
Increasing Degree of Integration
MODELS
PROF.
SERVICE
AGMTS.
CALL
COVERAGE
CLINICAL
CO-MGMT.
AGMTS.
EMPLOYMENT
JOINT
VENTURE
Decreasing Degree of Complexity & Risk
ACO
PROFESSIONAL SERVICES AGREEMENTS
• Medical Directorships, Leasing Arrangements,
etc.
• Bread and butter type relationships that are
necessary and will continue
• Help achieve some degree of integration and
loyalty….but not much
CALL COVERAGE AND QUALITY IMPROVEMENT SERVICES
ARRANGEMENT
• Call coverage, particularly in certain specialties,
is becoming increasingly difficult
• Hospital pressed to fill legitimate, unmet needs
for certain care (EMTALA)
• Fulfillment of need can be an opportunity to
achieve integration and improve and expand
services
CALL COVERAGE AND QUALITY IMPROVEMENT SERVICES
ARRANGEMENT (cont’d)
• Basic Structure
– Hospital engages group of specialists who agree to
provide detailed call coverage and other quality
improvement services
– If specialists are from more than one practice,
physicians form an LLC to be the contracting party
– Physicians in group become the “On-Call Panel” and
are responsible for setting call coverage schedule
CALL COVERAGE AND QUALITY IMPROVEMENT SERVICES
ARRANGEMENT (cont’d)
• Call Coverage Responsibilities:
–
–
–
–
–
–
Coverage 24/7/365
ED Coverage
Unassigned Inpatients
Unassigned ED Patients
Adhere to mandated response times
Daily rounds/consults
CALL COVERAGE AND QUALITY IMPROVEMENT SERVICES
ARRANGEMENT (cont’d)
• Call Coverage Compensation
– Physicians bill for and collect fees for services; plus
– Flat fee for coverage. An appropriate valuation of the
flat fee considers:
• Extent of burden on the physician and the likelihood of
having to respond to call
• Likely extent of treatment physician will be required to
provide
• Likelihood that physician will be required to provide
uncompensated care
• Restricted call demands higher compensation than
unrestricted call
CALL COVERAGE AND QUALITY IMPROVEMENT SERVICES
ARRANGEMENT (cont’d)
• Quality Improvement Component
– A call coverage arrangement presents an opportunity
to fill an unmet need for services and an opportunity
to improve the quality and efficiency of those services
– Sample QI Initiatives:
•
•
•
•
ED response times
Operation response times
Scheduling of follow-up consults
Patient satisfaction
CALL COVERAGE AND QUALITY IMPROVEMENT SERVICES
ARRANGEMENT (cont’d)
• Compensation for QI Initiatives
– Maximum amount of total comp in QI “bucket” is predetermined and set forth in agreement
– Physicians must meet defined QI “targets” in order to
receive portion of QI compensation
SAMPLE QI INITIATIVES AND TARGETS
QI Initiative
Target A
Target B
Target C
For all ED Patients, ED contact
returned within 30 minutes
Greater than 85%
but less than
90% of the
time (Point
Value = 1)
Greater than or
equal to 90%
but less than
95% of the
time (Point
Value = 2)
95% of the time
(Point Value = 3)
For all ED Patients and Unassigned
Inpatients, consult completed
within 24 hours of call/admit
(or emergently if clinically
indicated, with referring
physician to orthopedic
Physician communication)
Greater than 85%
but less than
90% of the
time (Point
Value = 1)
Greater than or
equal to 90%
but less than
95% of the
time (Point
Value = 2)
95% of the time
(Point Value = 3)
Operation if indicated less than 24
hours after admission or
medical clearance, provided
OR and necessary equipment
is available
Greater than 85%
but less than
90% of the
time (Point
Value = 1)
Greater than or
equal to 90%
but less than
100% of the
time (Point
Value = 2)
100% of the time
(Point Value = 3)
CLINICAL CO-MANAGEMENT AGREEMENT
• Basic Structure
– Medical Director relationships on steroids
– Hospital engages a group of physicians to provide medical
management services for a specific hospital service line
(cardiology, oncology, orthopedics)
– Agreement can be with a single group of physicians, multiple
groups or a new management company formed by physicians
– Selected physician leaders work with hospital administration to
oversee and implement the co-management relationship
– Hospital pays physicians for administrative, management
services and achievement of defined QI objectives
CLINICAL CO-MANAGEMENT AGREEMENT (cont’d)
• Management Responsibilities
–
–
–
–
–
–
Medical Director-type services
Committee meetings
Input on financial, budgetary and strategic matters
Input on supply utilization, staffing, equipment
Develop service line policies and procedures
Provide recommendations regarding clinical pathways and
measures
– Program and service line outreach activities
– Monitor and resolve quality and performance problems
CLINICAL CO-MANAGEMENT AGREEMENT (cont’d)
• Physician Compensation for Management
Services
– Compensation for administrative and management
responsibilities is based on a set, fair market value
hourly rate.
– Maximum amount for all administrative and
management services is established
– Physician work must be documented (i.e. time
sheets)
CLINICAL CO-MANAGEMENT AGREEMENT (cont’d)
• Quality Component
– Includes defined quality improvement initiatives
defined to improve the quality and efficiency of the
service line involved
– QI initiatives will vary depending on specialty
• For cardiology, specific quality measures can be developed
for frequently occurring diagnoses/procedures (acute MI,
CHF, CABG, PTCA)
• For orthopedics, complication rates, use of standardized
products
CLINICAL CO-MANAGEMENT AGREEMENTS (cont’d)
• Quality Component
– Quality initiatives can include “gainsharing” types of
measures (e.g. product standardization initiatives,
product substitution, use as needed)
– BUT, BE CAREFUL. Any type of “gainsharing”
measure must not create an incentive to reduce or
limit care
– Stay away from ALOS, cost per case and other nonspecific measurements relating to cost
CLINICAL CO-MANAGEMENT AGREEMENT (cont’d)
• QI Compensation
– Very similar to the compensation methodology
previously discussed with regard to call coverage
arrangements
– A set pool of money is pre-determined for the QI
Initiatives
– Achievement of specific QI targets will result in the
payment of QI compensation
EMPLOYMENT
• Hospital employment of physicians is growing
exponentially
• According to the MGMA, in 2002 70% of
physician practices were physician-owned, while
approx. 20% were hospital-owned
• In 2008, its almost 50/50.
• Why?
FACTORS DRIVING PHYSICIAN EMPLOYMENT
• Declining physician incomes
• Complexity and stress of running of private
practice
• Regulatory pressures on ancillary income
• Changing demographics
• Increasing acceptance among hospitals and
physicians
• Push toward quality and cost controls
FACTORS DRIVING PHYSICIAN EMPLOYMENT
•
•
•
•
Assure physician supply
Improved ability to recruit
Enhance key specialties
Meet call coverage needs and obtain other
necessary medical administrative services
• Much more flexibility in structuring employment
relationships under fraud and abuse laws
EMPLOYMENT –
WHAT ARE PHYSICIANS LOOKING FOR?
•
•
•
•
Income stability
Quality facilities and top of the line technology
Access to information technology
Seat at the table in strategic initiatives,
budgeting, etc. at both the practice and hospital
level
• Access to high-quality recruits
• Hospital support in developing clinical care
models
EMPLOYMENT –
WHAT ARE HOSPITALS LOOKING FOR?
•
•
•
•
•
•
Stable, professional, high quality medical staff
Engaged and loyal physicians
High quality care
Practice efficiency and cost-effectiveness
Physician leaders
Develop a platform for integration that is
responsive to a changing health care market
EMPLOYMENT MODELS
• The Practice Acquisition Model
• The Leased Practice Model
EMPLOYMENT MODELS (cont’d)
• Practice Acquisition
– Most common approach
– Hospital (or hospital-affiliated entity that employs
physicians) purchases the assets of the physician
practice
– Hard assets only, plus patient charts. Payment for
“goodwill” must be carefully analyzed
– Obtain valuation of the FMV of practice assets
EMPLOYMENT MODELS (cont’d)
• Practice Acquisition
– As a condition to closing the sale of the practice’s
assets, the physicians in the practice agree to enter
into employment agreements with the purchaser
– Deal may also include “exit strategies”
– Other issues
• Employment of practice non-physician staff
• Taking over leased space and equipment
EMPLOYMENT MODELS (cont’d)
• The Leased Practice Model
– Hospital (or affiliate) does not purchase practice
assets
– The physicians become employees of the
hospital/affiliate, but their practice entity remains in
tact and continues to hold the assets
– Hospital entity that employs the physicians enters into
a management agreement with the practice entity to
manage the employed physician’s practice, providing
all administrative services, space and equipment
EMPLOYMENT MODELS (cont’d)
The Leased Practice Model
EMPLOYMENT MODELS (cont’d)
• The Leased Practice Model
– Can be attractive physicians because it facilitates an
easier re-entry into private practice if the employment
relationship doesn’t work out
– Hospitals may like this model because it eliminates
the need for upfront capital to purchase assets
– However, model can be difficult to implement
administratively and operationally
THE EMPLOYMENT AGREEMENT
• Key Terms
–
–
–
–
–
Term
Non-Compete
Duties (clinical and non-clinical)
Practice governance and control
Compensation
THE EMPLOYMENT AGREEMENT
• Compensation
– Fixed salaries are a key reason the employment
movement of the 1990s failed
– Compensation based on productivity with a base
minimum is the standard now. Productivity
measurements include wRVUs, net revenues, net
collections, etc.
– Quality measures are commonly included as well
ACCOUNTABLE CARE ORGANIZATIONS
• What are they?
– As defined by Medicare:
‘An ACO is an organization of health care providers that
agrees to be accountable for the quality, cost and
overall care of Medicare beneficiaries who are
enrolled in the traditional FFS program and assigned
to an ACO.”
ACCOUNTABLE CARE ORGANIZATIONS (cont’d)
• Patient Protection and Affordable Care Act
(PPACA) requires HHS to establish a Medicare
Shared Savings Program by 1/1/12
• PPACA provides only broad principles for the
program. Details to be proposed in upcoming
regulations published by CMS
ACOs – THE MEDICARE SHARED SAVINGS PROGRAM
• What requirements must Medicare ACOs meet?
– Willing to become accountable for the quality, cost
and overall care of the Medicare FFS beneficiaries
assigned to it
– Participate in the program for 3 years
– Have formal legal structure to receive/distribute
payments for shared savings to participating
providers
– Have a sufficient number of PCPs for the number of
beneficiaries assigned (min. of 5,000 beneficiaries)
ACOs – THE MEDICARE SHARED SAVINGS PROGRAM
• What requirements must Medicare ACOs meet?
– Have a leadership and management structure that
includes clinical and administrative systems
– Have defined processes to (a) promote evidencebased medicine; (b) report on the necessary data to
evaluate quality and cost measures, and (c)
coordinate care
– Demonstrate it meets patient-centeredness criteria
ACOs – THE MEDICARE SHARED SAVINGS PROGRAM
• How will ACO participating providers get paid?
– Generally, will continue to receive FFS payments from Medicare
– The ACO will be rewarded with payments for shared savings if
the ACO
• Meets yet-to-be-defined quality standards by HHS; and
• Reduces the costs of its patients relative to a spending benchmark
to be established by HHS
– A percentage of the savings (as determined by HHS) will be paid
to the ACO
– OR…HHS may establish any payment model that it determines
will improve quality and efficiency
ACCOUNTABLE CARE ORGANIZATIONS
• The Medicare Shared Savings Program is just one
example of the efforts that are being undertaken to
modify the manner in which health care is delivered and
paid for
• Regardless of form, payment reform will only increase
pressure for hospitals and physicians to integrate
• The key is determining what integration platforms your
organization should be developing now to be prepared
for further integration in the future
QUESTIONS?
Kevin M. Hilvert
Schottenstein, Zox & Dunn Co., L.P.A.
250 West Street
Columbus, OH 43215
khilvert@szd.com
(614) 462-4921