“CONNECTING THE DOTS WITH GOVERNANCE”
SCHA TAP CONFERENCE
Hilton Head, South Carolina
September 18, 2014

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• How do local market conditions impact timing considerations?
• Can market-changing events create an urgent paradigm shift?
• What is my step-change business model risk?
• Do I have the financial tools to adequately analyze relevant states?
TIME
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Payer Movement to Value-Based Payment Models
Which Service Lines Will You Focus On
Over Next 12-18 Months
Source: Availity Research, April 2013

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http://ehrintelligence.com/2013/08/23/acos-doubled-during-past-year-medicare-outpaced-commercial/
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Populations,
Utilization,
Costs,
Budgets,
Monitoring Risk
Capable
“Overmanaged,”
Portfolio,
Multiple
Models,
Funds
Distribution
Structure, Governance, Alignment, Value
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Markets are changing…..
•
Alabama Medicaid reform – a market-changing event
•
Large orthopedics group – challenges around the corner
•
National not-for-profit – revenue portfolio transformation
•
National for-profit – preparing for changing markets
•
BPCI pilots exploding
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• Financial Impact and Consequences
– Hospital executives, Board and physician leaders need to understand the scope of what is at risk and potential implications of assuming this risk.
– Need to develop and implement into payor strategy for all payors:
• Governmental
• Commercial –Blue Cross, etc.
• Employers –Direct Contract

• Leadership must have proper resources and skill set to evaluate and implement risk based strategies. Boards must know how to evaluate these new types of strategies:
– Does hospital have the IT system to manage the risk-based strategies?
– Does hospital have clinical integration in place to assume risk?

• Implications of Development of Clinically Integrated Network
• Expectations Have Changed:
– Payors will be expecting hospitals to behave in a different way.
– Hospitals will be expecting physicians to behave in a different way.
– Physicians and patients will be expected to be more engaged and informed and to work together more closely.
– Population health management

• Physician/Hospital Alignment
– Hospitals who have financial relationship with physicians will be changed as the reimbursement methodologies change.
– Volume-based methodologies will transition to more specific clinical and cost metrics
• Value based purchasing
• Reducing re-admissions
• Reducing hospital acquired infections
– These new methodologies will need to be documented in new contracts with hospitals and physicians
• There will be growing pains

Medicare as Passive Payer
Medicare as Active Purchaser

2013
Physician groups 100 or more measured
2014
Physician groups of 10 or more measured
2015
Payment adjusted for physician groups of 100 or more and all physicians measured
2016
Payment adjusted for physician groups of 10 or more
2017
Payment adjusted for all physicians

Physician Risk – Medicare Payment
Physician Practice Expense
Number of Patients
Malpractice
Stark/Anti-kickback/CMP
Coding Compliance and Accuracy
Quality Metrics
Costs to Medicare
Quality Metrics
Costs to Medicare

• PQRS
– Patient Safety
– Patient Experience
– Care Coordination
– Clinical Care
– Population Health
– Efficiency
• Outcome measures
– Avoidable admissions for heart failure,
COPD, diabetes
– Avoidable admissions for UTI, dehydration, and pneumonia
– All-cause hospital readmissions
• Total Overall Costs (Medicare Parts A and B)
• Total Costs for patients with specific conditions
– COPD
– Heart Failure
– Coronary Artery Disease
– Diabetes
Gets to Post-Acute Care Spending
Medicare Spending
Per Beneficiary

• Regulatory Requirements/Risk
– Although the reimbursement/compensation methodologies may be changing, the regulatory framework for hospital/physician relationships are still in place.
– Must still comply with:
• Stark Law
• Anti-kickback Statute
• Antitrust Laws
• Civil Monetary Penalty Rules
• False Claims Act Laws
– ACOs provide some potential limited waiver-protection regarding compliance with these laws but this is not enough.
– Ultimately, may need changes in the regulatory framework to give providers the room they need to make transition to these new models.

• Other Potential Legal Implications
– Development of exclusive high performing or narrow networks.
• Could a system be carved out of a certain service line within a market by a payor?
– Return of Economic Credentialing?
• What happens to physicians who do not perform well under these new risk-based methodologies?
• Employment status
• Medical staff membership status
• Participating provider status in payor network

LEGAL EXPOSURE ASSOCIATED WITH
RISK-BASED CONTRACTING
• Other Potential Legal Implications
• Executive Qualifications/Compensation
– As these new reimbursement/compensation methodologies evolve, will a different type of executive leader be needed?
– What will necessary skill sets be?
– What will executive compensation look like?
– Role of physician leaders will be critical

Achieving sustainable risk capability must consider:
•
Complexities in creating reliable forecasts and capital plans
•
Federal and state uncertainties –
“stroke of the pen” risk
•
Operationalizing risk capability across multiple domains
•
Articulating and demonstrating ROI on major current investments
•
Compliance requirements across multiple providers
•
Alignment around measurable participation criteria: quality, certifications, clinical protocols, payment incentives
•
Accelerating transformation across the industry landscape
•
Identifying and deploying the
“right” tools to monitor progress and changes
•
Continuous evaluation: measuring, reporting and adjusting
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Difficulty in fully engaging physicians
Complexity and unpredictable impact of VBP contracts
Decrease in profitability during transition
Lack of information management infrastructure
Lack of sufficient economic predictability
32%
32%
31%
46%
50%
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High
Paralyzed by
Confusion
Embracing the
Opportunities
RESILIENCY
Low
Existing in
Denial
Resigned to
Acceptance
Low UNDERSTANDING High
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Risk management in an efficient and profitable organization
Maximize portfolio reimbursement to foster financial success
Educated patients with accountability who utilize services appropriately
Integrated provider network that enhances the continuum of care and creates value
Incentivized providers that manage quality and costs
Provider criteria with defined metrics to ensure compliance
Best practices for patientcentered care
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With You Today
Bill Hannah
Market Leader - CFO Advisory Services
DHG Healthcare
Bill.Hannah@dhgllp.com
404.575.8921
Matthew B. Roberts
Member
Nexsen Pruet, LLC mroberts@nexsenpruet.com
803.253.8286
Scott E. Hultstrand
Special Counsel
Nexsen Pruet, LLC scotth@nexsenpruet.com
803.540.2148
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