Maximizing the Financial Performance of Employed Physicians

1. Maximizing the Financial Performance of Employed Physicians Presented by: Health Directions, LLC Sabrina Burnett, Vice President HFMA Kentucky Chapter – Summer Institute, July 24, 2014

2. About Health Directions, LLC A premier healthcare consulting firm that delivers a national perspective to regional provider organizations • Assists healthcare organizations in improving their financial performance, physician satisfaction, health IT optimization, and strategic positioning • Delivers a range of health care consulting services through an experienced team of professionals • ACO Strategy and Development • Managed Care Strategy • Clinical Integration • EMR Implementation & Optimization • Health Information Technology • Physician On-Boarding and Enrollment • Strategic Planning

3. Today’s Objectives • Provide an overview of the industry trends and physician integration strategies • Introduce a “concierge approach” for successfully onboarding physicians • Present key performance indicators for employed physicians • Provide an overview of value-based contracting

4. Healthcare Trends and Challenges

5. Trends and Challenges • Aging demographics • Chronic disease: 75% of healthcare spending • Preventable Diseases consume 80% of spending • Rising costs • Consumer demands • Technologic Advances

6. Changing Healthcare Landscape • Payment Reform • Fee-for-service versus Pay-for-performance • Healthcare Technology • Drives connected care • Accountable Care • Growth of ACOs accelerates • Patient Satisfaction • Patient-provider communication and relationship critical to economic success

7. Fundamental Shifts in Care Delivery

8. Options For Physicians & Organizations High Create Provider-Driven Medical Home Model • Coordinate care within practice ‘s population • Establish value around chronic disease outcomes • Use outcomes to create value with payers Clinically Integrate Care • Track quality across continuum • Establish a patient longitudinal record • Prepare for value-based contracting Physician’s Level of Collaboration Develop Hospital Coordinated Care Model • Focus on cost reduction • Invest in health information technology • Connect providers to acute care setting Do Nothing • Maintain FFS Model • Negotiate contracts under current strategy • Tolerate fee schedule reductions Low High Organization’s Level of Collaboration 8

9. Physician Integration

10. Strategy Becomes Your First Filter

11. Objectives of the Hospital • Positive hospital/physician relationships • Increased referrals • Market positioning • Services and payer mix • Enhanced managed care contracting • Positioning for healthcare reform • Developing an integrated care network

12. Physician Integration Models • Employment • Co-Management • Clinically Integrated Network • Practice Support Services (i.e., MSO, EHR) • Payor Contracting

13. Employed Physicians Hospitals are employing physicians: Out of 193 surveyed hospitals, 94% have employed physicians (Modern Healthcare and Press Ganey) Source: “Clinical Transformation: New Business Models for a New Era in Healthcare,” Accenture, Oct. 31 (link)

14. Top Concerns for Physicians Considering Employment • 87% - business expenses • 61% - managed care • 53% - EHR requirements • 53% - maintaining and managing staff • 39% - number of patients required to break even Source: “Clinical Transformation: New Business Models for a New Era in Healthcare,” Accenture, Oct. 31 (link)

15. Reasons Physicians Stay Independent • Control over practice decisions/autonomy • Protection of staff • Job security (termination, covenant) • Personalities • Entrepreneurship • Outside income sources • Locations and hours of work • Relationship with patients 15

16. Challenges for Hospital Leaders • Identifying the value that the physician practices bring • Specialty network • Patient longitudinal record • Comprehensive managed care contracting • Identifying ROI and/or minimizing the losses • Managing a physician practice is different than managing a hospital • Managed care contracts / Revenue cycle management / Business metrics • IT support systems

17. Measure Twice, Employ Once • Start with Strategy as first line filter • Ensure prospect aligns with organizational goals • Create a sound financial pro forma of practice • Evaluate data carefully • Use industry metrics and benchmarks for evaluation • Interview/evaluate for culture fit—soft costs

18. 4 Key Pro-Forma Areas

19. Ancillary: Revenue Growth • Better performing practices generate greater than 15% of physician income from ancillary revenue • Average physician collects $50,000 in ancillary services • Growth of vertically integrated group practices

20. Compensation: Link between Productivity and Pay • Compensation plans need to be based on productivity • Understand the guarantee or short-term incentives • Evaluate work RVUs and bonus incentives • What makes sense for one specialty may not make sense across the board (strategy) • Evaluate Employment vs. Provider Services Agreement based on strategy • Benchmark comparisons: “apples to apples”

21. Technology: Strike a Balance on EHR • Evaluate system compatibility and interoperability and current use • Overhaul practice workflows • Perform Meaningful Use and other Clinical Data Gap Analysis

22. Staffing: Evaluate the Internal Team • Staffing model in current state • Skill sets of existing team members • Duplication of effort in consolidated model (too many office managers?)

23. Sample Pro-Forma

24. Employment Process • Complete due diligence and qualification process • Create 1-page employment summary prior to the employment agreement • Illustrate compensation, bonus and benefits using formula • Negotiate terms, then draft employment agreement • Encourage involvement of legal counsel…early • Execute agreement and deploy on-boarding plan

25. Physician On-Boarding

26. Why a Concierge Approach? “Concierge services are offered to those who need assistance whether it be for pleasure or out of necessity. From hotel guests who want a specific meal not listed on the menu to senior citizens who need companionship, concierge services are available to take care of specific needs.” During the employment transition cycle, physicians have specific needs that a hospital organization structure may not address.

27. On-boarding Program

28. Phase 1: Discovery Checklist Sample Discovery Checklist

29. Phase 2 Checklist Sample Phase II Checklist

30. Provider Enrollment 45-180 Days

31. Provider Enrollment Tools • Credentialing Software • Manages credentialing status • Populates applications, forms and letters • Reporting Tool • Tracking Module • Alert System • Imaging Module

32. Benefits of Centralized Credentialing • Improved Provider Relationships • Staffing Cost Reduction • Service Improvement • Revenue Cycle Optimization

33. Final Transition (Duration: 7 – 30 days)

34. Prepare a Toolkit • Practice Acquisition Checklist • Acquisition Document Requests • Pro-forma Methodology—tied to strategy • Practice Project Plan Checklist • On-boarding Tracking Tool (summary of milestones) • Department Work Plans – leverage your existing infrastructure to support physician employment

35. Key Performance Indicators

36. Continuous Success Requires Measurement • Financial and outcome indicators help define practice priorities and evaluate success • Evaluate performance based on strategy (value proposition of why we became partners) • Incorporate dashboard reports that are simple and easily understood by managers, physicians and staff

37. Physician Key Performance Indicators

38. The Revenue Cycle

39. Front-End Key Indicators

40. Back-End Key Indicators

41. Value of Benchmarking • Allows you to measure and track performance against peers • Gives you “what’s reasonable as well as what’s possible scenarios • Helps to quickly identify issues and proactively address them • Insight into what others in the industry are doing “If you can’t measure it, you can’t manage it.”-Norton & Kaplan

42. New Generation KPIs • Financial metrics are important to running a successful business, but there is a next generation of indicators that involve clinical performance, quality, patient satisfaction/engagement and cost of care • Meaningful Use Dashboard • Clinical quality scorecard • Value of connectivity and data

43. Meaningful Use Dashboard

44. ACO Measures

45. Sample Provider Scorecard

46. Meeting with Physicians • Review key information monthly • Production vs. Goals • Financials vs. Goals • Billing Performance vs. Goal • Practice improvement initiatives • Clinical quality reporting • Industry trends and future considerations (i.e., PCMH, ICD-10)

47. Presenting to Physicians • Present information that they will understand (for example, number of visits) • Establish monthly goals and compare to actual • Use graphics as opposed to spreadsheets • Share what is applicable to them and their practice • Create rapport and encourage open discussion • Co-develop an action plan for practice improvement

48. Value-Based Contracting

49. Organizational Self-Assessment Understand…. • What Do You Have to Offer • Where Are You on Your Roadmap to Value-Based Contracting • Know the Healthcare Needs in Your Market • Existing and Needed Technology • Full Cost of Care • Financial Implications of New Reimbursement Methods

50. Market Background Assessment • Payer Concentration in Market Limits Opportunities • Existing Quality Programs • Earning Incentive(s) Existing Contract(s) • Potential Partnership Opportunity • Narrow Network & Commercial HMO Risk Products