New models for care delivery in the reform era 9 27 2012
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New Models for Care Delivery in the Reform Era 9.27.2012. Agenda. Key Challenges of the Reform Era Hospital and Physician Alignment Drivers New Models of Care Delivery Co-Management – A Transitional Model. 1. 2. 3. 4. Key Challenges of the Reform Era. US National Debt at $15.9 Trillion.

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New models for care delivery in the reform era 9 27 2012

New Models for Care Delivery in the Reform Era 9.27.2012


New models for care delivery in the reform era 9 27 2012

Agenda

Key Challenges of the Reform Era

Hospital and Physician Alignment Drivers

New Models of Care Delivery

Co-Management – A Transitional Model

1

2

3

4


Key challenges of the reform era

Key Challenges of the Reform Era


Us national debt at 15 9 trillion

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.


A new dialog

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


Federal programs going broke

Federal Programs Going BROKE!

Source: Chicago Tribune – “Trustees Warn of Looming Insolvency for Social Security, Medicare” (4/25/12)

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.


Spending not related to quality or value

Spending Not Related to Quality or Value

84

82

80

78

76

74

72

Life Expectancy in Years

0

2,000

4,000

6,000

8,000

Health Spending Per Capita (USD PPP)

Source: OECD Health Data 2009


Reform initiatives

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


Legislative reform defining new paradigms

Legislative Reform Defining New Paradigms

PPACA (March 2010)

  • Improve Quality

  • Increase Access

  • Reduce Costs

GOALS

  • Adopt New Models of Care Delivery

  • Shift Accountability and Risk to Providers

  • Redirect and Shrink the Dollars

  • Provide Coverage for the Uninsured

OBJECTIVES

  • Physician Alignment

  • Provider Integration

  • New Model Adoption

  • Electronic Health Records

PREREQUISTES


Supreme court clearing the way for reform

Supreme Court Clearing the Way for Reform

High Court Decision Ends Constitutional Uncertainty

Three Key Decisions

Arguments Supporting Individual Mandate

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?

Supreme Court Decision

Upheld under Congress’ power to impose taxes

Medicaid expansion upheld; federal government may not withhold existing Medicaid funds if states forgo expansion

The remainder of the law can stand

Source: Advisory Board


New models for care delivery in the reform era 9 27 2012

“would reduce Medicaid spending by $771B over 10 years and $30B from Medicare” p6


Early on revenue implications

Early On, Revenue Implications….

Reductions

Reductions

Readmission

Readmission

Program in place


Then delivery implications

Then, Delivery Implications

ACO’s

Value Based

Bundling

Program in place

Pilot or Demonstration Period


Integration accelerating across the continuum

Integration Accelerating Across the Continuum

Source: Sg2


Insights from the front lines of change

Insights from the Front Lines of Change. . .

Access Point Strategy

Clinical Integration

Hospital Efficiency Program

Orthopedic Institute

Clinical Co-Management (Spine & Transplant)

Women’s Services Co-Management

Payor Strategic Plan

Comprehensive Cardiology Alignment

Training Directorship

Safety Net Hospital Crisis


Hospital and physician alignment drivers

Hospital and Physician Alignment Drivers


Caregiver supply not meeting demand

Caregiver Supply Not Meeting Demand

PCP Supply vs. Demand (in thousands)

350

300

250

200

337

  • Deficits … PCP = 66,000

  • Specialist = 79,000

316

298

282

271

267

260

244

229

215

Demand

Supply

2000 2005 2010 2015 2020

Source: SHP/VHA 2009 | Merritt Hawkins 2007


Caregiver supply not meeting demand1

Caregiver Supply Not Meeting Demand

National Supply and Demand Projections for FTE Registered Nurses

(2000 – 2020)

3,000,000

2,500,000

2,000,000

1,500,000

1,000,000

Demand

Supply

2000

2006

2012

2020

Source: Bureau of Health Professions, RN Supply & Demand Projections


Volume growth widening the gap

Volume Growth Widening the Gap

Projected Ten Year Volume Growth With and Without Reform

8.5%

8.1%

INPATIENT DISCHARGES

23.1%

19.1%

OUTPATIENT VISITS

7.4%

7.3%

MEDICAL ADMISSIONS

With Reform

Without Reform

11.2%

10.2%

SURGERIES

Source: Sg2


Hospital margins at risk

Hospital Margins At Risk

Reimbursement At Risk

Oct 2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Value-Based Purchasing

1%

2%

30-Day Readmissions

1%

2%

3%

Hospital Acquired Conditions

1%

2%

3%

5%

6%

TOTAL

Source: Sg2

20


Hospital drivers for alignment

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


Physician drivers for alignment

Physician Drivers for Alignment

Operating Expense

Administrative Burden

Assessment / Audit Risk

Alignment with Hospitals

Professional Fees

Ancillary Revenue

Leverage with Payors

Profitability &

Personal Income


Practice trends

Practice Trends

Percentages of U.S. Physician Practices Owned

by Physicians and by Hospitals, 2002-2010

Physician-owned

80

60

40

20

0

U.S. Physician Practice Ownership (%)

Hospital-owned

2002 2004 2006 2008 2010

Source: Physician Compensation and Production Survey, MGMA, 2003-2009


Payment reform models emerging

Payment Reform Models Emerging

High

Insurance product

Global capitation

ACO

Clinical integration program

Disease-specific capitation

Degree of Complexity

Bundled episodes (pre- and postcare included)

Bundled episodes (inpatient only)

P4P/value-based purchasing

Inpatient case rates (DRGs)

Fee for service

Low

High

Scope of Risk

Source: Sg2


New models of care delivery

New Models of Care Delivery


The old model

The Old Model


The new model

The New Model


Market dynamics accelerating new models

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


Shifting risk

Shifting Risk

FFS

Reimbursement

Cuts

Global

Payments / Capitation

Shared

Savings

Pay-for-Performance

Value-Based

Purchasing

Bundled

Payments

Consumers

Employers

Health Plans

Government Payors

Physicians

Medical Groups

Hospitals

Other Providers

Risk Shift

Source: PricewaterhouseCoopers | DHG


Payment reform accelerating new models

Payment Reform Accelerating New Models

FFS

Reimbursement

Cuts

Global

Payments / Capitation

Shared

Savings

Pay-for-Performance

Value-Based

Purchasing

Bundled

Payments

All Providers

Accountability

Integration

Alignment

Independent

Payers

Source: PricewaterhouseCoopers


Variety of alignment options

Variety of Alignment Options

High

% of Medical Staff Involved

Clinic Model

Small (<10% of the medical staff)

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

Complexity and Durability

Co-management

Traditional PHO

Joint Ventures

Gainsharing

MSO

IT subsidy

IPA

Next-generation PSA

Call coverage agreements

Medical directorships

Voluntary model

High

Low

Level of Integration

Source: Sg2 2012


Hospitals and health systems react

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


Clinically integrated models

Clinically Integrated Models

Proposed ACO Structure

Readmission Risk/Penalties

Co-Management

$

Other Providers

(CAH)

Primary Care

Physicians

Specialists

Post-Acute Care

Acute Care Hospital

$

CIN

PCMH

Proposed Bundled Payment Initiatives

Patient Centered Medical Home (PCMH):

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

Clinical Integration Network (CIN):

Acute care hospital, multispecialty physician network and other providers committed to quality and cost improvement, with support from joint negotiated commercial contracts

Accountable Care Organization (ACO):

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


Clinically integrated network cin or ipn

Clinically Integrated Network (CIN or IPN)

Private

Practice

Physicians

CI Entity

Health

System

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


Cin components

CIN Components


Cin infrastructure

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


Cin legal structures

CIN Legal Structures

PHO

IPA

Health System Subsidiary

Participating

Physicians

Participating

Physicians

Participating

Physicians

Health

System

Health

System

Health

System

Subsidiary

PHO

IPA

100%

50%

50%

Participating

Agreement

100%

Participating

Agreements

Payers /

Employers

Payers /

Employers

Payers /

Employers


Hospital efficiency program hep

Hospital Efficiency Program (HEP)

Health System

  • 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)

services

HEP Agreement

Physician Org.

(PHO, IPA, Sub)

Design Compensation Methodology for Participating Physicians


Cin hep benefits

CIN / HEP Benefits


Patient centered medical home pcmh

Patient Centered Medical Home (PCMH)

  • Defined in pilot programs in 44 states

  • Built on 7 fundamental principles

  • Focuses on comprehensive patient management

  • 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

Safety and Quality

Coordinated

Care

Whole Person Orientation

Enhanced Access

Physician

Directed

Practice

Personal

Physician

Payment for Added Value

Cornerstone of

Accountable Care Organizations


Pcmh care redesign

PCMH Care Redesign

Traditional

PCMH

Patients are registered in the medical home

PCMH systematically assesses all patient health needs to plan care

Care is determined by a proactive plan to meet patient’s needs (with our without an office visit)

Care is consistent with evidence-based guidelines

A prepared team of professionals coordinates all patient care

Acute care is delivered by open-access and non-visit contacts

PCMH tracks tests, consultations, ED visits, hospital visits and follow-up care

A multidisciplinary team works to serve patients

Patients make appointments

Patients’ chief symptoms or reasons for visit determine care

Care is determined by today’s problem and time available today

Care varies by provider

Patients are responsible for coordinating their own care

Acute care is delivered during the next available appointment and to walk-ins

Patient must tell caregiver what happened

Operations center on physician’s schedule

Source: Central Ohio PCMH Project


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.

PCMH Benefits and Risks

Benefits

  • Increases quality and reduces cost of chronic patient care

  • Enhances access and continuity of care

  • Aligns PCP physicians around care delivery

  • Focuses on integrated care management

  • Patient survey results help drive quality improvement

  • Presents opportunity for enhanced reimbursement

  • Creates possible competitive advantage

Risks

  • ROI uncertain and difficult to measure

  • Demands increased administrative support

  • Requires (significant) IT investment

  • Creates significant change in culture and practice patterns

  • Requires progressive use of technology and other models of patient interaction

Source: NCQA, 2011


Accountable care organization aco

Accountable Care Organization (ACO)

Hospital: Lower admissions and

re-admissions; more appropriate use of ED; integration with physicians; enhanced reimbursement(?)

Specialists: Increased level of integration with PCPs, increased efficiency, focus on reducing re-admissions

Hospital

Community

Payer

Specialists

Primary Care Provider: Increased focus on patient health, greater access to information, increased use of quality metrics, better reimbursement,

Primary

Care

Provider

Social

Worker

Payer: Improved member satisfaction, lower costs, opportunity for new business models

Other

Caregivers

Nurse

Patient

Government: Lower healthcare costs, healthier population

Employer

Government

Patient: Less costly, more convenient care; coordinated services, productive long-term relationship with all physicians

Pharmaceutical

Manufacturer

Employer: Lower costs, more productive workforce, improved employee satisfaction


Aco structure

ACO Structure

Source: CMS


Aco participants

ACO Participants

*Under Method II a CAH bills for both facility and professional services, which provides CMS with the data needed to perform various programmatic functions

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)

Source: CMS


Aco mechanics

ACO Mechanics

3

4

1

5

2

Source: CMS


Key imperatives for success

Key Imperatives for Success

Manage Utilization Risk

Maintain Exceptional Quality

Operate Under Elevated Transparency

  • Develop quality care standards

  • Create care pathways across providers

  • Coordinate care across sites of care, over time

  • Adopt IT systems that allow for data capture and use

  • Continue to provide data to ACO partners and CMS

  • Develop communication strategy amongst participants

  • Develop and utilize ambulatory network

  • Appropriately utilize pre and post acute care providers

  • Reduce preventable acute care episodes

  • Avoid unnecessary readmissions

Source: The Advisory Board Company


Aco care redesign

ACO Care Redesign

Traditional

ACO

Source: AMGA


Where the acos are

Where the ACOs Are

Source: The Advisory Board Company


Co management

Co-Management


Co management objectives

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


Co management1

Co-Management

Governance Committees

Management Fee Distributions

FMV Compensation

Physician LLC

Physicians

Hospital

Management Services

Investment

Fixed Duties

Performance Metrics

  • Committee Involvement

  • Day-to-Day Management

  • Strategic Plan Development

  • Clinical Care Management

  • Quality Improvement

  • Staff Oversight

  • Materials Management

  • Budget Development

Equipment*

Staffing*

Supplies

  • Clinical Outcomes

  • Patient Safety

  • Satisfaction

  • Operational Processes

  • Financial Performance

*Only one of two may be included


Co management fundamentals

Co-Management Fundamentals


Governance sample

Governance - Sample

LLC

Hospital

4 LLC Managers

3 Committee Chairs

8 Committee Members

7 Medical Directors

Hospital Representation

Physician Only

Board

4 LLC Managers

Heart and Vascular Executive Committee

4 CPM Managers + Hospital Staff

Finance & Capital

1 Chair +

2 Members +

Hospital Staff

Invasive Labs

1 Chair +

2 Members +

Hospital Staff

Quality & Clinical

1 Chair +

4 Members

Medical Directors (7)

Cardiac Rehab

  • 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

CHF Disease

Chest Pain

Hospital Coord (2)

Non-Invasive

IT Implementation


Sample metrics list

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

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”

Sample Cardiology Metrics


Sample metric

Sample Metric

Development of Performance Incentives and Supporting Metrics Fosters Hospital/Physician-Manager Collaboration

SAMPLE:


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 investmentby 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

Co-Management Benefits


Questions

Questions


Reform challenges

Reform Challenges

Reform Challenges our Personal Paradigms

High

Resiliency

Low

Paralyzed by Confusion

Embracing the Opportunities

Resigned to Acceptance

Existing in

Denial

Low Understanding High


Appendix

Appendix


Physician alignment process

Physician Alignment Process


Comprehensive cardiology alignment model

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)

Co-Management

Call Coverage

Panel Reads

Physician LLC

Employment

Reverse MSO Practice Lease

Non Inv. Imaging Acquisition

Employed Physicians

Investment

$ Based on equity & effort

Independent Physicians

Investment

Non Inv. Imaging Acquisition

$ Based on equity & effort

Affiliated Physicians

No Investment: Call/Panel Participation

$ Based on effort only


Who we are dhg healthcare consulting

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

Physician Alignment Models

ACO

HIZ

PCMH

High

Clinical Integration

Foundation

Bundled Payments

IT Deployment

Physician Enterprise

Institute

Individual Employment Contracts

PSA

Co Management

PHO

Resources

Joint Venture

MSO

Directorship / Pay for Call

Recruitment Support / Income Guarantee

Volunteer Medical Staff

Low

Tactical

Strategic

Transformational

Degree of Alignment

Source: Sg2


New models for care delivery in the reform era 9 27 2012

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


Proposed pfs reimbursement changes

Proposed PFS Reimbursement Changes

Source: Beckers, 2012


Critical success factors

Critical Success Factors

Trust

Communication & Transparency

Change Management

No “One Off Deals”

Physician Leadership

Adapt Guiding Principles/Physician Compact

1

3

2

4

5

6

67


5 key issues

5 Key Issues

Does the hospital have sufficient urgency?

Is there enough trustbetween the hospital and physicians?

Can we measure and document what we are good at and not so good at?

Do we fully understand the legal and tax issues associated with true Physician Alignment?

Do we have the infrastructureand the ability to financethe alignment strategy?

1

3

2

4

5

!

68


Gi interest in employment moderate to low

GI Interest in Employment Moderate to Low

Surgery

Family Medicine

Neurology

Orthopedics

Source: PwC 2010, DHG 2012

69


Physician hospital organization pho

Physician-Hospital Organization (PHO)

Health System

Physicians

PHO

50%

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


Professional services agreement psa

Professional Services Agreement (PSA)

Physicians

Hospital

Clinical Services

Management Services

Ownership

FMV Compensation

PSA

$

Billing and Collection for Technical and Professional Component of IR Procedures


Employment models

Employment Models

Physician Practice Responsibility

Low

High

Bump

Model

Practice Management Model

wRVU

Model

Net Income

Model


Clinical integration

Clinical Integration

Win | Win Criteria

Health System

Physicians

Payers

Clinical Integration Program

Quality

Membership

Contracting

Information Technology

Care Redesign

The Value of Clinical Integration to…


Models of group alignment

Models of Group Alignment

Degree of Integration

Low

High

IPA

ASC Investment

Group Practice Consolidation

ACO

Independent practices align under Association guidelines for purposes of joint contracting

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

Physicians (and other providers) align around health management and accountability of defined Medicare beneficiary population. Shared Savings drive compensation


Independent physician association ipa

Independent Physician Association (IPA)

Health System

Participating Physicians

IPA

Participating Agreement

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


Asc investment

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.


Group practice consolidation

Group Practice Consolidation

  • Single-Specialty Group

  • Information Sharing

  • Economies of Scale

  • Negotiating Leverage

  • Support for Ancillaries

  • Shared Cost of Technology and Practice Overhead

Merger or Acquisition

Into a Larger Medical Group

ADVANTAGES

Control Over Referral Sources

Combined Interests & Talents

Payor Relationships

  • Multi-Specialty Group

  • Advantages of SSG … plus …

  • Greater Coordination of Care

  • Internal Referrals

  • Market Presence

Enhanced Market Access

Risk Sharing

Peer Consultation / Review

Pooled Capital

77


New models for care delivery in the reform era 9 27 2012

Source: Sg2

78


New models for care delivery in the reform era 9 27 2012

Co-Management

Source: Sg2

79


New models for care delivery in the reform era 9 27 2012

Source: Sg2

80


New models for care delivery in the reform era 9 27 2012

Source: Sg2

81


New models for care delivery in the reform era 9 27 2012

Source: Sg2

82


New models for care delivery in the reform era 9 27 2012

Source: Sg2

83


New models for care delivery in the reform era 9 27 2012

Source: Sg2

84


New models for care delivery in the reform era 9 27 2012

Source: Sg2

85


New models for care delivery in the reform era 9 27 2012

Source: Sg2

86


Hospital margins at risk1

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

Disproportionate Share Hospital Payment Reductions Phase-in Begins

-9.40

-7.80

27

Million

No Coverage

-7.80

-5.20

18 Million

No Coverage

-5.20

-3.50

21 Million

No Coverage

-3.50

2015

Acquired Hospital Infection Penalties Phase-in Begins

-2.00

-2.00

-2.15

-2.15

-2.15

-0.50

-0.50

-1.70

-1.60

-1.60

-0.25

-0.25

-1.50

-1.50

-0.25

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Source: AHA, MedPAC, PPACA & assorted documents


Payment models shifting risk

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

  • Episodic Efficiency

  • Readmission Reduction

  • Care Standardization

  • Shared Savings

  • Chronic Care Management

  • Care Substitution

  • Disease Prevention

  • Pay-for-Performance

  • Process Reliability

  • Clinical Quality

  • Patient Experience

Source: The Advisory Board


Provider coordination required

Provider Coordination Required

Source: Sg2


Hospital physician concerns

Medicare Professional Reimbursement Changes

Financial Challenges

Hospital-Physician Concerns

Private Payor Professional Reimbursement Changes

Overhead / Expense Management

Patient Safety and Quality

Physician Concerns

Hospital CEO Concerns

Top Physician Concerns

Top Hospital Concerns

Care for the Uninsured

78%

78%

74%

Physician Alignment

43%

Practice Growth

71%

41%

Personnel Changes

Malpractice Costs

32%

32%

Healthcare Reform

Pay for Call

28%

30%

Patient Satisfaction

Hospital Relations

27%

26%

Regulation

22%

22%

Capacity

17%

Quality

16%

Technology

15%

9%

Workload

Malpractice

2%

14%

Source: Sg2 2009 | ACHE 2009


Some new models not so new

Some ‘New’ Models Not So New

Employment Trends

Hospital and health systems acquire primary care practices.

Growing interest in alignment and willingness to partner with physicians.

Degree of Integration

  • Expansion of hospitalist

  • model

  • Refocus on primary care

  • strategy and referring

  • physician relationships

  • Employment of Specialists

Many hospitals divest of primary care practices, refocus on core business.

Employment of hospital based specialists.

1980

1985

1990

1995

2000

2005

2010

2015

Source: Sg2 2008


Reform impact on providers

Reform: Impact on Providers

Accountability

& Risk

Analytics

Reimbursement

Providers

Volume

  • Medicare Cuts

  • $240 B

  • Hospital Consolidations

  • Physician Owned Hospitals and ancillaries

  • Insured +32M

  • Inpatient +5%

  • Outpatient +4%

  • $90B in penalties

  • P4P/Bundling

  • Shared Savings

  • Communication

  • Performance Tracking

  • CMS Reporting


Payment reform shifting risk

Payment Reform Shifting Risk

Shifting Risk to Providers

Utilization Risk

Performance Risk

Cost of Care Quality of Care Volume of Care

  • Bundled Pricing

  • Episodic Efficiency

  • Readmission Reduction

  • Care Standardization

  • Pay-for-Performance

  • Process Reliability

  • Clinical Quality

  • Patient Experience

  • Shared Savings

  • Chronic Care Management

  • Care Substitution

  • Disease Prevention

Source: The Advisory Board


Clinically integrated models emerging

Clinically Integrated Models Emerging

Spectrum of Alignment Models

ACO

High

CIN or IPN

PCMH

HEP

Employed

Physician Enterprise

Relocation

Support/Income

Guarantee

System Resources Required

Co-Management

Gainsharing

Paying for Call

Co-marketing

Directorships

Voluntary

Medical Staff

Low

Venture Arrangement

Independent

Strategic Alliance

Integration

Degree of Alignment

Source: Sg2


New models for care delivery in the reform era 9 27 2012

March 2010

PPACA Made Law


New models for care delivery in the reform era 9 27 2012

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


Strategic focus at the speed of change

Strategic Focus at the Speed of Change

#5

Developing Networks and Integration Across the Continuum

#1

Cost

Reduction/

Payer

Leverage

Integrating Across the Care Continuum

#6

New Payment Models and Trials

#2

Physician Alignment and Clinical Integration

#3

Geographic Coverage, Access, and OP

#4

Service Line Optimization


Organizational change

Organizational Change

Strategic Readiness


Physician real income declining

Physician “Real Income” Declining

Gap Increase Between Practice Cost Increase, Payment Updates

50%

40%

30%

20%

10%

0%

-10%

-20%

-30%

-40%

-50%

Practice Cost Increase

(MEI Estimates)

60% Gap

Increase

SGR1 Medicare

Physician Payment Updates

2001

2006

2011

2016

Source: Health Leaders 2011


Practice consolidation accelerating

Practice Consolidation Accelerating

Physician Distribution by Practice Setting2

1998/1999 vs. 2008

N=4,700

37.4%

32.0%

19.4%

14.5%

1998-99

2008

14.2%

9.6%

6.1%

3.5%

Solo/2-Physician Practices

6-50 Physician Practices

3-5 Physician Practices

50+ Physician Practices

Source: PwC 2010


Co management benefits1

Co-Management Benefits

Improved Quality Outcomes

Effect on Top 100 Hospital Rankings

Sample Hospital 1 – CABG Mortality Rates

Top Quintile (1 Years)

8%

15.1%

13.2%

4.2%

92%

11.1%

10.7%

2%

1%

1%

Top Quintile (3 Years)

Sample Hospital 1 – CABG Complication Rates

Year 1

Year 1

Year 2

Year 2

Year 3

Year 3

Pre-Adoption

Pre-Adoption

32%

68%

Physician-Led Management

Administrative Management

Source: Thomson Reuters 2009 | Advisory Board 2009


Co management benefits2

Co-Management Benefits

OR Utilization

Service Line Excellence

Sample Hospital 3 – Quality and Volume

After one year….

Quality

Ranked the #1 provider of overall orthopedic care in Ohio

Volume

Experienced an increase of 1,000 cases per year

Sample Hospital 2 – OR Utilization Rate and % Volume of Budget

70

80

76

60

6

141%

50

5

40

Physician Engagement

4

Number of ORs at Capacity

40

Sample Hospital 4 – Number of Active Staff Surgeons

30

3

20

2

60%

10

1

Before

After

After

Before

Source: Beckers ASC 2010 | HFMA 2009 | DHG Client 2010


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