Care Coordination and Shared Savings with Bundled Payments

1. Care Coordination and Shared Savings with Bundled Payments

2. Agenda Market Forces Driving Providers to Evaluate Clinical Integration & Bundled Payments Overview of Clinical Integration Key Elements of a Clinical Integration Strategy Bundled Payments Overview Customized Bundled Payment Report Review

3. Change Readiness Curve – Strategic Readiness Major Change is Essential TRANSFORMATIONAL Focused Change is Necessary STRATEGIC TACTICAL Been Here Before HIGH Urgency (Opportunity or Burning Platform) LOW

4. Leading Change – Right of Passage Multi-Hospital System With Very Large Employed Physician Base Major Change is Essential TRANSFORMATIONAL Multi-State, Multi-Hospital Investor Owned Focused Change is Necessary STRATEGIC Hospital Launching IPA+HEP Hospital With Multiple Co-Management Relationships TACTICAL Been Here Before HIGH Urgency (Opportunity or Burning Platform) LOW 4

5. Payment Models Supported by CIN Strategy Source: HFMA 2010 The Advisory Board 2010

6. Reshape the Value A X Y Z Curve Optimizing value by focusing on quality, service and costs Quality (Q) * Service (S) Cost (C) Value (V) = NEW PARADIGM PAST THINKING Effectiveness: Improved quality/ service at the same or lower cost Adding costs to improve quality/service High High B Innovation: Improvement in all dimensions A QUALITY & SERVICE QUALITY & SERVICE Efficiency: Cutting costs without impacting quality/ service Cutting costs at the expense of quality/service C Low Low High Low COST High Low COST Source: *Lean Hospitals, Graban, CRS Press, p10

7. Clinically Integrated Network Clinically Integrated Network PAYORS & EMPLOYERS Community Hospital(s) Community Facilities PHYSICIANS AMBULATORY Community Facilities Community Physicians

8. ClinicalIntegration Network Objectives Develop a network that includes independent physicians in the market Provide a mechanism to align the clinical practices of physicians across service lines Identify areas of opportunity within the system for quality and efficiency improvements Provide compensation for achieved results Improve the value equation (cost and quality) for healthcare delivered within the network

9. Clinically Integrated Network Defined A Clinically Integrated Network (CIN) is a selective partnership of physicians collaborating with hospitals to deliver evidence-based care, improve quality, efficiency, and coordination of care, and demonstrate value to the market. Clinically Integrated Network BENEFIT TO STAKEHOLDERS • Physicians • Preserving private practice model through alignment • Enhanced reimbursement through contracting for demonstrated network quality • Markets and Hospitals • Align independent, employed, and specialist physicians in one organization • Enhanced reimbursement under FTC guidelines for demonstrated quality Payors and Employers $ Contracts Participation Agreement Participation Agreement CI Entity WHAT IT’S NOT • Mechanism to gain negotiating leverage over payors Private Practice Physicians Health System and Employed Physicians • Physician employment • Hospital-led initiative Distribution of Funds $ $ 9

10. Network Considerations – Local Market Pace Risk-based Payment FFS Financial Performance Declining FFS market will require network model to meet Reform Era Imperatives Time Local Market Conditions will Impact Timing of Network Development

11. Critical Market Pacers to Consider

12. Components of a Clinically Integrated Network Structure & Governance Contracting Infrastructure & Funding Clinically Integrated Network Distribution of Funds Participation Criteria Information Technology Performance Objectives Physician Leadership 12

13. Structure & Governance Overview: Other than an employment-only model, a CIN usually is structured as a joint venture or subsidiary Physician Hospital Organization, or an Independent Practice Association (IPA). Joint Venture PHO IPA Health System Subsidiary PHO Participating Physicians Health System Participating Physicians Participating Physicians Health System Health System PHO IPA Subsidiary XX% XX% Participating Agreement 100% 100% Participating Agreement Payors / Employers Payors / Employers Payors / Employers

14. Infrastructure & Funding • Overview: The CIN is a separate business entity with a distinct identity, mission, and vision, dedicated leadership and staff, sustainable sources of revenue, and participating provider agreements with physicians that create potential value for both physicians and payors. Sources of Revenue The CIN will need to offset costs of building the network (Infrastructure) and eventually provide returns through various revenue sources depending on the maturity of the network. Reporting Incentives and Membership Fees Self Funded Health Plan Payor Contracts MATURITY OF CIN LOW HIGH Hospital Efficiency Program Employer Contracts Pay-for-Performance

15. Participation Criteria Overview: Member physicians or groups that satisfy certain guidelines and criteria must sign an agreement outlining the expectations and requirements for participation in the CI program. Sample Participation Criteria Participating Physicians Clinical Integration Legal Agreement (Independent & Employed) • Active member of “Hospital” Medical Staff • Participate in educational programs • Complete orientation program • Provide leadership and oversight over defined operations • Utilize professional and office email • Access to high-speed internet • Implement the preferred health information technology • Share clinical information / data • Develop, implement, and monitor clinical protocols • Review member physician performance • Develop / implement corrective action plans and process improvement initiatives • Participate in jointly negotiated contracts Physician Leadership Information Technology Adoption Quality Improvement Contracting Requirements

16. Performance Objectives Overview: CINs identify metrics and targets designed to meaningfully impact the clinical practice of all network physicians, and to align their conduct with hospital initiatives, so as to improve quality and demonstrate value across the entire continuum of care. Examples of Performance Improvement Source: Sg2 Analysis

17. Physician Leadership Overview: Health systems must empower physicians to have an influence on the future direction of the network. This will help integrate physicians’ clinical expertise into hospital operations and increase cooperation and credibility of the CI network. CIN Share In Network Governance IT QUALITY CARE REDESIGN MEMBERSHIP FINANCE Medicine Primary Care Lead and participate on sub-committees supported by CIN or Health System personnel Neurosciences Heart and Vascular Surgery Women & Children

18. Information Technology Overview: CINs use an IT-dependent performance improvement architecture with data-based mechanisms and processes to monitor and track utilization, quality, and efficiency of resource use to demonstrate value. Exchange health-related data within and between enterprises Deliverclinical and patient information to enhance patient care experiences and practitioner effectiveness View health-related data via a customizable user interface within an enterprise Derive value and intelligence to improve care quality and outcomes and to curb costs Digitize critical information on an individual within each care site CLINICAL CARE VALUE Advanced Clinical Decision Support Process/ behavioral change Health Analytics Health Information Exchange (Private) Healthcare Portals or Registries (Clinicians and Patients) Intermediate Electronic Medical Records IT Optimization MATURITY OVER TIME Source: IBM Center for Applied Insights

19. Distribution of Funds Overview: The CIN establishes an organized plan to link performance on defined gradients to eligibility for incentive payments. $ $ HOSPITAL / SYSTEM CLINICAL INTEGRATION NETWORK PAYORS & EMPLOYERS • Cost Savings • Efficiency Gains • P4P Contracts • Shared Savings • Increased Rates LOCAL NETWORK PERFORMANCE % GLOBAL NETWORK PERFORMANCE % INDIVIDUAL ACTIVITY/OUTCOMES % • Hospital • Specialty • Location • Equal distribution • Performance targets • Educational event attendance • Submission of Data • Adoption of IT platform

20. Keys to Developing a High-Performing CIN Determining the right structure for your organization that supports your vision and aligns all stakeholders Generating sufficient funding to support network development and incent physician members through initial contracting efforts Developing a distribution methodology that appropriately incents physician members Crafting a communication plan that effectively communicates the business case for CI for physicians and the health system

21. Bundled Payments Represent Key Opportunity for CINs Source: HFMA 2010 The Advisory Board 2010

22. Bundled payments

23. What are Bundled Payments? One all-inclusive price, focusing on a patient’s total episode of care Includes payment for all of a patient’s services for a certain procedure or diagnosis over a set number of days (usually from 30-120) Mega-DRGs

24. How do Bundled Payments Relate to Population Health? Creates incentives for providers to work together to coordinate care Focus on the whole patient, not the visit A targeted version of population health

25. Provider Services - Today Part B Service Part B Service Part B Service Part B Service Dr. Office Visit Initial Inpatient Stay Readmission Dr. Office Visit Dr. Office Visit Dr. Office Visit Dr. Office Visit Dr. Office Visit Dr. Office Visit Inpatient Post-Acute Stay (Rehab, Psych, LTC, SNF, HH) Other Part B Services (Hospital Outpatient, Labs, Durable Medical Equipment, Part B Drugs)

26. Bundled Services Part B Service Part B Service Part B Service Part B Service Dr. Office Visit Initial Inpatient Stay Readmission Dr. Office Visit Dr. Office Visit Dr. Office Visit Dr. Office Visit Dr. Office Visit Dr. Office Visit Inpatient Post-Acute Stay (Rehab, Psych, LTC, SNF, HH) Other Part B Services (Hospital Outpatient, Labs, Durable Medical Equipment, Part B Drugs)

27. Shared Savings Creates incentives for providers to work together to coordinate efficient, cost-effective care Bundled payment is set based on review of past performance and future expectations Savings “delta” between the set payment and actual is shared

28. Data Analytics Identify components of the bundle Discern patterns, variances and opportunities for efficiency Compare performance to benchmarks Determine potential for shared savings Monitor performance progress

29. Report Review

30. Analytics Available focus of today’s session

31. Episode Cost Variation

32. Episode Components Benchmark Comparisons

33. Episode Components Benchmark Comparisons

34. Episode Components Benchmark Comparisons

35. Average Episode Payment Benchmark Comparisons

36. Timing of Readmissions Benchmark Comparisons

37. Cost of Readmissions Benchmark Comparisons

38. Analysis of Readmissions

39. First Post-Acute Setting Benchmark Comparisons Average Inpatient LOS Average Post-Acute Payment

40. First Post-Acute Setting Benchmark Comparisons

41. First Post-Acute Setting Benchmark Comparisons

42. Analytics Available

43. Questions? Gloria Kupferman Vice President, National Information Products DataGen, a HANYS Solutions Company gkupferm@hanys.org 518-431-7968 www.datagen.info Brian Esser Manager, Healthcare Consulting Dixon Hughes Goodman LLP brian.esser@dhgllp.com 330-650-1752 www.dhgllp.com