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Overview. Strategic Contracting Getting the Business you Desire with Desirable Trading Partners. Presented by Patrick Gauthier, Director. Explore the Contracting Environment Review Options Discuss Strategy Questions. Objectives. The New Business Environment. Environmental Drivers:

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Strategic Contracting

Getting the Business you Desire

with Desirable Trading Partners

Presented by

Patrick Gauthier, Director

Explore the Contracting Environment

Review Options

Discuss Strategy


brief review of contracting environment
Environmental Drivers:


Self-insured employers

Large group insurance

CHIP and Medicaid managed care plans

Health Care Reform

Medicaid expansion

Health Insurance Exchange

More managed care

Block Grant

Integrated application

Addresses wrap-around and remaining uninsured

Brief Review of Contracting Environment
big pictures now then
Big Pictures: Now & Then

Private Insurance

Publicly-Funded Treatment


Federal Agencies


State Agencies

75% - 90%

10% -25%


Counties and Cities


Corrections & Courts

Managed Care

Managed Care

Health Insurance Exchanges

32+ Million Uninsured




Medicaid Managed Care Plans

Housing & Jobs

Standards & Science

parity scope of services
Parity & Scope of Services

MHPAEA does not stipulate what specific conditions, disorders or diagnoses must be covered.

Parity law does not mandate covered services except to say that parity applies to all six categories of service if it applies to any

Parity law does not mandate specific kinds of providers be covered

Deciding what conditions, services and providers are eligible for coverage – until we see a Final Rule with clear direction – is left to health plans and State regulators enforcing your State law and regulations.

take a stand on scope of service
Take a Stand on Scope of Service

Covered Conditions

Covered Services

Covered Providers

Medical Necessity Guidelines

where to take it
Where to take it

Health plans




PPOs and HMOs

Dept of Insurance


Attorney General



reform acos
Reform & ACOs

Q: What is an “accountable care organization”?

A: An Accountable Care Organization, also called an “ACO” for short, 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 fee-for-service program who are assigned to it.

For ACO purposes, “assigned” means those beneficiaries for whom the professionals in the ACO provide the bulk of primary care services. Assignment will be invisible to the beneficiary, and will not affect their guaranteed benefits or choice of doctor. A beneficiary may continue to seek services from the physicians and other providers of their choice, whether or not the physician or provider is a part of an ACO.


Structure, Governance and Shared Savings

IT Infrastructure and Data Management





& Hospice




& Rehab

Population Health Home

Rx & Lab


& Specialty








aco functions
ACO Functions


Business Operations







Managed Care



IT & Data




Case Mgmt



aco goals
ACO Goals

Promote development of newsystems of care

Change provider culture and incentives from fragmented FFS

Lower costs while improving population health

Measure both quality and financial performance

Hold provider systems accountable for both cost and quality of care for assigned patient populations

aco innovations
ACO Innovations

Minimize “barriers to entry” for patients and providers:

Patients attributed, not enrolled

No benefit or network restrictions; no lock-in; no prior-auth

Flexibility for providers to form different kinds of ACOs

Flexible payment model (e.g., can include bundling, Medical Homes)

“Bonus only” shared savings

“Symmetric risk” shared savings

Partial capitation and shared savings

Receiving shared savings requires first achieving quality threshold

aco reimbursement
ACO Reimbursement

Under the proposed rule, Medicare would continue to pay individual providers and suppliers for specific items and services as it currently does under the fee-for-service payment systems.

The proposed rule would require CMS to develop a benchmark for savings to be achieved by each ACO if the ACO is to receive shared savings, or be held liable for losses.

acos two tracks
ACOs – Two Tracks

To provide an entry point for organizations with varied levels of experience with and willingness to take on risk, the proposed rule would allow an ACO to choose one of two program tracks.

The first track would allow an ACO to operate on a shared savings only track for the first two years, but would then require the ACO to assume the risk for shared losses in the third year.

The second track would allow ACOs to share in savings and risk liability for losses beginning in their first performance year, in return for a higher share of any savings it generates.


Q: What forms of organizations may become an ACO?

A: The statute specifies the following:

ACO professionals (i.e., physicians and hospitals meeting the statutory definition) in group practice arrangements,

Networks of individual practices of ACO professionals,

Partnerships or joint ventures arrangements between hospitals and ACO professionals, or

Hospitals employing ACO professionals.

Other Medicare providers and suppliers as determined by the Secretary


Q: What are the types of requirements that such an organization will have to meet to participate?

A: The statute specifies the following:

1) Have a formal legal structure to receive and distribute shared savings

2) Have a sufficient number of primary care professionals for the number of assigned beneficiaries (to be 5,000 at a minimum)

3) Agree to participate in the program for not less than a 3-year period

aco requirements cont d
4) Have sufficient information regarding participating ACO health care professionals as the Secretary determines necessary to support beneficiary assignment and for the determination of payments for shared savings.

5) Have a leadership and management structure that includes clinical and administrative systems

6) Have defined processes to (a) promote evidenced-based medicine, (b) report the necessary data to evaluate quality and cost measures (this could incorporate requirements of other programs, such as the Physician Quality Reporting Initiative (PQRI), Electronic Prescribing (eRx), and Electronic Health Records (EHR), and (c) coordinate care

7) Demonstrate it meets patient-centeredness criteria, as determined by the Secretary.

ACO – requirements cont’d

Q: How would such an organization qualify for shared savings?

A: For each 12-month period, participating ACOs that meet specified quality performance standards will be eligible to receive a share of any savings if the actual per capita expenditures of their assigned Medicare beneficiaries are a sufficient percentage below their specified benchmark amount. The benchmark for each ACO will be based on the most recent available three years of per-beneficiary expenditures for Parts A and B services for Medicare fee-for-service beneficiaries assigned to the ACO.


Q: Will beneficiaries that receive services from a health care professional or provider that is a part of an ACO be required to receive all his/her services from the ACO?

A: No. Medicare beneficiaries will continue to be able to choose their health care professionals and other providers


Q: When will this program begin?

A: January 1, 2012. Agreements will begin for performance periods, to be at least three years, on or after that date.

goals objectives
Goals & Objectives

Improve Inpatient

Care Efficiency

Use Lower Cost


Improve Health



Adverse Events


Management of

Complex Cases

Hospitals & Specialists

Reduce Preventable


Reduce Preventable

ER Visits &


Lower Total



Use Lowest-Cost

Settings and


Primary Care



Testing & Referrals

Improve Practice


Improve Prevention

& Early


population health management
Population Health Management

ACOs must develop a process for identifying patients who have complex needs (multiple chronic conditions) or are at high risk of developing such needs and provide them with wellness and prevention programs, disease management, and complex case management, as indicated

ACOs must make available or support providers’ use of electronic prescribing, electronic health records systems, registries, and self-management tools

MH/SUD providers must be prepared to work in this environment and develop the necessary tools and resources

incentives to participate in an aco
Incentives to Participate in an ACO

Identified population/market share

Some administrative fees for administrative duties

Reliable referral sources within network

Common values and objectives (coordination, cooperation, collaboration)

Shared information (whole health)

Shared savings (financial incentives)

block grants
Block Grants

SAMHSA's proposed changes to the FY 2012/2013 Block Grants seeks to get State behavioral health systems ready for 2014 when more people will be insured through Medicaid or 3rd party insurance. Under this new approach States and territories will have the opportunity to use block grant dollars for prevention, treatment, recovery supports and other services that supplement services covered by Medicaid, Medicare and private insurance.

multiple chronic conditions
Multiple Chronic Conditions

The proportion of Medicaid beneficiaries with disabilities who are diagnosed with three or more chronic conditions ranges between 35% and 45%.

The frequency of psychiatric illness among Medicaid beneficiaries with disabilities ranges from 29% to 49%.

Psychiatric illness is represented inthree of the top fivemost prevalent pairs of diseases, or dyads, among the highest-cost 5% of Medicaid beneficiaries.


The Costof Health Care in America

Source: CMS, Office of the Actuary, National Health Statistics Group

options are a function of market
Self-Insured Plans (ERISA)

Traditional Indemnity (fully-insured)

Open access, higher coinsurance

Managed Care Plans

MBHO (carve-out)

HMO (network-centric, referral-based)

PPO (wider network, medical necessity standards)

POS (combines HMO and PPO with coinsurance differentials)

Consumer-Directed Health Plans

High deductible, catastrophic claims

Health Savings Accounts (HSA), Health Reimbursement Accounts (HRA) and Flexible Spending Accounts (FSA)

Options are a Function of Market
market research sources of valuable information
Market ResearchSources of Valuable Information

Health Plans and Managed Care Organizations

State Department of Insurance

AHIP and State Associations of Health Insurance Plans

Self-Insured Employers

National and Regional Business Group on Health

Employers’ Health Coalitions

Federal and State Agencies


market segments
Market Segments

Commercial Insurance / Public Funding

Voluntary / Involuntary

Geographic Markets



Specialty / Generalist / One-Stop Shop

Race / Culture / Language

Stand-Alone / Integrated / Joint Venture / Partnership


market segmentation
Market Segmentation

What kinds of markets appeal to your organization?

What suits your vision and mission?

In what market segments do you have a good reputation? Market share/penetration?

In what market segments do you/can you make a reasonable profit?

opportunity matrix tool
Opportunity Matrix Tool
  • Rank each according to:
  • Market Maturity/Longevity
  • Brand equity or reputation
  • Revenue share (%)
  • Share of profits
  • Qualifications, skills, subject matter expertise and capacity to grow
  • Weaknesses, competitors and threats
  • Cost of entry
  • Legislative/regulatory opportunities
new conversations
New Conversations


Health Plans and MCOs/MBHOs

Primary Care

Third-Party Administrators




Other Medical Specialists


new conversations1
New Conversations



Expressing willingness and interest

Demonstrating big picture understanding and prospect of synergies

Eager to develop viable, marketable, attractive solutions

Promoting new services and potential new business model

Clear, distinct, customer value proposition

Potential collaborator? Investor? Partner? Buyer?

Benefits and advantages more important than features and functions

Always Branding

reimbursement and fee schedules
Reimbursement and Fee Schedules

Variety of Approaches and Methodologies

Usual, Customary and Reasonable (UCR)

Diagnosis Related Grouping (DRG)

Resource-Based Relative Value Scale (RBRVS)

Innovations including:


Bundled case rates and episode rates

Administrative fees for additional services like Case Management

Bonuses for performance

Shared savings

global payment
Definition. Global payments are fixed-fee payments for the care and services that patients might receive in a given span of time such as a month, quarter or year. Global Payments are akin to Case Rates and Episode Rates. Global payments put providers at-risk financially for the occurrence of conditions as well as the management of those conditions.

Purpose. Global payments are designed to contain costs and reduce the incidence of unnecessary services, promote integration and coordination of services. Global payments can also feature incentives to improve the quality of care.

Global Payment
global payment1
Potential Issues. Global payments might induce providers to cut back on necessary care and to admit/select less expensive patients into their programs.

Global payments involve significantly more complex financial management, requiring infrastructure and personnel to manage risk.

Small providers may not be able to take on risk due to this complexity and any state regulations concerning financial solvency where risk exists.

Global Payment
contracting imperatives
Know your costs and cost structures

Know your profit model. At what point can a contract become profitable?

Don’t contract at rates lower than your costs if your model doesn’t absolutely demonstrate a reasonable point in time when you become profitable

Contracting Imperatives
contracting imperatives1
Review contracts from multiple perspectives:





Practical Operational


Contracting Imperatives
strategic concerns
What makes your decision to contract “strategic?”

The contract reflects your vision, your image of what it is you’re becoming

It supports your mission, how it is that you will strive to realize your vision

It helps you accomplish organizational goals and objectives

Strategic Concerns
examples strategy
New market segment


Self-insured employer

Impaired professionals program

Gains in % share of the market

Competitive advantage

Visibility and brand-image

New services in the same market

Addition of IOP, for example

Examples: Strategy
examples strategy1
New location/geographic expansion

New reimbursement methodology

Secure funding (sub-capitation for defined population, for example)

Joint venture/revenue share

Building credibility, loyalty, confidence in a step-wise growth plan

Goodwill in the community

Examples: Strategy
examples goals
Increased overall revenues

Improved profit



Transitions in care

Integration (vertical and horizontal)

Number of payers (diversification)

Sustainability of other programs

Examples: Goals
factors and variables
Service mix (billing codes)

Bundling/unbundling services

Rate of reimbursement

Reimbursement methodology


Shared Savings

Factors and Variables
Conduct Market Research

Conduct Strategic Planning

Gather Intelligence

Assess Market Conditions

Develop Customer Value Proposition

6. Develop clear sense of what you a) desire, b) want, c) will accept, and d) need

7. Practice concise pitch

8. Develop your allies

9. Talk to the right person

10. Approach with respect and professionalism and tell them what’s in it for them

thank you questions
Thank You! Questions?

Patrick Gauthier


888-898-3280 ext. 802