Health Care Transformation and Provider Collaboration

4. “Would you tell me, please, which way I ought to go from here?” “That depends a good deal on where you want to get to.” Source: Cambridge Research Institute

6. Source: Michael R. Irwin, Managing Director, Citigroup, 11/2011

7. Trustee Notes: • No matter who wins the election, health care delivery system transformation, in accord with the ACA and MRT, will accelerate increasingly for the next several years. • Under every strategic direction available, achieving higher quality and patient satisfaction scores is critical to financial success. • Be pragmatic, not idealistic, about your capacity to remain an independent provider. Do you need to integrate with others? Can you absorb risk or will your high quality and low costs make you an essential vendor of beds and health services to the risk-takers.

8. Recent Plan Strategies to Shed and Avoid Risk • Unilateral DRG down-coding • Notice requirements tied to significant financial penalties • Steering patients toward lower cost settings • Notifying patients of lower cost options in advance of pre-authorized services • Tying ED Evaluation & Management reimbursement to professional claim instead of facility bill

9. Quality Driven Payment • WellPoint Q-HIP Scorecard • BCBSA’s Distinction Centers of Excellence • UHC Bonuses/Rate Kickers Tied to Specific Quality and Efficiency Measures

10. Increased Government Audit Activity • Recovery Audit Contractors (RAC) • Created as a three-year demonstration through the Medicare Modernization Act of 2003 in California, New York, and Florida • Expanded to California and South Carolina before ending in 2007 • CMS announced in 2008 that RACs had collected $992.7 million in improper payments from providers • Made permanent by Congress through the Tax Relief and Health Care Act of 2006 in all States

11. Increased Government Audit Activity • RACs are paid on a contingency fee basis, receiving a percentage of the improper overpayments and underpayments they collect from providers • RACs may review the last three years of provider claims data • Use proprietary software programs to identify potential payment errors

12. Increased Government Audit Activity

13. Fundamental return to managed care concepts • Demand for efficiencies • Refusal to pay for hospital acquired conditions, serious adverse events, never events, potentially preventable admissions, readmissions, geographic variation, etc . . . • Increased medical management, utilization management, steering, and use of audit tools • Intransigence over rate increases, limited networks

14. Loss of Flexibility Traditional Underwriting Strategies Gone (E.g.  Exclusions)

15. What was the business of health insurance? (as perceived by Providers) Pricing Risk Avoiding Risk Shedding Risk Shifting Risk [Rather than Share Risk andManage Risk]

16. What has PPACA/economy changed for plans? • Mandates • Rate approval and MLR rules • Threats of market abandonment • Focus on federal landscape

17. Plan/provider relationships urgently need to evolve significantly –but will it happen? • PPACA support for collaborative care models • Endless proof about need for care coordination and evidence-based medicine • The need to “walk the walk” that we are in it together • The end of fee-for-service – eat what you kill mentality

18. Failure of Fee-for-Service • Rewards overutilization • Undervalues quality • Ignores care coordination • Creates an unsustainable trend

19. What is PPACA/economy doing to providers? • Can hospitals transition from inpatient margin to total care margins? • Can some hospitals exist in a non-hospital centric world? • Can providers move away from fee-for-service? • Can physicians and hospitals truly integrate to produce the right care models? • Can the electronic infrastructure be built? • Can plans be encouraged to collaborate?

20. And, at the same time: • Function in a non-aligned world • Negotiate traditional contracts and obtain rate increases • Devote resources to RACs, readmission targets, fraud inquiries, audits, eradication, never events • Focus on medical management challenges and denials management strategies • Solve on-call physician shortage and ambulatory surgery center types of competition?

21. Snapshot of ACO Development • 154 groups participating in ACO initiatives sponsored by CMS • 32 Pioneer ACOs • 116 Shared Savings Program (SSP) • 6 Physician Group Practice Transition demo (PGP) • ~67 (& growing) private sector ACOs in 45 states

22. ACO Distribution by State 8-10 “Growth and Dispersion of Accountable Care Organizations: June 2012 Update” Leavitt Partners

23. ACO Distribution 3 4 3 10 11 8 11 “Growth and Dispersion of Accountable Care Organizations: June 2012 Update” Leavitt Partners

24. Characteristics of Hospitals Participating Preparing to Participate, and Not Participating in ACOs Average Bed Size “Hospital Readiness for Population-based Accountable Care” Health Research & Educational Trust in Partnership with AHA

25. Characteristics of Hospitals Participating Preparing to Participate, and Not Participating in ACOs Teaching Hospitals “Hospital Readiness for Population-based Accountable Care” Health Research & Educational Trust in Partnership with AHA

26. Characteristics of Hospitals Participating Preparing to Participate, and Not Participating in ACOs Urban Status “Hospital Readiness for Population-based Accountable Care” Health Research & Educational Trust in Partnership with AHA

27. Characteristics of Hospitals Participating Preparing to Participate, and Not Participating in ACOs Governance “Hospital Readiness for Population-based Accountable Care” Health Research & Educational Trust in Partnership with AHA

28. Governance Structure of Hospitals Participating or Planning to Participate in an ACO “Hospital Readiness for Population-based Accountable Care” Health Research & Educational Trust in Partnership with AHA

29. “Growth and Dispersion of Accountable Care Organizations: June 2012 Update” Leavitt Partners

30. ACO Physician Arrangements “Hospital Readiness for Population-based Accountable Care” Health Research & Educational Trust in Partnership with AHA

31. ACO Physician Arrangements “Hospital Readiness for Population-based Accountable Care” Health Research & Educational Trust in Partnership with AHA

32. ACO Physician Arrangements “Hospital Readiness for Population-based Accountable Care” Health Research & Educational Trust in Partnership with AHA

33. Physician/Hospital RelationshipsStress Points Arizona Health Futures

34. Physician/Hospital Alignment • Find physician leaders inside or outside your organization • Promotes accountability • Ensures coordination • Adds leverage • Minimizes risk Arizona Health Futures

35. Payer Partnerships “Hospital Readiness for Population-based Accountable Care” Health Research & Educational Trust in Partnership with AHA

36. Contracts with Payers

37. Contracts with Private Payers “Hospital Readiness for Population-based Accountable Care” Health Research & Educational Trust in Partnership with AHA

38. Plans have: • Data • Captive populations • Ability to become good collaborative partners

39. Mean Number of Commercially Insured Patients Attributed to ACO “Hospital Readiness for Population-based Accountable Care” Health Research & Educational Trust in Partnership with AHA

40. Mean Number of Commercially Insured Patients Attributed to ACO Total = 197,607 “Hospital Readiness for Population-based Accountable Care” Health Research & Educational Trust in Partnership with AHA

41. Shared Savings Program Participants in New York State Accountable Care Coalition of the North Country, LLC Crystal Run Healthcare ACO, LLC Accountable Care Coalition of Syracuse, LLC Catholic Medical Partners Accountable Care Coalition of Mt. Kisco, LLC Chautauqua Region Associated Medical Partners, LLC Pioneer ACO WESTMED Medical Group, PC Phase 1 Phase 2 Beacon Health Partners, LLP Asian American ACO Balance Accountable Care Network Healthcare Provider ACO, Inc. Mount Sinai Care, LLC ProHEALTH Accountable Care Medical Group, PLLC Montefiore ACO

42. Shared Savings Program Participants in South Carolina Pioneer ACO Phase 1 Phase 2 Accountable Care Coalition of the Tri-Counties, LLC Out of State SSP Participants that Include SC Medicare Patients Meridian Holdings, Inc. (Based in California) Accountable Care Coalition of Coastal Georgia, LLC (Based in Georgia)

43. Challenges to Participating in the Medicare Shared Savings Program “Hospital Readiness for Population-based Accountable Care” Health Research & Educational Trust in Partnership with AHA

44. Risk Arrangements Risk Arrangements Medicare Shared Savings Program “Hospital Readiness for Population-based Accountable Care” Health Research & Educational Trust in Partnership with AHA

45. Risk Arrangements “Hospital Readiness for Population-based Accountable Care” Health Research & Educational Trust in Partnership with AHA

46. Mean % of Net Patient Revenue by Payment Mechanism “Hospital Readiness for Population-based Accountable Care” Health Research & Educational Trust in Partnership with AHA

47. Mean % of Net Patient Revenue by Payment Mechanism “Hospital Readiness for Population-based Accountable Care” Health Research & Educational Trust in Partnership with AHA

48. Examples of Risk Shifting Success Failure Attempt to share risk Some successes Complete risk shifts Insufficient reserves Capitation DRGs Withholds Pay for Performance Carve-out Companies Undersupply of beds; Empty beds viewed as revenue loss Worked to a point Incentivized meeting certain standards No new $ - zero sum game Had to fight to get paid Incentivized meeting quality performance standards Limited buy-in Standards imposed, not designed Viewed as withholds Provided oversight of specialist patient populations Additional risk shift generated administrative costs Mixed results

49. Why was there a retreat from capitation? • Rejection of managed care and restriction on choice and access • Failure of delivery systems to manage shift of risk • Too much risk, especially for start-up organizations • Success was exception, not rule

50. Three Types of Health Services Source: Health Futures