Physician Alignment in Fulfilling the “Value Proposition” in Healthcare

1. Physician Alignment in Fulfilling the “Value Proposition” in Healthcare ACHE Quarterly Education Session December 5, 2013 Charles “Chuck” D. Stokes System Chief Operating Officer Chris Lloyd CEO, MHMD Memorial Hermann Physician Network D. Keith Fernandez, M.D. President & Physician-in-Chief, MHMD

2. Our Current Healthcare Model is Unsustainable • The current healthcare system is economically unsustainable. A significant portion of the unsustainability is because of • Waste • Not getting it right the first time • Hospital and physician error • Poor discharge planning and readmissions • Fraud and abuse • Unnecessary care • End of life/futile care

3. The Value Equation The U.S. is in last place among 16 industrialized countries in “mortality amenable to health care” __________ The U.S. spends twice as much per capita as any other industrialized country _____ Quality* Value ═ Cost *Quality = Outcomes, Safety, Service Quality and cost statements are from the 2011 National Scorecard on U.S. Health System Performance from the Commonwealth Fund Commission on a High Performance Health System Mortality Amenable to Health Care: Deaths before age 75 that are caused by at least partially preventable or treatable conditions, such as bacterial infections, screenable cancers, diabetes, heart disease, stroke, or complications of common surgical procedures.

4. Are We Getting Value? Quality* _______ Value ═ Cost *Quality ═ Outcomes, Safety, Service

5. Cost Comparisons Average spending on healthper capita ($US PPP*) Expenditures on healthcare administration and insurance, 2009 (or nearest year) Source: Commonwealth Fund National Scorecard on U.S. Health System Performance, 2011. Source: OECD (2011), Health at a Glance 2011: OECD Indicators, OECD Publishing.

6. Are We Getting Value? Source: OECD, “Health at a Glance”, November 23, 2011

7. The Value “Reality” Quality* Value = _____________ Cost *Denis Cortese, MD, former Mayo Clinic president and CEO (Quality=Outcomes, Safety, Service ) Graph: OECD (2011), Health at a Glance 2011: OECD Indicators, OECD Publishing.

8. Private Model “Value” Cumulative increases in health insurance premiums, workers’ contributions to premiums, inflation and workers’ earnings Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2011. Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April), 1999-2011; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey, 1999-2011 (April to April).

9. Demanding Value Houston market showing signs of change recently experienced in other major markets • 7,000 empty beds in Houston today (88 admits/1,000) • 8,000 empty beds in Houston by 2016 (70 admits/1,000)

10. Industry Updates Moody’s S&P Market Consolidation • Influx of private equity investment in not-for-profit health care • Continued consolidation of the health care insurance providers and market concentration • Accelerated system/infrastructure integration post merger • Creativity in structuring affiliations and partnerships • Proactive, structured, and early identification of consolidation and affiliation opportunities

11. Memorial Hermann Must Change It will not be a small change New Model Old Model Only made phone calls. Very expensive. Integrates everything. Invaluable.

12. Gradual change Continue to enhance current structure while building future infrastructure Leverage position of strength This Will Be A Journey Old Model New Model SOLUTIONS PROBLEMS

13. Moving to Value • Current model is unsustainable • Those who deliver value will thrive Current Model Fee-for-Service Disparate Payments Illness & Cure Volume Incentive Fragmentation New Model Fixed Payment Bundled Payment Population Health Value Incentive Integration _____ Quality Value ═ Cost

14. Memorial Hermann Must Change The Healthcare Business Model is Changing

15. Healthcare System SustainabilityTop 8 Transition Focuses Physician Integration Ability to Handle Payment Risk High Quality Low Cost, including Market/Service Consolidation Integrated IT Infrastructure Workforce/Talent Capturing Covered Lives (Patient Preferred Network) Horizontal Expansion (Delivery Site Development and Integration)

16. The Role of Physician Engagement in Restructuring Our Healthcare Delivery System

17. Health Reform Distilled • Shift to Value Based Medicine Requires • Organizational Structure • Commitment to Evidence Based Medicine • Dedication • Information and education • Partnership QUALITY COST

18. Clinical Integration (CI) Clinical integrationis Integration of Physicians with each other (and often with a hospital or hospital system) on a Clinical basis to • Determine the right and best ways to practice medicine • Commit to practice that way • Commit to mutual accountability • Develop active performance improvement programs to enhance healthcare quality and efficiency Aligned Incentives

19. CI Practical Requirements: Build Trust and Consider a Compact MHMDagrees to: • Maintain primary loyalty to physicians • Negotiate well to align incentives • Include physicians in work and decision making • Provide clear and timely information • Membership Criteria, Quality Measure Scoring • Accountability / Improvement Process • Contract, Financial Performance • Provide physicians with information, services, and education to ensure high quality and ease practice burdens • Seek feedback from its physicians • Maintain confidentiality • Communicate, communicate, communicate • Make meetings worthwhile and engaging • Create leadership training programs

20. CI Practical Requirements: Build Trust and Consider a Compact Physicians agree to: • Practice evidence-based medicine • Uphold regulatory, quality, and safety goals • Report quality data • Meet CI criteria • Come to meetings and performance feedback sessions • Pay attention to information from MHMD • Accept decisions by physicians in MHMD committee settings • Be flexible, share ideas • Collaborate with colleagues and hospitals • Behave as professionals

21. MHMD Clinical Programs Committee Structure Order Set Editorial Board Clinical Ethics & Palliative Care Informatics Peer Review Acute Surgery

22. The Necessary Interrelationship for Change MHMD MHHS

23. The Necessary Interrelationship for Change • MHMD Board of Directors • Clinical Programs Committee “Up and Over” • Surgery • Medicine BOARD SYSTEM QUALITY COMMITTEE • Critical Care Hospital MECs (11) Med Staff

24. Physician Engagement • Participation in hospital operations • Service lines • Clinical Programs Committees • Strategic planning • Governance • Physician Employment • Pluralistic model • SGR • Management infrastructure • Physician culture

25. Physician Engagement • Physician Organization/Health System Organization as Partners • Physician leading physician • Clinical integration • Co-management structure • ACOs - gainshare • Medicare Profitability • Physicians must lead this initiative • Rationalization of duplicate services

26. Physician Engagement • Redesigning the Model of Healthcare to deliver! • patient centered medical home • post acute care services and 30 day readmissions • home healthcare • end of life care • healthcare worker shortage • experiment with new models of care • union issues

27. Physician Engagement • Journey to High Reliability • getting to zero serious safety events • commitment from governance • senior leadership mandate • no excuses accountability • connecting the heart of your employees with quality and patient safety • transparency with your board, physicians, and employees

28. Physician Engagement • Effective Board Relationships • administrative transparency (good news/bad news) • more physician involvement • keep discussions at 50,000 foot level • governance restructuring • educating the board • do not bring issues to the board for which you have no solutions • follow up on big capital expenditure; update proforma performance

29. Physician Engagement • Operational Efficiency • Observation patients • Use of hospitalists • Use of intensivists • Managing LOS

30. Inpatient Quality & Safety Metric Results 50% increase 5% increase BASELINE Order Set Usage e-Order Set Usage Iatrogenic Pneumothorax Events PPE or DVT Events Hospital Acquired Infections Serious Safety Events 68% reduction .5% reduction 12% reduction 13% reduction

31. Order Set ResultsExcluding Top 5% Costs – Jan - June 2011

32. Adult & Pedi ICU Ventilator Associated Pneumonias (VAP)

33. CI Performance (2011)

34. Accountable Care Accountable Care Organization Medicare Commercial

35. Accountable Care Organization Medicare Commercial Exclusive contracting Incentives aligned in reducing LOS and cost Quality and safety goals must be aligned Innovation encouraged and necessary