Joshua M. Weaver Polsinelli, PC (214)661-5514 jweaver@polsinelli Ashley E. Johnston

1. Population Health in the Age of Health Care ReformTexas Association for Healthcare Financial Administration Seminar Series - Wichita Falls, TexasMarch 14, 2014 Joshua M. Weaver Polsinelli, PC (214)661-5514 jweaver@polsinelli.com Ashley E. Johnston Gray Reed & McGraw, PC (469) 320-6061 ajohnston@grayreed.com

2. Agenda What is Population Health? Why the Focus on Population Health? Current Trends Potential Delivery Models

3. What is Population Health? • Population Health (“PH”) is a measurement of overall health outcomes across a defined population. It is the optimization of the health of a defined population. • The goal of population health management (“PHM”) is to keep a patient population as healthy as possible, minimizing the need for expensive care such as ED visits and hospitalizations. • Focus on needs of the population by focusing on the individual needs of the patient, from wellness and prevention to disease management • Care for entire population, not just those who seek care

4. What is Population Health? • Patient populations can be categorized into one of three segments: • Low risk patients (healthy or well-managed patient) [60%-80%] • Rising-risk patients (multiple risk factors) [15%-35%] • High-risk patients (complex illness, co-morbidities, and psychosocial problems) [5% - yet accounts for the majority of health care spending] • Different goals based upon risk of patients • Low-risk Population Goal: maintain population in healthy state through prevention and wellness programs • Rising-risk Population Goal: to avoid unnecessary care and prevent migration to the high-risk category • High-risk Population Goal: providing intensive, comprehensive and proactive management so that episodic and expensive care can be avoided

5. What is Population Health? • Different views of what is a “population” • Clinical View: those enrolled in the care of a specific provider, hospital system, insurer, or network • Public Health View: those in the geographic community • Illness-Specific View: Populations with Specific Illnesses • Ex: Cardiac, diabetes

6. What is Population Health? • Requires a significant change in way of thinking and in the practice patterns of providers. • Instead of doing more to earn more, providers will be rewarded for efficiency and quality.

7. Key Characteristics of Population Health • Organized system of care; • Use of multidisciplinary care teams; • Coordination across care settings; • Enhanced access to primary care; • Centralized resource planning; • Continuous care • Patient self-management education • Apps (numerous apps that track care, medications, lifestyle, health • Group visits • A focus on health behavior and lifestyle changes; • Use of health information technology • Importance of Integration

8. Why the Focus on Population Health?

9. US Health Care is Poor Quality and High Cost • 250,000 deaths per year due to medical error • US quality ranks low when compared to other developed countries • Health care comprises 18% of GDP . . . and increasing • $2.5 trillion spent in 2009*; Projected growth to 4.6 trillion by 2020** • “Waste” in 2009 = $765 Billion (30% of total): • $210B - unnecessary services • $190B - excessive administrative costs • $130B - inefficiently delivered services • $105B - prices too high • $75B - fraud • $55B - missed prevention opportunities • 43 Million people in Medicare today; 78 Million by 2030 (last year of baby boomer eligibility) • $520B Medicare spending in 2010; $970B by 2021** • By 2019, Medicare rates projected to be below current Medicaid rates* Sources: *Commonwealth Fund; Institute of Medicine, 2011; Medicare Office of Actuary; ** Kaiser Family Foundation

10. Why the Focus on Population Health? Total Healthcare Expenditure as % of GDP United States vs. the World (Source: World Bank)

11. Healthcare in Crisis Average spending on health per capita • In 2010 we spent $2.6 trillion on health care, or $8,402 per person. • The share of economic activity (GDP) devoted to health care has increased from 7.2% in 1970 to 17.9% in 2009 and 2010. • Health care costs per capita have grown an average 2.4 % faster than the GDP since 1970. • Half of health care spending is used to treat just 5% of the population (another argument for PH). Source: Commonwealth Fund National Scorecard on U.S. Health System Performance, 2011.

12. Examples of High Costs Source: Washington Post (March 26, 2013)

13. Examples of High Costs Source: Washington Post (March 26, 2013)

14. Examples of High Costs Source: Washington Post (March 26, 2013)

15. Examples of High Costs Source: Washington Post (March 26, 2013)

16. Why the Focus on Population Health? • Affordable Care Act • Expansion of insurance coverage (individual mandate, Medicaid expansion, insurance exchanges) • Provisions aimed at improving quality (CMS Center for Medicare and Medicaid Innovation, Patient-Centered Outcomes Research Institute) • Provider incentives to take responsibility for outcomes and quality (ACOs, HACs, VBP, Readmission penalties, etc.) • Community Health Needs Assessments • SGR Repeal and Medicare Provider Payment Modernization Act of 2014 (being considered by the House of Representatives) • Repeals the SGR and replaces it with a system focused on quality, value and accountability • Rewards value over volume • Incentivizes movement to alternative payment models • Expands use of Medicare data for transparency and quality improvement

17. Why the Focus on Population Health? Total: Over 6% of total Medicare payments at risk !!!

18. What Options Are Currently Available? Current Trends

19. New Model Objectives Change will happen Those who wait will be left behind No single solution for everyone, but Quality, satisfaction and lower cost required! The “Triple Aim” is a framework developed by the Institute for Healthcare Improvement that describes an approach to optimizing health system performance. It is IHI’s belief that new designs must be developed to simultaneously pursue three dimensions, which called the “Triple Aim”: Improving the patient experience of care (including quality and satisfaction); Improving the health of populations; and Reducing the per capita cost of health care.

20. Key Considerations for all Models • Each Patient Population Will Be Different and Will Require Different Approaches • Key considerations: • What does your patient population look like? • How can you best serve this population? • What is your goal? • The inevitable – how will you get reimbursed?

21. Key Considerations for all Models • In any situation, there must be an integrated system. • Will require collaboration among health care providers • Must develop relationships with community institution outside health care setting • Work with public health agencies, social service agencies, schools, etc. • Technology / Information Exchange • Education

22. How Do You (or Can You) Integrate Population Health Into Current Delivery Models?

23. Current Available Delivery Models • Accountable Care Organizations • Clinically Integrated Networks • Bundled Payments • Narrow Networks • Patient Centered Medical Homes • Pay for Quality • Service Line Co-Management

24. How Well Do the Current Models Meet the Goals? Current / Potential Delivery ModelsKey Considerations More Effective Less Effective Level of Integration

25. Accountable Care Organizations • An accountable care organization is a healthcare organization characterized by a payment and care delivery model that seeks to tie provider reimbursements to quality metrics and reductions in the total cost of care for an assigned population of patients. • Section 3022 of ACA allows ACOs to receive “shared savings” payment • NOT a pilot/demonstration • Goal • Break down silos between Part A and Part B payments. • Improve quality, improve patient experience and decrease cost for a DEFINED POPULATION

26. Clinical Integration • Clinical integration is a type of operational integration that enables patients to receive a variety of health services from the same organization or entity, which streamlines administrative processes and increases the potential for the delivery of high-quality healthcare. • Both an Antitrust and Operational Concept • Physician competitors who do not share substantial financial risk but engage in clinical integration also may use single source payor contracting if: • Establish and implement mechanisms creating high degree of interdependence and cooperation in order to control costs and assure quality • Create significant efficiencies and improvement in quality

27. CIN Governance – Board and Committees CIN/ACO Entity (New) Health System CI Services HIE, Portals, Messaging, Care Management, Credentialing Governing Board CI and other contracts/ funds IT Quality Finance Other Payers Dr./ Groups Group Hospital Other Prov. FFS Participation Agreements (provider services) CIN/ACO Example: Legal, Relationship & Governance Structure

28. CI Practical Requirements Physician Governance DVT/PE JOC Surgical Home JOC Pediatric Head CT JOC End of Life Care JOC Order Set Editorial Board Clinical Ethics & Palliative Care Informatics Peer Review Acute Surgery

29. Narrow Networks/Bundled Payments • Narrow Networks (NN): With narrow network plans, patients are only allowed to see physicians in the narrow network. • Intel and Presbyterian Healthcare Services’ narrow-network, accountable care-style arrangement for Intel’s employees in New Mexico • Bundled Payment (BP): Defined as the reimbursement of health care providers (such as hospitals and physicians) on the basis of expected costs for clinically-defined episodes of care. • Allocates risk to providers

30. Employers Bearing More Risk, Turning to Providers as Allies Why the Focus on NN/BPs?Shift to Self-Funding Employer Interest in Provider-Oriented Strategies Percentage of Self-Insured Employers Partially or Completely Self-Insured Adopt new accountable payment models Contract directly with hospitals, physicians, ACOs Offer incentives for care coordination In Place in 2013 Planned for 2014 Offer performance-based payments Employers want a reliable product with predictable and stable costs

31. Network Provider Agreement Group / Health System / Provider Commercial Payors Network Provider Agreement Employers Participating Network Provider Agreement • Physician Groups • Physician Services • Other providers • Acute Care Hospitals • Rehab Hospitals • LTACH • HHA • SNF • Health System or Hospitals • Acute Care Hospitals • Rehab Hospitals • LTACH • HHA

32. Current Trends • Delivery System Reform Incentive Payment (“DSRIP”) Program • Clinical Preventative Services • Group Visits • Technology Advancements – Options for Continued Improvement • Discharge Information • Patient Education • Patient Reminders etc.

33. Key Legal Considerations for all Models • No one size fits all solution. • Structural Options • Forming the Entity • Separate entity required? • Tax and antitrust considerations • Determination of participants • What types of providers? • How to structure physician participation (ownership, governing body, committees, compensation) • Fraud and abuse/compliance considerations • Be wary of compensation stacking (i.e., multiple relationships with same providers)

34. Key Legal Considerations for all Models • Tax Issues: Tax Exemption, Unrelated Business Income, Private Inurement & Benefit • Antitrust issues: FTC/DOJ ACO Antitrust Enforcement Policy • Peer review privilege • Clinical Pathway and Protocol Development • Contractual commitment • Active physician/provider participation • Create, implement, review • Metrics and Scorecards • Contractual commitment • Clearly defined “rewards & punishments” • Proactive enforcement

35. Key Considerations for all Models • What Physicians are in and out? • Who are the Physician champions? • Physician leadership in development and implementation is key. • “Only Engaged and Aligned Physicians need apply” • Accredited Investor Inquiry

36. Discussion

37. Joshua M. Weaver (214) 661-5514 jweaver@polsinelli.com Ashley Johnston (469) 320-6061 ajohnston@grayreed.com • Josh and Ashley provide counsel to health care providers on complex operational, transactional and compliance issues. They have experience advising hospitals, ambulatory surgery centers, independent diagnostic testing facilities, laboratories, pharmacies, physicians and other health care providers on various issues, including matters implicating the Federal Anti-Kickback Statute, the Physician Self-Referral ("Stark") Statute, the Texas Illegal Remuneration Statute, The Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), the False Claims Act, and the Emergency Medical Treatment and Active Labor Act ("EMTALA"), among many others. Josh and Ashley also advise clients with respect to reimbursement issues and payor audits. Their transactional experience includes drafting and negotiating a variety of health care contracts, including professional services agreements, physician employment agreements, asset purchase agreements, management and co-management agreements, business associate agreements, operating agreements, and equipment and space leases, among others. • Josh and Ashley also assist clients in the formation and syndication of hospitals, ASCs, joint ventures, pharmacies, and laboratories. • Josh and Ashley are both Board Certified in Health Law by the Texas Board of Legal Specialization.