“Should I join?” “Should I stay?” “Should I go?” A Look Into Three Viewpoints of Alignment

1. “Should I join?” “Should I stay?” “Should I go?”A Look Into Three Viewpoints of Alignment Ramona Osborne, CMPE Surgical Practice Preconference October 6, 2013

2. Learning Objectives • Understand key factors in the alignment decision process • Avoid common pitfalls when undertaking your desired alignment strategy • Identify practical steps that will improve physician satisfaction during implementation of your chosen strategy

3. Ohio Valley Surgical Specialists

4. “Should I join?” – Practice ProfileOhio Valley Surgical Specialists • Eight surgeons and one physician assistant • General, thoracic, and vascular surgery • In-house ICAVL accredited vascular laboratory • Governance: Board of Directors, Managing Partner, Executive Director • Compensation - 100% productivity • Implemented EPIC EMR in October 2011 • MGMA Better Performing Practice for four consecutive years • The roots of the practice extend back to the early 1920s

5. “Should I join?” – Market Description • 8 out of 9 general surgeons in primary service area employed by Ohio Valley Surgical Specialists • One acute care hospital in primary service area

6. “Should I join?” Internal Assessment

7. “Should I join?” External Assessment • Passage of the Affordable Care Act • Evolution of State Health Exchanges • No long term SGR fix • Surgeon shortage • Call burden • Certificate of Need restrictions

8. “Should I join?” Preparation and Negotiation • Decision support • Options for affiliation and best fit for group • Strategy - “This is a marathon, not a sprint.” • Staff communication • Timeline • The vote • Pitfalls and frustrations • Role of outside advisors (attorney, accountant, etc.)

9. “Should I join?” Integration with the IDS • Governance • Compensation model • Role of the administrator • Staff • How will we measure success going forward?

10. Lessons Learned • What I wish I knew then • Positive outcomes • Negative outcomes • Impact on referrals • Staff turnover • Surgeon satisfaction • If I had to do it all over again . . .

11. Contact Information Ramona Osborne, CMPE Director of Managed Care Owensboro Health 270-685-7590 Ramona.osborne@owensborohealth.org www.owenborohealth.org

12. Should I Join, Should I Stay, Should I Go?  A Look into Three Viewpoints of Alignment Strategies for Maintaining an Independent Surgical Practice John P. Berlin, MBA, CMPE – Chief Executive Officer, North Florida Surgeons, P.A. Presented at: MGMA Annual Conference, October 6, 2013, San Diego, CA

13. Learning Objectives • Understand the key factors in the alignment decision process • Avoid common pitfalls when undertaking your desired alignment strategy • Identify practical steps that will improve physician satisfaction during implementation of your chosen strategy

14. North Florida Surgeons - Background - Providers • Founded in 1996 as a physician-owned General Surgery practice • Single specialty 1996-2008 • Multi-specialty as of 2008 with over 40 surgical providers in 2013 (General, plastics, hand, otolaryngology, ophthalmologic) Revised Group Strategy/CEO Hired

15. North Florida Surgeons, P.A. – Background – Service Area • Service Area 1996 - 2008: (purple circle) • Service Area 2008 - 2013: (green line) North Florida Surgeons Office Locations

16. North Florida Surgeons- Background – Service Lines and Corporate Structure Comparison • Group model 1996 - 2008: • General Surgeons only • Ad Hoc growth • Shareholders responsible for all votes • Compensation is 100% productivity • Shared expenses on a fixed/variable model. • Seven divisions/offices in three health systems • ER call • PM system only (MEDIC/Athena) • Group model 2008 on: • Multi-specialty surgical with PAs • Managed growth • Executive Committee as key leaders • Compensation is 100% productivity • Shared expenses on a fixed/variable model. • 20 divisions/offices in five health systems • ER call, trauma call, surgicalists • PM/EMR (Allscripts Enterprise) • Attested for Meaningful Use in 2011 • Hospital and lab interfaces

17. Factors Driving Physician Mergers or Acquisitions • Regulatory Impacts: • PPACA • CMS – fee reductions • CMS – compliance • ACOs • 4010/5010 conversion • ICD-10 • Payer Impact: • Rate squeeze on smaller groups • PPACA clinical cost component • Employer retrenchment

18. Factors Driving Physician Mergers or Acquisitions (cont.) • Physician Specific Issues: • Physician recruiting and doctor shortages • Work/life balance issues • Physician strategic vision and business savvy • Desire to avoid the day to day business “hassle” • Advice from business advisors • Market Conditions: • Hospital attitude towards physician acquisition/hospital finances • Number of large groups in the market, region or state • Scale and Scope issues • Referral re-alignment: • Health system acquisition of referral sources • ACOs

19. Factors Driving the Independent Physician Model • Surgeon Mindset: • Physician ownership and entrepreneurial • Compensation is productivity driven • “Lead Huskies” • RVU productivity and compensation above average • Merged/acquired practices are same mindset as base group • Hospital/physician relations: • Collaboration vs. competition • Running successful programs (trauma, surgicalist, co-management) • Alignment of surgeons to health systems • Surgeons holding key hospital leadership roles

20. The Physician Alignment Decision Making Process • Be proactive: • Conduct research into your alignment options • varies by region and specialty • Review your Vision, Mission and how those align with the available options • Develop your roadmap for the short, medium and long term • Look at back up options if the primary option is not feasible • Open up dialog with all potential partners

21. The Physician Alignment Decision Making Process (cont.) • Determine if you will be an acquirer or be acquired: • Do you have the culture to align? • Determine your “best fit” potential partners or suitors • Do you have the resources for alignment, or will your partner provide them? • Is the best partner a physician group, insurance carrier or a health system? • You may not be a “fit” with anyone in the market

22. Steps to a Successful Group Integration • Clear governance policy: • Mergers of equals rarely work – need a clear leadership team in charge • Consistent surgeon contracts and shareholder paths • Merged/acquired practices must have the same mindset/culture as the core group • Avoid pyramid schemes • Understand mergers take time– may be measured in years! • Manage the four key “naysayers” from the acquired group: • Accountants • Lawyers • Consultants/vendors • Office managers

23. Steps to a Successful Group Integration (cont.) • Clear value equation: • Why should they join YOUR group? • Determine the merger’s impact on existing relations with hospitals, insurance carriers and referral sources • Can you show that the benefits (particularly financial) outweigh the costs for both sides? • Sounds great – but payer contracts may prohibit! • Corporate indebtedness: • Assign and allocate existing debt of acquirer and acquired groups up front • Make sure existing tax liability or NOLs are allocated • Put everything in writing!

24. Steps to a Successful Group Integration (cont.) • Aligning benefits: • Is your benefit program provide more attractive cost costs and coverage? • Profit sharing and/or pension plan • Long term disability policy • Compensation Models: • Must be agreed upon in advance • Productivity alignment with a shared ancillary revenue approach • Clear expense allocations • Review for Stark and regulatory compliance

25. Steps to a Successful Group Integration (cont.) • Risk management: • Ensure corporate structure supports an asset protection scheme • Ensure Medical Malpractice risk is either confined or accepted • Exit Options: • Policies are clear and consistent. • Non-compete policy is set by contract and agreed by all • Termination, retirement and/or buy out clauses – strict or lax? • Make sure tail policies are defined

26. Practice Merger Project Management Steps • Negotiations • Credentialing • Human Resources • Payroll • Banking and Accounting • Practice Management System • Technical review • Electronic Health Records

27. Tips for Maintaining Surgeon and Administrator Sanity • Physician “Champions” smooth the path: • Both the acquired group and the acquirer must have administrative and physician “champions” to make sure the integration succeeds. • Get buy in up front for the acquisition from both practices and make sure physician champions continue to express the value of the merger • Show your integration checklist to the physician champions and get their buy in. No surprises! • Make sure the new physician group champion has immediate feedback (as diplomatically as possible) if the “naysayers” are slowing the process • Consider inviting the new surgeons to shareholder or other group meetings, but keep the personalities and meeting agenda in mind

28. Tips for Maintaining Surgeon and Administrator Sanity (cont.) • Administrators – Don’t forget your existing practice: • Make sure you hire coders, claims analysts, payment posters, bookkeepers, and other business office staff with plenty of lead time to train and shake out – they may fail in their probationary period • Keep a close watch on the revenue cycle • Watch out for signs of stress on current staff – many have never worked on a merger • When integrating business office staff from the acquired group, be ready for culture clash and shake outs • When successful, make sure your physicians understand the value of your team: • Develop a bonus pool for the acquisition • Awards and recognition events

29. Tips for Maintaining Surgeon and Administrator Sanity (cont.) • Administrators – Have a plan for the integration: • Have the existing shareholders ensure the administrator role is extremely clear • Set expectations for your timeline and meet or exceed them • If you have documents that need to be reviewed and sign, have those ready as soon as possible • If you think you can go live with PM and EMR at the same time, think again • Do not get into battles with an acquired group’s administrative staff – use your physician champions • This is your real job interview with the new doctors – set expectations up front and be a rock star!

30. Summary • Understand the key factors in the alignment decision process • Avoid common pitfalls when undertaking your desired alignment strategy • Identify practical steps that will improve physician satisfaction during implementation of your chosen strategy

31. Contact Information • John Berlin, MBA, CMPE • Chief Executive Officer • North Florida Surgeons, PA • Telephone: 904-396-1725 • E-mail: jberlin@nflsurgeons.com

32. Practice Merger Tips Handouts • Negotiations: • Conduct due diligence on acquired group • Search on medical licenses, DEA, OIG, etc. • Have sample contract ready on day one. Explain that no deviations are possible • Allocate 60 days to years (!) for this process • Credentialing: • Get credentialing information before contract signed and documents ready before contract signatures are dry. Consider acquiring automated software to handle large volumes of applications • Validate malpractice policies • Include website policies and prepare website bios and photos • Allocate 90-120 days • Human Resources: • Provide employee handbook and brief on benefits • Significant paperwork required to bring on new offices including health, dental, vision, disability, life and other insurances, property and casualty policy, voluntary benefits, pension or profit sharing plan, employee handbook receipt, arbitration policies, etc. • Allocate 30-60 days

33. Practice Merger Tips Handouts (cont.) • Payroll: • In concert with HR on-boarding, complete W-4s, I-9s, background searches, drug screening (if a drug free workplace) • Determine policy in advance for PTO accruals and grandfathering of hire dates • Allocate 30-60 days for this process • Banking and Accounting: • Notify bank and lockbox for payments • Set up on credit card and check processors. Acquire card readers/machines • Walk physicians and office managers through financial policies including accounts payable policies, refunds and write offs • Make sure office managers are aware of cash and insurance policies, including posting • Allocate 30-60 days • Practice Management System: • Add physicians and departments and set up provider schedules • Add/validate most used carriers • Demographic conversion with vendor (if required) • Set up training time and system process • Allocate 60-120 days

34. Practice Merger Tips Handouts (cont.) • Technical review: • In concert with all other steps, determine acquired group network compatibility with all systems • Order equipment as needed • Set up on e-mail, secure text, remote users, firewall configuration, insurance carrier sites, and hospital CDR access for claims representatives, etc. • Allocate 30-60 days for this process • Electronic Health Records: • Set up walkthroughs and demo for physicians and staff. Show existing forms in the system and compare with acquired group notes and forms • Determine what will be converted from existing EMR • Add providers to eRx, CMS, PQRS, MU reporting, hospital and lab interfaces • Interview physicians and set up note templates • Set up transcription or Dragon • Set up patient portal • Set up training sessions for physicians and staff • Allocate 120+ days

35. Should I Join, Should I Stay, Should I Go A Look Into 3 Points of Alignment John P. Sano Practice Administrator / Director of Finance The Vascular Group 518-262-4339 sanoj@albanyvascular.com www.albanyvascular.com

36. THE VASCULAR GROUP“the whole is greater than the sum of its parts” • 19 BOARD CERTIFIED VASCULAR SURGEONS • Located in Upstate New York • 13 HOSPITALS • 10 ANGIO SUITES • 1 Outpatient Angio Facility owned by Group • 1 64 slice CT Scanner owned by Group • 10 VASCULAR LABS (including Mobile Labs) • Independent Research/Education Foundation • 131 Employees

38. How We Function • Team approach • Pairs/Multiple surgeons in the OR • cases done expeditiously and safely • keep the surgeons fresh • “everybody asks for help” • Shared responsibility • Minimizes stress • Objective assessment of results • Continuous self assessment

39. HISTORY • 1990- • Albany Medical Center • Clinical Departments • Anesthesia Ophthalmology • OB/GYN Emergency Medicine • Neurology Pediatrics • Medicine Psychiatry • Family Practice PM&R • Surgery • General, Trauma, Urology, Vascular, etc.

40. HISTORY • 1998 • Albany Medical Center • Faculty Practice Plan (FPP) • Anesthesia Ophthalmology • OB/GYN Emergency Medicine • Neurology Pediatrics • Medicine Vascular • Family Practice • Surgery • General, Trauma, Urology, etc. • Establishment of The Institute for Vascular Health and Disease

41. Role of Administrator • Financial and Operational Director of the Department • Worked under the Governance of the Faculty Practice Plan • Reported to Dept Chair and DOO of FPP • Facilitated needs and issues of MD’s and Department through the Hospital channels • Oversight of multiple departments

42. COMPENSATION • MD’s contracted under Medical College • Reported to Dept. Chair and Dean of Medical School • Received Faculty Appointments • Salaried by Faculty rack • Bonuses negotiated by Dept Chair with head of FPP and Dean • Based on individual productivity and overall performance of both the Department and Faculty Practice as a whole

43. How Does One Decide? • Benefits under Hospital • Fiscal security • Share technical revenue • Less Administrative Pain • More Insulated Life • Benefits of Independence • Fiscally Independent • More Leverage • Outside Venture Options • Separate Pay Scales • More Control of Staff • Potential Improved Collection • Better 401K Plans • No Restriction of Practice

44. Independence vs Security

45. How Does One Decide? • What Are Your Needs? • What is the Political Environment Competition, Leverage, Community Needs • What is Important (Independence vs Stability) • Cohesive Group or Individual Practices • What are the Hospitals Needs

46. Challenges With Independence • Must Be Economically Viable • Must Have Secure Infrastructure • Must Be Willing To Accept Risk • Monitor Fee schedules and Rates • Must Have Vision for Impending Change • Must Establish Alternative (non clinical) Revenue

47. Why We Left • Independence / Growth • Too many restrictions under the governance of the Medical Center • Ability to decide where to practice • Add other Hospital Systems to geographic footprint • To become accountable for Personal income • High Performance / Low Yield • Dean’s Tax based on Net Revenue • Our Departmental profits spread over FPP • Viewed as “undesirable” on paper

48. Why We Left (cont). • Ancillary Revenues • Ability to bill Globally for Vascular Ultrasound Studies • Improved Efficiencies

49. The Transition • Negotiations with Hospital began 2 yrs. prior to separation • PLLC Established • Opportunity to establish our own governance, Operating Agreement, and Compensation plan • MD Credentialing • Hospital Affiliation Negotiated • MD’s remained on Faculty • PLLC remained on Hospital Campus via rented space • Source of income to Hospital • Seamless transition for our patients • Partnership Approach • Non Partner Employment Contracts

50. NEGOTIATIONS WITH HOSPITAL • Explain How You Can Help The Hospital System • Be The “Best Solution” • Remember Metrics: Data, Cost, Outcomes, • Negotiate Honestly, Understand The Needs and Biases of With Whom You Are Negotiating • Fair Market Value Is Defined By Defined Tasks not by Volume (Quality Not Just Quantity)