Clinical Gain Sharing To Improve Clinical And Financial

Clinical Gain Sharing To Improve Clinical And Financial Outcomes OVERVIEW Patent Pending REYNOLDS & COMPANY Customizing Strategic and Financial Solutions One International Place Boston, MA 02110 -2624 (617) 951 -7476 Copyright © 2006. All rights reserved. 333 East 51 st Street New York, NY 10022 (212) 826 -1818

Improving Clinical Outcomes Requires The Design of Standardized Protocols/Pathways and Physician Adherence to Them. 1. Pick a patient condition that is a high priority for performance improvement -- clinical and financial 2. Select a national or hospital-based clinical protocol that reflects evidence-based best practices for that patient condition 3. Identify related opportunities to streamline hospital departmental performance and implement 4. Define relevant outcome measures of clinical and financial performance 5. Compare adherence and outcomes for your hospital with peer group benchmarks, adjusted for severity 6. Set performance targets for your hospital and customize the clinical protocol 7. Document, measure and monitor performance against process and outcome targets 8. Compare outcomes for cases that adhere to the protocol with those that do not 9. Compare outcomes among physicians who treat the condition and regularly share comparative information with those physicians 10. Follow up with selected physicians to reduce variability in practices and outcomes. Copyright © 2006. All rights reserved. 2 REYNOLDS & COMPANY Customizing Strategic and Financial Solutions

Generally, Physicians are Disinclined to Participate Concertedly In Hospitals’ Clinical Process Improvement Efforts. · Most physicians in private practice see their practice incomes threatened by purchasers’ tightening payment policies. · Much of their attention is focused on maximizing revenue in their own practices by treating larger volumes of patients and adding new revenue sources. · Hospitals, on the other hand, have opportunities to improve their clinical outcomes (mortality, complication and readmission rates) while reducing resource consumption patterns if their physicians will take an active role in redesigning the care process and then adhering to the new care plans. · Physicians, however, are understandably reluctant, however, to take time away from their practices to help re-design hospital-based care processes and dilute their professional autonomy when they do not receive any compensation for a great deal of hard work that benefits only the hospital. 3 Copyright © 2006. All rights reserved. REYNOLDS & COMPANY Customizing Strategic and Financial Solutions

Clinical Gain Sharing Provides The Means to Motivate Physicians to Participate. Physicians and hospitals face five related issues: l Affordability: Increasing operating costs and malpractice insurance premiums l Clinical quality of outcomes: Mortality and Complication rates l Payment methods that often don’t cover cost increases l Declining profitability of hospital and physician services l CMS is moving to value-based purchasing policies. Clinical Gain Sharing can produce synergistic results: l Hospital benefits: Ø Improved outcomes, such as mortality and readmission rates, that differentiate services Ø Greater coding accuracy Ø Lower cost per case Ø Increase in market share from differentiated services. l Physician benefits: Ø A share of realized hospital cost savings Ø Increasing reputation for high quality results Ø Better market positioning and increased volume. Copyright © 2006. All rights reserved 4 REYNOLDS & COMPANY Customizing Strategic and Financial Solutions

Publicly Available Clinical Information Systems, Such as Care. Science, Can Identify High Potential Opportunities, as Shown, to Improve Clinical and Cost Outcomes on which to Focus Redesign Efforts. DRG No. Cases Select Clinical Opportunity Index Select Cost Opportunity Index (0 - 37. 0) Patient Condition/Procedure Geometric Mean Cost Per Case Select Comparative Cost Deviation Total Cost Saving Opportunity (0 - 88. 0) 1. Vaginal delivery w/o complicating diagnoses 373 2, 344 15. 2 71. 6 $3, 224 $1, 471 $3, 448, 000 2. Coronary bypass w/o PTCA or card cath 109 426 19. 1 16. 3 $26, 822 $6, 636 $2, 827, 000 3. HIV w/major related condition 489 413 21. 2 16. 0 $13, 423 $2, 943 $1, 215, 000 4. Caesarean section w/cc 370 297 12. 3 29. 1 $9, 014 $3, 100 $921, 000 5. Vaginal delivery w/complicating diagnoses 372 402 32. 1 37. 6 $4, 918 $2, 184 $878, 000 TOP FIVE CONDITIONS/PROCEDURES 3, 882 Copyright © 2006. All rights reserved 5 $9, 289, 000 REYNOLDS & COMPANY 5 Customizing Strategic and Financial Solutions

Our Approach to Improving Clinical and Cost Performance Focuses on Targeting Severity-Adjusted Outcomes for Process Redesign. 1. 2. Patient-centered problems and opportunities to be addressed: · Clinical outcomes, such as mortality, complications and readmissions · Operational inefficiencies, such as discharge planning · LOS and Case Costs. Likely team members: · High volume physicians and Chief of Service · Relevant diagnostics/therapeutics Chiefs · Nurse/Case Manager · Chief Medical Officer · Chief Information Officer · Senior Managers, as necessary. 3. c. Care process characteristics to review for underlying problems and opportunities: · LOS by procedure and admission source/discharge destination · Cases by kinds and frequency of complications · Cases by patient care unit · Cases by timing and opportunities of diagnostics/therapeutics · Physician ordering patterns for diagnostics and therapeutics · Physician LOS patterns by procedure. 4. c. Design changes to improve clinical effectiveness and efficiency. 5. Methods for monitoring adherence to process design and related outcomes. 6 Copyright © 2006. All rights reserved. REYNOLDS & COMPANY Customizing Strategic and Financial Solutions

Our Approach Calls for Distributing Cost Savings to Participating Physicians Only if They Simultaneously Improve Clinical Outcomes. · Using baseline year values for relevant measures of clinical and direct cost performance for the selected patient condition, targets for improvement in these outcome measures are set in conjunction with evidence-based changes in the clinical and operational care process. · During the implementation year, dollars of cost savings associated with the targeted patient condition flow into a pool which will be shared proportionately between the hospital and participating physicians to the extent that clinical outcomes are simultaneously improved and fair market value considerations permit. There will be two physician pools – a maintenance pool for physicians who maintain their already high quality proficiency and an improvement pool for physicians who improve significantly. · Prior to implementation, the definition of fair market value for payments to the physicians will be agreed upon; this definition may involve use of a cap. · Interim clinical and financial results are reviewed quarterly with participating physicians, and process design elements are fine-tuned to improve outcomes. · At the end of the implementation year changes in clinical and case cost outcomes are measured, and cost savings that are correlated with improvements in clinical outcome measures are distributed. · The implementation demonstration goes on for three years for each targeted patient condition to give the team sufficient time to get up the learning curve with respect to clinical effectiveness and economic efficiency. 7 Copyright © 2006. All rights reserved. REYNOLDS & COMPANY Customizing Strategic and Financial Solutions

Our Approach Calls for the Following Criteria to be Satisfied · Clinical and financial transparency of quality indicators: Ø Use of specific, objective, generally accepted clinical indicators Ø Separate calculation for each quality indicator. · Safeguards against adverse impact on patient care: Ø Based on credible, objectively measured medical support Ø Ongoing monitoring and measurement by independent third parties to assess the program’s success and to confirm that the program is not having an adverse impact on clinical outcomes Ø Transparent information. · Safeguards against disproportionate federal health care program costs: Ø Absence of procedures that are disproportionately performed on federal health care program beneficiaries Ø Payments to the physicians based on all procedures with respect to each performance indicator regardless of the patients’ insurance coverage Ø Capping potential savings Ø Calculations based on the hospital’s actual direct costs and not on accounting conventions Ø Absence of steerage of more costly patients to other hospitals. · Safeguards against inappropriate reductions in service: Ø Use of objective historical and clinical measures Ø Use of baseline thresholds. · Meaningful patient and physician disclosure and freedom of choice: Ø Use of a program mission statement Ø Voluntary physician participation Ø Termination of physician participation if non-compliant Ø Disclosure of program in writing to patients. 8 Copyright © 2006. All rights reserved. REYNOLDS & COMPANY Customizing Strategic and Financial Solutions

9 Copyright © 2006. All rights reserved. REYNOLDS & COMPANY Customizing Strategic and Financial Solutions

Our Flow Chart For Launching A Gain Sharing Demonstration Focuses on Six Tasks 1. ● Agree on Focus, Scope and Performance Improvement Targets ● Select: Ø Patient conditions Ø Outcomes to be measured and rewarded · Demonstrate provisions to meet legal requirements 2. ● Identify Planned Changes in Clinical Practices 3. ● Identify Planned Changes in Hospital Operations Copyright © 2006. All rights reserved. 4. 5. ● Agree on: ØImprovement potential for: • Clinical Outcomes • Case Costs Ø Activities of physicians · Set formulas for sharing cost savings ● Assure that data system can measure + monitor performance variables 10 ●Deliver Services ● Measure Performance ● Report quarterly ● Discuss results ● Fine tune processes 6. ● Measure clinical and financial performance ● Assess results ● Distribute cost savings · Report on outcomes REYNOLDS & COMPANY Customizing Strategic and Financial Solutions

Our Preliminary Workplan and Schedule for Completing a Clinical Gain Sharing Cycle are Shown Below. Copyright © 2006. All rights reserved 11 REYNOLDS & COMPANY Customizing Strategic and Financial Solutions