evaluating physician affiliation network integration a conversation

evaluating physician affiliation & network integration: a conversation for boards & administration Kevin Locke / Dixon Hughes Goodman Tim Hewson / Nexsen Pruet Matthew Roberts / Nexsen Pruet

agenda § Drivers § Models § Lessons Learned § What hasn’t worked? § What’s working now? § Action Planning

drivers § Market Dynamics § Regulatory and Payment Reform § Continuum of Care

market dynamics accelerating physician affiliation and network integration More Care (32 M uninsured, Baby Boomers, Chronic Disease) Higher Quality (P 4 P, Shared Savings, Core Measures) Less Money ($240 B Cuts, $90 B Penalties) “Bottom line, if you attempt to use the same care delivery model moving forward, faced with the magnitude of reductions in forecasted revenue, you will go out of business. ” ~ Michael Sachs, Sg 2

payment reform accelerating physician affiliation and network integration Fee for Service Independent Pay-for. Performance Value-Based Purchasing Bundled Payments Alignment Accountability All Providers Payers Source: Pricewaterhouse. Coopers Shared Savings Global Payments / Capitation

continuum of care accelerating physician affiliation and network integration Source: Sg 2

potential models for physician integration § Employment § Direct § Through wholly owned subsidiary or affiliate entity § Exclusive Contracts/Independent Contractor Agreements § Co-Management/Medical Director Agreements § Clinically Integrated Networks

one size does not fit all… § Situational strategies must be developed. § Hospital and physicians must understand the collective strategic objective and the type of integration must incentivize attempts to achieve that objective. § Lower cost/improved quality are objectives that are supported by the federal government and private payors.

broad spectrum of models to consider ACO High CIN or IPN PCMH System Resources Required HEP Employed Physician Enterprise Relocation Support/Income Guarantee Gainsharing Paying for Call Co-Management Co-Marketing Directorships Voluntary Medical Staff Low Independent Strategic Alliance Venture Arrangement Degree of Alignment Source: Sg 2 Integration

clinically integrated models are accelerating Proposed ACO Structure Readmission Risk/Penalties Co-Management Primary Care Physicians PCMH Specialists $ Other Providers Acute Care Hospital Post-Acute Care $ CIN Proposed Bundled Payment Initiatives Patient Centered Medical Home (PCMH): Clinically Integrated Network (CIN): Accountable Care Organization (ACO): Primary care approach that supports comprehensive, team based care, improved patient access and engagement; serves as “hub” of care coordination; focuses on chronic disease management Acute care hospital, multispecialty physician network and other providers committed to quality and cost improvement, with support from joint negotiated commercial contracts Model to promote accountability for a patient population by improving care coordination, encouraging investment in infrastructure, and redesigning the care continuum around quality Co-Management: Model to align physician incentives around quality, cost and satisfaction with fair market compensation Source: The Advisory Board | Dixon Hughes Goodman

what hasn’t worked? § § Make physicians an offer they can’t refuse One-sided arrangements Command control management style Lack of physician participation in strategic planning process § Lack of physician engagement and/or leadership § Failure to educate physician on compliance and business objectives § Failure to define and measure quality improvements or cost reductions

what’s working now? § Include physician in governance and management § Transparency in affiliation and integration § Continuing education of physicians of what hospitals can and will do vs can’t and won’t do § Joint strategic plan which physicians buy into, understand, and are responsible for implementing

what’s working now? § Cultural integration § Clear definition of goals, metrics and expectations § IT systems to track, measure and report performance § Clinical/financial accountability § Customizing/aligning compensation to organizational goals § Developing physician leadership

co-management model Governance Committees Management Fee Distributions FMV Compensation Physician LLC Hospital Physicians Management Services Investment Performance Metrics Fixed Duties • • Committee Involvement Day-to-Day Management Strategic Plan Development Clinical Care Management Quality Improvement Staff Oversight Materials Management Budget Development Equipment* Staffing* Supplies *Only one of two may be included Source: Dixon Hughes Goodman • • • Clinical Outcomes Patient Safety Satisfaction Operational Processes Financial Performance

clinically integrated network (CIN) Payers and Employers Private Practice Physicians Health System CIN Employed Medical Group Employee Health Plan ONE Network that can Demonstrate Value Hospital Ambulatory Facilities Hospital

clinically integrated network (CIN) § Clinically Integrated Network (CIN) is commonly defined as a health networking together, using proven protocols and measures, to improve patient care, decrease costs and demonstrate value to the market § Generally, the FTC considers a program to be clinically integrated if it performs the following: § Establishes mechanisms to reduce cost and improve quality (enhance value) of healthcare services § Selectively chooses network physicians who are likely to further the value objectives § Invests human and financial capital to accomplish defined objectives

CIN key components Legal Structure & Governance Flow of Funds Contracting Infrastructure Clinically Integrated Network Information Technology Participation Criteria Performance Objectives Physician Leadership

CIN value proposition Health System Clinical Integration (CI) Network Physicians Payers Quality Membership Contracting Information Technology Care Redesign The Value of Clinical Integration to… Health System • • • Enhanced reimbursement for demonstrated quality Transformational care redesign Co-leadership with physicians Reduction in operating costs and waste Demonstrated quality Patients & Communities • • Improved coordination of care Higher patient satisfaction Improved quality and outcomes Enhanced cost efficiency Physicians • • • Source: DHG Enhanced reimbursement for demonstrated quality Long-term viability of private practice Role in leadership and governance Improved network coordination Enhanced patient care and satisfaction

managing risk § Parties must discuss business risk § To hospital § To physician § Parties must discuss legal/compliance § Risk is equally shared

forecasting future developments § Role of medical staff § Employed versus independent physicians § Changes in laws to make integration easier § New reimbursement methodologies § New and integrated alignment models

action planning for your leadership team § Strategic, cultural, and economic assessment of your market § Clear definition of objectives and win-win criteria § Thoughtful consideration of alternative models § Disciplined plan and process for integration