Massachusetts Medical Society

Transcription

1 Massachusetts Medical Society Physician Employment Options Webinar October 10, 2013 Key Questions for Session 1. What market factors are causing an increase in physician employment? Is it all economics? 2. Is there only one type or method of employment? What are the options/ alternatives? 3. What should physicians look for in an organization when considering employment by a health system/ hospital? 1 1

2 Employment Continues at Unprecedented Pace Percentage of U.S. Physician Practices Owned by Physicians and Hospitals, % 70% 60% 50% 40% 30% 20% 10% Hospitals Are Going On a Doctor Buying Binge... - May 15, % Hospital-Owned Physician-Owned Source: Medical Group Management Association (MGMA) Physician Compensation and Production Survey, Clinical Integration Is Driving Physician Employment Full Employment 78% Volunteer Medical Staff Paid Directorships Clinical Comanagement Medical Services Organization Foundation (CA Hospitals) Other 2% 10% 14% 25% 63% 67% 0% 10 % 20% 30% 40% 50% 60% 70% 80% 90% N = 258 Multiresponse Hospitals planning to employ more physicians in the next 12 to 36 months. No 26% Hospital leaders reporting an increase in requests for employment from physician groups. No 29% Yes 74% Source: Physician Alignment in an Era of Change, HealthLeaders Media, September Yes 71% 2

3 Health Systems are Aggressively Building Scale Physicians Organization A (Four-Hospital System) WA PA Physicians Organization C (Five-Hospital System) Est. CO Est. Physicians Organization B (11-Hospital System) FL Physicians Organization D (11-Hospital System) Est Est. Source: ECG client case study examples. 4 What is Driving Physician Employment/ Consolidation? Changing Payment and Delivery Models Private Practice Economics Early Career Physician Preference Access to Capital Emotion and Uncertainty New payment and delivery models that put reimbursement at risk and emphasize value over volume are driving health systems to build and expand financially integrated physician organizations. In most regions, professional fee income is insufficient to cover rising overhead costs of a practice and ability to pay competitive compensation to physicians and other providers in the practice. Majority of physicians emerging from training programs are reluctant to join a private practice because of the uncertainty and seek financial security in a health system (or uniquely large medical group). Right or wrong, most of the capital sits in the hospitals/ health systems which is driving independent physician practices to join in order to gain access to infrastructure and be part of the growth. The truth is that while many point to healthcare reform as the reason, much of the consolidation is attributed to uncertainty and emotion-driven transactions. 5 3

4 How is it Different From Waves of Employment? Characteristics of 1990s Physician Employment Trend Focus on primary care. Large, guaranteed compensation Large acquisition costs, including good will. Health systems unable to effectively organize and manage practices. Large acquisition costs. Hospital-centric strategies. Characteristics of Current Physician Employment Trend Primary care is a priority but full spectrum of specialists also targeted.. Incentive compensation plans that include productivity and quality metrics. Acquisition costs limited to hard assets. Gradual emergence of effective system-based physician organizations (verdict is still out). Acknowledgement that clinical integration will fail without true partnership with and leadership of physicians. 6 Physician Shortage Will Intensify Competition for Talent Projected Physician Supply and Demand Active Physician FTEs (Thousands) Physician Supply (All Specialties) Physician Demand (All Specialties) Source: AAMC Center for Workforce Studies, June 2010 Analysis. 7 4

5 Physician/Hospital Alignment is Not New Less Integrated More Integrated Limited Recruitment Assistance Location assistance and relocation expense. Start-up support (e.g., salary guarantee). Liability coverage assistance. Service Lines Centers of Excellence. Clinical institutes. Engaged physicians in a formal structure for a specific program. Administrative Agreements MSOs Shared-Risk Arrangements Medical directorships. Department and program chairs. Management On-call Medical executive positions. Exclusive coverage Centralized/ practice management services. A la carte menu of services to practices. Purchased services agreements (FMV). Freestanding or hospitalbased MSO. PHO/IPA risk contracts with payors. Bonus/ withhold contracts with employers. Pay-forperformance Payor guarantees. Supply chain management programs. DRGspecific bundled payments. Hospital provision of in-kind services for cost savings. Equity Joint Ventures Ambulatory surgery centers. Diagnostic imaging centers. Hospital in a hospital. Procedure labs. Medical office buildings. Specialty hospitals. Retail clinics. Comanagement Agreements Formal arrangements under which a physician group comanages selected sites and/or programs with a hospital. Administrative only or combined with a PSA. PSAs/Leased Arrangements Practice continues to employ physicians. Hospital/ system owns revenue stream and nonphysician costs. Alignment of financial interests through combined resources. Direct Employment Individual employment Direct to hospital or controlled practice. Asset acquisition. Inter-entity transfers and funds flow models. DRAFT 782\90\222216(pptx) 8 The Pressure to Build a More Integrated Model is New At a minimum there is pressure to achieve clinical integration which is causing most health systems to want financial integration. Less Integrated More Integrated Clinical Integration On Medical Staff Information Sharing/EMR PHM Performance Financial Integration No Financial Relationship Shared Risk Arrangements Employment DRAFT 782\90\222216(pptx) 9 5

6 Is Consolidation Improving Care Coordination? Massachusetts AG Report; April 24, 2013 Performance Risk without Incentives for Coordination Providers are taking on increased performance risk under extremely complex contracts that lack consistency in incenting providers to coordinate care, manage costs, and successfully take on risk. Insurance Risk without Mitigation by Health Plans Providers are taking on increased insurance risk without consistent mitigation by health plans. Contracts between health plans and providers vary widely with respect to protecting against extraordinary claims and adjusting for the health status of patient population. Alignment Unexplained by Care Coordination Providers are aligning in ways that are not explained by care coordination or risk contracting requirements..provider consolidation and alignments have significant market implications particularly where consolidation may undermine efforts to promote value-based decisions by purchasers. 10 Three Common Vantage Points for Physicians Today Limited Choices The practice is not financially strong, and full financial integration with either a hospital/health system or a super group (with significant reserves and contracts with hospitals and payors) is necessary. Incentive payments from ACO insufficient. Independent But Involved The practice is financially strong due to a lean cost structure and good payor rates through a network, including risk-based contract incentives, and wishes to remain actively involved in population health management but otherwise continue to be independent. Proactive Posture and Ready for Growth The practice is financially strong for steady-state mode but wishes to proactively address declining revenue streams, as well as grow and further develop clinical programs with a hospital, without the burden of running the business of an independent practice. 11 6

7 Hospital Vantage Point When considering physician employment, hospital leaders must have a rationale that fits with the hospital/system direction. Strategic Is employment part of a broader integration strategy or a tactic to solve specific problems? How does employment complement other strategies regarding outreach, program development, and outpatient service development? How will the private medical staff respond to employment? Do local medical groups have the capacity and desire to recruit new physicians? For hospitals/systems with little or no employment experience, does the right infrastructure exist? Tactical Is there a clear need for a physician in the community? Is employment the optimal solution, or can we provide recruitment support? Do the terms of employment ensure mutual success? 12 Ability to Provide Quality Care Trumping Economics When Considering Alignment with Hospital? The core dissatisfier was whether physicians went home at night thinking they delivered good care or whether they were blocked from doing so because of time pressures, EHR problems or simply being overwhelmed with administrative work. -- October 2013 Report: The RAND Corporation, American Medical Association, Factors Affecting Physician Professional Satisfaction and Their Implications for Patient Care, Health Systems and Health Policy,

8 Direct Employment of Physicians by Health System Less Integrated More Integrated Limited Recruitment Assistance Location assistance and relocation expense. Start-up support (e.g., salary guarantee). Liability coverage assistance. Service Lines Centers of Excellence. Clinical institutes. Engaged physicians in a formal structure for a specific program. Administrative Agreements MSOs Shared-Risk Arrangements Equity Joint Ventures Comanagement Agreements Medical Centralized/ PHO/IPA risk Supply chain Ambulatory Formal directorships. practice contracts with Individual management employment surgery arrangements management payors. programs. centers. under which a Department services. physician and program Bonus/ DRGspecific imaging Diagnostic group chairs. A la carte withhold menu of contracts with Direct bundled to hospital centers. or comanages Management selected sites services to employers. payments. practices. controlled Hospital practice. in a and/or Pay-forperformance provision of a hospital. Hospital hospital. programs with On-call Purchased Asset acquisition. services in-kind Procedure Medical agreements services for labs. Administrative executive (FMV). Payor only or Inter-entity cost savings. guarantees. Medical transfers office and combined with positions. Freestanding buildings. a PSA. funds flow models. or hospitalbased Specialty MSO. hospitals. Exclusive coverage Direct Employment Retail clinics. PSAs/Leased Arrangements Practice continues to employ physicians. Hospital/ system owns revenue stream and nonphysician costs. Alignment of financial interests through combined resources. Direct Employment Individual employment Direct to hospital or controlled practice. Asset acquisition. Inter-entity transfers and funds flow models. DRAFT 782\90\222216(pptx) 14 PSA/ Lease Arrangements Becoming Popular Alternative Less Integrated More Integrated Limited Recruitment Assistance Location assistance and relocation expense. Start-up support (e.g., salary guarantee). Liability coverage assistance. Service Lines Centers of Excellence. Clinical institutes. Engaged physicians in a formal structure for a specific program. PSAs/Leased Arrangements Administrative Agreements MSOs Shared-Risk Arrangements Equity Joint Ventures Medical Centralized/ PHO/IPA risk Supply chain Ambulatory directorships. practice contracts with management surgery management Practice payors. continues programs. to centers. Department services. and program employ Bonus/ physicians. DRGspecific Diagnostic imaging chairs. A la carte withhold menu of contracts with Management Hospital/system bundled owns centers. services to employers. payments. practices. Hospital in a revenue Pay-for- stream Hospital and hospital. On-call Purchased performance provision of nonphysician costs. services in-kind Procedure Medical agreements services for labs. executive (FMV). Payor Alignment of cost financial savings. guarantees. Medical office positions. Freestanding buildings. interests through Exclusive or hospitalbased MSO. combined resources. hospitals. Specialty coverage Retail clinics. Comanagement Agreements Formal arrangements under which a physician group comanages selected sites and/or programs with a hospital. Administrative only or combined with a PSA. PSAs/Leased Arrangements Practice continues to employ physicians. Hospital/ system owns revenue stream and nonphysician costs. Alignment of financial interests through combined resources. Direct Employment Individual employment Direct to hospital or controlled practice. Asset acquisition. Inter-entity transfers and funds flow models. 15 8

9 Organizational Integration Is Becoming a Key Factor Multispecialty Medical Group Physician-Physician Integration Single Specialty Medical Group Virtual or Clinically Integrated Group Group Practice Without Walls IPA Solo Practice Independent Medical Staff Privileges Only Physician Hospital Organization (PHO) or IPA Support MSO Interoperable EPM/EHR Clinical Integration Support Full Service PSA Employed Medical Group Physician-Hospital System Integration 16 What To Look for When Considering Employment 1. Balance of base salary and well-defined incentive components. 2. Transparency and ability to access standard performance reports on a regular basis for the practice and the health system. 3. Organization of the physicians within the health system/ hospital near and long term. 4. Streamlined decision-making within the organization. 5. Ability to co-manage clinics, ambulatory care services and inpatient units (where applicable). 6. Evidence of hospital-physician partnership from the board room to the front line of a clinic. 7. Service line development and the political willingness to break down barriers between specialties. 8. High performing practice management Infrastructure to support the physicians. 17 9

10 Hospital-Employed Specialty Pods Hospital-employed specialty pods entail distinct employment arrangements but often include dedicated oversight across specialties. Support services may be decentralized based on special needs or negotiated requests. Hospital CEO Physician Advisory Board Administrator Surgery OB/GYN Cardiac Surgery Primary Care Administrative Support Services (HR, Finance, Revenue Cycle, etc.) HR Billing 18 Employed Multispecialty Group The hospital-employed multispecialty group model entails recruiting and employing physicians under one integrated structure. Hospital CEO Physician Advisory Board Administrator Multispecialty Group Family Practice Internal Medicine OB/GYN General Surgery Neurosurgery Infectious Disease Orthopedics Medical Oncology Others Administrative Support Services (HR, Finance, Revenue Cycle, etc.) 19 10

11 Hospital-Employed Network Model The typical hospital employment model is transforming into one that has dedicated oversight and infrastructure but often segregates the physicians by service focus. Hospital CEO Physician Network CEO Network Planning Clinical Coordination Multispecialty Medical Group Dyad Leadership Model Internal Medicine Family Practice Pediatrics General Surgery OB/GYN Urgent Care Pediatric Network Dyad Leadership Model Cardiac Surgery Emergency Medicine Endocrinology Gastroenterology Nephrology Neurology Faculty Physicians Dyad Leadership Model Family Medicine Internal Medicine OB/GYN Surgery Administrative Support Services (HR, Finance, Revenue Cycle, etc.) 20 Adult Specialists Adult Hospitalists Cardiac Surgery Medical Oncology Neurology Neurosurgery Orthopedic Surgery Pain Management Radiation Oncology Urgent Care Gauging Levels of Integration Within the System Common Compensation Plan Tighter Integration Compensation Plan Looser Integration Physicianor Specialty- Specific Plan One Governing Body Governance Structure Separate Governing Groups Sole Executive Director Management Structure Several Directors Reporting to Executive Director Shared Support Services Infrastructure Specialty Support Services Streamlined Patient Experience Clinical Coordination Patient Self- Management DRAFT 782\90\222216(pptx) 21 11

12 Gradual Shift to Value for Compensation Plans Illustrative Transition From Productivity-Centric Plan Current Plan Years 1 to 2 Years 3 to 5 Years 5-Plus Nonproductivity Performance Pool Nonproductivity Performance Pool Production Incentives 100% Production 100% Production Production Guaranteed Salary The plan is assumed at 100% production. A major cultural shift is required in the transition. Data collection and reporting is inadequate. 100% production plan continues. Performance measure data collected and tested. Shadow reports created. Work group created to identify nonproductivity metrics and tie them to compensation pools. Production compensation reduced. Funding established for nonproduction pools. Nonproduction incentives grow every year and are continuously evaluated and improved. Transition completed. Potential combination of production, nonproduction, and guaranteed salary components. 22 Are PSAs an Alternative or Variation of Employment? PSAs have become an increasingly popular model nationally as physicians and hospitals seek to develop arrangements that: Allow both entities to remain independent but provide a vehicle for alignment across several key dimensions. Strategy and governance. Economics. Management and operations. Are relatively easy to implement (and unwind) and do not require any change in corporate structure. Can be used to test the waters in pursuit of a more integrated structure. Create a high level of transparency and manageable risk/reward for both parties. Can be structured to incentivize an increased level of care coordination and focus on efficiency that will be required by new payment and delivery models

13 PSA Overview Professional and Technical Fees 1 Payors Board Board Hospital Aggregate Compensation Per WRVU Payment Joint Operating Committee (JOC) PSA Professional Services Physician Group Neurology Provider Compensation 1 Professional fees may be billed and collected directly by the Hospital or transferred by assignment from the Physician Group. DRAFT 782\90\222216(pptx) 24 PSA Implications for Hospital Payors Board Hospital JOC PSA Board Physician Group Hospital would own professional fee revenue (either through direct billing or assignment from the Physician Group). Hospital can contract back the billing and/or collections function to the medical group (or third party) depending on what is most efficient. Hospital may lease clinical support staff from the Physician Group (if not already employed by the Hospital). Leased or employed staff provide services under hospital supervision. Hospital leases space and equipment from the Physician Group (if applicable). Hospital governance structure remains unaffected. DRAFT 782\90\222216(pptx) 25 13

14 PSA - Implications for Physician Group Payors Board Hospital JOC PSA Board Physician Group Continues as an operating entity and maintains practice organizational and governance structure. Continues to employ providers (physicians and extenders). Is responsible for the distribution of individual provider compensation from an aggregate lease payment made by the hospital. Maintains responsibility for: Income distribution. Hiring and termination of providers. Clinical practice quality. Is able to assume responsibility for leased employees once the arrangement ends. 26 Direct Employment Potential Benefits and Risks Benefits More financial security (i.e., base salary component). Little to no legal barriers to accessing resources of the health system. Formally part of a large organization with potential ability to shape strategy. Permanent relationship not a contracted relationship. Risks Disorganized physician enterprise model of the health system (i.e., just another employee). Loss of autonomy/ independence. Potential lack of parity for physician compensation loss of control to distribute. Permanent relationship not a contracted relationship

15 PSAs Potential Benefits and Risks Benefits More autonomy than employment. Ability to distribute income independently. Shift of financial risk for nonphysician costs. Test drive the relationship and buy time as the health system becomes more organized and market develops. Risks Less financial security than employment. Legal barriers remain for practice growth and access to capital. Contracted relationship with a term that may not line up with market developments. Set pricing/ payment rates that may fall behind market if not structured well. 28 Key Take Aways, Perspective and Predictions Integrated Networks Undervalued Highly integrated networks will continue to rise in popularity as physician employment is expensive and not desired by most established practices. Stark and Anti Kickback Laws will be Relaxed Many of the laws and regulations are unquestionable barriers to achieving clinical integration. Slow Shift to Value While many trumpet value as the reason for consultation, there is little evidence that shows the connection. More Physician Lead Health Systems With a pipeline of early career physicians that understand the business of healthcare, more health systems and hospitals will be lead by physicians. Nearing End of Provider-Based Clinics Notable revenue is generated in provider-based clinics which CMS will eventually phase out. This will put more economic stress on health systems and their physician enterprise. Centralization of Services While not popular, it will become imperative to centralize core services in the health system, including practice management services

16 Mass Medical Society: Guide to ACOs 30 Mr. Christopher T. Collins Principal Phone: