Driving Value Through Clinical Integration

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1 Driving Value Through Clinical Integration How Independent Physician Groups and Independent Practice Associations (IPAs) can remain independent and profitable in a changing healthcare reimbursement environment November Lippincott Drive Marlton, NJ

2 The challenge to remain independent under the ACA Although the passage of the Affordable Care Act (ACA) in 2010 has resulted in more insured Americans about 10 million to date it has also created new challenges for independent physician groups and IPAs. Under the current Fee-for-Service (FFS) model, payors created volume-based provider economics, where providers were paid each time they delivered a service. The new approach is accountable care, a model that places the focus on value over volume. Payment is tied to patient outcomes and appropriate use of healthcare resources. Value-based (VB) payment can take many forms: pay-for-performance (P4P), for example, or bundled payments. FUTURE STATE Projected Mix of Payment Models within Organization Among payors who are other than 100% FFS only FFS 56% 42% 32% 18% 19% Capitation 17% 14% 18% P4P Episode of Care/Bundled Global Payment Other (e.g. Shared Savings) 10% 8% 6% 3% 12% 8% 5% 14% 10% 7% Today *Source: McKesson Health Solutions, years from now 5 years from now 1

3 Doctors in small and large groups or traditional IPAs are not only subject to declining reimbursements and a reduction in FFS patients, they face increasing financial and time burdens, as they struggle to adopt new tools of medical practice, such as electronic health records (EHR). Because of the need for infrastructure investment, physicians may feel pressured to accept hospital employment as networks become more narrow. And with the increasing need for documentation for virtually every aspect of care, many doctors are frustrated and overwhelmed. As Dr. Fred Pelzman stated in a Medpage Today blog post about the new healthcare environment, Those of us who have been doing this for a long time worry that this is going to become just another version of some monitor looking over our shoulders at what we are spending while we care for patients, and telling us what we can and cannot do to take care of them. 1 While we recognize that ultimately there is a business side to healthcare...many of us fear that linking our practice of medicine to the sometimes unavoidable and messy nature of healthcare delivery, with the ultimate goal of saving money, creates a paradigm in which the practitioner may be pressured to avoid providing care they 1 think is necessary and appropriate. But whether physicians are ready or not, the ACA is driving change across the entire healthcare landscape. At the heart of health care improvement is the so-called 2 Triple Aim : improved experience of care for the patient, improved overall health for the community and lower overall costs, with a network of collaborating physicians at the core of care delivery. Although providers bear a greater portion of clinical risk under the new model, they are better positioned than payors to make proactive clinical decisions and appropriate tradeoffs. For the first time, providers have the opportunity to benefit from more cost-effective health outcomes, and many physician groups and IPAs have already been dipping their toes in the Accountable Care waters. In July 2012, a significant number of Medicare Accountable Care Organizations (ACOs) were new entities formed of independent physicians (with or without 3 hospitals) coming together through some type of virtual aggregation. Today in 2014, according to the New England Journal of Medicine, there are 361 ACOs contracting with Medicare and hundreds of ACO-like contracts in the private sector. 4 1 Pelzman FN. The Promise and Perils of ACOs blog Building the Patient-Centered Medical Home MedPage today October 14, The Institute for Healthcare Improvement descibes the"triple Aim" as an approach to optimizing health system performance through the pursuit of three dimensions - improving the patient experience of care (including quality and satisfaction); improving the health of populations; and reducing the per capita cost of health care. 3 Oliver Wyman, 2012 The ACO Surprise, p2 4 Casalino LP, Accountable Care Organizations The Risk of Failure and the Risks of Success. 2014, N Eng J Med. 371;18: Or we can go back to the primary reference cited: McClellan M, White R, Kocot L, Mostashari F. How to improve the Medicare accountable care organization (ACO) program. Washington, DC: Brookings Institution, June

4 The move to value is changing the treatment paradigm patient populations at a fixed reimbursement rate, reflecting historical costs and adjusted for population-specific risk. If a medical group is able to deliver that care for less than the target reimbursement, they share in the savings, either as part of a risk-sharing program or pay-for-performance. Providers have always viewed high quality care as an imperative, but traditional feefor-service contracts were never designed to support proactive care and disease management. Today, physicians need to think differently about their medical practice, learning how to help their patients manage their chronic illnesses to avoid acute episodes, for example, or identifying which patients in their practice are By focusing on the value of the health care given and the well-being of the patient instead of the volume of services provided, value-based contracts can improve quality, reduce overall costs, and improve providers financial performance but only if they are able to work together and coordinate care. 5 Recent data show that this approach appears to be working. A report from the Congressional Budget Office (CBO) in late August showed that 10-year Medicare cost projections have declined every year for the last six years in a row, with a difference of about $95 billion between the most recent projection of Medicare s 2019 budget and the one four years ago. Part of this reduction is attributed to a change in behavior by health care providers. According to a New York Times article, Medicare beneficiaries are using fewer high-cost health care services than in the past taking fewer brand-name drugs, for example, or spending less time in the hospital. These changes have dominated the downward estimate revisions since NIHCM Foundation, The Concentration of Health Care Spending, NIHCM Foundation Data Brief, July NY Times August 27, Medicare: Not such a Budget-Buster Anymore. 3

5 An analysis of the results of the effect of global budgets (that is value-based rather than traditional fee-for-service) in Massachusetts compared with traditional plans seems to bear this out. 7 Compared with similar populations in other states, claims spending under global budgets was slower over the four-year period between 2009 and 2012, mostly driven by cost savings in the outpatient setting, and explained by both lower fee schedules and reduced utilization. In addition, improvement in process and outcome quality was better than those seen in the control group (non-accountable care) and also compared with the Healthcare Effectiveness Data and Information Set (HEDIS). 7 Song Z, Rose S, Safran DG, et al. Changes in health care spending and quality 4 years into global payment. N Engl J Med 2014; 371:

6 Outcome Quality in the 2009 AQC Cohort Information Set (HEDIS), * * Outcome quality consisted of the following five measures: control of the glycated hemoglobin level ( 9%), control of the low-density lipoprotein (LDL) cholesterol level (<100 mg per deciliter [2.6 mmol per liter]), and blood-pressure control (<140/80 mm Hg) in patients with diabetes; the same level of control of LDL cholesterol in patients with coronary artery disease; and a blood-pressure control level of 140/90 mm Hg in patients with hypertension Although this news is a reassuring proof of concept it is not a slam-dunk for value-based arrangements. Sadly, many physician groups and IPAs are underequipped to manage proactive care and total cost performance, and lack the strategic partnerships with ambulatory, acute, and post-acute care providers. Moreover some groups lack the strong development strategy needed to achieve the information competencies required for effective population management, and to learn how to benefit clinically and financially by managing clinical risk. To do this, providers need extensive patient information. Without it, the group will find it almost impossible to understand patient stratification what segments live inside the total population or how to manage them. And without an information dashboard, integration tools, and actionable insights proactively delivered at the point of care, a multidisciplinary care team will have little chance of shifting the cost/quality/value equation. 5

7 Today s healthcare environment impacts traditional IPA members in several ways: Declining reimbursements Increasing financial and time burdens Pressure to accept hospital employment Lack of funding for infrastructure investment Threat of exclusion from emerging narrow networks Inability to capitalize on value-based reimbursement opportunities The opportunity for Independent Providers Clinical Integration well-being and clinical 6

8 With the right implementation, Clinical Integration comprises the organizational attributes necessary to catalyze the transformation of health care delivery, including governance structure, leadership, and comprehensive physician-hospital alignment, while allowing to continue to benefit from existing FFS opportunities. Why Clinical integration makes sense Strengthens relationships among all providers (physicians, hospitals, etc.) Makes providers more attractive network participants to payors Focuses efforts on keeping people well rather than treating acute events Lowers cost of care Creates momentum for additional quality initiatives to improve the health of the patient population, while improving the financial health of the practice Although shifting to a value-based payment environment may be daunting for providers accustomed to working in traditional silos, the benefits of either creating or joining a Clinical Integration arrangement can mean survival to physicians who want to maintain their independence. More than survival, the value to a Clinically Integrated physician group or IPA can be a return to the values that drove physicians to become doctors in the first place the practice of quality patient care and being a successful and financially solvent part of a healthy community. 7

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