A Roadmap to Clinical Integration: How to Successfully Transition to Value, While Still Operating in the Fee-for-Service World

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1 A Roadmap to Clinical Integration: How to Successfully Transition to Value, While Still Operating in the Fee-for-Service World In healthcare, transitions of care from one practice setting to another can be fraught with poor communication and inadequate collaboration among caregivers. In the same fashion, challenging transitions in the business of healthcare can create significant challenges for patients, physicians, hospitals, and payers. The transformation of our healthcare system from volume to value-based payment is proving to be particularly perilous for many providers especially those, such as cardiovascular physician groups, that have relied heavily on diagnostic testing and therapeutic intervention. Transitioning to a value-based future, however, requires more than just collaboration among providers; it requires rethinking of the core elements of practice organization and developing complimentary levels of clinical, operational, financial, and cultural alignment that further advance the respective participants shared incentives with objectives that support the entire enterprise. CONTACTS» James M. Palazzo Ronald J. Vance Rob Moss navigant.com/healthcare The resulting formal and informal relationships should move beyond the holding company model of decentralized, autonomous units into one that will require layers of integration and shared governance, structured around resource optimization for both clinical services and business functions. When organized effectively, this clinical integration will result in true performance optimization that will ready an organization for the value-based model. BALANCING IN TWO WORLDS But the journey to clinical integration is not straightforward; it requires a roadmap that focuses on specific steps in strategy, governance, financial alignment, clinical and business operations, and culture. During this transition, provider organizations must perform a delicate balancing act working effectively in the fee-for-service world, while preparing to make the leap into the value-based future. One world has come to rely upon maximal utilization and the more siloed model of care delivery, while the other promotes and incentivizes collaboration in order to reach the entwined goals of high-quality, cost-effective care. Providers find themselves challenged to continue optimizing performance in the current environment, while making the necessary changes to prepare for the new one. 1 PERSPECTIVES A Roadmap to Clinical Integration

2 WHY START NOW? Taking a wait-and-see approach in preparation for the value payment model may seem appealing, especially in light of the traditionally slow pace of change in the healthcare industry. But such an approach risks leaving physicians and hospitals ill-equipped to compete and prosper. The leap from the curve one to the curve two model comes with a host of changes. Just how all the changes will ultimately shape the industry remains to be seen, but the key drivers of change for cardiovascular programs include: Focus on output vs. input. Payment increasingly will be based on quality outcomes, rather than high production and utilization. Cuts in reimbursement. Providers are being penalized with lower payments for not meeting payer quality and patient experience goals. Collaborative, coordinated care. Through approaches such as accountable care organizations and shared savings plans, payers are incentivizing providers to work together to improve quality and reduce the cost of delivering care. Population health management. Providers are utilizing care models that better manage chronic and complex diseases to lower the cost of care and meet outcomesbased contract incentives. Data/technology. Meeting government-mandated meaningful use requirements and identifying practices that foster cost-effective, quality care requires significant investment in information systems to gather data and analytical tools to profile performance. Consumer-focused health care. Improving the patient experience becomes increasingly important as outof-pocket costs continue to rise and patients choose providers/services based on price, reputation, and convenience. Overall, the aim to provide the best care for an entire population of patients at the lowest appropriate cost drives the need for an integrated approach capable of meeting the demands of patients and payers. Historically, cardiovascular services have been a visible element of a provider s brand. In order to protect that brand, as payment and utilization rates decline, systems will have to acquire new connections and competencies. THREE PHASES OF MATURATION In achieving optimization and becoming a fully integrated organization, provider organizations migrate through three phases of maturation: 1. Asset Aggregation Initially, growth is the basic strategy. One hospital grows to two, two to four; health systems merge and acquire physician practice groups. The goal of aggregation is to obtain scale and clout; there is limited central control, so local units are largely autonomous. Critical mass is more emphasized than efficiency. 2. Functional Integration In this phase, the independent units of an aggregated system begin to form neural connections between business operations that can result in the beginning of improved efficiencies. Centralizing non-clinical functions such as information technology, supply chain, revenue cycle, and human resources can generate cost savings, but are limited in their impact given value-based requirements. Generally, business operational efficiency is more emphasized than clinical integration and efficiency. 3. System Optimization In the last phase of maturation, the model is that of a high-performing operating company. Strategic decision-making moves from the individual units to the core of the organization. Service line leadership takes place at the system level. Clinical integration is the end goal, and dependent upon the successful implementation of the first two phases above. Many organizations have acquired or merged with other providers and may have achieved some elements of functional integration. Reaching true clinical integration, however, requires optimization in clinical, financial, and operational spheres. 2 PERSPECTIVES A Roadmap to Clinical Integration

3 THE JOURNEY TO OPTIMIZATION Because changes continue to churn within the healthcare industry, crafting the perfect cardiovascular partnership is not possible. Rather, the strategy should focus on obtaining optimization between the cardiovascular service line and the overall enterprise. Doing so requires following a roadmap of priorities while crossing that bridge to value and moving from simple aggregation to true clinical integration. Decision-makers, therefore, should focus on building and strengthening these core areas within the cardiovascular enterprise: Vision and strategic direction. Provider organizations can integrate using a variety of models, ranging from the management service organization and joint venture to co-management and full employment. These models are not mutually exclusive, but no matter the type of affiliation, each partner or entity in the network must share principles and strategies that lead toward more efficient clinical, operational, and business practices. These stakeholders work together to redesign their system to deliver high quality, cost-effective care. Meeting targeted quality outcomes is not going to be enough. Nor is gaining networked leverage in managed care contracts. Reducing the enterprise cost structure is a core initiative in optimizing an integrated networks. As reimbursement drops along with volume, survival will require employing practices to achieve scale. This will include development of multiple sites with comprehensive services and an extensive patient referral base in order to leverage fixed costs. Inpatient, outpatient, and ancillary services have to become less fragmented. Assets will have to be redeployed and clinical operations must be redesigned to incorporate practices that reduce clinical variation, such as evidence-based protocols. Such a system will require wide ranging skills to manage operations along a continuum of care and support population health management. This will require an understanding and commitment of the need to invest in information systems and technology, such as electronic health record systems and data analytics that will equip physicians and other stakeholders with the tools necessary to identify inefficiencies and foster quicker, more effective decision-making. Physicians will also have to be introduced to data historically not in their domain, and trained in using it effectively to promote the overall strategic direction of the network. Shared governance. Shared governance involves removing the walls between the once disparate entities so that all key constituents participate in critical decision-making. Hospital executive leadership, middle management, physician group leaders, and other physicians and care-team providers all play a role in making decisions that support the overall vision and strategic direction of the partnership. These decisions will foster improved performance across multiple dimensions clinical (inpatient and outpatient), operational, and financial. When a cardiovascular practice group partners with another provider organization, system optimization means that all strategic and operational decision-making for an organization s cardiovascular programs are under a central cardiovascular governing body. The governing body then develops and oversees the implementation of cardiovascular strategies for the entire provider organization. Significant attention should be given to the voice of physician leaders in the clinically integrated network. Accustomed to being the sole decision-makers in volumebased care, physicians should not be made to feel disempowered, but re-empowered (along with other care-team members) as facilitators of the emerging healthcare model. They play the central role in optimizing utilization, managing expenses, and achieving required clinical outcomes the key tenets of population health management whose implementation is essential in achieving the value equation. Physicians must also be able to collaborate, sometimes serving as the captain and other times the lieutenant, in teams with other caregivers to achieve financial incentives offered in accountable care organization models. At multiple levels, however, the physicians must be empowered to help develop and implement the clinical and business 3 PERSPECTIVES A Roadmap to Clinical Integration

4 protocols that help reduce unnecessary clinical variations and enhance efficiencies. Financial alignment. Attaining system optimization requires forming agreement on what is best not only clinically for the organization, but also what is best financially enterprise-wide. Service line operating and capital budgets, for example, must be adopted across the enterprise. Alignment also means that those involved in the delivery of care have a vested interest in doing what is best for the financial health of the organization. Compensation models for both employed and independent physicians must move beyond a dependence on volume to reinforce clinical practices and behaviors that foster quality, efficiency, and a positive patient experience. Financial incentives for physicians are based on their ability to meet system-wide goals for the cardiovascular service line. Compensation arrangements will also reinforce accountability for minimum work standards for all cardiac providers. An individual physician or an entire department will be rewarded for using best clinical practices that also support cost efficiency. In a fully optimized system, a cardiologist will use a stent that meets both quality and cost standards developed by clinical and administrative leaders together. Clinical and business integration. When an enterprise is fully integrated, clinical practices and business operations are structured around the entire enterprise. Service lines are operated under the shared services approach, for example. Fundamentally, integration requires a change in how decisions are made. Essentially, physicians will find themselves adjusting their thought processes from basing their decisions largely on the good of their cardiovascular group to the more encompassing benefit of patients of the enterprise. Consolidating open heart surgery into one hospital may not benefit the other hospitals in the system, for instance, but it can produce improved outcomes and operational cost savings for the enterprise and its patients as a whole. The adjustment to enterprise-wide decision-making changes incentives from productivity to affordability cardiologists will follow care protocols that meet both quality and cost standards. Individual physicians also must understand how care practices have financial implications for the entire organization. Although a cardiologist may once have been concerned only with patient outcomes in use of a particular implant, meeting the value proposition requires considering the cost implications, as well. If the costs of treatment are excessive, the organization may lose patients, its margins will be negatively impacted and the ability of the enterprise to continue investing in the service line will be compromised. As the care delivery model evolves physicians will need to understand how they fit into the larger issues around management in the entire continuum of care. Cardiologists, in particular, must reinforce links with primary care physicians and work with care coordinators and other members of the networked care team to cost-effectively manage patient populations with chronic and complex conditions. Managing the health of patients with conditions such as heart failure will help to reduce hospitalizations, which serves the best interests of both the patient and the provider organization. Shared values and culture. In order for integration to work, all members of the enterprise must truly understand, accept, and support its mission and goals. Culture helps to connect disparate pieces so every part is moving in the same direction. In order to help right the ship, everyone has to support the reasoning and strategy for improving performance or pursuing growth. If one piece of the process is not performing up to standards, others will be needed do their part to strengthen that element for the good of the organization. Working together and achieving success will help to build a culture of trust that will go a long way in smoothing out the bumps along the road to system optimization. The importance of shared values and culture doesn t follow the other dimensions of the roadmap, therefore, but moves and grows along the journey. Being deliberate to develop and foster a culture of partnership and excellence, with high accountability for teamwork at all levels of the service line is essential to an optimized program. 4 PERSPECTIVES A Roadmap to Clinical Integration

5 PULLING IT ALL TOGETHER Acquiring and employing the expertise to pull all these strengths together presents the underlying challenge in achieving system optimization. Realizing continuous optimization requires not just experience in, but excelling in clinical, strategic, financial, and operational disciplines. There must also be a comprehensive understanding of how a cardiovascular program operates, the role it plays within the whole of a health system, and its interconnections with external stakeholders, such as payers. Health system leaders must recognize the gap between the existing competencies of their enterprise and what is needed to meet the requirements of the value-based payment model. Although the goals of value-based payment are well understood--better care both for the individual patient and for a population of patients along with lower-cost care the form these objectives will shape in each market will vary. Moreover, the pace of value-based payment incentives will likely be highly fragmented across the nation, and vary significantly by region and local markets. What is clear is that provider organizations have a unique opportunity to transform and redesign the healthcare system. However, doing so requires more than forming larger systems. Hospitals and physician groups must develop the vision and acquire the tools necessary to collaborate, align, and engage in order to become fully integrated and be able to operate successfully in the fee-for-service world while looking forward to the new world of health care whatever forms it takes. Given the current pressures and dependencies on cardiovascular services and the integration of cardiac providers, they have a unique opportunity and imperative to successfully lead the way on this journey Navigant Consulting, Inc. All rights reserved Navigant Consulting is not a certified public accounting firm and does not provide audit, attest, or public accounting services. See navigant.com/licensing for a complete listing of private investigator licenses. 5 PERSPECTIVES A Roadmap to Clinical Integration

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