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1 Orange County Healthcare Financial Network Click Here to Add Slide Headline Friday, May 15, 2015

2 Hardesty, LLC We are a national executive services firm offering flexible financial management solutions primarily focused on the Office of the CFO. Headquartered in Orange County, CA / Offices in Los Angeles, Atlanta, Houston, New York, Miami, Chicago and Irvine Click Here to Add Slide Headline 2 Private & Confidential

3 Hardesty, LLC Interim Management CFO VP of Finance Controller Director of Internal Audit Director of Financial Planning & Analysis Director of SEC Reporting Special Projects Audit Prep IPO Readiness Click Here M&A Assistance to Add Slide Headline Permanent Search C-Suite Positions Senior Financial Management Infrastructure Development SEC Reporting Financial Restatement 3 Private & Confidential

4 OCHFN Monthly Networking Luncheons Showcasing Innovation Integration Healthcare Trends Click Here to Add Slide Headline Best Practices Searching for Tomorrow s Healthcare Answers Today 4 Private & Confidential

5 OCHFN Target Audience Hospital Skilled Nursing Senior Housing Medical Group Specialty Hospital Outpatient Services Medical Device Payer Pharmaceutical Biotech Medical Software Laboratory Click Here to Add Slide Headline Life Sciences Behavioral Health Insurance Ambulatory Surgery Center 5 Private & Confidential

6 Changes in the Healthcare Marketplace from Reform Many know of the political or Health Insurance Changes caused by Healthcare reform but few are aware of the dramatic changes that are occurring in the healthcare delivery marketplace. Healthcare represents 18% of GDP and healthcare providers are often some of the largest employers in many communities. Healthcare reform not only is causing drops in overall healthcare costs resulting in reduced costs to the medicare trust fund but savings to health plans that have slowed premium increases and should result in lower costs and better access to care. Click Here to Add Slide Headline These changes have resulted in reductions in revenue for some hospitals and specialists. These reductions are painful but necessary. Anyone relating to this market needs to understand these changes and how they will affect healthcare markets regionally and nationally. Clinical Integration and Population management will change the way healthcare is delivered resulting in revenue reductions for some and opportunities for others. This presentation will educate you about these changes and how to position your organization to relate to healthcare in the future. 6 Private & Confidential

7 Walter C. Kopp Medical Management Services Walter Kopp is President of Medical Management Services a healthcare executive management and advisory group specializing in the development of clinically integrated communities. This group has assisted with medical group practice management, medical group and hospital integration, physician succession planning, managed care analysis and contracting, and healthcare technology implementation in Health Systems. Walter was previously Chief Operating Officer of the Sutter Pacific Medical Foundation, formerly Physicians Foundation at California Pacific Medical Center. SPMF is a multispecialty medical group of over 220 physicians operating in over 50 locations throughout Northern California and Nevada. Walter helped this group through a challenging period of growth and change as the group has expanded and built a strong infrastructure while improving its operations and profitability. Click Here to Add Slide Headline Previously, Walter was Chief Operating Officer of Menlo Clinic at Stanford University Medical Center. Walter was also Executive Director of BayCare Medical Group and Assistant VP and Director at St. Luke s Hospital in San Francisco. In addition, he worked for large accounting firms, Alta Bates Hospital, University of Colorado Hospital, UC San Francisco, and the Ross Valley Medical Group. Walter has served on various boards of Directors, including; Operation Access, National IPA Coalition, Marin Community Clinic, and the Bay Pacific Health Plan. Walter is founder and advisor to the California ehealth Collaborative. He earned his BA degree from the University of California, Berkeley and his Masters in Health Administration from the University of Colorado. 7 Private & Confidential

8 Market Changes from Healthcare Reform Walter Kopp Medical Management Services

9 Walter s Brief Background BA, UC Berkeley; MHA, University of Colorado CAREER HISTORY Worked for large accounting firms Hospitals: Alta Bates, U of Colorado; in San Francisco: UCSF, St. Luke s Med Groups: Ross Valley, Bay Care Executive Director, Menlo Clinic at Stanford University Medical Center COO, Sutter Pacific Medical Foundation CURRENTLY President, Medical Management Services Helping Health Systems to develop Integrated Medical Groups to manage population health Transition of San Leandro Hospital and Alameda Hospital to Alameda Health System, Lodi Health, Psyche Analytics, MOB Development Helping Coalitions to help FQHC s with Clinical Integration Developed Integrated Medical Groups with Marin General, Lodi, Salinas Valley, Torrance Memorial, City of Hope Medical Group others Assist Hospitals and Physician Groups with Clinical Integration Facilitated affiliations between hospitals and medical groups

10 Presentation Outline Market Drivers in California Evolution of Clinical Integration Market Changes by Region Demand Destruction and Price Drops Other Trends and Disruptive Technologies How Groups Transition Ways to Grow Virtually Integrated Communities Concluding Ideas for Physicians & Everyone Else Issues for Discussion

11 Market Drivers in California Aging Medical Staffs Physicians leaving for employment options Evolution to integrated multispecialty group practice Profits from ancillaries used for cross subsidy of PCPs IPAs are aging and must reposition...but are not Healthcare reform requires clinical integration Musical chairs for specialists Demand Destruction for Hosptials

12 Evolution of Clinical Integration FFS PPO Shared Risk/ ACO Capitation Full Risk

13 Market Changes in Northern California by Region South Bay Stanford University Health Alliance Affinity Med Group PAMF Expansion El Camino? Daughters of Charity sold to Prime Foundation? Good Samaritan no physician affiliated group Kaiser expansion Santa Clara County Medical Center

14 Market Changes in Northern California by Region East Bay Stanford University Health Alliance PAMF Expansion Sutter East Bay Medical Group Brown and Toland? Hill Physicians..Anthem and Blue Shield Valley Care Medical Center Stanford Washington Hospital? St Rose Prime San Leandro and Alameda Hospitals AHS Doctors San Pablo (bailed out, again) Alta Bates Summit new facility John Muir San Ramon Regional UCSF ACO Oakland Children s to UCSF

15 Market Changes in Northern California by Region West Bay Stanford University Health Alliance PAMF Expansion Mills Peninsula PAMF Sequoia Hospital..Dignity Medical Foundation Seton/DOC sold to Prime.. Foundation? San Mateo Medical Center and Clinics Brown & Toland..? Sutter Pacific Medical Foundation, Cathedral Hill Dignity Medical Foundation UCSF Hill Physicians Other ACO options

16 Market Changes in Northern California by Region North Bay Marin General Meritage IPA/ Prima Medical Group, Sonoma and Palm Drive Hospitals Sutter Hospital, Santa Rosa, Novato, SP Medical Foundation St Joseph Santa Rosa Memorial, Queen of the Valley Petaluma Valley Annadel Medical Group/ Meritage IPA Healdsburg? St Helena Adventist Palm Drive Bankruptcy, again Kaiser Growth

17 Southern California Foundations Cedars Sinai Medical Group CHW Medical Foundation City of Hope Medical Foundation St Joseph Heritage Medical Group Memorial Care Medical Group Foundation Sharp Rees-Stealy Medical Group Permanente Medical Group Bright Health Physicians Adventist Health Loma Linda Medical Group- Murrietta Providence Health Services Scripps Clinic Huntington Medical Torrance Kaiser

18 Evolution of Medical Groups HealthCare Partners Heritage Medical Network Monarch Memorial Care St Joseph Medical Network UCLA USC

19 Entrepreneurial IPA s Many small IPA s that are geographically or ethnically defined Capitation Aging medical staffs Fiercely independent SynerMed Maverick

20 SoCal Changes Vivity Fallbrook closure UCLA clinics USC Prime purchase of DOCHS Bear Valley RFP more

21 MemorialCare in San Clemente

22 Clinical Integration brings Demand Destruction Shared Risk contracts are cutting hospital and specialty revenue Medical groups are managing chronic disease better and reducing demand Hospital affiliated clinics are cutting the profits that support them Incentive payments to Medical Groups only partially fund Clinical Integration

23 Price Drops, too Newly insured will they pay premium/deductible only the sick Increased Medi-Cal better than nothing, but below costs Medicare decreased demand, revenue, readmissions, bundled payments, MA Commercial decreased HMO payments, increased Shared Risk and Clinical Integration

24 Other trends Over built hospitals white elephants. Debt Affordability.Price master pubic perception Provider sponsored Health Plans Reductions from Unnecessary care and management of Hot Spotters Outcomes data drive referrals Zombie Specialists National Health Systems Kaiser, DaVita Telemedicine and clinical affiliation partners High deductibles and lower Rx reducing costs

25 Who pays who benefits Hospitals investing in clinics that increase market share but drop revenue PCMH shifting resources to coordinate care Quality Metrics can drive change How long can hospitals fund systems that work to cut their revenue.market share Everyone s pie starts looking like Kaiser

26 Disruptive Technologies EMR s gaining value Big Data used to identify opportunities (Thrasys) Clinical Metrics are establishing standards of care Engaging all care givers (family) Tele homecare (CVHCare) Psychological Screening (PsycheAnalytics)

27 Insurance product evolution Shared risk contracts ACO s for PPO s Blue Groove patient responsibility PCMH and Ambulatory ICU s CalPERS, Blue Shield, Hill, Dignity Monarch, HCP, Anthem contracts United Purchase of Monarch and Memorial Employer Self-funded growth and demands

28 How Groups Transition Earn Shared Risk from capitated contracts Take advantage of shared services from billing and EHR development Clinically integrate and manage a population Affiliate with Hospital Partner Contracting for Shared Risk with ACOs and others Invest in PCP Chronic disease management Population management, market expansion and Clinical Support

29 Ways to Grow Virtually Integrated Communities Online Billing Contracting Capitated Contract Management Specialty support of PCP s Medical Foundation Development Shared services EMR development HIE virtual community development

30 Concluding Ideas for Physicians and everyone else impacted by Health Reform Transition your independent physicians to an integrated group to provide stability for your physicians and position your group for healthcare reform Develop a Clinically Integrated Community that works with your local hospitals to the long term benefit of the community Grow your market share by positioning your organization for Clinical Integration and telemedicine Position for: National or Regional chains Payment incentives and utilization management will reduce demand and change the way we deliver care

31 More Concluding Ideas Develop a Clinically integrated community that works with other local hospitals, and can bring long term benefits to the community. Transition your independent physicians to an integrated group to provide stability for your physicians and position your group for healthcare reform. Providers can benefit from health reform, if they Clinically Integrate. Healthcare reform will continue no matter what happens with ACA. Implementation will unfold over a long timeline, with important roles for state government and the private sector Payment incentives and Utilization Management will change the way we deliver care.

32 Thanks for listening Walter Kopp Medical Management Services