Health Care Reform, Physician Alignment and Accountable Care Organizations IDN Summit March, 2011
Table of Contents Why Reform? Healthcare Reform Reform Timeline & Provisions Payment Cuts Aligning Payments with Outcomes Delivery Systems Strategic Implications for Providers Physician Hospital Alignment Alternatives Accountable Care Organizations 2
$ In Billions National health expenditures per capita $9,000 $8,000 $7,000 $6,000 $5,000 National Health Expenditures per Capita and Their Share of Gross Domestic Product, 1960-2009 $4,878 $5,240 $5,682 $6,098 $6,458 $6,827 $7,198 $7,561 $7,845 $8,086 $4,000 $3,000 $2,000 $1,000 $- $147 $356 $1,110 $2,853 1960 1970 1980 1990 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 NHE as Share of GDP 5.2% 7.2% 9.2% 12.5% 13.8% 14.5% 15.4% 15.9% 16.0% 16.0% 16.1% 16.2% 16.6% 17.6% 3 Source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, at http://w w w.cms.hhs.gov/nationalhealthexpenddata/ (see Historical; NHE summary including share of GDP, CY 1960-2009; file nhegdp09.zip).
Percent of Total Health Care Spending Healthcare spending concentration 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Concentration of Health Care Spending in the U.S. Population, 2007 22.9% 49.5% 65.2% 74.6% 81.2% 97.0% 3.0% Top 1% Top 5% Top 10% Top 15% Top 20% Top 50% Bottom 50% ( $44,482) ( $15,806) ( $8,716) ( $5,798) ( $4,064) ( $786) (<$786) Percent of Population, Ranked by Health Care Spending Approximately 50% of US health care spending is concentrated in just 5% of the population. A full 97% is concentrated in 50% of the population. Note: Dollar amounts in parentheses are the annual expenses per person in each percentile. Population is the civilian noninstitutionalized population, including those without any health care spending. Health care spending is total payments from all sources (including direct payments from individuals, private insurance, Medicare, Medicaid, and miscellaneous other sources) to hospitals, physicians, other providers (including dental care), and pharmacies; health insurance premiums are not included. Source: Kaiser Family Foundation calculations using data from U.S. Department of Health and Human Services, Agency for Healthcare Research and Quality, Medical Expenditure Panel Survey (MEPS), 2007. 4
Cost and quality variability by state New Jersey Connecticut Michigan Massachusetts New York California Florida Texas Maryland Hosp Referral Region Reimb. Quality 97 IA-Dubuque $ 5,852 97.05% New Hampshire WI-La Crosse $ 6,008 97.05% ID-Boise $ 6,178 96.16% Vermont VA-Lynchburg $ 6,323 97.38% CA-San Luis Obispo $ 6,829 95.63% 96 CO-Pueblo $ 7,135 97.90% Iowa North Dakota South Carolina Maine Idaho 95 South Dakota Wisconsin Minnesota Nebraska Ohio Alaska Colorado Virginia Montana Rhode Island North Carolina Oregon Missouri Delaware Pennsylvania 94 Indiana Washington Oklahoma Illinois Utah Nat'l Average = 93.6 Arizona 93 Arkansas Tennessee West Virginia Wyoming Alabama Kentucky Nevada 92 Georgia Hawaii Louisiana Mississippi 91 Hosp Referral Region Reimb. Quality TN-Jackson $ 9,118 85.42% Kansas IL-Chicago $ 10,243 90.50% IN-Munster $ 10,568 90.94% LA-Monroe $ 11,277 86.75% New Mexico 90 CA-Los Angeles $ 11,303 91.89% TX-McAllen $ 15,695 86.94% Nat'l Average = $8682 89 $10,000 $9,000 $8,000 $7,000 $6,000 $5,000 C M S Q u a l i t y S c o r e 5 Medicare Reimbursement per Enrollee Source: DartmouthAtlas.org 2007 Data.
6 Current state of healthcare system delivery landscape Sick Patients are cared for in unorganized silos across the delivery system. Patients interact with Providers who do not have integrated access to comprehensive health information. There does not exist an orchestrated pathway to sound health and care. Providers are not organized or aligned across synonymous, strategic goals and outcomes. Network relationships may exist between some providers but are not necessarily high value driven. Payers are not partnered with a collection of aligned and incented providers.
Reform s bending the curve strategic plan Track 1 Track 2 Cuts to Existing FFS System Market basket reductions DSH cuts P4P & Nonpayment for anything preventable or unnecessary Disrupt Existing System Bundled Payments Innovation Center/ demonstrations ACOs 7
The Strategic Pillars in the era of reform How do we succeed? Address the Value Equation Align With Physicians Transforming the System of Care Optimize Revenue Clinical Excellence Clinical Integration via employment & virtual models Reduce variability & resource consumption Revenue cycle Service Excellence Operational Effectiveness Governance Physician lead PI teams to address VBP Reduce readmissions & HACs Lower LOS Service portfolio & market share improvement At the lowest cost position EMR Implementation Care continuum Pricing strategy Accountable Delivery Organization Move from transactionoriented to outcomeoriented Become accountable for outcomes and costs for a population Coordinate episodes of care and providers 9
The quest for common ground Physician Practice Goals and Strategies Hospital Enterprise Goals and Strategies Save time Improve patient s outcomes Noticeably increase (or stabilize) income or quality of life Increase professional satisfaction outside of the above Trust Common language Shared culture Clear goals and strategies Physician leadership Useful data Shared risk Consistent with organization s mission, vision, values or strategy Result in improvement in key measurable outcomes (quality, patient satisfaction, efficiency) The operational requirements and implications must be adequately identified and it must be possible to accommodate them 10
Characteristics of QUEST top performers Successful integration strategies Be visionary Utilize multiple engagement strategies (meet the physicians where they are), but deals are not the most important component of engagement Be selective in the groups they work with, targeting those who are committed to a quality and safety improvement culture Physicians must be involved in governance and leadership physicians must be included in governance, service line management, quality and process improvement shared governance and leadership of service lines be it a council or committee or some other name Relationships and trust Board and CEO are champions and CEO is integrally involved If asking the docs to do the work, then I should do the work. CEO relationship with physicians is foundation Consider the what s in it for me part of the equation for the docs identifying physicians who have a sense of shared ownership a recognition that it is in their best interest to work with a hospital that is financially strong and seen as a market leader it really is still about the money incentives focus behavior; management and physicians share common incentives Have robust and transparent data and peer review 11
Ready for Delivery Change & P4P High Low Traditional Medical Staff Model Sharing Call Range of hospital and physician Professional Services Contracts integration models Service Line Co- Management Clinically Integrated PHO with joint mgd care contracts for population Medical Directorships Joint Ventures Full Employment Bundled payments Hospital- Affiliated Group Practice 12 Minimal Time and Resources Extensive
Ten key areas for operational review of owned physician model Reasons Performance Less Than Benchmark The Ten Causes of $21M Loss Strategic Offset Operational Change in Revenue if Performance Improves to Benchmark 1 Productivity $1,821,569 $819,706 $1,001,863 2 Utilization $4,859,648 $4,859,648 3 Coding $2,518,464 $302,216 $2,216,248 4 Fee Schedule $521,655 $521,655 5 Payer Rates $2,306,036 $1,153,018 $1,153,018 6 Payer Mix $902,353 $902,353 7 Revenue Cycle $2,600,053 $780,016 $1,820,037 Change in Overhead if Performance Improves to Benchmark 8 Staff Cost $2,503,459 $751,038 $1,752,421 9 Other Cost $1,079,342 $1,079,342 10 Compensation Plan $2,732,354 $1,092,941 $1,639,412 Areas That Can Be Improved $5,801,288 $4,859,648 $11,183,996 13 Client Example
Bundled payment program development Methodology Organizational Processes Care Episode Development Oversight and Tracking Legal Framework Identification of Episodes For Bundling Organization Capabilities Assessment Payment Distribution Methodology Managed Care Negotiating Strategies Services To Include Timeframe For Episode Current Cost Structure Current Reimbursement Bundle Reimbursement Quality Metrics Risk Adjustment Proforma Development Quality Tracking Scorecard Cost Measurement Scorecard 14
Sample Orthopedic Service Line Joint Venture Orthopedic Surgeons Hospital 50% Owner 50% Owner ORTHOPEDIC DEVELOPMENT COMPANY (NEWCO) (K) Service Line Management Equipment Leasing Joint Venture Other Clinical Svcs. Development Group Purchasing Organization (K) Wholly owned by physicians Mgmt Contract * Strategic and tactical programmatic development of a comprehensive center of excellence would be pursued through the orthopedic development company. 15
What is a accountable care? Accountable Care Organizations (ACOs), while still evolving, are expected to connect groups of providers who are willing and able to take responsibility for improving the health status, efficiency and experience of care for a defined population. Accountable Care is A focus on primary care, wellness and population health Clinically and fiscally accountable Patients that are actively engaged Partnering relationships between hospitals and physicians Anticipating health needs and proactively managing chronic care 16
Accountable Care Organizations: Healthcare reform provision Accountability for total cost, quality and care of beneficiaries; 3-year participation commitment Legal structure to receive and distribute savings Primary care physicians to cover a minimum of 5,000 Medicare beneficiaries Defined processes for evidence-based medicine and patient engagement, quality and cost measures reporting and telehealth, remote patient monitoring, etc. No participation in other government-based shared savings demonstration projects Allows CMS to join existing ACOs with payment models beyond fee-for-service CMS may give preference to ACOs already contracting with private market Providers eligible to participate in ACOs: Hospitals employing ACO professionals ACO professionals in group practice arrangements Networks of individual practices of ACO professionals Partnerships or joint venture arrangements between hospitals and ACO professionals Other groups of providers that the Secretary deems appropriate ACOs must meet certain quality thresholds: Clinical processes and outcomes Patient and caregiver perspectives on care Utilization and costs Saves $4.9 B over 10 years Beneficiary assignment to ACO based upon preponderance of E&M codes Accountable Care Organizations - Providers meeting criteria can be recognized as ACOs and can qualify for incentives bonus. (no later than 2012-01-01) 2010 2011 2012 2013 2014 2015 2016 2017 17
Expending ACO shared savings ACO Launched Projected Spending Target Spending Shared Savings Actual Spending Year -3-2 -1 0 1 2 3 Source: Lewis, Julie. What Could be Next for Health Reform? The Debate In Washington Presentation. The Dartmouth Institute for Health Policy & Clinical Practice. 2009-07-02. 18
19 Building a bridge from FFS to accountable care Current FFS System What are the underpinning building blocks? Accountable Care ACO Core Components People Centered Foundation Health Home High Value Network Population Health Data Management ACO Leadership Payer Partnerships Foundational Philosophy: Triple Aim Measurement
2 Complete view of an ACO High Value Network delivers provider networks that will optimize care delivery within and across the continuum and ensure that care is coordinated. ACO CEO COO CFO CMO CNO CQO ACO Leadership addresses the strategic leadership and operational infrastructure necessary to support a successful ACO that is organized around Triple Aim goals. Health Home redesigns primary care to create a new PCP model that provides people centric care as well as care guidance to the practice population. People Centered Foundation will ensure that the first principle for ACO design and ongoing operations is to enable all people within the ACO community to meet their needs and desires for good health. Payer Partners Population Health Data Management facilitates the flow and analysis of clinical, financial, and patient related data and information across all components of the ACO. Payer Partnerships - focused on the framework necessary for an ACO to develop and maintain mutually advantageous relationships with ACO payer partners (plans and employers).
Assessing your building blocks: The capabilities framework 2
Local markets moving toward accountable care United HealthCare Oncology Bundled Payment Humana and Norton Healthcare New England Ship Builder ACO PHO Agreement Nationwide Children s Hospital Medicaid Capitation Cigna-Piedmont Physician Group ACO Agreement HealthCare Partners-Anthem ACO Agreement CalPERS ACO with CHCW and Hill Medical Group Advocate-Blue Cross of Illinois agreement AtlantiCare Special Care Center Massachusetts Blue Cross ACO contract Pennsylvania Chronic Care Collaborative Community based ACO initiatives Maine, New Jersey, Vermont 22
Example accountable care activities Accountable Care Principles with Payors Development of accountable care principles in contracts with payors, including shared savings models (Fairview -MN, Central Maine) Partnership with Savannah Business Group for ACO development (Saint Joseph s Candler GA) Employee Health Plan Impacts Incentivizing employees for more active involvement in health, managing chronic disease, and implementation of health home (St. Luke s - PA, Heartland Health MO) Health risk assessment program to identify high risk (Billings Clinic MT) Care Management Models Special Care Center a Medical Home for highest cost/highest need patients (Atlanticare NJ) ProvenNavigator (PCP redesign to population health management) and ProvenCare (provider driven P4P care models) (Geisinger PA) 23 Diabetes care management program to support employer contracts (Bon Secours SC) Bridge to Home program to help manage care transition (Summa OH) 24/7 hotline model for nurse triage, EHR access, scheduling, prescription refill for 30 PCP practices (Heartland Health)
Example accountable care activities High Value Network Development PCP team implementation (including BH) and health plan PCP development program (Presbyterian NM) Informatics driven primary care and HVN with well aligned physician incentives (Greater Newport Physician/Hoag Hospital RI) Network criteria development Summa Medical Home Development Pilot with BC of Montana (Saint Vincent s) Patient Experience Robust patient experience monitoring system to cover continuum of care, with ability to drill down to practice and physician level, and an action planning component (Long Island Jewish NY) Payment Model Pilots Saint Vincent s MT OrthoCarolina Charlotte, NC 24
Collaborative members NJ DE MD WA IL WI LA AR MO MN KS NE SD ND MT WY NM ID UT NV OR MA RI CT SC NC VA WV PA VT NH ME GA AL MS KY MI OH IN DC MO NY TX OK IA As of 1/27/2011 FL 25 TN CA CO AZ
Collaborative members 26 NJ DE MD WA IL WI L A AR MO IA MN KS NE SD ND MT WY CO NM ID UT AZ NV CA OR MA RI CT SC NC VA WV PA VT NH ME FL GA AL MS TN KY MI OH IN DC MO NY TX OK As of 1/27/2011
Questions? Contact Information: Brent Hardaway Vice President, Premier Consulting Solutions (512) 657-2225 Brent_Hardaway@PremierInc.com 27