Concurrent Session XI ACO Models: 1204(a) & 1206(d)

Concurrent Session XI ACO Models: 1204(a) & 1206(d) National ACO Congress October 26, 2010 Steven Packer Rick Vance David R. Green

Agenda Introduction & Overview Community Hospital of the Monterey Peninsula Marshall Medical Center El Centro Regional Medical Center 2

On the Path Toward Accountability Redesigning Delivery and Payment Methodologies Physician Alignment is a Pre-Requisite for any Successful Model Episodic Costs Total Costs Provider Cost Accountability

On the Road to ACOs Hospital-Physician Alignment Models Medical Foundation Free Standing Master Medical Foundation Co-management & P4P Models Management Services Organizations Friendly Physician Professional Corporations Hospital-based Employment and Employment Lite 1204 (a) 1206 (b) 1206 (d)

Who We Are Employees 2,162 Active Medical Staff 263 Staffed Beds 205 2009 Admissions 11,308 2009 Emergency visits 47,378 2009 Outpatient visits 271,325 2009 Surgeries 7,048 Inpatient 3,954 Outpatient 3,094 Length of Stay 4.6 Medicare Case Mix Index 1.64 Government Payer Mix 68.5% 5

Primary Care Physicians as of 2005 6

Primary Care Physicians as of 2009 7

Primary Care Physicians as of 2009 Accepting New Patients 8

Houston, we have a problem The physician shortage challenge : Our community currently demonstrates a deficit of at least 20 primary care physicians (PCPs). More than half are not accepting new patients or have limited the insurances they will accept. PCPs 55 45 35 25 15 5 2005 2009 2010 Primary Care Physicians Primary Care Physicians Accepting Patients

Key National Drivers Decreasing Supply National shortage of physicians ~ Balanced Budget Act of 1997 ~ Likely to continue for one or two decade Changing work life expectations ~ Changing per physician productivity ~ Changing income and employment model expectations Increasing Demand ~ Aging population ~ Increased chronic disease ~ New technologies

Local Physician Recruitment Challenges Inadequate physician reimbursement - Area 99 Since federal payers consider Monterey County a rural area, physicians are reimbursed as much as 18% less than in San Jose and San Francisco Cost of housing Monterey Peninsula has high-priced homes due to the ocean front location State legal limitations The corporate bar on the practice of medicine creates challenges for hospitals to recruit and offer benefit packages to physicians Lack of a structure to employ new physicians Most existing local primary practices are unable or not interested in recruiting new physicians due to the financial risk, lack of capital, and/or inadequate administrative structures to compete for physicians 11

Primary Care Projections (Family Practice & Internal Medicine) Primary Care Demand Full Time Equivalents 120 100 80 60 40 20 0 Year 2007 2010 2015 Supply Demand Recruitment Gap 13 33 52

General Surgery Projections General Surgery Demand Full Time Equivalents 14 12 10 8 6 4 2 0 Year 2007 2010 2015 Supply Demand Recruitment Gap 1 6 8

Pediatric Projections Pediatric Demand Full Time Equivalent 20 15 10 5 0 Recruitment Gap Year 2007 2010 2015 2 8 9 Supply Demand

Why Primary Care is Important A higher ratio of primary care physicians to population is associated with lower mortality rates. If everyone made appropriate use of primary care, the U.S. health care system would realize $67 billion in savings annually. 60 million Americans, or nearly one in five, lack adequate access to primary care due to a shortage of primary care physicians in their communities.* Very few new physicians today are choosing to enter primary care whereas fifty years ago, half of U.S. doctors practiced primary care - just over 30% do today, and just 8% of the nation s medical school graduates enter family medicine compared to 14% as recently as 2000.* Some estimates see a 20% deficit in the workforce, or about 200,000 physicians, occurring by the year 2020 or 2025.* *KFF & National Association of Community Health Centers, & Int Arch Med

Consultation Firm: Camden Group Engagement: Phase I: Medical Staff Interviews Phase II: Primary Care Study Group Phase III: Feasibility Study Phase IV: Strategy Implementation

Phase I Medical Staff Interviews September to October 2007 Over 30 physicians Findings: Reaffirm drivers Hospital needs to be the agent to stimulate change Interviewees suggested solutions: Facilitate group formation Engage community in the solution Start or expand hospital-based physician programs (laborist, hospitalist) Facilitate greater physician-physician interaction Facilitate the development of physician practice management skills

Phase I Medical Staff Interviews Other considerations, caveats and fears: Fear that CHOMP will create unfair competition Voiced prior bad experiences with group formation Must also address specialties other than primary care

Phase II Primary Care Study Group November 2007 to February 2008 Criteria - The options should be assessed based on the: Ability to foster the retention and recruitment of physicians in the community Pros and cons relative to existing practices in the community Financial sustainability of the option, initial investment and ability to bring new dollars into the community Ability of CHOMP to support practice infrastructure (IT, etc.) Relative ease and timeline for implementation, and Degree of legal risk

Phase II Primary Care Study Group Legal Considerations Anti-kickback laws, Stark laws, IRS Private Inurement Laws, California Bar on the Corporate Practice of Medicine Goals Enhance community access to primary care services within CHOMP s service area Enhance the stability of primary care practices in the community to ensure retention of existing practices Create a structure that is attractive for recruiting new physicians into the community to assure that growing needs are being met Ensure that the strategy supports a strong specialty service delivery structure

Phase II Models Alignment Models Assessed Medical Foundation Model Management Services Organization (MSO) Friendly Physician Professional Corporation Hospital sponsored clinics ~ hospital-based 1206(d) ~ community clinics 1204 (a) Partnerships with physician-owned professional corporations and/or not-for-profit clinics in the community

Phase II Model Shortfalls Medical Foundation Requires 40 physicians in 10 specialty to launch. Too large and complex to execute in a timely manner. Management Services Organization History with Cypress Medical Network. Not perceived as helpful at this time. Does not bring dollars into the community. Friendly Physician Professional Corporation Good transitional structure when moving toward a medical foundation model and if a vehicle for employing physicians is helpful. Does not bring dollars into the community.

Phase II Model Shortfalls Hospital-based Clinic - 1206(d) Requires regulatory and accreditation survey with the hospital. Hospital-based pay practices and labor law compliance. Not financially viable. Partnerships with professional corporations and clinics in the community No suitable partners at this time.

Phase II Recommendations Proceed with development of a feasibility study for CHOMP-sponsored community clinic(s) 1204(a) Continue to explore future partnerships with professional corporations and/or clinics in the community as opportunities arise.

Community Clinic Corporate Structure: CA corporate code 1204(A) not-forprofit community clinic Ownership: subsidiary of and licensed under Community Hospital Foundation (CHF) Governance: CHF BOT has ultimate authority. Subsidiary establishes an entity BOT Licensing: site-specific license from CDPH

Community Clinic Accreditation: usually does not require Joint Commission accreditation with the hospital Operations: physical plant, clinical staff, equipment, supplies, and IT are responsibility of clinic entity Physician Relationships: professional service agreement or employment. Market-based reimbursement

CHOMP-sponsored Community Clinic Community Hospital Foundation 501(c)(3) Community Clinic(s) (1204A) Subsidiary CHOMP Professional Services or Employment Agreement M D M D

Community Clinic Reimbursement: sliding scale Additional Funding: donations, bequests, contributions, government funds or grants Management: practice administrator and medical director Billing: vended or performed internally Contracting: function of practice administration Information Technology: ambulatory electronic health record

Community Clinic Ancillary Clinical Services: provided by CHOMP Physical Plant: suitable for 5-6 physicians per licensed clinic site Performance Improvement: Clinical Effectiveness and Practice Enhancement Work Group

Community Clinic Criteria Foster recruitment & retention New Dollars Sustainable Initial investment Ease and timeline Legal risk Recruitment good Retention good if part of clinic, not much help for others Foundation Funds, contracting Financial support required Low vs. moderate (rent vs. own) Moderate, 6 months to 1 year Low with market-based physician compensation

Community Clinic Risks Ongoing financial obligations for CHF Viewed as a competitor by non-affiliated primary care physicians Specialists may view primary care clinic as threatening as primary care becomes more influential in the community or more directive

Primary Care Initiative Our response is Peninsula Primary Care (PPC) The objectives of PPC are to: Enhance patient access to primary care services PPC will accept all insurance plans Enhance and ensure the viability of existing primary care practices Create an organization that can effectively recruit new physicians Expect and establish a culture of clinical and service excellence so doctors can coordinate overall patient care Develop a model practice for the launch of a community-wide ambulatory electronic medical record improving information sharing among providers 32

Peninsula Primary Care CARMEL Peninsula Primary Care Carmel Crossroads Shopping Village Opened October 1, 2009 Total of 7 providers (6 physicians and 1 nurse practitioner) Since opening, the facility has seen more than 11,000 patient visits and welcomed 1,427 new patients 67% of patients treated to date are Medicare patients Subsidy of approximately $1million in first year of operation 33

Peninsula Primary Care CARMEL 34

Primary Care Initiative Peninsula Primary Care (PPC) - MARINA PPC, The Dunes on Monterey Bay, Marina Anticipated Opening, June 2011 Marina has a population of more than 25,000 residents and expects 6,000 new homes and 18,000 new residents over the next 10 to 15 years. Recent surveys show Marina residents rely on the emergency department for care of ailments that can be treated in an urgent-care setting at a double rate than the rest of Peninsula residents. 35

Primary Care Physicians as of 2010 36

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