Keys in Transition: Co-management Agreements & Hospital Integration Howard Walpole,MD, MBA, FACC Vice-President Northeast Georgia Health System
Why must we change? 2012: U.S. Healthcare spending: $2.8 trillion Healthcare spending (% GDP): 17.2% 2023: Projections: (%GDP): 19.3%
The Nation s Health Dollar, 2012: Where It Came From
Our Reality 1. Increasing operational complexity 2. Increasing regulatory uncertainty 3. Falling per case rates 4. Decreasing utilization 5. Growing consumerism
Payment Reform: An Industry in Transition Transition from volume based to value based FFS Value Based Payment / Population Health The end of getting paid more to do more Quality as payment and market differentiator Hospitals as cost centers not revenue centers Huge information technology investment needs Facilities and services need to be reoriented from inpatient to outpatient and from outpatient to community or home based
Payment Reform: An Industry in Transition All successful value- based revenue models share 2 characteris6cs: 1) They financially reward providers for quality- improvement efforts that reduce per- capita pa6ent costs, and 2) They penalize providers that don t. Patient Value = Quality / Cost
CMS Measuring and Paying for Quality Has Already Started... Pay for performance initiatives started over seven years ago Commercially Variations of the quality theme being developed by private insurers and medical specialty associations Core measures tracking and benchmarking Medicare Group Practice Demonstration Program Never events Physician Quality Reporting Initiative (PQRI)
Commercial Measuring and Paying for Quality Has Already Started... Variations of the quality theme being developed by private insurers and medical specialty associations NCQA
More CMS Quality - Focused Reimbursement Programs Are Planned Value Based Purchasing Program Hospital readmission reduction program Payment reductions for healthcare acquired conditions Shared Savings Program (ACOs)
For physician groups, Revenue from practice: Cost of practice:
Profit Margin
So, how do we practice high quality medicine and protect our margin at the same time?
Less Than Fully Integrated Fully Integrated LOW HIGH Degree of Integration Affilia6on Purchasing & Best Prac6ce Collabora6ve Management Services Agreement Sale of Minority Interest Joint Opera6on Agreement Merger or Consolida6on
Service Line Co- Management Rela6onships Purpose: Recognize and appropriately reward participants for developing, managing and improving the quality and efficiency of a particular hospital service line. Scope: May cover inpatient, outpatient, ancillary and/ or multi-site services. Participants: May include one or more physicians, medical groups or faculty practice plans, or a jointventure entity owned in part or entirely by participating physicians or medical groups.
Direct Contract Model Hospital Service Line Governance Committee Management Agreement Physician Group(s)
Joint Venture Model Hospital Physician Specialty Group(s) Service Line Co-Management Agreement Profit Joint Venture Company
Service Line Co-Management Arrangements Base Fee A fixed annual base fee that is consistent with the FMV of the time and efforts of the participating physicians Includes compensation for service line development, management and oversight Bonus Fee A series of pre-determined payments that are contingent on the achievement of specified, mutually agreed upon targets Targets must be objectively measurable and based on program development, quality improvement and efficiency Fees must be fixed and commensurate with FMV.
Service Line Co-Management Arrangements Examples of Co-Management Services Clinical improvements Work flow process improvement Physician and patient scheduling Nurse and non-physician clinician oversight Patient case management activities Credentialing activities Materials management Medical staff committee service and leadership
Key Legal Issues Anti-Kickback Statute and Anti-Kickback Statute Safe Harbors Civil Monetary Penalty Statute Stark Act False Claims Act 501(c)(3) Tax Exempt Issues Provider-based Status Rules
Typical Features of a Co-Management Arrangement The agreement stipulates a listing of core management/ administrative services to be provided by the manager (for which the base fee is paid). The agreement includes pre-identified incentive metrics coupled with calculations/weightings to allow computation of an incentive payment (which can be partially or fully earned). Compensation is directed towards accomplishments rather than hourly-based services.
Co-Management: Good for the Hospital Hospital goal: improve quality/decrease costs Physicians role: standardize care/avoid complications & re-admissions/efficiently move patients thru the system Results: Improved Quality Safety Pt. satisfaction Reduced costs
Co-Management: Good for the Physician Physicians goals: Improve quality & revenue Physicians are paid for the time they spend in redesigning the care process, establishing the quality measures that will be required, and for overseeing the care process. their efforts to redesign care processes. They would also share in any savings that result from their efforts.
How do we do this?
Identify key service lines Compare hospital service line costs to competitive hospitals (CMS data)
Create structure Create a legal entity to contract with the hospital Define: - membership eligibility -scope of clinical focus -clinical standards to be tracked -monitoring physician performance
Define compensation model Amount physicians will receive (base fee) How future savings will be split
Approach payers Focus on incentives for improving quality, patient satisfaction, and reducing costs
Take the initiative Physicians must be proactive or suffer the consequences of a value-based system that favors the hospital. Physician leadership is vital!
Phases of Co-Management 1) Initial Concept: signing a contract 2) First year: adjusting to working together 3) Year 2 and beyond: co-managed services develop & mature
Phase 1: Initial Concept Engage consultants familiar with co-mgmt. Form steering committee of interested physicians Form corporate entity (LLC) hire attorney Outline scope of work & hospital goals Establish fair market value (FMV) of hourly rates Independent 3 rd party FMV firm suggested Negotiate: hourly rate & hours required Create comprehensive contract
Comprehensive contract: other items Board structure Meeting requirements Corporate governance Non-disclosure & non-compete clauses Compensation & bonus structure Member qualifications Decision-making authority make this clear
Phase 2 & Beyond: Working together Priori6ze projects Establish commivees for each project Monitor & present data on goals regularly Monitor hours spent
Legal Issues Contracts should delineate prohibited actions: 1) Stinting on care to patients 2) Increasing referrals to the hospital 3) Cherry-picking: healthy patients/good ins. 4) Inappropriately accelerating pt. discharges Conduct internal & external reviews (can limit damages, if actions are identified)
Legal Issues Base compensation on FMV for a specifically defined set of services - Make duties clear to all Duties should require the services of an MD - (No make-work ) Recommend periodic 3 rd party audit
Legal Issues Utilize specific & objective performance-based measures supported by nationally recognized standards, but do not inappropriately limit patient care or choice Incentive payments should be based on aggregated performance to allow for physician judgment on individual cases
Legal Issues Avoid compensation measures that vary based on the number or value of referrals and prohibit physicians from distributing compensation based on individual performance.
Legal Issues Limit the total compensation and duration of the co-management agreement (approx. 3 yrs. or less)
Summary The changing economics of healthcare require physicians and hospitals to re-evaluate their working relationships. New models of cooperation provide opportunities for all parties to benefit Co-management agreements are a viable option between physician groups and hospitals.
Questions/Comments: Howard Walpole, MD, MBA, FACC bowalpole@gmail.com @bowalpole Cell: 615-351-4719