macro trends and physician alignment...

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December2016

MacroTrendsandPhysicianAlignmentStrategies

2MacroTrendsandPhysicianAlignmentStrategies|December2016

TableofContents

ChallengesinToday’sHealthcareIndustry 3

PhysicianClinicalandBusinessAlignmentModels- Employedphysicianmodels- Aligningindependentphysicians- Next-generationphysicianalignment

SummaryConclusions 51

Appendix 56

December2016

ChallengesinToday’sHealthCareIndustry

Estimated2015USHealthcareSpendingbyPayerSource

Source:CMS’OfficeoftheActuary

PrivateInsurance1,10035%

Medicare64621%

Medicaid55518%

OutofPocket35111%

ThirdPartyPayers33411%

OtherInsurance1154%

TotalHealthcareExpenditures$3.24Trillion

HDHP HospitalownedMDGroups

HospitalownedASCJVs

DIRECTIONDecliningReimbursementIncreasedClinicalRiskNarrowNetworksGreaterTransparencyEnhancedConnectivity

ReadingthePuckinHealthcareTodayandTomorrow

LEVEL OF CRITICAL MASS LEADS MARKET ACCELERATIONCriticalMassofandbetweenPhysicians/PhysicianGroupsCriticalMassofandbetweenPhysicians/HospitalsCriticalMassbetweenPhysicians&Hospitals/Payers

EXTERNAL FORCESConsumerChoiceandAccessPayerMetamorphosisProviderConsolidationPrimacyofPrimaryCareNewCareDeliveryOptions(Th!nk,One,Retail,Online)

Physician/HospitalAlignmentandIntegration

The “Medical Ecosystem”

PhysicianCommunity

Hospitals

Pressures on Physicians• Decliningpayerreimbursement/growthinself-pay%

• Decliningrevenuefromancillaries

• PCPshortages

• SpecialistShortages

• Recruitingchallenges

• Increasedpracticeoverhead

• Growingregulatoryrequirements

Pressures on Hospitals• Pluralisticmedicalstaff

• Decliningpayerreimbursement/SelfPay%grows

• Increasedcompetitionfromspecialtyhospitals

• Physician-sponsoredOPcompetition

• RiseofP4Pprograms

• Increasedconsumerexpectations

• Regulatorydemands

Increasingly aligned interests and the need to manage to “Meaningful Clinical

Integration”

GrowingProfitabilityCrisisforNon-DominantProviders

Revenues and expenses per enrollees

Cost of care increasing 7-9%

annually

HealthcareReven

CostofC

Mountinglossesduetomedicalcostinflation

NOACTION

Declining reimbursement

over time

DOING NOTHING ISUNSUSTAINABLE

ProvidersCreateStructurestoOptimizeValue-BasedCareParticipationValue-BasedReimbursement NewPayerProducts

AlignmentofQualityMetricswithFinancialIncentives

BusinessModel Fee-for-Service P4P APRDRGs SharedSavings Bundles EpisodesofCare GlobalRisk

ClinicalModel CareTransformation PopulationHealth

Management

• Individual• SmallGroup• Mid-SizeGroup

• Mid-LargeGroup• PrivateExchange

• Individual• SmallGroup

• FFS• EpisodesofCare• APRDRGs

• FFS• MSSPACO• MedicareAdvantage

PatientCare/Experience

ChangesinReimbursement

CommercialInsurance

ERISA(ASO)

StateandFederalExchanges

Medicaid

Medicare

ExpansionofPatientPopulationCoverageCreatesNewProducts

andPurchaseOptions

NewProviderEntities

ACO SpecialtyCIN

DEFINITIONSCIN- FTC- compliantClinically

IntegratedNetwork

ACO- AccountableCareOrganization

MedicareSharedSavingsPlan

SpecialtyCIN- CINforCV,Orthopedics,

Oncology,CV,Spineandotherkeyspecialties

KEYTAKEAWAYHospitalsandaffiliatedphysicianshaveanopportunitytocaptureincentive-basedreimbursementbyenteringinto“value-based”contractswithpayers.Buttodothat,theyneedtoformaClinicallyIntegratedNetwork(“CIN”)thatmeetsFederalTradeCommissionstandards.

GovernmentalProgramsHaveFocusedonHighCostMedicareBeneficiaries– CV,Spine,Ortho,Oncology,EndofLifeExpensesLeadtotheExpansionofMedicareAdvantagePlansandMedicareSharedSavingsPrograms

Source:Fischbeck,Paul."US-EuropeComparisonsofHealthRiskforSpecificGender-AgeGroups.”CarnegieMellonUniversity:September2009

alperca

pitahealth

careco

Age0 10 20 30 40 50 60 70 80 90

$45,000

$40,000

$35,000

$30,000

$25,000

$20,000

$15,000

$10,000

$5,000

UKGermanySwedenUSSpain

U.S.isspendingmuchmoreforolderages

KeyTakeaway:TheCINmustalsohaveclinicalmodelsforthemanagementofspecialtycare,includingchroniccaremanagementandthemanagementofepisodiccare.

Payer-ProviderPartnershipsCanAlleviateProviderPressures

Today(3-5%

OperatingMargin)

Impact fromRate Pressures

(Negativemargin within3-5 years)

UnnecessaryUtilizationReduction

SharedSavings

New Growth(i.e., covered

lives)Operating

CostImprovements

Current FFSModel Accountable Care Model

Payer PitchNarrownetworksaggregatepatients,ultimatelyleadingtonewgrowththatmonetizesaccountablecarebeyondFFS.

PotentialScopeofIntegratedCareManagementModel

PREVENTIVE HEALTH

CASEMANAGEMENT

Wellnesssupportandpreventiveservicesforthecommunity

COMPLEX CAREPatientswithon-goingmedical

andsocialconcerns

COMMUNITY RESOURCES

ProgramManagementandServiceDelivery

ProgramSupport(e.g.,RiskStratification,Analytics,PerformanceTracking)

DISEASEMANAGEMENT

Patientswithsingle,non-complicated

chronicconditions

Potentialpatientmigration

Patientswithacute,time-limitedmedicalneeds

∙ InstitutionalCare∙ HomeHealth∙ SchoolClinics∙ EldercarePrograms∙ SocialWorkerSupport∙ Transportation∙ Etc.

NetworkDevelopment/Management

CarePlanIntegrationandUtilization

NarrowNetworks– 1stMoverPayerStrategy(15%HospitalDiscounts)RiskContinuumforExistingandProposedVBPaymentStructures

FinancialRiskClinicalIntegration

• Consumers• Employers• HealthPlans• GovernmentPayors

• Physicians• MedicalGroups• Hospitals• OtherProviders

*ModifiedfromHFMAmaterialswithSSBSolutions,Inc.proprietarydatabase

TierAFTCcompatiblemeaningful

clinicalintegrationinfrastructure-baseline

largenetwork

TierBCINnetworkatleast15%

smallerthantierIwithmoreadvancedCIcapabilities

TierCCINnetworkatleast30%smallerthantier1and

capableofglobalpaymentswithperformancerisk,

p4p,etc.

TierDCINnetworkatleast45%smallerthantier1andcapableofacceptingglobalpaymentwithfinancialrisk(e.g.MA

capability)

ManagingRiskUtilizesTiered/NarrowNetworks

HorizonAnnouncesOMNIATier1Network

THE OMNIA HEALTH ALLIANCE

1 3534

28 318

Tier 1 doctors, specialists andother health care providers

ADDITIONALTIER1PROVIDERSAtlantiCare23.AtlantiCareRegionalMedicalCenter– Mainland24.AtlantiCareRegionalMedicalCenter– AtlanticCity

CapeRegionalHealthSystem25.CapeRegionalMedicalCenter

CooperUniversityHealthCare26.CooperUniversityHospital

Englewood27.EnglewoodHospitalandMedicalCenter

MeridianHealth28.BayshoreCommunityHospital29.JerseyShoreUniversityMedicalCenter30.OceanMedicalCenter31.RiverviewMedicalCenter32.SouthernOceanMedicalCenter

PrincetonHealthCareSystem33.UniversityMedicalCenterofPrinceton

St.Joseph’sHealthcareSystem34.St.Joseph’sRegionalMedicalCenter35.St.Joseph’sWayneHospital

Shore36.ShoreMedicalCenter

OMNIA HEALTH ALLIANCE TIER 1 PROVIDERSAtlantic Health System1. ChiltonMedicalCenter2. MorristownMedicalCenter3. OverlookMedicalCenter4. NewtonMedicalCenter

BarnabasHealth5. ClaraMaassMedicalCenter6. CommunityMedicalCenter7. JerseyCityMedicalCenter8. MonmouthMedicalCenter9. MonmouthMedicalCenterSouthernCampus10.NewarkBethIsraelMedicalCenter11.SaintBarnabasMedicalCenter

HackensackUniversityHealthNetwork12.HackensackUMC13.HackensackUMCMountainside14.HackensackUMCatPascackValley

HunterdonHealthcare15.HunterdonMedicalCenter

InspiraHealthNetwork16.InspiraMedicalCenterElmer17.InspiraMedicalCenterVineland18.InspiraMedicalCenterWoodbury

RobertWoodJohnsonHealthSystem19.RobertWoodJohnsonUniversityHospitalHamilton20.RobertWoodJohnsonUniversityHospitalNewBrunswick21.RobertWoodJohnsonUniversityHospitalRahway22.RobertWoodJohnsonUniversityHospitalSomerset

SummitMedicalGroup613physicians

Payer/ProviderGoalsforVBPartnerships

ProviderCareAccountabilityandintegration

Relativ

ncialR

SharedIncentives

BundlesandEpisodesof

ManagingaSpecificConditionorService

SharedSavings

SharedRisk(ODS)

GlobalRisk(ODS)

ManagingHealthofaDesignatedPopulation

AchievingSpecific

QualityandCost

ImprovementMetricsor

PCMHStatus Hospital/HospitalSystemMulti-SpecialtyPhysicianGroup

Hospital/PhysicianGroupPhysicianNetwork/IPA

ParticipatinginaNarrowNetworkNarrowNetwork(orTiered)

ThreeExamplesofPayer/ProviderGoals:1) FindNEWpartnersinCURRENTVBpartnershipcategories2) FindNEWpartnersinNEWVBpartnershipcategories3) ExpandEXISTINGpartnersintoNEWVBpartnershipcategories

Payers/Providersneedstoassessintrinsicstrategies,clinicalmodelsandcapabilities.

WhileValueBasedPrograms(CINs/ACOs/SpecialtyCINs)HaveExpanded– WhyHaveRegionalPopulationHealthCostsNotDecreased?

Revenues and expenses per beneficiary

JerseyM

arketM

JerseyM

arketM

HighPerform

ingMed

p/CIN(SMG)

HighPerform

ingMed

p/CIN(SMG)

New Jersey Medicare Cost

per Beneficiary

D =8%D =22% IncreasedHospitalBased

Billing• MedicalGroupBillingStructure• Outpatient/AncillaryBilling• Hospital/PhysicianJointVentures

(e.g.HospitalASCRates)

IncreasedDiseaseBurden• Cardiovascular• Orthopedics• Oncology– therapy/drugs• Neurosciences/Dementia

TelemedicineWillVarybyProgramandEnablingCapabilities

Sources: The eICU® Solution: A Technology-Enabled Care Paradigm for ICU Performance http://www.ncbi.nlm.nih.gov/books/NBK22836/

Developing telemedicine capabilities thatallow forconsults,tele- EDand eICU acrossthe state and developcloser relationshipswith referring physicians while minimizing travel time.

American Telemedicine Association: Program Guidelines http://www.americantelemed.org/

Program Type Initial Requirements EnablingCapabilities

“On Demand” Consults

Patient or provider initiated consultsusing real-time, interactive

technologies to perform video andaudio-based interventions

• Two-wayvideo and audio• Provider’s and patient’s environmentthat

ensures privacy• Specialty programs could include tele-

derm – cardiology– pulmonary– neurology–radiology, etc.

Software,Hardwareand

Services

Tele-ED

Network of systems used to createa collaborative, inter-professionalcare model focused on patients

with emergent conditions

• Credentialing (can be by proxy)• Telemedicine cart and trained staff• Contract to provide telemedicine

servicesas a physician consult• Services could include tele-ED, tele-

stroke, and trauma

Services

Provides continuousmonitoring ofICU patient from a remote location,enabling more timely interventionsin a more cost-effective model

• Adequate bandwidth to support real- timevideo

• High-resolution camera and a two-way audiosystem in each patient room

• “Hot”phones provide ICUstaff withimmediate access to the intensivist - ledstaff inthe eICU.

Services

“Next-Generation”DeliveryModel—MaximizingAccesstoQualityServicesThroughFocusedAssetDevelopmentAndDeploymentStrategy

MAIN CAMPUS(S)

• Tertiary andquaternarycare facilitycaring forthe mostcomplexpatients andincludes:

• ICU• CVICU• NICU• Med/Surg• ED• Specialty care• Advancedimaging• Interventional radiology• ECMO• Anesthesia• Infusion• Dialysis

SATELLITE ACUTECARESITEOF SERVICE• Low to mid acuity in-patient facility servingas a referral centerinto main campus

• Licensed inpatientunits or free-standinghospital

• EDPHYSICIANSPECIALTY CENTER

• Specialty Care• Primary Care• Imaging• After Hours Urg Care

LARGEAMBULATORY SITE

• Specialty Care• Urgent Care• Rehab• Sedated Imaging• Infusion• Nutrition• Anesthesia• ASC

RETAILSPACES• Store front spaceforselect services(therapies, sports med,rehab, imaging)

COSTS $25M - $100M $5M- $15M $2M - $5M $500K- $2M

SPACE 20,000 – 60,000 Sq. Ft. 10,000 – 35,000 Sq. Ft. 2,500 – 10,000 Sq.Ft. 1,000 – 5,000 Sq.Ft.

Max MinSERVICE INTENSITY

Integratewithe-HealthandVirtualCare

CollaborationwithHPIandIndependentPhysiciansCreatingSystemofCare

Memorial Hermann

St. Luke’sMethodist

Inpatient Market Share Market Share Ranking1st: AggregateMarket Share1st: Burns1st: Cardiology1st: ENT1st: General Medicine1st: General Surgery1st: Neurology1st: Neurosurgery1st: Ophthalmology1st: Orthopedics1st: Rehab1st: Thoracic Surgery1st: Urology1st: Vascular2nd: Gynecology2nd: Obstetrics2nd: Neonatology2nd: Spine2nd: Oncology

211 Locations

$4.9B Total Assets$4BNetOperating Revenue

22,000 Employees; 5,000 Medical Staff

Greater Houston MSA 6.36million population, projected to 6.9million by2018

TheMarketLeader– EmphasizingRetailExpansionandCriticalMass

SUPERCINPerformanceStandards

ProviderNetworkSupport

SupportInfrastructure

$$$$$$$$$$

Payers

CONTRACTS REVENUE

SpecialtyCIN-ChospitalSpecialtyCIN-CphysiciansSpecialtyCIN-CCo-mgmt.companiesOtherentitiesfocusedonclinicalintegration/performance

CIN-A CIN-B SPECIALTYCIN-C

ContractedServicesEnterprise,SiteSpecific,Specialty,etc.

CIN-AhospitalsCIN-AphysiciansCIN-ACo-mgmt.companiesOtherentitiesfocusedonclinicalintegration/performance

CIN-BhospitalsCIN-BphysiciansCIN-BCo-mgmt.companiesOtherentitiesfocusedonclinicalintegration/performance

SuperCIN,CINandSpecialtyCINContractingOpportunities

CINA orCINBContractsfor

SpecialtyCINContractsfor

CINA/CINB N/A Complex CareSpecialtyPHM

Specialty CIN Complex CareSpecialtyPHM

SuperCIN ParticipateinSuperCINPHM

Contracts

Complex CareSpecialtyPHM

Payers DirectPHMContract

SpecialtyPHMContract

CONTRACTINGMATRIX

Quincy

“Provider-Dominant”– IowaSuperCINValue-BasedStrategy

MHNCentralIowa

MHNSiouxland

MHNDubuque

MHNClinton

MHNIowaProfile• JOA:CHIandTrinity• 27.5%MarketShare• 13,000Employees• $2.2BillionFY10OperatingRevenues

• 11OwnedHospitals• 29AffiliateHospitals• 142PhysicianClinics• 625Physicians

MHNNorthIowa

CURRENT STATEFragmented Community Care

Resources

National Dialysis

Contracts

Retail Pharmacy ContractsEmergencyCarePatient-Centered

CommunityCare(PC3)

NationalDialysisContracts

RetailPharmacyContracts

Federally-AffiliatedFacilities

EmergencyCare

ProjectARCH

Veteran’sChoice

Community Care Network

• VHAVisionistobuilda“SystemofSystems”toadministerCCN- 4.3MillionVeterans/$12.3BilliongoingtoprivatesystemsforFY17- High-PerformingNetworkSystems- IntegratedCustomerServiceSystems

“WildCard”– VHACCNOrganizesCurrentOfferingsintoSingle,IntegratedEntity

• Fragmentedandinefficientprograms

• Typicallyfocusedonaspecificpopulation

• Overlappingorinconsistenteligibilitycriteria

• Employmultipleprocessesforthesameactivity(e.g.,claimsprocessing)

• Careofteninconsistentwithbest

FUTURE STATEResources Integrated into Single

Program

VACommunityCareRegionsandEstimatedEligibleVeterans

TimingandSpeedofMarketShiftVariesbyState

+HospitalA

ggregateReven

AggregateFFSRevenue($)

AggregateValueBased/CINRevenue($)

2012 2013 2014 2015 2016 2017 2018 2019 2020

FasterMarketTransition-MA,AZ,CA

SlowerMarketTransition-

IN,MT,MD,LA

KEYTAKEAWAYHospitalsandaffiliatedphysicianswillhavetworevenuestreams(FFSandVB)formanyyears,butovertime,theVBstreamwillbecomelargerthanFFS.

Acceleratorsforvalue-basedmarkettransition- Non-Federaldefaultstate-basedexchanges(e.g.,MA;CA)- State-basedMedicaidexpansion(e.g.,AZ)

December2016

PhysicianClinicalandBusinessAlignmentModels- Employedphysicianmodels- Aligningindependentphysicians- Next-generationphysicianalignment

ClinicalIntegration:OptimizingContinuumofMDRelationships

Independent Physicians

Medical Directors ContractedPhysicians

RadiologyAnesthesiology

EREtc.

Credentialed Staff DirectorAgreements

Professional Services Contracts

Employed Physicians

Pluralistic Medical Staff

Teaching Faculty

EmploymentAgreements

Teaching and Research

Agreements

AlignmentModelsFocusonClinicalIntegration

Model Attributes/Enterprise Orientation Targeted Physicians

EMPLOYMENT PLUS VARIATIONS

Employment, by the hospital, larger physician group or related organization (payer). Most effective in “value-based” environment.

Historically highly focused on PCP’s, recently expanded to virtually all specialties

CIN/CO-MANAGEMENT Joint management of a hospital service line and/or operating entities between the hospital and a group of organized physicians. Works in both “value-based”and FFS environment.

CIN/Co-Management Structure. Historically, specific to the service line/COE but is becoming more expansive. Optimizes independent physician alignment

JOINT VENTURES Economic venture where the asset or service are jointly owned by physicians and hospital. Increasingly subject to intense regulatory scrutiny.

Specific to the service of the JV. provider-based reimbursement can be lucrative to independent physicians wishing to sell ancillaries

PRACTICE SUPPORT MSO, loans, recruiting support etc. To assist independent physician/groups practices. Most effective with independent physicians.

Historically focused on PCP’s but expanding to include specialists

PAYER CONTRACTING Legacy vehicle is PHO and is designed to increase negotiating strength with payers. Increasingly ineffective. PHO transitioning to CINs.

Open to all qualified medical staff members. Segmentation often lacking. Without a goal of “single signature”contracting other alignment models more effective

CONTRACTUAL Specific to single physician or group for a designated services. Examples include medical directors, hospitalists, PSAs, etc.

Aligned to specific service being provided. Alignment focus is evolving to more employment

December2016

EmployedPhysicianModels

Forthe3rdConsecutiveYear,theThreeMost-placedProvidersWereFamilyMedicine,InternalMedicineAndHospitalists

PlacementSpecialties2016.Source:TheMedicusFirm

IntegrationModelsforPhysicians

Model Attributes/Enterprise Orientation

EMPLOYMENT(Plus variations)

Employment, by the hospital, larger physician group or related organization (payer)

CIN/CO-MANAGEMENT Joint management of a hospital service line and/or operating entities between the hospital and a group of organized physicians. Migrating to Value Based Contracts.

JOINT VENTURES Economic venture where the asset or service are jointly owned by physicians and hospital.

PRACTICE SUPPORT MSO, loans, recruiting support etc. to assist independent physician/groups practices.

PAYER CONTRACTING Designed to increase negotiating strength with payers. Increasingly ineffective.

CONTRACTUAL Specific to single physician or group for a designated services (e.g., medical director)

An increasingly critical option for key primary care and specialty physicians struggling with practice cost vs. reimbursement issues

Hospital-SponsoredMedicalGroupStructuralOptions

Model A: “Embedded” Medical Group

Model B: Separate LLC / 501(c)3

Virtual stand-alone medical group with an advisory board, physician

executive, and CAO, but embedded in a health system structure

Medical group structured as a separate 501(c)3 or LLC legal entity sponsored by

a stand-alone health system

System board holds reserved powers over medical group

Hospital System Board

Hospital

Medical Group(Dept. of Hospital)

Group Board

Hospital System Board

Hospital

Medical Group(LLC/501(c)3)

Group Board

December2016

AligningIndependentPhysicians

IntegrationModelsforIndependentPhysicians

Model Attributes/Enterprise Orientation

EMPLOYMENT(Plus variations)

Employment, by the hospital, larger physician group or related organization (payer)

CIN/CO-MANAGEMENT Joint management of a hospital service line and/or operating entities between the hospital and a group of organized physicians. Migrating to Value Based Contracting.

JOINT VENTURES Economic venture where the asset or service are jointly owned by physicians and hospital.

PRACTICE SUPPORT MSO, loans, recruiting support etc. to assist independent physician/groups practices.

PAYER CONTRACTING Designed to increase negotiating strength with payers. Increasingly ineffective.

CONTRACTUAL Specific to single physician or group for a designated services (e.g., medical director)

Sweet spot hospital’s “anchor’ services (e.g., cardiology, orthopedics, oncology)

GeneralCo-ManagementStructure

CO-MANAGEDSERVICELINEClinicalDeliveryofServices

TeachingResearch

Planning/MarketingPhysicianDevelopment

CO-MANAGEMENTLLC

Operating Agreement

Physicians

CEO/President

LLCBoardMSA

SHAREHOLDERS

Clinical management

services

ClinicalManagement

FinancialManagement

OperationalManagement

TypicalFlowofFeesandIncentivePaymentsforCMLLC

Base Fees Incentive Fees

MedicalDirectors

Boards and Committees

Operating expenses

PhysicianInvestors

HospitalInvestors

CO- MANAGEMENTLLC

Management Fee (FMV)

Incentivefeesbasedonachievingspecifiedandmeasureablemetricsfor:– Clinicalquality– Budget-relatedgoals– Operationalgoals– Programdevelopment

ShareholderdistributionsmadeasavailableandsanctionedbyLLCboard

Admin Costs

LLCBoard

December2016

Next-GenerationPhysicianAlignment:CINs/CIOs/ACOs

VBRevenueStrategies– SpecialtyCIN

FFSRevenueEnhancementStrategies

ManagementCompanyKeytoManagingFFS&VBSpecialtyCare

ManagementofSpecialtyCareDuringFFS toVBTransition

2016 2017 2018

ManagingSpecialtyCareTransition

Ongoing

ManagementofOrtho/SpineServicesDuringTransitionfromFee-for-ServicetoValue-BasedReimbursement

2017 2018 20192016Past

Fee-for-Service

FocusisontransitiontoValue-BasedReimbursementenvironment,clinicalintegrationanddevelopmentoftheSpecialtyCIN

Focusisoncontractingforvalue-basedspecialtyservices;SpecialtyCINisthecontractingvehicle

Value-BasedReimbursement

Transition

FocusisonmanagementofservicelineinFFSenvironment

50% 50%

SpecialtyCINNeededforVBContracting*

OrthopedicGroups

SpecialtyCIN,LLCManagementLLC $Payers

SharedOwnership50% 50%

VBContracts

ManagementLLC—2Missions:• ManagementoftheServiceLines• ManagementoftheSpecialtyCIN

Co-ManagementCompany

SpecialtyCIN,LLCBoardofManagers

SharedGovernance

Ortho/SpineServiceLines

FinancialConsiderations:• Sharedcapitalcontributions• Sharedfinancialrisk

*Sharedownershipmodel

• ACOsandCINs• Governmentprograms• Commercialpayers• Directcontractswith

employers

PhysicianLeadershipandEngagementEssentialtoCINSuccess

GovernanceandLeadership• Effectivegovernanceandmanagement• Membereducationandengagement• Managingmemberdynamicsandrelationships

FormCIN• Legalstructure• Organization/ownership• Governance• Infrastructuredevelopment• Budgeting/financialmodeling

ClinicalIntegrationandPerformanceImprovement

• PopulationHealthManagementandValue-Basedclinicalmodels

• Caretransformation• Carecoordination• Providercompensation• Enablingtechnology• Performancetracking

MedicalStaffCollaboration• Staffeducationandengagement• Integrating/collaboratingwithCIN

qualityinitiatives• Delegatedfunctionality

Clinically Integrated Network

HPCPsSpecialists

PHYSICIAN-LEDINITIATIVE

PHYSICIAN-SUPPORTEDINITIATIVE

KEYTAKEAWAYAlignedphysicianswillneedtobecomeengagedinallfacetsofCINdevelopmentandwillneedtoprovidesignificantclinicalleadership.

Value-BasedContractingRequiresFTC-Compliant“ClinicalIntegration”

IndependentPhysiciansHospitalsandEmployedPhysicians

CINNetworkParticipationAgreements

ClinicalScope Membership

Encompassesfullcontinuumofcare (inpatient,outpatient,alternativecare,andcollaborativecaresettings)

Targetedatphysicianswhoseparticipation haspotentialtomaximizequalityandefficientresourceutilization

Performance Improvement CapitalRequirements

Designedtoimprovequalityandreducecoststhroughprotocolsadherence supportedbycomprehensivedatacollectionandreporting

Significantinvestmentrequiredtodevelop anddeploytechnologyinfrastructure(clinicalandfinancial)tosupportimprovedcaredelivery

OrganizationalRequirements LegalConsiderations

MarketPowerConcentration FraudandAbuseIssues

Clinicallyintegratednetworkswhichmateriallyreducecompetitionmaybesubjecttochallenge

Mustsatisfy Anti-KickbackStatute andStarkrules

Ownershipandcontractualarrangementsmustbeat FairMarketValue

StateLicensing/RegulatoryRequirements

Mustcomplywithallallstatelicensingandregulatory requirementswithregardtoownership,financialarrangementandotherstatutes

KEYTAKEAWAYForthehospitalandaffiliatedphysicianstoengageinjoint,value-basedcontracting,theycollectivelymustmeetFTCrequirementsfor“clinicalintegration,”whichcoveracombinationoforganizationalandlegaltouchstones.CINwillneedaformalorganizationstructure(usuallyanLLC)andproviderparticipationagreementsthatdefineparticipationrequirementsandperformanceexpectationsfornetworkserviceproviders.

PatientStratificationandPopulationHealthManagement

ClaimsMedications

LabTestsReferralsERAdmits

Low-Risk PatientsMedium-Risk PatientsHigh-Risk Patients

OngoingMonitoringandInterventions

PeriodicMonitoringandInterventions

EpisodicOutreachCl

inicalprotocols

-based

Carecoo

rdination

PerformanceMetrics

ClinicalManagement- Qualityandsafety- Outcomes- Patientsatisfaction

ResourceManagement- Useofancillaries- Admissions- ERvisits

HealthStatusStratification

redictiveModels

DATAPredictive

Models

Patient-CenteredMedicalHome(“PCMH”)

DataAnalytics

KeyTakeaway:PopulationhealthmanagementiscoordinatedthroughathePatient-CenteredMedicalHomemodelofcareanddrivenbydataanalyticstostratifythepopulation.

CriticalInfrastructureandTechnologyNeedsforCIOs/CINs/ACOsCategory Description KeyCapabilities

PopulationandClinicalRiskManagement

Quantifypatientrisk,inputtorisk-adjustedpaymentmethods,andabilitytopredict/tailorcareneedsandenablegreaterrisk-sharing.

• Predictivemodeling• Patientstratification• Clinicalriskquantification• Patientattributionanalysis

FinancialandNetworkManagement

Facilitatetransfer,disbursement,incentivealignment,andcontractmanagementofvalue-basedpayments.Tightlytrackcostsacrossthecarecontinuumtosupportoperationofahigh-performingnetwork.

• Novelreimbursementmodelsupport• Networkassessment• Contractdevelopment• Patientfinancialmanagement

ClinicalModelDesignandManagement

Promoteevidence-basedcaredelivery,enabletightercarecoordination,supportforintegratedtreatmentplanning,andcost-effectiveuseofresourcesandsettings.

• Clinicalprocessdevelopment• EBMpathwaydevelopment• Protocolmanagement• Bundledpaymentcaremanagementmodels• Carecoordination/transitionsofcare

CoreClinicalTechnologyInfrastructure

Deployandleveragerobustclinicaltechnologyinfrastructuretocreateseamlessclinicalintegrationacrossacuteandambulatorysettings.

• InteroperableEMR• Sharedclinicalandadministrativedocumentation• Referralandnetworkmanagement• POCdecisionsupport• Bundledpaymenttrackingandreporting

IntegratedDataExchange

Ensureintegrated,secure,timelyaccesstoclinicalandadministrativedata.

• Integratedaccesstoclinical,financial,andadministrativedata– e.g.claims,encounter,cost/quality,EBMguidelines

PerformanceManagement

Enablerobust,transparentperformancemanagementthatallowsroot-causeidentificationofcostandqualitygapsandtiespaymenttoperformance.

• Performancemetricdashboards• Integratedcostandqualityreporting• Providerperformanceprofiling• Utilization/qualityreview

PatientEngagement Enablepatient-focusedprogramsandtoolsthatpromoteself-managementandallowforcostandquality-conscioushealthcaredecisions,particularlyforat-riskandchronicallyillpatients.

• Patientnavigationandcarecollaboration• Intelligentscheduling/tracking/monitoring/alerts• Shareddecisionmaking• Informationportals

ProviderReimbursementChanges– SharedSavings/PatientCareManagementFeeswithQualityMetricsCreateValueBasedModels

FromCMS/CommercialPayertoHospitalsandPhysicians(inordinarycourse)

FromCIO/ACOtoNetworkPCPs($5.00-$40.00PMPM)

FromCMS/CommercialPayerSharedSavingsthroughCIO/ACO(bycreatingsavingsandmeetingdefinedperformancetargets)

ProvidersWillManage“New”MultipleValueBasedRevenueStreams

PCPandSpecialtyStrategieswillbeemployedbyCIOs,CINs,ACOs,SpecialtyCIOsallshouldbestructuredtotakeadvantageoftheFFSrevenuestreamplusfouradditionalrevenuestreamsandpaymentmethodologies.

AdministrativeFees

AdminCostsandContingency

PremiumRevenue

QualifyingPhysiciansUsuallyPCPs

OtherSpecialistsHospitals

AncillaryProvidersRx/LabOther

MedicalLossRatio(MLR)

Fee-For-Service

CLINICALQUALITYTARGETS

PATIENTSATISFACTIONTARGETS

SHAREDSAVINGS

PatientCareManagementFees

Value-BasedPerformancePayments

Newrevenuestream$

CMSPerCapitaSpendNationally

Source:DartmouthAtlas

$25.80

1.39 0.90

$20.03

CMSSavings CIOAdm HospitalsInPatient Physicians Pharmacy/OP/Other

MedicareFFS MedicareACO

RevenueImplications—NextGenerationACOvs.FFSMedicare

CIN/ProviderCosts $MMAdministration/$15PMPM 0.90Totals 0.90

Provider RevenueInpatient(Hospital) 20.03PhysicianServices 15.76Pharmacy/OP/Other 16.74Totals 52.53

IncentiveAllocationDistribution (IAD)CMS(15%) 1.39Hospitals(35.1%) 3.26Physicians(35.1%) 3.26AllPCPPhysicians(5%) 0.46Totals 8.37

(NetofCINAdminCosts)

1ForcomparabilityonlyasNextGenerationACOsrequire10,000attributedlives.

NGACOAssumes5,0001 enrolleesat$1,000PMPM$62MMinTotalPremiumRevenue/MaximumSharedSavingsare$9.3MMor15%)

$1.39of$9.3MMinMaximumSharedSavingstoCMS(15%Share)$7.9MMinMaximumSharedSavingstoACO(85%Share)plustelemedicinefees

$23.3total-9.7%

-22.4% -6.2% -3.8%

$19.5+16.0%

FinancialImpactonKeyStakeholdersMedicareFFSvs.NextGenerationACO($MM)

RevenueImplications– MedicareAdvantagevs.FFSMedicare

Assume5,000enrolleesat$1,200PMPM(HCC=1.23)withoutadditional“star”reimbursement$72MMinTotalPremiumMARevenuevs.$60MMintotalFFSPremiumRevenue

MLR=85%(industryincentives)toproviders/HumanaModel*

MAHealthPlan $MMAdministration 7.2Profit 3.6Totals(15%MLR) 10.8

ProvidersHospital (Inpatient) 20.2PhysicianServices 14.4Pharmacy/OP/Other 14.4Totals(68%MLR) 57.1

IncentiveAllocationHospitals (50%) 7.14Physicians (50%) 7.14Totals(17%MLR) 14.3

FinancialImpactonKeyStakeholdersMedicareFFSvs.MedicareAdvantage($MM)

*Humana=81%MLR:AetnaFL83%MLRWithout5Starincentiveallocation(4%+)

$25.05

$16.80$17.40

$20.20

$14.4 $14.4

TPI/MAHlthPln Hospitals Physicians Parmacy/OPOther

MedicareFFS MedicareAdvantage

$21.5Total+28%

$27.3Total+9%

NextGenerationClinicallyIntegrated“SystemofCare”

CREATING A CLINICALLY INTEGRATED “SYSTEM OF CARE”

Primarycare

Specialists

“Traditional”CIN

Ancillarie

s Hospitals

Strategicnetworkdesignprocesstocreateintegratedsystemofcaretoextendserviceaccessandtouchpoints(Hardassetsandvirtual)

Primarycare

Specialists

ClinicallyIntegratedSystemofCare

Ancillarie

s Hospitals

UrgentCareMinuteClinics

TelemedicineOnlineConsults

FreestandingEDsPostAcute

ASCsSpecialtyCenters

CENTRALIZEDSERVICESPayerContracting

NetworkManagementTechnologySupport

KEYTAKEAWAYThevisionforaclinicallyintegrated“SystemofCare”isstrategicallyinspiredbythegroundbreakingretailhealthcarestrategybeingimplementedsuccessfullyat“OneMemorialHermann.”Aclinicallyintegrated“SystemofCare”movesbeyondthe“traditional”CIN,whichfocusesprimarilyonintegratingandconnectingexistinginpatientandoutpatientfacilities,clinicsandphysicians,butdoesnotseektoprovideexpandedhealthcareaccesspointsthroughoutthecommunity.

Humana—MedicareAdvantageTransitionStrategyforProviders

1st Year—PhaseI 2nd Year—PhaseII 3rd Year—PhaseIII

SharedIncentives IncreasedIncentiveOpportunities

“15centSolution”

KeyElementsofPhaseI- FFSreimbursement

(e.g.,120%ofMedicare)

- Qualityreporting- HCCcalculation- Modestupside

incentiveopportunity

- Nodownsiderisk- Opportunityfor

higherreimbursement

KeyElementsofPhaseII- FFSreimbursement

(e.g.,120%ofMedicare)

- Largerincentivesforqualityperformance

- LargerincentivesforHCCimprovement

- Nodownsiderisk- Opportunityfor

highertotal

KeyElementsofPhaseIII- HumanapaysCIN

85%ofpremium- Baselinereflects

higherHCCscores- Significantupside

anddownsiderisk- Opportunityfor

muchhighertotalreimbursement(e.g.160%ofMedicare)

KEYTAKEAWAYHumanaprovidesaclear,3-5yearstrategytoevolvephysiciangroupsandcommittedCINstogreaterriskandgreaterpotentialreimbursementfortheMedicarepopulation.

December2016

SummaryConclusions

2016—ComplexandCrowdedFFSandValue-BasedEnvironment

Care Coordination and Patient OutreachProgram Advisory and Implementation Services

Data Aggregation and Intelligence Risk Management and Analytics

END-TO-END

Source:CuratingtheBestofDigitalandPopulationHealth,Dr.GordonJoneshttp://www.slideshare.net/elcid84/phmslideshare2014?qid=331b8a6e-df33-4f6b-8bbf-ee7bc139c465&v=default&b=&from_search=3

ConclusionsandImplications

NationalImplications:

• GovernmentalACOs/Plans– AsgoesreimbursementstructuresforMedicare,sogoesthecommercialreimbursementstructuresaswell.LookforMedicareAdvantageandNGACO’stoinfluenceeveryproviderinasimilar“ValueBased”manner.

• HealthSystemCINs– Alllargesystemswillemulatea“OneMemorialHermann”Modelbuttheirsuccesswilldependontheirsurvivalof“NarrowNetworks”andtheir“CapabilitytobuildouttherightmixRetailHealthandexistingassets.”

• Multi-SpecialtyGroupCINs– Needdominantcriticalmass(e.g.,800poundgorilla)inapluralistichospitalandpayerenvironment.OtherwisetheyneedtobeassociatedwithalargeHealthSystem(s)CINthathelpsthemachievecriticalmass.

• PayerRelationships– Pluralisticuntiltheystartdownthe“NarrowNetwork”/ValueBasedProduct/Population(AtRisk)pathwaysthentheywillsegregatebypopulation(MedicareAdvantage)andSpecialtyProduct(CVSpecialtyCINforJoints,CHF,IHD,CABG’s,etc.)

• “WildCard”– VeteransHealthcareAdministrationCommunityCareNetwork(VHACNN)– 4.3millionveteransusing(VHACCN)4regions,$12.3billionintotheprivatedeliverysystemFY17

CriticalTakeaways

PrioritizekeyInitiativestofulfillthefollowingobjectives:

• Preserveandgrowadominantcriticalmassofpatients,facilitiesandtechnologytosustainandenlargeanoptimalregionalfootprint

• Significantresourceinvestmentswillberequiredtosupportthedevelopmentofadditionalvalue-basedproducts

• Bepreparedfora“zig-zag”expansionpathwaywhichwillrequiremultiplestartsandstopstoultimatelydevelopnumeroussuccessfulmodels

5665NorthScottsdaleRoad,Suite110n Scottsdale,AZ85250Phone:(480)427-3943nwww.ssbsolutions.com

December2016

Appendix

MemorialHermannAccountableCare

• Clinically IntegratedIPA• Private, Employed & FacultyIntegration

• Exclusive Contracting DOJ/FTCProtections

CMSSharedSavings• 45,000 attributed beneficiaries• FocusPatientCenteredMedicalHome

Gr Houston >11,000MHMD 3,500CI 2,900ACO 2,700

PCMH304

211 Locations

Year 1 CMS Shared Savings $57,800,000 Savings(#1 ACO in the US)

COMMERCIAL

Commercial• 260,000coveredlives• BCBS,Aetna,Humana

MedicareAdvantage• 19,600coveredlives

MEDICARE

MHMDBoardof Directors

Clinical Programs Committee

Cardiology

Neurology

WomenChildren

Neonatal

Surgery Medicine Oncology Contract

MemorialHermannHealthSystemCINisOrganizedforPopulationHealthManagementAroundServiceLinesandSpecialties

CVSurgery Neurosurgery OBGyn

Anesthesia

Bariatrics

Orthopedics

CriticalCare Medical

Emergency

HospitalMedicine

PostAcute

Oncology

Radiation

Contract

Radiology

Pathology

AdultPCP

PrimaryCare

Banner/AetnaProducts

AetnaWholeHealthProductwithBanner

• License• Claims• MemberServices• SalesandMarketing• Actuarial/Underwriting• ImplementationServices

HealthPlanServices• License• Claims• MemberServices• SalesandMarketing• Actuarial/Underwriting• ImplementationServices

HealthPlanServices

CareManagement

• EmbeddedCM• TelephonicCM• DM,UM,CM• Wellness• SeniorPrograms• ImplementationServices

CareManagement

• Telephonic/Embedded• UM,DM,CM,BH,MMTraining,StaffandPrograms

• WellnessandLifestyle• Clinical/ITPlatform• ImplementationServices

HIT/HIE

• HIE• CDS

• PHR/PtPortal• Analytics

• ImplementationServices

• CTSuite

HIT/HIE

• HIE• CDS

• PHR/PatientPortal• Analytics

• ImplementationServices

• CareTeamSuite• HIE

• CDS•

• Analytics&Reporting• ImplementationServices

ProviderBrandedHealthPlan

StrategyDevelopmentandChangeManagement

AetnaWholeHealth

Physicians Hospitals OutpatientFacilities

Pharmacy HomeHealth

StandAloneorTurn-KeySolutions

AnyPayerAnyInsuranceSegment

CINStrategy:BannerHealthMovedthePhoenixMarketin2011andtheArizonaMarketin2014toBecomeaStatewideCIN

CIN Banner HealthNetwork(“BHN”)withFTCApprovalin2011

Participants • BannerHealth(Hospitals)includingUofA’stwohospitals• BannerMedicalGroupandUofAMedicalGroup/FacultyPracticePlan• BannerPhysicianHospitalOrganization• ArizonaIntegrated Physicians(IPA)ownedbyDaVitaHealthcarePartners

KeyPayerRelationship(s)

• Medicare(PioneerACO), Aetna,BCBSAZ(MA),Humana,HealthNet,United,Cigna• MultipleproductsandplansincludingMSSP,globalrisk,MA,narrownetwork• NoMedicaidproductatthistime

AttributedLives • 200Kcommerciallivesin2012;22KMAlives;estimated500K- 750Klivesbyendof2015;UofAHealthPlanMembers

OrgStructureandGovernance

• Physicians own50%andBannerHealthowns50%;sharedsavingscommensuratewithownership• BPHOcanengageinrisk-basedcontracting• BHNBoardhasrepresentativesfromallthreephysicianentitiesandBannerHealth;four

subcommitteesoftheBHNBoard:Quality/ClinicalIntegration;Finance;OperationsandContracting;andInformationTechnology

Key Points • AetnapartnershipispivotalinbuildingofBHNI/Tinfrastructuretosupportutilizationmanagement• ArizonaIntegratedPhysicianspartnershipchargedwithbuildingclinicalinfrastructureonambulatory

sideownedbyDaVita/HealthcarePartners• BHNpushingactivelytodevelopnarrownetworkproductsconsistentwithchangingpayerenvironment• BHNhastriedseveraltypesofriskmodelsandplans toofferacapitatedarrangementinthethirdyear

ofthePioneerprogram,aswellaswithseveralcommercialofferings

BannerHealthNetworkandBCBS-AZCaseStudy

BannerHealth25%

ArizonaIntegratedPhysicians25%

BannerMedicalGroup25%

BannerPHO*25%

BannerHospitals

800+Physicians120PCPs

600Physicians150PCPs900+Physicians

170PCPs

*BannerHealthowns50%ofBannerPHO

Banner

KeyElementsoftheBHNPartnership• “Win/win”structure• TermsareacceptabletoAIP

• FormationofnewcompanyforallVBPcontracting

• 50/50ownership• 50/50governance

• AIPhasleadershiprole• AIPisexclusivetoBHNforVBPcontracts

• BannerisexclusivetoBHNforVBPcontracts

• Alignmentofincentives• 50/50sharingofincentivesandrisk

JV#1:BannerHealthNetwork(50/50JVBetweenBannerHealthandPhysicians)

JV#2:BCBS-AZandBannerHealthNetwork

(50/50JV)• Purposeisjointdevelopmentofvalue-basedproducts

• Mutualexclusivityforvalue-basedproducts

ProgramDesignRequiresConsensusonFormandFunction

ApproachtoRisk

DegreeofCentralization

HeterogeneityofClinicalResources

LevelofIntegration

CentralizedDeliveryofServices

PCPOfficeBased

SpecializedClinicalTeam

BroadClinicalandBehavioralTeamandCommunity

Resources

Targeted,SiloedPrograms

ClinicallyIntegratedProgramSupportingaRangeofHigh-RiskPatients

Givenprogramvisionandscope,availableresources,andsizeoftheat-riskpopulation(nowandinthefuture),Aspirusneedstoidentifythesweetspotwithregardtobalancingkeyprogramdesignconsiderations

Selected Design Considerations

Disease-focused

Patient-focused

SSBCaseStudy:Multi-HospitalSystemLeveragingStanfordModel

HealthsystemstudiedandadaptedbestpracticesandtoolsfromtheIntensiveOutpatientCareProgramdevelopedatStanfordUniversity

CareCoordinationSupportHubPracticeA

PracticeB

PracticeC

H H TransitionalCare

Managers

POSTACU

DischargedPts

$PayerServicesandPrograms EM

BEDDEDCAREMAN

• Carecoordinationbuiltonfocuseddisciplineandadefinedstructure

• Dedicatedcarecoordinatorswithspecifiedresponsibilities- Hybridmodel—somecarecoordinatorsemployed

fulltimebytheCIN,andothersemployedeitherbypracticesorthehealthsystem

• Patient-centricratherthandisease-centric• Twoseparateprograms—chroniccareandcaretransitions

PROGRAMHIGHLIGHTS

CareManagementModelsMustBalanceGoalsandPerspectives

• Thegoalofcarecoordinationistofacilitatetheappropriateandefficientdeliveryofhealthcareservicesbothwithinandacrosssystemsofcare

• Whilestakeholdershareacommongoal,keygroupsmayalsohavedifferentperspectivesandexpectationsabouttherelativevalueandsuccessofdifferentapproaches/interventionsaswellasorganizationofresources

Source:AgencyforHealthcareResearchandDevelopment

Initial focus in model development is to ensure at the outset that stakeholder perspectives and

expectations are broadly understood and aligned

MeetPatientNeedsandPreferencesinDeliveryofHigh-Quality,

High—ValueCare

SystemRepresentative(s)Perspective

FourPHMPurchaseCategoriesforProviders

ENTERPRISEDEVELOPMENTPLATFORM Examples

Integrateddatacapture,analyticsandcommunicationsplatformto beusedbymultipleconstituenciesacrosstheenterprise

CaradigmHealthCatalystHealthcare DataWorksRecombinant(Deloitte)IBM

ANALYTICS-AS-A-SERVICE ExplorysHumedicaLumerisPremier(Verisk)Truven

OutsourcedPHManalyticsanddata managementtosupportPHMstrategiesandbenchmarking

POINTSOLUTIONS AltasoftMedventiveMidas+MedeAnaltyicsCloudera

Standalone componentswithnarrowbutdeepfunctionalityandsubjectmatterexpertise

EMRSUB-MODULE EpicCernerMEDITECHAllScripts

IntegratedPHManalytic andprocessroutineswithintheprovider’sEMR

Source:AdaptedmaterialfromtheAdvisoryBoard“OverviewoftheHealthcareAnalyticsMarket”(2014)http://www.slideshare.net/elcid84/phmslideshare2014?qid=331b8a6e-df33-4f6b-8bbf-ee7bc139c465&v=default&b=&from_search=3

5665NorthScottsdaleRoad,Suite110n Scottsdale,AZ85250Phone:(480)427-3943nwww.ssbsolutions.com

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