evaluating physician affiliation & network integration:

a conversation for boards & administration

Kevin Locke / Dixon Hughes GoodmanTim Hewson / Nexsen Pruet

Matthew Roberts / Nexsen Pruet

agenda

Drivers Models Lessons Learned

What hasn’t worked? What’s working now?

Action Planning

drivers

Market Dynamics Regulatory and Payment Reform Continuum of Care

market dynamics

More Care (32M uninsured, Baby Boomers, Chronic Disease)

Higher Quality (P4P, Shared Savings, Core Measures)

Less Money ($240B Cuts, $90B Penalties)

“Bottom line, if you attempt to use the same care delivery model moving forward, faced with the magnitude of reductions in forecasted revenue, you will go out of business.” ~ Michael Sachs, Sg2

accelerating physician affiliation and network integration

Independent Alignment Accountability

All Providers

Payers

payment reform

Source: PricewaterhouseCoopers

Bundled Payments

Value-Based Purchasing

Global Payments / Capitation

Pay-for-Performance

SharedSavings

Fee for Service

accelerating physician affiliation and network integration

continuum of care

Source: Sg2

accelerating physician affiliation and network integration

potential models for physician integration

Employment Direct Through wholly owned subsidiary or affiliate entity

Exclusive Contracts/Independent Contractor Agreements

Co-Management/Medical Director Agreements Clinically Integrated Networks

one size does not fit all…

Situational strategies must be developed. Hospital and physicians must understand the

collective strategic objective and the type of integration must incentivize attempts to achieve that objective.

Lower cost/improved quality are objectives that are supported by the federal government and private payors.

broad spectrum of models to consider

Degree of Alignment

System Resources Required

High

LowIndependent Strategic Alliance Integration

Paying for Call

Voluntary Medical Staff

Venture Arrangement

RelocationSupport/IncomeGuarantee

Gainsharing

Directorships

Co-Marketing

Co-Management

PCMH

CIN or IPN

HEP

ACO

EmployedPhysician Enterprise

Source: Sg2

Primary Care

Physicians

Primary Care

PhysiciansSpecialistsSpecialists Acute Care

HospitalAcute Care

HospitalPost-Acute

CarePost-Acute

Care

PCMH CIN

Patient Centered Medical Home (PCMH):Primary care approach that supports comprehensive, team based care, improved patient access and engagement; serves as “hub” of care coordination; focuses on chronic disease management

Clinically Integrated Network (CIN):Acute care hospital, multispecialty physician network and other providers committed to quality and cost improvement, with support from joint negotiated commercial contracts

Accountable Care Organization (ACO):Model to promote accountability for a patient population by improving care coordination, encouraging investment in infrastructure, and redesigning the care continuum around quality

Readmission Risk/Penalties

Proposed Bundled Payment Initiatives

$

Proposed ACO Structure

$

Other Providers

Other Providers

clinically integrated models are accelerating

Co-Management: Model to align physician incentives around quality, cost and satisfaction with fair market compensation

Co-Management

Source: The Advisory Board | Dixon Hughes Goodman

what hasn’t worked? Make physicians an offer they can’t refuse One-sided arrangements Command control management style Lack of physician participation in strategic planning

process Lack of physician engagement and/or leadership Failure to educate physician on compliance and

business objectives Failure to define and measure quality improvements or

cost reductions

what’s working now?

Include physician in governance and management

Transparency in affiliation and integration Continuing education of physicians of what

hospitals can and will do vs can’t and won’t do Joint strategic plan which physicians buy into,

understand, and are responsible for implementing

what’s working now? Cultural integration Clear definition of goals, metrics and

expectations IT systems to track, measure and

report performance Clinical/financial accountability Customizing/aligning compensation to

organizational goals Developing physician leadership

co-management model

• Committee Involvement• Day-to-Day Management• Strategic Plan Development• Clinical Care Management• Quality Improvement• Staff Oversight• Materials Management• Budget Development

• Clinical Outcomes• Patient Safety• Satisfaction• Operational Processes• Financial Performance

Physician LLC

Physician LLC

Equipment*Staffing*Supplies

Hospital

FMV Compensation

Management Services

Management Fee Distributions

Investment

Performance Metrics

Fixed Duties

Governance Committees

Physicians

*Only one of two may be included

Source: Dixon Hughes Goodman

clinically integrated network (CIN)

Health System

Ambulatory Facilities

Hospital Hospital

CIN

ONE Network that can

Demonstrate Value

Private Practice

Physicians

Payers and Employers

Employed Medical Group

Employee Health Plan

clinically integrated network (CIN) Clinically Integrated Network (CIN) is commonly defined as

a health network working together, using proven protocols and measures, to improve patient care, decrease costs and demonstrate value to the market

Generally, the FTC considers a program to be clinically integrated if it performs the following:

Establishes mechanisms to reduce cost and improve quality (enhance value) of healthcare services

Selectively chooses network physicians who are likely to further the value objectives

Invests human and financial capital to accomplish defined objectives

CIN key componentsLegal Structure &

Governance

Flow of Funds

Contracting

Information Technology

Physician Leadership

Infrastructure

Participation Criteria

Performance Objectives

Clinically Integrated

Network

Health System Physicians

Payers

Quality Membership Contracting Information Technology

Care Redesign

Clinical Integration (CI) Network

Health System Patients & Communities

Physicians

• Enhanced reimbursement for

demonstrated quality

• Transformational care redesign

• Co-leadership with physicians

• Reduction in operating costs and

waste

• Demonstrated quality

• Improved coordination of care

• Higher patient satisfaction

• Improved quality and outcomes

• Enhanced cost efficiency

• Enhanced reimbursement for

demonstrated quality

• Long-term viability of private

practice

• Role in leadership and

governance

• Improved network coordination

• Enhanced patient care and

satisfaction

The Value of Clinical Integration to…

CIN value proposition

Source: DHG

managing risk

Parties must discuss business risk To hospital To physician

Parties must discuss legal/compliance Risk is equally shared

forecasting future developments

Role of medical staff Employed versus independent physicians

Changes in laws to make integration easier New reimbursement methodologies New and integrated alignment models

action planning for your leadership team

Strategic, cultural, and economic assessment of your market

Clear definition of objectives and win-win criteria

Thoughtful consideration of alternative models Disciplined plan and process for integration