southwind survival in the new market clinical integration as the foundation meridian health partners...

Southwind Survival in the New Market Clinical Integration as the Foundation Meridian Health Partners Physician Summit June 7, 2014

2014 The Advisory Board Company advisory.com 2 Southwind in Brief 2 $300 M + In total opportunities identified across past five years 1,150+ Engagements completed 1,800+ Years of experience PHYSICIAN PRACTICE MANAGEMENT Long-term management solution for the physician enterprise Interim management ideal for driving meaningful improvement efforts Deep-dive assessment to identify and quantify improvement opportunities Executive recruiting for the physician enterprise Experienced, progressive physician practice management PRACTICE PERFORMANCE IMPROVEMENT Specialized team of experts in patient flow, revenue cycle, and IT Start-to-finish physician compensation redesign Financial data consolidation, reporting, and benchmarking Satisfaction solutions through patient and provider satisfaction surveys Focused improvement efforts that achieve a significant ROI MERGERS & ACQUISITIONS Thorough pre- acquisition due diligence Negotiating deal terms to reach a definitive agreement Post-transaction transition assistance Structuring physician practice acquisitions for long-term success VALUE-BASED CARE PROGRAMS Clinical integration and accountable care Patient-centered medical homes Clinical transformation Bundled payments Co-management Establishing value- based care programs for shifting payment models MEDICAL STAFF PLANNING Strategic community/ physician needs assessment Determining fair market value and reasonableness of compensation Recruitment policies for a high-performing medical staff Comprehensive medical staff development planning HOSPITAL PERFORMANCE MANAGEMENT Subject matter experts in clinical operations, strategy and financial improvement Achieving required margins at government rates Coordination of care across the continuum Capacity optimization Navigating strategic imperatives Enhancing strategic and operational performance to ensure sustainability advisory.com/southwind

2014 The Advisory Board Company advisory.com 3 Activities Required for Success Crafting a sustainable economic model Provide comprehensive, coordinated care across the continuum Identify patients at risk for avoidable adverse conditions in time to change course of care Build scaled operations to support care management across the system Match timing of deployment to contracting environment Scaling the care management enterprise Building and optimizing the provider network Assemble a strong provider network aligned with system-wide performance goals and engaged in quality improvement Develop organization, governance, incentives to enable joint contracting and drive success Introduce/optimize data analytics to drive network construction and performance monitoring Craft a sustainable value-based payment strategy with a solid financial foundation for profitability and growth Balance near term opportunities with longer term investments matched to payer environment Reduce network leakage to promote growth objectives Incorporate targeted programs to manage inpatient margins Full-spectrum of services to solve for challenges facing provider organizations to position for success within transition to value based care From assessment, through formation, to operations Create and implement Road Map to support formation of Population Health Management capabilities inclusive of: robust economic modeling; care model design across full spectrum of risk profiles and clinical conditions; and, available patient risk stratification Support and implement notable strategies to deliver product to the commercial market Advisory Board/Southwind Capabilities and Assets 2014 The Advisory Board Company advisory.com

4 2 3 4 1 Road Map Discussion, Questions and Answers Case Study Examples Forces Driving Change Building Blocks for Transition to Value Based Payment

2014 The Advisory Board Company advisory.com 5 Financial, Clinical Profiles Shifting Dramatically Todays Economics Mandate Transition to Value Decelerating Price Growth Continuing Cost Pressure Shifting Payer Mix Deteriorating Case Mix Medical demand from aging population threatens to crowd out profitable procedures Incidence of chronic disease, multiple comorbidities rising No sign of slower cost growth ahead Drivers of new cost growth largely non-accretive Baby Boomers entering Medicare rolls Coverage expansion boosting Medicaid eligibility Most demand growth over next decade comes from publicly insured patients Federal, state budget pressures constraining public payer price growth Payments subject to quality, cost-based risks Commercial cost shifting stretched to the limit

2014 The Advisory Board Company advisory.com 6 Private Market Initiatives Developing Nationwide Direction Not Just Coming From Washington BCBS Massachusettss Alternative Quality Contract: Annual global budget, quality incentives for participating providers Blue Shield California: Two ACOs in Northern California Cigna: Medical home contract with Piedmont Physicians Group BCBS Illinois: Shared savings contract with Advocate Health Care BCBS Minnesota: Shared savings contract with five providers UnitedHealth Care: ACO with Tucson Medical Center Maine Health Management Coalition: Multi-stakeholder group supporting ACO pilots Providence Health & Services: $30M, two-year contract with public employee benefits board Humana: ACO pilot with Norton Healthcare Anthem Blue Cross: ACO pilot with Sharp HealthCare medical groups Multiple Plans in NY: PMPM with Shared Savings for Providers Source: Anthem Blue Cross, Sharp HealthCare Pilot San Diego-Area ACO, available at: www.healthcarefinancenews.com; Norton Healthcare, Humana Launch ACO Pilot, Aetna, Carilion Clinic Building ACO in VA, available at www.healthleadersmedia.com; An ACO Takes Root in San Francisco, available at: www.chwhealth.org; 8 Aspects of UnitedHealthcare's Plans to Fund an ACO at Tucson Medical Center, available at: www.beckershospitalreview.com; Advocate Health Care, Blue Cross and Blue Shield of Illinois Sign Agreement Focusing on Improving Quality, Bending the Health Care Cost Curve, available at: www.bcbsil.com; Minnesotas Largest Health Plan Signs Total Cost Of Care Agreement With Park Nicollet Health Services, available at: www.bcbs.com; BCBS Massachusetts Announces First Year Results of Alternative Quality Contract, available at: www.bluecrossma.com; CIGNA and Piedmont Physicians Group Launch Accountable Care Organization Pilot Program, available at: newsroom.cigna.com; Maine Health Management Coalition, available at: www.mehmc.org; Health Care Advisory Board interviews and analysis.

2014 The Advisory Board Company advisory.com 7 A Population More Predisposed to Co-Morbidity Worsening Case Mix Not Just Due to Aging Obesity Rate Among U.S. Adults 1 1988 Source: Centers for Disease Control Behavioral Risk Factor Surveillance System, available at: http://www.cdc.gov/brfss/, accessed May 4, 2011; Health Care Advisory Board interviews and analysis. 1)Body Mass Index 30, or 30 pounds overweight for 5 4 person. No Data 30% Obesity Rate Among U.S. Adults 1 2009

2014 The Advisory Board Company advisory.com 8 The Looming Demographic Conundrum Number of People 20-64 for Every Person >65 1 Aging Beyond Our Ability to Support Source: Kaiser Family Foundation, Medicare Spending and Financing, A Primer, 2011, available at: http://www.kff.org/medicare/spending.cfm.; The Economist, Too Much, Too Young, April 2011; The Wall Street Journal, Baby Boomers and the Labor Force, March 22, 1011; all accessed: May 4, 2011; Health Care Advisory Board interviews and analysis. 1)Organization for Economic Cooperation and Development (OECD) average. 2)Males. 3)Projected. 1950 7.2 1980 5.1 2011 4.1 2050 3 2.1 Living Longer US Life Expectancy at 65 2 1940: 12 years 2007: 18 years 623 K 1.6 M 2X New Medicare beneficiaries each year 2010-2030 New Medicare beneficiaries each year 1995-2010 In 2030, Medicare will have twice as many beneficiaries as 2010

2014 The Advisory Board Company advisory.com 9 2 3 4 1 Road Map Discussion, Questions and Answers Case Study Examples Forces Driving Change Building Blocks for Transition to Value Based Payment

2014 The Advisory Board Company advisory.com 10 Success Clear in Theory, but Challenges Abound Transform Patient Care Manage Financial Outcomes Build the Provider Network Optimize Network Performance Ensure Cultural Evolution Which high-quality providers are splitting referrals and how can we strengthen alignment? How can we engage outlier physicians in performance improvement? Do we know how our clinical initiatives will impact revenue across all contracts? Are care teams delivering proactive, evidence-based care across the continuum? Have we developed and implemented a robust change management strategy? ? ? ? ? ? Execution will Determine Success

2014 THE ADVISORY BOARD COMPANY Each Organization on a Transition Path 11 Migrating to a Value-Based Business Model Payment Transformation Care Transformation Leading with Care Transformation Invest quickly Prove concept Obtain value- based payment Leading with Value- Based Contracts Meet payer demands for risk Secure share Adapt care model Source: Advisory Board interviews and analysis.

2014 The Advisory Board Company advisory.com 12 Transforming the Care Delivery Enterprise Stages of Program Development Develop sustainable financial model at the outset Alignment of physician platform; Identify common burning platform to motivate across stakeholders Establish ambitious standards for delivery system redesign Build IT network to support care management, performance improvement Create scalable care management infrastructure 12345 Five Lessons on Successful Care Transformation

2014 The Advisory Board Company advisory.com 13 Engaging Physicians in Shared Quality Improvement Efforts Source: Health Care Advisory Board interviews and analysis. Building a Unified Alignment Strategy Based on Value Clinical Integration Organization Core Contract Components Selective Physician Partnerships : Network of physicians opting to collaborate with hospitals in delivering evidence-based care and improving quality, efficiency, and coordination of care Comprehensive Improvement Initiatives: Identified and evolving metrics and targets designed to meaningfully impact clinical practice of all physicians in network to improve value across full continuum of care Performance Improvement Architecture : Data-driven mechanisms and processes to monitor and manage utilization of health care services, designed to control costs and ensure quality of care Clinical Integration Contract Hospital or System Independent Physicians Employed Physicians Payer Employer Hospital Joint Payer Negotiations Professional Fees P4P Incentives Shared Savings

2014 The Advisory Board Company advisory.com 14 A Three-Part Test of Antitrust Acceptability Source: U.S. Department of Justice and Federal Trade Commission, Statements of Antitrust Enforcement Policy in Health Care, August 1996; Health Care Advisory Board interviews and analysis CI Viability Contingent on Meeting Regulatory Bar Statements of Antitrust Enforcement Policy in Health Care Issued by the U.S. Department of Justice and the Federal Trade Commission August 1996 Program includes mechanisms to monitor and control utilization of health care services, assure quality Selective choice of network physicians likely to further efficiency objectives Participants are making a significant investment of capital, both monetary and human, in necessary infrastructure and capability to realize claimed efficiencies The Network Is Likely to Achieve Substantial Efficiencies 1 Joint Contracting Is Reasonably Necessary to Achieve Efficiencies Active participation by physicians in all contracts is needed Cross-referrals among participating providers are important for program success Joint contracting facilitates revenue sharing needed for collaboration 2 Market share above 35 to 40 percent of physicians in any specialty can raise market power concerns Substantially higher market share may be tolerated if collaboration is non- exclusive (i.e., providers free to contract outside network), particularly in areas such as rural markets, where number of available providers is low The Collaboration Will Not Give Participating Providers Market Power 3

2014 The Advisory Board Company advisory.com 15 Clinical Integration Works Across Diverse Systems Three Bright Lines for Program Design Program must be real Containing authentic initiatives, actually undertaken by the network Involves all physicians in the network Promotes collaboration and interdependence so physicians can achieve more than they likely could independently Initiatives of the program have the potential to achieve likely improvements in health care quality and efficiency Joint contracting with fee-for- service health plans is reasonably necessary to achieve the efficiencies of the Clinical Integration program Representative CI Networks 4-Hospital, 800 Bed System 11-Hospital, 2,000 Bed System 120 Bed, Standalone Hospital 5-Hospital, 1,400 Bed System 300 Bed, Standalone Hospital

2014 The Advisory Board Company advisory.com 16 Accountable Care Success Requires More Advanced Capabilities Source: Health Care Advisory Board interviews and analysis. 1)Pay-for-performance. Many CI Programs Still Focused on Basic P4P 1 CI Program Attributes Under Different Payment Imperatives Pay-for- Performance Focus on basic quality improvement Resources to collect, monitor physician performance data Primary reward: preferred fee schedule, P4P 1 bonus Value-Based Purchasing Focus on reducing readmissions, unit costs Resources to improve cross- continuum handoffs, standardize care Primary reward: penalty avoidance, inpatient cost savings Full Population Accountability Focus on reducing utilization, costs Resources to manage high-risk patients Primary reward: bonus based on total cost reduction Adequate for commercial fee-for- service joint contracting Necessary for successful management of performance and population risk

2014 The Advisory Board Company advisory.com 17 Creating an Infrastructure to Drive Results Valid, useful and real-time data engage physicians and prove value Charges/Patient Billing Evidence based medicine order sets EMR/CPOE Cost accounting info Decision Support Combining hospital data Claims clearing house Practice management system with ambulatory claims Integrates inpatient and ambulatory data Measures performance on cost, quality, guideline adherence Data drillable to actionable level to monitor and manage physician performance Business Intelligence Tool Metric Selection Data Aggregation Program Management Physician Scoring Clinical Redesign

2014 The Advisory Board Company advisory.com 18 Consistent Building Blocks for Success 18 Source: Health Care Advisory Board interviews and analysis. A Multi-Pronged Undertaking Performance Monitoring Systems to track physician performance Process to remedy underperformance Optimized IT Infrastructure Platforms for seamless data exchange Disease registry and other clinical tools Performance Incentive Pool Bonus structure tied to program goals, physician performance Support for Clinical Redesign Scalable care coordination infrastructure Principled referral management policies Selective Physician Partners Right specialty mix to advance care delivery Clear participation requirements Physician Oversight Broad engagement in governance, management Platforms for shared hospital-physician decision making Payer Engagement Early involvement in initiative selection Joint contracts that recognize CI value Meaningful Performance Metrics Program-wide and specialty-specific measures High-yield targets and objectives

2014 The Advisory Board Company advisory.com 19 Sustainable, Population Centered, Data Driven, Coordinated Care Southwind Solution to Population Health Management Care Model Establish ambitious clinical standards for delivery system redesign and care management resources Economics Craft a sustainable value-based payment strategy with a solid financial foundation for profitability and growth Infrastructure and Technology Deploy staffing, IT and other resources to support delivery system redesign, provider accountability, value-based quality monitoring, and patient engagement Network Assemble a strong provider network aligned with system- wide performance goals and engaged in quality improvement

2014 The Advisory Board Company advisory.com 20 Focus on Building Blocks Needed to Manage and Coordinate Care Source: Health Care Advisory Board interviews and analysis. Population Focus Requires New Set of Capabilities Population Management Core CompetencesRequired Network Support Systems Ready access to information about all care received by patients across the continuum Coordination across specialties, care sites on treatment for complex patients Robust care management staff resources to augment physician-provided care Data analysis to identify best opportunities for care cost reduction, quality improvement Forums to bring physicians, other providers together around care improvement Integrated information technology platform for data collection and exchange Ability to collect robust data, plus predictive analytic tool and data analysis staff Staffing resources provided at scale, deployed efficiently across practices as needed Clinically integrated or employed primary care physicians that coordinate care for improved quality and lower cost Each of the elements below: communication, technology, data, and a care management team

2014 The Advisory Board Company advisory.com 21 Source: Health Care Advisory Board interviews and analysis. Risk Stratification for Defining Patient Management High- Risk Patients Rising-Risk Patients Low-Risk Patients 60-80% of patients; any minor conditions are easily managed 15-35% of patients; may have conditions not under control 5% of patients; usually with complex disease(s), comorbidities Managing Three Distinct Patient Populations Keep patient healthy, loyal to the system Avoid unnecessary higher-acuity, higher- cost spending Trade high-cost services for low- cost management

2014 The Advisory Board Company advisory.com 22 Significant Investments in IT and Staffing Necessary Key Components of Population Health Infrastructure Identify, analyze and act on opportunities to reduce direct cost and improve quality Identify physician outliers and educate and motivate in behavior change Minimize unnecessary physician practice variation Engaging Physicians in Performance Improvement Manage total cost of care for at-risk populations across health system Support plan management with population-level intelligence to manage avoidable utilization and close gaps in care across at-risk lives Analyzing Populations at the Network & Plan Levels Enable comprehensive, patient-centered care across conditions and wellness needs Empower care managers with actionable data and workflow tools to deliver evidence- based care and activate patients in self-management Prioritize patients at risk for avoidable adverse episodes in time to change course of care Inform real-time resource allocation decisions to deliver intensive interventions to patients most at risk for acute events Inflecting Care Delivery & Outcomes at the Practice Level Intervening on Risk in Real Time Across the Continuum Population Health Management Imperatives

2014 The Advisory Board Company advisory.com 24 CI Partnership Yields Hospital Cost Savings at Covenant Case Study #1 Source: Health Care Advisory Board interviews and analysis. 1)Ventilator-associated pneumonia. Improving Inpatient Efficiency and Standardization Upfront payment Estimated savings Hospital ROI After One Year Primary Sources of ROI Decreased length of stay Increased coding revenue Reduced VAP 1 cases Decreased Foley catheter use and associated infections $3M $12M Case in Brief: Covenant Health Five-hospital integrated delivery system in Lubbock, Texas; corporate parent of Covenant Health Partners (CHP), a 310-physician CI network Focus on inpatient as well as outpatient efficiency strengthens achievement of health system goals CI Metric List Covers both inpatient and outpatient care Inpatient measures focus on longstanding cost and quality targets Health System CI Network

2014 The Advisory Board Company advisory.com 25 CI Program Affiliation Boosts Volumes for In-Network Specialists Case Study #2 Source: Health Care Advisory Board interviews and analysis. 1)Pseudonym. Tightening the Referral Network Specialty Referral Patterns Case in Brief: Oliver Hospital 1 Mid-size hospital with 200-physician CI network CI contracts reward physicians for quality, cost improvements CI specialists focus on communication, efficiency encourages PCPs to refer locally rather than to hospital in nearby town, increasing Oliver Hospitals inpatient volumes CI Network PCPs Out-of-Network Specialists In-Network Specialists Competing Hospital Oliver Hospital No formal performance improvement focus Follow metrics focused on communication, efficiency

2014 The Advisory Board Company advisory.com 26 Expanding the Care Management Infrastructure 26 Scaling Resources to Support Physicians in Clinical Transformation Case Study #3 * - Pseudonym Case in Brief: August Health Partners* 840-physician network affiliated with a four-hospital faith based system in Southeast U.S. Launched CI program in 2007 Has gradually expanded number of care management resources provided, with ultimate goal of redesigning delivery system for transition to accountable care Train office staff in care coordination, disease management Counsel practices on medical home transition Implement disease registry Launch patient activation, education tools Support expanded EMR use Time Investment Level 2007 2012 20082012 PHO FTE Staff 3 120

2014 The Advisory Board Company advisory.com 27 Source: Health Care Advisory Board interviews and analysis. 1)Clinical Integration. Putting Clinical Integration Into Practice Key Program Characteristics Case in Brief: Advocate Health Care Nine-hospital system with a large physician network located in northern Illinois Advocate Physician Partners (APP) is a platform for risk contracting and CI 1 programs APP composed of over 3,200 physicians, about 65 percent of the medical staff Approximately 75 percent of participants are independent physicians Patient Safety Training Diabetic Collaboratives Online Physician Portal Physician Report Cards P4P Bonus Payments All Major Plans in Market Selective, scalable membership Physician-led care improvement efforts Infrastructure for care coordination Performance management system Legal, meaningful incentives Joint commercial contracts 123456 Case Study #4

2014 The Advisory Board Company advisory.com 29 [email protected] 818-669-2180 Ken Keller, MBA Vice President Contact Information

2445 M Street NW I Washington DC 20037 P 202.266.5600 I F 202.266.5700 advisory.com

southwind survival in the new market clinical integration as the foundation meridian health partners...

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value based care programs

financial improvement

coordinated care

course of care

accountable care patient

quality improvement

payments comanagement

clinical operations