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TRANSCRIPT
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WelcomeMary Barker
Vice President, Publishing and Education
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Staff
Anne McLeodSenior Vice President, Health Policy & InnovationCalifornia Hospital Association
Anne McLeod provides leadership in the development of CHA’s public policy objectives and develops innovative policy solutions for CHA’s members. Using her experience and extensive knowledge of federal and state health policies, Ms. McLeod represents hospitals’ interests and supports their future growth and success as they respond to the challenges they face going forward.
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Speakers
With more than 20 years of health care experience, Todd Fitz has applied his expertise in finance, strategy, and operations to a variety of settings, including community hospitals, physician groups, academic medical centers, insurance organizations, government agencies, and medical device companies. His focus is on network development, physician integration and governance, and performance improvement. He is a frequent contributor to thought leadership publications and presents regularly to industry associations, medical staffs, organizational boards, and community groups.
Todd Fitz Senior Vice PresidentKaufman Hall
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John Poziemski Vice PresidentKaufman Hall
A member of Kaufman Hall’s strategy practice and based in Los Angeles, John Poziemski focuses on integrated strategic and financial planning, strategic options evaluation, mergers and acquisitions, and value-based transformation initiatives, working primarily with provider organizations in the western region.Mr. Poziemski has also managed a variety of consulting engagements and business-development activities focused on clinical program development and physician integration strategy.Mr. Poziemski is a regular presenter at industry conferences and board retreats.
Speakers
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Kalani Redmayne has more than 20 years of experience in the health care industry. Her responsibilities focus on payer-provider strategies, alternative reimbursement methodologies, health plan and service operations, health care reform, payer relations, and product development. Prior to joining Kaufman Hall, Ms. Redmayne was Vice President of Product Development and Management for UnitedHealthcare, Inc., where she focused on Medicare Advantage, Medicare Supplement, Prescription Drug Plans and UnitedHealthcare’s private exchange products.
Kalani Redmayne Assistant Vice PresidentKaufman Hall
Speakers
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Polling Question #1
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Introduction
Todd Fitz
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• Physician and clinical alignment• Contracting strategy • Network optimization • Operational efficiency• Enabling infrastructure
Five Interrelated Business Imperatives Need to Be Addressed
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Physician and Clinical Alignment
Todd Fitz
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The Emerging Business Model Demands a Higher Degree of Physician Alignment
Physician alignment has always been important, but in managing population health, it will be essential.
• Transformation from volume to value
• An emphasis on coordination of care across the continuum
• Steady and increasing pressure on price
• Unpredictable utilization in medium term
• Improved IT connectivity between hospitals/doctors/patients
• Markets’ increasing preference for scale/essentiality
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Realizing the promise of population health management will require the application of the most difficult integration mechanisms
Integration Models Vary Widely in Their Ability to Impact the Value Equation
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Polling Question #2
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Contracting Strategy
Kalani Redmayne
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• Hospitals must: pursue value-based contracting strategies, face exclusion from key networks, or play the role of a discounted vendor
• Many hospitals will: need to form strategic partnerships to execute their value-based strategies or prevent network exclusion
The Pursuit of Value-Based Initiatives Will Be Critical for Long-Term Sustainability
Provider organizations able to manage defined populations across the continuum will be more attractive to payers,
employers and consumers.
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Centers of Excellence
High Deductible
Reference Price
Direct Contract
Narrow Network
FFS P4P Bundled Payment
Full Risk
Shared Savings
Shared Risk
Service-Level ConsumerismLimited Networks
Shift Risk to Providers
Wholesale: “House Money, House Rules”
Public Exchange
Private Exchange
Retail: Shift Plan Choice
to Consumers
Shift to Exchanges
One Size Will Not Fit All – Purchasers Will Use Various Mechanisms to Achieve Greater Value from Providers
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Moving Across the Continuum of Risk Contracting Will Present Unique Opportunities and Challenges
No risk
FFSIncentive-
Based FFS
P4P Case Rates
Partial Risk
Full Risk
Health Plan
• VBP• Shared
Savings• Bonuses• Withholds
• Episodic• Bundled
payments
• Limited scope
• ACOs
• Capitation• PMPM• Percent of
premium
• Full integration
• Health plan and delivery system
• Quality and cost target payments
• PQRS• PCMH
Small % of financial risk Medium % of financial risk Large % of financial risk
Limited Integration Moderate Integration Full Integration
• The largest upside (and downside) potential is realized when moving to the greater acceptance of risk
• Clinical and organizational integration will be a fundamental requirement for the greater acceptance of financial risk
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Clinical and Organizational Integration Must Align with Contract Reimbursement Methodologies
Understanding and aligning the organizational and market readiness will be required for timing investments and implementing contracting strategies.
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Delivery of Cost Savings to Purchasers is Only Part of the Equation for Successful Value-Based Arrangements
“Boeing [was] looking for an environment where the hassle factor of healthcare is gone … similar to the experience when you walk into a modern retailer, like Nordstrom … you’re immediately made comfortable.”
Dr. Joseph Gifford, CEO, Providence Health & Services’ ACO
Sources: Catalyst for Payment Reform; Evans, M.: “Washington Health Systems Contract Directly with Boeing.” Modern Healthcare, June 13, 2014.
High-Value Network
IT Sophistication
Transparency
Measurable Outcomes
Patient-Centered, Coordinated Care
Foster Competition
Access and Patient
Satisfaction
Provider Risk-Sharing
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Network Optimization
John Poziemski
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Providers Aiming to Achieve/Ensure Network Essentiality
System C
System B
System E
System A
System D
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
$10,000
$11,000
$12,000
0 10,000 20,000 30,000 40,000 50,000
CM
I Ad
jus
ted
Co
st
Pe
r M
ed
ica
re D
isc
ha
rge
Membership Attribution
Attributed Lives vs. CMI Adjusted Cost per Discharge by Network Systems
Note: Bubble size denotes net patient service revenue.
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Network Design to Include Continuum of Care
Public Health Resources• Community Health
Centers
Acute Care
Ambulatory Specialty Care
Infrastructure and Ancillary Services• Diagnostics• Pharmacies• Laboratory• Therapy
Tertiary/Quaternary
Short-Stay, Psych
Rehab and SNF
Long-Term Care
Home Care
Post-Acute and Transitional Care
Hospice/Palliative
Assisted Living
Patient Acuity Level
Longitudinal Care Episode
Primary Care (PCMH)
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Statistic Hosp 1 Hosp 2 Hosp 3 Hosp 4 Total
Inte
rnal
U
tiliz
atio
n
Discharges 137 127 126 250 640
Days 1,297 1,136 1,196 1,886 5,515
Length of Stay 9.5 8.9 9.5 7.5 8.6
CMI 6.6 6.5 6.2 6.2 6.3
% Emergent Estimate* 60% 44% 33% 20% n/a
* % Emergent estimated using % treated in the ED for discharges in each hospital’s PSA, Q3 2012 – Q2 2013
Service Distribution Optimization –CABG Case Study
CABG Distribution Across the Regional Health System
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Service Optimization Has Ability to Drive Network Performance
1.36
1.12
0.92
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
Low Intermediate High
O/E
Mo
rtal
ity
Rat
io
Volume Tercile
Avg. CABG/Valve
Procedures in Volume Tercile
51 123 306
The meaning of an O/E ratio depends on the score.•Equal to 1.5. The hospital's mortality rate is higher than expected. •Equal to 1.0. The hospital's mortality rate is equal to what is expected. •Equal to 0.75. The hospital's mortality rate is 25 percent lower than expected. •Equal to 0.50. The hospital's mortality rate is 50 percent lower than expected.
O/E Ratio for All-Risk Adjusted CABG and Valve Procedures by Volume Tercile
Data from the Calif. Cardiac Surgery and Intervention Project suggest that hospitals in the higher volume tercile have lower observed-to-expected (O/E) mortality ratios than hospitals in the low volume tercile, suggesting that higher volume programs yield lower mortality ratios.
Source: Mayo Clinic, California Cardiac Surgery and Intervention Project Data
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Narrow Network Plans Favor High Performers
Source: Haeder, S.F., Weimer, D.L., Mukamel, D.B.: “California Hospital Networks Are Narrower in Marketplace Than in Commercial Plans, But Access and Quality Are Similar.” Health Affairs 34(5): 741-748, May 2015.
Red line indicates equal quality between commercial and marketplace plans.
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Network Regulations: Marketplace Plans Increasingly Subject to Common Standards
Source: Giovannelli, J., Lucia, K.W., Corlette, S.: “Implementing the Affordable Care Act: State Regulation of Marketplace Plan Provider Networks.” The Commonwealth Fund, May 2015
States with Marketplace Plans Subject to One or More Quantitative Standards for Network Adequacy (January 2014)
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Network Assembly: Employers
Future Network Growth Requires Appealing to a Variety of Consumers
Network Selection: Individual
Enrollment
Provider Steerage: Physician Referral
Network Growth
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Operational Efficiency
Todd Fitz
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As the Sphere of Influence Widens, Focus Shifts to Total Cost Management
Acute Care
Emergent Care Ambulatory
Care
Prevention
Physician Clinic
Wellness
Post-Acute Care
Home Care
Chronic CareDiagnostics
Urgent Care
Retail
Traditional Focus
Population Health Focus
Mental Health
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Affecting the Total Cost of Care Requires a New Way of Thinking
Tota
l Co
st o
f C
are
Marginal Cost Improvements
Transformational Cost Improvement
Time
Traditional Payment
Model
Value-Based Payment
Model
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Reducing Total Cost Demands a New Scope of Initiatives
Required cost focus areas under all business models
Required additional cost focus areas for value based
Margin Improvement Business (Re)Configuration Clinical Effectiveness
Clinical labor productivity Corporate/market scale Care processes
Nonclinical labor productivity Geographic footprint(s) Clinical variation
Overhead Service offerings Care utilization
Supply chain Service line distribution Care management
Revenue cyclePhysician alignment and optimization strategy Clinical integration
Facility planning/maintenance New contracting/pricing models Care transitions
Capital allocation Consumer and retail strategy End-of-life care
Nonoperating assets/liabilities Innovation strategy Patient education
Corporate risk management Community investment strategy Public health and wellness
Hard Harder Hardest
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A Long-Term Roadmap for Cost Transformation is Required
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Multiple Views of Potential Cost Savings are Needed
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Polling Question #3
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Enabling Infrastructure
John Poziemski
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The Enabling PHM Infrastructure is Critical to Success• Management/governance structures that include a high level of physician
involvement and cover contracting, risk assessment, clinical/operational decision making
• Delivery network of sufficient size and scope
• IT systems to support care management, common electronic health record systems, clinical/predictive analytics, payment receipt/distribution
• Care management tools and protocols tied to enterprise-wide decision support and reporting functions
• Contracting and risk assessment and management capabilities, including actuarial skills if assuming full risk for a population
• Patient engagement programs to build loyalty to the organization
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Risk Management
• Strategic and operational risk • Actuarial or insurance risk • Financial asset and liability risk
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Managing the Business Impact of the PHM
Transition
John Poziemski
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Cornerstones of Integrated Strategic Financial Planning• Link the organization’s strategic mission and vision to measurable financial
objectives
• Identify whether strategies are financially supportable
• Quantify future financial risk, consider alternative scenarios, and specify responses
• Monitor and update plan as strategies are implemented and markets shift
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Operational Execution
Financial Modeling
Managing the Transition to PHM
Strategic Plan Development
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Polling Question #4
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Concluding Comments
John Poziemski
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California PhysicianLeadership ProgramA customized program developed by and for physician leaders and medical executives
September 2015 – April 2016
This program brings together USC’s top-rated Marshall School of Business faculty, in partnership with health policy experts, to deliver curriculum on effective leadership strategies, the ever-changing health care delivery system, and core business principles. Designed to improve patient care by enhancing hospital-physician alignment, the program is specific to California and the unique environment in which we operate.
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