max&reiboldt,&cpa president/ceo · 7/31/12 1 & hospital/physicianalignmentmodels&...

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HOSPITAL/PHYSICIAN ALIGNMENT MODELS AND THE ALIGNMENT PROCESS

August 13, 2012

Presented by: Max Reiboldt, CPA President/CEO

AGENDA

Ø  Current Alignment Trends

Ø  Alignment Models

Ø  Process for Hospital/Physician Alignment

Ø  Compliance

Ø  Impact of Healthcare Reform 2

CURRENT ALIGNMENT TRENDS

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HOSPITAL /PHYSICIAN ALIGNMENT

•  In the 90’s, hospitals focused on purchasing exisNng pracNces to build their referral network

•  CapitaNon drove this desire to employ physicians •  Physicians were compensated via salary guarantees •  No (or very liTle) requirement for producNvity or producNvity-‐based incenNve plans

•  Hospitals failed to “partner” with physicians in decision making process that affected the pracNces

•  Physicians resented the hospital’s focus on cost cu[ng programs

THEN

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•  Hospitals are purchasing pracNces for Fair Market Value (FMV), entailing liTle up-‐front payments and virtually no goodwill

•  Physician producNvity is a key matrix in provider compensaNon

•  Hospitals and physicians are striving to form true “partnerships” that focus on quality of paNent care, delivery of services, and cost effecNve management

•  Non-‐employment models (like PSAs) are frequently viable alternaNves and preferred

NOW

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•  Hospitals o`en realize a value proposiNon by acquiring the ancillaries and being able to realize greater reimbursement

•  There is an emphasis on informaNon technology (IT) integraNon and conNnuity of care; clinical integraNon is primary goal

•  LiTle, if any, intangible value is being paid to physicians under current agreements

•  Tangible assets and possibly sign-‐on / retenNon bonuses are the norm (at FMV)

•  Accountable Care OrganizaNons are being piloted for managing care of Medicare paNents and for reimbursement

NOW

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REASONS FOR ALIGNMENT

Physicians are interested in aligning with hospitals for several reasons

Financial Stability — Improved compensaSon

MalpracSce Insurance – Shared risk

Lifestyle — Improved quality of life

Infrastructure Support — AdministraSve hassles off-‐loaded

PracSce Style – ShiY variances to hospital

Recruitment and RetenSon — Private pracSces cannot compete

Succession Strategy – No “cash-‐out” value in private pracSces

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CURRENT TRENDS

•  Employment of physicians by hospitals is on the rise §  81% of surveyed hospital leaders indicated a moderate to high interest in acquiring pracNces and/or physician employment*

•  Outside of employment, numerous other alignment iniNaNves are underway

Key Trend: Stronger collaboraSon between health

systems and physicians/pracSces

8 *Source: HealthLeaders Media-Intelligence; M&A: Hospitals Take Control, January 2012

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How will you respond to low Medicare/Medicaid Reimbursements?

Source: HealthLeaders Media 2012 Industry Survey: Physician Leaders Report

SURVEY OF HEALTHCARE LEADERS

50%

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TRENDS •  Physician hospital employment increased 34% in 2010, over the previous ten years*

•  Hospitals employ about 25% of all acNve physicians*

•  63% of physician recruitment in 2011 was for hospitals, up from 56% the previous year, and 11% eight years ago**

•  Family physicians and general internists topped the list of most comment physician recruitments**

Source: *AHA study **Statistics from a Merritt Hawkins 2012 report of their recruiting assignments

TRENDS

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PROJECTION

Source: Merritt Hawkins Annual 2012 Report

3 in 4 doctors hired in 2014 will work for hospitals

12 Source: HealthLeaders Media-Intelligence; M&A: Hospitals Take Control, January 2012

SURVEY OF HEALTHCARE LEADERS

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ALIGNMENT MODELS

ALIGNMENT STRATEGIES

Physicians and hospitals face unprecedented challenges to their ability to maintain viability

Partnering alternaNves are without quesNon the best soluNons to respond to these challenging issues and to the new federal themes

Most pracNces (and definitely all hospitals) should assume a pluralisNc approach to alignment

"   Merge operaNons "   Service sNpends "   Clinical co-‐management/service line

management "   Different forms of employment/employment

“lite” 14

ALIGNMENT CHALLENGES

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ALIGNMENT MODELS -‐ LIMITED STRATEGY BASIC CONCEPT COMPENSATION FRAMEWORK

Managed Care Networks (IPAs, PHOs)

• Loosely formed alliances • Primarily for contracNng purposes • Limited in ability unless clinically integrated • Being used as a plaiorm for ACO development

• No true impact on pay unless through improved payer contracts • If used as plaiorm for ACO, could result in distribuNon of incenNves received

Call Coverage SSpends

• CompensaNon for the personal, financial and risk burden associated with ED coverage

• Payment can come in the form of a daily sNpend, fee for service payment or hybrid payment

Medical Directorships

• Payment for defined administraNve services • Must be a true need for the services

• Typically paid via a market-‐based hourly rate

Recruitment/IncubaSon

• TradiNonal style of a hospital financially supporNng a new recruit

• Allows exisNng physicians in pracNce to not see a decrease in their pay as a new physician comes on board

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ALIGNMENT MODELS -‐ MODERATE STRATEGY BASIC CONCEPT COMPENSATION FRAMEWORK

Management Services OrganizaSon (MSO)

• Services such as revenue cycle, human resources, IT, etc. • Can be hospital-‐owned, joint venture, private pracNce owned

• Can provide an addiNonal revenue stream

Equity Model AssimilaSon

• Ties all enNNes via legal agreements • Can jointly contract with payers • May be with a hospital partner; may be with a private group

• Can result in increased profitability through beTer payer contracts and other efficiencies

Target Cost ObjecSves

• Focus to ensure delivery of cost effecNve care while sNll maintaining quality

• Savings shared with providers • Percentage • Hourly fee • Fixed fee

Provider Equity (Joint ventures, investments)

• Joint ventures such as specialty hospitals, surgery centers, etc.

• Can provide an addiNonal revenue stream to private pracNce physicians

Clinical co-‐management/ service line management

• Provision of administraNve services and work toward certain strategic iniNaNves within a service line • May include pay-‐for-‐call, medical directorships, etc.

• Involves hourly payment for administraNve Nme and incenNve payment for achieving established metrics

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ALIGNMENT MODELS -‐ FULL STRATEGY BASIC CONCEPT COMPENSATION FRAMEWORK

Employment lite (“PSA model”)

• Allows pracNce to remain private, but hedge payer risk • Hospital owns receivables • Hospital owns payer contracts • Contract with pracNce for professional services

• Hospital provides payment, o`en on wRVU basis, which is intended to provide FMV compensaNon, benefits and other overhead costs incurred by pracNce

Employment -‐ TradiSonal

• TradiNonal employment arrangement with a hospital

• Typically includes producNvity payment and potenNally some other incenNves for quality, cost control

Employment – Group PracSce Subsidiary (GPS)

• The larger single or mulNspecialty pracNce operates as a standalone wholly owned subsidiary of the hospital

• Entails a group income distribuNon plan (IDP) wherein enNty dynamics remain at play

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COMPARISON OF ALIGNMENT MODELS

STRATEGY ADVANTAGES DISADVANTAGES Managed Care Networks (IPAs, PHOs)

• Some economic align • Loyalty is to the contracts, not the other party

Call Coverage SSpends

• Can alleviate economic, personal and liability burdens

• Can alleviate economic, personal and liability burdens

Medical Directorships

• Flexible; can include as many physicians as necessary

• Can create poliNcal conflicts; requires physician Nme commitment

Recruitment/IncubaSon

• Flexible as long as there is demonstrated need

• Short-‐lived; no guarantees of loyalty or collaboraNon

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LIMITED

STRATEGY ADVANTAGES DISADVANTAGES Management Services OrganizaSon (MSO)

• Ties hospitals to physicians’ business success

• Costly; can hurt more than help if not done well

Equity Model AssimilaSon

• Ties all enNNes via legal agreements

• Can be difficult to transiNon; requires high level of trust

Target Cost ObjecSves

• Provides economic benefits for hospitals and physicians

• Short-‐lived; takes Nme to implement

Provider Equity (Joint ventures, investments)

• Closely unites parNes under common enterprise

• Costly; challenging to implement and govern; may increase operaNng costs

Clinical Co-‐Management/ Service Line Management

• Strong economic and strategic alignment; somewhat easier to unwind if necessary

• ContracNng potenNally complex; requires strong combined vision and agreement on strategic goals and operaNng principles

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M0DERATE


STRATEGY ADVANTAGES DISADVANTAGES Employment lite (“PSA model”)

• Can achieve clinical and financial integraNon without physician employment • Increased revenue for hospitals and greater compensaNon for physicians

• Management challenges as hospital may manage pracNce & administraNon, while physician manages clinical staff and procedures

Employment

• Strongest alignment; minimizes economic risk for physicians

• Significant economic and poliNcal risk, especially if incenNve compensaNon is not set up properly

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FULL


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PROCESS FOR PHYSICIAN/HOSPITAL ALIGNMENT

SAMPLE PHASES FOR ALIGNMENT PROCESS

Implement

Develop transiSon plan

DraY definiSve agreements

Finalize leher of intent (LOI)

Develop/modify physician compensaSon plan, if applicable

NegoSate and resolve all issues

DraY term sheet

Conduct financial analysis, if applicable

Discuss alignment opSons

Evaluate situaSon: for both sides

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SAMPLE TIMELINE

Discussions

Execute LOI

Valuation

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Discussions

Financial Analysis

Finalized LOI & TransiSon Plan

Dec. Oct. Sept. Aug. July June April March Feb. Jan May Nov.

NegoSaSons

Alignment Implemented & OperaSonal

LOI

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COMPLIANCE

FAIR MARKET VALUE Stark Law defines FMV as:

"Fair market value means the value in arm's-‐length transac5ons, consistent with the general market value. 'General market value' means the price that an asset would bring as the result of bona fide bargaining between well-‐informed buyers and sellers who are not otherwise in a posi5on to generate business for the other party, or the compensa5on that would be included in a service agreement as the result of bona fide bargaining between well-‐informed par5es to the agreement who are not otherwise in a posi5on to generate business for the other party, on the date of acquisi5on of the asset or at the 5me of the service agreement. Usually, the fair market price is the price at which bona fide sales have been consummated for assets of like type, quality, and quan5ty in a par5cular market at the 5me of acquisi5on, or the compensa5on that has been included in bona fide service agreements with comparable terms at the 5me of the agreement, where the price or compensa5on has not been determined in any manner that takes into account the volume or value of an5cipated or actual referrals.” 26

COMMERCIAL REASONABLENESS

Stark Law defines a transacSon as “commercially reasonable” if:

The arrangement would make commercial sense if entered into by a reasonable party of similar type and size, and a reasonable physician of similar scope and specialty, even if there were not potenNal “designated health services” referrals.

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FMV/CR CONCEPTS

•  Arrangements subject to FMV/CR:

§  EssenNally, any transacNon wherein money is exchanged between hospitals and physicians

§  Important to understand the FMV risk o Under or overpayment

• Employment • Co-‐management

• Medical directorships • Space/equipment/staff lease • Call coverage • Per click arrangements • Graduate medical educaNon • Contract services • CollecNons guarantees • ConsulNng fees (DME) • Service line management

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FMV/CR CONCEPTS

•  FMV deals with the dollars in the transacNon •  CR deals with whether transacNon makes “sense”

§  Business purpose §  Overnight increase in pay §  Supply/demand §  Recruitment efforts

•  Growing emphasis on commercial reasonableness •  TransacSons can be FMV and NOT CR!

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FMV/CR CONCEPTS

•  Key Areas of Concern: §  High guaranteed pay

§  Long contracts, with no ability to adjust variables

§  AdministraNve services with no tracking mechanisms

§  Ill-‐defined non-‐producNvity incenNves

§  Significant increases in pay for no addiNonal work

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FMV/CR CONCEPTS

•  Key Areas of Concern: §  “Stacked” compensaNon

§  ProducNvity incenNves with rate per wRVU well above median

§  Overall effecNve rate per wRVU at/above 75th percenNle

§  Total pay above 90th percenNle

§  Significant investment per physician

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FMV/CR CONCEPTS

•  Ensuring Compliance §  Use common sense (“the sniff test”) §  Establish consistent compensaNon methodology where there is confidence that FMV pay will result o  PotenNally test for FMV on the compensaNon plan level

§  Establish internal benchmarks that trigger addiNonal levels of review o  FMV tests occur on the individual physician level

§  Establish ceilings on pay and the effecNve rate/wRVU o Can be “hard” or “so`”

§  Be conservaNve on what is guaranteed o  Less FMV risk when pay is “at risk”

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IMPACT OF HEALTHCARE REFORM

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SUMMARY OF IMPACT OF HC REFORM

Ø  Provide paNents with greater access to insurance coverage, thus enhancing providers’ ability to increase revenue

Ø  Provide some addiNonal payments to certain classificaNons of providers

Ø  Mandate coverage to all ciNzens, which could increase provider revenue, but also greatly strain the system due to lack of PCPs

Ø  Require addiNonal “paperwork” and other requirements

Ø  Penalize some types of providers for failure to meet certain quality requirements or other provisions

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KEY PROVISIONS FOR PPACA

§  Allow providers organized into accountable care organizaNons (ACOs) who meet thresholds, to share in cost savings they achieve under Medicare program

§  Reduce Medicare payments that would otherwise be made to hospitals as specified percentages to account for excess (and preventable) hospital readmissions

§  Establish value-‐based purchasing program for Medicare and develop plans to implement such programs for SNFs, home health agencies and ASCs

§  Establish naNonal Medicare pilot program to develop bundled payment for acute, inpaNent hospital services, physician services, outpaNent hosp services & post-‐acute care for an episode of care

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2012 & Beyond -‐ AffecSng Healthcare and Employers


§  Reduce Medicare DisproporNonate Share Hospital (DSH) payments iniNally by 75% and subsequently increase payments based on the percent of uninsured populaNon & amount of uncompensated care provided

§  Increase Medicaid payments for primary care services by PCPs for 2013 & 2014 with federal funding

§  Require enhanced collecNon and reporNng of data on race, ethnicity, sex, primary language, disability status and for underserved rural and fronNer populaNons

§  Require US ciNzens and legal residents to have qualifying health coverage by 2014

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§  Simplify insurance administraNon by adopNng a single set of operaNng rules for eligibility verificaNon and claims status, EFTs, health care payments, remiTance rules, referral cerNficaNon and authorizaNons

§  Impose a 2.3% excise tax on sale of taxable medical devices §  Expand Medicaid to all non-‐eligible Medicare individuals with

incomes of up to 133% of federal poverty level §  Reduce Medicare payments to certain hospitals by 1% for

hospital-‐acquired condiNons (2015) §  CreaNon of accountable care organizaNons

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ACOS

ACO

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ACOS

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CMS Medicare Shared Savings Program

Pioneer Model

Physician or Hospital

Sponsored

Payer Sponsored

Employer Sponsored PRIVATE

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ACOS Whether CMS or private, all possess the same characterisScs:

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PaSent-‐centered care

Focus on quality

Focus on coordinated care

Focus on reduced expenses (fewer hospital admissions and fewer ER visits)

More ambulatory & home care services

SHARED SAVINGS PROGRAM (SSP)

•  IniNal ACO program introduced by CMS

•  Focused to allow any eligible providers to parNcipate

•  Two tracks, with Track 1 having no pay-‐back penalty for losses

PIONEER MODEL

•  Designed for organizaNons already experienced in managing coordinated paNent care in an ACO-‐type of environment

•  Greater incenNve percentages for savings; and sharing of losses

•  Quality measures are the same as the SSP

CMS ACOS

CMS SHARED SAVINGS PROGRAM (SSP)

Quality

Cost Benchmarks

Two Tracks Offered

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CMS SSP -‐ QUALITY

4 Domains (categories) – 33 Measures

PaSent/ Caregiver Experience

Care CoordinaSon/PaSent Safety

PrevenSve Health

At-‐Risk PopulaSon

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-‐Based upon Parts A & B FFS historical claims data for beneficiaries assigned to an ACO

-‐Cost benchmark established for each ACO at a per capita level

-‐If below certain threshold, savings are shared

-‐If over certain threshold, costs must be paid back to CMS (Track 2)

CMS SSP – COST BENCHMARKS

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CMS SSP:– TWO TRACKS OFFERED

TRACK 1

Shared savings only; no pay back for losses

TRACK 2

Shared savings, but losses must be paid back

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CMS: PIONEER ACO MODEL

•  Designed for providers already working in collaboraNve group who have been focused on coordinaNng paNent care

•  Program launched January 1, 2012 and runs through December 31, 2014

•  CMS limited this pilot program to 32 organizaNons and they project Medicare savings up to $430 million over three years

•  Uses same quality metrics as the Shared Savings Program

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QUESTIONS & ANSWERS

THANK YOU

MAX REIBOLDT, CPA PRESIDENT, CEO

[email protected] 678-‐832-‐2000

www.cokergroup.com

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APPENDIX

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LIMITED

•  “Loosely” formed alliances

•  Primarily for contracNng purposes

•  Limited in ability unless clinically integrated

•  Normally, no more than a messenger model

•  Limited collaboraNve usefulness

MANAGED CARE NETWORKS (IPAS, PHOS)

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•  Pay for unassigned ED call •  By specialty •  Fair market value •  Per diem •  Per “click” •  Fixed sNpend

•  Physicians seeing all paNents (paying and non-‐paying), causing them to request addiNonal compensaNon from hospitals

•  Other forms of alignment are becoming a reasonable alternaNve

•  Most primary care physicians are not subject to these as hospitalist programs saNsfy their needs

CALL COVERAGE STIPENDS

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MEDICAL DIRECTORSHIPS

Common alternaSve payment arrangement

for a physician’s administraSve duSes associated with their parScular specialty and/or department

Should document hours worked and services provided

Separate from employment compensaSon

contract

Subject to Stark provisions and

corresponding fair market value determinaSons

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Hospitals provide financial support to newly-‐recruited providers:

•  Income guarantees

•  TuiNon payments

•  IncubaNon •  Provider planning (supply/demand)

RECRUITMENT GUARANTEES/INCUBATIONS

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MODERATE

•  Management processes provided to pracNces •  Revenue cycle •  Personnel/human resources •  InformaNon technology •  Compliance

•  MSO ownership •  Joint hospital/provider •  Hospital only •  Private investors

•  Strategy to align with providers •  Also may be in the form of an ISO

MANAGEMENT SERVICES ORGANIZATION (MSO); OR INFORMATION SERVICES ORGANIZATION (ISO)

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Business •  Physicians and potenSally hospital form NewCo, LLC to provide specific management and administraSve services

•  Management Co., LLC hires or leases personnel necessary to provide management services

•  Hospital pays Management Co., LLC a fair market management fee for specified management services

•  Management fee may be a fixed amount per month of fixed percentage of revenues from service

•  Can include performance incenSves

Legal •  Management Co., LLC must have demonstrable benefit (cost and/or quality) as compared to alternaSves

•  PotenSal anS-‐kickback remains an issue with percentage management fees

•  Fee paid must be commercially reasonable

•  Must comply with Rev. Proc. 97-‐13

MANAGEMENT SERVICES ARRANGEMENTS BUSINESS/LEGAL DESCRIPTION

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Advantages Disadvantages

Ties all enNNes via legal agreements Governance and voNng can be a challenge

Can jointly contract with payers UNlizaNon of hospital benefits may be more costly

Can jointly develop ancillaries TransiNoning could present some challenges

Joint markeNng strategy would be possible CompensaNon of the providers can be challenging

Aligns interests as to profitability and return on investment

Joint investments will be required, and return on those investments must be dependent upon the individual enNty (no hospital subsidy)

One provider number will be easier to administer

Requires high level of trust

EQUITY MODEL GROUP ASSIMILATION (JOINTLY OWNED PRACTICES)

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•  Program works to ensure delivery of cost effecNve care while sNll maintaining quality and paNent saNsfacNon

•  Savings are shared with providers §  Percentage payment §  Hourly fee §  Fixed fee

•  Physicians are integral in the planning process to determine how these savings can be actualized

•  This model is limited in duraNon §  Not meant as a long term alignment soluNon

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TARGET COST OBJECTIVES

JOINT VENTURES

Structures •  Specialty Hospitals •  Management Services

Arrangements

•  Real estate developments

•  Freestanding Centers

•  Pay for Performance

•  Block Leases

•  Medical Directorships

“Laws” to Consider •  Stark •  AnN-‐Kickback •  Reimbursement •  Tax ImplicaNons •  State Law

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Legally permissible if one of the following is met:

The physicians must contribute 8inancial

capital

The physicians must provide business

expertise The physicians must have

a business risk

JOINT VENTURES

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CLINICAL CO-‐MANAGEMENT ARRANGEMENT DESCRIPTION

•  Purpose of the arrangement is to reward physicians for their efforts in developing, managing and improving the quality and efficiency of a parNcular hospital service line

•  A contractual relaNonship between the hospital and the service line management enNty

•  CompensaNon is performance based in part, Ned to achievement of specific quality objecNves

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CLINICAL CO-‐MANAGEMENT ARRANGEMENT DESCRIPTION

Provide medical management services for specific IP or OP

service line

Provide compensaSon at FMV, partly

performance –based, Sed to specific objecSves

Provider(s) Hospital

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CO-‐MANAGEMENT: MODEL A

ExisSng Physician Professional CorporaSon

Hospital (Service Line)

Management Services

Management Fees

Management Agreement

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EXAMPLE: ORTHOPEDIC SURGERY

ExisSng Physician Professional CorporaSon

Hospital

Clinical Co-‐Management

Agreement for Oversight of Orthopedic Services

Fixed Fee ConNngent Fee

Sports Medicine

Hand

Spine

Management CommiTee RepresentaNves

and Medical Director

Management CommiTee RepresentaNves

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CO-‐MANAGEMENT: MODEL B

Newly-‐ Created Management EnSty

Physician Ownership


Management Services Management Fees Management Agreement

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CO-‐MANAGEMENT: MODEL C

Joint Venture Management

EnSty

Hospital Ownership

Physician Ownership


Management Services

Management Fees

Management Agreement

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CO-‐MANAGEMENT: MODEL D

Joint Oversight CommiTee

Physician Group

Physician Group

Management Agreement between Hospital and Physician Group for a subset of management services and payment of a part of the total service line management fees

Management Agreement between Hospital and Physician Group for a subset of management services and payment of a part of the total service line management fees

Hospital

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CCMA MANAGEMENT FEES

•  Management fees include a base fee and an incenNve fee

•  The fee is fixed in advance, including both base and incenNve components, for a period of at least one year

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CCMA BASE FEE

•  The base fee is reimbursement for the Nme and efforts parNcipaNng physicians dedicate to the performance of specific management acNviNes

•  Commonly, the base fee equals 50-‐70% of the total fee

•  The base fee is typically an hourly rate (at FMV) for services provided and documented

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CCMA INCENTIVE FEE

•  The incenNve fee is a series of pre-‐determined payment amounts conNngent on achievement of specific, objecNvely measurable, program development, quality improvement and efficiency goals

•  Can incent the reducNon of administraNve or medically unnecessary costs as long as quality is not adversely affected and volume/case mix changes are not rewarded

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CCMA INCENTIVE FEE

15%

10%

50%

25% PaNent SaNsfacNon

Employee Engagement

Clinical Quality

OperaNng Efficiency

Sample CCMA Incentive Fee Structure

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FULL

FULL ALIGNMENT MODELS

Six Common Models Used by Hospitals for Physician Employment

PSA (professional service agreement) models PracNce management

arrangement

Group or ‘group without walls’

Hospital-‐employed mulN-‐specialty group

Hospital-‐employed specialty pods

Hospital-‐employed network model

EMPLOYMENT “LITE”

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PROFESSIONAL SERVICES AGREEMENT

•  Achieve clinical and financial integraNon without employment

•  Contracted services, mulNple opNons

Clinical (Professional) Services

Wraparounds (administraNve, call, quality, etc.)

•  Typically paid on a top-‐line basis per wRVU. Wraparounds can take other forms of payment, if included.

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PURPOSE

RELATIONSHIP

SERVICES

REMUNERATION

PSA – EMPLOYMENT “LITE”

1.  Tradi5onal PSA: Hospital contracts with physicians for professional services; hospital employs staff and “owns” administraNve structure

2.  Global Payment PSA: Hospital contracts with pracNce for Global Payment; pracNce retains all management responsibiliNes

3.  Prac5ce Management Arrangement: PracNce enNty retained and contracts with hospital; administraNve management and staff not employed by hospital

4.  Hybrid Model: Hospital employs/contracts with physicians; pracNce enNty spun-‐off into a jointly-‐owned MSO/ISO

FOUR POSSIBLE SCENARIOS OF PSA MODEL

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PSA – TRADITIONAL MODEL

•  Hospital contracts with physicians for professional services

§  As such, the physicians are not employed by the hospital, but remain employed by the pracNce

•  However, the hospital employs all support staff §  This typically includes pracNce administrators/ management staff

•  Under this model, many of the operaNonal and administraNve duNes become the responsibility of the hospital, as opposed to the pracNce

•  Ancillaries are usually acquired by the hospital 78

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DEF Medical Group (“Group”)

Payers ABC Health System

“System”

Real Estate

Group Ancillary Services

OperaSng Expenses

Lease Purchase or Lease

•  Independent contractors as a Group

•  Group includes all providers •  Payment to Group for professional services equal to net collecSons less direct costs paid by System

•  Includes site of service differenSal for professional services

•  Annual fixed amount to be paid to Group for value of ancillary services

•  set in advance •  not based on volume of

referrals

•  System hospital outpaSent based services

•  Ancillary staff are employees of System

•  Not always purchased by System, but included in comp via an annual fixed payment to Group set in advance

•  Lease paid by System

•  Lease expense deducted from professional service revenue to be paid to Group

•  Includes: •  lease / depreciaSon

expense

•  Other direct operaSng expenses

•  Deducted from professional service revenue to be paid to Group

Group Staff

•  System employees

•  Fully loaded expense deducted from professional service revenue to be paid to Group

Independent Contractor

System Employees

System OutpaSent Services

Professional and technical fees

PSA – TRADITIONAL MODEL

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PSA – GLOBAL PAYMENT MODEL

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•  PracNce is independent contractor

•  Physicians sNll “employed” by pracNce

•  Self-‐employed status: no benefits from hospital

•  PracNce invoices hospital for actual services rendered

§  Usually in wRVUs, converted to dollars

•  Hospital pays pracNce directly without any withholding

•  Files 1099 with IRS: pracNce responsible for withholding taxes from physician


•  CharacterisNcs of employment but stops significantly short of employment

•  Comprehensive alignment strategy requiring less integraNon than employment

•  Hospital engages pracNce who conNnues to employ physicians to provide comprehensive services through a PSA

§  PracNce is compensated on a global basis §  Independent pracNce maintained

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Services to be provided could include: §  MulN-‐specialty diagnosNc and procedural services

§  Clinical management and coordinaNon

§  AdministraNve, supervisory teaching and research funcNons

§  Medical directorships

§  Complete service line and clinical co-‐management

§  Call responsibiliNes §  Shared cost savings §  Quality incenNves

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•  Hospital compensates pracNce for professional fees and other services performed at and for the hospital § Medical directorships, call, service line/clinical co-‐management, etc.

§  Paid at FMV/ commercially reasonable rates •  Ancillaries may be sold/leased to hospital who bills at HOPD rates

•  Hospital bills at PBR (provider based rates) §  This is not a requirement of the model, and in fact, is not always done

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-‐Accounts receivable owned by hospital

-‐Fee structure established by hospital

-‐Payer contracts negoSated by hospital

-‐PracSce conSnues to perform the billing services for the hospital (at FMV rates)

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•  Overhead expenses paid by pracNce

•  Hospital provides base fee that should cover all expenses including physician compensaNon*

§  PotenNal for bonuses in addiNon to base fee

§  Ancillary services included (if included in hospital revenue base, must be considered in physicians’ compensaNon, but not directly Ned to same)

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* At wRVU conversion factor rates, Nered for higher producNon levels, separately calculated by specialty


Global payment rate may: §  OpSon One: Include physician compensaNon/benefit expenses and overhead expenses in a single rate/wRVU

§  OpSon Two: Include separate payments for each component o  O`en, the overhead component is paid based on a budgeted amount, rather than on an wRVU basis

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Comp and Benefits

Overhead

Comp and Benefits

Overhead

PSA – GLOBAL PAYMENT MODEL Global Payment Model

Prac5ce Hospital

Real Estate Ownership X

Medical Equipment Ownership (Non-‐Ancillary) X

Medical Equipment Ownership (Ancillary) * *

Employees’ Employer X

Billing Tax ID X

Recipient of Insurance Payments X

Owner of Ancillary Profits/Income * *

Party Responsible for Billing/CollecNons X

Provider of MalpracNce Insurance X

Managed Care ContracNng NegoNaNons X

MD Employment Status X *Depends upon negoNated agreement 87

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GLOBAL PSA – BENEFITS

§  Physicians maintain independence from hospital

§  Flexibility in structure

§  OpportuniNes to increase and enhance boTom-‐line for both hospital and the pracNce

§  Stability in relaNonship with hospital

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§  Bonus opportuniNes for excepNonal performance

§  OpportuniNes to expand services together without being fully aligned (i.e., employment)

§  Easy segue to full employment

PSA – GLOBAL PAYMENT EXAMPLE

Hospital (Integrated with

Physician Division Infrastructure) Aggregate

Compensation (Rate per w

RVU)

Clinical Services & Non-compete

Agreement

  Asset Ownership/Lease   Contracting   A/R Owned

  Approves Strategy/Finances   Oversees Operations/Business Planning   Establishes Compensation Principles   Achieves Value-Exchange Objectives   Is Typically Split 50/50 Between Hospital

and Medical Group

  Group Governance   Physician Hiring/

Termination   Income Distribution   Clinical Practice/Quality   Malpractice   Management and Staffing   Billing (3rd-party agent)   IT Support

  Membership   Compensation Hospital Board Medical Group

Board

Management Committee

Medical Group (For-Profit Entity) PSA

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Medical Group Infrastructure

Ownership

Physicians

Hospital

Employment

  Billing/Collections   Practice Management

  Compensation   Benefits

•  Physicians retain ownership of their pracNce infrastructure.

•  Physicians operate as the managers of the pracNce, providing all administraNve services, space, equipment, and support staff.

•  The hospital contracts with the pracNce enNty for these services and pays a fair market value (FMV) fee.

•  The compensaNon structure for the employed physicians is a producNvity-‐based system.

•  The arrangement can be easily dissolved, as the pracNce enNty stays outside the hospital control structure.

PRACTICE MANAGEMENT ARRANGEMENT

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HYBRID MODEL

HOSPITAL

EMPLOYMENT JOINT OWNERSHIP

Physicians Physicians Physicians Physicians

PRACTICE

MSO/ISO

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EMPLOYED

Under contract to hospital

Full benefits

Standard employee regulaSons

apply

Employee withholds taxes & social security

Less flexibility; potenSally more job security

EMPLOYED: EMPLOYMENT CONTRACT

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EMPLOYMENT MODELS

Group or “group without walls”

For this type of model, hospital establishes a separate management company

dedicated to managing physician business.

Group or “group without walls”

MSO Ownership

Medical Group

Hospital

Support Services

Compensa=on

Provides:   Staffing and Management

  ContracNng   Billing   Managed Care AdministraNon

  RecruiNng   IT Support

  Owns Assets   Controls Financials

  Provides Infrastructure

  Employs Physicians   Manages Clinical OperaNon

EMPLOYMENT MODELS

Hospital-‐employed mulN-‐specialty group

This model entails recruiNng and employing physicians under one integrated structure.

EMPLOYMENT MODELS

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HOSPITAL-‐EMPLOYED MULTI-‐SPECIALTY GROUP

Hospital CEO

Administrative Support Services (HR, Finance, Revenue Cycle, etc.)

Administrator Physician Advisory Board

Multi-specialty Group   Family Practice   Internal Medicine   OB/GYN   General Surgery   Neurosurgery   Infectious Disease   Orthopedics   Medical Oncology   Others

Hospital-‐employed specialty pods

This model contains disNnct employment arrangements that o`en include dedicated

oversight across specialNes.

EMPLOYMENT MODELS

Hospital CEO

AdministraSve Support Services (HR, Finance, Revenue Cycle, etc.)

Physician Advisory Board Administrator

Billing HR

Surgery OB/GYN Cardiac Surgery Primary Care

HOSPITAL-‐EMPLOYED SPECIALTY PODS

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Hospital-‐employed network model

The network model typically has dedicated oversight but frequently segregates

physicians by service focus.

EMPLOYMENT MODELS

Hospital CEO

AdministraSve Support Services (HR, Finance, Revenue Cycle, etc.)

  Dyad Leadership Model   Internal Medicine   Family PracSce

  Pediatrics   General Surgery

  OB/GYN   Urgent Care

MulSspecialty Medical Group   Dyad Leadership Model

  Cardiac Surgery   Emergency Medicine

  Endocrinology   Gastroenterology

  Nephrology   Neurology

  Pediatric Hospitalists   Surgery

Pediatric Network   Dyad Leadership Model

  Family Medicine   Internal Medicine

  OB/GYN   Surgery

Faculty Physicians   Adult Hospitalists   Cardiac Surgery

  Medical Oncology   Neurology

  Neurosurgery   Orthopedic Surgery   Pain Management   RadiaSon Oncology

  Urgent Care

Adult Specialists

Physician Network CEO

Network Planning

Clinical CoordinaSon

HOSPITAL-‐EMPLOYED NETWORK MODEL

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