“The Faculty Practice Plan & Our Strategic

Partnership with BJC”

Department of Pediatrics Leadership Development Program

February 28, 2018

Paul J. Scheel, MD

Assoc. Vice Chancellor for Clinical Affairs

CEO, Washington University Physicians Faculty Group Practice

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Depends on Who You Ask ?

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What is BJC ?

BJC is an Integrated Health Care Delivery System

Initially formed as merger between Barnes, Jewish, Christian hospitals

BJC Hospitals Include: Alton Memorial, St Peters, Progress West, Christian,

Parkland, Missouri Baptist, Barnes, St Louis Children’s, Belleville

Memorial , Boone, West County

Goldfarb School of Nursing

BJC Homecare

BJC Medical Group

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Institutional Relationships

Washington University

Teaching Hospitals:• BJH

• SLCH

• BWC

Board of Trustees

Chancellor

School of

Medicine

Dean & Executive Faculty

Faculty Group

Practice

BJC Health Care

Board of Directors

CEO

Community

Hospitals

Affiliation

Agreement

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WUSM-Teaching Hospital Affiliation Agreement

WUSM:

• Provides medical staff and medical direction for hospital clinical programs

• Supervises BJH/SLCH resident and fellowship training programs

• Limits its hospital practice activities to BJH/SLCH exclusively unless the parties agree

otherwise

• Assigns to BJH/SLCH/BJWCH the right to own and operate most outpatient technical

services offered on the WUMC campus

In Exchange, WUSM receives:

• Partial payment for GME supervision costs ($7.9m in CY15)

• Above-line medical coverage payments for pathology, anesthesiology, hospitalists, and

emergency medicine professional services

• 45% of teaching hospital operating margins (BJH/SLCH/BJWCH)

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Hospital Support Funds Flow

30%Unrestricted

(BLS)GME Payment ($7.9M)

BLS = 45% of Op Margin

45% Dean

55% FPP Clinical

Program Development

Distributed to Clinical Depts based on set

allocation formula

15% Strategic

Investment Fund

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WU Physicians Clinical Practice

• Ranks in top 5 of the nation’s 123 academic group practices

1,433 full-time faculty physicians (76 sub-specialties)

228 Nurse Practitioners, 36 PA’s, 124 CRNA’s plus PT, OT & Audiology

69 employed primary care providers thru WUCA (Washington University Clinical Associates)

3,768,961 total patient encounters in FY16 including:

1,082,665 outpatient visits & 1,114,682 procedures

65,268 surgeries

90,878 hospital discharges

Account for 98% of discharges from BJH & SLCH

• 67% of clinical activity on Washington University Medical Center

Campus

• 33% of clinical activity occurs at 49 off-campus clinical program sites

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FPP Organizational Structure

Board of Directors

Clinical

Information

Systems (EMR)

Professional

Liability

Clinical

PracticeFinance

• Board of Directors (n-28):

14 Clinical Department Heads

6 Faculty-At-Large

Head of Emergency Medicine

Basic Science Chair

FPP CEO

Dean

3 Hospital Representatives

• Decision Making By Majority Rule

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358 381 407 455

499 539 553

603 637

689 753

809 875

958

1,070 1,147

10.2

3.96.7

17.9

26.8

48.8

37.2 38.4 4037.1

57.354.3

58.6

70.775.9 73.8

9.2 21.9

21.4 24.9

27.2

-8.2 -8.5

16.4

3.4

11.0

20.2 22.5

11.1

17.7 17.3

5.6

-10

0

10

20

30

40

50

60

70

80

90

(100)

100

300

500

700

900

1,100

FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Clin

ical

Pra

ctic

e M

arg

in &

Pre

miu

ms

(mill

ion

s)

Clin

ical

Pra

ctic

e R

even

ue

(mill

ion

s)

Clinical Practice Revenue

Clinical Practice Margin

Premiums

Clinical Practice Revenue, Margin & Premiums

WUSM CLINICAL PRACTICE REVENUE, NET INCOME & PROFESSIONAL

LIABILITY COSTS1

In Millions

1 Margin in graph include rebates. Clinical Practice Margin includes Occupational Therapy, Physical Therapy, Physician Billing Services, Endowment Spending Distribution and Investment Income.2 CAGR = Compound Annual Growth Rate

Source: WUSM Finance, based on Hyperion reporting

FY02-FY17 Revenue CAGR2 = 8.1%

FY02-FY17 Margin CAGR2 = 14.1%

FY02-FY17 Premiums CAGR2 = -3.3%

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Primary Functions

1) Provides key services & infrastructure for clinical departments

2) Serves as the focal point for establishing strategic direction and coordinating clinical program activities across WUSM’s 14 clinical departments and with our major teaching affiliates

3) Oversees annual allocation of Clinical Program Development Funds

4) Establishes school-wide clinical practice policies

5) Public policy advocacy (ex: tort reform, safety net sustainability)

Washington University PhysiciansFaculty Practice Plan

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Core FPP Services

Billing &Collections

Services

Communications & Marketing

Patient Access & Service

Quality

Clinical Strategic& Operational

Planning

WUSM Clinical Practice

Managed CareContracting

ReferringPhysician

Relationships

ClinicalInformation

Systems(EMR, etc)

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Prior Uses of CPD Funds

1 Includes professional liability insurance cost relief, clinical practice space build out and clinical equipment requests,

time-limited clinical staff support, primary care loan forgiveness program, CAM TI Allowance, South County Phase 1

construction costs, WUCA expansion, ICD-10, CAM Expansion, South County Phase 2 construction costs and

Sleep Medicine Center construction costs.

Category Allocated

Dollars

(millions)

% of Total # of

Funded

Recruits (&/or

Proposals)

Faculty Recruitment $80.3 70% 283

EMR Infrastructure Support $14.1 12% 12

One-Time Clinical Practice O/H1 $20.5 18% 25

TOTAL $114.9m 100%

12 Year History

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FPP Key Clinical Priorities

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FPP Key Clinical Priorities

1) Work collaboratively with BJH and SLCH to develop and implement a plan for

Hospital Facility Expansion and Renewal on the WUMC campus

• Reconfigure SLCH’s bed platform to expand the critical care bed base, create private rooms

and meet the growing demand for pediatric diagnostic and treatment services

• Create an innovative, integrated Women’s and Infants Program

• Expand adult medical oncology inpatient bed platform on the north campus

• Expansion of the CAM to the BJH Center for Outpatient Health (COH)

2) Work in partnership with BJH and SLCH to expand our off-campus ambulatory

programs:

• South County Phase 1 Facility - SCC Satellite (opened Jan 7, 2013)

• New West County Pediatric Ambulatory Satellite (June 2015)

• South County – Phase 2 Ambulatory Program (April 19, 2016)

• Expansion of BJSPH SCC (mid 2016)

• Further Ambulatory Expansion and Hospital Replacement at BJWCH (late 2018)

• Planning new SCC satellites in North County and in Shiloh, Illinois

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9.6% 12.5% 13.8% 8.8% 29.3% 29.5%% Change from

Previous Year

$21.7$24.4

$27.8$30.2

$39.1

$50.7

$0

$4

$8

$12

$16$20

$24

$28

$32

$36$40

$44

$48

$52

$56

FY12 FY13 FY14 FY15 FY16 FY17

Off-Campus Activity Drives Significant Profit

• Off-campus clinical activity accounted for 34.6% of WUSM’s total revenue in FY17 and

generated a premium of $50.7M in incremental income as compared to an equivalent volume

and mix of services on the WUMC campus

Source: WUSM PBS Reporting Services

Off-Campus Incremental Net Income (millions)

FY12-FY17 CAGR – 18.2%

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FPP Key Clinical Initiatives

3) Secure and expand WUSM’s primary care physician referral base

4) Implement new EHR

5) Increase access

6) Improve patient experience

7) Safety

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6 Key Revenue Challenges

1) Flat market size, making it more difficult to grow clinical volumes

2) 1% per year expected shift from commercial payors to Medicare until 2030 as the “baby

boomer” generation ages

3) Potential erosion of historical referral patterns due to physician employment by

competitor hospitals

4) Growth in uncompensated care costs due to increase in charity care & below cost

reimbursement from Medicare and Medicaid

5) Changes in private sector health benefit designs and health plan market consolidation:

• High deductible health plan designs

• Narrow network and tiered network products

• Steerage programs

• Defined contribution health insurance models

• Insurance market consolidation

6) Shift from FFS to Value-Based Payment models with downside risk

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36.1% 36.8% 37.3%

14.1% 13.6% 13.4%

3.8% 3.9% 4.3%

19.2% 19.9% 20.3%

21.3% 20.8% 20.2%

5.1% 4.6% 4.2%

0.4% 0.3% 0.3%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

FY15 FY16 FY17

Commercial

Other

PPO

HMO

Self Pay

Medicaid

Medicare

“Baby Boomer” Payor Mix Shift

• Medicare now accounts for 37.3% of WUSM’s total payor mix, up 0.5% from the

prior year

Based on billed charges; Other includes transplant, international, hospital contracts, and workers compensation; Includes insurance co-payments; Managed Medicaid is included in Medicaid percentage.

Source: WUSM PBS Reporting Services

50.4%50.2% 50.7%

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% To WUSM

Total Charges0.3% 1.9% 20.2% 20.3% 2.3% 6.3% 4.3% 37.3% 7.1%

148% 153%

139% 136%

99% 90%

59% 67%

53%

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

Commercial Global TX PPO HMO Other Managed

Medicaid

Self Pay Medicare Traditional

Medicaid

Payor Reimbursement as a Percent of Clinical Practice Costs

• Medicare and Traditional Medicaid reimbursement is below the fully loaded cost of providing these services, covering 67%

and 53% of costs, respectively.

Government Payors Do Not Cover the Cost of Care

Payor Trends Relative to WUSM Clinical Practice Costs (FY17)

1Other includes Special Contracts; Non-contracted HMO, PPO, and POS; Workers Comp; Railroad employees; TRICARE; and Medicaid Appeals.

WUSM cost as a percent of Medicare RBRVS = 1/0.67 = 150%

Source: WUSM PBS Reporting Services44.4% of total charges

Breakeven

Point

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Uncompensated Care Trends

On a cost-basis, WUSM provided $97.9M in uncompensated care during FY17, an 15.9% increase over FY16

Under-reimbursed care for Medicare and Medicaid patients accounted for $84.1M of the total, a 13.2% increase

from FY16

Bad debt increased 11.8% in FY17 to $7.8M while charity discounts increased from $3.2M to $6.0M

$61.8$74.3

$84.1

$2.1

$3.2

$6.0

$7.8

$7.0

$7.8

$71.8

$84.5

$97.9

$0

$20

$40

$60

$80

$100

$120

FY15 FY16 FY17

Under-Reimbursed Care Charity Discounts Bad Debt

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How Do We Survive ?

- Increase market share commercial business

- Expand primary market

- Focus on regional, national, international referrals

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