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Courting Physicians: Pros and Cons of Six Integration ModelsOctober 20, 2011
Steven R. Smith and Sarah E. Swank
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Welcome
• Ober|Kaler Healthcare General Counsel Institute
• A little about our speakers
• Upcoming Physician-Hospital Relationship Webinars
• Topic overview
• Six trends in integration
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Meet Today’s Speakers
Sarah E. SwankPrincipal, Ober|[email protected] | 202.326.5003
Steven R. SmithPrincipal, Ober|[email protected] | 202.326.5006
Steve and Sarah are cofounders of the Ober|Kaler Health Care General Counsel Institute.
LOOK FOR US ON LINKEDIN: Ober|Kaler Health Care General Counsel Institute Group
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Physician-Hospital Relationships Series• Part 1: Courting Physicians: Pros and Cons of Six
Integration Models (October 20, 2011)
• Part 2: Physician Contracting and Compliance:To Disclose or Not to Disclose(December 7, 2011)
• Part 3: Disruptive Physicians: A Roadmap toAvoid Dangerous Behavior (January 18, 2012)
Visit www.healthcaregcinstitute.com for more information.
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Topic Overview
What do we mean by the “Pros & Cons” of an integration model?
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Topic Overview
What are the metrics to be used in evaluating each model?
• Cost to implement• Difficulty to implement• Efficiency• Alignment of incentives for hospital & physician• Potential for global impact on system or hospital• Quality implications• EHR and data collection/reporting
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Model 1: ACOs
• Fundamentally, an ACO is a network of providers that shares the responsibility for providing care to patients in a clinically and financially integrated entity
• Final Regs due out any moment?– More to come from Steve and Sarah along with our
multi-discpline ACO Team– Updates on: www.ober.com/practices/137
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Model 1: ACOs
Purpose of ACOs (quick review)• Better care for individuals with respect to safety,
effectiveness, patient-centeredness, timeliness, efficiency and equity
• Better health for populations through preventive service and education for issues such an substance abuse and physical inactivity
• Slower growth in costs through improvements in care and eliminating waste in the system
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Model 1: ACOs
• A true network of providers who are incentivized to provide efficient and effective care, including preventive service
• Alignment of providers and incentives should result in more efficient care
• EHR system with capability to analyze data regarding outcomes, quality, etc.
• Financial return through shared savings• Greater capacity for self-determination or at least self-
identification as a system
ACO Pros
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Model 1: ACOs
• Efficiency– Cost of care is likely to decline in the future as a
function of price and volume reductions
• Data Collection– EHR and the ability to capture and interpret and
report data
• Defining Quality – Quality is going to play an increasingly larger role in
computing payment
ACO Pros
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Model 1: ACOs
• Providing lower cost settings while enhancing quality of care
• Reduce readmissions to hospitals and ED visits by more effective chronic care management
• More efficient transitions for patients across the continuum of care
ACO Pros
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Model 1: ACOs
Becoming an ACO is a large and complicated undertaking• Application to HHS - Fully developed policies,
agreements, leadership, legal entity needed before applying to be an ACO
• Assemble and negotiate with all providers and others who will be a part of the ACO
• Have a governing body under which all ACO participants possess proportionate control over the ACO’s decision-making process
ACO Cons
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Model 1: ACOs
• Be comprised of an eligible group of ACO participants that work together to manage and coordinate care for Medicare beneficiaries
– Clinical management and oversight must be managed by a “full-time senior-level” state-licensed, board-certified physician medical director who is physically present at the ACO location
– Quality assurance program and process improvement committee to establish quality, cost effectiveness and process and outcome improvement standards
– Develop evidence-based medical practice or clinical guidelines and processes to meet the goals of the Shared Savings Program
ACO Cons
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Model 1: ACOs
Quality Monitoring and Reporting
• ACOs will be required to monitor and report claims review, financial and quality data, as well as submit quarterly and annual reports, perform site visits and conduct patient surveys
• Data to be used to determine if ACO meets the Quality Performance Standard and is eligible for shared savings
ACO Cons
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Model 1: ACOs
• Expensive to create the entire ACO package and infrastructure especially regarding data collection
• Limited return even if shared savings are realized
• Must have savings and meet 65 quality standards to have shared savings
• Risk of loss under one scenario
• Opportunities to accomplish much of same without all the expense and complexity under other models
ACO Cons
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Model 2: Bundled Payments
What is it?• CMS Innovation Center
• Defined episode of care
• Sharing gains arising from better coordination of care
• Is different from ACOs?
• Why now?
• Focus on flexibility
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Model 2: Bundled Payments
Should you apply?
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Model 2: Bundled Payments
Four models
• Model 1: retrospective acute care hospital stays
• Model 2: retrospective acute care hospital stays along with post acute care
• Model 3: retrospective post acute care
• Model 4: prospective acute care hospital stays
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Model 2: Bundled Payments
Application Process• Documents
– Step 1: Letter of Intent (LOI)– Step 2: Application– Step 3: Optional claims data
• May apply for more than one model
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Model 2: Bundled Payments
Deadlines• Model 1:
– LOI – October 6, 2011– Application – November 18, 2011
• Models 2 - 4:– LOI – November 4, 2011
– Application – March 15, 2011• Data Use Agreement/Addendum (optional)• Research Request packet (optional)
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Model 2: Bundled Payments
Reimbursement• Retrospective payment
– Pay fee-for-service (FFS) to each provider after services for each episode of care reconciled against a predetermined target price
• Prospective payment– Pay upfront for each episode of care instead of
traditional FFS
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Model 2: Bundled Payments
Future Models – Where are we heading?• Model 5: prospective acute care hospital stay
plus post-acute care
• Model 6: prospective post-acute care only
• Model 7: retrospective chronic care
• Model 8: prospective chronic care
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Model 2: Bundled Payments
Freedom of Choice• What is it?
• Post acute care
• Specifically mentioned
• OIG is worried about it too!
• Does everyone have skin the game?
Big Question: How do you control qualitywithout limiting choice?
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Model 2: Bundled Payments
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Model 3: Employment
• Direct hiring of physicians by a hospital or health system or through a subsidiary entity
• Why?
– Alignment of incentives
• Improve quality
• Improve efficiency and productivity
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Model 3: Employment
• Employment exception to AKS and Stark easy to meet with employment agreement
• Compensation terms should be well thought out and designed to achieve the objectives and goals of the hospital by considering the appropriate mix of productivity standards and incentives
Employment Pros
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Model 3: Employment
“There are many mechanisms for paying physicians; some are good and some are bad. The three worst are fee-for-service, capitation
and salary.” JC Robinson, “Theory and Practice in the Design of Physician
Payment Incentives”, 2001.
Employment Pros
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Model 3: Employment
What behavior does a hospital or system want from its employed physicians?
• Productivity: Professional fees
• Quality: Better and more efficient patient care
• Coordination of care
• Communication among providers
• Better outcomes
• Data to prove all the above
Employment Pros
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Model 3: Employment
• Compensation arrangement with physicians should be structured to incentivize the physician to achieve these goals
Employment Pros
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Model 3: Employment
• Straight Salary
– Pros• Easy to administer• Easy to understand
– Cons• If used on a long-term basis, there is no incentive
to increase productivity or maintain profitability
Compensation Alternatives
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Model 3: Employment
• Work RVU’s– Pros
• Pure productivity measurement• Insulates physicians from payor and administrative issues• Within reason, a physician can make as much, or as little,
as he/she desires– Cons
• May require extra administrative effort to track• May need to re-train for accurate coding (some physicians
may be under coding since, otherwise, “it doesn’t matter)
Compensation Alternatives
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Model 3: Employment
• Percentage of Collections– May be combined as bonus with straight salary if
desired– It is a more comfortable fit for centers on a cash
basis as opposed to accrual– It can be administered on a monthly, quarterly or end
of the year basis– Need to know revenue and operation expense
numbers in order to correctly set the right percentage for compensation
Compensation Alternatives
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Model 3: Employment
• Percentage of Collections– Pros
• It is relatively simple to administer and understand• It inherently rewards productivity• Risk of payor mix and poor collection performance
are shifted to the physician– Cons
• Physician may rebel because of the risk of payor mix and collection performance shifted to him/her
• Physicians will want/need to “inspect the books” to verify proper compensation
Compensation Alternatives
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Model 3: Employment
• Percentage of Net Revenues
– Requires advance agreement between employer and physician as to allocated expenses
– Pros
• The employer enjoys the greatest degree of fiscal protection
• Readily understood by entrepreneurial physicians
Compensation Alternatives
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Model 3: Employment
• Percentage of Net Revenues– Cons
• May require that physicians become actively involved in expense management and revenue collection issues
• Accounting systems and staff may have difficulty in producing timely P&L’s
• Issue may arise if allocated expenses are too high or collection performance is too low
Compensation Alternatives
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Model 3: Employment
• Easy and low cost to implement
• Potential for quality and clinical gains
– With employed physicians, oftentimes easier to implement treatment protocols and patient safety protocols
– Opportunity to enhance not only quality but to reduce risk as well
Pros
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Model 3: Employment
• Employment of physicians is usually not an effort to perform a global facelift on a hospital or system – usually a more targeted effort in one or more areas
• If appropriate attention is not given to the compensation model, hospital can be stuck with a non-productive and highly paid physician
– Financial impact
– Morale impact on other medical staff members
Cons
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Model 4: Clinical Co-Management
Trying to Define It• Physician led
• Coordinate to improve quality
• Shared accountability
• Quality
• Written agreement
• Example: oncologists
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Model 4: Clinical Co-Management
Structure• Joint Venture
– Form management company– Determine service lines– Enter into a management agreement– Set management fee
• Written Agreement – Medical Director light or heavy?
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Model 4: Clinical Co-Management
Duties• Involved in day to day management decisions
– Clinical – Operational – Employment
• Improve clinical outcomes and quality
• Clinical services (inpatient and outpatient?)
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Model 4: Clinical Co-Management
• Hourly Rate– Clinical services– Call
• Incentive Pool– Clinical outcomes– Patient satisfaction– Physician satisfaction– Quality indicators and
outcomes– Measurable improvement– Efficiencies
Remember to define benchmarks and targets
Compensation
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Model 4: Clinical Co-Management
• Stark– FMV– Personal services– Gainsharing
• Permissible in certain cases• Potential expansion in new ACO regulations and guidance
• AKS• Tax Exemption
– Not for profit hospital– For profit physician group or JV
Compensation
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Model 4: Clinical Co-Management
Some Pros, We Heard the Cons• Cost less• Certain physicians don’t want to be employed• Physician independence • Physician led• Innovation and expertise• Physician loyalty• Electronic medical record not in play
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Model 4: Clinical Co-Management
Does it work?• Have we moved beyond the co-management
idea?
• Skin in the game
• Post acute care ignored
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Model 4: Clinical Co-Management
Don’t forget the nurses and other valuable clinicians . . .
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Model 5: Recruitment
• What do we mean?
– Recruitment of physician into an existing group practice (including a hospital owned group) or as a new practitioner in a community
– Pursuant to an arrangement that is compliant with the Stark law exception for physician recruitment
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Model 5: Recruitment• Key consideration: This is a strategic action and
recruitment is simply a tool to help achieve the desired goal – therefore:– Is there a strategic vision for what the ultimate
medical staff or entity will look like and how it will fit within the existing hospital/system structure?
– Has a community needs assessment been done to support the need for recruitment?
– Have draft agreements, key terms, financial and other approvals all been secured BEFORE going out to speak with physicians?
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Model 5: Recruitment
• Who will be responsible for the cost of “tail” liability insurance as the physician leaves his/her current practice setting?
• Will appropriate information technology resources be available for the physician in the new practice setting?
• Closing steps and time estimate
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Model 5: Recruitment
• Large upfront costs for:
– Recruiter (possibly)
– Relocation of physician
– Signing bonus
– Front money for office set-up
– Ongoing subsidy until practice is established (you hope!)
Direct Costs
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Model 5: Recruitment
• For any recruitment, there is a risk that:
– The physician will not succeed in establishing a self-sustaining practice
– The physician takes a significantly longer period of time than anticipated (and what is written in the recruitment agreement) to establish the practice
Indirect Costs/Risks
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Model 5: Recruitment
• The alienation of a physician or group practice or the medical staff from having to enforce the terms of a recruitment agreement against a physician or group for:– Repayment of funds agreed to be repaid;
– Continuation of the practice after all assistance has been paid;
– Repayment of large sums upon breach of agreement by physician or group
Indirect Costs/Risks
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Model 6: Practice Acquisition
Why are hospitals back in the market?• Gate keepers
• Coordination of care
• Quality
• Readmissions/VBP
• Everyone is doing it!
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Model 6: Practice Acquisitions
Why physicians want to be acquired?• Troubled economy
• Work life balance
• Reduction in physician reimbursement
• Stable income
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Model 6: Practice Acquisitions
Shopping for Practices• Sheer numbers
– Physicians– Covered lives
• Profitability– AR– Payor Mix
• Certain specialties • Health care reform• Strategic planning
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Model 6: Practice Acquisitions
What are you buying?
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Model 6: Practice Acquisitions
Asset Checklist • FMV• Goodwill• Workforce/Employees• Medical records• Leases • Existing capital• Supplies• IP• Computers/Office Furniture• AR
Remember to complete
business and regulatory due
diligence
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Model 6: Practice Acquisitions
I bought some practices... now what?• Corporate structure• Governance• Policies• Forms• Contracts• Managed care contracts• Employment issues• Electronic health records integration• Compliance
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Model 6: Practice Acquisitions
That is SO 1992 ... and other colorful sayings• Integrated delivery systems - Version 2.0
• Moving toward capitation again, whatever
• Buy high, sell low
–Only with practices and the current stock market
• Blood, sweat and tears
–Not just a band from the 1970s
• Can we just all get along?
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Conclusion
We leave you with these questions:
• Does ownership promote integration?
• Is consolidation the only answer?
• Will insurers play a part in any of this?
• Will EHRs drive quality and cost efficiency?
• Do we have the answer yet?
• Does one size fit all?
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Questions
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More questions? Contact us.
Sarah E. SwankPrincipal, Ober|[email protected] | 202.326.5003
Steven R. SmithPrincipal, Ober|[email protected] | 202.326.5006
Steve and Sarah are cofounders of the Ober|Kaler Health Care General Counsel Institute.