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Success in the New Healthcare Market Executive Leadership Summit South Carolina Hospital Association July 23, 2014 Agenda Topic C-Suite Survey Emerging Working Relationships with Physicians Gears of Change Physician Change and Communication Discussion/Questions and Answers THE CAMDEN GROUP | 7/23/2014 1 Supply Chain Evidence Based Medicine PATIENT SATISFACTION Quality Medical Education Managed Care Physician Extenders Transparency Accountable Care Organization PHO Service Line Management Industry Consolidation Networks Regional Health Information Organizations Centers of Excellence Clinical Integration THE CAMDEN GROUP | 7/23/2014 IT P4P Population Health Management Mergers Physician Employment Networks Primary Care People Comparative Effectiveness Research Medicaid CPOE Medical Home Joint Ventures Bundled Payment MSO Group Practice Health Reform Leadership Health Navigators Capitation Patient Safety Telemedicine Medicare Fraud & Abuse Private Equity Market Share Health Insurance Exchanges ACO GOVERNANCE EMR Bond Rating Healthcare Systems Healthcare Today: Complex, Confounding, Challenging…Changing Ambulatory Centers Readmissions Volume Gainsharing Revenue Cycle CAPITAL Competition Payment Reform Care Redesign 2 Institute for Healthcare Improvement: The Triple AimTM The Triple AimTM set forth by the Institute for Healthcare Improvement: Optimal care delivery within and across the continuum Focused on improving the health of the population and cost of care Right care, Right place, Right time Population Health Triple AimTM Experience of Care Per Capita Costs Source: http://www.ihi.org/IHI/Programs/StrategicInitiatives/TripleAim.htm THE CAMDEN GROUP | 7/23/2014 3 Chief Executive Officer: Threat or Opportunity? Does your organization consider each of the following to be a threat or an opportunity? Issue Threat Opportunity Healthcare reform, overall 36% 52% Health information exchanges 7% 76% Health insurance exchanges 20% 53% Reduced reimbursements 91% 5% Industry consolidation 37% 44% Shared-risk, shared-reward payments 20% 62% Primary care redesign 9% 74% Care continuum relationships, clinical 4% 89% Care continuum relationships, financial 13% 66% Retail healthcare (e.g., clinics, pharmacies) 30% 43% Population health management 8% 75% Source: HealthLeaders, January/February 2014 THE CAMDEN GROUP | 7/23/2014 4 Chief Executive Officer’s: Switching from Volume to Value Do you believe the healthcare industry will make the switch from volume to value? YES 72% 28% NO Source: HealthLeaders, January/February 2014 THE CAMDEN GROUP | 7/23/2014 5 Top Three Areas to Improve or Address Which are the top 3 areas your organization must improve or address in order to reach your financial targets in the 3-year timeframe? 44% Physician-hospitalalignment alignment Physician-hospital 41% Costreduction reduction Cost Care model (e.g., population Care model (e.g., populationhealth, health,medical medical home) home) 40% 39% Reimbursement 30% Strategic partnershipswith withproviders providers Strategic partnerships 29% Information technology, clinical 25% Strategic partnerships with payers 23% Revenue cycle 14% Decline in acute care admissions Information technology, financial 8% Source: HealthLeaders ,January/February 2014 THE CAMDEN GROUP | 7/23/2014 6 Chief Executive Officers’ Cost-cutting Focus What are the top 3 areas you will focus on next to control costs? 79% Expense reduction via Expense reduction viaprocess processimprovement improvement 75% Labor Labor efficiencies efficiencies 53% Expense reduction viasupply-chain supply-chain efficiencies efficiencies Expense reduction via 45% Capacitymanagement management Capacity Employee benefit reductions 18% Labor reductions 18% Source: HealthLeaders, January/February 2014 THE CAMDEN GROUP | 7/23/2014 7 Hospital and Health System Pressures Sequestration Health Insurance Exchange Capital Requirements Operating Costs THE CAMDEN GROUP | 7/23/2014 SGR (Reimbursement Reduction) Hospital Health Systems Throughput Volume Declines Credit Rating Requirements Employed Physician Losses 8 Emerging Working Relationships with Physicians: Leadership and Culture Change Hospital Employment of Physicians We Have All Seen the Trends… Factors driving physicians to seek employment include: Flat Revenue Desire for economic stability/ security Changes in government payments to doctors Rising operating expenses The growing emphasis on patient safety and quality Lifestyle (e.g., predictable hours, less calls) Inability to recruit new physicians Rising Expenses Increasing Regulation Merritt Hawkins suggests that the industry will see 75 percent of the nation's physicians employed by hospitals in 2014. THE CAMDEN GROUP | 7/23/2014 10 Round 1: 1990’s What Happened Why We heard healthcare financial models changes were coming The first groups to be employed were physicians in the middle or near the end of their practice cycles Contracts were often salary-based Practice assets were financially evaluated (including goodwill) and paid for No to minimal discussions regarding quality of care, patient satisfaction, or cultural change was discussed THE CAMDEN GROUP | 7/23/2014 Healthcare financial reimbursement and payment models did not change significantly Salaried physicians did not produce to cover costs Over practice management developed Hospitals stained losses on operational balance sheets Many contracts and relationships disintegrated 11 Round 2: Mid to Late 2000’s What Happened Why We heard healthcare financial models changes were coming The new physicians had substantial educational debts Entering private practice had increased financial cost and risk New physicians wanted work/life balance New physicians did not require practice asset acquisition Some discussions regarding quality of care, patient satisfaction No-to-minimal cultural change was discussed THE CAMDEN GROUP | 7/23/2014 Healthcare financial reimbursement and payment models did not change significantly Salaried physicians did not produce to cover costs Over practice management developed Hospitals sustained losses on operational balance sheets Many contracts and relationships disintegrated 12 Round 3: Current and Together Again (“Divorces”) What Happened Why Healthcare financial models changes are here Variable based on region and size of system New physicians have substantial educational debts Average of $170,000 Entering private practice is not a viable option in many parts of the country New physicians demand work/life balance Discussions regarding quality of care, patient satisfaction are occurring Culture change is starting to be discussed THE CAMDEN GROUP | 7/23/2014 Healthcare financial reimbursement and payment models are changing Providers are leading the charge Salaried physicians may not produce to cover costs on a pure relative value units (“RVU”) metric New compensation models New and improved practice management is being developed Maybe Hospitals reevaluating physician “losses” on balance sheets Investments Many contracts and relationships are still at risk Longevity bonuses are more common 13 Pyramid of Success Quaternary Tertiary Community Hospital Surgical Specialists Medical Specialists Primary Care Access Points (UCC, FQHCs, ED, Health Plans, Physician Offices, Retails Clinics, etc.) Defined Population Commercial HMO PPO Direct to Employers Insurance Exchange Bundled Payment THE CAMDEN GROUP | 7/23/2014 CMS ACO-MSSP Pioneer ACO Medicare Advantage Bundled Payment Dual Eligibles HMO Medicaid HMO Fee-for-Service 14 Physician-Hospital Integration: Driving the Value Proposition High Impact on Value Accountable Care IDN/ Health Plan Bundled Payments Clinical Integration Managed Care Medical Home Shared Risk Specialty Co-management COE/Specialty Institutes Medical Foundation Physician Employment RHC, FQHC, Community Clinics Low Limited THE CAMDEN GROUP | 7/23/2014 Integration Full 15 Evolving From To From To Pay for procedures Pay for value Fee-for-Service Case rates/budgets/capitation More facilities/capacity Better access to appropriate settings Physicians/Hospitals acting independently Physicians/Hospitals collaboration: global risk Physicians and hospitals working in parallel Physicians and hospitals working in a highly integrated manner Hospital-centric Continuum of care (populationcentric) Treat disease/episode of care Maintain health THE CAMDEN GROUP | 7/23/2014 16 Emerging Physician Relationships Employment Co-Management/Bundled Payment Accountable Care Organizations Clinically Integrated Organizations Network Population Health Management Plan-to-Plan THE CAMDEN GROUP | 7/23/2014 17 The Traditional Primary Care Practice Model Is Changing Past Future THE CAMDEN GROUP | 7/23/2014 Single or small group practice primary care clinic no longer economically sustainable. Patient Centered Medical Home 18 Co-Management Structure Hospital contracts with a physician organization, under which the physicians are granted input and managerial authority to design and enforce clinical and operational standards. Generally, the physicians provide only their time and no other personnel or items. Physician Group/ Venture Executive Physician Director and Physicians THE CAMDEN GROUP | 7/23/2014 Co-Management Service Agreement (“Co-MSA”) Service Line Co-Management Committee Hospital Service Line/ Department Director 19 Physicians Are Involved In Each Aspect of Operations Possible Co-management Responsibilities Financial and Operations Management oversight of staffing Negotiation of service arrangements Operating and capital budgets Length-of-stay management and patient throughput Physicians Planning and Business Development Strategic plan development Technology planning Marketing strategies Clinical research plan Hospital Quality of Care Development of care protocols Quality management and improvement policies Quality outcomes Patient experience Co-management company governance structure includes various committees for managing all aspects of planning and care delivery (i.e., Quality Care Committee, Technology Committee, Operations Committee, Finance Committee, Research Committee) THE CAMDEN GROUP | 7/23/2014 20 ACO Structure Infrastructure (Provided or Contracted ACO Operations) Information Technology EMR, CPOE, PACS Data warehouse Reporting HIE Web portal Care Management Hospitalists and Intensivists CMO Disease management Clinical protocols Advanced analytics and modeling Call center Utilization management Knowledge management ACO responsible for: Clinical care management (clinical integration) Capture data for continuum of care Measure and monitor costs and quality THE CAMDEN GROUP | 7/23/2014 Health Network Delivery network Financial/Payment Systems 21 Network Population Health Management Partnerships Drive Success and Sustainability Accountable Care Infrastructure IDN/ ACO Umbrella Network IDN/ACO Physicians NW Network IDN/ACO THE CAMDEN GROUP | 7/23/2014 Physicians Columbia Network IDN/ACO Physicians Oregon Network IDN/ACO 22 Goal is Balance Clinically Integrated Network F A C I L I T I E S THE CAMDEN GROUP | 7/23/2014 23 Plan to Plan/Health Plan Health Plan (BC, BS, Aetna, United, etc.) Retain 15 - 20% Your Health Plan Hospitals Ambulatory Services Post-Acute Services Physicians Pharmacy Facilities THE CAMDEN GROUP | 7/23/2014 24 Getting the Gears of Change Aligned Payment Change Care Model Change Cultural Change THE CAMDEN GROUP | 7/23/2014 25 Change: What’s In It For…Hospitals? Participate in new models of care Transition to new payment models THE CAMDEN GROUP | 7/23/2014 Improve patient care and satisfaction Improve connectivity and relationships with physicians Enhance quality improvement results 26 Change: What’s In It For…Physicians? Care Management Support Participate in new models of care Financial Rewards Enhance Connectivity with Colleagues Improve Patient Health and Satisfaction THE CAMDEN GROUP | 7/23/2014 27 What Incentives Are the Right Incentives? Measures for Variable Compensation/Incentives Strategic Focus or Goal Financial Performance Productivity: Panel size, wRVU, Collections Expense management Profit/Loss by site Quality Patient Outcomes Service Patient Satisfaction Teamwork Group Profitability/Performance 360O Reviews “Citizenship” New Services/Growth Group Profitability Overall THE CAMDEN GROUP | 7/23/2014 28 Incentive-Based Models Incentives must be large enough to motivate behavior Pay at risk component is influenced by the interplay of 2 variables: Physician’s ability to impact the variable Value to the physician Bonuses measured/paid more frequently reinforce desired behaviors Pay at Risk Physician Ability to Impact Value 10% Small Low 15% Key Items Nice Reminder 20% Moderate Motivational 25% Significant High >30% Driving Behavior Very High THE CAMDEN GROUP | 7/23/2014 29 Performance Measures Panel Size Charges RVUs Encounters Net revenue Productivity Service/Quality Desired Performance Patient satisfaction Open panel Grievances Peer review Clinical quality Functional status Resource Utilization Staff review Participation in Group activities Protocol compliance Availability Medical records audits Coding compliance THE CAMDEN GROUP | 7/23/2014 Visits PMPM Pharmacy utilization Specialty/Ancillary Citizenship utilization ED utilization Charges/Case or Visit 30 A Challenging Time For Change Multiple Factors Many do not believe there is a need to change Transition during a schizophrenic time of payment models Loss of autonomy Lose Control Office Patients NPs/PAs/Others Reimbursement continues to decrease Expenses continue to increases Expanding knowledge-base THE CAMDEN GROUP | 7/23/2014 31 Why Is It So Difficult Payment Change Care Model Change Cultural Change THE CAMDEN GROUP | 7/23/2014 32 Leads to Emotional Factors Similar to Kubler-Ross Stages of Dying Denial Anger Negativity/Skepticism Acceptance Enthusiasm? THE CAMDEN GROUP | 7/23/2014 33 Physician Change and Communication Critical Elements THE CAMDEN GROUP | 7/23/2014 Make it About Quality of Care Delivery Make it Easier to Deliver the Care Align Financial Incentives Communicate the Rationale Loudly and Clearly 34 Make a Case for Change Why, How, What Create need for change based on data and information Quality metrics Outcomes New financial metrics and payment models Industry market trends Address new emotional dynamics that may arise Implement change by supporting the processes needed for the change Sustain change by sharing results of success Quality Financial THE CAMDEN GROUP | 7/23/2014 35 Group Dynamics for Change Identify the “right” people Formal and informal leaders Need some with positions and power to get things done Expertise and credibility to influence others Start with a small number of clear goals Develop an environment of trust and commitment within the team THE CAMDEN GROUP | 7/23/2014 36 Create an “Integrated” Culture PatientCentered Partnership/ Collaboration/ Trust Accountability Continuous Improvement THE CAMDEN GROUP | 7/23/2014 Transparency 37 Communicate Progress of What is Being Changed Start with Sharing the Vision Education Ongoing Focused as needed A Constant and Continuous Communication Plan Address Naysayers Engage Grassroots Privately Publically Multimedia Share Successful Results Non-Physician Staff is Just as Important! THE CAMDEN GROUP | 7/23/2014 38 Enable Implementation of Change Supply training, support, and opportunities for success (i.e., make life easier) Remove identified barriers that impede progress to the goals and vision Encourage and value (monetary) involvement Organization must commit the time and necessary resources THE CAMDEN GROUP | 7/23/2014 39 Target Short-Term Wins (Walk Before Run) Target a few agreed upon metrics of success that resonate with providers and the population Secure broad acceptance through communication and education Communicate success enthusiastically Include and learning that led to success into the plan Engage others that want to improve THE CAMDEN GROUP | 7/23/2014 40 Build and Expand On Success Any small short-term win can lead to bigger longer term wins Build on what works, change what does not See what works and continue to improve on it Continue monitoring metrics an reporting results – good and bad Achieving tangible results as quickly as possible Build infrastructure that expands, and emphasizes new behaviors Continue to align financial rewards to behavior change Add new metrics, models, processes, and programs THE CAMDEN GROUP | 7/23/2014 41 Cultural Transformation Start With A Vision Communicate and Collaborate Engage and Enable Across the System Create the Right Culture for Change Interviews Committee Meetings Vision THE CAMDEN GROUP | 7/23/2014 Gap assessment Integrated model design Rationale Empowerment and accountability Implement and Sustain Change Plan for implementation Resources and budget Technology Metrics for success Short-term wins, long-term sustainability Reassess, revise, revisit 42 Gold Keys for Success and Landmines to Avoid Keys To Hospital-Physician Alignment Strategies Understanding risks and rewards Determining individual and organizational expectations Full transparency and confidentiality The legal certainty and business reality mismatch THE CAMDEN GROUP | 7/23/2014 44 The Fundamentals Not all physicians are the same Employed vs. independent Primary care vs. specialists Exclusive medical staff privileges vs. “splitters” New recruits vs. veterans Not all terminology has universal or standardized meaning Each model has pros and cons; none is perfect The engagement process is often more important than the employment model selected THE CAMDEN GROUP | 7/23/2014 45 Challenges Physicians have unrealistic expectations about the value of their practices or their services Physicians expect hospitals to be the “deep pockets” while reimbursement catches up with the new risk/reward continuum The compensation methodology is not adequately tied to performance improvement and behavior change Management of physician practices different than hospitals or departments THE CAMDEN GROUP | 7/23/2014 46 Driving Issues Not Addressed in Contracts - Maybe They Should Be Hospital’s and health system’s ability to manage employed physicians and physician practices Billing (if employed) Efficiencies Staff Physicians lose autonomy “Bosses” Perceived lack of respect Behavior change Culture THE CAMDEN GROUP | 7/23/2014 47 Common Mistakes Failing to address the hospital’s shortcomings up front: Hospital management is not comfortable sharing power and control with physicians Weak practice management system Hospital is unsure how physicians actually impact hospital finances Failing to address leadership issues: Medical directors and physician leadership cannot or will not adjust Physicians are given inadequate accountability/responsibility Lack of appropriate governance roles for physicians THE CAMDEN GROUP | 7/23/2014 48 Common Mistakes Treating a medical group as just another department of the hospital Assuming that one approach will work for all medical groups/physicians Blindly copying the competition’s model Failing to build flexibility into the model Choosing the wrong compensation model for a particular medical specialty or service line Failing to do adequate due diligence Over-promising/Under-delivering Delivering an inconsistent message Refusing to deal with “the elephant in the room” THE CAMDEN GROUP | 7/23/2014 49 Lessons Learned Develop strategic plan to address the need for uniform compensation model vs. potential deviation for regional assets or hard to recruit specialists Do not sacrifice model for individual physician or group - most likely, physician will not be a long-term partner Twenty percent of compensation needs to be at risk for behavior modification Define compensation parameters that apply to all - avoid “car negotiation” mentality THE CAMDEN GROUP | 7/23/2014 50 Lessons Learned Break down silo mentality to avoid federation of providers and develop true group culture Do not prioritize growth over cultural compatibility Elevate physicians into leadership positions and create physician-led committees and/or Clinical Governing Council Engage physicians in selection process for electronic medical records and other IT systems to allow for effective information management to achieve strategic goals Beware of insurance companies as the new competitor to your physician-base Develop metrics to justify employed physician subsidy THE CAMDEN GROUP | 7/23/2014 51 Lessons Learned Understand that divorce is hard and develop strong front-end due diligence process (e.g., including coding and compliance review) including values alignment Evolve compensation model from production-based to mirror change in reimbursement system to value-based/bundled payment THE CAMDEN GROUP | 7/23/2014 52 Trends in Compensation Increasing need to be at or above market due to competition and shortages in key specialties Still focused on productivity, but quality, utilization, and behavior measures increasingly important due to new payment models Efficiency (cost of care) of the overall group and care team (members practicing at “top of license”) critical in “new” models Benefits and intangibles (work/life balance, no politics, etc.) becoming more important to attract physicians Strategies for engaging part-time physicians More frequent adjustment of compensation design to respond to changing market conditions and payment models THE CAMDEN GROUP | 7/23/2014 53 Trends in Compensation Recognition of new specialized roles for primary care physicians in particular – patient-centered medical home team leader, manager of post-acute care, chronic disease manager Longevity bonuses starting to become more frequent THE CAMDEN GROUP | 7/23/2014 54 But if We Refuse to Change… Choluteca Bridge Before Hurricane Mitch THE CAMDEN GROUP | 7/23/2014 55 But If We Refuse to Change Choluteca Bridge After Hurricane Mitch https://sharepoint.thecamdengroup.com/CI/General%20CI/Presentations/Camden_Success_in_New_Healthcare_Market_07_23_14.pptx THE CAMDEN GROUP | 7/23/2014 56 Questions and Discussion