Trends From The Trenches : Adapting to Affordable Care Act: Provider and Healthcare System Collaboration
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Trends From The Trenches : Adapting to Affordable Care Act: Provider and Healthcare System Collaboration



As the Affordable Care Act is implemented and healthcare expenditures continue to rise, providers and payers need to explore how to best set themselves up to succeed in an evolving marketplace. In ...

As the Affordable Care Act is implemented and healthcare expenditures continue to rise, providers and payers need to explore how to best set themselves up to succeed in an evolving marketplace. In this 5th webinar, Margaret Davino will discuss how the relationships between hospitals, physicians and other providers are changing and what structures are being used for providers and payers to work together, including accountable care organizations (ACOs). Margaret will also describe the different models of collaboration between hospitals and physicians, how these affect reimbursement, and what to expect in the future.



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Trends From The Trenches : Adapting to Affordable Care Act: Provider and Healthcare System Collaboration Trends From The Trenches : Adapting to Affordable Care Act: Provider and Healthcare System Collaboration Presentation Transcript

  • Margaret Davino, Esq. and Andrea J. Simon Ph.D. Adapting to Affordable Care Act: Provider And Healthcare System Collaboration - Structuring successful relationships Healthcare Innovation: Trends From The Trenches March 14, 2014
  • Our Presenters Andrea J. Simon, PhD Corporate Anthropologist President Simon Associates Management Consultants Margaret Davino, Esq. Healthcare Attorney Kaufman Borgeest & Ryan
  • Margaret Davino  A Partner in Kaufman, Borgeest & Ryan, Margie has been involved with physician-hospital contracts, affiliation and/or service contracts, employment agreements, managed care issues, bylaws and governance matters, regulatory compliance, medical staff affairs, establishing physician practices, as well as mergers and the formation of hospital systems.  The biggest part of her practice at the current time is relationships and collaborations between various providers, including physicians, super-groups, hospitals and others.
  • Webinar Series  Healthcare Innovation: Trends From The Trenches Dianne Auger, Senior Vice President, Marketing St. Vincent’s Medical Center President of the St. Vincent’s Foundation Linda MacCracken, MBA Vice President, Advisory Services Truven Health Analytics Kriss Barlow RN, MBA Principal, Barlow/McCarthy Andrea J. Simon, PhD Corporate Anthropologist President Simon Associates Management Consultants Margaret Davino, Esq. Healthcare Attorney Kaufman Borgeest & Ryan
  • Webinar Series: Trends From The Trenches  Why “Trends From The Trenches?”  Our job is to help you “see, feel and think” in new ways.  Goal: Help you more easily adapt to changing times.
  • Challenge Before Us “We don’t see things as they are. We see things as we are.” ~Anais Nin “The real voyage of discovery consists not in seeking new landscapes but in having new eyes.” ~Marcel Proust
  • Today’s Webinar  Theme: With all the talk about healthcare reform what is really happening?  What are the many ways the industry is re-inventing itself?  What are the major innovations taking place?  What is the impact for each of the different players?
  • Today’s Webinar  From the perspective of someone who is dealing with this from all sides: physicians, hospitals, payers, regulators.  And seeing the collaboration emerging, the innovation taking hold and the creativity in action.
  • To be covered today  Changes in the healthcare world and Why  Role of Affordable Care Act (ACA)  ACA’s goals and achieving such  Effect of ACA on providers  Accountable care organizations (ACOs)  Healthcare provider consolidation/alignment  Changing compensation models  Effects of consolidation
  • Adapting to Affordable Care Act: Provider and Healthcare System Collaboration— Structuring Successful Relationships Let Me Introduce Margaret Davino
  • Changes In The Healthcare Marketplace  Consolidation among providers  Different payment models: move towards capitation and global payments; quality metrics  Hospitals and physician groups forming insurance companies  Insurers’ directly working with their members  Employer programs to keep employees healthy  Direct contracts between employers and providers
  • Why Are All These Changes Happening?  Answer: $$$$$$  US spends approximately 17% of its gross domestic product (GDP) on healthcare (versus 11% in Canada, Germany and France)  States’ overall largest expenditure is healthcare (30% of NY State’s budget is spent on Medicaid)  Medicare and Medicaid comprise 25% of US budget
  • Effect Of Increasing Medical Costs  Rising insurance premiums (insurance premiums and deductibles rose 50% from 2003 to 2010)  Decreasing numbers of employers providing health insurance (61% in 2010 versus 69% in 2001)  Bankruptcies due to medical costs (over 50% of all bankruptcies are due to medical bills)  Affordable Care Act (Obamacare)
  • Tenets Of Affordable Care Act (ACA)  Expanding access to healthcare  Controlling costs
  • ACA – How Can It Promote Access To Healthcare?  Access to healthcare (equate w/health insurance)  Employer mandate to provide health insurance  Individual mandate to purchase health insurance  Insurance Reform  Can’t deny based on pre-existing conditions  Coverage of children up to age 26  Insurers must spend 85% of premiums on healthcare  All policies must cover mandated “essential” benefits  Expansion of Medicaid (but states may choose to expand)
  • Concept Of Access: More Insured Persons  Employer mandate: delayed until 2015/2016  Delayed until 2015 for employers with 100+ FTEs  Delayed until 2016 for employers with 50-99 FTEs (was supposed to be 2014)  Penalty of $2,000 per employee if health insurance not offered, & employee receives premium tax credit  $3,000 penalty if coverage not affordable (for each employee who receives a tax credit)
  • Access For Individuals: Through Exchanges  Concept: 29 million people will sign up for coverage through the exchanges by 2019  Current governmental estimate that 6 million will sign up by 3-31-2014 to avoid penalty  4.2 million had signed up by end of February 2014  Persons with income between 100-400% of federal poverty level eligible for tax credit to help them afford health insurance through an exchange
  • Relevance Of Exchanges To Providers  More insured patients should mean less bad debt and charity care: so plans to cut Medicare DSH payments  But rates that providers are paid by insurers with exchange products may be less than normal  None of the exchange products in New York have out-of-network benefits  Narrow networks: hospitals and physicians  The products on the exchanges have significant deductibles (average deductible for bronze plan $5000, silver $2900, gold $1200, platinum $350)
  • Other Provider Issue With Exchange Products: 3 Month Grace Period  Insurers under the ACA may not drop an insured who falls behind on premiums for 90 days  Insurers are responsible for paying claims only during the first 30 days of the 90 day grace period  So providers will have to collect from the individual patient for the other two months if the patient does not pay premiums and insurance is dropped
  • Can providers pay for the premiums?  HHS: Qualified health plans purchased through exchanges are not “federal health care programs” for purposes of the anti-kickback act  BUT: CMS has “significant concerns” with payment of premiums by hospitals, providers or commercial entities  Solution: Foundations
  • ACA – How Can It Control Costs?  Value driven purchasing (e.g., limits on payments for patients readmitted within 30 days of discharge)  Payment reform: move to global payments  Program integrity  Comparative effectiveness  Affordable Care Organizations (ACOs)
  • Hospital Value-based Purchasing  Began 2013 based on hospital performance on quality measures and efficiency measures  Reduction in pay for hospital-acquired conditions  Restriction on payment for patients admitted within 30 days after discharge (unnecessary readmissions) Focus: ties to quality
  • CMS Bundled Payment Initiative: 4 Models Model 1: payment to hospital for episode of care, with separate payments by Medicare to physicians, and gain-sharing allowed Model 2: Acute care hospital stay plus post-acute care Model 3: Retrospective post-acute care only Model 4: Prospective lump sum paid to hospital for all services (including physician) within a stay, including related admissions within 30 days after
  • Patient Centered Medical Homes  Provides additional payment to physician offices that meet standards for coordination of care and communication with patients  Often an additional dollar amount per patient per month
  • Clinical Effectiveness Research  Clinical effectiveness: evaluate and compare patient outcomes and benefits of two or more medical treatments and services  Includes protocols for treatment  Care delivery  Medical devices and drugs  Diagnostic tools
  • Accountable Care Organizations (ACOs)  Organization responsible for 5000+ Medicare FFS beneficiaries under Medicare shared savings program  Must have formal structure w/shared governance  Must have mechanism to receive and distribute payments among participating providers  Patients assigned to ACO based on PCP
  • Growth Of ACOs  Last round announced 12-31-2013 (123 new ACOs)  Total 366 Medicare shared savings ACOs  In all 50 states and DC (California leads)  5.3 million Medicare covered lives  Physician groups primary sponsor of ACOs
  • ACO Payment  Providers in an ACO continue to submit claims and be paid as always under Medicare fee for service, but are also eligible to earn shared savings:  If the ACO meets quality performance standards  The estimated average per capita Medicare expenditures per patient are under the benchmark 3 year contract with Medicare
  • ACOs In A Managed Care World  Similar model to Medicare shared savings program  Designates physicians participating and measures the care provided  Gives physicians incentives to manage care and costs  Requires meeting quality metrics
  • Effects Of The ACA  Healthcare provider consolidation/alignment  Creation of organizations capable of managing population health (with providers able to do so)  Increased use of electronic health records  More ambulatory care, e.g., medi-clinics to provide less costly care to both newly insured and uninsured  Consumer focus on costs with higher deductibles  Focus on primary care and non-MD providers
  • Healthcare Provider Consolidation  Hospital mergers and acquisitions/affiliations  Hospital employment of physicians (last year more than half of all graduating residents took jobs with hospitals)  Hospital acquisition of physician practices  Physician “super-groups”  Hospital relationships with post-hospital care providers
  • Hospital Consolidation  105 hospital mergers in 2012 alone (up to 50-60 annually in 2005-2007, pre-ACA and pre- recession)  Smaller number of hospital networks  Independent hospitals are becoming uncommon  Hospital consolidation includes hospitals both in the same geographic region, and outside same region
  • Hospital Acquisition Of Physicians  Physician practices are increasingly becoming part of hospitals  From 2004-2011, hospital ownership of physician practices increased from 24% of practices to 49% (JAMA 11/13)  More newly graduating physicians are now becoming employed by hospitals than entering private practice
  • Drivers Of Hospital-Physician Alignment: Hospital Perspective  Concern with healthcare reform & need for primary care  Questions as to future responsibilities for bundled payment  Participation in ACOs  Required specialty coverage for ED/trauma  Increasing competition and shrinking market share  Physician defection to other organizations
  • Drivers Of Hospital-Physician Alignment: Physician Perspective  Downward pressure on reimbursement and income  Dealing with managed care  Concern about increasing expenses  Malpractice insurance  Electronic medical records  Uncertainty as to healthcare reform and the future  Diminishing returns: seeing more patients, minimal income growth, loss of personal time
  • Reimbursement Driver Of Hospital-Physician Alignment  Position organization for ACOs and bundled payment  Differential between physician and hospital reimbursement  May charge a facility fee (if physician office becomes a hospital “provider-based” site)  Increased managed care rates?  Free-standing ASC Medicare payments 61% of hospital Medicare payment for ambulatory surgery
  • Physician goals  Positioning as to the future  Ancillary business opportunities  Diagnostic imaging, PT, clinical trials  Compensation from hospitals  Charity care  On call/ED coverage  Physician recruitment  Joint venture opportunities with hospitals
  • Options For Hospital-Physician Alignment Less Integration Professional Services Agreement (Hospitalist, On-call coverage) MSO Services Joint Venture Professional Services Agreement “PSA” Hospital Employment Full Integration Space Leases Medical Admin. Services Agreement (Medical Directorship) Physician Recruitment Medical Staff Membership Captive PC or Subsidiary Employment Model Foundation/ Clinic Model Co-Management Agreement
  • Traditional Model: Medical Staff/Voluntary Physicians  Physicians apply for voluntary medical staff membership on hospital medical staff  Relationship governed by medical staff bylaws  Physicians and hospital bill and collect separately  Hospital may provide support such as CME, technology services, physician referral line, general marketing
  • Space Leases  Hospital rents space to physician, often in a medical office building  Must meet Stark exception (similar to anti-kickback safe harbor) for space leases: minimum one year, signed, space specified, rent FMV set in advance  Can also have a license agreement for session use
  • Physician Recruitment Agreement  Hospital may support recruited physician to establish own practice, or join established practice  Physician must move from outside to inside hospital service area (lowest # of contiguous zip codes for 75% of patients) plus either (a) must move at least 25 miles or (b) 75% of revenue from new patients  Except graduating resident, physician in practice less than one year, or employed by certain federal agencies
  • Medical Director Relationships  Can be as an employee or independent contractor  Stark employee or personal services exception  But beware IRS issues with independent contractors  Employment can be full time or part time  Concern: Is this just a payment for referrals  Payment must be fair market value  Must define duties and time spent
  • Gainsharing Arrangements  Hospital gives physicians a percentage share of any reduction in the hospital’s costs for patient care attributable in part to the physicians’ efforts.  Gainsharing arrangements implicate the civil monetary penalty act (“CMP”) in section 1128A(b)(1) of the Social Security Act , which prohibits a hospital from making a payment to a physician as an inducement to reduce or limit services to Medicare or Medicaid beneficiaries under the physician’s care.  Requires an advisory opinion or participation in a demonstration program (such as through NJ Hospital Association) if Medicare/Medicaid involved  Greater New York Hospital Association gainsharing program: applies only to non-governmental patients, began in 2008 with Beth Israel
  • Professional Services Agreements  Agreement between hospital and physician group to provide professional services in a specialty area  Can be exclusive (e.g., anesthesia, radiology) or non-exclusive (e.g., rehab or reading EEGs)  May be for on-call coverage in a specialty area (and to ensure hospital meets EMTALA obligations in ER)
  • Professional Services Agreements: Issues To Consider  Restrictions on group (e.g., can they provide similar services elsewhere, or have an outside entity)  Responsiveness to calls  Care for all, including uninsured and Medicaid  Financial: who bills and collects, hospital payment, global payments, participation with all payers
  • Clinical Co-management Agreements  Provides compensation to physicians for co- management of a hospital clinical service line  Hospital contracts with physician LLC (formed by physicians) for co-management services  Each party appoints members of an advisory committee to oversee performance goals/standards
  • Clinical Co-management Agreements  Compensation:  Fixed: for performance of administrative duties  Incentive: based on achieving defined performance standards (e.g., reduction in complications, timeliness)  Comp must be FMV and set in advance  Cannot pay physicians for reduced levels of care to Medicare/Medicaid patients under CMP law
  • Professional Services Agreement - Physician Enterprise Model  Physicians (and perhaps staff) remain employed by practice, which contracts with hospital for services  Hospital pays single FMV service fee to practice for all services, space, equipment, staff  All clinical services performed by physician group billed by hospital
  • Captive PC Arrangements  Hospital sets up separate professional corporation to allow separate physician billing and avoid mingling of bills  Shareholder(s) of PC employed by hospital  Physicians may be employed by the PC with benefits from the PC  Captive PCs may seek tax-exemption as “supporting organizations” of tax-exempt hospital
  • Physician Employment  Gives most control and flexibility to hospital  Stark employee exception & anti-kickback safe harbor: identifiable services, FMV payment, contract would be commercially reasonable without referrals  Con: hospital infrastructure sometimes clashes with management of physician practices
  • Physician Employment & Remaining In Current Office  Physician employed by hospital  Hospital leases/subleases space from physician’s PC to allow physician to remain in current office location  Staff may also be provided by physician PC (or may be employed by hospital)
  • Practice Acquisition  Very common to see hospitals acquiring doctor practices  Value of practices has dropped  Common model: acquisition of practice and employment of physician  No safe harbor for acquisition by a hospital  Total comp (acquisition costs plus subsequent compensation) may be subject to scrutiny as to whether these are disguised payments for referrals (Sulzbach case)
  • Other Option For Physicians Wishing To Consolidate: Super-groups  Super-groups: large physician groups, most often multi-disciplinary  Can often achieve preferable managed care rates  Under Stark, can bill all ancillaries referred within group under “in-office ancillary services exception”  Feds/OIG concerned about proliferation of ancillary services (e.g., radiation oncology-urology)
  • Changing Compensation Models For Future  Move away from fee for service payment to global payment  Payment for an episode of care  Inclusive of multiple providers  May include complications (Geisinger warrants their cardiac surgery for 90 days)
  • Providers Becoming Payers  Question: can providers eliminate the middle box (insurers) and either become Insurers or contract directly? Employers Insurance companies/payers Providers (hospitals, doctors, LTC, home care, etc.)
  • Less Expensive Providers/Care  Reference pricing: patient decides to be treated by a lower-cost provider with less cost to the patient  CALPERS steers patients for joint replacements to providers who will charge no more than $30,000  If a patient goes elsewhere, patient pays the charge in excess of $30,000  Cleveland Clinic is offering a bundled price for cardiac surgery to employers (Bloomberg, March 5, 2014)
  • Changing Physician Payment Models  Conventional wisdom: at least 20% of salary must be at risk to be a factor in behavior  Potential components of compensation: 1. Base salary 2. Productivity component (RVUs, percentage of collections, encounters) 3. Bonus (can be based upon meeting delineated goals and objectives, quality, PQRI, documentation, etc.)
  • Determining Physician Salaries  Use outside source to determine FMV: MGMA, Sullivan Cotter, salary surveys  Salary may be related to percentile of MGMA/SC for that specialty  If above 50/75th percentile, from a compliance standpoint, document why the qualifications justify  Salary may be tied to productivity, e.g., Dr. A receives salary at 75th percentile with requirement she generate 75th percentile of RVUs for that specialty, or salary is adjusted
  • Basis For Productivity  If a physician’s salary is based (in whole or in part) on productivity, the RVUs or collections are based upon a physician’s personally performed services  But can include personally performed interpretations of ancillary services such as imaging  Productivity expectations are often graduated for new physicians  A new physician may have a salary guaranty for 1-2 years
  • Legal Issues In Determining Physician Salaries  Stark law  Anti-kickback law  Civil monetary penalties act (a hospital can’t pay a physicians for reducing services to Medicare/Medicaid beneficiaries)  Excess benefit regulations (applies to insiders: persons who at any time in 5 years before transaction were in position to exercise substantial influence over entity)
  • Effect Of Consolidation: Higher Prices  Larger organizations have greater negotiating leverage  Primary driver of growth in healthcare spending has been price increases  Antitrust concern if market power is too great  St Luke’s Hospital in Oregon ordered to divest physician group acquired (on appeal)
  • What Does The Future Hold  More consolidation of hospitals  More consolidation of physicians  Slow move toward bundled payment  More providers involved in insurance products  More ambulatory care  Potential regulation of hospitals as to charges to the uninsured  Narrow networks? (United dropping docs in Conn.)
  • And, Innovation! Perspective On Adaptation
  • 64 Market Evolution Change Matters !!!
  • Major Themes  Times They Are A’ Changing  Innovation is the application of better solutions that meet new requirements, unarticulated needs, or existing market needs.
  • Quick Thoughts On Change  Want to change? Have a crisis or create one!  Clearly pressure on rising costs and not exceptional outcomes has created a crisis that is pushing new ideas in all directions.
  • Brain Hates Change  Habits are hard to change and it is easier to see how the next generation is going to play in this game than it is to watch those well established in their fields adapt to the changing times.
  • More Ideas The Better  Research quite compelling: the more ideas you have the more likely you will have great ones.  You just don’t know which ones they are.  Leads to abundant testing, prototyping, piloting and pivoting.
  • Big Ideas At The Intersections  Often, the really big ideas come at the intersections  To see how they intersect requires new types of skills, leaders that can “see, feel and think” in new ways and managers that can visualize something that others might not be able to see much less actually do  Need those “risk takers” not the “care takers”– and certainly not the “undertakers
  • One Concern  Strategy + Business Winter 2013 list of the most Innovative Companies.  Not one was from Healthcare.  The list of top spenders was dominated by auto and healthcare companies, but not the most innovative.  “Innovation success is not about how much money companies spent but in how they spent it.”
  • Next Webinar April 25th At Noon EDT  Webinar #6: The Future of Healthcare Marketing is Digital  April 25, 2014 at 12:00 PM EST  Featured Speaker: Ben Dillon, Co-Owner and VP of Geonetric Inc.  In this webinar, Geonetric’s eHealth Evangelist, Ben Dillon, will share insights on how healthcare marketing and communications must urgently become more personalized, more automated, and more sophisticated than ever before. Ben will present new research from the 2013 Survey on Initiatives in eHealth, examine how leading healthcare organizations are using digital communication tools to attract and engage patients, explain how communications are evolving to support the healthcare organizations of the future, and share the skills and tools your organization will need to be successful.  Register now!
  • Thanks To Our Sponsor: HIxD  Healthcare Innovation by Design (HIxD) is a global network of healthcare delivery and experience innovators.  HIxD is the premier resource for healthcare innovation knowledge, networking and career development.  HIxD's 6800 members are executives, entrepreneurs, clinicians, designers, architects, engineers and IT professionals.
  • For More Conversation And Information Andrea J. Simon, PhD Corporate Anthropologist President, Simon Associates Management Consultants Office 914-245-1641 @simonandi @Andisamc Margaret Davino, Esq. Healthcare Attorney Kaufman Borgeest & Ryan