Using clinical co-management to improve quality and keep physicians


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Reviews governmental direction for the development of clinical co-management agreements; Describes appropriate structure and development of fair market value compensation for services provided under a clinical co-management agreement.

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  • Using clinical co-management to improve quality and keep physicians

    1. 1. Using Co-Management to Improve Quality and Keep Physicians Financially Engaged Curtis Bernstein, CPA/ABV, ASA, CVA, MBA Craig Anderson, DHG Chris Masone, DHG 1
    2. 2. Agenda How does Healthcare Reform support Clinical Co-Management? What is the Federal Government advising us about pay for quality, outcomes, and satisfaction? – Value Based Purchasing Incentives – Gainsharing Demonstration Projects and OIG Opinions What is a Clinical Co-Management Agreement? – Structure – Development – Compensation Example – Fair Market Value Compensation Calculation 2
    3. 3. Healthcare Reform Mandate 3
    4. 4. The Reform Mandate More Care (32M uninsured, Baby Boomers, Chronic Disease) Higher Quality (P4P, Shared Savings, Core Measures) Less Money ($240B Cuts, $90B Penalties)“Bottom line, if you attempt to use the same care delivery model movingforward, faced with the magnitude of reductions in forecasted revenue, you will goout of business.” Michael Sachs, Sg2 4
    5. 5. PPACA Objectives of Healthcare Reform Increase Healthcare “Value” GOAL • Improve Quality • Increase Access • Reduce Costs • Adopt New Models of Care Delivery OBJECTIVES • Shift Accountability and Risk to Providers • Redirect and Shrink the Dollars • Provide Coverage for the Uninsured PREREQUISTES • Physician Alignment • Provider Integration • New Model Adoption • Electronic Health Records Source: HFMA | DHG 5
    6. 6. Payment Reform is Shifting Risk 6
    7. 7. Value-Based Purchasing Incentives 7
    8. 8. Hospital Value Based Purchasing Program Hospitals are given points for Achievement and Improvement for each measure or dimension, with the greater set of points used Points are added across all measures to reach the Clinical Process of Care domain score 70% of Total Performance Score based on Clinical Process of Care measures 30% of Total Performance Score based on Patient Experience of Care dimensions 8
    9. 9. Medicare Measures12 Clinical Process of Care Measures: 8 Patient Experience of1.AMI-7a Fibrinolytic Received Within 30 Minutes of Care Dimensions:Hospital Arrival2.AMI-8 Primary PCI Received Within 90 Minutes ofHospital Arrival 1.Nurse Communication3.HF-1 Discharge Instructions4.PN-3b Blood Cultures Performed in the ED Prior to 2.Doctor CommunicationInitial Antibiotic Received in Hospital5.PN-6 Initial Antibiotic Selection for CAP inImmunocompetent Patient 3.Hospital Staff Responsiveness6.SCIP-Inf-1 Prophylactic Antibiotic Received WithinOne Hour Prior to Surgical Incision 4.Pain Management7.SCIP-Inf-2 Prophylactic Antibiotic Selection forSurgical Patients8.SCIP-Inf-3 Prophylactic Antibiotics Discontinued 5.Medicine Communicationwithin 24 Hours After Surgery9.SCIP-Inf-4 Cardiac Surgery Patients With Controlled 6.Hospital Cleanliness &6AM Postoperative Serum Glucose Quietness10.SCIP-Card-2 Surgery Patients on a Beta Blocker Priorto Arrival That Received a Beta Blocker During thePerioperative Period 7.Discharge Information11.SCIP-VTE-1 Surgery Patients with RecommendedVenous Thromboembolism Prophylacxis Ordered 8.Overall Hospital Rating12.SCIP-VTE-2 Surgery Patient Who ReceivedAppropriate Venous Thromboembolism ProphylaxisWithin 24 Hours 9
    10. 10. Point System How are Achievement Points awarded? – Hospital rank at or above the Benchmark: 10 Achievable Points – Hospital rank less than the Achievement Threshold: 0 Achievement Points – If the rank is equal to or greater than the Achievement Threshold and less than the Benchmark: 1-9 Achievement Points How are Improvement Points awarded? – Hospital rank at or above the Benchmark: 10 Improvement Points – Hospital rank less that or equal to Baseline Period Rate: 0 Improvement Points – If the hospital’s rank is between the Baseline Period Rate and the Benchmark: 0-9 Improvement Points 10
    11. 11. Sample Calculation - Performance55% 60% 65% 70% 75% 80% 85% 90% 95% 100% Threshold Benchmark 0 1 2 3 4 5 6 7 8 9 10 Hospital’s Performance Period Score1 – Achievement Threshold 9 x ( Benchmark – Achievement Threshold ) + 0.5 1 As used in these formula, the “score” refers to the hospital’s performance rate. 11
    12. 12. Relationship of Score to Compensation The exact slope of the linear exchange function will be determined after the performance period and will depend on the hospital’ Total Performance Scores and the total DRG amount withheldValue BasedIncentivePaymentPercentage 0 Total Performance Score 100 12
    13. 13. Gainsharing Models and Demonstrations 13
    14. 14. Demonstration Projects Initially performed by Medicare in the early 1990s under a Coronary Artery Bypass Graft Demonstration project. – Five year project – Saved Medicare $42 million on patients treated in demonstration hospitals » 10% from expected spending 14
    15. 15. New Jersey Demonstration Project #1 Application submitted in 2001 Eight hospitals covering all of the All Patient Refined (APR) DRGs – Maximum pools of Part A hospital savings for each APR-DRG treated in the hospital to be shared with the medical staff – Limited to 25% of total Part B payments received by the physician – Pools converted to a per-discharge cost for each APR- DRG, based on average cost of the lowest 90% of cases. – Responsible physicians identified for each hospitalization and they became eligible for bonuses if the average cost of their cases did not exceed the mean cost of the 90 percent baseline group of cases Terminated in its early implementation period 15
    16. 16. New Jersey Demonstration #2 CMS approved 12 New Jersey hospitals and their participating physicians to test gainsharing – Three year program – Offers physicians financial incentive to work with hospitals to lower costs » Includes stringent quality controls to protect patient – Designed around three cost areas: efficiency strategies, quality standards, and financial incentives In second year of program 16
    17. 17. Medicare Demonstration Project Began October 1, 2008 Two sites: Beth Israel Medical Center in New York City and Charleston Area Medical Center in Charleston, West Virginia – BIMC continued participation through September 30, 2011 and CAMC elected to end participation as of December 31, 2009 CAMC demonstration was limited to cardiac DRGs 17
    18. 18. March 28, 2011 Report to Congress Demonstration project is Secretary’s response to requirements under Section 5007(e)(3) of the Deficit Reduction Act of 2005 as amended by Section 3027 of the Affordable Care Act – Began October 1, 2008 – Test and evaluate methods and arrangements between hospitals and physicians designed to govern the utilization of inpatient hospital resources and physician work to improve the quality and efficiency of care provided to Medicare beneficiaries and to develop improved operational and financial performance with sharing of remuneration 18
    19. 19. Beth Israel Medical Center BIMC included most medical and surgical DRGs in their demonstration. Enrollment was voluntary for physicians. A pool of bonus funds was prospectively estimated from hospital savings on the basis of the following factors: – Total available incentive is a percentage of the best practice variance for each APRDRG. – Best practice variance = (actual spending - best practice cost) – Best practice cost = spending of the lowest-cost 25th percentile If no hospital savings were realized, no bonuses are allocated to participating physicians. The total available incentive was defined as: – total available incentive = X% x (actual spending - 25th percentile spending) – where X% = the percentage of spending (X%) to allot to the incentive pool An incentive pool calculation was made for every APR-DRG and then summed across all APR-DRGs. 19
    20. 20. BIMC Demonstration Project Each patient is assigned to one practitioner who takes financial responsibility for the care of the patient – For medical patients, the responsible physician is the attending physician – For surgical patients, the responsible physician is the surgeon Bonus is calculated as a percentage of the maximum performance incentive, based on performance Gainsharing payment is capped at 25% of the physician’s affiliated Part B reimbursement Standards to be eligible for bonus: – Overall admission rates within seven days must not increase – Adverse events and malpractice experience must not increase – Physicians must attain standards set for selected quality measures and administrative requirements – Increased post-acute care use by participating physicians will be reviewed for appropriateness 20
    21. 21. BIMC Results Through Report Staff estimates savings as a result of reduction in length of stay resulting from: – Use of electronic health records – More efficient use of consults – Improved communication and management of imaging choices – Streamlining evidence based care through implementation of protocols – Implementation of interdisciplinary rounds – More efficient operating room management – More appropriate use of intensive care unit beds 21
    22. 22. Quality Assurances BIMC proposed a range of physician quality standards, which, if not met by individual physicians, would make them ineligible for the gainsharing bonus. These overall standards are as follows: – Overall readmission rate within 7 days must not increase. – Adverse events and malpractice experience must not increase. – Physicians must comply with available quality measures. Complete evaluation results will be available through a report to Congress that is due in March 2013 and a final report to CMS that is due in December 2014. 22
    23. 23. Charleston Area Medical Center Focused on cardiac DRGs. CAMC anticipated that internal savings would be generated by the following initiatives: – examination of practice differences, – utilization of laboratory resources as needed, – evaluation of product usage, – increase in patient flow, and – negotiation of lower prices for medical devices and supplies The CAMC proposal did not propose Medicare savings and expects costs savings to be internal to the hospital. CAMC proposed to measure physician care provided on several factors to ensure that quality of patient care remained the same. Worse performance on any of the following standards for an individual physician would make him or her ineligible to receive the gainsharing bonus: – Readmission rates – Repeat procedures – Patient outcomes – Major events during procedures – Antithrombotic usage 23
    24. 24. CAMC Results Through Report Estimated savings are: – Surgical costs reductions made via negotiated rates on devices and implants – Reduced physician variation in practice patterns – Reduction in infections, complications, and readmissions for cardiac and orthopedic procedures 24
    25. 25. IHA Bundled Episode Payment and Gainsharing Demonstration Test the feasibility of bundling payments to hospitals, surgeons, consulting physicians and ancillary providers for selected inpatient surgical procedures – Limited to California – Funded by the Agency for Healthcare Research and Quality – Expands the current pilot that has focused on commercial PPO patients receiving total hip and total knee replacement in Los Angeles and Orange counties In 2011, Integrated Healthcare Association (IHA) added additional procedures including diagnostic cardiac catheterization, cardiac angioplasty with stents, and knee arthroscopy with meniscectomy 25
    26. 26. Clinical Co-Management Agreement 26
    27. 27. Co-Management Overview Governance Committee FMV Compensation Management Fee Distributions PhysicianHospital XYZ Physicians LLC Management Investment Services Fixed Performance Duties Metrics • Committee Involvement • Clinical Outcomes • Day-to-Day Mgmt • Patient Safety • Strategic Plan Dev • Clinical Care Mgmt • Satisfaction • Quality Improvement • Operational Processes • Staff Oversight • Budget Development • Financial Performance Source: DHG 27
    28. 28. Co-Management ModelsComponent Management Quality Share reduction of Manage day-to-dayWhat is it? expenses resulting operations of entity from improved quality Must delineate Compensating duties performed appropriate amountChallenges while maintaining associate with provider based individual metrics status Improved quality of Joint effort in cost care should reduce Benefits reduction through cost of care through management of lower lengths of stay staff and supplies and readmissions 28
    29. 29. Co-Management Overview Hospital PhysiciansSource: Sg2; Genesys Health System Case Study
    30. 30. Co-Management Agreement: Structure Shareholders: – Hospital – Class A interest – Physicians – Class B interest – Purpose: apply limitations on ownership (e.g., only physicians licensed in state in a certain specialty can own Class B interest) Committees – Board of Directors – oversees all other committees » Include both hospital and physician representatives – Quality Committee – Financial Committee – Operations Committee 30
    31. 31. Co-Management Agreement: Structure Compensation – Base compensation » Fixed monthly amount; or » Variable amount based on actual hours worked – Incentive compensation » Fixed amount » Varies based on achievement of different levels of goals – Compensation distributed based on hours worked and / or ownership percentage 31
    32. 32. Co-Management Agreement: Development Rally the troops –physicians may already be involved in a venture together (e.g., specialty hospital, ASC, or physician practice) Require buy-in to co-management company – Legal restrictions on offering of ownership interests – Only those with an ownership interest can participate in profit distributions Owners must actively participate in the management of hospital or hospital department 32
    33. 33. Co-Management – Valuation Overview Scope Departments Inpatient  Neurology  Outpatient  Neuro Surgery  Revenue of Selected Services (EXAMPLE): $1M Base Market Service Second Revenue FMV Range Range Range Approac Adjustment* Range Adjustment** (% of NR) (% of NR) h Low 5.00% 50.00% 2.50% 0.00% 2.50% $25,000 High 7.00% 50.00% 3.50% 0.00% 3.50% $35,000 *Service adjustment is associated with depth and breadth of fixed duties written into the agreement (100% would be fully comprehensive list of duties) **Revenue adjustment is associated with magnitude of net revenue of the service line. There are economies of scale associated with management of larger service lines, therefore the % of net revenue range is lowered for these larger service lines 33All Compensation is paid at Fair Market Value
    34. 34. Co-Management Model – Flow of Funds ($1M Service Line) Governance Committee Physician #1 FMV Compensation Management Fee Distributions Physician Physician #2 Hospital XYZ LLC Management Investment Physician #3 Services $2.5K - $5K Per MD Performance Fixed Duties Metrics* 60% 40% $15k Total, $10k Total $5k per MD * All Compensation is paid at Fair Market Value Investor Leader (2 Physicians) (1 Physician) **Maximum payment assuming full Approx. $2k per MD Approx. $6k attainment of performance metrics 34Source: DHG
    35. 35. Co-Management Example: Management Component Hours per Hourly TotalTask Year Rate CompensationStaff Management 600 $ 250 $ 150,000Peer and Hospital Education 100 250 25,000Financial and Operational Oversight 250 250 62,500Market and Strategy Development 100 250 25,000Billing and Coding Review 175 250 43,750Total Compensation $ 306,250 35
    36. 36. Co-Management Example: Quality ComponentTotal Quality Pool $ 1,000,000 Percent of Total Percent TotalMeasure Pool Achieved CompensationAMI-8 Primary PCI Received Within 90 Minutes ofHospital Arrival 10% 85.0% 85,000PN-3b Blood Cultures Performed in the ED Prior toInitial Antibiotic Received in Hospital 10% 90.0% 90,000SCIP-Inf-1 Prophylactic Antibiotic Received WithinOne Hour Prior to Surgical Incision 10% 95.0% 95,000SCIP-Inf-2 Prophylactic Antibiotic Selection forSurgical Patients 10% 85.0% 85,000SCIP-Inf-3 Prophylactic Antibiotics Discontinuedwithin 24 Hours After Surgery 10% 90.0% 90,000SCIP-Card-2 Surgery Patients on a Beta Blocker Priorto Arrival That Received a Beta Blocker During thePerioperative Period 10% 95.0% 95,000Patient Satisfaction Levels 10% 85.0% 85,000Coding Accuracy 10% 90.0% 90,000Surgery On Time Starts 10% 95.0% 95,000Electronic Medical Record Usage 10% 85.0% 85,000Total Pool 100% $ 895,000 36
    37. 37. Management Services Scope of Responsibilities Level of ResponsibilitiesDuties within Hospital Based Management Agreements Full Partial N/AFinancial Management ServicesOperational Management ServicesOther Management ServicesStaffing Management Services 37
    38. 38. Management Services Calculations Under Market Approach Market Value of Services Low HighOverall Percentage of Typical Services Provided 75.0% 80.0%Full Service Mgmt Fee 5.0% 6.0%Adjusted Management Fee (Based on Level of Services) 3.8% 4.8%Additional Discount for Service Line Size 20.0% 20.0%Adjusted Management Fee (Based on Level of Servicesand Size of Service Line) 3.0% 3.8%Revenue of Service Line $6,320,000 $6,320,000Results of Market Approach - Comparable Agreements $189,600 $242,688Results of Market Approach - Physician Compensation $233,420 $258,502Results of Market Approach (Equal Weighting) $211,510 $250,595 38
    39. 39. Benchmark Facilities Comparable Hospitals Gross Patient Revenues Case Mix Index Hospital (in Millions) Total BedsRegional Medical Center $1,283 265 1.6863Medical Center $767 204 1.4803Regional Medical Center $692 256 1.4537East $614 302 1.6324Regional Medical Center $685 243 1.5678Medical Center $1,277 290 1.6695Hospital $918 404 1.6919Hospital $1,299 268 1.7777Regional Medical Center $775 210 1.8117 39
    40. 40. Quality Incentive Cost per Case ExtendedAPC n 25th Median 75th 25th Median0006 5 $75 $97 $141 $375 $4850007 9 489 489 489 633 7640013 7 26 59 124 179 410All Others XXXXXXX XXXXXXXSubtotal $1,592,048 $2,038,759Variance in Range $446,711Shared Savings Percent 50%Shared Savings Amount $223,355 40
    41. 41. Contact Information: Curtis Bernstein ■ ■ 720-240-4440Craig Anderson, Jr. ■ ■ 330-650-1752 Chris Mason ■ ■ 330-650-1752 41