Emerging Business Models for Hospital and Physician Integration: Clinical Integration as a Business Strategy for Accelerated Growth

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Clinical Integration Model and Business Strategy

Clinical Integration Model and Business Strategy

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  • 1. NAMCP Fall Managed Care Forum 2010 (Las Vegas, NV) L E A D E R S H I P  P R O B L E M SO L V I N G  V A L U E C R E A T I O N November 4, 2010 Emerging Business Models for Hospital and Physician Integration: Clinical Integration as a Business Strategy for Accelerated Growth Christopher J. Kalkhof, FACHE Director, Healthcare Industry Group Francis LaMorte, M.D. Director, Healthcare Industry Group (New York Office)Copyright 2010. Alvarez & Marsal. All Rights Reserved.
  • 2. Presentation Agenda I. Overview of Evolving Federal and State Regulatory Landscape and Impact on Provider Revenues II. Emerging Provider Business/Financing Models: Options and Considerations III. Lessons Learned IV. Q&A and Program Close Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 1 (1)
  • 3. Presentation Agenda I. Overview of Evolving Federal and State Regulatory Landscape and Impact on Provider Revenues  Plan now for ACA impact  Do not put yourself in the position of having to react in 2013 or 2014 Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 2
  • 4. Evolving Federal and State Regulatory EnvironmentsI. Provider and Payer Brave New World – Transitions Under Affordable Care ActCost shifting, government reform, and budget deficits areeroding the traditional payer-provider relationship Cost shifting from government payers will not lessen and may increase under the Affordable Care Act. CMS, State Medicaid programs and the health plan community (irrespective of product type e.g., commercial, Medicaid, Medicare, etc.) have begun the process of fundamentally restructuring payment methodologies. Private sector health plans have to rethink the fundamental structure of their provider networks. Providers and payers… will be expected to do more with less! How efficient and cost-effective are your ops? © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 3
  • 5. Evolving Federal and State Regulatory EnvironmentsI. Provider and Payer Brave New World – Transitions Under Affordable Care ActWhat will be the impact of health care reform with respectto negotiated agreements between providers and payers? Providers and payers alike will be entering into unchartered waters. There will be multiple pricing and payment models emerging within different regional markets around the country over the next few years. There will be different winners and losers on a region-to- region basis. Some critical success factors? – Business model and ability to manage patient populations. – Physician alignment and integration. – Collaborative vs. adversarial payer relationships © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 4
  • 6. Evolving Federal and State Regulatory EnvironmentsI. Provider and Payer Brave New World – Transitions Under Affordable Care Act A value-driven/outcomes-based system reimbursement and by extension… pricing environment will:  Hold providers accountable for their performance in terms of patient quality, safety and outcomes as well as the cost and setting of care delivery.  Emphasize population and disease care management across a care continuum.  Creates significant financial incentives for physicians, hospitals, health insurance plans and other healthcare providers… to better align and coordinate care delivery.  Will require that providers in many cases… greatly enhance their decision support capabilities and overall contracting strategy across all contracts. © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 5
  • 7. Evolving Federal and State Regulatory EnvironmentsI. Provider and Payer Brave New World – Transitions Under Affordable Care Act The ACA offers few specifics at present.  The different legislative components of the ACA which impact providers and payers the most, go into effect between 2010 and 2014… some retroactively, but most on a “to be determined” going forward basis. – To finance the ACA… a re-basing of our core healthcare financing mechanisms will be required.  Absent specific regulatory guidelines, many organizations are struggling to understand the impact of the ACA on their organizations so that they can plan accordingly. – The economic and lost opportunity costs or either going in the wrong direction or waiting too long to take action… can be very significant. © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 6
  • 8. Evolving Federal and State Regulatory EnvironmentsI. Provider and Payer Brave New World – Transitions Under Affordable Care ActWhat do we think we know about strategic impact? Reform laws include provisions that pressure… – Health plan historical pricing and assumptions about managing provider costs. – Provider net revenue with the assumption of more risk. – Provider and health plan margins. There are general national themes… however implementation of specific strategies will most likely be deployed on a regional basis. There will be notable regional successes and failures. What about your local market? © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 7
  • 9. Evolving Federal and State Regulatory EnvironmentsI. Provider and Payer Brave New World – Transitions Under Affordable Care Act Converging market forces will impact strategic choices: Government and  Budget shortfalls in 48 States What if… payers under  States blocking payer rate hikes Fed/State pressure from premium increases  Demand for demonstrable value deficits grow? ACA costs:  Double digit billion $$ Medicare deficits > $1 trillion? Continual CMS  Unresolved Medicare SGR payment- threat to reduce adjustment for physicians (40% > $2 trillion? payments cumulative cut by 2016) Access  EHR meaningful issues/penalties diminishes?  RAC expansion into other payers Hospitals fail?  New risk-based payment models Increased Payer par  Need for clinical integration/physician uncertainty and networks revenue risk alignment and IT/operational support change?  ICD-9 to ICD-10 conversion in 2013 Impact of above on your care delivery model? © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 8
  • 10. Evolving Federal and State Regulatory EnvironmentsI. Provider and Payer Brave New World – Transitions Under Affordable Care Act Continue to operate the same but Maintain status quo expect different results Consolidation of like operations; Horizontal Merger economies of scale; shared services; a functional physician alignment Market Strategy strategy and the ability to capture and retain lives Develop strengths along continuum Vertical Clinical of care to manage patient populations… requires enhanced Integration quality of care and coordination across vertical care continuum; Strategy supporting IT and ability to collaborate across care continuum © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 9
  • 11. Presentation Agenda II. Emerging Provider Business and Financing Models: Options and Considerations  Understand clinical integration models  Understand your cost structure  Know how to “clinically integrate” at the service line level  Determine how emerging payment methodologies will evolve and impact your care delivery model Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 10
  • 12. Emerging Business/Financing Models: CIO OptionsII. Clinical Integration as a Business Strategy for Accelerated Growth Clinical Integration as defined by regulators  1996 Department of Justice and Federal Trade Commission Statements of Antitrust Enforcement Policy in Health Care – "[A]n active and ongoing program to evaluate and modify practice patterns by the networks physician participants and create a high degree of interdependence and cooperation among the physicians to control costs and ensure quality." © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 11
  • 13. Emerging Business/Financing Models: CIO OptionsII. Clinical Integration as a Business Strategy for Accelerated Growth Future State – CIO Provider Networks  Integration of facilities-practitioners with a true interdependence and collaboration.  Disease management and corresponding clinical protocols.  Integrated IT which allows efficient/effect patient information exchange… utilization and claims data collection to manage care and lower costs… clinical indicators to improve quality and measure physician protocol compliance and performance. © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 12
  • 14. Emerging Business/Financing Models: CIO OptionsII. Clinical Integration as a Business Strategy for Accelerated Growth Future State – CIO Provider Network  Specialists and PCP focus on in-network referrals.  A high level of physician financial investment and commitment of time for training, utilization of the disease management protocols and compliance with varied clinical pathways.  Processes for improving performance and care delivery, with enforceable consequences for non- compliance. © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 13
  • 15. Emerging Business/Financing Models: CIO OptionsII. Clinical Integration as a Business Strategy for Accelerated Growth The evolution of a messenger model PHO/IPA to CIO? The CIO will be a more complex, fully clinically integrated business model, which will be capable of providing non- risk/at-risk solutions to external stakeholder purchasers of healthcare services… will require:  All internal stakeholders to share a common vision  Joint governance (e.g., physician lead and professionally managed)  The equitable distribution of risks and rewards. Think “Group Model” HMO w/o the Insurance Risk © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 14
  • 16. Emerging Business/Financing Models: CIO OptionsII. Clinical Integration as a Business Strategy for Accelerated Growth Care Delivery and Financial Risk Continuum Full Global High Capitation Episodes of Care & Competitive e re fF a c lR k D g eo in n ia is Gainsharing Market and Global Hospital Provider Risk Is Capitation Dominant Global Hospital Case Rates Medical Homes Low High Acct Care Orgs (Physician Model) Non-Competitive Risk Withholds Market and & P-4-P Provider Risk is Uncommon Hospital PPS (IP/OP) FFS Charges Low Degree of Clinical integration © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 15
  • 17. Emerging Business/Financing Models: CIO OptionsII. Clinical Integration as a Business Strategy for Accelerated Growth Eight Step Clinical Integration and Business Plan Development Process: Hospital – Physician PHO Model Project Clinical Integration Determine C.I. Planning Gap Analysis Organization Model Determine Clinical Define and Plan Infrastructure Clinical Initiatives Determine Regulatory Implement Initial Compliance C.I. Programs Measure, Monitor, Report and Educate © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 16
  • 18. Emerging Business/Financing Models: CIO OptionsII. Clinical Integration as a Business Strategy for Accelerated Growth The process of starting a CIO starts with a strategic clinical integration planning process  Choose high level goals for redesign.  Determine the design of the overall care delivery system, care management and business processes.  Create a compelling value proposition for physicians to become actively engaged in the change process, take leadership roles in ensuring the success of the CIO and establish a system wide culture that says… …“this is how we will delivery high quality, safe, effective and efficient care to our patients.” Project Planning and Gap Analysis © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 17
  • 19. Emerging Business/Financing Models: CIO OptionsII. Clinical Integration as a Business Strategy for Accelerated Growth: Assessment to CIO Business Plan Audit clinical integration readiness of the medical staff  Assess physician motivations to develop a collaborative clinical integration initiative across the health system.  Use interview-based findings and existing management reports to create a summary profile of independent and employed physicians.  Identify the “vital few” …the critical mass of physicians who are willing to adapt/adopt and transition to a new model.  Identify physician needs and incentives relative to C.I.  Gauge physician views on expanding the PHO/IPA to include additional physicians in primary and secondary service area. Project Planning and Gap Analysis (18) © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 18
  • 20. Emerging Business/Financing Models: CIO OptionsII. Clinical Integration as a Business Strategy for Accelerated Growth: Assessment to CIO Business Plan Project organizational and internal/external project team roles; develop, review and finalize the work plan  Prepare internal communications plan for project stakeholders  Evaluate current processes and value stream mapping.  Assess current “level of clinical integration” among inpatient, outpatient and ambulatory services.  Perform internal/external benchmarking of cost, quality, efficiency, job skill requirements and calculate cost reduction and efficiency improvement opportunities  Assess technology tools, enabling capabilities, data warehouse and operational support needs. Project Planning and Gap Analysis (19) © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 19
  • 21. Emerging Business/Financing Models: CIO OptionsII. Clinical Integration as a Business Strategy for Accelerated Growth: Assessment to CIO Business Plan Match Organizational Architecture to Organizational Culture  Governance structure: – A committee hierarchy and governance model that promotes equitable distribution of rewards, risks, and control between hospital and physician partners.  Legal structure options. – Consider need to create a “New Co.” physician enterprise structure to serve as the integration vehicle.  Plan for transition… not disruption – Physician alignment preparation for transition to CIO model. – Payer relationship maintenance and CIO contracting strategy. Determine “Best Fit” C.I. Organizational Model © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 20
  • 22. Emerging Business/Financing Models: CIO OptionsII. Clinical Integration as a Business Strategy for Accelerated Growth: Assessment to CIO Business Plan Integrating Employed Non-Employed Physicians Physicians independent and employed Diffuse collection of Aligned w/Hospital interests…not aligned physicians? Service Lines w/hospital service linesOne piece of the CIOpuzzle… a selective, Compensation tied to Strategic focus at goals and productivity practice levelscalable membership criterion which Declining economics focuses on Higher cost structure and often unfavorable collaboration and payer contracts equitable treatment Advanced IT tools and Limited IT tools, limited among physicians, reporting reporting to manage patient outcomes and managing Many regulatory Few Regulatory barriers to hospital patient populations. Barriers alignment Determine “Best Fit” C.I. Organizational Model © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 21
  • 23. Emerging Business/Financing Models: CIO OptionsII. Clinical Integration as a Business Strategy for Accelerated Growth: Assessment to CIO Business PlanDefine and Plan Clinical Integration Initiative Considerations Build a clinical care model which emphasizes value-driven care and which can be deployed across disease management-based service lines in anticipation of future episodes of care and global capitation reimbursement models. Identify and validate the key metrics that will be used to define success and provide meaningful, actionable information. Provider network refinement/recruitment to allow for strategic community outreach and inclusion in the “New Co.” clinical integration organization. Focus on safety. Determine Clinical Infrastructure and Define/Plan C.I. Initiatives © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 22
  • 24. Emerging Business/Financing Models: CIO OptionsII. Clinical Integration as a Business Strategy for Accelerated Growth: Assessment to CIO Business Plan Management and clinical integration plan development should include utilization management strategies to:  Facilitate administration and physician development.  Foster agreement for a hospital-based UM program jointly developed with, and formally adopted by employed and non- employed physicians.  Accomplish joint review of the protocols between employed and non-employed physicians as well as the “New Co” CIO.  Evaluate the role/need for a CIO Medical Director.  Propose Policy and Procedures guideline for the development of quantifiable definitions and standards to be formally incorporated into the hospitals UM program. Determine Clinical Infrastructure and Define/Plan C.I. Initiatives © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 23
  • 25. Emerging Business/Financing Models: CIO OptionsII. Clinical Integration as a Business Strategy for Accelerated Growth: Assessment to CIO Business PlanDefine and Plan C.I. Initiative Considerations Develop comparative performance methodology to: – Identify physician- leaders with styles that are visionary, mentoring, affiliate, and democratic. – Avoid confrontational processes that could perceived as threatening to physicians with non-aligned practice styles. – Plan for the development and distribution of physician- specific reports. Build transformational experiences (small wins) to build trust and demonstrate successes. Remove barriers that frustrate physicians in delivery of care. Determine Clinical Infrastructure and Define/Plan C.I. Initiatives © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 24
  • 26. Emerging Business/Financing Models: CIO OptionsII. Clinical Integration as a Business Strategy for Accelerated Growth: Assessment to CIO Business Plan Define and Plan C.I. Initiative Considerations  Develop training and physician leadership roles for varied C.I. committees.  Assess necessary information technology and operational support structure necessary to enable and facilitate high quality physician care… as is clinically appropriate… at the individual patient level… across disease management oriented service lines.  Evaluate technology and infrastructure options for data collection, common patient data registry, disease management and EBM clinical protocols as well as EHRs. Determine Clinical Infrastructure and Define/Plan C.I. Initiatives © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 25
  • 27. Emerging Business/Financing Models: CIO OptionsII. Clinical Integration as a Business Strategy for Accelerated Growth: Assessment to CIO Business Plan Current State Understanding Supporting Systems Strategy Clinical Integration Objectives Potential IT strategies may include the following:  Clinical data broker  Single purpose 3rd party technologies integration “overlays”  Common EMR / Affiliate  Patient registry systems EMR  Portals  Data warehousing  Health data exchange  Managed care systems technologies Determine Clinical Infrastructure and Define/Plan C.I. Initiatives © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 26
  • 28. Emerging Business/Financing Models: CIO OptionsII. Clinical Integration as a Business Strategy for Accelerated Growth: Assessment to CIO Business PlanDetermine Regulatory ComplianceEngage qualified legal counsel in early development stages aswell as to determine likely FTC regulatory compliance. FTCreview considerations typically encompass the following:1. Integration of facilities/practitioners that represents true inter- dependence in collaboration and productive information sharing.2. Participation of both specialists and primary care physicians, in a way that requires in-network referrals.3. Treatment of a broad spectrum of diseases/disorders accompanied by a comprehensive array of corresponding clinical protocols.4. Integrated information technology that allows network providers to efficiently and effectively exchange information regarding patients and practice experience. Determine Regulatory Compliance of Change Process © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 27
  • 29. Emerging Business/Financing Models: CIO OptionsII. Clinical Integration as a Business Strategy for Accelerated Growth: Assessment to CIO Business PlanDetermine Regulatory Compliance5. Integrated IT in which utilization and claims information is collected, analyzed, and distributed with the goals of lowering costs, reducing utilization rates, and improving the quality of care.6. Integrated IT that enables the measurement of physician compliance and performance, in comparison to widely accepted, peer-reviewed benchmarks and standards.7. A high level of physician financial investment and commitment of time for training and utilization of the system, accompanied by agreement among physicians to comply with the standards, benchmarks, and protocols of the network.8. Processes for improving performance and compliance, with enforceable consequences for non-compliance. Determine Regulatory Compliance of Change Process © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 28
  • 30. Emerging Business/Financing Models: CIO OptionsII. Clinical Integration as a Business Strategy for Accelerated Growth: Assessment to CIO Business PlanScenario Planning for Clinical Integration Initiatives Define clinical integration strategy… obtain senior management and physician leadership input… prioritize strategic alternatives… identify and validate growth objectives… identify and confirm potential growth vehicles to achieve clinical integration objectives. “What if” considerations for extension of the planned CIO business model to other facilities in the region (e.g., for future initiatives such as an ACO or a network PHO clinical integration model). Determine Business Case for Change Process © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 29
  • 31. Emerging Business/Financing Models: CIO OptionsII. Clinical Integration as a Business Strategy for Accelerated Growth: Assessment to CIO Business PlanScenario Planning for Clinical Integration Initiatives Define key barriers and facilitators to future state process redesign and risk mitigation action plan. Develop IT Vision (e.g., financial, clinical and E.H.R.). Estimate one-time and recurring costs for each future state redesign area. Define phasing options relative to indentified change priorities and cost reduction/efficiency gain goal achievement. Estimate benefits to organization-physician members of Clinical Integration by major care delivery service line. Make the business case for each future state CIO design. Determine Business Case for Change Process © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 30
  • 32. Emerging Business/Financing Models: CIO OptionsII. Clinical Integration as a Business Strategy for Accelerated Growth: Assessment to CIO Business PlanPreparing Your Clinical Integration Business Plan (i.e., fromyour completed assessment and planning process)1. Internal and external clinical integration readiness assessment… current state design.2. Scenario planning: your future state design options and the required process changes to achieve them (core/contingent).3. Governance and committee structure for a clinical integration organization.4. Physician and Staff educational needs for creating a clinical integration business model.5. Required information system technologies to support a clinical integration business model. Your Clinical Integration Business Plan © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 31
  • 33. Emerging Business/Financing Models: CIO OptionsII. Clinical Integration as a Business Strategy for Accelerated Growth: Assessment to CIO Business Plan 6. Core operational, physician and employee issues associated with transitioning from a current state to a future state business model. 7. Estimated cost reduction as well as potential efficiency and quality gains. 8. Project management and performance improvement tools needed for clinical integration initiatives. 9. Future state clinical integration organization redesign/transition work plan for each major clinical service line area. Use your C.I. business plan as your development roadmap and/or as a template for a FTC Staff Advisory Opinion. Your Clinical Integration Business Plan © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 32
  • 34. Emerging Business/Financing Models: CIO OptionsII. Clinical Integration as a Business Strategy for Accelerated Growth: Payments Evolving/new payment value-based payments…  Should allow providers time to transition from current payment methodologies to more risked and accountability based payment methodologies.  The degree of provider integration and alignment of financial incentives across the care continuum… will determine the ability of providers to accept risk/reward based payments and remain financially viable.  The two leading contenders for the new “norm” for payment methodologies... bundled payments and global capitation. © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 33
  • 35. Emerging Business/Financing Models: CIO OptionsII. Clinical Integration as a Business Strategy for Accelerated Growth: PaymentsFeatures of a 2010+ Global Capitation Payment Model? Capitated payments supply provider organizations with fixed “medical care” budgets… partial or global services – Risk adjustments… protection mechanisms for adverse risk and catastrophic patient cases… formulaic structural rewards to providers for improving quality and reducing unnecessary services utilization. – Performance incentives… based on quality and safety metrics. – Shared savings opportunities… reducing underuse, misuse and overuse within global payment levels. © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 34 (34)
  • 36. Emerging Business/Financing Models: CIO OptionsII. Clinical Integration as a Business Strategy for Accelerated Growth: Payments Hospital Financial Proposal Review - HMO/Capitation Proposal Medical Budget - IPA/Hospital - Joint Managed Care Product IPA/Hospital Network 10/1/20XY - Small Urban Market COMMERCIAL MEDICAL BUDGET -- AVE. COSTS 1-1-XW TO 12-31-XW Utilization Average Gross Deduc. Net Category Of Service PMPY Cost PMPM or Copay PMPM Hospital Financial Proposal Review - HMO/Capitation Proposal Review - HMO/Capitation Proposal HOSPITAL Hospital Financial Proposal Medical Budget - IPA/Hospital - Joint Managed Care Product IPA/Hospital Network Managed Care Product IPA/Hospital Network Medical Budget - IPA/Hospital - Joint 10/1/20XY - Small Urban Market 10/1/20XY - Small Urban Market Inpatient COMMERCIAL MEDICAL BUDGET -- AVE. COSTS 1-1-XW7,664.40 0.0860 $ COMMERCIAL MEDICAL BUDGET -- AVE. COSTS 1-1-XW TO 12-31-XW TO 12-31-XW $ 54.93 0.00 $ 54.93 Ambulatory PHYSICIAN SERVICES Surgery 0.0520 OUTPATIENT 1,057.96 OTHER 4.59 0.00 4.59 Office Visits - PCPs Emergency Room Other Hosp Outpatient 2.8505 0.1530 90.76 $ $ 21.56 0.0020 276.90 15.00 $ $ 151.64 $ 18.00 3.54 0.05 50.00 $ 0.03 0.00 0.03 2.91 Radiotherapy 0.0010 483.87 5.00 0.05 Office Visits -Specialists 2.1010 90.76 15.89 15.00 13.27 0.0430 296.48 1.07 0.00 1.07 0.1660 0.0433260.73 DME Outpatient Radiotherapy Inpatient Visits Pharmacy 212.67 3.61 7.5300 0.00 3.61 72.60 0.77 45.56 0.00 15.00 36.15 0.77 Hospital Outpatient Office Procedures 2.3480 0.1537178.04 Laboratory Miscellaneous Ambulance 0.8310 Home Visits 22.77 4.46 0.0010 595.73 12.33 0.0010 0.00 0.00 4.46 697.15 12.33 7.64 0.06 0.00 50.00 0.06 7.64 135.23 0.02 20.00 0.02 SNF Surgery - Major 0.4820 0.0001517.39 Home Health Supplies 1,953.00 20.79 0.0110 0.00 20.79 345.02 0.02 0.32 0.00 0.00 0.32 0.02 Surgery- Minor 0.0060 X-Ray 282.58 0.15 1.6060 0.00 0.15 162.78 21.79 0.00 21.79 Ambulance Anesthesia 0.0520 0.0170999.72 High Risk Int. Care 612.56 4.34 0.0010 0.00 175.35 4.34 0.87 0.02 0.00 0.00 0.02 0.87 Dialysis/Chemo/Private Nurse 0.1680 0.0461228.82 Emergency Room Optical Dispensing 3.21 0.0130 374.40 0.00 108.11 3.21 1.44 0.12 0.00 0.00 0.12 1.44 OB/Delivery 0.0200 Alcohol2,679.32 Abuse 4.47 0.0730 5.00 142.36 4.47 0.87 0.00 0.87 Home CareOutpatient Mental Health 0.2180 0.0035150.40 Physical Therapy 306.47 2.74 0.1560 25.00 101.75 2.29 0.09 1.33 0.00 15.00 1.14 0.09 Home CareTOT. PHYSICIAN SRVCs Supplies 9.2425 0.0340121.40O/P TOT. OTHER $ $ 1,271.90 $ $ 86.92 $3.61 71.24 $ 0.00 $ 93.55 9.4380 $ 6.63 90.50 9.60 61.64 3.61 Surgery/Major 0.0060MEDICAL COSTS TOTAL 2,755.9619.3087 $ 1,739.39 1.38244.83 $ 0.00 $ $ 16.86 227.97 1.38 Misc. Office Serv. 0.0335 Medical Mgt. Fee348.41 Services @ 2% of Medical = IPA Desired For Physician 0.98 0.00 $ 1.74 0.98 (HMO CoPay/COB adjust. TOTAL GLOBAL CAPITATION REQUIRED = $ 229.71 factors & above changes) 0.0052 400.00 0.18 10.00 0.18 TOTAL HOSPITAL 0.6282 $ 1,527.49 $ 80.04 $ 0.63 $ 79.41 Example: Global Capitation © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 35 (35)
  • 37. Emerging Business/Financing Models: CIO OptionsII. Clinical Integration as a Business Strategy for Accelerated Growth: Payments Bundled Payments...  Payment methodologies referred to as “Episodes of Care” (EoC) – CMS has already started piloting an EoC payment methodology called “Acute Care Episodes” with a select number of hospitals… as CMS goes, will others?  The ACA expands episode of care pilot programs at the Medicare and State Medicaid levels… expect 1115 waiver modifications.  Some health plans are presently engaged in these pilot programs with hospitals or other provider organizations that have the operational support infrastructure to manage episode of care reimbursement methodology and risk. © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 36
  • 38. Emerging Business/Financing Models: CIO OptionsII. Clinical Integration as a Business Strategy for Accelerated Growth: Payments  Bundled payments have been around for some time in the form of specific provider type oriented payments such as DRGs… would expand to capture all EoC services.  The main difference with EoC payment methodologies of the future… specific requirement to coordinate and manage care across a vertical continuum of care… specific to an episode of care event… tied to a specific length of time… at a set, fixed price. The key challenge for providers will be their ability to align and integrate community care standards for a specific EoC while also being able to provide clinical/operational support for the entire episode of care. © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 37 (37)
  • 39. Presentation Agenda III. Lessons Learned Effective change in a restructured regulatory and reimbursement environment will not be sustainable… absent… physician leadership Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 38
  • 40. Lessons Learned: Risk and Care Management ModelsIII. Risk Models and the Assumption of Performance Risk  Transition to a value-driven healthcare system will require a great deal of re-engineering to support more integrated care delivery models designed to manage patient populations.  Managing the financial risk associated with bundled and capitation payment methodologies… the greater the financial risk for healthcare organizations… the greater the need for clinical integration and expanded information technology and operational support.  Healthcare organizations unable to develop the appropriate operating business model relative to the accepted level of financial risk will become financially distressed and at greater risk for bankruptcy. © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 39
  • 41. Lessons Learned: Risk and Care Management ModelsIII. Risk Models and the Assumption of Performance Risk In the end, its about…  Strategy and Strategy Execution  People  Process  Technology and Capital  Sustainability © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 40
  • 42. Lessons Learned: Risk and Care Management ModelsIII. Risk Models and the Assumption of Performance Risk The ACA will be a transformative event… be prepared… do not wait until 2013 or 2014 to act!!! © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 41
  • 43. Presentation Agenda IV. Questions and Answers Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 42
  • 44. Christopher KalkhofIV. Contact Information and Speaker Bio ▲ Christopher Kalkhof is a Director with Alvarez & Marsal’s Healthcare Industry Group in New York. He has more than 25 years of diverse healthcare management experience. He specializes in managed care strategy development and contract negotiations; contract implementation and integration with revenue cycle/case management processes; provider-payer collaborations; physician alignment and integration; strategic planning and new product development. ▲ Over the last several years, Mr. Kalkhof has spent much of his time assisting clients optimize their net managed care revenue potential, resulting in net rate increases and revenue improvements of nearly $500 million. Over the span of his career he has gained managed care related work experience in over 20 states and has directly negotiated hundreds of payer agreements for hospital, behavioral health, physician, IPA/PHO, home care, hospice and skilled nursing facility clients. He has also reviewed hundreds of additional payer contracts.Christopher Kalkhof, ▲ Recent or prior relevant experience has included: FACHE – Developing a broad-based managed care strategy and leading a contract rebasing/negotiations process involving over 50 payer product contracts/20 different payers for a partial physician owned hospital with an estimated net Director revenue improvement of $10 million on an 18 month run rate basis. – Working with a large safety net health system to improve physician charge capture and reduce payer denials as Office well as reorganize the managed care department, build a contracts administration unit and develop strategies for (347) 254-2433 improving market position for a system owned health plan. Mobile – Renegotiated payer contracts for nearly $13 million in net revenue increases (24 month run rate basis). Stopped an unjustified payer attempt to recoup $1.2 million in alleged overpayments, upgraded contract manager (CM) and (716) 912-0309 incorporated CM application into revenue cycle operations. E-Mail – Conducting a risk mitigation/EBIDA improvement opportunity assessment as part of a due diligence “clean team” ckalkhof@ review of an acquisition candidate hospital, which also included a clinically integrated PHO joint venture. – Evaluating a hospital’s current contracting strategy, contract content and physician-clinical integration options.alvarezandmarsal.com ▲ Prior to joining A&M, Mr. Kalkhof was: Director/National Managed Care Lead for a Big 4 firm’s provider consulting Website practice; Interim SVP of Managed Care for a nine hospital system; Interim VP Managed Care for a community hospital;www.alvarezandmarsal consulting Director of Managed Care at community hospital through the bankruptcy and post-bankruptcy ownership change to physicians; Partner in a practice management firm; Director of Marketing Administration and Professional .com Relations for a large health insurer; and Product Development Manager for a HMO. ▲ Mr. Kalkhof received his Master of Health Administration degree from Tulane University and his Bachelor of Science, degree from Allegheny College. He is a Fellow in the American College of Healthcare Executives and a frequent presenter on managed care revenue improvement and physician alignment topics for the HFMA, ACHE, MGMA, WRG and other professional groups. In 2008, Mr. Kalkhof served as a member of the NYS Office of Medicaid Inspector General’s Medicaid Managed Care Compliance Program Guidance Advisory Committee. © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 43 (43)
  • 45. Christopher KalkhofIV. Contact Information and Speaker Bio  Dr. Francis LaMorte is a Director with the Alvarez & Marsal Healthcare Industry Group in New York. He specializes in physician practice management, healthcare business strategy, hospital-based patient throughput, physician compensation, and governance  Prior to joining Alvarez & Marsal, Dr. LaMorte advised a financial syndicate on the buy-out of a generic pharmaceutical company, and developed the business plan and start up of a PPO  Since joining A&M his work has included contract assessment of a one-hundred member employed -physician medical foundation, a medical staff audit and development of a contract renegotiation strategy for a 252-bed medical center, a hospital merger assessment, and planned hospital closings for two systems Francis LaMorte, M.D.  Previously, Dr. LaMorte served as executive chairman of EMX, L.P., He led a post-demerger restructuring of the firm’s operations and governance, designing and leading multiple, sustained, transformational initiatives that Director enabled EMX to turnaround and become one of the nation’s largest privately-held emergency medicine practice management firms, with more than 400 providers under management at twenty-four emergency departments and Office hospitalists practices providing care for 1.3% of the nation’s emergency patients (347) 891-0116 – Achievements included: design and execution of a recapitalization as an alternative exit strategy to a planned IPO; restructuring of the corporate governance board; implementation of a balanced scorecard and productivity–driven physician compensation plan; and the business development of subsidiaries for urgent care E-Mail centers, hospitalist practices, a consumer retail chain, physician billing company and an IT management flamorte@ system now operating thirty EDsalvarezandmarsal.com  As company compliance officer, he co-developed the company HIPAA program. He developed risk control systems and training programs for billing, coding, EMTALA, and HIPAA obligations Websitewww.alvarezandmarsal  Dr. LaMorte served for twenty years as attending physician in the emergency department of the flagship hospital of .com the St. Barnabas Health Care System. He was chairman of the System’s utilization management committee, and president of the thousand-member IPA  Dr. LaMorte earned a bachelors degree from Princeton University, and received his doctorate in medicine from the Robert Wood Johnson Medical School. He holds a masters degree in business administration from the Yale University School of Management © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 44
  • 46. The Alvarez &Marsal Advantage Founded in 1983, Alvarez & Marsal (“A&M”) is a leading independent global professional services firm with more than 1,700 professionals based in North America, Europe, Asia and Latin America. Currently 39 offices globally with headquarters in New York, London, and Hong Kong. Offer deep financial, tax, operational and industry expertise. Deep bench of talent across industries with the unique ability to transition between financial, operational and advisory roles to meet client’s changing business needs.A&M is the leading, independent global professional services firm which excels at leadership, problem solving and value creation. A&M’sHealthcare Industry Group practice represents an assembled team of healthcare professionals who bring a significant track record of workingwith management, boards of directors and stakeholders of both investor-owned and non-profit providers, payers and suppliers to improveoperational, financial and clinical performance.A&M’s managed care consultants and interim management professionals bring deep best practices expertise in the development of managedcare contracting and physician alignment strategies, payer contract negotiations, and the implementation / integration of contracting andphysician alignment strategies into an organization’s overall clinical and business operations.Our managed care services are aligned with your contract management cycle and can be tailored to meet your specific needs and marketenvironment. We work with your team, serving in advisory or interim management roles, to ensure your success with your overall payercontracting strategy. www.alvarezandmarsal.com Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. 4545