2010 Arizona HFMA Spring   Conference   (Chandler, AZ)                     L E A D E R S H I P  P R O B L E M SO L V I N ...
Presentation Agenda          I.           Payer Physician Networks                        Basic Payer Goals              ...
Presentation Agenda          I.           Payer Physician Networks                        Basic Payer Goals              ...
Payer Business GoalsI. Payer Physician Networks    Profitability.    Membership Growth (traditional, new product, M&A). ...
Pros and Cons of Being a Par/Non-Par PracticeI. Payer Physician Networks Potential upside participation issues (w/favorabl...
Pros and Cons of Being a Par/Non-Par PracticeI. Payer Physician Networks Potential downside participation issues:  Reduce...
Pros and Cons of Being a Par/Non-Par PracticeI. Payer Physician Networks    If a Practice Chooses to Not Become a Particip...
Pros and Cons of Being a Par/Non-Par PracticeI. Payer Physician Networks  If a Practice Chooses to Not Become a Participat...
Traditional and Newer Payer Products and NetworksI. Payer Physician Networks    Payer Core Products (price and            ...
CMS: Medicare Payment LevelsI. Payer Physician NetworksCMS Sustainable Growth Rate (SGR) Payment Reductions               ...
State Budgets: Medicaid Vs. Medicare Payment LevelsI. Payer Physician Networks            Medicaid-to-Medicare Fee Index, ...
What Does “Market” Really Mean? Why Do Prices Vary?I. Payer Physician Networks Payer Reimbursement Variation Within Differ...
Physician Practice Current and Emerging ChallengesI. Payer Physician Networks Multiple stakeholder and customer groups… l...
Physician Practice Current and Emerging ChallengesI. Payer Physician Networks  Increasingly difficult to recruit/retain g...
Managed Care Strategy Development ProcessI. Payer Physician Networks  WHAT IF… 80%+ of practice revenues came from      y...
Presentation Agenda          I.           Payer Physician Networks                        Basic Payer Goals              ...
Third Party Payer Roles in Patient SteerageII. Patient Steerage – How Does It Really Work?   “Potential access” to payer ...
Payer UM Controls - Impact on ReferralsII. Patient Steerage – How Does It Really Work?  Primary Care Physician 145 - 370 S...
Hospital Role in Patient SteerageII. Patient Steerage – How Does It Really Work? General… Participation status of hospita...
Your Practice’s Role in Patient SteerageII. Patient Steerage – How Does It Really Work? Ensuring consistent patient/care ...
Your Practice’s Role in Patient SteerageII. Patient Steerage – How Does It Really Work? The clinical quality/cost efficie...
Practice Business Value Chain and Patient SteerageII. Patient Steerage – How Does It Really Work?     All Activities      ...
Presentation Agenda          I.           Payer Physician Networks                        Basic Payer Goals              ...
A&M’s Three Phase Contracting ApproachIII. Managed Care Contracting Strategies and Different Negotiating Approaches  The p...
Payer Contracting: Negotiating Process/ApproachesIII. Managed Care Contracting Strategies and Different Negotiating Approa...
Payer Physician Contract Outline - Best PracticesIII. Managed Care Contracting Strategies and Different Negotiating Approa...
Payer Contract Negotiations – Key QuestionsIII. Managed Care Contracting Strategies and Different Negotiating Approaches  ...
Payer Contract Negotiations – Key QuestionsIII. Managed Care Contracting Strategies and Different Negotiating Approaches  ...
Payer Contract Negotiations – Key QuestionsIII. Managed Care Contracting Strategies and Different Negotiating Approaches  ...
Payer Contract Negotiations – Key QuestionsIII. Managed Care Contracting Strategies and Different Negotiating Approaches  ...
Presentation Agenda          I.           Payer Physician Networks                        Basic Payer Goals              ...
Emerging Provider Business ModelsIV. Physician Alignment and Integration: Evolving and Emerging Business Models   Physici...
Emerging Provider Business Models: Physician IntegrationIV. Physician Alignment and Integration: Evolving and Emerging Bus...
Emerging Provider Business Models and PaymentsIV. Physician Alignment and Integration: Evolving and Emerging Business Mode...
Provider Business Models: Clinical IntegrationIV. Physician Alignment and Integration: Evolving and Emerging Business Mode...
Cost of Care Drivers: Insurance Vs. Performance Risk    IV. Physician Alignment and Integration: Evolving and Emerging Bus...
Episodes of Care Payment Methodology ElementsIV. Physician Alignment and Integration: Evolving and Emerging Business Model...
Provider Business Models: Clinical IntegrationIV. Physician Alignment and Integration: Evolving and Emerging Business Mode...
Provider Business Models: Clinical IntegrationIV. Physician Alignment and Integration: Evolving and Emerging Business Mode...
Provider Business Models: Clinical IntegrationIV. Physician Alignment and Integration: Evolving and Emerging Business Mode...
Provider Business Models: Clinical IntegrationIII. Clinical Integration as a Better Model for Managed Care Contracting  Va...
Provider Business Models: Clinical IntegrationIV. Physician Alignment and Integration: Evolving and Emerging Business Mode...
Provider Business Models: Clinical IntegrationIV. Physician Alignment and Integration: Evolving and Emerging Business Mode...
Physician - Hospital IntegrationIV. Physician Alignment and Integration: Evolving and Emerging Business Models  There is ...
Presentation Agenda          I.           Payer Physician Networks                        Basic Payer Goals              ...
Christopher KalkhofV. Contact Information and Speaker Bio                       ▲ Christopher Kalkhof is a Director with A...
The Alvarez &Marsal Advantage   Founded in 1983, Alvarez & Marsal (“A&M”) is a leading independent global professional se...
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Transcript of "Managed Care Contracting Strategy"

  1. 1. 2010 Arizona HFMA Spring Conference (Chandler, AZ) 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 March 18, 2010 Managed Care Contracting Strategy and Emerging Business Models: Physician Practice Perspective Christopher J. Kalkhof, FACHE Director, Healthcare Industry Group (New York Office)Copyright 2010. Alvarez & Marsal. All Rights Reserved.
  2. 2. Presentation Agenda I. Payer Physician Networks  Basic Payer Goals  Participation vs. Non-Participation and Implications for Practice  Payer Contracting Options and Products  Trends in Marketplace Impacting Practice Revenues II. Patient Steerage – How Does it Really Work? III. Managed Care Contracting Strategies and Different Negotiating Techniques  Key Questions to Ask Before Signing Any Payer Agreement IV. Physician Alignment and Integration: Evolving and Emerging Business Models V. Questions & Answers Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (1)
  3. 3. Presentation Agenda I. Payer Physician Networks  Basic Payer Goals  Participation vs. Non-Participation and Implications for Practice  Payer Contracting Options and Products  Trends in Marketplace Impacting Practice Revenues II. Patient Steerage – How Does it Really Work? III. Managed Care Contracting Strategies and Different Negotiating Techniques  Key Questions to Ask Before Signing Any Payer Agreement IV. Physician Alignment and Integration: Evolving and Emerging Business Models V. Questions & Answers Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (2)
  4. 4. Payer Business GoalsI. Payer Physician Networks  Profitability.  Membership Growth (traditional, new product, M&A).  Unit Cost Control (<= 4%-8%; slow loss of discount value).  Utilization Management/Disease Management Improvements.  Improve Operational Efficiency (SCR and provider network).  Metrics Management (scorecards, templates).  Customer Satisfaction, Consumerism and Product Value.  Compliance (DOI, DOH, CMS, NCQA, DOJ, etc.).  Accessible, Quality Oriented, Price Competitive, Stable long term Fixed contractual relationships with providers which represent Efficient, Stable and Predictable relationships. HOW DOES THE ABOVE IMPACT YOUR STRATEGY? © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (3)
  5. 5. Pros and Cons of Being a Par/Non-Par PracticeI. Payer Physician Networks Potential upside participation issues (w/favorable contract):  Increased patient volume through physician referral management.  Opportunity to negotiate higher than “norm” reimbursements.  Inclusion on payer participating provider lists/websites.  Retention of your patients which are payer members.  Electronic claims payment and accelerated cash flow.  Payer product benefit plan designs often provide members with financial incentives to use in-network physicians vs. out-of-network physicians… resulting potential incremental patient volume.  Potentially competitive reimbursement.. highs and lows depending on specific payer products… HMO/POS insured, rental PPO, etc.  Variable practice management tools. © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (4)
  6. 6. Pros and Cons of Being a Par/Non-Par PracticeI. Payer Physician Networks Potential downside participation issues:  Reduced control and independence on pricing strategy and patient care treatment (charges less important, many payment rules to follow).  Unavoidable increase in contract compliance and administrative costs.  Changed referral patterns with physicians and hospitals.  Future procedure payment reductions and margin yield when market dynamics change… with little to no say on reimbursement changes.  Increased economic risk exposure… e.g., Capitation, P-4-P and Value Purchasing programs such as bundled episodes of care payments.  A potential unfavorable change in practice service/profitability mix.  Quality rating potential exclusion from specific product networks.  Pressure to par with “All Payer Products” with a specific payer.  Price transparency and A/R challenges… retroactive payment re- coupments/audits w/high appeal costs… reduced cash flows. © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (5)
  7. 7. Pros and Cons of Being a Par/Non-Par PracticeI. Payer Physician Networks If a Practice Chooses to Not Become a Participating Practice with a Specific Payer or is Excluded:  Develop and execute strategies and tactics to maintain patient volume, service mix and net patient revenues. When a non-par… a potential exists for: – Loss of patients to competitors. – Changes in traditional physician referral patterns. – Increased collection challenges with patients and payers (e.g., for non-coverage/O-O-N payment allowances). – A net unfavorable economic impact on the practice. © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (6)
  8. 8. Pros and Cons of Being a Par/Non-Par PracticeI. Payer Physician Networks If a Practice Chooses to Not Become a Participating Practice with a Specific Payer or is Excluded:  Panels open at present may be closed in future.  Track market changes… erosion of traditional F-F-S medicine into increased enrollments in Medicare Advantage, Managed Medicaid/CHIP/FHP and Universal Coverage plans…further payer market consolidation… retail shopping chains entering primary care market, etc… can all impact practice economics.  Look into business models for hospital collaboration.  Alternate physician group practice/employment delivery models to strategically position practice. © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (7)
  9. 9. Traditional and Newer Payer Products and NetworksI. Payer Physician Networks Payer Core Products (price and Products-Provider Networks No PCPs - contracted network utilization control driven) Reduced out-of-network benefits Limited utilization mgmt. Deductibles, coinsurance & co-pays PPO PCPs - contracted network Reduced out-of-network benefits POS HMO style utilization protocols Primarily co-pays PCPs - limited network, localized area HMO No non-emergent out-of-network benefits Tight medical management protocols Tiered Primarily co-pays PCPs - selected subset networks with restrictive protocols No non-emergent out-of-network benefits Preferential pricing Indemnity Primarily co-pays No PCPs - open network No utilization management Deductibles & coinsurance Evolving and expanding payer products has increased the complexity and administrative requirements between physicians and payers. Most payer products are out of synch with new payment methodologies. © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (8)
  10. 10. CMS: Medicare Payment LevelsI. Payer Physician NetworksCMS Sustainable Growth Rate (SGR) Payment Reductions  The SGR formula calls for 21% fee schedule cuts starting 1-1-10… delayed again but unresolved for 2010.  This 21% cut will grow to about 40% in cumulative cuts by 2016 unless Congress acts soon to permanently reform Medicare’s physician payment system.  EMR requirements to stay in Medicare/Medicaid add unbudgeted operational expenses to practices. How will CMS changes impact Medicare, Medicaid & Commercial plan fee schedules, pay-for- performance and new payment methodologies? © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (9)
  11. 11. State Budgets: Medicaid Vs. Medicare Payment LevelsI. Payer Physician Networks Medicaid-to-Medicare Fee Index, 2008 (Medicaid & CHIP) What will happen to State Medicaid if… – CMS SGR cuts are applied? – Budget deficits continue? – Universal coverage is implemented? – Enrollment expands? © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (10)
  12. 12. What Does “Market” Really Mean? Why Do Prices Vary?I. Payer Physician Networks Payer Reimbursement Variation Within Different Product Classes Variable Payer Negotiation Outcomes: Low & High Ranges (1) Illustrative Provider Classes Large Commercial Network Rental Medicare Advantage Managed Medicaid HMO/POS/PPO PPOs (2) Physicians 65%-175% 90%-200% (2) 70%-150% (2) 35%-120% (2) (PCPs & (% of Medicare) (% of Medicare) (% of Medicare) (% of Medicare) Specialists) Amb Surg 75%-400%(2,3) 100%-500% 70%-120%(2,3) 35%-250%(2,3) (Hospital based (2,3) (% of Medicare) (% of Medicare) (% of Medicare) & Freestanding) (% of Medicare) Source: A&M analysis and payer reimbursement negotiations outcome experience. Low ranges are generally for providers who accept payer “market rates” with little question or negotiation on price. 1) Unless otherwise noted, reimbursement ranges are benchmarked against Medicare RVRBS reimbursement. Illustrated reimbursement ranges are representative of urban market settings around the country. 2) Provider business model, capacity/demand/size/brand as well as network participation… impact upper payment levels. 3) Significant price variability exists in a single market between hospital based and freestanding ASCs… business model, capacity/demand/size/brand as well as network participation all factor into the pricing strategy and negotiations outcomes. © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (11)
  13. 13. Physician Practice Current and Emerging ChallengesI. Payer Physician Networks Multiple stakeholder and customer groups… little customer loyalty… patient volume strategies largely shifted to retention. Practice models which provide little too no leverage with payers... – Reduced net revenue realization across largest payer contracts. – P-4-P programs and physician efficiency measurement reporting as well as tiered-network payer products. – Continued erosion of fee-for-service to managed care and new payment methodologies. – Continued payer market consolidation and State and Federal contracting with payers can result in an unfavorable practice payer mix revenue portfolio. Increased competition for less dollars and the same patients. Longer hours, higher expenses and less net income/physician. © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (12)
  14. 14. Physician Practice Current and Emerging ChallengesI. Payer Physician Networks  Increasingly difficult to recruit/retain good clinical and administrative staff.  Less time with patients and more paperwork.  More regulatory/payer compliance/costs and increasing lawsuits.  External parties trying to control the patient-physician relationship.  Price transparency and consumer-driven healthcare.  Lack of capital to support needed investment in technology  No resolution of CMS sustainable growth rate impact on CMS fee schedule… many national health plans index fees to CMS.  Questionable ability to maintain historical compensation levels.  CMS requirement for EMRs as a condition of continued Medicare participation.  State and Federal Healthcare Reform. © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (13)
  15. 15. Managed Care Strategy Development ProcessI. Payer Physician Networks WHAT IF… 80%+ of practice revenues came from your payer contracts? How would this impact your… – Short-term and long-term strategic planning? – Capital planning? – Alignment and integration strategies? – Collaboration or lack thereof with select payers? – Business and service development and/or divestiture? – Staff recruitment/retention strategies and policies? – Information technology needs, planning and implementation? – Relationships with patients and referring physicians? – Formation of provider networks… e.g., IPAs, Physician- Hospital Organizations, clinical integration models, acquisitions of physician practices or practice mergers? © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (14)
  16. 16. Presentation Agenda I. Payer Physician Networks  Basic Payer Goals  Participation vs. Non-Participation and Implications for Practice  Payer Contracting Options and Products  Trends in Marketplace Impacting Practice Revenues II. Patient Steerage – How Does it Really Work? III. Managed Care Contracting Strategies and Different Negotiating Techniques  Key Questions to Ask Before Signing Any Payer Agreement IV. Physician Alignment and Integration: Evolving and Emerging Business Models V. Questions & Answers Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (15)
  17. 17. Third Party Payer Roles in Patient SteerageII. Patient Steerage – How Does It Really Work?  “Potential access” to payer members through participation.  Health benefit plan design (e.g., group and Medicare Advantage products) can provide financial incentives to members to use participating providers.  Practice name, physician name(s), specialty and location listed in payer electronic and print media.  Provider contracts which encourage/require referrals to participating network providers.  No Active Steerage by the Payer... Why?... “LIABILITY!” Validate above from your practice data. What are your business reasons for participating with a payer? © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (16)
  18. 18. Payer UM Controls - Impact on ReferralsII. Patient Steerage – How Does It Really Work? Primary Care Physician 145 - 370 SPECIALIST Referrals Specialists 4,200 - 5,100 435 - 1,100 Amb. Visits/Yr. Amb. Visits/Yr. 95 - 135 50 - 85 50 - 150 Amb. Surgeries InpatientAmb. Surgeries I/P Admissions Inpatient 25 - 90 Procedures Procedures I/P Admissions (HOSPITALS) 145 - 220 75 - 240 165 - 530 Outpatient Hospital Inpatient Surgeries/Yr. Admissions/Yr. Procedures"REFERRAL Variables: Managed care penetration… IMPACT" practice business model… managed care strategy… practice business strategy. © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (17)
  19. 19. Hospital Role in Patient SteerageII. Patient Steerage – How Does It Really Work? General… Participation status of hospital and medical staff influences patient choice on elective or self-directed referrals… perceived quality of the service interactions influences repeat business and brand… both impact physician referrals. Hospital Employed… Patients access the hospital through elective and non-elective means… some number of patients return for follow-up care... hospital brand in market and marketing efforts have an impact. Hospital Based or a FPP… Variable impact depending on type of practice and emergent/urgent or elective nature of visit… market brand/reputation of hospital and physicians… marketing efforts. Integrated PHO or IPA… Delegated credentialing… contracting practices… deployed market strategies. Hospital-Physician Joint Ventures… Variable factors. © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (18)
  20. 20. Your Practice’s Role in Patient SteerageII. Patient Steerage – How Does It Really Work? Ensuring consistent patient/care giver satisfaction with your practice’s clinical quality and service quality – Do not underestimate the power of favorable clinical and service quality… i.e., the patient service experience… on the success of your practice and your payer strategy. – Ensuring you have a “customer” oriented culture? – Deploying strategies and resources to attract and retain patients and employees? – (Customer Service Leadership + Service/Clinical Quality Improvement) x (Staff Knowledge, Skills, Abilities) =  Improved Quality of Care, Patient Safety and Profitability… better payer leverage… reduced operating expense and risk exposure… more satisfied patient/customers. © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (19)
  21. 21. Your Practice’s Role in Patient SteerageII. Patient Steerage – How Does It Really Work? The clinical quality/cost efficiency of your practice… factors which are increasingly being considered by payers for tiered networks. Business growth/revenue diversification initiatives and inclusiveness/exclusiveness with other providers… don’t wait for the other shoe to drop! Your physician referral relationships, participation in Physician Organizations as well as your relationships with your affiliated hospital… all impact patient steerage. Your practice’s growth, marketing and referral strategies drive patient volume… not payers! © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (20)
  22. 22. Practice Business Value Chain and Patient SteerageII. Patient Steerage – How Does It Really Work? All Activities Patient Encounter Post Visit Patient That Lead To A & Services Outcomes & Patient Visit Delivery Satisfaction Patient REVISITS… new healthcare issues or continued health problems The “customer value” concept, common in retail businesses, does not work under a managed care network management model. Practice financial health and profitability is determined by how effective and efficient the Practice is in the overall delivery of services… clinical and non-clinical… and the value of these services to the patient customer as well as referring physicians. © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (21)
  23. 23. Presentation Agenda I. Payer Physician Networks  Basic Payer Goals  Participation vs. Non-Participation and Implications for Practice  Payer Contracting Options and Products  Trends in Marketplace Impacting Practice Revenues II. Patient Steerage – How Does it Really Work? III. Managed Care Contracting Strategies and Different Negotiating Techniques  Key Questions to Ask Before Signing Any Payer Agreement IV. Physician Alignment and Integration: Evolving and Emerging Business Models V. Questions & Answers Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (22)
  24. 24. A&M’s Three Phase Contracting ApproachIII. Managed Care Contracting Strategies and Different Negotiating Approaches The payer contracting process should be integrated with the practice’s strategic financial planning process to allow management to better determine their short-term/long-term financial targets, link financial targets to operational strategies and also align operational plans to financial targets. Develop Managed Care Negotiate Contracts Implement Contracts Contracting Strategy & Financial • Initiate Contracting Strategy/Proposal • Prepare Work Plan to Ensure Accuracy Planning Analyses Process with each Payer (new or prior of Contract Load, P-4-P and Care • Internal Assessment – Payer Contract to contract renewal) Management Program Implementation Performance, Modeling, Current • Collect Data on Practice Cash Issues • Integrate Contract into Patient Access, Practice Margin Gap, Net Revenue and Include in Negotiations Process Charge Capture & Patient Accounting Opportunity Assessment & Validation (i.e., for a concurrent resolution) • Payer Relationship Management • External Market Assessment – Payer • Counter Proposal Process and Rate • Revenue Recovery and Denial SWOT Analysis, Market Review, Sensitivity Modeling Analyses Management (ongoing process) Product Share, Physician Referrals, • Review and Finalize Contract/Rate Reimbursement & Alliance Options • Integrate with Payer Portfolio, Physician Amendment Referral Management & Network • Develop Overall and Payer Specific • If no Acceptable Contract… Prepare Development /Integration Strategies Contracting/Pricing Strategies, Tactics, Termination Disruption Analysis, Goals and Objectives • Monitor Payer Contract Performance Patient Retention/External • Standardize Contracting Process, Communications Strategy and • Train Staff Pricing/Proposal Templates & Practice Terminate Contract • Implement Outsourced Services (if Negotiations Team applicable) As part of the strategy formulation process, a leadership planning retreat is recommended © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (23)
  25. 25. Payer Contracting: Negotiating Process/ApproachesIII. Managed Care Contracting Strategies and Different Negotiating Approaches WHICH APPROACH FAVORS THE PAYER? THE PRACTICE? WITH EMERGING PROVIDER BUSINESS MODELS… WHAT WILL YOU NEED TO PREPARE FOR? Low Risk, Low Investment, Minimal Enhanced Moderate Risk, Some Traditional Performance… Payer Market Investment, Enhanced Market Defined Market Drive Performance and Link Payments and Driven {Small {Group to Strategy… Largely Process… Most Practice} Practice} Favors the Payer Common w/Practices High Risk/High Return, Higher Risk, StrategyStrategy Drives Process, Redefining Modified Drives Process,Alignment w/Physicians, Cost Plus Cost Plus Moderate Investments,Significant Investments, {Clinically {PHO-IPA- Better than Average Best Practices… Integrated} Hospital} Performance… moreRedefined Relationships Balanced Outcomes, with Payers, High Higher Termination Risk Termination Risk Practice Negotiating Models © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (24)
  26. 26. Payer Physician Contract Outline - Best PracticesIII. Managed Care Contracting Strategies and Different Negotiating Approaches Understand What You Are Agreeing To!!! © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (25)
  27. 27. Payer Contract Negotiations – Key QuestionsIII. Managed Care Contracting Strategies and Different Negotiating Approaches  How does the practice’s relationship with each key payer relate to its overall business goals and objectives?  Does the practice’s business goals and objectives with key payers drive its pricing and negotiating strategy?  Is the practice making or losing money on its key payer contracts? How does the practice know? – Can the practice improve its net revenues?  Does the practice’s relationships with payers help the practice to be more competitive in the marketplace?  Patient loyalty is to… the practice or the payer?  What will happen to some payer reimbursements if Gov. cuts payer plan payments… are fee schedules linked? © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (26)
  28. 28. Payer Contract Negotiations – Key QuestionsIII. Managed Care Contracting Strategies and Different Negotiating Approaches  How are the practice’s top line services impacted by its payer contracts? Protections from silent PPOs?  How are the practice’s competitors using payer contracts to their… Advantage? Disadvantage?  Practice’s patient service market share by payer product?  How do the practice’s contracts impact operational/capital planning?  How will the practice’s decisions on key payer contracts impact patient referrals to/from the practice?  What staffing and technology capabilities does the practice require to optimize its payer revenues?  What is the practice’s compelling value proposition for payers?  What are you committing to in the contract? © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (27)
  29. 29. Payer Contract Negotiations – Key QuestionsIII. Managed Care Contracting Strategies and Different Negotiating Approaches  What is the reimbursement relative to practice charges, cost and to Medicare?  What are the administrative requirements under the payer contract? What pre-authorizations are required for what specific services, and how will they impact current referral patterns?  Who determines medical necessity and how is it defined?  What are the specific eligibility determination requirements and how are retroactive terminations handled?  What are your appeal rights, how many levels of internal and external appeals are allowed and how are disputes resolved?  How are underpayments and overpayments to be handled?  Is the practice required to accept the payer contract under an overall “all payer” contract with the payer? © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (28)
  30. 30. Payer Contract Negotiations – Key QuestionsIII. Managed Care Contracting Strategies and Different Negotiating Approaches  Is the agreement an evergreen agreement and what are the term/termination provisions?  What is the annual inflation factor?  How and where has the payer modified the reimbursement fee schedule from traditional Medicare? – Is the fee schedule provided?  How are non-par referrals/coverages handled?  What P-4-P incentives are involved and what are the specific mechanics to obtain? Realistic? Meaningful?  If capitation or bundled payments are involved, what is allowed as a billable service outside the capitation? Risk adjustments?  How are new services/new technology added and reimbursed?  What are the payment timelines? Guarantees? © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (29)
  31. 31. Presentation Agenda I. Payer Physician Networks  Basic Payer Goals  Participation vs. Non-Participation and Implications for Practice  Payer Contracting Options and Products  Trends in Marketplace Impacting Practice Revenues II. Patient Steerage – How Does it Really Work? III. Managed Care Contracting Strategies and Different Negotiating Techniques  Key Questions to Ask Before Signing Any Payer Agreement IV. Physician Alignment and Integration: Evolving and Emerging Business Models V. Questions & Answers Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (30)
  32. 32. Emerging Provider Business ModelsIV. Physician Alignment and Integration: Evolving and Emerging Business Models  Physician alignment with hospital clinical care operations is critical for… – Better managing the care delivery process. – Gaining added resource efficiencies. – Expanding profitable patient service volume. – Improving bed management turnover and ALOS. – Optimizing managed care net revenue potential. – Developing a sustainable competitive advantage over primary competitors. © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (31)
  33. 33. Emerging Provider Business Models: Physician IntegrationIV. Physician Alignment and Integration: Evolving and Emerging Business Models Physician High… Alignment of Integration Risk & Return Continuum Clinically Joint Venture Integrated IDS • PHO/IPA/PO • Clinically Integrated PurchasePHO/IPA/PO • MSO/PSO • Asset Purchase • Surgery, Urgent & • Contractual and/or Employment • Non-Competes Imaging Centers Ownership Stake Low… • Employment • Hospital Syndication • Asset Purchase & • Employment Employment/Medical Alignment of & Ownership • Independent Group Foundation Risk & Return Contractors • Joint Ventures Cooperation • Medical Directorships • On-Call Coverage How will your practice address physician alignment and integration? © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (32)
  34. 34. Emerging Provider Business Models and PaymentsIV. Physician Alignment and Integration: Evolving and Emerging Business Models Continuum of Financial/Clinical Integration Full Global High The degree of Capitation provider Episodes of Care & integration andDegreeofFinancial Risk Gainsharing alignment of Global Hospital Capitation financial incentives Global Hospital across the care Case Rates continuum, will Medical Homes Low High determine the Acct Care Orgs ability of providers (Physician Model) to accept Risk Withholds & P-4-P risk/reward based Hospital PPS (IP/OP) payments, while FFS Charges Low remaining financially viable. Degree of Clinical integration © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved.
  35. 35. Provider Business Models: Clinical IntegrationIV. Physician Alignment and Integration: Evolving and Emerging Business Models  Clinical Integration 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." (*) Note: Above is excerpted/summarized information and does not represent a legal opinion. © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (34)
  36. 36. Cost of Care Drivers: Insurance Vs. Performance Risk IV. Physician Alignment and Integration: Evolving and Emerging Business Models Breaking Down An Episode of Care and Associated Costs Insurance Risk – How sick or well patients are… providers have Provider Performance Risk Wtd. Cost/ Specific Cost/Process for no control over this. CapitationInsurance Risk Episode of Care/ Each Service Person = Provided models in the 1990s contained insurance and performance risk, which caused major financial No. of Care No. Specific Clinical Episodes/ Processes performance challenges for many Provided/Service Person (times) providers. (times) No. & Type of Performance Risk – Once a No. Episodes of Care/Specific Services patient has an illness or condition Provided/Specific Clinical Episode and enters the healthcare system Episode of Care (times) (times) for treatment, it is appropriate for Provider Performance Risk providers to be held accountable for their performance in delivering Payer cost containment through price, payment care, the quality of the care and rules and utilization controls accomplishes little the cost of the care. with respect to quality or volume of care provided. © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (35)
  37. 37. Episodes of Care Payment Methodology ElementsIV. Physician Alignment and Integration: Evolving and Emerging Business ModelsKey Variables Length of time EoC Current EoC Type applies to. Payments Services to be bundled into an EoC payment. Tech Issues Yours? Key Payers? Source: Paths to Healthcare Payment Reform, Center for Healthcare Quality & Payment Reform (www.paymentreform.com) © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (36)
  38. 38. Provider Business Models: Clinical IntegrationIV. Physician Alignment and Integration: Evolving and Emerging Business Models Market Conditions Favorable for Clinical Integration  Traditional F-F-S and managed care payment sources are looking to slow payment growth, freeze or reduce payment levels to providers.  Increasingly difficult to the sustain traditional business models.  Technology has become a key factor for remaining competitive… clinical and administrative.  Major purchasers of healthcare are demanding evidence of improved quality, cost controls and utilization efficiency. Managed care health plans are increasingly expected to do more for less money, which will also impact payments to providers.  Practice economics are declining and physicians are overworked. © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (37)
  39. 39. Provider Business Models: Clinical IntegrationIV. Physician Alignment and Integration: Evolving and Emerging Business Models Market Conditions Favorable for Clinical Integration  Costs of care delivery are perceived or viewed as being too high.  Quality is perceived as mediocre and there is much variation in practice patterns among physicians.  Very little meaningful coordination of inpatient/outpatient/ ambulatory/chronic care services across the care continuum.  Decreased cooperation between hospitals and physicians with increased competition between both with each other… i.e., both going after the same fixed piece of the pie vs. looking to work together to increase the size of the pie piece.  Provider organizations best positioned in future state market environments will be those organizations which can effectively attract and retain patients. © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (38)
  40. 40. Provider Business Models: Clinical IntegrationIV. Physician Alignment and Integration: Evolving and Emerging Business Models Value Proposition for Hospitals and Physicians?  Allows for “pooling” of data and information across payers.  Provides for common standards and enforcement mechanisms that are not readily achievable by payers in the marketplace.  Provides a single efficient vehicle for physicians to interface with a large number of health plans.  Provides important vehicle for the hospital to achieve quality and community mandates with physician participation.  Enables efficiencies and quality enhancement that cannot be achieved by physicians and/or hospitals working independently.  Recognizes that physicians in a non-risk health plan environment can achieve efficiencies (cost and quality) without having to merge their practices or enter into a hospital employment model. © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (39)
  41. 41. Provider Business Models: Clinical IntegrationIII. Clinical Integration as a Better Model for Managed Care Contracting Value Proposition for Hospitals and Physicians?  Allows Hospital, Other Network Facility and Ancillary Services Providers to achieve efficiencies and clinical integration with network physicians and affiliated physician organizations.  Improves the value for the health care purchaser and the patient.  Employs significant financial incentives and other aspects of financial integration.  Collects relevant outcome data for consumers.  Increase access to market share and a more favorable payer mix.  Prepares providers for future payment methodologies that will hold them accountable for performance risk. Is any of the above materially inconsistent with the goals of both providers and payers for care and cost management? © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (40)
  42. 42. Provider Business Models: Clinical IntegrationIV. Physician Alignment and Integration: Evolving and Emerging Business Models1. Development and Organization Clinical Integration  Clinical Integration Readiness Assessment Development Process  Management/Clinical Development Team  Analysis of Current Legal Structure  Physician Alignment and Training  Analysis of Current Payer Contracting  IT Technology/Data Warehouse2. Initiate Clinical Integration Activities  Data Collection for Clinical Programs  Common Patient Registry  Network Refinement/Recruitment  Disease Management, EBM Clinical Protocols, and EMRs  Training and Physician Leadership3. Regulatory Compliance and Group Contracting  FTC Guidelines/Approval  Standardize and Integrate Protocols  Clinical Integration Network Contracting  Measure, Monitor, Report, and Educate © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (41)
  43. 43. Provider Business Models: Clinical IntegrationIV. Physician Alignment and Integration: Evolving and Emerging Business Models Illustration: Clinically Integrated Community PHO Network Model How will payers and Acute Care Full Service Hospital non-clinically and Related Services integrated providers Affiliated/Community-Based Physicians, Mid-Level Practitioners respond to clinically & Allied Health Providers integrated, multi- General and Advanced Medical Home Networks provider aggregations which Other Rehab, Sub-Acute, Behavioral Health & Ancillary Services Facilities can do joint contracting? Other Acute & Specialty Hospitals (e.g., Children’s & Cancer Hospitals) © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (42)
  44. 44. Physician - Hospital IntegrationIV. Physician Alignment and Integration: Evolving and Emerging Business Models  There is no one-size-fits-all approach.  Providers need to invest more in affiliations rather than less… traditional “cooperation” models are ineffective.  A shared culture, common vision, and operational support drive success more than economic incentives.  A defined business strategy should drive physician integration decisions. – Will the traditional practice business model be a viable and sustainable business model in your market in 3 to 5 years?  Balanced risk/reward compensation models work best with and for physicians.  Evolving payment models favor more integration vs. less. © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (43)
  45. 45. Presentation Agenda I. Payer Physician Networks  Basic Payer Goals  Participation vs. Non-Participation and Implications for Practice  Payer Contracting Options and Products  Trends in Marketplace Impacting Practice Revenues II. Patient Steerage – How Does it Really Work? III. Managed Care Contracting Strategies and Different Negotiating Techniques  Key Questions to Ask Before Signing Any Payer Agreement IV. Physician Alignment and Integration: Evolving and Emerging Business Models V. Questions & Answers Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (44)
  46. 46. Christopher KalkhofV. Contact Information and Speaker Bio ▲ Christopher Kalkhof is a Director with Alvarez & Marsal’s Healthcare Industry Group based out of New York, with more than 24 years of diverse healthcare and managed care management experience. He specializes in managed care strategy development and contract negotiations; contract implementation and integration with revenue cycle; 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 provider clients to optimize their net managed care revenue potential, resulting in net rate increases and revenue improvements in excess of $435 million. Over the span of his career he has gained managed care related work experience in over 20 states and has directly negotiated over 240 payer agreements for clients which have included hospital, behavioral health, physician, IPA/PHO, home care, hospice and skilled nursing facility contracts. He has also reviewed hundreds of additional payer contracts.Christopher Kalkhof, ▲ Current, recent and prior projects include: FACHE – Developing a broad-based managed care strategy and leading a contract rebasing/negotiations process, involving Director over 50 payer product contracts; inclusive of select payer collaborations and employer marketing. – Conducting a managed care revenue improvement assessment for a health system in a debt covenant violation Office with its creditors, to determine net revenue improvement opportunities. (347) 254-2433 – Managing a group health benefit payer selection process and building a tier-1 benefit provider network wrapped around a hospital and its medical staff. Mobile – Conducting a risk mitigation/EBIDA improvement opportunity assessment as part of a due diligence “clean team” (716) 912-0309 review of an acquisition candidate hospital, which also included a for profit, clinically integrated PHO joint venture. E-Mail – Evaluating a hospital’s current contracting strategy, contract content and physician-clinical integration options. – Managing contracting process for a health system with 1,400 employed physicians/mid-level practitioners. ckalkhof@ ▲ Prior to joining A&M, Mr. Kalkhof was as a Director in a Big 4 firm’s provider revenue cycle consulting practice and alsoalvarezandmarsal.com served as their national managed care lead. Earlier, he served in a number of interim management and consulting Website roles including: SVP of Payer Relations for a nine hospital health system; VP of Managed Care for a community hospital after the hospital’s separation from its parent health system; and as a functional Director of Managed Care forwww.alvarezandmarsal a community hospital while in bankruptcy and post-bankruptcy emergence. Mr. Kalkhof has also held management .com positions in a practice management firm, a health insurer, a HMO and a LTC facility. ▲ 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 topics for the HFMA, ACHE, MGMA, WRG and other professional groups. In 2008, Mr. Kalkhof served as a member of the New York State Office of Medicaid Inspector General’s Medicaid Managed Care Compliance Program Guidance Advisory Committee. © Copyright 2010. Alvarez & Marsal Holdings, LLC. All Rights Reserved. (45)
  47. 47. 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. 46 46
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