Duke Surgery Clinical Offsite Models

AASA National Conference

October 6, 2015

Katherine Stanley, Chief Administrator

2

Agenda

• Vision of Duke Surgery

• Duke Surgery Clinical Service Delivery Goals

• Clinical Offsite Models within the organization of Duke Surgery

– Number and specialties within DOS

• More details around the Affiliate Model

• Other Considerations

PDC Confidential – Not for Distribution

3

Duke Surgery Vision

United for all Patients

4

Excerpt from Duke Surgery Mission Statement

Provide safe and high-quality care based on an advanced understanding of and respect for our patients’ needs, and guided by best practices.

Page 5

Lab/Program

Division

Department/Center

School of Medicine

PDC

University

DUHS

School of Nursing

Department within the Duke Health organization

6

Contributions of Offsite Models

• Allows for dispersed network of providers to care for Duke patients

• Allows for better allocation of certain overheads

and can generate academic funds

• Expansion of quality, clinical brand - marketing

7

1. Duke Surgery Practice Creation (DPC)

2. Hospital Coverage Agreement (HCA)

3. Affiliate Hospital Purchase Services Agreement (PSA)

4. Private Practice Affiliation (PPA)

5. Safety and Quality consulting

Types of Clinical Offsite Models

8

PDC/DUHS identifies the opportunity to develop a stand alone outpatient clinic site. This could be primary care, specialty care or both.

Physician practice will be created by the PDC as its own unique cost center. The facility itself could be leased or owned by DUHS. DUHS could have hospital-based services at the location.

Financial Model is a “Start-Up” model with financial backing in the PDC Affiliations budget for a defined time period (ex: 2 years). Short-term $ risk with non-compete for long-term commitment of providers.

Newly recruited practice physicians become PDC members (assigned to a Department and Division) and there may be rotation of existing PDC physicians to the site.

Administrative Staff become Duke Employees assigned to the practice site and paid for by PDC. Practice to remain as its own cost center and with the intention of migrating the clinical operations

and financial budget to the assigned Department/Divisional after startup period. Evaluation Analysis: Professional reimbursement, market share gained, construction investment

and FMV of leased assets.

Direct Practice CreationExisting Faculty and/or New RecruitsPDC Operated

When: This approach is best utilized for affiliate sites that are startups and need business planning/support from Duke Medicine. This type of approach takes investment and typically success is measured based upon market penetration (market share). This type of strategy is more about managing site investment and services contained may include existing and new incremental providers.

9

Coverage (Subsidy) Agreement Model

Hospital provides compensation for PDC providing hospital required (e.g., call, inpatient rounding, operative coverage, etc.) professional services as a “Coverage Agreement.” PDC is at financial risk above the Coverage Dollars, but PDC realizes full profit or loss for practice.

PDC owns and operates the practice and employs the non-provider staff.

PDC provides the physician and physician extenders for the practice. PDC provides the recruitment services.

PDC bills and collects for services and retains all receipts.

PDC leases any necessary office space directly, and the clinic is designated as a PDC outpatient clinic.

When: This approach is best utilized when a hospital needs clinical support and also wants Duke Medicine to run the clinic (professional management, billing collections, EPIC, etc.). This is a model that only has 1- to 2-year time horizon for a contract, as requested by a hospital.

10

Resource Utilization and Flexibility: Potential for maximizing utilization of staff in an outpatient clinic setting. PDC will manage the staff (hiring and day-to-day management) in support of the physician practice. There also is the ability to use staff in this structure to support a multi-specialty practice setting. PDC may also be able to locate a site strategically within the market.

Market-Based Contracting: PDC will perform all the physician contracting with payors, and this may be separate from facility contracting. This allows for patients to access outpatient benefit provisions (copays) versus hospital-based deductible structures.

Outpatient Practice Efficiencies: Potential efficiencies for purchase and maintenance of equipment, facilities and medical & office supplies by the PDC. The practice will have access to all the purchasing and other centralized support of the PDC (purchasing, equipment leases, space leases, etc.).

Hospital Considerations for a Coverage (Subsidy) Agreement

11

Purchase Services Agreement Model

Hospital pays the PDC to provide the physicians and physician extenders for the practice as a “Purchase Services Agreement.” Hospital-Based or Owned Clinic Model.

Hospital owns and operates the practice and employs the non-provider staff (although certain mid-level providers are PDC). PDC provides the recruitment services.

Hospital realizes full profit or loss for practice.

Hospital bills and collects for professional and technical services and retains all receipts.

Alternative – The PDC bills and collects professional charges and turns all receipts (less a cost-based percentage for billing services) over to Hospital.

When: This approach is best utilized when a hospital needs manpower but wants to run the operations via the hospital operations (i.e., a hospital-based clinic). This is a model that only has 1- to 2-year time horizon for the contract, and when requested by a hospital. Some hospitals see this as a replacement for employment by a hospital directly.

12

Hospital Branding of Services: Hospital can brand the services to patients as a one-stop shop for services, while also branding Duke Affiliation and Duke Physicians.

Facilities:  Hospital-owned practice designation, thereby streamlining facility overhead structure. If the practice is designated as outpatient, this would allow for patients to access outpatient benefit provisions (copays) versus hospital based deductible structures.

Non-Provider Staffing: Hospital to employ support staff and integrate into hospital wage/benefit programs and staff management structure.

Hospital Considerations for a PSA Agreement

13

Financial Model is a “Private Practice” model with risk to remain with the practice physicians.

PDC could develop a centralized Department for Affiliates (remove Departments). PDC could nominate a Chair of the Affiliate Department and/or Board membership. Practice physicians become PDC members.

Practice will be run and maintained in its existing site(s) as its own unique cost center within the PDC.

Administrative Staff become Duke University employees assigned to the practice site. Practice to remain as its own cost center and with intention to remain as a “Stand Alone

Clinical Site.” Oversight for “Day-to-Day” clinical operations primarily resides with the local practice

physicians. Compensation model should be a private practice Revenue Minus Expense model, subject

to regulatory compliance review. Evaluation Analysis: Professional Revenues and valuation of the lease amount for assets to

be retained by the physicians.

Private Practice Affiliation (“CPDC”)Existing Physician Practice – Primary or Specialty

When: This approach is best utilized for affiliate sites that wish to remain in a private practice-like model of compensation and autonomy while also having the entity assume certain business risk. This approach provides flexibility but requires an affiliate that has a sustainable business model on their own professional revenues. Option has low investment and low risk for the institution.

14

Number and Types of Arrangements

• Cardiothoracic Surgery – HCA (3); Quality reviews (3)• Vascular – Lumberton – HCA (1) ; PSA (1)• Bariatric Surgery – PSA (1)• Acute Care Surgery / SICU – PSA (1)• Head & Neck Surgery and Communication Science –

PPA (1)• Advanced Oncologic and Gastrointestinal Surgery – PPA

(2); HCA (2)• Urology – DPC (1)

15

Arrangements with DUH

• Oncologic Surgery• Pediatric Surgery• Dental Surgery• SICU• Acute Care Surgery• Emergency Medicine

16

Determining the Model

• Requests of Affiliate Hospitals• Needs of Duke Health System Hospitals• Professional revenue stream • Ability to expand a specialty

PDC Confidential – Not for Distribution

17

Affiliate Organizational Structure

Duke Private Diagnostic

Clinic, PLLC

Health Plan Contracts

Malpractice Plan

Duke University School of Medicine

PDC MSO & Billing

Services

Individual Physician Contracts

• Physician 1 – Practice X• Physician 2 – Practice X• Physician 3 – Practice X• Physician 4 – Practice XPractice X,

PA

• PDC Does Not Hold Assets• Physicians May Retain Assets – (Enhances Flexibility)• Accomplishes Mutual Objectives of the Parties

Practice Responsibilities

• Practice Employees Become PDC Employees

• Practice Operates on the Duke Maestro Care System

• PDC-Practice Bills & Collects on PDC Systems and PDC Collects Receipts to Assign to Physician P&Ls

• PDC-Practices Retains the Right to Oversee Expense Allocations

• PDC-Practice Retains the Right to Oversee Quality Initiatives

18

Management Services Summary

• Duke PDC Management Services (Paid for by fee as a percent of receipts)

• Physician Services– Contract Management and General Management– Physician Credentialing

• Financial Services– Financial and Accounting Services– Financial and Operational Performance Reporting– Health Plan payer Contracting

• Support Services– Human Resources and Benefit Management– Billing and Collections – Joint Commission Accreditation– Legal and Compliance Oversight– Real Estate Planning, Site and Lease Management– Access to Duke PDC purchasing contracts– Patient Satisfaction Survey and Data

• Information Systems Services– Connectivity to Duke Systems– Duke Software for Billing and Scheduling – Staff Training and Support on Billing Software – Cash Management Policies– Duke Appointments Reminder Service

• Direct Practice Expenses – Physician Compensation and Benefits– Physician Malpractice Expenses– Practice Employee Salary and Benefits– Office based equipment (lease or fair market

cost)– Practice based facility maintenance – Medical Supplies– Facility Lease costs– Telephone and IT Hardware Costs– Physician Professional Fees/Dues/Subscriptions– Advertising costs– Travel– Postage and Freight – Office Supplies for Billing– Other direct practice expenses

• A la Carte Services from Duke PDC– Physician Recruitment– Charge Capture and Revenue Management

Services: Direct cost depending on the request.– Practice Specific Marketing Program: Direct

cost depending on the request.

19

Overview Of Typical Due Diligence Process For Affiliation

Initial Discussion

• Execute Confidentiality Statement• Submission of Data by Practice for Analysis

Practice Assessment

• Conduct Financial Assessment of Practice• Conduct Operational Assessment of Practice• Present Initial Financial & Operational Analysis to Practice• Determine Mutual Desire to Move Forward

Contract Discussions & Execution

• Develop Physician Contractual Agreements

Practice Integration

• Credentialing• Physician On-boarding• Staff On-boarding• Information Technology Transition• Joint Commission Preparation• Lease Transfers

20

Practice Assessment - Financial

• Submission of requested data elements for analysis by Physician/Practice.• Designation of Physician/Practice contact for communication during

development of analysis• Review by PDC of data submitted. PDC will respond to Physician/Practice

within 2 weeks with additional questions or data needs.• Development of pro forma by PDC

– Uses practice’s actual expense and PDC benefits, etc.– Compares practice’s managed care contracting aggregate

reimbursement to PDC’s, although individual rates are not shared. – Identify opportunities for financial enhancement of practice– Review benefits of practice – compare to PDC’s

• Presentation of initial analysis/findings to Practice.

21

Practice Assessment - Operational

Determines affiliation start-up cost and practice impact through…

• Joint Commission Mock Survey– PDC Safety Officer surveys clinic and provides a plan to meet Joint Commission standards.

Areas reviewed include: Infection Control, Environment of Care and Patient Safety

• Information Technology Site Assessment– Patient Revenue Management Organization (PRMO) assesses current IT capabilities to

determine appropriate equipment is in place to perform PDC billing functions

• Compliance Review– Existing Malpractice– Billing Compliance – Minimal Chart review to ensure current billing practices meet

governmental and third party payer guidelines

PDC Confidential – Not for Distribution

22

PDC Due Diligence and Assessment Timeline

Sign Confidentiality Agreement• 1-2 Weeks

Practice Submits Requested Information• 1 Month

Practice Assessment Completed• 2 Months

Contract Discussion & Contract Execution• 1 Month Practice Integration

• 4 Months

3 ½ Months 5 Months

Timeframe May Be Less Depending on the Extent of Contract Discussions

23

Other Considerations

• Faculty Appointments or no Faculty Appointment– depending on expected academic duties.

• Stark Law– Physician compensation regulatory considerations

24

Thank you and Acknowledgements

• Guy DeCarlucci, Esq., General Counsel, Private Diagnostic Clinic, PLLC

• William Schiff, Vice President Strategic Services and Network Development

• Paul Lindia, Vice President, Network Services, Duke University Health System