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Hospital / Physician Integration
Jeffrey Hatcher, MD, FACOGPhil Ellis, MBA, FHFMAJune 10, 2014
Phil Ellis, MBA, FHFMA
• CIPROMS, Inc. CFO & Senior Vice President
• Board of Directors, IN HFMA
• President-Elect & Board of Directors: HBMA
• Certified Electronic Records Specialist (Rutgers
University)
• 1.317.870.0480
Hospital/ Physician Integration
• This is a very broad topic
• We need some background, or “set up”
• We need to consider some things at the 30,000’ level
• We need to consider some things at the 3’ level
• Multiple issues to discuss
• And then put them back together so that they make
sense
o Or at least a little bit more than they do now!
Agenda
• Why integration is occurring
• What are the driving forces
• What are some issues facing hospitals
• What are some issues facing physicians
• Where is common ground
• What are the benefits of an integrated system
• What are the challenges of an integrated system
• What can we expect in the next 3 to 5 years
Hospital/ Physician Integration
• This is not from an accountant or economist’s perspective
• This is not from a legal perspective
• This is not from a political perspective
• This is about:
o Why it is happening
o What are the relevant issues
o What are the benefits / challenges• From a business and provider perspective
Why Integration is Occurring
• Quick exercise:
o Can we analyze a situation without bias?• Even if you are a current stakeholder?
o Can we shed our hospital or physician title?
o Consider 2 questions:• Who is impacted the most by our healthcare
financial “situation”
Why Integration is Occurring
• Concerned parties to the issue of rising costs of healthcare; pre
2000
o Employers
o Insurance companies
o Providers
• Concerned parties to the issue of rising costs of healthcare; post
2005:
o Employers
o Insurance companies
o Providers
o The General Public !
Why Integration is Occurring
o “Here’s another fine mess you’ve got us into….”
Who is Impacted the Most?
o The General Public• You, me, our families• Access to care is a necessity
– Not a career– Not an investment
o The Payers:• Must meet financial objectives
– Or they leave the markets– The Golden Rule (of healthcare)
Who is Impacted the Most ?
• The others provide services:o Hospitals
o Physicians
o Industry support• IT• Services; Revenue Cycle, Accounting, Collections,
etc.• Provider employees
• They DO NOT make the expectations of the General
Public. They respond to them
And Why is the General Public so Upset?
• Spending on healthcare is growing faster
than national income.o “A billion here, a billion there, pretty soon
you’re talking about real money!”• Sen. Everett McKinley Dirksen (Rep. Illinois)
o Let’s look at it another way:
o 1960: Healthcare was 5% of GDP
o 2012: Healthcare was 17.2% of GDP
o 2025: Estimate…. 20%
Driving Forces: The Process Itself
• Patient/ Consumer frustration
• Primary Care physician refers me to orthopedic surgeon
• Orthopedic surgeon admits to hospital
• Insurance claims from:
o Primary Care
o Orthopedic Surgeon
o Anesthesiologist
o Hospital
o Then balance billing from each
Driving Forces (cont.)
• Made sense to us…..
• But it DOES NOT to the General Public
• Kaiser Permanente CEO George Halvorson:
o “We have over 9,000 billing codes for individual
healthcare procedures, services, and separate units of
care. There is also not one single billing code for a cure.
Providers have a huge economic incentive to do a lot of
procedures. They have no economic incentive to actually
make us better. The economic incentive score is 9,000 to
zero –process vs. results”
Driving Forces: Demographics
o Demographics: • Retirees: 75 million Baby Boomers• 3 million will retire each year for the next 20 years
(Hospitals & Health Networks 1/14/14)• And will spend 50% of their income on
healthcare….out of pocket by 2025 (“The Unsustainable Cost of Healthcare” 2009)
Driving Forces: Payment Reform
• Evolving Payment Modelso Quality based
• Requires inputs from all providers
o Bundled Billing• One payment for all providers
– Independent or not– CMS and Commercial plans
o Patient Centered Medical Home
o Accountable Care Organizations
The Golden Rule
• He Who Has the Gold…Makes the Rules.
• And who is “He/She”?
oPublic and Private payers• “pay for quality not quantity”
Driving Forces: Payment Reform
• Key point:
o Previous combatants in the financial arena: • Insurance Payors• Employers• Providers
– Consumers represented a small % of payments
o Post reform combatants in the financial arena:• Insurance Payors• Employers• Providers
– Consumers represent a large % of payments
Driving Forces: Rising Deductibles
Driving Forces: Payment Reform
• Politicians did not drive payment reform alone.
• Angry voters drove politicians to payment reform
Driving Forces: Rising Out of Pocket Costs
• Average cost of Healthcare Premium rose 62% from 2003-
2011o (2012 Bill Fay, debt.com)
• Average cost of employee share (patient) rose 74%
(2003-2011)o (2012 Bill Fay, debt.com)
• Cost of Out of Pocket = 20% of family income in 35 stateso (2012: commonwealthfund)
Driving Forces: Payment Reform
• And they are not happy !
Driving Forces: Regulatory Requirements
• Security Rule:
• Technical Safeguards: (and the associated costs)
o Access Control
o Audit Controls: Hardware/ software to mechanisms to
record and examine access of e-PHI
o Integrity Controls: to ensure that e-PHI is not improperly
altered or destroyed.
o Transmission Security: Technical measures to protect
against unauthorized transfer of e-PHI
Driving Forces: Regulatory Requirements
• Technical (cont.)o Policy for password usage
o “Secured” passwords that is
• Overheard in the cafeteria:
• “We saved the hospital
money on user licenses by
sharing passwords!”
Driving Forces: Regulatory Requirements
• ICD-10…
o Well, maybe
• PQRS
o Value Based Payment Modifier
• RAC, MPIC, & other audits
• EHR & Patient Portals,
o Meaningful Use
• etc. etc. etc. etc. etc.
Hospital/ Physician Integration
• So…
• We’ve discussed why it is occurring
• We’ve discussed some of the driving forces
• Time for some perspective
o Jeffrey Hatcher, MD, FACOG
Relevant Issues from the Physician World
• Unwavering demand of payment reform
• Declining reimbursement
o Public plans (Medicare, Medicaid, VA, etc.)
o Health Insurance Exchanges
o Commercial plans
o Costs of collecting from Patient/consumers vs. Insurance
• Shifting costs from Public & Commercial payers to….
o You guessed it…. The General Public• (those are the ones who are upset)
Relevant Issues from the Physician World
• High Deductible Plans
o Not just HSA plans
o Soaring deductibles on traditional health insurance plans
o New GE employee health plan: Deductible grew from a
few hundred to $7,000.00 ….• Per Insured
o Consider the high cost of billing patients (consumers)
The Cost of Billing
• Impact of rising deductible plans
• Cost of billing insurance pays: eCommerce, semi-
automated
• Cost of billing patients:
• Multiple statements (Forms and postage)
o Telephone follow up calls• And the “Oh, I never got a bill” response
• Bottom line: It is much more costly to bill and collect from
patients.
Relevant Issues from the Physician World
• Price Transparency
• Some practices lowering the “meaningless” Gross Charge
o Why:
o Ask the front desk staff how many calls the get for
pricing.
• Prices too high, lose patients
• Prices too low, compromise revenue base
• We’re all trying to keep patients
Relevant Issues from the Hospital World
• The growing demand for a Holistic approach to healthcare
o From cradle to grave healthcare
• Competitive factors
o Market share
o Consumer ratings• Healthgrades, etc.
• Attracting reputable providers
• How to manage physician acquired physician practices
Relevant Issues from the Hospital World….It’s a Different World Over There!
• Part A, DRG vs. Part B, CPT
• How to analyze practice performance
• Practice Efficiency
o Effective management is:• Half management of people• Half management of data• You cannot measure what you cannot quantify
The Physician Practice
o What are the most critical data elements to monitor in a
medical practice?• System Protocols • Financial• Productivity• Work flows
Practice Management: Protocols
• Financial
o How are charges captured?• Office charges• Hospital charges
o How are daily charge totals recorded?
o How are daily payment totals recorded?
o How is that information delivered to the billing department?
o These are things where hospitals must understand• On their own• Or through supporting vendors
Practice Data & Practice Management
• Financial (continued)
o How are payments received (and what is the security
process?)• CBO?• Office street address• PO Box• Bank Lockbox• Credit Cards
o How are payments made in the office processed and recorded
o What is the appeals process for payments made which are
inconsistent with contractual terms?
Practice Data & Practice Management
• Review of Financial performance
o Who reviews trends?• Declining deposits
– What about charges in previous months?– Were charges confirmed to export files to e-
claims?– Does the AR reveal anything unusual?
• Increased managed care write-offs?– Was there a reimbursement change or a policy
change?
Practice Data & Practice Management
• Review of financial performance
• Any change in the Avg. Gross Charge per BPE?
• Any change in the Avg. Payment per BPE?
• Look at billing personnel costs & productivity
o What is the relationship to number of BPEs to hours
worked?• Paying overtime for billing? • Are all deposits posted?• Is there any mail not processed?
Practice Data & Practice Management
• “Must haves” from Practice Management systems
o Financial:• Gross Charges (from practice “charge master”)• Collections• Adjustments (managed care discounts)• Write offs (bad debt)• Gross charges by payer• Collections by payer• Gross Collection percent (by payer contract)• Account receivable by responsible party
Practice Data & Practice Management
• “Must haves” from Practice Management systems
o Financial:• Days in AR
– By DOS– By DOR
• RVU report• Liquidation report• Write off analysis• Denial reporting
o Billing at Gross vs. Allowable (and impact on AR Reports)
Practice Data & Practice Management
• “Must haves” from Practice Management systems
• Data
o “Billable patient encounter”• The basic unit of work • For provider productivity
– Alternative to using RVUs» X number of RVUs is not the same as multiple
lines of CPT codeso Necessary to evaluate MD and FTE levels
Practice Management: Productivity
o Average patient volume before the practice is acquired….
o Average patient volume after the practice has been
acquired• But why?
– Different EHR/ PM– Different scheduling protocols
o Practice staff culture• Different leadership team
o The time to address is before the acquisition• ……Not after
Practice Management: Work Flows
• Variety of EHR / PM is each practice acquired?
• How to consolidateo System conversion?
o Phase out of each?
• Do you need a business partner who speaks the language
Section Summary
• Issues to consider from the Physician perspective
• Issues to consider from the Hospital perspective
Common Ground?
• Successful health systems
o Include a reputable hospital
o With reputable providers
• Both are supported from quality business partners
o Accounting
o Technology
o Revenue Cycle
o Regulatory (compliance)
Common Ground
• At the most basic level:
• Patients, the General Public:
o Not interested in the financial, legal, economic divides
• Hospitals must have a strong physician relationship
• Physicians must have a strong hospital relationship
• Both provider types have a strong commitment to serve
patients
• Both depend on payer networks to provide that care
• Both must be adaptive to change
What Are the Benefits of an Integrated System?
• Meets the General Public demand for logical health care
delivery
• Integration fits payment reform
• Better coordination of care
• Better coordination of business efforts
• Attract highest professional business partners
• Cost efficiency
What Are the Challenges of Integration
• Disparate cultures
• Disparate systems
• Achieving a unified approach to:
o Patient care
o Processes
o Business protocols
What Can We Expect in the Next 3-5 Years?
• More integrated models like
o Cleveland Clinic
o Mayo Clinic
o Kaiser
• More Participants
o Walmart / Walgreen’s, CVS
• More Payment reform
Questions
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