B–1 BOARD OF REGENTS MEETING

B–1/207-17 7/12/17

UW Medicine Strategic Review – Project design, work plan, areas of emphasis, and analogs INFORMATION This item is for information only. BACKGROUND The Regents have engaged ReCon Strategy (http://reconstrategy.com/) to perform a strategic review of UW Medicine. An initial report out on project design, work plan, areas of emphasis and analogs will be provided. Full materials will be available on the day-of the meeting.

UW Board of RegentsUWM Strategic Review

Preliminary update 

July 12 2017

ATTACHMENTB–1.1/207-17 7/12/17

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Objectives for today’s discussion

Provide a process update and review some specifics of the work‐planning 

Share some initial findings from review of analog systems

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Key messages for today

Project is on track after “soft” kick‐off last month

Interviews with Regents suggest strong focus on assessing strategic risks and governance • Work plan tweaked to ensure appropriate breadth of analogs

Analog set matches UW Medicine core features (including state system challenges)

Academic medicine recognizes that it must transform to thrive in value‐based world

Analogs provide good illustrations of the scope of change underway• Stitching together broad, integrated systems across geographies and care continuum• Building capabilities to support population health and value‐based care• Investing heavily relative to local competition

Governance structures vary substantially across analogs• Governance must promote and support integration of clinical, teaching, and 

research mission and activities• Empowerment plus local factors and culture likely key drivers of what works

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Project on track after soft kick‐off last month

Completed Initial interviews with Regents, selective UW Medicine Board members and senior leadership within UW Medicine as part of “soft kick‐off”

Site visits for major elements of UW Medicine

Initial data collection

Selection of benchmarks for deep dives

Underway Detailed review of benchmarks (including interview targets)

Follow‐up data requests 

Interviews with next layer of UW Medicine management

Narrowing on key analytical priorities

Development of pressure testing scenarios

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Based on our interviews, Board of Regents is focused on strategic risks and governance challenges

Deep respect for UWMedicine accomplishments, capabilities and long‐term momentum

At a high level, strategy seen as consistent with market• Recognition that strategy has risks and requires investment (…and a strong desire 

to understand these better)

Market changing fast: reimbursement uncertainty, able competitors, market entrants.  Given that context, recent financial performance raising broader questions:

• Does it have required structures, capabilities and resources to execute?• What are the gaps and can these be addressed fast enough to ensure success?• Is the senior team overburdened given significant growth of enterprise?

Significant discomfort with current approach to governance• Several efforts to put improvements in place, but ambiguity of roles remains • Information flows seen as insufficient to support full engagement and oversight

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No major changes to work plan requiredAdding additional analogs to ensure broad fact base

Preparation ImplicationsAnalysis

Engagement with UW and UW Medicine leadership throughout

Data collection Consistency andcompleteness 

Alignment withenvironmental opportunity

Scenario characterization(high level)

Robustness checks

Key risks and implicationsfor governance

Benchmark selection Performance and strategycomparison with peers Financial implications and

outcome ranges

1 2 3

July Sept

Internal

Compar‐ables

Scenarios

Lenses

Originally planned 3‐4 analogs. Now: 5 full reviews + 1 for governance insights only

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SystemHosp‐itals Beds

Affili‐atedphysi‐cians

CoreMSA pop (M)

Share (in 

MSA)5

Primarycompetition 

(share in MSA) KaiserCIN, ACOactivity

NIH$M1

Med stud.

Prim. care rank

Univ. con‐trol

System leader 

report to SoM dean

UWMedicine 5 1,380 2,799 3.8 33% Swedish/Prov(26%) Now 2 employers,

Premera 639 1,022 1 Yes Yes

Johns Hopkins Medicine 7 2,415 3,454 2.8 23% UMD (34%)  Yes CMS MSSP 565 471 27 No2 Yes

(joint)

UCSF Health 5 1,039 1,372 4.7 51% Sutter (23%) Yes Canopy Payer ACOs 577 633 3 Yes No

UCSD Health 4 671 1,168 3.3 16% Sharp (37%) Yes Humana ACO 330 507 12 Yes Yes

UC Health(Colorado) 83 1,706 2,806 2.9 27% HealthOne 

(33%) Yes UCHealth IN Cigna ACO 195 697 8 No No

UNC Healthcare 154 2,918 3,477 2.26 26% Duke (26%) UNC Alliance

BCBSNC ACO 278 834 2 Yes Yes(joint)

Michigan Medicine  3 1,008 2,548 1.26 43% St. Joseph

Mercy (32%)Together HealthCMS MSSP 402 719 5 Yes Yes

(joint)(1) Based on NIH data compiled through the US News methodology except University of Colorado(2) Johns Hopkins University and Johns Hopkins Health System are separate legal entities(3) Primary hospitals. System also has several small hospitals and several under construction.(4) Large share of hospitals outside the core MSA(5) Based on inpatient Medicare Fee For Service charges (non-Medicare Advantage); may not fully include Kaiser in all markets(6) Expanded geographies used for UNC (Raleigh-Durham-Chapel Hill CSA) and Michigan Medicine (combined Ann Arbor, Flint, Lansing MSAs)Sources: NIH, US Census, Medicare inpatient charges dataset FY2014, health system websites, press releases, US News & World Report, AHD, Definitive Health, Recon analysis

Our six analogs match key features of UW MedicineNote: Michigan Medicine to be analyzed on governance topics only

Clinical Research Academics Governance

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Each analog also has specific features which make them useful comparisons on strategy

• Strong research branding and medical education legacy• Sophisticated ability to manage risk (e.g. own health plan)• Yet remains “boxed in” to the #2 market share position

• Sustained market leadership vs. strong local competition (Sutter)• Strategic partnership driven growth (esp. John Muir system)• Aspirational model especially given public university position

• Slower pace on value‐based transition and partnership strategy• Facing reinvigorated Kaiser competition (new hospital)• Share position behind 2 strong local competitors (Sharp, Scripps)

• Holding its own against strong in‐market academic competition • Moving quickly on regional/multiregional/rural network and population 

health transition

• Competing vs. mix of non‐profit, for profit systems, and Kaiser• Moving quickly on regional/rural network and population health 

transition

• Broad regional set of primary clinics + recent hospital acquisition• Recently changed governance structure to consolidate clinical and 

educational leadership roles

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Academic medicine recognizes need for radical change to thrive in value‐based environment

Note: Adapted from Advancing the Academic Health System for the Future: A Report from the AAMC Advisory Panel on Health Care (2014)

Scope Broad regional scope and services across the continuum of care

System Organization and systems which promote unified direction and accountability

Governance Governance structures which promote strategic alignment with universities on critical challenges and how they should be addressed

Leadership Academic and physician leadership structures will need to grow as the clinical and organizational cultural requirements rapidly evolve to demands of new era

Transparency Transparency of progress towards value‐based care demonstrated in quality outcomes and financial performance

Operations Operating model restructured and focused on delivering value‐based care and operational efficiency

Population health Leadership on population health strategies for attributed lives and communities

Cultural readiness Culture of candor and rigorous self‐assessment to support rapid evolution towards the new model 

Key recommendations from “Advancing the Academic Health System for the Future” study

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Analogs illustrate several key themes

The importance of health systems encompassing services across the care continuum increases as networks are “hardened”

Academic medicine is building capabilities to position for continued transition from fee‐for‐service to value‐based care/reimbursement; how far along varies greatly

As a whole, academic medicine is investing heavily – often outpacing local competitors

No one‐size‐fits‐all model for governance, however initial findings suggest that empowered dedicated healthcare boards support success

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Analog systems tightening control of referral flowResult of network expansions and hardening of competitor networks

Note: System-ness defined as: (total # of in-system encounters for all Medicare Fee For Service admissions within 30 days of admission)/(Total # of encounters for all Medicare Fee For Service admissions within 30 days of admission). Source: Definitive Health (Medicare data from CMS 2013-2015 Physician Referral Patterns datasets); Recon analysis

System 2013

Gains fromfirming 

affiliations

Losses from reduced external 

referrals 2015

UWMedicine 60% 6% 6% 72%

Johns Hopkins 62% 4% 5% 71%

UCSF 60% 2% 4% 66%

UCSD 68% 4% 2% 74%

UCHealth (CO) 67% 4% 3% 74%

UNC 67% 5% 4% 76%

Average 64% 4% 4% 72%

Degree of “system‐ness” of Medicare Fee For Service patientsadmitted to system flagship academic hospital

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UCHealth building geographically diverse, cross‐continuum system 

GeographyPhysician

practices / clinicsCommunityhospitals

Tertiary / Quaternary Behavioral

Post‐acute / long‐term

North(Fort Collins)

Central(Denver)

South

Colorado Health Medical Group

Poudre ValleyHospital

Medical Centerof the Rockies Mountain Crest

O/P facilitiesAnchutz campus + 9 

other clinics

University of Colorado Hospital

Center for Dependency, 

Addiction, Rehab(50 beds residential)

Associates in Family Medicine

Memorial Hospital Central

University of Colorado Medicine / UPI

Affiliated O/P facilitiesHospital campuses + 

Medical Plaza

Parkview Medical Center

Parkview Medical Group

Kindred

Vivage QualityHealth Partners

Colorado SpringsPueblo

SoM practice group long affiliated with UCHealth but with ownership participation in the Integrated Network

Creation of behavioral health service line, 

integrated into clinics

7/2012 – Joint Operating Agreement with PVHS

2015 – Various strategic initiatives10/2012 – Long term lease of MHS operations

2017 – Launch of UCHealth Integrated Network

Pre‐2012 core UCHealth

Physicians part of Colorado Health Medical Group

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UCSF uses affiliations to expand geographic footprint

GeographyPhysician

practices / clinicsCommunityhospitals

Tertiary / Quaternary Behavioral

Post‐acute / long‐term

East(East Bay)

Central(San Francisco)

North (Marin/Sonoma)South(San Mateo)

SF General – long‐standing partnership for primary, secondary, 

hospital care (staffed by UCSF faculty/residents)

7 hospitals & 3 medical groups join UCSF/JMH ACO; renamed “Canopy Health”

2013 – Begin affiliation strategy

2015 – Upgrade UCSF assets2014 – Launch of UCSF/John Muir network

2016 – Expansion of UCSF/JMH ACO

Pre‐2013 core UCSF

Future – New development under UCSF, BayHealth

UCSF Medical Center at Mission Bay  opens (289‐

beds);Parnassus upgraded for 

specialty services

2015 – Intro of “UCSF Health” as integrated healthcare network, incorporating all UCSF hospitals and SoM

Hospice by the Bay affiliation

Children’s Oakland partnership

Washington Hospital affiliation (341‐bed acute, Gamma Knife Center, rad 

onc, OP surg)

Expanded affiliation to include medical oncology

UCSF/John Muir Health create JV “Bay Area Health Network”, cornerstone of new ACO

Network expands med spec (transplant)

UCSF Parnassus original campus (hospital, ambulatory care)

UCSF Porter Psychiatric Institute at Parnassus

UCSF Mount Zion becomes outpatient hub once Mission Bay 

campus opens Plans to open new Berkeley OP center via JV development company 

BayHealth

UCSF plans for new psych building at Mission Bay, will double UCSF OP 

capacity

UCSF Benioff Children’s

7 hospitals & 3 medical groups join UCSF/JMH ACO; renamed “Canopy Health”

Richard H Fine People’s Clinic (staffed by UCSF faculty/residents)

Source: UCSF website, press releases, local coverage

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Analogs illustrate several key themes

The importance of health systems encompassing services across the care continuum increases as networks are “hardened”

Academic medicine is building capabilities to position for continued transition from fee‐for‐service to value‐based care/reimbursement; how far along varies greatly

As a whole, academic medicine is investing heavily – often outpacing local competitors

No one‐size‐fits‐all model for governance, however initial findings suggest that empowered dedicated healthcare boards support success

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UNC investing considerable organizational resources in value‐based care capabilities

Strategic leadership and architecture

Strong cadre for implementation

Selected key initiatives

Creation of the UNC Institute for Healthcare Quality Improvement (2013)• Intellectual leadership with model 

development and research 

Appointment of a Chief Analytics Officer reporting to the CEO (2016)• Strategy to maximally leverage Epic 

across system “Epic@UNC”

VP for Practice Quality & Innovation Management• Focus on supporting transformation of 

physician clinical practice• Care management • Population health

VP for Operational Efficiency• Focus on lean hospital operations

Director of Performance Improvement for UNC hospitals• Focus on hospital quality, e.g. 

readmissions

Dedicated System VP for post‐acute care

Primary Care Improvement Initiative (2013)

Outpatient Transitions Collaborative (2014)

Reducing Patient Harm (2015)

Enhanced attractiveness of UNC Health Alliance Clinically Integrated Network for non‐affiliated community practicesAbility to deliver on accountable care and engage in value‐based contracting

Sources: UNC public documentsB–1.1/207-17 7/12/17

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UCSD Health System organizational groupings are more traditional

CHANCELLOR UCSD* Chief Human Resources 

Officer Vice Chancellor forHealth Sciences and

Dean, School of MedicineChief Financial Officer, UCSD Health Sciences

Chief Executive Officer andChief Strategy Officer, UCSD Health

CEO Clinical Practice & Dean Clinical Affairs, Health Sciences

Chief Counsel,UCSD Health

Assistant Dean Clin Affairs, Health SciChief Operating Officer, Clinical Practice Org

Chief Compliance and Privacy Officer ** Chair, Dermatology ** Chair, Anesthesiology CAO Surgical, Anesth, Musc, 

Neuro, Imaging ServicesChief of Staff UCSD Health System

Associate Dean Clinical Affairs, Health Sciences

** Director, MCC * Chair, Biomedical Informatics

CAO Cardiovascular, Derm & Hospital Medicine Chief Medical Officer Chief Executive Officer

Internat’l Clin Programs

** Chair, Pediatrics ** Chair, Emergency Medicine

CAO Oncology, Radiation Therapy Services

Director, Primary Care Operations

Associate Dean, GME and Designated Official ** Chair, Psychiatry ** Chair, Family Medicine 

and Public HealthCAO,  Women & Infants, Psychiatry, Ophth Services Director, Managed Care

Chief Quality andPatient Safety Officer

** Chair, Radiation Medicine & App Sciences ** Chair, Medicine

** Chair, Radiology ** Interim Chair, Neurosciences

** Chair, Reproductive Medicine

Acting Chief of Clinical Affairs, Neurosurgery

Director, SCVC Acting Chief of Academic Affairs, Neurosurgery

Director, SCVC ** Chair, Ophthalmology

** Chair, Surgery ** Chair, Orthopaedic Surgery

** Chair, Urology ** Chair, Pathology

Associate Vice Chancellor Health Sci Advancement

Board Of Governors

Chairs Chairs Chief Adm. Officers (CAO) Corporate Functions Medical Group

* Joint Health System and Health Sciences appointment

** Joint Health System and Health Sciences appointment  (75% Health Sciences; 25% Health System)

Director, Telemedicine

Associate Medical Dir., Ambulatory Quality

Chief Operating Officer UCSD Medical Group

Chief Experience Officer

Medical Dir Ambulatory Primary Care – Family MedMedical Dir Ambulatory Primary Care – General 

Internal Medicine

Executive Director, Student Health&Wellness

Chief Contracting Officer

Chief Operating Officer UCSD Clinical Integration 

Network

Chief Clinical Officer

Chief Financial Officer

Chief Information Officer

Source: UCSD Health posted org chart, May 4 2017B–1.1/207-17 7/12/17

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Analogs are stepwise committing business to value‐based reimbursement 

System 2011 or earlier 2012 2013 2014 2015 2016 2017

JohnsHopkins

EHP (55K members); Priority Partners MCO; US FHP; PepsiCo CoE

CMS MSSP ACO (39K lives in ‘15); Walmart/Lowe’s/McKesson CoE

Medicare Advantage plan

UCSF Blue Shield ACO (city /county employees, 19K lives in ’12); Health Net HMO ACO (12K lives in ‘15)

Anthem ACO (employers, 13K lives in ‘15); BPCI (joint)

Canopy/ Health Net ACO (UC employees);  Cigna ACO (PPO members, 8K lives); Blue Shield HMO ACO (12K lives in ‘15)

United ACO(self‐funded employers) 

UCSD MedicareAdvantage/Humana

AccentCare BPCI (joint)

United ACO (self‐funded employers) 

UCHealth CO Access RCCO Medicare Advantage/Anthem

Cigna ACO (CHMG);BPCI (joint)

CMS MSSP ACO

UNC BCBS Carolina Advanced Health pilot

CMS Next Gen ACO (~24K lives); Cigna ACO (health plan members)

Entry into risk‐based contracts: 

GovernmentCommercial

Key:

ACO = Accountable Care Organization ; BPCI=‐ Bundled Payment for Care Improvement; EHP = Employer Health Program; MCO = Managed Care Organization (health plan); MSSP = Medicare Shared Savings Program; RCCO = Regional Care Collaborative Organization

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Analogs illustrate several key themes

The importance of health systems encompassing services across the care continuum increases as networks are “hardened”

Academic medicine is building capabilities to position for continued transition from fee‐for‐service to value‐based care/reimbursement; how far along varies greatly

As a whole, academic medicine is investing heavily – often outpacing local competitors

No one‐size‐fits‐all model for governance, however initial findings suggest that empowered dedicated healthcare boards support success

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Analogs reinvesting heavily into the businessOften outpacing competition 

Note HCA, Medstar, Dignity are multi-regional systems with substantial presences and headquarters beyond the markets they share with the analogs; a significant portion of their capital expenditures is allocated centrally and therefore not captured in the regional market. *Note: 2012-2016 for Baltimore, San Francisco, and San Diego; 2011-2015 for Raleigh-Durham and SeattleSource: Definitive Health (Medicare data from CMS 2013-2015 Physician Referral Patterns datasets); Recon analysis

0

2

4

6

8

10

12

14

16

18

20

22

24

26

HCA

Virginia MasonUCSD

Sharp

Wake

JH

Swed/Prov

Sutter

UW

UNC

Dignity

MedStar

County Duke

UCSF

UMDScripps

LifeBridge

CHISLC

UC Health

5‐year average ratio of CapEx to Net Patient Revs, %*

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Example: Johns Hopkins budgeted $500M in CapEx  in 2015 relative to Net Patient Revenue of $5.6B

Source: Johns Hopkins Medicine: A Look at Our Books Fiscal Year 2015 Capital Budget and Annual Operating Plan 

59

40

146

104

65

3734

25

JH SOM

529

Suburban Hospital

OtherHoward County Hospital

Sibley Hospital

2015 Capital Expenditures ($M)

Children’s Hospital

JH Hospital

Bayview Medical Center

JH Health System

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Key investments and facility locations

Epic imple‐menta‐tion

New tower

Reno‐vation of 

I/P facility

Build out of O/P cancer facilities

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Analogs illustrate several key themes

The importance of health systems encompassing services across the care continuum increases as networks are “hardened”

Academic medicine is building capabilities to position for continued transition from fee‐for‐service to value‐based care/reimbursement; how far along varies greatly

As a whole, academic medicine is investing heavily – often outpacing local competitors

No one‐size‐fits‐all model for governance, however initial findings suggest that empowered dedicated healthcare boards support success

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Wide range of governance systems which are the result of historical adaptations

Johns Hopkins SOM and Health System started out separate but joined in the 90s

University of Colorado SOM and Health system were separated in the early 90s

UNC Health system was granted substantial autonomy by the State in the early 00s 

Position of Dean and CEO are combined under “JH Medicine” accountable to president of JHU and board of JH Medicine• Board of JH Medicine is self‐perpetuating

UCHealth has a CEO accountable to its Board and is independent from the University of Colorado• BoR has strong influence on Board of 

UCHealth composition 

Position of Dean and CEO are combined and reports to UNC leadership but is accountable to UNC Health Board of Directors with broad authority. 

At least through an external view, each of these models seem to be working well for the systems they serve – there is no obvious “best model”

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Strategic context’s implications for governancePreliminary thoughts

The landscape for each analog is anything but static….most are taking strategically active postures in response

• Fleshing out the care pyramid through alliances, acquisitions, build‐outs• Restructuring operations towards efficient care delivery and value• Commitment of substantial financial resources

An active posture requires accelerated decision making on complex investment and risk issues and opportunities, placing a significant burden on governance

• Effective governance will require active engagement at a high level of complexity

Possible outcomes ‐‐• Governance keeps pace with strategy and addresses strategic requirements• Strategy gated by governance, leading to missed opportunities and falling behind• Strategy moves faster than governance, creating stress and insufficiently pressure‐

tested decision‐making

B–1.1/207-17 7/12/17