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Centricity Live May 2014 Sustainable Physician-‐Led Enterprises – Lessons from the Field Don McDaniel Sage Growth Partners
Hypothesis: Health Care Will be Disrupted
There is an overwhelming confluence of
interests, incenIves, and macro-‐environmental forces that will disrupt the industry and drive
real change – Payment model redesign will be a core catalyst for
change
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A Step Further
§ Even if no net-‐new, domesIc U.S. HC is a $1T arbitrage opportunity – and its largely in faciliIes, specialists, transiIons, and chronic care management
§ Health care will experience its industrial revoluIon § Transparency § Standards § Focus on efficiency
§ In an industrial model – community organizers/entrepreneurs (PCPs) are very well suited to assume the mantle of leadership
§ The garage is coming to health care § IncenIves are aligned between payers and enlightened providers beUer then ever – economics and ACA are driving payers to shiW risk
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Lots of QuesAons
§ The role of hospitals and health systems § The role of physicians – especially independents § The role of subsItutes § The pace of migraIon to VBP § The pace of provider/payer convergence
§ WHAT IS THE PHYSICIAN-‐LED ENTERPRISE TO DO?
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What’s a Physician-‐Led Enterprise to Do? Focus on Three Swim Lanes
Best Care
Dominant Delivery
OrganizaIon(s)
Dominant Delivery Network
Dominant Enabling Business Pla^orm
Best Health Status Best Value
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THE EVIDENCE
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Volume to Value MigraAon AcceleraAng
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Medicare ACO Map Geographic DistribuAon of ACO Covered Lives
Increase in ACOs Medicare and Commercial Increase in Number of ACOs by Ownership Type
Source: LeaviU Partners, Growth and Dispersion of Accountable Care OrganizaIons: August 2013 Update.
Source: LeaviU Partners, Geographic DistribuIon of ACO Covered Lives December 2013 Update
Source: Health Affairs Blog with data from LeaviU Partners February 2013.
Percent of Total ACO Contracts by Payer
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56%
14%
5%
2%
3%
3%
17%
CMS Cigna Aetna WellPoint BCBS of Mass Cambia Health SoluIons Other
Source: AIS. Reprinted from Health Plan Week. hUp://aishealth.com/print/31639 March 2014
Hospital ACO Plans
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Resources to Improve PopulaAon Health Management Partnerships to Improve PopulaAon Health Management
Hospital ACO Plans by Size Hospital ACO Plans by LocaAon
0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00%
Rural Non-‐rural
0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00%
Already Have ACO in place
By the end of 2013
By the end of 2014
By the end of 2015
AWer 2015 Not in the forseeable future
Small Hospital Mid-‐sized Hospital Large Hospital
71.60% 62.40% 61.50%
56.90% 45.90%
41.30% 41.30%
37.60% 30.30%
LIFESTYLE/WELLNESS COACHING
PATIENT-‐CENTERED MEDICAL HOMES
TRANSITIONAL AND/OR END-‐OF-‐LIFE CARE
HOME HEALTH
PATIENT RISK STRATIFICATION
VIRTUAL CARE/TELEMEDICINE
PARTNERING WITH PAYERS
INTEGRATED CLINICAL, SUPPLY CHAIN, AND FINANCIAL DATA
PATIENT REGISTRY
76.90% 53.80% 51%
46.20% 46.20% 44.20%
40.40%
PHYSICIAN AND PROVIDER LEADERSHIP WITHIN ORG
LOCAL HEALTH DEPARTMENTS
LARGE LOCAL EMPLOYERS
PRIVATE PAYERS (COMMERCIAL)
HEALTH AND WELLNESS-‐FOCUSED COMMUNITY GROUPS
EXTERNAL HOSPITALS, HEALTH SYSTEMS, OR NON-‐ACUTE PROVIDERS
PUBLIC PAYERS
Source: Premier, Inc Accountable Care OrganizaIon and PopulaIon Health Management Trends Dec. 2013
Physician ACO Plans
Confidence in Vendor’s Ability to Assist in CoordinaAng Care
Physician Familiarity with ACOs Pay-‐for-‐Performance Program ParAcipaAon
42%
23%
6% 3%
26%
None 1-‐2 3-‐4 More than 4 Don't Know
How Would Shi_ing an ACO Affect…
Source: AthenaHealth Physician Survey 2013.
Hospitals won’t disrupt themselves!
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Private Health Insurance Benefits by Spending Category
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18% current OUTPATIENT
32% current INPATIENT
32% current
PHYSICIAN
4% current
OTHER
15% current DRUGS
Fastest Growth 2007 -‐ 2012
Slowest Growth 2007-‐2012
8.2% Growth
10% Growth
8% Growth
6.1% Growth
5.4% Growth
Source: Price Waterhouse Coopers Medical Cost Trend: Behind the Numbers 2013 “Other” category includes services such as ambulance, home health and durable medical equipment
PCP = 6%!
Challenged Public Payers
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Source: Avalere Health analysis of American Hospital Association Annual Survey data, 2012, for community hospitals. (1) Includes Medicare Disproportionate Share payments. (2) Includes Medicaid Disproportionate Share payments.
70%
80%
90%
100%
110%
120%
130%
140%
150%
92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
The (really) lean health plan
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Number of Lives Covered by ACO Contracts
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EsImated Number of Lives Covered by ACO Contracts; Source: LeaviU Partners Center for Accountable Care Intelligence
New reality High performing provider organizaAons must manage risk
• Market forces driving a heightened need for financial accountability
• Insurers seeking to transfer the financial risk of clinical service
• The risk-‐transference taking the form of payment-‐for-‐value arrangements
• Entrepreneurial provider-‐sponsored organizaIons are well posiIoned
• OrganizaIons may lack technology and soluIons infrastructure to transform their business models
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Where are you? Are you ready?
16 Source: Klas and LeaviU Partners report on ACOs. November 2012.
NEW (?) PAYMENT MODELS
Evolving Models Diverse Strategies
§ Bundled payment arrangements § Quality performance incenIves § Gain sharing § Narrow network arrangements § Shared-‐risk/Full-‐risk payments
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§ Fee-‐for-‐service § Fee-‐for-‐outcome § Fee-‐for-‐access/Network
model
Why VBP?
§ Purchasers are demanding more accountability around quality and cost
§ Medicare and Medicaid need the “stop loss” § Its a way to take and grow share § It allows a focus on “industrial improvement” § Its working in key markets § Its driving quality outcomes
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Overall Medical Trend – Winning and Losing Panels
20 Source: CareFirst PCMH Program Data
Overall Decrease in Medical Trend
21 Source: CareFirst PCMH Program Data
BUILDING CAPABILITIES TO ADDRESS MARKET NEEDS
CITI research1 Framework for managing populaAon health
1Source: PopulaIon Health Management-‐Hill’s Handbook to the Next Decade in Healthcare Technology, 14 May 2013
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CCHIT ACO Framework
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Source: CCHIT. An IT Framework for ACOs. hUps://www.cchit.org/c/document_library/get_file?uuid=47dd2a86-‐2872-‐41c7-‐8wd-‐dbc260eddf5d&groupId=18
Elements of an Integrated Care Strategy
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SOURCE: “Clinical Decision Support”. ADVISORY BOARD
Path to High Performance Accountable Care
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LESSONS FROM THE FIELD
LamenAng the Incumbent
§ Legacy thinking (referrals, beds)
§ Legacy costs
§ Legacy technology
§ Legacy governance
§ A rejecIon of market principals (For the most part)
§ Legacy payment models
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The Legacy Voice
29 Source: Health Leaders Media hjp://www.healthleadersmedia.com/pdf/white_papers/0913_Intel%20Report_Free%20Report%20v41.pdf
Old Economy MoAvaAons of Hospitals
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Source: Health Leaders Media “Top 3 objecAves or moAvaAons behind physician alignment strategy.” hjp://www.healthleadersmedia.com/pdf/white_papers/0913_Intel%20Report_Free%20Report%20v41.pdf
New IniAaAves in the Next Three Years
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Source: Health Leaders Media “Which of the following iniAaAves will your organizaAon be pursing in the next 3 years?” hjp://www.healthleadersmedia.com/pdf/white_papers/0913_Intel%20Report_Free%20Report%20v41.pdf
Why are Physicians Seeking Employment?
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Source: Health Leaders Media “Top 2 moAvators for physicians to seek employment.” hjp://www.healthleadersmedia.com/pdf/white_papers/0913_Intel%20Report_Free%20Report%20v41.pdf
Independent Physicians are Dying Off?
33 Sources: hUp://www.healthleadersmedia.com/pdf/white_papers/0913_Intel%20Report_Free%20Report%20v41.pdf
Current In Three Years
Physician Employment Trends
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Source: Accenture Physician Alignment Survey 2012. hUp://www.accenture.com/SiteCollecIonDocuments/PDF/Accenture-‐Clinical-‐TransformaIon-‐New-‐Business-‐Models-‐for-‐a-‐New-‐Era-‐in-‐Healthcare.pdf
Sustainable?
§ Hospitals lose on average $176,463 per physician on owned physician pracIces
§ The longer a hospital owns physician groups, the higher the likelihood it is losing money on them.
§ The more physicians a hospital employs, the more likely they incur losses
§ 78% of hospitals are paying physicians non-‐producIvity incenIves (paIent saIsfacIon, clinical quality, and ciIzenship), expected to rise to 94% in 3 years
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Sources: MGMA 2013 Cost Survey All mulI-‐specialty groups, hospital-‐owned and Report: Hospital-‐owned pracIces lose up to $100K per doc each year – FiercePracIceManagement
How Hospitals Can Avoid Physician Alignment Losses
Risk Area PotenAal Loss MiAgaAon Strategy
Market Strategy Acquired pracIce does not support service line strategy and drains needed resources from other strategic investments
Build physician strategy on well designed service line plan; use plan to analyze acquisiIons
ProducIvity Employment dynamics and new demands of health system parIcipaIon reduce paIent volume and pracIce producIvity
Introduce compensaIon incenIves for producIvity, quality, and cost control
Capital Investment AcquisiIon includes purchase of office building, high-‐cost equipment or other physician assets
Contract with physician under a provider services agreement (PSA) to minimize capital request
Payor ContracIng PracIce carries underperforming health plan contracts with low fee schedules, restricIve policies, and frequent payment delays
Subject newly employed pracIces to payer review; drop or renegoIate low-‐fee contracts
Revenue Cycle PracIce loses revenue on inefficient coding and billing and high denied claims rate
Add experIse in physician billing; centralize revenue cycle operaIons or outsource to a third party
Technology PracIce EHR system is incompaIble with hospital system, but hospital EHR is too complex and expensive for pracIce staff
Support a range of ambulatory EHR systems and provide implementaIon project management
Clinical IntegraIon PracIce does not support quality, safety, and cost control goals of overall health system
Set quality and cost milestones aligned with hospital goals; provide support and performance feedback
36 Source: Strategic Physician Onboarding: 7 TacIcs for Minimizing Losses on Employed Medical PracIces. hUp://www.beckershospitalreview.com/hospital-‐physician-‐relaIonships/strategic-‐physician-‐onboarding-‐7-‐tacIcs-‐for-‐minimizing-‐losses-‐on-‐employed-‐medical-‐pracIces.html
What’s a Physician-‐Led Enterprise to Do?
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Dominant Delivery
OrganizaIon(s)
Dominant Delivery Network
Dominant Enabling Business Pla^orm
If It Were My OrganizaAon, I’d be thinking about… § PopulaAon Health – let’s define – needs to be CORE § AUribuIon/idenIficaIon § Surveillance § Risk assessment § Risk straIficaIon – what’s our triangle look like? § Gap assessment § Coordinate/drive intervenIons
§ On-‐ramps for providers – especially PCPs § Running through walls to enhance/aggregate primary care
§ Build a new economic model – “the era of 3x” § Employment opIons § Find the entrepreneurs
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If It Were My OrganizaAon, I’d be thinking about…
§ Aggressively courAng Payers/Purchasers (Insurers, TPA/ASO, Employers, Unions, Purchasing Groups) § Make something different happen § Get out and talk early and oWen § Don’t make assumpIons and don’t ignore purchasers
§ Embracing transparency wholeheartedly – Prices, Costs, Quality
§ Don’t forget the infrastructure – And plan the Ecosystem § IT, Rev Cycle, Messaging, CDS, PH, PI, Retail, remote monitoring, etc. etc. etc.
§ Capital Partners – be creaAve
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QuesAons?
Thank you
Don McDaniel dmcdaniel@sage-‐growth.com
410.534.1161 443.904.2882
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