HFMA Executive Survey: Value-Based Payment Readiness
HFMA Executive Survey: Value-Based Payment Readiness explores ways hospitals are readying their value-driving capabilities and determining ROI of efforts in an environment where incentives increasingly are focused on improving quality and reducing costs of care delivery for patient populations.
Determining Your Options: Educating Your Board
It is essential to keep your organization's board of directors up to date on your organization's current situation, capabilities and needs, and potential options for acquisition or affiliation. As you narrow in on the most viable options and partners for your organization, the PowerPoint template tools below outline key elements of your proposed course of action that should be shared with the board. Options are provided for proposals involving both less than fully integrated and fully integrated acquisition and affiliation models. Tool: Educating Your Board: Less than Fully Integrated Models Tool: Educating Your Board: Fully Integrated Models Go to Next Page Home
A Closer Look at a Health System’s Strategic Options
An example of the evolving physician strategy of a health system with a clinically integrated network is shown below: Manage the mix of independent and employed relationships. Rationale: The right mix varies depending on the hospital, market and service, even within a highly aligned, integrated system. Failure to balance and coordinate incentive structures and approaches between independent and employed physicians is a threat to the system. Create financial and non-financial incentives for independent and employed practices to reduce leakage out of the system. Rationale: Keep all elements of the CIN moving forward at roughly the same pace with respect to the journey from fee-for-service to value-based payment. Accept specialty facilities and specialists back into the system. Rationale: It is becoming less attractive for specialty centers to remain independent, and it behooves the system to work out a path for them to move from competitor to ally. Some of these specialists are particularly good, and the system does not want them going to a competitor. Also, since the system’s payments are still significantly fee-for-service, these specialists create profits that can be re-directed to strengthen the financial base. Use changes in physician relationships to manage the physician/patient ratio. Rationale: The greatest cause of “excessive” investments in employed physician practices is a shortage of patients per physician. For example, some employed physicians place restrictions on their schedules that hinder filling them with patients. Also some employed specialists have too few patients because they don’t have enough referrals from independent physicians in their service area. Continue to adjust employed physicians’ compensation packages as the ratio of value-based to fee-for-service revenues changes. Rationale: Relying on leadership is not enough; compensation has to remain aligned.
A Closer Look at a Medical Group’s Strategic Options
The independent medical group has several options regarding its future strategy. Indeed, many groups pursue more than one strategy at once. Here is an example of a single specialty orthopedic group’s strategy: Merge with a (formerly) competing orthopedic group. Rationale: cover more geography, enable the group to support a sports medicine practice, enable the group to have its own rehabilitation group, support more hospitals more effectively, support a stronger professional management team, and support additional orthopedic sub-specialization. Initiate a bundled payment initiative. Rationale: learn (along with a partner health system) to manage all elements of the care process in a value-based payment environment, and gain additional revenues once successful. Integrate IT approaches with as much as possible of the referral base (including EHR, decision-support, and other elements). Rationale: an essential step in accomplishing the other elements of the group’s strategy, with the potential to reduce the group’s total IT costs. Provide leadership in developing a CIN. Rationale: expand and shore up key parts of the group’s referral network, lead the development of an integrated approach to care management for the group’s patients (including total joints, trauma, and other areas), influence the development of the CIN’s funds flow and compensation models, and influence the alliances and other relationships developed by the CIN. Together, the orthopedic group’s strategies seek to make the transition from fee-for-service to value-based payments, to enhance short-term revenues and market position, and to make the group more successful in recruiting.
Clinically Integrated Networks
Overview. The clinically integrated network (CIN) is an increasingly preferred alignment option. First, it allows employed and independent physicians to develop and implement a full range of coordinated approaches. Second, it allows combinations into larger groups—for example, one health system’s CIN can work with another system’s CIN, or with a larger independent CIN—creating a still larger group that will be more cost effective in achieving population health management. The underlying principle of the CIN is that it enables more effective, coordinated care, and that this is better for the patient. One of the strongest appeals of the CIN is its flexibility. CINs can include many forms of hospital-physician models—academic practice plans, employed physician groups, independent physician groups—as long as they adhere to legal requirements of a CIN. CINs increasingly include the full range of care options, including pre- and post-acute services. In order to fulfill the legal requirements of a CIN, the network must develop and follow common approaches to delivering care (for example, for chronically ill patient populations). A discussion of the legal requirements for CINs is available in HFMA’s Acquisition and Affiliation Strategies Value Project report. Need to insert graphic Organizing services within a CIN. Many CINs begin by organizing care into major service areas. Teams are organized under the CIN’s governing body. These are typically comprised primarily of physicians and advanced practice clinicians, but also may also include the broader care continuum (including pre-and post-acute care services). They are often under the management of a dyad leadership—the chief medical officer for the CIN, for example, will be paired with an administrative leader. Tool: Organizing a CIN by Service Area Common quality and cost emphases for CINs. High cost points in care transitions include readmissions to hospitals and leakage from the CIN. Special task forces or teams are often assigned to address these issues. After the CIN has been in place for a time, the network often identifies selected populations that are disproportionately expensive and could benefit from targeted approaches. Example segments that are being targeted for special approaches include: Chronic or intensive care groups, such as cancer and cardiac patients that benefit from targeted multi-disciplinary teams in a specialized setting The sickest of the sick, who can benefit from targeted care through specialized extensivist or ambulatory intensivist services that provide better care and help avoid inappropriate hospitalization Multiple diagnosis patients, such as patients with six or more diagnoses who also may be treated best by a multidisciplinary team in an ambulatory setting Homebound and nursing home patients, who may benefit from mobile care. The precision with which these populations are identified and cared for on an ongoing basis is improving through techniques such as predictive modeling.
Employment of Physicians
As noted in the Strategies for Physician Engagement and Alignment report, many health systems are focused on physician practice acquisition and direct employment of physicians (or use of a foundation model in states that ban direct physician employment). The trend toward physician employment has several implications: Specialists’ referral bases are increasingly comprised of employed physicians. Referrals are also increasingly made by other healthcare professionals (e.g., physician assistants and care coordinators) who are also employed by health systems. The percentage of physicians in clinically integrated networks (CINs) is also climbing. As a result, these two processes are becoming more coordinated, with many common issues and approaches, and a significant overlap in key decision-makers. Some CINs carefully balance the number of board members from independent practices, employed practices, and faculty practice plans based on the make-up of the CIN. Recruiting for employed physician groups often emphasizes the ability and inclination of a physician to collaborate. Employment is not alignment. A common refrain among systems that are pursuing physician employment is the caution that employment is not equivalent to alignment. Healthcare Strategy Group, which is sponsoring this Value Project topic, has identified eight functional areas, identified in the graphic below, that together define a high-performing employed physician network. Based on these eight areas, Healthcare Strategy Group has developed 67 Tips for Developing a High-Performing Physician Network, available on the Healthcare Strategy Group website, as well as a free tool—available below—that enables health systems to assess the state of their employed physician network. Health systems can access a free tool that enables them to assess the state of their employed physician network on the Healthcare Strategy Group website at. Tool: HealthcareStrategy Group’s Physician Network Diagnostic Tool Compensating employed physicians. Physician compensation will need to adjust in sync with changes in payment models and other strategies. As a system accepts more risk-based payment, for example, incentivizing physicians based on quality and cost-efficiency goals will become more important. If a system accepts capitated or global payments for managing the health of a population, the size of the patient panel a physician and his or her team is able to manage can become a significant factor in determining the physician’s compensation. Shown below is an example compensation approach, provided courtesy of the Healthcare Strategy Group, for a health system with a growing number of employed physicians in a market that is still mostly fee-for-service. The example is for employment of a primary care physician; in practice, the terms of compensation agreements will vary according to market conditions and physician specialty and in all instances must be vetted for fair market value and commercial reasonableness. Tool: Example of aPhysician Compensation Agreement Next Page Home Previous Page
Determining Options
Health systems and physician groups have a range of options. The tool below displays a range of approaches in terms of degree of integration as well as degree of change in terms of physician autonomy. Tool: Physician – Health System Alignment Options As health systems move from fee-for-service towards value-based payments, their physician relationships tend to move higher on the integration scale displayed in the alignment options tool above. Both employment and clinically integrated networks are increasing rapidly in popularity. Bundled payments are also common, both through the Center for Medicare and Medicaid Innovation’s bundled payment program and with commercial insurers. For many health systems, bundled payments are a key step along the journey. As one academic center CFO noted, “This allows us to start looking at data and talking costs with our physicians for the first time.” Next Page Home Previous Page
Market Assessment
Both health systems and medical groups should assess and understand the local physician market to determine their best options. Ten questions for assessing a local physician market are: What is the physician supply/demand balance in the market by specialty? What types of care are delivered within the market, and what is referred out of the market? Where do cases that leave the market go, and why? What are the referral patterns within the market? For example, do referrals go freely across system lines, or is “leakage” being reduced? Are referrals influenced by narrow networks, clinically integrated networks, or some groups (for contractual reasons or other factors) not accepting some payer categories? Are some groups deemed to be of higher quality than others? What is the growth or decline in the patient population? How are patient demographics changing? How are physician groups likely to respond to the changes? Are physicians in some groups doing significantly better or worse financially than the market as a whole? How easy is it to recruit physicians to this market? Where does the market stand now in terms of these indicators: •Medicare cost per member per month? •Commercial costs per member per month? •Physician group revenues per RVU, per specialty compared to national benchmarks?
Health System Perspectives
Most health systems’ key initiatives depend on the involvement of its physician groups (both employed and independent). This tool illustrates the steps in the journey toward population health management and health system sustainability can be made without direct physician involvement.
Assessing the Situation
A successful physician strategy is built upon an understanding of: Perspectives of the health system seeking to develop or refine its physician strategy Perspectives of the medical group and physician practices (both employed and independent) with which the health system seeks to engage Relevant market conditions As a starting point, it is important to understand the perspectives of both health systems and medical groups (employed and independent). Both perspectives are important, and although they share certain common goals, they are not the same. Tool: Examples of Common and Organization-Specific Goals