the tennessee orthopaedic society proudly presents: payer contracting: taking control, getting it...

The Tennessee Orthopaedic Society proudly presents:

PAYER CONTRACTING: TAKING CONTROL, GETTING IT DONE,

& MAXIMIZING RETURNS

RELIANCE CONSULTING GROUP

Presented by :

John P. Schmitt, Ph.D. - RCG Managing Director &

Robert W. Keen, Esq. - Legal Counsel2-15-12

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Part I: The Need for Payer Contracting– Orthopaedic Practices: Survival & Satisfaction– Payer Contracting: Example Solution & Savings

Part II: The Process of Payer Contracting– Taking Control: Strategies & Pitfalls– Getting It Done: Strategies & Pitfalls– Maximizing Returns: Strategies & Pitfalls

Part III: The Future of Payer Contracting– What is coming next? What to do about it– How should you resource payer contracting?

AGENDA

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PART I: THE NEED FOR PAYER

CONTRACTING

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• “Doctors in America are harboring an embarrassing secret: Many of them are going broke” (CNN Money, 1/5/12)

• Hospitals’ physician employment jumped 32% from 2000-2010. (AHA Hospital Statistics, 2012)

• Small Business Administration (SBA) loans issued to physicians rose from $60 million in 2000 to $675 million in 2011 (CNN, 1/30/12)

MEDICAL PRACTICES

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• Between 2010-2011 Orthopaedic practice revenues declined by nearly 10%

• Orthopaedic physicians’ average income dropped from $350K in 2010 to $315K in 2011

• Only 51% of orthopaedic physicians report being satisfied with their profession, and only 46% would choose medicine again as a career

Source: Medscape Physician Compensation Report: 2012 Results

ORTHOPAEDIC PRACTICES

6Source: Medscape Physician Compensation Report: 2012 Results

MEDICAL PRACTICESWho’s up, Who’s Down Since 2010?

7Source: Medscape Physician Compensation Report: 2012 Results

MEDICAL PRACTICESPhysician Compensation In 2011

8Source: Medscape Physician Compensation Report: 2012 Results

MEDICAL PRACTICESSatisfaction by Specialty

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PAYER CONTRACTING: EXAMPLE PORTFOLIO

Blue Cir-cle

15%Tri-dent 8%

Sigma7%

Coastal3%

Comm. Other22%

Medicare/Med-icaid27%

Other18%

ACME Payer Portfolio

Overall Revenue

$8,800,000/yr

Blue

Cir-cle

28%

Tri-dent

14%Sigma13%

Coastal5%

Comm. Other40%

ACME Commercial Payers:

Accounts for 55% of overall practice

revenue

Commercial Revenue

$4,840,000/yr

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• Return on Investment (ROI): • Commercial payer revenue: $4,840,000• Contracts determined for negotiation (60% commercial

revenue) $2,904,000• Conservative adjustment (15% reduction): $436,000• Negotiated returns: ($2,904K-$436K) x 5% estimated

adjustment= $123,000

Year 2: $123,000Accumulated earnings: $208,000

Year 3: $123,000Accumulated earnings: $331,000

Year 1: $123,000 (- $38,000)

Accumulated earnings: $85,000

= 2.24 ROI

= 5.47 ROI

= 8.71 ROI

• Example Contracting Costs: $38,000 (estimate)• Pre-negotiation analytics & research• Negotiation meetings & evaluations• Payer relations & product participation

PAYER CONTRACTING: EXAMPLE ROI

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PART II: THE PROCESS OF PAYER

CONTRACTING

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Strategies

• Taking Control

• Getting It Done

• Maximizing Returns

PitfallsPAYER CONTRACTING

&

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“As you negotiate contracts and terms, data can add a powerful punch.”

- Susan Turney, MD, President MGMA-

ACMPE, Coaches Corner, MGMA Connexion, April 2012)

Develop compelling analytics!!TAKING CONTROL: STRATEGY # 1

Data Examples:• Practice costs relative value units (RVU)• CPT-specific fee schedule analytics• Practice quality and cost metrics• Payer mix and market analyses • Payer network analyses

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Develop compelling analytics!!TAKING CONTROL: STRATEGY # 1 (continued)

CPT Codes & Fees

CPT: 99213DESC: ESTABLISHED PATIENT-LOW

CMS: $66.09

Tennessee Orthopaedic UCR Charges

99213 = $110.52

Relati

ve Va

lue U

nit (R

VU) Cos

t Ana

lyses

9921

3 = $7

5.34

Commercial Minimum RVU Analyses99213 = $84.60

Market-Based (37415) Payer Analysis99213 = $90.55

Payer-Specific Negotiation Strategy & Recommendations

• Example:

Fee Triangulation

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MEDICAL PRACTICESTAKING CONTROL: STRATEGY # 2

• Determine payer service area (zip codes)• Determine payer panel count (attribution)• Apply AAOS population statistics to payer

information (next slide)• Research payer network’s orthopaedic

membership in the service area• Prepare payer-specific presentation to

include subspecialists, quality data/metrics, unique delivery capabilities (payer will do cost/variance analyses using claim histories)

Know your competition- and compete!!TAKING CONTROL: STRATEGY # 2

16Source: AAOS Department of Research: April 2010

MEDICAL PRACTICESTAKING CONTROL: STRATEGY # 2 (continued)

Nationally, the 2010 density of orthopaedic surgeons is 5.67 for every 100,000 people in the US. In Tennessee, the density ranges between 6.0-6.6 per 100,000 people.

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“Overall the (surveyed) practice executives realized that they are more reactive than

proactive with their business and strategic planning processes. They stated there are numerous external and internal variables beyond their control, such as physician

retirement, insurance fee schedules, and regulator changes that constrain their ability to plan for their practices’ future growth.”

-Practice Excellence-Success Stories for

Outstanding Orthopedic Practices, MGMA, J. A. Harvey, 2007

Being reactive rather than proactive!!TAKING CONTROL: PITFALL # 1

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• You don't ask you don't receive- everything is negotiable

• The real issue is not discounting but reducing cost variance: http://www.changehealthcare.com

• Patients with high deductibles are researching and negotiating provider prices; providers should research and negotiate payer reimbursements: http://www.healthcarebluebook.com

Accepting payer contract offers as non-negotiable!!

TAKING CONTROL: PITFALL # 2

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Example: Chattanooga, TN

Accepting payer contract offers as non-negotiable!!

TAKING CONTROL: PITFALL # 2 (continued)

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• Payer reps are messengers• Prepare a message around CMS’s "Triple

Aim"– Lower per-capita cost– Clinical excellence and accountability– Improved population health

• Deliver the message to decision-makers found in the clinical, business development, and economic areas-Chief Medical Officer, V. P. Networks, Medical Actuary

Get your message to the decision-making level!!

GETTING IT DONE: STRATEGY # 1

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• Payer Contracting is two-fold: 1) Tactical- contract/fee adjustments; 2) Strategic- payer relationship building

• Low trust causes friction and slows negotiations e.g. hidden agendas, win-lose thinking, defensive communication.

• High trust produces speed- e.g. transparent data, kept commitments, win-win-win solutions.

Build high trust payer relationships!!GETTING IT DONE: STRATEGY # 2

Trust =Trust =

SpeedSpeed

CostCostSource: The Speed of Trust, Stephen R. Covey

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Assuming all payers are the same!!GETTING IT DONE: PITFALL # 1

0 5000 10000 15000 20000 25000 30000100.00

105.00

110.00

115.00

120.00

125.00

130.00

135.00

140.00

145.00

150.00

Blue Circle

Trident

CoastalPillar Health

Fortress

ThorGroup

Zygomed

HealthStreamSigma

ACME Orthopedics-Analytic ResultsBusiness Case Analysis

RVU's

% o

f Med

icare

commercial minimum

cost

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Contract terms impact all aspects of your practice!

• Practice Development

• Internal Operations

• Risk Exposure

TAKING CONTROL: PITFALL # 1Overlooking legal safeguards!!

GETTING IT DONE: PITFALL # 2

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Practice Development• Exclusivity• Affiliate• Assignment (Silent PPOs)• Favored Nation• Marketing Limitations

TAKING CONTROL: PITFALL # 1Overlooking legal safeguards!!GETTING IT DONE: PITFALL # 2 (continued)

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Internal Operations• Eligibility Confirmation• Claims Submission• Payment Timeframes• Dispute Resolution• Inclusion of External Documents

TAKING CONTROL: PITFALL # 1Overlooking legal safeguards!!GETTING IT DONE: PITFALL # 2 (continued)

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Risk Exposure• Termination• Standard of Care• Third Party Beneficiaries• Medicare Rates• Class Action Waivers

TAKING CONTROL: PITFALL # 1Overlooking legal safeguards!!GETTING IT DONE: PITFALL # 2 (continued)

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Where do you fit in? Are you prepared?

Know where payment reform is headed!!

MAXIMIZING RETURNS: STRATEGY # 1

CMS Payment Reform Timeline

2010 2011 2012 2015+

Paym

ent v

ia P

IP In

itiat

ives

P

PACA

Gain

Sha

ring

– ACO

’sBu

ndle

d Pa

ymen

ts &

H

ealth

Insu

ranc

e

Exch

ange

s

Phys

icia

n Va

lue-

base

d

M

odifi

er

EHR

Mea

ning

ful U

se

2013

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New delivery models:– ACOs (2011)

• 32 Medicare Pioneer Programs (mostly hospital-centric)

• 27 Shared Savings Programs (mostly physician-centric)

– Patient Centered Medical Home (PCMH 2008)–Narrow Networks (2012)

New Payer Relationships:– Episode-based bundled payments (2013)– Value-based payment modifiers (2015+)– Partial capitation arrangements ( ? )

Prepare for accountable care!!MAXIMIZING RETURNS: STRATEGY # 2

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Prepare for accountable care!!MAXIMIZING RETURNS: STRATEGY # 2 (continued)

Source: Physician Compensation Shifting Incentives, HealthLeaders Media Intelligence, October 2011

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Prepare for accountable care!!MAXIMIZING RETURNS: STRATEGY # 2 (continued)

Source: Medscape Physician Compensation Report: 2012 Results

Participation in Various Payment Models

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Prepare for accountable care!!MAXIMIZING RETURNS: STRATEGY # 2 (continued)

Source: Medscape Physician Compensation Report: 2012 Results

How Will ACOs Affect Your Income?

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New payment models are more partnerships than contracts e.g. three year ACO pilots

"It is time to stop shifting costs and instead align payers and providers around their common

goals… Payers and providers must collaborate in a meaningful way to truly manage the care

and costs of our patients. And it all comes down to the need for alignment in three basic areas:

clinical, economic and administrative."

-The New Era of Healthcare: Practical Strategies for Providers and Payers, Emad Rizk, MD, HCPro, 2009

Being combative versus collaborative!!MAXIMIZING RETURNS: PITFALL # 1

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Failing to prioritize payers!!MAXIMIZING RETURNS: PITFALL # 2

0 5000 10000 15000 20000 25000 30000100.00

105.00

110.00

115.00

120.00

125.00

130.00

135.00

140.00

145.00

150.00

Blue Circle

Trident

CoastalPillar Health

Fortress

ThorGroup

Zygomed

HealthStreamSigma

ACME Orthopedics-Analytic ResultsBusiness Case Analysis

RVU's

% o

f Med

icare

commercial minimum

cost

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Failing to prioritize payers!!MAXIMIZING RETURNS: PITFALL # 2 (continued)

• Coastal• Trident

• Pillar Health• Fortress

• Blue Circle• Sigma • HealthStream• ThorGroup• Zygomed

High

HighLow

Paye

r C

olla

bora

tion

Revenue Potential

III

I II

IV(Highest priority)

(Lowest priority)

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PART III: THE FUTURE OF PAYER

CONTRACTING

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THE ROAD AHEAD

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Commercial Payer Changes• Cigna has launched 3 collaborative accountable care initiatives located in Tennessee (Memphis, Holston, & Jackson)

• UHC is changing contracts to include value-based incentives which will affect 70% of its members by 2015

• Aetna launched its first orthopaedic bundled payment pilot in California

• The Blues are launching ACO type pilots in various states

THE ROAD AHEAD

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• Healthcare delivery and payment is changing dramatically- from volume (FFS) to value (risk and incentives)

• There will be winners and losers over the next few years- primary care will be a winner, competition will increase among specialists, hospitals, and ancillary providers based on cost, utilization & quality

•New delivery models will trigger new types of payer relationships

• Payer contracting is the tactical pathway to strategic positioning- payers will reward providers that are:• Proactive• Collaborative• Innovative • Accountable

CONCLUSIONSCONCLUSIONS

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• Determine internal capabilities & resources

• Time commitment• Internal expertise • Data resources

• What can be outsourced?• Pre-negotiation analytics (e.g. Fee

Triangulation, RVU)• Payer negotiations• Payer relationship management

RESOURCING PAYER CONTRACTINGRESOURCING PAYER CONTRACTING

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Reliance offers Free Payer Contracting webinars:– Limited to 30 minutes plus Q&A– Tailored around practice-provided data– Scheduled at practice’s convenience

Visit our website:

www.RelianceCG.com

Click on the Webinar Request Form tab

RELIANCE CONSULTING GROUP

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For more information about Reliance Consulting Group, visit: www.RelianceCG.com

Or Contact John Schmitt directly: jschmitt@reliancecg.com

RELIANCE CONSULTING GROUP

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