cxo summit 2010 - partnering physicians with hospitals

8/7/2019 CXO Summit 2010 - Partnering Physicians With Hospitals

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Partnering Physicians with

Hospitals/Health Systems

Joel R Sauer

Former CEO, Lutheran Medical Group


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Overview

Pressures on private practiceCurrent integration trendsIntegration structures availableCompensation ModelsGovernanceUnderstanding whyQ&A


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Pressures on Private Practice

I give up!


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Financial pressures

Costs up, reimbursement down Practice expenses have risen by over 6% per year over

the past three-plus years (source: MGMA)

Over this same time period, Medicare reimbursement hasnot kept up with national CPI

Greater than 30% cuts for cardiology & radiology services Looming 23% cut Dec 1; 6% more Jan 1 Commercial reimbursement trends with Medicare

Leveraged impact to physician income 2:1 for overhead around 50%


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Working harder for less moneyAll Payors


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Financial pressures (contd)

Costs up, reimbursement down Practice expenses have risen by over 6% per year over

the past three-plus years (source: MGMA)

Over this same time period, Medicare reimbursement hasnot kept up with national CPI Greater than 30% cuts for cardiology & radiology services Looming 23% cut Dec 1; 6% more Jan 1 Commercial reimbursement trends with Medicare

Leveraged impact to physician income 2:1 for overhead around 50%

Its going to get worse, not better!


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Payor mix

Aging population Medicare as percent of total is rising 26% of orthopedic patients in 1988, now more than a

third*

Medicare has not historically been the best payor Sicker patients take more time

Coding levels just dont make up the difference

*Department of Orthopaedic Surgery, University of California at San Francisco, 500 Parnassus, MU320W, San Francisco, CA 94143-0728


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Practice complexity Added regulations

STARK Red Flag

RAC Prior authorizations

EHR Implementation Significant capital outlay Often raises costs in the early phases of adoption Can negatively impact volumes Leveraged impact

Global payments Probably to hospitals/health systems Very complex algorithms to make money


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Pressures on volumes

Current economyIncreases in pre-authorization

requirementsNew/Updated researchTransition of primary care & other

specialties to employment

No longer compensated for technicalprofits

Ordering habits change


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Looming Physician Shortages

Baby boomer retirements Increase in women physicians (source: AMA)

13.7% in 1972, now over 50% of graduates

80% as productive as male physicians overall Rising malpractice costs

Limits enrollment in high-risk specialties Alternative employment

Growing administrative rolls


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The new physician

More interested in balance thanincome

Comfortable with the employmentmodelNot looking to be an entrepreneurDifficult to replace aging leaders

#1 challenge facing practiceadministrators according to 2009MGMA poll


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Current integration trends

Mass migration towards employment


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Current Trends

This isnt the 90s all over again!Primary care, cardiology &

orthopedics leading way65% of established physicians who

changed jobs in 2009 moved toemployment model; nearly 50% of

new fellows joined hospital positions(Source: MGMA)


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Percent of medical practices

owned by . . .

Source: MGMA (ran as part of Wall Street Journal article)


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Integration options available

From first kiss to holy matrimony!


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Were just friends

Recruitment support Very basic Hospital pays retainer or finders fee

Collections guarantee; net incomeguarantee

On-going practice support for 1 2 years Typically based on incremental costs No loss for practice in early years of

practice

Typically limited to hospital-based docs


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Can we dance??

Gain sharing Physicians participate in savings

generated inside the hospital; i.e.,heart or ortho service lines

Often include quality metrics Limited to hospital services

Difficult to maintain long-termHospitals tend to re-set indexesDwindling economic valueCompliance complexities


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Friends with benefits

Hospital coverage agreements Physicians are paid to cover, particularly

nights & weekends Fixed daily/monthly stipend; may be

based on RVUs or other production metric

Cost or FTE basedNet of collections

Typically exclusive Common with anesthesia, hospitalists,

intensivists, trauma

Physicians practically employed


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I bought her a ring!

Joint ventures Often on surgery centers or other

ancillariesReimbursement bloom is off the rose

Whole hospitalHeartOrthopedics

Can be challenging for non-profits Moratorium on new or expansion

Government just doesnt like em!


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Do you, physician, take IDS. . .

Practice acquired Stock vs. asset purchase Full employment Ancillaries often moved to hospital Alignment for global payments Many models available, particularly for

compensation & governance Leverage matters!


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Physician compensationmodels in an IDS

Youve seen one, youve seen one!


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Compensation for something

Most want some portion based onproduction

Lessons learned from the 90sSubspecialties tend to be more

production based; primary careoften has a guarantee

Full spectrum from 100% salary to100% production based

Inverse relationship betweenguaranteed comp & control


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Production models

Often use CMS work RVU Payor blind Not perfect, but darn good For most part, unit value is in line with

market reimbursement

Doesnt reward toys Equal pay for equal work across specialties

But have specialty specific RVU rates Maintained by 3rd party Most PMs automatically track; no new

work


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Production models (contd)

RVU rate can be fixed, or floatbased on survey data (e.g., MGMA)

Median compensation / Medianproduction = RVU Comp Rate

Caution: Survey data can moveprecipitously from year to year, up &down!

May want to set collarsUse multiple surveysLess volatile with larger N

Good to have a Plan B


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Other production metrics

Charges or net revenue (cash)Practice net income/loss

Not a big fan of either Physicians typically dont control non-

clinical aspects of practice, like billingoffice and other costs

Dwelling on loss tends to demoralize


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Other production metrics (contd)

Patient encounters Easy to understand

But a bit tricky to define

More hassle to create & maintain Not always a standard PM report Gives all encounters same value

No reward for higher complexityDisconnects physician compensation from

proper coding

Disconnects compensation from marketvalue, federal & commercial


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Remember youre now partners!

Hospitals/IDSs are typicallycompetitive

New market share is criticalPhysician partners have the greatest

ability to add business

Cant simply say noBlazing new trails isnt easy!


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In a production based model . . .

Need to protect physicians fromunproductive time like new clinics/

marketsConvert hours to RVUs (by

specialty) based on norms

Inflate value of new patientsGuarantee certain baseAlways check compliance!


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Beyond just the exam room

Additional compensation for agreedupon metrics

Quality Patient satisfaction Market share Panel size CPOE and/or EHR Implementation

Percent of comp, fixed amountNeeds to be significant enough to

motivate, but not distract

All for one??


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Compensation pooling

Pool by group or by specialtyPhysicians then decide how to

distribute (compliantly)Potential for sharing across entire

IDS

Prepare for global payments Quality is not an individual thing

Very powerful; scary for many


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Compensation summary

Keep it simpleReward hard work; reward what you

want & needPay appropriatelyIncentivize behaviors that help the

system succeed

Test your models at the extremes


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Governance

Whos in charge here?!?


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Keep in mind

New employer is at riskMore guaranteed comp = less

controlUltimately the employer is in charge


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Sure youd love to be in control of

everything, but . . .

Focus on whats really importantHiring/Firing physicians

Appropriate to have significant control,particularly with production basedcompensation

Guard against over population(balancing act)

Need to protect employer from bademployees

Contract language is important!


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Whats really important?

Clinical staffing Always top of mind with doctors Cant be an open check book Base on FTEs, not absolute amount Build in normal CPI Measure against benchmarks

Office hours Guaranteed vs production

Daily schedules


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Whats really important (contd)?

Quality Systems need and physicians should

want to maintain control Will become critically important to an

IDS in the future

Market shareDirect financial global paymentsPopulation based medicine

This area can really impact dailyphysician life; production


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Whats really important (contd)?

Coding Employer is at risk for coding misdeeds

Therefore employer has right to watchcarefully & motivate good behavior

Need checks & balances on this powerMany subjective aspectsDue process

EHR unintended consequencesParticularly early in adoption


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Whats really important (contd)

Compensation Control over pool Ability to react to market conditions,strategic objectives, etc.

Difficult negotiation


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Understanding Why

If you dont know where youregoing, youll probably get there!


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Sustainable integrationMoney goes a long way, but . . .Physicians in general are motivated

to provide good healthcareIntegration centered on improving

the product

Quality Patient experience


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A better mousetrapOne integrated clinical recordEliminate waste & duplication

Reordered tests simply because notavailable

Unreliable testing One registration; one new patient

form!Accountable Care Organization

Global payments Medical Home


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Q&A

Joel R [email protected]

www.JoelSauerLLC.com

(260) 433-3672


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Resources Designing Incentives that Reward High-Quality, Cost

Effective Care hfma.org/leadership Fall/Winter special report

Healthcare in Three Acts Eric Cohen & Yuval Levin, Feb 2007

Integrated delivery system structural options Bruce A. Johnson, JD, MPA; Connexion Jan 2008

Physician Autonomy in an Integrated Delivery System James G. Bruggemann, MD & Daniel K. Zismer, PhD; Group Practice

Journal, Oct 2008

The Cost Conundrum Atul Gawande; New Yorker, Annals of Medicine, Jun 2009

What does the future hold for the larger, independent,multispecialty group? Daniel K. Zismer, PhD & Peter E. Person, MD, MBA; Group Practice

Journal, April 2007

cxo summit 2010 - partnering physicians with hospitals

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