iProtean—Results of National Survey of Physicians

Deloitte Center for Health Solutions recently released results of its 2013 Survey of U.S. Physicians, and the findings suggest that physicians see value in some provisions of the Affordable Care Act (ACA), and that they have a sense that health care is moving in the right direction.  The survey was sent to 20,000 physicians and 613 responded.

 

Survey results showed that many or most physicians:

  • Worry about the profession’s erosion of clinical autonomy and income, and its inability to achieve medical liability reform.
  • Believe that the U.S. healthcare system is flawed and underperforming, and favor many elements of the ACA to address its problems.
  • Foresee increased consolidation of physicians into larger organizations.
  • Believe action is required to integrate comparative effectiveness research into patient care.
  • Are closely watching innovations in technology and evidence-based practices; physicians are receptive, provided that evidence of safety and efficacy is readily available.
  • Think incentives can be effective in changing consumer health if carefully implemented.

 

Kaiser Health News reported that the study indicates doctors foresee opportunities in integrated health systems encouraged in the ACA, such as accountable care organizations (ACOs).  But they are still hesitant to change their practices without more evidence that these systems will work.  More than two thirds of physicians surveyed said that even without conclusive studies, large healthcare delivery systems—which include ACOs, medical homes and hospitals—would yield more financial success in the future.

 

“There’s still uncertainty about how the financial side is going to play out,” said Dr. Bob Williams, a physician and national medical leader at Deloitte, about changes in the health delivery system. “But physicians also see the value in the ACA, and see the value in improving access to care . . . there’s an optimism here, a sense of being headed in the right direction.”  (“Doctors Eager for Evidence About Integrated Health Systems,” Kaiser Health News, March 22, 2013)

 

Deloitte concluded its report by noting emerging relationships between physicians and hospitals, health insurance plans, retail pharmacies, employers and medical device and drug manufacturers.  “A transparent business relationship built on mutual respect and trust, with incentives appropriately aligned, is key.”  It offered the following elements of an effective relationship with and among physicians:

  • Compensation commensurate with the training, experience and effectiveness of the clinician, inclusive of performance-based bonuses based on team and individual goals.
  • Integration of physicians in team-based models where clinical and financial decision-making is encouraged and clinical autonomy is balanced between managing inappropriate variation and adherence to evidence-based practices.
  • Effective deployment of clinical and administrative information technologies . . .
  • Inclusion of physicians in organizational leadership and provision of structured training and experience-based learning . . .
  • Access to support tools and resources that assist clinicians in assimilating into the organization.
  • A stable organization with a clear vision and strategy for its future, adequate resources to withstand competitive and regulatory pressures, and leadership that capably executes a plan for innovation and growth.
  • An organizational culture that reflects mutual respect for the profession and the entities with whom physicians affiliate or partner.

(Deloitte 2013 survey of U.S. Physicians:  Physician Perspectives about Health Care Reform and the Future of the Medical Profession, March 19, 2013.)

 

To view the full report from Deloitte, please click here.

 

Reminder to iProtean subscribers:  Major D&O insurance carries have been attracted to iProtean’s board certification program.  Interested iProtean subscribers may want to explore the possibility of reducing their D&O insurance premiums as a result of completing iProtean’s certification program.

 

In the upcoming iProtean advanced course, Employing Physicians, Dan Grauman, Nate Kaufman and Susan Douglas discuss the critical components of working with and employing physicians including:  developing an employed physician strategy, establishing a platform of trust, designing the compensation program, the role of the board in establishing compensation parameters, joint performance goals and employed physician math.  Look for the course in your course library in May.

 

 

For a complete list of iProtean courses, click here.

 

For more information about iProtean, click here.

 

iProtean—Cutting Healthcare Costs Even Further

It seems hospitals have been in cost-cutting mode for many years, and still experts say that a significant amount of waste is inherent in our healthcare system.  The healthcare environment—today and tomorrow—must find additional ways to bring down costs, and many agree that hospitals should use multiple strategies to attack different aspects of cost savings at the same time.  A recent article from the Healthcare Financial Management Association outlines specific strategies for bending the cost curve.  (Moore, Eyestone, Coddington, “The Healthcare Cost Curve Can be Bent,” hfm, March 2013)

 

Most of the strategies require a broad-based effort from the healthcare industry.  But heading the list is one individual hospitals/health systems can and should embrace: moving from fee-for-service to value-based contracting.

 

We have noted in previous blogs the importance of moving to value-based purchasing (see Transitioning to Value-based Care, February 19 and Value-based Contracts, February 26).  The authors of the hfm article note that payers such as Medicare, private health plans and employers should aggressively move away from open-ended, fee-for-service contracts toward payment based on value—and it seems clear this is their intention.

 

Leaders of hospitals/health systems have been working to prepare their organizations for value-based contracting by focusing on all facets of planning, projection scenarios, integrating with physicians and even payers.  Progressive hospitals/health systems make sure they have strong financial leadership to manage the transition, Lisa Goldstein from Moody’s Investors Service noted in the iProtean course Transforming Your Organization to an Integrated Delivery System.  “The new mantra is ‘no outcome, no income,’ and that is going to be the new way of payment going forward.  So for integrated health systems of all sizes, if they really are going to be progressive with their future, they need to understand what the new payment arrangements will be and how they are going to move their organization from today’s world to tomorrow’s world.”

 

Planning for this change should be done deliberately and with urgency.  Hospitals, health systems and physician groups should determine their “tipping point”—where they are receiving sufficient value-based payments, as opposed to fee-for-service/volume-based payments, to warrant reengineering their approaches to care.  Strategic and scenario planning should be detailed and thorough as the organization moves toward implementation of these approaches.  In most cases, payers and providers will work together for this transition to be successful.  (Moore, Eyestone, Coddington, “The Healthcare Cost Curve Can be Bent,” hfm, March 2013)

 

The transition requires hospitals/health systems to move quickly to adopt new management dashboards and analytics, and to create workable accountable care organizations capable of managing the health costs of a population.

 

Other initiatives to bend the cost curve suggested in the hfm article include:

  • Increasing the supply and effective utilization of primary care physicians and physician extenders
  • Focusing on the management of individuals with chronic disease or those who are likely to become chronically ill
  • Discouraging the use of physician-owned ambulatory surgery centers, imaging centers and specialty hospitals
  • Encouraging the formation of multispecialty group practices and integrated systems
  • Reducing administrative complexity
  • Rejecting excuses that physicians and hospitals cannot cover their costs under Medicare and therefore need to shift costs to the private sector
  • Expecting more from the customer

 

 

 

Reminder to iProtean subscribers:  Major D&O insurance carries have been attracted to iProtean’s board certification program.  Interested iProtean subscribers may want to explore the possibility of reducing their D&O insurance premiums as a result of completing iProtean’s certification program.

 

The iProtean advanced courses Value-based Purchasing & Accountable Care Organizations, Financing Considerations for Integrated Delivery Systems and Transforming Your Organization into an Integrated Delivery System feature experts in value-based purchasing and system/clinical integration.  Nate Kaufman, Lisa Goldstein, Marian Jennings and Dan Grauman offer suggestions for boards that strive to be up-to-date on these and other topics related to the implications of health reform and the challenges facing hospitals/health systems.

 

 

For a complete list of iProtean courses, click here.

 

For more information about iProtean, click here.

iProtean—Mergers and D&O Insurance

Since the passage of health reform, hospitals have increasingly been focused on antitrust liability coverage.  Most, if not all, hospitals have had concerns about regulatory oversight even before health reform, but those concerns have heightened in response to “ambiguity on how the regulators will address antitrust exposures . . . more and more risk managers and executives of healthcare systems have concerns about the coverage that’s in place.  There is more thought going into the purchase of D&O coverage,” noted an executive at the nonprofit management liability group at ACE USA.

 

Directors and Officers (D&O) insurance provides board members coverage against “wrongful acts” that include actual or alleged errors, omissions and neglect or breach of duty on the part of the board of directors.  This includes antitrust allegations—increasingly seen as essential to organizations involved in mergers, joint ventures and other activities designed to reduce costs in today’s post-reform environment.

 

Hospital/health system boards of directors have unlimited personal liability for their actions, and also inaction.  Liability arises from three common law duties:  the duty of obedience, the duty of care/diligence and the duty of loyalty.  Although board members have “corporate indemnification” protection, the organization could have difficulty meeting its obligation either through financial constraints or public policy restrictions.  Voluntary immunity statutes provide no protection for “recklessness” or acting in “bad faith.”

 

As a result, hospitals/health systems typically secure D&O insurance to transfer liability risk to the insurer.  D&O insurance can either “pay of behalf” of board members directly to damaged third parties or indemnify the organization for payments it makes under its agreement with its board members.  This insurance usually covers the cost of legal counsel, out-of-court settlements and other court-ordered compensation payments.

 

Any time the words “antitrust” or “unfair competition” appear in a lawsuit filed against a hospital/health system, D&O liability coverage generally comes into play to provide a defense and, in some cases, to pay settlement costs.  Antitrust coverage under a D&O policy also could be accessed in certain acquisition situations.

 

Some predict antitrust litigation will increase as hospitals and other medical providers collaborate to form accountable care organizations.  The Justice Department and the Federal Trade Commission have signaled their intention to intervene in mergers and collaborations that appear to have a dampening effect on competition in a given market.

 

“Once your board has determined to do a merger or affiliation with another organization, you need to look at what the potential material stumbling blocks might be from a regulatory perspective.  Increasingly, boards are concerned about the potential of a challenge either from the federal government or from state governments on an antitrust challenge. That is to say, the combination of your hospital with another hospital or system will result in too much market share, too much market power, and therefore has the potential to be challenged, materially delayed, or even derailed. It is correct to say that in the last few years, the Federal Trade Commission has been more active at closely scrutinizing potential hospital mergers.”  (Monte Dube, Proskauer, discussing the regulatory implications of affiliations/mergers in the upcoming advanced Mission & Strategy course Affiliation & Consolidation Strategies)

 

While the majority of claims against nonprofit hospitals/health systems have involved employment practice issues, the cost of settling such disputes is considerably less than that of resolving a D&O antitrust violation.  “An antitrust claim could be a limit loss,” meaning it could erode all of a hospital/system’s D&O coverage.

 

When entering into mergers or collaborations with other hospitals/systems, boards and executives should be aware that these arrangements have high risk/reward ratios, and therefore increase exposure to D&O suits.  Consider the following questions:

 

  • What if we chose the wrong partner?

 

  • What if the collaboration suffers from poor management and clinical errors are made?

 

  • What if the partnership leads to financial losses to either organization or to an affected third party?

 

D&O insurance premiums can vary broadly, depending not only on the coverage sought by the organization, but also by the organization’s rating.  The organization’s rating depends on several factors: its total consolidated assets, the number of employees, financial solvency, claims history, board turnover, business activity (i.e., mergers, acquisitions) and corporate governance.

 

Of note to iProtean subscribers:  major D&O insurance carries have been attracted to iProtean’s board certification program. The carriers believe educated and informed boards represent a better risk class, which translates into lower premiums for D&O liability insurance.  Where iProtean’s program makes a difference is that it quantifies board member knowledge to a degree that carriers have not previously seen.

 

Interested iProtean subscribers may want to explore the possibility of reducing their D&O insurance premiums as a result of completing iProtean’s certification program.

 

 

The iProtean advanced courses Affiliation & Consolidation Strategies Part 1 and 2, scheduled for publication in March and April, feature experts Monte Dube, Lisa Goldstein, Marian Jennings and Dan Grauman.  In addition to regulatory implications, the experts discuss factors driving consolidation, timing, the continuum of options and emerging models, when mergers go bad and the ratings impact of consolidation.

 

 

 

For a complete list of iProtean courses, click here.

 

For more information about iProtean, click here.

iProtean—Impact of Sequestration on Hospitals

Hospitals face a 2 percent reduction in Medicare payments as early as April 1 under sequestration—this could cost hospitals $3 billion and 73,000 jobs nationwide this year, according to iVantage Health Analytics.

 

Hospitals, physicians and other providers are hoping that Congress will put together a solution to avoid the cuts before they are actually felt.  If sequestration stands beyond April 1, the cuts would force hospitals to again examine ways to make up for the reimbursement shortfall without compromising medical care.

 

Many hospital and health system executives have been preparing for the impacts of sequestration since the national deficit talks first began in the summer of 2011. Most hospitals will lose millions in Medicare reimbursements, with larger providers taking cuts up to eight figures. The CEO of an 18-hospital system told Kaiser Health News his system expects to lose $12 million on $2.5 billion in revenue.

 

Medicare will remain a high-priority issue for hospital executives this year and into 2014, where some say adept budgeting will become paramount.  In anticipation of the 2 percent cut and other recent and projected Medicare reductions, many executives have budgeted very conservatively, and have made or expect to make the necessary budget cuts.  (“Sequestration Set to Kick in, Cut Medicare by Billions,”Becker’s ASC Review, March 1, 2013.)

 

Experts from Huron Consulting Group’s healthcare division recently offered their perspectives on how sequestration would hit hospitals, three of which are noted here:

 

  • The healthcare industry needs to reduce its cost structures between 20 and 40 percent, whether the sequestrations cuts take effect or not, said a Huron executive.  Providers still have an urgent need to develop multi-pronged, strategic approaches to reducing costs and improving revenue across their entire enterprise.

 

  • Cost reduction through better operational and clinical positioning for value-based purchasing becomes more important.  More providers have shown movement on this strategy over the past six to 12 months.

 

  • Healthcare spending cuts are in the government’s budget crosshairs, whether through sequestration alone, or sequestration plus additional cuts down the road.

(“6 Key Observations on Sequestration and Hospitals,” Becker’s Hospital Review, February 27, 2013)

 

Health and Human Services says that sequestration will not noticeably affect implementation of the Affordable Care Act.  “Only a small fraction of the $1.6 trillion the Affordable Care Act spends to cover the uninsured over the next decade is subject to the so-called sequester,” said a HHS spokesperson.

 

iProtean subscribers please note that the recently published advanced courses, Value-based Purchasing & Accountable Care Organizations, Transforming Your Organization into an Integrated Delivery System and Financing Considerations for Integrated Delivery Systems, feature financial experts Marian Jennings, Lisa Goldstein, Nate Kaufman and Dan Grauman.  They offer their perspective on Medicare payment reductions in general and suggest approaches to weather the increasingly restrictive payment environment.

 

 

 

For a complete list of iProtean courses, click here.

 

For more information about iProtean, click here.