Clinical Integration Trumps Physician Employment

As payment moves from volume to value, many hospitals/health systems have begun to employ physicians as a business strategy, seeking to align with physicians around common goals and objectives. The Healthcare Financial Management Association (HFMA) reports, however, “many health systems have found that alignment does not automatically follow employment and that the employment model can bring unsustainable losses and decreased productivity.” (“Taking Smart Steps Toward Clinical Integration in Health Care,” HFMA Weekly, March 27, 2015)

 

A clinically integrated network offers an attractive alternative to physician employment for weathering the transition to and full-scale implementation of value-based care delivery and payment models. Physicians in a clinically integrated network tend to be more productive than when employed by a hospital or health system, say the writers of the HFMA report. In addition, a clinically integrated network:

 

Lowers operating expenses: A health system’s operating expenses per physician have been shown to be significantly lower when managing a clinically integrated network compared with managing employed physicians: The 2014 Medical Group Management Association Cost Survey reports that median operating expenses for a health system in the employed physician model range from $320,000 to $450,000 per physician, depending on specialty, whereas recent Deloitte Consulting experiences indicate operating expenses for a clinically integrated network can range from $30,000 to $50,000 per physician, depending on the scope of services offered to participants.

 

Achieves better clinical cost performance: Early results from health systems with successful clinically integrated networks show better clinical cost performance in shared-savings arrangements when compared with organizations where employment is the primary physician engagement strategy. For example, in the Medicare Shared Savings and Pioneer accountable care organization (ACO) programs, ACOs composed of both health system-employed and independent physicians generated savings per participating physician approximately 17 percent greater than those formed predominantly with health system-employed physicians.

 

“Taken together, findings related to productivity, operating expense and shared-savings performance suggest health systems that have invested in an employed physician model should consider reevaluating their strategy and—short of unwinding physician employment—explore a broader strategy that includes working with independent physicians through a clinically integrated network.” (“Taking Smart Steps Toward Clinical Integration in Health Care,” HFMA Weekly, March 27, 2015)

 

Clinical Integration Characteristics

 

Clinical integration is a “network implementing an active and ongoing program to evaluate and modify practice patterns by the network’s physician participants and create a high degree of interdependence and cooperation among the physicians to control costs and ensure quality,” according to a joint report from the Federal Trade Commission (FTC) and the Department of Justice.

 

The FTC has a framework for antitrust enforcement that in effect could be demonstrated by a clinically integrated network. The FTC framework has four characteristics:

 

The ability to achieve significant clinical and economic efficiencies. Participating physicians and hospitals/health systems would share clinical goals and guidelines, enter into payer contracts together, increase savings and improve quality, achieve appropriate service utilization and ultimately provide better care at a lower cost.

 

Broad physician representation and physician investment. Physicians in a clinically integrated network must financially invest in the people, processes and tools necessary to drive change. These investments give physicians a voice in the development of a patient-centered, quality-focused care delivery model without being employed by the hospital/health system.

 

A well-developed care management program that uses evidence-based guidelines. Evidence-based guidelines are a key tool for clinically integrated networks. Physicians and other providers must work as a team to develop a care management program that, ideally, ensures patients are treated by a team that manages the patient’s health care using shared information.

 

A data management system that enables data collection, information sharing and utilization review. Technology is the backbone of a clinically integrated network, pooling many data sources across a broad clinical record for shared patients. It is also vital for applying the agreed-upon evidence-based guidelines to consolidate patient data so noncompliance or gaps in care are apparent.

 

(iProtean thanks the Healthcare Financial Management Association for allowing us to liberally quote from its publication, “Taking Smart Steps Toward Clinical Integration in Health Care,” HFMA Weekly, March 27, 2015)

 

 

iProtean subscribers, the new advanced new advanced Governance course, Two Imperatives for Boards, featuring Tom Dolan, Ph.D. and Karma Bass, MPH, FACHE of Via Healthcare Consulting is in your library.

 

 

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Provider Advocates Welcome New ACO Option

Note: iProtean Connect will take a break next week because of the iProtean Symposium at The Lodge at Torrey Pines in La Jolla, CA.

 

The Centers for Medicare and Medicaid Services (CMS) recently provided more information on its “Next Generation of ACO Model,” an initiative for accountable care organizations (ACOs) that are experienced in coordinating care for populations of patients.

 

The goal of the Model is to test whether strong financial incentives for ACOs, along with tools to support better patient engagement and care management, can improve health outcomes and lower expenditures for original Medicare fee-for-service beneficiaries. (“New Medicare ACO Option Offered,” HFMA Weekly, March 13, 2015)

 

CMS wrote in its recent press release that the Next Generation ACO Model has strong patient protections to ensure that patients have access to and receive high-quality care. It will be evaluated (as other Medicare ACO initiatives) on its ability to deliver better care for individuals, better health for populations and lower growth in expenditures. CMS will publicly report the performance of the Next Generation Pioneer ACOs on quality metrics, including patient experience ratings, on its website.

 

CMS expects approximately 15 to 20 ACOs from a variety of provider organization types and geographic regions to participate in the Next Generation ACO Model. The Model will consist of three initial performance years and two optional one-year extensions. (Next Generation ACO Model, CMS)

 

The model includes a voluntary participation component for Medicare enrollees, and allows providers experienced in coordinating care for populations of patients to assume greater amounts of financial risk and reward than in the existing Pioneer or Medicare Shared Savings Program (MSSP) ACOs.

 

Key features include:

  • Refining benchmarking to reward both achievement and improvement in cost containment, ultimately transitioning away from comparisons to an ACO’s historical expenditures
  • Offering a selection of payment mechanisms to enable a graduation from fee-for-service payments to capitation

 

New features for beneficiaries include:

  • Access to home visits, telehealth services and skilled nursing facilities
  • Opportunities to receive a reward payment for receiving care within the ACO
  • A process to allow beneficiaries to confirm their care relationship with ACO providers

 

A Healthcare Financial Management executive noted that many of the features in the Next Generation ACO Model “appear designed to address existing challenges encountered by providers in the MSSP and Pioneer models.” (“New Medicare ACO Option Offered,” HFMA Weekly, March 13, 2015)

 

Another expert from Premier, a provider alliance, noted that the additional ACO option would enable the market to mature and evolve.

 

Medicare providers can apply for the Next Generation ACO Model through two rounds of applications in 2015 and 2016.

 

 

 

iProtean subscribers, the new advanced new advanced Governance course, Two Imperatives for Boards, featuring Tom Dolan, Ph.D. and Karma Bass, MPH, FACHE of Via Healthcare Consulting will be in your library soon. Ms. Bass will be an expert presenter at iProtean’s upcoming symposium.

 

 

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Legal Challenge to Federal Subsidies Carries Significant Risk for Hospitals

Moody’s Investor Service analysts characterize the current legal challenge to the Affordable Care Act (ACA) as “significant downside risk” if the Supreme Court strikes down federal subsidies for consumers purchasing insurance on the federal health exchange. If it rules in favor of the government, there will be no impact.

 

On March 4, the Supreme Court heard oral arguments in King v. Burwell, a case that will determine whether federal subsidies are legal in the 34 states that did not establish their own healthcare insurance exchange. A ruling is expected in June. If the Supreme Court rules in favor of the government, there will be no impact. If the subsidies are struck down, there will be various credit effects.

 

If the Supreme Court rules against the government, Moody’s predicts that:

 

People in the 34 states that do not have a state-run exchange will drop health insurance because it will be too expensive without federal subsidies. These subsidies cover 72 percent of monthly premiums on average. This will be credit negative for hospitals—fewer patients with insurance means a jump in uncompensated care and bad debt expense.

 

  • Payer mix likely will weaken. That is, there will be more self-pay patients and fewer commercially insured patients.

 

  • Those who choose to keep their insurance coverage (without subsidies) likely will be sicker than average, thus exposing insurers to adverse selection and losses on the exchange products. Insurers will then increase premiums, placing additional stress on the individual insurance market. Ultimately, “we expect that many insurance carriers will elect to exit the individual market in these states.” The share of people receiving subsidies in each state on the federal exchange ranges from 71% to 94% of enrollees. (Legal Challenge to Affordable Care Act Carries Significant Downside Risk for Not-For-Profit Hospitals, Sector In-Depth, Moody’s Investors Service, March 3, 2015)

 

Hospitals in states that did not expand Medicaid will be most negatively affected by a ruling against the government because the ACA mandates cuts to Medicare payments. The rationale for those cuts was based on the idea that more people will gain insurance coverage through Medicaid or the exchanges.

 

  • So far, hospitals in these states have experienced small improvements in payer mix through a reduction in exposure to self-pay. A negative ruling from the Supreme Court likely will result in an erosion of these payer mix gains. But hospitals will still have to absorb ACA related reimbursement cuts.

 

Moody’s analysts wrote that if the Supreme Court rules against the government, passing new legislation to allow people to continue to receive federal subsidies is possible, but not likely given the “politically divided atmosphere in Washington.” They also noted that states could establish their own exchanges, but “this would not be a quick, easy or inexpensive solution.”

 

(iProtean thanks Moody’s Investor Services for permission to liberally quote from its paper: Legal Challenge to Affordable Care Act Carries Significant Downside Risk for Not-For-Profit Hospitals, Sector In-Depth, Moody’s Investors Service, March 3, 2015)

 

 

 

iProtean subscribers, the new advanced new advanced Governance course, Two Imperatives for Boards, featuring Tom Dolan, Ph.D. and Karma Bass, MPH, FACHE of Via Healthcare Consulting will be in your library soon. Ms. Bass will be an expert presenter at iProtean’s upcoming symposium.

 

 

For a complete list of iProtean courses, click here.

 

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Medicare Advantage Rate Cut May Be Good News for Some Hospitals

The Centers for Medicare & Medicaid Services (CMS) recently announced a proposed rate cut of 0.95 percent for Medicare Advantage plans for 2016; the cut actually would result in an average rate increase of 1.05 percent after factoring in an expected increase in risk scores.

 

Investors were pleased. The proposed cut is smaller than expected and, based on CMS reversals of planned cuts in the past, the cut may not go forward at all. Humana, UnitedHealth Group and Aetna shares increased from 3 to 6 percent.

 

For hospitals the effect will be varied. Local and regional health systems that have partnered with or started their own health plans will see a direct, positive effect. CMS has reported that 70 percent of the Medicare Advantage plans it has approved since 2008 have been provider sponsored.

 

One health analyst commented that with the proposed rates, Medicare Advantage plans would be “a good bet” if the market situation is favorable for providers who want to start a health plan. Medicare Advantage plans have been seen as a desirable way to get into the managed care business. Plans with as few as 5,000 members have proven to be profitable.

 

For those that already have a health plan, it remains an attractive opportunity, especially if the care model is implemented effectively.

 

Providers would also be affected under the proposed rate rule by a provision that strengthens requirements for Medicare Advantage plans to have “accurate and updated provider directories.”

 

Additional provisions included in the rule include:

 

  • Full implementation of a new model for risk adjustment
  • Delay of a plan to alter payments based on whether beneficiaries are treated through an office or home visit
  • A cap on total payments to all Medicare Advantage plans, to take effect in 2017

 

As expected, insurance experts take issue with a cap on total payments, noting that CMS may not have the authority to set a cap.

 

(Source: “Amid Proposed Rate Cut, Medicare Advantage Insurers Surge,” HFMA Weekly, February 27, 2015)

 

 

 

 

iProtean subscribers, the new advanced Quality course, Board Mindsets to Drive Value, featuring Stephen Beeson, M.D., and Larry McEvoy, M.D. is now in your library. Dr. Beeson and Dr. McEvoy offer suggestions about working with physicians to build a different kind of organization where collaboration, innovation and change will become the norm.

 

In March, look for the new advanced Governance course, Two Imperatives for Boards, featuring Tom Dolan, Ph.D. and Karma Bass of Via Healthcare Consulting. Ms. Bass will be an expert presenter at iProtean’s upcoming symposium.

 

 

For a complete list of iProtean courses, click here.

 

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