A Crucial Conversation about Healthcare Acquired Inflections · A Crucial Conversation about...

KAUFMAN: Houston ACHE 060415 (DKB0522) 5/22/2015

Prepared by Nathan Kaufman, Kaufman Strategic Advisors, LLC 1

A Crucial Conversation A Crucial Conversation about Healthcare

Acquired Inflections

Nathan Kaufman, Managing DirectorKaufman Strategic Advisors, LLC11440 West Bernardo Ct., Suite 155San Diego, CA 92127(858) [email protected]

Kaufman Strategic Advisors, LLCEvidence Based Consulting

It’s Raining Acronyms - Hallelujah

“ Never ask a barber if you need a haircut

Warren BuffetWarren Buffet

2



A Health System’s “Circle of Life”: Access to Capital

Providing Value to Patients and Stabilizing

Supply Costs

Patients and Stabilizing Physician Compensation

Requires the

Ability to Borrow

Revenue –Expenses =

Bond Rating:

Access to Capital (Credit Score)

Negotiated Rates &

Government Reimbursement

Physician Investment

& Buy-In

Personnel

Costs

Capital Spending

3

N8 Kaufman –Comfortable with Strategy

Why Smart People Struggle With StrategyRoger Martin HBR

4



All Businesses are Susceptible to Inflections

▪ 1981: Kodak’s research concluded that digital was inevitable but not for 10

1975

years ▪ Status Quo

▪ 1988: Bought Sterling Labs ▪ Adjacency, Synergy

▪ 1996: Created Advantix Hybrid CameraG Thi k ▪ Group Think

“The true sign of intelligence is not knowledge but imagination.” ~ Albert Einstein

5

Strategy Requires a Point of View (POV) Regarding Market Pace and Organizational Competencies

Where is our market really moving?‒ How fast will it happen here?

What competencies do we need to succeed?‒ Do we have them?‒ Realistically can we develop them?‒ How long will it take?

Have we seen this movie before – how did it end?

6

Are the physicians on board?

How will this impact our financials (w/o heroics)?‒ Will we be able to ‘pay the mortgage’?



The Key to Successful Strategic Transformation for Healthcare Providers

You Become

Strategy

You Become What You Measure:

■Actionable clinical analytics

■Accurate cost

7

■Accurate cost accounting

Population Health: Shifting from a Provider-Centric to a Subpopulation-Centric Model of Care

Global Risk for Managing the Health of the General Population

1993: Bold, Disruptive Predictions (1,500 Leaders)

Employ Physicians to Prepare for Most Certain

Proliferation of Capitation

the General Population

Chronically Ill and Elderly

Population

Health System-Employee Population

Office-Based

8

Office-Based Population

Institutional Population

(APC)

(DRG)

AHA Guidelines reduced telemetry use by 70% without any harm to patient care. WSJ Sept. 22 2014

JAMA Internal Medicine

Geisinger: 2.4% of its diabetic patients visiting PCPs were getting appropriate care.



Segmentation and Focus are Essential

9

Courtesy of Brian Silverstein MD

Conclusion: Chronically ill patients whose primary care providers offer highly fragmented care more often experience lapses in care quality and incur greater healthcare costs.Am J Manag Care. 2015;21(5):355-362 - See more at: http://www.ajmc.com/journals/issue/2015/2015-vol21-n5/Care-Fragmentation-Quality-Costs-Among-Chronically-Ill-Patients#sthash.qtsMmUKF.dpuf

Are The Physicians “Engaged” in Your Population Health Strategies?

What’s with all this doom and gloom? Right

If you don’tchange your

lifestyle, there will gloom? Right now, I feel great! be consequences.

“There are almost no human behaviors in which we take the long-term future into account.” ~ Dan Ariely

Dr. Eric WestmanKetogenic Diet

account. ~ Dan Ariely

1010



“Changing the payment system probably isn't enough to ensure that patient care will improve.”Effects of Alternative Payment on Physician Practices In the US, Rand Corporation, AMA, 3/19/15

Physicians are affiliating to maintain status quo

Alternative payment models are increasing physician workload but not income

Alternative payment models haven’t substantially changed the way physicians deliver care

Operational problems in new payment programs are frustrating the physician participants impacting theirfrustrating the physician-participants impacting their enthusiasm

40% of doctors choose fines over quality reporting compliance

11

SGR Fix Brings Long-Term Problems Says CMS Actuary

April 14, 2015

I f 0 5% i h f th t f Increase of 0.5% in each of the next four years

Participation in “alternative-payment systems” e.g., ACO, PCMH results in a 5% bonuses from 2020 to 2024

Merit based Incentive Payment System (MIPS) based

12

Merit-based Incentive Payment System (MIPS) based on ‘quality’, IT and VBP will provide penalties and incentives from -4% to 4% in 2018 increasing to -9% to 9% by 2021



Strategy Requires Leaders to Adopt a Point of View (POV) Re: the Market

Unsustainable Economic Trends(Using Conservative Assumptions)

$51,000

“Bundled payments, ACOs, and medical homes can reduce cost levels but not the overall growth rate... Medicare spending will grow faster than projected and

Medicaid spending will double to almost $919 billion in 2023 from $450 billion in 2013. ~CMS

grow faster than projected ...and Congress won’t be able to avoid changing course.”

~Richard S. Foster, Chief Actuary for CMS (Ret.) February 28, 2012

14Altarum’s Triangle of Painful Choiceshttp://www.youtube.com/watch?v=QrPaJBh01sE



15

Where Are the Savings?

Net Payment - Blue Cross Negotiated Prices for Hip Replacement Surgery:Prices for Hip Replacement Surgery:

• $23,696 to $47,386 in San Diego• $17,910 and $73,987 in Massachusetts

California Healthline, January 22, 2015

16



Volume to Value?

Pay for Conformance

Market Power Continues to Drive Payment Rates

17

y

Strategic Advantage forDominant Regional Systems

NOT National Systems

Has Customer Value Been The Driving Force Behind Healthcare Delivery Design?

Payer Profits

Beware of Health Plans that offer to “collaborate”!

Payer Profits

Provider Profits

Physician Comp.

Preference

Precedence

Providers Payers

2016 Requested Rate Increase

• NM: BC - 51%• TN: BC - 36%• MD: CF - 30%• VA: BC – 13%• OR: MO – 25%

Phacilities

18

“We understand –but you don’t!”



Who is the Sponsor?

19

Negotiated Rates: Colonoscopy

20



Does the Data Support the Growth in Consumerism

"We always yoverestimate the change that will occur in the next two years and underestimate the change that will occur in the next 10. Don't let yourself be lulled into inaction." ~Bill G t Th R d Ah d 1996

21

Gates, The Road Ahead,1996

New Health Benefit Design

Tiered NetworksTier 1 - Preferred: Members pay the lowest cost shareTier 2 - Enhanced: Members pay a higher cost share Tier 3 - Standard: Members pay highest cost share

Direct Contracting & Narrow Networks

Private Exchanges (Expedia)Rapid transition to “REAL Value-

based Commercial Pa ments”

Reference Pricing & Transparency& High Deductibles

Domestic Medical Tourism & Bundled Payments

for Elective Centers of ExcellenceSingle Payer

22

Private Exchanges (Expedia)

Provider-Based Health Plans andCommercial Capitation (Risk)

based Commercial Payments” and “Population Health”

Medicare and Medicaid “Value“Value--based Payments”based Payments” &

Risk!



There is a Fine Line Between a Vision and a Hallucination

Risk: To Put Oneself in Danger Anecdotes are not data – FFS with a 5% bonus is neither a

“risk-based” nor “value-based” contract

■ The vast majority of hospitals don't have anything close to the systems and infrastructure necessary to take on risk successfully [and most who have tried have not succeeded]succeeded].

■ Managed care plans have been at this for 20-30 years and still make big mistakes on a fairly regular basis.

23~Carl McDonald

More than a third of Americans are obese, with another third classified as overweight

Brought to You by United Healthcare

24



Brought to You by United Healthcare

25

The Emerging Reward/Penalty System for Medicare

Hospital Name

FY 2015 Estimated

ReadmissionsPenalty

FY 2015 ReadmissionsNet Revenue

Change

FY 2015 Final VBP

Adj. Factor

FY 2015 Estimated VBP

Incentive Payment

FY 2015 VBP Net Revenue

Change

FY 2015 Total P4P Impact

Inc. HAC

FY 2015 % P4P Impact

INOVA FAIRFAX HOSP ($39,645.56) -0.02% 0.9922 ($1,034,238.40) -0.51% ($3,072,601.62) -1.53%

VIRGINIAVIRGINIA HOSP CTR ($150,114.24) -0.18% 1.0069 $434,097.47 0.51% $283,983.23 0.34%

NORTH SHORE UNIV HOSP ($937,785.76) -0.37% 0.9993 ($117,815.36) -0.05% ($3,613,223.42) -1.41%

YALE-NEW HAVEN HOSP ($1,728,414.67) -0.41% 0.9961 ($945,908.23) -0.22% ($6,889,715.58) -1.62%

“Quality scores on Medicare's Hospital Compare website are unlikely to significantly improve hospital outcomes.” ~JAMA Internal Medicine

26

“Approximately three dozen hospitals across the U.S. will be penalized more than 3% by CMS in 2015.” ~MHC 1/5/15

The Obama administration wants to dramatically change how doctors are paid ~Washington Post 1/26/15



Changing Economic F d t lFundamentals

The New Regulations Impacting the Commercial Insurance Industry will Eventually Impact Providers

Premium Caps & Transparency

Health Plan

Profits$

Premiums

28

Benefits

Standard Benefits & Universal Coverage



Bureau of Labor StatisticsProducer Price Index: Hospital Component

Percent Change in Hospital Producer Price

3%4%

5.8%

4.9%3.8% 4.4%

3.5%3.0% 3.0% 3.0%

2.1%2.5% 2.2%

1.3%

0%

1%

2%

3%

4%

5%

6%

7%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Index

-.1%

29

“Negative revenue and cost pressures continue to outweigh the positive impact of mergers, acquisitions and ACA-driven coverage expansion.” S&P 3/2015

The New Math of Population Health M tManagement



ACOs Will Make the Economics of Health Systems Worse for Providers!

Payer

50%

ACO

10%

Institutional Revenue

100%

VolumeInfrastructure

Physicians

Savings

10%

50%10%

Minimal

31

Price

Hospital

20%

20%80%

0%

Strategy Requires St ategy equ esLeaders to Adopt a Point of View (POV) Re: Organizational CompetenciesAre you a value-based network?



Value= Real and Perceived Benefit /Price

-----------------Output-----------------

Value = (A x (O + S + Ac))/ W)/Price

A: Appropriate care based on the best medical scienceO: OutcomesS: Service

33

Virginia Mason Quality Formula

Ac: AccessW: Waste (optimizing the efficiency of care)

Authenticity, the Key to Earning Long Term Brand Loyalty and Avoiding Commoditization

Strategy:

Provide Value that

An airline for the common man: We exist to connect people to what’s important in their lives through friendly, reliable, and low-cost air travel.

Provide Value that is Sustainably

Differently Betteras defined by

the Patient(Measurement)

Employees and Affiliates

Do it:

To achieve best-in-class safety performance, flyer friendly, customer first!

34

Leadership Defines How to

Behave and What to Do



The Value-based Network Test

A 2011 study: about 50% of stent procedures were appropriate, 38% were

If I had to reduce my message for achieving excellence to just a few

uncertain, and 11.6% were inappropriate,

American College of Cardiology

35

How many different sets of

orders?

words, I'd say: it all has to do with reducing variation.”

~W.E Deming

How About This?

May 18 2015

Risks Are High at Low-Volume HospitalsPatients at thousands of hospitals face greater risks from common operations, simply because the surgical teams don't get enough

May 18,2015

36

Leapfrog and Castlight 2014

g gpractice.



The “Value Proposition" of a Traditional Health System

Your care will be noYour care will be no worse than that

provided by our least competent physician!*

37

*And we cannot guarantee that your care will be appropriate, efficient, state-of-the-art or meet the highest professional standards.

The “Value Proposition” for Future Success

A Value-based Network (VBN) of providers that consistently delivers:y

‒ Superior service‒ Predictable reasonable cost per episode

and‒ Appropriate, accessible, standard care

b d th b t i i di i

38

based on the best science in medicine

VBNs are well-positioned for every payment methodologyif they are geographically indispensable



Rate the Functionality of Your Delivery Network

CCSIA Coalition of

Competing

CA Kaiser Permanente

‘A’ Rating Leapfrog‘5 Star’ Medicare Advantage‘5 Star’ Medical Groups (CA)‘5 Star’ Health Plans (CA) Competing

Self Interests

Value FFS

5 Star Health Plans (CA)Top MA Plans – NCQAJD Powers Best Patient Sat.

39

• Organized broad geographic network• Transparent actionable analytics• Compliance w/ hundreds of clinical guidelines• Focus on team care & collective performance• Integrated health plan, physicians and hospitals• Interconnected EHR• Full acute care continuum

• Limited geographic network• Culture of optionality/autonomy/silos• Patients fend for themselves• Focus on individual compensation• Traditional medical staff-hospital disputes

over authority and money• Incomplete continuum of care

Who is Getting Medicare Advantage Right?

40

NCQA



It Takes More Than Scale

Henry Ford being reviewed for credit downgrade reporting net income of $27.8 million, up from a $12reporting net income of $27.8 million, up from a $12 million loss in 2013 ~MHC May 9, 2014

S&P downgraded CHI’s ratings after CHI lost $641 million for fiscal 2014 on $13.9 billion in revenue (1,500 layoffs)

Partners HealthCare reported a $22 million loss on $11Partners HealthCare reported a $22 million loss on $11 billion in revenue mainly due to their health plan which lost $110 million

41

Creating a Value-based Delivery N t kNetworkWhat’s The Plan & Will It Work?



Most Health Systems Have the Same Strategic Plan

Clinically integrate with employed and independent physicians

Extensive use of protocols, EHR/IT to coordinate care Breakeven on MedicareBreakeven on Medicare

Broad rational geographic coverage with a sufficient supply of primary care physicians and specialists

Shared savings relationships with payers

Benchmark financial performance

Top tier quality and patient safety

Service line strategies to drive revenue growth

Highly engaged employees

Operate as a high functioning health system with attractive, modern facilities

43

Eliminate Waste (W)

■ Optimize performance of key systems: e.g., Revenue Cycle, IT,

Staffing, Case Management, Cost Accounting, Supplies, etc.

‒ Consider getting outsiders to ‘kick the tires’

■ Develop an aggressive goal for cost reduction. Use a

systematic approach – LEAN and Activity-Based Costing (ABC)

■ If you are a system, develop your ‘standard way’ and

consolidate functions and services

■ Optimize the investment in employed and contracted

physicians and promote the use of ‘mid-levels,’ and virtual

medicine

44



Warning: Payers Are Targeting the Physician Employment Paradigm

Hospital ownership of physician practices leads to higher prices.

~Vertical Integration, Hospital Ownership of Physician Practices, Lawrence C. Baker et. Al. Health Affairs,

33 756-763

MedPAC recommends that hospitals be paid at the same rates they pay physician offices.

45

Investment in Physician Employment

RaiseRates &

Convert to HOPPS!

Physicians are Seeking a Safety Net

Pure wRVU Compensation

Incentivizes patient hording and over utilizationutilization

Disincentive to focus on overall success of the system

Signals physicians that patient satisfaction, safety, access appropriateness and expense control (i.e. value) are extra

Disincentive to recruit

Inaccurately valued wRVUs my be a disincentive to do the right thing

46

2014 Medicare Trustees Report, AMA



Finding the “Magic” in Physician Employment

"A system will not manage itself. Left to themselves,

CONSOLIDATION & DEEP MANAGEMENTtse e t to t e se es,

components become selfish, competitive, independent profit centers, and thus destroy the system.” ~W E Deming

Central, shared governance Compact: gives and asks Physician hierarchy w/performance

evaluation and routine reports Consolidation of offices. Common name & standard office systems Standard use of clinical guidelines

“The problem is management..It is management's job to direct the efforts of all

47

Referral management Blended comp. plan

direct the efforts of all components toward the aim of the system.:

~W E Deming

Promote Appropriate Care (A)

■ Develop clear lines of accountability and performance expectations for hospital-based physicians‒ Hospitalist, ED physicians, Case managers

■ Implement a process for physicians to develop clinical guidelines and measure and encourage compliance‒ Quality Committee of Board creates a quality compact with the

medical staff

‒ CI Network

■ Extensive use of EMR and ensure accurate clinical documentationdocumentation

Eliminate optional low volume services/facilities

■ Create disease management programs for high risk populations and companionate palliative care program

48



Redesigning Care Delivery

84 Year Old Female “Problem List”:

1. Type II diabetes with neuropathyyp p y2. Iron deficiency anemia2. Breast cancer3. Coronary artery disease4. Peptic ulcer disease5. Osteoarthritis6. Hypertension7. Glaucoma 8 D ti

$88.31*

8. Dementia

Taking 12 medications, seeing 8 physicians

49

*GXXXC APC 0634

Wellness vs. Disease Management

Researchers have combed through all of the most recent wellness evidence and concluded that wellness and weight loss programs aren’t saving money, reducing disease burden or helping people slim

50

helping people slim down.

~American Journal of Managed Care 2/19/15



Strategic End Game■ You can demonstrate superior value PER EPISODE which attracts

contracts and market share (try to avoid per unit price reductions)

‒ Significant decline in employee health plan costsB f M di d th V l b d t‒ Bonuses from Medicare and other Value-based payments

■ Become geographically indispensable possibly through merger/51% JV

■ Multiple “Centers of Excellence” able to win competitive bids based on

quality and cost

‒ “If you are what you do but you don’t document it then you are not”

■ Payors seek out your network for collaborations e.g., for Medicare

51

Advantage, Tiered Networks etc.

■ Affiliated physicians are recognized as a premier network in the region

■ Capacity and services are consolidated and your portfolio of facilities is rationalized

Behavior Change Requires a Compelling Reason to Leave Your Comfort Zone

AnalyticalReason

(Long Term)

APPEAL TO EMOTIONS AND MAKE IT EASY

INCREMENTAL RESULTS LEAD TO CREDIBILITY

StatusQuo

Change

Behavior Based on Training

and Perceived Short Term

Benefit

52Switch: How to Change Things When Change Is Hard Chip and Dan Heath



Behavior Change Requires a Compelling Reason to Leave Your Comfort Zone

Suits

APPEAL TO EMOTIONS & MAKE IT EASY

INCREMENTAL RESULTS LEAD TO CREDIBILITY

StatusQuo

ValueNetwork

Suits

Medical Staff

53

Peer Leadership

Then a Miracle Occurs:Leadership, Trust, Shared Vision

54



Global Compliance With Standard Work Attracts Payer Collaboration

MHMD Physician Board of Directors

Clinical Programs Committee

H&V

Cardiology

CV Surgery

Neuro

Neurology

Neurosurgery

Woman/Child

Neonatal

OB/Gyn

Surgery

Anesthesia

Bariatrics

Medicine

Critical Care

Emergency

Oncology

Oncology

Contract

Imaging

Pathology

PCP

Peds

55

CV Surgery Neurosurgery OB/Gyn Bariatrics

Orthopedics

ENT

Emergency

Ad hoc

Hospital Medicine

Pathology

56



You Don’t Have to Agree with My POV

“Nate, Stop! Take a look at what you have become.Look in the mirror, look hard, look honestly.You are a real downer.Get a grip rise above the hate!Get a grip, rise above the hate!Really. Man up, money to be made.”

From an SVP @ FP Hospital Company 4/2014

Healthcare Strategy is All About the Bear Story

That’s OK. I I don’t

think we t just need to

outrun you!can outrun the bear!

Value-based Healthcare

58



How Are You Going to be Perceived as Differently Better in the Eyes of a

Cost Conscious Customer?

Become a Learning Organization

59

Volume and Value are Not Mutually Exclusive!

Why: To provide affordable, accessible, high quality healthcare services that improve the health of your patientsthe health of your patients.

How: Minimize optionality Define and measure quality Define and measure service Measure outcomes Take action on results Focus on cost and redesign to

VOLUME Value

60

Focus on cost and redesign to eliminate waste

Hire for attitude Decisions driven by the needs of

patients



Don’t let this be your “Kodak

The future is here; it’s just

unevenly

Hope is NOT a StrategyYou can’t bolt a population

health platform onto a dysfunctional health system

chassis and expect to be

Thank You for

Kodak moment!”

unevenly distributed.

chassis and expect to be successful

Become “Differently Better”

Listening Sign up to receive our blog at

www.kaufmansa.com

Don’t let this be your “Kodak

The future is here; it’s just

unevenly

Hope is NOT a StrategyYou can’t bolt a population

health platform onto a dysfunctional health system

chassis and expect to be

Thank You for

Kodak moment!”

unevenly distributed.

chassis and expect to be successful

Listening Sign up to receive our blog at

www.kaufmansa.com



▪Extra Slides

63

64



65

Does Healthcare Reform Drive to Value:The Massachusetts Experience

66



SGR “Fix” Will Force Consolidation

Increase of 0.5% in each of the next four years

Payment rates would then hold flat for six years

Physicians who qualify for the alternative-payment system e.g., ACO, PCMH will receive 5% bonuses from 2020 to 2024

Merit-based Incentive Payment System (MIPS) starts in 2018—penalties and incentives from -4% to 4% in 2018 Those rewards

67

penalties and incentives from -4% to 4% in 2018. Those rewards or penalties would range from -9% to 9% by 2021. – Quality, IT, VBP

Instability and Poor Financial Returns are Rampant in Medicare ACOs

Source: Outpatient Care Patterns and Organizational Accountability in Medicare, McWilliams MD et. Al. JAMA Internal Medicine, April 21, 2014

Shared Savings ACO Moneyball:• Memorial Hermann generated almost 10% of the shared savings for the program!• Thirty-two (32) of the ACOs generated 80% of the savings.• Of the 203 ACOs reporting results 150 (73%) received no shared savings

payments. • The 203 ACOs reporting data spent in excess of $400 Million on infrastructure

and received a collective shared savings payout of $300 Million.

68

Thirteen of Thirty-Two Pioneer ACOs Have Dropped Out of the Program.



Risk is Not Just a Four Letter Word

■ The vast majority of hospitals don't have anything close to the systems and infrastructure necessary to take on risk successfully [and most who have tried have not succeeded]

Exposure to chance of injury or loss; to put oneself in danger

successfully [and most who have tried have not succeeded]

■ Managed care plans have been at this for 20-30 years and still make big mistakes on a fairly regular basis

69

~Carl McDonald, Citigroup

Most of the Cost Savings Will Come From Reducing Hospital Utilization/Revenue

Medicare Population: 5,000Medicare FFS Total Provider Payments: $30,000,000Calculates to: $500 PMPM

Traditional FFS Medicare Risk

Medicare Population: 5,000Medicare Pays Entity: $450 PMPMMedicare FFS Annual Cost: $27,000,000

Hospital Receives

Risk Bearing Entity: Health Plan, Medical Group, Health System

Or Some Combination

Hospital

Entity Profits$41,010

Hospital Rev.$200,440

Hospital Rev. $109,320

Medical Management

and Non-institutional

Services e.g., Home Care20 Receives

$10,022LOS:

5.5 Days

15 Adm.DRG871

Entity to PayHospital

$1,822/day

Hospital Receives

LOS:Days

$7,288

($10,022/5.5 = $1,822/Day)4

Adm.DRG871

Medicare Pays

70




Providing Value to Patients Requires

Supply Costs

qAbility to Borrow

Bond Rating:


R

Balance Sheet

i.e., CASH

Negotiated Rates

Physician Investment &

Buy-In

Services &

Growth


Net IncomePersonnel

Costs & Efficiency of

Care

Capital Spending

71


Providing Value to Patients and Stabilizing

Physician Compensation

Supply Costs

Physician Compensation Requires the

Ability to Borrow

Bond Rating:


R

Balance Sheet

i.e., CASH

Negotiated Rates

Physician Investment &

Buy-In

Services &

Growth


Net IncomePersonnel

Costs & Efficiency of

Care

Capital Spending

72



2015 Guidance

It’s Not All Bad – NFPs continue to expect ongoing physician integration to drive supply savings and savings per episode of care

It’s Not All Bad – NFPs continue to expect ongoing physician integration to drive supply savings and savings per episode of care.

Hospitals with Negative Operating Margins

73

2011 2013

13% 25%

Operating Margins

You Become What You Measure -Job 1: Develop Actionable Analytics &

Accurate Cost Accounting

Value = (A x (O + S)/ W)/ PriceA: Appropriate care based on the best medical scienceO: OutcomesS: ServiceW: Waste (optimizing the efficiency of care)

-------------Output-------------

74

W: Waste (optimizing the efficiency of care) Virginia Mason Definition of Quality



Job 1A: Organize Physicians into a Clinically Integrated Network (CIN) Practice on System Employees

Triple Aim 1. Improve the patient experience of care2. Improve the health of populations3. Reducing the per capita cost of health care

Triple Gain 1. Improve income2. Improve work-life3. Reducing work load

Value-based Care Volume-based Care

g p p g

CI AnatomyCI Physiology

75

• Interoperable EMR• Aligned purpose and work• Compliance with a large number of guidelines• Actionable analytics• Physician performance evaluation• Market share gains• Measurably improved quality (not core measures)• Decreasing cost/episode

• CI Staff• CI Governing Board• New IT Systems• A few protocols developed but not universally used• Physicians sign up

Confront the Brutal facts“You must never confuse faith that you will prevail in the end with the discipline to confront the most brutal facts of your current reality.”

~ Admiral James Stockdale“We can no longer tolerate a healthcare industry that markets non-existentindustry that markets non-existent excellence …that allows clinicians to use outdated treatments and/or perform procedures even when they lack

adequate training.”

~Dr. Marty Makary, Johns Hopkins Pancreatic Cancer Surgeon, Author of Unaccountable

▪ Believing you or your market is different or that you are too big to fail

▪ Promoting new, exciting strategies but failing to create competitive advantage

Avoid Self Delusion & Hubris:

“ At Virginia Mason… we understand that healthcare is impeded not facilitated by

76

▪ Pursuing big mergers and acquisitions that deliver scale and bold headlines but not long term value

~Fighting Corporate Hubris, BCG June 6, 2013

the notion of physician autonomy.”

~Dr. Gary Kaplan MD, CEO Virginia Mason, January 11, 2014

“If you are what you do but you don’t document it properly, then your not!”



AGGREGATION

Disparate office systems

Is Your Employed Physician Group a “Group Practice” or a “Group of Practices?”

CONSOLIDATION & DEEP MANAGEMENT

Consolidation of locations

Offices are not rationally consolidated Pure productivity–based comp. No code of conduct Escalating investment No hierarchical structure

“I do my part seeing patients. In return, the system needs to support me and my

Central, shared governance and values Hierarchy w/performance evaluation and

routine reports Common name & standard office systems Blended comp. plan Standard use of clinical guidelines Referral management

income. Finding the resources to do so is their problem.”

77

“My role is to see patients and support system initiatives so the system has enough resources to support me and my income.”

Expect Perpetual Negotiation!

Aggregation“I do my part seeing

Is Your Employed Physician Group a “Group Practice” or a “Group of Practices?”

Integration“I th t

Consolidation“M l i t “I do my part seeing

patients. In return, the system needs to

support me and my income. Finding the

resources to do so is their problem.”

“I am the system, my income depends on

the collective performance of me

and my colleagues.”

“My role is to see patients and support system initiatives so

the system has enough resources to support me and my income.”

78



A Health System’s Circle of Life: Access to Capital

Ability to Provide Value to Patients

Revenue –Expense =

Net Income

Investment in New & Old

Infrastructure

Balance Sheet

Bond Rating:

Access & Cost of Capital

(Credit Score)

79

80



81

“Limited Effects of Care Management forHigh Utilizers on Total Healthcare Costs”

Healthcare organizations implementing care management programs should expect low or no total cost savingscost savings.

In contrast to many current explicit or implied claims to the contrary, estimates of total cost savings from care management in randomized trials are consistently low or none.

82

Dr. Brent Williams MD, MPH, Medical Director University of Michigan Complex Care Management Program. American Journal of Managed Care, Vol 21

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