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RISK CAPABILITY AND THE HARD WORK OF HEALTHCARE TRANSFORMATION: “CONNECTING THE DOTS WITH GOVERNANCE” SCHA TAP CONFERENCE Hilton Head, South Carolina September.

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Presentation on theme: "RISK CAPABILITY AND THE HARD WORK OF HEALTHCARE TRANSFORMATION: “CONNECTING THE DOTS WITH GOVERNANCE” SCHA TAP CONFERENCE Hilton Head, South Carolina September."— Presentation transcript:

1 RISK CAPABILITY AND THE HARD WORK OF HEALTHCARE TRANSFORMATION: “CONNECTING THE DOTS WITH GOVERNANCE” SCHA TAP CONFERENCE Hilton Head, South Carolina September 18, 2014

2 Our Transformational Perspective 2

3 PROVIDER NET REVENUE TIME Industry Transformation How do local market conditions impact timing considerations? Can market-changing events create an urgent paradigm shift? What is my step-change business model risk? Do I have the financial tools to adequately analyze relevant states? 3

4 Payer Movement to Value-Based Payment Models Source: Availity Research, April, 2013 A Survey of the Commercial Payer Community Increasing Portion of Business Supported By Value-Based Models A Survey of the Commercial Payer Community Percentage of Payer Community Increasing Portion of Business Supported By Value-Based Models Which Service Lines Will You Focus On Over Next Months Source: Availity Research, April

5 5

6 Risk Capable…ACO Adoption 6

7 The Risk Capable Healthcare Organization Risk Capable Populations, Utilization, Costs, Budgets, Monitoring “Over- managed,” Portfolio, Multiple Models, Funds Distribution Structure, Governance, Alignment, Value 7

8 Case Study Thumbnails Alabama Medicaid reform – a market-changing event Large orthopedics group – challenges around the corner National not-for-profit – revenue portfolio transformation National for-profit – preparing for changing markets BPCI pilots exploding Markets are changing….. 8

9 LEGAL EXPOSURE ASSOCIATED WITH RISK-BASED CONTRACTING Financial Impact and Consequences –Hospital executives, Board and physician leaders need to understand the scope of what is at risk and potential implications of assuming this risk. –Need to develop and implement into payor strategy for all payors: Governmental Commercial –Blue Cross, etc. Employers –Direct Contract

10 LEGAL EXPOSURE ASSOCIATED WITH RISK- BASED CONTRACTING Leadership must have proper resources and skill set to evaluate and implement risk based strategies. Boards must know how to evaluate these new types of strategies: – Does hospital have the IT system to manage the risk-based strategies? –Does hospital have clinical integration in place to assume risk?

11 LEGAL EXPOSURE ASSOCIATED WITH RISK- BASED CONTRACTING Implications of Development of Clinically Integrated Network Expectations Have Changed: –Payors will be expecting hospitals to behave in a different way. –Hospitals will be expecting physicians to behave in a different way. –Physicians and patients will be expected to be more engaged and informed and to work together more closely. –Population health management

12 LEGAL EXPOSURE ASSOCIATED WITH RISK-BASED CONTRACTING Physician/Hospital Alignment –Hospitals who have financial relationship with physicians will be changed as the reimbursement methodologies change. –Volume-based methodologies will transition to more specific clinical and cost metrics Value based purchasing Reducing re-admissions Reducing hospital acquired infections –These new methodologies will need to be documented in new contracts with hospitals and physicians There will be growing pains

13 Physician Value Based Purchasing Medicare as Passive Payer Medicare as Active Purchaser

14 Who and When? 2013 Physician groups 100 or more measured 2014 Physician groups of 10 or more measured 2015 Payment adjusted for physician groups of 100 or more and all physicians measured 2016 Payment adjusted for physician groups of 10 or more 2017 Payment adjusted for all physicians 60% of Physicians

15 What Are the Standards? Physician Risk – Medicare Payment Physician Practice Expense Number of Patients Malpractice Stark/Anti-kickback/CMP Coding Compliance and Accuracy Quality Metrics Costs to Medicare Quality Metrics Costs to Medicare

16 Standards for Payment Adjustment Quality PQRS –Patient Safety –Patient Experience –Care Coordination –Clinical Care –Population Health –Efficiency Outcome measures –Avoidable admissions for heart failure, COPD, diabetes –Avoidable admissions for UTI, dehydration, and pneumonia –All-cause hospital readmissions Cost Total Overall Costs (Medicare Parts A and B) Total Costs for patients with specific conditions –COPD –Heart Failure –Coronary Artery Disease –Diabetes Medicare Spending Per Beneficiary Medicare Spending Per Beneficiary Gets to Post-Acute Care Spending

17 LEGAL EXPOSURE ASSOCIATED WITH RISK-BASED CONTRACTING Regulatory Requirements/Risk –Although the reimbursement/compensation methodologies may be changing, the regulatory framework for hospital/physician relationships are still in place. –Must still comply with: Stark Law Anti-kickback Statute Antitrust Laws Civil Monetary Penalty Rules False Claims Act Laws –ACOs provide some potential limited waiver-protection regarding compliance with these laws but this is not enough. –Ultimately, may need changes in the regulatory framework to give providers the room they need to make transition to these new models.

18 LEGAL EXPOSURE ASSOCIATED WITH RISK-BASED CONTRACTING Other Potential Legal Implications –Development of exclusive high performing or narrow networks. Could a system be carved out of a certain service line within a market by a payor? –Return of Economic Credentialing? What happens to physicians who do not perform well under these new risk-based methodologies? Employment status Medical staff membership status Participating provider status in payor network

19 LEGAL EXPOSURE ASSOCIATED WITH RISK-BASED CONTRACTING Other Potential Legal Implications Executive Qualifications/Compensation –As these new reimbursement/compensation methodologies evolve, will a different type of executive leader be needed? –What will necessary skill sets be? –What will executive compensation look like? –Role of physician leaders will be critical

20 Key Considerations Complexities in creating reliable forecasts and capital plans Federal and state uncertainties – “stroke of the pen” risk Operationalizing risk capability across multiple domains Articulating and demonstrating ROI on major current investments Compliance requirements across multiple providers Alignment around measurable participation criteria: quality, certifications, clinical protocols, payment incentives Accelerating transformation across the industry landscape Identifying and deploying the “right” tools to monitor progress and changes Continuous evaluation: measuring, reporting and adjusting Achieving sustainable risk capability must consider: 20

21 Barriers – Forbes insights 50% 46% 32% 31% Difficulty in fully engaging physicians Complexity and unpredictable impact of VBP contracts Decrease in profitability during transition Lack of information management infrastructure Lack of sufficient economic predictability 21

22 Paralyzed by Confusion Embracing the Opportunities Existing in Denial Resigned to Acceptance High RESILIENCY Low Low UNDERSTANDING High A View on the Change Response 22

23 The Risk Capable Healthcare Organization Maximize portfolio reimbursement to foster financial success Risk management in an efficient and profitable organization Integrated provider network that enhances the continuum of care and creates value Best practices for patient- centered care Educated patients with accountability who utilize services appropriately Provider criteria with defined metrics to ensure compliance Incentivized providers that manage quality and costs 23

24 24 With You Today Bill Hannah Market Leader - CFO Advisory Services DHG Healthcare Matthew B. Roberts Member Nexsen Pruet, LLC Scott E. Hultstrand Special Counsel Nexsen Pruet, LLC


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