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The Tennessee Orthopaedic Society proudly presents: PAYER CONTRACTING: TAKING CONTROL, GETTING IT DONE, & MAXIMIZING RETURNS RELIANCE CONSULTING GROUP.

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Presentation on theme: "The Tennessee Orthopaedic Society proudly presents: PAYER CONTRACTING: TAKING CONTROL, GETTING IT DONE, & MAXIMIZING RETURNS RELIANCE CONSULTING GROUP."— Presentation transcript:

1 The Tennessee Orthopaedic Society proudly presents: PAYER CONTRACTING: TAKING CONTROL, GETTING IT DONE, & MAXIMIZING RETURNS RELIANCE CONSULTING GROUP Presented by : John P. Schmitt, Ph.D. - RCG Managing Director & Robert W. Keen, Esq. - Legal Counsel

2 Part I: The Need for Payer Contracting – Orthopaedic Practices: Survival & Satisfaction – Payer Contracting: Example Solution & Savings Part II: The Process of Payer Contracting – Taking Control: Strategies & Pitfalls – Getting It Done: Strategies & Pitfalls – Maximizing Returns: Strategies & Pitfalls Part III: The Future of Payer Contracting – What is coming next? What to do about it – How should you resource payer contracting? AGENDA 2

3 3 PART I: THE NEED FOR PAYER CONTRACTING

4 “Doctors in America are harboring an embarrassing secret: Many of them are going broke” (CNN Money, 1/5/12) Hospitals’ physician employment jumped 32% from (AHA Hospital Statistics, 2012) Small Business Administration (SBA) loans issued to physicians rose from $60 million in 2000 to $675 million in 2011 (CNN, 1/30/12) MEDICAL PRACTICES 4

5 Between Orthopaedic practice revenues declined by nearly 10% Orthopaedic physicians’ average income dropped from $350K in 2010 to $315K in 2011 Only 51% of orthopaedic physicians report being satisfied with their profession, and only 46% would choose medicine again as a career Source: Medscape Physician Compensation Report: 2012 Results ORTHOPAEDIC PRACTICES 5

6 Source: Medscape Physician Compensation Report: 2012 Results MEDICAL PRACTICES 6 Who’s up, Who’s Down Since 2010?

7 Source: Medscape Physician Compensation Report: 2012 Results MEDICAL PRACTICES 7 Physician Compensation In 2011

8 Source: Medscape Physician Compensation Report: 2012 Results MEDICAL PRACTICES 8 Satisfaction by Specialty

9 PAYER CONTRACTING: EXAMPLE PORTFOLIO 9 Overall Revenue $8,800,000/yr Commercial Revenue $4,840,000/yr

10 Return on Investment (ROI): Commercial payer revenue: $4,840,000 Contracts determined for negotiation (60% commercial revenue) $2,904,000 Conservative adjustment (15% reduction): $436,000 Negotiated returns: ($2,904K-$436K) x 5% estimated adjustment= $123,000 Year 2: $123,000 Accumulated earnings: $208,000 Year 3: $123,000 Accumulated earnings: $331,000 Year 1: $123,000 (- $38,000) Accumulated earnings: $85,000 = 2.24 ROI = 5.47 ROI = 8.71 ROI Example Contracting Costs: $38,000 (estimate) Pre-negotiation analytics & research Negotiation meetings & evaluations Payer relations & product participation PAYER CONTRACTING: EXAMPLE ROI 10

11 11 PART II: THE PROCESS OF PAYER CONTRACTING

12 12 Strategies Taking Control Getting It Done Maximizing Returns Pitfalls PAYER CONTRACTING &

13 “As you negotiate contracts and terms, data can add a powerful punch.” - Susan Turney, MD, President MGMA-ACMPE, Coaches Corner, MGMA Connexion, April 2012) 13 Develop compelling analytics!! TAKING CONTROL: STRATEGY # 1 Data Examples: Practice costs relative value units (RVU) CPT-specific fee schedule analytics Practice quality and cost metrics Payer mix and market analyses Payer network analyses

14 Develop compelling analytics!! TAKING CONTROL: STRATEGY # 1 (continued) CPT Codes & Fees CPT: DESC: ESTABLISHED PATIENT-LOW CMS: $66.09 Tennessee Orthopaedic UCR Charges = $ Relative Value Unit (RVU) Cost Analyses = $75.34 Commercial Minimum RVU Analyses = $84.60 Market-Based (37415) Payer Analysis = $90.55 Payer-Specific Negotiation Strategy & Recommendations Example: Fee Triangulation 14

15 MEDICAL PRACTICES 15 TAKING CONTROL: STRATEGY # 2 Determine payer service area (zip codes) Determine payer panel count (attribution) Apply AAOS population statistics to payer information (next slide) Research payer network’s orthopaedic membership in the service area Prepare payer-specific presentation to include subspecialists, quality data/metrics, unique delivery capabilities (payer will do cost/variance analyses using claim histories) Know your competition- and compete!! TAKING CONTROL: STRATEGY # 2

16 Source: AAOS Department of Research: April 2010 MEDICAL PRACTICES 16 TAKING CONTROL: STRATEGY # 2 (continued) Nationally, the 2010 density of orthopaedic surgeons is 5.67 for every 100,000 people in the US. In Tennessee, the density ranges between per 100,000 people.

17 “ O verall the (surveyed) practice executives realized that they are more reactive than proactive with their business and strategic planning processes. They stated there are numerous external and internal variables beyond their control, such as physician retirement, insurance fee schedules, and regulator changes that constrain their ability to plan for their practices’ future growth.” -Practice Excellence-Success Stories for Outstanding Orthopedic Practices, MGMA, J. A. Harvey, 2007 Being reactive rather than proactive!! TAKING CONTROL: PITFALL # 1 17

18 You don't ask you don't receive- everything is negotiable The real issue is not discounting but reducing cost variance: Patients with high deductibles are researching and negotiating provider prices; providers should research and negotiate payer reimbursements: Accepting payer contract offers as non-negotiable!! TAKING CONTROL: PITFALL # 2 18

19 19 Example: Chattanooga, TN Accepting payer contract offers as non-negotiable!! TAKING CONTROL: PITFALL # 2 (continued)

20 Payer reps are messengers Prepare a message around CMS’s "Triple Aim" – Lower per-capita cost – Clinical excellence and accountability – Improved population health Deliver the message to decision-makers found in the clinical, business development, and economic areas-Chief Medical Officer, V. P. Networks, Medical Actuary Get your message to the decision-making level!! GETTING IT DONE: STRATEGY # 1 20

21 Payer Contracting is two-fold: 1) Tactical- contract/fee adjustments; 2) Strategic- payer relationship building Low trust causes friction and slows negotiations e.g. hidden agendas, win-lose thinking, defensive communication. High trust produces speed- e.g. transparent data, kept commitments, win-win-win solutions. Build high trust payer relationships!! GETTING IT DONE: STRATEGY # 2 21 Trust = Speed Cost Source: The Speed of Trust, Stephen R. Covey

22 Assuming all payers are the same!! GETTING IT DONE: PITFALL # 1 22

23 Contract terms impact all aspects of your practice! Practice Development Internal Operations Risk Exposure TAKING CONTROL: PITFALL # 1 Overlooking legal safeguards!! GETTING IT DONE: PITFALL # 2 23

24 Practice Development Exclusivity Affiliate Assignment (Silent PPOs) Favored Nation Marketing Limitations TAKING CONTROL: PITFALL # 1 Overlooking legal safeguards!! GETTING IT DONE: PITFALL # 2 (continued) 24

25 Internal Operations Eligibility Confirmation Claims Submission Payment Timeframes Dispute Resolution Inclusion of External Documents TAKING CONTROL: PITFALL # 1 Overlooking legal safeguards!! GETTING IT DONE: PITFALL # 2 (continued) 25

26 Risk Exposure Termination Standard of Care Third Party Beneficiaries Medicare Rates Class Action Waivers TAKING CONTROL: PITFALL # 1 Overlooking legal safeguards!! GETTING IT DONE: PITFALL # 2 (continued) 26

27 Where do you fit in? Are you prepared? Know where payment reform is headed!! MAXIMIZING RETURNS: STRATEGY # 1 27 CMS Payment Reform Timeline Payment via PIP Initiatives PPACA Gain Sharing – ACO’s Bundled Payments & Health Insurance Exchanges Physician Value-based Modifier EHR Meaningful Use 2013

28 New delivery models: – ACOs (2011) 32 Medicare Pioneer Programs (mostly hospital-centric) 27 Shared Savings Programs (mostly physician-centric) – Patient Centered Medical Home (PCMH 2008) – Narrow Networks (2012) New Payer Relationships: – Episode-based bundled payments (2013) – Value-based payment modifiers (2015+) – Partial capitation arrangements ( ? ) Prepare for accountable care!! MAXIMIZING RETURNS: STRATEGY # 2 28

29 Prepare for accountable care!! MAXIMIZING RETURNS: STRATEGY # 2 (continued) 29 Source: Physician Compensation Shifting Incentives, HealthLeaders Media Intelligence, October 2011

30 Prepare for accountable care!! MAXIMIZING RETURNS: STRATEGY # 2 (continued) 30 Source: Medscape Physician Compensation Report: 2012 Results Participation in Various Payment Models

31 Prepare for accountable care!! MAXIMIZING RETURNS: STRATEGY # 2 (continued) 31 Source: Medscape Physician Compensation Report: 2012 Results How Will ACOs Affect Your Income?

32 New payment models are more partnerships than contracts e.g. three year ACO pilots "It is time to stop shifting costs and instead align payers and providers around their common goals… Payers and providers must collaborate in a meaningful way to truly manage the care and costs of our patients. And it all comes down to the need for alignment in three basic areas: clinical, economic and administrative." -The New Era of Healthcare: Practical Strategies for Providers and Payers, Emad Rizk, MD, HCPro, 2009 Being combative versus collaborative!! MAXIMIZING RETURNS: PITFALL # 1 32

33 Failing to prioritize payers!! MAXIMIZING RETURNS: PITFALL # 2 33

34 Failing to prioritize payers!! MAXIMIZING RETURNS: PITFALL # 2 (continued) 34 Coastal Trident Pillar Health Fortress Blue Circle Sigma HealthStream ThorGroup Zygomed High Low Payer Collaboration Revenue Potential III III IV (Highest priority) (Lowest priority)

35 35 PART III: THE FUTURE OF PAYER CONTRACTING

36 36 THE ROAD AHEAD

37 Commercial Payer Changes Cigna has launched 3 collaborative accountable care initiatives located in Tennessee (Memphis, Holston, & Jackson) UHC is changing contracts to include value-based incentives which will affect 70% of its members by 2015 Aetna launched its first orthopaedic bundled payment pilot in California The Blues are launching ACO type pilots in various states THE ROAD AHEAD 37

38 Healthcare delivery and payment is changing dramatically- from volume (FFS) to value (risk and incentives) There will be winners and losers over the next few years- primary care will be a winner, competition will increase among specialists, hospitals, and ancillary providers based on cost, utilization & quality New delivery models will trigger new types of payer relationships Payer contracting is the tactical pathway to strategic positioning- payers will reward providers that are: Proactive Collaborative Innovative Accountable CONCLUSIONS 38 CONCLUSIONS

39 Determine internal capabilities & resources Time commitment Internal expertise Data resources What can be outsourced? Pre-negotiation analytics (e.g. Fee Triangulation, RVU) Payer negotiations Payer relationship management RESOURCING PAYER CONTRACTING 39 RESOURCING PAYER CONTRACTING

40 Reliance offers Free Payer Contracting webinars: – Limited to 30 minutes plus Q&A – Tailored around practice-provided data – Scheduled at practice’s convenience Visit our website: Click on the Webinar Request Form tabWebinar Request Form 40 RELIANCE CONSULTING GROUP

41 For more information about Reliance Consulting Group, visit: Or Contact John Schmitt directly: 41 RELIANCE CONSULTING GROUP Q & AQ & A


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