Creating a Value-Based Medical Group 2013 MGMA Annual Conference October 7, 2013 John A. Lutz, FACMPE, Managing Director, Huron Healthcare

Agenda I.Learning Objectives II.Why Create a Value-Based Medical Group? III.Key Components for Success IV.Examples V.Necessary Competencies VI.Patient Centered Medical Homes/Practices VII.Challenges and Opportunities – Next Steps VIII.Q & A © 2013 Huron Consulting Group. All rights reserved. Proprietary & Confidential.2

Learning Objectives  Understand the strong practice framework necessary for enabling improved efficiency, care effectiveness, and profitability.  Identify key operational drivers and opportunities for enhanced capacity and productivity.  Implement the operational changes that improve profitability and support long-term medical group practice goals. © 2013 Huron Consulting Group. All rights reserved. Proprietary & Confidential.3

QUESTION: As you think about the future, what about your group practice keeps you awake at night? A.Uncertainty B.Independence C.Stability D.Income Preservation E.Staffing, reduced hours, work/life balance F.All of the above

Why Create a Value-Based Medical Group? A Dynamic Environment

 Accountable Care Act: Focus on population health and covered lives Value-based payment models continue to grow  Federal and commercial reimbursement reductions and changes: Reduced payment per procedure Continuous SGR threat Bundled payment initiatives The reality of transitioning payment from procedure to value (e.g., bundles) © 2013 Huron Consulting Group. All rights reserved. Proprietary & Confidential.6

A Dynamic Environment  Physician groups must take a proactive approach to improving operational efficiency to be optimally positioned to thrive  Physician succession and supply/demand deficits  Physician compliance with evidence-based guidelines for chronic diseases and acute conditions  Research and technology advances  Patient and referring physician satisfaction  It’s the right thing for our patients! © 2013 Huron Consulting Group. All rights reserved. Proprietary & Confidential.7

Key Components for Creating a Successful Value-Based, High Performing Medical Group

What Defines a High Performing Medical Group? © 2013 Huron Consulting Group. All rights reserved. Proprietary & Confidential.9 Characteristics  Physician leadership in medical care and shared responsibility for non-clinical activities.  Uses defined policies and processes for quality measurement and improvement activities across sites of care and between patient visits.  Shared financial and regulatory responsibility and accountability for successfully managing the cost of health care, improving the patient care experience, and improving the health of its respective populations.  Uses a team-based approach that supports collaboration and communication among the patient, physician, and licensed or certified medical professionals across medical specialties and health care settings.  Use of interoperable information technology and comparative analytics.  Use of compensation structures that provide incentives to physicians and licensed Advanced Practice Professionals (APPs) to leverage physician time, improve outcomes and manage expense. Definition: A high performing medical group is able to meet the clinical demands of its target patient market and its partner institution(s) by: 1)Providing ready access to the right mix of primary and specialty care providers; and 2)Supporting clinical staff in the right place and within well- defined clinical quality, revenue, and expense parameters. Source: American Medical Group Association

Key Financial Metric2012 Median Performance 2013 Median Performance Median total medical revenue per FTE$538,803$569,935 Median total operating cost per FTE$387,586$413,334 Median total non-physician (comp/benefits) per FTE $32,895 $34,108 Median total physician compensation/benefits per FTE$299,853$322,274 Median total financial support per FTE$150,903 $82,683 Average practice overhead is ~35% of net patient revenue Internal Huron Benchmarks Total provider compensation is ~50% of net patient revenue Internal Huron Benchmarks © 2013 Huron Consulting Group. All Rights Reserved. Proprietary & Confidential.10 Financial Characteristics Source: MGMA Physician Compensation and Production Survey: 2012 Report Based on 2011 Data & 2013 Report Based on 2012 Data (with appropriate MGMA resource).Used with permission from the Medical Group Management Association, 104 Inverness Terrace East, Englewood, Colorado Notes: While hospital ownership is a growing component (~50% in 2012), independent groups still report higher median performance characteristics. Median compensation variances substantially by specialty. FTE = Full-Time Equivalent Physician

Direction: What is your strategic plan? © 2013 Huron Consulting Group. All Rights Reserved. Proprietary & Confidential. 11 We (the group) must know (and agree on) what we want, the direction, and how to achieve it (together) in order for us to accomplish it (by objective measurement) and be successful (defined up front) in the future (time period).

Creating Success: FIVE KEY COMPONENTS © 2013 Huron Consulting Group. All Rights Reserved. Proprietary & Confidential. 12 There are five key components that must be optimized in order for a group to be high-performing, value-based, and successful under evolving payment models. ACCESS & CAPACITY MANAGEMENT OPERATIONAL EFFICIENCY FINANCIAL STABILITY CLINICAL EFFECTIVENESS CLINICAL INTEGRATION

Clinical Integration:  Right care, right time, right place, most appropriate cost.  “Triple Aim” commitment  Governance and leadership  IT  Medical management  Payer contracting  Compliance  Provider network  Financial strength  Defined population © 2013 Huron Consulting Group. All rights reserved. Proprietary & Confidential.13 CLINICAL INTEGRATION CLINICAL INTEGRATION

Operational Efficiency:  Optimizing provider & staff productivity  Management control processes  Open scheduling  Ready patient access  Trained & proficient staff  Maximum technology utilization - EHR  Measurement – actual to benchmarks  Care coordination – PCMH  Referral management © 2013 Huron Consulting Group. All rights reserved. Proprietary & Confidential.14 OPERATIONAL EFFICIENCY

Access & Capacity Management:  Patient access to physicians, staff, & facilities  Succession planning  Strategic partnerships  Appropriate contracted services  Revenue growth potential  Market share  Care coordination  Referral management © 2013 Huron Consulting Group. All rights reserved. Proprietary & Confidential.15 ACCESS & CAPACITY MANAGEMENT

Financial Stability:  Realistic goals  Revenue & expense controls  Effective revenue cycle  Actual to budget performance  Variance analysis & benchmarking  Progressive physician compensation  Downstream revenue management  Payer contracting audits  Shared rewards for success © 2013 Huron Consulting Group. All rights reserved. Proprietary & Confidential.16 FINANCIAL STABILITY

Clinical Effectiveness:  Quality management  Patient centered – Outcomes focused (PCMH)  Interdisciplinary care coordination  Performance dashboard  Care variation management  Member retention & growth  Downstream services contribution  Governance & leadership  Continuous improvement © 2013 Huron Consulting Group. All rights reserved. Proprietary & Confidential.17 CLINICAL EFFECTIVENESS

QUESTIONS: Does your group practice have a strategic plan? Does your group practice currently utilize these five key components?

Necessary Competencies

Necessary Competencies for Value-Based Groups  Realistic goals  Physician commitment  Administrative leadership  Staff proficiency  Information technology  Aligned incentives  Expense management  Care management (From episodic to longitudinal care models)  Aligned “partnerships” © 2013 Huron Consulting Group. All rights reserved. Proprietary & Confidential.20

Clinical Effectiveness IMPROVEMENT AREAS © 2013 Huron Consulting Group. All rights reserved. Proprietary & Confidential. Patient Access Case Management Care Variation Management Interdisciplinary Care Coordination Ensures patients access the right care setting at the right time to improve outcomes and maximize the use of valuable resources. Proactive management of patients across the continuum, driving quality and cost effective care. Strong case management reduces avoidable admissions and minimizes delays in clinical settings (e.g. PCMH). Clinical practice redesign that improves the reliability, quality, and safety of patient care by integrating medical, nursing, and ancillary practice while decreasing process variation. Increases communication with the care team, ensures continuity of care, provides seamless transitions for your patients. 21

Clinical Operations A COMPREHENSIVE APPROACH © 2013 Huron Consulting Group. All rights reserved. Proprietary & Confidential. Operational Transparency Accountable Culture Process Improvement Sustained Operational Improvement | Increased Patient & Staff Satisfaction | Recurring Financial Benefit Optimize Technology Collective Ownership Standardized Processes Executive Reporting Accountability Structure Status Communication 22 Establish consistent processes that minimize artificial variability Clarify individual roles and performance expectations Improve timeliness and effectiveness of communication (e.g., tools, key medical record inputs, policies) End-to-end process visibility allows staff to see beyond their unit Establish goals and trend metrics across functions and departments Integrate tools to support best practices (e.g., reporting, bed board) Institute governance structure and collaboration forums Use metrics to support decision making and monitor performance Individual accountability through performance monitoring and feedback

Patient-Centered Medical Home

Patient-Centered Medical Home (PCMH) © 2013 Huron Consulting Group. All rights reserved. Proprietary & Confidential. Patients are cared for in a Medical Home by a multi-disciplinary team. A Navigator or Health Coach works with the patient to engage the patient, assess health risks, and develop a Health Plan. Self-care management is enabled through tools, processes, and benefit design. Medical Home Team: Multidisciplinary team including participants such as Health Coach, Primary Care Physician, Nurse Practitioners, Dietician, Social Worker (provides integrated behavioral health clinical services and linkage to other community- based services), Physical Therapist, etc. Care Manager: Supports Medical Home Team People Process Tools/Systems/Enablers Health Risk Assessment Tool: Used to identify health risks Patient Self-Care & Education Tools: Multiple vehicles such as 24x7 care line staffed by RNs, online/ interactive tools, social media, brochures (e.g., on Urgent Care Clinic availability), etc. Benefit designs promoting self-care: e.g., no co-pays for office visits. Rewards for activities: such as joining a smoking cessation program. EMR / Personal Health Record: Medical history, medications, recent hospitalizations, emergency or urgent care visits, health maintenance. Advance Directives Patient registries, referral protocols, medication adherence guidelines Community resources Health Planning : Periodic assessment of a patient’s specific health risks and development of a customized Health Plan. The Health Plan incorporates age/sex-appropriate wellness monitoring and interventions (e.g., mammograms, immunizations). Health Management: Monitoring the patient’s health (e.g., hospitalizations), updating the Health Plan, monitoring compliance, and initiating reminders based on triggers to ensure patients stay on track with Physician’s orders. Includes coordinating care across the continuum (e.g., referral specialists, emergency care, hospital admissions, therapeutic care, skilled nursing facilities, home care). Includes medication reconciliation. Self-care management is supported and patients are provided with tools to proactively manage their health. Health Education: Providing patient self-management information about managing existing health conditions as well as preventative care. 24

Next Steps Operational Challenges & Opportunities

 Identification of goals and specific needs: Existing patients Community served Group owners Employees/payers  Resource capabilities: Physicians/APPs Administrative leadership Other staff members IT Medical management Connectivity Capital © 2013 Huron Consulting Group. All rights reserved. Proprietary & Confidential.26

Operational Challenges & Opportunities  Third party partnerships  Measurement and evaluation capabilities  Third party contracting  Continuous performance improvement and strategic planning  Incentives and rewards for measurable improvement  “Go slow to go fast”  OPC - Outcomes/Processes/Connections © 2013 Huron Consulting Group. All rights reserved. Proprietary & Confidential.27

Q & A