HFMA: Maine Chapter Trends for Advanced Practice Providers and Bipartisan Budget Act of 2015 Update

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1 HFMA: Maine Chapter Trends for Advanced Practice Providers and Bipartisan Budget Act of 2015 Update February 18, 2016

2 Agenda I. Introduction II. Advanced Practice Provider (APP) Industry Trends III. APP Management and Compensation IV. Bipartisan Budget Act Discussion 1

3 I. Introduction 2

4 I. Introduction Presenters John Budd MANAGER Angie Collins MANAGER 3

I. Introduction About Our Firm For more than 40 years, ECG s mission has been to provide exceptional management consulting services exclusively to healthcare clients.

5 I. Introduction About Our Firm For more than 40 years, ECG s mission has been to provide exceptional management consulting services exclusively to healthcare clients.» ECG is a national consulting firm focused on offering strategic, management, and financial advice to healthcare providers.» We are particularly known for our expertise in strategy, hospital/physician relationships, business planning, and program development.» We focus on creating customized, implementable solutions to meet our clients specific challenges, in both community-based and academic settings.» We have approximately 190 consultants nationwide.» Our overall mission is to provide highly specialized management consulting services to healthcare providers and maintain a pattern of steady growth and profitability through developing staff with a strong commitment to high quality, client service, ethical standards, and professionalism. 4

6 I. Introduction About Our Firm (continued) ECG offers a comprehensive range of strategic, financial, operational, and technology services. In compensation planning, we find that the depth of our solutions differentiates us from our competitors.» Enterprise strategic planning» Accountable care organizations and population management» Transactions and affiliations» Service line strategy» Graduate medical education» Organizational development STRATEGY AND GOVERNANCE FINANCIAL PERFORMANCE» Contracting» Provider compensation and productivity» Expense management» Staffing ratios» Revenue cycle» Analytical modeling and impact analyses» Operations optimization» Organizational turnaround» Work flow assessment» Labor and workforce optimization OPERATIONS AND MANAGEMENT TECHNOLOGY OPTIMIZATION» System selection and implementation» System optimization» Health information exchange strategy» Revenue cycle improvements» Meaningful use assessments» Interim management Our success is rooted in our deep understanding of physicians and their integration within healthcare organizations. 5

7 II. APP Industry Trends 6

8 Growing Supply of APPs II. APP Industry Trends Increasing Prevalence of APPs In response to the aging population and expanded insurance coverage, health systems are looking to APPs to mitigate the shortage of physicians and expand capacity for care.» There are approximately 94,000 physician assistants (PAs) and 205,000 nurse practitioners (NPs) in the U.S. 1 The number of PAs has grown by 119% over the past 10 years. 2 The U.S. Bureau of Labor Statistics reported NPs and PAs among the fastest growing occupations between , with a projected increase of between 30% and 35%. 3» The Patient Protection and Affordable Care Act invested in programs to support the growth of NPs and PAs. $31 million to fund stipends for 26 schools of nursing to increase full-time enrollment in primary care NP and nurse midwife programs. $30 million to fund stipends for 28 primary care PA training programs. PA SPECIALTIES 2013 AAPA ANNUAL SURVEY 1» 32% Primary Care» 27% Surgical Subspecialties» 19% Other Specialties» 11% Emergency Medicine» 10% Internal Medicine Subspecialties» 2% Pediatric Subspecialties NP SPECIALTIES 2015 NP FACT SHEET 1» 87% Primary Care» 8% Acute Care» 4% Psychiatry/Mental Health» 2% Other Specialties 1 Source: American Academy of Physician Assistants, 2013 Annual Survey Report and American Academy of Nurse Practitioners, 2015 NP Facts. 2 Source: 2013 Statistical Profile of Certified Physician Assistants, An Annual Report of the National Commission on Certification of Physician Assistants. 3 U.S. Bureau of Labor Statistics, Employment Projections , released December 8,

9 II. APP Industry Trends APP Scope of Practice APP organizations are constantly pushing for state legislation to expand the scope of practice for APPs, while some physician organizations (e.g., AAFP) believe the current scope is appropriate. SCOPE OF PRACTICE IN MAINE D.C.» Solo Practice. NPs or PAs may diagnose and treat without physician involvement.» Medication Prescription. APPs are allowed to prescribe medication within a collaborative practice agreement.» Chart Sign-Off. Physicians do not have to sign off, although it might be required by some insurance groups. Full Practice State practice and licensure law provides for NPs to evaluate patients; diagnose, order, and interpret diagnostic tests; and initiate and manage treatments, including prescribe medications. This is the model recommended by the Institute of Medicine and National Council of State Boards of Nursing. Reduced Practice State practice and licensure law reduce the ability for NPs to engage in at least one element of NP practice; requires a regulated collaborative agreement with physicians. Restricted Practice State practice and licensure law restricts the ability of an NP to engage in at least one element of NP practice; requires supervision or team management with a physician. Source: American Association of Nurse Practitioners: 2015 Nurse Practitioner State Practice Environment. Source: Physician Assistant and Nurse Practitioner Scope of Practice Laws, Henry J. Kaiser Family Foundation ( 8

10 II. APP Industry Trends APP Roles Organizations should seek to first understand how to best maximize their provider resources and how much autonomy they will offer APPs. As the role of the APP expands, health systems can develop more innovative, team-based models of care. SPECTRUM OF APP ROLES PRACTICE EXTENDER» Medical histories» Physician exams» Preoperative workup» Patient triage» Family planning» Patient education» Disease management COLLABORATIVE PROVIDER» Surgical assistance and minor surgeries» Inpatient rounding» Call coverage» Medication management» Consults» Resident training TYPICAL BILLING SCENARIO INDEPENDENT PROVIDER» PC patient panels» Patient evaluations» Patient diagnosis» Prescriptive authority» Care plan development Incident to Mix of incident to and independent Independent Organizations with multiple, differing roles will require flexibility policies for clinical oversight, compensation, and billing practices. 9

11 II. APP Industry Trends Increasing APP Compensation Consistent with physician compensation, APP, including NP and PA, compensation is trending upward, although stabilizing. In fact, NP compensation fell slightly from 2014 to 2015 to a median value of $100,785. $140,000 $130,000 $120,000 $110,000 $100,000 $90,000 $80,000 $70,000 $60,000 $50,000 $40,000 APP Compensation, 2006 to 2015 Select Provider Types PA Surgical PA Nonsurgical NP Source: ECG 2006 to 2015 Physician Compensation Surveys. 10

12 II. APP Industry Trends Concerns About Increasing APP Compensation Compensation for the three most commonly employed types of APPs decreased moderately from Surgical PAs maintained the highest compensation levels, whereas NPs experienced the greatest decrease in median compensation (-3.0%) from Percentage Change of Compensation Medians From 2013 to 2015 Metric NP PA Nonsurgical PA Surgical Compensation: 2014 $103,912 $108,780 $125,844 Compensation: 2015 $100,785 $108,211 $124,774 Percentage Change: 2014 to 2015 Percentage Change: 2013 to % -0.5% -0.9% 1.1% 0.5% 4.4% Source: ECG 2013 to 2015 Physician Compensation Surveys. APP compensation remains less than half of the compensation of a primary care physician. 11

13 II. APP Industry Trends WRVU Production Trends Consistent with physician productivity, APP (including NP and PA) productivity has remained fairly constant since ,000 APP Productivity, 2006 to 2015 Select Provider Types 3,500 3,000 WRVUs 2,500 2,000 1,500 1, PA Surgical PA Nonsurgical NP Source: ECG 2006 to 2015 Physician Compensation Surveys. 12

14 II. APP Industry Trends APP Utilization in Physician Offices Medical groups are more likely to utilize NPs and PAs as both physician extenders and independent practitioners, rather than one or the other exclusively. Physician Office Role Independently manage the care of patients, with services typically billed using the provider s own identification number. Primarily function as physician extenders, with services typically billed under the incident to provision. Function as both physician extenders and independent practitioners. NOTE: Figures may not be exact due to rounding. Source: ECG 2015 Physician Compensation Survey. Physician Office Utilization of APPs NP PA Nonsurgical PA Surgical Average WRVUs 48% 33% 6% 3,703 19% 11% 47% 2,824 33% 56% 47% 3,334 Independent APPs generate approximately three-quarters of the WRVUs of a primary care physician. 13

15 II. APP Industry Trends APP Employment Rationale On average, organizations that utilize APPs employ approximately one APP for every two physicians. Within surgical subspecialties, groups are employing more than one surgical PA for every two surgeons. APP FTEs Per Physician FTE by Specialty Category APP FTEs Per Physician Specialty Category NP PA Nonsurgical PA Surgical Primary Care N/A Medical 0.44 N/A 0.50 Surgical Source: ECG 2015 Physician Compensation Survey. 14

16 III. APP Management and Compensation 15

17 III. APP Management and Compensation Physician Compensation for APP Oversight Organizations that choose to pay physicians for APP oversight do so to align practice performance with compensation and encourage physicians to utilize APPs. Risk Model MODEL DESCRIPTION» The collections and expenses associated with an APP are allocated to physicians based on the predetermined APP allocation factor.» APP expenses typically include compensation, benefits, operating and overhead expenses, and a management fee for the parent organization, which is typically a predetermined percentage of the provider s collections. WRVU Incentive Model MODEL DESCRIPTION» The WRVUs associated with an APP are allocated to physicians based on the predetermined APP allocation factor.» Physicians will be paid $1 per WRVU for the APP WRVUs that are allocated to their practice. Oversight Stipend Model MODEL DESCRIPTION» Physicians responsible for the supervision of assigned APPs would receive a defined payment amount for this activity.» The payment is usually not a significant amount, but allows the organization to associate the responsibility of managing APPs with specific physicians. 16

18 III. APP Management and Compensation Case Study: Team-Based Care Model Approach Organizations sought to develop compensation plans that incorporated their APP providers as well as promoted increased productivity and value-based elements.» The purpose of this model was to incentivize individual productivity while supporting the evolution toward a value- and outcome-based care model.» Stipends were distributed directly to the individual physician.» Productivity and APP funding were combined into one clinical pool for distribution. A portion of the clinical funding was allocated to each distribution pool. The portions may change over time as reimbursement models evolve.» Performance relative to the dashboard was compensated based on individual and group metrics in the four domains of quality, access, cost, and citizenship.» All funds were distributed completely under this model via an internal point system. Physician Productivity FUNDING APP Supervision DISTRIBUTION POOLS 5% 10% BALANCED DASHBOARD Quality Citizenship 15% 70% Cost Stipends Individual WRVUs Site WRVUs APP WRVUs Dashboard Access 17

19 III. APP Management and Compensation Incorporating Risk Into APP Compensation Plans More market compensation models are incorporating risk into their APP compensation plans. Less than half of APPs receive a guaranteed salary. 100% 80% 60% 37.3% 10.7% 30.4% 34.3% 10.2% 5.9% 9.0% 2.5% 16.9% 13.5% 12.0% 22.6% 13.7% 20.0% 18.0% 18.0% 12.0% 14.1% 14.2% 15.7% 21.0% 41.2% 44.6% 41.2% 40% 20% 52.0% 59.4% 59.8% 88.5% 60.5% 72.8% 68.0% 64.0% 66.0% 44.6% 41.2% 43.0% 0% Midwife NP PA Midwife NP PA Midwife NP PA Certified Nurse Midwife Straight Salary Variable With <50% Risk Variable With >50% Risk NP PA Source: ECG 2012 to 2015 Physician Compensation Surveys. The majority of APPs are either salaried or compensated under a variable compensation plan that has a portion of the earnings at risk based on performance. 18

20 III. APP Management and Compensation Example APP Compensation Approaches In order to account for the nuances of different practice models, organizations commonly make use of multiple base-plus-incentive compensation plans for APPs. PRACTICE EXTENDER» There is minimal opportunity for production.» Focus is on practice efficiency and patient satisfaction. Performance Bonus Base (Fixed Compensation) COLLABORATIVE PROVIDER» Majority of production is billed incident to.» Performance is based on both production and quality. Other Compensation Performance Bonus Base (Fixed Compensation) INDEPENDENT PROVIDER Other Compensation Performance Bonus Base (Fixed Compensation) 19

21 IV. Bipartisan Budget Act Discussion 20

22 IV. Bipartisan Budget Act Discussion Reimbursement Changes: Overview The Bipartisan Budget Act, signed into law by President Obama on November 2, 2015, has significant implications for facility-based Medicare reimbursement. DESCRIPTION» In addition to raising the debt ceiling, the law will also exclude newly acquired, off-campus hospital outpatient departments (HOPDs) from receiving reimbursement under Medicare s hospital outpatient prospective payment system (OPPS).» After January 1, 2017, new off-campus locations will be reimbursed under the ambulatory surgical center payment systems and quality reporting programs or the Medicare Physician Fee Schedule.» On-campus departments are not affected.» Outpatient departments are now defined as on campus if they are within 250 yards of a main campus or a remote location.» Facilities under construction will not be grandfathered; only those sites that are billing as an HOPD as of November 2, 2015, will continue to be reimbursed under OPPS.» Off-campus emergency departments are excluded.» Commercial reimbursement is not yet impacted. KEY ASPECTS OF THE BILL 21

23 IV. Bipartisan Budget Act Discussion Reimbursement Changes: Implications for Provider Organizations The reimbursement changes have significant impact for provider organizations, including:» Definition of New Provider-Based Clinics The legislation specifies that new provider-based HOPDs are those that execute a CMS provider agreement after the date of enactment.» Consequences for Developing HOPDs Healthcare organizations that were in the process of converting off-site locations into provider-based HOPDs and did not meet the deadline will have to reassess and update their financial and operational plans.» Implications for Acquisitions Any potential acquisition will no longer be eligible for a provider-based billing differential at the physician groups existing clinic locations.» Response of Commercial Payors Several commercial payors have announced they will not reimburse certain procedures in an HOPD setting when less expensive options are nearby, and some have gone as far as to contact patients and steer them toward non-hopd facilities. It will be important for provider organizations to explore the various options moving forward. 22

24 IV. Bipartisan Budget Act Discussion Reimbursement Changes: Impacts to Outpatient Departments Though the bill has been enacted, the extent of the impact is under evaluation, and there are a number of questions that still need to be answered. WHAT DOES THIS MEAN FOR THE OUTPATIENT DEPARTMENTS? Future practice acquisitions may no longer be eligible for provider-based billing. Developing clinics adjacent to hospitals may allow organizations to still achieve this differential. CONSIDER: It will be important for organizations to explore the various options moving forward, and the emphasis may be more focused on creating patient-friendly freestanding clinics. It will be important for organizations to consider other potential options for clinic locations and operations. 23

25 IV. Bipartisan Budget Act Discussion Projected Financial Impact: Overview To quantify the impact of the changes to both reimbursement and the number of providers initially located at the outpatient clinic, several financial scenarios must be considered. Below are the assumptions that would underlay these models. FACILITY STAFFING» Rent, Utilities, Maintenance, and Repairs Based on draft lease agreement, current tenant agreements, and benchmark rates» Locations Determination of the number of physicians who will practice at any of the existing or new HOPDs» Physician Compensation and Benefits Based on current physician compensation plan or movement from FFS to value-based compensation plans» Staff Salaries and Benefits Anticipated staff-to-physician ratios based on current practice profiles; salaries and benefits estimated using the organizational median hourly rate SUPPLIES» Medical and Office Supplies Based on benchmark values to estimate the per WRVU cost RECRUITMENT» New Physicians Estimated total FTEs for new physicians recruited to new or existing clinics over the next 5 years 24

26 IV. Bipartisan Budget Act Discussion Strategic Considerations: Overview New Clinic Options We have outlined several strategic options for consideration; these may or may not be mutually exclusive. OPTIONS Continue with Continue with the Change the clinic Explore the Explore options plans to develop current plan for location to a possibility of to enhance the a clinic at a construction of a building that is practicing in an services provided remote site and clinic at the within 250 yards existing offcampus at a rural health assume that the current location, of the main provider- clinic or federally clinic s proximity but reserve the hospital. based clinic. qualified health to the remote option to refer all center. hospital facility ancillary testing will enable to the hospital. provider-based billing. Organizations consider opportunities and challenges regarding new clinic locations and services provided. 25

27 IV. Bipartisan Budget Act Discussion HOPD Reimbursement Changes: Options for Provider Organizations Provider organizations will need to reevaluate their strategic plans and reassess the financial impact of continuing to pursue HOPDs or consider alternative options. Potential Alternative Consider moving to an oncampus location. Description» Transfer the clinic either in part, or entirely, to an on-campus facility within 250 yards of the main campus.» Relocate only the ancillary offerings to an on-campus facility, as the reimbursement differential for imaging and testing procedures is more significantly enhanced under the OPPS reimbursement schedule than office-based professional fees. Increase practice efficiency.» Consider new care models, including utilizing APPs to expand clinic hours and patient panel size. Expand service offerings.» Perform a practice assessment to seek efficiencies and streamline internal processes.» Identify new procedures and technologies that would allow for expansion or higher reimbursements without significant financial investment.» Develop a strategic plan to assess key strengths, competitor landscape, and market opportunities to detect avenues for growth. 26

28 Questions & Discussion John Budd Angie Collins

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