FROM ZERO TO CIN: HOW A COMMUNITY HOSPITAL AND LOCAL PHYSICIANS BUILT A CLINICALLY INTEGRATED NETWORK IN LESS THAN NINE MONTHS

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1 FROM ZERO TO CIN: HOW A COMMUNITY HOSPITAL AND LOCAL PHYSICIANS BUILT A CLINICALLY INTEGRATED NETWORK IN LESS THAN NINE MONTHS Jason Barrett Chief Integration Officer and Executive Vice President Flagler Hospital, Inc. David W. McMillan Principal Pershing Yoakley & Associates Charmaine T. M. Chiu, Esq. Shareholder Smith Hulsey & Busey Christopher K. Wilson Senior Manager Pershing Yoakley & Associates A. INTRODUCTION One of the key concepts introduced to the health care industry with the passage of the Patient Protection and Affordable Care Act of 2010 ( PPACA ) was the accountable care organization ( ACO ). Of course, hospitals, physician group practices, and other health care providers have long employed various models and entered into many forms of transactions, the purposes of which have included encouraging a cooperative approach to medicine. 1 With PPACA and ACOs, however, came a mandate for the United States Department of Health & Human Services, Centers for Medicare and Medicaid Services ( CMS ) to adopt methods by which clinically integrated networks could be financially rewarded for furnishing comprehensive care to patients, achieving improved clinical 1 See Michael F. Schaff & Glenn P. Prives, Hospital Physician Integration Models Before PPACA, American Health Lawyers Association, The ACO Handbook: A Guide to Accountable Care Organizations, pp (2012) (describing such models and concerns with each, including service agreements, management services organizations, joint ventures, physician co management agreements, and health system employment). 1

2 outcomes, and identifying cost efficiencies in health care delivery. 2 As recently as December 23, 2013, CMS trumpeted the formation of over one hundred and twenty three (123) new ACOs that have been granted Medicare Shared Savings Program ( MSSP ) status effective January 1, 2014, providing 1.5 million additional Medicare beneficiaries with access to care through clinically integrated networks; this brings the overall number of MSSP ACOs in the nation to three hundred and sixty (360), serving an aggregate of 5.3 million Medicare beneficiaries. 3 While many of our colleagues in the American Health Lawyers Association may be familiar with the federal laws, rules, and other guidance concerning ACOs, and in particular those clinically integrated networks that are MSSP enrolled, perhaps not as many have had the opportunity to actually build a clinically integrated network from the ground up with their provider clients. This paper describes the creation of one specific ACO, First Coast Health Alliance, LLC ( FCHA ), the logistics involved in developing this clinically integrated network, and lessons learned (and still being learned) by the hospital administrators, physician leaders, consultants, and legal counsel participating in this project. B. FOUNDATION: A RIPENING ENVIRONMENT FOR CLINICAL INTEGRATION Flagler Hospital, Inc. (the Hospital ) is an independent (i.e., not affiliated with a national or local multi hospital health system) three hundred and thirty five (335) bed acute care hospital located in St. Augustine, Florida. The Hospital has operated as a not for profit health care institution since its founding in 1889, and is the only hospital facility in the St. Augustine, Florida area. The Hospital draws most of its patients from the immediate community (i.e., St. Johns County, where St. Augustine is situated); but its size and the nature of some of its clinical offerings 2 76 Fed. Reg (Nov. 2, 2011). 3 Centers for Medicare and Medicaid Services, Press Release, More Partnerships Between Doctors and Hospitals Strengthen Coordinated Care for Medicare Beneficiaries, December 23, 2013, Releases/2013 Press Releases Items/ html. 2

3 means that its reach extends to patients from adjacent counties as well. Most of the physicians on the Hospital s roughly two hundred and fifty (250) member medical staff are in small, independent practices. Prior to PPACA and the advent of ACOs, physicians in the community related to the Hospital and to each other in the traditional medical staff fashion. Outside of the formal medical staff structure, there was no forum in which to share ideas or consider common strategy among the Hospital and area physician leaders. There was little trust on which to build broader clinical or economic relationships. Like most hospital governing bodies, however, the Hospital s Board of Directors faced the challenges and negative pressures of foretold revenue reductions, threatened competition from nearby metropolitan health systems, and uncertainty about health care reform. At the same time, there were some positive pressures as well. Private third party payers and local employers were offering new opportunities. Payers proposed new contracts with innovative incentives: pay for performance rewards; network access fees; and shared savings payments. Leading employers were looking to the Hospital for leadership on strategies to reduce their costs, including comprehensive employee wellness programs. Through facilitated strategic planning, members of the Hospital s Board of Directors came to understand that closer alignment between the Hospital and community physicians was essential to meeting these challenges. Specifically, Board members observed the following: Declining revenue highlighted the need for cost controls that would necessitate medical staff participation and changes in physician behaviors. The Hospital and community physicians shared a common interest in protecting the market from outside control. St. Augustine, Florida is 3

4 uniquely situated in that there are larger metropolitan communities to both the north and south; the Hospital itself is an independent, unaffiliated facility sandwiched between national and locally owned, multi hospital health systems. Residents of St. Augustine, Florida, including members on the Board of Directors and community physicians in particular, have historically been fierce guards of the Hospital s independence. The challenges of health care reform, as well as payers and employers push for new payment models, demanded coordination and collaboration among all community providers, and the Hospital and area physicians specifically. The Hospital s Board of Directors and administrators refused to bury their heads in the sand. They undertook to become educated on how to form a clinically integrated network, specifically an ACO that would qualify as a MSSP participant, and began building a new future for the local health care community. The time and environment was ripe for the creation of a clinically integrated network. C. FORMATION: BUILDING THE CLINICALLY INTEGRATED NETWORK The Hospital s Board of Directors made the brave decision to invite and empower community physicians to lead the process of developing a clinical integration strategy. The Board of Directors enlisted several recognized community physician leaders (who were not necessarily the same physicians as those who led the Hospital s medical staff at the time) to serve on a Clinical Integration Committee ( CIC ). The Board of Directors charged the CIC with presenting detailed recommendations on how the Hospital and community physicians could form and operate a successful clinically integrated network ready to contract with payers by August The initial CIC members educated themselves about the key characteristics and 4

5 functions of a clinically integrated network. Next, the CIC sponsored education sessions for all community physicians on changing market conditions that demanded hospitalphysician integration. The organize to operate timeline began with the education sessions for the CIC and community physicians in November This allowed nine months to achieve success. This tight timeline, driven by payers insistence on new payment models (and a desire for the clinically integrated network to participate in the Medicare Shared Savings Program in 2014) turned into a blessing rather than the anticipated curse because it kept all parties intensely focused on the process. The CIC saw the need for broader physician participation, and thus created five workgroups, comprised of physicians and supported by Hospital administration, to support its efforts: Governance; Quality/Operations; Technology; Communications/ Network Development; and Finance. The Hospital s Board of Directors called upon its consultants, Pershing Yoakley & Associates ( PYA ) to assist in drafting detailed workgroup charters and facilitating each of the initial workgroup meetings in January Early on, CIC members recognized that the strength of a clinically integrated network depends upon whether physicians trust the organization to address their common concerns while respecting their individual interests. Building this trust required a carefully crafted balance of power (i) between the Hospital and community physicians, and (ii) between the community physicians themselves, which is reflected in the FCHA s final and agreed upon governance structure. The CIC and workgroup members nearly 50 community physicians total committed to a two day, off site summit to discuss, debate, and reach consensus on the clinically integrated network s governance structure (together with other matters relating to the clinically integrated network). In advance of the summit, PYA developed, disseminated, and analyzed the results of an electronic survey which assessed the opinions of all medical staff members on clinically integrated network participation and 5

6 structure. Armed with this data, PYA consultants organized the summit, prepared background materials, and facilitated (and, on occasion, refereed) the physicians discussions during the two day event. By the end of day two, the physicians in attendance reached consensus on a governance structure for the clinically integrated network. That consensus created a sense of ownership and commitment to the continuing process. The physicians left the summit believing in the possible, overcoming their doubts and reservations about working with one another and with the Hospital. FIGURE 1. FIVE STEPS TO A CLINICALLY INTEGRATED NETWORK For the next six weeks, each CIC workgroup discussed and developed its specific recommendations regarding the CIN s form and functions. The CIC workgroups responsibilities and achievements during this six week period included the following: Governance Workgroup. Crafted a detailed organizational chart for the jointly owned physician hospital organization (PHO) that would operate the clinically integrated network; reviewed, revised, and 6

7 approved the PHO s draft operating agreement, subscription agreement, and participation agreement; and developed an election process to select the PHO s initial Board of Directors. Quality/Operations Workgroup. Defined a process to establish and enforce demanding standards of care and to support robust care coordination activities among clinically integrated network participants; explored opportunities for hospital efficiencies and physician management services; detailed PHO strategic planning needs; and specified PHO s staffing needs. Technology Workgroup. Identified the CIN s technology needs and related budget; developed a request for proposal (RFP) and a schedule for IT solution implementation. Communications/Network Development Workgroup. Devised a medical staff education and recruitment strategy. Finance Workgroup. Prepared financial projections for the first three years of the clinically integrated network s operations with anticipated expenses and income derived from PHO participation fees, shared savings, and network access fees (including participation in the Medicare Shared Savings Program, private payer initiatives, and direct contracting with employers). Once finalized by the workgroups, all of the workgroup recommendations were combined into a single report for review and approval by the full CIC. Following a lengthy meeting with spirited but respectful discussion, the CIC voted unanimously to recommend the report to the Hospital s Board of Directors for consideration and adoption. 7

8 D. FINALIZATION: TAKING CLINICALLY INTEGRATED NETWORK LIVE At the Hospital Board of Director s next meeting, CIC members presented the final report and answered questions from Board members. The Board of Directors voted unanimously to accept the physicians recommendations developed following the CIC summit, and to commit the financial resources necessary to operationalize them. In four short months, physicians who previously had shared little economic or clinical interests built consensus around a detailed plan to form a PHO and operate a clinically integrated network in partnership with each other and the Hospital, with which they had few to no pre existing business relationships. The Hospital and community physicians then set on the task of becoming educated about coming changes to the healthcare payment and delivery system, and began to look to how they could improve quality and enhance efficiency through collaboration. FIGURE 2. LESSONS LEARNED IN FORMING A CLINICALLY INTEGRATED NETWORK 8

9 Following approval by the Hospital s Board of Directors in April 2013, a flurry of activity ensued. The first order of business was to constitute the clinically integrated network s Board of Managers. Nominations were opened for the seven (7) physician seats on FCHA s Board of Managers, and more than 20 physicians threw their hats in the ring. All active medical staff members were invited to sign a letter of intent to participate in the clinically integrated network. More than half of them did so, each receiving the right to vote for FCHA s seven (7) initial physician board members. The Hospital appointed its representatives on the FCHA Board of Managers, including a community representative. In conjunction with those elections and appointments to the Board of Managers, final arrangements were made to formally form the business entity that would house the clinically integrated network and commence its operations. At this point, the Hospital and the physicians were advised by separately retained legal counsel regarding finalization of the corporate documents developed, which were negotiated through a collaborative process. These corporate documents included FHCA s operating agreement, the subscription agreement, and the Hospital and physician participation agreements. Upon completion of that process, both the physicians and the Hospital were confident they could embark on this new endeavor knowing their respective individual interests were legally protected. With facilitation by PYA, Hospital s legal counsel, and the physicians legal counsel, the FCHA Board of Managers approved the organizational documents, elected officers, appointed committee chairs, adopted a conflicts of interest policy and compliance plan, approved a clinically integrated network physician recruitment plan, followed up on its technology RFP, and reviewed several payer opportunities. By early July, FCHA had hired a full time Executive Director, responded to an RFP from the local school district to provide a comprehensive wellness program, and commenced conversations with other private payers. FCHA also was aggressively 9

10 recruiting additional physicians to join the clinically integrated network. By the end of July, FCHA had submitted its application to participate in the Medicare Shared Savings Program as an ACO. By then, its membership ranks had swelled to nearly 200 physicians. Full committees had been appointed and had set themselves to work implementing the recommendations in the Board approved CIC report. Building the clinically integrated network is only the first step in a long process. FCHA participants now must operationalize the network by pursuing the following opportunities: FIGURE 3. TASKS FOR THE NEW CLINICALLY INTEGRATED NETWORK 10

11 E. CONCLUSION Despite all of the buzz around hospital physician alignment and clinical integration these days, finding a starting point for network development can be a real challenge. One should not underestimate the effort involved in fostering a culture of trust. Enlisting the assistance of an honest broker someone who can help build and maintain lines of communication between and among physicians and hospital executives can help meet this challenge. That same honest broker can present a straw man to which the parties can react, rather than starting from scratch in building their network. And, finally, that broker can develop and implement work plans for network development and deployment. 11