Embracing Change: How to Position Your Hospital For Success 2018 HFMA Northern California and Nevada Fall Conference Resort at Squaw Creek Jeffrey M. Johnson, CPA, Partner September 17, 2018
Today s Agenda Preparing Now For What Is to Come Shift to Value-based Purchasing Trends in Mergers and Acquisitions Types of Collaborations How to Prepare Your Hospital: Steps to Successful Change Conclusions & Takeaways Questions
Preparing Now For What Is To Come The Shift to Value-based Care Wipfli LLP 2
Preparing Now for What Is to Come The Changing Health Care Landscape: The shift to accountable care and value-based reimbursement is tied to the performance of services and management of patients with an expected quality outcome. To address this reality, clinically integrated networks (CINs) are forming with the goal of bringing down health care costs with the promise of highquality care focused on patients specific needs. 3
Preparing Now for What Is to Come Clinical Integration is Driving Change: What is it? Coordination of patient care across conditions, providers, settings, and time in order to achieve care that is safe, timely, effective, efficient, equitable, and patient focused. An organization-wide quality infrastructure. The goal is to coordinate patient care and position participants for success by leveraging quality. Source: AHA description of clinical integration 4
Preparing Now for What Is to Come The World as We Know it Is Changing: Health care provider revenue stream equals service volume (and service mix) multiplied by reimbursement rates for services. Clinical integration is placing downward pressure on both service volumes and reimbursement rates Clinical integration is adding a quality (and outcome) expectation to the service delivery model Provider and staff burnout are at an all-time high, creating shortages and turnover, which can significantly disrupt the service/quality you promise your patients 5
Preparing Now for What Is to Come Merging the Delivery and Payment Systems Organized System of Care Clinically Integrated Network Governance Clinical programs Care management Contracting Infrastructure 6
Preparing Now for What Is to Come Key Drivers: Merging the Delivery and Payment Systems Reimbursement (FFS vs. Capitation) Cost-of-care (PMPM) Patient Access Reconciliation Period Provider/Member Attribution Value- Based Contract Products Employers Care Management and Quality Indicators Patients 7
8 Preparing Now for What Is to Come Integration: Shifting Volume to Value What to watch for... Non-value-based care will be challenged and care in the wrong settings (inpatient vs. outpatient vs. home-based) may be denied. Claim denials create a potential liability for the health care organization watch for denial trends, percent of denials, and if any pending claim denials should be allowed for at year-end. Physician education will be required to understand the changing landscape. Based on our review of critical access hospital (CAH) claims, we see a substantial portion of inpatient cases admitted for what Medicare considers ambulatory sensitive conditions risk of future inpatient volumes!
Value-Based Care Will Change Reimbursement Methods Value-based contracting = Accountability for cost and quality Value-based contract goals: Deliver a CIN of providers Assume accountability for patients (members) within the contract Manage patients around the total cost of care Use quality metrics to drive outcome improvement 9
10 Value-Based Care Will Change Reimbursement Methods Value-Based Payment Models Fee-for- Service Pay-for- Performance Value-Based Purchasing Bundled Payments Shared Savings Global Payments Fee-for- Service Providers are paid a specified amount for each service provided. Pay-for- Performance Incentives for higher quality are measured by evidencebased standards. Value-Based Purchasing Percentage reimbursement at risk, earned back by high-quality outcomes. Bundled Payments Single payment for episodes of treatment, shared by hospital and physicians. Shared Savings Percentage of savings from reduced cost of care shared with hospitals and physicians. Global Payments All services compensated in one payment that manages the patient across the delivery system. Consumers Employers Health Plans Government Payors Physicians Medical Groups Hospitals Other Providers Source: HFMA 2010 The Advisory Board 2010
Trends in Mergers and Acquisitions Types of Hospital Affiliations Wipfli LLP 11
Mergers & Affiliations Transactions Activity 12
Mergers & Affiliations Transactions Activity 13
Mergers & Affiliations: Options of Collaboration Range of options that do not require a full merger Seldom strategic. Activities and projects at a fairly low risk level; minimal long-term impact). Simple written agreements or contracts around goods and services. No significant impact on governance or control. Typically involve minor capital commitments Activities and projects have longterm consequences around business strategies common to both partners Significant investment at stake. Usually have an element of cogovernance (i.e., board representation). Increasing degree of affiliation or partnership Least sharing of governance & least strategic Most sharing of governance & most strategic 14
Affiliation Process Overview While each arrangement has unique characteristics, most hospitals experience the following phases as part of a strategic partnership: Phase 1: Partner Planning Phase 2: Exploration and Term Sheets Phase 3: Due Diligence Phase 4: Integration (or Collaboration) Develop goals Identify approach to selecting partner (Competitive or Single Source) Identify Team Identify available partners Develop RFP (if necessary) Evaluate RFP responses Interview/select partners Develop Term Sheet Execute LOI Engage qualified healthcare attorney Conduct due diligence Prepare agreements Review regulatory issues and gain approvals, as necessary Confirm expectation of integration Establish resources required to execute the integration or collaboration Develop operational workplan Execute on integration or collaboration 15
Define Goals for Affiliation Example of management defining goals of the affiliation might be to improve operations at hospital. Goals may include: Increase capital needs: Increase Cash on Hand (90 days, 120 days?) Capital equipment/update equipment or facilities Medical office building (expand primary care or specialty care?) EHR investment Increase revenue by expanding services offered Assistance with physician recruitment Setup of primary care clinics (e.g., rural health clinics). This can tie into larger systems strategy to establish rural health strategy Bring physician specialists into the community Increase utilization of the facility (typically happens based on above initiatives) 16
Affiliation Agreements Considerations Number of Years of the Agreement Role of Board hiring/firing employees provided for by Management Agreement Points of Discussion Out Clause Performance Metrics Participation in a Clinically Integrated Network (i.e. part of an insurance product) Provision for Non-Competing Services 17
How to Prepare Your Hospital A Framework for Success Wipfli LLP 18
19 How to Prepare Building Blocks to Success in Preparing for Change Step 5 Focus on operational efficiency & optimizing revenue streams. Step 4 Improve your quality. Step 3 Develop an outstanding primary care network. Step 2 Create a strategic financial plan to address the new realities. Step 1 Understand and share the new economic realities of health care today with your board, leadership, and staff.
How to Prepare Step 1: Understand and share the new economic realities of health care today with your board, leadership, and staff Understand the future trends in mix of services, volumes, reimbursement, and the potential impact on your organization. Understand organizational capabilities (people, processes, technology, facilities). Understand potential risks to your organization. Understand how your organization fits into the local health care market. Prepare for a formal planning process and determine what resources are needed. Assess board capabilities to deal with these new realities. 20
21 How to Prepare Step 2: Create a strategic plan to address the new realities Creating a High- Performing Health System Mission Why We Exist Values What s Important to Us Vision What We Want to Be Strategy Map Translate the Strategy Performance/Scorecard Measure and Focus Targets and Initiatives What We Need to Do Scorecard and Initiatives What Our Teams and Departments Must Do Personal Objectives What I Need to Do Strategic Assessment and Direction Strategic Position and Strategic Plan Strategic Plan Implementation Strategic Outcomes Financial Viability Satisfied Internal & External Customers/Patients Effective Processes Enabling Investments
How to Prepare Step 3: Develop an outstanding primary care network Physician-hospital integration Seeing a pick-up with hospital and physician integration, mostly primary care providers and certain specialties General Surgery Orthopedics Urology Mental Health (Big focus! Severely needed in rural areas) Secure primary care base to position/stabilize hospital markets Prop-up physician compensation to recruit and retain primary care providers Getting creative in ways to make this happen with out a lot of capital outlay from the hospital 22
How to Prepare Step 3: Develop an outstanding primary care network (Continued) Physician compensation re-design to incorporate VBP components into compensation plans Goal to align comp plan with payment model Incorporate VBP domains: Clinical process of care Patient experience Outcomes Efficiencies Start small and step to balance quantitative and qualitative aspects of the compensation plan Pilot first year by running parallel systems Step in 5% increments to maximum of 40% based on VBP (40% might be 3-5 years out 23
How to Prepare Step 4: Improve your Quality Continue to see development of patient care teams Patient care teams might look like: One physician or one Non-physician practitioner (NPP) 1 medical assistant assigned to provider (minimize sharing between providers) 1 RN to 2-3 provider teams Scribes in some cases to help providers with EHR documentation, et al. (can focus on the care versus the data entry) Involving community healthcare providers (EMS, medical responders to help manage patient population in communities 24
How to Prepare Step 5: Focus on operational efficiency and optimizing reimbursement Increased activity in Chargemaster Reviews Not just the compliance component Focus on charge capture Also looking at pricing to be competitive Increased activity in CAH Affiliations Regional alliances are continuing to emerge but with a focus well beyond the typical GPO model Health System collaborations Strategic affiliations (e.g., management agreements, share services) Joint ventures Clinical affiliations 25
How to Prepare Throughout the Process Focus on Data, Data, Data Data mining will be paramount in identifying population health outcomes, reviewing quality data, etc. Small hospitals (including CAHs) partnering to share resources for IT expertise For rural providers, seek opportunities through Rural Development and other organizations such as Federal Office of Rural Health Policy to seek funding by structuring grant application to include IT support 26
Conclusions and Takeaways Wipfli LLP 27
In Summary : Preparing Now for What Is to Come Preparing Now for What Is to Come: Prepare for Value-based Purchasing by focusing on operational efficiencies and optimizing reimbursement. You need to think about ways to improve access, care processes, quality, and provider/staff satisfaction as a means to capture more managed lives in your market area Connect with larger health systems to find common ground. How can you help each other? Position your hospital to be in the best position for collaboration and/or affiliation by building a strategic framework for success. 28
Questions?
Today s Presenters Jeffrey M. Johnson, Partner Wipfli Health Care Practice Oakland Office 509.232.2498 jjohnson@wipfli.com
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