DESIGNING THE NEW HEALTH CARE SYSTEM: THE NEED FOR CMO AND CFO COLLABORATION

2015 DESIGNING THE NEW HEALTH CARE SYSTEM: THE NEED FOR CMO AND CFO COLLABORATION A JOINT REPORT FROM THE AMERICAN ASSOCIATION FOR PHYSICIAN LEADERSHIP AND HEALTHCARE FINANCIAL MANAGEMENT ASSOCIATION

A Joit Report from the America Associatio for Physicia Leadership ad Healthcare Fiacial Maagemet Associatio Preface Effective collaboratio betwee the cliical ad fiacial leaders of health care orgaizatios is icreasigly imperative. Success uder ew care ad paymet models requires that leaders across orgaizatios uderstad these models ad their implicatios, esure the aligmet of the models with the strategic goals of the orgaizatio, ad traslate these goals ito appropriate icetives to optimize practices at the frotlies of care. To accomplish these tasks, cliical ad fiacial leaders must break dow ay existig silos betwee them, establish commo groud ad work together effectively. Such collaboratio is essetial i the quest to icrease value i health care ad achieve success i the icreasigly prevalet value-based models. Without the combied expertise of cliical ad fiacial leaders, reachig ew orgaizatioal ad populatio health goals will be challegig if ot impossible. To ecourage greater collaboratio, the America Associatio for Physicia Leadership ad the Healthcare Fiacial Maagemet Associatio joitly coveed a day-log meetig of the cliical ad fiacial leaders of hospitals ad health systems across the coutry. The primary goal of this edeavor was to facilitate a prelimiary coversatio betwee executives who have ot ofte had the cause to work closely together i the past. This report covers the most saliet topics that emerged from the expert presetatios ad breakout sessios held durig the meetig. We hope this report, ad the early coversatios it represets, help to advace collaboratio betwee the cliical ad fiacial leaders of health care orgaizatios across the coutry ad support the move toward icreasig value i health care delivery. Peter Agood, MD, FRCS(C), FACS, MCCM Presidet & Chief Executive Officer America Associatio for Physicia Leadership Joseph Fifer, FHMA, CPA Presidet & Chief Executive Officer Healthcare Fiacial Maagemet Associatio

EXECUTIVE SUMMARY STAKEHOLDERS THROUGHOUT THE HEALTH CARE SYSTEM INCREASINGLY recogize the eed for greater value i health care a improvemet i both the quality ad cost of care. The emergece of ew value-based care ad paymet models emphasizes the importace of collaboratio betwee the cliical ad fiacial leaders withi health care orgaizatios. It is imperative that leaders commuicate a commo message about the pursuit of value, which requires a commo defiitio ad agreemet o the metrics selected to track progress. Distict capabilities i four categories ca help orgaizatios avigate the shifts required to move toward value-based care delivery: people ad culture, busiess itelligece, performace improvemet, ad cotract ad risk maagemet. Oe powerful cocept that ca bridge the traditioal gap betwee cliical ad fiacial leaders is the goal of becomig a high-reliability orgaizatio: oe that delivers performace as iteded cosistetly over time. This cosistecy would traslate ito: No harm to patiets (safety focus) Cliical excellece (quality focus) Patiet satisfactio (patiet-cetered care) Positive margi (fiacial focus) Orgaizatioal leaders ca use the trust cycle to eable the chages required for successful adoptio of ew care ad paymet models. The cycle icludes four key steps: Fidig commo groud Havig eeded dialogues that are healthy, meaigful ad safe Tappig collective wisdom Buildig trust Because the trasitio to value-based models iheretly icludes both quality ad cost, it is a critical area for collaboratio betwee cliical ad fiacial leaders. It is importat to ackowledge that CMOs ad CFOs speak differet laguages, have differet perspectives ad focus o differet goals. It is absolutely critical for cliical ad fiacial leaders to recogize ad uderstad the pai poits of their colleagues o the other side of the C-suite. Success i the value-based eviromet requires leaders who ca bridge the gaps betwee the cliical ad fiacial realms. It requires cliicias who ca uderstad fiaces ad ca galvaize their peers aroud orgaizatioal or populatio health goals. Success also requires fiacial leaders who uderstad cliical priorities. CFOs must be able to idetify relevat, actioable data for cliicias ad commuicate effectively with CMOs ad care providers. It is essetial that orgaizatios miimize dollars withheld from pealty programs ad maximize dollars received i reimbursemet ad i icetive programs. Fiacial success i these programs requires cliical ad fiacial leaders who have a clear uderstadig of the various paymet programs ad a process for shiftig strategies ad practices i respose to chages i these programs. The availability of timely, accurate, actioable data is critical to providig the feedback that cliical ad fiacial leaders eed to avigate the trasitio from volume-based to value-based paymet. It is also essetial for providig rapid feedback ad comparative dashboards to alig frotlie cliicias with orgaizatioal goals ad iform decisios that affect populatio health. Issues with iteroperability ad difficulties with amassig data from differet IT systems whe icosistecies are preset remai sigificat barriers to optimal data sharig. Fially, the vast amout of data collected requires traslatio to useable iformatio for leaders, cliicias ad patiets. Leaders must esure that all required metrics are collected ad reported, yet idetify the meta-drivers those key levers for optimizig performace with which icetives should be aliged.

Collaboratio DESIGNING THE NEW HEALTH CARE SYSTEM: THE NEED FOR CMO AND CFO COLLABORATION A Joit Report from the America Associatio for Physicia Leadership ad Healthcare Fiacial Maagemet Associatio ACROSS THE COUNTRY, STAKEHOLDERS throughout the health care system patiets, physicias, other cliicias, orgaizatioal leaders, policymakers, payers ad employers are icreasigly recogizig the eed for greater value i health care. Although the specific defiitio of value varies, it is geerally accepted that the term icorporates both the quality ad cost of care. The desire amog payers for greater value has fueled a emergece of ew paymet models, which has traslated ito more provider fuds at risk ad a greater potetial impact of reimbursemet pealty programs. I the past, cliical ad fiacial leaders withi health care orgaizatios have ofte operated o parallel yet separate tracks. However, with the advet of ew care ad paymet models, these leaders eed to coverse ad collaborate as ever before. The trasitio from volume- to value-based care affects virtually every aspect of the strategy ad operatios of hospitals, health systems ad physicia practices. Its eormity is such that chief medical officers (CMOs) ad chief fiacial officers (CFOs) must bridge the divide betwee them ad fid effective ways to work together. The eed for CMO-CFO collaboratio is evidet i the cliical realm where the call for greater value requires icreased cliical itegratio amog departmets ad service lies withi a orgaizatio ad across the etire care cotiuum. The eed is reflected i the icreased focus o trasitios of care ad ivestmet ito care maagemet strategies ad protocols. It is evidet i the ew care delivery models implemeted by hospitals ad physicia groups, icludig patiet-cetered medical homes, home visits, e-visits, telehealth programs, telephoe visits, ad extesivist cliics (i.e., facilities that provide ipatiet-type services without a overight stay for appropriately screeed patiets). The eed for collaboratio is evidet i the icorporatio of decisio tools, such as the evidece-based Choosig Wisely program, ito the electroic health records (EHR) system to avoid the use of uecessary tests ad procedures. The eed for collaboratio is also evidet i the cotiued reliace o defesive medicie, which creates waste ad reduces the value of care to patiets. NO ONE IS BRINGING THE CMO AND CFO TOGETHER FOR THESE KINDS OF CONVERSATIONS. WE MUST CONTINUE TO TALK TO EACH OTHER. The eed for collaboratio is eve more of a imperative give federal govermet paymet goals to decrease the proportio of Medicare paymets based o fee-for-services ad icrease those tied to alterative paymet models. The eed for CMO-CFO collaboratio is just as evidet i the fiacial realm of health care orgaizatios. New paymet models, such as budled paymet programs, full capitatio, gaisharig ad related demostratio projects, such as the Medicare Shared Savigs Program (MSSP), require that fiacial leaders uderstad both the fiscal implicatios of implemetig these models or participatig i demostratio projects ad the cliical implicatios. Without such a balaced uderstadig, the jourey toward higher value is ulikely to be smooth. The eed for collaboratio is evidet i the shift of tyig physicia compesatio more closely to quality, performace or orgaizatioal fiacial metrics. It is also evidet i the eed for fiacial leaders to seek ovel forms of paymet for 1

ACTION CALL TO ACTION Complexity i the health care idustry is iheret ad will ot be easily resolved Optimal cliical delivery ad fiacial maagemet are paramout for success CMOs ad CFOs must stregthe their relatioship i order to help achieve successes CFOs ad CMOs must uderstad each other s professioal laguages ad priorities to adapt to shiftig health care practices ad to leverage their ability to achieve both cliical ad fiacial goals Value-based approaches to health care are also complex but clearly here to stay Value-based approaches to health care are also complex but clearly here to stay CMOs ad CFOs must agree o a clear value defiitio, icludig the key compoets of quality ad price CFOs ad CMOs must establish valid metrics ad measures to accurately track value Public reportig of validly measured quality outcomes ad price iformatio is critical for success Cliicias primarily drive quality improvemets for health care CMOs must work collaboratively across systems to clarify quality improvemet priorities CMOs must work closely with CFOs to help improve the CFO s uderstadig of cliical care CFOs must help idetify actioable fiacial data that accurately relates to cliical care Price is related to busiess practices but is also affected by efficiecies gaied or lost cliically CFOs must work collaboratively across systems to clarify fiacial maagemet priorities CFOs must work closely with CMOs to help improve the CMO s uderstadig of busiess practices, the competitive eviromet, ad priorities for health care systems CMOs must lead quality improvemet iitiatives with a improved balace of cliical care ad fiacial maagemet priorities Improved health care systems will occur with iovatio ad redesig of collaborative workig relatioships betwee CFOs ad CMOs ew relatioship models are essetial CMOs should proactively lear more about the impacts of health care delivery decisios o busiess priciples ad fiacial maagemet CFOs should proactively lear more regardig the approaches of cliical decisio-makig ad help provide a fiacial ifrastructure that supports optimal patiet care outcomes CMOs ad CFOs together must develop opportuities to iovate, collaborate ad share ovel approaches that improve the overall value of care i a chagig eviromet 2 CMO CFO COLLABORATION

services that are ot covered uder traditioal fee-for-service (FFS) models, such as e-visits. Fially, chages i paymet, such as shared risk arragemets, ca have a sigificat impact o the fiacial viability of health care orgaizatios, uless leaders uderstad the most effective ways to optimize the delivery of high-quality care i a cost-efficiet maer. Coversatios that bridge the gaps betwee cliical ad fiacial leadership are essetial. A first topic for cosideratio amog these leaders is determiig a commo defiitio of value. DEFINING AND MOVING TOWARD VALUE Success i creatig more value i health care delivery starts with a commo defiitio of the term. Accordig to James Ladma, JD, PhD, director of Healthcare Fiace Policy, Perspectives & Aalysis at HFMA, value ca be defied as the relatioship of quality to paymet. More specifically, quality refers to the composite of patiet safety, outcomes ad experiece, while paymet is the cost to all purchasers of purchasig health care. FIGURE 1 \\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\ THE VALUE EQUATION VALUE = Whichever defiitio of value a orgaizatio selects, it is essetial that leaders commuicate a commo message about the pursuit of value. Because the defiitio of value iflueces the metrics selected to track progress, esurig that CMOs ad CFOs are speakig from a commo defiitio is critical. I the past, the primary purchasers of health care, patiets, were geerally ot exposed to or iflueced by the cost of care. The situatio has chaged sigificatly with the growth of high-deductible health plas ad the icreased sesitivity of employers to the cost of care for their employees. A key shift i thikig, reflected i the defiitio of value, is viewig quality ad paymet through the les of the purchaser rather tha the provider. This shift has importat implicatios for achievig success i a icreasigly value-based market. Health care leaders must reframe goals to be i aligmet with the value propositio. Health care orgaizatios may face certai barriers whe attemptig to reframe goals i this way. Accordig to Ladma, these barriers iclude: Expectatios of dimiished future reveues Quality (1) Paymet (2) (1) Composite of patiet outcomes, safety, ad experieces (2) Cost to all purchasers of purchasig care Ucertaity about future paymet models Iflexible cultures ad orgaizatioal structures Difficulty aligig physicias ad hospitals/health systems aroud commo orgaizatioal goals Lack of accoutability A vague value propositio A HFMA survey of member orgaizatios demostrated that oly about oe-fifth are cofidet that they could offset dimiished govermet reveue with icreased commercial paymets. Give this reality, orgaizatios must idetify sources of potetial waste to improve the value equatio. As show i Figure 2, the Istitute of Medicie has idetified three mai categories of waste withi health care delivery: uecessary care, excess admiistrative complexity ad iefficietly delivered care. Of the potetial sources of waste idetified, HFMA members believe the greatest opportuities lie i cliical process redesig, as show i Figure 3. The chages required for such redesig require the buy-i ad egagemet of cliicias ad strog collaboratio betwee cliical ad fiacial leadership. Ladma recommeds that health care orgaizatios build distict capabilities i four categories to make the shifts required for cliical process redesig ad for other aspects of movig toward value-based care delivery. These categories iclude people ad culture, busiess itelligece, performace improvemet ad cotract ad risk maagemet. CMOs ad CFOs ca build these capabilities through several specific actio steps, as show i Figure 4. Leaders should cosider the eed for iovative orgaizatioal structures, such as joit operatig agreemets, ad strategic parterships, such as employer-sposored welless programs, to create the foudatio eeded to support ew capabilities. The jourey from volume- to value-based paymet is differet for each orgaizatio, based o a host of factors. Because FIGURE 2 \\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\ COMPLEXITIES AND INEFFICIENCIES DRIVE WASTE UNNECESSARY CARE: $210 BILLION Overuse beyod evidece-established level Discretioary use beyod bechmarks Uecessary choice of higher cost services EXCESS ADMINISTRATIVE COMPLEXITY: $190 BILLION Isurace paperwork costs beyod bechmarks Isurers admiistrative iefficiecies Iefficiecies due to care documetatio requiremets INEFFICIENTLY DELIVERED CARE: $130 BILLION Mistakes (errors ad prevetable complicatios) Care fragmetatio Uecessary use of higher cost providers Operatioal iefficiecies at care delivery sites 3

FIGURE 3 \\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\ HFMA MEMBERS SEE GREATEST OPPORTUNITIES FOR SAVINGS IN CLINICAL PROCESS REDESIGN What have you idetified as the greatest opportuities to achieve savigs, either directly or through utilizatio impacts, over the ext three years? Cliical process/workflow redesig/greater use of cliical pathways ad evidece-based medicie 61% Improvemets i productivity maagemet 41% Establishig a high performig etwork of physicias to esure best quality/low cost choice for payers ad cosumers Cetralizatio of admiistrative/operatioal fuctios (shared physicia office fuctios; shared iformatio techology, etc.) 29% 27% New parterships/affiliatio/merger to achieve ecoomies of scale 24% Service ratioalizatio (e.g., fewer heart surgery programs) 7% Asset ratioalizatio (e.g., fewer or smaller facilities) 5% success uder value-based paymet requires the aligmet of stakeholders across the health care system, it ca be a complicated jourey to iitiate ad to time. Each orgaizatio will eed to cosider carefully the elemets that ifluece the speed ad timig of the trasitio: local market factors, pre-existig relatioships betwee FIGURE 4 \\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\ CAPABILITY FOCUSES PEOPLE AND CULTURE: Emphasize chage maagemet Alig icetives with strategic goals Cultivate physicia leadership BUSINESS INTELLIGENCE: Implemet EHRs/cliical decisio support Refie costig capabilities Develop aalytical capabilities PERFORMANCE IMPROVEMENT: Idetify cliical variatios ad work o stadardizatio Remember that performace improvemet must occur across the orgaizatio (ot just cliical) CONTRACT AND RISK MANAGEMENT: Develop ability to mitigate risk by uderstadig populatio-specific drivers of utilizatio ad cost stakeholders (e.g., the history of collaboratio, or lack thereof, betwee physicias ad hospitals i the local area), payer mix, populatio health eeds ad other factors. Although there is o well-defied sigal markig the full trasitio to populatio health maagemet models, fiacial experts at HFMA estimate that a tippig poit occurs whe 20 to 30 percet of reimbursemet is tied to value-based paymet models. At this poit, the orgaizatio will likely have moved aggressively toward icreased exposure to value-based paymet methodologies. To offset the reveue losses associated with reduced utilizatio (e.g., fewer prevetable readmissios) the orgaizatio will eed to have developed ad implemeted effective populatio health maagemet strategies. These strategies will be effective oly whe they ivolve cliical leadership to esure quality of care ad fiacial leadership to track ad commuicate related fiacial metrics. Close collaboratio is essetial to success. The CMOs ad CFOs who participated i the meetig held a variety of opiios about egagig i iovative paymet models. May leaders edorsed movig toward global paymet or full-risk capitatio as the optimal strategy. They believe that participatio i these programs will give providers more ifluece over decisios about how premium dollars are spet, esurig more cotrol over care maagemet decisios. They believe that full capitatio carries the advatage of simplicity ad cosistecy. I additio, may asserted that shared savigs programs are overly complicated ad that budled paymet programs are short-term solutios. Several leaders coteded that budled paymet programs eed to show more upside beefits before they will gai widespread adoptio. They reported that readmissios programs carry sigificat risk if the orgaizatio does ot have robust care coordiatio iitiatives i place. They emphasized the importace of urse care coordiators ad the eed to esure that care providers are held accoutable for high quality care 4 CMO CFO COLLABORATION

but are ot pealized for care delivery or outcomes outside their cotrol. Leaders reported a rage i terms of the curret status of their orgaizatios i the movemet toward value-based paymet. Several leaders reported that their orgaizatios curretly egage mostly i traditioal paymet models yet are actively moitorig the market to stay abreast of ew iitiatives. THESE DISCUSSIONS FOSTER A CLOSE PARTNERSHIP BETWEEN THE CFO AND CMO. THIS ENCOURAGES SHARED GOALS FOR THE HEALTH SYSTEM AS A WHOLE AND FOCUS ON THE IMPACT WE HAVE AS LEADERS WITHIN OUR ORGANIZATION. A few orgaizatios are egagig i global capitatio for ipatiet care. I geeral, few orgaizatios have take aggressive steps toward value-based paymet models, yet may are begiig to discuss ad ivestigate budled paymet, shared savigs ad capitatio models. THE BUSINESS CASE FOR COLLABORATION Leaders of health care orgaizatios must have a clear uderstadig of the busiess case for collaboratio betwee its cliical ad fiacial leaders. Several specific ratioales exist for the eed for CMO-CFO collaboratio. Cliical ad fiacial leaders of health care orgaizatios have a shared imperative. This imperative traslates ito several shared goals: Achievig better quality ad cost-effective care Re-egieerig ad trasformig cliical ad admiistrative processes Assessig opportuities to right site ad size capacity Allocatio ad distributio of fiacial ad itellectual capital I additio, the atioal movemet toward achievig the Triple Aim, which ca be summed up as better care, better outcomes ad lower cost, emphasizes the importace of parallel ad collaborative leadership i the cliical ad fiacial areas. Curret market demads ad forces heighte the eed for collaborative leadership to achieve success. These demads iclude the call for improved patiet safety, health outcomes, trasparecy ad affordability of health care. They iclude the drive toward achievig greater value, with a associated shift away from FFS toward shared or full-risk paymet models. The demads also iclude the eed to achieve better care maagemet across the cotiuum, which requires greater cliical itegratio of care providers, ad to address populatio health ad the eeds of the local commuity. Curret market forces require greater geographic stregth to capture sufficiet market share ad patiet umbers for shared savigs or capitated plas. These market forces geerate a greater eed for techology both to support patiet egagemet ad care betwee visits (e.g., smart wearables ) ad to provide the timely, actioable data that cliicias ad maagers eed to maage care rather tha simply measure it. These forces emphasize the eed for better workforce maagemet with a effective balace betwee full time employees ad other employmet models ad betwee staffig for ipatiet ad outpatiet settigs as care moves progressively outside the acute care eviromet. Accordig to Peggy Naas, MD, chief medical officer at Healthcare Performace Improvemet, oe powerful cocept that ca bridge the traditioal gap betwee cliical ad fiacial leaders is the goal of becomig a high-reliability orgaizatio. Such a orgaizatio would be able to deliver effectively o ay iitiative, ot just oe that is curretly receivig attetio. I short, a high-reliability orgaizatio would deliver performace as iteded cosistetly over time. This cosistecy would traslate ito: No harm to patiets (safety focus) Cliical excellece (quality focus) Patiet satisfactio (patiet-cetered care) Positive margi (fiacial focus) A coalitio of childre s hospitals i Ohio serves as a good example of the effectiveess of this bridgig cocept. The Solutios for Patiet Safety (SPS) was fouded with eight Ohio childre s hospitals i 2009. By sharig data ad best practices trasparetly amog the coalitio, the hospitals improved outcomes. As a group, they reduced serious safety evets by more tha 70 percet sice the iceptio of the coalitio. The group is leadig a atioal effort that icludes more tha 80 childre s hospitals, represetig more tha 50 percet of childre s hospital care available i the Uited States. Sice 2012, the atioal effort has avoided serious harm to more tha 2,500 childre, which traslates ito savigs of more tha $60 millio. To achieve the goals of the Triple Aim, remai successful uder curret ad future market demads ad forces, icludig greater emergece of value-based purchasig models, ad move toward becomig a high-reliability orgaizatio, CMO-CFO collaboratio is imperative. The cliical leader ca help the CFO uderstad the cliical implicatios of fiacial decisios, whereas the fiacial leader ca help the CMO better uderstad the fiacial implicatios of care decisios ad ca help esure that frotlie cliicias have the data they eed to maage populatio health effectively. At the least, cliical ad fiacial leaders eed shared educatio to better uderstad the curret reality that is the health care eviromet today. 5

ENABLING EFFECTIVE COLLABORATION Humas seem to have a iate desire to retreat to the familiar i times of chage. The trasitio from volume- to value-based paymet is o exceptio. However, it is doubly challegig because it also requires collaboratio amog previously disparate groups. Health care leaders eed to proactively eable collaboratio while eablig chage. Accordig to Lawrece R. McEvoy, MD, FACEP, chief of strategy ad iovatio at Practicig Excellece, the trust cycle is a effective approach for eablig chage by ecouragig adoptio of the ew rather tha etrechmet i the old. As show i Figure 5, the cycle icludes four key steps. The trust cycle begis with fidig commo groud. It is essetial that staff ad leaders work together to idetify shared purpose ad meaig, which requires iteractive experieces where idividuals work together to choose commo goals. The secod step is havig eeded dialogues that are healthy, meaigful ad safe. These coversatios should be iquiries rather tha iquisitios. The ext step is tappig collective wisdom. This step ivolves critical thikig ad collaboratio amog the members of the group. The fial step is buildig trust. Trust-buildig requires leadership actios that stregthe relatioships. McEvoy suggests applyig the trust cycle to accelerate improvemet. For example, if sufficiet timely data are ot available to guide chage, cosider usig the cycle to develop metrics that are applicable to the specific situatio ad usig huddles ad short feedback loops to advace improvemet efforts. I McEvoy s experiece, applyig the trust cycle as part of a rapid chage process allowed his orgaizatio to move ahead with improvemets that were later substatiated whe the data were available. Accordig to McEvoy, effectively shepherdig chage requires trust, especially i a eviromet with a history of tribal idetities. McEvoy asserted, Askig idividuals to chage, to do somethig outside their comfort zoe without a safe eviromet is a recipe for etrechmet. Leaders ca ecourage ad model the attributes that foster trust. I a survey of more tha 3,500 idividuals, McEvoy idetified the capacities that promoted a sese of trust. These capacities are described by the acroym TRUSTED, as show i Figure 6, the red lie i the figure separates the baselie ecessary skills for a job talet, executio, dedicatio ad devotio from the capacities that are essetial for trust ad successful chage, which are ofte overlooked. Because the trasitio to value-based models iheretly icludes both quality ad cost, it is a critical area for collaboratio betwee cliical ad fiacial leaders. It is importat to ackowledge that CMOs ad CFOs speak differet laguages, have differet perspectives ad focus o differet goals. It is absolutely critical for cliical ad fiacial leaders to recogize ad uderstad the pai poits of their colleagues o the other side of the C-suite. Success i the value-based eviromet requires leaders who ca bridge the gaps betwee the cliical ad fiacial realms. It requires cliicias who ca uderstad fiaces ad ca galvaize their peers aroud orgaizatioal or populatio health goals. FIGURE 5 \\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\ TRUST CYCLE: HOW WE DO WHAT WE DO TRUST stregthe coectios Choosig to be trustworthy, choosig to trust, ad allowig T.R.U.S.T.E.D. Colleague relatioships to grow. Seeig T.R.U.S.T.E.D. as a jourey, ot a label. COLLECTIVE WISDOM egage, discover, iovate Cotiuously improvig toward cosistecy ad iovatio; seeig, actig, decidig together. COMMON GROUND create shared purpose & meaig Participatig i iteractive experieces that create mutual purpose ad clarity; o-egotiable ad mutually chose DIALOGUE meaigful, healthy, safe Havig the coversatios we eed to have, the way we eed to have them. The way we chage reality. FIGURE 6 \\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\ A TEAM OF T.R.U.S.T.E.D. COLLEAGUES T. = Team player (makes others better) R.= Resposive ad respectful U.= Uderstadig (listes & lears without judgmet) S. = Safe (easy to approach; ivites other opiios) T. = Talet (skill, kowledge, judgmet, proficiecy) E. = Executio (gets thigs doe; gets results) D.= Dedicatio ad devotio (work ethic) The iclusio of cliical leaders i the discussio is essetial because they speak the laguage ad share the perspective of the care providers at the frot lies of care. They will be able to rally physicias ad other cliicias i a way that other leaders may ot. They may iheretly uderstad that cost ad alterative paymet models will rarely egage physicias. Istead, they may choose topics that aturally iterest cliicias: quality of care, reliability of care delivery ad the eed to reduce uecessary variatio i care. They ca support the fiacial leaders goals by commuicatig to cliicias that fiscal viability is critical for supportig the cotiued delivery of high quality, safe care. Success i the value-based eviromet also requires fiacial leaders who uderstad cliical priorities. CFOs must be able to idetify relevat, actioable data for cliicias ad commuicate effectively with CMOs ad care providers. With the growig eed for a shared uderstadig, it makes sese to educate cliical ad fiacial leaders together about the 6 CMO CFO COLLABORATION

FIGURE 7 \\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\ MEDICARE IP REDUCTIONS OCT OCT OCT OCT OCT OCT OCT OCT OCT 2012 2013 2014 2015 2016 2017 2018 2019 2020 Value Based Purchasig 1.0% 1.25% 1.5% 1.75% 2.0% 2.0% 2.0% 2.0% 2.0% Readmissio Reductio Program 1.0% 2.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% Hospital Acquired Coditios 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 2.0% 3.25% 5.5% 5.75% 6.0% 6.0% 6.0% 6.0% 6.0% Market Basket Reductios 0.1% 0.3% 0.2% Multifactor Productivity Adj * 0.7% 0.5% 0.5% Documetatio & Codig Adj (DCA) ** 1.0% 0.8% 0.8% 1.8% 1.6% 1.5% Sequestratio 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% TOTAL IMPACT 5.8% 6.9% 9.0% % = % of Medicare ipatiet operatig paymets * The Multifactor Productivity Adjustmets is a estimate geerated by the CMS Office of the Actuary **DCA, also kow as the behavioral offset. FIGURE 8 \\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\ MANDATORY AND VOLUNTARY PROGRAMS MANDATORY VOLUNTARY Value Based Purchasig Readmissio Reductio Program Hospital Acquired Coditios SNF Value Based Purchasig Physicia Value Based Modifier Comprehesive APCs Patiet Cetered Medical Home Budled Paymet for Care Improvemet Medicare Shared Savigs Physicia Group Practice Trasitio Demostratio Trasformig Cliical Practices Iitiative May more o Iovatio website chagig health care ladscape ad the skills ad capabilities that are eeded ow ad will be critical i the future. CMO-CFO collaboratio requires a eablig orgaizatioal structure. For example, goverace structures that ecourage cliical iput ito operatig decisios foster collaborative work. Usig a dyad leadership model, i which a cliical leader is paired with a fiacial leader withi each relevat uit, is a effective techique for creatig the capacity for shared work. THE SHARED WORK A essetial capability for achievig success uder the ew care ad paymet models is a clear uderstadig of the various paymet programs ad a process for shiftig strategies ad practices i respose to chages i these programs. It is also essetial to success that orgaizatios are able to miimize dollars withheld from pealty programs ad maximize dollars received i reimbursemet ad i icetive programs. Accordig to Melida S. Hacock, FHFMA, CPA, parter at Dixo Hughes Goodma LLP/DHG Healthcare, a first step is determiig which reductios i reimbursemet the orgaizatio ca ifluece. For example, Medicare paymet for ipatiet services icludes four paymet programs ad several other across-theboard reductios. Health care orgaizatios have o cotrol over the latter, but ca cotrol the degree to which they lose dollars through pealties i the four paymet programs. As show i Figure 7, the potetial pealties add up to 5.5 percet more tha half of the total impact of ipatiet reductios. Curretly, there are six madatory value-based paymet programs ad umerous volutary programs, which are listed i Figure 8. The metrics upo which performace is measured i these programs are cotiuously chagig. As show i Figure 9, the weightig of the four performace domais (core measures, patiet experiece, outcomes, ad efficiecy) has evolved ad cotiues to evolve. The three federally madated value-based paymet programs, value based purchasig, readmissios ad hospital acquired coditios, have reportig ad performace periods that overlap ad vary i duratio. The timelie for these programs ca be complex. Remaiig abreast of chages ad makig the requisite shifts i practice to optimize performace based o the desigated icetives ad pealties ca be challegig. Success requires a stadard process, commuicatio amog service lies ad uits withi the orgaizatio ad collaboratio amog leaders. 7

Cliical ad fiacial leaders eed to be aware of the shiftig performace metrics for these paymet programs. For example, chages i core measures have bee recetly implemeted, reflectig the elimiatio of measures for which there was little differece betwee performace at the 75th FIGURE 9 \\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\ VBP SHIFTING OF DOMAIN WEIGHTS FY 2013 FY 2014 FY 2015 FY 2016 10% 20% 30% 30% 30% 25% 45% 25% 70% 20% 25% 30% 40% Patiet Experiece Core Measures Efficiecy (MSPB) Outcomes ad 90th percetiles ad addig ew measures. Begiig i 2017, core measures will iclude measuremet of elective delivery earlier tha 39 weeks gestatio. Meawhile, the weightig of core measures withi the value-based purchasig program will drop from 70 percet i 2013 to just 10 percet i 2016. It is importat for CMOs ad CFOs to appreciate that may of the performace programs are based o rollig percetiles. A orgaizatio ca achieve similar absolute performace from oe year to the ext, yet fall i its rakig compared with peer orgaizatios, potetially droppig ito the rage for which pealties are exacted. For this reaso, it is essetial that all orgaizatioal leaders uderstad the implicatios of the performace programs ad remai apprised of the orgaizatio s curret performace status. Leaders eed to esure that the orgaizatio avoids pealties ad captures available rewards across all paymet programs. As show i Figure 10, achievig breakeve status fails to capture all available rewards. Leaders must esure that performace goals are set to capture the full advatage of available fuds. THE CRITICAL ROLE OF DATA The jourey toward value is depedet o data. The availability of timely, accurate, actio- FIGURE 10 \\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\ CORE MEASURES Eared Back Ueared Measure Value %Eared Facility $381,643 $218,077 $599,720 63.64% OUTCOMES Eared Back Ueared Measure Value %Eared Facility $539,763 $359,837 $899,600 60.00% Breakeve Poit: $232,525 Breakeve Poit: $348,788 $381,643 $539,763 $0 $599,720 $0 $899,600 HCAHPS Eared Back Ueared Measure Value %Eared Facility $278,896 $620,704 $899,600 31.00% EFFICIENCY Eared Back Ueared Measure Value %Eared Facility $59,974 $539,746 $599,720 10.00% $278,896 Breakeve Poit: $348,788 Breakeve Poit: $232,535 $59,974 $0 $899,600 $0 $599,720 8 CMO CFO COLLABORATION

able data is critical to providig the feedback that cliical ad fiacial leaders eed to avigate the trasitio from volumebased to value-based paymet. It is also essetial for providig rapid feedback ad comparative dashboards to alig frotlie cliicias with orgaizatioal goals ad iform decisios that affect populatio health. Collectig accurate cost ad quality data is essetial to garerig aligmet. Oe health system had cost-related data that demostrated greater efficiecy whe ipatiet admissios were hadled by hospitalists rather tha other admittig physicias. However, it was ot util the orgaizatio was able to substatiate the quality-related discrepacy i performace that physicias were willig to support the decisio to close the ipatiet medicie service ad shift to a hospitalist-oly admissios policy. While more orgaizatios have acquired the eeded IT ifrastructure, may curretly struggle with issues related to the lack of iteroperability betwee IT systems withi ad across orgaizatios. The iteroperability issue remais a sigificat barrier to the movemet toward value. Aother importat barrier to optimal data sharig is the difficulty related to amassig data from differet IT systems whe icosistecies are preset, such as durig medicatio recociliatio. Orgaizatios also curretly are challeged by the plethora of metrics collected. The vast amout of data requires traslatio to useable iformatio for leaders, cliicias ad patiets. I additio, leaders must esure that all required metrics are collected ad reported, yet idetify the metadrivers those key levers for optimizig performace with which icetives should be aliged. Such filterig of large quatities of data to idetify key actioable data poits has log bee a foudatio i fiace. Fiacial leaders are familiar with readig a profit ad loss statemet, the lookig to more detailed reports to idetify the explaatios for those figures. CFOs could help their cliical colleagues develop greater facility with trackig treds ad applyig this skill to health care, especially for idetifyig ad uderstadig treds i populatio health. KEYS FOR SUCCESSFUL COLLABORATION Success uder ew care ad paymet models requires close commuicatio ad effective collaboratio betwee cliical ad fiacial leaders. The jourey toward value i health care is differet for each health care orgaizatio, depedig o the local market, payer mix ad other factors. However, there are recommeded strategies that ca help all orgaizatios move toward greater value. Orgaizatioal leaders ca focus o the developmet of people ad culture, busiess itelligece, performace improvemet ad cotract ad risk maagemet. They ca adopt as a aligig focus becomig a high-reliability orgaizatio, which would traslate ito o harm to patiets, cliical excellece, patiet satisfactio ad a positive margi. Leaders ca eable the required orgaizatioal ad culture chages through the trust cycle, which icludes four steps: fidig commo groud, havig eeded dialogues, tappig collective wisdom ad buildig trust. To successfully avigate toward value, leaders must remai aware of chages BARRIERS IMPEDING MOVEMENT TOWARD VALUE CMOS AND CFOS WHO ATTENDED THE meetig idetified several barriers to the greater value from the health care system as a whole. These barriers fall ito four mai categories: paymet ad icetives; policy ad orgaizatioal culture; patiet- ad populatio health-related ad iformatio techology. Specific barriers to movig toward greater value iclude: Paymet ad icetives l Widespread use of the FFS model geerates misaliged icetives that hider trasformatio l Lack of clear aligmet of icetives across all stakeholders, icludig physicias, aroud the goal of icreased value l Need for stroger icetives to reduce ad remove waste from care delivery l Allocatio of capital to joit vetures Policy ad orgaizatioal culture l Lack of agreemet about ad uderstadig of value i health care across all stakeholders l Lack of a solid, broadly accepted atioal voice i health care l Lack of a atioal strategy for movig toward value l Poor wordig of certai govermet regulatios ad certificatio requiremets, which adds waste to the system l Orgaizatioal culture that hiders collaboratio betwee providers such as hospitals ad payers l Culture that udermies the will to try ew models ad practices without a guaratee of success CONTINUED 10 9

CONTINUED FROM 9 l Lack of willigess of some payers to joi i value-based paymet programs l Excess admiistrative burdes of care delivery ad associated costs (e.g., fuds spet to prepare for a CMS surveyor ispectio; the costs associated with claim creatio, submissio ad resolutio) Patiet-related ad populatio-health related l Lack of uderstadig about patiet accoutability ad the degree to which patiets are resposible for their health outcomes l Lack of beefit plas desiged to egage patiets i their care ad ecourage shared decisio-makig l Lack of effective tools to improve populatio health ad ultimately improve value l Lack of uderstadig of the may determiats of populatio health ad of effective mechaisms for improvig populatio health (e.g., a uderstadig of the data ad tools eeded to impact the desired dowstream health outcomes, such as reducig obesity) l The expectatio amog some patiets that more care is better care to reimbursemet programs to avoid pealties ad capture all available icetive paymets. Leaders must also appreciate the critical role of data i this trasitio ad address potetial barriers, such as a culture that udermies the will to try ew models ad practices. To accelerate the pace toward providig greater value, orgaizatioal leaders ad boards ca hold the expectatio that CMOs ad CFOs will work collaboratively toward commo goals. CMOs ca commuicate to their peers the importace ad relevace of fiacial data. They ca remid cliicias that fiscal viability ultimately supports the missio of carig for patiets. CFOs ca make it a priority to uderstad the cliical implicatios of fiacial decisios ad proactively commuicate with cliicias. Both cliical ad fiacial leaders ca work together to stay abreast of paymet model chages, advocate for effective IT systems that eable better care ad address barriers to providig greater value i health care. A JOINT REPORT FROM THE AMERICAN ASSOCIATION FOR PHYSICIAN LEADERSHIP AND HEALTHCARE FINANCIAL MANAGEMENT ASSOCIATION ACKNOWLEDGMENTS The America Associatio for Physicia Leadership ad Healthcare Fiacial Maagemet Associatio (HFMA) gratefully ackowledge the time dedicated by meetig attedees to participate i the meetig ad breakout discussios. I additio, we would like to thak GE Healthcare, Humaa ad KaufmaHall for their support for this evet; Diae W. Shao, MD, MPH, for writig services, ad the staff of the America Associatio for Physicia Leadership ad HFMA for cotet, programmig ad admiistrative support. Techology-related l Need for IT ifrastructure that ca provide timely, actioable data ad decisio support tools l Lack of iteroperability of IT systems ad costs associated with IT l Failure to use techology to ecourage evidece-based medicie Ackowledgig ad gaiig a shared uderstadig of these possible barriers is essetial to movig ahead i the jourey toward value. By aticipatig these blocks, the proactively addressig them, cliical ad fiacial leaders ca help smooth the potetially bumpy jourey as their orgaizatio shifts from optimizig volume to deliverig greater value. 10 CMO CFO COLLABORATION

America Associatio for Physicia Leadership 400 N. Ashley Drive, Suite 400 Tampa, FL 33602-4322 Phoe: 800-562-8088 Fax: 813-287-8993 www.physicialeaders.org Healthcare Fiacial Maagemet Associatio 3 Westbrook Corporate Ceter, Suite 600 Westchester, IL 60154 Phoe: 800-252-4362 Fax: 708-531-0032 www.hfma.org