Transitioning to a Value-Based Accountable Health System Preparing for the New Business Model Michael C. Tobin, D.O., M.B.A. Interim Chief medical Officer Health Networks February 12, 2011 2011 North Iowa Winter Retreat Agenda The New Accountable Care Business Model Setting the Stage A Change in Thinking Required Capabilities Expectations and Next Steps 2
Setting the Stage for the New Accountable Care Business Model This is a Time of Significant Change There are a Lot of Pieces to Fit Together Accountable Care Organizations Chronic Disease Management Meaningful Use Incentives The Affordable Care Act Aging Hospital Workforce Clinical Integration DSH Cuts Nursing Shortage Pay For Performance Shared Savings Payments SGR Issues Physician Shortage Uninsured Patients Insurance Exchanges Bundled Payments Patient Centered Medical Home Patient Centered Medical Home Hospital Bad Debt The Great Recession Provider Organization Alignment
And Washington Does Not Always Provide Definitive Answers 5 But we do know there are Six Fundamental Trends that Cannot be Sustained Volume-based FFS payment system is driving unsustainable levels of spending. A healthcare system where costs grow faster than the economy is unsustainable Demographics are increasing incidence of chronic disease, further accelerating demand for health services and increasing health care spending Poor economy and public sentiment means that there will be no increase in levels of health care spending ( no additional dollars) Currently, achieving sub-optimal clinical outcomes and quality of patient experience, relative to the dollars spent and other countries The uninsured population is growing, creating barriers to access and cost-shifting to a shrinking insured population Growing physician shortages, accelerated by retirement of baby 6 boomer physicians, are creating additional barriers to access
And we do know there are Four Fundamental Actions we have to take 1. Control unsustainable levels of spending 2. Improve clinical outcomes and experience of care 3. Expand the insured population 4. Address the growing physician shortage 7 Addressing the Required Actions 1. Control unsustainable levels of spending Decrease per capita cost of care through greater efficiencies Improve effectiveness of managing chronic diseases (Evolving demographics demand this) Adopt an accountable care model of care (Shift greater portion of financial risk to those providing the care) Switch from the current volume-based payment system to a valuebased payment system 8
What is the New Value-Based Payment System? The new value proposition measures performance as: Decreased per-capita cost (increased efficiency) Improved patient experience with care (improved quality) Improved health of the population (better clinical outcomes) Value-based care requires a shift in payment for volume ( pay for procedure ) to payment for performance All elements of the health care continuum will be at risk in a value-based payment system 9 An Increase in Value-Based Reimbursement will be Needed to Offset Significant Decreases in FFS Payments 2011 2014 Baseline Revenue Value-Based Revenue Bonus Above Baseline FFS Volume- Based Revenue Value-Based Revenue FFS Volume- Based Revenue Required to Maintain Baseline Revenue 10
Value-based Reimbursement Is Already Here Sample: All Trinity-affiliated independent and employed PCPs in Michigan Major payer Results Group 1: Those not qualifying for value-based incentives = reimbursement was at 110% of Medicare (FFS only) Group 2: Those qualifying for value-based incentives = reimbursement was at 159% of Medicare (FFS plus value-based) Currently, 49% difference in reimbursement among physician Groups Addressing the Required Actions (Cont.) 2. Improve clinical outcomes and experience of care Integrate patient-centered care principles into a new delivery model 3. Expand the insured population Primarily through legislative and regulatory actions 4. Address the growing physician shortage (esp. PCPs) Adopt of new practice models that emphasize patient-centered and team-based care Expand education and residency training opportunities for new physicians 12
There s a Lot Going On In Washington These Days 13 The Politics of Reform Opinions from the Experts Full repeal is still unlikely, but major challenges will continue over the next several years Many popular provisions will have been implemented by HHS by 2013, the first time repeal would be realistically possible Repeal without a replacement plan could significantly increase federal deficits De-funding will not stop the implementation Individual mandate and unconstitutionality challenges could take 18 months to go to Supreme Court Current Reform Law sets Medicare on a path from FFS to capitation, through a combination of Medicare Advantage and ACOs Commercial insurers already acting on many of the elements of Reform Sources: Modern Healthcare, Health Care Advisory Board, Avalere Health 14
Bottom Line We won t know exactly how legislation and regulations will be finally resolved in Washington for some time Legislation and regulations will not change what has to happen, just how these changes are implemented But we do know what fundamental changes will happen and we can prepare for these fundamental changes 15 A Required Change in Thinking and Approach
New Business Model Requires Changes in Thinking and Approach Different mindset Ability to deal with higher levels of change and uncertainty Shift from hospital-centric to accountable health network-centric New economics No additional levels of healthcare funding Decrease in volume-based (FFS) reimbursement Continued reduction in ancillary reimbursement New at-risk payment models Bundled payments Shared savings Capitated reimbursement New approach by payers (to both hospitals and physicians) 17 Commercial Health Plans are Changing their Thinking In the past, health plan strategy was negotiating lowest FFS cost per unit of service, with maintenance of acceptable quality (HEDIS, etc.). But when health plans compete for patients (covered lives) in the future, it will be based on lowest per capita cost. In future negotiations, providers will need to prove low per capita cost and evidence-based quality. Provider strategies will have to shift from fee-negotiation strategies to providing objective evidence of value Value = lower per capita cost + improved clinical outcomes Lower per capita cost = Improved control of utilization
Changes Required in Thinking and Approach (Cont.) Increased dependence on technology Demanded by both public and private payers Essential for population health management High level of interoperability among disparate IT systems Coordination of care Across the continuum within the system Governance and leadership Governance structure will not be nearly enough Shared governance and physician leadership will be essential 19 Changes Required in Thinking and Approach (Cont.) Culture of collaboration across the continuum In the new business model, hospital-based health systems will not own the entire continuum. Health systems must achieve greater collaboration with: Aligned private practice physicians Physician organizations Payers Must collaborate with new partners and form new partnerships to establish all components of the continuum of care model 20
Changes Required in Thinking and Approach (Cont.) Resource allocation The traditional hospital-centric integrated delivery system model will not be enough under the new business model Must shift thinking from hospital-centric approach to strategically reallocate resources throughout the continuum must adequately resource non-hospital areas to succeed Must reallocate resources in order to meet the requirements of the new, value-based business model 21 Required Capabilities
Some Accountable Care Caveats Accountable care is a journey. MOs should not focus immediately on creating end-game accountable care structures. Avoid ACO mania. The process will not change overnight. Every MO can start building the essential capabilities that will allow you to function in an accountable care world. Let form follow function in creation of organizational structures. Accountable care is primarily about developing essential capabilities ( core competencies ) to operate successfully in a risk-based environment. 23 The Accountable Care Business Model Will Require New Core Capabilities Requirements Prove value to third parties Operate in a risk-based environment (up to full financial accountability) Use advanced technology Improve chronic disease management Report on performance Manage populations of patients Improve care coordination Five Essential Sets of Capabilities Collaboration and inter-dependency among providers Achieve higher levels of patient & provider communication 24
The Five Essential Sets of Capabilities CORE CAPABILITIES 1. Deliver coordinated, patient-centered care across the continuum 2. Integrate all provider types and jointly contract with payers 3. Be financially accountable for the care of populations of patients 25 The Five Essential Sets of Capabilities CORE CAPABILITIES 1. Deliver coordinated, patient-centered care across the continuum 2. Integrate all provider types and jointly contract with payers 3. Be financially accountable for the care of populations of patients OVERARCHING / SUPPORTING CAPABILITIES 4.Capability to create collaborative governance, leadership and culture 5. Capability to develop advanced communication and information technologies 26
Developing Capability Sets Foundation of the Accountable Health Network Major Goals of the AHN Focus on the Patient Improved Efficiency Enhanced Quality Better Clinical Outcomes Increased Collaboration Improved Care Coordination Essential Core Capabilities for Accountable Care Patient-Centered Care Population/chronic care management capabilities Performance measurement and reporting capabilities Practice-level IT capabilities Extended access Develop patient-centered work force competencies System-level IT capabilities Transition management capabilities Acute care clinical resource management capabilities 28
A Few Comments on Patient-Centered Care: IT Tools The Three Essential IT Tools for Patient- Centered Care: Patient Registry Electronic Prescribing Patient Portal A Few Comments on Patient-Centered Care: The Patient Registry Registry Accept External Clinical Data Feeds Accept External Claims and Eligibility Data Feeds Accept Internal epm Data Feeds Accept Manual Internal Data Entry Function #1 - Generate Actionable Lists Function #2 - Generate Patient Summary Reports Function #3 - Generate Performance Reports Export Data
A Few Comments on Patient-Centered Care: The Electronic Health Record A disease registry does not require an EHR and an EHR is not a registry. A disease registry is a more important tool for PCMH and chronic disease management than an EHR. [You are] better off starting with a basic disease registry and then incorporating the additional efficiencies of an EHR into the registry than the other way around. Source: The Advisory Board A Few Comments on Patient Centered Care: Health Coaches Specially-trained RNs perform five basic patient-centered tasks in the practice: Oversee and manage the registry Conduct pre-visit chart review Work with patients & family on self-management Coordinate care across the care continuum (specialty referrals, transitions, community resources, etc.) Significant involvement in practice QI activities Enhance Patient-Centered Care Currently in use in many markets, including Mercy Health Network in Des Moines (Mercy Clinics) Change practice posture from reactive to proactive ROI The Mercy Clinic experience: Health Coaches return $4 for every $1 invested.
Why the Patient-Centered Medical Home is the Heart of Accountable Care The essential principle of Accountable Care is Total Cost Accountability The essential component of total cost accountability entails controlling the frequency and volume of unnecessary or inappropriate care, that is - Utilization Management The essential component of utilization management is Chronic Care Management The single most effective delivery model for providing effective chronic care management is The Patient-Centered Medical Home Essential Core Capabilities for Accountable Care Integration and Joint Contracting Develop clinical integration and joint contracting work force capabilities Develop risk-assumption capabilities Economic integration of strategic practice units Ability to pass three-part FTC test and other clinical integration criteria for nonemployed/non-owned components 34
Joint negotiations are critical to engaging physicians and rewarding them for [performance] improvement. Dr. Lee Sacks, CEO Advocate Physician Partners 3,500-physician clinically integrated ACO 35 Integration and Joint Contracting Essential for Accountable Care 20% - 40% 60% - 80% Employed Providers Private Practice Providers Economic Integration Hospital Clinical Integration ABILITY TO JOINTLY CONTRACT
Clinical Integration Requirements FTC s Three Part Test Evidence that the clinical integration is real Demonstration that the program is likely to achieve targeted performance improvements Evidence that any joint contracting with payers is reasonably necessary to achieve targeted performance improvements and incidental to the program Clinical Integration Requirements Evidence that it is Real High degree of physician participation and interdependence among providers Sufficiently-broad set of clinical practice guidelines and targeted conditions In-network referral requirement Integrated information technology Written physician compliance agreements regarding standards and protocols Sufficient physician financial and time investment in IT resources Formal enforceable consequences for provider non-compliance Selective membership criteria Non-exclusive participation; right of provider to opt out Joint agreements include entire spectrum of provider types (PCPs, SCPs, hospital, ASC, LTC, home health)
Essential Core Capabilities for Accountable Care Assume Financial Accountability Willingness to be financially accountable Develop accountable care work force capabilities Capability to set rates, receive & distribute payments Ability to create sufficient patient access Ability to analyze & manage risk Sophisticated performance management systems Sufficient care coordination capabilities 39 Essential Core Capabilities for Accountable Care Advanced IT & Communications Patient registry Online, evidence-based guidelines and protocols Ability to provide data security & information privacy Ability to collect & measure performance data Ability to aggregate & share data from multiple EHR products IT system capable of receiving and distributing incentive dollars Patient portal Referral and test tracking Electronic prescribing EHR Data warehouse / HIE 40
Essential Core Capabilities for Accountable Care Governance, Leadership & Culture Develop a physician-led culture Aligned culture of collaboration Sufficient physician and executive leadership resources Governance structure has seats for everyone in continuum Governance equality among employed and aligned physicians Multi-level degrees of decisionmaking (recommend, approve & act) Ability to create functional teams Ability to mediate among various stakeholders Ongoing leadership training for physicians and executives 41 The First Step Assess Your Accountable Care Readiness Comprehensive Financial Accountability Integration and Joint Contracting Coordinated, Patient-Centered Care 1. All-payer/all-patient registry 2. Electronic referral tracking capabilities YES NO 3. Patient portal 4. Electronic test tracking capabilities 5. Open-access scheduling 6. Electronic prescribing 7. Team-based visits 8. Data warehouse or HIE 9. Evidence-based guidelines 10. Preventative care tools 42
The Aligned Health System One Part of the Accountable Health Network 43 Typically 20-40% of all physicians Aligned Private Providers - Another Part of the Accountable Health Network Typically 60-80% of all physicians 44
Bringing All the Parts Together The Accountable Health Network Expectations and Next Steps
Trinity Health s Home Office Will Convene Accountable Care Executive Leaders ( home office and MOs) to engage in refining direction regarding strategy, resource requirements and other key decisions Through Health Networks, assess each market for its level of Accountable Care readiness Create a UEM forum that: Refines Accountable Care strategies, priorities and resource requirements Provides education and updates regarding accountable care best practices Create the Trinity Patient-Centered Partnership, a collaborative between MOs and the UEM for the development and operations of patient-centered care 47 Trinity Health s Home Office Will Provide assistance with physician alignment and integration strategies Provide legal assistance with formational, operational and governance structures to meet changing market opportunities for alignment (providers, PO s, etc.) Provide (registry, patient portal, etc.) system-wide IT and electronic communication systems Provide advocacy support for private, federal and state opportunities / initiatives (grant funding sources, collaborative, demonstration projects, payor initiatives, etc.) 48
Recommendations for Ministry Organizations Create governance and management structures focused on accountable care capabilities Provide direction of MO leadership on building Accountable Care capabilities, including critical resource re-allocation Develop a coordinated, patient-centered continuum of care (acute, long term, home care, ambulatory mental health, medical practices) Shift focus from specialty to primary care network development Create strategies for integrating clinically with aligned private practice providers Create strategies to address evolving requirements of payers 49 Recommendations for Ministry Organizations Lead the collaboration efforts with employed and aligned providers Develop collaborative relationships with payers and POs Provide financial management systems to support essential capabilities Become the lowest per capita cost, highest quality provider of care in your market. (Insurers say you must have at least a10% cost differential versus your competitors to move business to you.)
Closing Thoughts Accountable Care is a new business model requiring five essential sets of capabilities The new business model will demand fundamental changes in both thinking and approach. Incremental change will not be enough Learn to operate effectively in a healthcare arena that has a greater degree of change and uncertainty than in the past You can start making changes now. Despite current politics, basic health reform changes are known today Focus on foundational capabilities and characteristics that we know will be required in the new business model 51 Closing Thoughts Focus on developing essential capabilities versus focusing excessively on end-game organizational structure Re-allocate resources to nonhospital portions of the system Cannot overestimate the importance of IT, culture, governance and leadership required in the new business model Begin shifting your payer strategies from negotiation strategies to evidence of performance Maximize collaboration between Health Networks and other home office resources and MOs in regard to developing Accountable Care capabilities and structures 52