Physicians Leading Care Innovation Excellence 2014 Annual Report
Change within the healthcare system requires a spirit of leadership among those of us who work to support and advocate for physicians and patients. As a doctor-owned and directed medical group, Brown & Toland s mission is to create a local system of care that is integrated, nimble and accessible to independent medical practices. We achieve this goal in three key ways: by caring for the health of our patients, pursuing practice and other business innovations, and striving for the highest standards of clinical excellence. Revenue (mm) Membership (m) 250 230 210 190 170 150 180 150 120 90 60 30 0 MACO + COMMERCIAL ACO-PPO SENIOR COMMERCIAL 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Brown & Toland s revenue remained stable in 2014 while our innovative accountable care organization (ACO) programs, combined with growth in our Medicare Advantage (MA) plans, continued to diversify and grow our overall membership makeup.
A Message from the Chairman and Chief Executive Officer An Unexpected Opportunity Brown & Toland Physicians was founded on the idea that doctors should be able to practice high quality, coordinated care in the model that they find the most personally rewarding. While this independent spirit has remained the same since the company was founded, the healthcare system in which we operate has changed dramatically. Most notably, the passage of the Affordable Care Act (ACA) in 2010 introduced substantial reforms to the healthcare insurance payment system and brought with it layers of bureaucracy that doctors must be able to navigate. Despite its challenges, the ACA also has created an unexpected opportunity. By restructuring the insurance payment system, the ACA has shifted the focus of clinical care from volume to value by emphasizing the quality of care delivered over the quantity of care. This shift has diminished the dominance of large, volume-driven hospital systems and opened a space for smaller, more agile physician-led organizations like Brown & Toland. It also enables us to demonstrate our unique ability to deliver better, more targeted and efficient care to our patients while reducing the total cost of care. Accountable Care: The Key to Our Network Strength One of the most important functions Brown & Toland serves is to develop and manage a unified business strategy for the entire medical group. Supporting and advocating for our doctors is a key part of that strategy, and includes many of the services that are most familiar to them like insurance contract negotiations, practice support services, electronic health records (EHRs) and our prevention and disease management programs. As the ACA continues to change the rules of engagement, capitalizing on its clinical and financial opportunities requires us to change our business strategy to develop new programs that position us to take on accountability for the full continuum of care. For example, Brown & Toland s historical revenue base was focused on physician and clinical services provided to patients. In 2013, we expanded our revenue base by adding Brown & Toland Health Services (BTHS), which allows us to assume responsibility for the full spectrum of medical care costs for a subset of our Medicare Advantage (MA) patients. In addition, our successful PPO accountable care organization (ACO) and Pioneer ACO programs continue to achieve a range of cost savings and quality-of-care metrics. Taken together, these innovative programs bolster our efforts to meet a variety of goals crucial to our success. Reflecting Back, Looking Forward 2014 saw a number of extremely positive business results for the organization and new opportunities for our doctors. While our overall revenue for 2014 was flat 1
compared to 2013, we expanded our portfolio of ACO programs with the addition of the Anthem Blue Cross and Blue Shield PPO ACOs. We added close to 9,000 HealthNet MA seniors to the BTHS program last year, bringing the total population of patients receiving care through BTHS to close to 10,000. We also increased our electronic health record (EHR) adoption rate, equipping our doctors with the tools they need to coordinate care effectively. In terms of the overall financial performance, 2014 was another very strong year, with $7.9 million earmarked for physician bonuses. In 2015, BTHS will remain a major area of focus. We will seek out opportunities to migrate more MA patients to the program and to scale it up accordingly. Knowing that the success of BTHS and our ACOs depends on the engagement and participation of our doctors, we will expand our outreach efforts so that they fully appreciate the crucial role their clinical decisions play in managing the total cost of care. With a number of doctors preparing to retire or scale back their practices every year, we will continue to focus on keeping our membership numbers stable and recruiting younger doctors who share our spirit of independence, innovation and entrepreneurship. We will expand and refine our member support services, especially for our doctors at transitional career milestones such as starting or winding down a practice. Finally, we will continue our efforts to integrate more data through our EHR and health information exchange (HIE) systems, and will help our doctors with ICD-10 adoption. Our Time to Lead Last year, Health Affairs published a study demonstrating that smaller, physicianowned medical practices have lower rates of avoidable hospital admissions than do their larger counterparts 1. This study backs up a point of view that we have long held to be true: independent, physician-owned practices are uniquely equipped to provide more accessible and responsive care to patients and to reduce the total cost of care by relying on strong primary care to reduce unnecessary hospital admissions. The success of our BTHS and ACO programs certainly bear this out. The dust has yet to settle on the rollout of the ACA and the challenges of owning a small practice in the Bay Area are not likely to diminish any time soon. But through it all, Brown & Toland remains steadfast in our mission to support our doctors to be independent and to deliver excellent patient care. Caring for patients. Embracing innovation. Pursuing clinical excellence. These are the qualities of leadership we stand for. This is what it means to be a Brown & Toland physician. Neal Birnbaum, M.D. Chairman of the Board Richard Fish Chief Executive Officer 1 Health Affairs; September 2014, Small Primary Care Physician Practices Have Low Rates of Preventable Hospital Admissions, by Lawrence P. Casalino, Michael F. Pesko, Andrew M. Ryan, et al. 2
Empowering Independent Physician Practices Care Healthcare payment reform and its impact on healthcare delivery reform is here to stay. As a physician-owned and operated medical group, we believe that this moment requires not just our clinical acumen, but our clinical leadership. Now is our opportunity to shape the reforms being hammered out and ensure that the healthcare system that emerges out of the Affordable Care Act (ACA) is one that values, supports, and rewards doctors and that enables us to deliver the best possible care to our patients. It is difficult to overstate the importance of the shift happening in healthcare right now from volume to value. Since we were founded, Brown & Toland has always been about creating value, and we strive to embody this philosophy not just with respect to clinical care but also in the work we do every day to advocate for our doctors and support them in running successful practices. The Pillars of Our Physician-Centric Philosophy An all-products strategy to align with where employers and the health insurance market are going so that we can support our physicians in maintaining patient volume Contract negotiations with health insurers that create economies of scale and help maintain the reimbursement rates for the care our doctors deliver An electronic health records (EHR) system designed to help our doctors increase practice efficiency, clinical integration, and coordination of care Physician support and practice management services that enable our doctors to navigate the increasing complexity of the healthcare system and run thriving practices 3
Our All-Products Strategy (and Why It Matters) Narrow Networks The fundamental economics of healthcare have been changing for quite some time, and the Affordable Care Act (ACA) has only hastened the pace. While Brown & Toland has always strived to deliver value to our doctors, employers (the customers of the insurance plans with whom we contract) are aggressively pursuing strategies to reduce their healthcare costs. Consequently, insurers are under pressure to hold flat or drive down the cost of the insurance products they offer, which in turn has had an adverse impact on reimbursement rates. This has spawned an array of narrow network products that direct patients to healthcare providers who accept lower reimbursement rates or can reduce overall healthcare costs and demonstrate better outcomes. For many solo and small group practice doctors, this upheaval makes it harder to maintain a steady roster of insured patients, which in turn can introduce financial instability into the practice. Brown & Toland has been honing our business strategy so that we can adapt under the changing economics of the system. We call this our all-products strategy. Through it, we develop a range of innovative programs and approaches to diversify the number and types of insurance products in which we participate in order to support membership and revenue growth. The Importance of Diversification Our patient membership numbers from 2010 to 2014 demonstrate this diversification strategy in action. Until 2010, our membership predominantly consisted of patients covered under commercial insurance products with a modest representation of Medicare Advantage (MA) patients. Since then, our commercial membership has decreased significantly, and we have covered the loss in commercial membership by increasing our MA membership slightly and adding membership through innovative commercial HMO and PPO accountable care organizations (ACOs) and the Pioneer Medicare ACO (MACO). Brown & Toland s all-products strategy has allowed us to stay ahead of the curve on the economic changes that have affected other providers and physician groups. For our doctors, our move toward product diversification means continued access to patients from a wider range of health plans and greater access to healthcare dollars, both individually and collectively. 4
Innovation 5
Putting Innovation into Action: Brown & Toland Health Services (BTHS) Developing innovative new programs under our all-products strategy is about more than simply diversifying the number and types of insurance products in which we participate. It is about leading the transformation of a healthcare delivery system that has historically been organized around individual doctors to one that is more interconnected and collaborative. 6
Excellence Expanding Accountability for the Continuum of Care We are proud of our HMO and PPO Accountable Care Organization (ACO) programs that are demonstrating our ability to collaborate with employers and insurers to make care simultaneously better and less expensive. In 2013, we launched Brown & Toland Health Services (BTHS). Under a limited Knox-Keene license, we are now able to expand the scope of our accountability and assume risk for the entire continuum of care. For example, Brown & Toland s access to healthcare dollars historically was limited to physician and clinical services provided directly to patients. Now, through BTHS, we can potentially generate revenue through managing prescriptions, hospital care and other healthcare services coordinated and distributed across an entire population of Medicare Advantage (MA) patients. ALL OTHER CARE ALL OTHER CARE RX DRUGS Traditional Scope of IPA Accountability PHYSICIAN & CLINICAL SERVICES by % of Total Costs of Care HOSPITAL CARE RX DRUGS Emerging Scope of IPA Accountability PHYSICIAN & CLINICAL SERVICES by % of Total Costs of Care HOSPITAL CARE While managing the total cost of care for this segment of MA patients brings additional accountability, the clinical and financial upsides can be tremendous. It means that we have the lead role when it comes to when, where and how we care for our patients. It also diversifies our sources of patients, revenue, and income. 7
A PPO ACO Case Study: Brown & Toland and Cigna In late 2013 and early 2014, Brown & Toland launched new Anthem Blue Cross and Blue Shield PPO Accountable Care Organizations (ACOs), bringing our total number of ACO programs to six. Here we profile results from our Cigna PPO ACO, which we launched in 2012. Brown & Toland s partnership with Cigna on this collaborative care initiative made significant progress in 2014 toward achieving its three key objectives: improved patient health, increased affordability and a better overall patient experience. Over the course of the program, participating Brown & Toland doctors have delivered efficient, costeffective, quality care to more than 12,000 Cigna customers across the Bay Area. Critical to the program s success are Brown & Toland s clinical care coordinators including nurses, doctors, and other professionals who help patients with chronic conditions or other health challenges navigate the healthcare system. The care coordinators enhance care by using customer-specific data from Brown & Toland and Cigna to identify individuals discharged from the hospital who might be at risk for readmission, as well as assist patients who may be overdue for important health screenings or who may have skipped a prescription refill. Patients also receive health education and have access to both organizations wellness and clinical programs. Inpatient costs 3% Outpatient costs 6% Medical cost trend 5.4% from local market The ACO s outpatient success is a result of Brown & Toland s strong partnerships with ancillary facilities, as well as our doctors commitment to decreasing avoidable emergency room visits by providing easy access to primary care services. Patients in the inpatient setting have the benefit of working directly with Brown & Toland s nurse care managers and care coordinators to make sure they receive the support they need, both in the hospital and after discharge. 8
Board of Directors Neal Birnbaum, M.D. Chairman David Busch, M.D. Anita Demas, M.D. Ronald Elkin, M.D. Richard Gerber, M.D. Gary Gin, M.D. Laurie Green, M.D. Jacob Johnson, M.D. Dan Kelly, M.D. Debra Levinsky, M.D. Robert Mickel, M.D. Richard Oken, M.D. Senior Management Team Joel Klompus, M.D. President Richard Fish Chief Executive Officer Ray Williams Chief Operations Officer Michael Gam Chief Financial Officer Vineeta Hiranandani Vice President, Chief Marketing Officer Andrew Snyder, M.D. Chief Medical Officer Fiona Wilson, M.D. Senior Vice President and Chief of Clinical Transformation Joel Piser, M.D. Andrew Ross, M.D. Daniel Roth, M.D. Lawrence Shore, M.D. Leah Tessler, M.D. Corporate Office Brown & Toland Physicians 153 Townsend Street, Suite 700 San Francisco, CA 94107 Regional Office Brown & Toland Physicians/Alta Bates Medical Group 2000 Powell Street, Suite 830 Emeryville, CA 94608 2015 Brown & Toland Physicians
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