Using Your Employed Physicians as a Competitive Weapon
- 1. Using Your Employed Physicians as a Competitive Weapon HSG Webseries March 21, 2012 LOUISVILLE KY | WASHINGTON DC www.healthcarestrategygroup.com
- 2. Presenters David’s primary focus is on strategy development, physician alignment, business planning, medical staff development planning, and growth strategies for hospitals and physicians. He draws from 15 years of experience with Norton Healthcare in Louisville, KY where he served as COO, VP of Managed Care and Quality, CP of Physician Services, and Administrator of the Brown Cancer Center. David is a fellow in the American College of Healthcare Executives. He holds a Master's Degree in Health Administration from The Ohio State University and a Bachelor's Degree from Virginia Polytechnic Institute. David Miller | Partner | 502.814.1188 | dmiller@healthcarestrategygroup.com Travis’s practice focuses on helping hospitals and health systems with physician alignment issues through strategic planning initiatives, such as Hospital Strategic Planning, Employed Physician Group Strategic Planning, Physician Alignment Planning, and Service Line Planning. Travis holds a Master’s of Business Administration from Vanderbilt University, and Bachelor’s of Science Degrees in Finance and Business Management from the University of Tennessee. Travis Ansel | Manager, Strategic Services | 502.814.1182 | tansel@healthcarestrategygroup.com 2
- 3. Our Mission To be Leaders in Hospital/Physician Integration 3
- 4. About HSG • Average growth rate of 25% over past four years • 73% of 2010 revenue was generated through repeat business Named to 2010 and 2011 Inc. Magazine’s list of fastest growing privately-held companies in the US for past 2 years Recognized as one of the top-50 fastest growing privately-held companies in the Louisville metropolitan area for past 4 years 4
- 5. Agenda for Today • State of the Market • How Employed Physician Groups Contribute Value • “Weaponizing the Group” • Requirements for Success • Case Studies 5
- 6. Initial Contributions from Employed Groups • Protection of existing volume and referral sources • Ability to recruit new physicians • Serve community need • ED and hospital coverage 6
- 7. State of the Market Growing Physician Networks • Rapid growth in last half-decade • Employment an expectation for new grads • Healthcare reform driving many hospitals to vertically integrate • Lack of vision for employed groups an issue, leading to problems 7 Source: 2012 AHA Hospital Statistics
- 8. State of the Market Growing Physician Networks • According to Merritt Hawkins (Dallas-based recruiting firm): – In 2003 14% of placements were hospital positions – In 2006 43% of placements were hospital positions – In 2010 50+% of placements were hospital positions • Reasons: – Declining reimbursement and incomes – Uncertainty of health care reform – Clinical integration - ACOs, Medical Homes, Bundled Payments – Cost of electronic health record – Quality of life – Security 8
- 9. State of the Market Physician Practice Financial Issues • Average of $212k loss per employed physician • Hospitals with financially successful groups experiencing losses at <$100k/physician • Downstream gains in hospital revenue are variable 9 Source: 2011 MGMA Cost Survey
- 10. State of the Market Lack of Strategic Focus for Employed Groups • Issues – Lack of strategic vision – Recruitment into group done haphazardly – Lack of solid governance structure • Collection of practices with no physician leadership – Not tied to hospital strategy, including service lines – No plan for mutual success for hospital and group • Referrals poorly managed; not staying within group • Leads to: – Lack of downstream revenue to hospital – Inability to leverage group to compete in marketplace 10
- 11. State of the Market Lack of Operational Capabilities • Issues – Limited management capabilities and limited management infrastructure – Poor billing, collections, and accounts receivable management – Physician compensation models lacking proper incentives causing productivity issues • Leads to: – Losses on practices which are difficult to “turn around” – Board questions and concerns – Need for significant assessment of groups to define corrective actions 11
- 12. State of the Market Physician Practice Financial Issues Hospital Revenue vs. Average Practice Loss Average Annual IP/OP Minus 50% Hospital Avg. Practice Loss per Specialty Net Income Revenue per Physician* Variable Cost FTE** Internal Medicine $ 1,678,341 ($839,171) ($254,103) $ 585,068 Family Medicine $ 1,622,832 ($811,416) ($143,776) $ 667,640 Hematology/ Oncology $ 1,485,627 ($742,814) $10,340 $ 753,154 Urology $ 1,382,704 ($691,352) ($246,294) $ 445,058 OB/GYN $ 1,364,131 ($682,066) ($226,667) $ 455,399 Neurology $ 907,317 ($453,659) ($204,678) $ 248,981 Total $ 8,440,952 ($4,220,476) ($1,065,178) $ 3,155,298 • Bottom-line: – Physicians are seeking employment, if they do not find employment with you then they’ll find it elsewhere 12 – If this happens then hospital revenue is at risk Sources: * Merritt Hawkins 2010 Physician Inpatient/Outpatient Revenue Survey ** MGMA 2011 Cost Survey (Hematology/Oncology taken from MGMA 2010 Cost Survey
- 13. State of the Market Payment Reforms Impacting Strategy • Fee-for-service transitioning to quality and value focus • Self-Insured employers focused on lowering costs are pursuing direct contracting or other risk-based models with providers • CMS focused on reforming healthcare through payment reforms and incentives – Shared Savings Program (ACOs) – Pay for Performance – Value-Based Purchasing – No-Pay/Adverse Events – Bundled Payments • Implications – Hospital/physician relationship must become closer – Success will require physician leadership and engagement – Employed groups well positioned to respond 13
- 14. State of the Market Looking for Value CEOs asking: “How do we produce value from these groups?” 14
- 15. State of the Market Looking for Incremental Value • Help respond to the evolving market • Manage quality/care processes • Increase clinical capabilities • Provide medical staff leadership • Build service lines • Grow regional presence • Improve hospital financial position • Build a group culture that aids in meeting our mutual objectives 15
- 16. “Weaponizing the Group” • Referral Management / Control • Primary Care Strategy • Regional Specialty Strategy • Care Process Improvement (Core Measures and Readmissions) • Clinical Integration • Direct Contracting/Assuming Risk 16
- 17. “Weaponizing the Group” Referral Management / Control • Define and measure the problem, both referrals and dollars • Assign accountability to the physician advisory board • Systematically address problems: – Gaps in specialties – Gaps in skills – Gaps in quality – Gaps in service 17
- 18. “Weaponizing the Group” Referral Management / Control • Create “preferred” lists of providers that group will support based on quality of care, customer service • Tie to compensation???? 18
- 19. “Weaponizing the Group” Primary Care Strategy • Define PCP base required to drive business to key profitable services • Define and locate primary care physicians in outlying areas to draw volumes • Aggregate PCPs together and potentially with ancillary service centers 19
- 20. “Weaponizing the Group” Primary Care Strategy • Define strategy to tie PCPs and employers • Must have robust hospitalist program to support PCP growth • Must support through a marketing strategy 20
- 21. “Weaponizing the Group” Regional Specialty Strategy • Focus on strategic specialties – Profitable – Differentiated capabilities • Use employed specialty physicians to target outlying regions • Compensation plan needs to incent business development 21
- 22. “Weaponizing the Group” Care Process Improvement - Core Measures/Readmissions • Employed physicians best positioned to impact hospital care • Define best practices within each specialty, institutionalize with IT • Handoffs of care also a key focus – PCP to/from hospitalists – PCP to/from specialists – Standards of performance in these interactions 22
- 23. “Weaponizing the Group” Clinical Integration • Evaluate primary care models and leverage those capabilities with employers • Evaluate IT strategy • Explore disease management capabilities • Explore post-acute care relationships • Evaluate impact of above on physician specialty needs in employed group • Assemble and start leveraging • Co-management a good start 23
- 24. “Weaponizing the Group” Direct Contracting / Assuming Risk • Focus on employers, and the patients that provide all of the profits for most hospitals • Self-insured employers are an untapped market • Ability to help lower costs will be the key to retaining profitable commercial volumes 24
- 25. “Weaponizing the Group” Direct Contracting / Assuming Risk • Engage and involve the physicians – Medical directorships – Care management opportunities – Implement process changes • Leverage physician expertise • Engage employers in open dialogue about challenges 25
- 26. Requirements for Success • Culture • Leadership • Marketing/Branding • Investment 26
- 27. Requirements for Success Culture • Everyone must understand the vision • Benefits must be clear • Bad actors and other roadblocks must be eliminated…develop shared behavioral expectations • Focus, transparency, and accountability are key 27
- 28. Requirements for Success Leadership • Develop a vision for what physician leadership means • Identify physician leaders – Respected + capable • Build a program with your vision in mind – Education – Interaction with executives – Interaction with hospital board • Continued planning for individual improvement 28
- 29. Requirements for Success Marketing/Branding • Leverage brand of group and hospital – Common branding – Not necessarily same name • Must integrate with referral management • Physician liaison bringing referrals to group and hospital • Targeting markets strategically to manage payer mix and promote profitability 29
- 30. Requirements for Success Investment • Resources invested don’t stop at the subsidy for the hospital • EMR/Practice management systems • Central billing infrastructure and personnel • Administrative time for physicians • Marketing • Facilities 30
- 31. Case Studies • Contracting for risk • Managing referrals and improving quality • Improving rates 31
- 32. Case Study 1 Chronic Care Initiative • State-led shared savings program • Management of chronic disease • 16 primary care physicians out of ~50 in employed group participated • Built NCQA-certified patient-centered medical homes • Increased resources for care management within the practice 32
- 33. Case Study 1 Chronic Care Initiative • Generated payments of $50,000 per physician in year 1 • PCMH model will be expanded within group, and within general medical staff • Can leverage into Medicare or private payer ACO; direct contracting • Point of differentiation in competitive landscape 33
- 34. Case Study 2 Referral Management / Quality Focus • CEO concerned about how to get group to pursue strategies that will make the health system successful • Two approaches: – Education of the physicians concerning reform and changing market – Working with a physicians Advisory Board to develop a group strategy 34
- 35. Case Study 2 Plan Focus • Keeping referrals in the group to: – Build financial strength and – Ensure consistent care • Begin to create a group culture – Empower the physician board – Begin to build common behavioral expectations – Create a common vision 35
- 36. Case Study 2 Plan Focus • Focus on quality – Hospital core measures – Best practices – Handoffs of patients • Define the group size – What types of physicians – In what quantities – Where 36
- 37. Case Study 2 Plan Focus • Primary care strategy • Direct contracting/bundled payments • Financial reporting within the group 37
- 38. Case Study 3 Rate Improvement • Hospital built groups from 30 to 300 • In process, acquired about 30% of PCPs • Insurers fear: the hospital system would leverage PCPs in the negotiations • Hospital system did just that • Able to move the physicians rates from 105% of Medicare to 135% 38
- 39. Case Study 3 Rate Improvement • Made intake of new physicians much easier • Built in cash flow bump of about 10%- 15% on each practice required • More in some specialties 39
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- #14: TA: Responding effectively to shifting incentives from payers is currently, and will continue to be, a major strategic issue for hosptials and health systems.Overall, we are seeing CMS lead the charge, with other payers following suit, to reduce FFS payments and focus on transitioning to payments based on improving quality, improving patient satisfaction, and reducing payer cost. CMS, in particular, has a number of reforms I’m sure all of you are dealing with right now, which employed physicians can be key in heping the hospital deal with.
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