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Strength In Numbers: Super Clinically Integrated Networks Built to Improve Healthcare Value

Posted by Matthew Smith on Mar 22, 2016 2:27:39 PM

Graham A. Brown, MPH, CRC, Vice President, and Marc Mertz, MHA, FACMPE, Vice President, GE Healthcare Camden Group

As organizations assess their capabilities, resources, and infrastructure to succeed in evolving value-based reimbursement structures, many health systems have begun to partner with other health systems in a manner that allows organizational independence but fosters collaboration in areas where synergies may exist, specifically around population health management.

The creation of super clinically integrated networks ("SCINs") reflects this trend. For some, these SCINs are merely a stepping stone to full integration or merger, but to most, these affiliations are viewed as a vehicle to strengthen each of the independent members by collectively joining forces to improve healthcare value.

These SCINs could have significant strategic potential if they are able to organize appropriately, prioritize initiatives, and advance to the level of jointly assuming risk, developing effective care models, and positioning the members as an attractive option to healthcare purchasers.

Often, SCINs embark on relatively low risk activities at the outset such as optimizing the supply chain, sharing services and overhead, sharing clinical knowledge around best practices, and improving patient access (particularly when organizations are in different markets).

While these may be reasonable starting points that help to garner trust and build momentum, they will not be solid long-term strategies on their own to support sustainability of the SCIN or lead to return on investment for its members.

Establishing goals and objectives of the SCIN at the outset with cohesive strategy formulation and buy-in, as well as ensuring that it is properly resourced, will be integral to their success.

As mentioned, most SCINs that have been formed have a goal of developing joint population health management infrastructure. Defining exactly what this means and responsibilities of the SCIN versus responsibilities of each individual member is a key initial step.

Certainly, there is extensive cost associated with developing the proper infrastructure to support population health. Thus, the economic opportunities to the SCIN should be evident when compared to resourcing population health initiatives as individual organizations.

Ultimately, as the population health infrastructure is built and care model effectuated, there are many opportunities to better manage care and impact overall value. Many SCINs endeavor to offer an attractive, efficient delivery network to self-funded employers via direct to employer contracting; and this activity often begins with their own collective employee health benefits programs. More advanced SCINs progress to joint payer contracting but will need to have achieved clinical and/or financial integration to an acceptable level.

Shifting of financial risk from major payers to the SCIN through a plan-to-plan type arrangement or global capitation are other alternatives as the SCIN evolves and is better equipped to manage risk. Further, the individual exchange marketplaces and Small Business Health Options Program (“SHOP”) allow these advanced delivery networks to access individuals and small groups in an efficient manner and compete more quickly with larger carriers.

Depending on the overall goals, objectives, market characteristics, and current capabilities of each individual member and the SCIN, a provider sponsored health plan may be another opportunity to consider. Between 2012 and 2015, 54 percent of the new Medicare Advantage plan entrants were provider owned.

There is great risk in starting a health plan, but sharing this risk across organizations in the SCIN could be a mechanism to diffuse risk and share collective resources. Additionally, the mere scale in size of the SCIN provides a larger pool of lives than any individual system would have on its own. While the task seem to daunting, particularly at a time when the healthcare system is changing rapidly, embarking on these initiatives collectively may prove to be the best strategy.

There is significant opportunity for super clinical integrated networks to chart their own path and truly transform the delivery system in a positive manner. However, coordinating efforts across multiple large organizations that remain independent is not without its challenges.

Starting with the basics is a reasonable first step so long as there is a well thought out strategy and plan to more fully develop the organization to its potential.

Each individual organization will have its separate priorities. Determining how the SCIN moves forward as “one” while supporting the independence and priorities of the individual organizations will be key to their success.

An effectively designed governance structure of the SCIN that includes the chief executive officer of each member, along with one other key leadership position, is recommended. This will allow nimbleness of the SCIN in decision-making, but will also foster effective communication and alignment of strategies.

Those organizations that can pull it all together could easily set themselves apart and have significant strategic advantage in their respective market(s). Developing a detailed strategic framework for the SCIN that all parties support and holding each other accountable will serve as a foundation of success for these organizations.


BrownG.jpgMr. Brown is a vice president and clinical integration practice leader with GE Healthcare Camden Group and has over 25 years of experience in the areas of payer negotiations, program administration, and change management with healthcare provider, payer, government, and human service clients. He is an experienced leader in business planning and implementation for clinical integration and accountable care organization development across the U.S. He may be reached at g.brown@ge.com.

 

MertzM.jpgMr. Mertz is a vice president with GE Healthcare Camden Group and has 18 years of healthcare management experience. He has 15 years of experience in medical group development and management, physician-hospital alignment strategies, physician practice operational improvement, practice mergers and acquisitions, medical group governance and organizational design, clinical integration, and physician compensation plan design. He may be reached at marc.mertz@ge.com.    

 

This article was originally published by Modern Healthcare Executive, November 27, 2015

Topics: CIN, Clinically Integrated Networks, Clinically Integrated Network, Marc Mertz, Graham Brown, Super CIN

Super Clinically Integrated Networks Offer Unique Opportunities

Posted by Matthew Smith on Dec 8, 2015 2:09:45 PM

By Graham Brown, MPH, Vice President and Clinical Integration Practice Leader; Marc Mertz, MHA, FACMPE, Vice President and Physician Services Practice Leader, GE Healthcare Camden Group

As organizations assess their capabilities, resources, and infrastructure to succeed in evolving value-based reimbursement structures, many health systems have begun to partner with other health systems in a manner that allows organizational independence but fosters collaboration in areas where synergies may exist, specifically around population health management.

The creation of super clinically integrated networks ("SCINs") reflects this trend. For some, these SCINs are merely a stepping stone to full integration or merger, but to most, these affiliations are viewed as a vehicle to strengthen each of the independent members by collectively joining forces to improve healthcare value.

These SCINs could have significant strategic potential if they are able to organize appropriately, prioritize initiatives, and advance to the level of jointly assuming risk, developing effective care models, and positioning the members as an attractive option to healthcare purchasers.

Often, SCINs embark on relatively low risk activities at the outset such as optimizing the supply chain, sharing services and overhead, sharing clinical knowledge around best practices, and improving patient access (particularly when organizations are in different markets).

While these may be reasonable starting points that help to garner trust and build momentum, they will not be solid long-term strategies on their own to support sustainability of the SCIN or lead to return on investment for its members.

Establishing goals and objectives of the SCIN at the outset with cohesive strategy formulation and buy-in, as well as ensuring that it is properly resourced, will be integral to their success.

As mentioned, most SCINs that have been formed have a goal of developing joint population health management infrastructure. Defining exactly what this means and responsibilities of the SCIN versus responsibilities of each individual member is a key initial step.

Certainly, there is extensive cost associated with developing the proper infrastructure to support population health. Thus, the economic opportunities to the SCIN should be evident when compared to resourcing population health initiatives as individual organizations.

Ultimately, as the population health infrastructure is built and care model effectuated, there are many opportunities to better manage care and impact overall value. Many SCINs endeavor to offer an attractive, efficient delivery network to self-funded employers via direct to employer contracting; and this activity often begins with their own collective employee health benefits programs. More advanced SCINs progress to joint payer contracting but will need to have achieved clinical and/or financial integration to an acceptable level.

Shifting of financial risk from major payers to the SCIN through a plan-to-plan type arrangement or global capitation are other alternatives as the SCIN evolves and is better equipped to manage risk. Further, the individual exchange marketplaces and Small Business Health Options Program (“SHOP”) allow these advanced delivery networks to access individuals and small groups in an efficient manner and compete more quickly with larger carriers.

Depending on the overall goals, objectives, market characteristics, and current capabilities of each individual member and the SCIN, a provider sponsored health plan may be another opportunity to consider. Between 2012 and 2015, 54 percent of the new Medicare Advantage plan entrants were provider owned.

There is great risk in starting a health plan, but sharing this risk across organizations in the SCIN could be a mechanism to diffuse risk and share collective resources. Additionally, the mere scale in size of the SCIN provides a larger pool of lives than any individual system would have on its own. While the task seem to daunting, particularly at a time when the healthcare system is changing rapidly, embarking on these initiatives collectively may prove to be the best strategy.

There is significant opportunity for super clinical integrated networks to chart their own path and truly transform the delivery system in a positive manner. However, coordinating efforts across multiple large organizations that remain independent is not without its challenges.

Starting with the basics is a reasonable first step so long as there is a well thought out strategy and plan to more fully develop the organization to its potential.

Each individual organization will have its separate priorities. Determining how the SCIN moves forward as “one” while supporting the independence and priorities of the individual organizations will be key to their success.

An effectively designed governance structure of the SCIN that includes the chief executive officer of each member, along with one other key leadership position, is recommended. This will allow nimbleness of the SCIN in decision-making, but will also foster effective communication and alignment of strategies.

Those organizations that can pull it all together could easily set themselves apart and have significant strategic advantage in their respective market(s). Developing a detailed strategic framework for the SCIN that all parties support and holding each other accountable will serve as a foundation of success for these organizations.

This article was originally published by Modern Healthcare Executive, November 27, 2015


Mr. Brown is a vice president and clinical integration practice leader with GE Healthcare Camden Group and has over 25 years of experience in the areas of payer negotiations, program administration, and change management with healthcare provider, payer, government, and human service clients. He is an experienced leader in business planning and implementation for clinical integration and accountable care organization development across the U.S. He may be reached at gbrown@thecamdengroup.com or 585-512-3905.

 

mertz_headshot.pngMr. Mertz is a vice president with GE Healthcare Camden Group and has 18 years of healthcare management experience. He has 15 years of experience in medical group development and management, physician-hospital alignment strategies, physician practice operational improvement, practice mergers and acquisitions, medical group governance and organizational design, clinical integration, and physician compensation plan design. He may be reached at mmertz@thecamdengroup.com or 310-320-3990.    

 

Topics: CIN, Clinically Integrated Networks, Clinically Integrated Network, Marc Mertz, Graham Brown, Super CIN

Asked and Answered: Frequently Asked Questions by Physicians About Clinically Integrated Networks

Posted by Matthew Smith on Sep 21, 2015 3:35:11 PM

By Daniel J. Marino, MBA, MHA, Executive Vice President, GE Healthcare Camden Group

While clinical integration development continues to build momentum, many questions still remain. The following questions and answers will help communicate the value of clinical integration and clinically integrated networks ("CINs") to your physicians. If you're a physician, these questions and answers should help you with some recurring and nagging issues.

What is clinical integration?

Clinical integration is an effort among physicians, often in collaboration with a hospital or health system, to develop active and ongoing clinical initiatives focused on delivering quality, performance, efficiency and value to the patient.

What’s driving the movement toward clinical integration?

In the years ahead, physicians and hospitals must partner more closely than ever before to ensure that the community receives the highest quality and value. As we move from today’s fee-for-service reimbursement models to new performance- and value-based pay models, CINs enable healthcare providers to join together to enhance the health of a community. These networks bring value to patients, payers, and physicians by improving transitions of care, coordinating chronic disease management, and managing the health of a population.

What does a CIN do?

A CIN helps physicians align with the hospital to coordinate care across caregivers, focus on quality and performance, and prepare for new, incentive-based compensation programs in addition to the base compensation they already receive. The network will develop new payment systems and methods that focus on achieving quality, efficiency, cost-management measures, and enhancing value.

What is the purpose of the CIN?

The principal purpose is to enhance the quality and efficiency of patient care services provided by the participating providers to the community. A CIN with participating providers works together to develop clinical performance standards and protocols for the network. These will form the basis for the network to negotiate contracts with payers for performance incentive programs.

How is it structured?

The CIN is a wholly owned subsidiary of the health system managed by its own Board of Directors, with community physicians and hospital members. Physicians willing to participate in a meaningful way have the opportunity to be involved in the organizational committees that drive the network.

What are the benefits of joining?

For physicians, the network offers the opportunity to:

  • Become available as a preferred network provider to members
  • Use care management resources provided by the CIN
  • Identify and measure best practices
  • Improve outcomes for patients
  • Receive financial rewards for value-based outcomes and achievements

The goal of the CIN is to provide an exemplary patient experience and improve the health of individuals in our community in a continuum of care that is focused on quality, performance, efficiency, and value. This serves as the platform that will determine financial incentives for physicians.

Who can join?

To ensure the best value for patients and payers, the CIN welcomes physicians who want to be accountable and raise the quality of care. These physicians can be:

  • Independent community physicians who seek clinical and quality alignment
  • Physicians employed by a health system
  • Physicians who contract with the hospital to provide services in specialties such as emergency medicine, anesthesiology, and pathology

Do physicians join as individuals, or do all the physicians in a practice need to join?

For independent physicians, a delegated representative from a group practice may sign the participation agreement and code of conduct on behalf of the practice to enroll all providers. However, in most instances, each individual physician in the group will need to complete a short application packet. Physicians employed by the health system will be enrolled with other members of their practice groups.

Will members be required to refer enrolled patients to other network members?

In-network referrals allow for the efficient accumulation and reporting of data, promote coordination and continuity of care and ensure adherence to evidence-based medicine.

What type of data is monitored?

Network leaders and physician advisory committees will determine details on clinical initiatives and data to be monitored and reported. Collected data likely will be similar to that being measured for Medicare programs, such as the Physician Quality Reporting System.

How will clinicians submit data to the network?

Providers will submit clinical and claims data on a timely basis to a secure, web-based platform that is HIPAA compliant and password protected. The web-based platform enables physicians to conveniently and easily submit data from any device with internet access.

What is the difference between a CIN and an Accountable Care Organization ("ACO")?

According to the Centers for Medicare and Medicaid Services, an ACO is accountable specifically for Medicare beneficiaries. It is an organization of healthcare providers that agrees to be accountable for the quality, cost, and overall care of Medicare beneficiaries enrolled in the traditional fee-for-service program who are assigned to the ACO. Similarly, a CIN is an alignment model, coordinating care across affiliated caregivers and developing contracts with payers to improve quality while controlling growth in total cost of care, including value-based contracting initiatives with commercial payers and Medicare.

Clinical Integration Networks, CIN, Daniel J. Marino


Daniel J. Marino, The Camden Group, Clinically Integrated NetworksMr. Marino is an executive vice president with GE Healthcare Camden Group with more than 25 years of experience in the healthcare field. Mr. Marino specializes in shaping strategic initiatives for healthcare organizations and senior healthcare leaders in key areas such as population health management, clinical integration, physician alignment, and health information technology. He may be reached at dmarino@thecamdengroup.com

 

 

Topics: Population Health, Clinically Integrated Care, Clinically Integrated Networks, Clinically Integrated Network, Daniel J. Marino

 3 Important Considerations for Funding Your Clinical Integration Project

Posted by Matthew Smith on Sep 15, 2015 1:58:54 PM

By Daniel J. Marino, MBA, MHA, Executive Vice President, GE Healthcare Camden Group

Healthcare leaders are asking some serious questions about clinical integration. How much will it cost to develop a clinically integrated network ("CIN")? How and when will the CIN begin paying for itself?

Here are answers to three important questions about the economics of clinical integration.

Q. What Initial Investment Will Clinical Integration Require?

The upfront investment depends on the resources each participant can contribute to the network. The initial primary cost drivers of a CIN are information technology, professional and legal support, and staffing. The good news is that all three cost components can usually be managed within the available resources of the hospital partner.

Based on the work The Camden Group is doing with clients, new CINs typically require $500,000 to $3 million in investment capital. This money funds the network build and launch over a two- to three-year period.

Q. What is the Net Impact of Clinical Integration?

Leading organizations are developing CINs with the idea that they will not achieve true return on investment until two or three years down the road. The sooner a CIN can manage population health and build an organized system of care, the sooner it will realize a net positive return. Two areas are key:

Network Impact

The CIN as a whole should focus on securing incentive payments. These include incentives tied to reducing the cost of care and meeting/exceeding quality thresholds under value-based and risk-based contracts. Networks can also pursue employer contracts that provide care management fees and revenue from employee health outreach, wellness, and prevention services.

Participant Impact

Hospitals and physicians that participate in a CIN can expect a positive impact within their separate operations.

  • As network-driven care matures, patient outmigration (commonly referred to as patient leakage) outside the CIN should decrease by 10 percent to 15 percent. Hospitals will see their utilization increase, even though typical indicators such as length-of-stay and readmissions will decrease.
  • Many CINs begin by enrolling the hospital’s self-insured employed population. These hospitals will see a decrease in their variable employee costs and a decline in overall spending per employee per year.
  • Integration will also complement a hospital’s internal quality improvement initiatives. Hospitals that participate in a CIN will have a greater ability to bend the cost curve, achieve quality targets, and improve patient access.
  • Physicians have the opportunity to receive performance incentives in the form of shared savings distributions. Medical providers should also see a stabilization and eventual increase in their practice population, resulting in stronger practice revenue.
Q. What is the Financial Value of Clinical Integration?

Ultimately, CINs need to look beyond short-term incentives and start developing the ability to assume financial risk for groups of beneficiaries.

Payers are beginning to offer complementary insurance products that leverage population health management. These payers need high-performing CINs that:

  • Deliver a strong network of providers focused around organized care principles
  • Demonstrate the ability to drive down costs for high-risk population cohorts
  • Incorporate care coordination functions that result in high-quality care outcomes

CINs that can deliver on these points will build undisputed financial value, giving them a commanding position within emerging provider/payer partnerships.

Start with a Financial Model

Will your CIN be economically viable? The answer depends on many variables, including market forces and assumptions inherent in population health management.

The first step for any new CIN is careful financial modeling. Successful CINs get a fast start by building sophisticated financial models that take into account changing conditions and sensitivity analyses. These models help CINs build strong provider networks, align participants with a population health vision, maximize their net economic impact, and create true financial value. 

Clinical Integration Networks, CIN, Daniel J. Marino


Mr. Marino is an executive vice president with GE HealthcareCamden Group with more than 25 years of experience in the healthcare field. Mr. Marino specializes in shaping strategic initiatives for healthcare organizations and senior healthcare leaders in key areas such as population health management, clinical integration, physician alignment, and health information technology. He may be reached at daniel.marino@ge.com

 

 

Topics: Clinically Integrated Care, Funding Clinical Integration, Clinically Integrated Network, Daniel J. Marino, Funding CINs

Mergers and Acquisitions: Key Considerations for Creating Efficiencies Through Consolidation

Posted by Matthew Smith on Aug 11, 2015 4:36:39 PM

By Brandon Klar, MHSA, Vice President GE Healthcare Camden Group

Originally published in the August 2015 issue of Compliance Today. Used with permission.

As a result of the Affordable Care Act ("ACA"), healthcare mergers and acquisitions ("M&A") have increased dramatically as providers attempt to consolidate to achieve economies of scale and provide a full continuum of services in support of population health. However, at the same time, there are specific anti-trust regulations that must be considered when contemplating a merger or acquisition ("M/A"), and recent compliance and enforcement activity shows that it is not just hospital-to-hospital consolidation that creates a concern; acquisition of physician practices can also be subject to anti-trust enforcement action. Healthcare providers must conduct effective due diligence and analyses to ensure that the efficiencies and business justifications for the M/A support the transaction, and that the benefit to the market in terms of quality and cost of care are apparent and fully achievable. Integrating anti-trust compliance into the due diligence phases of M&A considerations is imperative.

Incentives associated with the ACA, growing financial pressures, and infrastructure needs have led hospitals and other providers to seek partners in order to survive in the new healthcare delivery system. As shown in Graph 1 (below), hospital transactions have risen significantly during the post-ACA years. In this period, hospitals have attempted to align in order to provide the full continuum of care and capture the maximum patient population needed to transition to population health-based methodologies, all while seeking to create greater efficiencies from consolidation.

At the same time, hospital acquisitions of physician practices have increased for many of the same reasons, but particularly because of the financial needs of the practices and the desire of hospital systems to employ physicians as an alignment strategy in the population health transition. According to the American Medical Association, as of 2012, 53 percent of physicians were self-employed as compared to 76 percent in 1983.1 Simultaneously, the Medical Group Management Association reports that annual financial losses per provider (all multi-specialty) have increased from $143,834 in 2013 (based on 2012 data) to $235,866 in 2014 (based on 2013 data), representing a 64 percent increase in annual losses per provider. Historically, hospitals have not excelled at managing physician practices. Concurrent with the rapid increase in hospital-hospital M&As and hospital-physician group acquisitions is the evolution of healthcare antitrust laws in the post-reform era. Long-standing evidence shows that consolidation of hospitals reduces competition and drives up market prices in a fee-for-service environment. This effect is counter to the goals of the ACA and thus has received increasing scrutiny from the Federal Trade Commission (FTC). In fact, Edith Ramirez, Chair of the FTC, recently stated:

The success of health care reform in the United States depends on the proper functioning of our market-based health care system. The current consolidation wave could have substantial consequences for health care reform efforts that depend heavily on competition to control costs and improve quality.… Consolidation risks upsetting this competitive dynamic and harming consumers.2

In line with the FTC’s concerns, there have been more challenges to consolidation activities, including the Promedica-St. Luke’s case in which the U.S. Court of Appeals for the Sixth Circuit upheld the FTC decision to block the hospital merger of ProMedica and St. Luke’s Hospital in the Toledo, Ohio market due to the reduction in competition and likelihood of increasing prices in the way of premiums and copays for consumers.3 Further, in a historic case the FTC challenged the acquisition of Saltzer Medical Group ("Saltzer") by St. Luke’s Health System in Idaho based on the tenet that it would violate federal and state anti-trust laws. Although St. Luke’s argued that the acquisition created better coordination of care and supported the goals of the ACA, they could not show that the efficiencies would decrease the overall costs of care while improving quality.4

Although consolidation by way of M&As may be the best alternative in some cases in order to succeed under value-based payment and population health based models, it is imperative that hospitals and medical groups are able to demonstrate the efficiencies of the consolidation outweigh the risks under reduced competition. Ultimately, these systems must show not only the improved quality and reductions in costs associated with the M/A, but also illustrate how the efficiencies and cost reductions are translated to reduced cost of care that is passed on to consumers, and why these efficiencies can only be gained through M/A. Key considerations when considering new mergers or acquisitions include:

  • In hospital-hospital transactions, what efficiencies can be created between the entities that will reduce overall costs, and how can that translate to reduced costs of care for consumers?
  • In hospital-medical group transactions, what efficiencies can be created between the hospital and medical group that will reduce overall costs, and how can that translate to reduced costs of care for consumers?
  • Is the merger or acquisition the only way to accomplish the stated goals? Is there another structure that can produce similar results while keeping the organizations independent?

Hospital-Hospital Transactions

Efficiencies associated with hospital-hospital transactions are regularly cited by the organizations’ boards and senior leadership as a fundamental driver to formally merge operations, yet many newly formed firms are ill prepared to achieve and sustain these savings without significant planning or external consultation. It is for this reason that the FTC has increased its scrutiny of submitted Business Plans of Operational Efficiency ("BPOE") associated with proposed transactions as a means by which to overcome the potential anticompetitive effects of the transaction.

Successfully merged firms have achieved efficiencies across the myriad of administrative, support, infrastructure, and clinical hospital functions while demonstrating their ability to enhance quality through care model redesign and clinical programmatic alignment. Efficiency plans for such integrations were framed and constructed pre-transaction with the support of external healthcare experts, respecting each party’s inability to share competitively sensitive information. The plans were further refined and enhanced post-transaction with dedicated multidisciplinary teams composed of representatives of the transacting parties focusing on specific functional integrational plans. These efficiency plans were built around a clearly articulated vision for the merged firm and maintained well-defined action plans specifying how and when each efficiency would be achieved, the likelihood of achieving each efficiency, the associated quantifiable savings, and any related capital or operating costs of implementation. When well-constructed plans are developed and implemented, the operational and financial benefits are often the first advantages illuminated. But with time, these efforts drive cultural alignment that regularly translates into further collaboration and efficiencies beyond those previously highlighted.

Short-term efficiency savings opportunities can be achieved by integrating back-office functions such as finance, human resources, and legal services. Full consolidation of staff and contract services will lead to substantial savings, because these efficiencies can be clearly achieved and sustained through a merger. The centralization of management and joint contracting for services and supplies represent efficiencies in the support and infrastructure departments that can be achieved in the shortto mid-term range post-transaction. These efficiencies are often challenged by regulatory agencies, because hospitals are frequently unable to provide reasonable means to verify or quantify efficiencies savings pre-transaction. Clinical efficiencies have been proven to yield the largest efficiencies of merged firms, but the likelihood of achieving such efficiencies varies greatly, because they will often require further vetting and stakeholder support that is unattainable pre-transaction, leaving these efficiencies speculative to a degree.

Despite the challenges with identifying and quantifying efficiencies associated with mergers, BPOEs have been able to translate to lower costs of care for patients in two principle ways. First, the alignment of both administrative and clinical operations of two previously independent hospitals into a merged firm has provided a platform by which to reduce unnecessary, duplicative testing. Integrated electronic health records (EHR) and alignment of clinical programs across locations can reduce unnecessary utilization and subsequent out-of-pocket expenses for patients. Second, the merged firm’s efficiencies, driven by the cumulative effect of lowering the per-case costs of services by way of achieving multiple efficiencies, can be significant enough to prevent commercial plan price increases in a market that may be sought if the existing cost structures of the two independent hospitals were to remain in place.

Hospital-Medical Group Transactions

When hospitals acquire medical practices, it is often done with the good intention of fully integrating the practice(s) and supporting the transition to population health-based models. However, it is common practice for the acquired medical groups to continue to operate autonomously, with limited integration into the hospital system for efficiency gains. In fact, acquired medical groups frequently perform worse under a hospital-employed structure than when they were independent. Part of the reason is that integration is not easy, and most hospital systems are either in the early stages of population health transition or have not started, and thus put medical group acquisition at the forefront of their population health strategy. Consequently, acquisitions are occurring and often driving up prices in the market, because competition is being reduced. Larger systems have greater leverage to negotiate favorable reimbursement in the market, and the benefits of population health and value-based contracting are not yet realized.

The economics of medical practice change significantly when a physician transitions from independent practice to hospital employment. Not only are payer contracts negotiated by the hospital, which often has greater negotiating power, but cost structures may rise from more robust benefits structures, staff wage ranges, and physician compensation. Additionally, when operating as an independent practice, physicians have to cover their overhead expenses—there is no subsidy. When they are employees, their salary is negotiated with the hospital and may not reflect their productivity or contain incentives to keep expenses in check. Changes in reimbursement related to the site or type of service also occur when medical groups are acquired by hospitals— specifically, hospitals are able to charge facility fees or move ancillary services from medical practices to the hospital, thereby increasing costs. And, historically, hospitals have not efficiently managed physician practices overall.

Furthermore, the St. Luke’s-Saltzer decision shows that even when systems are taking initial steps toward value-based care, such as sharing an integrated EHR, it is not enough to justify an acquisition. And, although systems need aligned primary care physicians in order to grow their patient base and capture attributed lives under value-based contracting, the St. Luke’s-Saltzer case also shows that is not reason enough to promote acquisition of medical groups, because other alignment structures could produce similar results without harming competition. When considering an acquisition of a medical group in the post-reform era, hospital systems and their compliance team need to have a clear plan for how the acquisition will increase quality and reduce costs. This proposal must include consideration of not only how the action will reduce operating costs of the medical practice and make it more efficient, but also how the acquisition will reduce overall costs to the consumer. For that, a much more detailed financial impact analysis, managed care strategy, and operational implementation plan are necessary.

Merger and Acquisition Alternatives

Although M&As once dominated healthcare transactions, today many healthcare entities are looking for innovative affiliation models that do not require fully relinquishing their independence, but still offer operational efficiencies. Accordingly, new models are becoming more prevalent that allow these entities to seek partners that can satisfy their unique financial, operational, and quality needs, while still maintaining a level of control, in an effort to meet their key strategic objectives.5 The details of these alternative affiliation models will vary from transaction to transaction, but the basic principles of three increasingly common models will remain consistent.

Joint Operating Agreements

Within a joint operating agreement ("JOA"), the assets and governance of the two partners are not merged, but considerable management and financial authority is transferred to the joint operating entity. This model provides the platform for the partners to achieve significant efficiencies by way of the integration of operational and financial results, while also protecting the partners’ rights to religious directives and major corporate decisions, including the sale of assets. This model is highly complex in nature, but allows the joint operating entity to collectively borrow to satisfy the capital needs, undertake care model redesign to enhance quality, and achieve operational efficiencies that will drive cost savings for the partners. Operational efficiencies within a JOA can, in some instances, reach levels attainable through full mergers or acquisitions. In addition, the FTC does not deem these arrangements to be anti-competitive and thus, the two partners may be able to contract jointly.

Joint Ventures

In addition to JOAs,non-profits are also looking to pursue joint ventures to attain needed capital infusions and operational expertise while maintaining a reduced level of control. With the non-profit contributing its assets and business operations to the joint venture, a partner organization contributes capital to ascertain a majority share within the joint venture. The joint venture is then overseen by the majority stakeholder by way of a management contract, while the non-profit provides clinical services to the joint venture. This model yields moderate operational efficiency outside of consolidated administrative services offered by the majority stakeholder, and gives the non-profit the ability to ascertain the expertise and capital required to sustainably maintain operations to fulfill the community need.

Clinically Integrated Networks

Another model being pursued more frequently in light of the ACA are clinically integrated networks ("CINs"). This model provides the platform for healthcare entities to develop collaborative networks that support care coordination throughout the continuum while sharing in the infrastructure costs associated with managing a defined population. In a CIN the partners do not merge their assets or relinquish control of their organizations. Instead, the partners establish an alliance that maximizes the existing clinical expertise of their independent organizations, while sharing the costs of infrastructure and information technology required to participate in new accountable care payment plans and in preparation for population health. This model often maintains its own board and management team, which is directly responsible for clinically integrating the two partners and reducing cost (both operational and capital) through the achievement of clinical and operational efficiencies.

Conclusion

As health systems prepare for success in the new value-based world, M&As are often a major part of their strategy. However, federal anti-trust laws must be considered, not only in hospital-hospital transactions, but in hospital-medical group transactions as well. The BPOE and assessment of efficiencies must demonstrate the need for the M/A and how those efficiencies will lead to reduction in the cost of care, not just improvement in the system’s cost structure and bottom line or overall improved quality of care for the market. There are significant opportunities to improve the cost structure when organizations come together—those must be explored, verified, and ultimately, have a succinct implementation plan as well as a plan for translating savings to consumers. Further, alternative structures must be reviewed to determine if the stated goals and efficiencies may be accomplished in another manner. These considerations should be included in the due diligence phase of planning to assure ongoing compliance in a rapidly consolidating environment.

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Hospital Consolidation, Mergers and Acquisitions, The Camden Group


  1. Carol K. Kane and David W. Emmons: “New Data on Physician Practice Arrangements.” The American Medical Association. Available at http://bit.ly/1dbtuoP
  2. Edith Ramirez: “Anti-trust Enforcement in Health Care — Controlling Costs, Improving Quality.” The New England Journal of Medicine, December 11, 2014; 371:2245-2247. Available at http://bit.ly/1QM65q5
  3. Marlene Harris-Taylor: “Promedica ordered to drop St Luke’s: Court declares merger anticompetitive.” Toledo Blade, April 22, 2014. Available at http://bit.ly/1RpDR62 
  4. Jonathan L. Lewis, Lee H. Simowitz, and Sean T. Hartzell: “In the Wake of the FTC’s St. Luke’s Victory in Idaho, What Does the Future Hold for Hospital-Physician Acquisitions?” ABA Health eSource, vol 10, no.7. Available at http://bit.ly/1Je71Gg
  5. Jonathan Spees: “Choosing the Right Affiliation Structure.” Hospital and Health Networks Daily, October 9, 2014. Available at http://bit.ly/1Lw59WP

Mr. Klar is sa vice president with GE Healthcare Camden Group with over 12 years of experience in healthcare management. He specializes in strategic and business planning advisory services, including service line planning, master facility planning, and transaction work (e.g., mergers, acquisitions, affiliations, joint ventures). He may be reached at brandon.klar@ge.com

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Topics: Clinically Integrated Network, Mergers, Acquisitions, Hospital mergers and acquisitions, Brandon Klar, Mergers and Acquisitions

New Download: Managing the Newly Eligible Medicaid Population

Posted by Matthew Smith on Feb 19, 2015 11:36:00 AM

Medicaid, The Camden Group, Tawnya Bosko, Medicaid EligibilityAs more states begin to take on newly eligible Medicaid populations, there are a number of lessons that can be learned from health systems that have already begun managing these patients. Not all institutions within a state will be equally prepared to manage the newly eligible population due to organizational, information technology, and provider network constraints.

This new download from The Camden Group examines challenges associated with the newly eligible Medicaid population and takes a closer look at:

  • Challenges facing hospitals
  • Approaches to assessing readiness
  • Key stakeholders
  • Key formation components
  • Expectations for clinically integrated network formation
  • Lessons learned from other providers

To download this PDF, simply click on the button below, complete the necessary fields, and press the "Click for Download" button. Your file will appear and will be available for you to save to your device.

Medicaid Population, The Camden Group, Population Health

Topics: Clinical Integration, Hospitals, Clinically Integrated Care, Medicaid, Clinically Integrated Network, Health Systems

New Download: Population Health Management--What Does It Mean To Your Practice?

Posted by Matthew Smith on Sep 8, 2014 11:00:00 AM

Clinical Integration, Clinically Integrated Care, Population Health

The time has come for primary care physicians to reboot their practice operations and begin the process of managing population health. Many physicians are delaying the planning and implementation process that will prepare them for a transformation of how they are paid from fee-for-service to reimbursement-for-results. 

This new PDF presentation from Health Directions examines current trends in Population Health Management as they pertain to physician practices and addresses such topics as:

  • Population Health Defined
  • The Building Blocks of Clinical Integration
  • ACO/Clinically Integrated Network Components
  • Case Study: Forming an ACO
  • Key Implementation Steps
  • Implications for Physicians and Office Managers
  • Participation Considerations

To access this presentation, please click the button below:

Population Health, Practice Management, Clinical Integration

Topics: Clinical Integration, Population Health, Clinically Integrated Care, Physician Practice, Clinically Integrated Network, Download

Clinical Integration: A "3rd Way" for Hospital-Physician Collaboration

Posted by Matthew Smith on Aug 4, 2014 8:15:00 AM
By Daniel J. Marino
President/CEO
Health Directions

Clinical Integration, CI, Clinically Integrated NetworkAs healthcare costs continue to rise, payers are putting pressure on all providers to deliver more coordinated care. Hospitals and physicians are now expected to collaborate to improve outcomes, reduce utilization and control costs.

What does this mean for medical practices? Physicians have only a few options.

One alternative is to seek employment by a hospital or health system. The benefit of employment is a certain level of income security for physicians. The downside, of course, is loss of autonomy.

The second alternative is to remain independent. While this option preserves physician control, it exposes doctors to new risks. In the coming years, payers will continue to put pressure on physicians to accept lower reimbursement. Physicians’ negotiating leverage will continue to decline.

Fortunately, a third alternative is now emerging—clinical integration between physicians and hospitals. A clinically integrated network allows physicians to work collaboratively with a hospital, other physicians and post-acute providers. Under the right legal structure, clinical integration allows physicians to maintain independence while benefiting from joint contracting based on quality outcomes and cost management.

The Benefits of Clinical Integration

Independent physicians can benefit from a clinically integrated network in four ways:

Autonomy Within Collaboration

Clinical integration allows physicians to maintain their independence while coordinating patient services across the entire continuum of care. A clinically integrated networkenables autonomous medical practices to participate in collaborative care teams and measure comprehensive quality outcomes.

Negotiation Leverage

Clinically integrated networks create value with payers by coordinating quality tracking, performance outcome measurement and cost management for network providers. As an approved legal structure for provider collaboration, a clinically integrated network can contract for enhanced reimbursement through shared savings and/or performance incentives.

Population Health Support

In the near future, population health management will become a key tool for improving patient outcomes and controlling costs. But independent physicians cannot afford to build a population management infrastructure. A clinically integrated network can provide the technology to track quality outcomes, the organizational structure to integrate patient management with other providers, and the tools to identify and influence the cost of care.

Protection Against Payment Risk

Payment models will continue to evolve rapidly in the years ahead. Physicians who align themselves with a clinically integrated network will stay on the forefront of opportunities to benefit from new contracting approaches, new reimbursement structures and new ways to maintain accountability for contract performance.

3 Questions to Ask

Independent physicians who are considering joining a clinically integrated network should ask three questions:

Are Physicians Leading the Network?

Successful clinically integrated networks are governed and led by physicians. Hospital leaders should participate in setting strategic direction, but physicians must have a leading role in developing clinical programs, designing financial incentives and building the provider network.

Are You Willing to Adopt New Care Models?

Innovative care models are key to achieving the goals of clinical integration. Independent physicians must be willing to incorporate new models into their clinical workflow. This could include enhanced use of EMR, participating in care teams and incorporating certain patient care services that may not currently be reimbursed.

Are You Willing to Make a Long-Term Investment?

The financial benefits of a clinically integrated network might not be realized for 12, 18 or 24 months. Participating physicians must be willing to invest their time in building an innovative delivery network that will only pay off in the future.

While the benefits may take time to materialize, clinical integration is a promising alternative for physicians. Joining a clinically integrated network now is a sound strategy for preparing your practice for the future.


Daniel J. Marino, Clinical Integration, Health DirectionsAs President/CEO of Health Directions, Daniel J. Marino shapes strategic initiatives for healthcare organizations and senior health care leaders in key areas such as population health management, clinical integration, physician alignment, and Health IT. With a broad background in all aspects of practice management and hospital/physician alignment, Dan is nationally recognized as a strategic leader in Accountable Care Organizations and clinical integration development. He frequently speaks at national conferences and regularly authors articles for the nation’s top healthcare industry publications related to current transformations in healthcare delivery. Dan may be reached via email at dmarino@healthdirections.com or by phone at 312-396-5400.

 

Clinical Integration, Physician Engagement, Health Directions

Topics: Clinical Integration, Clinically Integrated Care, Medical Practice, Clinically Integrated Network

Ten Key Governance Best Practices for Your ACO or CI Program

Posted by Matthew Smith on Jul 21, 2014 12:48:00 PM
By Daniel J. Marino,
President/CEO, Health Directions

ACO, Clinical Integration, GovernanceA board’s most valuable resource is its time.”  That single sentence, from a renowned expert on board and governance matters, serves as the wellspring for some important guiding principles for governance of your accountable care organization (ACO) or clinical integration program.

Following are some best practices your organization can adopt to ensure optimal effectiveness of governance functions and your organization’s overall success in achieving its strategic objectives.

 

1. Screening Tool for Prospective Governance Members

Most population health management-type organizations are comprised of multiple stakeholder groups, some of whom have little history of working together or knowledge of the capabilities and potential conflicts of leadership. In some cases, these stakeholders have historically thought of themselves as competitors to one another. An important exercise for any board is to work through a process for objectively and consistently screening potential board members to ensure suitability. Such a screening process probably should involve some sort of screening for conflicts of interest, but at its simplest level should at least make sure the prospective governance member is available to attend governance meetings at scheduled times.

2. Position Descriptions for Board and Committee Chairpersons and Rank and File Members

Position descriptions are not just for management. A succinct statement of the purpose and expectations of both Board/Committee chairpersons as well as “rank-and-file” Board and Committee members can be remarkably helpful, particularly in underscoring the importance of leaving members’ legacy “stakeholder” organizational interests at the door and acting in the best interests of the enterprise. This is an important first step in building a common culture and preparing for the future, rather than preserving the past.

3. Cycled Performance Review of Board and Committee Chairs and Rank and File Members

Once formal position descriptions for Board/Committee chairpersons and rank-and-file members are developed and approved by the Board, it is easy to use these tools – specifically the duties – as the basis for formal performance evaluation and feedback. It is recommended that Board and Committee chairs be formally reviewed once a year, and that a cycled approach be used for rank-and-file Board/Committee members such that these members are reviewed at least once every two or three years. Performance feedback should be sought from fellow Board/Committee members. An objective third party might be engaged to consolidate (and de-identify) peer feedback, and then review results with the reviewee.

4. Formal Orientation for New Governance Members

It is important to have a steady rotation of new Board and Committee members to ensure all stakeholder represented in Board and committee decision-making, and in building a “bench” of physician leaders knowledgeable of and committed to the organization’s strategies. One effective means of doing this is to have formal orientation governance sessions with the incoming class of governance members. Depending upon the size of your governance, these orientation sessions might be conducted once or twice a year. They should be scheduled at times that are convenient for incoming governance members to attend (e.g. early morning or dinner meeting times). Attendance at an orientation could be a requirement before a candidate is officially seated on the Board or a Committee.

5. Governance Compensation

Some organizations routinely compensate physicians for their attendance and participation in committee work. Other organizations fiercely resist the practice. Regardless of whether you chose to compensate or not, the Board may wish to proactively evaluate the merits of, and formally adopt a policy related to, governance compensation, rather than just respond reactively when asked.

6. Charters & Annual Work Plans

It is typical for a Board, as one of its first orders of business, to develop a governance organization structure that creates a select few committees to do a “deeper dive” into policy matters and oversight activities. While each committee typically reports to the Board, there is often significant interaction among the committees as well. For these reasons, it behooves the Board to clearly articulate the role and expectations of its committees. This can take two forms: first, a “charter” outlining the general roles and responsibilities of each committee, and second, an annual “work plan” outlining what specific activities the committee is to undertake in a particular year. To illustrate, it would be typical for the “charter” of a quality committee to specify that committee as the governance entity in which program measures are to be developed. The “annual work plan” might include a directive from the Board that, this year, it expects the quality committee to develop measures related to cardiology, oncology and orthopedics. Committee charters should be reviewed and changes approved by the Board on annual basis, presumably at the same time that annual Committee work plan assignments are approved.

7. Board and Committee Self Review Process

Boards and committees are collections of individual members, but are also entities unto themselves. Just as individuals’ performance should be reviewed on a periodic basis, it is recommended that Boards and Committees do a collective self-review once a year, perhaps as part of an annual retreat process or in a special executive session.

8. Planning vs. Monitoring

As noted above, a board or committee’s most valuable resource is its time. The role of governance is to set strategy and the role of management is to implement strategy. It would be a revealing exercise to review the agendas of your board over the past year, identifying the proportion of meeting time and content spent on monitoring and looking over the shoulders of management vs. developing strategy and setting policy. How much time was spent looking forward vs. looking backwards at operations?  Ideally, at least 70 percent of Board time should be spent setting strategy, formulating goals and crafting policy. To expedite monitoring functions, it is suggested that the Board develop high-level dashboard reports on critical indicators and other management-by-exception practices.

9. Pro Forma Agenda and Annual Master Calendar of Agenda Items

To help ensure the Board spends adequate time on strategy while still attending to its duties to monitor operations, it can be instructive to develop an annual calendar of agenda items as a planning guide for board activities. This will help ensure that nothing “falls through the cracks” while balancing activities throughout the year.

10. Mix of Routine and Extended Meetings

At least once a year, the board should hold a meeting of extended length to review past year accomplishments conduct a self-review of governance effectiveness and update strategy to chart the way forward for the next year or planning cycle. This type of extended meeting, typically a board retreat, can be followed by a similar extended meeting of key committees – perhaps a month or two following the board retreat – at which committees can assimilate the strategy updates of the board and assess the impacts on committee activities.


Daniel J. Marino, CIN, Clinically Integrated Networks; As President/CEO of Health Directions, Daniel J. Marino shapes strategic initiatives for healthcare organizations and senior health care leaders in key areas such as population health management, clinical integration, physician alignment, and Health IT. With a broad background in all aspects of practice management and hospital/ physician alignment, Dan is nationally recognized as a strategic leader in Accountable Care Organizations and clinical integration development. He frequently speaks at national conferences and regularly authors articles for the nation’s top healthcare industry publications related to current transformations in healthcare delivery. Dan may be reached via email at dmarino@healthdirections.com or by phone at 312-396-5400.

Topics: Accountable Care, ACO, Accountable Care Organization, Clinical Integration, Clinically Integrated Network, Governance, Daniel J. Marino

New Download: FAQs By Physicians About Clinical Integration

Posted by Matthew Smith on Mar 25, 2014 12:31:00 PM

FAQ, Clinical Integration, Clinically Integrated Networks, CINClinical Integration programs unite physicians for the purpose of delivering higher quality health outcomes. Payers in certain markets reward systems with Clinical Integration programs due to the savings created by better population health management. Physicians are sometimes reluctant to join Clinical Integration programs and appropriately ask “What’s in it for me?” 

While our previous article, titled "5 Incentives for Enlisting Physicians in a Clinical Integration Program" examined the "What's in it for me" question, we received some great feedback asked for more answers to commonly received questions. This FAQ will help you communicate the value and details of clinical integration and a clinically integrated network to your physicians. If you're a physician, these questions and answers should help you with some recurring and nagging questions.

Top Questions Include:

  • What’s driving the movement toward clinical integration?
  • What is the purpose of the clinically integrated network?
  • What are the benefits of joining?
  • Who can join?
  • Do physicians join as individuals, or do all the physicians in a practice need to join?
  • What type of data is monitored?
  • How will clinicians submit data to the network?
  • What is the difference between a Clinically Integrated Network and an Accountable Care Organization (ACO)?
  • and more.

Do you have a question that is not included in the FAQ? Feel free to share your question in the comments section and we will address these in a follow-up document.

To download the FAQ, simply click on the button, below:

FAQ_Button_Orange.png

Topics: Clinical Integration, CIN, Clinically Integrated Network, FAQ

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