GE Healthcare Camden Group Insights Blog

Co-management Economic Impact Elements to Consider

Posted by Matthew Smith on Oct 25, 2016 1:10:12 PM

By Panos Lykidis, MBA, Vice President, and Angela Thiagarajah, MHA, Manager, GE Healthcare Camden Group

physician_engagement-1.jpgCo-management agreements continue to grow in popularity as organizations turn to pay-for-performance reimbursement models. These agreements are typically quality focused arrangements in which physician groups contract with hospitals to manage a particular service line to ensure efficient and effective care is provided to patients. Co-management arrangements also allow for hospital-physician collaboration without requiring physicians to become hospital employees. 

Determine the Structure of the Arrangement

To assess the economic impact of a potential co-management arrangement, the first step is to determine the structure of the arrangement, beyond just the service line. For example will this include inpatient and outpatient services and/or medical and surgical services? These services will also need to be further defined through a combination of selecting coding (e.g., MS-DRGs, ICD-10 codes, and CPT codes), specific physicians, and physician specialties. The definition of the structure should be clearly defined and not overly complex, to establish a baseline and enable the development and execution of recurring reports, which will measure future performance. The structural design will be an iterative process, using actual data to test that the volumes, associated with the definitions, are substantial enough to develop a meaningful baseline and internal benchmark, in order to effectively evaluate the performance of physicians.

The baseline is the historical physician performance for the services within the above defined structure of the co-management arrangement. Important metrics for the baseline include volume (discharges and visits), average length-of-stay (“ALOS”), direct variable cost, case mix index (“CMI”), and other quality indicators as agreed upon. A minimum of one year of historical data is typically required to have statistically significant volume to identify trends and project the future impact of performance improvement. It is important for participating physicians to understand how the baseline and benchmarks were developed, and agree to its accuracy.

For benchmarking inpatient services, the CMI, which reflects clinical complexity and resource need of the population served, can be used to weight or adjust the length-of-stay or direct variable cost, for a more meaningful comparison of a single physician’s performance to peers or top performers, by taking into account patient acuity. The gap between the historical performance and the internal benchmark will identify opportunities for improvement. Internal benchmarking is useful when external benchmarks are not available, however, if possible, external benchmarks should also be reviewed and used in conjunction. Using national or other external benchmarks can ensure internal top performers are actually top of field when compared to competitors.

Assess the Cost of Implementation

It is also important to assess the cost to implement. Typically, co-management arrangements include base management and incentive fees. The base management fee is compensation to physicians for their participation in furthering the goals of the co-management arrangement (e.g., committee participation, clinical protocol development, and daily oversight). The incentive fee is compensation for achievement of performance goals such as financial, operational, quality, and patient satisfaction metrics. It is important that co-management agreements be set up in a way to ensure compliance with civil monetary penalty and anti-kickback laws. Organizations should take time to ensure their fees and services are of fair market value and meet commercial reasonableness requirements, in order to avoid legal complications. 

Additional costs to consider include consulting and legal fees and additional staffing needs for program management and analytics. Also, consider the impact of current medical directorships and whether or not these will roll-over into the co-management arrangement. Hospital management should use this process to assess the effectiveness of existing medical directorships and decide which ones should be:

  1. kept separate from the co-management arrangement;
  2. rolled into the co-management arrangement; or
  3. allowed to expire or be terminated.

The implementation of the co-management arrangement will standardize care delivery, reduce supply costs, reduce length-of-stay, and improve quality which will lead to savings and improved value. Achievement of these savings will ramp up over the period of the arrangement, generally three years. If targets are exceeded in year 1 and/or year 2, loftier targets and metrics should be included in future iterations. This is to ensure that the service line incentives keep pace with the progress being accomplished by the collaborative efforts of the physicians and hospital management. An assessment on return on investment should include risk for achievement of savings.

Setting the Foundation

A well-conducted economic impact analysis will serve as a foundation for the creation and implementation of the co-management arrangement. The assessment can be used to educate and align participating physicians and hospital management. It will also set the stage for the work to come, which will include developing an optimal structure, defining performance measures and targets, modeling compensation arrangements, and the execution of the services.

Lykidis_P.jpgMr. Lykidis is a vice president with GE Healthcare Camden Group with more than 15 years of healthcare experience specializing instrategic and business planning for a broad range of healthcareprovider and payer organizations. His experience includes serviceline strategic planning, such as developing hospital/ physician alignment models, co-management arrangements, facility master planning, conducting medical staff development plans and community impact studies, and performing physician needs and fair market value compensation studies. He may be reached at panos.lykidis@ge.com.


Thiagarajah_A.jpgMs. Thiagarajah is a manager with GE Healthcare Camden Group specializing in financial operations and decision support. Her experience includes service line assessments, productivity analytics, and the development of financial forecasting models, including the financial impact analysis and customized payment bids to prepare organizations for bundled payments. She has led the successful implementations of financial information systems for hospitals. In addition, she has worked to streamline hospital operations and finance functions. She may be reached at angela.thiagarajah@ge.com.



Topics: Hospital-Physician Collaboration, Volume-Based Reimbursement, Panos Lykidis, Angela Thiagarajah, Reimbursement Models, Co-Management

Best of 2015: Top 10 Considerations When Transitioning Physicians to Payment-for-Value

Posted by Matthew Smith on Dec 28, 2015 10:51:59 AM

Tawnya  Bosko, DHA, MS, MHA, MSHL, Vice President, GE Healthcare Camden Group

change-ahead-sign.pngLeading into the new year, GE Healthcare Camden Group will be re-publishing the most shared and popular blog posts of 2015.

With increased focus on payment based on value, physician practices and those involved with physician practices need to plan for how to transition to new reimbursement models. Here are the top considerations to keep in mind when implementing value-based structures:

1. How do you define value? 

For all the talk of compensating physicians based on value as opposed to volume, there is no consistent methodology for measuring “value.” Often, payers define value in different ways, making it difficult for physician practices to understand what is required of them in order to meet criteria. Leadership should define what value means to the practice with insight from key payers. Typically, initial steps in measuring value are based on compliance with designated measures from the Healthcare Effectiveness Data and Information Set, but depending on the program, different criteria may be used. Further, the practice may include measures that it has identified as needing improvement, such as patient access, completing notes, meeting meaningful use, or responding to lab results in a timely manner.

2. How do you report on value?

Once the practice has determined the clinical measures or other criteria that will define value, it must proactively assess information system readiness for reporting on these measures. Historically, many payers have tracked these values based on claims data. Practices must be able to monitor, track, and report on performance related to value metrics. Assess the system, and ensure that necessary data can be extracted efficiently and accurately for reporting. Build custom fields within the electronic health record (“EHR”), or consider an add-on reporting tool if needed.

3. How do you document value?

Just as important as determining how to generate reports to measure the value metrics, practices must determine how physicians and other providers should document their work within the EHR in order to ensure their results are captured. Often, EHRs have several ways and areas in which documentation of a certain procedure or services can be documented. Best practice is determining the field or area to document each measure so that it is clearly communicated to physicians and easily reported on, retrospectively.

4. Incentive program - carrot or stick?

Once the metrics to measure value have been determined, what is the incentive (carrot) or penalty (stick) for meeting or failing to meet value as defined by the group? There must be enough incentive to gain buy-in so that physicians do not feel as though extra work is being added without additional benefit. And, there must be enough penalty at stake for the program to be taken seriously. It is about finding the right balance. Is it a withhold on revenues with the opportunity to earn X times the withhold in return if measures are met? Is there a “direct” line of sight between the incentive earned by physicians and the impact on their compensation? There are many models that could be implemented to meet the practice’s needs.

5. Educate, educate, educate

This point cannot be emphasized enough. Often, healthcare leaders think the difficulty is in defining value, measuring value, and designing the incentive program. While those can be complex, educating the physicians on the measures, model, and how to document them is a very important step and could make or break your program. Remember that these situations often involve changing the way a physician has practiced and/or documented and that it takes time, education, and re-education. Ensure the appropriate processes and tools are in place to communicate and educate effectively.

6. Living in a grey world/burden of value

Understand that during this transition to payment-for-value, physicians are living in a grey zone. They are expected to take extra steps to meet value criteria, but the majority of reimbursement may still be based on a fee-for-service or volume-based methodology. Essentially, they are asked to spend extra time with patients and on documentation in order to meet quality measures but also to continue to meet their productivity targets in order to sustain the viability of the practice. Typically, the burden of many of the value-based measures falls hardest on primary care physicians. Be aware of this when designing incentive models. Do not do too much at once and overwhelm physicians to the point where they give up.

7. Transparency of data

Physicians, rightfully so, are often skeptical of performance-related data. They have questions...make sure tyou have answers. Be transparent with data. If a physician asks for the names of patients where they failed on a certain measure, ensure the information is provided. It is important to not only be transparent with data but to build confidence in results.

8. Timeliness of results

Be timely with reporting. Provide information to physicians in a timely and regular manner so that they are able to improve any deficiencies in the measurement period. Do not wait until the point where it is too late to correct issues for the current performance year. It is in the practice’s interest to improve each physician’s performance. Use the data and reporting to provide feedback and to help them be successful in the program.

9. Impact on total compensation

Understand the impact that the design of the incentive program has on total compensation. What percentage of total compensation does the incentive (or withhold) represent? Does the physician employment agreement need to be revised to incorporate the incentive model? If physicians are on salary guarantees, how is that addressed so that the incentive/penalty falls on them and not the employer?

10. Engage payer partners

Work with payer partners and do it early. Discuss their needs when measuring value and pursue discussions on how they can support the transition. Make it a collective effort where initiatives are streamlined and convergent. It is not practical for practices to have multiple different models for multiple different payers; be open with major payers, and develop a program that is supported uniformly.

bosko_headshot.pngDr. Bosko is vice president at GE Healthcare Camden Group and has over 20 years of experience in healthcare management and strategy. Her areas of focus and expertise include healthcare reform, market forces, and strategic analysis, specifically around hospital-physician alignment, emerging reimbursement and incentive models, performance optimization, payer strategy, and the intersection of health policy and delivery system transformation. 

Dr. Bosko is a nationally-recognized speaker on healthcare market trends and insights, focusing on the financing and delivery of care. She frequently presents at industry conferences and is the author of multiple articles for leading industry journals and publications on the transition to value-based reimbursement and health system strategy. She may be reached at tbosko@thecamdengroup.com or 310-320-3990.


Topics: Value-Based Care, Physician Compensation, Payment Models, Tawnya Bosko, Volume-Based Reimbursement

Survive Today, Thrive Tomorrow: From Volume- to Value-Based Worlds

Posted by Matthew Smith on Jun 19, 2015 10:54:23 AM

By Tawnya Bosko, MHA, MSHL, MS, Senior Manager, The Camden Group (Via AMGA's Group Practice Journal)

volume_value1.pngHealthcare delivery in general, and physician reimbursement specifically, are undergoing unprecedented transformation. While most physician practices still operate largely in a fee-for-service ("FFS") world, government and commercial payers alike have signified their intent to reimburse physicians and other providers based on value.

Many physicians recognize that the FFS system is imperfect at best, but the evolving value-based reimbursement system is ill defined, leaving physicians facing a great deal of uncertainty. During this time of uncertainty, medical practices have opportunities to improve performance and position themselves for success in the rapidly changing healthcare market. It is natural to begin focusing on clinical measures and outcomes as a means for proving value, but it is just as important to remain financially viable during the transition. By understanding the structures of evolving reimbursement methodologies, changing health plan dynamics, and developing market trends, we can thrive in this uncertain world.

To read this article in its entirety, please click the button below for an instant PDF download of this article:

Volume-Based Reimbursement, The Camden Group

Topics: Tawnya Bosko, Volume-Based Reimbursement, Fee-for-Service, Healthcare Delivery

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