Hospital-Owned Orthopaedic Practices
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Transcript of Hospital-Owned Orthopaedic Practices
Page 1Date
Prepared for Tennessee Orthopedic Society
Hospital-Owned Orthopaedic Practices
2014 Annual Conference Tennessee Orthopaedic Society
September 27, 2014
Page 2Date
Prepared for Tennessee Orthopedic Society
Agenda
• Current Market Trends
• Hospital/Physician Alignment
– Clinical co-management arrangements
– Professional services agreements
– Hospital employment & key considerations
• Key considerations
Page 3Date
Prepared for Tennessee Orthopedic Society
Current Market Trends
Page 4Date
Prepared for Tennessee Orthopedic Society
Hospital Employment Trends
Does your hospital/system plan to employ a greater percentage of
physicians in the next 12-36 months?
HealthLeaders Intelligence Report
Top 5 Service Lines
Primary care
Hospitalists
Cardiology/CV
General Surgery
Orthopaedics
69%
47%
46%
43%
42%Source: HealthLeaders Intelligence Report, September 2012.
Page 5Date
Prepared for Tennessee Orthopedic Society
Hospital Employment Trends• American Academy of Orthopedic Surgeons 2012
Orthopedic Census Report showed hospital/medical center employment up from 7% in 2008
Source: AAOS Orthopedic Surgeon Quick Facts, http://www.aaos.org/research/stats/surgeonstats.asp.
44%
18%
9%
12%
9%
8%
Current Practice Setting 2012
Private Orthopedic Group PracticePrivate Solo PractitionerPrivate Multi-Specialty PracticeAcademicHospital/Medical CenterOther
Page 6Date
Prepared for Tennessee Orthopedic Society
State of the Physician Practice-What You Said
Is your group considering integration with a hospital/health system within the next 12 months?
13%
87%
Yes No
Source: TN Orthopaedic Society member responses, August 2011 and 2013
18%
82%
2013
YesNo
2011
Page 7Date
Prepared for Tennessee Orthopedic Society
State of the Physician Practice-What You Said
Rate your group’s ability to sustain its financial independence in the next 3 to 5 years.
Source: TN Orthopaedic Society member responses, August 2011 & 2013
Not confident Uncertain Very confident0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
14.00%
47.00%
39.00%
28.95%
34.21%36.84%
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Employed Physician Estimate% of Total US
PhysiciansEstimated %
EmployedWeighted Estimate
Primary Care 48% 50% 24%
Specialty 52% 30% 15.6%
Total 100% 39.6%
Predicting the next five years…
• Increasing number of newly trained physicians seeking employment
• Nearly one-third of practicing physicians are 55 or older
• More than 40% of physicians still practice in groups of fewer than five
• AAMC analysis forecasting a shortage of 160,000 physicians by 2025
• Medicare program sustainability and healthcare reform impact
Page 9Date
Prepared for Tennessee Orthopedic Society
Haven’t We Been Here Before?• 1980’s – Hospitals employed PCPs in anticipation of capitated,
managed care contracting, “Gatekeepers”
• 1990’s – Hospitals were losing significant dollars on employed physician groups; began divesting their physician practices
• 2000’s – New wave of physician employment by hospitals, including PCP’s and specialist
• Today – “Hospital-Physician Integration”
– There are new rules
– Hospitals and physicians are wiser
– Partnering for the future is critical for success
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Page 10Date
Prepared for Tennessee Orthopedic Society
Top 10 Medical Practice Challenges in 2014
1. Preparing for the transition to ICD-10 diagnosis coding
2. Dealing with rising operating costs
3. Preparing for reimbursement models that place a greater share of financial risk on the practice
4. Preparing for value-based payments (e.g., shared savings, capitation/global payments, quality/outcome)
5. Managing finances with the uncertainty of Medicare reimbursement rates
6. Understanding payers’ criteria for physician performance ratings and its impact on provider networks and tiering
7. Collecting patient due balances (self-pay, high deductibles, and HSA)
8. Participating in the CMS EHR Meaningful Use incentive program
9. Negotiating contracts with payers
10. Understanding the total cost of an episode of care
Source: Medical Group Management Association, “What Keeps You Up At Night? Exploring the Challenges Facing MGMA Members,” presented on July 17, 2014.
Page 11Date
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Physician Alignment Today
More IntegrationLess Integration
More Common
Less Common
Equipment JV
Clinical Co-Management
Medical Directorships
ACO
Real Estate JV
Medical HomeModels
PHO/ Narrow Network
Bundled Payments
Professional Services Agreement
Physician Employment
Call pay
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Professional Services Agreement• Allows physicians to provide clinical and/or administrative
services under a contractual arrangement that is designed to be an independent contractor relationship
• Four common types of PSA
– Traditional
– Global
– Practice management/contracting
– Hybrid
Page 13Date
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Professional Services Agreement• Allows physicians to provide clinical and/or administrative
services under a contractual arrangement that is designed to be an independent contractor relationship
• Common examples of PSA
– Medical director agreements
– Coverage agreements
– Leased employee agreements
– Hospital coverage agreements
– Clinical co-management agreements
Page 14Date
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Two Common Types of PSAs• Traditional
– Hospital contracts with physicians for professional services
– Hospital employs and manages staff, purchases or leases practice assets, assumes operations
– Hospital negotiates payer contracts, bills and collects for services
• Global
– Hospital contracts with group for global services
– Group maintains ownership and management of practice and staff
– Hospital negotiates payer contracts, bills and collects for services
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Example PSA
Physicians
Clinic Ancillaries
Clinic & Staff
Hospital
$ Compensation Model
$ Professional and Technical Fees
PSA
PSA
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Clinical Co-Management Agreements
Contractual arrangements designed to recognize and appropriately reward participating medical groups/physicians for their efforts in hospital service line
• Development
• Management
• Quality and efficiency improvement
Page 17Date
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Clinical Co-Management Agreements Are Not
• One Size Fits All
• Hospital Employment
• Medical Directorships
• Opportunities for Passive Income
• Gainsharing Relationships
• An ACO
Page 18Date
Prepared for Tennessee Orthopedic Society
Advantages of Clinical Co-Management Arrangements
Potential for improved clinical and financial outcomes for both the hospital and the physician group
Develops the framework for value-based care and reimbursement models in preparation for both federal and commercial payer opportunities
Relatively easy to unwind if performance goals are not achieved
Page 19Date
Prepared for Tennessee Orthopedic Society
Co-Management Model
Management Company/
LLC/Committee
Hospital Physicians
•Base management fees• Incentive Compensation (limited) Including:
- Quality
- Operational
Efficiency
Hospital pays for: $
PhysiciansHospital
Service Contract to Manage Hospital’s Service Line at Risk
for Quality and Operational Goals
Page 20Date
Prepared for Tennessee Orthopedic Society
Example: Orthopaedic Clinical Co-Management Agreement
• Proposed benefits
– Increased physician volume without risk
– Increased alignment with hospital
– Defense of market from suburban providers and the stemming of any outmigration
– Potential expansion into other local community markets
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Prepared for Tennessee Orthopedic Society
Example: Orthopaedic Clinical Co-Management Agreement
• Proposed tasks
– Clinical protocol development
– Supplies management and procurement
– Quality standards definition and improvement
– OR design/process management
– Technology & service planning
Page 22Date
Prepared for Tennessee Orthopedic Society
Example: Orthopaedic Clinical Co-Management Agreement
• Revenue structure
– Hospital pays Management Company fair market value for consulting services
– Physicians potentially earn revenueo By providing consulting services for Management Co.
o By achieving quality measures
o As a shareholder – distributions of earnings from Management Co.
Page 23Date
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Hospital Employment• Often referred to as “Buy & Employ” model
• Hospital purchases practice and employs physicians and staff either as:
– Employee of hospital
– Employee of hospital’s physician enterprise
• Hospital typically assumes control of practice operations, billing and collections, policies & procedures, risk
• Depending on the structure, practice may fall under new regulatory/industry guidelines such as Joint Commission
Page 24Date
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What it is, and Should be!• Strategic move for the future of your practice• PARTNERSHIP between the hospital and physicians• Improve clinical quality within your practice and the hospital
– Improved patient care should be driving force for practice and hospital
• An opportunity to gain market leverage– Payers– Competitors
• An opportunity to improve operational and financial performance of your practice
– Cash Flow– Expense Reductions– Management Expertise and Assistance
• A chance to grow your practice– Access to capital
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Page 25Date
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What it is Not, and Should not be!• All my troubles and worries are over! NOT!!!
– Some issues will be gone, new ones will take their place
– It’s still your practice and your patients
• We will have all the money we will need! WRONG!!
– Easier access to capital, but there still is a cost
– Hospital is not a bank
• We will continue to run our practice like we want to!! GUESS AGAIN!!
– There will be constraints
– Part of a larger group, “Group Mentality”
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Page 26Date
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Strategic Issues to Consider• Is there a shared organizational vision and mission?
• Is this an organization you want to be identified with?
• Do you TRUST administration?
– Can you work with them?
– Do they listen?
• Is the Board of Trustees dedicated to the hospital’s and patient’s best interest?
– Are they supportive of physician employment initiative?
• Has the hospital articulated a clear business strategy?
• Can I improve the quality of care provided to my patients?
• Is there access to new referral sources?
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Page 27Date
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Tactical Issues to Consider!• Does the hospital currently have other practices they own or manage?
– What do those physicians say about their experience?
• What’s the hospital’s financial status?
• What is the physician network legal structure?
– Separate for-profit corporation?
– Hospital department?
• Is there a formal governance structure for the clinics?
– Who is on this board?
– How did they get there?
• Is there a competent, professional, practice manager overseeing day to day operations?
– Will/Can you retain your current manager?
– Who at the hospital would provide management support to your practice?
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Page 28Date
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Tactical Issues to Consider Continued!
• Do they have appropriate infrastructure?
• Who handles day-to-day business/practice decisions?
• How is physician comp structured?
– Formula/Methodology?
• Physician and employee benefits?
• How are expenses divided?
– Shared versus Individual
o Staff
o Supplies
o Building/Rent
o Capital Costs
• Equipment purchases, who decides?
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Advantages
• Physicians are able to focus on patient care and quality
• Access to capital for growth and expansion
• Professional practice management support– Business decision making
– Legal/Regulatory
– Financial
– Business development, strategic planning
• Potential for improved cash flow
• Payer Contracting
• Technology Improvements – EMR
• “Seat at the Table” – Governance, shared decision making
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Disadvantages• Often Loss of Control, Loss of Autonomy related to:
– Corporate Policies and Procedures
– Group Decision Making, Governance
– Staffing, (#, who, discipline, compensation, benefits)
– Physician Compensation
– Insurance/Payer Participation
– Malpractice Coverage
– Ancillary Services, (Lab, X-ray, etc.)
– Practice Financial Issueso CBO
o Monthly Reporting
– Corporate demands on your staff’s time and responsibilities
– Hospital Bureaucracy
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Page 31Date
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Key Considerations
• Shared vision and foundation of trustCulture
• Meaningful physician input and leadershipLeadership
• Effective practice management structure/mechanisms Operations
• FMV and aligned with system objectives Compensation
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Impact on Orthopedic Surgeons
• Assess integration or alignment need in light of future reimbursement models
– Referral patterns
– Prospective, Point of Care, Retrospective viewpoints
• Regional expansion strategy
– Volume and market share still matter
– Rules have changed with aim as preferred partner in orthopedic surgical care
Page 33Date
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Form Follows Function
• No set recipe for alignment
• Risk is relative: mitigate, not eliminate
• Start with what you want to achieve, select a vehicle that will get you there
• Manage uncertainty by maintaining options
• Innovation, new services, better performance still matters
Page 34Date
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Thank You!
Contact:
Lori A. Foley, CMA, PHR, CMM
Principal
(404) 266 – 9876
www.pyapc.com