Lessons Learned from the Financial Front Lines of Population Health Management

Transcription

1 Lessons Learned from the Financial Front Lines of Population Health Management

2 Presenters Deborah Bloomfield, PhD, CPA Central Markets CFO for Catholic Health Partners and CFO for Mercy Health Charles Vignos President of Summa Health Network, COO of Summa Accountable Care Organization, and VP of Managed Care Brent Hardaway Vice President, Population Health, Premier healthcare alliance Mark Hiller Vice President, Strategic Innovation, Premier healthcare alliance 2

3 Overview Providers that become ACOs must implement steps to better understand the cost and utilization of services across the care continuum and to implement changes to provide the most effective care in the most efficient manner. They will also need strategies to analyze voluminous information in a digestible format periodically. As Integrated Delivery Networks evaluate the financial impact of moving toward accountable care, there are 6 variables that deserve special attention. While there are hundreds, if not thousands, of variables that affect the financial outcome, these 6 will materially shape the results and influence the broader strategy for the ACO. 3

4 Learning Objectives After this session, you will be able to: Describe 6 key variables that will materially affect the financial impact on a system that is exploring / building an ACO. Understand the performance of other ACO precursor programs (e.g., PGP) in terms of setting expectations for new ACOS. List several of the key cost drivers for building an ACO. Re-iterate many of the experiences of providers who have either built or are in the process of building ACO capabilities. 4

5 PGP: Results for 10 Participants Shared Savings Are Difficult To Create Of the 10 participants, 4 generated savings payments in at least 3 of the 5 years Top Tier Upper Tier Lower Tier Lowest Tier PPP ID # Shared Savings Payments Y1 Shared Savings Payments Y2 Shared Savings Payments Y3 Shared Savings Payments Y4 Shared Savings Payments Y5 SS Payments Total Years of SS Proj. Enrollees Proj. 5 Year SS Payments / Enrollee EST. Savings Y2 1 $ 4,565,327 $ 5,781,573 $ 13,816,922 $ 16,154,242 $ 15,832,603 $ 56,150, ,200 $ 2, % 2 $ 2,758,370 $ 1,239,294 $ 2,798,005 $ 5,222,852 $ 5,329,967 $ 17,348, ,700 $ % Avg $ 3,661,849 $ 3,510,434 $ 8,307,464 $ 10,688,547 $ 10,581,285 $ 36,749, ,950 $ 1, % 3 $ - $ - $ 3,143,044 $ 8,185,757 $ 2,598,859 $ 13,927, ,700 $ $ - $ 6,689,879 $ 3,570,173 $ 328,798 $ - $ 10,588, ,600 $ % 5 $ - $ - $ - $ - $ 5,673,177 $ 5,673, ,000 $ 299 Avg $ - $ 2,229,960 $ 2,237,739 $ 2,838,185 $ 2,757,345 $ 10,063, ,100 $ % 6 $ - $ - $ 1,950,649 $ 1,788,196 $ - $ 3,738, ,400 $ $ - $ 129,268 $ - $ - $ - $ 129, ,700 $ % Avg $ - $ 64,634 $ 975,325 $ 894,098 $ - $ 1,934, ,550 $ % 8 $ - $ - $ - $ - $ - $ ,400 $ - 9 $ - $ - $ - $ - $ - $ ,000 $ - 10 $ - $ - $ - $ - $ - $ ,700 $ - Avg $ - $ - $ - $ - $ - $ ,033 $ % Avg $ 732,370 $ 1,384,001 $ 2,527,879 $ 3,167,985 $ 2,943,461 $ 10,755, ,940 $ % 3 of these 4 participants did not have experience owning an HMO Only 1 Participant with fewer than 19,000 enrollees received savings any year In Y2, 2 participants went slightly backwards and increased spending faster than peers & another increased by 4% Sources: CMS, Medicare Physician Group Practice Demonstration July 2011; RTI International, Financial Results from the Physician Group Practice (PGP) Demonstration, June 2009; Hospital Press Releases

6 History is often more instructive than inspirational The Physician Group Practice 5 Year Demonstration Project was a precursor to ACO s and CMS has cited the project as helping inform the ACO rule making process. There were 10 participants in the demonstration, with 13,000 to 39,000 Medicare enrollees. 7 of the 10 participants either owned or had owned an HMO; the 3 participants that did not were among the 4 worse performers. Of the 10 participants, 2 generated shared savings payments all 5 years, 2 received 3 years of payments, 2 had 1 2 years of payments and 3 received no payments. In year 2, 3 of the enrollee populations had medical spending higher than the benchmarks, including one that was ~4% higher. No participant decreased utilization faster than the rate of medical inflation and/or growth in utilization Every year the average spending per beneficiary increased The average year 2 decline in medical spending was 1.2% with a high of 4.8% The average 5 year shared savings per enrollee was $360, with a high of $2,925 1 organization potentially generated revenue equal to the AHA s estimated 5 year cost for building and operating an ACO ($56M versus the range of $37M - $83M). Only 1 Participant with fewer than 19,000 enrollees received savings any year. Over the 5 year period there was an average of 25% annual enrollee turnover. 6

7 Results of Premier s AC financial model 7

8 AC Financial Impact Model Overview Important to Understand How AC Impacts Financials Based on lessons from the Premier ACO collaborative, Premier developed an Accountable Care Financial Model to examine the impact of implementing accountable care principals. Used with over 20 systems. Overarching characteristics: Combines market and population based data with the operational and capital costs of implementing an accountable care strategy Projected shared savings earned (if any); 5 year pro forma of delivery system and consolidated performance; Impact of individual insurance mandate; 150+ projection levers. 8

9 Financial Impact Model Overview Projected P&Ls Revenue Revenue Historical Periods Historical Periods Projection Period Projection Period Total Net Patient Revenue before shared savings Total Net Patient Revenue before shared savings $ 1,637,000,000 $ 1,692,860,018 $ 1,751,034,445 $ 1,637,000,000 $ 1,764,602,932 $ 1,692,860,018 $ 1,962,587,584 $ 1,751,034,445 $ 2,048,738,017 $ 1,764,602,932 $ 1,962,587,584 $ 2,048,738,017 ACO - Shared Savings ACO - Shared Savings ,372,094-38,903,754-77,299,696 16,372, ,880,703 38,903,754 77,299, ,880,703 Net patient revenue Net patient revenue 1,637,000,000 1,692,860,018 1,767,406,539 1,637,000,000 1,803,506,686 1,692,860,018 2,039,887,280 1,767,406,539 2,180,618,720 1,803,506,686 2,039,887,280 2,180,618,720 Other Revenue Other Revenue 75,500,000 65,764,095 66,576,900 75,500,000 67,361,085 65,764,095 76,999,584 66,576,900 82,544,032 67,361,085 76,999,584 82,544,032 Total Revenue Total Revenue 1,712,500,000 1,758,624,113 1,833,983,439 1,712,500,000 1,870,867,771 1,758,624,113 2,116,886,864 1,833,983,439 2,263,162,752 1,870,867,771 2,116,886,864 2,263,162,752 Operating Expenses Operating Expenses Salary, Wages, and Benefits Salary, Wages, and Benefits 753,317, ,089, ,819, ,317, ,125, ,089, ,273, ,819, ,195, ,125, ,273, ,195,538 Supplies Supplies 240,609, ,599, ,794, ,609, ,961, ,599, ,153, ,794, ,853, ,961, ,153, ,853,059 Miscellaneous Miscellaneous 324,973, ,766, ,767, ,973, ,321, ,766, ,669, ,767, ,212, ,321, ,669, ,212,429 Bad Debt Bad Debt 356,500, ,689, ,181, ,500, ,547, ,689, ,601, ,181, ,642, ,547, ,601, ,642,819 Medical costs Medical costs Admin and general Admin and general - 2,086,164 4,236,845-5,088,536 2,086,164 4,858,998 4,236,845 5,239,594 5,088,536 4,858,998 5,239,594 Management fee Management fee Total Operating Expenses Total Operating Expenses 1,675,400,000 1,680,231,764 1,689,800,406 1,675,400,000 1,706,044,398 1,680,231,764 1,840,556,118 1,689,800,406 1,925,143,439 1,706,044,398 1,840,556,118 1,925,143,439 Operating Margin Operating Margin 37,100,000 78,392, ,183,032 37,100, ,823,374 78,392, ,330, ,183, ,019, ,823, ,330, ,019,313 % of Net Revenue % of Net Revenue 2% 4% 8% 2% 9% 4% 13% 8% 15% 9% 13% 15% Other Income / Expense Other Income / Expense Other Community Hospital Net Income Other Community Hospital Net Income 80,426,000 80,000,000 80,000,000 80,426,000 80,000,000 80,000,000 80,000,000 80,000,000 75,000,000 80,000,000 80,000,000 75,000,000 ACO Management Fee ACO Management Fee Shared savings distribution - Physician Providers Shared savings distribution - Physician Providers - - (2,555,780) - (5,867,672) - (10,894,210) (2,555,780) (17,567,433) (5,867,672) (10,894,210) (17,567,433) Shared savings distribution - Hospitals Shared savings distribution - Hospitals Net Income from ACO Net Income from ACO Other Clinic Other Clinic 300, , , , , , , , , , , , , , , ,000 Total Other Income / Expense Total Other Income 300,000 / Expense 450,000 80,926, ,000 80,500, ,000 77,994,220 80,926,000 74,692,328 80,500,000 69,680,790 77,994,220 58,032,567 74,692,328 69,680,790 58,032,567 Income (loss) before minority interest Income (loss) before minority 300,000 interest 450, ,026, , ,892, , ,177, ,026, ,515, ,892, ,011, ,177, ,051, ,515, ,011, ,051,880 Minority interest in ACO Minority interest in ACO Net income(loss) Net income(loss) $ 300,000 $ 450,000 $ 118,026,000 $ 300,000 $ 158,892,349 $ 450,000 $ 222,177,253 $ 118,026,000 $ 239,515,702 $ 158,892,349 $ 346,011,536 $ 222,177,253 $ 396,051,880 $ 239,515,702 $ 346,011,536 $ 396,051,880 Historical Periods Projection Period Revenue Total Net Patient Revenue before shared savings $ 1,637,000,000 $ 1,692,860,018 $ 1,751,034,445 $ 1,764,602,932 $ 1,962,587,584 $ 2,048,738,017 ACO - Shared Savings ,372,094 38,903,754 77,299, ,880,703 Net patient revenue 1,637,000,000 1,692,860,018 1,767,406,539 1,803,506,686 2,039,887,280 2,180,618,720 Other Revenue 75,500,000 65,764,095 66,576,900 67,361,085 76,999,584 82,544,032 Total Revenue 1,712,500,000 1,758,624,113 1,833,983,439 1,870,867,771 2,116,886,864 2,263,162,752 Operating Expenses Salary, Wages, and Benefits 753,317, ,089, ,819, ,125, ,273, ,195,538 Supplies 240,609, ,599, ,794, ,961, ,153, ,853,059 Miscellaneous 324,973, ,766, ,767, ,321, ,669, ,212,429 Bad Debt 356,500, ,689, ,181, ,547, ,601, ,642,819 Medical costs Admin and general - 2,086,164 4,236,845 5,088,536 4,858,998 5,239,594 Management fee Total Operating Expenses 1,675,400,000 1,680,231,764 1,689,800,406 1,706,044,398 1,840,556,118 1,925,143,439 Operating Margin 37,100,000 78,392, ,183, ,823, ,330, ,019,313 % of Net Revenue 2% 4% 8% 9% 13% 15% Other Income / Expense Other Community Hospital Net Income 80,426,000 80,000,000 80,000,000 80,000,000 80,000,000 75,000,000 ACO Management Fee Shared savings distribution - Physician Providers - - (2,555,780) (5,867,672) (10,894,210) (17,567,433) Shared savings distribution - Hospitals Net Income from ACO Other Clinic 300, , , , , , , ,000 Total Other Income / Expense 300, ,000 80,926,000 80,500,000 77,994,220 74,692,328 69,680,790 58,032,567 Income (loss) before minority interest 300, , ,026, ,892, ,177, ,515, ,011, ,051,880 Minority interest in ACO Net income(loss) $ 300,000 $ 450,000 $ 118,026,000 $ 158,892,349 $ 222,177,253 $ 239,515,702 $ 346,011,536 $ 396,051,880 IDN - Hospital Historical Periods Projection Period Revenue Total Net Patient Revenue before shared savings $ 1,637,000,000 $ 1,692,860,018 $ 1,751,034,445 $ 1,764,602,932 $ 1,962,587,584 $ 2,048,738,017 ACO - Shared Savings ,372,094 38,903,754 77,299, ,880,703 Net patient revenue 1,637,000,000 1,692,860,018 1,767,406,539 1,803,506,686 2,039,887,280 2,180,618,720 Other Revenue 75,500,000 65,764,095 66,576,900 67,361,085 76,999,584 82,544,032 Total Revenue 1,712,500,000 1,758,624,113 1,833,983,439 1,870,867,771 2,116,886,864 2,263,162,752 Operating Expenses Salary, Wages, and Benefits 753,317, ,089, ,819, ,125, ,273, ,195,538 Supplies 240,609, ,599, ,794, ,961, ,153, ,853,059 Miscellaneous 324,973, ,766, ,767, ,321, ,669, ,212,429 Bad Debt 356,500, ,689, ,181, ,547, ,601, ,642,819 Medical costs Admin and general - 2,086,164 4,236,845 5,088,536 4,858,998 5,239,594 Management fee Total Operating Expenses 1,675,400,000 1,680,231,764 1,689,800,406 1,706,044,398 1,840,556,118 1,925,143,439 Operating Margin 37,100,000 78,392, ,183, ,823, ,330, ,019,313 % of Net Revenue 2% 4% 8% 9% 13% 15% Other Income / Expense Other Community Hospital Net Income 80,426,000 80,000,000 80,000,000 80,000,000 80,000,000 75,000,000 ACO Management Fee Shared savings distribution - Physician Providers - - (2,555,780) (5,867,672) (10,894,210) (17,567,433) Shared savings distribution - Hospitals Net Income from ACO Other Clinic 300, , , , , , , ,000 Total Other Income / Expense 300, ,000 80,926,000 80,500,000 77,994,220 74,692,328 69,680,790 58,032,567 Income (loss) before minority interest 300, , ,026, ,892, ,177, ,515, ,011, ,051,880 Minority interest in ACO Net income(loss) $ 300,000 $ 450,000 $ 118,026,000 $ 158,892,349 $ 222,177,253 $ 239,515,702 $ 346,011,536 $ 396,051,880 IDN - ACO Historical Periods Projection Period Revenue Total Net Patient Revenue before shared savings $ 1,637,000,000 $ 1,692,860,018 $ 1,751,034,445 $ 1,764,602,932 $ 1,962,587,584 $ 2,048,738,017 ACO - Shared Savings ,372,094 38,903,754 77,299, ,880,703 Net patient revenue 1,637,000,000 1,692,860,018 1,767,406,539 1,803,506,686 2,039,887,280 2,180,618,720 Other Revenue 75,500,000 65,764,095 66,576,900 67,361,085 76,999,584 82,544,032 Total Revenue 1,712,500,000 1,758,624,113 1,833,983,439 1,870,867,771 2,116,886,864 2,263,162,752 Operating Expenses Salary, Wages, and Benefits 753,317, ,089, ,819, ,125, ,273, ,195,538 Supplies 240,609, ,599, ,794, ,961, ,153, ,853,059 Miscellaneous 324,973, ,766, ,767, ,321, ,669, ,212,429 Bad Debt 356,500, ,689, ,181, ,547, ,601, ,642,819 Medical costs Admin and general - 2,086,164 4,236,845 5,088,536 4,858,998 5,239,594 Management fee Total Operating Expenses 1,675,400,000 1,680,231,764 1,689,800,406 1,706,044,398 1,840,556,118 1,925,143,439 Operating Margin 37,100,000 78,392, ,183, ,823, ,330, ,019,313 % of Net Revenue 2% 4% 8% 9% 13% 15% Other Income / Expense Other Community Hospital Net Income 80,426,000 80,000,000 80,000,000 80,000,000 80,000,000 75,000,000 ACO Management Fee Shared savings distribution - Physician Providers - - (2,555,780) (5,867,672) (10,894,210) (17,567,433) Shared savings distribution - Hospitals Net Income from ACO Other Clinic 300, , , , , , , ,000 Total Other Income / Expense 300, ,000 80,926,000 80,500,000 77,994,220 74,692,328 69,680,790 58,032,567 Income (loss) before minority interest 300, , ,026, ,892, ,177, ,515, ,011, ,051,880 Minority interest in ACO Net income(loss) $ 300,000 $ 450,000 $ 118,026,000 $ 158,892,349 $ 222,177,253 $ 239,515,702 $ 346,011,536 $ 396,051,880 IDN Physician Network 9

10 ACO Financial Results Cautionary Tales & Lessons Learned For the models we have run - the impact of implementing ACO like principles is deleterious to the profitability of an IDN because of a number of issues. The Halo effect; Revenue typically decreases faster than cost reductions. Example s from IDN s with $500M in revenue: $2M - $5M annual decline in profitability for a mid-sized Medicare ACO; $3M - $5M on an employee ACO; $5M - $10M on a small to mid-sized commercial plan. 10

11 Six key variables to assess financial impact 1) The Halo Effect 2) Number of Enrollees 3) The Cost to Build and Operate the ACO 4) The Ability to Bend the Cost Curve 5) Structural Considerations 6) The System s Ability to Adapt 11

12 Six key variables to assess financial impact 1) The Halo Effect As care patterns for covered lives these efforts tend to spill over and affect non-aco lives as well. Reduced utilization or less intense services Benefits the ACO in the form of generating savings. Among non-aco lives just lowers revenues. Understanding the halo effect is critical to evaluations of accountable care s effect on the system s bottom line. Typical assumption is 1:1 change in utilization across populations. Increasing the number of enrollees can increase the potential for shared savings. 12

13 Six key variables to assess financial impact 2) Number of Enrollees ACO related cost spread over larger enrollments reduces permember costs. In small ACO populations, or if shared savings are spread among a large number of providers, average incentives per provider can be small. In Medicare the Minimum Savings Rate to become eligible for shared savings decreases as lives increase. The number of potential enrollees in a market is limited. Note - In PGP about 25 percent of members dis-enrolled each year. 13

14 Six key variables to assess financial impact 3) Cost to Build and Operate the ACO 14

15 Six key variables to assess financial impact 4) The Ability to Bend the Cost Curve Looking at PGP, the generation of savings appeared highly correlated with owning an HMO. In PGP of participants that generated payments all had experience owning an HMO except one. Savings will take time to be realized. In PGP four of the 10 participants generated shared savings payments in three out of five years, Two generated payments every year. Average improvement was just 1.2% Some participants in PGP experienced increased utilization relative to the benchmarks. Early results are starting to trickle in from MSSP it is still early. 15

16 Six key variables to assess financial impact 5) Structural Considerations ACOs may not achieve break-even until years after forming. Per the IRS - physician owners cannot have losses subsidized. Therefore most IDNs opt for super majority, if not complete, ownership of the ACO. Once break-even is achieved, IDNs need a strategy for funding expenses and provider bonuses. Projections estimate the ACO needs to retain 40 percent for operating expenses, leaving 60 percent for bonuses and incentives. Many IDNs elect a 50/50 division between hospitals and physicians Some have proposed 33 percent to the hospital, 33 percent to specialists and 33 percent to primary care providers. 16

17 Six key variables to assess financial impact 6) The Systems Ability to Adapt ACOs in many cases result in near-term losses. For this reason, it is important to understand the IDN s ability to reduce operating cost in order to restore margins. Financially success in the ACO model for some have come by filling beds emptied by Medicare (or Medicaid) patients with better paying commercial patients. Questions for the IDN to think through: Degree of Institutional Readiness Population Health Experience Specific Plans to Address Utilization / Focus Financial Incentives for Providers (e.g. shared savings) Spending per Beneficiary in Baseline Period Physician Leadership / commitment 17

18 Counterbalancing ACO Impact In every ACO financial model Premier has run to date, the impact on IDN margins has been negative. What does it take to counter balance reduced margins: Increasing profitable market share: a 5% - 10% (3 to 6 points) increase in commercial / MA market share. Increasing revenue: 2% - 5% increases in commercial rates above what is already expected Decreasing expense by an additional 1% - 3%. The reality is most systems will need to attempt a range of strategies to achieve even small wins. Potential impact of insurance mandate - Key questions: What % of the uninsured will gain insurance? What will the associated reimbursement look like? What will happen with their utilization? 18

19 Summa s accountable care financial experience 19

20 Summa Health System (SHS) 20

21 Summa Who Are We? Hospitals Physicians Health Plan Foundation Inpatient Facilities Tertiary/Academic Campus 3 Community Hospitals 1 Affiliate Community Hospital 2 JV Hospitals with Physicians 1 Rehab Hospital Outpatient Facilities Multiple ambulatory sites Locations in 3 Counties Service Lines Cardiac, Oncology, Neurology, Orthopedics, Surgery, Women s, Seniors, Behavioral, Emergency, Respiratory Multiple Alignment Options Employment Joint Ventures PHO/EMR Implementation Programs Clinical Integration PHO Accountable Care Organization Geographic Reach 20 Counties for Commercial 23 Counties for Medicare 60 Hospital Commercial Provider Network 41-Hospital Medicare Provider Network National accounts in multiple states 225,000+ Total Members Commercial Self Insured Commercial Fully Insured Group Process Outsourcing Medicare Advantage Individual PPO System Foundation Focused On: Development Education Research Innovation Community Benefit Diversity Government Relations Advocacy Net Revenues: Over $1.6 Billion Total Employees: Nearly 11,000 21

22 Summa s ACO Launched in 2011 NewHealth Collaborative Vision: The ACO is a clinician-led care organization that partners with communities to compassionately care for and serve our populations in an accountable, value- and evidence-based manner. Organizational Facts: Legal entity established as a non-profit taxable to allow for physician majority on the Board - 6 of 9 Board members are physicians Partners include: Primary Care Physicians Specialists - Summa Hospital/Ambulatory Facilities - SummaCare/CMS - Independent Hospitals and Physicians Partnership of Independent and Employed physicians critical to success - 65% of PCPs are independent 22

23 NHC Populations SummaCare Medicare Advantage Go-live date of January 1, 2011 Approximately 10,000 members Summa Health System (SHS) Employee Health Plan Go-live date of January 1, 2012 Approximately 7,000 members Medicare Shared Savings Program (MSSP) - Medicare Fee-For-Service Go-Live date of July 1, 2012 Approximately 23,000 beneficiaries 23

24 Key Financial Numbers Total Membership: 40,000 Lives Medical Spend: $350 Million Operating Expense: 1% Provider s Business: About 30% 24

25 Challenges to Building an ACO 1. Need to bridge the gap between current and future reimbursement models. (Variable 2 Enrollees; Variable 4 Cost) - Know Your Data! 2. Time, cost and expertise to build the infrastructure for Population Health Management. (Variable 3 Operate; Variable 4 Cost; Variable 5 Structure) - Short-Term v. Long-Term Strategy 3. Growth in Market Share to offset the financial challenges within the delivery systems. (Variable 6 Adapt) - Delivery System Network Analysis Learning with a Medicare Shared Savings Population 25

26 Performance Bridge the Gap Between Two Models WE ARE HERE Building Curve 2 infrastructure for Population Health while being paid like Curve 1 Curve #2: VALUE-BASED PAYMENT Shared Savings Programs Bundled / Global Payments Value-based Reimbursement Rewards integration, quality, outcomes and efficiency Curve #1 FEE-FOR-SERVICE All about volume Reinforces work in silos Little incentive for real integration Time 26

27 Data Availability for MSSP Population Health Management Claim and Claim Line Feed (CCLF): Beneficiary Assignment Utilization/Cost Data/Drivers: Services provided by ACO Providers Services provided by Non-ACO Providers GAPS in Care: Chronic/Wellness High Risk/Medically Complex Predictive Modeling Market Share Analysis 27

28 Medicare Shared Savings Program Data Limitations (CCLF Files) Beneficiary Assignment: Quarterly Process Plurality Rule: Turnover (death, move, snowbirds, change physicians) 28% (six months) Returning Beneficiary 2% (second quarter) Primary Care Services (All Providers) Lack clear start and end dates member months/person year Missing Data: Opt out of Data Sharing: 4-5% of Population Drug and Alcohol Treatment Risk Scores Tracking Beneficiaries SSN v. HICN Contact Information - Addresses 28

29 Medicare Shared Savings Program Aggregate Expenditures/Utilization Trend Report Total expenditures per assigned beneficiaries: % Reduction Component expenditures: Inpatient, SNF, Institutional Home Health DME Hospice Transition of care per 1000: 30 Day All Cause Readmission Ambulatory Care Sensitive Conditions Utilization rates per 1000: Hospitalization Emergency Visits CT/MRI Events 29

30 Infrastructure for Population Health Management (Short v. Long Term) 30

31 Clinical Communications Center (CCC) CCC created to provide enhanced call management to NHC providers and increase satisfaction of their patients Clinical Protocols Nurse triage with connectivity to electronic medical records (EMR) Patient CCC Provider Goals: Care coordination Access to clinical information Support of the Delivery Network Limit leakage out of network EMR 31

32 Impact on Hospital Utilization Clinical Communication Center 32

33 Integrated Care Management Medically Complex Care Model NHC Clinical Value Committee Establishes overall goals and priorities for processes and expectations for high risk care management Data Driven Actions Identify new patients Reveal plan of care status Refreshed quarterly Clinical Communications Center After hours support and triage Proactive patient outreach on select patients Care Management Establishes ongoing patient relationship Facilitates individualized plan of care Monitors needs and outcomes Adjusts plan of care after collaboration with physician Primary Care Physician Team Review and distribute reports Schedule comprehensive care visit Incorporate patient goals Implement and modify plan of care 33

34 Impact to Utilization/Cost Integrated Care Management Average case load per care managers Preparation time per case New Services secured/coordinated Outcomes: TBD 3 hours TBD - ED encounter avoided TBD - Hospital admits avoided TBD 34

35 Medicare Shared Savings Program Market Share Growth Delivery System Network Analysis: Part A Claim File: ACO Facilities 67% Non ACO Facilities 33% Skilled Nursing Facilities $17 million Part B Claim File: Primary Care Referrals to Specialist Specialist to Non-ACO Facilities 35

36 Looking Ahead - Key to Success Population Growth: Adjustment for change in demographics move from Commercial to Medicare Move Market Share Clear Business Plan: Culture of collaboration and trust Effective communication Metrics of success Aligned Incentives: Payer shared savings (FFS to value base) Provider surplus distribution Population Health Analysis: Integration of clinical and claims information Transparency regarding quality performance 36

37 Mercy Health s financial analysis and decisions made as a result 37

38 Catholic Health Partners at a Glance 2012 Total Assets (billions) $5.6 Net Operating Revenue (billions) $3.8 FTEs 27,339 EBIDA % 10.7% Operating Margin 3.4% Community Benefits % of Total Exp. 10.4% Bond Rating A1/AA-/AA- 38

39 Mercy Health at a Glance Cincinnati Health System 6 Hospitals 5 Senior Health & Housing Facilities 4 Health and wellness centers 2 Urgent care centers Over 100 Physician Offices MH 2012 Total Assets (billions) $1.0 Net Operating Revenue (billions) $1.1 FTEs 6,643 EBIDA % 11.8% Operating Margin 5.9% Community Benefits % of Total Exp. 10.1% 39

40 How is Mercy Health transforming healthcare delivery? Through Mercy Health Select, our Accountable Care Organization (ACO)-The Catalyst for Change Approved by Medicare to be an ACO in July 2012 Includes Mercy Health Physicians and affiliated physicians Participating providers care for patients on fee-for-service basis 22,000 attributed lives, as defined by Centers for Medicare and Medicaid Services (CMS) CMS performs annual reconciliation of performance Shared savings is distributed within the ACO 40

41 Three Transitional Strategies for Strategic Growth Opportunities (Variable 6- Adapt) Medicare Accountable Care Organization (Variable 3 Build & Operate, Variable 5 Structure) Care Redesign (Variable 4 Bend the Cost Curve) 41

42 Strategic Growth Opportunities CHP is exploring a number of growth opportunities What is it? Criteria for growth Allows us to shift to an integrated care model Strengthens our ability to get paid for value Improves market share/position Overall value improvement for patients/users Why do it? Outcome a statewide solution Ohio Leader of the statewide solution Kentucky an integral part of a statewide solution 42

43 TRANSITIONAL STRATEGY TWO Medicare Accountable Care Organization What is it? CMS has awarded Cincinnati a Medicare ACO pilot; 22,000 patients are attributed to the ACO to receive their care; pursuing expansion of ACO to all of our other markets Toledo is participating in a bundled payments pilot program for cardiac bypass surgery patients Cincinnati, Lima and Toledo are at risk for 1,300 Medicare Advantage members Why do it? ACOs and bundled payments programs allow us to migrate into at-risk payments, enabling us to build new capabilities with limited downside The ACO is an attractive partnership option for community physicians What does it look like? Cincinnati has built a network (Mercy Health Integrated Delivery Network) in partnership with many of our forward thinking physicians to provide care to 22,000 Medicare recipients and 20,000 employees and families CMS allows Mercy a share in savings as long as quality outcomes are achieved We distribute the payments to the network members for the services they render 43

44 Cost to Build & Operate The Anyway Scenario: Planned investments versus ACO specifics ACO year 1 operating costs $7 million; 50% related to care coordinators Revenue: Traditional FFS and Projected Shared Savings Calculating PMPM Target, Medicare Loss and ACO Modeled PMPM, Utilizing Premier Models Determining impact to volume including halo 4 year margin impact projected at a negative $30 million 44

45 Mercy Health Select Infrastructure Information Technology All hospitals and employed physicians on EPIC Data warehouse to aggregate claims and clinical data (InforMed) Analytics tools (risk stratification and predictive modeling) Physician portal (Explorys) and patient portal (MyChart) Network analysis tool (Activate Network) Care Coordination Expansion of Patient-Centered Medical Home practices Embedded Care Coordinators and Social Workers Physician leadership Capital Investment in programs, technology, and additional resources 45

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48 TRANSITIONAL STRATEGY THREE Care Redesign Physician Alignment and Leadership Focused on Key Specialties Primary Care Oncology Cardiology General Surgery Orthopedics OB/GYN Behavioral Health Expanding Hospitalist Coverage Mixed Model Hard-wiring hand offs Standing up Palliative Medicine Other, 272 Provider FTEs by Specialty 701 at 12/31/2012 Family Practice, 218 Development Priorities Patient Centered Medical Home High Intensity Medical Home Ambulatory Care Management/ Post Discharge Care Coordination Palliative Care Ortho, 19 OB/GYN, 13 General Surgery, 26 Cardiology, 71 Internal Medicine, 82 48

49 Mercy Health Spending Analysis 49

50 Kentucky Market ACO Independent Physician Group Practice of 19 Reduced admissions by 11% Reduced ED visits by 12%; extended office hours and utilization of owned urgent care clinic; patients call preservice center before going to ED. Outpatient ancillaries down 5% 50

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52 Contact information Debbie Bloomfield, PhD, CPA, Central Markets CFO for Catholic Health Partners and CFO for Mercy Health Telephone: Charles Vignos, President of Summa Health Network, COO of Summa ACO, and VP of Managed Care Network Telephone: Brent Hardaway, VP Premier Telephone: Mark Hiller, VP Premier Telephone: