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The Changing Dynamics of Healthcare Finance and Delivery

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					The Changing Dynamics of
Healthcare Finance and Delivery

Texas Association of Health Plans              Presented by:
                                         William D. Darling, Esq.
Hyatt Lost Pines Resort                  Strasburger & Price LLP
                                    600 Congress Avenue, Suite 1600
October 18, 2011                             Austin, TX 78701
                                              (512) 499-3685
                                      1700 K Street, NW, Suite 640
                                         Washington, DC 20006
                                              (202) 742-8603
                                      bill.darling@strasburger.com
                                    www.valuebasedpurchasing.com
  Blurring of the Lines--
          Payors
• Buying physician practices

• Buying health systems

• Merging and consolidating plans

• Becoming “health care companies”
     Blurring of the Lines
• Private Equity firms entering the
  Health Market
• Hospitals buying physician
  practices/providers
• Practice management companies
  acquiring physician practices/practice
  managers
• Physician practices are
  – Merging
  – Developing MA plans
 Why is this happening?
• Consolidation of a historical fragmented market
• Lack of capital drives market concentration to those
  with money, i.e., payors, hospitals and the capital
  markets
• ACO regulations create hospital/physician clusters
• Comprehensive Primary Care Initiative
• Clinical integration required for bundled payments
  creates merged systems
• Roll up of the Health Care “System”
• Are we headed to a single payor system?
      Market Conditions
• Aging populations
• Lessening numbers of independent
  physician groups
• Multiple new buyers are emerging to
  acquire the limited supply of physician
  groups who are organized for health reform
• Some areas have not seen development of
  IPA/large multi-specialty groups in years
• Payors and providers seek to diversify
WHO IS DRIVING THIS RIG
       ANYWAY?




       Patients
  WHO IS DRIVING THIS RIG
         ANYWAY?




Patients         Government
  WHO IS DRIVING THIS RIG
         ANYWAY?




Hospitals           Patients
   WHO IS DRIVING THIS RIG
          ANYWAY?




Patients          Physicians
WHO IS DRIVING THIS RIG
       ANYWAY?




Payors             Patients
            Physicians




Hospitals                Patients            Government



                                    Payors
  WHO IS DRIVING THIS RIG
         ANYWAY?




Patients        Government
      Government Efforts

• Attempts to Modify Health System Behavior
  through
   – Pay for Performance
   – Bundled payments
   – Comparative effectiveness research
   – No payment for “Never Events”
• CMS innovation attempts to change health
  delivery system are hamstrung by politics
ACO Regulations are Lagging

ACO RULE ISSUED IN OCTOBER?- a CMS
official said it would be October before a final
ACO rule was released. This is acknowledging
what many stakeholders had already
concluded, given that the regulation had not
yet been delivered to OMB for its review.

POLITICO Pulse [pulse@politico.com] Sept 27, 2011
 'Poster Boys' Take A Pass On Pioneer
            ACO Program
• During the health care debate, the Mayo Clinic,
  the Cleveland Clinic, Geisinger Health System
  and Intermountain Healthcare were repeatedly
  touted as models for a new health care delivery
  system.
• Now, they have something else in common: All
  four have declined to apply for the Pioneer
  program tailor-made by the Obama
  administration to reward such organizations.
Provided by Kaiser Health News. www.kaiserhealthnews.org
   Comprehensive Primary
      Care Initiative

• CMS announced the Comprehensive Primary
  Care (CPC) Initiative in September
• CPC Initiative is a CMS-led, multi-payor
  initiative fostering collaboration between public
  and private health care payors
• The CPC Initiative will test a
   – service delivery model and
   – payment model.
  Payors Play a Major Role
          Application Process
• Interested payors must submit a nonbinding letter
  of intent by November 15, 2011
• Final applications must be received on or before
  January 17, 2012.
• Applications must describe payor’s level and type of
  support for primary care practices being offered.
• Once CMS evaluates these proposals and selects the
  markets, a second solicitation will be issued for
  primary care practices in those markets.
  CPC Initiative is Both a
 Service & Payment Model

• Service Delivery Model
  – Risk-stratified Care Management;
  – Access and Continuity;
  – Planned Care for Chronic Conditions and
    Preventative Care;
  – Patient and Caregiver Engagement;
  – Coordination of Care Across the Medical
    Neighborhood.
    Medicare FFS Payment
           Model
• Monthly care management fee paid to the
  selected primary care practices on behalf of
  their fee-for-service Medicare beneficiaries
• Years 2-4 of the initiative, the potential to
  share in any savings to the Medicare
  program.
• Shared saving calculated on a market, not
  individual practice basis
Payment for Medicare Fee-for-
    Service Beneficiaries
• The comprehensive primary care functions initially
  pay approximately $20 per beneficiary per month
  (PBPM), on average, for a Medicare population.
• In years three and four of the initiative, the PBPM
  will likely be reduced to an average of $15

• Shared Savings Component
   – shared savings calculated on the market level—not
     individual physician groups
   – based on Medicare Parts A and B expenditures
   – allocated on quality measures reported by the practice
   – quality measures likely to be a subset of those included
     in the final rule for the Medicare Shared Savings
        Risk Adjustment

• The Innovation Center will risk adjust the care
  management fees for Medicare beneficiaries at
  the start of the initiative based on a
  retrospective look at two years of prior claims
  data and hierarchical condition category (HCC)
  scores for all Medicare beneficiaries in a market
• The risk adjusted PBPM rates will range from $8
  to $40. Individual payors will define their own
  risk adjustment approach and CMS will evaluate
  their approach as part of the application scoring
  Medicaid FFS Payment Model

• The Innovation Center will make funding available
  for enhancements to primary care, such as newly
  initiated or enhanced primary care case
  management (PCCM) services
• States must maintain their current level of funding
  and use Innovation Center funding only for purposes
  of providing more services to current beneficiaries or
  increasing the number of beneficiaries
• All Medicaid PBPM payments provided with
  Innovation Center funding will go directly to
  providers.
 Medicaid FFS Payment Model
• States must
  – Use 100% of Innovation Center funding to reimburse
    eligible practices for PCCM services
  – Provide the Innovation Center with a list of Medicaid-
    only fee for service beneficiaries receiving care at
    participating practices
  – Work with CMS and the practices to develop a uniform
    process for reporting the beneficiaries for whom the
    PCCM payment would be made
  – Collaborate with CMS in conversations with Medicaid
    managed care organizations
  – Share data with CMS
  – Work with CMS to evaluate the initiative
 WHO IS DRIVING THIS RIG
        ANYWAY?




Hospitals           Patients
  Hospital Vertical/Horizontal
     Integration Strategy

• Hospital systems have actively pursued the
  affiliation/acquisition of physicians for years
• Vertically integration with physicians has been a
  challenge for many
• Costs of affiliation and assimilation of physicians are
  significant
• At least one major system has seen their bond
  rating affected negatively by physician affiliation
  costs
• Horizontal consolidation with other hospitals is costly
  and difficult
• Federal and state regulations cause difficulty in
  integration
    HOSPITAL-SPONSORED MODEL (TEXAS)


                               Hospital

                          Board of Directors                      Medicare FFS
                                                                  Beneficiaries


Commercial
  Payor                              Member



                                     ACO/5.01(a)

                                                            SHARED
         Payor
                                                      $     SAVINGS
        Contract    5.01(a) BOARD
                                                  Clinical Integration
                   PHY   PHY        PHY
        Vendor




                                                                            Participating Physician
                                                  1   IT




                                                                                                      Part B Patients
        Contract                                  2   Quality Measure
                                                  3   Transparency




                                                                                    Contract
                                                  4   Credentialing
                               Contract
                               Vendor




 Hospital                      ASC                                 Physicians



                                          Part A Payments
WHO IS DRIVING THIS RIG
       ANYWAY?




Payors             Patients
 Payor Vertical/Horizontal
        Integration
• Many Payors have decided that

  – Indirect management of costs does not work
  – Disease management has not reduced costs
  – Physicians efficiency can be better managed through
    payor controlled practice management companies
  – Payors can implement technology to direct demand
  – Payors have skill sets and data to sell to the hospital
    and physician practice management market
        Highmark buys West Penn
        Allegheny Health System

• Pittsburgh insurer, Highmark Inc., struck a deal to
  acquire the second-largest hospital chain in its
  region
• West Penn has a 19-hospital network and employs
  2,881 physicians
• Under the plan, nonprofit Highmark will pump as
  much as $475 million into the five-hospital West
  Penn Allegheny Health System, which has been
  operating in the red for the past five years.

Wall Street Journal
    June 29, 2011
   WellPoint buys Medicare
       Advantage Plan
• WellPoint purchased California-based CareMore
  Health
• CareMore operates a Medicare Advantage
  Plan and 26 affiliated clinics in Arizona,
  California and Nevada
• CareMore specializes in intensive disease
  management, employing physicians, nurse
  practitioners, medical assistants, podiatrists,
  physical therapists, nutritionists, psychologists
  and case managers as part of its benefits
  program.
                                  CIGNA
• CIGNA controls CIGNA Medical Group (CMG)
  and reports that it has saved 9 percent to
  employers last year
• CMG is a multi-specialty group practice founded
  in 1968 in Phoenix, AZ
• CIGNA has now expanded CMG to 32 locations
• Employs over 170 clinicians – 89 in Primary
  Care, 42 in Sub-specialties and Surgery, and 40
  Non-physician providers
Source: Kaiser Health News: First Edition (April 21, 2011), available at
    www.kaiserhealthnews.org
        CMG is Full Service

• CMG is full service
   –   A large outpatient surgery center
   –   An imaging center with MRI and CT
   –   7 On-site imaging facilities
   –   3 On-site laboratories
   –   3 robust Urgent Care Centers
   –   7 Optometry locations
   –   8 Audiology locations
   –   17 In-clinic pharmacies under CMG ownership
          United HealthCare
• OptumHealth, a subsidiary of United Health, is building
  physician practice management capabilities
• The company has physician practice management
  activities in California, Arizona and Nevada
• Optum’s Collaborative Care unit has acquired the
  management arm of AppleCare Medical Group and
  Memorial Healthcare IPA in California
• Collaborative Care acquired an 80 percent stake in
  WellMed Medical Management, which manages a medical
  group with clinics in Texas and Florida focused on chronic
  care and Medicare Advantage
  Source: Kaiser Health News: First Edition (April 21, 2011), available at
  www.kaiserhealthnews.org
    OptumHealth purchases
   2,300 physician practices
• OptumHealth purchased the management arm
  of Monarch HealthCare, an Irvine, Calif.,
  association that includes approximately 2,300
  physicians in a range of specialties
• Because of corporate practice issues Optum
  buys non-clinical assets and signs a long-
  term management agreement


Wall Street Journal September 1, 2011
 Payor Practice Management Company ACO Model

                    Management Company

                         Clinical Integration
                            1 IT
                            2 Quality Measure                       Medicare FFS
                            3 Transparency
                            4 ACO Management
                                                                    Beneficiaries


Commercial
  Payor                               Member



                                      ACO/5.01(a)

                                                             SHARED
         Payor
                                                      $      SAVINGS
        Contract    5.01(a) BOARD
                                                   Clinical Integration
                   PHY    PHY        PHY
        Vendor




                                                                              Participating Physician


                                                                                                        Part B Patients
        Contract                                    Credentialing




                                                                                      Contract
                                Contract
                                Vendor




 Hospital                       ASC                                 Physicians



                                           Part A Payments
           United HealthCare
• Optum has developed NextDoor Health which
  partners with local physicians in Texas and
  elsewhere to open retail clinics in Wal-Mart stores
• Optum launched LifePrint, a physician Network in
  Phoenix to serve United’s private Medicare plans
   – AARP® MedicareComplete® from
     SecureHorizons®
   – SecureHorizons® Group Retiree Plan
   – Evercare® DH
• Optum says it will serve rival health plans whose
  policyholders use the same physicians

Source: Kaiser Health News: Managed Care Enters the Exam Room (July 6 , 2011),
    available at www.kaiserhealthnews.org
   United Healthcare Outreach

• United Healthcare paying Dallas pharmacies,
  YMCA for successful diabetes prevention and
  control
• United program called “Not Me” is paying
  pharmacies up to $160 per participant who
  meets certain targets for A1c hemoglobin
  levels, blood pressure and body mass index
• YMCA receives $250 to $350 per program
  participant who reaches the goal of a 7 percent
  reduction in their BMI
Dallas Business Journal
Humana buys Concentra
• Humana bought Concentra, a chain of
  walk-in urgent-care and work-site clinics, in
  December 2010.
• Humana has also launched a Medicare Part
  D prescription drug plan (PDP) with Wal-
  Mart Stores Inc. to provide Medicare
  beneficiaries including seniors and the
  disabled
                         Coventry
• Coventry announced an arrangement to offer Medicare
  prescription drug plans, in an attempt to woo the
  burgeoning senior market.

• Coventry has joined forces with Walgreens, Wal-Mart,
  and Target to offer its plan with an average monthly
  premium of $25.60 and no annual deductible, Reuters
  reports.

• Providing Medicare drugs "is a commoditized generic,
  over-the-counter world now and it may be a better fit for
  the Wal-Marts of the world than for the insurers.“ says
  Dave Shove, Bank of Montreal, New York in Business
  Week


•   http://www.fiercehealthpayer.com/?utm_medium=nl&utm_source=internal
      Walgreens hires Chief
         Medical Officer
• Cigna’s Chief Medical officer is hired by
  Walgreens
• Dr. Kang was responsible for health strategy
  and policy for Cigna’s medical, pharmacy and
  behavioral products
• Dr. Kang also led Cigna’s pay-for-performance ,
  patient-centered medical home and accountable
  care organizations.
Hartford Courant
                             Big Box Stores
     Physicians




     Hospitals    Patients   Government


Big Pharmacies
                             Payors
                                          Aetna

• We recently bought Medicity, a health
  information exchange [company]. We’re
  using that as a platform to create a data
  exchange. We will shift risk to the
  provider system.

• We’ll provide them cover with capital as re-
  insurers. We will be the Intel-inside. We are
  as much a health information
  technology company as an insurer.
Aetna CEO, Mark Bertolini


Source: Kaiser Health News:First Edition (April 21, 2011), available at www.kaiserhealthnews.org
Payor controlled Networks
• Payors are seeking to sell core services to
  the health industry
• Some payors are working to consolidate the
  health system, maximize its efficiencies so
  that they can sell the services of these
  efficient physician groups to self-funded
  employers and other payors
• Does all of this consolidation implicate anti-
  trust questions?
Managing Medical Practices
               Payors Beware?

• The management of hospitals and physician
  practices is a complicated by Federal and State
  regulations
   – Stark Law
   – Anti-Kickback Statute
   – Civil Monetary Penalties
• Violations of these laws can result in civil and
  criminal penalties
• Billing mistakes can bring contingent liability to
  the manager
Managing Medical Practices
• Vicarious liability for malpractice and other torts
  may be asserted against the manager—e.g., the
  manager is the “partner” of the facility or physician
• Risk that Payor is a “partner” for deficits in provider
  risk pools
• Physicians don’t necessarily make good “employees”
• Are you responsible for the provider/physician
  practice compliance plan?
• Is there a conflict in the Payor/Manager role?
• Need competent counsel that is experienced in the
  PPMC business
   WHO IS DRIVING THIS RIG
          ANYWAY?




Patients          Physicians
   Mayo Clinic Outreach

• Building affiliations with physicians who are
  referral sources
• Affiliated physicians may be an extended
  network for the future or future employees
• Working through internet and telemedicine
  to serve as specialists in outlying areas
• Advertising in the Dallas area for patients
Cleveland Clinic and Lowe's
• Lowe’s and Cleveland Clinic have a 3-year
  arrangement in which Clinic doctors perform heart
  surgeries for a bundled payment.
• Lowe’s waives employees’ usual $500 deductible
  and other out-of-pocket costs and pays for their
  airfare, hotel and living expenses while in
  Cleveland,.
• Lowe’s employees seeking heart surgery aren’t
  required to get it from Cleveland Clinic.
• Lowe’s calls early returns on the alliance a “home
  run.”
• The facility anticipates more such deals with other
  companies. It may also apply the program to
  specialties such as orthopedic surgery.
  Hospital Review
 Have we seen this movie?

• What happens if this latest model turns out
  to be just another failed effort to change
  healthcare—PPACA repealed or litigation
  succeeds?
• Who or what will be around to pick up the
  pieces?
• Does the consolidation/affiliation of major
  players change things this time?
  To succeed, jump as quickly at
  opportunities as you do at
  conclusions.


Benjamin Franklin
The Changing Dynamics of
Healthcare Finance and Delivery

Texas Association of Health Plans              Presented by:
                                         William D. Darling, Esq.
Hyatt Lost Pines Resort                  Strasburger & Price LLP
                                    600 Congress Avenue, Suite 1600
October 18, 2011                             Austin, TX 78701
                                              (512) 499-3685
                                      1700 K Street, NW, Suite 640
                                         Washington, DC 20006
                                              (202) 742-8603
                                      bill.darling@strasburger.com
                                    www.valuebasedpurchasing.com

				
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