2014 May Affiliate Practice

Affiliated Practice

MAY 2014

SGR, ICD-10 Extentions Approved by Senate

Practice Makes Perfect: Collaborating with Insurers to Implement New Payment Models Want Your Practice to Stay Independent?

Join a SuperGroup

An Interview with Jeffrey LeBenger, MD, CEO, Summit Medical Group

P U B L I S H E R ’ S

Dear Readers, Welcome to the May edition of Affiliated Practice, the only publication serving the ACOs, Super Groups, Hospital owned or managed practices, Corporate owned or managed practices, and the physicians who are part of these large groups in the United States.

This month we begin with a conversation with Dr. Jeffrey LeBenger, CEO of Summit Medical Group. Started in 1929, Summit Medical has grown to approximately 400 physicians currently, with much of the growth occurring in the past 7 years. Our discussion focuses on how a long established and very large multi-specialty medical practice can adapt in changing times to stay current with the latest business models. What has impressed me most about this meeting is that no one business model may be the best answer for an already large group. Rather, a variety of models may be utilized to accommodate the needs of both the practice and the physicians that comprise it.

The rules are changing for physician practices being purchased by hospitals.

Early on, it was a seller’s market, with physicians having the upper hand, but the economies didn’t always work out. Now, hospitals seek financial and productivity records, tax and income statements and volume statistics as analytical tools to evaluate private practices for employment acquisitions.

In my meetings with the CEOs of large group practices modeled after many different business forms, one of the constants each has put in place is a collaboration with insurers. New payment models are being explored with payers to find the right balance to improve the practice of medicine while reducing operating expense. Fee for service is evolving, not going away, but value reimbursement methods that may work in combination with FFS are being explored.

Independence while having the strength of a group is a model many are looking into. There is a large number of physicians who want their own office, want to be their own boss, and are spending much time and money to operate their business while ending up on the short end of insurance reimbursement. The answer for some of these practitioners is a Super Group. Frequently based on a single specialty, but conceptually able to work in a multi-specialty atmosphere, the practice pays a percentage of billing revenue to the management group in exchange for services that include billing, reimbursement negotiation from a position of strength, staffing, purchasing and all of the nonclinical responsibilities the doctor has to handle. For many it is the answer for today’s rapidly changing practice environment.

With warm regards,

Michael Goldberg

Affiliated Practice

L E T T E R

Published by Montdor Medical Media, LLC Co-Publishers and Managing Editors Iris and Michael Goldberg

Contributing Writers Iris Goldberg Michael Goldberg Catherine Hollander Jeffrey Milburn Russ Banham Bil Hethcock Janet Colwell Farzad Mostashari Anna Marcus Andrew Kitchenman Melanie Evans Beth Fitzgerald Rachel Landen Layout and Design - Nick Justus On The Cover - Sir Roy Calne creates a powerful sense of drama and atmosphere of calm in this painting of a liver transplant operation. - Taken from Art, Surgery and Transplantation by Sir Roy Calne Affiliated Practice is published monthly by Montdor Medical Media, LLC., PO Box 257 Livingston NJ 07039 Tel: 973.994.0068 F ax: 973.994.2063 For Information on Advertising in Affiliated Practice, please contact Michael Goldberg at 973.994.0068 or at mgoldberg@NJPhysician.org Send Press Releases and all other information related to this publication to mgoldberg@NJPhysician.org Although every precaution is taken to ensure accuracy of published materials, Affiliated Practice cannot be held responsible for opinions expressed or facts supplied by its authors. All rights reserved, Reproduction in whole or in part without written permission is prohibited.

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C O N T E N T S 4

An Interview with Jeffrey LeBenger, MD, CEO of Summit Medical Group

6 9

SGR, ICD-10 extensions approved by Senate Practice Makes Perfect: Collaborating with insurers to implement new payment mod-

10

Top Ten Changes Physician LLC Members Should be Concerned About Regarding New LLC Law in New Jersey

12

Reforecast: New business models for hospitals buying medical practices

14

Physician turnover rises as hospitals employ more docs

14

Want Your Oncology Practice to Stay Independent? Join a Supergroup

15

What a Physician-Led ACO Can Teach Us about Getting It Right

18

Medicaid ACO Program Holds Promise, But Isn’t a Cure-All, Experts Say

20

Reform Update: Higher-risk Medicare Shared Savings program pays off for some

22

About 60% of physician practices avoiding ACOs, study finds

23

Give ACOs a break, AHA tells CMS Innovation Center

24

Study: Lower costs for those with chronic illnesses treated in patient-centered medical homes

25

Reform Update: Advocate Health sees progress with ACO

26

WellPoint, Emory partner to create new senior care model

27

Vermont awards grants for healthcare innovation

27

Atlantic Health System, UnitedHealthcare launch new ACO partnership

28

HBCBS, HackensackUMC announce new health care reform initiative

2 AFFILIATED PRACTICE

Affiliated Practice

An Interview with Jeffrey LeBenger, MD, CEO of Summit Medical Group After serving in World War I, William H. Lawrence, MD and Maynard G. Bensley, MD, returned home to the United States to practice medicine in an era with significant technologic and medical advances.

Although group medical practices existed in various forms since the late 1800s, and grew rapidly throughout the mid, far and southwest regions of the country they were rare in the Eastern United States. Technologies prompted the need for experts in an increasing variety of medical specialties. It was against this backdrop that Lawrence and Bensley founded the Diagnostic Group of Summit in October 1929.

Proud to carry out Dr. Lawrence’s and Dr. Bensley’s vision for health care, Summit Medical Group now has more than 400 board-certified practitioners in more than 74 medical specialties which are located in Essex, Morris, Somerset and Union counties.* Affiliated Practice: Summit Medical Group, of course, is one of the first Supergroups established in New Jersey and one of the largest. What we’d like to talk about is what Summit has done to keep current in this rapidly changing environment.

Jeffrey LeBenger, MD: Right now, we’re up to approximately 400 providers and our model is moving from a shared savings or population health model. We’re trying to convert our contracts from a fee for service to a fee for value model. We’re looking at population health on the outside and we have a very interesting model. As we expand our regional population of patients, we are extending urgent care centers, which are high acuity centers that are not for just a lump or a bump, but for chest pain, abdominal pain, etc.

AP: So you’re talking about serious complaints, not a deep cut or other less life threatening conditions?

JL: Absolutely. We are opening four urgent care centers in our surrounding towns – Livingston, Florham Park/ Morristown, South Union, in the Westfield/Clark area and eventually in the Bridgewater area. We have found that how we save dollars in healthcare is by preventing admissions. Our hospital admission rate from our urgent care centers is only 3% where a hospital emergency room has a 20% admission rate. We also started our own care management for population health, where for very sick patients, we have nurses who dedicate time to take care of those patients to make sure they are on track with their medications, that they see their physician and we follow their care closely so we can prevent them from being admitted or prevent a readmission to the hospital.

4 AFFILIATED PRACTICE

AP: Isn’t that an important goal that every new practice model should be attempting to reach?

JL: Correct. We also have medical directors in all of the skilled nursing facilities so besides watching readmission from home we are also watching the readmission rate from skilled nursing facilities. We have APNs as well as geriatricians and physiatrists, who are the rehab docs, to take care of those patients within those skilled nursing facilities. We also compensate our doctors based on quality metrics that lower length of stay and readmission rate rather than prioritizing seeing a volume of patients - one after another after another. We have positioned ourselves over the years by creating a very healthy management company called Summit Health Management that manages all of this for the Summit Medical Group. We also have something called a patient-centered medical home where we embed care managers within practices to help lower costs and to follow the moderate risk patient that goes from moderate risk to high risk. We really want to get a good handle on those patients to control their health situation so they don’t enter into that high risk patient category.

AP: Is it true that you have started some ACOs as well?

JL: I don’t know if I would call it an Accountable Care Organization. It’s more of a product with a payor to define a network of patients that we could take care of so they become attributed to the Summit Medical Group. We have found that the more hands we have on that patient the lower the cost is for that patient in the system.

AP: When you say a product with a payor, does that mean you are partnering with some of the insurance companies?

JL: Horizon, Aetna, Cigna, we have some type of product with them all in population health and care management or shared savings programs.

AP: Have you been purchasing or leasing practices?

JL: We’ve been acquiring practices on the outside. We feel that for us to lower costs we need to be able to take care of patients in the surrounding counties, and that, of course, means acquiring primary care practices. With our urgent care and our integrated healthcare system we have shown that we lower costs.

AP: You mention that you have 400 providers. Are all of those physicians partners?

JL: There are some contracted physicians and right now we have about 130-135 partners. There is the potential in the next three to five years of going up to 250 partners in the Summit Medical Group.

AP: Do you expect to go up beyond 400 providers?

JL: We are onboarding approximately 75 to 100 physicians a year so I would think that in three years from now, we should be close to 600 providers or more.

AP: Stepping away, from just your world within the Summit Health Group, because I’m sure you are observing everything that is going on, where do you see this all ending up five years from now?

JL: I think there will be a consolidation of practices. Either private practices like we have, that are multi-specialty groups which are fully integrated versus a system group owned by a hospital or some type of hospital system or foundation. I think the one or two or small physician group on the outside will be heading towards extinction. I just don’t think they will be able to have the management structure to do what the government is asking us to do with Medicare in terms of meaningful use, NCQA, and patient-centered medical homes. I think there are going to have to be large institutions that help manage the physicians.

AP: Does Summit get involved at all in any of these type of relationships where the providers maintain their practice but outsource the management, such as negotiation of reimbursement and the other business issues?

JL: Yes, Summit Medical Group spun off its entire corporate structure and it’s called Summit Health Management. Summit Health Management is in the business of providing these services to physicians on the outside.

AP: So, the provider has the option of either being part of the group directly or availing themselves of some of the services that you can offer them in terms of the sheer numbers and the benefits thereof?

JL: Yes and no. In our surrounding community, where we are located now, it is best if you come into Summit Medical Group because since we’ve been around for 80 plus years, we can most effectively and dramatically lower costs if those providers within our locale become embedded in our group. However, we do go out to other areas in New Jersey and we do go out to other areas around the country to offer services like we do at the Summit Medical Group.

AP: It sounds as if you are at the forefront of things as you always have been.

JL: We try. We do try.

MAY 2014

5

Legislative Issues

SGR, ICD-10 extensions approved by Senate

By Catherine Hollander The Senate approved a bill that prevents steep cuts to Medicare physician payments from going into effect for one year and delays the conversion to ICD-10 diagnostic and procedure codes for at least one year.

The Senate voted 64-35 in favor of the Protecting Access to Medicare Act of 2014, which the House approved. Assuming the president signs the legislation, it will be the 17th such patch that Congress has enacted since the so-called Medicare sustainable growth-rate formula became law in 1997.

Many senators made their disappointment with this short-term solution clear.

Sen. Tom Coburn (R-Okla.) said it was an example of “why the American people are disgusted with (Congress). “We should be fixing this problem, instead of delaying the problem,” Coburn said before the legislation passed.

Sen. Ben Cardin (D-Md.) gestured in frustration as he urged Congress to pass a permanent solution to this perennial problem.

“We have two options: Another temporary fix, continuing uncertainty, continuing this problem down the road, asking those who didn’t cause it to pay for it, even though it’s already been paid for before—or we could really take care of it.”

It wasn’t to be. The Protecting Access to Medicare Act of 2014 will freeze Medicare physician payments only through March 2015. Senate Majority Leader Harry Reid (D-Nev.) said the legislation was “not ideal,” but that he lacked the votes for a permanent solution. Without the patch, physician payments would have been cut by 24%. The measure was approved by the House.

Ardis Dee Hoven, president of the American Medical Association, said in a statement her organization, on the other hand, was “deeply disappointed” with the patch. “This bill perpetuates an environment of uncertainty for physicians, making it harder for them to implement new innovative systems to better coordinate care and improve quality of care for patients,” Hoven said.

The Federation of American Hospitals praised Congress for averting the cut. “Absent the immediate option of a comprehensive overhaul to permanently repeal and replace the sustainable growth rate, the (Federation of American Hospitals) believes action now through the passage of this patch is necessary for hospitals and patients, especially seniors and vulnerable Americans as well as residents of rural areas, to avoid reduced access to care,” the trade group for investor-owned hospitals said in a statement.

Hopes had been high that Congress would pass a permanent solution this year. The momentum began building in February 2013, when the nonpartisan Congressional Budget Office unexpectedly cut the cost of a permanent fix by over $100 billion based on lower projections for Medicare spending. Last month, the House Energy and Commerce and Ways and Means committees and Senate Finance Committee released a bipartisan proposal for reforming the formula, a rare example of bipartisan, bicameral cooperation in Congress—they just couldn’t agree on how to pay for it. That continued to be a sticking point.

Sen. Ron Wyden (D-Ore.), the new chairman of the Senate Finance Committee, asked the Senate to consider a unanimous consent to pass a permanent replacement for the SGR funded by savings from winding down the war in Afghanistan. Sen. Jeff Sessions (R-Ala.) objected, then put forward his own solution: repealing the Affordable Care Act’s mandate for individuals to have health insurance, which would produce savings because the government would pay less in subsidies if fewer people get coverage.

Wyden immediately objected to Sessions’ request for the Senate to pass that measure by unanimous consent, stopping it in its tracks.

The exchange was repeated later, with Sen. Orrin Hatch (R-Utah), the ranking member on the Finance Committee, volleying with Wyden over the same legislative proposals. Wyden ultimately voted no on the temporary fix passed by Congress.

Still, talk of a permanent fix didn’t stop even as it became clear how the vote would play out. “We’re farther down the road than we’ve ever been before,” said Julius Hobson, a senior policy adviser at Polsinelli who closely follows doc fix negotiations.

“Once this legislation is signed into law, we need to get back to the negotiating table,” Hatch said.

The House passed the same bill previously by voice vote, which means it will now go to President Barack Obama. The White House did not respond to a request for comment on whether the president would sign the bill into law.

The CMS had been holding firm to an October deadline for the healthcare industry to implement ICD-10 codes, even though the AMA, the Medical Group Management Association and others continued to express serious concerns about the feasibility and costs of meeting it. The American Hospital Association, on the other hand, strongly opposed delaying ICD-10 implementation for an additional year.

6 AFFILIATED PRACTICE

The American Health Information Management Association expressed disappointment with the delay and asked for an explanation of the wording “at least one year” that describes the delay in the legislation. “On behalf of our more than 72,000 members who have prepared for ICD-10 in good faith, AHIMA will seek immediate clarification on a number of technical issues such as the exact length of the delay,” AHIMA CEO Lynne Thomas Gordon said in a statement.

The inclusion of the ICD-10 delay in the bill came as a surprise because CMS Administrator Marilyn Tavenner said one month ago that there would be no extension. The ICD-10 issue was not a focus of the floor debate over the bill.

The bill passed would also partially delay enforcement of a controversial inpatient payment rule for hospitals, the “two-midnight rule,” for six months.

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MAY 2014

7

Practice Makes Perfect: Collaborating with insurers to implement new payment models

By Jeffrey Milburn Last June, MGMA released the results of a questionnaire that ranked members’ most pressing practice management challenges.

In this edition of “Practice Makes Perfect,” we address No. 8 on that list: collaborating with payers to implement new payment models.

Payment mechanisms are changing as healthcare moves to value-based reimbursement. Multiple programs from both government and commercial payers involve a plethora of reimbursement plans that include varying metrics, benchmarks and incentives for physician practices. Some of these plans offer only upside reward potential, while others create possible risk for medical practices.

Payers and providers are embracing the volume-to-value initiative to varying degrees, but some believe that fee-for-service reimbursement will continue to be part of the equation. It is possible that FFS and value reimbursement will coexist for a number of years.

Though they can be time-consuming for healthcare executives, value-reimbursement programs can be managed effectively. As payment mechanisms evolve, keep in mind: • Value reimbursement isn’t going away. Fee-for-service is evolving, and practices should anticipate combinations of FFS and value-reimbursement methodologies when contracting with payers.

• Physician compensation may be based on both FFS and value metrics, which can add additional complexity to compensation plans.

• Practices will need to understand and manage multiple value-based reimbursement programs, each having multiple components from multiple payers. This will add complexity to reimbursement management and physician compensation.

• Some value-based reimbursement programs may require practices to incur implementation costs, such as a startup investments and ongoing operating expenses. Practices should also consider how these new reimbursement programs could initially impact productivity and understand gains or losses in revenue flow. It is important to correlate the timing between a plan’s component costs and anticipated revenue, because the time lag can affect cash available for operating expenses and compensating physicians.

• Understanding new contracts with payers inside and out is critical. Does the specific payer value-based reimbursement program and each of its components make sense for your practice? Is it worth doing at all? Can practices decline participation initially? Is there a way to amend the contract in the future if necessary? Working closely with commercial payers to negotiate the various plan component metrics and benchmarks might be possible if the practice has some contracting leverage. This might not be possible, though, since payers tend to standardize as often as possible.

Practices should evaluate each payer’s reimbursement programs and their components carefully. It will also be critical for practices to acquire program data that are accurate and timely to monitor, audit and actively manage various programs and the supporting providers.

Although there are many issues to consider in collaborating with payers on implementing new payment models, take these issues as an opportunity to understand how to enhance patient care, and how these new contracts could lower expenses or stabilize compensation for physicians. Immense industry changes bring opportunities to think outside the box and to determine ways to collaborate more meaningfully with payers to position organizations for success in a value-based care environment.

MAY 2014

9

Top Ten Changes Physician LLC Members Should be Concerned About Regarding New LLC Law in New Jersey On March 1, 2014 the New Jersey Revised Uniform Limited Liability Company Act (ìRULLCAî) became effective, and the New Jersey Limited Liability Company Act (the ìOld Actî) was repealed. RULLCA has made a number of important changes in New Jersey limited liability company (ìLLCî) law. This article will examine the top ten changes in LLC law under RULLCA that physician members of LLCs should be concerned about with respect to their participation in a New Jersey LLC. As a result of the changes under RULLCA, it is more important than ever for physician LLC members to ensure that they have a written operating agreement in place to govern their LLCs. Distributions. Under the Old Act, unless otherwise specified in the operating agreement of the LLC, each member was entitled to share profits or losses of the LLC based on the agreed value of each memberís capital contribution to the LLC. However, under RULLCA, each member of an LLC is entitled to an equal share of the profits or losses, regardless of capital contributions or ownership percentages, unless the LLCís operating agreement provides otherwise.

Voting. Under the Old Act, unless otherwise provided in the LLCís operating agreement, most matters, including mergers and consolidations and sales of assets, were decided by a majority of the membersí current profit percentages. Under RULLCA, unless otherwise provided in the LLCís operating agreement, ordinary matters are decided by a majority of the members, with each member having one vote, regardless of the memberís profit percentage interest in the LLC. Under RULLCA, unless otherwise provided in the operating agreement, extraordinary matters such as mergers, consolidations and sale of all or substantially all of the LLCís assets, are decided by the unanimous vote of the members (including in LLCs that are manager-managed). However, the ability to alter the default rule in the operating agreement is qualified by some special rules relating to approval of certain merger, conversion and domestication transactions in which a member will have personal liability.

Fiduciary Duty of Loyalty. Under the Old Act, no specific fiduciary duties were imposed on managers or LLC members. Under RULLCA, in a member-managed LLC, members now have a fiduciary duty of loyalty and in manager-managed LLCs, managers now have a fiduciary duty of loyalty. This new duty of loyalty requires the persons managing the LLC to account to the LLC and to hold as trustee for it any property, profit or benefit derived (1)†in conducting, or winding up, of the LLCís activities, (2)†from the use of the LLCís property, and (3)†from misappropriation of any business opportunities of the LLC. Persons managing the LLC are now also required to refrain from competing with the LLC and refrain from engaging in ìinterested transactionsî with the LLC, such as lending money to the LLC or leasing property to the LLC. However, there are certain limited defenses to the duty of loyalty which are available to LLC members.

RULLCA provides that an operating agreement of an LLC may eliminate or restrict the duty of loyalty specified under RULLCA, so long as doing so is not determined to be ìmanifestly unreasonableî (discussed in further detail below). For example, an operating agreement may identify specific types or categories of activities that do not violate the duty of loyalty (such as members of an LLC that owns a surgery center agreeing that members of the LLC may have other interests in other surgery centers located in other counties). Additionally, in lieu of the default requirement for all members to approve an ìinterested transactionî involving a managing person, an operating agreement may require a super-majority or majority of disinterested members to authorize or ratify an ìinterested transactionî violating the duty of loyalty after a full disclosure of material facts.

Whether an elimination or restriction of fiduciary duties is ìmanifestly unreasonableî is an issue of law to be decided by the court based on the circumstances as of the time the provision was added to the operating agreement of the LLC. The court can invalidate the limiting provision if it is readily apparent in light of the purposes and activities of the LLC, that the objective of the term is unreasonable or the term is an unreasonable means to achieve the termís objective.

Fiduciary Duty of Care. The Old Act did not impose any duty of care on managers or members in the operation of an LLC. Under RULLCA, in a member-managed LLC, each member owes a duty of care to the other members and in a manager-managed LLC, each manager owes a duty of care to the members (but members do not have a duty of care in a manager-managed LLC).

Under RULLCA, the duty of care requires a managing person to refrain from engaging in grossly negligent or reckless conduct, intentional misconduct or a knowing violation of law. Unlike the fiduciary duty of loyalty, an operating agreement of an LLC cannot eliminate the duty of care (regardless of whether the elimination could be found to be not ìmanifestly unreasonableî).

However, the operating agreement of an LLC may alter the duty of care (if not ìmanifestly unreasonableî), except to authorize intentional misconduct or knowing violation of law.

Contractual Obligation of Good Faith and Fair Dealing. Under the Old Act, there was no statutory covenant of good faith and fair dealing. Under RULLCA, members and managers of an LLC are required to exercise their rights and perform their duties under both RULLCA and the LLCís operating agreement under a standard of good faith and fair dealing. Under RULLCA, the contractual obligation of good faith and fair dealing cannot be eliminated in an LLCís operating agreement, but it may prescribe standards by which to measure whether a member or manager has complied with the obligation.

10 A F F I L I A T E D P R A C T I C E

Oppression. Under the Old Act, there were no rights or remedies available to oppressed members of an LLC such as those available to minority shareholders of New Jersey corporations. Under RULLCA, a court can dissolve an LLC or appoint a custodian or provisional manager on grounds that the managers or controlling members (a)†have acted, are acting, or will act in an illegal or fraudulent manner or (b)†have acted or are acting in an oppressive manner that was, is or will be directly harmful to a member.

Under RULLCA, the rights and remedies available to oppressed members of an LLC may not be eliminated or altered in the LLCís operating agreement.

Resignations. Under the Old Act, a resigning member was entitled to receive fair value from the LLC for the memberís equity interest as of the date of resignation, less all applicable discounts (such as minority or marketability discounts), unless otherwise provided in the LLCís operating agreement. Under RULLCA, a member who resigns or withdraws from an LLC is not entitled to fair value for that memberís equity interest or any other distribution from the LLC, but instead simply becomes a disassociated member who continues to be entitled to distributions and a liquidating distribution on dissolution, without a right to vote or participate in the management of the LLC. However, the LLCís operating agreement can include provisions which address buyouts on resignations or withdrawals so as to avoid this issue.

Member Retention of Rights, Duties and Obligations After Transfer of the Memberís LLC Interest. Under RULLCA, unless otherwise provided in the LLCís operating agreement, when a member transfers a ìtransferable interestî of the member (the right to receive distributions), the transferring member retains the rights of a member other than the interest in distributions transferred and retains all duties and obligations of a member of the LLC. Under RULLCA, there is an exception under which a transferring member does not retain the rights of a member, but that exception requires the transferring member to be disassociated as a member of the LLC by being expelled by the unanimous consent of the other members of the LLC upon the transfer of all of the personís ìtransferable interestî in the LLC. Therefore, unless otherwise provided in an LLCís operating agreement, a transferring member of an LLC will continue to be a member of the LLC with all rights and duties, except the right to receive distributions, unless affirmatively expelled by the other members in accordance with RULLCA (in which case the expelled person would have no management rights but would remain liable for any liabilities and obligations incurred while a member of the LLC). Though a transferring member and the LLC could try to negotiate this issue at the time of transfer (to allow the transferee to obtain all member rights), it is in the interest of LLC members to have this issue resolved in their operating agreement so that no last minute negotiations of this issue will be necessary.

Oral and Implied Operating Agreements Permitted. Under the Old Act, an LLC was not affirmatively required to have an operating agreement, but if it had one, it had to be in writing to be enforceable. Under RULLCA, oral and implied operating agreements are permitted. If an LLC does not have a written operating agreement which addresses the concerns described above or otherwise modifies the default rules under RULLCA, physician LLC members may be faced with the very difficult task of proving their oral or implied agreements regarding the LLC in court in lengthy and expensive litigation.

Dissolution. Under RULLCA, dissolution of an LLC is now a two-step process under which the LLC must first file a certificate of dissolution with the New Jersey Division of Revenue, wind up the LLC and then file a certificate of termination upon the completion of the wind up of the LLC. RULLCA also contains detailed provisions regarding LLC dissolution procedures. Under RULLCA, unless otherwise provided in the LLCís operating agreement, any remaining funds of the LLC after payment of creditors and distribution of unreturned capital contributions is to be distributed equally to members and dissociated members (i.e., per capita). Under the Old Act, such liquidating distributions were to be distributed to members based on the percentages in which the members shared profit distributions, unless otherwise provided in the LLCís operating agreement.

For more information regarding the changes in New Jersey LLC law under RULLCA, please contact Patrick Convery, Esq. at (732) 219-5499 or pconvery@ghclaw.com.

MAY 2014

11

Reforecast: New business models for hospitals buying medical practices Russ Banham, In the present reimbursement environment, the acquisition of physician practices by hospitals is requiring sellers to play by the hospital’s rules, sharing the same economics they do.

These expectations are a far cry from the buyer-seller relationship that existed during the early 1990s. Back then physicians enjoyed the upper hand, selling their practices for as much as 10 times what a practice it was actually worth, in some cases. The outlay was based to a large extent on goodwill value—the reputation the practice enjoyed with patients. This intangible asset seemed to promise hospitals a steady income for the foreseeable future.

Unfortunately, the economics didn’t pan out as hoped, and acquisition prices swooned. “The first go-round went bust, and most of those doctors were spun off and went away,” recalls David J. Cooke, former CFO at Park Nicollet Health Services, a healthcare delivery system comprised of two hospitals and a 650-group medical practice in Minneapolis, with annual revenues of approximately $1 billion. “Now there are different dynamics at play. Hospitals want to buy only hard assets now, not accounts receivables or goodwill.”

Cooke, who recently left Park Nicollet to become CFO at New Orleans-based LSU Medical Center, explains that hospitals are no longer snapping up physician practices for their intangible assets. “This is not about increasing (the number of patients), as much as decreasing patient admissions and length of stay, avoiding re-admits, and finding other means than surgery to care for them,” he says. “In the old days, it was all about the physician doing things to maximize the returns in his or her practice, which was in alignment with what the hospital wanted then. Now, the economics have changed.”

Alignment in the New Era Today, finance has a different objective when it comes to acquiring a private practice. William McCauley, MD, president and CEO of Susquehanna Health Medical Group, points out that in the past Susquehanna required financial and productivity records, tax

12 A F F I L I A T E D P R A C T I C E

and income statements, and volume statistics as the premier analytical tools when evaluating private practices for employment acquisition. Today, the focus is not nearly as sharp on these factors.

“The old business model mirrored how a typical small business would run, with a profit/loss statement at the end of the day to show their value,” Dr. McCauley explains. “Nowadays, the business information about a practice is just one small piece of the puzzle and does not reflect the new definition of `value’ at all.”

Rather, to be successful as a healthcare organization, a hospital must acquire physician practices able to work in a world that is essentially foreign to what they are used to. “The `new normal’ is based on value, outcomes and patient satisfaction,” Dr. McCauley says. “Gone are the days where the financial bottom line tells the story. Instead, our new healthcare environment requires consistent, positive outcomes with well managed expectations throughout the continuum of care. … Our job is to be the vehicle carrying the support resources to ensure the practitioners can be successful in this new world.”

When conferring with a practice on the block, Susquehanna Health emphasizes its culture, stewardship and care teams supporting patients. It points out that from a compensation standpoint, physicians are valued on patient satisfaction scores and how well they manage diseases in the outpatient setting, rather than how many inpatient hospital admissions are credited to their name.

“We’ve changed our compensation model to reward physicians’ leadership and participation in a culture that fosters positive outcomes and healthcare management for our population,” says Melissa Davis, Susquehanna Health vice president and Chief Operating Officer. “If our patients are satisfied, receive good care, and require less significant medical intervention, the payers will reward them with high quality scores and accolades for being efficient and effective.”

This, in turn, guides greater compensation, as opposed to the old model of rewarding physicians for volume alone. “Our practitioners actually welcome the new model, as they prefer to be graded on value and good, clinical outcomes, rather than production line numbers that don’t have a face or a name,” she says.

Cooke confirms this model, noting that it is not unusual to see physician compensation tied to RVU production after a one or two-year guarantee. An RVU or Relative Value Unit is a metric assigned to a CPT (Current Procedural Terminology) code describing medical, surgical and diagnostic services. Medicare pays physicians for services based on the CPT code. “It is more common today to see bonuses for achieving certain quality outcomes or patient satisfaction measures,” he says. “The new rules are productivity related to patient outcomes and quality care.”

New Rules Obviously, these changes have import for physicians selling their practices. “Successful integration between the hospital and the practice requires tough discussions pre-acquisition,” says Cooke. “For instance, the practice owner will be told he or she must now refer their patients to a specific set of specialists, which likely won’t be the specialists they referred their patients to in past.

They will need to participate in the hospital’s readmission avoidance programs, and expand their hours to accommodate same day appointments.”

This is the price of acquisition for many hospitals and not just Park Nicollet, he notes.

This helps explain why so few hospitals are interested in partial practice ownership, given the focus on patient care and related physician productivity. MD Anderson Center at the University of Texas in Houston, for instance, favors a total physician practice ownership model, rather than partial alignment with practice owners. “We have our own physician practices (set aside) as a separate entity, where we can watch their income statements, in terms of the practice’s plans and the financials behind them,” says Juan C. Castro, associated vice president, financial planning and analysis.

Not that this silo treatment is without challenge. “We need to make sure the doctors generate the revenue we expect from them to hit the bottom line,” Castro explains. “If they say they will be 60 percent clinical and 40 percent research-oriented (MD Anderson is an academic medical center), and then those percentages are switched, it doesn’t help us do what we need to do, economically.”

By managing the practices together through the separate entity, greater accountability can be applied. “If a doctor’s practice is plastic surgery and he or she says they’re 60-40, clinical versus research, we need good operating metrics behind that 60 percent,” Castro says. “We need to see how many surgery cases the practice has, how many patients, and the RVUs.” While every hospital’s billing system is tied to the CPT codes, the problem is the definition behind the 60 percent clinical work, “what constitutes it,” Castro says. “It needs to be documented and benchmarked, which is difficult. And when it is discerned that the physician is not hitting the numbers, management must step in and hold them accountable.” This might lead to disciplinary actions like termination or probation, he adds.

Obviously, they heyday of physician practices striking gold is long gone. Selling the practice to a hospital or achieving some form of partial alignment are fraught with difficulties. For physicians at the threshold of their vocations, employment by a hospital, as Cooke pointed out, is increasingly the more viable career path.

“The private practice in most markets is numbered, although there are some pockets where this is not true,” he says. “In small to medium-size communities, the independent practice has pretty much disappeared.”

And with this change, another slice of American enters the history books.

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Physician turnover rises as hospitals employ more docs Bill Hethcock As more doctors become employees of hospitals and hospital systems, physician turnover is likely to become a bigger problem, and physician vacancy rates and how to deal with them a bigger issue.

That’s one conclusion from a new survey from Staff Care, the temporary staffing company affiliated with Irving-based physician recruitment firm Merritt Hawkins. The survey examines trends in temporary physician staffing.

Ninety-percent of hospitals and other health facilities polled in a new survey used temporary physicians in the last 12 months — up from 74 percent the previous year. The main reason was to address physician turnover and to maintain services while hardto-find permanent physicians are being sought.

The annual survey asked 230 hospital and medical group managers about their use of temporary physicians. Of those health care facility managers who used temporary doctors in the last 12 months, more did so to fill-in for physicians who had left than for any other reason.

Physician turnover is likely to increase as more health care facilities employ doctors, said Sean Ebner, president of Staff Care.

When physicians were mostly small business owners, they had more at stake in their practices and tended to put down roots, Ebner said. As hospital employees, they are more likely to switch jobs if compensation, schedules or other factors are not to their liking, he said. When that happens, many facilities turn to temp doctors, he said.

Health care facilities also use temporary docs to provide coverage while physicians are on vacation or to supplement medical staffs during peak usage periods, the survey found.

Primary care physicians such as family practitioners are in the greatest demand to temp, followed by behavioral health care specialists, hospitalists, emergency medicine physicians and general surgeons.

The survey further found that demand is growing for temporary non-physician clinicians such as nurse practitioners and physician assistants.

In 2012, only 4.8 percent of health care facility managers reported they had used temp NPs in the previous 12 months, according to the survey. In 2013, that number rose to 12.4 percent. The number of health care facility managers who reported they had used temp PAs rose from 4.7 percent in 2012 to 7 percent in 2013.

Want Your Oncology Practice to Stay Independent?

Join a Supergroup

By Janet Colwell In order to remain independent, community oncologists must align themselves with a critical mass of providers in their local or regional markets and be prepared to accept more financial risk for the quality and cost of care they provide, according to a perspective in the current issue of Journal of Oncology Practice.

“There is no one-size-fits-all solution to preserving independent private practice for oncologists. Any successful strategy must respond to the unique stakeholders and competitive dynamics in the locality,” wrote Michael L. Blau, Esq., partner and chair of the health care venture practice at Foley & Lardner LLP in Boston. “That said, it is possible to discern some success factors that may help guide oncology groups in considering their strategic alternatives.”

One way to achieve critical mass in a market is by forming an oncology supergroup, which combines independent physicians and groups into a single group practice, said Blau. In order to remain vital to payers, the supergroup should include medical, radiation, specialty, and surgical oncologists and provide easy access to care in key locations across the region or state.

Besides boosting their market position and bargaining power with payers and vendors, supergroups allow smaller practices to reap the benefits of centralized services, such as information technology platforms; gain access to a wider variety of specialized programs and services; and collaborate with peers on quality improvement initiatives.

Supergroups also have legal advantages, including the ability to jointly price or collectively bargain with payers and vendors without running afoul of antitrust laws, said Blau. The structure also allows physicians to legally make referrals to each other and share ancillary revenue without violating anti-kickback statutes or the Stark Law.

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Creating a supergroup can be difficult due to different cultures and lack of trust among the various entities, said Blau. In those cases, some practices may consider joining a single-specialty oncology network with shared financial risk (individual physician payments are tied to overall group performance) and clinical integration (all physicians follow best practices and coordinate care to achieve value).

Other options for retaining independence include: •Oncology medical homes. Most medical home practices are primary care providers but oncology practices can qualify if they provide whole-patient primary care services for at least 75% of their patients.

•Oncology ACOs. Rather than participate in Medicare ACOs, which are predominantly made up of primary care practices, oncologists can form their own oncology-only commercial ACO. The ACO would include a health system partner who assists with transitions of care, and a commercial insurer who would offer incentive payments for ACO practices to reduce costs and improve quality.

•Multispecialty groups. Oncologists can operate as a separate division within a larger multispecialty group.

•CMS innovation grants. These grants support creative arrangements for value-based care, such as oncology medical homes and ACOs, and financially or clinically integrated networks.

What a Physician-Led ACO Can Teach Us about Getting It Right

By Farzad Mostashari, MD & Anna Marcus Several of the provisions included within the Affordable Care Act in 2011 designate Accountable Care Organizations (ACOs) as formal, contractual entities.

However, in the real world ACOs come in a variety of shapes and sizes.

When compared to larger, hospital-sponsored ACOs, rural and small physician-led ACOs face a tough challenge, because despite limited resources they need to come up with substantial upfront capital and infrastructure investment to establish a strong ACO foundation.

To help ease this burden, 35 ACOs were selected to participate in the Advanced Payment Model ACO demonstration through a grant program from the Center for Medicare and Medicaid Innovation (CMMI). The grants provided a portion of upfront capital to determine whether or not this financial assistance would help ease the startup burden for smaller ACOs, and increase their success rate.

One of those 35 organizations includes the central Florida-based Physicians Collaborative Trust ACO, LLC (PCT-ACO). They are participants in the January 2013 Medicare Shared Savings Program (MSSP) ACO cohort, along with 106 other ACOs. Larry Jones, PCT-ACO’s CEO, describes his personal mission as an effort to “preserve and protect the independent practice of medicine.” For over 25 years he has been advocating for physicians through their efforts to organize, negotiate with health plans, and other challenges.

He’s led the formation of 18 multispecialty independent physician associations (IPAs), created a large single specialty IPA, and led several management services organizations.

We recently spoke with Larry about his “freshman year” experience in the Advanced Payment Model demonstration, including PCT-ACO’s challenges, big wins, and even bigger lessons learned.

Change is Good.

Jones painted a broad picture of what it means to be an Advanced Payment ACO, while maintaining the independent practice of medicine. PCT-ACO’s 13,500 Medicare patients are managed by 35 primary care physicians across 18 independent practices, none of which are hospital-based.

However, altering the structure of the primary care practices did not occur overnight, and considerable physician buy-in was necessary to achieve such a dramatic change. Jones made it clear to his physicians that with the health care reforms rolling out reimbursements are moving away from fee-for-service, and toward value-based payments.

Therefore, the need to embrace new concepts of care will only continue to grow.

But rather than feel threatened by change, Jones advocates for “putting physicians back in control of the delivery of care and showing doctors that there is a light at the end of the tunnel.

Jones was able to successfully bring his physicians on board with the structural changes, in part, because of his savings distribution model. The MSSP model allows ACOs to recoup a share of the savings if expenditures for beneficiaries are below target cost MAY 2014

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benchmarks. Jones likens their unique position to being issued a “CMS debit card with $140 million on the tab.”

The ACO is entitled to half the funds left on the “debit card” at the end of the year with the rest of the savings going back to CMS. The ACO is then allowed to divvy up this chunk of savings as they see fit. After infrastructure spending, 90% of PCT-ACO savings are given back to the providers.

Within that 90% of funds, Jones allocates 70% to primary care physicians and 20% to specialists.

If the ACO can reduce total costs by 8%, which he believes is feasible, primary care physicians would receive nearly $100,000 in extra annual revenue.

High-risk can mean high reward.

Jones knew very well that changing the financing model alone would not automatically bring about savings for their ACO. They also needed to implement some essential care processes to both improve the quality of care and find areas to reduce costs. Jones asked the physicians to identify the highest-risk patients among the 13,500 in their network.

Physicians identified approximately 300 patients based on high emergency department (ED) use, inpatient admissions, hospital readmissions rates, presence of chronic conditions and other factors. Once the claims data became available, physicians were able to identify the 10% of patients driving 60% of the practice’s entire costs (many of whom were already flagged by the clinicians).

Although an analysis of its incremental value has not been completed, Jones (like many others) believes that a provider’s intuition and relationship with their patients are just as valuable as the algorithms created by sophisticated analytics tools.

With these high cost patients identified, providers and the health coaches were able to begin their more targeted efforts to reduce ED visits and chronic disease management. The Advance Payment funds allowed PCT-ACO to bring in new team members, including three health coaches to meet with patients and serve as an extension of the primary care practice.

The health coaches not only support coordination of patient care – a key characteristic of an ACO – but they also act as a resource for patients when they are in need of immediate medical attention. As the coaches became a more integral part of the care team, patients began initiating direct contact with them, instead of rushing to the ER or hospital.

On Measuring and Improving Quality.

In the first year of the program, the ACOs must report quality measures in order to achieve shared savings, but in subsequent years, the amount of shared savings depends on actual performance determined by standardized ACO measures.

These results are reported to CMS for monitoring purposes and maintaining accountability.

However, assembling the data necessary for reporting these measures can be an incredible challenge, particularly for smaller organizations. Fortunately, PCT-ACO has been able to establish direct interfaces between electronic health records (EHR) and their privatehealth information exchange (HIE) for about half of the practices.

In addition, PCT-ACO administers a patient survey to complement the data for the EHR.

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On Creating Referral Networks.

While PCT-ACO has started working on ways to curb spending of their highest-cost patients, Jones found that a significant portion of PCT-ACO’s costs are tied to specialist care. To find ways to reduce overall costs, PCT-ACO has started creating specialist agreements to create a high-quality referral network that lays out the mutual expectations of coordinating patient care and encourages specialists to cover their costs for health IT infrastructure.

In addition, Jones has asked his primary care providers to identify their top seven to ten referral specialist physicians, which has resulted in a list of roughly 200-250 specialists. Eventually, PCT-ACO hopes to establish specialist scorecards that assess care quality, and provide a means of comparison for utilization patterns and resource use.

It is expected that outpatient specialists that provide high quality visits and procedures without costly hospital facility fees may become more preferred.

Looking Ahead.

Though the MSSP provides a critical boost toward accountable care, redesigning practices and organizational change for a small proportion of patients is incredibly difficult. To enhance the financial model, Jones is busy bringing in commercial plans to the mix.

Blue Cross Blue Shield has agreed to contract with them as their preferred network provider in 6 counties, and negotiations with Cigna for a shared savings contract and other large plans are underway.

Jones was able to leverage the ACO infrastructure to secure the largest BCBS contract in the area, and they will manage all of their Medicare Advantage lives across 6 counties.

While the Advanced Payment model does not hold the answers to all of the challenges ahead for small ACOs face, it certainly opens up an opportunity for new ACOs to “get in the game” and begin the transition toward truly accountable care.

Ultimately, the success of smaller physician-led ACOs are essential for the health care field, and as Jones notes, “We need to fight against the mentality that physicians either have to be owned by a hospital or put out of business.”

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Medicaid ACO Program Holds Promise, But Isn’t a Cure-All, Experts Say Andrew Kitchenman

Coalitions continue preparations as they await state rules allowing launch of new healthcare model A new model for providing healthcare to low-income New Jerseyans has the potential to achieve some of the savings called for

by Gov. Chris Christie, but healthcare leaders also say there are significant limits to what it can achieve.

Medicaid Accountable Care Organizations aim to improve coordination of patient care and to realign the incentives that providers have so that they are more focused on improving patients’ health outside of visits to hospitals and doctors’ offices, according to panelists who participated in a recent NJ Spotlight conference.

Medicaid ACOs have been under development since a law creating a demonstration project was enacted in 2011. The final state regulations allowing the project to move forward are expected early this year, although state officials have said there isn’t a timeline for publishing these rules.

Like other ACOs, such as the Medicare Shared Savings program, the project is designed to reward providers by paying them in part based on their ability to achieve cost savings while still improving patients’ health. Unlike the other programs, the project will include all of the patients in a geographic area.

Dr. Ruth Perry, executive director of the Trenton Health Team, said ACOs help patients attain the tools they need to navigate the array of challenges that they face. Her team is one of three existing organizations -- along with the Camden Coalition of Healthcare Providers and the Greater Newark Healthcare Coalition -- that are preparing to apply for the Medicaid ACO project.

Many of the Medicaid patients who make the most visits to hospitals face various medical, behavioral health and social challenges.

“Any one of them alone is extremely challenging – all three of them concurrently is extraordinarily difficult,” Perry said.

Therefore, Perry said, the ACOs must represent just one of a series of other efforts to address the social factors that affect patients’ health.

“If our streets are not safe, if people don’t have housing, if education is poor, if we cannot treat patients with cultural competency, if we have no income -- there are no jobs -- we’re still going to be very limited in our success,” said Perry, adding: “I don’t think we should look to ACOs as the panacea, but it is a key piece in improving overall health.”

Michael Anne Kyle, Perry’s counterpart with the Newark coalition, said the groups in Newark, Trenton and Camden have already made progress, laying the groundwork for the ACO project. For example, her coalition has been working to identify ZIP codes whose residents will participate in the project.

The Medicaid ACO is “really just the legal structure for a cultural shift, which really need to start doing before you even apply, because you need to build the trust and the partnerships and then you start thinking in a serious way about how you would deliver care differently,” Kyle said.

Some of the potential for the project has been identified by Joel Cantor and other researchers at the Rutgers Center for State Health Policy, which Cantor directs. He noted that Christie called on Rutgers to develop innovations in Medicaid to improve healthcare for the 5 percent of Medicaid recipients who generate half of the costs.

Cantor has done research that potentially avoidable hospital costs vary from community to community. “These variations to us suggest that there is room for improvement,” Cantor said.

The fact that all patients in an area will belong to the ACO is an advantage, making it easier to measure whether changes that occur due to the ACO lead to savings, Cantor said. But the project does face a potential obstacle – whether the insurers that manage the care for these patients will participate.

“Unless the managed care organizations, MCOs, come to the table, there’s virtually no opportunity for shared savings,” Cantor said.

John Koehn, CEO of Amerigroup New Jersey – one of the MCOs – said the Medicaid ACO is a model worth trying and that he expects insurers to participate. But he pointed out some potential stumbling blocks. For example, some patients may never interact with ACO nurses, but if they contribute to lowered healthcare costs, the savings may be inaccurately attributed to the ACO. He also pointed out that the project doesn’t include a provision to punish the ACO if it fails to lower costs.

Koehn also noted that there are areas where hospitals appear unlikely to collaborate, such as Hudson County. The program also will only work in areas where there is a higher density of Medicaid recipients.

“By its very nature (the ACO project) cannot be replicated in all 21 counties,” Koehn said.

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Koehn and Shabnam Salih of the Camden Coalition of Healthcare Providers differed on the effectiveness of a major feature of the state’s current Medicaid program – the case management done by managed-care nurses through phone calls.

Koehn said the phone calls could be a useful way to reach many patients in a cost-efficient way.

“What I heard from Gov. Christie the other day was an executive who was frustrated that there were other priorities that were crowded out” by healthcare costs, Koehn said of Christie’s budget address.

But Salih, the Camden Coalition’s program manager for external affairs, said that there isn’t evidence that phone calls work for the most challenging patients, suggesting that the resources would be better spent on community-based case management done through organizations like ACOs. “The New Jersey Medicaid system is unaffordable, unsustainable, and we’re at a point where it really needs to change,” Salih said.

The uniqueness of the New Jersey project was underscored by Frank Winter, regional partnership manager for the federal Centers for Medicare and Medicaid Services. He said it was an example of valuable experimentation in care delivery.

“We’re going to see who’s succeeding and who’s not succeeding as much over time,” opening up the potential for successes to be replicated, Winter said.

Winter emphasized that the federal government is trying to improve coordination between different programs that receive federal funding, adding that the Medicaid ACOs will likely work closely with these programs.

“When you’re working together, you’re going to see a lot better results,” Winter said, adding that he’s optimistic about the projects’ chances for success.

Another factor -- the importance of healthcare workers in contributing to the success of patients’ health -- shouldn’t be underestimated, said Milly Silva, executive vice president for Local 1199 of the Service Employees International Union – United Healthcare Workers East.

“Studies have shown that patient satisfaction and employee satisfaction are tied together,” Silva said.

She urged policymakers to resist spending cuts the impact the home health aides and other frontline caregivers her union represents.

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Reform Update: Higher-risk Medicare Shared Savings program pays off for some

By Melanie Evans Heartland Regional Medical Center had more to lose than most when it gambled and joined Medicare’s experiment with accountable care in 2012. For the first year at least, that risky bet paid off. The St. Joseph, Mo., hospital owes Medicare nothing and instead will be awarded $2.9 million for its efforts.

Heartland Regional was one of four out of 114 organizations that opted for the riskier of two payment options under Medicare’s broad test of accountable care, known as the Shared Savings Program, during its inaugural year. That choice meant that failure to curb medical expenses for Medicare patients under Heartland Regional’s care would put the hospital at risk for potentially significant financial penalties. The hospital would be required to pay Medicare for a share of costs that exceeded set targets.

But with a willingness to risk losses, Heartland Regional also stood to earn bigger rewards. (The remaining 110 organizations agreed to smaller bonuses with no risk for loss.)

Early results show Heartland Regional’s first annual bonus will total roughly $2,861,000, which amounts to 60% of what the hospital’s quality and cost-control strategies saved Medicare.

However, as reported in January, that success was not universal. Overall, three out of four organizations failed to earn Medicare bonuses in the first year of their programs. Twenty-nine organizations, including Heartland Regional, will share $128 million in bonus awards.

Despite limited and mixed results, the Medicare program continues to grow and now includes more than 350 organizations.

The Shared Savings Program is one of several Affordable Care Act provisions that experiment with new ways to pay doctors and hospitals and is intended to promote efficiency and quality. In late March, the CMS announced deadlines for medical groups and hospitals to enter the next round of ACO contracts, which will begin in January 2015.

Heartland Regional’s earnings will cover the hospital’s roughly $2 million first-year investments in new care management, data analytics staff and new software to aid clinicians, said Heartland Regional’s administrator, Linda Bahrke. Returns are expected to increase as earlier investments pay off and new strategies do more to reduce spending, but Bahrke added that it was the hospital’s decision five years ago to employ nurse and social-worker care managers to work with patients outside the hospital that first positioned Heartland Regional to succeed.

Even before the accountable care organization was created, more than a dozen care managers met with patients in their homes and communities under Heartland Regional’s existing program, she said. Entry into the Shared Savings Program expanded that effort to include another 18 care managers working with doctors and patients in outpatient clinics, as the ACO began to target efforts to the 15% of its patients who are high-risk and complex.

Additionally, information technology investments—including three new employees who exclusively analyze patient data— created new electronic medical record alerts that doctors see immediately when they first treat ACO patients.

Now the system is developing criteria to identify the most high-quality, cost-efficient specialty and post-acute providers. That information will be distributed to primary care doctors who make referrals. “It will be selection of the fittest, in terms of the highquality providers,” Bahrke said.

Another Medicare ACO that assumed downside risk in its contract was the Rio Grande Valley Accountable Care Organization Health Providers, a group of independent providers. Rio Grande also succeeded, despite launching without a care coordination program, and in spite of working with multiple EMR systems across several independent medical groups.

Rio Grande’s leadership chose to pursue the larger potential Medicare bonus after identifying operational changes that it believed could yield sufficient savings. Edwin Estevez, the ACO’s administrator and chief operating officer during its first two years, likened the process to a patient considering diet and exercise changes to shed pounds. “I don’t think there’s any risk aversion in our group,” he said. “We went after it.”

Two other organizations, the Physicians of Cape Cod ACO and the Dean Clinic and St. Mary’s Hospital ACO also entered into Medicare Shared Savings contracts with risk for both bonuses and losses. Both organizations ended the year with losses, CMS said. Neither responded to a request for comment.

Sunshine Act sheds limited light This fall, the Physician Payments Sunshine Act, included in the Affordable Care Act, is expected to reveal pharmaceutical and medical-device industry payments and gifts to doctors and teaching hospitals.

The first round of reporting under the law ended in March. Records will be released later this year, but may not include everyone

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Heartland Regional Medical Center

in healthcare delivery, medical education and research with a potential conflict of interest. New research published in the Journal of the American Medical Association identified 41 academic leaders who served on pharmaceutical company boards in 2012, where they received an average compensation of $312,564 and had a fiduciary responsibility to shareholders. Academics who are not physicians may not be subject to the new sunshine disclosure rules.

More data, no verdict on health spending trends New data offers mixed messages on the durability of the industry’s record slowdown in health spending growth, which policymakers are watching closely for signs that reform efforts have fundamentally curbed the upward spiral in U.S. medical expenses. One analysis by the Altarum Institute, based on updated federal data, shows an unexpected acceleration in health spending during the last three months of 2013. Meanwhile, private insurance companies reported slower growth in spending for 60 million customers who account for 40% of the nation’s non-managed care business.

MAY 2014

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About 60% of physician practices avoiding ACOs, study finds

By Melanie Evans The majority of physician practices have not joined an accountable care organization and don’t plan to anytime soon, a new study has found. These reluctant medical groups are also less likely to have the resources—electronic health records, care coordinators, formal quality improvement initiatives—to effectively manage the costs and care for chronically ill patients, the study said.

The results, published online in the journal Health Services Research, show that roughly 6 of 10 physician groups have so far avoided accountable care, a proliferating payment model that rewards and penalizes hospitals and doctors based on their ability to meet cost and quality targets. Medicare accountable care efforts, launched in 2012 under the Patient Protection and Affordable Care Act, now include more than 350 organizations. Private insurers have entered into more than 600 accountable care contracts, according to estimates by healthcare consultant Leavitt Partners.

When measured against an index of 25 measures of care management, patient engagement and quality, the physician practices with no plans to join an ACO scored lowest, the study said. Medical groups already under accountable care contracts ranked highest.

One-quarter of survey respondents were in ACOs. The survey included roughly 1,180 medical groups that researchers adjusted to reflect a nationally representative sample. Another 15% planned to join an ACO soon.

“It would have been surprising and extremely disappointing if those already in ACOs had the least capabilities,” Stephen Shortell, a University of California at Berkeley professor of health policy and management and one of the study’s authors, said in an interview.

But that gap in readiness and resources between those that eschew and those that embrace accountable care suggest that widespread and rapid adoption of the payment model is unlikely, Shortell said. “We’re not on the scale ... where that’s going to occur,” he said. Too many medical groups lack the necessary capacity to manage the financial risk of accountable care.

That lack of capacity among such a large segment of physician groups is discouraging if accountable care succeeds at slowing health spending while improving quality, Shortell said.

It’s too soon to tell if that’s the case. Medicare ACOs met rudimentary quality goals for the first year, but were not required to show progress. Meanwhile, ACOs achieved mixed results on efforts to control health spending.

Shortell and co-authors Sean McClellan, Patricia Ramsay, Lawrence Casalino, Andrew Ryan and Kennon Copeland said success among early adopters could help encourage groups not in ACOs to invest and prepare for the change. The demands on ACOs are significant.

“Early formative evaluations of pilot sites highlight the challenges of building capabilities in electronic health-record functionality, predictive analytics, data collection reporting and analysis, care management, physician and patient engagement, and the key roles played by culture and leadership,” they said.

ACOs also face a dilemma in how to fairly divvy up financial bonuses from successful efforts, an unrelated commentary in the Journal of the American Medical Association recently noted.

Doctors may exit ACOs that fail to account for physicians’ contributions and challenges toward meeting ACO goals, the authors wrote.

The Shortell study found other differences between physician practices inside and outside ACOs. Medical groups already in accountable care were more likely to have 100 or more doctors and were less likely to be owned by a hospital. That may be because of financial incentives under accountable care to reduce, when possible, costly hospital admissions, the study said. “Our findings also suggest that those practices owned by hospital and health systems may be reluctant participants given that the new value-based payment models are likely to adversely affect hospital admissions and financial viability.”

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Give ACOs a break, AHA tells CMS Innovation Center

By Melanie Evans The American Hospital Association is lobbying the CMS Innovation Center to make it easier for accountable care organizations to earn Medicare bonuses and delay potential penalties as the agency looks to expand the initiative.

In a letter to Dr. Patrick Conway, the Innovation Center’s acting director, the AHA said that financial risks outweighed the potential bonuses for hospitals under the Medicare shared-savings program, the accountable care initiative created under the Patient Protection and Affordable Care Act. “The No. 1 way to increase participation in ACO programs is to modify the shared-savings determination to ensure that more ACOs are able to receive a bonus—and a larger bonus—so that they can continue to invest in the program.”

The Medicare shared-savings program as of January included roughly 320 ACOs, or networks of providers that contract to reduce health spending and meet quality targets in exchange for a share of savings that exceed certain benchmarks. A limited number of ACOs also volunteered to be at risk for losses if spending exceeds the benchmarks. In exchange, they qualify for larger bonuses if they succeed. After three years, all ACOs must enter the riskier contracts.

Medicare should delay the switch to riskier contracts for six years, the AHA said. “It takes several years to put in place the clinical and financial infrastructure necessary to transform care delivery,” according to the letter.

Meanwhile, benchmarks to earn shared savings are too high and quality metrics are too complicated, the AHA said.

Few ACOs of those with enough time to calculate savings have earned bonuses. Initial results show one-quarter of the 114 organizations in the program’s first round will receive a share of savings.

Poor access to data from the CMS has also created significant challenges for ACOs, the association said. Their providers have been hampered by getting data on patients’ care that is often inaccurate and six to nine months old, the AHA said. Monthly information on patients would better position ACOs to manage patients’ care, the AHA said.

The Innovation Center’s second ACO initiative, known as Pioneers, would benefit from greater flexibility as reimbursement under the contracts shifts toward capitation, the letter said.

Earlier this year, the Innovation Center asked for comments on attracting new Pioneers to participate. The initiative launched in January 2012 with 32 ACOs, but that fell to 23 after the first year as ACOs switched to the less-aggressive shared-savings program and a few dropped out.

The AHA suggests in its letter that Medicare’s ACO programs won’t remain viable without changes. “The ACO model is a good step forward toward transforming our delivery system, but its current structure is not sustainable given diminishing returns for providers.”

MAY 2014

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Study: Lower costs for those with chronic illnesses treated in patient-centered medical homes

By Beth Fitzgerald A key to the Affordable Care Act is to improve population health and cut wasted U.S. medical spending by focusing on chronically ill patients and insuring they get timely, well-coordinated medical care that keeps them out of the hospital.

A new study published Monday in the Plainsboro-based American Journal of Managed Care suggests this approach is working.

The use of a patient-centered medical home model, which is where patients get extra attention and follow-up to care for those with chronic illness, reduced costs and trimmed hospital utilization for high-risk patients, according to the three-year study.

The study involved 700 patients of Independence Blue Cross of Pennsylvania, most of whom had multiple chronic illnesses such as congestive heart failure, chronic obstructive pulmonary disease, diabetes and asthma. Patients with these illnesses typically experience a disproportionately high number of hospital stays and use more health care services.

The study found that PCMH patients had fewer hospital admissions than the control group: 10.8 percent fewer in 2009, 8.6 percent fewer in 2010, and 16.6 percent fewer in 2011, according to the study. In addition, in 2009 and 2010, there was a savings in total medical costs of 11.2 percent and 7.9 percent, respectively, for the PCMH high-risk group. The study authors are Susannah Higgins, Ravi Chawla, Christine Colombo, Richard Snyder and Somesh Nigam.

“These results are promising,” said Joel Cantor, director of the Rutgers Center for State Health Policy. “A lot of stock has been put in the patient centered medical home model, with the hope that better care can also reduce cost.” He said the study found that savings were achieved “among the highest risk, sickest patients. Over time, investing in models like this one are likely to have an important payoff for the patients who are the main drivers of high health care costs – those with complex chronic illnesses.”

In New Jersey, numerous patient-centered programs have been rolled out in the last few years by Horizon Blue Cross Blue Shield of New Jersey, which now has more than 500,000 of its members enrolled in these innovative programs. In a 2012 study of their impact, Horizon reported that the cost of care was six percent lower among the Horizon PCMH practices compared to non-PCMH practices. Horizon spokesman Tom Vincz noted that the Horizon results reflect all the PCMH patients, not just the chronically ill patients.

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Reform Update: Advocate Health sees progress with ACO

By Melanie Evans Advocate Health Care says that early results in operating Medicare accountable care organizations have been promising but that progress has been achieved through failure, experimentation and adaptation.

“I cannot stress enough that it does take a long time,” said Sharon Rudnick, vice president of outpatient enterprise care management for Advocate and its medical group, at the American College of Healthcare Executives annual meeting in Chicago this week. Now, with more than three years of experience, Advocate’s strategy continues to evolve. “Just get used to reevaluating it and changing it every year,” she advised.

Advocate was among more than 100 organizations to sign Medicare’s first Shared Savings Program contract in 2012. The program was one of the cost control and quality improvement initiatives authorized by the Patient Protection and Affordable Care Act. The contracts test the accountable care model, which offers financial incentives to hospitals and doctors for meeting cost and quality targets. One year earlier, the Downers Grove, Ill.-based health system had entered a private ACO contract with Blue Cross and Blue Shield Illinois.

Shared savings contracts now account for two-thirds of Advocate’s hospital revenue. “We’re very much getting to a tipping point,” said Michael Randall, Advocate vice president of innovation.

Advocate is preparing to expand its ACO efforts. Officials said its investments show a promise of return. “You can manage risk by managing really good quality of care,” Rudnick said. “You can manage expense and revenue as well.”

That optimism was echoed by other executives at the meeting who outlined strategies and results from their ACO programs.

They also discussed strategies for hospitals to expand beyond acute care into prevention and disease management to reduce costs.

Peter Bernard, CEO of Bon Secours Virginia Health System, which operates nine Bon Secours Health System hospitals in Virginia, said his system’s accountable care program for its own employees’ healthcare resulted in a $7 million rebate for its employee health plan. “It fell to the bottom line,” he said.

Bon Secours Health System also operates a Medicare ACO that began in January 2013 and includes 60,000 Medicare enrollees.

Results are not yet available.

Advocate’s ACO program with Blue Cross and Blue Shield Illinois has kept patients out of the hospital, Advocate officials said. But its Medicare ACO results were more mixed. Cost did not accelerate. Still, the system did not reduce spending enough to earn a bonus.

Advocate made investments in workforce and information technology to operate ACO programs. Early investments expanded Advocate’s workforce to include 60 care coordinators, and it hired assistants to shoulder some of the coordinators’ workload. Its networks of providers have grown as the system signed new contracts with patients with distinct needs, such as seniors who need more long-term care or expectant mothers and infants on Medicaid.

Rudnick said one problem has been limited access to timely data on patients’ use of medical care and costs, which are needed to target interventions and potentially avoid hospitalization, though there has been improvement in that area. “We’ve been flying blind,” Rudnick said. “Now, we’re flying in the dark with our hand in front of our face.”

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WellPoint, Emory partner to create new senior care model

By Rachel Landen WellPoint is expanding its reach into healthcare with an announcement Wednesday that the insurer's subsidiary, CareMore Health System, will partner with the Emory Healthcare Network in Atlanta on a new care model for seniors.

Under the agreement, Emory Healthcare Network plans to implement CareMore's clinical care model for reducing costs and increasing quality for Medicare Advantage patients. The collaboration will focus on value-based reimbursement and risk-based payment arrangements while Emory adds more comprehensive care centers similar to CareMore's facilities.

CareMore already serves close to 70,000 Medicare members in Arizona, California and Nevada through its health plans, comprehensive care centers and specialized healthcare programs for fall prevention and diabetes monitoring.

“We have been impressed with CareMore's success in improving the health of senior members through their highly coordinated care model that leverages technology, early intervention and a personal touch,” Emory Healthcare Network President and Chief Quality Officer Dr. Richard Gitomer said in a news release. “With our CareMore collaboration, we are eager to deliver those benefits to our patients as well.”

With 200 provider locations and six hospitals in Georgia, Emory Healthcare Network is the first provider organization in the area to collaborate with CareMore on this kind of advising initiative, though it isn't a new concept for some organizations.

The American Academy of Family Physicians has been in the consulting arena since 2005 when it launched TransforMED, its subsidiary that works with primary-care practices to adopt the medical home model. Last year, TransforMED announced it had received a three-year, $20.75 million grant from the CMS Center for Medicare & Medicaid Innovation to help 90 primary-care practices create an improved, lower-cost care delivery network.

If negotiations surrounding this latest joint venture between Emory Healthcare Network and CareMore are successful, organization officials expect the new model to be in place early next year.

“It's a win-win collaboration for all because we will help in improving the quality of life for our patients, while lowering healthcare costs,” Emory Healthcare President and CEO John Fox said in the release.

In January,Emory Healthcare announced that it had signed an agreement with WellPoint's Blue Cross and Blue Shield of Georgia to form an accountable care organization designed to coordinate care and align resources for improved outcomes.

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Vermont awards grants for healthcare innovation Vermont awarded more than $2.6 million in grants to healthcare providers Wednesday in a push to cut costs and promote healthcare innovation across the state.

Gov. Peter Shumlin and Vermont Health Care Innovation Project leaders announced the eight grants in Rutland. The purpose of the grants is to cut healthcare costs by supporting projects that encourage collaboration between healthcare providers and patients.

"Our challenge is to put a stop to skyrocketing healthcare costs that are hammering Vermont businesses and families," Shumlin said. "Through this grant program, we are supporting leaders who are working to do just that."

Providers from Rutland to the Northeast Kingdom to Burlington received funds.

Among the recipients are: • The Vermont Program for Quality in Health Care received $350,000 for a statewide partnership to improve surgical care.

• Bi-State Primary Care and HealthFirst received $400,000 each to develop provider networks that will increase care quality and reduce costs.

• The Vermont Medical Society Education and Research Foundation and the Fletcher Allen Health Care Department of Pathology and Laboratory Medicine received almost $549,000 to work on a statewide program to reduce what officials called "unnecessary and potentially harmful medical testing."

The grants are funded through a program administered by the federal Center for Medicare and Medicaid Innovation. In total, the federal centers granted Vermont $45 million over the next three years in support of the project.

The awards announced this week are the first round of sub-grants and there will be at least one more round during the next two years, said VHCIP chair Anya Rader Wallack.

Atlantic Health System, UnitedHealthcare launch new ACO partnership

By Beth Fitzgerald The accountable care organization movement is continuing to gain traction in New Jersey.

This week, the ACO of Atlantic Health System, whose hospitals include Morristown and Overlook Medical Centers, and the health insurer UnitedHealthcare announced an ACO partnership that will seek to provide coordinated health care that improves quality and reduces costs for New Jersey residents enrolled in UnitedHealthcare's employer-sponsored health plans.

Atlantic ACO, a subsidiary of Atlantic Health System, has more than 1,700 primary care physicians and specialists who coordinate care and are accountable for quality, cost and patient satisfaction. The Atlantic ACO started out working with Medicare to improve the care delivered to Medicare patients and has since been expanding into ACO partnerships with commercial insurers.

The new ACO with UnitedHealthcare will launch June 1 and aims to help shift the New Jersey health care system based on volume of care to one that rewards quality and value. Atlantic ACO and its physicians will manage all aspects of patients' care with the goal of providing the right care in the right place at the right time.

"Atlantic ACO is pleased to join with UnitedHealthcare on a model that will enhance health services and improve coordination of care for patients," said Dr. David Shulkin, president, Atlantic ACO and Morristown Medical Center, and vice president of Atlantic Health System. "We have had great success in improving wellness and managing costs for the more than 120,000 people enrolled in our ACO and look forward to expanding to include UnitedHealthcare employer-sponsored health plan participants."

And this is UnitedHealthcare's first ACO in New Jersey.

"Atlantic ACO is a leader in accountable care in New Jersey with extensive experience in coordinating quality care that leads to better health outcomes for patients," said Michael McGuire, president & CEO, UnitedHealthcare of New York and New Jersey. "We believe our ACO partnership will deliver enhanced quality and efficient care for our health plan customers in New Jersey."

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HBCBS, HackensackUMC announce new health care reform initiative

By Beth Fitzgerald New Jersey's latest patient-centered health care reform initiative was announced Tuesday between Horizon Blue Cross Blue Shield of New Jersey and an affiliate of Hackensack University Medical Center.

Horizon is partnering with the accountable care organization of the Hackensack-Physician Hospital Alliance in order to improve medical care and clinical outcomes for more than 16,000 Horizon members.

Under the ACO agreement, Horizon will provide care coordination payments to the ACO to take on additional accountability for improving health and the patient experience as well as controlling the cost of care for Horizon patients. The ACO and its physician practices – provided they meet certain health improvement, patient satisfaction and cost goals – have an opportunity to share in the financial savings with Horizon.

The Hackensack ACO already has a shared savings program with Medicare that has saved the federal government about $10 million so far by better coordinating the care patients receive and reducing excess hospital admissions.

Throughout New Jersey, ACOs are now being broadened beyond Medicare and are enrolling commercial insurance plan members in the enhanced patient-care program that ACOs were created to foster. Horizon has launched ACOs with JFK Medical Center, Lourdes Health System, Barnabas Health, Partners In Care and Summit Medical Group, among others.

This new ACO collaboration between Hackensack and Horizon will include more than 450 primary care doctors in Bergen County.

"This ACO reflects Horizon's continuing commitment to collaborate with providers to deliver better quality care at lower cost," said Jim Albano, vice president of Network Management and Horizon Healthcare Innovations at Horizon.

ACOs strive for measured patient quality outcomes and to decrease unnecessary and duplicate medical tests and treatments.

"As the nation focuses its attention on providing efficient, accountable care, HackensackUMC is proud to collaborate with New Jersey's largest health insurer. Working together, we can improve the quality of care delivered to thousands of patients by coordinating care and controlling costs," said Dr. Morey Menacker, president of Hackensack Alliance ACO. Horizon, which has 3.7 million members in New Jersey, has been developing a number of innovative, patient centered programs in the last few years, including patient centered medical homes. It now has more than 500,000 of its members in these programs.

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