Clinical Integration: a Strategy for Physician Alignment, Better Quality, and Collective Payer Contracting

1. Clinical Integration: a Strategy for Physician Alignment, Better Quality, and Collective Payer Contracting John Marren Thomas Babbo jpm@hmltd.com tjb@hmltd.com Hogan Marren, Ltd. · Chicago, Illinois (312) 946-1800 March, 2009

2. Agenda 1. Update on Clinical Integration—the national health care perspective • The FTC perspective • MGO’s efforts to date • What it takes to be Clinically Integrated • Contracting with payors

3. Let’s be specific • Physicians can align with each other and hospitals to: • (1) distinguish themselves in the market on the basis of quality • (2) justify higher reimbursement • (3) conduct collective negotiations with health plans

4. What do we know about today’s health care environment?

5. The solution is physician alignment • Through employment • Through management models • Through clinical integration clinical integration Combining the efforts of employed, managed, and independent doctors 5

6. What does CI achieve? • Fosters collaboration among doctors and hospitals in a way that increasesthe quality and efficiency of patient care • Presents doctors and hospitals a powerful business and clinical strategy to thrive in the advent of consumerism, pay-for-performance, and quality report cards • Allows physician networks to assert themselves forthrightly in collective negotiations with health plans and/or employers 6

7. What do we know about CI? If Clinical Integration is defined as… “... an active and ongoing program to evaluate and modify practice patterns by the network's physician participants and create a high degree of interdependence and cooperation among the physicians to control costs and ensure quality . . .” … then we know at least three things:

8. What do we know? First, CI is not … • The “messenger model” • Risk contracting redux • Payor-driven “P4P” 8

9. What do we know? the FTC has said a lot about Clinical Integration. Second,

11. The FTC staff … considered the "explicit admission" by GRIPA thatone objective of the plan was to contract at higher fee levels for the services of physician-members. • Ordinarily, such an objective would raise concerns that higher prices would result from the exercise of market power, the FTC staff said. • "Here, however, GRIPA's higher fee levels are anticipated as part of a program that seeks, and through the participants' integration appears to have significant potential to achieve, greater overall efficiency and improved quality in the provision of medical care to covered persons.” • Based on the information provided, the FTC staff letter said, it appeared that GRIPA's joint negotiation of contracts, "including price terms with payers on behalf of its physician members who will be providing medical services to payers' enrollees under those contracts is subordinate to, reasonably related to, and may be reasonably necessary for, or to further, GRIPA's ability to achieve the potential efficiencies that appear likely to result from its member physicians' integration through the proposed program."

12. May 28, 2008 FTC Conference Center601 New Jersey Avenue, N.W.Washington, DC 20001

13. antitrust laws forbid collective negotiations… In other words,

14. …unless you’re reallyclinically integrated An analysis of any physician network’s clinical integration program is essentially a three-part test which asks: • whether the network’s clinical integration program is “real” containing authentic initiatives, actually undertaken by the network, which involve all physicians in the network, and apply to the physicians’ practice patterns relative to patients who obtain health benefits under fee-for-service health plans; • whether the initiatives of the program are designed to achieve likely improvements in health care quality and efficiency; and • whether joint contracting with fee-for-service health plans is “reasonably necessary” to achieve the efficiencies of the clinical integration program.

15. What else do we know? Third, many lawful, well-constructed CI programs have and are being developed across the country . . . So, we need to get going!

16. Current Successful CI Models • Advocate Physician Partners • Brown & Toland Medical Group • Greater Rochester IPA • MedSouth • St. Luke’s Magic Valley • Memorial Hermann HNP • Covenant Health Partners • Etc.

17. Evaluate CI Readiness Build Physician & Hospital Consensus Establish Network Organization Develop CI Initiatives Select & Deploy CI Infrastructure Engage Regulators Implement CI Program Commence CI Contracting Achieving CI: a phased approach

19. Health System Physicians Health Systems CI Operations Company A wholly-owned subsidiary of Health System. Governance is predominated by physicians, along with a number of key hospital representatives (and possibly important purchasers/stakeholders). Payors Employer/ Community

20. Health CI Operations Company A joint venture Physician Hospital Organization (PHO); A 50=50 partnership, both in governance and equity. Payors Employer/ Community

23. Examples of CI initiatives MGO is considering Clinical • Readmission within 30 days of patients discharged with a diagnosis of heart failure • Prophylactic antibiotic selection for surgical patients • Ambulatory management of patients with GERD All of these can be measured now! Non- Clinical • Electronic Connectivity – high speed internet & e-mail • Attendance at CI information meetings • Completion of on-line assessments and courses

24. www.advocatehealth.com Search for: 2008 Value Report (http://www.advocatehealth.com/physpartners/about/employers/value_report.html) Or call 1.800. 3ADVOCATE

25. Infrastructure: building on a solid foundation • Networks of independent physicians that are affiliated with hospitals or health systems enjoy a distinctadvantage in the development of CI • Existing OhioHealth QI and patient safety initiatives • Established MGO/OHG medical management activities • MGO/OhioHealth/OHG investments in advanced clinical technologies and information systems • The presence of such infrastructure greatlyaccelerates the implementation of a comprehensive CI program • The CI activities of the MGO/OHG entail reorientation and realignment of this infrastructure, rather than building basic CI competencies

26. Hospital Systems Ambulatory Claims • MGO billing program • Med3000 PMS • Aetna claims • OhioHealth benefits • MIDAS • MIDAS + DataVision • EMR/CPOE • ORB • Existing QI Programs Ambulatory EMR* *(good to have, but not necessary) Med3000 Data Warehouse Physician Profiling and Actionable Reports

27. Food for thought… “Though creating clinically integrated organizations is difficult and expensive, physicians should recognize that clinical integration can help them both to gain some negotiating leverage with health plans and to improve the quality of care for their patients.” Lawrence P. Casalino M.D., Ph.D., University of Chicago “The Federal Trade Commission, Clinical Integration, and the Organization of Physician Practice,” Journal of Health Politics, Policy and Law, 2006, Duke University Press, 31(3):569-585; DOI:10.1215/03616878-2005-007

28. MGO efforts to date A brief history - 2005 - • Representatives from OHC and MGO began meeting to discuss PHO contracting and market changes. • Clinical Integration was adopted as the “go to market” strategy of the PHO. • The OHG Board formed a PHO Strategy Team with representatives from OHG, MGO and OHC. 2006 - • The PHO Strategy Team developed a clinical integration implementation plan. • A pilot program with OhioHealth as the employer was proposed. 7

29. MGO efforts to date(continued) 2007 - • OHG populated a data warehouse with three years of OhioHealth employee and dependent claims data. • A pilot pay for quality (P4Q) program that incentivizes MGO physicians to support OhioHealthy initiatives was planned. 2008 - • The MGO Board adopted clinical integration as the organization’s primary strategic initiative • The pilot pay for quality program focused on OhioHealth associates and dependents was implemented. • Aetna, a payer, agreed to provide claims data for the data warehouse to expand the pay for quality program in 2009. • The PHO Strategy Team transitioned to the Clinical Integration Development and Implementation Team (CI DIT). 8

30. INFORMATICS • Data Warehouse • Results • Reporting • INFORMATION • TECHNOLOGY • Connectivity • Data Acquisition • Electronic • Medical Records • E-prescribing METRICS DEVELOPMENT QUALITY COMMUNICATION MANAGED CARE CONTRACTING LEGAL OHIOHEALTH PILOT PROGRAM Clinical Integration Development & Implementation Team CI DIT Core Committee Chair Dr. ____________ CMO MGO/OHG Vice Chair Bruce Vanderhoff, MD CMO OH Interim Chair Tom Thompson COO OHG OH Reps Mike Louge Exec. VP and CFO Paul Patton VP Human Resources - Interim MGO Reps John Burns, MD Ben Humphrey, MD Work Groups Chair Allen Heilman VP OHG Chair Michael Krouse CIO OH Chair Bob Thompson, MD Assc. Medical Director MGO Chair Kitty Martin COO MGO Chair John Kontner System VP Mgd Care OH Chair Bob McAdams Legal Counsel OHG Chair Tom Thompson COO OHG

31. What it takes to be CI • Network of physicians committed to Clinical Integration • A set of initiatives that impacts all • An infrastructure that supports CI And, most importantly,--the proper narrative

32. Next steps for MGO • Ask physicians to participate in the clinically integrated network • Begin marketing the program to employers and payers • Develop a strategy for engaging payors • Aetna Anthem Cigna • Medical Mutual UHC