Kirkland A. McGhee VP & Regional Counsel Kaiser Permanente of Georgia Understanding the Business/Legal Implications of Integrated Delivery Systems From the Perspective of the Health Plan American Health Lawyers Association Healthcare Liability and Litigation, Hospitals and Health Systems, and Regulation, Accreditation, and Payment Practice Groups Joint Annual Luncheon June 26, 2012 Kirkland A. McGhee VP & Regional Counsel Kaiser Permanente of Georgia

The Opportunities in Integrated Delivery Systems (IDS) Understanding the Business/Legal Implications of Integrated Delivery Systems From the Perspective of the Health Plan THE Challenge for Health Care in the United States is Controlling Costs Regardless of the U.S.Supreme Court’s Decision on the Affordable Care Act, There Must be Better Structural Alignment Among Patients, Providers, and Payers The Opportunities in Integrated Delivery Systems (IDS) The Challenges of Building Successful IDSs Learning from the Kaiser Permanente Model

THE Challenge for Health Care in the United States is Controlling Costs Health expenditures in the United States neared $2.6 trillion in 2010, over ten times the $256 billion spent in 1980. [1] The rate of growth in recent years has slowed relative to the late 1990s and early 2000s, but is still expected to grow faster than national income over the foreseeable future. [2] 1 Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, National Health Care Expenditures Data, January 2012. 2 Robert Wood Johnson Foundation, High and rising health care costs: Demystifying U.S. health care spending, October 2008.

THE Challenge for Health Care in the United States is Controlling Costs This Cost Trend is Unsustainable for Business, Government and Individuals.

The Way We Pay for Care There are Many Reasons for the Upward Trend: THE Challenge for Health Care in the United States is Controlling Costs There are Many Reasons for the Upward Trend: Technology Chronic Diseases from Life Style and Consumption Cost Shifting Uncompensated Care/The Uninsured Aging Population The Way We Pay for Care

We Pay for Filled Hospital Beds We Pay for Care by the Unit THE Challenge for Health Care in the United States is Controlling Costs We Pay for Sick Care We Pay for Filled Hospital Beds We Pay for Care by the Unit We Pay for Care based Largely on the Interests of Providers and Payers

When You are a Hammer Everything Looks Like a Nail THE Challenge for Health Care in the United States is Controlling Costs When You are a Hammer Everything Looks Like a Nail

A Fundamental Change in How We Pay for Health Care Must Occur. There Must be Better Structural Alignment Among Patients, Providers and Payers A Fundamental Change in How We Pay for Health Care Must Occur. We Cannot Continue to Incentivize Pay: for Sick Care Only for Filled Hospital Beds for Care by the Unit for Care based Largely on the Interests of Providers and Payers

There Must be Better Structural Alignment Among Patients, Providers and Payers We Must Incentivize Better Structural Alignment Among Patients, Providers, and Payers

Shared Savings – the Promise of IDS There Must be Better Structural Alignment Among Patients, Providers and Payers Shared Savings – the Promise of IDS

Doctors as the Managers of Patient Care and Claims There Must be Better Structural Alignment Among Patients, Providers and Payers Doctors as the Managers of Patient Care and Claims Hospitals as the Mangers of Patient Care and Claims Payers as the Managers of Patient Care and Claims

There Must be Better Structural Alignment Among Patients, Providers and Payers “The mixed history of physician groups and physician-hospital organizations to successfully manage financial risk suggests that this is not a skill that many have mastered.” – Victor R. Fuchs, PhD and Leonard D. Schaeffer, Journal of the American Medical Association, June 6-Vol 307, No.21, pp 2261-2262

There Must be Better Structural Alignment Among Patients, Providers and Payers “The List of Jokes about Insurance Companies Managing Patient Care is Too Long to Imagine!” – Kirk McGhee, AHLA Annual Meeting, June 26, 2012

Learning from the Kaiser Model A Little About the History of Kaiser Permanente Henry J. Kaiser Sidney Garfield, MD The Tahoe Agreement

Learning from the Kaiser Model Kaiser Foundation Health Plans Permanente Medical Groups Kaiser Foundation Hospitals Kaiser Permanente Medical Care Program

Learning from the Kaiser Model Kaiser Foundation Health Plans Kaiser Foundation Hospitals Permanente Medical Groups

Learning from the Kaiser Model Medical Service Agreement The Constitution for the Enterprise Annual MOU for Planning, Enterprise Budgeting, Payments Methodologies Exclusive Partners

Learning from the Kaiser Model Advantages: Autonomous Physicians Creating Medical Protocols, Focusing on Wellness, and Making Clinical Decisions “Medical Group shall be solely responsible for the rendition of all medical services, without intervention in any manner by Health Plan or its agents or employees” Separate Regulatory Regimes Planned, Budgeted, Predictable Delivery

Learning from the Kaiser Model Reflective or Joint Management Structures Incentives for Health Improvement Kinder, Gentler, Insurer Enterprise-minded Practitioners

Learning from the Kaiser Model Disadvantages: Duplicative Sometimes Contentious Slower Role Confusion Regulatory Confusion

Learning from the Kaiser Model The Structural Alignment Should: Acknowledge the Autonomy of Physicians and the Specialized Knowledge They Possess. Create Opportunities for Leadership by Each Entity and the Opportunity for Dependency as Well. Reflect a Shared Enterprise Mentality.

Learning from the Kaiser Model The Opportunity for Health Care Lawyers

Learning from the Kaiser Model Thanks for Your Attention. Questions?