Summary Projected Business Landscape Physician Employment's Role Growth in physician employment is expected to continue Nearly one-third of future physician strategies will be around co-managements, directorships, and other professional arrangements Physician Employment's Role Less than one-fourth of CFOs expect physician employment to result in positive ROI Employment's role in improved care coordination, market share, physician engagement, and referrals will be key benefits, say CFOs 2

Summary (contd.) Shifts in Performance Management Physician incentives will begin to focus less on productivity and more on quality, costs, and panel size Few hospitals have the structure, infrastructure, or capabilities to use data to manage population health within an accountable care environment Key Relationship Dynamics Physician practice functions that most frequently report to hospital/system leadership include IT, financial reporting, and billing; patient registration is less likely to report to the hospital/system 3

Summary (contd.) Satisfaction with Group Processes Overall, executives are more satisfied with physician group processes when reporting into the hospital vs. the physician practice Executives indicated they were “somewhat” or “not at all satisfied” most often with practice-based oversight of coding and documentation and least often with practice-based financial reporting and billing 4

Growth in Employment Expected to Continue Anticipated Growth in Physician Employment Median = 10% 12-Month Growth Source: Executive Survey on Hospital and Physician Affiliation Strategies, Sponsored by McKesson. 5

Less Than a Quarter Will Maintain Current Physician Strategy Future Physician Community Strategies Increasingly pursue clinical co-managements, directorships, or other professional arrangements Increasingly pursue professional service agreements (PSAs) Increasingly pursue joint equity/ownership ventures Maintain current physician strategy Source: Executive Survey on Hospital and Physician Affiliation Strategies, Sponsored by McKesson. 6

CFOs Do Not Expect Physician Employment to Yield a Positive ROI ROI Expectation for Physician Strategies Do you believe your organization will achieve a positive ROI after 2 years of physician employment? No Yes * Further breakdown shows 21% of hospitals with >100 beds; 29% of hospitals with 500+ beds Source: Executive Survey on Hospital and Physician Affiliation Strategies, Sponsored by McKesson. 7

Care Coordination Seen as Chief Benefit to Physician Employment Results Anticipated Two Years Post-Employment Source: Executive Survey on Hospital and Physician Affiliation Strategies, Sponsored by McKesson. 8

Physician Employment Expectations “Our emphasis is on care coordination to gain efficiencies throughout the system.” Chief Finance Officer, Hospital with 100 Beds or Less “It is increasingly becoming a defensive strategy …we are particularly targeting cardiologists.” Chief Financial Officer, Hospital with 300-500 Beds “Employing physicians will be the key to our survival in our marketplace.” Chief Financial Officer, Rural Hospital 8

Today’s Physician Contracts Chiefly Incent Volume Basis for Incentive Under Current Physician Agreements* * Participants asked to select all that apply Source: Executive Survey on Hospital and Physician Affiliation Strategies, Sponsored by McKesson. 10

Basis for Incentive Under Physician Agreements* Future Physician Contracts More Likely to Incent Quality, Cost Management Basis for Incentive Under Physician Agreements* * Participants asked to select all that apply Source: Executive Survey on Hospital and Physician Affiliation Strategies, Sponsored by McKesson. 11

Accountable Care Preparedness Few Hospitals Have the Structure, Infrastructure, or Capabilities to Manage to Physician Data Accountable Care Preparedness How prepared is your organization to manage the following areas within an accountable care environment? Source: Executive Survey on Hospital and Physician Affiliation Strategies, Sponsored by McKesson. 12

Reporting Relationship by Function Most Practice Functions Report to Hospital/System Leadership or Are Co-Located Reporting Relationship by Function Source: Executive Survey on Hospital and Physician Affiliation Strategies, Sponsored by McKesson. 13

Key Relationship Dynamics “Clinic-based services is an area that could no longer stay alone as a department of the hospital. A new VP was hired to reorganize the 501(a) structure from the revenue cycle to management of physicians.” Chief Finance Officer, Health System “Culture is important. There is a difference between an organization being led by physicians and one that just employs physicians.” VP Finance & Treasury, Hospital with More Than 500 Beds 13

Satisfaction with Physician Group Processes Executives Are Somewhat to Not at All Satisfied with Processes of Their Employed Physician Groups Satisfaction with Physician Group Processes Source: Executive Survey on Hospital and Physician Affiliation Strategies, Sponsored by McKesson. 15

Satisfaction Level Considering Reporting Structure Executives Are More Satisfied with Hospital- or System-Based Billing, Collections, and Coding Satisfaction Level Considering Reporting Structure 40% 35% 30% 25% 20% 10% 5% Percentage Indicating “Completely Satisfied” Source: Executive Survey on Hospital and Physician Affiliation Strategies, Sponsored by McKesson. 16

Physician Strategies “We have a multi-layered approach with employed, contracted, and community-based physicians, transitioning from FFS to value–based arrangements.” Vice President and CFO, Multi-Hospital System “Our physician strategy involves establishing incentives and revising contracts.” CFO, Critical Access Hospital “Our emphasis is managing costs. This includes increasing the number and use of physician extenders.” CFO, Hospital with 300-500 Beds “We are working to put the physicians — rather than the hospital — at the center of care coordination, but it is very difficult.” CFO, Hospital with 100-300 Beds Q10 Do you have any additional comments or feedback related to your hospital-physician strategy? 16

Summary of Research Response 139 Responses from Hospital and Health System CFOs and Vice Presidents of Finance Bed Size Category Response Greater than 500 Beds 22% 300-500 Beds 12% 100-300 Beds 24% Fewer than 100 Beds 42% Geography Response Urban 54% Rural 46% 17

About HFMA About Our Sponsor HFMA is the nation's leading membership organization for healthcare financial management executives and leaders. More than 39,000 members-ranging from CFOs to controllers to accountants-consider HFMA a respected thought leader on top trends and issues facing the healthcare industry. HFMA members can be found in all areas of the healthcare system, including hospitals, managed care organizations, physician practices, accounting firms, and insurance companies. For more information, see hfma.org. About Our Sponsor http://www.tha.org/HealthCareProviders/Advocacy/Addendum%20C.pdf http://www.bing.com/search?q=State+by+State+Analysis+of+Corporate+Practice+of+Medicine+and+Physician+Employment&first=13&FORM=PERE http://www.mondaq.com/unitedstates/x/159200/Contract+Law/Physician+Restrictive+Covenants+A+Delicate+Balancing+Act McKesson Revenue Management Solutions is a leading provider of medical billing and practice management services. Now with the recent acquisition of MED3OOO, a healthcare management and technology services company, the combined organization offers a comprehensive portfolio of advanced technology and strategic services designed to improve productivity, grow revenues and help customers succeed in an accountable care environment. McKesson RMS supports McKesson’s Better Health 2020™ strategy which is focused on providing the capabilities needed to reduce costs, improve financial performance and successfully manage complex payment models. 19