Management, Inc 2012 Hospital Owned Group Management

Management, Inc 2012 Hospital

Medical Management, Inc 2012 Why are hospitals acquiring Everyone Else Is Hospital Pie is shrinking Secure Downstream Revenue Consultants Tell them To Keep Providers in the area Reform is forcing them/ACA WHY THE ACQUISITION TREND Why are physicians selling: Regulatory requirement fears (Stark, Anti-Trust, Compliance) Contracting leverage Losing Money/Better Pay Not interested in running a business Work-life balance Retirement

Medical Management, Inc 2012

Hospital

Management, Inc 2012 Inherent Flaws and Result Clinics Losing Money Pressure from Board Members Executive Turnover Difficult Physicians Decrease in Access/Productivity Decreased Quality/Accountability Increased Cost/Reimbursement Intent of Law and Results of Law aren’t aligned Intent of the Law: To Decrease costs To Increase Quality To Increase Access

Medical Management, Inc 2012 Financial Viability Keep Providers in the area Continuity of Care Support System Integrated Network of Physicians Good Reasons for Acquisition

Management, Inc 2012 Construction Business Model One time customers Large $s Payment upon completion About Outcomes Bowling Business Model Recurring customers Small $s Collection up front About Experience Risk of Failure is Very High

Medical Management, Inc 2012

Different Entity Different Governance Different Metrics Different Revenue Cycle Different Business and Delivery Model Hospital Clinics

WHY DO HOGS LOSE MONEY: Run as hospital department not separate entity The hospitals decisions optimize earnings of health system vs. the group Hospitals tend to have large risk management and administrative overhead Hospitals strip the ancillaries from the clinic for better reimbursement The benefits in hospital systems are generally higher Hospital revenue cycle different than in groups, aren’t optimized for groups Hospitals have many one time interactions. Groups recurring interactions Healthcare is getting very complex providing a lot more business to accountants and attorneys. Hospitals pay accordingly Rates contracted for physicians are frequently contracted lower in order to have hospital's receive reimbursement at a higher rate Payer mix often changes when groups are brought into hospital ownership Doctors don't have same interest in cost and quality control or accountability in a hospital owned environment as when they own their own business Physicians receive base salaries or insufficient incentives productivity drops The groups size is often too small to focus on collections or credentialing like one would in doctor owned business The cost of failed or unwound acquisitions is costly to the system as a whole Limited Physician Voice

Hospitals Most Important Asset Medical Management, Inc 2012

GROUP CULTURE ValuesPurpose ManagementGovernance GROUP PEOPLE Dyad ModelProviders Back Office Procedures Technology GROUP SYSTEMS Front Office Processes Clinical Protocols Revenue Cycle Compensation Model GROUP FINANCE Group Specific Metrics System Profit (Printer/Ink) NetworkJoint Ventures Branding GROUP GROWTH GROUP SUCCESS Telemedicine

Medical Management, Inc 2012 Margin: 20-30% Margin: LOSS

Real Life Example

Questions to Ask Yourself Should I employ physicians? If no: – Am I supporting and partnering with area DOGs – Am I forming or being part of Clinically Integrated Networks – Am I forming joint ventures If yes: – Do have the right physicians? – Do I have physician leaders (Dyad Model) – Do I treat my medical group as it’s own entity Medical Group specific Governance Medical Group specific Processes (Clinical, Front & Back Office) Medical Group specific Revenue Cycle Management Medical Group specific Branding Medical Management, Inc 2012

Clinics

Medical Management, Inc 2012