Presented by Corbin Wilson, Executive Director, JPS Physician Group Tammy Walsh, Director of Finance, JPS Physician Group Considerations of Integrating Physician Group Operations and some suggestions on how to get it right!

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3 a CPA/consulting group, conducted a study in response to a clear need and current trends. Nearly every health system and hospital their healthcare team interacted with has recently acquired physician groups, is actively seeking to acquire them, or both. Yet, nearly every health system and hospital with integrated physician groups is realizing substantial operating losses from those groups. An Integration Trends Study

The Survey 4 The survey included 80 hospitals/ health systems The survey had 30 questions and was taken using Survey Monkey The survey was broken down into 4 sections Background Structure Operations Opinions

5 Analyzing the data Once they received all the responses, they analyzed the answers from each as it related to the question… “What is your average annual loss per physician?”

6 41% of all respondents reported that their average annual loss for hospital-owned physician groups is greater than $100,000 87% of all respondents reported a loss Big Results

7 Other stats from the study When it came to losses… The size of the hospital didn’t matter The more physicians employed, the more likely operating losses became Length of contracts did not impact results Method of physician compensation had little impact When it came to Governance...

8 Less than a quarter of respondents reported that their hospital had a unique board of directors that oversaw the operations of the physician group(s) Autonomy Engagement Control Management

9 Does every physician group acquisition need to have a positive bottom line to be beneficial to hospitals?

10 Not necessarily…. But hospitals need to manage these practices as effectively as they can. Hospitals benefit from the tradeoff of additional revenue streams to the hospital for losses on employed physicians; as compensation criteria changes, that tradeoff becomes less sustainable

11 87% reported losses 41% losses over $100K Why are hospitals losing money on physician groups? 70% losses over $50K

12 Employing specialty and sub specialty physicians to meet needed service gaps Employing whomever is available, not necessarily following a strategy Employing for clinical quality support of other providers and the hospital Lack of leadership or professional practice management experience Enticing employment with unsustainable initial compensation & benefits Failure to take advantage of non-clinical other revenue sources/programs available to provider groups Because...

13 The compensation model does not drive profitable results or includes unaligned incentives

14 Compensation Model Flaws The model needs to incentivize volumes of patient delivery and the payor mix; physicians work harder and smarter with correct productivity goals Negotiated compensation is not realistic to actual market forces; minimum base is too high, productivity incentives are too rich, or additional non- productivity compensation builds up

15 Compensation Model Flaws Pure productivity based compensation without regard to actual collections and cost often result in unfavorable financial results Discipline to communicate and adjust annual plan for lower results, including terminating underperformers, is sometimes lacking

16 Understand Operations Operations can become disjointed or hospital-centric; the business of physician practices differs from the hospital Billing, Payor Contracting, Credentialing, Collections for Professional Services Hospital/Provider based billing and global billing Integration of computer systems for EHR, billing, and practice management

17 Understand Operations Meaningful Use and clinical data reporting Duplication of functions and staff occurs as practices get added rather than accomplishing economies of scale

18 Physicians Experience Administrative, management, and billing functions less efficient than promised Confusing compensation model with data integrity concerns Equity (Financial) issues and Quality issues among employed physicians IT solutions lacking Decision rights and integration in Health System confusing – lack of practice autonomy Limited ability for physician to implement necessary changes – you are now an employee!

19 Physician Integration done right!

20 Understanding what the physician & group values and its goals in selling its practice will lead to a more positive, transparent agreement and long term relationship

21 Strategic Recruitment Program Effective/efficient practice management structure and support Data rich; frequent reporting and tracking of clinical quality, patient satisfaction, and financial results What Works

22 Address different generational culture and goals among physician group (schedules, benefits, etc) Physician leadership development and support; physicians must participate and lead in the planning process & future governance not just quality & utilization Hospital as sole-member of 501(a) organization with LIMITED reserved powers in bylaws What Works

Compliant, Stark, Anti-Kickback, OIG/CMS (ASA considerations) Design a compensation model that aligns Hospital and Physician goals with an objective methodology for calculating physician compensation Transparency, understandability and data integrity will engender trust with the physicians Plans must evolve to align with changing reimbursement systems 23 Compensation Plans

24 Compensation Plans Plans should reward integration with the system – Consider leaving certain ancillaries with physician practice. – Determine equitable allocation of bundled payments among practices. – Provide appropriate coverage payments and stipends rather than cover losses.

25 Compensation Plans Maximize productivity & revenue growth while preparing for transition toward quality, satisfaction, and population health based system – Incorporate Value Based criteria lightly, as supplemental, to begin knowledge build towards transition

26 As with Hospitals, recruit the best Physician Practice Management Provider side experience and balanced approach are key Benchmarking and data driven decision making IT technology and resources Avoid overlay of excessive bureaucracy

27 Keeping an independent mindset Encourage provider involvement and leadership They are your partner – not your employee Structure enterprise governance where providers have influence on decision making & management

28 Healthcare reform is trying to line doctors and hospitals up in one continuum… these entities need to learn to work cohesively and in a financially sustainable model

29 Tammy Walsh Treasurer/Finance Director JPS Physician Group Corbin Wilson CEO, Executive Director JPS Physician Group