Agenda Market Forces Driving Providers to Evaluate Clinical Integration & Bundled Payments Overview of Clinical Integration Key Elements of a Clinical Integration Strategy Bundled Payments Overview Customized Bundled Payment Report Review

Change Readiness Curve – Strategic Readiness 3 Urgency (Opportunity or Burning Platform) TACTICAL TRANSFORMATIONAL STRATEGIC Major Change is Essential LOW HIGH Focused Change is Necessary Been Here Before

Leading Change – Right of Passage Urgency (Opportunity or Burning Platform) 4 4 TACTICAL TRANSFORMATIONAL STRATEGIC Major Change is Essential LOW HIGH Focused Change is Necessary Been Here Before Hospital With Multiple Co- Management Relationships Hospital Launching IPA+HEP Multi-Hospital System With Very Large Employed Physician Base Multi-State, Multi-Hospital Investor Owned

Payment Models Supported by CIN Strategy Source: HFMA 2010 The Advisory Board 2010

A X Y Z QUALITY & SERVICE High Low High COST Adding costs to improve quality/service Cutting costs at the expense of quality/service B A C QUALITY & SERVICE High Low High COST Effectiveness: Improved quality/ service at the same or lower cost Innovation: Improvement in all dimensions Efficiency: Cutting costs without impacting quality/ service PAST THINKING NEW PARADIGM Value (V) = Quality (Q) * Service (S) Cost (C) Source: *Lean Hospitals, Graban, CRS Press, p10 6 Reshape the Value Curve Optimizing value by focusing on quality, service and costs

Community Facilities AMBULATORY Community Physicians PHYSICIANS PAYORS & EMPLOYERS Community Hospital(s) Community Facilities Clinically Integrated Network 7

1.Develop a network that includes independent physicians in the market 2.Provide a mechanism to align the clinical practices of physicians across service lines 3.Identify areas of opportunity within the system for quality and efficiency improvements 4.Provide compensation for achieved results 5.Improve the value equation (cost and quality) for healthcare delivered within the network 8 Clinical Integration Network Objectives

A Clinically Integrated Network (CIN) is a selective partnership of physicians collaborating with hospitals to deliver evidence-based care, improve quality, efficiency, and coordination of care, and demonstrate value to the market. Clinically Integrated Network Health System and Employed Physicians Private Practice Physicians CI Entity Payors and Employers $ $$ Contracts Physicians Preserving private practice model through alignment Enhanced reimbursement through contracting for demonstrated network quality Markets and Hospitals Align independent, employed, and specialist physicians in one organization Enhanced reimbursement under FTC guidelines for demonstrated quality BENEFIT TO STAKEHOLDERS WHAT IT’S NOT Physician employment Hospital-led initiative Mechanism to gain negotiating leverage over payors Distribution of Funds Participation Agreement 9 Clinically Integrated Network Defined

Network Considerations – Local Market Pace Financial Performance Time Local Market Conditions will Impact Timing of Network Development Declining FFS market will require network model to meet Reform Era Imperatives FFS Risk-based Payment 10

HOSPITAL PROFILE Location, access, inpatient volume and market share, EBITDA, profit margin, quality scores, asset distribution, IT infrastructure, etc. MARKET CHARACTERISTICS Supply and demand of beds & access, demographics, population growth, CON requirements, uninsured, HIX COMPETITIVE LANDSCAPE Competitive intensity, history of irrationality, pursuit of new strategies and/or payment models PHYSICIAN PROFILE Mix of independent, employed, multispecialty or super groups, historical hospital-physician and physician-physician relationships PAYOR PROFILE Payor mix, rate parity and willingness to offer P4P or risk-based contracts EMPLOYER PROFILE Large employers (>1,000 employees) pursuing contracts with providers; small employers likely to abandon plans for Exchanges 11 Critical Market Pacers to Consider

Infrastructure & Funding Distribution of Funds Contracting Information Technology Physician Leadership Structure & Governance Participation Criteria Performance Objectives Clinically Integrated Network 12 Components of a Clinically Integrated Network

IPA Health System Subsidiary PHO Joint Venture PHO Health System Participating Physicians Payors / Employers PHO XX% Health System Payors / Employers IPA Participating Agreement 100% Participating Physicians Health System Payors / Employers Participating Agreement 100% Participating Physicians Subsidiary Overview: Other than an employment-only model, a CIN usually is structured as a joint venture or subsidiary Physician Hospital Organization, or an Independent Practice Association (IPA). 13 Structure & Governance

MATURITY OF CIN Reporting Incentives and Membership Fees LOW HIGH Hospital Efficiency Program Self Funded Health Plan Payor Contracts Employer Contracts Pay-for-Performance Overview: The CIN is a separate business entity with a distinct identity, mission, and vision, dedicated leadership and staff, sustainable sources of revenue, and participating provider agreements with physicians that create potential value for both physicians and payors. The CIN will need to offset costs of building the network (Infrastructure) and eventually provide returns through various revenue sources depending on the maturity of the network. Sources of Revenue 14 Infrastructure & Funding

Sample Participation Criteria Participating Physicians Clinical Integration Legal Agreement (Independent & Employed) Physician Leadership Information Technology Adoption Quality Improvement Contracting Requirements Active member of “Hospital” Medical Staff Participate in educational programs Complete orientation program Provide leadership and oversight over defined operations Utilize professional and office Access to high-speed internet Implement the preferred health information technology Share clinical information / data Develop, implement, and monitor clinical protocols Review member physician performance Develop / implement corrective action plans and process improvement initiatives Participate in jointly negotiated contracts Overview: Member physicians or groups that satisfy certain guidelines and criteria must sign an agreement outlining the expectations and requirements for participation in the CI program. 15 Participation Criteria

ElementDescriptionExamples Variance & Cost Reduction Minimize variable physician performance not related to patient characteristics Minimize orthopedics supply chain cost Staffing and productivity opportunities Unnecessary Care Reduction Reduce avoidable, unproductive and duplicative services Prostate cancer screenings for elderly patients Reduce Readmissions Clinical Restructuring Ensure treatment in most optimal setting with most appropriate level of provider Early step down from an IP to SNF bed Partnerships with a local retail clinic to offer non-urgent care System Optimization Shift focus to upstream, preventative care with emphasis on CI and population health Disease-based medical homes Patient engagement strategies using telehealth Source: Sg2 Analysis Examples of Performance Improvement Overview: CINs identify metrics and targets designed to meaningfully impact the clinical practice of all network physicians, and to align their conduct with hospital initiatives, so as to improve quality and demonstrate value across the entire continuum of care. 16 Performance Objectives

CIN ITQUALITYCARE REDESIGNMEMBERSHIPFINANCE Lead and participate on sub-committees supported by CIN or Health System personnel Medicine Primary Care Neurosciences Heart and Vascular Surgery Women & Children Overview: Health systems must empower physicians to have an influence on the future direction of the network. This will help integrate physicians’ clinical expertise into hospital operations and increase cooperation and credibility of the CI network. Share In Network Governance 17 Physician Leadership

MATURITY OVER TIME CLINICAL CARE VALUE Process/ behavioral change Digitize critical information on an individual within each care site View health-related data via a customizable user interface within an enterprise Exchange health-related data within and between enterprises Derive value and intelligence to improve care quality and outcomes and to curb costs Deliver clinical and patient information to enhance patient care experiences and practitioner effectiveness Intermediate Electronic Medical Records Healthcare Portals or Registries (Clinicians and Patients) Health Information Exchange (Private) Health Analytics Advanced Clinical Decision Support IT Optimization Source: IBM Center for Applied Insights Overview: CINs use an IT-dependent performance improvement architecture with data-based mechanisms and processes to monitor and track utilization, quality, and efficiency of resource use to demonstrate value. 18 Information Technology

PAYORS & EMPLOYERS Cost Savings Efficiency Gains P4P Contracts Shared Savings Increased Rates Hospital Specialty Location Equal distributionPerformance targets Educational event attendance Submission of Data Adoption of IT platform INDIVIDUAL ACTIVITY/ OUTCOMES % LOCAL NETWORK PERFORMANCE % CLINICAL INTEGRATION NETWORK GLOBAL NETWORK PERFORMANCE % $$ Overview: The CIN establishes an organized plan to link performance on defined gradients to eligibility for incentive payments. HOSPITAL / SYSTEM 19 Distribution of Funds

Determining the right structure for your organization that supports your vision and aligns all stakeholders Generating sufficient funding to support network development and incent physician members through initial contracting efforts Developing a distribution methodology that appropriately incents physician members Crafting a communication plan that effectively communicates the business case for CI for physicians and the health system Keys to Developing a High-Performing CIN

Bundled Payments Represent Key Opportunity for CINs Source: HFMA 2010 The Advisory Board 2010

BUNDLED PAYMENTS

What are Bundled Payments? One all-inclusive price, focusing on a patient’s total episode of care Includes payment for all of a patient’s services for a certain procedure or diagnosis over a set number of days (usually from ) Mega-DRGs 23

How do Bundled Payments Relate to Population Health? Creates incentives for providers to work together to coordinate care Focus on the whole patient, not the visit A targeted version of population health 24

Provider Services - Today 25 Dr. Office Visit Initial Inpatient Stay Dr. Office Visit Readmission Dr. Office Visit Inpatient Post-Acute Stay (Rehab, Psych, LTC, SNF, HH) Other Part B Services (Hospital Outpatient, Labs, Durable Medical Equipment, Part B Drugs) Part B Service

Bundled Services 26 Dr. Office Visit Initial Inpatient Stay Dr. Office Visit Readmission Dr. Office Visit Inpatient Post-Acute Stay (Rehab, Psych, LTC, SNF, HH) Other Part B Services (Hospital Outpatient, Labs, Durable Medical Equipment, Part B Drugs) Part B Service

Shared Savings 27 Creates incentives for providers to work together to coordinate efficient, cost-effective care Bundled payment is set based on review of past performance and future expectations Savings “delta” between the set payment and actual is shared

Data Analytics Identify components of the bundle Discern patterns, variances and opportunities for efficiency Compare performance to benchmarks Determine potential for shared savings Monitor performance progress 28

REPORT REVIEW

ANALYTICS AVAILABLE Bundled Payment Preview Analysis -Tier 1- 2 high-volume DRGs (major joints/heart failure) 90-day episode review with benchmark comparisons 10-page.pdf report Member service Available through Association/System Affiliation Bundled Payment Preview Analysis -Tier 2- All 175 BPCI Demo-eligible DRGs 90-day episode review with benchmark comparisons Interactive Excel workbook Set fee with discount for multi-hospital systems Available through DataGen Custom Analytics BPCI Awardees - data analytic and monthly monitoring services Other Risk-Sharing Arrangements Commercial or public payer Varying episode definitions and/or lengths Custom benchmark comparisons focus of today’s session

Episode Cost Variation 31

32 Episode Components Benchmark Comparisons

33 Episode Components Benchmark Comparisons

34 Episode Components Benchmark Comparisons

35 Average Episode Payment Benchmark Comparisons

36 Timing of Readmissions Benchmark Comparisons

37 Cost of Readmissions Benchmark Comparisons

Analysis of Readmissions 38

Average Inpatient LOSAverage Post-Acute Payment 39 First Post-Acute Setting Benchmark Comparisons

40 First Post-Acute Setting Benchmark Comparisons

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ANALYTICS AVAILABLE Bundled Payment Preview Analysis -Tier 1- 2 high-volume DRGs (major joints/heart failure) 90-day episode review with benchmark comparisons 10-page.pdf report Member service Available through Association/System Affiliation Bundled Payment Preview Analysis -Tier 2- All 175 BPCI Demo-eligible DRGs 90-day episode review with benchmark comparisons Interactive Excel workbook Set fee with discount for multi-hospital systems Available through DataGen Custom Analytics BPCI Awardees - data analytic and monthly monitoring services Other Risk-Sharing Arrangements Commercial or public payer Varying episode definitions and/or lengths Custom benchmark comparisons

Questions? 43 Gloria Kupferman Vice President, National Information Products DataGen, a HANYS Solutions Company Brian Esser Manager, Healthcare Consulting Dixon Hughes Goodman LLP