1. Funds Flow for Johns Hopkins Department of Surgery October 4, 2015 Joint SSC and AASA Session Presented by: John D. Hundt

2. Funds Flows Clinical Service –Billable Professional Services –Other Clinical Activity Education Research

3. Funds Flows with SOM Outflows Dean’s taxes –Clinical Revenue -14% –Gifts – 20% Indirect cost recoveries Inflows General funds Space provided without charge (except for doctor’s office clinical space).

4. Johns Hopkins Medicine At the enterprise level, JHM has multiple risk or full premium arrangements: –Priority Partners – a Medicaid plan with over 200,000 lives –EHP – a plan for self insured employers –USFHP – a full risk contract for DOD beneficiaries Payments to the Department of Surgery for services to plans is completely FFS based on billed CPT codes. The SOM shares based on profitability in these plans ($85 million in FY15) but not directly at the department level.

5. Johns Hopkins Medicine

6. Internal Payments Under Managed Care Gross Collection Rates As a percent of Medicare EHP (Self Insured Market)43%168% USFHP (Capitated Contract)43%169% PRIORITY/PARTNERS MCO (Medicaid Market)22%86%

7. Case Rates One exception to FFS payments Has been in place for over a decade for solid organ transplant and major cardiac procedures Expanding to other high volume complex procedures (other departments have larger programs) Professional fees paid at agreed upon rate with settlement after all care is provided Less than 0.5% of surgeries are under case rates Not enough volume to influence behaviors yet Maryland regulatory environment has slowed development

8. Other Gainsharing or Incentives for Clinical Services Gainsharing with the medical center For a decade, a model based on exceeding budgeted contribution margin goals was in place. Most years – no payout Implemented a new plan more tied to value

9. FY 2016 Medical Center Gainsharing Metrics 1.Maryland Hospital Acquired Conditions ( MHAC’s) 2.Readmissions 3.Inpatient Cost per Case 4.Outpatient Cost per Case 5.Length of Stay 6.Out-of-State Revenue 7.Expense Budget Variance 8.Financial Planning and Budget 9.Cost Standards 10.Billing Accuracy 9

10. JHH Sample Functional Unit Maximum Scores 10 Expense Budget Total Opportunity $364K Total Surgery Revenue at Hospital is $400 million Department Pro fees approximately $36 million

11. Models vary greatly within our health system At JHH, our primary hospital Decentralized with department managing most areas. All advanced practice are provided by hospital. At Hopkins Bayview, our secondary teaching hospital Hospital provides and pays for scheduling and clinic. Department manages the faculty. Advanced practice all employed by department. At our Community Hospitals Department employees surgeons but leases them to health system for practice management

12. A word about Maryland We are 20 months into a 5 year special waiver Hospital revenues have been capped for in-state patients Volume driven revenue and margin growth for the hospital is limited to out of state patients Shifts in the volume of in-state patients may result in revenue increases (or decreases) in the following year 8 percent of the hospital revenue is at risk for quality and performance metrics Physician payment system remains the same – volume driven FFS

13. Funds Flows for Education All trainees are employed by Department of Surgery The cost of salary and benefits are billed to and paid by the hospitals to which the trainees rotate Department shares in the malpractice costs of trainees Support for training program infrastructure is buried within a general funds amount negotiated over the last several decades and has not kept up with regulatory burden or the increase in advanced training programs

14. Funds Flows for Education General Surgery, Pediatric Surgery and Cardiac Surgery are supported under historical house staff budget Specialty fellowships developed after these three programs have all been funded initially by the department with requests and negotiation with the medical center to support

15. Funds Flows for Research Indirect Cost Recoveries are paid 100% to SOM Lab Space is provided rent free Renovations to lab space frequently paid by department Return of Indirect Cost Recoveries is through General Funds subject to negotiation Usually when a new chair is hired or to help with recruitment or retention of key research faculty

16. Summary Points Funds Flow at Hopkins For clinical services, mechanisms for funds flow have not caught up with institutional strategies Virtually 100% of clinical revenue is still volume and RVU driven. Clinical program costs are fully allocated to the department (scheduling, billing, clinic, malpractice) Institutional and external incentives or penalties do not yet directly affect funds at the department level.

17. Summary Points Funds Flow at Hopkins Continued internal payments under FFS models has avoided disruption but probably delayed changes that would be helpful Developing compensation models that align institutional goals with departmental financial performance is a challenge under current funds flow