1. Introduction to Medical Cost and Performance Management August 3-6, 2019

2. Why Physicians Leaders Need to Understand Cost Management
Manifestations of “Big-Med”
Expanding Physician-Hospital Affiliation
Horizontal and Vertical Integration of Industry Participants
New Forms of Provider Partnerships
Healthcare in the United States is in a transition to “Big Med;” i.e., a more systematic provision of services by much larger integrated entities that control most aspects of a patients care…. the effect on patients is to shift the relationship to an institutional health care provider rather than a single physician or group practice….
A recurring lesson is that once begun, consolidation can occur astonishingly quickly.
H, Moses et. al, “The Anatomy of Healthcare in the United States,” JAMA, Nov 2

3. Trends in Physician-Hospital Affiliation
Percent of Hospital Owned Physician Practices 3
Source: Avalere Health

4. Healthcare Consolidation & Integration
Major Health Systems are Merging
Providers are becoming payers
Payers are becoming providers
Companies from other segments are becoming providers 4

5. Degree of Hospital Consolidation Across States

6. Major Varieties of Provider Partnerships
Merger or Acquisition
Clinically Integrated Hospital Network
Accountable Care Organization
Regional Collaborative
Clinical Affiliation
Description
Formal purchase of one organization’s assets by another or the combination of two (or more) organization’s assets into a single entity
Collection of hospitals contracting jointly in order to support improved coordination, outcomes.
Independent entity, owned by one or several independent organizations, that accepts risk-based contracts and distributes shared savings.
Flexible umbrella structure, often encompassing many independent organizations of similar geography, that may serve as foundation for further integration.
Typically bilateral agreement to cooperate around a particular initiative or service line; may involve local or national partners.
Examples
Baylor Scott & White
Community Health System/Health Management Associates
Trinity Health/Catholic Healthcare East
Tenet/Vanguard
Long Island Health Network
Vanderbilt Health Affiliated Network
BS&W Quality Alliance
Southwest Health Resources
Quality Health Solutions
Arizona Care Network
Accountable Care Alliance
Providence Health Network
Allspire Health Partners
Stratus Healthcare
BJC Collaborative
Noble Health Alliance
Health Innovations Ohio
Evergreen Health with Virginia mason
Mayo Clinic Care Network
Cleveland Clinic Affiliate Program

7. What Does it Take for Physician Leaders to Have a Seat at the Table?6

8. Cost Management vs. Financial Management
August 2019
Medical Cost and Performance Management
December 2020
Financial Management of Healthcare Organizations
As a Physician Leader
How do I manage my costs? What information do I need to control costs?
How are my administrative and clinical costs classified and allocated?
How do I determine the true per unit cost of my medical services?
How do I determine which services are profitable or unprofitable?
What do I do if a service covers it’s direct costs, but not its overhead costs?
How do I determine the true cause of any variance between my budgeted and actual results?
Looking Backward
How has it performed? How do I evaluate the past financial and operational performance of a healthcare organization?
What data do I need?
Which data is the most important?
How do I interpret the numbers?
Looking Forward
How much is it worth? How do I evaluate the financial value of a prospective purchase, sale, merger, partnership or joint venture proposal?
What data or projections do I need?
What approach do I use to analyze it?
How do I interpret the results? 7

9. You’ll Have to Concentrate8