dbutzprez on group practice arrangements
DESCRIPTION
Some basics of physician group practicesTRANSCRIPT
Some Business Foundations of Physician Group Practices
Part 1: Basics of Costs and Revenues
David Butz PhDRoss School of Business, University of MichiganCareEvolutionDabAnalytics LLCNovember 2011
© David A. Butz. Please do not copy or distribute without written permission.
Disclosure
I am not supported by any commercial entity.
I do not sell any medical goods or products.
I have no relevant financial conflict of interest to disclose.
David Butz received his PhD in Economics from Northwestern University. After eight years on the Economics faculty at UCLA, he moved to Ann Arbor, MI, where he has served in various capacities on the faculty of the University of Michigan’s Business and Medical Schools. Dr. Butz devotes most of his research effort to the economics of health care delivery. Other research interests lie in health care outcomes research, industrial organization, law and economics, antitrust, and supply chain contracting, where he has published numerous peer-reviewed papers.
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To buy or not to buy? Bill is thinking of investing $450 to buy and
configure a new iPod. He figures the iPod will last 3 years, which
means $150/year, or $3/week, or 5¢/ song. On these terms, he decides, “Yes! I will get
more than 5¢/ song of enjoyment.”
Buying and Listening to an iPod
To listen or not to listen? After buying, Bill finds himself short of cash. In an
effort to save $3, he goes 1 week without listening.
Good reasoning.
Faulty reasoning.
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Health Care:
Fixed Costs But a Variable Cost Business Model
Health care costs are mostly “up front” or ongoing and fixed. Variable costs are modest.
This is also true of many other industries.Bill allocates overhead of 5¢ for each song in
order to account for his $450 up front investment. This is called “cost accounting.”
We pay by the song (“fee-for-service”), so everyone believes that the way to manage costs is to listen to fewer songs!
Distribution of Variable vs Fixed Costs of Hospital Care Rebecca R. Roberts, MD; et al. JAMA. 1999;281644-649.
Results: In 1993, the hospital had nearly 114,000 emergency department visits, 40,000 hospital admissions, 240,000 inpatient days, and more than 500,000 outpatient clinic visits. The total budget for 1993 was $429.2 million, of which $360.3 million (84%) was fixed and $68.8 million (16%) was variable. Overall, 31.5% of total costs were for support expenses such as utilities, employee benefits, and housekeeping salaries, and 52.4% included direct costs of salary for service center personnel who provide services to individual patients.
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Tracking and Billing For Costs
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Alternate Methodology
1. What is the diagnosis? Principle Diagnosis (Prin Dx) Secondary Diagnoses (Many?)
2. What care was delivered? Principle Procedure (Prin Px) Secondary Procedures (Many?)
3. What algorithm defines $? Hospitals: Diagnosis Related
Groups (MS-DRGs) Physicians: Relative Value
Units (RVUs)
Set Charges; Send a Bill
1. Assign costs. >11,000 “Intermediate product
codes” at a large hospital. Figure variable costs and then
allocate overhead Total Cost.
2. “Charge description master.” A list of facility charges. A nearly 1:1 mapping
w/intermediate product codes.
3. Track resources item-by-item; then send a big long bill for each encounter.
Background on Billing and Coding
Coding: Describes/documents both the medical necessity (Dx) of patient care and the actual work done (Px).
Motivations include:An accurate medical recordAn accurate report of services rendered, for fair and
timely reimbursementCompliance – There are heavy financial penalties for
individuals and organizations that violate the basic rulesProfessional Liability – Poor documentation puts
individuals and organizations at considerable riskMore – Research, teaching, operations, public health, …
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Nomenclature (for Physicians AND Other Providers)
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Diagnosis (Dx) CodesDescribe medical necessity – why the patient is seen.
ICD-9-CM: International Classification of Diseases, 9th Revision, Clinical Modification.
A 3-, 4-, or 5-digit number.
Note: The Affordable Care Act mandates that all providers move soon to the 10th Revision.
Procedure (Px) CodesDescribe work – what the patient is having done.
CPT: Current Procedural Terminology. Incl. “E&M” codes.
HCPCS: Healthcare Common Procedure Coding System.
A 5-digit number.
APC: Ambulatory Payment Classification for outpatient services done at a hospital.
The Common Denominator of Reimbursement
Different payers have many different methods to reimburse different provider services.
In every case, though, the provider must document the medical necessity using a “Principle Diagnosis” and perhaps many secondary diagnoses.
And in every case, the provider must document the procedures performed. There is a “Principle Procedure” and perhaps many secondary procedures.
Always, two questions:
1) What is the medical necessity? (Dx)
2) What are the services rendered? (Px)
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The information is part of the patient’s medical record. The answers may trigger payment to more than one provider, as when a surgical Px yields separate professional fees to the surgeon and anesthesiologist, as well as a payment to the hospital.
Straightforward and Consistent, but w/Exceptions
What if there is no medical necessity? A person who is not sick
seeks out a specific service. Get a flu shot. Donate an
organ. Discuss a problem that isn’t a current illness or injury. Examine a normal newborn. …
In this case, substitute a “V Code” for the usual CPT code, and proceed as usual.
What if we aim to flag/group certain types of patients? A person’s illness is caused
by an external injury. A motor vehicle accident. A
fall. A burn, poisoning, …
In this case, supplement the usual CPT code with an “E code,” and proceed …
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There are many such cases. Follow up if and only if you must.
Don’t be intimidated when you don’t know some detail.
Physician Nomenclature
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Relative Value Unit (RVU)A number assigned by CMS to each Px code that reflects the value of the physician services provided, and thus payment.
The sum of three components:
1) Work RVU
2) Practice Expense RVU
3) Professional Liability RVU
Physician productivity is often measured using wRVUs.
Conversion Factor ($)A single number that for each CPT code maps RVUs into dollar payment amounts.
MPFS: Medicare Physician Fee Schedule
Simple methodology: Take the RVU and multiply it by the conversion factor.
Other payers often reimburse as a percentage of MPFS.
YearConversion
Factor Change 2000 $36.612001 $38.26 4.5%2002 $36.20 -5.4%2003 $36.79 1.6%2004 $37.34 1.5%2005 $37.90 1.5%2006 $37.90 0.0%2007 $37.90 0.0%2008 $38.09 0.5%2009 $36.07 -5.3%2010 $36.87 2.2%2011 $33.98 -7.9%
Physician Nomenclature
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Conversion Factors ExampleCPT Code 99201
“Office or Other Outpatient Services, New Patient”
wRVU: 0.48
PE-RVU: 0.69
PLI-RVU: 0.04
Total: 1.21
Reimbursement = 1.21 * $33.98
= $41.11
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Hospital CountMedian
LOSMedian Charge Hospital Count
Median LOS
Median Charge
UNIVERSITY OF CALIFORNIA DAVIS MEDICAL CENTER 10 5.0 $132,083 MISSION HOSPITAL REGIONAL MEDICAL CENTER 14 4.5 $64,161 EL CAMINO HOSPITAL 19 5.0 $103,964 SCRIPPS GREEN HOSPITAL 18 5.0 $63,726 VALLEYCARE MEDICAL CENTER 13 4.0 $99,539 GROSSMONT HOSPITAL 14 5.0 $63,164 ALTA BATES SUMMIT MED CTR-SUMMIT CAMPUS-HAWTHORNE 17 5.0 $96,851 COMMUNITY HOSPITAL MONTEREY PENINSULA 13 4.0 $59,453 ALTA BATES SUMMIT MED CTR-ALTA BATES CAMPUS 10 5.0 $95,913 SHARP MEMORIAL HOSPITAL 15 4.0 $57,511 CEDARS SINAI MEDICAL CENTER 42 5.0 $92,363 EISENHOWER MEMORIAL HOSPITAL 33 4.0 $57,403 JOHN MUIR MEDICAL CENTER-WALNUT CREEK CAMPUS 16 4.0 $89,927 SCRIPPS MEMORIAL HOSPITAL - LA JOLLA 15 5.0 $55,670 JOHN MUIR MEDICAL CENTER-CONCORD CAMPUS 14 3.0 $82,750 SADDLEBACK MEMORIAL MEDICAL CENTER 22 6.0 $55,150 SAN RAMON REGIONAL MEDICAL CENTER 11 5.0 $81,761 HOAG MEMORIAL HOSPITAL PRESBYTERIAN 30 5.0 $55,061 SANTA ROSA MEMORIAL HOSPITAL-MONTGOMERY 17 4.0 $80,297 CITY OF HOPE HELFORD CLINICAL RESEARCH HOSPITAL 11 4.0 $52,545 STANFORD HOSPITAL 21 4.0 $77,921 ST. JOSEPH HOSPITAL - ORANGE 26 5.0 $51,482 UCSF MEDICAL CENTER 10 7.5 $76,349 HUNTINGTON MEMORIAL HOSPITAL 16 5.0 $51,146 PENINSULA MEDICAL CENTER 18 5.5 $74,200 ST. AGNES MEDICAL CENTER 19 4.0 $49,698 COMMUNITY MEMORIAL HOSPITAL-SAN BUENAVENTURA 12 3.0 $73,680 LONG BEACH MEMORIAL MEDICAL CENTER 13 4.0 $48,839 DOMINICAN HOSPITAL-SANTA CRUZ/SOQUEL 11 4.0 $72,660 SANTA BARBARA COTTAGE HOSPITAL 16 3.5 $46,268 PROVIDENCE SAINT JOSEPH MEDICAL CENTER 13 4.0 $70,141 ST. JOHN'S HEALTH CENTER 17 4.0 $41,355 TORRANCE MEMORIAL MEDICAL CENTER 14 5.5 $67,701 CLOVIS COMMUNITY MEDICAL CENTER 18 4.0 $35,861 CALIFORNIA PACIFIC MED CTR-PACIFIC CAMPUS 34 4.0 $65,683
METHODIST HOSPITAL OF SOUTHERN CALIFORNIA 10 4.0 $33,821
ST. JOSEPH'S MEDICAL CENTER OF STOCKTON 12 4.0 $64,828 All CA 2008 hospitals with N 10.
Charges represent “list” prices only. They vary a lot!
Next, One More Bit of Information
Health Care Charges: Big Markups!
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Source: http://www.medpac.gov/documents/Jun10DataBookEntireReport.pdf
http://www.hcup-us.ahrq.gov/reports/factsandfigures/2008/pdfs/section1_1.pdf
Corroboration …
Mean Charges:
$29,000
Mean Total Costs:
$9,100
Markup: 219%
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Time here is too precious to turn over to institutional detail.
How is All of This Reimbursed? Look Here:
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And this is just for Medicare/Medicaid …
Orthopedic Surgery Plays a Central Inpatient Role
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These are disproportionately Medicare patients.
In each case, Medicare provides a nice, short, slick overview.
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Other third-party payers often but not always follow Medicare’s lead.
Inpatient Rehabilitation Facilities
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Source: MedPAC, March 2011 Report to Congress, p.211.
Why Not Focus Solely on Our Professional Fees?
Start with your fees, for the same reason that flight attendants tell you to put on your own oxygen mask first.
But re: the big picture, it’s obvious: You’re the QB/steward. Your actions affect outcomes, both clinical and financial.
Knowing costs makes a difference! You have a responsibility to patient, payer, employer, family,
colleagues, and the health system. If there is one fundamental policy issue that enjoys near
unanimity, it is that fee-for-service must go away. As a practical matter, you are the one going forward who will
be called to account for costs.
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Too much of this remains in Managed Care 2.0!
Managed Care 1.0: Openly Adversarial
“Instead of free choice at the time of illness, employees henceforth were forced to make a choice among competing private health plans that would then have a contractual right to regulate medical treatments the employees and their families received at the time of illness. The preferred term in the industry for this intrusion into the doctor-patient relationship is ‘managing care.’”
Reinhardt, Uwe, “The Predictable Managed Care Kvetch on the Rocky Road from Adolescence to Adulthood,” Journal of Health Politics, Policy and Law, Vol. 24, No. 5, October 1999, pages 897 – 910.
“Managed care, as its name implies, involves those methods of financing and delivering health care services that manage, or intervene, in care decisions made by patients or doctors.”
Gaynor, Martin, and Haas-Wilson, Deborah, “Change, Consolidation, and Competition in Health Care Markets,” Journal of Economic Perspectives, Vol. 13, No. 1, Winter 1999, pages 141-164.
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These are representative of a 1990s consensus that managed care revolved around restricting the prerogatives of physicians and their patients.
This legacy remains.
The New Yorker, 14 December 2009
“Testing, Testing,” Atul Gawande
“Our fee-for-service system, doling out separate payments for everything and everyone involved in a patient’s care, has all the wrong incentives: it rewards doing more over doing right, it increases paperwork and the duplication of efforts, and it discourages clinicians from working together for the best possible results.”
Source.
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Investors are right to ask, especially since CMS is the industry’s price leader:
What Does the Future Hold?
23http://www.medpac.gov/documents/Jun10_EntireReport.pdf
Meanwhile, Physician Group Practices Have High Fixed Costs!
Fixed costs are reflected in PE and PLI RVUs Work RVUs
52% Physician time Technical skill and effort required Mental effort, judgment, physician stress, …
Practice Expense RVUs 44% Based on an assessment by CMS of the mostly fixed costs of
running an efficient practice, effectively amortized over many patients. This includes office space, staff, IT, utilities, taxes, etc. If a group practice is small and unable to capture economies of
scale and scope … then this reimbursement is too low.
Professional Liability Insurance RVUs 4% 24
Mean
If Bill’s iPod costs $150/year and songs are “priced” at 5¢ each.
Economics of Fixed Cost Businesses: Throughput!
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0 250 500 750 1000 1250 1500 1750 2000 2250 2500 2750 3000 3250 3500 3750 4000 4250 4500 4750 5000$0
$50
$100
$150
$200
$250
$300
Costs
Revenues ($0.05)
Revenues ($0.04)
Low Utilization:Big Losses
High Utilization:Big Profits
BreakEven
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A 3-physician medical oncology practice in Allentown, PA.
Hematology Oncology Associates
Friedman, et al., “Taking the Pulse of a Practice,” Oncology Issues, 2005. Previously private practice group; bought by Lehigh Valley Hospital in 1999. Hospital-based (Dorothy Morgan Cancer Center). Also an office practice: patient visits, labs, nurse, and certified registered
nurse practitioner. The practice subcontracts billing to the hospital.
Productivity Measurement and Compensation: Physicians are “salaried” but strongly incented using wRVUs exclusively. Individual RVU thresholds and group threshold. Bonus based linearly on
RVUs over the threshold, but only if the group threshold is also met. If the practice loses money, the physicians feel some hit in their salaries. “Salaries are therefore reflective of the direct productivity of the physician.” Various hospital obligations, including teaching, committee work, weekend
rounds, and night call. How are these factored into compensation?
Some Business Foundations of Physician Group Practices
Part 2: The Group’s Business Functions
David Butz PhDRoss School of Business, University of MichiganCareEvolutionDabAnalytics LLCNovember 2011
© David A. Butz. Please do not copy or distribute without written permission.
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Why do physicians form group practices?
Negotiating leverage with payers. Better night/weekend coverage
ED On-call can be better distributed across a larger group.
More opportunity for professional development. Potentially better infrastructure
Higher levels of support & broader scope, as well. Better capitalization. Better amortized overhead. Better specialization of talents.
Stronger leadership (e.g., an MBA, MHA, …) President/CEO: Represents group to Sr. management, payers, … Manages day-to-day operations of the group. But … Practice leadership is almost uniformly MD.
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Conventional Wisdom:
At any given moment …
• Must carry a pager.
• No alcohol.
• Can’t travel far.
• Leisure could be disrupted.
Put differently, what is the cost of the flow of on-call services cardiologists provide?
How much could this really cost?
Consider the cost of taking ED “call” …
The Cost of a Cardiologist’s Capacity
Cost of capacity:
How does ED call affect …
• The capacity of my practice?
• The capacity of my group?
The cost looks quite different.
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For you as a professional, and for your group, the ultimate question: How best to allocate your limited capacity?
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Group Finances & Governance
Business model driven by RVU generation. Ancillary fees are important, but for most groups professional
fees provide the lion’s share of revenue.
Group/physician productivity: measured by RVU’s. Must have organizational by-laws & principles of
governance and professional expectation. Compensation and staffing arrangements (e.g., ED call) Business functions Group access guidelines Professionalism Medical records Compliance
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The Medical Staff and its By-Laws
Physicians are “Self-Governing” Policies and Governance Procedures Credentialing and Privileging Levels of Appointment
Active Honorary Consulting Affiliate
The Medical Staff’s Relationship with the Hospital Hospital Rules and Regulations Physicians’ Rights and Responsibilities
Most prominent: ED call obligations & Professional Liability Insurance Administrative Responsibilities, etc Due Process
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Physician-Led Health System Infrastructure
Departments/Sections Formal Programs: Trauma,
Transplant, Bariatrics, … Centers: Cancer, Stroke,
Spine, Cardiovascular, … Women’s Health Ancillary Services
Blood Bank Respiratory Therapy Transport Dialysis Housecleaning Dietary And the list goes on …
Standing Committees Conflict of Interest Compliance Risk Management IRB Formulary Committee Medical Device Committee, … Materials Management Central Sterile Supply Capital Budget Planning Mortality & Morbidity Disciplinary Committees Privileging And much more …
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Clinical Programs, Verified Centers, & Regional Systems
Ex: Trauma Accreditation by the American College of Surgeons Rigorous standards
Patient registries Explicit staffing requirements with job descriptions Governance (Quality Assurance, Accountability, Feedback loops) Documentation, beginning with patient registries Protocols Call schedules Structured outreach and education Specific training requirements Re-accreditation every 3 years, including site visits by reviewers Pre- and post-hospital requirements. Much more
Regional and often statewide, inclusive systems of care.
Management Functions Run the Gamut
Human Resources Payroll Benefits
Medical / Dental / Vision 401K
Life Insurance
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Billing/Claims Processing/Collections Billing
Scheduling Registration Insurance verification Medic+ A/R Collections
Claims Processing Adjudication Processing Reporting
Collections Mail telephone techniques Aging analysis Monthly collection reports
General Accounting General ledger Standard, reporting Day end journal
entries of deposits CME tracking Bank reconciliations Revenue allocation
reporting at month end Group purchasing
Source: Rocky Mountain MSO
Management Functions Run the Gamut Human Resources
Training Recruitment
Place ads Screen applicants Set up interviews Check references
Policies & Procedures Evaluation/Merit System Background Checks Counseling
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Credentialing & Licensing/Malpractice
Credentialing/CME Licensing & renewals Medical Malpractice
Managed Care Contracting Contract analysis Contract negotiations Contract
management Sub-capitation
Marketing Satisfaction surveys Patient retention
strategies Direct mailing Building ads Press releases Brochures Phone book listings
Source: Rocky Mountain MSO
Office Operations Medical records Coding Supplies Ancillary ordering,
tracking On-call telephone
service Patient
appointments Patient triage Health information Prevention
Intermediaries Include:
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Management Service Organizations Provide services to
physicians and their practices.
Administrative tasks, including billing, IT, compliance, etc.
Can also provide group purchasing of services, supplies and benefits.
Group Purchasing OrganizationsGPOs are organizations that act as purchasing intermediaries that negotiate contracts between their customers—health care providers—and vendors of medical products. GPOs’ sources of revenue include contract administrative fees, other fees obtained from vendors, and fees resulting from direct charges to customers. According to a 2009 study, on average, GPO contracts account for about 73 percent of nonlabor purchases that hospitals make.
Source: Group Purchasing Organizations: Services Provided to Customers and Initiatives Regarding Their Business Practices, General Accounting Office, August 2010, Page 4.
Employed Physicians and System Alliances
Employed PhysiciansWhy have an independent physician group at all?
Why not have the hospital buy them out and run them. This could align incentives and reduce overhead costs.
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Pennant Health Alliance Physician/hospital network
“Sponsors:” 9 hospitals and 100+ outpatient venues.
UMHS, 6 Trinity hospitals, Metro Health Hospital in Wyoming, MI.
Services emphasize supply chain, IT, and revenue cycle.
Streamlining business processes, reducing costs, increasing revenue and providing the best health care for our patients.
Support and strengthen independent MI providers.
Intermediaries Include:
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Patient-Hospital Organization Longstanding and tested. A separate legal entity
formed by physicians and at least one hospital for purposes of joint contracting.
The PHO objective, in other words, is to negotiate contracts with third-party payers to provide both physician and hospital services.
Independent Practice AssociationA single- or multi-specialty association of otherwise independent physicians for purposes that may include some or all of the following: Contracting among the other IPA
physicians, with independent physicians, with health systems, and with payers.
Care coordination and guided referrals. Modest administrative services.
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Physicians contract via the group HMOs & Physician Groups have multiple partnersFixed patient fee (PMPM) Commit to as little as a fee scheduleLittle autonomy, but … guaranteed patient flow and …
Physicians are salaried HMO employees A loose physician arrangementNo financial risk and no upside The IPA negotiates on behalf of physiciansStable lifestyle The IPA provides other nominal services The physician maintains considerable autonomy
Physicians are salaried hospital employees
No financial risk and no upsideStable lifestyle
Practices/Depts. are "owned" by the hospital.Physicians are salaried.Stable lifestyle
Independent Group Practices
Independent Group Practice/Network Model HMO
Independent Practice Association (IPA)
Captive Group Practices
Integrated Delivery Systems
Hospital-Based Practices
Group-Model HMOs
Staff-Model HMOs
Status Quo: Physicians Organize in Many Ways
Professional Liability Insurance (PLI)
Historically, procured by the group through the commercial insurance market.
Administratively, the group stands as intermediary between physician, plaintiffs, defendants, insurer, hospital.
The physician is just one interested party among many.Larger groups (hospitals, as well) are now forming group
captives, or more formally, risk retention groups (RRGs).The group and its physician members are self-insured, up
to a point, with insurance and re-insurance to hedge against the largest claims.
The legal, financial, regulatory, and management hurdles are substantial. The potential, though, is huge!
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Which Services Matter Most to Orthopedic Groups?
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Imaging, procedures, etc. matter, but isn’t growth still hospital-based?
Community-Based Group Practices Even more business-focused, RVU-driven, referral-
based: available, affable, and then able. The medical staff may be quite “diverse.” Side deals may abound; trust may be short.
Dr. Smith has a nice deal as trauma director. Who still takes ED call and who has managed to opt out? Your colleague, Dr. Lee, is a terrific surgeon (or not), but she does 250 of
the total 450 cases, and at 61 years old shows no signs of slowing down. You are splitting up the residual with others.
Your group and most others have relationships and admitting privileges at multiple hospitals, as well as interests in various other venues. Your interests, attention, and physical presence may be more divided. Care may be more difficult to coordinate.
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A 3-physician medical oncology practice in Allentown, PA.
Hematology Oncology Associates
Friedman, et al., “Taking the Pulse of a Practice,” Oncology Issues, 2005. Previously private practice group; bought by Lehigh Valley Hospital in 1999. Hospital-based (Dorothy Morgan Cancer Center). Also an office practice: patient visits, labs, nurse, and certified registered
nurse practitioner. The practice subcontracts billing to the hospital.
Productivity Measurement and Compensation: Physicians are “salaried” but strongly incented using wRVUs exclusively. Individual RVU thresholds and group threshold. Bonus based linearly on
RVUs over the threshold, but only if the group threshold is also met. If the practice loses money, the physicians feel some hit in their salaries. “Salaries are therefore reflective of the direct productivity of the physician.” Various hospital obligations, including teaching, committee work, weekend
rounds, and night call. How are these factored into compensation?
What do we make of the trend of hospitals buying up group practices?
Employing a Physician is a ≥$500K Investment
Hospitals lose $150,000 to $250,000 per year over the first 3 years of employing a physician — owing in part to a slow ramp-up period as physicians establish themselves or transition their practices and adapt to management changes. The losses decrease by approximately 50% after 3 years but do persist thereafter.
…
For hospitals to break even, newly hired PCPs must generate at least 30% more visits, and new specialists 25% more referrals, than they do at the outset. After 3 years, hospitals expect to begin making money on employed physicians when they account for the value of all care, tests, and referrals.
Kocher R. and Sahni N.R. Hospitals' Race to Employ Physicians - The Logic Behind a Money-Losing Proposition N Engl J Med 2011; 364:1790 – 1793, 05/12/ 2011. 44
Some Business Foundations of Physician Group Practices
Part 3: What the Future May Hold
David Butz PhDRoss School of Business, University of MichiganCareEvolutionDabAnalytics LLCNovember 2011
© David A. Butz. Please do not copy or distribute without written permission.
4646
Front/Center: What Sway Do Group Practices Have?
Still true going forward?
What Do We Mean by “Fragmented?”
Donald Berwick: “A common criticism of U.S. health care is the fragmented nature of its payment and delivery systems. Because in many settings no single group of participants — physicians, hospitals, public or private payers, or employers — takes full responsibility for guiding the health of a patient or community, care is distributed across many sites, and integration among them may be deficient. Fragmentation leads to waste and duplication — and unnecessarily high costs.”“Launching Accountable Care Organizations — The Proposed Rule for the Medicare Shared Savings Program,” NEJM, 31 March 2011.
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Conventional Wisdom from NEJM, Dec. 30, 2010, R. Kocher and N. Sahni,
“Physicians versus Hospitals as Leaders …”“Much of [the US’s high health care] cost derives from high rates of unnecessary hospitalizations and potentially avoidable complications, and these, in turn, are partially driven by fee-for-service incentives that fail to adequately reward coordinated care that effectively prevents illness.”
…
“The desired consequence of these changes is enhanced tertiary prevention, leading to substantial reductions in unnecessarily expensive specialty referrals and tests and avoidable complications. …
“Achievement of this level of care coordination will require the development of larger integrated delivery organizations — preferably, accountable care organizations (ACOs) that incorporate primary care practices structured as patient-centered medical homes and that can support new investments in information systems and care teams and can maintain service hours resembling those of retailers. A move toward ACOs will mean major changes in the structure of physicians’ practices, …”
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Thomas L. Greaney, New England Journal of Medicine, December 22, 2010.
“Accountable Care Organizations – The Fork in the Road”
“ACOs offer a much-needed vehicle for integrating health care delivery and reducing the well-documented shortcomings of the system that are attributable to payment and organizational features that reward high volume rather than low cost or high quality.”
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Avery Johnson, Wall Street Journal, March 28, 2011
“The Model of the Future?”
“The health-care law promoted accountable-care organizations. But it's hard to know what they are.”
"An ACO is like a unicorn; everyone thinks they know what one is, but no one has ever seen one," says Gene Lindsey, President and Chief Executive of Atrius Health.
Elliott Fisher, the Dartmouth Medical School professor who helped coin the term ACO, and who worked with members of Congress to draft the ACO concept into the health-care law, concedes that "there are some really important questions about whether this will work."
But, Dr. Fisher adds: "I think it's the best hope we have.”
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Health care’s greatest bottleneck will be MDs
1910: The Flexner Report leads to many medical schools closing.
1965: The push to train more physicians begins. By 1980, the number of graduates roughly doubled.
40 years of rapid workforce growth. 1980 – 2010: No appreciable increase in the number
of US-trained MD graduates (allopathic).
Going forward, US-trained MDs reaching retirement age will almost offset new allopathic graduates. An abrupt near-steady state.
Revisiting Operations Management
Each year, starting circa 1970, roughly 16,000 physicians have entered the “workforce pipeline” by graduating from allopathic medical schools (throughput). They spend four decades practicing before reaching retirement age (flow time). If there is no attrition at all during these four decades, it follows that in 2010, with the pipeline full, the size of the US-trained, allopathic physician workforce (i.e., inventory) is roughly ____ physicians.
40 Years
640,000 US-MDs when full.16K/Yr
1970 2010
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Elevate the Workforce
The Future of Nursing: Leading Change, Advancing Health, Institute of Medicine, Nov 17, 2010.http://www.iom.edu/Reports/2010/The-Future-of-Nursing-Leading-Change-Advancing-Health/Recommendations.aspx?page=1
Recommendation 1: Remove scope-of-practice barriers. Advanced practice nurses should be able to practice to the full extent of their education and training.
Recommendation 2: Expand opportunities for nurses to lead and diffuse collaborative improvement efforts.
Recommendation 3: Implement nurse residency programs.
Recommendation 4: Increase the proportion of nurses with a baccalaureate degree to 80 percent by 2020.
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Elevate the Workforce
The Future of Nursing: Leading Change, Advancing Health, Institute of Medicine, Nov 17, 2010.http://www.iom.edu/Reports/2010/The-Future-of-Nursing-Leading-Change-Advancing-Health/Recommendations.aspx?page=1
Recommendation 5: Double the number of nurses with a doctorate by 2020.
Recommendation 6: Ensure that nurses engage in lifelong learning.
Recommendation 7: prepare and enable nurses to lead change to advance health.
Recommendation 8: Build an infrastructure for the collection and analysis of interprofessional health care workforce data.
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“The Family Health Team [FHT] model [introduced in 2004] is designed to expand the capacity of primary care through development of interdisciplinary teams and to improve the breadth and quality of care through incentives provided by a blended payment model. Today, about 720 physicians in 150 FHTs serve more than 1 million patients. [emphasis added.]
…
“Physicians have responsibility for a defined panel of patients and are assisted by other health professionals, such as nurses, nurse practitioners, psychologists, pharmacists, social workers, and health educators. A typical physician panel includes about 1400 patients, smaller than a typical U.S. practice. Inclusion of a nurse practitioner adds 800 patients to the expected practice size.
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“Patient-Centered Medical Homes in Ontario”Walter W. Rosser, M.D., Jack M. Colwill, M.D., Jan Kasperski, R.N., M.H.Sc., and Lynn Wilson, M.D.
New England Journal of Medicine, January 6, 2010. 10.1056/NEJMp0911519
“Physician payment is based on age- and sex-based capitation that is calculated from Ontario’s fee-for-service experience. Additional fees are provided for services deemed to require added emphasis ……
“Since income is not based primarily on physician visits, practices can explore broader roles for team members … The total number of visits per patient has not declined, but more visits appear to be occurring with team members other than the primary physician.
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One effect that is already obvious is an increase of approximately 40% in physicians’ incomes: the average net income for a family physician has increased from $180,000 (Canadian) in 2004 to $250,000 within FHTs …
Consider reading this article while replacing every occurrence of “patient-centered” with “capacity-centered.” Is the meaning much the same? Put differently, does a capacity-centered business model provide the economic foundation that enables a patient-centered medical home?
“Per capita, Canada has one third fewer active physicians than the United States, 15% more primary care physicians, and half as many specialists. Consequently, the heavy responsibilities of Canadian specialists promote shared care with family physicians, and specialists rarely see patients without referral. … Ontario’s large investment in FHTs signifies its commitment to enhancing the capacity and quality of primary care. [emphasis added.]
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Ontario continues to convert fee-for-service practices to patient-centered medical homes, so far with positive results, including more graduates entering family medicine.
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“Patient-Centered Medical Homes in Ontario”Walter W. Rosser, M.D., Jack M. Colwill, M.D., Jan Kasperski, R.N., M.H.Sc., and Lynn Wilson, M.D.
New England Journal of Medicine, January 6, 2010. 10.1056/NEJMp0911519
For a different perspective on medical homes:
The Patient Centered Medical Home (Robert Graham Center, November 2007)
http://www.graham-center.org/PreBuilt/PCMH.pdf
The analysis does not presume any particular focus either on “capacity” or on the importance of management principles. On the contrary, there is a sense that medical homes “counter market dynamics” that otherwise obstruct equity, efficiency, and quality.