DMI Transitions Clinical Institutes: The Ultimate Integration ...

DMI Transitions

Clinical Institutes:The Ultimate Integration Strategy

Presented by:

Jerry Youkey, M.D.Vice President, Medical and Academic Services

Greenville Hospital System

and

Ken E. Mack, FACHEPresident, DMI Transitions

September 2003

Society for Healthcare Strategy and Marketing Development

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Jerry Youkey, M.D.

Jerry R. Youkey, M. D., is Vice President, Medical and Academic Services for Greenville Hospital System in Greenville, SC. Dr. Youkey received his Bachelor of Arts degree from Stanford University, Palo Alto, CA, and his medical degree from Medical College of Wisconsin, in Milwaukee WI. He served a rotating internship and general surgery residency at William Beaumont Army Medical Center, El Paso, Texas and a fellowship in peripheral vascular surgery at Walter Reed Army Medical Center, Washington, DC.

Dr. Youkey served in the United States Army, attaining the rank of Colonel, Medical Corps, and then served as Chief, Department of Surgery, and Director, Peripheral Vascular Surgery Fellowship program at Geisinger Medical Center, Danville, PA prior to coming to Greenville. Dr. Youkey is certified by the American Board of Surgery in general surgery and general vascular surgery, and is a member of numerous professional societies. He is widely published in his specialty field of general vascular surgery, having authored books, abstracts, and journal articles. In his current capacity he is the Director of Medical Education for the Greenville Hospital System, and the Chief Medical Officer for their 230-physician multi-specialty group practice.

Dr. Youkey holds the academic appointment of Professor and Associate Dean at the University of South Carolina, Columbia, SC, and the Medical University of South Carolina in Charleston. In addition to his administrative duties, Dr. Youkey has an active general vascular surgery practice at the Greenville Hospital System.

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Ken E. Mack, FACHE

Ken E. Mack, FACHE, is President of DMI Transitions (DMI). DMI has aided its health provider clients across the country in a wide range of revenue development and operations turnaround projects. Under Ken’s direction, DMI has, in the last seventeen years, assisted over five hundred healthcare providers in developing profitable business solutions. DMI’s client list includes hundreds of hospitals such as Stanford and Scripps Medical Centers in California, Baylor Medical Center in Dallas, The Cleveland Clinic, University of Maryland Medical System, and Northwestern Medical Center in Chicago. Prior to founding DMI, Ken Mack was Vice President of Business Development for Akron General Medical Center, (Akron, Ohio), a Strategic Planner and Product Manager for General Electric and National Marketing Director for the Stouffer Corporation. He has been a frequent faculty member for the American College of Healthcare Executives, HFMA, AMA and the American Hospital Association.

His achievements and professional honors include 1990 Who’s Who in America, Editorial Advisory Board for “Healthcare Competition Weekly,” board member Academy for Health Services Marketing, AMA Keynoters on Tour, Trendwatchers Panel AMA, JC’s Outstanding Young Men in America, Omicron Delta Kappa Leadership Fraternity, Review Board of the Journal of Health Care Marketing, as well as recognition awards by American Marketing Association and Ohio Hospital Association. Ken earned an MBA in marketing from Cleveland State University and a BS in management from Bowling Green State University and is a Fellow in the American College of Healthcare Executives.

[email protected]

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Who is DMI Transitions?

DMI Transitions, Inc. (DMI) was founded in 1985 to assist healthcare systems and their medical staffs to maximize their individual profitability. Our clients’ success has been achieved through revenue and operations solutions that have improved the working relationships between physicians and the administrative staff.

We are a consulting firm made up of experienced practitioners who are involved in practical and profitable programs, services and joint ventures and department turnarounds. Our team has serviced over 500 healthcare clients from Bangor, Maine to La Jolla, California.

DMI is widely recognized for its excellent “hands-on” client support. Over the last sixteen years we have assisted clients in developing successful physician group practices, joint ventures, primary care networks, business development programs, and the implementation of operations improvement solutions. We have also assisted our clients in fixing a wide range of revenue related problems. These include managed care contracting, employed physicians, department performance, specialty contracting and market share declines.

Tel: 440-838-8551

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Course Expectations

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How would you rate your organization’s overall effectiveness in aligning with its physicians?

1 Excellent

2 Good

3 Fair

4 Poor

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1 Excellent

2 Good

3 Fair

4 Poor

5 No PHO

If your organization presently has or has had in the past a PHO, how would you rate its effectiveness in aligning with physicians?

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If your organization employs or has employed PCP’s, how would you rate this alignment strategy?

1 Excellent

2 Good

3 Fair

4 Poor

5 No Employed PCP’s

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1 Yes

2 No

Does your organization have joint ventures with physicians?

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1 Excellent

2 Good

3 Fair

4 Poor

If your answer was yes, how would you rate the joint venture(s)’ effectiveness?

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1 Yes

2 No

Do you believe your physicians are trying to capture a share of “your” technical revenues?

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Industry State of the Union

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National Healthcare Expenditures

0

500

1000

1500

2000

2500

3000

Bill

ions

1995 1997 1999 2001 2003* 2005* 2007* 2009* 2011*

Year* ProjectedSource: Centers for Medicare and Medicaid Services

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National Per Capita Healthcare Expenditures

0100020003000400050006000700080009000

10000

Dol

lars

1995 1997 1999 2001 2003* 2005* 2007* 2009* 2011*

Year* ProjectedSource: Centers for Medicare and Medicaid Services

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Economic

Skyrocketing supply, pharmaceutical, and personnel costs

Escalating liability premiums Rising numbers of uninsured Shrinking state and federal reimbursement Increasing contractual discounts Balanced Budget Act-97 and beyond Impact of rising healthcare costs on business

community Shift of healthcare costs to consumer

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Regulatory

HIPPA State agencies JCAHO CMS/OIG Compliance Patient safety Work hour limitations

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Social

Shortage of physicians, nurses, and allied health care professionals

Geriatric baby boomers+AARP Medicare demonstration projects Leap Frog Consumerism Focus on medical errors Evidence based medicine Internet based health care report cards

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Overall Trends

Physician

Income

Hospital

Margins

Competition

Between

Physicians

and Hospitals

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Pay For Performance

CMS Payers Employers

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“One day you are sipping the wine,the next day you are picking the grapes.”

- Lou Holtz

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Hospitals Want

Patients Medical staff to bring patients Cost control Contracting leverage Medical leadership Market differentiation

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Physicians Want

Income preservation– Indirect compensation– Access to patients– Access to ancillaries– Improvement in efficiency– Reduction in overhead

Access to capital Contracting leverage Participation in decision making Market differentiation

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The Spectrum of Physician/Hospital Relationships Employment

Institute model

Joint venture arrangement

Mutual project development including medical staff procedures and governance

Neutral medical staff participation (membership)

Competitive position

Aligned with or employed by a competing hospital

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A Wide Range of Options

Neutral medical staff participation

Competitive position

Institute model

Mutual project development including medical staff procedures and governance

Employment

Joint venture arrangement

$ R

isk

Potential ROI

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Hospital Needs

Physician specialty-specific:

Input into strategic planning

Collaborative involvement in operations

Integrated involvement in quality of care initiatives

Participation in medical education, research initiatives, and CME activities

Referral network development for third party contracting

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The Bottom Line

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You are either building bridges…

…or putting up walls

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Definitions

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Clinical Program

A coordinated, but limited scope of diagnostic and therapeutic services designed to deliver clinical care to a defined group of like patients, i.e., an endovascular program, a complex spine program, etc.

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Center

A comprehensive and expanded group of clinical services delivered at a single site and designed to provide care to a subgroup of patients within a service line, i.e., cancer center, dialysis center, etc.

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Clinical Institute

A clinical and business structure designed to integrate the efforts of a hospital with a group of variously aligned physicians in order to:

Develop market differentiating excellence of care

Increase market share through a broad scope of high quality services for patients with related clinical needs, i.e., a women’s institute, a cardiovascular institute, etc.

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Institute Model

Clinical InstituteGovernance

Physician Hospital/Members Health System

Clinical quality benchmarking and improvement Revenue generation

– Clinical trials– Gain sharing– Medical management

Membership exclusivity– Benefits of membership

Fund raising Promotional and public relations support Research Employer/Payer links

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Institute Model

Very proactive and flexible physician integration and alignment vehicle Institutes can be constructed to reflect the unique needs of the

Hospital/Health System, its physicians and the market place Components can include:

– Independent and employed physicians

– Clinical management contracts (medical directorships)

– Clinical drug trials

– Gain sharing

– Joint ventures

– Clinical protocols

– Preferred privileges including scheduling and block OR time

– Clinical benchmarking and quality improvement

– Preferred local and regional access to referrals

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Avoiding “Turf” Wars

Nationally, approximately 12,000 procedural specialists are competing for vascular patients– 2,500 Vascular Surgeons

– 4,000 Interventional Cardiologists

– 5,500 Interventional Radiologists

Technology advances in non-invasive techniques have

fueled the war, but success requires collaboration

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Peripheral Vascular Disease (PVD)

300,000 patients diagnosed each year 8-10 million affected 2-5 times more common in men Those affected have a 6 times higher death rate from

cardiovascular disease 15% chance of dying within 5 years when

symptomatic 50% chance of dying within 10 years from initial

diagnosis Disease should be treated as a systemic disease

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Vascular Market Growth

0

20000

40000

60000

80000

100000

120000

PTA/Atherectomy/ Noncoronary Vessel

1998 1999 2000 2005 (est.)

Estimated Number of Procedures

Source: 2003 The Advisory Board Company

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Growing the Pie – Skyview Health System

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Utilization Increases - 2001

Patient Volume Growth

Total Patie nt Vis its Vascular Surge rie s

Vascular Ultrasounds

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

Operating and Downstream Revenue

Resulting Downstream Revenue

Vascular Center Operating Income

Downstream Inpatient Revenue

Downstream Inpatient Contribution Income

Source: 2003 The Advisory Board Company

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Physician Integration Options

IPA PHO Joint Venture Institute Employment

Hospital Risk Physician Risk Clinical Quality Improvement Payer Contracting Hospital Financial Improvement Physician Financial Improvement Market Share Physician Integration Hospital Control Physician Autonomy

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Components of a Clinical Institute

Clinical activities: – Comprehensive, coordinated clinical care– Individual professional services, programs and centers– Laboratory services– Imaging services

Business structure– Closed staff including selected physicians from any practice

setting– Flexible to include employment, joint ventures, contractual

affiliation, etc.– Many physicians may spend only a portion of their work

time providing specific clinical services under the auspices of the Institute

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Components of a Clinical Institute

Academic initiatives

– Clinical trials

– CME programs

– Subspecialty post-CME training programs e.g. new technology training

– Applied basic science research

Foundation strategy

– Philanthropy

– Grants and endowment to help pay for activities not funded by traditional professional or technical revenue

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Pros:– Benchmarks and improves quality outcomes– Provides a vehicle to develop comprehensive clinical pathways– Provides revenue opportunities for physician members

» Joint ventures» Medical management fees» Gain-sharing» Clinical trials

– Non-revenue physician benefits» Preferred scheduling» Medical equipment purchases» Office links» CME’s» Promotional and speaking options» Priority referrals

– Branding– Fund Raising– Clinical research– Non-compete qualifications– Enhanced ability to recruit physicians

Institute Model

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Cons:– Not all physicians on staff would be Institute members

– Physician “control” of Institute activities

– Long-term commitment required

– Pressure to create additional institutes

– Potential to limit capital expenditure flexibility

Institute Model

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Example: A Cardiovascular Institute

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Cardiovascular Institute

Screening

Education/ Prevention

Self Referral/

Call Center

Primary Care Physician

Emergency Department

Diagnostic Testing

and/or Sub-specialist Referral

Non-Invasive

Treatment

Invasive Treatment

HHC

PCP /Specialist

Rehab

Disease Identified

?

Continued Treatment

Yes

No

Care Management

Physician

Care Management

Physician

Benchmarking – Clinical PathwaysMeasurableClinicalOutcomes

MeasurableClinicalOutcomes

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Integrated services providing cardiology, cardiac surgery, vascular medicine, vascular surgery, and endovascular diagnostic and therapeutic cares

In addition to their traditional professional services:

– Cardiologists could be involved in leadership initiatives and strategically develop the geographic catchment area for the Institute

– Cardiac surgeons can be involved in the development of a new clinical program, i.e., off-pump bypass surgery, arrhythmia surgery, etc.

– Vascular surgeons lead academic endeavors to include development of a post-GME subspecialty training program in vascular surgery and a multi-specialty annual cardiovascular CME program

Cardiovascular Institute Features

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The vascular medicine specialists developed a multispecialty vascular interventional service (with vascular surgeons, cardiologists, and interventional radiologists) that is the primary driver of a PVD clinical trials program.

Various diagnostic/therapeutic services such as a non-invasive cardiovascular laboratory or MRA will be included in the Institute.

The Institute is collaboratively managed, subject to a single strategic planning process and marketed under the banner of the Cardiovascular Institute.

Cardiovascular Institute Features

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Responsibilities of Physician Members of Institute Development of and participation in standardized

clinical protocols

Development of and participation in utilization initiatives

Assistance with outcomes data collection and reporting

Participation in peer review activities

Contribution to patient satisfaction goals

Compliance with professional behavior standards

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Responsibilities of Physician Members of Institute Involvement in medical education and research

activities as appropriate Participation in research activities as appropriate Contribution to program development as

appropriate Participation in philanthropic efforts as needed Assistance in negotiations with vendors as

requested by management Performance of a predetermined portion of their

patient care activity within Institute facilities in order to assure ability to track quality outcomes

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1 Excellent

2 Good

3 Fair

4 Poor

How would you rate your organization’s effectiveness in improving clinical outcomes through the use of Centers of Excellence and/or service lines?

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1 Less Than 5%

2 5-10%

3 10-20%

4 More Than 20%

What percentage of your costs could be improved if your physicians and the hospital were economically aligned?

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1 Trust

2 Power

3 Money

4 Control

What is the primary reason you have not achieved optimal alignment with your physicians?

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1 Yes

2 No

Do you believe that clinically we are still in the era of “piecework medicine?”

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Physician Alignment

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Rank Specialty Revenue generated per year

1 Cardiac surgeon $3.1 million

2 Neurosurgeon $2.3 million

3 Vascular surgery $2.2 million

4 Cardiologist $1.8 million

5 Orthopedic surgeon $1.8 million

6 General surgeon $1.8 million

7 Hematologist/oncologist $1.8 million

8 Nephrologist $1.7 million

9 Obstetrician/gynecologist $1.6 million

10 General internist $1.5 million

The Physician Specialist“Customer” Value!

This list of the top 10 specialties bringing in the most revenues for acute care hospitals includes all the major specialties investing in surgery hospitals

Source: Merritt, Hawkins & Associates, based on 2002 survey of 4.000 hospital CFOs

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Institute Concierge Club

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Privileges of Physician Institute Members Inclusion in Institute mediated third-party

contracting negotiations

Marketing

– Channeled referrals through Institute physician referral system

– Participation in patient care promotional activities

– Indirect marketing through Institute promotional activities

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Privileges of Physician Institute Members

Recruitment assistance

Access to Institute based clinical trials

Appropriate house staff coverage through teaching activities

Gainsharing

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Screening ExampleTarget Population

for High Cholesterol

Store 1 Store 2 Store 3 Store 4 Store 5 Store 6

100 Screenings

100 Screenings

100 Screenings

100 Screenings

100 Screenings

100 Screenings

600 Screenings80% learn about

sponsors55% at Risk

40% seek MD Referral57% seek MD w/in 1 mo. MD Referral Other Services

Retail or Institute Physicians’ Offices

66

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Assumptions

Number of pieces mailed Inactive 1200 Active 8800

Revenue Office Visit $175 Downstream $ w/in 12 mos $1,214 Contribution Margin & Profit 17%

Response/use rates Inactive 24% Active 5% % w/ downstream activity 55%

Mailing cost Set up $3,500.00 Per piece w/postage $1.20

Return MD Office Downstream Total Rev Margin Mail Costs ROI:1 Inactive $50,400 $192,297.60 $242,698 ######## $3,190 13 Active $77,000 $293,788 $370,788 ######## $12,310 5

$127,400 $486,086 $613,486 $104,293 $15,500 7

Financial Proforma: Physician Reminder Program/Margin based

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Operational infrastructure to support Institute programs

Access to otherwise exclusive joint ventures Appropriate reward for leadership in medical

management initiatives Participation in Institute strategic planning initiatives Differential access to hospital resources through the

Institute (e.g. scheduling, block time) Input into Institute related capital acquisition

decisions

Privileges of Physician Institute Members

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Assistance with individual physician practice development and practice management to the extent that it contributes to Institute success

Participation in Institute CME activities Participation in Institute Foundation strategy Institute sponsored physician training opportunities Access to Institute patient education materials Staff RN and technician training programs Inpatient physician extender support

Privileges of Physician Institute Members

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Preferred lease rates

Input into who are the Institute Fellows (physician members)

Provider outreach assistance

Participation in visiting clinician programs

Privileges of Physician Institute Members

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Legal Opinion Letter

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Institutes

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Example: Cole Eye Institute

Cleveland Clinic Foundation

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Cole Eye Institute

Opened in 1999, state-of-the-art institute that handles over 140,000 patient visits a year

Ranked nationally by U.S. News & World report and is ranked the best in Ohio

Provided an ideal environment for research and top quality patient care, comfort and convenience

Established a strategy to capture market share in surrounding suburbs of Cleveland, Ohio– Extended its ophthalmic care to six locations around

Northeastern Ohio

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Cole Eye Institute

Philanthropy – donations from patients and civic leaders played an essential role in its development and continuing delivery of high-quality care and research

Includes a team of vision researchers committed to understanding genetic-based eye diseases

Created to support ophthalmologists:– Treating a wide range of eye problems

– Conducting research

– Teaching

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Review of Expectations

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Institutes Benefits

Clinical synergies

Patient Care

Brand identity

Physician commitment

Market share

Preferred contracting

Long-term life cycle

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Institute Development – Hospital Role

Although a clinical Institute can be conceived as a corporate strategy, it cannot be developed top down. It is highly dependent upon physicians to develop the array of high quality clinical activities upon which it is built.

As a proactive strategy, a hospital can facilitate building of these individual physician-dependent programs and practices, but it cannot create them. The same is true of the academic endeavors.

Once the clinical and academic components are sufficiently established, the hospital may best play a lead role in definition and implementation of the business structure, development of necessary infrastructure, and provision of appropriate corporate support services.

Development of an institute will result in:

• A true business partnership between the physicians and the hospital

• Alignment and integration of the physician members

• Recognition that the Institute is a differentiating factor in the market

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Veni

Vidi

Vici