Accountable Care The Market Driven Opportunity

1. Accountable Care The Market Driven Opportunity

2. Charlie Jarvis Vice President, Healthcare Services and Government Relations

3. National Political Reality

4. National Budget/Debt Ceiling Reconciliation- Medicare Implications First phase ($1.2 trillion in savings) spared health expenditures Second phase is to find $1.4 trillion in additional savings- through a “Super Congressional Committee” with an automatic savings reduction (if no agreement is reached) Second phase automatic reductions; Medicare- 2% Health expenditure reductions are expected to be “on the table” in the Super Committee

5. From Bloomburg Government News- 8/05/11 “The digital health record program has bipartisan support and would be “low on the list” of cuts.”.…” (however)Across-the-board cuts to Medicare would “make it more difficult to continue to invest in expensive new technology like electronic health records.”….” Because Medicare and Medicare payments come out of entitlement funds there is reason to be concerned that program could be cut off in mid-stream or changes in the law could prohibit the entry of new eligible hospitals and eligible providers into the program.”

6. Other Health Expenditure Items( adding “fuel to the fire”) The Sustainable Growth Rate(SGR) Issue is up for consideration again- this time a 29.7% cut. An SGR fix would be an additional expenditure adding to the $1.4 trillion savings goal. State Medicaid Roles continue to swell as the unemployment rate remains higher than predicted. The Patient Protection and Affordable Care Act (PPACA) continues to exceed cost predictions.

7. Health Insurance Exchange Update

8. Health Insurance Exchange Update Part of Affordable Care Act was to create HIX for the small group market and individuals to be able to purchase a quality health plan for an affordable price. HIX are to be designed for the consumer – easy to use, understandable, standard. A proposed rule was released on July 11 that released the basic functionality requirements for these exchanges- touched on enrollee support services, oversight of qualified health plans, operation of websites and risk management. Comments are due on September 28th

9. Health Insurance Exchange Update • Four models have emerged as to the role that states will play:   • Information aggregator- meets the bare minimum requirements for ACA • Retail-oriented exchange- retail shopping experience, think fly.com • Guided exchange- limits carriers through competitive selection process • Market curator- robust, end to end consumer experience from shopping to enrolling.

10. Health Insurance Exchange Update There has been some discussion on regional exchanges – both within states and across borders – states have thought about this but are more concerned about getting things up and running in their individual states.

11. Market Drivers

12. Shift to Value-based Purchasing Key Programs Implement value-based-purchasing in physician office, hospital & ASC Expand quality metrics in key disease & safety areas Leverage existing value-based-purchasing pilots • PQRI payments extended through 2014 • Physician performance on CMS website: Jan. 2011 • Hospital payments adjusted based on exceeding readmission thresholds: Oct. 2012 • Value-based purchasing for hospitals: Oct. 2012 (per FY 2012 experience) • Value-based payment modifier for physician fee schedule – quality and cost: Jan 2015 (per CY 2014 experience) GE Confidential and Proprietary

13. Accountable Care Defined • A new model of care delivery in which: • Hospitals, physicians, patients, payers, employers incentivized to work together • Participant organizations accountable for quality, cost, and overall care of patient population • New models do not require beneficiary lock in • Public and private payers may implement: • New payment models including, shared-savings, capitation, bundled payments • Penalties for not meeting quality and cost benchmarks

14. The Journey to Accountable Care Proactive Care Continuous Improvement • Patient Engagement • Care Coordination • Predictive Modeling • Population Management • Care & Disease Management Digitization & Connectivity • Clinical Decision Support • Evidence-based medicine • Quality Measurement • Reporting & Analytics • Health Information & Image Exchange • Electronic Medical Records (EMR) • Revenue Cycle Management • Practice Management Action Insight Information

15. CMS Three Part Aim Better care for individuals:Safety, effectiveness, timeliness, patient-centeredness, efficiency, equity Better health for populations:educate beneficiaries about “upstream” causes of ill health– and importance of prevention Lower growth in expenditures:cut waste & inefficiency- do not withhold needed care

16. Market Activities Accountable Care is an evolution of ideas that are positioned to drive Health Reform Accountable Care is a model of innovation for integrated delivery and payment reform CMS ACO is coming soon — January 1, 2012, first “ACO” pilot started in 2005 NCQA ACO is close to timing/content of CMS; will be used by commercial market Commercial Pilots started 2-3 years ago and will begin to announce first year results mid 2011

17. Market Activities CMS, NCQA and ACO pilots have significant focus on quality measurement and medical home • All include Medical Home (NCQA for now) • 72 Measures that are shared across the programs • Include; Cal-1, Dartmouth, NCQA, PQRS, MU, HEDIS and NQF • Increase in measures that focus on; Integrated Inpatient/Ambulatory, Patient Satisfaction, Self-Management, Care Coordination/Management and complex multi-condition Phased reporting vs. performance; incremental technology and data sharing requirements over 3 years Early Adopter or Wait and See? • It is all about market share; ALL providers must be prepared and have their Medical Home and Quality Programs in order Impact to specialties could be significant if they do not align with ACO’s and become part of the “ACO Network”

18. CMS Innovation Center Initial Models • Medical Home models • Risk based payments • Chronic condition management • Moving from fee for service • HIT-enabled care coordination, including remote monitoring • Incentives for imaging CDS • Patient self-management and decision support • Incentives for use of cancer treatment guidelines • Research, develop, test, expand innovative payment and delivery models • Funding for benefits not covered by Medicare • Successful models can be expanded

19. Innovation Grants Drive Change CMS Innovation Center - New ACO Models • The Pioneer ACO Model - designed for organizations ready to participate in shared savings *now accepting applications to hit 2012 mark • Comments on the Advance Payment ACO Model that would provide additional up-front funding for ACO formation • Accelerated Development Learning Sessions for interested Provider Groups

20. Approach and Success Factors

21. Community Integration – Driving Forces • Improved quality of care and patient safety via information sharing • Payment Reform and Accountable Care Government Reform Consumerism Market Competition • Enhanced Referral Management Networks • Clinically integrated/ virtual staff models • Improved patient and community relations

22. Accountable Care Organization *Source: McClellan, Mark et al, “A National Strategy to put Accountable Care into Practice,” Health Affairs, 29, No 5 (2010): 982-990 • Provider-led organizations with a strong base of primary care that are collectively accountable for quality and total per capita costs across the full continuum of care for a population of patients* • Payments linked to quality improvements that also reduce overall costs* • Reliable and progressively more sophisticated performance measurement, to support improvement and provide confidence that savings are achieved through improvements in care* • Of adequate size and scope to fulfill its responsibilities

23. ACO Key Objective: “Clinical Transformation” “Clinical transformation is the lynchpin of ACOs’ success, and it does not happen automatically by simply changing payment arrangements and measuring performance. Rather, it requires effective investment in infrastructure, process and organizational redesign, and other clinical activities to achieve delivery reforms that can actually produce needed improvements in care (for example, enhanced preventive care, better care transitions, and chronic disease management).” Source: McClellan et al, “A National Strategy to Put Accountable Care Into Practice” Health Affairs, May 2010, p. 982

24. Reformed System Transformational Impact of H/C Reform Current System Fragmentation Adversarial relationships Focus on “doing” One-to-one care Gatekeeper Perverse financial incentives Focus on volume/intensity Integration Cooperation Focus on “prevention” Population Management Team-based care System management Aligned incentives Focus on quality and outcomes Source: Dartmouth-Brookings ACO pilot project

25. Nutritional Ingredients to ACO Success • • EHR and HIE Functionality • • Practice Redesign • • Systems Engineering Tools • Statistical Process Control • PDSA Cycles • Quality Functional Deployment • Lean Production • Teams • Leadership • Culture • “Aligned Incentives puts everyone on the same page…” • Source: Steven Shortell, PhD - National ACO Congress, October 2010 Source: Steven Shortell, PhD, “Implementing ACO’s”, The National ACO Congress, October 2010

26. ACO Medicare Shared Savings Plan Projected Final Rule Timelines

27. Technology

28. EHR Core Functionalities Lay Foundation for Better Outcomes

29. NextGen ACO Strategy • Medical Home is now a common component in most Commercial Payer Contracts. • ACO is an emerging model & will likely change; BUT the fundamental drivers of quality at a reduced cost will persist in reformed reimbursement models ACO Medical Home Practices Financials and Analytics Claims/ Clinical HIE Quality Reporting Functional Pillars of an ACO Functional Pillars of an ACO

30. NextGen Healthcare Revenue Cycle Management Community Connectivity Solutions (HIE / Patient Portal) Acute Solutions

31. NextGen Patient-Centered Care The End to End Solution

32. NextGen’s Quality Reporting, BI and Outcomes Solution – Coming in 2011 • Drill down • Reporting at the point of care • Concurrent Analytics • What if scenarios (BI) • Advanced Notifications • Patient Recalls • Integration with Patient Chart • Registry Repository • Submission • Retrospective Reporting • Program Support

33. HQM 2011 and Beyond HQM Centralized Repository Data Aggregator Services Registries Reporting Services Hosted Registry Services Hosted Reporting Services Extended data model as subscribers grow NG Products and local HQM Solutions Publish and Subscribe Asynchronous information sharing Traffic cop for authorized publishers and subscribers Messaging through data bus 3rd party Registry Messaging and ETL Tools /Processes Messaging with standard XML schema’s or SQL for data collection, data sharing and reporting Standard data dictionary and ETL services for data normalization State Registries HIE’s 3rd Party Products • All products including NextGen will use the same messaging and data services for HQM

34. Industry Alignment

35. NextGen ACO RoadmapIndustry Alignment • Center for Medicaid Services (CMS) • PQRI and Meaningful Use • Medical home pilots • ACO definition for 2012 • National Committee for Quality Assurance www.ncqa.org • NCQA PCMH 2011 • NCQA ACO Recognition • Patient Centered Primary Care Collaborative www.pcpcc.net • 6,500 members from all areas of healthcare • Supports Pilots, Grants and other industry initializes • Leadership in both PCMH and ACO Workgroups • Dartmouth and Premiere Pilots • NG clients are participating across the U.S. • Leadership on ACO Boards and within the ACO Community

36. ACO Medicare Shared Savings Plan • Proposed ruling in comment period through June 6th • Kicks off 1/1/2012 • 3 year program • CMS states proposed regulation for ACO’s could potentially save as much as $960 million over three years • Medicare would continue to pay under the Original Medicare payment systems • Financials; Two Models Proposed: • One-sided risk model (sharing of savings only for the first two years and sharing of savings and losses in the third year) • Two-sided risk model (sharing of savings and losses for all three years) • Shared loss cap of 5 percent of the benchmark in the first year of the Shared Savings Program, 7.5 percent in the second year, and 10 percent in the third year • Payments can be increased by 2.5% if FQHC or RHC is included in the ACO when using one-sided model • Payments directly to the ACO TIN *concerns about gaming etc.. • CMS is proposing to establish a minimum sharing rate that would account for normal variations in health care spending, so that the ACO would be entitled to shared savings only when savings exceeded the minimum sharing rate • CMS is “holding back” 25% as a slush fund

37. ACO Medicare Shared Savings Plan • Each year, 25 percent of the shared savings distribution will be withheld by CMS to protect against their ability to be repaid in years where shared losses occur. • At the end of the three-year agreement, the withheld amounts will be distributed to the ACOs as long as they do not have shared loss amounts that need repaid. • If an ACO does not complete its three-year agreement, the ACO would forfeit any of the withheld amounts.

38. Success Stories

39. NextGen Client Initiatives NextGen Clients and Quality Reporting • Over 1100 physicians reported PQRI 2009 • Nearly $2M reported in incentive payments with an average $3.5K per primary care doc and $10-14K per specialist • In 2010 over 100 clients and over 4,000 physicians reported PQRI a • Nearly 300 clients have signed up for reporting MU (to date) NextGen Clients and ACO’s/Medical Home • Nearly 100 clients with level 2 or 3 Medical Home recognition, this accounts for nearly 30% of the current recognized medical homes in the U.S. • Clients participating in Commercial ACO Pilots include PCP’s and Specialists • ACO board members in two Brookings Dartmouth pilots • Leadership roles in learning collaborative in both Dartmouth and Premiere Programs • ACO’s in California Pilot

40. Revenue Gains from Quality Improvement Initiatives SETMA 1. Tier 3 NCQA Medical Home, Medicare Advantage participant 2. Payment via capitation and large percentage of shared-savings pool 3. Supply Medicare Advantage HEDIS data on Diabetes, CAD, Dyslipidemia, COPD as Medicare Advantage STARS program. Due to excellent performance results, got greater than $2.5Million through Shared-Savings Pool 4. SETMA had 273% improvement with capitation and Shared- Savings pool vs. conventional FFS

41. Revenue Gains from Quality Improvement Initiatives Gilbert Family Medicine 1. Tier 3 NCQA Medial Home 2. Instead of traditional FFS, implemented capitation and Shared-Savings pool (50/50) 3. 2,000 members, $5PMPM to assist with Infrastructure costs, $7 PMPM capitation, and Shared-Savings Pool 4.Gilbert had a 300% improvement with capitation and Shared-Savings pool vs. conventional FFS (% savings over market) = $1.2M-$1.6M (600k-800k after split)

42. Revenue Gains Continue Graybill Medical Group 1. ACO with Anthem Blue Cross, *Full-Risk Relationship* 2. Average Bed Days reduced 38% from 2004 to 2009 3. RAF score increased from .317 in 2006 to .62 in 2009 4. 90th Percentile for P4P in 2010; Quality Incentives = 3% of commercial capitated revenue

43. NextGen Client Initiatives Hill Physicians group • Sacramento based ACO pilot in conjunction with Blues and Catholic Healthcare West Brookings-Dartmouth Collaborative Clients • Healthcare Partners / LA • Monarch Orange County • New Pueblo Piedmont Physicians Group – Cigna Pilot • Huge emphasis on Quality • HQM is cornerstone to participating • Achieve Bridges To Excellence medical home • Very successful in achieving reimbursement with both BTE and PQRI

44. A “Necessary” Strategy

45. Proposed Strategy HIT Investment needs to be demonstrated to reduce health care expenditures. HIT Investment needs to be demonstrated to support more effective health care. Providers need to continue to learn about, and embrace collaborative care and accountable care models of healthcare delivery that move away from fee-for-service medicine which is traditionally more expensive.

46. Proposed Strategy The Medical Community needs to accept the fact that healthcare delivery model change is inevitable but they need to ADVOCATE for a reasonable financial path to care delivery model change with a glide path/ reduction of fee for service care models (including the SGR fix). National HIT Week- 9/12-16 Drastic cuts such as no SGR fix, elimination of HIT incentives or other massive Medicare cuts will not allow an effective transition to new delivery models. The Medical Community needs to accept the reality of change but argue for a reasonable transition plan

47. A Few Cultural Challenges • Physicians and physician organizations • Develop skills in leadership, partnership and teamwork • Hospitals • Challenge is to evolve from revenue center to cost center • Health Plans • Provide investments in advance of documented savings • Guard against problems of large organizations • Patient-centered care is best guide

48. “Culture Eats Strategy for Breakfast -Everyday” Peter Drucker Bestselling Author on Management

49. Thanks for your time and interest!