Managed Care From Provider to Partner New Orange Hills: A Case Study

1. Managed CareFrom Provider to PartnerNew Orange Hills: A Case Study Stephen N. Flood New Orange Hills, Inc. Orange, CA

2. Managed Care: A New Paradigm 1. We have reason to believe that the next 2-5 years will see a complete shift away from government controlled delivery systems. The following MCO systems are here or at our doorstep. • Accountable Care Organizations • Bundling • Dual Eligible Programs • Senior Advantage Programs • County Run Medi-Cal Organizations 2. The previous ownership of New Orange Hills anticipated this type of change and pushed forward toward systems that would be rewarded by MCO’s.

3. New Orange Hills • History • Opened in 1987 • Integrated Health Services – Bought in 1992 • Owned Between 1992-2002 • Contracted: Kaiser, St Joseph’s, Others • Sub-Acute with Piped Oxygen – 1996 • Sold to Facility Administrator – 2002 • Sold to Current Ownership – Dec. 2006

4. Current Demographics • Percentages by Payer Type • Managed Care – 50% • Medicare – 10% • MCAL Subacute – 30% • Custodial – 10% • Programs – Diagnosis/Disease Based • TBI/SCI/CVA & Other NeuroDx • Orthopedic • Advanced Wound Care • Infectious Disease Dx • Pulmonary and Cardiac

5. Philosophy • If we want to move to the next level in the managed care environment we have to start with a different philosophy. • The question we must ask is “What will it take (leaders, personnel, experts, resources and practices) to create a managed care relationship that operates on a “Win-Win” basis and adjusts regularly to; ensure progress and maintain equilibrium.

6. Provider vs. Partner pROVIDER pARTNER • Payment: Maximized by Provider and Minimized by Payer • Utilization: Minimized by Provider and Maximized by Payer • Quality: Minimal Efforts to Coordinate Quality Efforts • Utilization/Payment: Optimized through Collaboration • Quality: Regular Efforts to Align Care Systems and Keep Each Other Mutually Accountable

7. Utilization/Payment: Optimized • Payment Methodology • Fixed Payments that Represent the Large Percentage of Patients - Predictable and Based on the Mean: • New Orange Hills: 2 Fixed Tiers • Complex Medical Coverage – All Levels • Tier with Ventilator Add-on • Flexible Systems That Adjust for Acuity: PRN • Pharmacy: Exclusions or At-Cost Provision by MCO • DME: Exclusions, Provision or Shared Purchase • Sitters: Provision by MCO for One-on-One Needs • Fee for Service Payment for Transfusions

8. Utilization – Cooperative Management • Census: • The Issue is Not the Number of Patients but the Type of Patients • Higher Acuity, Greater Complexity, and More Flexibility than the Facility down the street – From ER, ICU, Urgent Care, Home • MCO and Facility Works Together to Ensure Hospital refers Right Segment of Patients • Less Complex Patients are Not Admitted • MCO and Facility Continue to Identify Ways to Increase Capacity for Higher Acuity Patients

9. Utilization: Measurement • Effective Utilization – Outcome Based • Average Length of Stay Based on Functional Level at Admission and Admitting Dx • Safe, not Highest, Functional Level Upon Discharge • % Discharged Home based on Admission Criteria • Minimal Rehospitalizations – Risk Adjusted • Controlled Hospital Utilization: ER, Direct Admit • Specialist Utilization on Site - Efficiency • HAC’s: PU’s, HAI’s, Incidents

10. Quality: Alignment of Care Systems • Managed Care Organization • Share Formularies & Care Pathways • Share Educational Resources • Collaborate on Best Practices • Provide QA Oversight and Feedback • Facility • Commit Resources Outside Contract: ROI • Provide Transparency and Access: Trust and Influence • Become a Champion of MCO Systems in the Facility • Develop Best Practices that Resource the MCO • Become the Expert in your Health Care Segment: Add Value

11. Developing the Partnership • Necessary Components • Managed Care Organization (MCO) • Commitment of Decision Makers – Find the Leader(s) • Vision, Financial, and Organizational Backing • You Must be Special to Warrant this LT Commitment • Physician and Organizational Involvement in Operations • Trust is based on Control/Relationship • Skilled Nursing Center • Willingness to Do What it Takes • Capacity: Procure/Develop Resources to Stay a Step Ahead • Independent Owners are in a Special Position to Do This • Trust that Resources will be at the right place at the right time on a consistent basis. Owners have capacity for responsiveness and longevity. Care happens locally and is facility based.

12. Questions Contact Information: Steve Flood New Orange Hills sflood@neworangehills.com (714) 997-7090 (office) (714) 612-7984 (cell)