Delivery System & Payment Reform under the ACO Initiative

1. Delivery System & Payment Reformunder the ACO Initiative September 7, 2011 C. Edward Brown Chief Executive Officer The Iowa Clinic

2. The Iowa Clinic • Multi-specialty clinic, 37 specialties • 120 physicians, 16 mid-level providers • 15% Primary Care, 85% Specialty Care • 2 primary locations (West Des Moines, Methodist Medical Center), 21 outreach locations • 120,000 patients served annually • Over 400,000 outpatient visits annually

3. Health Care Reform • Regulation: • Control costs by controlling total resources going into the system • The Market: • Control costs through insurance competition and informed consumers • System Reform: • Control costs from inside-out through information, delivery models, and payment incentives 3

4. A New Health Care Model Past Future • Provider-centered • Price-driven • Knowledge disconnect • Slow innovation • Reactive, episodic care • Outcome ignored • Costs increase • Patient-centered • Value-driven • Knowledge intensive • Rapid innovation • Health-oriented involvement • Accountable • Costs stable/decrease 4

5. Paying for Value It’s on the horizon . . . • Government: CMS is encouraged by demonstration results: • Hospital Quality Incentive (HQID) • Physician Group Practice (PGP) • Medicare Care Management Performance (MCMP) • Nursing Home Value-Based Purchasing • Hospital Gainsharing • Physician Hospital Collaboration • Commercial: Starting to pilot • Wellmark • 2011 Pilot ACO project • Looking to bundle payment for some surgeries

6. (Physician Group Practice) PGP Demo Project Timeline:2004 Base yearYr 1: Mar 2006Yr 2: Mar 2007Yr 3: Mar 2008Yr 4: Mar 2009Yr 5: Mar 2010 Data is available only for the first four years. • CMS Objectives • Encourage coordination of Part A & Part B • Coordinate care for chronically ill and high cost beneficiaries in an efficient manner • Decrease the growth in Medicare spending over the next 3 years

7. PGP Demo Financial Model • Savings Threshold: • The first 2% of savings goes entirely to CMS • Residual savings: • 80% Group/20% CMS • Yr 1 allocation: 30% Quality, 70% Efficiency • Yr 2 allocation: 40% Quality, 60% Efficiency • Yrs 3-5 allocation: 50/50 Quality & Efficiency

8. Summary of demo results

9. Success in value-based paymentwill be defined by INCREASING VALUE Quality Value Cost Requires Physician & Facility Collaboration and Mutual Accountability

10. Hospital/PhysicianCollaboration Options An ACO is a TACTIC, not a STRATEGY. • Bundled Payment • Inpatient Gainsharing • Co-Management • Clinical Integration • Employment/Merger Financial Integration 5 4 3 2 1 Physician Engagement is the critical success factor. Physician Involvement

11. Building an ACO:Keys to Success • Culture of Collaboration • Coordination of Care • Compensation Incentives Apply whether Employed, Merged, or Clinically Integrated

12. Building an ACO:Keys to Success Culture • Both Physicians and Facility must: • Have shared vision of high-quality, low-cost care – Patient-centric • Be willing to collaborate • Be willing to change • Consider strategy, quality, and culture when selecting ACO partners • Not just facility-physician, but physician-physician as well

13. Building an ACO:Keys to Success Culture • Transition to Team-Based Care (Medical Neighborhood) • Care coordination • Care Management staff • PCP role as Gathering Point Medical Home Medical Neighborhood

14. Building an ACO:Keys to Success Care Coordination • Formalize shared Governance and Management • Governance: Collaborative Leadership Structure that includes both Physician and Facility representation • Management: Pair Physician and Administrative leaders into Dyads

15. Building an ACO:Keys to Success Care Coordination • Strong Physician Leadership • Must lead physician-physician and physician-facility collaboration • Must lead care coordination and management • Must lead role transitions • Need administrative and financial support

16. Building an ACO:Keys to Success Care Coordination • Empower Ownership to Front-Line Physicians • Need wide representation • Can support, believe in, and effectively implement their own ideas • Ideas needed to improve cost & quality

17. Building an ACO:Keys to Success Care Coordination • Establish 2-Way Data Exchange • Implement Performance Management System that combines cost-quality data @ patient level • Establish standardized clinical pathways • Use it to drive quality outcomes and reduce costs

18. Building an ACO:Keys to Success Compensation Incentives • Align incentives with ACO objectives • Population Management • Patient Population for PCP’s, Specialists and Coordinators • Scaled Network to Population • Quality • Cost Reward Value!

19. Building an ACO:Keys to Success Compensation Incentives • Support additional costs for care management teams • Burden on physicians will prevent progress • Support IT Infrastructure costs • Data critical to success • Use IT to minimize Human overhead

20. Impediments to Reform • National economics • Government driven vs. Commercial • Provider Commitment • American Consumers

21. Implications for Physician Groups • Disruption of high margin care • Payment for outcomes • Contracts with ACO’s and commercial insurers • In-depth knowledge of cost and outcomes • Cultural acceptance of standardization • Rapid application of best practice • Population health management • Develop Physician Leaders 21