A Compelling Case for Community Needs Analysis… Forecasting Physician Supply/Demand

1. A Compelling Case for Community Needs Analysis… Forecasting Physician Supply/Demand Sample Board Presentation Sandy Champion, CMSR The Champion Group, LLC

2. Community Needs Analysis Physician Supply/Demand In-depth analysis of a given service area to determine the appropriate estimated number of physicians required to provide adequate medical coverage now and in the future • For Hospitals and medical groups • From the community need point of view • Redefining your service area • Forecasting physician supply/demand The Champion Group, LLC

3. Why Conduct a Community Needs Physician Supply/Demand Analysis? • Legal Compliance • Understand Access to Care • Economic Success The Champion Group, LLC

4. Legal – Regulatory Compliance • Applies to all tax exempt hospitals under the Internal Revenue Code §501(c)(3), Anti-kickback statute, and the Stark Law • Applies to all hospitals that are tax-exempt as public entities or municipal corporations (e.g. public hospital districts) • Some application to all hospitals participating in federal payment programs (Medicare and Medicaid) that engage in physician recruiting activities. The Champion Group, LLC

5. Legal -- IRS • In an attempt to balance two competing needs by permitting recruiting incentives an basis that a hospital establishes a “community need” IRS and OIG DHHS required tax-exempt hospitals to demonstrate evidence of a community need for the recruited physician. • IRS Rev. Ruling 97-21 (April 1997) addresses implications of physician recruitment arrangements and emphasis based on demonstrated community need. Strongly suggests that demonstrated community need is an important factor finding recruitment permissible. • Hermann Hospital Closing Agreement (1994) detailed recruitment guidelines. States “permissible incentives” will not be considered unless demonstrated community need evidenced by: specialty deficit, lack of availability, demonstrated reluctance to relocate, long waiting periods, Federal HPSA Designation, reasonable decrease due to retire, deficit serving Medicaid. The Champion Group, LLC

6. Legal -- IRS • Unpublished Private Letter Ruling (1998) Maintained importance of demonstrated objective evidence of need for the physician in the form of needs assessment. • IRS Rev. Ruling 73-313(1973) concluded that when a hospital conducted “community needs assessment demonstrating need they provided sufficient, objective evidence of need.” • IRS Hospital Audit Guidelines (1992) Hospital examination guidelines for compliance with community benefit standard required for 501(c) (3) refer to need for physician in the community must be determined Note: This exhibit is not a complete discourse on the law in this area and is not intended as legal advice. Specific situations require specific analysis and advice by a qualified attorney. The Champion Group, LLC

7. Legal – “OIG” (DHHS) Federal Medicare Anti-kickback statute enforcement agency “OIG” applies all hospitals • OIG Advisory Opinion (2001) Concern in offering recruitment incentives. Offer safe harbors with documented evidence of objective community need. Less suspect for HPSA or recruited physician’s services. • OIG Fraud and Abuse Compliance Program Guidelines (1998) For hospital recruitment to identify fraud and abuse issues that could pose significant risk. Recommends that hospital’s provide evidence “that recruited physicians’ specialty is necessary.” The Champion Group, LLC

8. Legal – CMS (Stark) • Stark Law Phase I (1989) Phase II (2004) interpreted by CMS determined recruitment as part of “financial relationship” and silent on community need as a factor in finding exception to the prohibition against physician referrals. It is expected that by 2008 Stark will include community need as documentation for a recruiting exception. The Champion Group, LLC

9. Understand Access to care • Clarifying FTEs • Open,limited,closed practices (by insurance by specialty) • Wait times • Use of midlevels • Succession needs • Baby-boomer population • Physician distribution, growth potential • Population segments with limited or timely access • Service gaps The Champion Group, LLC

10. Economic • Physician Supply = economic expansion • Organizational success • Ideal/adequate manpower • Growth potential • Attractive to candidates • Market share The Champion Group, LLC

11. What is Community Need Physician Supply Analysis and Planning? “A required statistical document to comply with all government regulations, guidelines, and recommendations.” The Champion Group, LLC

12. Analysis Quantitative Analysis (statistical) • Current supply providers database • Service area assessment • Physician-to-population comparison Qualitative Analysis (narrative) • Practice access analysis • Market-driven factors • Succession The Champion Group, LLC

13. Who are the Stakeholders? The Champion Group, LLC

14. Methodology – Service Area Definitions • Primary Service Area (“PSA”): Includes those zip codes from which the hospital derives approximately 85%-90% inpatients. • Secondary Service Area (“SSA”): Includes those zip codes from which the remaining inpatient discharges come from. • Stark Definition of geographic area where recruited physicians must relocate: “The area composed of the lowest number of contiguous zip codes from which the hospital draws at least 75 percent of its inpatients.” (CMS Stark II Phase II July, 2004) The Champion Group, LLC

15. Methodology -- Ratios Baseline • G.M.E.N.A.C. 1990 • C.O.G.M.E. • American Medical Association Market-Driven • Solucient • Other published reports The Champion Group, LLC

16. Methodology – Data Collection • Service area definition/overview • Internal assessment • Physician workforce database including physicians and midlevels • Access study • Physician supply/demand analysis The Champion Group, LLC

17. Final Analysis Report and Electronic Desktop Supply Database • Demand Analysis • Succession Analysis • Provider Database • Demographics • Population • Market share • Recommendations The Champion Group, LLC

18. Challenges…Final Thoughts Challenges: • Given a statistical need, what is the strategic need based on the key issues? • Then, how to design a delivery system to match capacity against demand while accommodating the underserved populations but not damaging the private practice providers who are serving their patients • How to proceed with a comprehensive hospital program that is well designed, meets the community needs, and is well-communicated throughout the medical community Final Thoughts: • Most hospitals are likely to experience moderate to significant shortages in various specialties • Develop a system to analyze and track workforce supply, physician distribution, succession, and demand needs with relevant tools can assist hospitals to assure access to care and success for decades to come. The Champion Group, LLC

19. Contact Sandy Champion, CMSR The Champion Group, LLC (206) 567-7737 Main (206) 658-5113 Cell (206) 567-0516 Fax championgroup42@msn.com www.thechampiongroup.org The Champion Group, LLC