Volume to Value: Considerations for Physician Hospital Alignment in Otolaryngology

1. Volume to Value: Considerations for Physician Hospital Alignment in Otolaryngology Scott P. Stringer, MD

2. Health care costs are rising. • 3.8% (09) • 4.0% (11-13) • 5.6% in 4Q 2103 • 6.1% (14) • 5.7% average (11-21) • 0.9% faster than GDP • $2.8 trillion • $8,948 per person • ACA role

3. Health care costs are rising faster than the CPI.

4. We spend more per person and as a percent of GDP than other countries.

5. We do not gain additional life expectancy secondary to increased spending raising the question of the value of the spending.

6. We do not get a lower infant mortality as a result of increased spending.

7. Teaching mothers to read reduces infant mortality. (Population health)

8. Spending is concentrated among a relatively small portion of high cost users.

9. Recent key drivers of rising unit prices and utilization are technology, chronic disease prevalence, and provider consolidation. • Technology (40%) • Provider price increases (26%) • Aging/chronic disease (11%) • Increase in GDP/income (11%) • Moral hazard (11%) • Malpractice and administrative

10. Insurance coverage encourages halfway technologies and decreases cost effective thinking. • Non-technology: (inexpensive) – Bandaid or crutch • Halfway technology: (expensive) – Ventilator or hip replacement • High technology: (inexpensive) – Gene replacement

11. The ACA seeks to increase health insurance coverage. • Individual mandates • Exchanges • Insurance market reforms • Lifetime limits, pre-existing conditions, adult children, exchanges • Employer mandate • Medicaid and CHIPS expansion • 31 million more insured

12. The ACA is financed by a combination of increased revenue, payment cuts, and hoped for gains in cost effectiveness. • Fees on drug and device makers as well as insurers • Medicare tax increase • Medicare cuts • Tanning bed tax

13. The ACA offers little in terms of decreasing the cost of health care. • Tax on high cost health plans • Increased payments to PCP’s • Ban on physician owned hospitals • Quality reporting requirements and payment • Payment reforms

14. A variety of pilot projects stipulated in ACA are currently being carried out as precursors to payment reform. • Pay for performance • Patient satisfaction • Quality • Shared savings • Bundled and episode based payments • Accountable Care Orginizations (ACO’s) • VOLUME TO VALUE SHIFT

15. ACO’s are one of the current pilots and seek to reduce costs and improve quality by shifting the responsibility for such to the providers. • Physician groups or hospital/physician groups • Shared revenues • Quality • At risk for negative events • Continuity of care across episode and time • Medical home

16. There has been a rapid growth in physician employment over the last 10 years. • PCP’s: 18%-40% in last 10 years • Specialists: 5%-24% in last 10 years • Merritt Hawkins • 64% of assignments are from hospitals in 2013 • 11% in 2004 • 2% solo, independent practice • Down 17% over five years • Local market

17. A variety of factors will continue to drive physician hospital alignment. • Payment methodologies • Quality goals and reporting • Compliance • EHR • Workforce shortage • Substitutes • Protect market share • Work/life balance • Uncertainty

18. There are a number of progressive alternatives for increased physician hospital alignment. • Recruitment incentives • Management services organization • Joint ventures • IT deployment • Co-manage service lines • Virtual ACO’s • Independent contracting • Call pay • Employment

19. Compensation will likely remain stable for the short term but will be under pressure in the long term. • Initial demand increase • Needed by hospitals to drive market share to offset volume decreases • Declining ancillary revenues • ASC’s • Allergy • CT scanners • Balloons in office • Churning getting tougher • Long term requirement for value • Living in two worlds

20. Beware of the hospital in sheep’s clothing. • Different perspectives and backgrounds • Different incentives • Lack of experience in physician management • Hospitals led by physicians ranked 25% higher in quality scores than those led by business persons. • Loss of autonomy • Second contract is usually worse • Exit strategy • Multiple options open

21. There are many challenges to physician hospital integration. • Most aren’t really integrated. • Protection of turf • Resistance to change • Lack of clear vision, direction, and leadership • No shared sense of value or urgency • Milk it as long as possible • Differing missions • Poor communication • Mistrust

22. Ongoing economic pressures will continue to drive some version of health reform of future election results. • State and national deficit • Slow economy • Cost pressures • To the nation and the providers • Lower revenue • If not this plan, another one • Capitation, gatekeepers, managed care • PHO’s, PPMC’s, PCP acquisition

23. Summary • Value is the coin of the realm • Quality • Patient satisfaction • Efficiency (cost reduction) • Fixed payments for outcome rather than per click • Advanced practice provider’s roles will increase • Data is critical • Integration will continue • Comparative effectiveness research required • Stay engaged and remain flexible