Integrated Systems and Payment Models

1. Integrated Systems and Payment Models PEAK Symposium Connie March President & CEO, Presence Life Connections March 16, 2014 Washington, D.C.

2. Honesty The Value of Honesty instills in us the courage to always speak the truth, to act in ways consistent with our Mission and Values, and to choose to the right thing. Oneness The Value of Oneness inspires us to recognize that we are interdependent, interrelated and interconnected with each other and all those we are called to serve. People The Value of People encourages us to honor the diversity and dignity of each individual as a person created and loved by God, bestowed with unique and personal gifts and blessings, and an inherently sacred and valuable member of the community. Excellence The Value of Excellence empowers us to always strive for exceptional performance as we work individually and collectively to best serve those in need. Inspired by the healing ministry of Jesus Christ, we, Presence Health, a Catholic health system, provide compassionate, holistic care with a spirit of healing and hope in the communities we serve. We will be a leader in transforming health care by delivering clinical excellence, outstanding value and exceptional experience to achieve better health for our communities. Mission Vision Values

3. Presence Health: At a glance Midwest Regional Catholic-sponsored Healthcare System Acute care hospitals Long-term acute care hospital Nursing & rehab centers Senior housing communities Adult day centers Primary & specialty care clinics Home care agencies Comprehensive behavioral health network Occupational health Immediate care centers Outpatient surgery centers Employed physician network Hospice agencies Medical residency programs Clinical pastoral education program School of radiology University (nursing/nurse practitioners/health informatics)

4. Presence Life Connections: At a glance . A division of Presence Healththat provides a peri-acute constellation of care, support and services that enhances lives by connecting the right person to the right service at the right time. Primarily serve older adults Provide services/support to 6,000 people daily 172,000 annual home health visits last year 1.9 million residents days in our nursing & rehab centers and housing communities last year 1,800 Lifeline customers 3,600+ employees Provide management services 50 sites in Illinois and Indiana, including: • 20 nursing and rehabilitation centers • 14 senior housing communities • 6 home care agencies • 3 hospice agencies • 2 adult day centers • 1 child day center (part of intergenerational center) • Misc. HCBS • 2 centralized LTC pharmacies

5. Peri-acute Constellation

6. Vision: We will be a leader in transforming health care by delivering clinical excellence, outstanding value and exceptional experience to achieve better health for our communities. Growth & Integration Finance Operating Model Innovative Care Model Portfolio Culture Transformation Presence Health Strategic Plan Status Quo

7. Presence Health is moving toward an integrated operating model • System directives with some ministry autonomy • System participates in all major decisions • Many key processes standardized • Some integration • Stand alone functions • Decisions at ministry level • Decentralized • Not integrated • Integrated common functions • Major decisions made at the System level • All key capabilities standardized • Highly integrated • Unified/consistent brand & experience • System guidance to ministries • System input into some operating decisions • Some standardization • Little integration • System directed operations • System makes all operating decisions • All processes standardized • Wholly integrated Holding Company Operating Company

8. Culture Transformation: Core Competencies that Support Population Health Management A culture that can embrace change A clinical delivery system that has care coordination at its center A very sophisticated information technology platform A cost structure that can cope with an unpredictable revenue platform Capability to take risk all the way to full capitation A physician alignment strategy that supports all of the above A Very Demanding Going-Forward Agenda Reference: Kaufman Hall

10. Presence Health Partners Innovative Care Models Goal: Create integrated network (Presence Health Partners) capable of supporting Presence Health in managing 50% of top-line revenue from value-based contracts in 2017 Requires Presence Health to enroll 520,000 covered lives by 2017 Assumes 50% of Presence Health’s current Medicare, Medicaid and commercially insured patients will be seen through some form of value-based payment • ACO, ACE, capitation, % of premium, etc.

11. Presence Health CMS Innovative Care Model Pilots Medicare Shared Savings Program Bundled Payment for Care Improvement, Models 2 & 3 Presence Health has two internal shared risk care models and one external risk care models • Medicare Shared Savings Program (MSSP) • Bundled Payment for Care Improvement (BPCI), Model 2 • Bundled Payment for Care Improvement (BPCI), Model 3 Presence is participating in these projects to develop the capabilities to manage the health of populations and assume risk for the outcomes: • Quality, Cost and Patient Experience Presence believes that developing expertise in this arena is a critical strategy and will position the organization and our partners for success in the evolving healthcare environment

12. Recent National Reports Indicate Some Medicare Shared Savings Program (MSSP) ACOs will be Successful There are 400 CMS MSSP and Pioneer ACOs in operation today 50% have generated savings 15% have generated sufficient savings to distribute shared savings to network participants.

13. Presence Health’s Accountable Care Organization (ACO) Medicare Shared Savings Program (MSSP) Presence is: • Serving as an accountable care organization • Taking risk on overall health cost and outcomes for Medicare population Medicare Value Partners (PH) ACO began operations January 1, 2013 Medicare Shared Savings Program 20,000 beneficiaries attributed to ACO 94% of beneficiaries in Cook County (Chicago) 400 providers in two Presence Health acute care Chicago regions

14. Presence Health’s ACO Medicare Value Partners: PLC Participation ACO Board Membership Participation in service development Participating PLC providers within ACO Geographic Area • Nursing Facilities • Home Care • Exploring HCBS participation

15. Bundled Payment for Care Improvement, Model 2 Presence Health is: Serving as awardee convener Taking risk on outcomes and cost for Medicare total hip and knee replacement episodes of care 3 days pre-op through 90 days post acute Three year pilot; start date January 1, 2014 Rewards performance – Fee for Value vs Fee for Service Providers may assume risk

16. Bundled Payment, Model 2 PLC Participation Care design teams PLC providers within BPCI Geographic Area • Nursing and Rehab Centers • Home Care Assuming risk for quality and cost outcomes for hip and knee replacement for PLC post-acute care for 90 days Gainsharing participant

17. BPCI Overview Care Model Redesign and Support

18. PH Network – Provider Network • Selection Criteria • Historical volumes • Physician preference • Geographic distribution • Engagement in the project • Value added to the network

19. Gainsharing Overview Bundled Payment for Care Improvement, Model 2 To encourage innovation, CMS and the Office of the Inspector General (OIG) are waiving rules that prohibit gainsharing Providers have flexibility in determining how savings will be distributed among participating providers CMS will reconcile Presence performance against a Target Price, which is the historical payments per episode trended forward to 2013 and then discounted by pre-determined percentage CMS savings (CMS payment reductions) may be shared among the participating providers Presence has a Gainsharing Committee that oversees the gainsharing accounting and fund distributions

20. Bundled Payment for Care Improvement, Model 3 Awardee convener is Illinois Bone and Joint Institute (IBJI) Taking risk on outcomes and cost for Medicare total hip and knee replacement post-acute care for 90 days Northern Chicago area market Three year pilot Start date: January 1, 2014 Providers may assume risk

21. Bundled Payment for Care Improvement, Model 3 Presence Life Connections is: Post-acute provider Assuming risk for outcomes and cost for Medicare hip and knee replacement for PLC site post-acute care within 90 days

22. PLC Participation in Non-Presence Medicare ACOs Service Providers • Selected Nursing and Rehab Centers within Geographic market • Selection Criteria Varies • Typically 4 or 5 star CMS overall rating, may specify quality star rating • Low hospital readmission rate • Short post acute length of stay • Preferred referral services within ACO system services • Physician and/or patient preferences Program designed by ACO, typically with little or no post acute provider input Requires quality data submission to ACO Participation at discretion of ACO Fee for service

23. Presence Innovative Care Model Outcomes Medicare Shared Savings Program-Presence Health ACO • Quality data submission end of March • Must attain quality metric targets to access shared savings • Initial cost data promising but too early for final determination • Reviewing placement criteria based on early data analysis • Learning importance of physician & provider collaborations BPCI, Model 2 and Model 3 • Initiated January 1, 2014 • Too early for meaningful outcomes data • Learning importance of clear communication as model is refined Medicare Shared Savings Program-Non-Presence ACO • Insight into ACO metrics prior to PH ACO started • Hospital readmissions, Emergency Dept. visits reduced • Progressive shortening of post acute patient lengths of stay

24. Challenges with Innovative Models Communication • Identification of participating patients • Hand offs from provider to provider • Key software, hardware, interface installation and implementation Multiple pilots at same provider locations concurrently • Patient/pilot identification and differentiation • Patient, staff, physician, community education & awareness for each pilot Data • Access to pilot and site specific data • Timely receipt and submission of data Risk assumption • Financial uncertainty—budget vs actual—retrospective review • Quality metrics • Requires new skills, software, processes Culture change: New models concurrent with old models of care Change management

25. Business model is transitioning from pre-reform… Pre-Reform Business Model Hospitals d Doctors d Patients Source: Kaufman, Hall & Associates, Inc.

26. … to a post-reform business model The Post Post-Reform Business Model Employers Patients Medicare and Medicaid Fee-for-Value Model Select Contract(?) Who Is This? Healthcare Company Content of Care • Commodity • Make vs. buy • Low-cost provider • Contract to specifications Hospital Doctors Outpatient Services Continuum of Care Source: Kaufman, Hall & Associates, Inc.

27. Opportunities—Value-based Care Peri-acute Providers Determine your path Make the tough decisions and start now Drive down per unit costs Use evidence to demonstrate value to partners Ability to assume care for higher acuity and/or specialty population care Care management Good quality outcomes High participant satisfaction Market your value Fill the care/service gaps Be open to new opportunities

28. Medicare Shared Savings Program Multiple Opportunities Medicaid Managed Care Commercial ACO/Insurance Bundled Payment, Model 3 Home Bound Elderly-Targeted At Risk Population Segment Veterans Care Peri-acute Constellation Medicaid Assisted Living Bundled Payment, Model 2 Dual Eligible Managed Care Medical Home Narrow Network