How Physicians Can Achieve Success in the Arriving Population Health Model

1. How Physicians Can Achieve Success in the Arriving Population Health Model Presented to: University of Virginia Health System Presented by: John A. Deane CEO, Southwind Division Lisa Bielamowicz, M.D. Executive Director & CMO The Advisory Board Company September 26 , 2013

2. National Trends Driving Physician Alignment

3. Meet Your Newest Medicare Beneficiaries Happy 65th Birthday! Steven Tyler Al Gore Ozzy Osbourne James Taylor Terry Bradshaw Kathy Bates

4. A Population More Predisposed to Comorbidity No Data <10% 10%–14% 15-19% 20-24% 25-30% >30% Worsening Case Mix Not Just Due to Aging Obesity Rate Among U.S. Adults1 1988 Obesity Rate Among U.S. Adults1 2009 Source: Centers for Disease Control Behavioral Risk Factor Surveillance System, available at: http://www.cdc.gov/brfss/, accessed May 4, 2011; Health Care Advisory Board interviews and analysis. Body Mass Index ≥ 30, or 30 pounds overweight for 5’ 4” person.

5. Chronic Disease Growth Outpacing Population Growth Source: Milken Institute, available at: http://www.milkeninstitute.org/ pdf/chronic_disease_report.pdf, accessed April 27, 2011; Health Care Advisory Board interviews and analysis. Projected Increase in Chronic Disease Cases 2003-2023 19%: Projected population growth, 2003-2023

6. Getting Paid Less to Do Less New Payment Models Calling Old Imperatives Into Question Source: Health Care Advisory Board interviews and analysis. Accountable Payment Models Performance Risk Utilization Risk Volume of Care Quality of Care Cost of Care • Bundled Pricing • Bundled Payments for Care Improvement program • Commercial bundled contracts • Pay-for-Performance • Value-Based Purchasing • Readmissions penalties • Quality-based commercial contracts • Shared Savings • Medicare Shared Savings Program • Pioneer ACO Program • Commercial ACO contracts

7. Health Care Defects Occurring at an Alarming Rate Growing Demand for Higher Value Source: Modified from Buck, CR, General Electric; Health Care Advisory Board interviews and analysis; Southwind. Health Care Quality Defect Breast cancer screening (65-69) Adverse drug events Hospitalized patients injured through negligence 1,000,000 100,000 Anesthesia-related fatality rate Post-MI beta-blockers 10,000 Defectsper Million Hospital- acquired infections 1,000 Overall health care in U.S. 100 Airline baggage handling 10 U.S. industry best-in-class 1 1 (69%) 2 (31%) 3 (7%) 4 (.6%) 5 (.002%) 6 (.00003%) σ Level (% Defects)

8. Bridging the Transition Between Payment Paradigms Mitigating Incentive Disconnect Between FFS, Value Based Payment 100% Total Cost Accountability Realizing Returns Today Preparing for Tomorrow Revenue Generated Through Incentive Model • Can increase FFS rates • Stabilizes physician economics • Improves performance on key quality and cost initiatives • Can increase market share • Creates infrastructure for care coordination, management • Builds physician comfort with performance focus Fee for Service 0% Time

9. Forcing Tighter Ties Payment Reforms Place Greater Burden on Care Coordination Strategic Responses to New Payment Methodologies Pay-for-Performance Hospital-Physician Bundling Shared-Savings Model Episodic Bundling • Partner with PCPs • Invest in chronic disease management • Reduce utilization • Partner with post-acute providers • Standardize care site transitions Degree of Management Challenge • Standardize devices • Reduce orders and consults • Engage active medical staff • Standardize care processes • Track and analyze performance • Leverage physician incentives Actions needed under all payment reforms Provider Cost Accountability

10. Creating a Value-Based Health Care Delivery System Michael Porter, Harvard University, 2013 Organize "Integrated Practice Units" or "IPUs" around patient conditions Organize primary and preventative care to serve distinct patient segments Measure outcomes & cost Offer bundled pricing arrangements Integrate delivery across separate facilities Expand geographic coverage by excellent providers Build and enable information technology The Strategic Agenda

11. This Is Not a Cup of Coffee Source: Health Care Advisory Board interviews and analysis.

12. An Absurdly Fragmented Market Offering Dozens of Businesses, Thousands of Products Source: Accreditation Council for Graduate Medical Education, http://www.acgme.org/acWebsite/RRC_sharedDocs/ACGME-Accredited_Specialties_and_Subspecialties.pdf, accessed May 14, 2012; Health Care Advisory Board interviews and analysis. Medicare Severity-Diagnosis Related Group. Healthcare Common Procedure Coding System. Accreditation Council for Graduate Medical Education. Typical Silos in Health Care Delivery Office Visits Imaging Lab Tests Quite a Lot on the Menu 745 MS-DRGs1 Emergency Department Outpatient Procedures Inpatient Procedures ~15,000 HCPCS2 Codes ACGME3-Accredited Specialties Rehab Long-Term Care Pharmacy 26

13. In Consumers’ View, Only Two Products Inputs Source: Health Care Advisory Board interviews and analysis. Individual Services Merely Inputs; System’s Role is in Assembly Health Care Production Model Office Visits Imaging Value-Added Products Lab Acute Care Episodes Emergency Care Inpatient Procedures • High-quality, low-cost treatment of acute illness • Includes pre-acute, post-acute services, readmission Outpatient Procedures Health System Rehabilitation • Planning • Coordination • Delivery Long-Term Care Longitudinal Management Pharmacy • Ongoing, comprehensive health management • Includes chronic disease care, wellness, prevention

14. Physicians at the Nexus Physicians Essential to Generating Value from Systemness Independent Practice Association. Source: Health Care Advisory Board interviews and analysis. Value-Added Processes Hospitals Integrating Physicians Care Delivery • Examples: • Texas Health Resources acquires Medical Edge • St. Thomas forms 1,600-strong IPA1 in two years • MemorialCare acquires 400-physician Nautilus Payers Integrating Physicians Care Planning Care Coordination • Examples: • UnitedHealth acquires Monarch HealthCare • Humana acquires Concentra • WellPoint acquires CareMore

15. Moving Beyond “Us and Them” True Systemness Requires Demolition of Individual, Group Silos Clinically integrated. New Ambition for Hospital-Physician Relations Source: Health Care Advisory Board interviews and analysis. ” Traditional Goal: Strengthen individual practice ties to hospital center Collaborative Care Enterprise Words Matter Today’s Goal: Align priorities, strategies, and efforts of system leadership with those of broader physician network Traditional Goal: Strengthen ties within medical group/CI1 network “The language hospital leaders use to describe physician alignment—‘how do we get them to work with us’—reveals how deeply rooted this sense of separateness is.” Health System Executive

16. The New Hospital-Physician Compact Collaborating to Deliver Value to Patients Patient Demands, System Responsibilities Source: Health Care Advisory Board interviews and analysis. Timely Access Top-Quality Care • Physicians build schedules around patient needs, connect to other providers to expand options • System invests in alternative access points and needed capacity • Physicians build and utilize evidence-based care standards • Clinical decisions prioritize quality • All providers accept, respond to transparent performance data Open Communication Cost-Effective Care • Physicians actively work to reduce cost, unnecessary utilization • System encourages use of low-cost care pathways • Physicians, care teams respond promptly to patient inquiries • Providers proactively engage patients in care management Unified Care Experience Principled Referrals • Referral decisions based on quality and cost, not habit • Physicians coordinate with peers to ensure safe and effective transitions • Care transitions appear seamless to patients • Information is a system asset, updated and utilized by all to streamline care experience

17. Executing Strategy in the Accountable Care Era Securing Physician Alignment Care Transformation Reducing Costs, Advancing Quality Managing Total Population Risk • Evaluate, secure and stabilize primary care base • “Clinically Integrate” the network • Engage physicians in leadership, governance • Promote adoption of evidence-based care standards with aggressive quality targets • Start medical home transformation • Foster seamless data exchange across sites of care • Align clinical, operational and financial goals • Manage inappropriate utilization of high- risk patients • Reduce costs through quality improvement, care coordination • Leverage business intelligence systems to identify core competencies • Consider value-based contracts across payers • Tailor interventions for population health management Tactics for Evolving Primary Care to Support Accountable Care Strategy

18. Start by Segmenting Medical Staff by Role in ACO The Accountable Physician Enterprise Community-Based Medical Specialists Primary Care Hospital-Based Non Admitting Specialists Community Contractors Proceduralists Cardiology Medical Oncology Endocrinology OB/GYN Dermatology Ophthalmology Radiology Anesthesiology Pathology ED Physicians General Surgery Cardiac Surgery Neurosurgery Orthopedics Internal Medicine Pediatrics Family Medicine Hospitalist Effective Care Management Enterprise Minimal Relationship Efficient Procedural Enterprise “ACO Partners” “ACO Collaborators” “ACO Principals”

19. More Than Just Great Clinicians Ideal Partners Willing to Demonstrate Cultural Compatibility Information-Powered Value-Conscious Open to Transparency System-Oriented Instinctively pursues system goals Prioritizes system needs over individual ambitions Trusts that decisions made with interest of patients, not politics, in mind Understands benefit of full data transparency Accepts results as validated, unbiased, accurate Views release of performance data as opportunity to improve Supplements personal experience with communal knowledge resources Actively contributes to expanding body of knowledge on care standards, patient records Source: Health Care Advisory Board interviews and analysis. Acknowledges continuous cost pressures within system Actively works to improve patient care in cost-effective manner Four Attributes of the Ideal Physician Partner

20. Address Physician Concerns About Team-Based Care Key Responses to Common Physician Pushback Source: Innovations Center interviews and analysis. Fear of “Losing” Patients Medical Home is a physician-led team of providers Key relationship built around maximizing patient-physician interaction Physician actively engaged in overall patient care Protecting “Physician-Required” Tasks Best practices are standardized, maximizing physician time “Triggers” to engage physician can be built into care processes Physician-required tasks are not offloaded to team Imposition on Physician Time, Productivity Role and goals of physician defines how team is used Team extends time available to patient, without requiring additional physician time Cost of Creating the Care Team More efficient visits improve financial performance of practice More cost-effective to minimize physician time spent on non-physician tasks Allows team members to operate at the top of their licenses

21. Finding the Right Physician Leaders Least Engaged Most Engaged ” Willingly Cooperative Passionately Leading Disruptively Opposed Grudgingly Obedient Distractingly Over-Enthused Great majority of physicians willing to support system strategy but need strong physician leadership Best suited to spearhead change, disseminate system vision Putting Our Best Foot Forward “Even today, we still have people within our system who viscerally oppose our ongoing shift to clinical process management and improvement. Change is hard. However, we have enough people who “get it”—and are deeply convinced of and committed to it—that we can move vigorously ahead.” Dr. Brent JamesChief Quality Officer, Intermountain Healthcare Source: Intermountain Healthcare, “How to Run Your Own Clinical Quality Improvement Training Program,” available at: http://intermountainhealthcare.org/, accessed May 14, 2012; Health Care Advisory Board interviews and analysis. Spectrum of Physician Engagement with System Strategy Best Ambassadors Are Eager, Committed, Humble

22. Building an Effective Ambassador Corps Attributes of Effective Physician Ambassadors • Respected clinicians • Ethic of trust and stewardship • Effective communicators • Skilled at resolving conflict • Natural problem-solvers Ambassador Corps How Much is “Critical Mass”? Rule of thumb from change management research: The number of leaders necessary to spearhead organizational change is equal to the square root of n, where n is the total number of individuals in an organization Rank-and-File Physicians Small Groups of Leaders Make Large Impact Source: Intermountain Healthcare, “How to Run Your Own Clinical Quality Improvement Training Program,” available at: http://intermountainhealthcare.org/, accessed May 14, 2012; Health Care Advisory Board interviews and analysis.

23. Funneling Patients Through A Siloed Enterprise • Primary care practices serve as feeders to specialty service lines • Each practice as individual point of care, not comprehensive network Primary Care • Specialty service lines serve as core business under FFS1 model • Care, services streamlined within each specialty but not across service lines Specialty Service Lines • Ambulatory space serves as driver of volumes to inpatient setting, treatment • Hospital as nexus of clinical enterprise rather than node on care continuum Acute Care Hospital Individual Components Strong But Disconnected Traditional Clinical Enterprise Source: Health Care Advisory Board interviews and analysis. Fee-for-Service.

24. A Week in the Life of a Diabetic Fragmented Pathways, Poor Coordination Threaten Outcomes Source: Health Care Advisory Board interviews and analysis. Typical Diabetic Complication Pathway Root Causes of Care Management Breakdowns Call to PCP Office Urgent Care Visit Med/Surg Admission Surgery Consult Wound Team Intervention ED Visit Discharge Typical Primary care pathways, providers fractured across care continuum Lack of coordination, interfacing across service lines, specialties Lines of control fail to converge at any actionable level

25. Patient Problems Often Span Multiple Specialties Source: Health Care Advisory Board interviews and analysis. Specialists Required to Generate Post-Op Wound Prevention Standards Even Simple Problems Require Broad Specialist Collaboration Surgical Specialists Guarantee pre-, post-op care order consistency Hospitalists, Intensivists Manage general post-op care Wound Care Specialist Supervises wound therapy pre-, post-discharge Infectious Disease Specialist Ensures appropriate antibiotic use Total number of specialists required for comprehensive wound care 7

26. Meeting Clinical Needs Head On Quality Committee Characteristics MissionPoint Quality Committees • Cardiac – CHF1 and Chest Pain • Diabetes Mellitus • Respiratory – Asthma/COPD2 • Sepsis • Preventive Care • Depression • Joint Pain (including back pain) • Women/Newborn Health • Weight Loss Nine quality committees organized around initiatives rather than specialties All physicians required to spend two hours per month on a committee Physicians not compensated for time Case in Brief: MissionPoint Health Partners • 1,400-physician clinically integrated population management network affiliated with St. Thomas Health located in Nashville, Tennessee • Mandates multidisciplinary physician participation on quality committees;18 percent of physicians participate on a committee at any given time Organizing Quality Around Patient Issues Source: Health Care Advisory Board interviews and analysis. Congestive Heart Failure. Chronic Obstructive Pulmonary Disorder.

27. Evolving to a New Physician Leadership Bench Chief Clinical Officer VP of Care Transformation VP of Medical Affairs • Holds management jurisdiction, authority over entire clinical enterprise • Bridges stakeholder relationships • Applies systematic analysis to pilot effective population health programs • Tailors offerings, rolls out stratified risk programs Chief Medical Officer • Roles largely limited to inpatient quality management, standards • Legacy of independent medical staff model, responsible for credentialing • Limited authority to enact true change across organization Chief Medical Information Officer Chief Quality Officer • Bridges communications gap between IT staff, physicians • Provides guidance on realities of clinical practice as IT systems are deployed • Leads transition to evidence-based practice • Sets unified quality standards across care continuum New Crop of Leaders Rising To Meet Tomorrow’s Challenges Traditional Hospital Physician Leadership Source: Health Care Advisory Board interviews and analysis. Tomorrow’s Health System Leaders

28. Patient-Focused Culture Not an Overnight Change Transforming Personal Relationships, Attitudes Takes Time Source: Health Care Advisory Board interviews and analysis. Shifting Perspectives

29. Tough Decisions Require New Paradigms Successful Physician Alignment Must Be Redefined Difficult (But Necessary) Transformations Source: Health Care Advisory Board interviews and analysis. Traditional Goals • Physician satisfaction • Network size • Physician “buy-in” to hospital-led strategy • Minimized losses on employed practices Restrict network participation to culturally-aligned, performance-focused physician partners Empower physicians with meaningful influence in system strategic planning New Measures of Success • Stronger physician engagement with system • Network integrity, compatibility with payer contracting objectives • Physician contribution to jointly-led strategy • Physician impact on quality, cost of care Restructure reporting relationships to emphasize unified, coordinated patient care over parochial interests

30. Value Proposition of Systemness Broadening Traditional Physician Benefits of Systemness Source: Health Care Advisory Board interviews and analysis. Attracting Physicians to New Model Requires Making Benefits Clear Additional Value Proposition Collaboration with network peers Coordination across care continuum Comprehensive IT infrastructure Patient-focused care model Affiliation with larger, respected brand Stronger negotiating position with payers Access to investment capital Efficiency through shared services Affiliation with larger, respected brand Stronger negotiating position with payers Access to investment capital Efficiency through shared services

31. Three Fundamental Principles Recalling the Tenets of True Systemness Source: Health Care Advisory Board interviews and analysis. An End to Factionalism Physician-Oriented Leadership Patients at the Center System leaders need not be physicians, but must have collegial, productive relationships with physician partners All stakeholders must understand that system value derives from serving patient needs through high-quality, cost-effective care Hospital leaders, physicians must move beyond “us vs. them” mentality to one of system unity, shared purpose

32. Questions