This year has been a noteworthy year for physicians and hospitals, and the key structural drivers of change will continue into 2012. Accountable care organizations were declared "the party that nobody comes to," payors began to buy physicians and hold hospitals financially accountable for costs, and physicians sought hospital employment in droves.
Alex Hunter, managing director in Navigant's Healthcare practice, shares his thoughts on seven trends that will persist throughout 2012 and the potential implications for hospitals and physicians as they continue to strategically align.
1. Innovation will be driven by local markets rather than national policy. "Local innovation driving healthcare change isn't necessarily about the failure of the national government. Local markets just move faster and are more attune to the needs of payors and providers. So much of what is going to happen will happen locally," says Mr. Hunter. Rather than regulations, marketplace competition and private resources will push the industry to achieve principles of healthcare reform like accountable care and integrated delivery.
Mr. Hunter points to CMS' Value-Based Purchasing Program, which will take effect in Oct. 2012 and distribute an estimated $850 million to hospitals based on their overall performance of quality measures, as a government program that could be overshadowed by local arrangements among providers and payors. "The Value Based Purchasing program will have $850 million allocated to it for FY 2013, and yet the administration estimates that we need $1.2 trillion to achieve its cost reduction objectives under health reform.1 I'm not saying VBP is a bad idea, but at least initially, the potential financial impact is not sized to create substantial impact and drive innovation and change. The force of VBP is maybe 1 times as great compared to the force of health systems combined with private resources, which has 10 times multiplier effect," says Mr. Hunter.
2. Hospitals and cardiologists will continue to align, but certain other specialties are likely to become the focus of integration. There was a land-grab for cardiologists and cardiology practices in 2010 and 2011, making it one of the most sought-after specialties for hospital employment or alignment. It looks like that trend might span a few more years, along with specialties that face similar financial landscapes as cardiology.
"A number of factors came into play in 2010 and 2011. There was a significant reduction in reimbursement for cardiovascular ancillary tests and services. There was a malaise in the economy and hospitals were concerned that the physicians which supported their most profitable service lines were having economic problems," says Mr. Hunter. "Given the risk of losing key physicians, hospitals decided to partner and/or strategically align with physicians."
Mr. Hunter says this trend isn't about to show any signs of slowing down. Due to similar economic concerns, orthopedics, neurosciences and oncology/hematology practices will experience continued pressure to become employed as well.
3. Clinically integrated networks will continue to proliferate and drive alignment. Clinically integrated networks are likely to become a popular model in the years ahead as hospitals look to strategically align both employed and independent providers in the community. "Hospitals are looking to create clinically integrated networks, and many of these provide a platform for the use of a common EMR and other essential clinical data exchange capabilities. It's a compelling way to increase clinical alignment," says Mr. Hunter.
Clinical integration is an active and ongoing program to evaluate and modify practice patterns of the network’s physician participants and to create a high degree of interdependence and cooperation among the physicians to control costs and ensure quality. Effectively, physicians partner together in an organization that enables them to:
4. Payors will still look to acquire primary care physicians as well as specialists. Insurers increased their claim by acquiring physician practices in 2011. By some estimates, insurers have invested more than $5 billion in acquiring medical groups in recent years, and this strategy will continue to emerge.. The deals being struck between payors and providers are growing in size and frequency. For instance, in September, UnitedHealth Group acquired 2,300 physicians through its purchase of Monarch Healthcare — the largest medical group in California's Orange County.
"Insurers are looking at multi-specialty groups, and those types of deals will become more frequent in the next couple of years ahead," he says. Hospitals are beginning to realize that insurance companies are looking to recruit the same physicians they're looking at, which is likely to drive more aggressive recruitment efforts.
5. Payors will develop more creative models to drive hospital savings. In a notable 2011 strategy, BCBS of Massachusetts launched its Blue Cross Hospital Choice plan, which identified 15 "higher-cost" organizations and pinned an extra charge to members if they went there for care. Several of the high-cost hospitals are teaching institutions, but smaller hospitals also were categorized as high-cost due to their geographical dominance or other factors.
Mr. Hunter says strategies like this are likely to stick around as payors try to drive saving opportunities. "We'll continue to see performance incentives based on quality and safety, and payors will continue to develop creative models for patients and providers," Mr. Hunter says.
6. The approach and direction of CMS may change if/when Dr. Donald Berwick leaves. Dr. Berwick's time as CMS administrator will come to an end Dec. 31 unless he receives Senate approval by the end of the year, an event members of Congress have deemed unlikely. In March, 42 Republican senators urged the Obama administration to withdraw a nomination for Dr. Berwick to lead CMS. That number of senators would be enough to block a confirmation, according to a New York Times report.
"Honestly, I think there is still a very, very big window for leadership regarding healthcare reform to be exhibited either legislatively and/or from a regulatory standpoint," says Mr. Hunter. "I think there is going to be a transition with Dr. Berwick leaving CMS." If his replacement is more focused from a population health management standpoint, Mr. Hunter says he/she would be more likely to perpetuate Dr. Berwick's ideas. If his replacement is more market-focused, you'll Mr. Hunter says we might be able to expect more laissez-faire leadership with heightened emphasis on state implementation of healthcare reform.
Marilyn B. Tavenner, RN, the principal deputy and COO of CMS, has been identified as a possible candidate for the role, according to the New York Times report. She is a former Virginia secretary of health and human resources and spent more than two decades with Hospital Corporation of America serving as a hospital executive and president of the company's outpatient group. Ms. Tavenner's combination of private sector and public policy experience could bring a different leadership style into CMS if she's nominated.
7. ACOs won't gain momentum absent an adjustment to the current regulations. The potential for accountable care organizations rocked the industry in early 2011. As providers and payors waited on the publication of the regulations, the industry was gripped with a sense of urgency that sometimes seemed to delve into ACO-panic. While there were doubts and skepticism early on, the proposed regulations unleashed a more solidified wall of resistance. It was especially remarkable when the "poster-children" of ACOs such as Mayo Clinic said they'd sit out on further development of ACO model.
"If you talked to me in February 2011, I would have said, 'ACOs could be the way we're organizing care going forward. However, when CMS finally issued the regulations all the wind went out of the sails. The value equation just wasn't there for hospitals or physicians due to the limits established and requirements place on potential ACO participants."
Mr. Hunter says ACOs and like-minded models will continue to flourish in private and commercial arrangements, but the CMS model or its Pioneer ACO program has minimal draw for health systems. "When you look at it, it's just simple law of physics that force equals mass times acceleration. There's no acceleration on this right now," says Mr. Hunter. With CMS ACOs receiving less attention in the industry compared to 2010 and 2011, it will be interesting to see how other hospital-physician arrangements proliferate.
1. Mr. Hunter was referencing an article from the New England Journal of Medicine. NEJM, 2009; 361: 229 – 231, July 16, 2009.
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Alex Hunter, managing director in Navigant's Healthcare practice, shares his thoughts on seven trends that will persist throughout 2012 and the potential implications for hospitals and physicians as they continue to strategically align.
1. Innovation will be driven by local markets rather than national policy. "Local innovation driving healthcare change isn't necessarily about the failure of the national government. Local markets just move faster and are more attune to the needs of payors and providers. So much of what is going to happen will happen locally," says Mr. Hunter. Rather than regulations, marketplace competition and private resources will push the industry to achieve principles of healthcare reform like accountable care and integrated delivery.
Mr. Hunter points to CMS' Value-Based Purchasing Program, which will take effect in Oct. 2012 and distribute an estimated $850 million to hospitals based on their overall performance of quality measures, as a government program that could be overshadowed by local arrangements among providers and payors. "The Value Based Purchasing program will have $850 million allocated to it for FY 2013, and yet the administration estimates that we need $1.2 trillion to achieve its cost reduction objectives under health reform.1 I'm not saying VBP is a bad idea, but at least initially, the potential financial impact is not sized to create substantial impact and drive innovation and change. The force of VBP is maybe 1 times as great compared to the force of health systems combined with private resources, which has 10 times multiplier effect," says Mr. Hunter.
2. Hospitals and cardiologists will continue to align, but certain other specialties are likely to become the focus of integration. There was a land-grab for cardiologists and cardiology practices in 2010 and 2011, making it one of the most sought-after specialties for hospital employment or alignment. It looks like that trend might span a few more years, along with specialties that face similar financial landscapes as cardiology.
"A number of factors came into play in 2010 and 2011. There was a significant reduction in reimbursement for cardiovascular ancillary tests and services. There was a malaise in the economy and hospitals were concerned that the physicians which supported their most profitable service lines were having economic problems," says Mr. Hunter. "Given the risk of losing key physicians, hospitals decided to partner and/or strategically align with physicians."
Mr. Hunter says this trend isn't about to show any signs of slowing down. Due to similar economic concerns, orthopedics, neurosciences and oncology/hematology practices will experience continued pressure to become employed as well.
3. Clinically integrated networks will continue to proliferate and drive alignment. Clinically integrated networks are likely to become a popular model in the years ahead as hospitals look to strategically align both employed and independent providers in the community. "Hospitals are looking to create clinically integrated networks, and many of these provide a platform for the use of a common EMR and other essential clinical data exchange capabilities. It's a compelling way to increase clinical alignment," says Mr. Hunter.
Clinical integration is an active and ongoing program to evaluate and modify practice patterns of the network’s physician participants and to create a high degree of interdependence and cooperation among the physicians to control costs and ensure quality. Effectively, physicians partner together in an organization that enables them to:
- Identify and adopt clinical protocols for the treatment of particular disease states.
- Develop systems to monitor compliance with the adopted protocols on both an inpatient and outpatient basis.
- Collaborate with the hospital or hospital system to encourage compliance with inpatient performance improvement processes and protocols.
- Enter into physician-directed "pay-for-performance" and other contractual arrangements with health plans in a way that financially recognizes the physicians’ efforts to improve healthcare quality and efficiency.
4. Payors will still look to acquire primary care physicians as well as specialists. Insurers increased their claim by acquiring physician practices in 2011. By some estimates, insurers have invested more than $5 billion in acquiring medical groups in recent years, and this strategy will continue to emerge.. The deals being struck between payors and providers are growing in size and frequency. For instance, in September, UnitedHealth Group acquired 2,300 physicians through its purchase of Monarch Healthcare — the largest medical group in California's Orange County.
"Insurers are looking at multi-specialty groups, and those types of deals will become more frequent in the next couple of years ahead," he says. Hospitals are beginning to realize that insurance companies are looking to recruit the same physicians they're looking at, which is likely to drive more aggressive recruitment efforts.
5. Payors will develop more creative models to drive hospital savings. In a notable 2011 strategy, BCBS of Massachusetts launched its Blue Cross Hospital Choice plan, which identified 15 "higher-cost" organizations and pinned an extra charge to members if they went there for care. Several of the high-cost hospitals are teaching institutions, but smaller hospitals also were categorized as high-cost due to their geographical dominance or other factors.
Mr. Hunter says strategies like this are likely to stick around as payors try to drive saving opportunities. "We'll continue to see performance incentives based on quality and safety, and payors will continue to develop creative models for patients and providers," Mr. Hunter says.
6. The approach and direction of CMS may change if/when Dr. Donald Berwick leaves. Dr. Berwick's time as CMS administrator will come to an end Dec. 31 unless he receives Senate approval by the end of the year, an event members of Congress have deemed unlikely. In March, 42 Republican senators urged the Obama administration to withdraw a nomination for Dr. Berwick to lead CMS. That number of senators would be enough to block a confirmation, according to a New York Times report.
"Honestly, I think there is still a very, very big window for leadership regarding healthcare reform to be exhibited either legislatively and/or from a regulatory standpoint," says Mr. Hunter. "I think there is going to be a transition with Dr. Berwick leaving CMS." If his replacement is more focused from a population health management standpoint, Mr. Hunter says he/she would be more likely to perpetuate Dr. Berwick's ideas. If his replacement is more market-focused, you'll Mr. Hunter says we might be able to expect more laissez-faire leadership with heightened emphasis on state implementation of healthcare reform.
Marilyn B. Tavenner, RN, the principal deputy and COO of CMS, has been identified as a possible candidate for the role, according to the New York Times report. She is a former Virginia secretary of health and human resources and spent more than two decades with Hospital Corporation of America serving as a hospital executive and president of the company's outpatient group. Ms. Tavenner's combination of private sector and public policy experience could bring a different leadership style into CMS if she's nominated.
7. ACOs won't gain momentum absent an adjustment to the current regulations. The potential for accountable care organizations rocked the industry in early 2011. As providers and payors waited on the publication of the regulations, the industry was gripped with a sense of urgency that sometimes seemed to delve into ACO-panic. While there were doubts and skepticism early on, the proposed regulations unleashed a more solidified wall of resistance. It was especially remarkable when the "poster-children" of ACOs such as Mayo Clinic said they'd sit out on further development of ACO model.
"If you talked to me in February 2011, I would have said, 'ACOs could be the way we're organizing care going forward. However, when CMS finally issued the regulations all the wind went out of the sails. The value equation just wasn't there for hospitals or physicians due to the limits established and requirements place on potential ACO participants."
Mr. Hunter says ACOs and like-minded models will continue to flourish in private and commercial arrangements, but the CMS model or its Pioneer ACO program has minimal draw for health systems. "When you look at it, it's just simple law of physics that force equals mass times acceleration. There's no acceleration on this right now," says Mr. Hunter. With CMS ACOs receiving less attention in the industry compared to 2010 and 2011, it will be interesting to see how other hospital-physician arrangements proliferate.
1. Mr. Hunter was referencing an article from the New England Journal of Medicine. NEJM, 2009; 361: 229 – 231, July 16, 2009.
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