Key Considerations for Rural Healthcare Leaders · Bundled Payments Pay for Performance Partial or Full Capitation (ACO Model) Shared Savings (ACO Model) Quality and Experience Cost

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© 2019 The Chartis Group, LLC. All Rights Reserved. March 2019 Page 1

Key Considerations for Rural Healthcare Leaders

Michael Topchik, MPHNational Leader

The Chartis Center for Rural Health

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The Administration’s Rural Health Strategy

1. Apply a rural lens to CMS programs

and policies

2. Improve access to care through

provider engagement and support

3. Advance telehealth and telemedicine

4. Empower patients to make decisions

about their health care

5. Leverage partnerships to achieve

goals CMS Rural Strategy goals

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Engaging Rural Hospital Leadership Teams Across the Country

500+ healthcare executives

and their trustees.

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Key Considerations for Rural Hospitals

Remote geography presents both opportunities and challenges for rural providers

Physician recruitment, retention, retirement, and burnout are significant patient

barriers to access in rural healthcare

Reliance on government reimbursement disproportionately impacts the rural health

safety net

Improving access and quality of care requires clinical integration

EHR integration is critical to effective clinical partnerships

Virtual care may improve access and patient experience at low cost, but may be a

disruptor to current care delivery and payment models

Value is incentivized by alternative payment models, under which strong

performance is essential to secure bonus revenues

Investment in primary care networks by rural acute care providers is critical

Population health management demands high-value, coordinated care, incentivized

by alternative payment models that reward improved community health

Strategic governance must be informed by the latest rural-relevant research

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Older, Less Healthy and Less Affluent

Rural populations are more socioeconomically disadvantaged and impacted by health disparities including:

Child Poverty

PCP Access 65+

Opioid Addiction Diabetes

Mental Health Access

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Older, Less Healthy, Less Affluent…

…and Limited Access to Multiple Types of Care

Rural populations are more socioeconomically disadvantaged and impacted by health disparities.

0

10

20

30

40

50

60

70

80

Veterans Over 65 Child

Poverty

Diabetes

Non-Rural Median

010203040506070

Mental

Health

Access

Dental

Access

Primary

Care

AccessRural Median

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Limited Access to Care

P O P UL AT I ON H E A LT H M A NAGE M E NT A N D VA LU E - B AS E D PAY M E NT S T R AT E G YPAT I E N T B A R R I E R S TO A C C E S S E X I S T – A N D P E R S I S T – I N R U R A L C O M M U N I T I E S

Recruitment Retention Retirement

Provider integration into the

community (i.e., family life, lifestyle)

Rural residents seek employment in

urban areas (i.e., technology,

coverage, professional growth)

Loan repayment and forgiveness

pose financial burdens for providers

Burnout threatens physician health,

turnover, and patient safety

Success Story: Tufts Maine Track

(Grow Your Own/Rural Residency)

Remote communities are often

viewed as unfavorable (i.e,

technology, on-call, lack of

integration, professional

growth/collaboration)

Rural hospitals struggle to offer

competitive compensation

H1B Visa-Docs are often challenged

by language/cultural barriers

of HPSAs are rural (or partially rural)1

Rural providers are aging

Physicians often remain on staff

until retirement

Providers seeking employment in

rural areas are often late in their

careers

81%

1 Healthcare Resource & Services

Administration (HRSA), 2018

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Sustained Pressure on Margins

⚫ Experimentation with DSRIP

programs in numerous states

⚫ Continued push towards

Medicare Advantage conversion

⚫ Goal of 50% of payments tied to

value by 2018

⚫ Healthcare transformation task

force commits to shifting 75% of

its business into value-based

contracts by 2020

Source:S&P Global Market Intelligence, Not for Profit Healthcare Sector Outlook, Jan 2017; Moody’s, Not-for-Profit Healthcare and Public Hospitals, May 2017; Becker Hospital Review, 50 Things to Know About the Hospital Industry, Jan 2017

“Median operating margin decreased from 3.4% to 2.7% from 2015 to 2016”

“United States

nonprofit hospitals see

decrease in median

operating margins”

“Growing concern of weaker operating performance due to declines in utilization and payor mix”

Evidence of sustained reimbursement pressure coupled with rising operating costs culminate in slim

and shrinking operating margins.

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New Healthcare Delivery Models Emerge

Retail /

Convenient Care

▪ Preventative care

▪ Minor trauma

▪ Travel clinic

▪ Virtual consults

Existing Primary

Care Models

Next-Generation

“Primary” Care

▪ Imaging

▪ Routine Dx (e.g. lab)

▪ Low-complexity specialty

care

Traditional

Specialist

Providers

Free-Standing

Outpatient Services

▪ Outpatient Surgery

▪ Interventional

Cardiology

▪ Chemotherapy

▪ Urgent care

Hospitals

The new (l) is competing with the traditional (r)

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Employers Continue to Test New and Innovative

Models to Contain Costs

72%

28%Of employers:

healthcare delivery payment reform is

part of current strategy

“In the private sector, escalating [healthcare] costs have eroded the

bottom line ...purchasers simply cannot afford the status quo”

2012 IOM executive roundtable findings

SEEKING

NATIONAL

CONTRACTS

SHIFTING RISK

TO DEFINED

CONTRIBUTION

CAPPING

PAYMENTS

SPREADING

MODELS

Reference pricing

Purchaser consortium

Private exchange

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The Lines Begin to Blur Across the Healthcare Landscape

Providers are becoming payors

Payors are becoming providers

Companies from other segments are

becoming providers

New players are getting into the risk

business

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Disruptors May Upend Healthcare as We Know It

• These companies are moving into

healthcare because they see

opportunity: a broken healthcare

system hampered by legacy assets,

business models, and payment systems

• They bring with them elements that

traditional healthcare providers and

start-ups don’t have, including: tons

of cash, large customer bases,

distribution networks, advanced data

tracking and analysis capabilities,

artificial intelligence experience

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Challenges and Opportunities: Rural Geography

As an “island”, rural providers gain:

Historic captive market

Strong community support for

local access to care

Primary care network serves as a

future asset in value based care

Success Story: Aspen Valley,

CO/Park City, UT ortho program;

Tahoe Forest, CA/Transylvania, NC

oncology

However, in isolation, rural providers face:

Recruitment and retention

challenges

Lack of clinical integration and

“system-ness”

Lack of sub-specialties

Population health challenges

High costs

Greater exposure to localized

disruptions

Strengths Risks

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A Shift in Focus – from Treating Individuals to Managing

a Population

Key capabilities required:

• Providers with clinical capabilities

• A mix of services that the population

demands, generally of your choosing

• Facilities, equipment, supplies

• Some IT platforms

• Billing and coding department

• Administrative infrastructure

Key capabilities required:• Everything to the left, plus:

• Full range of services, owned or via partnership

• Population risk stratification

• Actuarial capabilities to examine costs

• Advanced data informatics capabilities

• Disease management programs and

interventions

• Care coordination

• Clinical integration

• Extensive quality improvement programs

• Patient attraction and retention strategies

FOCUS ON TREATING INDIVIDUALS FOCUS ON MANAGING A POPULATION

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Proliferation of Value Based Models with Varying

Degrees of Risk & Reward

Fee For Service (FFS)

Bundled Payments

Pay for Performance

Partial or Full Capitation (ACO

Model)

Shared Savings (ACO Model)

Quality andExperience

Cost

Value-Based Payment Models

Volume of Services Provided

Volume (Services, Episodes and/or Attributed Lives) + Outcomes and Cost Effectiveness

Value is being embedded in traditional models –

through benefits design, value- based purchasing,

and reference based pricing

Portion of reimbursement tied to performance on

specific metrics. -typically on top of a FFS base

Fixed reimbursement for an episode of care -

providers take responsibility for managing costs

Actual spending compared to target for

defined population over a set period.

Providers and payors share in any savings

Provider groups receive prospective fixed payment and take responsibility for managing all associated costs.

While the private sector continues to expand and test a range of value-based payment models,

CMS has already transitioned 85% of FFS payments to value based purchasing categories.

Increasing Degree of Risk/Reward

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Increasingly, Rural Hospitals Seek Affiliations and Partnerships

System-affiliated rural hospitals tend to see higher operating margins (based on INDEX).

1 AHA Data Viewer, 20152 Healthcare Cost Report Information System (HCRIS) Q3 2017

53% of Rural Hospitals

are System-Affiliated1

29% Of these facilities are

Contract-Managed1

47% of Rural Hospitals are

Freestanding1

2.9%

0.6%

0.0%

1.3%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

System-Affiliated (incl.

Contract Mgd)

Contract-Managed Freestanding

Med

ian R

ura

l H

osp

ital

Op

era

ting

Pro

fit

Marg

in2

Median Operating Profit Margin All Rural Median

52%ile 52%ile

49%ile50%ile

40

45

50

55

60

System-Affiliated (incl.

Contract Mgd)

Contract-Managed Freestanding

Med

ian IN

DEX

Sco

re

Median INDEX Score All Rural Median

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Creating Sustainable Value in Rural IDNs

Creating value in a rural IDN is fundamentally predicated on achieving the benefits of economies of scale, without sacrificing the collective “voice” of the local entities.

Rural Affiliates Health System

Articulation & Prioritization

of (Aggregate) Needs

Provision of High Value

Service & Technology

Solutions

Joint Assessment & Review

of Service and/or

Technology Provision

Sustainable value requires explicit definition of the relationship between affiliates and the system across four dimensions:

(1) Governance, (2) Management, (3) Economics, and (4) Strategy

1 2

3

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Articulating Goals & Partnership Requirements

Establishing an open dialogue across the enterprise that facilitates a candid discussion of needs and the associated trade-offs is essential to defining overall strategic direction and objectives.

Rural Affiliates Health System

Articulating Goals

What services or technologies would be

helpful in delivering care to your local

communities?

What are they system’s goals and

expectations from better alignment with

rural affiliates?

Considerations & Trade-Offs

What level of control would be

acceptable to share in order to access

this suite of services/technology?

What level of control would be

acceptable to share to gain tighter

alignment with rural affiliates?

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Rural Clinical Integration Requires a Digital Strategy

C R E AT I N G A C C E S S I B L E H I G H - Q U A L I T Y H E A LT H C A R E R E Q U I R E S

A C O O R D I N AT E D A P P R O A C H TO C L I N I C A L I N T E G R AT I O N

Local Care Delivery

Capabilities

Regional Care

Delivery CapabilitiesDigital Capabilities

Elements of Effective Clinical Integration:

Active engagement of care team members in

care model development and management

Effective communication between caregivers

Digital tools seamlessly integrated across the

care continuum and all combined sites of care

Consistent EHR access across all providers

Clearly-defined care protocols for discrete

patient populations

Seamless patient transitions across care

settings and sites of care

Commitment to shared objectives

Transparent economic and performance data

© 2018 The Chartis Group, LLC. All Rights Reserved. 20

© 2018 The Chartis Group, LLC. All Rights Reserved. 21

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The Three Future Dimensions of Clinically

Integrated Care Delivery

Clinical

Quality

Operational

Consumer

Experience

Operational

Efficiency

Quadruple

Aim

Individual

Serving the Needs of the

Healthcare Consumer…1Through a Comprehensive Digital

Delivery Network

Care Team

Delivering Exceptional

Patient-Centric Care…2Through Integrated Digital

Care Models

Business Units

Seamlessly Coordinating

Business Operations…3Through Integrated Digital

Operating Ecosystem


How Are Rural Providers Coping With Pressure?

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Key Industry Responses to Changing Environment

Material changes in the structure of the healthcare market…

Unsustainable national and state healthcare

spending

Uncertainty driven by repeal and replace

Fueling of consumerism and rise of new

disruptive healthcare models

Shift of risk to providers – value based models,

innovative employer cost containment

strategies

Sustained pressure on margins

1

2

3

4

5

…resulted in key industry responses

I

II

IV

III

Seeking meaningful scale & regional

consolidation

Moving from care asset aggregation to

coordinated system clinical integration

Investing in new capabilities like pop. health,

consumerism & digital

Pursuing new pathways to strategically

differentiate

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Rural Health Strategy – Building Blocks for the Future

⚫ Consider ‘staying the course’ provided existence of geographic monopoly

and sufficient private payer base

⚫ Develop virtual care models capable of extending services and reaching

more patients within the community

⚫ Increase investment in community outreach (e.g. community health

workers)

⚫ Pursue clinical integration in combination with alternative payment

models

⚫ Pursue partnerships/affiliations at a minimum through CINs

⚫ (If already part of a health system) advocate for a global budget

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Sample Questions and Challenges Facing Key

Stakeholder Groups

Hospitals and Healthcare

Systems

Physicians/Clinicians and

Medical Groups

• How do we attract more commercial patients to improve margins near-term? How do we

optimize revenue?

• How can we better understand and control our costs?

• Where do we get access to capital?

• How can we grow our physician group?

• What services will be needed in the future?

• What IT systems should we invest in?

• How do we break into digital health? Where do we begin?

• Do we need a partner?

• Can I survive as an independent practice? How do I keep costs down? How can I grow my

revenue? Should I combine with another practice, group or health system? Should I retire

early?

• What new capabilities do I need, by when, and how will I afford them? Where do I find

them? How do I implement them?

• Do we have the right leadership in place to guide us into the future?

• What do my patients want and how do I provide it?

• How do I tackle all of this and stay abreast of new medical advancements, billing and

coding, continuing medical education – and avoid burnout?

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Key Considerations for Rural Hospitals

Remote geography presents both opportunities and challenges for rural providers

Physician recruitment, retention, retirement, and burnout are significant patient

barriers to access in rural healthcare

Reliance on government reimbursement disproportionately impacts the rural health

safety net

Improving access and quality of care requires clinical integration

EHR integration is critical to effective clinical partnerships

Virtual care may improve access and patient experience at low cost, but may be a

disruptor to current care delivery and payment models

Value is incentivized by alternative payment models, under which strong

performance is essential to secure bonus revenues

Investment in primary care networks by rural acute care providers is critical

Population health management demands high-value, coordinated care, incentivized

by alternative payment models that reward improved community health

Strategic governance must be informed by the latest rural-relevant research


Michael Topchik

National Leader, The Chartis Center for Rural Health

Senior Vice President, iVantage Health Analytics

[email protected]

Thank You For Your Time and Attention

Documents

Key Considerations for Rural Healthcare Leaders · Bundled Payments Pay for Performance Partial or Full Capitation (ACO Model) Shared Savings (ACO Model) Quality and Experience Cost