Acknowledgements · program demographics, physician compensation trends and hospital system impact. The report will also highlight ... helping to lead the industry out of its current

Abilene Cardiology Consultants – Abilene, TX

Adirondack Cardiology, Queensbury – NY

Alegent Heart and Vascular Specialists – Omaha, NE

Appleton Cardiology – Appleton, WI

Arkansas Cardiology – Little Rock, AR

Arkansas Heart Hospital – Little Rock, AR

Aspirus – Wausau, WI

Assoc. in Cardiovascular Disease – Springfield, NJ

Athens Regional Medical Center – Athens, GA

Austin Heart – Austin, TX

Bay Area Heart Center – St. Petersburg, FL

Berks Cardiologists – Wyomissing, PA

Berkshire Medical Center – Pittsfield, MA

Bradenton Cardiology Center – Bradenton, FL

Brigham and Women’s Hospital – Boston, MA

Bryan Heart Institute – Lincoln, NE

Buffalo Cardiology and Pulmonary Associates – Williamsville, NY

Cardiology Associates – Jonesboro, AR

Cardiology Associates Medical Group – Ventura, CA

Cardiology Associates of Bellin Health – Green Bay, WI

Cardiology Associates of Mobile, Inc. – Mobile, AL

Cardiology Associates of New Haven – New Haven, CT

Cardiology Clinic of San Antonio – San Antonio, TX

Cardiology Consultants Medical Group of the Valley – Tarzana, CA

Cardiology Inc. – Columbus, OH

Cardiology of Virginia – Midlothian, VA

Cardiovascular Associates – Elk Grove Village, IL

Cardiovascular Associates of Marin & SF – Larkspur, CA

Cardiovascular Associates, PC – Sioux City, IA

Cardiovascular Consultants – Cape Girardeau, MO

Cardiovascular Medicine PC – Davenport, IA

Cardiovascular Specialists of Central Maryland – Columbia, MD

Carolina Cardiology Consultants – Greenville, SC

Centennial Heart – Nashville, TN

Centra – Lynchburg, VA

Central Ohio Cardiology – Grove City, OH

Central Texas Heart Center – Bryan, TX

Central Utah Clinic – Provo, UT

Children’s Hospital & Medical Center – Omaha, NE

Cincinnati Children’s Heart Institute – Cincinnati, OH

Clearwater Cardiovascular – Clearwater, FL

Coastal Carolina Cardiology – Greenville, NC

Columbia Heart Clinic – Columbia, SC

Columbus Cardiology PC d/b/a Indiana Heart Physicians – Columbus, IN

Creighton University Cardiology – Omaha, NE

Desert Cardiology Center – Rancho Mirage, CA

Evergreen Health Cardiology – Kirkland, WA

Exempla Healthcare – Denver, CO

Florida Cardiac Consultants – Sarasota, FL

Florida Heart Group – Orlando, FL

Genesys Heart Institute – Grand Blanc, MI

HAVI – Safety Harbor, FL

Heart Associates – San Jose, CA

Heart Care Group, PC – Allentown, PA

Heart Center at St. Mark’s – Salt Lake City, UT

Heart Center Cardiology – Bend, Oregon

Heart Clinic of Louisiana – Marrero, LA

Heart Clinics Northwest a Division of Kootenai Medical Center – Spokane, WA

Heart Consultants, P. C. – Omaha, NE

Heart Group of Lee Memorial Health System – Fort Myers, FL

Heart South Cardiovascular Group – Alabaster, AL

Heartland Cardiology – Wichita, KS

HeartPlace, P.A. – Dallas, TX

Hickory Cardiology – Hickory, NC

Hopedale Cardiology – Upton, MA

Illinois heart and Vascular – Hinsdale, IL

Integris Cardiovascular Physicians – Oklahoma City, OK

Jacksonville Heart Center & Southern Heart Group – Jacksonville, FL

LeBauer HeartCare – Greensboro, NC

Lehigh Valley Health Network – Allentown, PA

LifePoint Hospitals – Brentwood, TN

Long Island Cardiovascular Medical Associates, PC – Deer Park, NY

Louisiana Cardiology Associates – Baton Rouge, LA

Lourdes Cardiology Services – Haddon Heights, NJ

Medical University of South Carolina – Charleston, SC

Mercer Bucks Cardiology – Yardley, PA

Mercy Health Physicians – Fairfield, OH

AcknowledgementsMedAxiom would like to thank the following practices/hospitals for taking the time to fill out this survey. The information you provided will be invaluable to others as they explore integrating or move through the process.

Metro Heart & Vascular – Wyoming, MI

Michigan Heart – Ypsilannti, MI

Michigan Heart Group PC – Troy, MI

Mid Carolina Cardiology – Charlotte, NC

Minneapolis Heart Institute – Minneapolis, MN

MMP Maine Health Cardiology – So Portland, ME

Montana Heart Institute – Billings, MT

Montgomery Cardiovascular Associates – Montgomery, AL

Mount Vernon cardiology – Alexandria, VA

NEOCS – Akron, OH

New Jersey Cardiology – West Orange, NJ

New Mexico Heart Institute – Albuquerque, NM

New York Heart Center – Syracuse, NY

North Central Heart – Sioux Falls, SD

North Ohio Heart – Elyria, Ohio

North Suburban Cardiology Assoc – Evanston, IL

North Texas Heart Center, PA – Dallas, TX

Northland Cardiology – North Kansas City, MO

Northpointe Heart Center – Berkley, MI

Northstate Cardiology – Chico, CA

Northwest Heart Specialists – Arlington Height, IL

Northwest Medical Center – Margate, FL

Northwest Medical Center Tucson – Tucson, AZ

Oklahoma Heart Hospital Physicians – Oklahoma City, OK

Orlando Heart Center – Orlando, FL

OSF Healthcare: Heartcare Midwest and Rockford Cardiovascular Associates – Peoria, IL

Parkersburg Cardiology Associates, Inc. – Parkersburg, WV

Parkview Physician’s Group-Cardiology – Fort Wayne, IN

Parkway Cardiology Associates – Oak Ridge, TN

Pavilion Services – St. Louis, MO

Pee Dee Cardiology Associates – Florence, SC

Piedmont Heart Institute – Atlanta, GA

Pima Heart Physicians – Tucson, AZ

PinnacleHealth Cardiovascular Institute, Inc. – Wormleysburg, PA

Prairie Cardiovascular Consultants, Ltd – Springfield, IL

Renown Institute for Heart and Vascular Health – Reno, NV

RMG-NSPG CARDIOLOGY – Evanston, IL

Rocky Mountain Cardiology – Boulder, CO

Saint Thomas Heart – Nashville, TN

San Diego Cardiac Center – San Diego, CA

Sanger Heart & Vascular Institute – Charlotte, NC

Scottsdale Cardiovascular Center – Scottsdale, AZ

South Carolina Heart Center – Columbia, SC

South Denver Cardiology Associates – Littleton, CO

South Texas Cardiovascular Consultants – San Antonio, TX

Southern Oregon Cardiology, LLC – Medford, OR

Spectrum Health – Grand Rapids, MI

St Josephs Hospital – Liverpool, NY

St Vincent Health System – Erie, PA

St. Vincent Heart Clinic Arkansas – Little Rock, AR

Sutherland Cardiology Clinic – Germantown, TN

Sutter Pacific Medical Foundation – San Francisco, CA

TCI – Lansing, MI

The Cardiology Group PA – Mount Laurel, NJ

The Cardiovascular Center – Redding, CA

The Chattanooga Heart Institute – Chattanooga, TN

The Heart Center – Poughkeepsie, NY

The Heart Group, PC – Evansville, IN

The Heart House-CADV – Haddon Heights, NJ

The Polyclinic Cardiology – Seattle, WA

TN Heart – Cookeville, TN

Traverse Heart and Vascular – Traverse City, MI

UCVA – Rochester, NY

University of MN Physicians Heart – Edina, MN

Upper Michigan Cardiovascular Associates, PC – Marquette, MI

Utah Cardiology, PC – Bountiful, UT

Valley Health

Wellmont CVA Heart Institute – Kingsport, TN

Wellstar Medical group/CVM – Marietta, GA

Wyoming Cardiopulmonary Services, PC – Casper, WY

M e d A x i o M A n n u A l i n t e g r At i o n r e p o r t – 2 0 1 3 4

Forward - By Suzette JaskieEarly in my career, I was surprised to learn that hospitals and physicians operated as distinct organizations with separate and often competing strategies, approaches to the market, and approaches to patients. From my “Pollyanna” perspective, I would not have imagined that hospitals and doctors weren’t united and aligned. Early collaboration was polite and typically consisted of physicians serving in advisory roles to the development and selection of deployed technology and in medical staff governance roles, and rarely in strategic or decision making roles. Hospitals were rarely invited to provide the same advisory input to a physician practice. And neither the hospital’s nor the practice’s circumstance typically dissuaded the other organization to slow its strategic development by the impact or consequence to the other “partner”.

As clinical complexity increased and as service duplication in both the hospital and practice environments proliferated, further efforts to collaborate, or to integrate and align efforts, emerged. These collaborative efforts were predominant in cardiovascular programs. The integration of the hospital and the cardiology practice entities allowed both organizations to reconsider their historical vertical perspective of care delivery into a truly patient-centric model that could work horizontally across the care continuum. Contractual models whereby hospitals incented physicians to engage in the co-development and co-management of the hospital program became common place. Joint ventures or other contractual approaches were developed to optimize capital investment and decrease duplication of services (particularly ancillary testing services) were pursued. The thought of “selling the practice to the hospital” was a distant and rejected notion from both the hospital and practice perspectives. The ability for either the cardiology practice or the hospital to maximize its impact in the integrated environment was determined by the degree of organizational trust between the parties – referred to in the model as the “trust-o-meter.”

FORWARD

5 M e d A x i o M A n n u A l i n t e g r At i o n r e p o r t – 2 0 1 3

M e d A x i o M

Several important industry and other external factors gravely impacted the effectiveness of these contractual collaborative models as permanent solutions to align hospitals and physicians.

• On-slaughtofhealthcarelegislationandregulationspecificallyaimedattherelationshipsbetweenhospitalsandphysicians made many of these “make-sense” business arrangements difficult and even impossible to operate.

• Significanteconomicpressuretothephysicianpracticebornefromdrasticreductionsinclinicalservicesreimbursement.

• Thesocietalrealizationthatthecurrenthealthcareindustrymodelwasunsustainablefromacostperspectiveand the likely culprit was the fragmented structure of the industry and the fee-for-service payment model.

• TheenactmentofthePatientProtectionandAffordableCareAct(PPACA),aka “healthcare reform.”

This report will overview the integration trend and illustrate the pursuit of an integrated cardiovascular delivery system as the now - most common - operating platform that attempts to address the issues outlined. The report will detail survey data gathered from cardiology programs across the nation with regard to the integration models, program demographics, physician compensation trends and hospital system impact. The report will also highlight and discuss common barriers and problems arising from integration as well as solutions and emerging best practices in the integrated environment. And above all, the report will aim to provide inspiration to pursue a better model for sustaining our healthcare system and support a philosophy of collaboration between hospital and physicians.

And if we really hit it out of the park, the integration report will move us more swiftly on the path of transformation – helping to lead the industry out of its current state of chaos and gloom into a healthcare future that provides better value for patients, a sustainable healthcare future and work that we can be forever proud to have contributed.

SUZETTE JASKIEPresident and CEO of MedAxiom Consulting

FORWARD


Contents

Executive Summary .........................................................................................7

Overview of the Report ..................................................................................9

Survey Objectives ............................................................................................. 9

Methodology .................................................................................................... 9

Overview of the Report Organization .............................................................. 9

Survey Demographics ...................................................................................10

Prevalence of Integration ..............................................................................13

Hospital Demographics .................................................................................. 14

Integrating Practice Demographics ............................................................... 17

Nature of Integration ....................................................................................18

Type of Sale .................................................................................................... 18

Integration Terms ........................................................................................... 21

Stages of Integration ...................................................................................... 23

Collaborative Management ............................................................................ 25

Cardiovascular Service Line ............................................................................ 28

Cardiovascular Service Line Authority & Responsibility ................................. 34

Cardiovascular Service Line Performance ...................................................... 38

Early Lessons Learned ...................................................................................43

Integration and Physician Compensation ....................................................... 44

Staff Retention Post-Integration ..................................................................... 54

Satisfaction ..................................................................................................... 55

Technology ..................................................................................................... 55

Billing/Coding ................................................................................................. 57

In the Process of Integrating .........................................................................59

Hospital Demographics .................................................................................. 61

Considering Integration ................................................................................63

Not Currently Considering Integration .........................................................66

Never Considering Integration .....................................................................72

Conclusion ....................................................................................................75

About MedAxiom .........................................................................................76

MedAxiom Consulting Biographies ..............................................................79

CONTENTS


It is clear that the architects of health care reform favor a consolidated healthcare industry. Beginning with the landmark Institute of Medicine publications – Crossing the Quality Chasm (2001) and To Err is Human (1999), followed by the passage of the Patient Protection and Affordable Care Act (PPACA) in 2010, it has been obvious that sustaining the healthcare industry meant restructuring payment models that would facilitate the restructuring of the care delivery system, eliminating excessive and wasteful spending from the system and paying for value of services, not volume of services. It is believed that the development of integrated delivery systems is the platform on which the restructuring of the industry will be possible.

In nearly every industry segment consolidation efforts are observed – hospitals purchasing hospitals, physician organizations being purchased by both hospitals and insurance plans and industry device and pharmaceutical providers consolidating operations and sales forces to better align with the new healthcare order. The consolidation of the healthcare industry is no longer a trend. The pervasiveness of the consolidation is reflective of the changed and still changing nature of the structure of the healthcare industry. Cardiologists have not only been affected by the trend, but have led the way. Perhaps due to the hospital-based nature of the clinical specialty and the hospital’s economic dependence on cardiology as a determinant of its financial success, coupled with hospital payment incentives largely focused on cardiovascular incentives and significant economic pressures on the cardiology practice – cardiovascular physicians in systems and towns, large and small across the country, are now employed by their hospital partners. For further details and data please refer to pages 13-17.

Integration or consolidation of cardiologists into the hospital, whether by employment or some other means, conceptually – has many promises. First, integration has and will stabilize cardiologist’s income, thereby assuring the presence of cardiologists in the market. As cardiologist’s become employed by hospital systems, typically, the risk of annual increasing practice expense and collection risk from patients with no viable means to pay for services rendered - is transferred to the hospital. But, more importantly, when provider fragments are aligned, the integrated delivery approach promises that both hospital and physician performance from a quality, operations and financial perspective are enhanced. For clarity, the overriding goal of integrating the hospital and cardiology practice organizations is to create value for patients by leveraging the multiple resources and talent perspectives harbored within the two organization types. It is important to note that integration does not necessarily mean physician employment, though this is the most common model. For further details and data please refer to pages pages 18-24 of this report.

The belief is that although the organization’s structure and culture are significantly different, the multiple perspectives and talents – that inherently see the world in different ways – are materially important in optimizing the performance of the merged organization. Progressive programs, whose aligned vision and commitment are to create a better performing cardiovascular enterprise, will surely prevail in the face of changing and heightened demands of our healthcare environment. However, doing so is clearly occurring incrementally where first the transaction of integration is completed, followed by a stage of cultural integration until finally – real rolling up the sleeves, working-together kind of integrated approach to clinical care across all environments is actually achieved. It is clear that until cultural integration has been achieved, whether by integrating the practice and the hospital or multiple physician practices involved in an integration or some combination of both - the ability to create value in the cardiovascular enterprise (whatever it is) is thwarted.

Integrated program governance structures generally appear to operate on a similar basic premise. However, the clinical scope, nature and degree of leadership from both the physician and the administrative perspective and the degree of authority and autonomy, as well as focus of efforts and improvement are widely variable. It appears as if those programs who have pursued the vision to create a governance structure that spans both hospital and physician office environments have also structured real authority and responsibility within those organizations. Additionally consistent is the leadership and management infrastructure design that pairs physicians and administrators in dyad relationships throughout the infrastructure. For further details on both stages of integration and governance, please refer to pages 25-34 of this report.

EXECUTIVE SUMMARY

Executive Summary


M e d A x i o M

The survey also presents physician compensation, and physician and program performance data. As has been consistent with previous surveys, employment is the dominant model of integration and generally physician compensation increases post integration. Most physician employment models remain predominately productivity based with work relative value units (wRVU) as the measure of productivity. However, as more and more programs are discussing the impacts of payment reform in which it is expected that bundling, value based purchasing and population based payment mechanisms will substantially change the reimbursement environment, new productivity models and compensation models are being developed and evaluated. For further details on physician compensation models and economic impact please refer to pages 44-54 of this report.

Failure to leverage integration to create value for the system and value for patients will only ever be – expensive. In the pursuit of creating value, savvy administrators and physicians alike understand “the disquieting truth,” expressed by Arnold Relman, MD, former Editor of the New England Journal of Medicine and Professor Emeritus of Medicine and Social Medicine at Harvard Medical School. In his editorial (The New York Review of Books, September 30, 2010, Volume 57, Number 14), entitled “The Disquieting Truth” – Dr. Relman explains that in the United States healthcare expenses related to physician services account for about 20% of the total healthcare cost. He goes on to explain, however, that in treating patients (ordering tests, prescribing medications, providing and prescribing treatments and therapies and guiding patient decision making) physicians influence (and often control) 100% of healthcare’s expenditures. As the healthcare system pursues the reduction of 30% of its cost, providing better quality care at a lower, leaner price point - integrated health systems MUST partner with physicians to be successful.

Programs are pursuing the creation of value by examining the care delivery system cost structures, reimbursement appropriateness and quality performance. Development of an operating lense(s) such as lean and six sigma are commonly being deployed as a new management paradigms. Performance systems are being developed. This report will overview the types of initiatives and impacts that the integrated programs are pursuing. Although most commonly, integrated programs pursue both quality and cost initiatives, they typically emphasize one initiative type over the other. It is expected that as cardiovascular enterprise infrastructures mature – they will commonly comprehensively examine, design-for-win and pursue the clinical, strategic, financial and operational aspects. For further details on program performance development please refer to pages 38-42 of this report.

EXECUTIVE SUMMARY


SURVEY OBjECTIVESThe objective of this survey was to identify trends within the field of cardiology in integration as well as identify challenges, innovative solutions, and outcomes of becoming integrated.

METhODOLOgYIn August 2012, an online survey was sent out to 960 cardiology practices and hospitals. Respondents were asked to answer some basic demographic information about their practice or hospital and the stage of integration they were in. Based on the following stages, specific questions were asked that were tailored to that stage:

•FullIntegration • IntheProcessofIntegrating •ConsideringIntegration •Notcurrentlyconsideringintegrationbutmayinthefuture •Neverconsiderintegration

The survey was left open for several weeks in order to obtain a high enough sample size. Once the surveys were collected, a team from MedAxiom reviewed and analyzed the data, looking for trends and correlations in the data.

OVERVIEW OF ThE REPORT ORgANIzATIONThe report begins with overall survey demographics and then goes into details based on the stage of integration as noted above. The Full Integration Section is broken down into several sub-sections including:

•PrevalenceofIntegration – Hospital Demographics – Integrating Practice Demographics •NatureofIntegration – Type of sale – Integration terms – Stages of integration – Collaborative management – Cardiovascular Service Line – Cardiovascular Service Line Authority and Responsibilities – Cardiovascular Service Line Performance •EarlyLessonsLearned • IntegrationandPhysicianCompensation •StaffRetentionPostIntegration •SatisfactionPostIntegration •Technology •Billing/Coding

The remaining sections of the survey will cover the responses to the appropriate questions for those in the process of integrating, considering integration, not currently considering integration, or those who will never consider integration.

OVERVIEW OF ThE REPORT

Overview of the Report


OVERALL RESULTS/DEMOgRAPhICSA total of 156 responses were received for the 2013 (based on 2012 data) integration survey. This represents more than 2420 physicians across the nation. Below is a breakdown of the type of facility that responded:

The number of physicians in the practices and programs of those responding to the survey are as illustrated in the following graph.

SURVEY DEMOgRAPhICS

Survey Demographics


M e d A x i o M

The graph above was taken from the MedAxiom national benchmarking database. In 2011, the average cardiology practice within the MedAxiom member network had 19.3 FTE cardiologists.

SURVEY DEMOgRAPhICS


The respondents to the survey are well disbursed from a market characteristic, group size and geographical perspective.

SURVEY DEMOgRAPhICS


PREVALENCE OF INTEgRATION

As illustrated below, integration – regardless of the model, has been rapidly adopted through the private practice cardiology ranks. The trend was led by large, predominantly Midwest practices, whose market dynamics created a natural alignment. Although not a rule, large, sub-specialized practices in generally less competitive markets were the first to integrate. However, as the trend raced across the country groups of all sizes and in virtually every market type followed suit. In many markets, particularly urban, the alignment of physicians with hospitals also caused re-alignment of the physician practice group. This broke historical partners who serviced different hospitals within the same group into multiple and separate integrations. Today, as observed in the demographic data, the prevalence of integrated cardiovascular delivery systems is a dominant operating structure and is within large and small, urban and rural, competitive and less competitive medical markets across the country.

A total of 78 survey respondents are fully integrated, meaning their practices have been acquired by the hospitals and the physicians are now employed by a hospital entity. This accounts for 53% of the survey responses.

TABLE 1 – TOTAL NUMBER OF RESPONDENTS BY SURVEYANSWER # OF RESPONSES PERCENTAgE

Fully Integrated 78 53%

In the Process of Integrating 20 14%

Considering Integration 17 11%

Not currently considering integration, but may in the future 28 19%

We will never consider integration 5 3%

MedAxiom has been surveying cardiology groups since the beginning of 2010 on the topic of integration. The graph below indicates the trend that integration is taking as groups move from considering integration to becoming fully integrated.

Note: This is the first year that “In the Process of Integrating” was an option on the survey, so no trending data are available.

Prevalence of Integration


M e d A x i o M

The results below are for those groups who were fully integrated at the time of the survey.

TABLE 2 – TYPE OF FACILITY RESPONDINg TO ThE FULL INTEgRATION SECTION OF SURVEYANSWER # OF RESPONSES PERCENTAgE

Physician Practice 58 74%

Hospital 2 3%

Health System 9 12%

Other, please list 9 12%

Total 78 100%

hOSPITAL DEMOgRAPhICS

Integration is pervasive as illustrated by the following hospital demographic data. The integrated programs are not only well disbursed geographically, but observable in large and small hospitals as well as in community and tertiary hospitals. The consistency in response to this data as compared to the national data is a good illustration of the extent of the consolidation of cardiovascular programs across the U.S.

TABLE 3 – TYPE OF hOSPITALS BEINg INTEgRATED WIThANSWER # OF RESPONSES PERCENTAgE

General/Community 25 33%

Tertiary 19 25%

District/Health System 17 23%

Specialized 4 5%

Teaching 8 11%

Public 1 1%

Rural 1 1%

TABLE 4 – COMPARISON TO AMERICAN hOSPITAL ASSOCIATION NATIONAL DATAAccording to the American Hospital Association, in 2010, there were 5,754 registered hospitals in the U.S. Below is a breakdown based on the AHA definitions and how the results of this survey compare.

TYPE OF hOSPITAL % OF US REgISTERED hOSPITALS % OF CURRENT MEDAXIOM IN 2010 ACCORDINg TO ThE AhA SURVEY RESULTS

Community 86.6% 77%

System 51.1% 22%

Rural 34.5% 1%



Definitions:

• Communityhospitalsare defined as all nonfederal, short-term general, and other special hospitals. Other special hospitals include obstetrics and gynecology; eye, ear, nose, and throat; rehabilitation; orthopedic; and other individually described specialty services. Community hospitals include academic medical centers or other teaching hospitals if they are nonfederal short-term hospitals. Excluded are hospitals not accessible by the general public, such as prison hospitals or college infirmaries.

– In order to obtain the MedAxiom results, General/Community, Tertiary, Specialized, Teaching, and Public were combined.

• System is defined by AHA as either a multihospital or a diversified single hospital system. A multihospital system is two or more hospitals owned, leased, sponsored, or contract managed by a central organization. Single, freestanding hospitals may be categorized as a system by bringing into membership three or more, and at least 25 percent, of their owned or leased non-hospital pre-acute or post-acute health care organizations. System affiliation does not preclude network participation.

• NodefinitionforRural hospital was given.

http://www.aha.org/research/rc/stat-studies/fast-facts.shtml

TABLE 5 – NUMBER OF BEDSANSWER # OF RESPONSES PERCENTAgE

<200 10 14%

200-400 27 37%

400-600 17 23%

>600 19 26%

TABLE 6 – COMPARISON TO NATIONAL DATABelow is a table showing the distribution of hospitals based on bed size that was reported by the Agency for Healthcare Research and Quality (AHRQ) based on AHA-registered U.S. hospitals as compared to the MedAxiom survey. The AHA data was combined so as to have an even comparison.

BED SIzE % OF US REgISTERED hOSPITALS % OF CURRENT MEDAXIOM IN 2012 ACCORDINg TO ThE AhA SURVEY RESULTS

<200 74.1% 13%

200-400 17.4% 36%

400-600 400-499 Beds – 3% 23% >500 Beds – 5%

>600 Included above 28%

http://www.ahrq.gov/qual/hospsurvey12/hosp12appc.htm



M e d A x i o M

TABLE 7 – LEVEL 1 TRAUMA CENTERANSWER RESPONSE PERCENTAgE

Yes 30 41%

No 43 59%

TABLE 8 – FOR VS. NOT-FOR PROFITANSWER RESPONSE PERCENTAgE

For-profit 8 11%

Not for-profit 66 89%

TABLE 9 – COMPARISON TO NATIONAL DATA

According to the American Hospital Association, in 2010, there were 5,754 registered hospitals in the U.S. Below is a breakdown of for-profit vs. not for-profit hospitals based on the AHA definitions and how the results of this survey compare.

TYPE OF hOSPITAL % OF US REgISTERED hOSPITALS % OF CURRENT MEDAXIOM IN 2010 ACCORDINg TO ThE AhA SURVEY RESULTS

For-profit 17.6% 11%

Not for-profit 50.5% 89%

http://www.aha.org/research/rc/stat-studies/fast-facts.shtml

TABLE 10 – NUMBER OF hOSPITALS IN ThE hEALTh SYSTEMANSWER RESPONSE PERCENTAgE

1 14 19%

2-4 25 33%

5-7 18 24%

7+ 18 24%

The review of hospital characteristics as compared to all hospitals in the nation are consistent. This is a good indication of the pervasive nature of integration. In the early years of the trend, integration was predominately in middle markets with mostly large groups. A few years later, it is clear that the trend has swept thru markets of all types, hospitals of all types and physician groups of various sizes.




INTEgRATINg PRACTICE DEMOgRAPhICS

TABLE 11 – NUMBER OF PhYSICIANSANSWER RESPONSE %

1 - 10 18 23%

11 - 20 22 28%

21 - 30 11 14%

31 - 50 15 19%

51 - 75 8 10%

> 75 4 5%

TABLE 12 – % OF TOTAL CARDIOLOgISTS IN ThE MARkET AREAANSWER RESPONSE %

< 20% 10 13%

20% - 40% 21 27%

41% - 60% 24 31%

61% - 80% 13 17%

81% - 100% 10 13%

TABLE 13 – POPULATION OF MARkET AREAANSWER RESPONSE %

< 500,000 28 36%

500,000 - 1,000,000 28 36%

> 1,000,000 21 27%

TABLE 14 – WORk OUT OF hEALTh SYSTEMS COMPETITIVE TO gROUP’S EMPLOYERANSWER PRE-INTEgRATION PRE-INTEgRATION POST-INTEgRATION POST-INTEgRATION RESPONSE PERCENTAgE RESPONSE PERCENTAgE

Yes 45 61% 48 66%

No 29 39% 25 34%


NATURE OF INTEgRATION

Integration is the organizing structure currently believed to be the most relevant option to respond to and succeed in the face of healthcare reform. Emerging payment models require that participants meet “clinical integration” criteria, as defined in the regulations, in order to participate. Clinical integration requires collaborative leadership and aligned incentives organized around clinical programs and a supporting technology infrastructure. In order to meet the clinical integration criteria and retain compliance with other laws regulating the relationships between physicians and hospitals, integration most commonly has taken the form of physician employment.

TYPE OF SALE

TABLE 15 – TYPE OF SALE OR LEASEANSWER RESPONSE PERCENTAgE

Stock Sale 9 14%

Asset Sale 42 65%

Asset Lease 4 6%

Multiple based on the Revenue Stream 1 2%

Other, please specify 9 14%

TABLE 16 – MODEL USED TO INTEgRATEANSWER RESPONSE PERCENTAgE

An employment model where the practice assets/stocks 56 79% are purchased by the hospital and the cardiologists and practice staff become hospital employees

A professional services model where the hospital leases one or more 5 7% physicians as well as the practice required to operate those physicians and the ancillary service business is sold to the hospital.

A business enterprise model which shares elements of both the 3 4% professional services model and the employment model. In this model, the cardiologists are employed and the assets and staff are leased or the cardiologists are leased and the practice is employed by the hospital. In this model the ancillary service business is sold to the hospital.


Nature of Integration


M e d A x i o M

The predominant model utilized to integrate and align the interests of a hospital and a physician practice is employment (79% of respondents), with asset sales as the most readily utilized approach. In this model, quite simply the practice assets are valued and purchased by hospital. Tangible assets such as desks, chairs, computers and leasehold improvements are consistently purchased; intangible assets such as work-force-in-place are common, though certainly not uniformly valued, in an asset transaction. Although some respondents indicate that their practice stock was purchased by the hospital system (7% of respondents), these transactions are unusual and were generally early in the integration trend. The stock transaction has several benefits to the physicians, however, the risk of purchasing the stock, that includes the practice liability, is often thought to be prohibitive to the hospital.

TABLE 17 – IF LEASED: ANSWER RESPONSE PERCENTAgE

Leasing physicians to one hospital only 3 30%

Leasing physicians to multiple hospitals 1 10%

Leasing the practice to the hospital 6 60%

TABLE 18 – DISTRIBUTION OF ThE PROCEEDS OF ThE TRANSACTION:ANSWER RESPONSE PERCENTAgE

Lump sum payment 45 68%

Payment over time 13 20%

No proceeds from the transaction 8 12%




TABLE 19 – ThE PROCEEDS WERE DISTRIBUTED TO:ANSWER RESPONSE PERCENTAgE

To all partners 53 91%

Other 5 9%

TABLE 20 – INCLUDED IN VALUATIONANSWER RESPONSE PERCENTAgE

Furniture/office equipment 56 85%

Imaging equipment 52 79%

Medical records / EHR system 46 70%

Physician work-force in place 46 70%

Staff work-force in place 44 67%

Name of the group 38 58%

Telephone numbers 32 48%

Leasehold improvements 30 45%

Accounts receivable 27 41%

Practice debt 23 35%

Practice stock 20 30%

Real estate 17 26%

Intellectual property 16 24%

Cath lab 8 12%

Other intangible assets, please specify 8 12%

Sleep lab 7 11%

The second most common model utilized to integrate and align the interests of a hospital and a physician practice is a professional services agreement where physician services are leased to the hospital. This model often includes a lease of the practice as well, whereby the practice is leased in a turn-key fashion and continue to work in the practice context. The lease model is useful in situations where the group works with multiple hospital systems or in California – where hospital employment of physicians is not permitted and the foundation model is in place. Ancillary services are typically purchased by the hospital in this model. The third model, or the enterprise model - is a combination of both the employment and lease models. In this model, either the physicians or the employees are employed by the hospital while the other is leased. In either case, ancillary services are typically purchased by the hospital. Regardless of the model, proceeds from the transaction were distributed predominantly to the physician shareholders though commonly retired practice debt prior to distribution.


M e d A x i o M

INTEgRATION TERMSEarly integrations tended to be longer in term, commonly five or more years. The length of the term(s) appears to be mostly contingent on the valuation firm’s willingness to provide a fair market value opinion for the economics of the employment contract or lease. Because of the uncertainty in today’s market, contracts may have terms of five or more years but they typically require a fair market value opinion in three years or less. More often, current guarantee of economic terms are trending shorter. Of particular interest is the number of integrated programs who are nearing or at the end of the initial terms. The next several years will be dominated by the renegotiation process.

TABLE 21 – hOW WERE PhYSICIANS EMPLOYEDANSWER RESPONSE PERCENTAgE

Hospital department 5 8%

Newly created entity 24 36%

Hospital owned multispecialty group 15 23%

Wholly owned 13 20%

Foundation 2 3%


TABLE 22 – TERM OF ThE INITIAL PhYSICIAN EMPLOYMENT AgREEMENTANSWER RESPONSE PERCENTAgE

1 year or less 2 3%

2 years 2 3%

3 years 11 16%

4 years 1 1%

5 years 36 53%

6-9 years 5 7%

10+ years 11 16%



TABLE 23 – RENEgOTIATION OF COMPENSATION FOR FAIR MARkET VALUE AFTER ThE INTEgRATION IS COMPLETE IN:

ANSWER RESPONSE PERCENTAgE

1 year or less 14 21%

2 years 12 18%

3 years 18 27%

> than 3 years 23 34%

TABLE 24 – DO ThE INTEgRATION AgREEMENTS RESTRICT ThE PhYSICIANS AND/OR ThE PRACTICE FROM COMPETINg AgAINST ThE hOSPITAL IN ThE EVENT OF A DISSOLUTION OF ThE TRANSACTION?


Yes 37 58%

No 27 42%



M e d A x i o MNATURE OF INTEgRATION

STAgES OF INTEgRATIONIt should not be surprising that the realignment of the industry, merging formerly competing entities, has not been a smooth course. The first stage of integration is the transaction, and for the last several years – the focus of our efforts. In the transaction stage, typically, the hospital purchases some or all aspects of the practice and enters into either employment agreements or professional service agreements with the physicians. The transaction stage, like all negotiations, require vast (and distracting) attention from all participants, is often conflictual and certainly always emotional. The transaction stage is often long, and mismatched in resources available– where the hospital typically has many staff, consultants, attorneys and valuation firms working on its behalf. The practice usually has the practice administrator and management team, often supplemented by outside legal counsel and consultants.

The second stage of integration is cultural integration. Although there are anecdotal examples of purposeful, well-orchestrated integration of the newly acquired practice into the hospital system, and the easy development of shared financial and other data - most practice on-boarding and cultural integration efforts have been less than optimally executed. The cultural integration often is two-fold. Not only does the hospital culture and the practice culture need to integrate, but often times cultural integration includes multiple cardiovascular (cardiology, cardiothoracic surgery and vascular surgery) physician groups who are also simultaneously integrating; many of whom are direct competitors.

Cultural integration is also dominated by the lack of integrated management and data integration. Significant differences in accounting practices, a lack of common language in billing/coding and finance, flexibility and transparency of systems and lack of involvement by department level managers all contribute to often clunky and conflictual initial interactions. Physicians and practice leaders lack of experience in the hospital management structure and approach to problems are often perceived as pushy and beyond scope and authority. These same leaders, accustomed to having management control, feel a lack of control and acceptance, and worse are often forgotten in the process, leading to feeling diminished, not considered and without the necessary tools to perform their jobs. Pragmatic issues such as fragmented data systems and lack of access to systems and data extending in both directions, coupled with a belief by hospital and practice leaders alike, that if only the other would operate as they operate, the organization would be more successful! Early integrations have taught us that purposeful on- boarding and purposeful reorganization of leadership, management and staff roles and responsibilities is not only recommended, but crucial to the new, integrated entities’ ability to create value. Successful integrations have taught us that despite the vast differences in the organizations and the people that run them, the multiple perspectives available in each – when combined – is a powerful deployment and capable of delivering the promises for which the integration was initially pursued. Our best learnings in cultural integration is knowing that integration isn’t a transaction. To achieve integration it takes vision and time to resolve both the physical barriers of system and data integration, but most importantly time to resolve the leadership and management barriers therein incorporated.



The third stage of integration is creating value. Only post transaction, given the structure of the integrated relationship and cultural integration – can the hospital and physician organization truly align and perform as an integrated unit. Creating value in the integrated cardiovascular program is done by empowering the combined governance infrastructure with measured and defined authority, responsibility and accountability to operate, as well as the charge to improve the quality, operations, financial and market performance of the combined scope of services.



COLLABORATIVE MANAgEMENT

Among the participants, it was consistently found that those organizations that had significantly collaborated prior to the integration had the most immediate success in collaborating, or co-managing post transaction. These same organizations had fewer hurdles with regards to cultural integration, though were not devoid of the process. Medical directorships (91%) were the most common collaborative agreements respondents had prior to integration; with a cardiovascular service line (CVSL) co-management agreement (53%) the second most common. Interestingly, most, but not all, of the respondents who had CVSL agreements prior to integration retained them post integration. It appears that the development of leadership and management scope is iterative, with simple directorship based leadership roles proceeding co-management of any scope.

TABLE 25 – DID ThE PRACTICE hAVE ANY COLLABORATIVE AgREEMENTS WITh ThE hOSPITAL PRIOR TO INTEgRATINg?


Yes 34 51%

No 33 49%

TABLE 26 – WhAT TYPES OF COLLABORATIVE AgREEMENT?ANSWER RESPONSE PERCENTAgE

Medical Directorships 31 91%

Outreach Support 7 21%

Recruiting Support 5 15%

Call Pay 10 29%

CV Service Management Agreement 18 53%

Joint Ventures 4 12%



TABLE 27 – DID ThE gROUP hAVE A CO-MANAgEMENT AgREEMENT POST-INTEgRATIONANSWER RESPONSE PERCENTAgE

Yes 30 43%

No 39 57%

TABLE 28 – WAS ThE CO-MANAgEMENT AgREEMENT VALUED SEPARATELY FROM ThE COMPENSATION PLAN, OR WAS ThE VALUATION jOINTLY?


Valued separately 11 41%

Valued jointly 16 59%

TABLE 29 – DESCRIPTION OF gOVERNANCE INTEgRATION MODELANSWER RESPONSE PERCENTAgE

Physician governed practice model 14 25%

Hospital and physician jointly governed practice 28 49%

Hospital and physician joint practice managed service line 11 19%


TABLE 30 – MAkEUP OF gOVERNINg BODY OF ThE INTEgRATED ENTITY. (Board of Directors, Board of governors, Integration Committee, governance Committee, etc.)


All Physicians 10 18%

51%-99% Physicians 19 35%

50% Physicians 21 38%

<50% Physicians 5 9%



TABLE 31 – REPORTINg RELATIONShIP OF ThE gOVERNINg BODY ANSWER RESPONSE PERCENTAgE

Hospital/Health System CEO 33 59%

Hospital/Health System COO 5 9%

Hospital/Health System VP 4 7%

Other senior level hospital executive(s) 1 2%

Cardiovascular Service Line Director or 1 2% other non-senior level hospital executive

Hospital multi-specialty practice 4 7%

Other 8 14%

TABLE 32 – WhO IS RESPONSIBLE FOR MANAgINg ThE SERVICE LINE?ANSWER RESPONSE PERCENTAgE

Physician 19 36%

A practice designated administrator 14 26%

A hospital designated administrator 36 68%

TABLE 33 – DOES ThE gROUP hAVE A PhYSICIAN COMPACT?ANSWER RESPONSE PERCENTAgE

Yes 13 25%

No 39 75%



CARDIOVASCULAR SERVICE LINE

At least one of the emerging operating models, post integration – is the development of the cardiovascular service line (CVSL). The service line, in its most simple explanation, is a reorientation of strategy, resource planning and allocation on the horizontal continuum across provider entities, versus a vertically oriented approach segregating provider types into independent operating units, or silos. It is the strategic and operational organization of cardiovascular services in a marketplace, wherever they occur – hospitals, clinic, long term care and the like. The theoretical value in the horizontal or service line approach is created in aligned and not duplicative investment strategy in program, staff, equipment and other resources required serving cardiovascular patients. The service line approach is truly patient-centered to the delivery of healthcare services and is organized in the way that cardiovascular patients experience healthcare. By nature, the integration of cardiology practices with hospitals provides the opportunity for strategic, financial and operations alignment between organizations serving the same patient populations.

Initially, it appeared that CVSL organizations were developing solely in large cardiovascular programs. However, as the concept has developed and proved successful – service line organizations appear to be proliferating in programs of all sizes, profit and non-profit institutions, community hospitals and large hospital systems. Significant variance in the approach to service lines in management structure, scope and governance and clear “best practices” have in most cases not emerged. What is clear is that the model is based on physician and administrator joint responsibility for cardiovascular services in multiple locations ranging from some of the CV related departments in one hospital to all of the CV related departments in multiple hospitals.

TABLE 34 – WhAT BEST DESCRIBES ThE MANAgEMENT STRUCTURE POST-INTEgRATION?ANSWER RESPONSE PERCENTAgE

Physician and administrative leaders have joint responsibility 5 19% for some cardiovascular services and departments within the hospital.

Physician and administrative leaders have joint responsibility for all 6 22% cardiovascular services within one hospital.

Physician and administrative leaders have joint responsibility for all 12 44% cardiovascular services within multiple hospitals in the hospital system.

Physicians have delegated responsibility for some cardiovascular 2 7% services and departments within the hospital.

Physicians have delegated responsibility for all cardiovascular services 0 0% within one hospital.

Physician have delegated responsibility for all cardiovascular services 2 7% within multiple hospitals in the hospital system.



TABLE 35 – WhO ARE ThE PARTICIPANTS IN ThE CVSL?ANSWER RESPONSE PERCENTAgE

Cardiology 23 88%

CT Surgery 16 62%

Vascular Surgery 11 42%

CV Anesthesiology 3 12%

Interventional Radiology 2 8%

Radiology 1 4%

Pulmonary 2 8%

Neurology 1 4%

Emergency Doctors 2 8%

Hospitalists 2 8%

Primary Care 2 8%


The most common clinical participants in the CVSL organization are cardiology, cardiothoracic surgery and vascular surgery – with a cadre of various participants outside of those core specialties. The CVSL’s are generally strong participants in clinical registries as well as participants in third party quality rating programs such as LeapFrog or HealthGrades. Programs that are participating in CVSL are both individual hospitals and hospital systems, and are generally not for profit. The participating hospitals are of all sizes and types, and in markets with variable market strength.





Many of the CVSLs are participating in innovative payment model experimentation, with accountable care organizations (ACO) as the predominant example. The CVSLs are pursuing clinical improvements, operations or efficiency improvements and financial improvements in order to create value in their service lines. Many of the initiatives are focused on efforts to perform in the value based purchasing or readmission incentive programs applicable to the hospital. However, the breadth of initiatives pursued is a variable as the programs pursuing them.







CARDIOVASCULAR SERVICE LINE AUThORITY & RESPONSIBILITY

The systems that are deploying the CVSL as its operating structure are doing so substantially. The following data illustrates the functional authority of the CVSLs, focus on both big picture strategic performance as well as operations performance. The CVSLs are responsible for the strategic plan (78%) of the joined hospital and physician based cardiovascular services, for the capital budget (67%) and the operating budget (74%). From an operational perspective, the CVSL’s are responsible for day-to-day operations (81%), quality performance (78%) and patient satisfaction (70%). Interestingly, fewer of the CVSL’s have profit and loss responsibility. This is further reflected in the actual – rather diminished, financial authority delegated to the CVSL. It is expected that the CVSL model will be iterative, and that as the operating platform succeeds – more distinct and integrated profit and loss responsibility and general financial authority will be expanded.

TABLE 36 – ThE CO-MANAgEMENT AgREEMENT IDENTIFIES RESPONSIBILITY FOR ThE FOLLOWINg FUNCTIONS (check all that apply)


Strategic Planning 21 78%

Capital Budget 18 67%

Operating Budget 20 74%

Profit and Loss Responsibility 13 48%

Daily Operations 22 81%

Physician Recruiting 19 70%

Staff Hiring and Firing 14 52%

Risk and Compliance 13 48%

Patient Satisfaction 19 70%

Quality Performance 21 78%

Other Responsibilities, Please Specify 5 19%

TABLE 37 – gROUP’S FINANCIAL AUThORITY OVER ThE CVSL:ANSWER RESPONSE PERCENTAgE

Budget Based 11 50%

Department Based 3 14%

Authority to Approve over $1m 0 0%

Authority to Approve up to $750k 0 0%





No Fund Approval Ability 7 32%



TABLE 38 – ThE PRIMARY INITIATIVES OF ThE CARDIOVASCULAR SERVICE LINEANSWER RESPONSE PERCENTAgE

Increasing Quality 19 79%

Clinical Program Development 16 67%

Market Development and Expansion 15 63%

Reducing Costs 15 63%

Operations Efficiency 13 54%

Reducing Risk 2 8%

Information Technology Optimization 2 8%

Other, Please Specify 1 4%

The majority of the CVSLs are structured with some sort of governing oversight group, flexibly named a cardiovascular services board, a cardiovascular institute board, a leadership councils or other similar naming. The oversight group is comprised of physician, hospital and practice leaders who oversee a committee structure. Committees are both clinically and non-clinically based. The clinical committees appear to fall within physician sub-specialties or major departments and the non-clinical committees into functional performance areas such as finance and marketing/business development. The scope of responsibility of the oversight group is broad and deep alike, and reflective of a strategic business unit (SBU) orientation.





The cardiovascular service lines appear to report high in the organization with 59% reporting to the hospital or health system CEO. Many of the CVSLs report to the hospital or system board. Management responsibility of the CVSL predominately falls to a hospital designated administrator (68%), with former practice administrators (26%) less common and a physician designated administrator less frequently as well (36%).

gOVERNANCE PROVIDES ThE OPPORTUNITY TO BUILD TRUST

68% of respondents described their governance structure as one that incorporated the dyad leadership model and are physician and andministrator collaboratively led.



TABLE 39 – WhO IS RESPONSIBLE FOR MANAgINg ThE SERVICE LINE?ANSWER RESPONSE PERCENTAgE

Physician 19 36%

A practice designated administrator 14 26%

A hospital designated administrator 36 68%

CARDIOVASCULAR SERVICE LINE PERFORMANCE

The expectation is that the investment in the integrated cardiovascular infrastructure will result in improved clinical, operational, financial and market performance. Typically, clinical performance, both in clinical program development and clinical quality improvement, are the initial areas of focus. However, reducing costs and improving operations efficiency are also commonly pursued. The degree of scope, responsibility, authority and accountability drive the focus and the volume of initiatives pursued.





TABLE 40 – OPERATIONAL METRICS UTILIzED TO MANAgE ThE SERVICE LINEANSWER RESPONSE PERCENTAgE

Length of Stay 35 80%

Noninvasive lab accreditation (nuclear, echo, vascular, CT, MR) 25 57%

Cath lab turnaround time 24 55%

Cath lab accreditation 21 48%

Timely discharges 20 45%

On-time starts 18 41%


TABLE 41 – hOW ARE METRICS DEVELOPED?ANSWER RESPONSE PERCENTAgE

The physician group largely identifies the performance metrics 7 16%

The hospital largely identifies the performance metrics 4 9%

The hospital and physician leaders jointly developed 33 75% the performance metrics

TABLE 42 – WhO WAS RESPONSIBLE FOR INITIATINg qUALITY, EFFICIENCY, AND/OR SATISFACTION EFFORTS?


Physician initiated 15 34%

Administrative leaders initiated 12 27%

CV department director or manager initiated 2 5%

CVSL executive initiated 2 5%

CVSL structure initiated 13 30%



•23% OF hOSPITALS SAY ThEY ARE FULLY ALIgNED WITh ThEIR PhYSICIANS

•67% OF hOSPITALS SAY ThEY ARE PARTIALLY ALIgNED WITh ThEIR PhYSICIANS

•62% OF hOSPITALS SAY ThEY hAVE DIFFICULTY ALIgNINg WITh ThEIR PhYSICIANS

•54% OF hOSPITALS SAY ThEY hAVE DIFFICULTY ALIgNINg PhYSICIAN COMPENSATION

•54% OF hOSPITALS SAY ThEY hAVE DIFFICULTY ACqUIRINg STRATEgIC PhYSICIAN ORgANIzATIONS

•PREDICTION ThAT CVSL LEADERShIP TEAM WILL DRIVE INTEgRATION SUCCES

HealthLeaders Service Line Survey - 2012

The survey respondants validate the HealthLeaders Service Line Survey in which hospitals indicated that the development of service lines was the integrated operating structure that they would pursue. It appears as if those hospitals that have developed a cardiovasclar service line approach, will replicate that approach in other clinical specialties.

Over the next 2 years, 75% of hospital executive respondents indicated that they will expand their service lines

78% of hospitals queried will invest in service lines

HealthLeaders Service Line Survey - 2012



Survey respondents were asked to describe both what is working in their integration efforts as well as what are the challenges. Following is a summary of those responses.

WhAT’S WORkINg...

ChALLENgES...

CONCLUSIONS

•Relationshipwiththehospitalimproving •Resourcesforclinicalprograms •MakingsenseoutofIT • ResourcesforITimplementationandnewapplications •HavingaHRfunction •Marketingdollars •Physicianrecruitmentsupport

•Hospitalpurchasingcontract •Resourcesformeaningfuluse,etc. •Makingsenseoutofqualitydata •Leanresources •Outreachsupport •Adequatestaffing

•Culturalinetgration •Hospitalculture •Mergingtwointegratedgroups •Slow,burdensome,complex •Reallyslowdecisionmaking •Hospitalsubsidyofpracticeunacceptable •Lackoftransparency

•Developingco-management •Alignmentvs.integrating •Toomanymeetings •Slowapprovals •Noinfrastructureorplanforon-boarding •Trackinggroupfinancialperformance •Gettingdata

• Thosewhowereworkingcollaborativelypriortotheintegration,aremorequicklycreatingintegrationvalue •CulturalintegrationFIRST,creatingvaluesecond •Hospitalvisionsupportingservicelinecritical •CVSLleadershipwilldrivesuccess •Betsbenchmarkofsuccessisdidyoumovethestrategicorganizationalneedle


EARLY LESSONS LEARNED

The road to creating a horizontally oriented structure in the face of a well-established vertical business structure model is not typically easily accomplished. The course of constructing the service line, in most institutions, is transformative. Virtually every reporting relationship and decision making structure is potentially disrupted.

When asked what was working in the service line organization, the respondent most often responded the development of infrastructural elements and culture, often responding that the relationship between the hospital and the physicians had improved. Access to and more purposefully coordinated resources have enhanced the ability to implement projects related to technology, clinical program development (such as TAVR) and market development, such as outreach – in both the hospital and practice environments. Many respondents have identified and are now improving quality and registry reporting and data and have successfully participated in efforts to perform in a value based purchasing environment or in response to third party accreditations and rating program. Many of the programs are participating in innovative payment model pilots, such as ACO’s and bundled payments, initiatives that would have previously been embroiled in negotiating the contract terms between the entities rather than focusing on the development of the model. Most programs have been able to standardize equipment and supply utilization and thus effect per unit cost savings and many have begun the work of improving processes within the hospital and practice, but very importantly – between the environments.

• Physiciandrivencostpercaseadvances,focusedonreducingvariationincare.

• Physicianandstaffcollaborativedeployingpurchasingstrategiesbasedonclinicalcarestandards– do we really need three high voltage devices?

• Strategicdeploymentofphysicianresourcestoeffectivelymanageoutreachoperationsandother program developments.

• Betterdeploymentandadoptionofinteroperableinformationtechnologyplatforms.

• Valuecreationviadatacontrol.

• Qualityimprovementindiscreetclinicalprocesses.

• Operationsefficiencyadvancesinclinicalandnon-clinicaloperations.

• Physicianrecruitingandsuccessionmanagementstabilization.

• Costreductionviaeliminationofduplicateservicesandfunctions.

• Improvedclinicaldocumentationandcodingpractices.

• Consolidatedfinancialstatementsthatclearlyreflectthebusinessperformanceoftheentiretyoftheserviceline.

Survey respondents reported that the clear, executive leadership support of an articulated shared vision was critical to the organization’s success and facilitated the cultural integration and the infrastructure development. It is also clear from the survey responses that cultural integration precedes value creation, but where programs are working collaboratively – integration value is being created.

• Atransformativevisionattractsphysiciansandstafftoanewandbetterfuture,engenderingsupportandbuy-in.

• Seniorleadershipsupportandcommunicationarerequiredtoteachandtransform.

• Understandingthattheskillsrequiredforaservicelineleadermaynotbethesameasthoseofaphysicianpractice leader or a department leader. Leadership of the service line, both clinically and administratively, will have to be carefully selected and developed.

• Deliberateandobtuseon-boardingtacticstofacilitatethephysicianpractice’sculturalintegrationisacriticalatthe outset of the integration.

Early Lessons Learned


M e d A x i o MEARLY LESSONS LEARNED

• Positivephysicianenergywillfueltheeffort;lackofphysicianenergy–regardlessofthedegreeofstaffenergy,will kill it.

• Thosemostpowerfulwillhavetocompromise.Period.

• Trustisaseriesoftrustworthyevents…trustisrequiredtoovercometheinevitablebumps;startbuildingnow!

• Thethreemostimportantaspectstobuildingtrustare:transparency,transparencyandtransparency.Transparencyin data, in objectives, and in everything is required to build trust and credibility.

• Leaderswillbepushingthesnowballupthemountainuntiltheorganizationadoptsa“we”orientation, vs. us and them.

• Unleashingthephysician’sclinicalexpertisetoreconcileandestablishclinicalstandardsaroundwhichefficientprocesses, empowered staff and leveraged information technology systems will deliver improved quality and decreased cost. Decision making models and compensation plan design, giving the physicians the authority and responsibility to create value are the vehicles to facilitate performance.

INTEgRATION AND PhYSICIAN COMPENSATION

The majority of integrations were at least in part motivated by the financial pressures incurred by cardiovascular practices over the past many years. As practice financial pressures have increased, they have responded in two distinct ways: 1) continual reduction of the practice expense, and 2) the slowing of physician recruitment – thus increasing individual physician productivity. These strategies, regardless of their effectiveness, have a limited life. Individual financial pressures and the need for health care reform will continue to drive consolidation. Therefore, it is important to understand integration’s financial implications, primarily expressed thru physician compensation post integration.

The majority of compensation plans continue to be based solely on compensation without physician responsibility for expenses (80%) and utilize a compensation pool methodology, as opposed to individually negotiated and calculated physician compensation formulas. Although funding of the physician compensation pool is highly negotiated and attended to by the hospital, distribution of the pool to individual physicians is often at least a partially delegated responsibility. It is generally believed that compensation is a cultural issue, with changes to the distribution formula regarded materially. However, due to the requirement that an individual physician meet fair market value – physician groups with significant productivity variance between the physicians sometimes have difficulty meeting the requirement of fair market value assessment when the formula splits the compensation pool equally. This understanding is the likely impetus to the change in compensation formula post integration as illustrated below.

TABLE 43 – TYPE OF COMPENSATION PRE-INTEgRATIONANSWER PRE-INTEgRATION PRE-INTEgRATION POST-INTEgRATION POST-INTEgRATION RESPONSE PERCENTAgE RESPONSE PERCENTAgE

Equal Share 27 46% 16 27%

Productivity 13 22% 14 24%

Blended 14 24% 18 31%

Salary Plus Bonus 2 3% 8 14%

Other, please specify 3 5% 3 5%



TABLE 44 – gO TO A POOL OR DIRECTLY TO PhYSICIAN?ANSWER RESPONSE PERCENTAgE

Create a compensation pool, distributed by formula 38 64% to individual physicians

Pay physicians directly 21 36%

TABLE 45 – IF A COMPENSATION POOL IS CREATED, DISTRIBUTION IS BASED ON:ANSWER RESPONSE PERCENTAgE

Equal share 21 49%

Blended 16 37%

Productivity 6 14%

TABLE 46 – IF DIRECTLY TO ThE PhYSICIANS, IT IS DISTRIBUTED BASED ON:ANSWER RESPONSE PERCENTAgE

Fixed salary 4 12%

Base salary plus productivity 8 24%

Base salary plus productivity or other incentives 15 44%

Total productivity 7 21%

TABLE 47 – WERE ThE PhYSICIANS RESPONSIBLE FOR PAYINg FOR ThEIR EXPENSES POST-INTEgRATION?


Yes, all of the practice expenses 11 16%

Yes, a percentage of the practice expenses 4 6%

No 54 78%

TABLE 48 – DOES ThE COMPENSATION FORMULA SPECIFY A MAXIMUM COMPENSATION ThAT CANNOT BE EXCEEDED?


Yes, flat amount 9 16%

Yes, wRVU amount 4 7%

No 42 76%

The vast majority of physician compensation formulas still remain largely based on work relative value units (wRVU). Even those that are not based on wRVUs likely have a valuation component tied to wRVUs, and will remain so until another surrogate for productivity is recognized. Although not particularly common, there are some physician compensation plans that indicate maximum compensation per wRVU. The purpose of this collar is to keep plans that are not based solely on productivity and incorporates some degree of sharing, within fair market value.



TABLE 49 – WhAT IS ThE PhYSICIAN COMPENSATION BASED ON?ANSWER RESPONSE PERCENTAgE

Fixed salary 4 7%

Fixed base salary plus incentives 12 20%

Work RVU based compensation formula 34 57%

Time RVU based compensation formula 4 7%


TABLE 50 – COMPENSATION PLAN wRVU CONVERSION RATESANSWER RESPONSE PERCENTAgE

$36-$40/wRVU 2 4%

$41-$45/wRVU 5 10%

$46-$50/wRVU 17 33%

$51-$55/wRVU 12 24%

$56-$60/wRVU 4 8%

$61-$65/wRVU 2 4%

$66-$70/wRVU 0 0%

>$70/wRVU 2 4%


As discussed earlier in the report, the length of the term of the employment contract or professional service agreement does not necessarily coincide with the length of time in which compensation is re-examined for fair market value. The current level of industry and economic uncertainty has resulted in a shortening of the fair market value valuation term. At the outset of the integration trend, valuation and contract length were roughly approximate.

TABLE 51 – IF PAID ON WRVUS, DOES ThAT INCLUDE EXPENSES?ANSWER RESPONSE PERCENTAgE

Yes 8 20%

No 32 80%

TABLE 52 – COMPENSATION WILL BE EVALUATED FOR FAIR MARkET VALUE AFTER ThE INTEgRATION IS COMPLETE IN:


1 year or less 14 21%

2 years 12 18%

3 years 18 27%

> than 3 years 23 34%

Increasingly, performance incentives other than productivity are included in physician compensation formulas. Although increasing in frequency, the percentage of compensation effected – truly at risk – remains small. As new payment models emerge, it is expected that at-risk compensation will increase significantly. Additionally, many contracts have additional monies built into the plan for directorships, administrative time, citizenship bonus and other such items.



TABLE 53 – FINANCIAL INCENTIVES FOR PhYSICIANS IMPROVINg:ANSWER RESPONSE PERCENTAgE

Quality 19 35%

Productivity 8 15%

Efficiency – Practice 2 4%

Efficiency - Hospital 2 4%


No financial incentives for improvements 14 26%

TABLE 54 – PERCENTAgE OF COMPENSATION AT RISk FOR PERFORMANCE RESULTS (NOT INCLUDINg PRODUCTIVITY)


1-3% 8 14%

4-6% 6 10%

7-9% 3 5%

10-12% 8 14%

13-15% 5 9%

16-18% 1 2%

19-21% 3 5%

> 21% 1 2%


N/A 21 36%

TABLE 55 – hOW ThE INCENTIVE RELATES TO ThE COMPENSATION MODELANSWER RESPONSE PERCENTAgE

Performance metrics financial rewards are individual physician-based 11 23%

Performance metrics financial rewards are earned as a global “pool” 33 69% for distribution as the group determines


TABLE 56 – PhYSICIANS hAVE ThE OPPORTUNITY TO EARN ADDITIONAL COMP FOR:ANSWER RESPONSE PERCENTAgE

Medical directorships 37 69%

Physician administrative time 35 65%

Citizenship bonus 10 19%

Clinical quality incentive pay 30 56%

Operations efficiency incentive pay 13 24%

Other incentive pay, please specify 10 19%

Other:

•MeaningfulUse •EMRAdoption •Testinterpretationpanels

•Research •Retention •PatientSatisfaction



The vast majority of physicians had an increase in compensation post integration transaction.

TABLE 57 – hOW hAS PhYSICIAN’S INCOME ChANgED POST-TRANSACTION ANSWER RESPONSE PERCENTAgE

Increased 38 78%

Decreased 1 2%

Flat 10 20%

gRAPh 38 – PERCENTAgE OF INCREASE

TABLE 58 – PhYSICIANS ARE COMPENSATED RELATED TO ThE CO-MANAgEMENT AgREEMENT BY: (check all that apply)

INCREASE RESPONSE PERCENTAgE

Medical directorship(s) 15 63%

Metric based performance incentives 18 75%

Hourly compensation for all physician participants 14 58%

Gain sharing or similar at risk model 2 8%

Not compensated, part of physician job description 2 8%

By and large, physician compensation has increased as a result of integration.


Ninety-six percent (96%) of the survey respondents responded affirmatively to the question of whether or not they would recommend integration to their peers. When asked what advice that they would give their peers in doing so, the following:

TABLE 59 – WOULD YOU RECOMMEND INTEgRATION TO OThER gROUPS?ANSWER RESPONSE PERCENTAgE

Yes 46 96%

No 2 4%


FROM PENNSYLVANIA:

Governance is the most important aspect.

FROM gEORgIA:

Have good advisers.

FROM COLORADO:

Make sure that they have a good lawyer who understands how practices integrate / Be patient and be willing to walk away.

FROM FLORIDA:

Make sure the CVSL finacials are integrated (Facilities and Practice)

FROM FORT INDIANA:

Put everything on paper before integration is finalized.

FROM WISONSIN:

Keep physician comp partially RVU based and include quality metrics.

FROM ARkANSAS:

Carefully discuss how governance will work beforehand and insist the organization stick to it afterward.

FROM WAShINgTON:

Recognize cultural differences between hospital and clinic. Be patient.

FROM MIChIgAN:

Hire the most knowledgable independent legal counsel available. Each integration has many variables and the practice must do their homework so that they clearly understand the pros and cons of the deal. Understanding and objectively assessing the pros/cons requires independent and skilled consultants.

FROM MIChIgAN:

Have good legal representation that can deal with both hospital and physician leadership.

FROM FLORIDA:

Every potential relationship extremely unique and deal must be tailored to fit taking into account the nuances of the hospital system, group members, demographics, local competition , perception of the hospital system by the medical community and much more. There is no one correct way to do it .



FROM TEXAS:

Integration is a clash of cultures. Hospitals move much slower, are very concerned with compliance isues that result in physician headaches, and dealing with multiple competitors being hired is always a challenge / On the other hand you need good people, good equipment and good partners to do your job and the current economics makes it unlikely you can achieve those needs in private practice.

FROM CAPE MONTANA:

Hire an experienced lawyer and experienced practice consultant.

FROM WISCONSIN:

Governance is the key. Upfront money is nice.

FROM MINNESOTA:

Maintain as much goverance as you can.

FROM OhIO:

Be careful and use peers for advice.

FROM TENNESSEE:

Give lots of scenarios to determine how issues would be handled operationally / i.e.: imaging becomes hospital / what additional computer entries needed / is there duplicative computer system for hospital / exactly what paper records are needed / what is time frame for delivery / how delivered fax, scanned, or paper bundled / Is hospital CMS intermediary same as MD.....not all Dx codes will work for ordering tests, etc / Basically, run many scenarios to determine workflow.

FROM OkLAhOMA:

Choose hospital partner carefully and expect some loss of control and autonomy in return for income stability (and possibly enhancement). Trade offs have to be accepted and understood.

FROM WISCONSIN:

1) Have an experienced attorney 2) Work hard to agree upon a vision of the integration prior to getting too far into negotiations 3) Know your non-negotiables and set your negotiating team and define their role/limits 4) Try to have the same firm do both the asset and comp valuations 5) Don’t do the deal if you are not comfortable with the relationship and terms.

FROM NORTh CAROLINA:

Discuss all concerns upfront. Do your research regarding payment for certain responsibilities, ie On Call Pay, Directorships. Dont assume anything, get it in writing.

FROM gEORgIA:

Have clear line of communication and Chain of command / Long term contract / Have a spending budget, reviewable annually / Have a specific member of HR assigned to the group.

FROM TENNESSEE:

Get eveything negotiated in the contract. Be bold.


TABLE 60 – BENEFITS TO INTEgRATIONANSWER RESPONSE PERCENTAgE

Improved physician compensation 39 80%

Greater security for both the practice and its employees 37 76% as healthcare evolves

Greater voice in service line decision-making 20 41%

Improved access to capital 15 31%

Streamlined decision-making 5 10%


TABLE 61 – DISADVANTAgES TO INTEgRATIONANSWER RESPONSE PERCENTAgE

Slow decision making process 42 88%

Too many meetings 35 73%

Loss of control 31 65%

Must compete for capital 20 42%

Decreased focus on patient care issues 5 10%


Loss of physicians and staff who will not work for the acquiring hospital 1 2%

BIggEST ChALLENgES TO BEINg INTEgRATED:


FROM INDIANA:

Navigating through the system.

FROM WISCONSIN:

Physician adjustment to working through administration for approvals, recruitments, purchases, etc.

FROM FLORIDA:

Taking the leap from alignment to a truly integrated system. Focus appears to be on individual physician productivity. We need to develop a CVSL. The cardiologists are part of a small multispecialty group which is making it difficult to create a CVSL.

FROM gEORgIA:

Communication and chain of command with the Administration / Administration attempting to use “one size fits all” for integrated pracitces (small primary care vs large cardiology) / Getting answers to any problems in a timely manner.

FROM TEXAS:

communication / timeliness to address issues / Organization structure.

FROM SOUTh CAROLINA:

Increased protocols to accomplish goals that were seamless previously...i.e. captial purchasing, new service start-up, etc.


M e d A x i o M

FROM TENNESSEE:

Hospital wanting to salvage 2 cardiology practices by adding them to our group. (group 1 culture opposite. group 2 major quality concern).

FROM MINNESOTA:

Vying for capital and budget dollars with hospital.

FROM ARkANSAS:

Hospital’s lack of practice management understanding.

FROM OhIO:

Buracracy.

FROM MIChIgAN:

Hospital decision making/beauracracy / Lack of 100% commitment to group (appeasing non-employed cardiologists) / Maintianing practice production and profitability.

FROM OkLAhOMA:

Integrating key administrative and billing functions, hospital accreditation requirements imposed on group, and increased rules associated with expense reimbursements and other HR policies impacting both group staff and physicians. Also, group’s ability to track revenue and expense in detail has been big challenge.

FROM TEXAS:

the hospital moves slower / the health system has employed by not fully integrated competing cardiologists into one group / staff pay is a challenge as the ranges put staff at a disadvantage / real estate - office locations in other docs offices- extremely legally challenging.


Adjusting to loss of control. Learning all the processess of how things are now being done.

FROM WISCONSIN:

Physician leadership and struggles for control between hospital admin and clinic admin.

FROM WISCONSIN:

1) managing the cultural integration / 2) accurately capturing financial performance / 3) gaining clarity on priorities versus the many system initiatives.

FROM TENNESSEE:

collabotative efforts with health system leadership.



WhAT COLLABORATIVE EFFORTS WITh ThE hOSPITAL hAVE BECOME EASIER POST INTEgRATION?

FROM PENNSYLVANIA:

Interventional cardiologists seem very happy.

FROM gEORgIA:

Clinical programs / Resources / IT.

FROM FLORIDA:

Better communication with key leadership in hospital. Access to information that will help all parties manage CVSL better.

FROM MIChIgAN:

IT: EMR implementation and interfaces with multiply facilities. We merged the two cardiology groups when we intergrated so there were many improvements that occured post integration but it is hard to measure whether it is integration or consolidation into one service(standardization etc).

FROM NEW jERSEY:

Practice Management.

FROM NEW YORk:

Too soon to tell.

FROM FLORIDA:

None.

FROM gEORgIA:

Really none.

FROM TENNESSEE:

access to capital.

FROM TENNESSEE:

TAVR

FROM INDIANA:

Human Resources.

FROM NEBRASkA:

Relationship with hospitals employed primary care physicians has been strengthened.


Capital purchase, access to money to improve or grow the CVSL program.


Physician recruitment, purchasing and contracting leverage.

FROM WISCONSIN:

Meaningful use efforts, ACO approval, billing and collections, purchasing, human resources function.



M e d A x i o M

FROM WISCONSIN:

1) strategic planning 2) contributing to system strategic thinking from a physician practice perspective 3) capital budget planning 4) UTILIZING LEAN thinking

FROM TEXAS:

HR functions / Money to fully staff / Funds for new doctors, new equipment and new offices

FROM WISCONSIN:

outreach

FROM ARkANSAS:

advertising

FROM MINNESOTA:

Outreach growth with more CV time.

FROM OhIO:

Managing hsopital employed physicians.

FROM MIChIgAN:

Quality initiatives / Operational improvements.

FROM OkLAhOMA:

Tracking clinical quality and compliance much easier with collaborative effort.


STAFF RETENTION POST-INTEgRATION:

TABLE 62 – DID ANY PhYSICIANS LEAVE ThE gROUP?ANSWER RESPONSE PERCENTAgE

No 30 60%

Yes, 1 - 3 16 32%

Yes, 3 - 5 2 4%

Yes, 6 or more 2 4%

TABLE 63 – IF YES, DID ANY REMAIN IN ThE AREA?ANSWER RESPONSE PERCENTAgE

Yes 17 77%

No 5 23%

TABLE 64 – IF PhYSICIANS LEFT ThE gROUP AS A RESULT OF ThE INTEgRATION, DID ThEY BECOME EMPLOYED OR OThERWISE INTEgRATED WITh A COMPETINg hOSPITAL/hOSPITAL SYSTEM?


Yes 13 54%

No 11 46%



TABLE 65 – DID ANY STAFF LEAVE ThE gROUP?ANSWER RESPONSE PERCENTAgE

No 25 51%

Yes, a few 23 47%

Yes, a substantial amount 1 2%

TABLE 66 – DID ANY MANAgEMENT LEAVE ThE gROUP?ANSWER RESPONSE PERCENTAgE

Yes 8 16%

No 41 84%

SATISFACTION:

SATISFACTION % MEASURINg INCREASE IN DECREASE IN NO ChANgE IN DO NOT kNOW SATISFACTION SATISFACTION SATISFACTION SATISFACTION SATISFACTION POST-INTEgRATION POST-INTEgRATION POST-INTEgRATION POST-INTEgRATION

Physician 36% 44% 11% 33% 11%

Management 33% 25% 31% 38% 6%

Employee 60% 27% 20% 43% 10%

Patient 84% 24% 10% 41% 24%

TEChNOLOgY:

Survey respondents were asked about their information technology infrastructure prior to integration as well as how it changed after they became fully integrated.

TABLE 67 – DID ThE hOSPITAL REqUIRE YOU TO REPLACE ThE CURRENT PRACTICE MANAgEMENT SYSTEM WITh ThE hOSPITAL SYSTEM?


Yes 10 20%

No 39 78%

No practice management system 1 2%



TABLE 68 – WhAT PRACTICE MANAgEMENT SYSTEM IS ThE CARDIOLOgY gROUP UTILIzINg POST-INTEgRATION?


Allscripts 7 13%

Athena 1 2%

eClinical Works 0 0%

Epic 5 10%

GE 7 13%

GEMMS 8 15%

Greenway 0 0%

iMedica 0 0%

NextGen 14 27%

None 2 4%

Other 7 13%

Sage 1 2%

TABLE 69 – IF ThE gROUP hAD AN EMR PRIOR TO INTEgRATINg, DID ThE hOSPITAL REqUIRE ThAT IT BE REPLACED WITh ThE hOSPITAL SYSTEM?


Yes 7 14%

No 34 68%

No EMR prior to integrating 9 18%

TABLE 70 – WhAT EMR IS ThE CARDIOLOgY gROUP UTILIzINg POST-INTEgRATION?ANSWER RESPONSE PERCENTAgE

Allscripts 7 13%

Alteer 1 2%

Athena 0 0%

Cerner 2 4%

eClinical Works 0 0%

Epic 7 13%

GE 5 10%

GEMMS 7 13%

Greenway 0 0%

iMedica 0 0%

Medent 2 4%

MedInformatix 1 2%

Mysis 1 2%

NextGen 13 25%

None 4 8%

Sage 1 2%

SRS 1 2%


BILLINg/CODINg:

TABLE 71 – IS ThE gROUP OR ThE hOSPITAL BILLINg PROVIDER-BASED?ANSWER RESPONSE PERCENTAgE

Yes 42 81%

No 10 19%

TABLE 72 – WhAT SERVICES ARE BEINg BILLED PROVIDER-BASED?ANSWER RESPONSE PERCENTAgE

Diagnostic Services 26 62%

E&M 1 2%

Both 15 36%

WhAT ChALLENgES OR BENEFITS hAS ThE gROUP SEEN FROM gOINg TO PROVIDER-BASED STATUS?

FROM PENNSYLVANIA:

Patients complain that they pay more.

FROM NEBRASkA:

Disparity between provider-based and office-based billing in various offices that we staff.

FROM MIChIgAN:

benefits fiancial / challenges: complex, hospital not familar with practice billing model, multiply locations and hospitals more costly to patient.

FROM WISCONSIN:

Patient complaints and loss of patients because of increased copayments. Some sytem design issues to get provider based billing to work successfully.

FROM COLORADO:

Higher charges have upset many patients.

FROM ILLINOIS:

pt complaints / Payors directing pts to Physician offices.

FROM gEORgIA:

Greater revenue but more customer complaints.


Change in culture for existing patients with rate increases to include the facility charges.

FROM WAShINgTON:

Patient and staff education

FROM ILLINOIS:

self pay patients, higher co pays, more complexity in pre auth, demand for payment up front



M e d A x i o M

FROM MINNESOTA:

Increased revenue vs. patient complaints.

FROM OhIO:

Little if any.

FROM MIChIgAN:

increased revenue, patient satisfaction or dissatisfaction depending upon the patient’s insurance coverage.

FROM OkLAhOMA:

Primary benefit is that substantially more revenue accrues to the overall enterprise with minimal increase in cost. Challenges include more complex billing (now includes hospital vs. just group in the past), patient registration, patient collections, and hospital facility accreditation requirements. Patient complaints have increased due to more out-of-pocket costs, but not to the point of losing many patients to competitors. Also, provider-based status has required that practice lose some autonomy and control to hospital administration.


TABLE 73 – WhO IS RESPONSIBLE FOR ThE FOLLOWINg FUNCTIONS:qUESTION hOSPITAL TOOk OVER PERCENT hOSPITAL RETAINED IN PERCENT RETAINED SOME OR ALL OF ThE PRACTICE IN ThE PRACTICE ThIS FUNCTION

Charge entry 10 15% 42 30%

Coding 12 18% 40 28%

Billing 19 28% 33 23%

Collection 26 39% 26 18%


IN ThE PROCESS OF INTEgRATINg

OVERALL RESULTS A total of 20 survey respondents are in the process of integrating. This accounts for 14% of the survey responses. Below is a breakdown of the type of facility that responded to the In Process section:

In the Process of Integrating


M e d A x i o MIN ThE PROCESS OF INTEgRATINg


hOSPITAL DEMOgRAPhICS

TABLE 74 – TYPE OF hOSPITALS BEINg INTEgRATED WIThANSWER RESPONSE PERCENTAgE

General/Community 7 37%

Tertiary 4 21%

District/Health System 2 11%

Specialized 0 0%

Teaching 6 32%

Public 0 0%

Rural 0 0%

TABLE 75 – NUMBER OF BEDSANSWER RESPONSE PERCENTAgE

<200 2 11%

200-400 8 42%

400-600 2 11%

>600 7 37%

TABLE 76 – LEVEL 1 TRAUMA CENTERANSWER RESPONSE PERCENTAgE

Yes 9 47%

No 10 53%

TABLE 77 – FOR VS NOT-FOR PROFITANSWER RESPONSE PERCENTAgE

For-profit 2 11%

Not for-profit 17 89%

TABLE 78 – NUMBER OF hOSPITALS IN ThE hEALTh SYSTEMANSWER RESPONSE PERCENTAgE

1 2 11%

2-4 7 37%

5-7 4 21%

7+ 6 32%



M e d A x i o M

TABLE 79 – PROVIDE SERVICES TO COMPETITIVE hOSPITALS – PRE- AND POST- INTEgRATIONANSWER PRE-INTEgRATION PRE-INTEgRATION POST-INTEgRATION POST-INTEgRATION RESPONSE PERCENTAgE RESPONSE PERCENTAgE

Yes 17 89% 16 100%

No 2 11% 0 0%

TABLE 80 – DOES ThE PRACTICE CURRENTLY hAVE A CO-MANAgEMENT AgREEMENT?ANSWER RESPONSE PERCENTAgE

Yes 4 22%

No 14 78%

Total 18 100%

TABLE 81 – SCOPE OF CO-MANAgEMENT AgREEMENTANSWER RESPONSE PERCENTAgE

Entire cardiovascular service line 2 50%

Hospital located CV Imaging 1 25%

Outpatient clinic located CV Imaging 1 25%

Cath Lab 1 25%

Cardiothoracic and Vascular Operating Rooms 0 0%

CCU 0 0%

SICU 0 0%

Telemetry step-downs 0 0%

Prep and recovery unit 0 0%

General medical services 0 0%

Chest pain center 0 0%

Cardiac rehab 0 0%

Outpatient cardiovascular clinics 1 25%

Other 1 25%



CONSIDERINg INTEgRATION

A total of 17 survey respondents are considering integration. This accounts for 11% of the survey responses. Below is a breakdown of the type of facility that responded to the considering integration section:

Considering Integration


M e d A x i o MCONSIDERINg INTEgRATION


CONSIDERINg INTEgRATION

TABLE 82 – ANTICIPATED LENgTh OF TIME UNTIL TRANSACTION IS COMPLETEANSWER RESPONSE PERCENTAgE

< 6 months 6 35%

6 months - 1 year 4 24%

1 year - 18 months 3 18%

18 months - 2 years 0 0%

2 years - 30 months 3 18%

30 months - 3 years 0 0%

> 3 years 1 6%

TABLE 83 – TYPE OF INTEgRATION ThAT gROUPS ARE CONSIDERINgANSWER RESPONSE PERCENTAgE

Employment 7 41%

Professional service agreement 5 29%

Physician lease 0 0%

Practice lease 1 6%

Co-management agreement 2 12%

Combination 2 12%


Yes 3 18%

No 14 82%





Cath Lab 2 67%


CCU 3 100%

SICU 3 100%





Cardiac rehab 2 67%


Other 0 0%


NOT CURRENTLY CONSIDERINg INTEgRATION

A total of 28 survey respondents are not currently considering integrating. This accounts for 19% of the survey responses. Below is a breakdown of the type of facility that responded to the not currently considering section:

Not Currently Considering Integration


M e d A x i o MNOT CURRENTLY CONSIDERINg INTEgRATION




Yes 11 39%

No 17 61%





Cath Lab 5 45%


CCU 3 27%

SICU 0 0%





Cardiac rehab 1 9%


Other 1 9%

TABLE 88 – hAS ThE OPTION TO INTEgRATE BEEN REVIEWED?ANSWER RESPONSE PERCENTAgE

Yes, please explain 14 52%

No 13 48%

hAS ThE OPTION TO INTEgRATE BEEN REVIEWED, BUT ThE DECISION REMAINED TO STAY INDEPENDENT/NOT INTEgRATE?

FROM IOWA:

Reviewed at a very high level - no desire on groups part to pursue further.

FROM VIRgINIA:

want to retain autonomy as long as possible.

FROM OhIO:

Hospital withdrew offer for integration.

FROM NEW YORk:

Decided on co-management arrangement which we are currently exploring.


M e d A x i o M

FROM TEXAS:

Due to the multiple health systems in which we practice, we did not feel it was in our best interest to integrate. In addition, integration of cardiologists in our area is not very high.

FROM FLORIDA:

Yes, detailed negotations occoured but we were not able to come to terms, especially on governance.

FROM WAShINgTON:

They want to stay independent.

FROM NEW jERSEY:

Met with several systems in our area to listen to their pitch.

FROM OREgON:

not surrender control.

FROM OREgON:

Group did not feel they lose the partnership relationship if they became employed.


WhY IS ThE gROUP NOT CURRENTLY CONSIDERINg INTEgRATION, BUT MAY IN ThE FUTURE?

FROM IOWA:

We are successful as an independent practice with the majority of the market and limited competition. We serve 2 competing hospital systems and have CVSL co-management agreements with both.

FROM INDIANA:

We reviewed the prospect of integration, spending approximately 18 months in negotiations. At the end our prospected seemed better to remain independant, focus on our group’s organization and management, and ensure our investments (including a heart hospital) were productive. Since that time the group has done very well and physician earnings have equalled or exceeded expectations in all areas. We do recognize that healthcare reform may force integration in the future, and remain open to that possibility.

FROM WYOMINg:

Survival.

FROM VIRgINIA:

We realize that with reimbursement cuts we may be forced to join with a hospital to even out our overhead and to have access to hospital resources. However, we want to maintain our independence as long as possible so that we can deliver the type of quality care our patients are used to. We are a “boutique” practice and do lots of extra things for our patients. This is our niche market.


FROM CALIFORNIA:

The hospital already has a mult-specialty group foundation model and is not interested in integrating with another group. We are preparing to make a proposal of why it would be beneficial to both the hospital and our group to integrate.

FROM ALABAMA:

We continue to do well financially on our own. We have good leadership and are able to recruit very talented physicians. In our market we service 5 hospitals full time that are a part of 4 different systems. We are a major part of each hospitals cardiovascular services and they are all important to us. The volume we do is fairly evenly split among all hospitals for inpatient work as well as the referral base associated with each. So, if we affiliate with one hospital or one system, we could potentially put at risk a significant amount of our business that comes from the other hospitals and systems. Finally, a number of primary groups are owned by the different hospitals, but there are very few specialists that have been aquired. The systems in our market have not felt the need to rush to integrate specialists into their provider networks, at this point.

FROM WAShINgTON:

This does not fit with their core values of providing personalized high quality care at low cost= value. It seems wrong to give the same care but add a facility fee- just to beat the system.

FROM OREgON:

The group’s preference is to stay independent and partner with the local hospital. We feel that it keeps everyone more honest. However, as reimbursements change and we move more toward fixed payment and quality based models it may require us to become integrated to make the finances work.

FROM OhIO:

The environment for the independent practitioner is getting increasingly difficult. Reimbursements continue to decline from both government and private payors. If the right offer was made, this practice would sell out.

FROM TEXAS:

IF SGR reappears, we may not be able to survive financially without integration.

FROM NEW YORk:

hosp not ready, but also group is successful as independent.

FROM UTAh:

Practice Autonomy. However seeing the realization of being the last survivor on the island!

FROM NEW YORk:

Cardiologists in area are developing an LLC which would co-manage the cardiac service line with the hospital system.

FROM WEST VIRgINIA:

Currently very strong from a competitive, management and financial standpoint. Would only consider if conditions changed dramatically.


FROM CALIFORNIA:

Doing well as independent group with excellent hospital administration relationship. Hospital would prefer working with us not owning day to day management.


M e d A x i o M

FROM ALABAMA:

Group is divided on idea of integration. We have talked with our hospital. They are ambivalent as well.

FROM UTAh:

Strong emotional and financial ties to current multi specialty group, would consider in the future if current trends continue.

FROM FLORIDA:

We are not currently considering integration because we were not able to agree on terms, especially governance, in our previous negotiations. At this time, we are pursuing a strategy which will strengthen our group is an independent group. However, we realize we are in a changing environment and we would consider integration under the right circumstances.

FROM MONTANA:

The physicians like their independence. They like being able to make decisions and having them implemented in a timely manner. (The hospital is very slow at making decisions and then implementing them).

FROM NEW jERSEY:

The physicians value their autonomy.

FROM TENNESSEE:

Only group in area practicing at mainly one hospital.



NEVER CONSIDERINg INTEgRATION

A total of 5 survey respondents are never considering integration. This accounts for 3% of the survey responses. Below is a breakdown of the type of facility that responded to the never considering integration section:

Never Considering Integration


M e d A x i o MNEVER CONSIDERINg INTEgRATION


Yes 0 0%

No 5 100%

TABLE 90 – hAS ThE OPTION TO INTEgRATE BEEN REVIEWED?ANSWER RESPONSE PERCENTAgE

Yes, please explain 2 40%

No 3 60%


WhY WILL ThE gROUP NEVER CONSIDER INTEgRATION?

FROM TEXAS:

The Group provides cardiology services to four different health systems, with two covering roughly a third of our business each. Integration will likely have a detrimental impact to at least half of our business, regardless of the choice of integration partner. Secondly, the Group does not currently view this integration trend to be a sustainable model. Physicians are being overpaid in some circumstances when viewed from a productivity model. In time, there may be resulting compliance or IRS issues (private annurement) when the funding of operating deficits for physician practices is reviewed.

FROM TEXAS:

We are not convinced that the current integration trend will be sustainable due to poor management performance of hospitals and declining reimbursement expectations for Provider Based Reimbursement. We currently cover 4 separate healthcare systems and integration would represent a significant disruption to a significant portion of our business.

FROM TEXAS:

The group is fiercely independent, and does not believe that it is in their best interests, professionally or financially, to integrate. Furthermore, the markets that we serve currently have hospitals that have no desire to purchase practices due in part to the wide availability of cardiologists in the marketplace. This group is well managed (MGMA better performing practice since 2006) and the physicians have continually been above the 75th percentile for physician compensation. This does not give us much incentive to integrate.

FROM CALIFORNIA:

We will lose control of our practice.

FROM NEW YORk:

At this time we are not comfortable with the hospital administration and I do not believe they want to integrate with a cardiology group.

NEVER CONSIDERINg INTEgRATION


CONCLUSION

Conclusion

It is clear that healthcare reform favors the consolidation of the healthcare industry. In nearly every aspect of healthcare, consolidating efforts are observed – hospitals purchasing hospitals, physician organizations being purchased by both hospitals and insurance plans and industry device and pharmaceutical providers consolidating operations and sales forces to better align with the new healthcare order. However, consolidation without a strategy to leverage the joined entities operationally, financially and strategically will be only one thing – expensive.

The re-emergence of the service line, with an incumbent mandate to drive care coordination and value to patients, is a model that has early promise to facilitate effective healthcare transformation. The service line successful operation, like all operations, is dependent on the leadership and staff that work within it. Service lines that are led in a dyad leadership fashion, pairing business and clinical leaders, whose joint responsibility is to lead across the care continuum, is rapidly earning best practice status. In addition, a multi-disciplinary management team is assembled by examining the combined organization’s functional silos and identifying managers and staff who are focused on cardiovascular services within the functional departments. Empowering that team around a shared vision of excellence for cardiovascular patients is the “go-power” fueling the effort.

As the Patient Protection and Affordable Care Act is rolled out over the next years, the healthcare industry will be forced to restructure and redesign its approach to every aspect of its operations. Leaders will be challenged to think and work differently; leading their organizations to a future that today is comprised of only concepts. The consolidated industry structure will be tested for sustainability. It is important that experiences - successes and failures - are shared in order that the industry is well transformed, expediently and expeditiously.

IF YOU WOULD LIkE ADDITIONAL INFORMATION ABOUT ThIS SURVEY, PLEASE CONTACT:

Suzette Jaskie

[email protected]

904.625.4811

Katie Willerick

[email protected]

269.254.5105

SUCCESS IN ThE FACE OF SEISMIC ChANgE

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Our reports use your data to provide you with a customized analysis of how well your practice is doing on nearly 300 measures. These detailed and customized reports are the key practice-management tools in determining everything from appropriate staffing ratios to expected ROI on product lines and services. Creating these reports on your own would cost tens of thousands of dollars—that’s if you even had access to the data. Our database and custom-report generation can save you thousands of dollars and months of your valuable time. And it delivers all the information you need to be successful.


ABOUT MEDAXIOM

ThE MEDAXCESS 2.0 INTERACTIVE DATABASE TOOL MedAxcess 2.0 is an interactive database that allows MedAxiom members to query the company’s extensive data resources on demand through a web-based platform. MedAxcess 2.0 is a powerful tool for practices seeking to review, benchmark and interpret their practice data. Practices can compare themselves against others using over 600 metrics from key areas such as:

• Physicianproductivitycomparisons • Numberofnewpatientvisits • Procedureratios,suchasCath-to-NuclearratioorNuclear-to-OfficeEncountersratio • Procedurevolumes • Revenue,expense,profitandreturnandnumberofstudies • Generalledger • Staffingcomparison • AccountsreceivableandPayermix

graph types include:

• BenchmarkingReports • TrendingReports • ComparisonReports • QuartileReports • TabularReports • Multi-yearReports

You can customize your reports through different filter types including:

• Geographicarea • Numberofphysicians(practicesize) • Physiciancompensationmethodology • Ownershipmodel • EHRandPMSVendors • Andmanymore

MedAxcess 2.0 is an extremely powerful tool that allows you to see how your practice is performing compared to your peers. Don’t be in the back of the pack, with MedAxcess 2.0 you can ensure you have the information to become a leader and achieve the best results for your practice.


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SUzETTE jASkIE, PRESIDENT & CEO OF MEDAXIOM CONSULTINg

Suzette Jaskie is President of MedAxiom Consulting and the Executive Vice-President of MedAxiom. Ms. Jaskie was the CEO of West Michigan Heart and Wisconsin Heart and Vascular in Milwaukee, WI prior to her current position. She also previously served as the Executive Director of the Frederick Meijer Heart and Vascular Institute, for Spectrum Health System in Grand Rapids, MI, that governs and manages the cardiovascular service line for the regional health system. Ms. Jaskie has a Masters Degree in Business Administration from the University of Hartford and a

Bachelor of Science from the University of Wisconsin.

Ms. Jaskie is a former President of Medical Group Management Association’s cardiovascular assembly (CSCA) and is currently a serving on the American College of Cardiology’s Practice Management Council. Ms. Jaskie is a faculty member of the American College of Cardiology Advanced Leadership Institute and a former board member of the Cardiovascular Advocacy Alliance. She has rich experience in strategic planning and program development and has been a speaker at numerous conferences on varied topics such as Physician Compensation, Strategic Planning, Product Line and Program Development, Performance Management, Operations Efficiency, as well as Governance and Leadership.

DENISE BROWN, V.P. - BUSINESS INTELLIgENCE SOLUTIONS & SENIOR CONSULTANT

Denise Brown is the Vice-President of MedAxiom Consulting. As a health care executive with over 25 years of experience in hospital system and private practice healthcare operations, operational efficiency, physician recruitment, business development, marketing, and facilities planning; she recently achieved her Green Belt in Lean Sigma from the Johns Hopkins, Center for Innovation in Quality Patient Care.

Prior to her current position she was Chief Operating Officer at West Michigan Heart in Grand Rapids, Michigan. There she led the clinical, technical and business operations initiatives; business development efforts and operationalized both co-management and integration efforts for the practice. Ms. Brown also served as Director of Business Development for Wisconsin Heart and Vascular Clinics, owners of the Wisconsin Heart Hospital. She has extensive experience in developing clinical program models to drive referring physician, patient/consumer and payer engagement.

Denise also held prior positions as the AV.P. of Purchasing for Health Services Corporation of America (HSCA) one of the founding members of AmeriNet GPO as well as Materials Management Directorships at two healthcare systems in Wisconsin.

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jOEL SAUER, V.P. - CONSULTINg

For over 14 years, Joel Sauer was Chief Executive Officer of a large Midwestern multi-specialty physician group. Through his leadership, the group expanded from a single specialty practice of 15, to over 225 physicians with over 600 employees in nearly every medical specialty.

In 2009, Joel orchestrated the acquisition of his own group by a large health system and then acquiring other practices to create an accountable care network. Beyond engineering the transaction details, Joel provided the leadership behind the operational and cultural integration of

the merged entities. Beginning in 2001, Joel led his group’s conversion from a paper chart to a full electronic health record. Given the complexity of the process, both from an operational and cultural standpoint, Joel considers this one of his greatest accomplishments. Joel headed up two significant site development projects for the group including the construction of an attached, two operating room, ambulatory surgery center and a significant expansion and renovation of the group’s previous building. Other relevant experiences Joel brings to the table include: strategic planning, joint venture formation, hospital/health system relations, financial analysis, payor contract negotiations, implementing operational efficiencies, and ancillary services creation.

Prior to his tour as CEO, Joel worked for a large hospital, managed an outpatient ancillary services business, and worked for a healthcare software developer in implementation and support.

CAThLEEN BIgA, SENIOR CONSULTANT

Cathie is President and CEO of Cardiovascular Management of Illinois, a cardiology physician practice management company. She has successfully integrated her physician groups and continues to manage their integrated practices and facilitate cardiovascular service line growth and development. She has over 30 years experience as a hospital and health system executive and most recently has spent eight years as an industry leader in medical practice management. Cathie will provide consulting services exclusively through MedAxiom while maintaining her CMI

organizational activities.

Cathie has held positions as hospital CEO, VP of patient Care services and has been active inpractice management for the last 15 years. In her current practice she is responsible forstrategic planning, growth and development of cardiology practices, their operational efficiencies, and the development/implementation of new technologies. She has recently completed three integrations of her current groups – successfully transitioning 46 cardiologists. Cathleen serves as the Executive Director of Adventist Heart and Vascular Institute and is instrumental in the development and growth of the CV Service Line for the organizational.

She has been active nationally with physician/hospital integration, development and formation of CV SL, quality initiatives, development of Clinical co-management agreements, designing balanced quality score cards, advocacy issues and lectures widely on the implementation of Integration strategies, PQRI, eRx, and operational efficiencies.


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jUNE 12-14, 2013RITZCARLTONBUCKHEAD•ATLANTA,GA

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kATIE WILLERICk, PERFORMANCE IMPROVEMENT CONSULTANT

Katie received her Bachelor of Science degree in psychology from Western Michigan University where she also received her Master of Arts degree in industrial/organizational psychology. Katie has worked in the healthcare industry, specifically hospitals, since 2005. Katie worked for a Baldrige Award-winning hospital in the Midwest. She was a part of the safety department for three years where she completed multiple Failure Modes and Effects Analyses (FMEAs), enforced various regulatory requirements, and also instituted a hand hygiene observation program for the

hospital. Katie moved to the Process Management department in 2007 where she was certified in Lean and received her Green Belt in Six Sigma from Motorola University. She facilitated many Kaizen (process improvement) events throughout the organization and was also responsible for identifying and helping managers develop productivity metrics for their department as well as finding optimal compare groups to benchmark their performance against. Katie began working for MedAxiom in 2009 where she works on hospital integration, developing measures for Cardiovascular service lines, as well as performance improvement projects.

CLAUDIA URBANO, CREATIVE/MARkETINg MANAgER

Claudia Urbano has 14 years experience in creative development, brand creation and maintenance in advertising and marketing. In the past, she has worked in the agency environment and successfully lead a graphic design studio. Claudia joined MedAxiom to manage the brand and sub-brand identity and usage, marketing coordination, campaign development and implementation, communication channel management and exhibit support. Claudia holds a Bachelor in Fine Arts from the University of North Florida.

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UPCOMINg SURVEYS:

Echo ASE survey – Released June 2013

Nuc/ASNC Survey – Released September 2013

On-Call Survey – Released October 2013

Medical Directorship Survey – Released October 2013

Submission of 2014 Hospital Integration Survey Data (to be printed in

2014 based on 2013 data) – August 2013

IF YOU WOULD LIkE ADDITIONAL INFORMATION ABOUT ThIS SURVEY, PLEASE CONTACT:

Suzette Jaskie

[email protected]

904.625.4811

Katie Willerick

[email protected]

269.254.5105

www.medaxiom.com

CORPORATE OFFICE

2050KingsCircleSouth

NeptuneBeach,FL32266

904.249.1880

Fax 904.249.1604

Documents

Acknowledgements · program demographics, physician compensation trends and hospital system impact. The report will also highlight ... helping to lead the industry out of its current