Planning for a Physician Led Community Health Plan

The Flagship Physician Network is an independent physician initiative that is designed to provide additional revenue products to our members.  Hospital integration and ObamaCare are structuring opportunities for some practitioners and preparing to exclude others.  Integration is the process combining the elements of patient care into a structure that may improve the quality and efficiency of healthcare delivery. These systems are generally expected to be the recipients of government-controlled Medicare patients.  It is reasonable to expect that Medicare patient volume will be joined by commercial and Medicaid patient utilization. There is also the expectation that a fixed payment schedule for treating specific medical conditions will result in pay-for-performance and bundled reimbursements. Whether revenues will be increased or decreased by ObamaCare is in little doubt.  Physicians are quite safe if they assume a negative overall impact, but with change comes opportunity for those willing and able to accept the challenge.

 The inclusion of physicians is being achieved by both (1) acquisition and (2) direct financial control by the owners of the integrated delivery system.  Insurers and hospitals are the primary architects of the delivery systems, i.e., accountable care organizations (ACOs). Certain physicians in a specific market like Dallas-Fort Worth will decide whether to join an existing ACO such Baylor Health Care or Texas Health Resources/Methodist System or run the risk of not being included in the anticipated future patient volume.  Other physicians will not be given the choice; they will simply be excluded.

 PDA and its affiliated organization, “The Flagship Physician Network” is working hard to develop a similar network and contracting capability for independent physicians who do not wish to be acquired.  There are decisions to be made about where to build pilot programs that serve specific communities. The right niche of potential patients/consumers must be determined. And the important combination of physicians, hospitals, outpatient providers, etc. must be sculpted to convert the Flagship Network concept into a nimble, high-quality provider of care with aggressive sales capability. This model is the core purpose of PDA. The new system must produce new revenue for independent physicians, with a minimum of hassle and require no more direct labor.

 Plans are being made.  Discussions are unfolding in three market areas. Soon, the Flagship banner will be unfurled.   

New Revenue Opportunity – DFW Physicians

The “golden years of medicine” were marked by far greater simplicity regarding revenues. Some specialties historically generated greater revenues than others, but physicians were generally busy and reimbursement seemed acceptable.  Today, it is much more complex and difficult to earn a reward that compensates for physician effort, challenge and years of education.  PDA understands.  We are finding ways to make our independent practitioners more money without increased effort and hassle.  

To survive in the “new normal”, practitioners need a business orientation.  We must learn to think of a medical practice as a “store”.  We must have a businesslike approach to seek every way to increase revenues incrementally without changing the fixed costs of operation.  Every new service or practice-compatible offering that adds only variable cost will have a profit margin greater than the current baseline profits.  For example, if telemedicine allows new billings with only the variable costs of a web camera, computer and some training time, the profits could be double digit because the fixed costs of rent, collections, equipment, etc. are not affected.  So, $1,000 of telemedicine billing might be only slightly offset by a very small associated expense.  

Telemedicine was not randomly chosen as an example.  PDA leadership is in advanced stages of investigating two telemedicine products.  Each of these products has the potential of bringing in significant revenues with negligible cost.  In other words, the revenues directly increase bottom line profits. 

This is an opportunity which applies equally to primary care and specialty providers.  If you are interested in this approach to increasing your revenues with no extra hassle or time requirements, contact the PDA office so we can share details with you. This is potentially a big financial opportunity, and it can be thought of as “found money”.  


Accountable Care Organization Breaking News

In the DFW market, the Accountable Care Organization (ACO) movement is creating a buzz.

Baylor and THR are the marketplace giants whose thoughts are absorbed in integration endeavors. They are definitely working at getting an ACO framework in place.  You should ask the question “Why?”  What motivates these huge hospital systems to work so hard to become distribution systems? The answer is simply one word: “VOLUME”.  And then, more VOLUME.  These big businesses must first cover their capital costs and fixed costs. As volume increases from that point, revenue will increase faster than variable costs.  The volume that covers the variable costs allows profits, bonuses, etc.  Hey, there is nothing amiss with that.  The point is that volume drives the big machines, and the ACO is a mechanism to profitably capture volume.  The ACO is a big production engine for commercial, Medicare and Medicaid patient volume.

“The Breaking News” is that there are other eager prospective owners of an ACO distribution system.  For example, consider the insurance industry titans.  They have a different purpose from the hospitals.  Insurance companies want to transform health insurance payment models industry-wide.  They want the ACOs to coordinate care and share in savings or losses under the banner of improved patient outcomes.  The insurers are dedicated to moving away from fee-for-service. They call this transition value-based contracting.  United Healthcare is currently active with an ACO pilot in Tucson, Arizona and will have eight to twelve such ACOs running in 2012.  That is very important to know.  One can see how important the PDA initiatives are to self-direction. PDA seeks a strong clear voice in how practitioner members are being paid.

Summing up, both the insurance industry and the hospital systems will jockey and lobby for their control of the ACO distribution system. This spreading integration effort will be evaluated in future blogs and discussions.  If you would like to know more, you can call one of our physician leaders for doctor-to-doctor communication. (Daniel S. Karin M.D., Medical Director, Dwight A. Lee M.D., Chief Medical Officer and Chairman of PDA, Mark A. Heaver D.O., Primary Care Practice Manager)

One can see how the battle is taking shape.

The bottom line is that PDA and its branded ACO partnership program, “The Flagship Physician Network”, must provide strategies t0 ensure practitioner independence and self-reliance while generating new profits.  Our long-time members as well as our new enlistments need to examine their goals and expectations.  

The game is on!

News on ACO’s

News on ACO’s

It is critical to understand the Accountable Care Organization (ACO) movement.  The Federal government’s involvement with medicine will have a direct impact on every American.  This message is for you, the physician, your office manager, and your staff.  The consequences will involve horizontal and vertical integration of the healthcare system.  The consequences must be made clear to your families, neighbours, accountants, friends, and congregations you may attend.  Everyone needs to get the message of how valuable the independent physician is to their needs. We earnestly desire that you recognize the importance of the office staff and all of their contacts in the community. We are preparing for a “sea change” in healthcare delivery.

 There will always be the physicians that are solely focused on seeing the next patient and working harder, ever harder to stay ahead of the game.  And that is OK for those physicians.  Some will sell out, be aggregated, and let the system lead the way.  But, our group of independent, quality, committed practitioners are determined to make more money, cut hassle and not work any harder than we already work.  We want to do something better!  So, here is today’s flash.


 Health and Human Services has released a 429-page proposed rule book on Medicare ACOs.  Yes, 429 pages!  Comments on the proposed rules will be accepted for 60 days.  ACOs are slated to start in January, 2012.  That is nearly half a year away. We believe that we will be actively promoting our own ACO-type product before then.  And, we also believe that in the near future, THR and Baylor will be rolling out their versions of the ACO.

Healthcare organizations have begun to analyze the regulations and will soon provide more information on their expected impact.  PDA will study these releases and may submit comments to HHS on the proposed regulations.

There are most likely trial balloons included in the proposal, but the game starts here.  We have gleaned what we share from reports of conference calls with Federal officials, from others who received advance copies of the proposal, and directly from the proposal its self.  We will track the information and when possible elaborate on how to make it work for you and our Flagship Network.  Today, we want to share a few points to give you a flavour of the thoughts from the Federal hierarchy:

  • A single hospital can become an ACO.  A hospital would not have to bring together other providers to become an ACO, as long as the hospital has a sufficient number of primary care physicians.
  • Projected savings.  HHS and CMS are reported to believe that net savings over the first three years will be $510 million, or possibly as high as $960 million.
    In the initial stage of the program, the proposal allows ACOs to choose between two different tracks to get shared savings. The “one-sided risk” model, an ACO that saves at least 2 percent of reimbursements, would get 50 percent of the money above that threshold, but it would have no penalty if it spent more in the first and second year. A second, more aggressive model would give an ACO 60 percent of the money above the threshold but also penalize the ACO if it spent more.  “All ACOs would become responsible for losses by the third year of the program”, notes Chet Speed, Vice President for public policy at the American Medical Group Association. He thinks that might be too early for new ACOs with little experience. “Only half of physician practices in the Physician Group Practice Demonstration, the model for the ACO program, received shared savings”, Mr. Speed says.  But in a question and answer session, CMS Administrator Don Berwick, MD, reportedly said the new program has different sharing rates than the demonstration had which is an implication of more upside.  He did not provide details.
  • No start-up funding. The proposal reportedly lacks any start-up funding for ACOs. ACO planners have stated that the shared savings should be an adequate incentive for providers to invest in an ACO. The average start-up cost for each participant in the Physician Group Practice Demonstration was in the seven figures range.
  • Broad antitrust safety zoneSeparate hospitals or other independent providers creating an ACO would be in an “antitrust safety zone”, free from antitrust concerns as long as they represent 30 percent or less of the market, a little bit broader than the current level. They would be under no obligation to contact the enforcement agencies.
  • Three specific levels of antitrust enforcement. The Federal Trade Commission and the Department of Justice have jointly issued a proposed statement of enforcement policy for ACOs, which have mapped out the following levels of enforcement. Separate hospitals or other independent providers creating an ACO would be in an “antitrust safety zone,” free from antitrust concerns as long as they represent 30 percent or less of the market.  If providers in the ACO represent 30-50 percent of the market, they would be free from prosecution as long as they engage in specified pro-competitive behaviour. The details of this “behaviour” will be researched by your IPA and the Flagship Network.
  • Beneficiaries can limit data. Each provider in the ACO must inform beneficiaries that they are part of the ACO and that the ACO would like to request claims data for them. Beneficiaries who object are given a form to opt out of information sharing. Those who opt out can still get care from the physician or other providers. This opt-out provision may cause problems for ACOs.
  •  Reporting quality data. In the first year, an ACO would only have to report quality data. Then in years two and three their quality data will be scored and affect their shared savings payment. ACOs would report a total of 65 quality measures in five domains: patient/caregiver experience, care coordination, patient safety, preventive health, and at-risk populations and frail elderly. The measures would be refined for the second year.

This is just a smattering of a rapidly developing body of knowledge. We will put it all together and learn how to develop our opportunities.  PDA, through its affiliation with the Flagship Physician Network, can help independent physicians prosper in the “new-normal” of healthcare reform.