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Affiliated Practice Limited Medicare ACO Quality Data Shows Sharp Variations In Performance

Hospital and Physician Consolidation Won’t End Anytime Soon

An Interview With Ron Geraty, MD, CEO of DermOne

JUNE 2014

P U B L I S H E R ’ S

Welcome to the June issue of Affilliated Practice, reaching the administrators and physicians of ACOs, SuperGroups, Hospital or Corporate Owned or Leased Practices and independent practices associated with outside management companies. Newly published papers from attorneys and economists state that the hospital and physician consolidation underway won’t end anytime soon-and shouldn’t, in some cases-but with concentration comes the risk of rising prices that demands response from policymakers. “There will be more consolidation,” said Paul Ginsburg, a health policy and economics professor at USC. “Rather than fight it, we should just start looking at how to cope with the greater market power from increased consolidation. To expect the trend to stop is unrealistic in light of the capital necessary to adapt to changing markets and public policy.” In keeping with our desire to present interviews with individuals involved in different business models in today’s medicine, we welcome Ron Geraty, MD, and CEO of DermOne. Previously, Dr. Geraty served as CEO of Alere Medical and founded and served as CEO of Sanare, LLC. DermOne is a leading provider of comprehensive dermatology services through a growing network of company owned practices. Currently DermOne has over 40 practices in 5 states and has a goal of creating a national brand of dermatology practices. Ascension Health and CHE Trinity have formed an integrated network in Michigan. The new company for managed care contracting unites a network of 27 hospitals, more than 12 physician organizations and 5,000 physicians in the state. The new company will be known as Together Health Network and will become one of the largest and most closely aligned clinically integrated networks in the nation. It is the intention of this new company to avoid raising the hackles of antitrust regulators, and experts say that’s possible if the new entity steps carefully. The post-acute care provider Kindred has made an unsolicited $1.6 billion bid to buy Gentiva Health Services. The combined company would serve approximately 127,000 patients a day in 47 states and employ 110,000. Annual revenue for the new company would be approximately $7.2 billion, Kindred said. AtlantiCare plans to merge with the PA.-based Geisinger Health System. The Atlantic City based AtlantiCare Health System, whose model calls for marrying the financing of care through a health plan with a hospital and doctor network, the two organizations announced. Geisinger’s health plan has 467,000 members who receive medical care from a physician-led system with a 1,100 member multispecialty group practice, eight hospital campuses and two research centers. AtlantiCare is an integrated system of health care services that includes the three location AtlantiCare Regional Medical Center and the AtlantiCare Physician Group comprised of 700 physicians who deliver health care to southern New Jersey communities at nearly 70 locations. With warm regards,

Michael Goldberg Michael Goldberg Publisher

Affiliated Practice


Published by Montdor Medical Media, LLC Co-Publishers and Managing Editors Iris and Michael Goldberg Contributing Writers Iris Goldberg Michael Goldberg Melanie Evans Beth Kutscher Ari Burd Beth Fitzgerald Jay Greene Joe Carlson John N. Frank Andis Robeznieks Emily Bader Joseph Conn Meg Fry Layout and Design - Nick Justus On The Cover - Reassuring Worried Mother by Joe Wilder. “My physician paintings depict a very condensed and enriched focal world in which human beings are tossed together, all sharing a common denominator, a diseased or damaged body, as human dignity finally prevails.” Affiliated Practice is published monthly by Montdor Medical Media, LLC., PO Box 257 Livingston NJ 07039 Tel: 973.994.0068 F ax: 973.994.2063 For Information on Advertising in Affiliated Practice, please contact Michael Goldberg at 973.994.0068 or at Send Press Releases and all other information related to this publication to Although every precaution is taken to ensure accuracy of published materials, Affiliated Practice cannot be held responsible for opinions expressed or facts supplied by its authors. All rights reserved, Reproduction in whole or in part without written permission is prohibited. No part of this publication may be reproduced or transmitted in any form or by any means without written permission from Montdor Medical Media. Copyright 2014. Subscription rates: $48.00 per year $6.95 per issue Advertising rates on request

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An Interview An Interview with Ron Geraty, MD, CEO of DermOne Limited Medicare ACO quality data show sharp variations in performance Reform Update: Accept consolidation trend and find ways to cope with rising prices, papers say Reform Update: ACO efforts to constrain spending face hurdle—patients Medicare ACO architect Gilfillan leads changes at CHE Trinity Doc employment won’t lead to lower healthcare spending, research shows The Expensive Consequences of Failing to Create Corporate Documents For Your Practice AtlantiCare to merge with Pa.-based Geisinger Health System HUMC establishes Mountainside Medical Group to address looming doctor shortages Ascension Health, CHE Trinity form integrated network in Michigan New Mich. network must tread carefully to avoid antitrust scrutiny Kindred makes unsolicited $1.6 billion bid to buy Gentiva CHE Trinity, Walgreen enter coordinated-care agreement

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Renown Health hires Slonim as CEO, president


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Mednax, TeamHealth see earnings rise in first quarter


Epic, Cerner are top EHRs for docs meeting meaningful-use requirement


Cerner reports earnings increase, predicts boost from ICD-10 delay


Medfusion and Allscripts call it quits


AmeriHealth, Regional Women’s Health plan to improve the quality of care for 350,000 N.J. women annually


WellCare, Centene likely Ascension insurance targets: analyst

Deal will let Partners HealthCare acquire hospitals


Affiliated Practice

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An Interview with Ron Geraty, MD, CEO of DermOne Ron Geraty, MD has been CEO of DermOne since its inception in February 2012 (prior to that, DermOne was known as Accredited Dermatology). Before joining DermOne, Dr. Geraty founded and served as CEO of Sanare, LLC, a diabetes “total solutions” company. In 2011, Sanare had revenues of approximately $130 million. From 2001 to 2010, Dr. Geraty was also CEO of Alere Medical, a company whose revenue he helped grow from about $1 million in 2001, to over $500 million when he left to form Sanere. Dr. Geraty has served on the faculty of Harvard Medical School and was a Fellow at the Division of Healthcare Policy and Research at Harvard. He completed his psychiatric residency training at Los Angeles + USC Medical Center and received his medical degree from Loma Linda University. DermOne is a leading provider of comprehensive dermatology services through a fast growing network of neighborhood skin care centers offering more locations, convenient hours and acceptance of all insurance.

Affiliated Practice: Dr. Geraty, welcome to Affiliated Practice. At this time, how many offices does DermOne have? Dr. Geraty: DermOne currently has over 40 offices in 5 states. AP: Are all practices company-owned or are some leased or managed? Dr. G: We have no leased or managed practices. Eighty percent of our offices are company-owned outright, with 20% having physician partners. We offer partners liquidity, autonomy, capital for expansion, support and shared services, branding and marketing support, cutting edge technology – including EMR, negotiating power for reimbursement and ultimately, a more lucrative practice – allowing the physician to fully practice medicine. AP: What are your goals in developing this business? Do you envision a national brand? Dr. G: Yes, our goal is to develop a national network of dermatology practices with a satellite concept of general dermatology offices surrounding a center for Mohs surgery and a center for cosmetic treatments. This will allow access for patients to be seen promptly and if necessary, treated by our team of subspecialists within a reasonable vicinity of their location. It is doubtful we would establish such a network in North Dakota, for example, due to population distribution but there are many states that this concept works well in, with Centers of Excellence in each area, surrounded by satellite offices.


AP: Do you envision an alliance with hospitals, super groups or insurance companies as you develop? Dr. G: I don’t think we would ally with hospitals as most dermatology cases can be handled in-office. However, it is possible as we grow that insurance companies would find benefit in some sort of a relationship with us. The insurance companies might be looking for an alliance with a single specialty and we would consider working with them in a mutually beneficial relationship. A multi-specialty practice probably wouldn’t offer benefit to our business model. AP: Is the growth of the business meeting your expectations at this time? Dr. G: We’ve doubled our number of practices in the last year. We are meeting our goals for growth and plan to continue this growth going forward. AP: What is the ultimate direction in which you intend to take this business? Perhaps, adding other specialties? Dr. G: We are an outpatient-focused company in a single specialty. I can see expansion by adding related practices such as cosmetics, plastic surgery, and vein and skin treatment. Perhaps we would add pathology as well, since we have a state-of-the art laboratory that could service physician needs. The core business will always be medical dermatology but we see related subspecialties that would fit into the model and brand comfortably. AP: How is the business organized? Do you have a central management or are there regional managers overseeing operations? Dr. G: We have regional managers who are strictly business managers – not medical managers. They concentrate on managing the business in their specified area. We have a centralized office for billing and other back office needs. AP: Dr. Geraty, we’ve covered, with you, the development of a corporate owned medical practice. Is there something you’d like to add about how DermOne fits into a neighborhood community? Dr. G: Yes, our core belief is to be part of the community and to maintain a strong relationship with the patient and the primary care doctor, keeping them fully informed on the care their patient is receiving. AP: Thank you, Dr. Geraty, for your contribution to Affiliated Practice magazine. JUNE 2014


Limited Medicare ACO quality data show sharp variations in performance By Melanie Evans

Since the Obama administration launched its accountable care initiative as part of healthcare reform in 2012, the CMS has announced which hospital and physician networks in one of the programs have met cost targets and received shared savings. But so far, it has published little data on quality of care delivered by these networks, which were designed to deliver better care as well as lower costs for Medicare patients. The $380 million in Medicare savings produced by accountable care organizations in the Shared Savings and Pioneer programs in 2012 have been well-publicized. But the CMS has not yet delivered on its stated goal of transparency for quality-of-care measures, which will be used to evaluate Medicare ACOs to determine whether they will receive financial bonuses or penalties. Quality measures ensure that ACOs—which are eligible to keep half to 70% of what they save—do not inappropriately skimp on care to win the savings bonuses. “If you're going to collect 33 (quality) measures, I don't know why it is that the public doesn't have access to that information,” said Dr. Robert Berenson, an expert on Medicare policy and senior fellow at the Urban Institute. Public access to the data adds “credibility and accountability” to the ACO program and could help Medicare beneficiaries decide whether to join an ACO if proposals to establish enrollment in the program are enacted, Berenson said. Lack of confidence in the validity of the quality data may be one reason for delays, he said. Care Reform. Hospitals and doctors may be skittish to publicly report their quality data, while CMS officials may see a limited release in the first year as one way to “just get them comfortable,” Patel said. “Year one was sort of the dress rehearsal,” said Dr. Anita Ung, medical director for quality improvement and performance measurement at Atrius Health, a Pioneer ACO in Massachusetts. The CMS declined to answer questions about why it has opted for a limited release of quality data or about the deadline for ACOs to post performance online. The CMS is largely responsible for public disclosure of quality performance for more than 300 ACOs that care for more than 5 million Medicare patients. First-year results are available for the 145 ACOs that have operated since 2012 in the CMS Shared Savings Program and in the CMS Innovation Center's Pioneer initiative. But so far, the CMS has released results for only five of 22 quality measures it has responsibility for publishing. The original ACO rules said that releasing these data would “hold ACOs accountable and contribute to the dialogue on how to drive improvement and innovation in healthcare.” Meanwhile, ACOs are still waiting for final guidance from the CMS on how to publish three measures on preventable hospital admissions. The CMS collects more extensive data than it reports under ACO rules, which require hospital and medical groups to meet performance criteria for 33 measures. The CMS also internally audits utilization and spending among ACOs every three months for signs that providers are stinting on care or overtreating other patients to offset reduced revenue from ACO patients. While ACOs themselves can see the data, the public can learn little about ACO quality of care from the CMS data. The agency's reticence about publicly releasing ACO quality information runs counter to the Medicare program's increasing boldness in publishing cost and quality information about hospitals and physicians, and to the growing pressure for cost and quality transparency in the private sector as well. Despite the limited public reporting, however, ACO leaders say the program's quality measures have accelerated improvement efforts and strengthened care, most notably in areas not previously tracked by providers and in areas of weak performance. The information that has been released shows that ACOs earning shared savings from having met cost targets also demonstrated better quality performance, suggesting that the two accomplishments may be linked. ACOs that received financial bonuses had stronger quality scores across four of five publicly reported measures compared with ACOs that did not slow spending enough to earn bonuses. One Pioneer ACO in Minneapolis has voluntarily released quality performance results that opens a window onto the results for other Pioneer and Shared Savings ACOs that haven't released data. Allina Health's data release reveals sharp variations in quality performance across measures of preventive care and disease management. ACO leaders say some of that variation can be attributed to inexperience with newly introduced measures and confusion over reporting criteria during the first year. Under the rules for the Shared Savings and Pioneer programs, ACOs that fail annual quality performance measures cannot receive shared-savings bonuses, no matter how large their savings. Both Shared Savings and Pioneer ACOs are required to meet the same quality targets.


For the first year, ACOs were simply required to submit quality results to Medicare to be eligible for possible bonus awards based on savings. Their quality performance initially was not factored into their bonus calculations. Five of 145 ACOs failed to submit the quality measures, and two were deemed ineligible for shared savings as a result. Quality performance The quality requirements grow more stringent after the first year, with ACOs scored on quality performance for an increasing number of measures during the second and third years. To be eligible for bonuses in the second year, ACOs will be scored on quality performance for 25 measures, increasing to 32 measures in the third year. The ACOs, however, will continue to be required to report their performance on all 33 measures. Second-year quality results for the 23 Pioneer ACOs, measured through last December, will be finalized this summer. The five measures the CMS made public track whether heart disease patients receive recommended prescriptions and how they fared on diabetes management. Quality measures not yet released by the CMS or ACOs include patient-satisfaction scores, rates of preventable hospital admissions, and screening rates for colon and breast cancer, depression, and risk of falling. ACOs and the CMS faced technical hurdles as they worked to report ACO quality measures, ACO leaders said. Confusion during 2012 created reporting discrepancies that make performance across ACOs for some measures difficult to compare. ACOs adopted different interpretations of how to collect and report some measures. Hospitals and physicians also needed the year to adapt electronic health records to capture new data and report measures they previously did not track. Nonetheless, ACO leaders insisted that the program's quality requirements have helped providers identify and target quality efforts where performance was weakest. Doctors armed with new data culled from quality registries now focus additional effort on patients who have gaps in care. The tougher requirements for the second and third year of the program forced ACOs to move quickly to make quality improvements, said Dr. Scott Hines, an endocrinologist and co-chief transformation officer for Crystal Run Healthcare ACO in New York's Hudson Valley. Voluntary reporting by Allina Health's Pioneer ACO may offer the most comprehensive public information available on ACOs' quality performance for 2012, the first year of the ACO demonstration. Allina, a six-hospital system, published its 2012 quality performance compared with the highest, lowest and median performance figures for all 145 ACOs in 2012. Medication reconciliation . The Allina data show that performance across ACOs varied significantly on many measures. Rates of influenza immunization ranged from 42% at the 30th percentile of performance to 71% at the 90th percentile. Rates for colorectal and breast cancer screening also varied. For example, rates were 43% for colorectal cancer screening at the 30th percentile and 87% at the 90th percentile. Performance on a measure known as medication reconciliation also showed wide variation. The measure tracks the percentage of patients who see a physician to review their prescriptions within 60 days of leaving a nursing home or hospital. At the 30th percentile, 70% of patients saw a doctor who reviewed their medications within 60 days of their leaving a hospital or nursing home, compared with 99.7% at the 90th percentile. The median rate was 85%. For 114 Shared Savings ACOs, the CMS' publicly reported results on five performance measures in 2012 show a correlation between strong quality performance and cost savings. ACOs that succeeded in earning shared savings reported higher median scores than ACOs that did not receive shared savings on three out of four measures for diabetes control. Tobacco use among diabetics was the one exception. There are efforts to improve Medicare ACO quality measurements and integrate them with other quality programs. Some organizations, including the National Committee for Quality Assurance, are analyzing quality measures across public and private ACOs for ways to standardize and benchmark ACO quality performance inside and outside Medicare. The Dartmouth-Brookings ACO Learning Network is reviewing where quality measures overlap across private insurers, Medicare ACOs and various federal programs. The goal is to create standard measures for ACO performance, said Dr. Tom Valuck, a consultant with Discern Health. Meanwhile, the American Hospital Association has criticized the current Medicare ACO performance measurement system. The AHA, in a letter to Dr. Patrick Conway, acting director of the CMS Innovation Center, described the current quality measures as confusing and an obstacle to Medicare ACO expansion. Hospitals will balk at the hefty investments required to launch an ACO without clearer financial incentives, said Nancy Foster, the AHA's vice president for quality and patient-safety policy. JUNE 2014


Reform Update: Accept consolidation trend and find ways to cope with rising prices, papers say By Melanie Evans Hospital and physician consolidation underway won't end anytime soon—and shouldn't, in some cases—but with concentration comes the risk of rising prices that demands response from policymakers, according to newly published papers from attorneys and economists this week. "There will be more consolidation," said Paul Ginsburg, a health policy and economics professor at the University of Southern California, who authored one of four papers released online by the journal Health Affairs. To expect the trend to stop is unrealistic in light of the capital necessary to adapt to changing markets and public policy. "Rather than fight it, we should just start looking at how to cope with the greater market power from increased consolidation." Consolidation has intensified across healthcare, with megadeals merging hospital giants such as Catholic Health East and Trinity Health and other acquisitions between health plans, medical groups and hospitals. Dealmakers say the transactions allow for greater coordination to reduce unnecessary services and improve outcomes, as well as sufficient scale to manage the financial risks of new payment models, such as accountable care organizations. More coordination among hospitals and doctors is one promising fix for the harmful and costly waste created by healthcare's highly fragmented markets. The nation spends billions of dollars on unnecessary hospital visits, overuse of diagnostic tests and medication errors, which policymakers say can be saved with fewer gaps in patient care. Greater investment in information technology will improve easy access to patients' medical history and eliminate duplication, but closer work between hospitals and may also eliminate gaps in care and bolster prevention, proponents say. That integration, however, also consolidates providers into larger networks that can command higher prices. Health plans risk consumer revolt by excluding large or prominent provider networks, weakening their bargaining power. "We're better off with choices than not as consumers," said Mark Pauly, a professor of economics and healthcare management at the University of Pennsylvania. ACOs, which have expanded under Medicare as part of the Affordable Care Act, have encouraged consolidation to promote more effective care, he said. "That's worrisome," said Pauly, who was not an author on the journal articles. "It's not a foregone conclusion that it will improve the quality of care. That adds to my general apprehension about consolidation." Ginsburg argues that it's up to policymakers to ensure larger networks compete on price and quality and don't exploit market power. For example, Massachusetts law prohibits hospitals and doctors from refusing to contract with insurers that exclude them from top tiers of plans that steer patients to low-cost and high-quality providers, he said. Tiers could be expanded to include more sophisticated options that steer patients toward specific services within hospitals, he said. Policies can also inhibit competition. That might be the result of regulation forcing health plans to expand narrow provider networks. Narrow networks limit patients' choice of providers and offer lower premiums because the participating providers accept lower rates in exchange for the promise of more patients. Where narrow networks fail, governments could consider direct price regulation, he said. Regulators could also influence emerging payment models under reform, such as accountable care organizations, to develop a more competitive marketplace, said William Sage, a professor at the University of Texas School of Law and author of another paper. Accountable care organizations should be encouraged to develop customizable bundles for specific services that carry a warranty based on performance, he said. Warranties should be universal in healthcare, Sage said, just as automakers must fix defective ignition switches. That leaves hospitals and doctors at risk for losses for poor quality. Warrant risk, however, would not put providers at risk for demand for healthcare services, a risk typically borne by insurers. "We have a very sorry history of asking physicians to bear insurance risk," he said. Bundles in an industry as complex as healthcare may be impractical, consultant Bruce Vladeck countered in a separate paper, and options such as tiered networks that rely on consumers to exert influence over prices overestimate consumers' clout. "One effect of changes in health financing in the past two decades is unavoidably clear, if too often overlooked or minimized in importance by the health policy community: The average individual with health insurance is considerably worse off now than 20 years ago," thanks to higher out-of-pocket costs and more aggressive billing and collection practices, he said. More on market power UnitedHealthcare did not enter federally run health insurance exchanges, and that decision increased premiums by an average of 5.4% for the second-lowest priced sliver health plans sold to individuals, researchers estimated in a newly released economics


paper. UnitedHealthcare, the largest U.S. insurer, has significant (20%) market share in some states where it operates, such as South Carolina and Arizona. The absence of a major rival potentially reduced price competition, researchers said. Indeed, federal spending on subsidized plans sold on the exchanges would be $1.7 billion lower if every eligible insurer entered the marketplaces. Speaking of the exchanges Deals like one between Presbyterian Healthcare Services in Albuquerque, N.M., and Intel Corp. will likely increase, say Fitch Ratings analysts who cover the not-for-profit healthcare sector. Presbyterian entered into a direct contract to provide health benefits for Intel employees. More such direct contracts are expected thanks to continued pressure to control health spending, analysts said in a new report. "Increasing frustration about rapidly rising healthcare costs have driven employers to search for nontraditional healthcare arrangements that provide financial incentives to more effectively manage annual healthcare spending for their employees," Jennifer Kim, a Fitch associate director, said in a news release.

Reform Update: ACO efforts to constrain spending face hurdle—patients By Melanie Evans

Hospitals and doctors aspiring to increase their margins by controlling health spending are finding their patients' indifference to those efforts a significant obstacle. To grasp how significant, look no further than 300 accountable care organizations under contract with Medicare to manage seniors' medical expenses. Control of health spending depends on how often patients receive medical care and the cost of that care. Medicare ACOs attempt to reduce unnecessary care by steering patients to low-cost treatment options, such as home healthcare, instead of a trip to the hospital. Steering patients, however, is problematic when patients can visit any hospital or doctor, including those outside the accountable care network, and patients have little incentive to consider the cost of care. That is the case for patients in Medicare's ACOs, which number about 330 with more to be named in January. While Medicare managed-care plans limit patients' choice of providers, Medicare fee-for-service does not. Accountable care organizations exclusively treat fee-for-service patients. Early results suggest a large number of patients do roam frequently, ACO leaders have said. Albuquerque-based Presbyterian Healthcare Services—one of Medicare's first ACOs—exited the program after the first year in part because of the system's inability to limit patients' choice of providers. New research this week hints at the scope of the challenge. Harvard University researchers analyzed Medicare bills for patients they estimated to be included in 145 ACOs during the two years before the program launched. Those patients sought 67% of visits to specialists outside the ACOs, and 33% of the beneficiaries were not included in the same ACO both years. The findings “confirm the seriousness of failing to link Medicare beneficiaries with ACOs,” economist Paul Ginsburg, a health policy and management professor at the University of Southern California, wrote in the journal JAMA Internal Medicine, where the research appeared. “Beneficiaries have no incentive to stay within the ACO, and the study illustrates how little ACOS can do to guide beneficiaries to physicians or hospitals within the ACO.” Policymakers and hospitals are calling for new incentives for patients to stick with accountable care providers, but the incentives raise thorny issues about the potential for abuse. One proposal would allow Medicare seniors to volunteer, or enroll, in accountable care organizations. In a letter last week to Dr. Patrick Conway, acting director of the Medicare Innovation Center, the American Hospital Association endorsed such a move. “Patients will better understand that their care will be coordinated among a group of hospitals, physicians, nurses and other providers that will work together to provide high-quality care.” However that could spark a race among ACOS to recruit the healthiest seniors with the least need for costly medical services that drive spending, said Dr. Kavita Patel, managing director for clinical transformation and delivery with the Brookings Institution's Engelberg Center for Health Care Reform. Voluntary enrollment should be offset with patients who are randomly assigned to ACOs to ensure access for the most vulnerable, she said. A bipartisan group of lawmakers in the Senate and House, meanwhile, has proposed creating an alternative to the ACO program that would give the sickest Medicare patients an incentive to choose networks of providers to coordinate their medical care. The bill, the Better Care, Lower Cost Act of 2014 is championed by Sen. Ron Wyden (D-Ore.), who this year assumed leadership of the powerful Senate Finance Committee. Patel, who as of this year is among the physicians operating under an ACO, said the study published this week highlights a need to more closely integrate specialty care into accountable care models, which emphasize primary care, perhaps through extending savings incentives to specialists. JUNE 2014


The AHA also called for changes to health benefits, such as lower copayments or deductibles, to create incentives for patient to remain within the ACO. Further research will help clarify the need for such changes as more data on the early results of ACOs becomes available, said Dr. J. Michael McWilliams, an associate professor of health policy at Harvard University and co-author of this week's study. “We don't know how well they can steer or control care under the current constraints of the model,” he said. On the CMS wish list Top CMS officials Marilyn Tavenner and Drs. Patrick Conway and Rahul Rajkumar write of the agency's efforts to reform healthcare financing in this week's issue of JAMA. The aim, they wrote, is to “move an increasingly large share of total payments to clinicians and organizations from fee-for-service with no link to quality to models that reward quality and efficiency in care delivery and to continue to learn how best to incentivize better health outcomes and lower costs.” One of these initiatives has awarded $300 million to states to revamp healthcare payment and delivery. The CMS is hoping for a major payoff. “CMS has set an aspirational goal for Model Testing States in the State Innovation Model initiative to work with both public and private payers to shift 80% of their population into value-based alternative models instead of pure fee-for-service within five years.” Repeat hospital visitors, by payer Medicare patients most likely to be readmitted in 2011 were those with congestive heart failure, septicemia and pneumonia, according to a new report from the Agency for Healthcare Research and Quality (PDF). The three most common diagnoses for Medicaid patients who were readmitted were mood disorders, schizophrenia and diabetes. Among the privately insured, the topranking diagnoses for readmitted patients included maintenance chemotherapy, mood disorders and surgical complications.

Medicare ACO architect Gilfillan leads changes at CHE Trinity By Beth Kutscher

When Dr. Richard Gilfillan unexpectedly left his post as director of the CMS Innovation Center last June, healthcare leaders feared his departure would slow the shift to a healthcare model that emphasizes value over volume. But he hopes that by moving to a leadership post at CHE Trinity Health, a Catholic provider that is one of the nation's largest not-for-profit systems, he can take that model and use it to reshape how U.S. healthcare is delivered. “When I left CMS, my goal was to be part of the healthcare delivery system transformation that was going on,” Gilfillan said. “Population health is something our ministry has been interested in for 150 years. It was a natural fit.” Gilfillan is No. 1 on this year's ranking of the 50 Most Influential Physician Executives and Leaders. It's the second time he has topped the list. As the Innovation Center's first leader, Gilfillan was instrumental in ushering in new payment and delivery models such as Medicare accountable care organizations and bundled payments. He set the tone for new programs that coordinate care for enrolled patient populations seeking to reduce costs while improving patient outcomes and satisfaction. After three years at the helm, Gilfillan shifted to the provider side, taking the reins in October at the newly merged CHE Trinity Health. That merger brought together more than 80 hospitals from the former Catholic Health East and former Trinity Health in a deal that closed last May. The system had already started laying the groundwork for managing the health of enrolled populations before Gilfillan's arrival. But under his leadership, it is accelerating those efforts in each of its markets. CHE Trinity is aiming to reinvent how it cares for its patients. Among Gilfillan's goals is to have a Medicare Shared Savings Program ACO in each of the system's markets by Jan. 1. It currently has five ACOs that have been approved and implemented, with 11 more applications in process for January 2015. It also is extending its population health program to cover its 87,000 employees in its self-insured health benefit plan. It's building similar value-based programs, including bundled-payment models, with private insurers to serve other patients. MH Takeaways While he's new to hospital operations, Gilfillan brings insurance expertise that could help CHE Trinity expand its ACOs, launch a population health program for its 87,000 employees and begin accepting bundled payments. CHE Trinity has set a three-year objective to achieve $300 million in savings through merger synergies with a goal of $80 million in the first year—a target it already has surpassed. “We're well ahead of that at this time,” Gilfillan said. The system's care-delivery reforms are occurring at the same time as CHE Trinity engages in the tough job of integrating its two legacy systems, said Kevin Holloran, an analyst at Standard & Poor's who covers not-for-profit health systems. That includes melding cultures while achieving economies of scale.

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In October, S&P lowered the long-term and underlying rating on the stronger Trinity Health bonds while raising the rating for Catholic Health East debt, so that both organizations share the same credit rating. Moody's Investors Service made a similar move. The ratings agencies will be watching to see how the two parties execute their megamerger and what the system's projected capital expenditures look like as it carries out ambitious expansion plans. Some observers were surprised that CHE Trinity didn't select someone from its inner circle to lead the system. “An organization the size of CHE Trinity often has massive bench strength, and it's kind of unusual that they would go outside the organization,” Holloran said. But the appointment of an outsider to the top post could be a sign that the board wanted to create a new system that's more than the sum of its parts. “Perhaps that sends a message to everyone that, 'We're not CHE, we're not Trinity Health.' ” Gilfillan earned his medical and undergraduate degrees at Georgetown University and started his career as a family physician at the Georgetown University Community Health Plan. He later moved to Massachusetts, where he helped found a community health center and a family medicine practice. His first position on the insurance side was as medical director for Medigroup Central HMO, a Blue Cross of New Jersey managed-care plan. Gilfillan was thinking about value-based models when he was in medical school in the 1970s, talking about HMOs and the “triple aim” goals of better patient experience, improved population health and reduced costs. “I went into healthcare because I was always interested in figuring out how to get great healthcare to people,” he said. While he's new to hospital operations, he brings expertise that the system didn't have before, said Rick O'Connell, executive vice president of CHE Trinity Health and president of the Trinity Health division. Prior to the CMS, Gilfillan was CEO of Geisinger Health Plan and executive vice president of insurance operations for Geisinger Health System. Earlier in his career, he served as senior vice president for national network management at Coventry Health Care, and also held positions at Independence Blue Cross. “We're getting someone with a whole new set of eyes,” O'Connell said. “He came from the payer side so his ability to understand how payers think has been a gift in and of itself.” Trinity Health had been setting up clinically integrated networks in its markets prior to the merger. It's now building relationships with insurers, O'Connell said. Gilfillan's arrival has “given us the acceleration we need to move forward in that direction.” Some skeptics question the overall prospects for success of ACO-type population health management, noting that the first years of the Medicare ACO program have shown mixed results. They also point out that many hospitals and physician groups did not do well financially in managing enrolled patient groups under HMO capitated payment in the 1990s, and that those efforts triggered a public backlash over restricted access to care. But Gilfillan said the Medicare ACO programs and CHE Trinity's population health management initiatives are very different from those earlier efforts because of the greater focus on measuring and optimizing the patient experience. “I think everyone realized that we needed to start from the perspective of the patient,” he said. Former CMS Administrator Dr. Don Berwick said he recruited Gilfillan to the Innovation Center because he respected the work he did at Geisinger Health Plan. At the Innovation Center, “Dr. Gilfillan had the job of establishing a brand new organization in a highly controversial political environment,” said Berwick, currently running for the Democratic nomination for Massachusetts governor. “I think his work there was heroic. ... He was elegant and very resilient in dealing with these potentially very demanding influences.” Gilfillan developed the ACO program and the bundled-payment initiatives. He also recruited the people to lead the different Innovation Center programs. The office space he designed for the Innovation Center was an open floor plan, with low partitions between work areas to encourage interaction. “Rick was always driven by a vision he called 'true north,' where incentives for providers are aligned with the outcomes we want to see—higher-quality and lower-cost care,” said Dr. William Shrank, who served as the Innovation Center's director of research and rapid-cycle evaluation and is now chief scientific officer and chief medical officer at CVS Caremark Corp. “His clarity of purpose stimulated the Innovation Center to launch a wide array of new payment models. I think they all have Rick's fingerprints as we move away from rewarding volume and toward rewarding value in the delivery of healthcare.” Nearly four years later, Gilfillan's key programs face growing pains. Many provider networks that participated in the Medicare Shared Savings and Pioneer ACO programs failed to achieve savings. In the Pioneer program, nine of the 32 original participants dropped out after the first year. Of the 23 remaining, only nine saved money. Gilfillan acknowledged that providers want more clarity on how the transformation to accountable care should work. The challenge includes having to work simultaneously under both value-based payment and fee-for-service, with conflicting incentives, which may slow the shift to the new model. “I think there continues to be uncertainty around timing and direction,” he said. Still, insurers and providers are moving rapidly to risk-bearing payment models, and organizations that don't adapt will be left behind, S&P's Holloran said. “Once the ACA was passed, it was a symbol that the stars and the moon and sun are actually aligned,” he said. “As an industry, everyone knows we can do better.” Berwick said that bundled and capitated payment models are challenging old habits for healthcare industry leaders, and that Gilfillan is well positioned to show others the way forward. “We're still in a very important era of expedition,” he said. “It's not an easy one. I think Dr. Gilfillan represents the new model of clinical leadership and organizational leadership for change.” JUNE 2014


Doc employment won’t lead to lower healthcare spending, research shows By Melanie Evans

Market share and prices tend to climb among hospitals that employ doctors but not for hospitals with looser contracts with independent physicians, according to newly published research. The findings, the authors say, suggest that integration itself does not produce the savings that many health system executives and policymakers promise from closer coordination between hospitals and doctors. Lower healthcare spending won't be an “easy or automatic” result of physician employment, said Laurence Baker, an economist and health policy and research professor at Stanford University and an author of the study published in the journal Health Affairs. The results, he said, suggest hospitals must to do more to achieve the potential benefits of tight integration, Hospital prices, according to the study, increased 2% to 3% each time physician-employing hospitals' market share increased by one standard-deviation. The results were drawn from an analysis of roughly 2 million hospital bills submitted to private insurers between 2001 and 2007. Overall spending on services at the hospitals that employed physicians grew, while the utilization of services at those hospitals didn't change. “This is really a question of how we get the best for patients and for the country as a whole,” Baker said. “Can we get those benefits without putting ourselves in a difficult situation in regard to pricing?” It's a question troubled antitrust regulators, who in February scored a court victory when a judge ordered St. Luke's Health System to divest the Saltzer Medical Group on a decision that the deal would raise prices. In March, St. Luke's filed for a stay, pending an appeal. The price hikes for hospitals with employed doctors were smaller than price increases seen in one standard-deviation change in a measure of market clout used by antitrust regulators, but not by much. Each standard-deviation change to the HerfindahlHirschman index, which measures market share in a defined geographic area, is associated with price increases of 4% to 6%. Hospitals and large U.S. health systems across the country—for example, Catholic Health Initiatives, Englewood, Colo.; UnityPoint Health, West Des Moines, Iowa; and Bon Secours Health System, Mariottsville, Md.—have moved aggressively in recent years to hire doctors. Employed doctors share information technology with hospitals, and systems can use employment contracts to promote more efficient and higher quality care, executives say. And increasingly, health systems are paid incentives by public and private insurers that are tied to quality and savings targets, such as accountable care agreements. The Patient Protection and Affordable Care Act, which includes a fast-growing Medicare program encouraging the creating of accountable care organizations, will accelerate that trend, Baker said. “Every time you turn around, there are stories about integration,” he said. “This is a potentially very important evolution in the way we provide healthcare.” Baker said the accountable care model may see more success in controlling spending with use of mechanisms such as shared savings incentives, which were not widely used in the market between 2000 and 2007. Indeed, the findings have more historical value than relevance given the industry's rapid transformation, said Bruce Sokler, an antitrust attorney with Mintz Levin in Washington. “Seven years in these markets is more than a blink of an eye,” he said. “It's nearly a lifetime with the rate of change that's going.” During the study period, fully integrated health systems significantly eroded the market share of hospitals with any of three lessformal physician agreements: closed physician-hospital organizations, open physician-hospital organizations and independent practice associations. The fully integrated systems had 36% of the market by 2007, up from 23% in 2001. Meanwhile, hospitals with the trio of looser agreements saw market share decline to 23% from 36% during the same period. Less-formal agreements were “more benign and potentially socially beneficial,” Baker and his co-authors M. Kate Bundorf and Daniel Kessler wrote. “Increases in these forms of integration did not appear to increase prices or spending significantly and may even decrease hospital admission rates.”

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The Expensive Consequences of Failing to Create Corporate Documents For Your Practice by: Ari G. Burd, Esq.  Giordano, Halleran & Ciesla, PC. It is imperative for every practice, big or small, to have written documents setting forth the rights, duties and obligations of the practice owners.  Regrettably, having your accountant file your LLC Certificate of Formation or Articles of Incorporation when applying for your EIN, is not adequate.  If you are a partnership, you should have a partnership agreement.  If you are an LLC, you should have an operating agreement.  If you are a PC, you should have a shareholder agreement.  If you have non-owner physician employees, you should have employment agreements in place.  These agreements not only establish the manner in which your practice will be run, but also address what will happen in a variety of circumstances.  Failing to take the time to create these agreements is a shortcut that will leave you vulnerable to a variety of pitfalls that can potentially cost you tens, if not hundreds of thousands of dollars in the long run. Imagine for a moment that after years of building up your practice, your practice goes through a divorce.  How will the practice be split?  Today, while everyone is happy, those answers seem simple and easy.  But how do you think those same discussions will go years from now, when the animosity between you and your fellow practice owners has reached the point that you’ve decided the practice cannot continue? What about when you or your fellow practice owners are ready to retire, die or becomes disabled? How will the value of the practice be determined?  Or what happens if a physician in your practice decides to quit and open up a competing practice down the street?  These are all issues that can and should be addressed within shareholder, operating, partnership and employment agreements.   You should also consider who will hear and decide serious disputes that arise between members of the practice.  If you create a partnership, operating or shareholder agreement, you can agree ahead of time that all disputes will be heard by a neutral arbitrator, who can hear evidence and render an enforceable decision for the practice’s eyes only.   Fail to do so and your only avenue for recovery may be the courts, where your practice’s dirty laundry will be aired in public for all to hear.      Giordano, Halleran & Ciesla has been assisting physicians for over forty years.  Let us help you put in place agreements that will protect you and your practice from these and other avoidable pitfalls.

AtlantiCare to merge with Pa.based Geisinger Health System By Beth Fitzgerald

The Atlantic City-based AtlantiCare health system will join Pennsylvania's Geisinger Health System, whose model calls for marrying the financing of care through a health plan with a hospital and doctor network, the two organizations announced Tuesday. The systems signed a letter of intent last November and are now moving forward to a merger that they estimated will take nine to 12 months for state regulatory review. AtlantiCare will continue to use its name, a well-established brand in the southern New Jersey marketplace. Geisinger’s health plan has 467,000 members who receive medical care from a physician-led system with a 1,100-member multispecialty group practice, eight hospital campuses and two research centers. AtlantiCare is an integrated system of health care services that includes the three-location AtlantiCare Regional Medical Center and the AtlantiCare Physician Group. Its 700 physicians deliver health care to southern New Jersey communities at nearly 70 locations. “The main thing to take away from this is we are both looking at the future the same way and recognizing that health care in the United States is changing to the value-based model,” AtlantiCare Chief Executive David P. Tilton said. “We went looking for a partner that saw the world the way we did and had the same point of view and found Geisinger. “They expressed a willingness to help us continue our transformation,” Tilton said. “We’ve done a lot of work already in these value-based models but they will bring their tools, their capabilities, their competencies and intellectual capital to South Jersey to help us transform. It will help AtlantiCare continue to grow and be more innovative.” He said both are nonprofit hospital systems, and the merger will not involve a financial payment to AtlantiCare. Tilton said Geisinger is already licensed as a health insurance company in New Jersey. JUNE 2014


“That is a key element of their model,” he said. “They are able to drive a lot of innovation in care through having access to premium dollars and providing support to physicians and hospitals to change the way they provide care and the way they serve populations of people.” Tilton said the fact that Geisinger is based in Danville, Pa., will not be an obstacle to working with the AtlantiCare population base. He noted Geisinger has already expanded into Maine and West Virginia. “They have been able to share and transfer what they have learned in Pennsylvania to other locations,” he said. “They have been able to achieve the same kinds of cost, quality and patient experience outcomes in those locations as they have in (Danville) and the surrounding community.” He said AtlantiCare physicians will go to Pennsylvania to study Geisinger’s best practices, and Geisinger will send people to New Jersey. AtlantiCare already has been adopting some of Geisinger’s tools and approaches, he said, “and I see no reason why we can’t accelerate it.” He said AtlantiCare has a lot to offer Geisinger: “We are a nationally recognized organization ourselves for the work we have done and I think there is an opportunity for both of us to benefit from the relationship.” AtlanticCare has spent a half-dozen years preparing to move away from the “fee-for-service (model), where the more you do, the more you get paid,” Tilton said. The organization believes that model is “obsolete and not adding any great value to the consumer any longer.” He said AtlantiCare has been building its primary care network and transforming those practices, adding new IT tools to help physicians manage patient health. But he added that Geisinger has more “practice management tools” that are very advanced. He also said AtlantiCare’s IT system is “pretty good, but I will tell you theirs is more advanced than ours. They’ve been at it a lot longer than we have.” The key now is to accelerate the ongoing transformation of AtlantiCare, Tilton said: “Speed is very important as you transform an organization like ours. It is inevitable that America is moving into these new value-based models and we want to lead that work. We want to reshape health care, particularly in southern New Jersey.” Kevin Brennan, chief financial officer of Geisinger, said the organization has been building an integrated health network with hospitals, physicians and health plans since the 1970s and now has clients all across the country, including New Jersey, as well as Maine, West Virginia and Delaware. “The idea of taking some of our models of care delivery and organizing the financing of care through a health plan is something that we have a lot of experience with.” While AtlantiCare is “doing some of this, they wanted to ramp that up faster and broader.” He said Geisinger believes “the market is ripe for the introduction of successful care redesign on a population-wide basis. We know that the current payment models in the United States is the fee-for-service model is waning and the interest in treating populations smarter is in all of our data resources and all of our evidence-based programs.” He said Geisinger has about $4 billion in annual revenue, while AtlantiCare has about $800 million. “It is an especially challenging time in health care; however, we stand at the brink of making significant enhancements that will benefit patients for generations to come,” said Dr. Glenn Steele Jr., Geisinger’s chief executive. “Today’s announcement is good news for the people we serve, and we look forward to making a positive difference in southern New Jersey.” In a joint announcement, they said their emphasis is on implementation of evidence-based medicine programs, enhancing capabilities and clinical services, optimizing the use of the electronic health records and clinical informatics, along with implementing population health management and value-based payment models. “Over time, we will improve the patient experience and health status of the community, reduce the total cost of care while improving quality and efficiency, transform care from episodic to value-focused, and provide meaningful coordination across all of health care,” Steele said. Annette Catino, chief executive of the managed health care company QualCare, said it wasn't clear that the merger would benefit New Jersey. She said of Geisinger, "Their model works great where they are in their geography.  I'm not sure that it's a model that is easily transferable to this part of New Jersey." Mark Manigan, health care attorney with Brach Eichler said, "The Geisinger/AtlanticCare transaction is interesting because Geisinger has a robust provider sponsored health plan in Pennsylvania, which is the natural extension of the population management and risk bearing business models that many New Jersey health care systems are spending lots of time and resources positioning themselves for. Geisinger is already there."

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HUMC establishes Mountainside Medical Group to address looming doctor shortages By Beth Fitzgerald To help address what experts see as a looming and acute shortage of primary care doctors, HackensackUMC Mountainside has created the Mountainside Medical Group, a network of physicians who are employed by the hospital and practice at different locations in the community. Montclair-based Mountainside, part of the Hackensack University Health Network, said seven doctors are currently treating patients at three of the group’s locations, and more physicians and offices will come on board in the coming months. “Although it has been proven that primary care physician relationships promote wellness and improve quality of life, there’s also a documented shortage of such practitioners locally and nationally,” said John Fromhold, chief executive of HackensackUMC Mountainside. “The Mountainside Medical Group will help to alleviate that concern in our region and afford area residents the opportunity to build productive, long-term relationships with doctors who have exceptional clinical skills and a genuine interest in getting to know them.”  Fromhold said it may seem counter intuitive for a hospital to invest in primary care, which seeks to improve the “well care” of the patient population and thus “ideally will reduce hospital admissions.” But, this new venture “is consistent with Mountainside’s long and distinguished history of adapting to changing times. The health care landscape has changed dramatically since our hospital was founded in 1891, yet we’ve successfully served multiple generations and become a hub for comprehensive care by keeping abreast of emerging local needs and medical advances,” Fromhold said. Mountainside and the Hackensack University Health Network are among a number of hospitals statewide that are increasing the number of primary care physicians that they employ. Health care is moving toward the “accountable care organization (ACO)” model, where hospitals and doctors get financial incentives from government and commercial payers if they can improve care and control costs. There’s a widespread view in the industry that for ACOs to work, primary care needs to be tightly integrated with the care provided by hospitals and other clinicians. The Atlantic Health System, whose hospitals include Morristown and Overlook Medical Centers, is taking a different approach to strengthening primary care via Primary Care Partners, a large physician group that is owned by the doctors and affiliated with Atlantic’s hospitals. Headed by Dr. David Shulkin, vice president of Atlantic Health, Primary Care Partners has more than 50 physicians and is continuing to grow. Its physicians continue to practice medicine in their communities while getting the benefits and resources of a large practice.

JUNE 2014


Ascension Health, CHE Trinity form integrated network in Michigan By Jay Greene Two of the largest U.S. health systems—Ascension Health and CHE Trinity Health—have formed a joint company for managedcare contracting in Michigan, uniting a network of 27 hospitals, more than 12 physician organizations and 5,000 physicians in the state. Officials for Ascension Health Michigan and CHE Trinity Health Michigan said the new company—Together Health Network—will become one of the largest and most closely aligned clinically integrated networks in the nation. “This is one of the more transformational initiatives (Ascension Health) has ever done,” said Patricia Maryland, COO of St. Louisbased Ascension Health. The alliance means 75% of the population in Michigan will be 20 minutes from either a network hospital or physician office, said Rick O'Connell, president of Trinity Health Division and executive vice president of CHE Trinity. “We can work with the payers in a more flexible way than our competitors can,” O'Connell said. Under the agreement, physician organizations affiliated with Ascension and Trinity in Michigan will be invited to join the new physician-led organization, Maryland said.

Starting this fall, Together Health will offer new health plan products to health insurers and employers. The company also will sell a variety of managed care products on private health insurance exchanges and on the federally run marketplace in Michigan, O'Connell said. Over the next several months, Together Health Network will hire a physician CEO and appoint a 15-member board with nine physician members, four Trinity and Ascension managers and two community members. Together Health plans to use existing Trinity and Ascension management staff to support the company until a dedicated staff is hired. A budget and projected first-year revenue for the company have not been determined, O'Connell said. “We have delegated authority to local governance with only a few reserved powers,” O'Connell said, noting Trinity and Ascension will be funding the company equally. The managed care contracts offered will include shared savings arrangements, pay-for-performance based and global budgets --with bundled payments around procedures with narrow provider networks. No antitrust approval needed The systems' legal experts concluded Together Health will not require federal or state antitrust approval because it is not an asset merger, O'Connell said.

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Ascension Health Michigan operates 14 hospitals with 5,000 affiliated or employed physicians, employs 30,000 people and includes Borgess Health in Kalamazoo, Genesys Health System in Grand Blanc, St. John Providence Health System in Detroit, St. Joseph Health System in Tawas and St. Mary's of Michigan in Saginaw. Ascension Health, the parent company, is the nation's largest Catholic system with 131 hospitals, 34,000 affiliated physicians, more than 155,000 associates in 23 states with 2013 operating revenue of $17.1 billion. CHE Trinity Health Michigan has 13 hospitals, nine nursing homes, 27 senior living communities, 10 home health agencies and six hospices with $3.4 billion in operating revenue in 2013. CHE Trinity Health, the parent system, is the second largest Catholic system in the nation, with 86 hospitals, 3,200 employed doctors, 87,000 employees in 20 states with annual operating revenue of $13.3 billion last year. While clinically integrated networks are not new – more than 500 exist in the U.S., according to The Advisory Board Co. – the formation of a clinically integrated network between competing health systems is a newer trend, said Dr. Dennis Weaver, executive vice president of consulting and management services at The Advisory Board. “As we move from fee-for-service to fee- for-value, you need to be successful in population health management. CHE Trinity and Ascension Health are two of several health systems that have signed performance-based contracts with Blue Cross and Blue Shield of Michigan. The reimbursement contracts give hospitals financial incentives for working closely with physicians to improve quality and safety while reducing unnecessary tests, hospitalizations and diagnostic procedures. “Our clinically integrated networks are in various stages of maturation,” said Dr. Paul Harkaway, Trinity's vice president of clinical integration. “We will take the various entities already formed and roll them into the statewide company.” By Jan. 1, Together Health plans to begin providing care to patients through new managed care contracts. “We want to have a single signature for employers,” Maryland said. “We want to build trust and shorten the distance between the payer and the patient.”

JUNE 2014


New Mich. network must tread carefully to avoid antitrust scrutiny By Joe Carlson and Melanie Evans

Together Health Network, a new clinically integrated network of doctors and hospitals in Michigan, was formed with the intention of reaching a huge swath of Michiganders without raising the hackles of antitrust regulators. And experts say that's possible if the new entity steps carefully. Together Health will combine hundreds of physicians' offices and outpatient centers with two dozen hospitals owned by two large competing health systems, Ascension Health and CHE Trinity Health. Insurance plans with the network will soon be sold on the state insurance exchange, and the partners estimate that 75% of state residents will live within 20 minutes of an in-network provider from Together Health. It's an interesting development in a state with a history of antitrust scrutiny in healthcare. Traditionally, it would be illegal for competitors such as Ascension and Trinity to jointly negotiate prices with insurers—what's known as price-fixing. And the Federal Trade Commission has declared a special focus on healthcare in recent years, including challenging hospital mergers and even litigating an Idaho hospital's acquisitions of large physician practices in Nampa. But the FTC also has long allowed competing providers (PDF) to coordinate prices provided they can show that they are truly working in concert to improve care. That would include jointly buying health information technology, setting common clinical protocols across different providers, and sanctioning people or entities that break the rules. “Collaboration leads to innovation,” said Patricia Maryland, president of healthcare operations and chief operating officer of Ascension Health. “There are a lot of things that we're doing already, but we can learn” from CHE Trinity. She said the organizations were looking forward to working together on population-health and coordinated-care models that require sophisticated analytical infrastructure. The new group will also disseminate innovations across its service lines, including ways to address public health concerns and multiple chronic conditions in patients. “Instead of creating a financially integrated model, what we're really trying to do is to virtually achieve the same thing using a collaborative partnership model,” said Kevin Sears, vice president for payer and product innovation at CHE Trinity. The antitrust analysis doesn't end with integration, however. “The second question you would ask is, do you have market power?” said Douglas Ross, a partner with Davis Wright Tremaine in Seattle and the past chairman of the American Health Lawyers Association's antitrust practice group. Market clout would be the ability to force insurance companies to contract with Together Health, which would give the network the ability to unilaterally raise prices because it's a “must-have” provider. Officials with Together Health say that won't be an issue for them for two reasons. First, only a small number of Together Health providers overlap in geographic markets, so the removal of competition isn't a factor. And second, the network will be “nonexclusive,” which means that the providers will still be able to negotiate contracts with insurers outside the network. “Antitrust issues arise when you have combinations of competitors that involve a large share of a market and create concerns regarding market power. Here you don't get past the first question,” said Detroit antitrust attorney David Ettinger, who represents CHE Trinty. “This is pro-competitive. It offers customers better coverage.” A spokeswoman with the state attorney general's office said an e-mail from a reporter was the first time the office had heard of the new entity. And Together Health officials said approval from the FTC would not be needed because the new organization is not an asset merger. Meanwhile, insurers in the state are likely to watch the development closely. The state's dominant insurer, Blue Cross and Blue Shield of Michigan, commended Ascension and CHE Trinity for embracing Blue Cross' approach improving the value of healthcare by focusing on population health and care quality. “As a result of healthcare reform, we are seeing hospital systems coming together to collaborate on more effective ways to provide quality care at affordable costs,” said Sue Barkell, senior vice president, healthcare value, at the Michigan Blues company. “This trend has the potential to benefit patients, consumers and businesses—and we will be watching to see what Ascension and Trinity achieve here in Michigan.”

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Kindred makes unsolicited $1.6 billion bid to buy Gentiva By John N. Frank

Post-acute care provider Kindred Healthcare launched a hostile takeover attempt of Gentiva Health Services in a deal with a total value of roughly $1.6 billion. Gentiva has so far rejected Kindred's overtures, according to an exchange of correspondence that Kindred released with the announcement of its latest offer. The offer includes a combination of $7 a share in cash plus $7 in Kindred stock for each share of Gentiva along with an assumption of Gentiva's debt. A combined company would serve approximately 127,000 patients a day in 47 states and employ 110,000. Annual revenue for the new company would be roughly $7.2 billion, Kindred detailed. Gentiva board rejects latest Kindred offer as undervalued “Together we would create a unique platform to 'Continue the Care' by delivering patient-centered care across the full spectrum— from hospital to outpatient facility to the patient's home," Kindred CEO Paul Diaz said in the news release. "The combined company's national footprint would allow it to deliver enhanced coordinated care, helping to transition patients home more quickly and provide more patient-centric, cost-effective treatment.” Kindred informed Gentiva of its latest takeover intentions May 5, the company said. Initial contact between the companies occurred in April, with Gentiva telling Kindred April 28 it would not accept its first offer for a merger, according to a letter from senior Gentiva executives to Kindred which Kindred released Thursday. “Having considered your revised proposal, our Board continues to believe that our long-term strategy as a stand-alone company will generate substantially more value to our shareholders. Accordingly, at this time, we are not interested in pursuing the transaction you are proposing,” read the latest Gentiva letter from its Executive Chairman Rodney Windley and lead director Victor Ganzi about the $14 a share offer. Kindred earlier this month reported net income of $8 million in the first quarter compared with $3.1 million in the same period last year. Revenue increased 2% to $1.3 billion. The company has launched a strategy to place more emphasis on home health and rehabilitation care while shifting away from skilled nursing. Atlanta-based Gentiva provides home health and hospice services to more than 350,000 patients in more than 420 locations across the country, according to its website. Gentiva shares closed at $8.54 Wednesday but were up to $13.51 in pre-market activity, likely because of the takeover announcement. This month Gentiva reported net income of $314,000 on revenue of $487.5 million in revenue for the quarter that ended March 30, compared with a loss of $207 million on $415.6 million in revenue in the same period last year.

JUNE 2014


CHE Trinity, Walgreen enter coordinated-care agreement By Andis Robeznieks

The nation's largest pharmacy chain and one of the largest healthcare systems plan to work together on “innovative models of care” in select markets. Walgreen Co., the Deerfield, Ill.-based operator of more than 8,200 drugstores and 750 retail clinics, will collaborate to coordinate patient care with CHE Trinity Health, a Livonia, Mich.-based system that operates more than 80 hospitals where 3,200 physicians practice. “Coordinated-care programs are vitally important to help ensure patients have access to the quality, convenient, affordable care they need before, during and after a hospital admission,” Alan London, Walgreen vice president of strategic clinical partners, said in a news release (PDF). “Working with an integrated health system such as CHE Trinity Health offers an ideal opportunity to further leverage Walgreens healthcare assets to coordinate patient care across multiple regions of the country.” CHE Trinity has operations in 20 states and system spokeswoman Carol Tingwall described the agreement as an “umbrella collaboration” that could vary region to region. “This agreement does provide a menu of opportunities for each of our local ministries to consider and they will determine which are the most appropriate for their market,” Tingwall said. “These will be local decisions made in local markets.” Scott Nordlund, CHE Trinity's executive vice president of growth, strategy and innovation, spoke to Modern Healthcare from the annual Non-Profit Health Care Investor Conference in New York, and he said that virtually every presentation at the meeting is focused on forming partnerships that “create access sites outside the acute model” and that “create access to high-quality experiences.” “I think you're going to see more and more of this,” Nordlund said, adding that many CHE Trinity hospitals are collaborating with Walgreen already and this agreement provides a framework for others to implement their own partnerships more quickly. Nordlund also said that the system's collaboration would go beyond Walgreen's retail clinic operations and that CHE Trinity was looking to integrate Walgreen's pharmacists into collaborative efforts as well. The agreement also calls for incorporating information technology, for example, to check a patient's multiple prescriptions for possible harmful drug interactions, said Shelby Decosta, CHE Trinity Health senior vice president for mergers, acquisitions and partnership development. “Having a partner like Walgreens that already has a presence in our communities and has this expertise is a benefit,” she said. Earlier this year, Walgreen announced that it would have health information technology tools providing patient assessment and “individual predictive analytics” at the point of care available at 400 of its approximately 750 in-store Healthcare Clinics (formerly known as Take Care Clinics). It also entered into a similar collaborative agreement in January with Centura Health, an Englewood, Colo.-based 15-hospital system jointly sponsored by Catholic Health Initiatives and the Adventist Health System. Walgreen's main competitor in the retail clinic space, the CVS Caremark Corp.'s Minute Clinics, recently entered into collaborations with four Eastern health systems: Hartford (Conn.) HealthCare; Memorial Health, Savannah, Ga.; Lahey Health, Burlington, Mass.; and Baystate Health, Springfield, Mass. CHE Trinity's President and CEO, Dr. Richard Gilfillan, topped the 2014 Modern Healthcare list of the 50 Most Influential Physician Executives and Leaders. He also topped the list in 2011 when he was director of the CMS Innovation Center.

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Renown Health hires Slonim as CEO, president By John N. Frank

Dr. Anthony Slonim has been appointed president and CEO at Renown Health in Reno, Nev. He had most recently served as executive VP and chief medical officer for Barnabas Health in West Orange, N.J. Slonim replaces Renown's interim CEO Don Sibery, who had held the post since April 2013 after a management shakeup at the organization. The search for his permanent replacement lasted a year. "We are extremely fortunate to have secured someone with Tony's unique combination of education and experience. Frankly, I feel like we hit the jackpot," Renown Health Board Chairman David Line said, alluding to Reno's gambling culture. Slonim is a fellow of the American College of Physician Executives and the College of Critical Care Medicine. He is board certified in internal medicine, pediatrics, internal medicine critical care and pediatric critical care and holds faculty appointments at the University of Medicine and Dentistry of New Jersey, the Jefferson College of Nursing and Health, and is a tenured professor of basic sciences, medicine and pediatrics at the Virginia Tech Carilion School of Medicine. Renown Health is a not-for-profit network serving a 17-county area in northern Nevada, the Lake Tahoe region and northeast California. The system includes three acute-care hospitals, a rehabilitation hospital, a skilled-nursing facility, a medical group, an urgent-care network, and a not-for-profit insurance company.

Deal will let Partners HealthCare acquire hospitals Massachusetts Attorney General Martha Coakley reached an agreement Monday with Partners HealthCare that will allow the state's largest hospital and physicians' network to acquire South Shore Hospital and Hallmark Health Systems. Coakley said the deal will also alter the negotiating power of Partners for the next decade and help control healthcare costs in Massachusetts. The agreement follows an antitrust investigation. Partners President and CEO Gary Gottlieb said the agreement will let the network continue its core healthcare mission. The deal bars Partners from raising costs across its network more than the general rate of inflation through 2020. The rate of inflation has averaged 1 to 2 percent over the past several years, well below the rates traditionally negotiated by Partners over the past decade. This price restriction covers all of Partners providers, including hospitals, outpatient facilities, physicians and healthcare professionals. Any year that Partners doesn't comply with the cost freeze, it will have to refund the amounts charged or received. Coakley said the agreement, which must still be finalized and approved by a court, "fundamentally reduces the negotiating power of Partners for the next 10 years to better control health costs for families and businesses, and help level the playing field in the market." The deal seeks to slow the growth of Partners by capping its physician growth for five years, preventing it from negotiating commercial insurance contracts for physicians not employed by Partners for 10 years, and blocking hospital expansion in eastern Massachusetts and Worcester County for seven years, exempting Emerson Hospital, a Partners affiliate. Gottlieb said the agreement will let Partners "carry forward with our plans to offer the highest quality care, whenever possible, closer to the homes of our patients and their families in a lower cost community-based setting." He said that Partners has already cut $300 million in costs out of its system, but that it will have to operate within "a tighter budget envelope." JUNE 2014


"Society and the marketplace are calling on us to do so. This means that there will be trade-offs and decisions to make and we will need to manage them, carefully and thoughtfully," Gottlieb said in a letter Monday. In February, the state Health Policy Commission, said that Partners' acquisition of South Shore Hospital would increase healthcare spending, likely reduce competition, and result in increased premiums for employers and consumers. The commission referred its report to Coakley's office. Commission Chairman Stuart Altman said Monday that he was pleased with the settlement and that he looked forward to reviewing the final agreement. Monday's agreement must be completed by the parties by June 16 and approved by a court before taking effect. Coakley said the agreement is the result of an antitrust investigation by her office and the Department of Justice into Partners and into the organization's intention to purchase South Shore and Hallmark hospitals. Hallmark runs Lawrence Memorial Hospital and Melrose-Wakefield Hospital.

MEDNAX announces acquisition of N.J. anesthesiology practice By Emily Bader

Fort Lauderdale, Fla.-based MEDNAX Inc. announced Tuesday it has acquired Anesthesia and Pain Management Group LLC, a private physician group practice in Millburn. According to the announcement, the practice will become part of MEDNAX’s American Anesthesiology division. “After evaluating our options, it was American Anesthesiology’s mission and culture that aligned with ours, and their back-office infrastructure gives us confidence that we can excel even as we face the changes occurring with health care reform,” Idrees Ahman, M.D., who will serve as medical director for the practice, said in a prepared statement. “We look forward to collaborating with a national network of physicians as part of the company’s research, education and quality initiatives as we look to grow our niche outpatient anesthesia services.” MEDNAX’s division consists of more than 2,050 anesthesia providers, more than 875 physicians and 1,175 anesthetists practicing in Florida, Georgia, Maryland, Michigan, New Jersey, New York, North Carolina, Tennessee, Texas and Virginia, the company said. Financial terms were not disclosed, but according to the announcement it was a cash transaction.

Mednax, TeamHealth see earnings rise in first quarter By Beth Kutscher

o physician outsourcing firms reported gains in earnings this week as the sector benefits from healthcare reform with fewer uninsured patients and higher reimbursement. Mednax, a Fort Lauderdale, Fla.-based company that offers pediatric, obstetric and anesthesiology services, cited new acquisitions, Medicaid parity payments, improving reimbursement from commercial payers and contract renewals for its 15% growth in net income. Its first-quarter revenue increased 12.7%. The firm reported $63.7 million in income on revenue of $566.3 million for the quarter, compared with $55.4 million on revenue of $502.7 million for the same period last year. About 9.6% of its revenue growth could be attributed to recently acquired practices, the company said Thursday. Mednax paid $72.8 million in cash to buy a pediatric group and two anesthesiology groups in the first quarter. Another $14 million in revenue came from states whose Medicaid programs are now matching Medicare rates for primary-care and certain subspecialty services under a provision of the Patient Protection and Affordable Care Act. While the company saw a shift to more government payers, it did book a modest increase in reimbursement from its third-party insurers. TeamHealth, which focuses on anesthesiology, emergency medicine and hospitalist services, similarly reported Wednesday that Medicaid parity, acquisitions and cost controls helped boost net income 30.8%. Revenue increased 11.4%, with acquisitions adding 7.2% of the growth. The Knoxville, Tenn.-based company saw $23.8 million in earnings on revenue of $641.7 million in the first quarter, compared with $18.2 million on $575.9 million in revenue in the same quarter last year. Like their hospital clients, both companies reported that winter storms and below-average temperatures contributed to weaker patient volume in the quarter.

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Epic, Cerner are top EHRs for docs meeting meaningful-use requirement By Joseph Conn Epic Systems is the top vendor of complete electronic health-record systems used by physicians and other professionals who earned Medicare incentive payments for using the technology, according to federal data. Cerner Corp. leads the pack among the smaller number of physicians who use modular EHR systems. Privately held Epic, based in Verona, Wis., ranks No. 1 among developers of complete EHRs used by physicians and other eligible professionals in an ambulatory-are setting to meet the meaningful-use requirement of the Medicare portion of the program created under the American Recovery and Reinvestment Act, according to a mashup of databases from the CMS and the Office of the National Coordinator for Health Information Technology at HHS. Epic tops 486 developers in that market niche with 98,770 payments to providers who used its EHR system to attest to meeting their Stage 1 Medicare meaningful-use requirements. The payments in that category to Epic’s customers reflect 22.1% of the total. Allscripts placed No. 2, with 48,074 payments (10.8%) followed eClinicalWorks with 31,959 (7.2%), NextGen Healthcare with 29,222 (6.6%) and GE Healthcare with 23,715 (5.3%.) Publicly traded Cerner, Kansas City, Mo., ranks No. 1 among developers of modular EHRs used by physicians and other EPs in ambulatory care. Cerner leads among 113 developers of these modular systems with 32,148 user attestations and payments, totaling 41.8% of the payments in this category. Allscripts placed second in this category, too, with 11,412 payments (14.8%), followed Intermountain Healthcare with 6,028 (7.8%), Allscripts subsidiary Jardogs with 4,494 (5.8%) and GE Healthcare with 3,809 (4.9%). The top five vendors racked up 75.2% of the meaningful-users attestations and payments in this category. Through March, the Medicare, Medicaid and Medicare Advantage versions of the EHR incentive payment program have paid out $22.9 billion since payments began in January 2011, including nearly $8.6 billion paid to physicians and other EPs. About $5.5 billion was paid through Medicare, $2.8 billion through Medicaid, and almost $316 million through Medicare Advantage programs. The remaining $14.3 billion has been paid to hospitals.

Cerner reports earnings increase, predicts boost from ICD-10 delay By Joseph Conn Health information technology developer Cerner Corp. expects the congressionally imposed delay of the move to ICD-10 codes will be good for business. “We think the delay in ICD-10 will be a slight benefit,” Cerner President Zane Burke said Thursday during a call discussing the Kansas City, Mo.-based company's first-quarter earnings. Many organizations had been putting off technology purchases to focus on the looming Oct. 1, 2014 launch date for the ICD-10 diagnostic and procedure codes. Now, Burke said, “they're looking at ways to accelerate other projects.” Sales upticks could come in revenue-cycle management products, as well as from clinical systems for ambulatory care providers because some new physician-documentation requirements are amenable to software upgrades, Burke said. Even with ICD-10 on schedule, business was good in the first quarter. Overall, Cerner reported that its first-quarter net earnings rose 8.6% to $119.5 million compared with the same period in 2013. Revenue for the quarter was $784.8 million, up 15.4% from the first quarter of 2013. The company reported 1 in 4 customer contracts it signed during the period were with new customers, the company reported. Burke said 13 of those contracts were for amounts greater than $10 million.

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Medfusion and Allscripts call it quits Split creates meaningful-use headaches for customers By Joseph Conn Medfusion, a provider of personal health records and website services for tens of thousands of office-based physicians, is cutting its long-running business ties with electronic health-record developer Allscripts Healthcare Solutions. The flap affects about 30,000 providers using Chicago-based Allscripts' Enterprise or TouchWorks EHR and Professional EHR systems, which are integrated with Medfusion's Web portals and personal health records. Medfusion founder and CEO Steve Malik declined to specify the nature of the dispute, with the company's news release only saying that it's related to “unresolved payment disputes.” “We’re going to pursue all of our options,” which includes legal action, Malik said in an interview. An Allscripts spokeswoman said in an e-mail that the company “does not as a matter of policy, speak publicly to specific terms of contractual relationships with its vendors.” She added that Allscripts does provide customers with its own patient portal called FollowMyHealth. The breakup comes at a sensitive time for both vendors and even more so for office-based physicians relying on their software. Physicians and other medical professionals must achieve 90 consecutive days of federally defined “meaningful use” of EHRs during 2014 to qualify for incentive payments and avoid Medicare penalties. That includes using the technology to communicate with patients. Medfusion, which has its headquarters in Cary, N.C., has a Web page of information for its Allscripts customers, including links to the news release, a page of frequently asked questions, an invitation to three “virtual town hall” meetings and a sign-up page to continue service. Malik said the company is cognizant of the timing problem for meeting Stage 2 meaningful-use criteria. “Today, what we’re focusing on is minimizing disruption,” Malic said. “With the termination, they’re going to be unable to provide our solution to their customers, but we can,” Malic said. “We’re going to be offering them free service for the month of May. We think that most of them will come with us for the same or less than they’re currently paying, and get more.” After May, Medfusion will offer practices that stick with it “a very basic package” for $99 per provider per month on a month-tomonth basis. It will also offer discounts for practice size and longer-term contracts.

AmeriHealth, Regional Women’s Health plan to improve the quality of care for 350,000 N.J. women annually By Meg Fry In an effort to guide New Jersey residents toward cost-effective comprehensive and preventative care, AmeriHealth New Jersey announced Monday a new contract agreement with Regional Women's Health Group LLC. The Regional Women's Health Group is a large OB/GYN and IVF group practice with 55 locations throughout New Jersey and more than 140 participating obstetrical gynecologists and mid-level practitioners. "At Regional Women's Health Group our goal is to provide efficient practice management, electronic medical records and care coordination services that help physicians and medical centers gain greater control of patient care and financial management," Frank J. Caso, president and CEO of Regional Women's Health Group, said in a press release. By partnering with AmeriHealth New Jersey, which has the largest provider network in the state, Regional Women's Health Group can improve the quality of care for approximately 350,000 women annually. Headquartered in Cranbury, AmeriHealth New Jersey provides health insurance coverage to employers and individuals statewide in addition to offering value for customers through wellness, incentive and benefits programs.

JUNE 2014


WellCare, Centene likely Ascension insurance targets: analyst By Melanie Evans WellCare Health Plans or Centene Corp. are the most likely insurance acquisition targets for Ascension Health, posits an analyst with healthcare investment bank Leerink Partners, New York. Ascension Health, the nation's largest not-for-profit health system with 101 hospitals, is in talks to acquire an insurance company with operations in 18 states, Robert Henkel, the system's president and CEO said during an interview at an investor conference in New York last week. Spokeswomen for WellCare and Centene said the companies would not comment on rumors. WellCare, a Medicare and Medicaid managed-care company based in Tampa, Fla., operates across 18 states, including 12 that overlap with Ascension Health's markets, said Ana Gupte, a Leerink managing director and senior analyst, in a research report. “Such a transaction, if it materialized, has broader implications for healthcare and could potentially catalyze a new wave of vertical consolidation across hospitals and publicly traded health plans, which has not been broadly contemplated within the investment community,” Gupte wrote. That's because larger publicly traded health plans have not expressed an interest in hospital deals, with some instead moving to acquire physician practices, Gupte said in an interview. Also notable would be a not-for-profit health system's deal for a for-profit insurance company. Ascension Health is not the only hospital operator with an interest in health insurance markets. Catholic Health Initiatives, Englewood, Colo.; Partners HealthCare, Boston; and the Detroit Medical Center have all acquired health plans. Others have moved to build health plans from scratch, including Sutter Health, Sacramento, Calif.; North Shore-Long Island Jewish Health System, Great Neck, N.Y.; and a combined effort by the Georgia health systems Piedmont Healthcare, Atlanta, and WellStar Health System, Marietta. Michigan is among the states where WellCare and Ascension Health jointly operate. Michigan is Ascension's largest market—it accounted for one-fifth of the company's revenue and 20% of its operating cash flow last year, according to Moody's Investors Service. Ascension Health also announced a deal earlier this month with CHE Trinity Health, another of the largest U.S. health systems, to combine its 27 Michigan hospitals and a dozen physician organizations into a clinically integrated network. WellCare reported first-quarter growth of 60,000 Medicaid members as eligibility for the safety-net insurer expanded in many states under the Patient Protection and Affordable Care Act. Centene, based in St. Louis where Ascension is headquartered, operates in 20 states, Gupte wrote. Centene does not operate a health plan in Michigan, according to its website, but last December the company reached a deal to acquire a majority stake in Fidelis SecureCare of Michigan, which develops Medicare managed-care drug plans and special needs plans. The deal is expected to close in the fourth quarter this year, according to Securities and Exchange Commission filings.

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Affiliated Practice * June 2014 Issue  
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