Business Models For Cancer Business Models For Cancer Center - PDF document

Business Models For Cancer Business Models For Cancer Center Success Center Success Michael L. Blau, Esq. Partner, Foley & Lardner LLP “It is difficult to make predictions, especially about the future.” -- Yogi Berra 2 1

Business Models Business Models • Hospital-Physician • Hospital-Hospital • Physician-Physician • Developers/Financiers 3 Hospital- -Physician Physician Hospital Business Models Business Models 4 2

Why Collaborate? Why Collaborate? • Avoid destructive competition • Branding/patient draw • Coordinate patient-centric care • Broader continuum of care • Align for quality and efficiency • Shared resources, risks and rewards • Position for growth and competitive advantage • Solidify relationships 5 Key Physician Partners Key Physician Partners (By Tumor Site) (By Tumor Site) Key Technologies Key Physician Partners FFDM Medical oncologist Breast MRI Radiation oncologist BREAST Breast tomosynthesis Breast surgeon Radiologist PCP/gynecologist PET/CT Medical oncologist Robotic surgery Radiation oncologist PROSTATE IGRT Radiologist Urologist PET/CT Medical oncologist Lung CT Radiation oncologist LUNG SRS Thoracic surgeon IGRT Radiologist PCP 6 3

Looming Physician Shortage Looming Physician Shortage Shortage of 2550 – 4080 oncologists by 2020 Source: ASCO, Center for Work Force Studies, Forecasting the Supply of and Demand for Oncologists 7 “One Can’t Run a Hospital With Doctors, One Can’t Run a Cancer Program Without Them” -- Anonymous Hospital CEO 8 4

Competition v. Collaboration Competition v. Collaboration • Typical Hospital Strategies – 3D – Divide and Conquer – Rope-a-Dope – Extraordinary Rendition – Build It and They Will Come 9 Competition v. Collaboration Competition v. Collaboration (cont’ (cont ’d) d) • Typical Hospital Strategies – Scorched Earth • Economic Credentialing/Decredentialing • Contracts/Leverage • Refuse Transfer Agreements • Zoning Amendments • Opposition To Governmental Approvals • Legislation • PR Offensive • Litigation 10 5

Competition v. Collaboration Competition v. Collaboration (cont’ (cont ’d) d) • Typical Hospital Strategies – Increase in direct physician employment and practice acquisitions • Response to looming physician shortage and national competition • Change in attitude of younger physicians toward employment • Existing small groups and solo practitioners without viable succession plans • Local competition and desire for control • Capture specialty referrals and ancillaries • Responsibility to community 11 Competition v. Collaboration Competition v. Collaboration • Typical Hospital Strategies – Collaboration • Defensive – Free-standing cancer centers – 50% of high-end imaging in free-standing settings (30% margin) – 40% of outpatient surgery in non-hospital settings (20% margin) – Emergence of physician-owned cancer centers and hospitals • Offensive – Market capture and growth – Win-Win ventures 12 6

Multiple Models for Successful Multiple Models for Successful Collaboration Collaboration • Contracts • Clinical Joint Ventures – Physician Employment – Whole cancer hospitals – Recruitment Agreements – Specialty surgical hospitals – Professional Service Agreements – Oncology ASCs – Practice Acquisition Agreements – Oncology Clinics – Practice Support Agreements • Physician-Hospital Organizations – Clinical Research Agreements (PHOs) • Contractual Venture Models – Payor and P4P contracting – Medicare/Medicaid risk contracting – Gainsharing Arrangements – Clinical Integration – Block Leasing • Foundation Model Arrangements – Service-Line Co-Management – Institute Model • Hospital-Affiliated Group Practices 2 nd Generation Practice Management – Center of Excellence Model • – Under Arrangements Model (Hospital Organizations Outpatient Facilities) – Seeding practice integration • Non-Clinical Joint Ventures • Participating Bond Transactions – Cancer center facility development • Captive Insurance Arrangements – Equipment leasing companies – Management companies – HIT ventures 13 Integration Continuum Integration Continuum Hospital - Physician Clinical Hospital PHO Foundation Clinical Integration Affiliated Group (Nonrisk) Gainsharing/PFP Model Joint Ventures (Multi-Specialty) (Exempt) Staff Service Line Joint Service Line/ Friendly PC Direct PHO (Risk) Privileges Co-Management Venture Under Arrangements (Taxable) Employment (contract) MSO Joint Ventures 14 7

Quality Improvement Through Quality Improvement Through Service Line Co- -Management Management Service Line Co 15 The Problem of Variability The Problem of Variability Check List for Landing a 747 in a Strong Cross Wind* *(Had It Been Written by a Physician) • Use only the settings of the plane’s instruments that were available when you were trained • Follow your instincts, not the autopilot • Every airline and pilot can use different landing sequences • Be really, really careful as you get close to the ground 16 8

Quality Shortfall: Quality Shortfall: Getting it Right 50% of the Time Getting it Right 50% of the Time * Breast Cancer 75.7% Prenatal Care 73.0% Low Back Pain 68.5% Coronary Artery Disease 68.0% Hypertension 64.7% Congestive Heart Failure 63.9% Depression 57.7% Adults receive about half of Orthopedic Conditions 57.2% recommended care * Colorectal Cancer 53.9% 54.9% = Overall care 54.9% = Preventive care Asthma 53.5% 53.5% = Acute care Benign Prostatic Hynoptaia 53.0% 56.1% = Chronic care Hyperlipidemia 48.5% Diabetes ? 46.4% Headache 45.2% Not Getting Urinary Tract Infection 40.7% the Right Ulcers 32.7% Care at the Hip Fracture 22.8% Right Time Alcohol Dependence 10.5% 0% 25% 50% 75% 100% Percentage of Recommended Care Received Glynn EA, et al., “The Quality of Health Care Delivered to Adults in the United States,” Journal of Medicine, Vol. 348, No. 26, June 26, 2003, pp. 2635-2645 17 Medical Errors Are a Leading Cause Medical Errors Are a Leading Cause of Death of Death Medical Errors Compared to Other Common Causes of Death Medical Number of Deaths per Year Errors 44,000- 98,000 Motor Breast Vehicles Cancer HIV 47,000 41,000 14,000 Sources: National Vital Statistics Report, Institute of Medicine 18 9

Costs of Poor Quality Costs of Poor Quality Cost of Litigation-2% Cost of Defensive Medicine-8% Remaining Cost of Poor Quality Healthcare 20% Healthcare Costs Not Associated with Poor Quality 70% Source: Juran Institute, Inc. and The Severyn Group Inc., “Reducing the Costs of Poor Quality Health Care Through Responsible Purchasing Leadership.” April 2003. 19 Ventures To Improve Quality Ventures To Improve Quality • Predicates to quality improvement – Data transparency – IT infrastructure for clinical data capture and evaluation – Development of evidence-based (and accepted) clinical protocols/standards – Development of quality metrics/outcomes measures – Incentives to comply with quality standards – Processes to monitor compliance with quality standards – Effective processes to deal with noncompliance 20 10

Service Line Co- Service Line Co -Management Model Management Model • Service Line Management or Co- Management Arrangements • Institute Model • Center of Excellence Model • Pay for Quality Arrangements 21 Service Line Co- -Management Management Service Line Co Arrangements Arrangements • The purpose of the arrangement is to recognize and appropriately reward participating medical groups/physicians for their efforts in managing and improving quality [and efficiency] of a hospital service line (e.g., oncology) 22 11

Service Line Co- -Management Management Service Line Co Arrangements (cont Arrangements (cont’ ’d) d) • The arrangement is contractual in nature • There are typically two levels of payment under the contract: – Base fee: a fixed annual base fee that is consistent with the fair market value of the time the medical groups/physicians dedicate to the service line management, development, implementation and oversight processes – Bonus fee: a series of pre-determined payment amounts associated with achievement of specified, mutually agreed, objectively measurable, quality improvement [and efficiency] goals 23 Service Line Co- -Management Management Service Line Co Arrangements (cont Arrangements (cont’ ’d) d) • Bonus fee may include: – Quality of service incentives – Operational efficiency incentives – [Budgetary objective incentives] – New program development incentives • Fair market appraisal of fees for health regulatory reasons 24 12