Alliances between AMCs and Community Hospitals

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Kansas Heart and Stroke Collaborative

Daniel Peters Jeff Ellis, PYA

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Kansas Heart and Stroke Collaborative –

Alliances between AMCs and Community Hospitals

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Pressure to Consolidate

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Barriers to Traditional Consolidation

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Another Way: Regional Collaboration

Merger?Acquisition?

Joint Venture?

Regional Hospital

Critical Access

Hospital

Community Hospital

AMC

Other Providers

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Regional Collaboratives

Characteristics

• Two+ hospitals enter into formal relationship to share resources and capabilities with an eye toward clinical integration

• Participants together define common interests to be advanced through the Collaborative

• Each participant’s individual interests are respected and protected through the Collaborative’s governance structure

• Participants make some financial commitment to support the Collaborative’s operations, but each remains economically independent

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Regional Collaboratives

Characteristics

• Participants retain management authority of their respective organizations

• Participants retain financial independence of their respective organizations

• Participants’ governance remains with their respective governing boards

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Getting Started:A Win/Win/Win Strategy

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Motivations

• Achieve economies of scale through joint purchasing and similar strategies

• Leverage current and future information technology investments

• Sustain members as they learn to thrive under new care models

• Design continuums of care for specific types of patients

• Improve quality of care through common evidence-based clinical guidelines

• Develop narrow networks for contracting purposes

• Defend against competition from larger integrated delivery systems

• Test the waters for more “involved” relationships

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Cautions

• From the AMC perspective, communicate more than you think is needed

• Decide what you can accomplish and commit to starting there

• Make sure everyone is open and upfront about what their limitations are

– Financial

– Governance

– Structural

• Be clear up front about geography

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Getting Started:What Brings Participants Together?

Geography

Political Pressure to

Support Rural Communities

Payer Initiatives

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Models and Resources

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Two Different Approaches

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Shared Services Operating Company

• Governance structure to support decision-making process

Independent providers form new company

• Group purchasing arrangements

• Combine administrative functions

• Coordinated IT solutions

• Share best practices

Leverage resources and

pursue economies of

scale

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Balanced Degree of Integration

• Extended group with similar interests or concerns who interact and remain in informal contact for mutual assistance or support

Network

• Regularly interacting or interdependent group of items forming a unified whole

System

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SSOC vs CSOC

Stratus Healthcare (Georgia)

Value Care Alliance (Connecticut)

Trivergent Health Alliance (Maryland)

Illinois Rural Community Care Organization

Vanderbilt Health Affiliated Network

University of Iowa Health Alliance

Health Network of Missouri


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Five Stages of Collaborative Development

• Stage 1: Develop internal strategy

• Stage 2: Assess and engage potential partners

• Stage 3: Jointly establish terms of relationship

• Stage 4: Commence and maintaincollaborative

• Stage 5: Have an exit strategy

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Stage 1: Develop Internal Strategy

• Engage in level-setting education

• Define rationale and objectives for pursuing a collaborative

• Determine preferred scope (what you want in, what you want out)

• Examine feasibility

• Make go/no-go decision

• Commit to action

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Stage 2: Assess and EngagePotential Partners

• Develop selection criteria

• Identify and engage interested parties

• Execute confidentiality agreements

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Stage 3: Jointly Establish Termsof Relationship

• Define business aims and outcomes

• Identify and prioritize objectives

• Determine scope (what’s in, what’s out)

• Custom design and memorialize governance structure

• Develop preliminary business plan

• Commit financial and human resources

• Enter into letters of intent

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Stage 4: Commence andMaintain Collaborative

• Operationalize governance structure

• Engage in strategic and operational planning

• Refine business plan

• Secure information technology infrastructure

• Develop timelines and link resources

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Stage 5: Have an Exit Strategy

• Specify triggers

• Determine procedures to wind down formal organization

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Form Follows Function

Define Business Aims and Outcomes

(Function)

Identify and Prioritize

Objectives

(Function)

Determine Scope

(Function)

Custom Design and Memorialize Structure

(Form)

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Unique Governance Structures with Common Characteristics

Balanced time, energy, and economic investments by participants

Balanced voting rights and reserved powers for participants

Shared vision and goals while recognizing participants’ unique priorities

Formal but flexible and adaptable rules of operation

Fair opportunity for all participants to engage and be heard

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The Kansas Heart and Stroke Collaborative is a care delivery and

payment model to improve rural Kansans’ heart health and stroke

outcomes and reduce total cost of care for that population

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University of Kansas Hospital received $12.5 million Health Care Innovation Award

Develop rural clinically integrated network involving AMC, rural tertiary care center, 10

CAHs, FQHC, and providers at all facilities

Focus on regional systems of care for patients at risk of or who have suffered

heart attack or stroke

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IncentivesRewards for Teamwork and Field Work

• Direct payment for care management services

• Upward payment adjustments for participating rural physicians and mid-level providers

• Disease-specific shared savings program

Transitional payment model

• Build shared analytic infrastructure to identify and evaluate alternatives to cost-based reimbursement to preserve local access to care

Transformational payment model

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Goals vs Concerns of Collaborating•AMC– Goals:

» Meet mission of improving the health of citizens of service area and expand the reach of highly acute cases

– Concerns:» Can we effectively address practice patterns and cultures several hundreds of miles apart?

•Regional Hospital– Goals:

» Take advantage of AMC reputation and relationships for scope and scale» Build relationships with other regional hospitals» Managed care strength and support

– Concerns: » Will the critical access hospitals be accepting of models and recommendations?» Does the regional hospital lose out in new payment models that keep patients at home?

•Critical Access Hospitals– Goals:

» Better access to consistent care models» Learning from provider and technology inconsistencies

– Concerns:» Fridays Night Lights Syndrome» Will I lose my health care providers?» We can’t afford it» We’re running as fast as we can .. . . .

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How Structure Facilitates Organization’s Function

Provides structured environment for discussion and

decision

Promotes trust and transparency

Balances power among diverse

participants

Protects individual rights and concerns

Facilitates joint decision-making

in a safe environment

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Legal Issues

State Law

Antitrust

Others?

StarkAnti-

Kickback

CMPs

HIPAA

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Antitrust

The Sherman Act prohibits the unreasonable restraint of trade; and the FTC Act prohibits unfair methods of competition in or

affecting commerce.

Some restraints of trade are considered “per se” illegal – e.g., naked price fixing and market allocation agreements among competitors.

“Rule of reason” analysis applies to arrangements between competing healthcare providers that are financially and/or clinically

integrated where the arrangement is reasonably necessary to accomplish the pro-competitive benefits of integration.

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Factors Supporting Rule of Reason Analysis

Potential for Pro-Consumer Cost Savings or

Quality Improvement

Not Simply a Mechanism to

Create Leverage with Payers

Agreements Are Reasonably

Necessary to Achieve

Benefits of Collaboration

Bona Fide Integration

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Rule of Reason Analysis

Does the arrangement, on balance, benefit consumers? Or, is it likely to diminish quality, reduce output, or increase price?

Define the relevant product and geographic markets

Identify the market participants

Calculate market shares and concentration

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Rule of Reason Analysis (cont’d)

Consider the likelihood of expansion by existing players or entry by new players

Determine whether efficiencies will likely result

Consider whether the individual members may continue to compete independently

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Antitrust Safety Zones

• Exclusive Networks

• Non-Exclusive Networks

FTC/DOJ Guidelines

• Automatic Rule of Reason Analysis for MSSP ACOs

• Safety Zone for MSSP ACOs with PSA less than 30%

MSSP ACOs

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Certificate of Public Advantage (COPA)State legislation intended to provide “state action” antitrust immunity under the state purpose doctrine to collaborations of healthcare providers who demonstrate that the benefits of the proposed arrangement outweigh the disadvantages resulting from reduced competition.

Disadvantages caused by any reduction in

competition

Benefits of proposed arrangement

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Civil Monetary Penalties

CMP Statute assesses civil penalties against hospitals for:

Knowingly paying a physician to induce the physician to reduce or limit services provided to a

Medicare or Medicaid patient

Offering or paying remuneration to Medicare or Medicaid beneficiaries to influence the

beneficiaries to order or receive an item or service from a particular provider, practitioner, or supplier

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Civil Monetary Penalties:OIG Seeking Input

The OIG is seeking comments on how the CMP Statute’s implementing regulations should be revised

to promote hospital-physician alignment and to encourage beneficiaries to engage in health

behaviors.

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Anti-Kickback Statute (AKS)

AKS prohibits the knowing and willful offer, payment, solicitation, or receipt of remuneration as an inducement for referrals or for

items or services paid for by federal healthcare programs.

“Remuneration” includes anything of value

AKS is violated if “one purpose” of the remuneration is to induce referrals

Some states have anti-kickback statutes as well

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Common Themes for AKS Compliance

Written Agreement

Commercially Reasonable

Compensation Fair Market

Value

Compensation Set in Advance

Signed by the Parties

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Stark Law

The Stark Law prohibits referrals by a physician to an entity for the provision of “designated health services” if:

The entity has a direct or indirect financial relationship with the physician, and

The financial relationship does not satisfy a statutory or regulatory exception to the Stark Law (Note: To avoid a

Stark violation, the arrangement must meet every requirement of the applicable exception.)

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Examples of Stark Law Exceptions

Academic Medical Center

Fair Market Value

Compensation

Indirect Compensation

Electronic Health

Records

Personal Services

Arrangements

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Federal Innovation Program Waivers

Waivers for CMP, AKS, and Stark may be available if the collaborative chooses to participate in a federal innovation

program.

ACO Pre-Participation Waiver

(no application required –

automatically applies if requirements are

met)

ACO Participation Waiver

(no application required –

automatically applies if requirements are

met)

Bundled Payment for Care Improvement

Initiative

(must request specific waiver in the BPCI

program participation application)

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Questions