March 2, 2015

Hospital & Physician Relations Executive Summit: Transformation Strategies

Delivering Value Through a Strategic Alliance

Agenda

I. IntroductionII. Learning ObjectivesIII. Setting the StageIV. Regional Provider Network (RPN)V. Strategic Alliances

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I. IntroductionMeet the Presenters

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Michael Hein, M.D.• Dr. Hein is Chief Executive Officer of the Nebraska-based RPN.• He is a 20-year healthcare veteran with leadership experience in large

integrated healthcare systems, rural primary care practices, inpatient and ambulatory care settings, as well as academic medicine and clinical research.

• As CEO, Dr. Hein provides leadership to the RPN to ensure that the overall vision and objectives of the RPN are achieved.

Darin Libby• Darin is a Principal in ECG’s Healthcare practice.• His practice focuses on strategic planning, hospital/physician ventures, medical

staff development, operational restructuring, and hospital and medical group financial management.

• Darin’s role with RPN began in 2013 with network formation and planning support and continues today with strategic advising, implementation assistance, and project management support.

II. Learning Objectives

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The objective of today’s presentation is to explore how forming a strategic alliance with other provider organizations offers hospitals and physicians

the opportunity to accelerate population health performance.

Learning Objectives• How independent hospitals can remain independent yet gain the scale and

expertise necessary to deliver care in a value-oriented environment• How a strategic alliance that is focused on improving health across the state and

surrounding region formed in Nebraska• How statewide collaboration across providers allows for pooled risk and clinical

integration

III. Setting the StageThe Triple Aim Framework

• A single aim with three simultaneous pursuits

• Improving the patient experience of care (including quality and satisfaction)

• Reducing the per capita cost of healthcare

• Improving the health of populations

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The overwhelming challenge is working toward these three pursuits in a world of rising expenses with declining reimbursements.

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The IHI Triple AimPopulation Health

Experience of Care

Per Capita Cost

Financial Disruption

III. Setting the StageDilemma of a Hospital Board

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Is going it

ALONEstill an option

for your hospital?

IV. RPNA Look Back and Glance Forward

Impetus Local Market

Consolidation and National

Realities

Conceptual Response

Strategic Alliance

Operational Response

Alliance Formation

Early Growth and

Development

First-Generation Successes

2012–20132012–2013 20132013 2013–20142013–2014 2014–20152014–2015 2015–20162015–2016

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IV. RPNIdentifying the Common Mission

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IV. RPNFounding Principles and Purpose

• Support local autonomy and independence.• Collaborate with independent providers who choose to work together.• Provide options for degree of involvement.• Engage physicians in improving the health of our communities.• Create value for patients and purchasers.

CatalystFacilitator Integrator

RPN Purpose

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Population Health

PopulationMedicine

Care Coordination, etc.

Clinical Integration

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The specific activities of the medical care system that, by themselves or in collaboration with partners, promote population health beyond the goals of care of the individuals treated.

The specific activities of the medical care system that, by themselves or in collaboration with partners, promote population health beyond the goals of care of the individuals treated.

The health outcomes of a group of individuals, including the distribution of such outcomes within the group

(80% nonmedical care).

The health outcomes of a group of individuals, including the distribution of such outcomes within the group

(80% nonmedical care).

IV. RPNThe Journey to Population Health

IV. RPNDefining the Initial Vision and Goals

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RPN was formed in 2013 by the nine Nebraska health systems to further improve the quality and efficiency of the care being delivered.

The RPN members will collaborate and innovate to:

Improve Outcomes

Gain Efficiencies

Deliver Value to the

Populations We Serve

Vision

1

2

3

Strategic GoalsCreate a platform to share best practices to improve the quality of care.

Reduce the cost of delivering care through shared services and best practices.

Develop favorable positioning of participating providers for value-based reimbursement.

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IV. RPNMember Locations

The alliance has engaged additional participation by 49 regional provider organizations, which represent CAHs and other community providers.

IV. RPNGovernance: Board of Managers Composition

The 20 representatives will be selected as follows:• Each founding member will appoint two managers. • The Regional Membership Committee will appoint two managers. • A minimum of 50% of the board will be composed of providers.

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Board of Managers

Bryan Health

Great Plains Health

Columbus Community

Hospital

Faith Regional

Health Services

Fremont Health

Mary Lanning

Healthcare

Nebraska Methodist

Health System

Nebraska Medicine

Regional West

Medical Center

Regional Member

Committee

Members (i.e., Owners)

The RPN Board consists of 20 managers, with a physician and executive manager appointed by each member.

IV. RPNCommittee Structure

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Board of Managers

Payor Contracting

Clinical Leadership and Quality

Data and IT NetworkMembership

Shared Services

• Contract execution

• Financial performance

• Funds flow development

Identification of opportunities for shared services

• Protocol development/enhancement

• UM/QA

• Selection of medical managementopportunities

• Information management and reporting

• Business intelligence

• Infrastructure

• Network development/provider relations

• Credentialing

• Strategic and clinical planning• Communications• Workforce planning• Alignment policy development• Contracting strategy/oversight• Budget development and management

Regional MembersRegional Members

• Identification of regional issues

• Nomination of regional representatives for committees

Several committees have been established to provide recommendations to the Board of Managers regarding priority initiatives of the RPN.

RPN Planning Committee

RPN Planning Committee

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IV. RPNPursuit #1 — Clinical Integration

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RPN is pursuing clinical integration as the strategy to achieving its vision.

• RPN will need to achieve standards of clinical integration to participate in joint contracting, including:

– Interdependence. – Participation of primary care providers and

specialists, with a requirement for in-network referrals.

– Investments in standards and clinical protocols.

– Integrated IT infrastructure.– Penalties for noncompliance with standards

and protocols. • RPN is building its population health

management capabilities for members’ self-insured employee health plans, which will then be expanded to other populations in the future.

IV. RPNPursuit #1 — Clinical Integration (continued)

Create PHOsJoin With Affiliate

Members

Focus on EHP

Population

Demonstrate Population

Health Capability

Contract to Move

Beyond EHP

Create Health in Our Communities

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IV. RPNPursuit #2 — Payor Contracting

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RPN is developing payor relationships and payment structures that align incentives to reduce cost and promote higher-quality care.

• RPN will align with health plans to develop risk-based contracting arrangements.

• Opportunities include:– Commercial shared-risk and pay-for-performance

programs.– Medicare and Medicaid programs.– Direct contracts with self-insured employer health

plans.• RPN will provide the support and infrastructure required

to succeed under these arrangements, including:– Medical management.– Integrated information technology.– Payor contracting negotiation and execution.– Funds flow and incentive designs.– Risk management.

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IV. RPNPursuit #3 — Shared Services

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RPN is seeking to reduce the cost of delivering care through shared services.

Rationale for Shared Services• Enhance communication channels to share and

implement best practices irrespective of joint contracting.

• Negotiate using the combined size for greater purchasing power with vendors outside of GPOs.

• Effectively deploy capital dollars with a combined approach to strategic planning.

Areas of Opportunity• Vendor contracts and pricing• Provider credentialing• Best practices and education• Medical delivery support• Centralized corporate functions

IV. RPNPursuit #3 — Shared Services (continued)

Create Legal and

Operational Framework

Assess Existing

Opportunities

Find and “Pluck” the

“Low-Hanging

Fruit”

Mature Analysis

Capabilities and Trust

Tackle Higher-

Return, More Complex

Opportunities

Reduce the Overall Cost

of Care

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IV. RPNPursuit #4 — Health Information Technology

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RPN aims to develop the optimal IT infrastructure for managing population health.

• Health Information Exchange Capabilities—Data linkages necessary to exchange clinical data at the point of care.

• Analytics and Reporting —– Tracking provider performance,

identifying clinical variation, and reporting.– Implementing a population management

and risk assessment tool across the network to identify opportunities for care improvement and cost savings.

• Effective IT Utilization — Support efforts to improve the use and functionality of members’ existing technologies. Examples include assisting with achieving EHR meaningful use requirements and sharing best practices.

IV. RPNAspirational Goals

• Create health in the communities we serve.• Build unity of purpose, function, and results over time.• Be one of a kind in structure, culture, processes, and results.

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Create Health Be One of a KindBuild Unity

IV. RPNMembership Groups

• Founding Members• Affiliate Members (Phase 2)• Associate Members (Phase 1)• Contractors

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IV. RPNEarly Wins

• First shared services contract realizing member cost reductions:– Blood products — approximately $0.5 million over 3 years– Others soon to follow

• Crimson Tool from The Advisory Board Group– Founding members Employee Health Plan (EHP) – Clinicians able to analyze population management opportunities– Provides “First-Look” opportunity for clinical improvement in EHP population

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IV. RPNNext 12 Months

• Maturing the vision, mission, and purpose, and creating a corporate identity• Sharpening the strategic focus• Expanding management capabilities• Completing early-win shared services opportunities• Increasing consistency in EHP offerings and structures• Defining our network• Improving the analytical and performance improvement capacity• Developing the early framework for a learning community• Beginning clinical improvement efforts within each PHO• Building purposeful relationships with payors and employers

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Emergence Transition Maturity Critical CrossroadsKey Factors in Each Stage

Environment Poses Threat and Uncertainty

Motivation to AchievePurposes of the

Alliance

Willingness to Put Alliance Interests First

Increased Centralization and Dependence on

Alliance Motivates Members to Seek

Hierarchy or to Withdraw From

Alliance

Organizations Share Ideologies and Similar

Dependencies

Increased Dependence on Alliance for Valued

Resources

Members ReceiveBenefits From Previous

Investments

Examples of Tasks at Each StageDefine the Purpose of the Alliance (Strategic

Intent)

Hire or Form a Management Group

Attain Stated Objectives

Manage Decisions About Future of the

AllianceDevelop Membership

CriteriaEstablish Mechanisms for Coordination and

Control

Sustain Member Commitment

V. Strategic AlliancesLife Cycle Stages

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“The granddaddy of all mistakes is competing to be the best,

going down the same path as everybody else and thinking that somehow you can achieve better

results.”– Michael Porter

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V. Strategic AlliancesCreate New Opportunities

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V. Strategic Alliances Rule #1 — Be Nimble

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V. Strategic Alliances Rule #2 — Anticipate the Future

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V. Strategic AlliancesRule #3 — Have World-Class BCI

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Questions

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QuestionsAnswersQ. A.

Reference Articles

• Sarah Klein and Douglas McCarthy, “All Health Care is Local: The Power of Community to Drive Improvement,” The Commonwealth Fund, September 11, 2014. Available here.

• Michael E. Porter and Thomas H. Lee, “The Strategy that Will Fix Healthcare,” Harvard Business Review, October 2013. Reprint R131OB. Available here.

• Edward J. Zodiac et al., “Managing Strategic Alliances,” in Lawton Burns et al. (eds.), Shortell & Kaluzny's Health Care Management: Organization Design & Behavior (sixth edition), Delmar Cengage Learning, New York, 2011, pp. 321–346. Available here.

• Jonathan Hughes and Jeff Weiss, “Simple Rules for Making Alliances Work,” Harvard Business Review, November 2007. Available here.

• Brook Manville, “For big goals, a ‘thick we’ community trumps a network,” Financial Review,September 23, 2014. Available here. Harvard Business Review blog version here.

• Malcolm Gladwell, “How David Beats Goliath: When Underdogs Break the Rules,” The New Yorker, May 11, 2009. Available here.

• Kate Lovrien, “The Virtual Primary Healthcare Revolution: What Health Systems Need to Know,” Becker’s Hospital Review, February 3, 2014. Available here.

• The Advisory Board Company, Expert Perspectives, “The Extreme Pessimist’s Argument for Population Health,” Spring 2014, Vol. 2, pp. 6–9.

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