ISOC CEO MeetingINSTITUTIONAL OVERVIEWS & CASE

STUDIES

Campbell ClinicGeorge Hernandez

Chief Executive Officer

OCTOBER 2011(revised 10/04/11)

Medical Malpractice and Risk ManagementCampbell Clinic

MEDICAL MALPRACTICE

• Medical malpractice for Campbell Clinic Physicians (individually) and

Campbell Clinic and Campbell Surgery Center (corporate policy)

• Professional liability insurance purchased from State Volunteer

Mutual Insurance Company (SVMIC)

• Limits $5 million per occurrence / $7 million aggregate

• $250,000 deductible (i.e. self insured first $250,000)

• $750,000 aggregate (3 deductibles) per year

• $750,000 funded from deductible premium cost savings over several

years

• Annual premium ~ $20,000 per MD

Medical Malpractice and Risk ManagementCampbell Clinic

EDUCATION• Annual attendance by all physicians at risk management seminar• Annual education of all employees of risk management issues

SELF ASSESSMENT • M.O.R.E. Program (Medical Office Risk Evaluation)• Annual survey• Questionnaire and comprehensive site visit• Premium reduction ~ 10%

SVMIC HIGH RISK PHYSICIANS• Ineffective communicators• Poor documenters• Those who do not adhere to standard of care• Those who operate without tracking systems

Medical Malpractice and Risk ManagementCampbell Clinic

ADVERSE EVENTS

• Be accessible to patient and family

• Be supportive and express sympathy

• Frank and prompt discussion of events with patient/family

• Help direct timely information gathering

• Avoid “finger pointing”

• Follow up

• Notify insurance company

Medical Malpractice and Risk ManagementCampbell Clinic

CLAIMS MANAGEMENT

• Early reporting potential events or claims

• Extensive proactive pre-claim investigation to determine exposure

• Aggressive and top tier defense counsel

• Decision to settle case remains with clinic (or physician)

Medical Malpractice and Risk ManagementCampbell Clinic

NATIONAL DATA (25 Year History 1985-2010)

Closed Claims (% of $$$ Paid Claims) 22% Obstetrics/Gynecology 11% General Surgery 7% Orthopaedic Surgery 3% Neurosurgery 3% Cardio-Thoracic Surgery

Average Paid Claim Neurosurgery $326,000 Obstetrics/Gynecology $290,000 Cardio-Thoracic Surgery $227,000 General Surgery $193,000 Orthopaedic Surgery $178,000

Medical Malpractice and Risk ManagementCampbell Clinic

SVMIC DATA (25 Year History 1985-2010)

Closed Claims (% of $ Claims) 14% Obstetrics/Gynecology 7% General Surgery 5% Orthopaedic Surgery 3% Neurosurgery 2% Cardio-Thoracic Surgery

Average Paid Claim Neurosurgery $294,000 Obstetrics/Gynecology $266,000 Cardio-Thoracic Surgery $222,000 General Surgery $176,000 Orthopaedic Surgery $152,000 Average 15% Less Than National Average

Medical Malpractice and Risk ManagementCampbell Clinic

MEDICAL MALPRACTICE

Claims Experience – 20 Year History

84 claims filed

13 claims with loss payment

12 claims with payment < deductible

1 claims with payment > deductible

$76,000 average loss payment

50% less than SVMIC average for orthopaedics

58% less than national average for orthopaedics

~ $10 million premiums (~ $15 million future value @ 4%)

~ 2% payout ratio by SVMIC

Medical Malpractice and Risk ManagementCampbell Clinic

CAPTIVE

• Insurance co which insures and is controlled by owners/insureds

• Tax advantages (deduct 100% premium, premium > losses)

• Long term investment/return on investment potential

• Mitigate financial exposure with “excess” insurance

• Cost savings over traditional liability insurance e.g. SVMIC paid claims ~ 2% of paid in premium for Campbell

• Increased control over claims management

• Campbell at exploratory stages1. Group captive with 60 orthopaedic surgery practices2. Join existing captive 3. Start own captive

Alignment, Standardization and Clinical PathwaysCampbell Clinic

NATIONAL TRENDS IN US

MD Owned Practices Hospital Owned Practices2002 70% 22%

2004 67% 30%

2006 60% 38%

2008 48% 50%

2009 39% 55%

2010 28% 68%

Alignment, Standardization and Clinical PathwaysCampbell Clinic

HOSPITAL ALIGNMENT (Memphis Tennessee)

• 2 major healthcare systems, each with multiple hospitals

• Both aggressively acquiring local physician practices

• Typically - 5 year employment agreement - asset acquisition, with or without real estate

• Others - VA Medical Center - government owned/operated - exclusively for veterans

• Others - Regional Medical Center - trauma center - academic medical center

Alignment, Standardization and Clinical PathwaysCampbell Clinic

CAMPBELL CLINIC STRATEGY

• Remain aligned with all major health systems and institutions

• Listening to the hospitals “pitch” to buy practice

Questions & Concerns:

- Can we be owned by two competing systems that each control ~ 35% of market?

- Will we be able/permitted to practice in both health systems?

- Does either hospital system have sufficient capacity to accommodate our total volumes?

Alignment, Standardization and Clinical PathwaysCampbell Clinic

CAMPBELL CLINIC STRATEGY

Questions & Concerns (continued):

- Can we survive if we are only part of one system?

- Is there sufficient business to sustain clinic’s ~ 15% annual revenue growth rate?

2000 $44 Million (MD) + $0 Million (ASC)

2010 $122 Million (MD) + $40 Million (ASC)

Alignment, Standardization and Clinical PathwaysCampbell Clinic

CAMPBELL CLINIC STRATEGY

• How much “control” will we retain?• Governance• Compensation• Personnel, employee salaries and benefits• Scope of services• Capital expenditures and access to capital

• After initial 5 year contract?• Renewal … On what terms?• Cancel … How do we re-acquire assets?• How do we re-acquire contracts?• Start business back from ground floor?

• Many unknowns at present – unable to develop or entertain employment model proposal

Alignment, Standardization and Clinical PathwaysCampbell Clinic

INTERIM (TRIAL) ALIGNMENT

1) Hospitalist orthopaedic surgery services

- Staff orthopedic surgeons in hospital 24 / 7 / 365

- Replace existing contract between hospital and third party physician staffing company

- Handle 100% of orthopaedic surgery services; emergency, consultations, other

- Compensation by hospital for “coverage”

- Clinic bills and collects for professional services

- Quality indicators and measures

Alignment, Standardization and Clinical PathwaysCampbell Clinic

2) Co-management of orthopedic service line

- share in management of inpatient orthopedic services

- potential for economic incentives for efficiency, cost reductions, quality indicators

- low cost of entry• no capital investment

• no bricks and mortar investment

- low risk• paid hourly rate for time devoted to project

• paid proportion of efficiency savings• paid for achieving measurable quality standards

Alignment, Standardization and Clinical PathwaysCampbell Clinic

2) Co-management of orthopedic service line (continued)

- upside potential – likely, but limited • implants

• turn around times• length of stay

- after several years and most economic potentials realized, then value of agreement diminished?

- will there remain financial rewards for continued quality improvements?

Alignment, Standardization and Clinical PathwaysCampbell Clinic

LONGER TERM POTENTIAL

Orthopaedic Specialty Hospital

• Physician (Clinic) owned Single Specialty Hospital

• currently prohibited by law

• requires Certificate of Need (permission from governmental agency certifying need for the additional capacity)

• Jointly owned by existing healthcare system and Campbell Clinic

• requires Certificate of Need

Operational EfficiencyCampbell Clinic

PERFORMANCE METRICS STRONG (ASHEVILLE ORTHOPAEDIC FORUM)

Campbell = Lower 25th Percentile MD $$$ Productivity Per MD

Campbell = Lower 25th Percentile Office Visits Per MD

Campbell = Lower 25th Percentile Surgical Procedures Per MD

Campbell = Upper 75th Percentile Non Patient Care Revenues

Campbell = Lower 25th Percentile Operating Expenses

Campbell = Lower 25th Percentile Staffing Levels Per MD

Campbell = Upper 75th Percentile Compensation

Operational EfficiencyCampbell Clinic

REFOCUS ON PATIENT EXPERIENCE

• Believe that clinical excellence and clinical quality second to none

• Referral sources validate this assumption

• What do patients think?

- Anecdotal data vs objective metrics

- Patient Experience Specialist – New Full Time Position

- Objective: Measure and improve patient experience

- Criteria: Excellent/Outstanding Good Fair Poor

Operational EfficiencyCampbell Clinic

REFOCUS ON PATIENT EXPERIENCE (continued)

Showing improvement – by measuring and reporting, employees are aware and intuitively pay more attention

Direct linkage employee year end bonus ($$$) to patient experience results

Estimates range from 6 to 10 times more costly to attract new patient than to retain existing one

One dissatisfied patient will complain to average of 20 other people

One on one follow up to all dis/undersatisfied patients to rectify/remedy where we fell short; goals to 1) regain their trust 2) continue as patient and 3) transform to advocate

Operational EfficiencyCampbell Clinic

REFOCUS ON PATIENT EXPERIENCE (continued)

Disney Institute Training

Engaged Disney Institute to help develop “Culture of Excellence”

Top down and bottom up initiative

Focus on 3 primary factors

• Setting

• Cast (Employees/Physicians)

• Processes

Operational EfficiencyCampbell Clinic

REFOCUS ON PATIENT EXPERIENCE (continued)

Disney Institute Training

Empower all levels of organization to identify opportunities to improve patient experience

Empower all levels of organization (Council) to develop recommended programs or solutions to improve patient experience

Physician leadership and all physician participation essential

Physician oversight via Quality Improvement Committee responsibility

Operational EfficiencyCampbell Clinic

QUALITY IMPROVEMENT PROGRAM

• Believe that clinical excellence and clinical quality second to none

• Referral sources validate this assumption

• What do customers/constituent groups think?

- Anecdotal data vs objective metrics

- Quality Analyst – New Full Time Position

- Objective = measure and improve quality indicators

Develop clinically relevant criteria

Establish metrics to measure

Operational EfficiencyCampbell Clinic

QUALITY IMPROVEMENT PROGRAM (continued)

Currently subject to external metrics developed/derived/used by others

- Primarily economically driven based on retrospective cost analysis

- Publish select metrics to public/patients (1 Star vs 2 Star vs 3 Star)

Objectives:

- Validate/challenge/revise external metrics used by others

- Publish validated metrics

- Improve performance where metrics show room for improvement

- Develop comprehensive quality metrics

- Improve public profile

- Improve negotiating position with payers

Operational EfficiencyCampbell Clinic

QUALITY IMPROVEMENT PROGRAM (continued)

CHALLENGES

- Creation/adoption/selection of consistent quality standards for major orthopaedic procedures

- Partner with other orthopaedic groups to design the quality metrics for use nationally/internationally

- Design efficient and effective systems for data acquisition and analysis and reporting

- Create benchmarks for quality and functional outcomes