Clinically integrated networks: The path forward through a fog of uncertainty

As I write this article in mid-July 2017, there has never been more uncertainty in healthcare due to the repeated attempts by the Republican Party to repeal and replace the Affordable Care Act.

How can a clear path exist when there are no answers to fundamental questions around:

• the existence and scope of health insurance coverage for substantial portions of the population.
• whether mandatory Centers for Medicare and Medicaid Services (CMS) bundled payment programs such as the Comprehensive Care for Joint Replacement Program (CJR) and Episode Payment Model (EPM) will become voluntary.

The path forward has never been clearer.
Despite the bi-partisan paralysis over insurance coverage, there is bi-partisan support for the transition from the traditional fee-for-service payment system to value based care. The first CMS bundled payment pilot program, the Acute Care Episode (ACE) program, was launched under the George W. Bush Administration. While Health and Human Services Secretary Tom Price has been a vocal opponent of mandatory bundled payment programs such as CJR and EPM, he has been supportive of value-based care. He co-authored the Medicare Access and CHIP Reauthorization Act (MACRA), which passed with almost unanimous support in the U.S. Senate. The level of bi-partisan congressional support shown for MACRA is not common these days and demonstrates that value based care holds the promise of quality improvement combined with reduced costs needed to create a sustainable healthcare system that will be increasingly stressed as the population ages. The path to success that hospitals and physician groups are taking in order to achieve these goals is the development of Clinically Integrated Organizations (CIOs) and Clinically Integrated Networks (CINs)

A CIO is a structured collaboration among physicians (and usually hospitals), using proven protocols and measures to improve patient care, decrease cost and demonstrate value to the market. An Accountable Care Organization (ACO) is a type of CIO that is becoming more popular due to its availability under the Affordable Care Act. A CIN is a network of physicians that establish best practices and utilize care coordination techniques to improve quality and reduce costs, allowing large numbers of diverse providers to contract with payers. A CIN can establish a CIO so it can directly take on risk contracts or can contract with CIOs to participate in their risk contracts.

CINs and CIOs provide a clear path forward by creating a structure that helps health systems and physician groups compete in this new environment. Declining reimbursement from payers, increasing Information Technology costs, the shift from traditional fee-for-service payment system to value and risk-based payments, enhanced collaboration among providers and the ability to achieve cost efficiencies through economies of scale are some of the trends encouraging clinical integration.

In reacting to these trends, many physicians have become employed by health systems or have consolidated into larger physician groups while many hospitals have merged into larger health systems. This is expected to continue and perhaps accelerate. With value and risk-based population healthcare contracts becoming more prevalent, the healthcare risk for populations is being shifted to the providers. This is blurring traditional lines as healthcare insurers acquire physician groups, health systems and ambulatory surgery centers and as hospitals and health systems create their own affiliated insurance companies1,2. In these situations, providers are becoming more deeply integrated through networks and are using Information Technology systems, data analytics and care coordination techniques to improve quality, reduce costs and remain competitive in their markets.

Bundled payments represent an important vehicle for value-based contracting but experience has shown that most episodes of care do not have enough volume at any one facility to warrant the expense of targeted programs. This holds true even when the payer is CMS, typically the hospital’s largest payer. Independent hospitals and physician groups often face similar volume challenges when they attempt to structure a bundled payment program with a single commercial payer for even their highest volume episodes of care. The creation of CINs with substantial geographic reach can address these challenges. When a CIN negotiates a contract with a payer, it engages in collective bargaining by providers that compete with each other, which would violate antitrust laws unless they qualify for exemptions created to enable clinical integration. It is important for the CIN to be structured properly as to avoid violating these laws, which may become more challenging as the networks grow.

Because population-based healthcare contracts are focused on a “population” of patients, CINs tend to focus on, and reward, Primary Care Providers. CINs do not generally incentivize and align specialists, who are important to high cost service lines such as cardiac and orthopedics. Strykers Performance Solutions enhances the alignment of these important specialists by creating “Specialty-CINs” under the umbrella CIN, and by utilizing co-management, joint ventures, bundled payments and similar techniques to align both employed and independent specialists in these critical service lines and across all sites of service.

No matter what happens with healthcare reform, CINs represent a clear path forward in today’s uncertain environment. Performance Solutions can help.

Paul Jawin, JD, Vice President, Alignment, Stryker Performance Solutions
Paul brings more than 35 years of legal, business, financial and capital markets experience to his role in developing physician alignment and payment reform programs. A co-founder of Comprehensive Care Solutions—acquired by Stryker in 2012—he has helped physician organizations and health systems align and turn reform into opportunity by utilizing new payment and delivery structures, including Accountable Care Organizations (ACO) and bundled payments.

Paul is a regular speaker at industry conferences and events, including the American Academy of Orthopaedic Surgeons Hospital-Physician Alignment Symposium. He co-founded and served as Senior Vice President and General Counsel of Secured Independence, Inc., and has held senior executive positions with public and private companies involved in real estate and senior housing. Paul has a Bachelor of Arts degree in History from Ithaca College, and practiced corporate, securities and real estate law in New York City for more than 10 years after graduating from Syracuse University School of Law with a Juris Doctor degree.

Email: Paul.Jawin@stryker.com

1 https://www.beckershospitalreview.com/hospital-management-administration/the-quiet-takeover-insurers-buying-physicians-and-hospitals.html
2 http://www.modernhealthcare.com/article/20150128/NEWS/301289934/major-providers-insurers-plan-aggressive-push-to-new-payment-models

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