3 strategies for clinically integrated networks to achieve financial success

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Over the past decade, health systems have invested significant resources in forming clinically integrated networks, which are legal partnerships with physicians that permit the collective facilitation of coordinated care and single signature value-based contracts. However, many CINs are struggling to achieve optimal financial performance and an adequate return on these investments as they fail to generate shared savings for both physicians and health systems.

While the first step for any CIN is a candid assessment of their performance and the implementation of best practices, CINs must manage expenses and enhance revenue to achieve financial success. In working with more than 40 CINs to build or repair their operating models, we have learned that having effective physician-led governance, holistic expense and revenue management, and aligned contracting strategies are critical keys to success.

1. Effective Physician-Led Governance

In most healthcare markets where health systems and providers compete for business, CINs may struggle to establish physician-led governance that builds upon a foundation of trust and shared decision making.  Without governance that is representative of the physician network and engages physicians in decision-making and oversight, CINs struggle with physician engagement and successful financial performance under value-based payment contracts.

Common governance mistakes include:

  • Physician leaders without adequate business and leadership training.
  • Boards/Committees engineered around "report out" functions, without framing issues and alternatives, and seeking decision-making input from physicians.
  • Limited representation of primary care physicians on the Board of Managers and Committees.
  • Board/Committee composition that excludes relevant independent physician groups.
  • Lack of physicians capable of leading value-based change.

Effective CINs are differentiated by physician leaders in key roles and capable of communicating effectively and leading change. As CINs expand their reach across multiple markets, geographic regions and states, establishing an effective governance model becomes more challenging, but no less critical to success.

2. Holistic Margin Management

Many CINs overbuild their infrastructure too early in their evolution, spending millions of dollars without a significant number of contracts or lives to spread the cost of the infrastructure. For example, some CINs sign contracts for comprehensive software systems, while others lack a contracting or revenue plan.

CINs that have less than 100,000 contracted lives with a more modest, phased revenue plan in the first three years need to prudently manage expenses. Sources of new revenue are critical to replacing reduced revenue from fewer emergency department visits and hospital utilization. Opportunities for additional revenue include care management payments (since many health plans shift these functions and costs to the delivery system), network access fees, shared savings, provider withholds and market share increases.

Improved market share can occur due to the CIN's ability to reduce leakage by identifying specific PCP referrals and service lines using a basic claims analytics tool and by addressing physician concerns about specific in-network services. By way of infrastructure, low-cost ($200,000 to $300,000 per year) claims analytics solutions should be enough for the start-up years, and can be expanded as the CIN covers more lives.

In addition, a conservative approach to staffing is also warranted in the early years. In many cases, work can begin by placing part-time physicians/administrators in leadership roles, sharing these positions with health systems or group practices to avoid over hiring full-time staff. Human resources, benefit administration, marketing and finance positions can also be tasked to perform services for the CIN.

3. Aligned Contracting

The development of a three-year contracting strategy tailored to both the market and organizational needs is a must. CINs often start with the health system’s employee health plan or a Hospital Quality and Efficiency Program  contract between the hospital and the CIN. By starting internally, systems can begin to deliver financial returns (typically between $2 million to $3 million a year), jump start physician efforts to manage care engagement and collaborate, demonstrate progress in improving performance, offset a portion of the CIN investment costs and generate shared savings payments for physicians.

Other organizations begin by their CIN participating in the Medicare Shared Savings Program, which provides a significant opportunity for shared savings by implementing basic value-based care services for high-cost populations that historically have not been managed. The MSSP also allows access to various governmental waivers, including antitrust and fraud and abuse waivers, and the opportunity to access timely, accurate, "unblinded" comprehensive claims data. At the same time, building care management capabilities in the MSSP prepares the CIN for value-based contracts with Medicare Advantage plans, which often have significant financial opportunities given that typical per capita payments tend to be higher, and there are well-established measures and spend targets and benchmarks attached to this population. For more mature CINs, not only is Medicare Advantage an excellent candidate to deliver an early win, but this payer segment is attractive for testing two-sided risk arrangements among a limited pool of beneficiaries that limits overall exposure to risk.

Commercial health plans and large area employers are usually the last step in value-based contracting strategies, since most health systems do not want to risk their profitability until they become seasoned in value-based care and payment models. 

Example of Success

Henry Mayo Newhall Hospital in Santa Clarita, Calif., is an example of how a well-organized and thoughtful phased approach to building the CIN can be successful. Premier helped Henry Mayo build a high-value CIN and HQEP over a 12-month period by working with the executive team, legal counsel and a fractious physician community on all facets of CIN development. Henry Mayo created an effective governance model, developing physician champions, designing operating and provider participation requirements and a holistic shared savings methodology based on targeted, data-driven improvement opportunities.

Once established, 230 physicians were recruited into the CIN, and financial returns began to flow back to the system and physicians almost immediately, generating $1.1 million in savings in the first three months alone, with reductions in the inpatient length-of-stay, readmissions and improved implementations of evidence-based care. In addition, the CIN resulted in dramatic improvements in physician alignment, moving up from 27 percent alignment in 2016 before the CIN was implemented, to 82 percent post implementation.

In summary, for CINs to be successful, they must establish an effective governance infrastructure that is led by engaged physicians; holistically manage margins by tying expenses to size and pace of revenue growth, and establishing a revenue plan to fund required infrastructure, offset lower utilization and ensure shared savings; and implement a prudent contracting plan that starts with one-sided risk.

 

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