TSA Bulletin - July 2012

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Emergence of Clinical Integration:

How has clinical integration progressed since its inception in 1996? It turns out that since its inception by the FTC/DOJ statement in 1996, the concept did not really take off in the 90s and early 2000s. Reasons include the belief that IPAs could negotiate non-risk contracts. This essentially displaced for years the desire to try clinical integration. Many do not really know what constitutes clinicial integration and the costs of demonstrating it are high, while the benefit is still unclear. For PPO patients, it is actually difficult to track them compared to HMO patients, making clinical integration more complicated. So, for these and other reasons, it has not really taken off as of yet.

The supposed financial benefits of clinical integration are perceived to be weaker, but they include providing a safety zone for non-risk contracts at higher rates and improving quality scores leading to higher reimbursement. Further, they hope to reduce administrative costs and increase the volume of visits.

In the last couple of years in Texas, we are starting to see efforts to use clinical integration. Two examples include Baylor Quality Alliance (BQA) and the Memorial Health Care System. Baylor has been a leader in attempting to deliver quality care in the DFW area for years. Here are statements and videos from BQA’s “About” section on its website:

BQA: http://www.baylorhealth.edu/Quality/BaylorQualityAlliance

Of note in the video, Dr. Carl Couch, President BQA, refers to BQA as being an “ACO,” but clarifies that the term “ACO” is only a general use of the term as a concept and not the federally dictated structure as defined by the Affordable Care Act.

Given the history above, one can start to make sense of what has emerged. There is clear reference to the phrase “clinical integration” and independent physicians. There is also clear reference to attempting to bend the curve of health care costs. So, while this model emerged out of a desire to collectively bargain, what really arises is an organization whose focus is to deliver a different model of care that wants to assume the risk for quality and costs.

It is very early in the course of this effort by Baylor and the benefits have yet to be realized. Baylor is in its building phase and recruiting practices to join.

Memorial Health Care:

The Memorial Health System in its “White Paper” says:

“An increasing number of hospitals are looking to Clinical Integration as a mechanism to marshal both employed and independent physicians into a unified, performance-focused alignment platform. In a CI organization, physicians voluntarily commit to invest heavily in robust and active performance improvement infrastructure and initiatives.

• A commitment by physicians to evidence-based care standards
• Data-based mechanisms to monitor and manage physician performance across the continuum of care
• An organization-wide commitment to selective partnerships with high-performing providers

In exchange, CI creates an FTC-recognized “safe harbor” from the usual antitrust proscription of collective bargaining. This allows independent physicians to jointly negotiate for commercial contracts that generally reward participants financially— via higher base rates or performance-based bonuses—for their investment in quality and efficiency improvement.”

Organizations that Arose Primarily from Statute:

Departing from organizations that emerged from collective bargaining, there are wholly different types of organizations that have arisen from statute.

Accountable Care Organization from the US Aff ordable Care Act of 2010:

For this particular article, I am not itemizing what is known or not known about this particular collaborative effort. As of this writing, many organizations are choosing not to use this methodology because the risks are high and the benefits are low. It is unclear at this time whether this type of structure will take off as a primary organizational type or as a subordinate type to some other structure. It is not even clear if the ACA will survive the Supreme Court. The ACA is specific in that it wanted the ACO to be adapted by state prescription should they choose to do so. At this time, I am not knowledgeable of the protections for providers in the governance or control of this type of organization.

Health Care Collaborative from the State of Texas SB7 of 2011:

In the 2011 Legislative Session, many stakeholders and legislators pushed for a Texas version of a nexus of Provider, Facility, and Payer. They were not happy with those prescribed by the ACA. During the legislative rendering, the TMA, along with its ACO Committee chaired by our own Asa Lockhart, M.D., was able to achieve a set of laws that was favorable for providers who are in a strong position to insure quality of care.

SB 7 creates a new type of entity called a Health Care Collaborative which is again a nexus of Provider, Facility, and possible Risk Taker. There are some key features that make these organizations different from IPAs or PHOs based on CI or FI. These features are prescribed by law and regulated at the state level. Some important features guaranteed include that the Board of Directors (BOD) must be composed of at least 50% physicians. Further, if the Collaborative contains hospital based physicians, then at least one must sit on the BOD.

These Collaboratives will also have a waiver from the both federal and state antitrust laws for payer contracting.

To date, TDI is writing the rules for regulation. Draft versions of those rules clearly spell out reporting requirements for a host of features. The TSA attended the Stakeholder Meetings in February 2012. Further, we offered our written opinions, as did the TMA. HCCs offer a much more robust promise of physician input due to the requirement that 50% of its BOD must be physicians chosen by the physicians. TSA’s main comments to TDI were that we felt disclosure of organizational requirements to TDI at application and reapplication were a key component to insuring that physician protections were in place.

Currently, we are awaiting TDI’s first draft of its Rules for HCCs. Final rules are due by September 2012.

What are Differences Between Organizations that have Emerged from the Collective Bargaining Process and Those Created by Statute?

Clearly, there are a variety of ways that the nexus of Provider, Facility, and Risk Taker can come together. I have not discussed multi-specialty groups, academic centers, or foundations; these are other ways. Each of these methods has its own history of development, and each has certain characteristics that have their own set of pros and cons for patients and providers. Allow me to point out a few characteristics:

IPAs/PHOs with CI versus HCCs:

These are likely to get their day in court as of this writing. Clearly, Baylor and Memorial are starting down the CI pathway despite this method being used little in the past sixteen years since its endorsement by the FTC/DOJ joint statement of 1996. It is important to note that because this type of organization is not particularly created by statute, its features are more nebulous in terms of being strong, physician led organizations.

Governance: In the case of BQA, Baylor is it’s sole owner and its all physician Board of Governors is “appointed” by Baylor. Compare this to the HCC as described by SB 7. These Collaboratives have the same protections from the antitrust laws, but they are partnerships between Provider, Facility, and Risk Taker in which 50% of the controlling BOD are physicians.

Practice Environment: It is hard to know whether HCCs or PHOs created under CI will have a better practice environment. Both are bound to be dedicated to quality and efficiency. A difference is that the HCCs BOD has physicians as the controlling interest by statute. PHOs with CI does not have that certainty.

Regulator Reporting Requirements: HCCs are governed by the Texas Department of Insurance. The reporting requirements are significant on a yearly basis with oversight by the Office of the Attorney General of Texas, to insure that features mandated by statute are present. As best I can tell, PHOs and IPAs fall into a much more nebulous category not mandated by statute, and only by interpretation by the FTC and DOJ. The FTC/DOJ has specifically left many guidelines nebulous so as not to limit experimentation within the market space. While this does allow innovation, it does create a shroud of uncertainty regarding antitrust guarantees and physician protections.

Reserve requirements: Conceivably, both of these types of organizations will be eventually taking on at-risk contracts that include capitation and bundled payments. It is unknown at this time if TDI oversight of HCCs will insure reserve requirements that provide protections for its providers, if the risk assumed breaks the bank. I am even less certain about the CI/FI route. History is littered with the carcasses of IPAs and PHOs that went belly up in the 90s and 2000s and left providers holding the bag.

Sources:

1. http://www.upenn.edu/ldi/issuebrief2_7.html. “Models of Physician-Hospital Organization: Possibilities and Pitfalls” by Lawton R. Burns, Ph.D., M.B.A. LDI Senior Fellow, Associate Professor of Health Care Systems, The Wharton School, University of Pennsylvania Volume 2, Number 7; November 1995
2. http://library.findlaw.com/1999/Apr/1/130743.html, “Messenger Model IPA’s Face Antitrust Enforcement” By Marian Wossum Schlow of Broad and Cassel
3. http://www.acpinternist.org/archives/2001/09/ipa.htm. “IPAs down but not out with Doctors”
4. Journal of Health Politics, Policy and Law, Vol. 31, No. 3, June 2006 DOI 10.1215/03616878-2005-007© 2006 by Duke University Press, “The Federal Trade Commission, Clinical Integration, and the Organization of Physician Practice”, Lawrence P. Casalino, University of Chicago
5. “Clinical Integration: A Physician and Hospital Strategy for Better Quality, Enhanced Competition, and Collective Contracting”, by Thomas J. Babbo, John P. Marren, and Patrick E. Deady, Hogan Marren, Ltd., Chicago, Illinois
6. Physician’s News Digest, July 2001, “Building a successful IPA”, by Brice D Armon, Esq & Howard A. Miller MD.
7. Creating Physician Alignment Through a Clinical Integration Program Case Study from Memorial Hermann Health System
8. http://www.baylorhealth.edu/Quality/BaylorQualityAlliance