Independence Through Interdependence
Fee-for-service reimbursement rewards independence: each provider is paid for providing a discrete service, without regard to others’ performance. There is no incentive for providers to work together in providing patient care.
Value-based payment systems, however, demand interdependence: providers are rewarded for quality and efficiency achieved through collaborative care.
The structure to develop and support such interdependence is the clinically integrated network, or CIN. Regardless of the specific type of value-based payments — pay-for-performance, shared savings, bundled payments, or global budgets — they require that providers be accountable to each other and the community they serve.
Developing a CIN is a journey, not an event. The first step in that journey is a common understanding of why everyone is suddenly talking about clinical integration, and what it means to the future of health care delivery.
THE TRANSITION TO VALUE-BASED PAYMENT IS ACCELERATING
The Centers for Medicare and Medicaid Services (CMS) is promoting this transition in the Medicare program through a number of initiatives including, for example, the Medicare Shared Savings Program, value-based purchasing of hospital physicians, and bundled payments.
Commercial insurers, as well as employers, also are aggressively pursuing value-based purchasing arrangements. More and more payers are introducing pay-for-performance provisions in their standard provider agreements.
Achieving measurable improvements in quality and efficiency demanded under these new payment models requires coordination and collaboration among a community’s providers. Independent physicians are seeking ways to work together for these purposes while protecting their individual interests.
Clinical integration is a new model for health care delivery. It promotes collaboration among a community’s independent providers to furnish high-quality care in a more efficient manner. Physicians, hospitals, and other providers share responsibility for, and information about, patients as they move from one setting to another over the entire course of their care.
Working together, clinically integrated providers develop and implement evidence-based clinical protocols, focusing on patient engagement and coordinated management of high-risk and rising-risk patients. Utilizing shared information technology, these providers conduct ongoing clinical care reviews to identify opportunities for improvement and ensure adherence to protocols.
While the antitrust laws generally prohibit joint contract negotiations among independent providers, those laws permit clinically integrated providers to collectively negotiate with payers. Working together, these providers can compete for payer contracts based on demonstrable quality and greater efficiency in care delivery.
In short, clinically integrated providers are accountable to each other and to the community they serve to deliver high-quality care in an efficient manner. They accomplish this by (1) collectively establishing and enforcing standards of care, (2) coordinating patient care (especially for high-risk, high-cost patients), and (3) jointly negotiating and managing payer contracts.
DEFINING THE INTEGRATED NETWORK
A CIN is the lean infrastructure needed to support clinical integration among a community’s independent providers. The network develops a governance structure through which these providers develop and implement clinical guidelines, monitor compliance, enforce standards, and reward performance.
Other network activities include, for example, identifying, implementing, and maintaining supportive technologies (including data analytics); analyzing care processes to identify efficiencies; encouraging patient engagement; negotiating pay-for-performance payer contracts; and distributing incentive payments to members.
While a hospital can provide administrative expertise for a CIN, network leadership is shared with physicians. Physicians have the knowledge, skill, and experience needed to achieve improvements in clinical quality and efficiency.
Unlike organizations such as integrated delivery networks (with hospital-employed physicians) and large multispecialty physician practice groups, which base their clinical integration strategies on economic integration, a CIN respects and preserves the economic independence of its physician members.
Key characteristics of a successful CIN include the following:
- Well-defined governance structure to promote organizational goals while protecting individual interests
- Physician-driven, professional management
- Data-driven reporting, foundation, philosophy, or approach
- Relentless focus on managing high-risk and rising-risk patient population
- Adherence to evidence-based clinical guidelines
Provider worries about federal regulators are well grounded. Since 2001, the federal government has prosecuted more than 30 provider organizations alleging price-fixing arrangements. The Federal Trade Commission (FTC), however, does not view collaboration through a CIN as collusion among independent providers. To the extent joint contracting is both necessary and subordinate to a CIN’s broader effort to improve quality and efficiency, the government views CIN arrangements as beneficial to consumers and pro-competitive. Thus, providers’ full commitment to achieving critical integration is critical.
A CIN IS NOT NECESSARILY AN ACO
The term clinically integrated network dates back to the mid-1990s, when the FTC first acknowledged that independent providers working together to improve quality and efficiency could engage in joint payer negotiations.
The term accountable care organization was first used about a decade later in reference to a group of providers that assumes responsibility to provide care for an assigned patient population. Typically, an ACO bears some financial risk associated with providing such care.
An ACO is a more formal arrangement, structured to satisfy specific payer requirements. For example, only an ACO that meets certain regulatory requirements is eligible to participate in the Medicare Shared Savings Program.
A CIN may elect to form an ACO for purposes of contracting with a particular payer. That decision, however, may be deferred until the CIN is fully operational.
A CIN’s governance structure must further its members’ common goals while protecting their individual interests. This is achieved through the selection of governing board members, balancing voting rights among participants, reserving certain fundamental decisions to the respective parties, delegating organizational functions through carefully drafted committee charters, and more.
Before deciding on a particular structure, however, there should be consensus around common goals, i.e., identification of the functions the CIN will perform. Stated another way, the form the CIN takes should follow from the functions it will perform, not vice versa.
CINs fund their operations in a number of different ways, including, for example, contributions from the participating hospital, physician dues, the sale of investment interests, revenue generated by selling services, and withholdings from payer reimbursement and/or pay-for-performance payments.
PAY-FOR-PERFORMANCE AND SHARED SAVINGS PROGRAMS
Under a pay-for-performance contract (often referred to as a P4P contract), an individual provider continues to submit claims and receive fee-for-service reimbursement. If the provider achieves a certain goal specified in the contract, the provider receives an additional incentive payment. A P4P contract may provide for a penalty if a provider fails to meet a specified target.
Many commercial payers are looking to include P4P provisions in their contracts with individual providers. Generally speaking, a CIN can negotiate more favorable P4P terms. Also, a CIN supports an infrastructure that enables its members to achieve P4P measures.
Under a shared savings program, a CIN is eligible to receive a portion of a payer’s savings generated through greater efficiency in care delivery. This is accomplished through a multistep process:
- The payer assigns a specific patient population to the CIN, usually based on patients’ primary care providers. The payer calculates a total cost-ofcare benchmark for that population based on historical data.
- Both CIN and non-CIN providers continue to receive fee-for-service reimbursement for all services furnished to patients in the population.
- At year-end, the payer calculates its actual total cost of care for the patient population, including services furnished by non-CIN providers.
- If the actual cost is less than the benchmark and if specified quality measures are met, the CIN will receive a share of savings based on a predetermined formula. If the quality measures are not met, however, the CIN does not receive any shared savings.
- A CIN may opt for a “two-sided” shared savings program. If the actual cost is more than the benchmark, the CIN repays a portion of the difference. But if the actual cost is lower, the CIN will receive a larger percentage of the savings.
- The CIN decides how shared savings (or losses) are distributed among its members. Typically, a portion is retained by the CIN to pay expenses.
PHYSICIANS AS CIN MEMBERS
To ensure compliance with the antitrust laws, CIN participation should be open to any physician who satisfies established minimum requirements for membership and maintains compliance with specified performance standards. Part of the CIN planning process involves identifying reasonable and appropriate requirements and standards.
Typically, a CIN’s governing body develops a network participation agreement that specifies the rights and duties of CIN members. Community providers are given the opportunity to review this agreement prior to making a formal commitment to CIN participation.
At a minimum, a physician member of a CIN is expected to adhere to CIN-approved protocols and otherwise participate in and support CIN operations. Depending on decisions made by the CIN’s governing body, a participant’s ability to contract with payers independently or through another network may be limited.
The implementation of clinical protocols and performance measures is an ongoing process of education and continuous quality improvement. No provider will be expected to perform at a certain level without adequate support to achieve that goal. While the intent is to improve quality and outcome metrics, successful CINs must be willing to terminate repeat offenders. To protect individuals’ rights, the CIN may establish a review process to afford a physician the opportunity to challenge an adverse decision. No participant should be excluded based solely on subjective criteria.
As CINs develop and mature, physicians will have many opportunities to affiliate with different networks. To evaluate those opportunities, a physician should ask critical questions regarding the CIN’s operations:
- What financial commitment is required and what financial rewards can be expected?
- What is the CIN’s payer contracting strategy?
- What support services does the CIN provide to member physicians?
- What experience does management have in operating a CIN?
- What are the CIN’s technological capabilities?
- What is the CIN’s operational plan to improve quality and lower total cost of care?
- What are the opportunities for physician involvement in CIN governance and operations?
The answers to these questions will give a strong indication of the CIN’s likelihood for success. In turn, a physician’s affiliation with a strong CIN likely will be a key factor in a physician’s ability to thrive under new payment and delivery models.
MARTIE ROSS is a principal at Pershing Yoakley & Associates, PC and advises providers navigating the everexpanding maze of health care regulations. Prior to PYA, she spent two decades as a health care transactional and regulatory attorney.
JEFF ELLIS is a principal at Pershing Yoakley & Associates, PC representing health care providers on matters such as corporate restructuring of diverse health care systems, government regulatory compliance, mergers of health care entities, restructuring of hospital-physician relationships, hospital medical staff matters, development of health information technology, and the full range of business concerns faced by hospitals and related business entities. Mr. Ellis is also a trained mediator with the American Health Lawyers Association.