Practice Economics

In a poster presented at HM12, Kathryn Quinn, MPH, CPPS, FACHE, described how her quality team at the University of California at San Francisco (UCSF) developed a checklist to improve physician communication with patients, then taught it to the attending hospitalist faculty.¹ The project began with a list of 29 best practices for patient-physician interaction, as identified in medical literature. Hospitalists then voted for the elements they felt were most important to their practice, as well as those best able to be measured, and a top-10 list was created.

Quinn, the program manager for quality and safety in the division of hospital medicine at UCSF, says the communication best practices were “chosen by the people whose practices we are trying to change.”

The quality team presented the best practices in one-hour training sessions that included small-group role plays, explains co-investigator and UCSF hospitalist Diane Sliwka, MD. The training extended to outpatient physicians, medical specialists, and chief residents. Participants also were provided a laminated pocket card listing the interventions. They also received feedback from structured observations with patients on service.

Quinn says UCSF hospitalists have improved at knocking and asking permission to enter patient rooms, introducing themselves by name and role, and encouraging questions at the end of the interaction. They have been less successful at inquiring about the patient’s concerns early in the interview and at discussing duration of treatment and next steps.

“We learned that it takes more than just talk,” Quinn says. “Just telling physicians how to improve communication doesn’t mean it’s easy to do.”

Still to be determined is the project’s impact on patient satisfaction scores, although the hospitalists reported that they found the training and feedback helpful.

References

1. Quinn K, Neeman N, Mourad M, Sliwka D. Communication coaching: A multifaceted intervention to improve physician-patient communication [abstract]. J Hosp Med. 2012;7 Suppl 2:S108.
2. Sokol PE, Wynia MK. There and Home Again, Safely: Five Responsibilities of Ambulatory Practices in High Quality Care Transitions. American Medical Association website. http://www.ama-assn.org/resources/doc/patient-safety/ambulatory-practices.pdf. Accessed February 12, 2013.
3. Dharmarajan K, Hsieh AF, Lin Z, et al. Diagnoses and timing of 30-day readmissions after hospitalization for heart failure, acute myocardial infarction, or pneumonia. JAMA. 2013;309(4):355-363.
4. JAMA Internal Medicine. Nearly one-third of physicians report missing electronic notification of test results. JAMA Internal Medicine website. Available at: http://media.jamanetwork.com/news-item/nearly-one-third-of-physicians-report-missing-electronic-notification-of-test-results/.Accessed April 8, 2013.
5. Miliard M. VA enlists telehealth for disasters. Healthcare IT News website. http://www.healthcareitnews.com/news/va-enlists-telehealth-disasters. Published February 27, 2013. Accessed April 1, 2013.

In a poster presented at HM12, Kathryn Quinn, MPH, CPPS, FACHE, described how her quality team at the University of California at San Francisco (UCSF) developed a checklist to improve physician communication with patients, then taught it to the attending hospitalist faculty.¹ The project began with a list of 29 best practices for patient-physician interaction, as identified in medical literature. Hospitalists then voted for the elements they felt were most important to their practice, as well as those best able to be measured, and a top-10 list was created.

Quinn, the program manager for quality and safety in the division of hospital medicine at UCSF, says the communication best practices were “chosen by the people whose practices we are trying to change.”

The quality team presented the best practices in one-hour training sessions that included small-group role plays, explains co-investigator and UCSF hospitalist Diane Sliwka, MD. The training extended to outpatient physicians, medical specialists, and chief residents. Participants also were provided a laminated pocket card listing the interventions. They also received feedback from structured observations with patients on service.

Quinn says UCSF hospitalists have improved at knocking and asking permission to enter patient rooms, introducing themselves by name and role, and encouraging questions at the end of the interaction. They have been less successful at inquiring about the patient’s concerns early in the interview and at discussing duration of treatment and next steps.

“We learned that it takes more than just talk,” Quinn says. “Just telling physicians how to improve communication doesn’t mean it’s easy to do.”

Still to be determined is the project’s impact on patient satisfaction scores, although the hospitalists reported that they found the training and feedback helpful.

References

1. Quinn K, Neeman N, Mourad M, Sliwka D. Communication coaching: A multifaceted intervention to improve physician-patient communication [abstract]. J Hosp Med. 2012;7 Suppl 2:S108.
2. Sokol PE, Wynia MK. There and Home Again, Safely: Five Responsibilities of Ambulatory Practices in High Quality Care Transitions. American Medical Association website. http://www.ama-assn.org/resources/doc/patient-safety/ambulatory-practices.pdf. Accessed February 12, 2013.
3. Dharmarajan K, Hsieh AF, Lin Z, et al. Diagnoses and timing of 30-day readmissions after hospitalization for heart failure, acute myocardial infarction, or pneumonia. JAMA. 2013;309(4):355-363.
4. JAMA Internal Medicine. Nearly one-third of physicians report missing electronic notification of test results. JAMA Internal Medicine website. Available at: http://media.jamanetwork.com/news-item/nearly-one-third-of-physicians-report-missing-electronic-notification-of-test-results/.Accessed April 8, 2013.
5. Miliard M. VA enlists telehealth for disasters. Healthcare IT News website. http://www.healthcareitnews.com/news/va-enlists-telehealth-disasters. Published February 27, 2013. Accessed April 1, 2013.

In a poster presented at HM12, Kathryn Quinn, MPH, CPPS, FACHE, described how her quality team at the University of California at San Francisco (UCSF) developed a checklist to improve physician communication with patients, then taught it to the attending hospitalist faculty.¹ The project began with a list of 29 best practices for patient-physician interaction, as identified in medical literature. Hospitalists then voted for the elements they felt were most important to their practice, as well as those best able to be measured, and a top-10 list was created.

Quinn, the program manager for quality and safety in the division of hospital medicine at UCSF, says the communication best practices were “chosen by the people whose practices we are trying to change.”

The quality team presented the best practices in one-hour training sessions that included small-group role plays, explains co-investigator and UCSF hospitalist Diane Sliwka, MD. The training extended to outpatient physicians, medical specialists, and chief residents. Participants also were provided a laminated pocket card listing the interventions. They also received feedback from structured observations with patients on service.

Quinn says UCSF hospitalists have improved at knocking and asking permission to enter patient rooms, introducing themselves by name and role, and encouraging questions at the end of the interaction. They have been less successful at inquiring about the patient’s concerns early in the interview and at discussing duration of treatment and next steps.

“We learned that it takes more than just talk,” Quinn says. “Just telling physicians how to improve communication doesn’t mean it’s easy to do.”

Still to be determined is the project’s impact on patient satisfaction scores, although the hospitalists reported that they found the training and feedback helpful.

References

1. Quinn K, Neeman N, Mourad M, Sliwka D. Communication coaching: A multifaceted intervention to improve physician-patient communication [abstract]. J Hosp Med. 2012;7 Suppl 2:S108.
2. Sokol PE, Wynia MK. There and Home Again, Safely: Five Responsibilities of Ambulatory Practices in High Quality Care Transitions. American Medical Association website. http://www.ama-assn.org/resources/doc/patient-safety/ambulatory-practices.pdf. Accessed February 12, 2013.
3. Dharmarajan K, Hsieh AF, Lin Z, et al. Diagnoses and timing of 30-day readmissions after hospitalization for heart failure, acute myocardial infarction, or pneumonia. JAMA. 2013;309(4):355-363.
4. JAMA Internal Medicine. Nearly one-third of physicians report missing electronic notification of test results. JAMA Internal Medicine website. Available at: http://media.jamanetwork.com/news-item/nearly-one-third-of-physicians-report-missing-electronic-notification-of-test-results/.Accessed April 8, 2013.
5. Miliard M. VA enlists telehealth for disasters. Healthcare IT News website. http://www.healthcareitnews.com/news/va-enlists-telehealth-disasters. Published February 27, 2013. Accessed April 1, 2013.

From informal polls I’ve recently conducted of hospitalists, many are not even aware they are part of an accountable-care organization (ACO). And if they are aware, they might not be engaging in meaningful dialogue with ACO leaders about their role in these organizations. But, in the long term, ACOs will need to bring hospitalists to the table in order to be successful.

Are You Part of an ACO?

David Muhlestein, who blogs for Health Affairs, tracks the growth of ACOs around the country. He states that, as of Jan. 31, there were 428 ACOs in the U.S. (see Figure 1).¹ In terms of numbers, Florida, Texas, and California lead the nation with 42, 33, and 46 ACOs, respectively. So it is likely that you are part of an ACO. If you are unsure, ask your chief medical officer or president of the medical staff.

How ACOs Work

All ACOs seek to manage a group, or population, of patients as efficiently as possible while maintaining or improving quality of care. For Medicare ACOs, the goal is to bring together hospitals and physicians in order to share savings derived from efficiencies in care. But before any savings can be shared, the Medicare ACO must demonstrate that it achieved high-quality care across four domains, totaling 33 individual quality measures. (see Table 1)

Main Flavors of ACOs

There are two types of ACOs: private ACOs and Medicare ACOs. Prior to Medicare ACOs, which were launched in January 2012, there were 150 private-sector ACOs, and this number continues to grow. Private ACOs represent a heterogeneous group in terms of reimbursement model. Some operate under shared savings programs; others use full or partial capitation, bundled payments, and/or other types of arrangements. But nearly all ACOs operate under the premise that the incentives used to make care more efficient and less costly can only be applied if measurable quality is maintained or improved. ACOs do not pay doctors or hospitals more unless high quality is demonstrated.

ACO Quality Measures and Hospitalists

Most of the 33 quality measures required by Medicare ACOs are based in ambulatory practice. These include measures related to blood pressure, immunizations, cancer, and fall-risk screening, and measures for diabetics, such as lipids and hemoglobin A1C. However, there are a few measures for which hospitalists should share in accountability, including:

• All-cause hospital readmission rate—risk-standardized;
• Ambulatory sensitive condition hospital admission rates (CHF, COPD); and
• Medication reconciliation after discharge from an inpatient facility.

Four Key Actions for Hospitalists

Hospitalists make a significant contribution to the quality and the financial performance of ACOs. In addition to the quality metrics cited above, hospitalists impact the inpatient portion of the overall population’s cost of care. Furthermore, hospitalists are vital partners in the care coordination required for an ACO to be successful.

Here are four actions I suggest taking in order for your hospitalist group to be effective as participants in an ACO:

1. Have a representative from your group participate in ACO committees that address hospital utilization and related matters, such as care coordination impacting pre- and post-hospital care.
2. Learn how to work with ACO case managers on care transitions, including post-discharge follow-up and information transfer.
3. Understand an ACO’s approach to engagement of and coordination with post-acute-care facilities. The ability of a post-acute facility, such a skilled nursing facility, to accept patients who have complex care needs, to manage changes in condition in the facility when appropriate, and to send complete information upon transfer to the hospital are important strategies for an ACO’s success.
4. Understand how an ACO reports quality and cost performance and how savings will be shared among participants.

Mindset Change

If hospitalists are part of the chain of ACO physicians and providers held accountable for the health of a population of patients, we must work more closely with the medical home/neighborhood, post-acute-care facilities, and home-care providers. The change in mindset will occur only if we have a set of tools to get the job done, such as case managers and information technology, and the appropriate incentives to support better care coordination. I encourage my fellow hospitalists to make things happen, instead of taking a passive role in this monumental transformation.

Reference

1. Muhlestein D. Continued growth of public and private accountable care organizations. Health Affairs website. Available at: http://healthaffairs.org/blog/2013/02/19/continued-growth-of-public-and-private-accountable-care-organizations. Accessed March 16, 2013.

Dr. Whitcomb is medical director of healthcare quality at Baystate Medical Center in Springfield, Mass. He is a co-founder and past president of SHM. Email him at wfwhit@comcast.net.

From informal polls I’ve recently conducted of hospitalists, many are not even aware they are part of an accountable-care organization (ACO). And if they are aware, they might not be engaging in meaningful dialogue with ACO leaders about their role in these organizations. But, in the long term, ACOs will need to bring hospitalists to the table in order to be successful.

Are You Part of an ACO?

David Muhlestein, who blogs for Health Affairs, tracks the growth of ACOs around the country. He states that, as of Jan. 31, there were 428 ACOs in the U.S. (see Figure 1).¹ In terms of numbers, Florida, Texas, and California lead the nation with 42, 33, and 46 ACOs, respectively. So it is likely that you are part of an ACO. If you are unsure, ask your chief medical officer or president of the medical staff.

How ACOs Work

All ACOs seek to manage a group, or population, of patients as efficiently as possible while maintaining or improving quality of care. For Medicare ACOs, the goal is to bring together hospitals and physicians in order to share savings derived from efficiencies in care. But before any savings can be shared, the Medicare ACO must demonstrate that it achieved high-quality care across four domains, totaling 33 individual quality measures. (see Table 1)

Main Flavors of ACOs

There are two types of ACOs: private ACOs and Medicare ACOs. Prior to Medicare ACOs, which were launched in January 2012, there were 150 private-sector ACOs, and this number continues to grow. Private ACOs represent a heterogeneous group in terms of reimbursement model. Some operate under shared savings programs; others use full or partial capitation, bundled payments, and/or other types of arrangements. But nearly all ACOs operate under the premise that the incentives used to make care more efficient and less costly can only be applied if measurable quality is maintained or improved. ACOs do not pay doctors or hospitals more unless high quality is demonstrated.

ACO Quality Measures and Hospitalists

Most of the 33 quality measures required by Medicare ACOs are based in ambulatory practice. These include measures related to blood pressure, immunizations, cancer, and fall-risk screening, and measures for diabetics, such as lipids and hemoglobin A1C. However, there are a few measures for which hospitalists should share in accountability, including:

• All-cause hospital readmission rate—risk-standardized;
• Ambulatory sensitive condition hospital admission rates (CHF, COPD); and
• Medication reconciliation after discharge from an inpatient facility.

Four Key Actions for Hospitalists

Hospitalists make a significant contribution to the quality and the financial performance of ACOs. In addition to the quality metrics cited above, hospitalists impact the inpatient portion of the overall population’s cost of care. Furthermore, hospitalists are vital partners in the care coordination required for an ACO to be successful.

Here are four actions I suggest taking in order for your hospitalist group to be effective as participants in an ACO:

1. Have a representative from your group participate in ACO committees that address hospital utilization and related matters, such as care coordination impacting pre- and post-hospital care.
2. Learn how to work with ACO case managers on care transitions, including post-discharge follow-up and information transfer.
3. Understand an ACO’s approach to engagement of and coordination with post-acute-care facilities. The ability of a post-acute facility, such a skilled nursing facility, to accept patients who have complex care needs, to manage changes in condition in the facility when appropriate, and to send complete information upon transfer to the hospital are important strategies for an ACO’s success.
4. Understand how an ACO reports quality and cost performance and how savings will be shared among participants.

Mindset Change

If hospitalists are part of the chain of ACO physicians and providers held accountable for the health of a population of patients, we must work more closely with the medical home/neighborhood, post-acute-care facilities, and home-care providers. The change in mindset will occur only if we have a set of tools to get the job done, such as case managers and information technology, and the appropriate incentives to support better care coordination. I encourage my fellow hospitalists to make things happen, instead of taking a passive role in this monumental transformation.

Reference

1. Muhlestein D. Continued growth of public and private accountable care organizations. Health Affairs website. Available at: http://healthaffairs.org/blog/2013/02/19/continued-growth-of-public-and-private-accountable-care-organizations. Accessed March 16, 2013.

Dr. Whitcomb is medical director of healthcare quality at Baystate Medical Center in Springfield, Mass. He is a co-founder and past president of SHM. Email him at wfwhit@comcast.net.

From informal polls I’ve recently conducted of hospitalists, many are not even aware they are part of an accountable-care organization (ACO). And if they are aware, they might not be engaging in meaningful dialogue with ACO leaders about their role in these organizations. But, in the long term, ACOs will need to bring hospitalists to the table in order to be successful.

Are You Part of an ACO?

David Muhlestein, who blogs for Health Affairs, tracks the growth of ACOs around the country. He states that, as of Jan. 31, there were 428 ACOs in the U.S. (see Figure 1).¹ In terms of numbers, Florida, Texas, and California lead the nation with 42, 33, and 46 ACOs, respectively. So it is likely that you are part of an ACO. If you are unsure, ask your chief medical officer or president of the medical staff.

How ACOs Work

All ACOs seek to manage a group, or population, of patients as efficiently as possible while maintaining or improving quality of care. For Medicare ACOs, the goal is to bring together hospitals and physicians in order to share savings derived from efficiencies in care. But before any savings can be shared, the Medicare ACO must demonstrate that it achieved high-quality care across four domains, totaling 33 individual quality measures. (see Table 1)

Main Flavors of ACOs

There are two types of ACOs: private ACOs and Medicare ACOs. Prior to Medicare ACOs, which were launched in January 2012, there were 150 private-sector ACOs, and this number continues to grow. Private ACOs represent a heterogeneous group in terms of reimbursement model. Some operate under shared savings programs; others use full or partial capitation, bundled payments, and/or other types of arrangements. But nearly all ACOs operate under the premise that the incentives used to make care more efficient and less costly can only be applied if measurable quality is maintained or improved. ACOs do not pay doctors or hospitals more unless high quality is demonstrated.

ACO Quality Measures and Hospitalists

Most of the 33 quality measures required by Medicare ACOs are based in ambulatory practice. These include measures related to blood pressure, immunizations, cancer, and fall-risk screening, and measures for diabetics, such as lipids and hemoglobin A1C. However, there are a few measures for which hospitalists should share in accountability, including:

• All-cause hospital readmission rate—risk-standardized;
• Ambulatory sensitive condition hospital admission rates (CHF, COPD); and
• Medication reconciliation after discharge from an inpatient facility.

Four Key Actions for Hospitalists

Hospitalists make a significant contribution to the quality and the financial performance of ACOs. In addition to the quality metrics cited above, hospitalists impact the inpatient portion of the overall population’s cost of care. Furthermore, hospitalists are vital partners in the care coordination required for an ACO to be successful.

Here are four actions I suggest taking in order for your hospitalist group to be effective as participants in an ACO:

1. Have a representative from your group participate in ACO committees that address hospital utilization and related matters, such as care coordination impacting pre- and post-hospital care.
2. Learn how to work with ACO case managers on care transitions, including post-discharge follow-up and information transfer.
3. Understand an ACO’s approach to engagement of and coordination with post-acute-care facilities. The ability of a post-acute facility, such a skilled nursing facility, to accept patients who have complex care needs, to manage changes in condition in the facility when appropriate, and to send complete information upon transfer to the hospital are important strategies for an ACO’s success.
4. Understand how an ACO reports quality and cost performance and how savings will be shared among participants.

Mindset Change

If hospitalists are part of the chain of ACO physicians and providers held accountable for the health of a population of patients, we must work more closely with the medical home/neighborhood, post-acute-care facilities, and home-care providers. The change in mindset will occur only if we have a set of tools to get the job done, such as case managers and information technology, and the appropriate incentives to support better care coordination. I encourage my fellow hospitalists to make things happen, instead of taking a passive role in this monumental transformation.

Reference

1. Muhlestein D. Continued growth of public and private accountable care organizations. Health Affairs website. Available at: http://healthaffairs.org/blog/2013/02/19/continued-growth-of-public-and-private-accountable-care-organizations. Accessed March 16, 2013.

Dr. Whitcomb is medical director of healthcare quality at Baystate Medical Center in Springfield, Mass. He is a co-founder and past president of SHM. Email him at wfwhit@comcast.net.

Johnbuck Creamer, MD

SHM added a new item to its 2012 State of Hospital Medicine report: the ratio of respondents’ observation admissions to inpatient admission encounters. This metric was added because observation encounters have been increasing, with financial effects on hospitals and patients. SHM survey respondents reported a 20% observation rate for both adult and pediatric practice groups (see Figure 1).

Johnbuck Creamer, MD

Under observation status, services that used to be billed as inpatient status (e.g. chest pain evaluation, treatment of asthma exacerbation) must be billed by the hospital at much lower outpatient rates. Some hospitals have responded to this financial pressure by creating observation units or making other operational adjustments. One recent analysis suggested that nationwide adoption of such efforts could save billions of dollars.¹

Becoming lean enough to do short work in short time, though, does not address all of the observation-related issues facing hospitals. When the Centers for Medicare & Medicaid Services’ (CMS) Recovery Audit Contractors (RACs) determine retrospectively that an inpatient admission should have been an observation encounter, the hospital’s payment is not downgraded but forfeited.² This development has prompted hospitals to preemptively opt for observation status for certain patients. Case managers and providers increasingly are spending time reviewing inpatient versus observation status throughout a patient’s stay. Many hospitals have turned to third-party contractors to help review observation status.

Observation status has financial implications for patients as well. In the past year, USA Today, The Wall Street Journal, and CNN Money all have reported on patients hit with unexpected out-of-pocket expenses related to observation care.^3,4,5 A common theme: Medicare patient hospitalized with an acute fracture, managed nonoperatively but requiring rehabilitation prior to returning home. These patients found out too late that observation, a status they were often unaware of, did not qualify for CMS’ three-day inpatient requirement to cover rehabilitation costs. Some patients were charged exorbitant prices for noncovered “outpatient” services, such as providing their routine medications.

Advocacy groups have joined the fray on patients’ behalf, and legal challenges have ensued. AARP and others are educating patients about observation status—and their right to challenge it. The Center for Medicare Advocacy (www.kslaw.com/Library/publication/HH111411_Bagnall.pdf) has filed a lawsuit against the U.S. Department of Health and Human Services on behalf of patients hit with uncovered rehabilitation costs, and the American Hospital Association has teamed with several hospitals to sue over funds forfeited in RAC audits (www.aha.org/content/12/121101-aha-hhs-medicare-com.pdf). Both houses of Congress have legislation (H.R. 1543 and S. 818) seeking to count observation days toward the Medicare three-day rule. For its part, CMS has promised to review observation status and, hopefully, clarify the rules.

Hospitalists, meanwhile, are gearing up for more observation care. The 2012 State of Hospital Medicine report shows that 37% of adult groups and 28% of pediatric groups reported having primary responsibility for observation or short-stay units. My own hospital runs both a clinical decision unit in the ED and a short-stay unit staffed by our hospitalist group. As SHM tracks observation status in future surveys, HM groups will be able to follow this phenomenon among their colleagues and benchmark their own rates of observation encounters.

Dr. Creamer is medical director of the short-stay unit at MetroHealth Medical Center in Cleveland and a member of SHM’s Practice Analysis Committee.

References

1. Feng Z, Wright DB, Mor V. Sharp rise in Medicare enrollees being held in hospitals for observation raises concerns about causes and consequences. Health Aff (Millwood). 2012;31(6):1251-1259.
2. Baugh CW, Venkatesh AK, Hilton JA, Samuel PA, Schuur JD, Bohan JS. Making greater use of dedicated hospital observation units for many short-stay patients could save $3.1 billion a year. Health Aff (Millwood). 2012;31(10):2314-2323.
3. Gengler A. The painful new trend in Medicare. CNN Money website. Available at: http://money.cnn.com/2012/08/07/pf/medicare-rehab-costs.moneymag/index.htm. Accessed March 6, 2013.
4. Jaffe S. Patients held for observation can face steep drug bills. USA Today website. Available at: http://usatoday30.usatoday.com/money/industries/health/drugs/story/2012-04-30/drugs-can-be-expensive-in-observation-care/54646378/1. Accessed March 6, 2013.
5. Landro L. Filling a gap between ERs and inpatient rooms. The Wall Street Journal website. Available at: http://online.wsj.com/article/SB10001424052970204349404578101060863887052.html. Accessed March 6, 2013.

Johnbuck Creamer, MD

SHM added a new item to its 2012 State of Hospital Medicine report: the ratio of respondents’ observation admissions to inpatient admission encounters. This metric was added because observation encounters have been increasing, with financial effects on hospitals and patients. SHM survey respondents reported a 20% observation rate for both adult and pediatric practice groups (see Figure 1).

Johnbuck Creamer, MD

Under observation status, services that used to be billed as inpatient status (e.g. chest pain evaluation, treatment of asthma exacerbation) must be billed by the hospital at much lower outpatient rates. Some hospitals have responded to this financial pressure by creating observation units or making other operational adjustments. One recent analysis suggested that nationwide adoption of such efforts could save billions of dollars.¹

Becoming lean enough to do short work in short time, though, does not address all of the observation-related issues facing hospitals. When the Centers for Medicare & Medicaid Services’ (CMS) Recovery Audit Contractors (RACs) determine retrospectively that an inpatient admission should have been an observation encounter, the hospital’s payment is not downgraded but forfeited.² This development has prompted hospitals to preemptively opt for observation status for certain patients. Case managers and providers increasingly are spending time reviewing inpatient versus observation status throughout a patient’s stay. Many hospitals have turned to third-party contractors to help review observation status.

Observation status has financial implications for patients as well. In the past year, USA Today, The Wall Street Journal, and CNN Money all have reported on patients hit with unexpected out-of-pocket expenses related to observation care.^3,4,5 A common theme: Medicare patient hospitalized with an acute fracture, managed nonoperatively but requiring rehabilitation prior to returning home. These patients found out too late that observation, a status they were often unaware of, did not qualify for CMS’ three-day inpatient requirement to cover rehabilitation costs. Some patients were charged exorbitant prices for noncovered “outpatient” services, such as providing their routine medications.

Advocacy groups have joined the fray on patients’ behalf, and legal challenges have ensued. AARP and others are educating patients about observation status—and their right to challenge it. The Center for Medicare Advocacy (www.kslaw.com/Library/publication/HH111411_Bagnall.pdf) has filed a lawsuit against the U.S. Department of Health and Human Services on behalf of patients hit with uncovered rehabilitation costs, and the American Hospital Association has teamed with several hospitals to sue over funds forfeited in RAC audits (www.aha.org/content/12/121101-aha-hhs-medicare-com.pdf). Both houses of Congress have legislation (H.R. 1543 and S. 818) seeking to count observation days toward the Medicare three-day rule. For its part, CMS has promised to review observation status and, hopefully, clarify the rules.

Hospitalists, meanwhile, are gearing up for more observation care. The 2012 State of Hospital Medicine report shows that 37% of adult groups and 28% of pediatric groups reported having primary responsibility for observation or short-stay units. My own hospital runs both a clinical decision unit in the ED and a short-stay unit staffed by our hospitalist group. As SHM tracks observation status in future surveys, HM groups will be able to follow this phenomenon among their colleagues and benchmark their own rates of observation encounters.

Dr. Creamer is medical director of the short-stay unit at MetroHealth Medical Center in Cleveland and a member of SHM’s Practice Analysis Committee.

References

1. Feng Z, Wright DB, Mor V. Sharp rise in Medicare enrollees being held in hospitals for observation raises concerns about causes and consequences. Health Aff (Millwood). 2012;31(6):1251-1259.
2. Baugh CW, Venkatesh AK, Hilton JA, Samuel PA, Schuur JD, Bohan JS. Making greater use of dedicated hospital observation units for many short-stay patients could save $3.1 billion a year. Health Aff (Millwood). 2012;31(10):2314-2323.
3. Gengler A. The painful new trend in Medicare. CNN Money website. Available at: http://money.cnn.com/2012/08/07/pf/medicare-rehab-costs.moneymag/index.htm. Accessed March 6, 2013.
4. Jaffe S. Patients held for observation can face steep drug bills. USA Today website. Available at: http://usatoday30.usatoday.com/money/industries/health/drugs/story/2012-04-30/drugs-can-be-expensive-in-observation-care/54646378/1. Accessed March 6, 2013.
5. Landro L. Filling a gap between ERs and inpatient rooms. The Wall Street Journal website. Available at: http://online.wsj.com/article/SB10001424052970204349404578101060863887052.html. Accessed March 6, 2013.

Johnbuck Creamer, MD

SHM added a new item to its 2012 State of Hospital Medicine report: the ratio of respondents’ observation admissions to inpatient admission encounters. This metric was added because observation encounters have been increasing, with financial effects on hospitals and patients. SHM survey respondents reported a 20% observation rate for both adult and pediatric practice groups (see Figure 1).

Johnbuck Creamer, MD

Under observation status, services that used to be billed as inpatient status (e.g. chest pain evaluation, treatment of asthma exacerbation) must be billed by the hospital at much lower outpatient rates. Some hospitals have responded to this financial pressure by creating observation units or making other operational adjustments. One recent analysis suggested that nationwide adoption of such efforts could save billions of dollars.¹

Becoming lean enough to do short work in short time, though, does not address all of the observation-related issues facing hospitals. When the Centers for Medicare & Medicaid Services’ (CMS) Recovery Audit Contractors (RACs) determine retrospectively that an inpatient admission should have been an observation encounter, the hospital’s payment is not downgraded but forfeited.² This development has prompted hospitals to preemptively opt for observation status for certain patients. Case managers and providers increasingly are spending time reviewing inpatient versus observation status throughout a patient’s stay. Many hospitals have turned to third-party contractors to help review observation status.

Observation status has financial implications for patients as well. In the past year, USA Today, The Wall Street Journal, and CNN Money all have reported on patients hit with unexpected out-of-pocket expenses related to observation care.^3,4,5 A common theme: Medicare patient hospitalized with an acute fracture, managed nonoperatively but requiring rehabilitation prior to returning home. These patients found out too late that observation, a status they were often unaware of, did not qualify for CMS’ three-day inpatient requirement to cover rehabilitation costs. Some patients were charged exorbitant prices for noncovered “outpatient” services, such as providing their routine medications.

Advocacy groups have joined the fray on patients’ behalf, and legal challenges have ensued. AARP and others are educating patients about observation status—and their right to challenge it. The Center for Medicare Advocacy (www.kslaw.com/Library/publication/HH111411_Bagnall.pdf) has filed a lawsuit against the U.S. Department of Health and Human Services on behalf of patients hit with uncovered rehabilitation costs, and the American Hospital Association has teamed with several hospitals to sue over funds forfeited in RAC audits (www.aha.org/content/12/121101-aha-hhs-medicare-com.pdf). Both houses of Congress have legislation (H.R. 1543 and S. 818) seeking to count observation days toward the Medicare three-day rule. For its part, CMS has promised to review observation status and, hopefully, clarify the rules.

Hospitalists, meanwhile, are gearing up for more observation care. The 2012 State of Hospital Medicine report shows that 37% of adult groups and 28% of pediatric groups reported having primary responsibility for observation or short-stay units. My own hospital runs both a clinical decision unit in the ED and a short-stay unit staffed by our hospitalist group. As SHM tracks observation status in future surveys, HM groups will be able to follow this phenomenon among their colleagues and benchmark their own rates of observation encounters.

Dr. Creamer is medical director of the short-stay unit at MetroHealth Medical Center in Cleveland and a member of SHM’s Practice Analysis Committee.

References

1. Feng Z, Wright DB, Mor V. Sharp rise in Medicare enrollees being held in hospitals for observation raises concerns about causes and consequences. Health Aff (Millwood). 2012;31(6):1251-1259.
2. Baugh CW, Venkatesh AK, Hilton JA, Samuel PA, Schuur JD, Bohan JS. Making greater use of dedicated hospital observation units for many short-stay patients could save $3.1 billion a year. Health Aff (Millwood). 2012;31(10):2314-2323.
3. Gengler A. The painful new trend in Medicare. CNN Money website. Available at: http://money.cnn.com/2012/08/07/pf/medicare-rehab-costs.moneymag/index.htm. Accessed March 6, 2013.
4. Jaffe S. Patients held for observation can face steep drug bills. USA Today website. Available at: http://usatoday30.usatoday.com/money/industries/health/drugs/story/2012-04-30/drugs-can-be-expensive-in-observation-care/54646378/1. Accessed March 6, 2013.
5. Landro L. Filling a gap between ERs and inpatient rooms. The Wall Street Journal website. Available at: http://online.wsj.com/article/SB10001424052970204349404578101060863887052.html. Accessed March 6, 2013.

For those who remain unaware, hospitalists who care for Medicaid patients will be getting a raise in 2013 and 2014. The reason is that the Affordable Care Act (ACA) requires Medicaid rates for specified primary-care services to be equal to those of Medicare rates during those two years, with the federal government paying the difference. Hospitalists generally meet the requirements and, therefore, will see this pay increase for their applicable Medicaid billing. For some context of the scope of this change, on average, Medicaid pays physicians at 66% of the national Medicare rates, although there is significant variation among the states.

To qualify, a physician must have a specialty designation of family medicine, internal medicine, or pediatrics, then further attest to board certification in one of those specialties or related subspecialties. Alternatively, the physician must have a 60% claims history for the specified evaluation and management (E&M) codes.

Multiple parties who have heard reports about state plans for Medicaid parity recently have contacted SHM; the plans, they report, intentionally would exclude hospitalists from the promised increase. There are variations on the explanation for the exclusion and where the idea is coming from, but the inquiries follow this general theme: “Since the definition of eligible physicians remains a grey area, states are developing alternative plans with a more narrow interpretation of the qualifying factors for the increase. These plans are only including physicians who practice in the community setting (i.e. not the hospital setting).”

This is demonstrably wrong. Even if states are having these discussions, such a plan is not going to come to fruition. The final rule for Medicaid parity, which essentially has the effect of law, is very clear: It does not allow for differing eligibility or alternate state plans.

The Centers for Medicare & Medicaid Services (CMS) specifically stated in the final rule that the increase is not limited to office-based primary-care services, but it will also include hospital observation and consultation for inpatient services provided by nonadmitting physicians, ED services, and critical-care services. In other words, a hospitalist who attests eligibility for their respective state Medicaid agency and bills 99231-3, 99221-3, 99238-9, etc., will receive the increased payment for these codes.

In response to an SHM inquiry for further clarification, CMS officials have stated, “The regulation requires that qualified physicians billing eligible codes receive higher payment. States do not have the latitude to exclude physicians simply because they practice in hospitals.”

It is possible that some confusion might be arising due to the recent controversies around the upcoming Medicaid expansion, which would extend Medicaid eligibility to individuals who earn up to 138% of the federal poverty line. Some states have chosen to opt out of this expansion and have publicly fought its implementation. The Medicaid parity provision is parallel to, but independent of, Medicaid expansion. Even if a state opts out of the expansion, the Medicaid payment increase for primary-care services should remain unaffected.

This isn’t to say that the Medicaid parity provision is a certainty. With the eyes of Congress turned toward budget cuts and austerity, the funds allocated for this temporary increase could easily be targeted. Regardless, any change in eligibility would require a rule change at the federal level, which is unlikely.

Many states have already devoted much time and effort on plans to implement the provision, and the plans were due to be submitted to CMS on March 31. It is pretty late in the game to consider changes. Barring an unlikely rule change or total elimination of funding, it is clear that hospitalists are eligible for the payment bump and should remain so.

Josh Boswell is SHM’s senior manager of government relations.

For those who remain unaware, hospitalists who care for Medicaid patients will be getting a raise in 2013 and 2014. The reason is that the Affordable Care Act (ACA) requires Medicaid rates for specified primary-care services to be equal to those of Medicare rates during those two years, with the federal government paying the difference. Hospitalists generally meet the requirements and, therefore, will see this pay increase for their applicable Medicaid billing. For some context of the scope of this change, on average, Medicaid pays physicians at 66% of the national Medicare rates, although there is significant variation among the states.

To qualify, a physician must have a specialty designation of family medicine, internal medicine, or pediatrics, then further attest to board certification in one of those specialties or related subspecialties. Alternatively, the physician must have a 60% claims history for the specified evaluation and management (E&M) codes.

Multiple parties who have heard reports about state plans for Medicaid parity recently have contacted SHM; the plans, they report, intentionally would exclude hospitalists from the promised increase. There are variations on the explanation for the exclusion and where the idea is coming from, but the inquiries follow this general theme: “Since the definition of eligible physicians remains a grey area, states are developing alternative plans with a more narrow interpretation of the qualifying factors for the increase. These plans are only including physicians who practice in the community setting (i.e. not the hospital setting).”

This is demonstrably wrong. Even if states are having these discussions, such a plan is not going to come to fruition. The final rule for Medicaid parity, which essentially has the effect of law, is very clear: It does not allow for differing eligibility or alternate state plans.

The Centers for Medicare & Medicaid Services (CMS) specifically stated in the final rule that the increase is not limited to office-based primary-care services, but it will also include hospital observation and consultation for inpatient services provided by nonadmitting physicians, ED services, and critical-care services. In other words, a hospitalist who attests eligibility for their respective state Medicaid agency and bills 99231-3, 99221-3, 99238-9, etc., will receive the increased payment for these codes.

In response to an SHM inquiry for further clarification, CMS officials have stated, “The regulation requires that qualified physicians billing eligible codes receive higher payment. States do not have the latitude to exclude physicians simply because they practice in hospitals.”

It is possible that some confusion might be arising due to the recent controversies around the upcoming Medicaid expansion, which would extend Medicaid eligibility to individuals who earn up to 138% of the federal poverty line. Some states have chosen to opt out of this expansion and have publicly fought its implementation. The Medicaid parity provision is parallel to, but independent of, Medicaid expansion. Even if a state opts out of the expansion, the Medicaid payment increase for primary-care services should remain unaffected.

This isn’t to say that the Medicaid parity provision is a certainty. With the eyes of Congress turned toward budget cuts and austerity, the funds allocated for this temporary increase could easily be targeted. Regardless, any change in eligibility would require a rule change at the federal level, which is unlikely.

Many states have already devoted much time and effort on plans to implement the provision, and the plans were due to be submitted to CMS on March 31. It is pretty late in the game to consider changes. Barring an unlikely rule change or total elimination of funding, it is clear that hospitalists are eligible for the payment bump and should remain so.

Josh Boswell is SHM’s senior manager of government relations.

For those who remain unaware, hospitalists who care for Medicaid patients will be getting a raise in 2013 and 2014. The reason is that the Affordable Care Act (ACA) requires Medicaid rates for specified primary-care services to be equal to those of Medicare rates during those two years, with the federal government paying the difference. Hospitalists generally meet the requirements and, therefore, will see this pay increase for their applicable Medicaid billing. For some context of the scope of this change, on average, Medicaid pays physicians at 66% of the national Medicare rates, although there is significant variation among the states.

To qualify, a physician must have a specialty designation of family medicine, internal medicine, or pediatrics, then further attest to board certification in one of those specialties or related subspecialties. Alternatively, the physician must have a 60% claims history for the specified evaluation and management (E&M) codes.

Multiple parties who have heard reports about state plans for Medicaid parity recently have contacted SHM; the plans, they report, intentionally would exclude hospitalists from the promised increase. There are variations on the explanation for the exclusion and where the idea is coming from, but the inquiries follow this general theme: “Since the definition of eligible physicians remains a grey area, states are developing alternative plans with a more narrow interpretation of the qualifying factors for the increase. These plans are only including physicians who practice in the community setting (i.e. not the hospital setting).”

This is demonstrably wrong. Even if states are having these discussions, such a plan is not going to come to fruition. The final rule for Medicaid parity, which essentially has the effect of law, is very clear: It does not allow for differing eligibility or alternate state plans.

The Centers for Medicare & Medicaid Services (CMS) specifically stated in the final rule that the increase is not limited to office-based primary-care services, but it will also include hospital observation and consultation for inpatient services provided by nonadmitting physicians, ED services, and critical-care services. In other words, a hospitalist who attests eligibility for their respective state Medicaid agency and bills 99231-3, 99221-3, 99238-9, etc., will receive the increased payment for these codes.

In response to an SHM inquiry for further clarification, CMS officials have stated, “The regulation requires that qualified physicians billing eligible codes receive higher payment. States do not have the latitude to exclude physicians simply because they practice in hospitals.”

It is possible that some confusion might be arising due to the recent controversies around the upcoming Medicaid expansion, which would extend Medicaid eligibility to individuals who earn up to 138% of the federal poverty line. Some states have chosen to opt out of this expansion and have publicly fought its implementation. The Medicaid parity provision is parallel to, but independent of, Medicaid expansion. Even if a state opts out of the expansion, the Medicaid payment increase for primary-care services should remain unaffected.

This isn’t to say that the Medicaid parity provision is a certainty. With the eyes of Congress turned toward budget cuts and austerity, the funds allocated for this temporary increase could easily be targeted. Regardless, any change in eligibility would require a rule change at the federal level, which is unlikely.

Many states have already devoted much time and effort on plans to implement the provision, and the plans were due to be submitted to CMS on March 31. It is pretty late in the game to consider changes. Barring an unlikely rule change or total elimination of funding, it is clear that hospitalists are eligible for the payment bump and should remain so.

Josh Boswell is SHM’s senior manager of government relations.

“Forty percent of physicians reported that their typical inpatient census exceeded safe levels at least monthly.”¹

This quote is taken from an article by Henry Michtalik and colleagues that appeared at the end of January this year in JAMA Internal Medicine. In 2010 the authors conducted an on-line survey asking hospitalists their perceptions of their workload. Respondents indicated that with concerning frequency a high workload prevented them from adequately discussing with patients treatment options or answering questions, delay admitting or discharging patients until the next day or shift, or in some other way risk patient safety or the overall quality of their work.

This alarming finding matches my anecdotal experience working with many different hospitalist groups around the country. I think few hospitalists were surprised by the survey’s findings. Excess hospitalist workloads are indeed a problem in some settings, and those who bear them are typically not shy about speaking out.

The demand for hospitalists has exceeded the supply of doctors available to do the work throughout the history of the field. Under the weight of stunningly rapid growth in referral volume, from about 1995 to 2002, it was reasonably common for the original doctors in a hospitalist practice to become overwhelmed and leave for other work after a year or two, sometimes resulting in the collapse of the practice. Most practices are no longer in such a rapid-growth phase, but for many of them, staffing has not yet caught up with workload. The result can be chronic excess work, and even if daily patient volume is not seen as being unsafe, the number of days or shifts worked might be excessive and lead to fatigue and poor performance.

Other Workload Data

The respondents to the Michtalik survey reported that regardless of any assistance, “they could safely see 15 patients per shift, if their effort was 100% clinical.” What we don’t know is how long their shifts were, whether they included things like ICU coverage, and how many shifts they work consecutively or in a year.

SHM’s 2012 State of Hospital Medicine report, which is based on 2011 data, provides additional context. It shows that hospitalists serving adult patients report a median 2,092 billed encounters annually (mean 2,245, standard deviation 1,161). They spread this work over a median 185 shifts (“work periods”) annually (mean 192). While there are lots of methodological problems in manipulating those numbers further, 2,092 encounters divided by 185 shifts yields 11.3 encounters per shift. These numbers exclude academicians who typically spend significant time in activities other than direct patient care, and I’m intentionally ignoring such issues as the night-shift doctor, who typically has low productivity, bringing down the average per full-time doctor in a practice.

The numbers from both surveys are sort of fuzzy because they aren’t audited or verified, but the 2012 State of Hospital Medicine data suggest that typical workloads aren’t too high in most practices, yet 40% of respondents in the Michtalik survey said they were high enough—unreasonably high—to risk quality and safety at least once a month.

One way to reconcile these findings is to take into account the standard deviation in daily volume in a single practice of about 30% to 40% on above or below the mean. If a hospitalist averages 14 encounters each day shift, then he should expect that the daily number might vary between about eight and 20. The Michtalik survey responses were likely reflecting the shifts on the high end.

Perspective

I wonder what a survey of physician workload opinions in other specialties would show, or what a survey of workers across all segments of the U.S. workforce in and out of healthcare would show. Of course, many or most jobs outside of healthcare don’t risk another’s health or well-being as significantly as ours do, but it would still be instructive to know how people in general think about the work they do.

I suspect a significant number of people across many different jobs feel like too much work is expected of them, and they can point to the ways their performance suffers as a result. It is difficult to know what portion of those who report too much work is just complaining versus a thoughtful self-reflection of the determinants of their performance. Lots of hospitalists do face worrisome high workloads, but some would probably still complain even with a much lower workload.

What Can Be Done?

For those practices facing remarkably high patient volumes, the solution is to make sure you’re recruiting additional doctors, and/or NPs/PAs, as fast as you can. But a portion of these practices must first convince their employers that more staff is needed. Some practices face a real uphill battle in getting the required additional funding, and the place to start is with a careful analysis of your current workload—based on hard numbers from your practice, not just anecdotes and estimates.

Don’t forget that some hospitalists put themselves in the position of having to manage high daily patient volumes by choosing a schedule of relatively few worked days annually. For example, a group working a seven-on/seven-off schedule that also has 14 shifts of time off means that each doctor will work only 168.5 shifts annually. Compressing a year’s worth of work into only 168 shifts means that each shift will be busy, and many will involve patient volumes that exceed what is seen as safe.

It could make more sense to titrate that same work volume over more annual shifts so that the average shift is less busy. I would love to see the Michtalik data segregated by those who work many shifts annually versus those who work few shifts. It is possible that those working more shifts have reported excessive workloads less often.

SHM has a role in influencing hospitalist workloads and promotes dissemination of data and opinions about it. At HM13 next month in Washington, D.C., I am leading a session titled “Hospitalist Workload: Is 15 the Right Number?” Although it won’t provide the “right” workload for all hospitalists, it will offer worthwhile data and food for thought.

It is much more difficult to do studies of how workload influences performance than something like effects of sleep deprivation on performance, so we may never get clear answers. You could take some consolation in the fact that successive surveys have shown little change or even modest decreases in annual patient encounters. But then again, maybe that hasn’t helped with excess work since providing hospital care gets harder and more complex every year.

Dr. Nelson has been a practicing hospitalist since 1988. He is co-founder and past president of SHM, and principal in Nelson Flores Hospital Medicine Consultants. He is co-director for SHM's "Best Practices in Managing a Hospital Medicine Program" course. Write to him at john.nelson@nelsonflores.com.

Reference

1. Michtalik HJ, Yeh HC, Pronovost PJ, Brotman DJ. Impact of attending physician workload on patient care: a survey of hospitalists. JAMA Intern Med. 2013;28:1-2.

“Forty percent of physicians reported that their typical inpatient census exceeded safe levels at least monthly.”¹

This quote is taken from an article by Henry Michtalik and colleagues that appeared at the end of January this year in JAMA Internal Medicine. In 2010 the authors conducted an on-line survey asking hospitalists their perceptions of their workload. Respondents indicated that with concerning frequency a high workload prevented them from adequately discussing with patients treatment options or answering questions, delay admitting or discharging patients until the next day or shift, or in some other way risk patient safety or the overall quality of their work.

This alarming finding matches my anecdotal experience working with many different hospitalist groups around the country. I think few hospitalists were surprised by the survey’s findings. Excess hospitalist workloads are indeed a problem in some settings, and those who bear them are typically not shy about speaking out.

The demand for hospitalists has exceeded the supply of doctors available to do the work throughout the history of the field. Under the weight of stunningly rapid growth in referral volume, from about 1995 to 2002, it was reasonably common for the original doctors in a hospitalist practice to become overwhelmed and leave for other work after a year or two, sometimes resulting in the collapse of the practice. Most practices are no longer in such a rapid-growth phase, but for many of them, staffing has not yet caught up with workload. The result can be chronic excess work, and even if daily patient volume is not seen as being unsafe, the number of days or shifts worked might be excessive and lead to fatigue and poor performance.

Other Workload Data

The respondents to the Michtalik survey reported that regardless of any assistance, “they could safely see 15 patients per shift, if their effort was 100% clinical.” What we don’t know is how long their shifts were, whether they included things like ICU coverage, and how many shifts they work consecutively or in a year.

SHM’s 2012 State of Hospital Medicine report, which is based on 2011 data, provides additional context. It shows that hospitalists serving adult patients report a median 2,092 billed encounters annually (mean 2,245, standard deviation 1,161). They spread this work over a median 185 shifts (“work periods”) annually (mean 192). While there are lots of methodological problems in manipulating those numbers further, 2,092 encounters divided by 185 shifts yields 11.3 encounters per shift. These numbers exclude academicians who typically spend significant time in activities other than direct patient care, and I’m intentionally ignoring such issues as the night-shift doctor, who typically has low productivity, bringing down the average per full-time doctor in a practice.

The numbers from both surveys are sort of fuzzy because they aren’t audited or verified, but the 2012 State of Hospital Medicine data suggest that typical workloads aren’t too high in most practices, yet 40% of respondents in the Michtalik survey said they were high enough—unreasonably high—to risk quality and safety at least once a month.

One way to reconcile these findings is to take into account the standard deviation in daily volume in a single practice of about 30% to 40% on above or below the mean. If a hospitalist averages 14 encounters each day shift, then he should expect that the daily number might vary between about eight and 20. The Michtalik survey responses were likely reflecting the shifts on the high end.

Perspective

I wonder what a survey of physician workload opinions in other specialties would show, or what a survey of workers across all segments of the U.S. workforce in and out of healthcare would show. Of course, many or most jobs outside of healthcare don’t risk another’s health or well-being as significantly as ours do, but it would still be instructive to know how people in general think about the work they do.

I suspect a significant number of people across many different jobs feel like too much work is expected of them, and they can point to the ways their performance suffers as a result. It is difficult to know what portion of those who report too much work is just complaining versus a thoughtful self-reflection of the determinants of their performance. Lots of hospitalists do face worrisome high workloads, but some would probably still complain even with a much lower workload.

What Can Be Done?

For those practices facing remarkably high patient volumes, the solution is to make sure you’re recruiting additional doctors, and/or NPs/PAs, as fast as you can. But a portion of these practices must first convince their employers that more staff is needed. Some practices face a real uphill battle in getting the required additional funding, and the place to start is with a careful analysis of your current workload—based on hard numbers from your practice, not just anecdotes and estimates.

Don’t forget that some hospitalists put themselves in the position of having to manage high daily patient volumes by choosing a schedule of relatively few worked days annually. For example, a group working a seven-on/seven-off schedule that also has 14 shifts of time off means that each doctor will work only 168.5 shifts annually. Compressing a year’s worth of work into only 168 shifts means that each shift will be busy, and many will involve patient volumes that exceed what is seen as safe.

It could make more sense to titrate that same work volume over more annual shifts so that the average shift is less busy. I would love to see the Michtalik data segregated by those who work many shifts annually versus those who work few shifts. It is possible that those working more shifts have reported excessive workloads less often.

SHM has a role in influencing hospitalist workloads and promotes dissemination of data and opinions about it. At HM13 next month in Washington, D.C., I am leading a session titled “Hospitalist Workload: Is 15 the Right Number?” Although it won’t provide the “right” workload for all hospitalists, it will offer worthwhile data and food for thought.

It is much more difficult to do studies of how workload influences performance than something like effects of sleep deprivation on performance, so we may never get clear answers. You could take some consolation in the fact that successive surveys have shown little change or even modest decreases in annual patient encounters. But then again, maybe that hasn’t helped with excess work since providing hospital care gets harder and more complex every year.

Dr. Nelson has been a practicing hospitalist since 1988. He is co-founder and past president of SHM, and principal in Nelson Flores Hospital Medicine Consultants. He is co-director for SHM's "Best Practices in Managing a Hospital Medicine Program" course. Write to him at john.nelson@nelsonflores.com.

Reference

1. Michtalik HJ, Yeh HC, Pronovost PJ, Brotman DJ. Impact of attending physician workload on patient care: a survey of hospitalists. JAMA Intern Med. 2013;28:1-2.

“Forty percent of physicians reported that their typical inpatient census exceeded safe levels at least monthly.”¹

This quote is taken from an article by Henry Michtalik and colleagues that appeared at the end of January this year in JAMA Internal Medicine. In 2010 the authors conducted an on-line survey asking hospitalists their perceptions of their workload. Respondents indicated that with concerning frequency a high workload prevented them from adequately discussing with patients treatment options or answering questions, delay admitting or discharging patients until the next day or shift, or in some other way risk patient safety or the overall quality of their work.

This alarming finding matches my anecdotal experience working with many different hospitalist groups around the country. I think few hospitalists were surprised by the survey’s findings. Excess hospitalist workloads are indeed a problem in some settings, and those who bear them are typically not shy about speaking out.

The demand for hospitalists has exceeded the supply of doctors available to do the work throughout the history of the field. Under the weight of stunningly rapid growth in referral volume, from about 1995 to 2002, it was reasonably common for the original doctors in a hospitalist practice to become overwhelmed and leave for other work after a year or two, sometimes resulting in the collapse of the practice. Most practices are no longer in such a rapid-growth phase, but for many of them, staffing has not yet caught up with workload. The result can be chronic excess work, and even if daily patient volume is not seen as being unsafe, the number of days or shifts worked might be excessive and lead to fatigue and poor performance.

Other Workload Data

The respondents to the Michtalik survey reported that regardless of any assistance, “they could safely see 15 patients per shift, if their effort was 100% clinical.” What we don’t know is how long their shifts were, whether they included things like ICU coverage, and how many shifts they work consecutively or in a year.

SHM’s 2012 State of Hospital Medicine report, which is based on 2011 data, provides additional context. It shows that hospitalists serving adult patients report a median 2,092 billed encounters annually (mean 2,245, standard deviation 1,161). They spread this work over a median 185 shifts (“work periods”) annually (mean 192). While there are lots of methodological problems in manipulating those numbers further, 2,092 encounters divided by 185 shifts yields 11.3 encounters per shift. These numbers exclude academicians who typically spend significant time in activities other than direct patient care, and I’m intentionally ignoring such issues as the night-shift doctor, who typically has low productivity, bringing down the average per full-time doctor in a practice.

The numbers from both surveys are sort of fuzzy because they aren’t audited or verified, but the 2012 State of Hospital Medicine data suggest that typical workloads aren’t too high in most practices, yet 40% of respondents in the Michtalik survey said they were high enough—unreasonably high—to risk quality and safety at least once a month.

One way to reconcile these findings is to take into account the standard deviation in daily volume in a single practice of about 30% to 40% on above or below the mean. If a hospitalist averages 14 encounters each day shift, then he should expect that the daily number might vary between about eight and 20. The Michtalik survey responses were likely reflecting the shifts on the high end.

Perspective

I wonder what a survey of physician workload opinions in other specialties would show, or what a survey of workers across all segments of the U.S. workforce in and out of healthcare would show. Of course, many or most jobs outside of healthcare don’t risk another’s health or well-being as significantly as ours do, but it would still be instructive to know how people in general think about the work they do.

I suspect a significant number of people across many different jobs feel like too much work is expected of them, and they can point to the ways their performance suffers as a result. It is difficult to know what portion of those who report too much work is just complaining versus a thoughtful self-reflection of the determinants of their performance. Lots of hospitalists do face worrisome high workloads, but some would probably still complain even with a much lower workload.

What Can Be Done?

For those practices facing remarkably high patient volumes, the solution is to make sure you’re recruiting additional doctors, and/or NPs/PAs, as fast as you can. But a portion of these practices must first convince their employers that more staff is needed. Some practices face a real uphill battle in getting the required additional funding, and the place to start is with a careful analysis of your current workload—based on hard numbers from your practice, not just anecdotes and estimates.

Don’t forget that some hospitalists put themselves in the position of having to manage high daily patient volumes by choosing a schedule of relatively few worked days annually. For example, a group working a seven-on/seven-off schedule that also has 14 shifts of time off means that each doctor will work only 168.5 shifts annually. Compressing a year’s worth of work into only 168 shifts means that each shift will be busy, and many will involve patient volumes that exceed what is seen as safe.

It could make more sense to titrate that same work volume over more annual shifts so that the average shift is less busy. I would love to see the Michtalik data segregated by those who work many shifts annually versus those who work few shifts. It is possible that those working more shifts have reported excessive workloads less often.

SHM has a role in influencing hospitalist workloads and promotes dissemination of data and opinions about it. At HM13 next month in Washington, D.C., I am leading a session titled “Hospitalist Workload: Is 15 the Right Number?” Although it won’t provide the “right” workload for all hospitalists, it will offer worthwhile data and food for thought.

It is much more difficult to do studies of how workload influences performance than something like effects of sleep deprivation on performance, so we may never get clear answers. You could take some consolation in the fact that successive surveys have shown little change or even modest decreases in annual patient encounters. But then again, maybe that hasn’t helped with excess work since providing hospital care gets harder and more complex every year.

Dr. Nelson has been a practicing hospitalist since 1988. He is co-founder and past president of SHM, and principal in Nelson Flores Hospital Medicine Consultants. He is co-director for SHM's "Best Practices in Managing a Hospital Medicine Program" course. Write to him at john.nelson@nelsonflores.com.

Reference

1. Michtalik HJ, Yeh HC, Pronovost PJ, Brotman DJ. Impact of attending physician workload on patient care: a survey of hospitalists. JAMA Intern Med. 2013;28:1-2.

Eight educational tracks, an equal number of credit bearing pre-courses, a score of small-group forums, three plenaries, and an SHM Town Hall meeting offers a lot of professional development in a four-day span. But that’s just a sampling of what HM13 has slated May 16-19 at the Gaylord National Resort & Convention Center in National Harbor, Md., just outside Washington, D.C.

So how does one get the most value out of the conference?

“The highest-yield content is going to depend on what your background is and how to spend that time in a way that augments your knowledge, your perspective, or your exposure to like-minded colleagues in a very individual way,” says HM13 course director Daniel Brotman, MD, FACP, SFHM, director of the hospitalist program at Johns Hopkins Hospital in Baltimore. “One of the things that’s so cool about hospital medicine is its diversity.”

But don’t take Dr. Brotman’s well-educated word for it. Here’s a list of recommendations from Team Hospitalist, the only reader-involvement group of its kind in HM, on events they would not miss this year.

The New Anticoagulants: When Should We Be Using Them?

2:45 p.m., May 17

Dr. Ma: “I’m very interested about the new anticoagulants talk. What I’m curious to see is what the speaker thinks about the survivability of these medications in our society, with so many lawyers. Pradaxa already has fallen out of favor. Let’s see what happens to Xarelto.”

How do CFOs Value Their Hospitalist Programs?

2:50 p.m., May 18

Dr. Ma: “The problem today is CFOs have to valuate their hospitalists in the setting of other specialists who also receive subsidies. There is less money to be spent on hospitalists, as other specialists vie for this allotment of savings from hospital-based value purchasing.”

Check out our 6-minute feature video: "Five Reasons You Should Attend HM13"

Mentoring/Coaching an Improvement Team: Lessons from SHM’s Mentored Implementation Programs

2:45 p.m., May 17

Dr. Perumalswami: “As a Project BOOST physician mentor in Illinois, I would highly recommend the session because the discussion will involve an inside look into valuable experience-based observations and analysis for the success of any process improvement team. The nature of teams and the culture of improvement at various sites will also be discussed. There will be a mentee side of the presentation, too, which will help other mentors of implementation programs better understand what the issues are ‘from the other side.’”

Strategies to Improve Communication with Patients and Families to Improve Care

2:45 p.m., May 17

Dr. Hale: “It is well known in pediatrics that you are treating two patients: both the child and the parents. If the family has a shared understanding of the child’s illness and there is collaboration for the care plan, there will be improved care.”

Neonatal HSV: When to Consider It, How to Evaluate for It, and How to Treat It

11 a.m., May 18

Dr. Hale: “Neonatal HSV is a devastating disease. It is essential to recognize high-risk patients to decrease morbidity and mortality for this illness. There have been recent updates in the understanding of epidemiology of this disease that can assist the provider in recognizing high-risk patients.”

Supporting Transition for Youth with Special Healthcare Needs: Coordinating Care and Preparing to Pass the Baton

4:15 p.m., May 18

Dr. Hale: “The transition of adolescents and young adults from pediatric-care teams to adult-medicine-care teams should be seamless for the sake of the patient, but often it is a blurry transition over the course of years. This session is high-yield for both pediatric and adult hospitalists.”

Getting Ready for Physician Value-Based Purchasing

9:50 a.m., May 19

Dr. Simone: “Dr. [Pat] Torcson’s presentation last year was one of the best at HM12, and I expect this year to be the same. He chairs SHM’s Performance Measurement and Reporting Committee and is well versed in these matters. He speaks in terms that will capture all audiences, whether they are experienced or new to the business aspects of medicine. Highly recommended.”

BOOSTing the Hospital Discharge Process: What Works and What Doesn’t

10:35 a.m., May 17

Dr. Simone: “Both panelists are excellent presenters as well as leading authorities when it comes to discharge processes. This presentation is very timely with the new CMS payment system, which penalizes unnecessary and unexpected readmissions.”

Success Stories: How to Integrate NPs and PAs into a Hospitalist Practice

4:15 p.m., May 18

Cardin: “This is an important session because, as every hard-working hospitalist knows, there simply aren’t enough physicians to fill the needs of our medically complex hospitalized patients. It is simply a reality that there will be an increased need in the future for mid-level providers, and it is valuable to maximize the success of a program by learning how to assimilate them into hospitalized practice.”

Diagnostic Errors and the Hospitalist: Why They Happen and How to Avoid Them

12:45 p.m., May 17

Cardin: “Half of practicing medicine is pattern recognition, and if there are patterns to making diagnostic errors, it would be so valuable to be aware of them. We have tremendous responsibility when caring for patients, and I think it is always beneficial to learn from mistakes.”

Richard Quinn is a freelance writer in New Jersey.

Eight educational tracks, an equal number of credit bearing pre-courses, a score of small-group forums, three plenaries, and an SHM Town Hall meeting offers a lot of professional development in a four-day span. But that’s just a sampling of what HM13 has slated May 16-19 at the Gaylord National Resort & Convention Center in National Harbor, Md., just outside Washington, D.C.

So how does one get the most value out of the conference?

“The highest-yield content is going to depend on what your background is and how to spend that time in a way that augments your knowledge, your perspective, or your exposure to like-minded colleagues in a very individual way,” says HM13 course director Daniel Brotman, MD, FACP, SFHM, director of the hospitalist program at Johns Hopkins Hospital in Baltimore. “One of the things that’s so cool about hospital medicine is its diversity.”

But don’t take Dr. Brotman’s well-educated word for it. Here’s a list of recommendations from Team Hospitalist, the only reader-involvement group of its kind in HM, on events they would not miss this year.

The New Anticoagulants: When Should We Be Using Them?

2:45 p.m., May 17

Dr. Ma: “I’m very interested about the new anticoagulants talk. What I’m curious to see is what the speaker thinks about the survivability of these medications in our society, with so many lawyers. Pradaxa already has fallen out of favor. Let’s see what happens to Xarelto.”

How do CFOs Value Their Hospitalist Programs?

2:50 p.m., May 18

Dr. Ma: “The problem today is CFOs have to valuate their hospitalists in the setting of other specialists who also receive subsidies. There is less money to be spent on hospitalists, as other specialists vie for this allotment of savings from hospital-based value purchasing.”

Check out our 6-minute feature video: "Five Reasons You Should Attend HM13"

Mentoring/Coaching an Improvement Team: Lessons from SHM’s Mentored Implementation Programs

2:45 p.m., May 17

Dr. Perumalswami: “As a Project BOOST physician mentor in Illinois, I would highly recommend the session because the discussion will involve an inside look into valuable experience-based observations and analysis for the success of any process improvement team. The nature of teams and the culture of improvement at various sites will also be discussed. There will be a mentee side of the presentation, too, which will help other mentors of implementation programs better understand what the issues are ‘from the other side.’”

Strategies to Improve Communication with Patients and Families to Improve Care

2:45 p.m., May 17

Dr. Hale: “It is well known in pediatrics that you are treating two patients: both the child and the parents. If the family has a shared understanding of the child’s illness and there is collaboration for the care plan, there will be improved care.”

Neonatal HSV: When to Consider It, How to Evaluate for It, and How to Treat It

11 a.m., May 18

Dr. Hale: “Neonatal HSV is a devastating disease. It is essential to recognize high-risk patients to decrease morbidity and mortality for this illness. There have been recent updates in the understanding of epidemiology of this disease that can assist the provider in recognizing high-risk patients.”

Supporting Transition for Youth with Special Healthcare Needs: Coordinating Care and Preparing to Pass the Baton

4:15 p.m., May 18

Dr. Hale: “The transition of adolescents and young adults from pediatric-care teams to adult-medicine-care teams should be seamless for the sake of the patient, but often it is a blurry transition over the course of years. This session is high-yield for both pediatric and adult hospitalists.”

Getting Ready for Physician Value-Based Purchasing

9:50 a.m., May 19

Dr. Simone: “Dr. [Pat] Torcson’s presentation last year was one of the best at HM12, and I expect this year to be the same. He chairs SHM’s Performance Measurement and Reporting Committee and is well versed in these matters. He speaks in terms that will capture all audiences, whether they are experienced or new to the business aspects of medicine. Highly recommended.”

BOOSTing the Hospital Discharge Process: What Works and What Doesn’t

10:35 a.m., May 17

Dr. Simone: “Both panelists are excellent presenters as well as leading authorities when it comes to discharge processes. This presentation is very timely with the new CMS payment system, which penalizes unnecessary and unexpected readmissions.”

Success Stories: How to Integrate NPs and PAs into a Hospitalist Practice

4:15 p.m., May 18

Cardin: “This is an important session because, as every hard-working hospitalist knows, there simply aren’t enough physicians to fill the needs of our medically complex hospitalized patients. It is simply a reality that there will be an increased need in the future for mid-level providers, and it is valuable to maximize the success of a program by learning how to assimilate them into hospitalized practice.”

Diagnostic Errors and the Hospitalist: Why They Happen and How to Avoid Them

12:45 p.m., May 17

Cardin: “Half of practicing medicine is pattern recognition, and if there are patterns to making diagnostic errors, it would be so valuable to be aware of them. We have tremendous responsibility when caring for patients, and I think it is always beneficial to learn from mistakes.”

Richard Quinn is a freelance writer in New Jersey.

Eight educational tracks, an equal number of credit bearing pre-courses, a score of small-group forums, three plenaries, and an SHM Town Hall meeting offers a lot of professional development in a four-day span. But that’s just a sampling of what HM13 has slated May 16-19 at the Gaylord National Resort & Convention Center in National Harbor, Md., just outside Washington, D.C.

So how does one get the most value out of the conference?

“The highest-yield content is going to depend on what your background is and how to spend that time in a way that augments your knowledge, your perspective, or your exposure to like-minded colleagues in a very individual way,” says HM13 course director Daniel Brotman, MD, FACP, SFHM, director of the hospitalist program at Johns Hopkins Hospital in Baltimore. “One of the things that’s so cool about hospital medicine is its diversity.”

But don’t take Dr. Brotman’s well-educated word for it. Here’s a list of recommendations from Team Hospitalist, the only reader-involvement group of its kind in HM, on events they would not miss this year.

The New Anticoagulants: When Should We Be Using Them?

2:45 p.m., May 17

Dr. Ma: “I’m very interested about the new anticoagulants talk. What I’m curious to see is what the speaker thinks about the survivability of these medications in our society, with so many lawyers. Pradaxa already has fallen out of favor. Let’s see what happens to Xarelto.”

How do CFOs Value Their Hospitalist Programs?

2:50 p.m., May 18

Dr. Ma: “The problem today is CFOs have to valuate their hospitalists in the setting of other specialists who also receive subsidies. There is less money to be spent on hospitalists, as other specialists vie for this allotment of savings from hospital-based value purchasing.”

Check out our 6-minute feature video: "Five Reasons You Should Attend HM13"

Mentoring/Coaching an Improvement Team: Lessons from SHM’s Mentored Implementation Programs

2:45 p.m., May 17

Dr. Perumalswami: “As a Project BOOST physician mentor in Illinois, I would highly recommend the session because the discussion will involve an inside look into valuable experience-based observations and analysis for the success of any process improvement team. The nature of teams and the culture of improvement at various sites will also be discussed. There will be a mentee side of the presentation, too, which will help other mentors of implementation programs better understand what the issues are ‘from the other side.’”

Strategies to Improve Communication with Patients and Families to Improve Care

2:45 p.m., May 17

Dr. Hale: “It is well known in pediatrics that you are treating two patients: both the child and the parents. If the family has a shared understanding of the child’s illness and there is collaboration for the care plan, there will be improved care.”

Neonatal HSV: When to Consider It, How to Evaluate for It, and How to Treat It

11 a.m., May 18

Dr. Hale: “Neonatal HSV is a devastating disease. It is essential to recognize high-risk patients to decrease morbidity and mortality for this illness. There have been recent updates in the understanding of epidemiology of this disease that can assist the provider in recognizing high-risk patients.”

Supporting Transition for Youth with Special Healthcare Needs: Coordinating Care and Preparing to Pass the Baton

4:15 p.m., May 18

Dr. Hale: “The transition of adolescents and young adults from pediatric-care teams to adult-medicine-care teams should be seamless for the sake of the patient, but often it is a blurry transition over the course of years. This session is high-yield for both pediatric and adult hospitalists.”

Getting Ready for Physician Value-Based Purchasing

9:50 a.m., May 19

Dr. Simone: “Dr. [Pat] Torcson’s presentation last year was one of the best at HM12, and I expect this year to be the same. He chairs SHM’s Performance Measurement and Reporting Committee and is well versed in these matters. He speaks in terms that will capture all audiences, whether they are experienced or new to the business aspects of medicine. Highly recommended.”

BOOSTing the Hospital Discharge Process: What Works and What Doesn’t

10:35 a.m., May 17

Dr. Simone: “Both panelists are excellent presenters as well as leading authorities when it comes to discharge processes. This presentation is very timely with the new CMS payment system, which penalizes unnecessary and unexpected readmissions.”

Success Stories: How to Integrate NPs and PAs into a Hospitalist Practice

4:15 p.m., May 18

Cardin: “This is an important session because, as every hard-working hospitalist knows, there simply aren’t enough physicians to fill the needs of our medically complex hospitalized patients. It is simply a reality that there will be an increased need in the future for mid-level providers, and it is valuable to maximize the success of a program by learning how to assimilate them into hospitalized practice.”

Diagnostic Errors and the Hospitalist: Why They Happen and How to Avoid Them

12:45 p.m., May 17

Cardin: “Half of practicing medicine is pattern recognition, and if there are patterns to making diagnostic errors, it would be so valuable to be aware of them. We have tremendous responsibility when caring for patients, and I think it is always beneficial to learn from mistakes.”

Richard Quinn is a freelance writer in New Jersey.

Success as an ACO likely won’t come from any one strategy, but from many. Christopher Kim, MD, MBA, SFHM, a hospitalist and associate professor of internal medicine at the University of Michigan, says the Michigan Pioneer ACO serving roughly 20,000 beneficiaries in the state’s southeastern region has benefited greatly from a variety of pre-existing relationships and initiatives. The university’s medical center, one of 10 participants in a Medicare ACO precursor called the Physician Group Practice demonstration project, was among the few sites to successfully meet the requirements and gain the full cost savings benefits in all five years.

The newer ACO, which officially launched in January 2012, pairs the university’s Faculty Group Practice with Integrated Health Associates Inc. (IHA), a large multispecialty private-practice group. Many IHA providers already had access to the university’s electronic health records so they could track admitted patients. One preliminary collaborative effort between the two entities hinted at a trend toward lower readmission rates among a small group of patients who were seen by a primary-care provider within seven days of a hospital discharge, underscoring the importance of a smooth transition.

Providers also have been able to tap into statewide initiatives aimed at improving quality and care coordination in key areas, such as cardiovascular disease, cancer, and hospital care transitions (sponsored by Blue Cross Blue Shield of Michigan).

These programs have helped physician organizations and hospitals throughout the state become familiar with best practices.

—Christopher Kim, MD, MBA, SFHM, associate professor of internal medicine, University of Michigan Health System, Ann Arbor

“These programs helped physician organizations and hospitals throughout the state become familiar with best practices related to these kinds of conditions,” Dr. Kim says, “and I think partly because of that, we were very prepared to work on a quality-improvement initiative such as this while also improving efficiency.”

Listen to Dr. Kim discuss the added responsibility hospitalists in ACOs like the one formed between the university faculty and a large multi-specialty practice called Integrated Health Associates, Inc.

For stratifying beneficiaries by risk, the ACO has benefited from a separate initiative called the Michigan Primary Care Transformation Project, which uses the concept of a pyramid to classify increasingly complicated patients. A complex-case manager, typically an advanced practice nurse, acts as the point person for guiding patients in the upper half of the pyramid toward the best resources while preventing unnecessary duplication of tasks or consultation referrals. Optimal coordination means that hospitalists need to communicate effectively with these managers as well as with other providers.

From Medicare claims supplied by CMS, Beth Israel Deaconess Physician Organization (BIDPO) in the Boston metropolitan region has used software to identify its highest-risk patients, or those most likely to be admitted to the hospital within the next 12 months. As part of the process, BIDPO officials asked doctors to validate the results based on their own patient records and observations.

The ACO has hired nurse practitioners through a company called INSPIRIS Massachusetts to visit its sickest and frailest Medicare beneficiaries at home to prevent hospital admissions and to avoid post-discharge readmissions among the highest-risk patients. BIDPO also uses nurse care managers to do telephone-based care management for less acute patients, and is asking emergency department staff to recognize patients who could be sent home safely with appropriate care rather than be admitted. Patients with cellulitis, for example, could be treated via IV antibiotic therapy at home, a service made possible through a collaboration with a home infusion company.

Dr. Parker, BIDPO’s medical director, says hospitalists will be key to understanding the need for excellent inpatient care and thoughtful, comprehensive discharge planning that helps avoid adverse events post-discharge.

Success as an ACO likely won’t come from any one strategy, but from many. Christopher Kim, MD, MBA, SFHM, a hospitalist and associate professor of internal medicine at the University of Michigan, says the Michigan Pioneer ACO serving roughly 20,000 beneficiaries in the state’s southeastern region has benefited greatly from a variety of pre-existing relationships and initiatives. The university’s medical center, one of 10 participants in a Medicare ACO precursor called the Physician Group Practice demonstration project, was among the few sites to successfully meet the requirements and gain the full cost savings benefits in all five years.

The newer ACO, which officially launched in January 2012, pairs the university’s Faculty Group Practice with Integrated Health Associates Inc. (IHA), a large multispecialty private-practice group. Many IHA providers already had access to the university’s electronic health records so they could track admitted patients. One preliminary collaborative effort between the two entities hinted at a trend toward lower readmission rates among a small group of patients who were seen by a primary-care provider within seven days of a hospital discharge, underscoring the importance of a smooth transition.

Providers also have been able to tap into statewide initiatives aimed at improving quality and care coordination in key areas, such as cardiovascular disease, cancer, and hospital care transitions (sponsored by Blue Cross Blue Shield of Michigan).

These programs have helped physician organizations and hospitals throughout the state become familiar with best practices.

—Christopher Kim, MD, MBA, SFHM, associate professor of internal medicine, University of Michigan Health System, Ann Arbor

“These programs helped physician organizations and hospitals throughout the state become familiar with best practices related to these kinds of conditions,” Dr. Kim says, “and I think partly because of that, we were very prepared to work on a quality-improvement initiative such as this while also improving efficiency.”

Listen to Dr. Kim discuss the added responsibility hospitalists in ACOs like the one formed between the university faculty and a large multi-specialty practice called Integrated Health Associates, Inc.

For stratifying beneficiaries by risk, the ACO has benefited from a separate initiative called the Michigan Primary Care Transformation Project, which uses the concept of a pyramid to classify increasingly complicated patients. A complex-case manager, typically an advanced practice nurse, acts as the point person for guiding patients in the upper half of the pyramid toward the best resources while preventing unnecessary duplication of tasks or consultation referrals. Optimal coordination means that hospitalists need to communicate effectively with these managers as well as with other providers.

From Medicare claims supplied by CMS, Beth Israel Deaconess Physician Organization (BIDPO) in the Boston metropolitan region has used software to identify its highest-risk patients, or those most likely to be admitted to the hospital within the next 12 months. As part of the process, BIDPO officials asked doctors to validate the results based on their own patient records and observations.

The ACO has hired nurse practitioners through a company called INSPIRIS Massachusetts to visit its sickest and frailest Medicare beneficiaries at home to prevent hospital admissions and to avoid post-discharge readmissions among the highest-risk patients. BIDPO also uses nurse care managers to do telephone-based care management for less acute patients, and is asking emergency department staff to recognize patients who could be sent home safely with appropriate care rather than be admitted. Patients with cellulitis, for example, could be treated via IV antibiotic therapy at home, a service made possible through a collaboration with a home infusion company.

Dr. Parker, BIDPO’s medical director, says hospitalists will be key to understanding the need for excellent inpatient care and thoughtful, comprehensive discharge planning that helps avoid adverse events post-discharge.

Success as an ACO likely won’t come from any one strategy, but from many. Christopher Kim, MD, MBA, SFHM, a hospitalist and associate professor of internal medicine at the University of Michigan, says the Michigan Pioneer ACO serving roughly 20,000 beneficiaries in the state’s southeastern region has benefited greatly from a variety of pre-existing relationships and initiatives. The university’s medical center, one of 10 participants in a Medicare ACO precursor called the Physician Group Practice demonstration project, was among the few sites to successfully meet the requirements and gain the full cost savings benefits in all five years.

The newer ACO, which officially launched in January 2012, pairs the university’s Faculty Group Practice with Integrated Health Associates Inc. (IHA), a large multispecialty private-practice group. Many IHA providers already had access to the university’s electronic health records so they could track admitted patients. One preliminary collaborative effort between the two entities hinted at a trend toward lower readmission rates among a small group of patients who were seen by a primary-care provider within seven days of a hospital discharge, underscoring the importance of a smooth transition.

Providers also have been able to tap into statewide initiatives aimed at improving quality and care coordination in key areas, such as cardiovascular disease, cancer, and hospital care transitions (sponsored by Blue Cross Blue Shield of Michigan).

These programs have helped physician organizations and hospitals throughout the state become familiar with best practices.

—Christopher Kim, MD, MBA, SFHM, associate professor of internal medicine, University of Michigan Health System, Ann Arbor

“These programs helped physician organizations and hospitals throughout the state become familiar with best practices related to these kinds of conditions,” Dr. Kim says, “and I think partly because of that, we were very prepared to work on a quality-improvement initiative such as this while also improving efficiency.”

Listen to Dr. Kim discuss the added responsibility hospitalists in ACOs like the one formed between the university faculty and a large multi-specialty practice called Integrated Health Associates, Inc.

For stratifying beneficiaries by risk, the ACO has benefited from a separate initiative called the Michigan Primary Care Transformation Project, which uses the concept of a pyramid to classify increasingly complicated patients. A complex-case manager, typically an advanced practice nurse, acts as the point person for guiding patients in the upper half of the pyramid toward the best resources while preventing unnecessary duplication of tasks or consultation referrals. Optimal coordination means that hospitalists need to communicate effectively with these managers as well as with other providers.

From Medicare claims supplied by CMS, Beth Israel Deaconess Physician Organization (BIDPO) in the Boston metropolitan region has used software to identify its highest-risk patients, or those most likely to be admitted to the hospital within the next 12 months. As part of the process, BIDPO officials asked doctors to validate the results based on their own patient records and observations.

The ACO has hired nurse practitioners through a company called INSPIRIS Massachusetts to visit its sickest and frailest Medicare beneficiaries at home to prevent hospital admissions and to avoid post-discharge readmissions among the highest-risk patients. BIDPO also uses nurse care managers to do telephone-based care management for less acute patients, and is asking emergency department staff to recognize patients who could be sent home safely with appropriate care rather than be admitted. Patients with cellulitis, for example, could be treated via IV antibiotic therapy at home, a service made possible through a collaboration with a home infusion company.

Dr. Parker, BIDPO’s medical director, says hospitalists will be key to understanding the need for excellent inpatient care and thoughtful, comprehensive discharge planning that helps avoid adverse events post-discharge.

click for large version

Throughout much of 2011, ambivalence plagued efforts by the Centers for Medicare & Medicaid Services (CMS) to expand the federal government’s reach into integrated care delivery to help improve patient outcomes while lowering costs. Critics panned the initial draft of regulations for a large accountable-care demonstration project called the Shared Savings Program, and prominent medical groups announced their intention to sit on the sidelines.

At the start of 2013, the atmosphere couldn’t be more different. CMS won over most of its critics with a well-received final version of the rules that provided more incentives for groups to form accountable-care organizations (ACOs), and the presidential election provided more clarity about the future of healthcare reform. Medical groups around the country are readily jumping on the ACO bandwagon, with its emphasis on shared responsibility among provider groups for a defined pool of patients.

Few medical groups have enough data to suggest whether their varied approaches to managing patient populations will lead to better-quality care that’s also more affordable; the first batch of Medicare ACO data isn’t expected until later this spring. And healthcare experts differ on which models and components are likely to make the biggest long-term impact; even the precise definition of an ACO remains a moving target. But industry observers say they’re surprised and encouraged not only by the speed with which the movement has taken off, but also by the breadth of models being investigated, the strong engagement of the private sector, and a spreading sense of cautious optimism.

“This is actually moving faster than I thought—faster than I think anybody thought,” says SHM Public Policy Committee chair Ron Greeno, MD, FCCP, MHM.

Although CMS still is in the beginning stages of its work and has focused most of its efforts on reviewing applications and providing feedback on organizations’ historical expenditure and utilization patterns, agency officials say the ACO initiative has not encountered any unexpected setbacks. “As with any new program, there are bumps along the way, but I don’t think we’ve experienced anything that is out of the ordinary,” says John Pilotte, director of Performance-Based Payment Policy in the Center for Medicare. “We’re pretty happy with where we are with the program.”

The Shared Savings Program, which Pilotte describes as “an easier on-ramp” to population management for providers and offers low financial risk in exchange for a modest level of shared cost savings, is proving especially popular. Combined, several hundred organizations submitted applications for the program’s second and third rounds, which began July 1, 2012, and Jan. 1, 2013, respectively.

“Two hundred twenty ACOs are currently up and running, and we expect to continue to add ACOs to the program annually,” Pilotte says.

Some people have said they haven’t had to make any major changes to their organization, while some people have had to drastically think how they provide care.

—David Muhlestein, analyst, Leavitt Partners

Last January, another 32 groups joined Medicare’s Pioneer ACO program, designed for more experienced organizations with more resources. The groups assume more risk, and in return are more handsomely rewarded if they meet benchmarks.

All told, the tally of confirmed ACOs in the U.S. reached 428 by the end of January, according to Leavitt Partners, a Salt Lake City-based healthcare consulting firm that is tracking the growth of accountable care (see “A Sampling of Significant ACO Programs,” below). David Muhlestein, an analyst with Leavitt Partners, says private ACOs now account for roughly half of that total, a trend driven by their ability to experiment with different approaches and more easily track costs through clearly defined patient populations.

The central role for hospitalists within most ACOs is rooted in the reality that hospital care is the most expensive part of healthcare. Successfully implementing a plan to coordinate care and prevent hospital readmissions might not correlate directly with improved quality metrics, but it can lead to significant savings.

The diverse ACO models now being tested, however, could result in varying responsibilities for hospitalists, depending on the focal points of the sponsoring entities. After patients have been admitted to a hospital, for example, many hospitalists assume responsibility for managing inpatient care and the inpatient-outpatient handoff. A main goal of a physician-owned medical group, such as an independent practice association (IPA), by contrast, is to keep patients out of the hospital altogether, placing more of the focus on primary and specialty care. An IPA that forms an ACO, Muhlestein says, might hire its own hospitalists to monitor the care of patients in affiliated hospitals while using the association’s approach to limiting costs.

ACO participants also have varied widely in the effort expended to get up to speed. “Some people have said they haven’t had to make any major changes to their organization, while some people have had to drastically think how they provide care,” Muhlestein says. In general, many of the former have had the luxury of working within relatively integrated facilities and building upon existing frameworks, whereas many of the latter previously toiled away in silos and are now scrambling to establish more cohesive working relationships from scratch.

Optimism Abounds

Though many ACOs have only limited data so far, Muhlestein says most are generally optimistic that their early results will be positive. Even so, Dr. Greeno says, he fully expects the Pioneer ACOs to produce the best results among the Medicare demonstration projects. Those organizations already have successful track records in managing patient populations, and the Pioneer model’s incentives are stronger because the groups are assuming more risk. If the Pioneer ACO results are eclipsed by those of the Shared Savings Program, he says, “I’d fall out of my chair.”

The Beth Israel Deaconess Physician Organization (BIDPO) now has four global payment contracts, including its Pioneer ACO arrangement with CMS that serves 33,000 beneficiaries in the Boston metropolitan region. “The decision-making around joining was a recognition that the fee-for-service model is highly dysfunctional,” says Richard Parker, MD, BIDPO’s medical director. “Our organization and our leadership believed that most of the country, both private payor and governmental payor, would be moving toward global payment and that it would be to our advantage to get in early.”

Dr. Parker

Despite the complicated rollout and delays in receiving Medicare data on patients from CMS, Dr. Parker says, the feedback from both providers and patients has been mostly positive. “I would say, anecdotally, that the doctors seem appreciative that we’re trying to fix some of these gaps in care that we all know have existed for some time,” he says. “And, anecdotally from the patients, we get appreciation that we’re trying to take better care of them.”

Chris Coleman, chief financial officer for Phoenix-based Banner Health Network, another Pioneer ACO participant, says the project fits in well with his company’s decision “to transform itself into more of a value-based, performance-based provider.” Banner’s ACO, which serves about 50,000 beneficiaries, is still setting up needed systems, including a consistent platform for electronic medical records throughout the entire provider network. Even during the building phase, however, Coleman says company officials have been pleasantly surprised by the ACO’s positive effect on utilization, patient care, and apparent savings.

Although the company has only a partial year of Medicare claims to go by, Coleman says the data look “pretty good” so far and suggest the ACO is on track for modest savings of perhaps 3% or 4%. Like BIDPO, Banner has other shared-risk agreements in place, including one for a Medicare Advantage population and another with a private payor. So far, Coleman says, those arrangements also seem to be “performing positively.”

Dr. Greeno and other experts see the best ACO results coming from such rapidly growing private arrangements, and early published data have been generally encouraging.¹ The ability to more narrowly define patient groups and assume more control over payments, he says, has allowed private ACOs to keep better track of costs and implement innovative population health interventions.

This is actually moving faster than I thought—faster than I think anybody thought.

—Ron Greeno, MD, FCCP, MHM, SHM Public Policy Committee chair

Built to Last?

Whether public, private, or a hybrid between the two, some ACOs are trying to manage the care of their entire patient pool and look at everything that might help them accrue cost savings. Others are focusing only on the sickest patients to reach their quality improvement (QI) and savings goals, and targeting specific parameters, such as blood pressure or medication adherence, for patients with myocardial infarction.

Dr. Goodroe

Joane Goodroe, an Atlanta-based healthcare consultant, favors the latter approach, at least for new ACOs. Goodroe recommends adopting a streamlined strategy that will get an ACO up and running, then allow the group to gradually add to it, rather than waiting until all of the right pieces fall into place. Her own data analysis of Medicare patients, for example, suggests that a diabetic who’s been an inpatient can average $50,000 in yearly costs, compared with $2,400 for a diabetic who has never been admitted to a hospital.

Setting up a system to manage every diabetic patient from the start, she says, would require too much time and money. “If you try to build the perfect ACO structure, it’s going to be too expensive for the results you initially get back,” she says, making it seem like the ACO is an unsustainable failure. “You’ve got to figure out how to build a cost-effective infrastructure while you’re also improving the care of the patients, and the best place to go is to target your sickest patients first.”

CMS’ Advance Payment ACO Model is designed to help by providing upfront payments to smaller ACO organizations that might lack capital, giving them an advance on potential shared savings so they can install the infrastructure and support structures necessary to redesign care.

To maximize the overall chances of success, Dr. Parker says, ACO leadership should be fully engaged, and each organization should have enough resources to address its own care management and information technology needs. “My goal as medical director is to improve the quality of care of the patients and, hopefully, also improve the working life of the doctors and staff,” he says. “And my belief and expectation is that if we do that, the cost of care will ultimately go down.”

Bryn Nelson is a freelance medical writer in Seattle.

Reference

1. Salmon RB, Sanderson MI, Walters BA, et al. Innovation profile: a collaborative accountable care model in three practices showed promising early results on costs and quality of care. Health Aff. 2012;31:2379-2387.

click for large version

Throughout much of 2011, ambivalence plagued efforts by the Centers for Medicare & Medicaid Services (CMS) to expand the federal government’s reach into integrated care delivery to help improve patient outcomes while lowering costs. Critics panned the initial draft of regulations for a large accountable-care demonstration project called the Shared Savings Program, and prominent medical groups announced their intention to sit on the sidelines.

At the start of 2013, the atmosphere couldn’t be more different. CMS won over most of its critics with a well-received final version of the rules that provided more incentives for groups to form accountable-care organizations (ACOs), and the presidential election provided more clarity about the future of healthcare reform. Medical groups around the country are readily jumping on the ACO bandwagon, with its emphasis on shared responsibility among provider groups for a defined pool of patients.

Few medical groups have enough data to suggest whether their varied approaches to managing patient populations will lead to better-quality care that’s also more affordable; the first batch of Medicare ACO data isn’t expected until later this spring. And healthcare experts differ on which models and components are likely to make the biggest long-term impact; even the precise definition of an ACO remains a moving target. But industry observers say they’re surprised and encouraged not only by the speed with which the movement has taken off, but also by the breadth of models being investigated, the strong engagement of the private sector, and a spreading sense of cautious optimism.

“This is actually moving faster than I thought—faster than I think anybody thought,” says SHM Public Policy Committee chair Ron Greeno, MD, FCCP, MHM.

Although CMS still is in the beginning stages of its work and has focused most of its efforts on reviewing applications and providing feedback on organizations’ historical expenditure and utilization patterns, agency officials say the ACO initiative has not encountered any unexpected setbacks. “As with any new program, there are bumps along the way, but I don’t think we’ve experienced anything that is out of the ordinary,” says John Pilotte, director of Performance-Based Payment Policy in the Center for Medicare. “We’re pretty happy with where we are with the program.”

The Shared Savings Program, which Pilotte describes as “an easier on-ramp” to population management for providers and offers low financial risk in exchange for a modest level of shared cost savings, is proving especially popular. Combined, several hundred organizations submitted applications for the program’s second and third rounds, which began July 1, 2012, and Jan. 1, 2013, respectively.

“Two hundred twenty ACOs are currently up and running, and we expect to continue to add ACOs to the program annually,” Pilotte says.

Some people have said they haven’t had to make any major changes to their organization, while some people have had to drastically think how they provide care.

—David Muhlestein, analyst, Leavitt Partners

Last January, another 32 groups joined Medicare’s Pioneer ACO program, designed for more experienced organizations with more resources. The groups assume more risk, and in return are more handsomely rewarded if they meet benchmarks.

All told, the tally of confirmed ACOs in the U.S. reached 428 by the end of January, according to Leavitt Partners, a Salt Lake City-based healthcare consulting firm that is tracking the growth of accountable care (see “A Sampling of Significant ACO Programs,” below). David Muhlestein, an analyst with Leavitt Partners, says private ACOs now account for roughly half of that total, a trend driven by their ability to experiment with different approaches and more easily track costs through clearly defined patient populations.

The central role for hospitalists within most ACOs is rooted in the reality that hospital care is the most expensive part of healthcare. Successfully implementing a plan to coordinate care and prevent hospital readmissions might not correlate directly with improved quality metrics, but it can lead to significant savings.

The diverse ACO models now being tested, however, could result in varying responsibilities for hospitalists, depending on the focal points of the sponsoring entities. After patients have been admitted to a hospital, for example, many hospitalists assume responsibility for managing inpatient care and the inpatient-outpatient handoff. A main goal of a physician-owned medical group, such as an independent practice association (IPA), by contrast, is to keep patients out of the hospital altogether, placing more of the focus on primary and specialty care. An IPA that forms an ACO, Muhlestein says, might hire its own hospitalists to monitor the care of patients in affiliated hospitals while using the association’s approach to limiting costs.

ACO participants also have varied widely in the effort expended to get up to speed. “Some people have said they haven’t had to make any major changes to their organization, while some people have had to drastically think how they provide care,” Muhlestein says. In general, many of the former have had the luxury of working within relatively integrated facilities and building upon existing frameworks, whereas many of the latter previously toiled away in silos and are now scrambling to establish more cohesive working relationships from scratch.

Optimism Abounds

Though many ACOs have only limited data so far, Muhlestein says most are generally optimistic that their early results will be positive. Even so, Dr. Greeno says, he fully expects the Pioneer ACOs to produce the best results among the Medicare demonstration projects. Those organizations already have successful track records in managing patient populations, and the Pioneer model’s incentives are stronger because the groups are assuming more risk. If the Pioneer ACO results are eclipsed by those of the Shared Savings Program, he says, “I’d fall out of my chair.”

The Beth Israel Deaconess Physician Organization (BIDPO) now has four global payment contracts, including its Pioneer ACO arrangement with CMS that serves 33,000 beneficiaries in the Boston metropolitan region. “The decision-making around joining was a recognition that the fee-for-service model is highly dysfunctional,” says Richard Parker, MD, BIDPO’s medical director. “Our organization and our leadership believed that most of the country, both private payor and governmental payor, would be moving toward global payment and that it would be to our advantage to get in early.”

Dr. Parker

Despite the complicated rollout and delays in receiving Medicare data on patients from CMS, Dr. Parker says, the feedback from both providers and patients has been mostly positive. “I would say, anecdotally, that the doctors seem appreciative that we’re trying to fix some of these gaps in care that we all know have existed for some time,” he says. “And, anecdotally from the patients, we get appreciation that we’re trying to take better care of them.”

Chris Coleman, chief financial officer for Phoenix-based Banner Health Network, another Pioneer ACO participant, says the project fits in well with his company’s decision “to transform itself into more of a value-based, performance-based provider.” Banner’s ACO, which serves about 50,000 beneficiaries, is still setting up needed systems, including a consistent platform for electronic medical records throughout the entire provider network. Even during the building phase, however, Coleman says company officials have been pleasantly surprised by the ACO’s positive effect on utilization, patient care, and apparent savings.

Although the company has only a partial year of Medicare claims to go by, Coleman says the data look “pretty good” so far and suggest the ACO is on track for modest savings of perhaps 3% or 4%. Like BIDPO, Banner has other shared-risk agreements in place, including one for a Medicare Advantage population and another with a private payor. So far, Coleman says, those arrangements also seem to be “performing positively.”

Dr. Greeno and other experts see the best ACO results coming from such rapidly growing private arrangements, and early published data have been generally encouraging.¹ The ability to more narrowly define patient groups and assume more control over payments, he says, has allowed private ACOs to keep better track of costs and implement innovative population health interventions.

This is actually moving faster than I thought—faster than I think anybody thought.

—Ron Greeno, MD, FCCP, MHM, SHM Public Policy Committee chair

Built to Last?

Whether public, private, or a hybrid between the two, some ACOs are trying to manage the care of their entire patient pool and look at everything that might help them accrue cost savings. Others are focusing only on the sickest patients to reach their quality improvement (QI) and savings goals, and targeting specific parameters, such as blood pressure or medication adherence, for patients with myocardial infarction.

Dr. Goodroe

Joane Goodroe, an Atlanta-based healthcare consultant, favors the latter approach, at least for new ACOs. Goodroe recommends adopting a streamlined strategy that will get an ACO up and running, then allow the group to gradually add to it, rather than waiting until all of the right pieces fall into place. Her own data analysis of Medicare patients, for example, suggests that a diabetic who’s been an inpatient can average $50,000 in yearly costs, compared with $2,400 for a diabetic who has never been admitted to a hospital.

Setting up a system to manage every diabetic patient from the start, she says, would require too much time and money. “If you try to build the perfect ACO structure, it’s going to be too expensive for the results you initially get back,” she says, making it seem like the ACO is an unsustainable failure. “You’ve got to figure out how to build a cost-effective infrastructure while you’re also improving the care of the patients, and the best place to go is to target your sickest patients first.”

CMS’ Advance Payment ACO Model is designed to help by providing upfront payments to smaller ACO organizations that might lack capital, giving them an advance on potential shared savings so they can install the infrastructure and support structures necessary to redesign care.

To maximize the overall chances of success, Dr. Parker says, ACO leadership should be fully engaged, and each organization should have enough resources to address its own care management and information technology needs. “My goal as medical director is to improve the quality of care of the patients and, hopefully, also improve the working life of the doctors and staff,” he says. “And my belief and expectation is that if we do that, the cost of care will ultimately go down.”

Bryn Nelson is a freelance medical writer in Seattle.

Reference

1. Salmon RB, Sanderson MI, Walters BA, et al. Innovation profile: a collaborative accountable care model in three practices showed promising early results on costs and quality of care. Health Aff. 2012;31:2379-2387.

click for large version

Throughout much of 2011, ambivalence plagued efforts by the Centers for Medicare & Medicaid Services (CMS) to expand the federal government’s reach into integrated care delivery to help improve patient outcomes while lowering costs. Critics panned the initial draft of regulations for a large accountable-care demonstration project called the Shared Savings Program, and prominent medical groups announced their intention to sit on the sidelines.

At the start of 2013, the atmosphere couldn’t be more different. CMS won over most of its critics with a well-received final version of the rules that provided more incentives for groups to form accountable-care organizations (ACOs), and the presidential election provided more clarity about the future of healthcare reform. Medical groups around the country are readily jumping on the ACO bandwagon, with its emphasis on shared responsibility among provider groups for a defined pool of patients.

Few medical groups have enough data to suggest whether their varied approaches to managing patient populations will lead to better-quality care that’s also more affordable; the first batch of Medicare ACO data isn’t expected until later this spring. And healthcare experts differ on which models and components are likely to make the biggest long-term impact; even the precise definition of an ACO remains a moving target. But industry observers say they’re surprised and encouraged not only by the speed with which the movement has taken off, but also by the breadth of models being investigated, the strong engagement of the private sector, and a spreading sense of cautious optimism.

“This is actually moving faster than I thought—faster than I think anybody thought,” says SHM Public Policy Committee chair Ron Greeno, MD, FCCP, MHM.

Although CMS still is in the beginning stages of its work and has focused most of its efforts on reviewing applications and providing feedback on organizations’ historical expenditure and utilization patterns, agency officials say the ACO initiative has not encountered any unexpected setbacks. “As with any new program, there are bumps along the way, but I don’t think we’ve experienced anything that is out of the ordinary,” says John Pilotte, director of Performance-Based Payment Policy in the Center for Medicare. “We’re pretty happy with where we are with the program.”

The Shared Savings Program, which Pilotte describes as “an easier on-ramp” to population management for providers and offers low financial risk in exchange for a modest level of shared cost savings, is proving especially popular. Combined, several hundred organizations submitted applications for the program’s second and third rounds, which began July 1, 2012, and Jan. 1, 2013, respectively.

“Two hundred twenty ACOs are currently up and running, and we expect to continue to add ACOs to the program annually,” Pilotte says.

Some people have said they haven’t had to make any major changes to their organization, while some people have had to drastically think how they provide care.

—David Muhlestein, analyst, Leavitt Partners

Last January, another 32 groups joined Medicare’s Pioneer ACO program, designed for more experienced organizations with more resources. The groups assume more risk, and in return are more handsomely rewarded if they meet benchmarks.

All told, the tally of confirmed ACOs in the U.S. reached 428 by the end of January, according to Leavitt Partners, a Salt Lake City-based healthcare consulting firm that is tracking the growth of accountable care (see “A Sampling of Significant ACO Programs,” below). David Muhlestein, an analyst with Leavitt Partners, says private ACOs now account for roughly half of that total, a trend driven by their ability to experiment with different approaches and more easily track costs through clearly defined patient populations.

The central role for hospitalists within most ACOs is rooted in the reality that hospital care is the most expensive part of healthcare. Successfully implementing a plan to coordinate care and prevent hospital readmissions might not correlate directly with improved quality metrics, but it can lead to significant savings.

The diverse ACO models now being tested, however, could result in varying responsibilities for hospitalists, depending on the focal points of the sponsoring entities. After patients have been admitted to a hospital, for example, many hospitalists assume responsibility for managing inpatient care and the inpatient-outpatient handoff. A main goal of a physician-owned medical group, such as an independent practice association (IPA), by contrast, is to keep patients out of the hospital altogether, placing more of the focus on primary and specialty care. An IPA that forms an ACO, Muhlestein says, might hire its own hospitalists to monitor the care of patients in affiliated hospitals while using the association’s approach to limiting costs.

ACO participants also have varied widely in the effort expended to get up to speed. “Some people have said they haven’t had to make any major changes to their organization, while some people have had to drastically think how they provide care,” Muhlestein says. In general, many of the former have had the luxury of working within relatively integrated facilities and building upon existing frameworks, whereas many of the latter previously toiled away in silos and are now scrambling to establish more cohesive working relationships from scratch.

Optimism Abounds

Though many ACOs have only limited data so far, Muhlestein says most are generally optimistic that their early results will be positive. Even so, Dr. Greeno says, he fully expects the Pioneer ACOs to produce the best results among the Medicare demonstration projects. Those organizations already have successful track records in managing patient populations, and the Pioneer model’s incentives are stronger because the groups are assuming more risk. If the Pioneer ACO results are eclipsed by those of the Shared Savings Program, he says, “I’d fall out of my chair.”

The Beth Israel Deaconess Physician Organization (BIDPO) now has four global payment contracts, including its Pioneer ACO arrangement with CMS that serves 33,000 beneficiaries in the Boston metropolitan region. “The decision-making around joining was a recognition that the fee-for-service model is highly dysfunctional,” says Richard Parker, MD, BIDPO’s medical director. “Our organization and our leadership believed that most of the country, both private payor and governmental payor, would be moving toward global payment and that it would be to our advantage to get in early.”

Dr. Parker

Despite the complicated rollout and delays in receiving Medicare data on patients from CMS, Dr. Parker says, the feedback from both providers and patients has been mostly positive. “I would say, anecdotally, that the doctors seem appreciative that we’re trying to fix some of these gaps in care that we all know have existed for some time,” he says. “And, anecdotally from the patients, we get appreciation that we’re trying to take better care of them.”

Chris Coleman, chief financial officer for Phoenix-based Banner Health Network, another Pioneer ACO participant, says the project fits in well with his company’s decision “to transform itself into more of a value-based, performance-based provider.” Banner’s ACO, which serves about 50,000 beneficiaries, is still setting up needed systems, including a consistent platform for electronic medical records throughout the entire provider network. Even during the building phase, however, Coleman says company officials have been pleasantly surprised by the ACO’s positive effect on utilization, patient care, and apparent savings.

Although the company has only a partial year of Medicare claims to go by, Coleman says the data look “pretty good” so far and suggest the ACO is on track for modest savings of perhaps 3% or 4%. Like BIDPO, Banner has other shared-risk agreements in place, including one for a Medicare Advantage population and another with a private payor. So far, Coleman says, those arrangements also seem to be “performing positively.”

Dr. Greeno and other experts see the best ACO results coming from such rapidly growing private arrangements, and early published data have been generally encouraging.¹ The ability to more narrowly define patient groups and assume more control over payments, he says, has allowed private ACOs to keep better track of costs and implement innovative population health interventions.

This is actually moving faster than I thought—faster than I think anybody thought.

—Ron Greeno, MD, FCCP, MHM, SHM Public Policy Committee chair

Built to Last?

Whether public, private, or a hybrid between the two, some ACOs are trying to manage the care of their entire patient pool and look at everything that might help them accrue cost savings. Others are focusing only on the sickest patients to reach their quality improvement (QI) and savings goals, and targeting specific parameters, such as blood pressure or medication adherence, for patients with myocardial infarction.

Dr. Goodroe

Joane Goodroe, an Atlanta-based healthcare consultant, favors the latter approach, at least for new ACOs. Goodroe recommends adopting a streamlined strategy that will get an ACO up and running, then allow the group to gradually add to it, rather than waiting until all of the right pieces fall into place. Her own data analysis of Medicare patients, for example, suggests that a diabetic who’s been an inpatient can average $50,000 in yearly costs, compared with $2,400 for a diabetic who has never been admitted to a hospital.

Setting up a system to manage every diabetic patient from the start, she says, would require too much time and money. “If you try to build the perfect ACO structure, it’s going to be too expensive for the results you initially get back,” she says, making it seem like the ACO is an unsustainable failure. “You’ve got to figure out how to build a cost-effective infrastructure while you’re also improving the care of the patients, and the best place to go is to target your sickest patients first.”

CMS’ Advance Payment ACO Model is designed to help by providing upfront payments to smaller ACO organizations that might lack capital, giving them an advance on potential shared savings so they can install the infrastructure and support structures necessary to redesign care.

To maximize the overall chances of success, Dr. Parker says, ACO leadership should be fully engaged, and each organization should have enough resources to address its own care management and information technology needs. “My goal as medical director is to improve the quality of care of the patients and, hopefully, also improve the working life of the doctors and staff,” he says. “And my belief and expectation is that if we do that, the cost of care will ultimately go down.”

Bryn Nelson is a freelance medical writer in Seattle.

Reference

1. Salmon RB, Sanderson MI, Walters BA, et al. Innovation profile: a collaborative accountable care model in three practices showed promising early results on costs and quality of care. Health Aff. 2012;31:2379-2387.

Experts disagree on what a sustainable accountable-care organization (ACO) will look like in the future. The shared savings model currently dominates the ACO landscape, but David Muhlestein, an analyst with Washington, D.C.-based healthcare consulting firm Leavitt Partners, says his firm’s interviews with participants suggest that very few see the approach as the best long-term answer. Some believe those capitated models of the 1990s—the much-despised HMOs with their narrowly defined networks and global payments to provider groups—could make a comeback in a slightly altered form. Others feel strongly that a bundled payment model, which provides more flexibility in where patients can go for care, will instead dominate. A few providers have even suggested that the shared savings experiment will eventually revert back to a fee-for-service approach.

“Right now, the ACOs that have formed are people who want to forge their own trail. There are many more providers that want to follow some path, and they want to follow a path that has some evidence that it has been successful.”

—David Muhlestein, analyst, Leavitt Partners, Washington, D.C.

SHM Public Policy Committee chair Ron Greeno, MD, FCCP, MHM, says bundled payments and shared savings alone are unlikely to deliver optimal value within the integrated care structure.

“There’s just not enough incentive, and the organization that’s taking risk doesn’t have enough flexibility in terms of how they use resources,” says Dr. Greeno, chief medical officer of Cogent HMG. The real improvements, Dr. Greeno says, might not come until ACOs assume a more capitated structure in which they accept global risk and are given unfettered freedom in how they allocate payments. In the meantime, he says, Medicare could be simply trying to encourage organizations “to start dipping their toe in the water of integrated care.”

John Pilotte, director of performance-based payment policy in the Center for Medicare at CMS, agreed that one major aim of its Shared Savings Program is to provide a “new avenue for providers to work together to better coordinate care for Medicare fee-for-service beneficiaries, and to move away from volume-based incentives and to recognize and reward them for improving the quality and efficiency and effectiveness of the care they deliver.”

Muhlestein says his firm has spoken with many organizations that are carefully monitoring how the current ACOs are faring. “Right now, the ACOs that have formed are people who want to forge their own trail,” he says. “There are many more providers that want to follow some path, and they want to follow a path that has some evidence that it has been successful.”

The more paths that are taken, he says, the greater the likelihood that one or more will achieve success. And although healthcare analysts often talk about success in terms of controlling costs, Muhlestein says, quality improvement (QI) and better outcomes alone could prove alluring to would-be ACOs.

“Even if we don’t see a moderation in cost growth, but we do see an improvement in quality, there is the chance that the model could still stick around, because that’s enough,” he says. “Even if we’re paying the same amount, we’re getting better results, so our value has improved.”

Regardless of how the ACO experiment plays out, Dr. Greeno says, it represents a fundamental shift toward a more integrated, pay-for-performance healthcare system that will not be optional for providers in the near future.

“Everyone is going to be asked to perform at a higher level, and there’s going to be tremendous pressure on hospitalists to lead that performance,” he says. “My advice would be to embrace it—it’s a great opportunity to bring value to the healthcare system.” TH

 Bryn Nelson is a freelance medical writer in Seattle.

Experts disagree on what a sustainable accountable-care organization (ACO) will look like in the future. The shared savings model currently dominates the ACO landscape, but David Muhlestein, an analyst with Washington, D.C.-based healthcare consulting firm Leavitt Partners, says his firm’s interviews with participants suggest that very few see the approach as the best long-term answer. Some believe those capitated models of the 1990s—the much-despised HMOs with their narrowly defined networks and global payments to provider groups—could make a comeback in a slightly altered form. Others feel strongly that a bundled payment model, which provides more flexibility in where patients can go for care, will instead dominate. A few providers have even suggested that the shared savings experiment will eventually revert back to a fee-for-service approach.

“Right now, the ACOs that have formed are people who want to forge their own trail. There are many more providers that want to follow some path, and they want to follow a path that has some evidence that it has been successful.”

—David Muhlestein, analyst, Leavitt Partners, Washington, D.C.

SHM Public Policy Committee chair Ron Greeno, MD, FCCP, MHM, says bundled payments and shared savings alone are unlikely to deliver optimal value within the integrated care structure.

“There’s just not enough incentive, and the organization that’s taking risk doesn’t have enough flexibility in terms of how they use resources,” says Dr. Greeno, chief medical officer of Cogent HMG. The real improvements, Dr. Greeno says, might not come until ACOs assume a more capitated structure in which they accept global risk and are given unfettered freedom in how they allocate payments. In the meantime, he says, Medicare could be simply trying to encourage organizations “to start dipping their toe in the water of integrated care.”

John Pilotte, director of performance-based payment policy in the Center for Medicare at CMS, agreed that one major aim of its Shared Savings Program is to provide a “new avenue for providers to work together to better coordinate care for Medicare fee-for-service beneficiaries, and to move away from volume-based incentives and to recognize and reward them for improving the quality and efficiency and effectiveness of the care they deliver.”

Muhlestein says his firm has spoken with many organizations that are carefully monitoring how the current ACOs are faring. “Right now, the ACOs that have formed are people who want to forge their own trail,” he says. “There are many more providers that want to follow some path, and they want to follow a path that has some evidence that it has been successful.”

The more paths that are taken, he says, the greater the likelihood that one or more will achieve success. And although healthcare analysts often talk about success in terms of controlling costs, Muhlestein says, quality improvement (QI) and better outcomes alone could prove alluring to would-be ACOs.

“Even if we don’t see a moderation in cost growth, but we do see an improvement in quality, there is the chance that the model could still stick around, because that’s enough,” he says. “Even if we’re paying the same amount, we’re getting better results, so our value has improved.”

Regardless of how the ACO experiment plays out, Dr. Greeno says, it represents a fundamental shift toward a more integrated, pay-for-performance healthcare system that will not be optional for providers in the near future.

“Everyone is going to be asked to perform at a higher level, and there’s going to be tremendous pressure on hospitalists to lead that performance,” he says. “My advice would be to embrace it—it’s a great opportunity to bring value to the healthcare system.” TH

 Bryn Nelson is a freelance medical writer in Seattle.

Experts disagree on what a sustainable accountable-care organization (ACO) will look like in the future. The shared savings model currently dominates the ACO landscape, but David Muhlestein, an analyst with Washington, D.C.-based healthcare consulting firm Leavitt Partners, says his firm’s interviews with participants suggest that very few see the approach as the best long-term answer. Some believe those capitated models of the 1990s—the much-despised HMOs with their narrowly defined networks and global payments to provider groups—could make a comeback in a slightly altered form. Others feel strongly that a bundled payment model, which provides more flexibility in where patients can go for care, will instead dominate. A few providers have even suggested that the shared savings experiment will eventually revert back to a fee-for-service approach.

“Right now, the ACOs that have formed are people who want to forge their own trail. There are many more providers that want to follow some path, and they want to follow a path that has some evidence that it has been successful.”

—David Muhlestein, analyst, Leavitt Partners, Washington, D.C.

SHM Public Policy Committee chair Ron Greeno, MD, FCCP, MHM, says bundled payments and shared savings alone are unlikely to deliver optimal value within the integrated care structure.

“There’s just not enough incentive, and the organization that’s taking risk doesn’t have enough flexibility in terms of how they use resources,” says Dr. Greeno, chief medical officer of Cogent HMG. The real improvements, Dr. Greeno says, might not come until ACOs assume a more capitated structure in which they accept global risk and are given unfettered freedom in how they allocate payments. In the meantime, he says, Medicare could be simply trying to encourage organizations “to start dipping their toe in the water of integrated care.”

John Pilotte, director of performance-based payment policy in the Center for Medicare at CMS, agreed that one major aim of its Shared Savings Program is to provide a “new avenue for providers to work together to better coordinate care for Medicare fee-for-service beneficiaries, and to move away from volume-based incentives and to recognize and reward them for improving the quality and efficiency and effectiveness of the care they deliver.”

Muhlestein says his firm has spoken with many organizations that are carefully monitoring how the current ACOs are faring. “Right now, the ACOs that have formed are people who want to forge their own trail,” he says. “There are many more providers that want to follow some path, and they want to follow a path that has some evidence that it has been successful.”

The more paths that are taken, he says, the greater the likelihood that one or more will achieve success. And although healthcare analysts often talk about success in terms of controlling costs, Muhlestein says, quality improvement (QI) and better outcomes alone could prove alluring to would-be ACOs.

“Even if we don’t see a moderation in cost growth, but we do see an improvement in quality, there is the chance that the model could still stick around, because that’s enough,” he says. “Even if we’re paying the same amount, we’re getting better results, so our value has improved.”

Regardless of how the ACO experiment plays out, Dr. Greeno says, it represents a fundamental shift toward a more integrated, pay-for-performance healthcare system that will not be optional for providers in the near future.

“Everyone is going to be asked to perform at a higher level, and there’s going to be tremendous pressure on hospitalists to lead that performance,” he says. “My advice would be to embrace it—it’s a great opportunity to bring value to the healthcare system.” TH

 Bryn Nelson is a freelance medical writer in Seattle.

Whether your hospitalist group has five or 500 practitioners, you and your partners might be thinking about whether you want—or need—to enter into a merger or acquisition in the near future. For some hospitalist groups, mergers and acquisitions could be part of a growth strategy designed to increase geographic footprint, market penetration, or bargaining power. These types of transactions will allow larger groups to increase their competitiveness by being able to leverage investments in such items as information technology upgrades across a larger base of business.

For others, a desire to retire or an inability to either afford or justify certain capital investments needed to remain competitive might be leading some players to consider selling their hospitalist groups. Moreover, changes in the healthcare industry, coupled with the anticipation of tax increases, could factor into decisions to sell practices in the relatively near term.

While each transaction is unique, most tend to follow a similar process, incorporating a number of relatively standard phases that must be undertaken in order to complete a transaction. The transaction process typically takes between three and nine months, although preparations are often best begun in advance of the actual deal process.

Preliminary Matters

For hospitalist group owners and executives considering selling their practice, a number of preliminary matters should be addressed in preparation for a sale. First, potential sellers should carefully consider whether they really wish to enter into the sale process. The sale process is lengthy, time-consuming, and costly, and it is often stressful and demanding on the practice’s management. Thus, potential sellers should not undertake the process unless they are serious about selling and have a realistic expectation of what they will receive as the purchase price.

As part of the preparation, sellers should begin by assembling an experienced transaction team. Typically, the team includes key members of the practice’s management, as well as experienced healthcare mergers and acquisitions attorneys and accountants. These experienced professionals can be of great assistance in making sure that a transaction is executed on a timely basis and under terms appropriate for the specific transaction.

Another prudent step is undertaking a tax analysis to determine the implications of the sale on both the selling practice and its individual owners. This analysis should be performed as far in advance of a proposed transaction as possible, in order to allow time for adjustments to be made (if necessary) to limit the tax implications in advance of the sale. Sellers also will want to use this preparatory phase to make sure that the practice’s books and records are in good order in preparation for the buyer’s due diligence review, as well as to address any issues in order to make the practice more attractive to potential buyers. Some sellers might want to have an investment banker or other qualified professional provide a valuation appraisal of the practice to provide a realistic purchase price.

Finding a Buyer

As a seller begins the process to find a buyer, the seller must first consider the approach that it wants to take. Some larger groups are sold through auction-like processes in which a number of bidders are contacted and invited to participate. The advantage of this type of process is that it typically drives prices higher by introducing competition into the bidding process. On the other hand, this type of process has certain disadvantages, such as a longer time frame and increased risk of a breach of confidentiality.

For some sellers, a more targeted approach, with limited participants, might be more desirable. If a fair purchase price can be obtained without involving multiple potential buyers, the process can be completed faster and with less risk to the ongoing business operations.

The process of finding a buyer typically requires the seller to provide potential buyers with confidential information regarding the business so the interested parties can evaluate whether the selling group is even of interest and the amount that they will be willing to pay. However, the selling practice should only provide this confidential information after potential buyers have signed nondisclosure agreements.

Ultimately, the process will lead to the submission of specific proposals from interested parties. Typically, this results in the seller and the selected buyer entering into a letter of intent, a statement of key terms for the proposed transaction. Letters of intent are largely not binding and are subject to the satisfaction of conditions, such as the negotiation of definitive written agreements. Typically, in this phase of the process, the basic structure of the transaction, the purchase price, and the manner of payment are determined.

Due Diligence

In almost all sale transactions, the buyer will conduct a review and investigation of the seller’s business. The purpose of this review is to confirm the information previously provided by the seller and to allow the buyer to gain a thorough understanding of the business to determine whether it is truly willing to buy the business on the terms identified in the letter of intent. The buyer will want to confirm that it is not going to inherit any unexpected liabilities or problems, such as healthcare regulatory issues or lawsuits. To comply with the information requests from the buyer as it conducts its due diligence review, the seller will be required to assemble many documents and voluminous amounts of financial and other information. The burden of providing this information to the buyer will be substantial and could distract management from their day-to-day duties of running the practice.

Upon completion of the due diligence process, the buyer will either confirm that it is willing to move forward with the transaction “as is,” or, if the due diligence review reveals troubling information, the buyer can either demand changes to the transaction (such as a reduction of the purchase price) or be unwilling to proceed with the transaction altogether.

Negotiating Definitive Agreements

The parties will need to negotiate and agree on certain definitive written agreements, which will govern the transaction. First and foremost, this will include a purchase agreement, such as a stock purchase agreement or an asset purchase agreement. In addition, there may also be various ancillary agreements, such as noncompetition agreements between the buyer and the owners of the selling practice and new employment agreements for the sellers.

Typically, the negotiation of definitive agreements proceeds in parallel with the buyer’s due diligence review.

Closing

At the closing, both sides will sign numerous documents, including those necessary to transfer ownership of the purchased group to the buyer, as well as all ancillary agreements and other documents needed for the transaction. Once signatures have been obtained and exchanged between the parties, the transfer of title will occur and the buyer will tender the purchase price.

Post-Closing

Although the vast majority of the work associated with the transaction will terminate upon the completion of the closing, certain aspects of the sale will require some attention after the closing. For example, there may be purchase price adjustments based upon the final balance sheet or net working capital position of the seller’s business as of the closing date. Typically, these adjustments are addressed in the months following the closing. Also, if any indemnification claims are brought, the parties will need to address those claims and reach a resolution.

Merger and acquisition transactions are complex, time-consuming matters that require a great deal of effort on the part of all parties involved. An orderly process is essential for both buyers and sellers. Sellers will want to take steps to make sure that the transaction is completed in a timely manner while minimizing risk to the ongoing business operations. At the same time, buyers will want to make sure that the value that they are receiving from the seller’s business is commensurate with the purchase price and that the buyer’s goals for entering into the sale will truly be met post-closing.

Steven M. Harris, Esq., is a nationally recognized healthcare attorney and a member of the law firm McDonald Hopkins LLC in Chicago. Write to him at sharris@mcdonaldhopkins.com.

Whether your hospitalist group has five or 500 practitioners, you and your partners might be thinking about whether you want—or need—to enter into a merger or acquisition in the near future. For some hospitalist groups, mergers and acquisitions could be part of a growth strategy designed to increase geographic footprint, market penetration, or bargaining power. These types of transactions will allow larger groups to increase their competitiveness by being able to leverage investments in such items as information technology upgrades across a larger base of business.

For others, a desire to retire or an inability to either afford or justify certain capital investments needed to remain competitive might be leading some players to consider selling their hospitalist groups. Moreover, changes in the healthcare industry, coupled with the anticipation of tax increases, could factor into decisions to sell practices in the relatively near term.

While each transaction is unique, most tend to follow a similar process, incorporating a number of relatively standard phases that must be undertaken in order to complete a transaction. The transaction process typically takes between three and nine months, although preparations are often best begun in advance of the actual deal process.

Preliminary Matters

For hospitalist group owners and executives considering selling their practice, a number of preliminary matters should be addressed in preparation for a sale. First, potential sellers should carefully consider whether they really wish to enter into the sale process. The sale process is lengthy, time-consuming, and costly, and it is often stressful and demanding on the practice’s management. Thus, potential sellers should not undertake the process unless they are serious about selling and have a realistic expectation of what they will receive as the purchase price.

As part of the preparation, sellers should begin by assembling an experienced transaction team. Typically, the team includes key members of the practice’s management, as well as experienced healthcare mergers and acquisitions attorneys and accountants. These experienced professionals can be of great assistance in making sure that a transaction is executed on a timely basis and under terms appropriate for the specific transaction.

Another prudent step is undertaking a tax analysis to determine the implications of the sale on both the selling practice and its individual owners. This analysis should be performed as far in advance of a proposed transaction as possible, in order to allow time for adjustments to be made (if necessary) to limit the tax implications in advance of the sale. Sellers also will want to use this preparatory phase to make sure that the practice’s books and records are in good order in preparation for the buyer’s due diligence review, as well as to address any issues in order to make the practice more attractive to potential buyers. Some sellers might want to have an investment banker or other qualified professional provide a valuation appraisal of the practice to provide a realistic purchase price.

Finding a Buyer

As a seller begins the process to find a buyer, the seller must first consider the approach that it wants to take. Some larger groups are sold through auction-like processes in which a number of bidders are contacted and invited to participate. The advantage of this type of process is that it typically drives prices higher by introducing competition into the bidding process. On the other hand, this type of process has certain disadvantages, such as a longer time frame and increased risk of a breach of confidentiality.

For some sellers, a more targeted approach, with limited participants, might be more desirable. If a fair purchase price can be obtained without involving multiple potential buyers, the process can be completed faster and with less risk to the ongoing business operations.

The process of finding a buyer typically requires the seller to provide potential buyers with confidential information regarding the business so the interested parties can evaluate whether the selling group is even of interest and the amount that they will be willing to pay. However, the selling practice should only provide this confidential information after potential buyers have signed nondisclosure agreements.

Ultimately, the process will lead to the submission of specific proposals from interested parties. Typically, this results in the seller and the selected buyer entering into a letter of intent, a statement of key terms for the proposed transaction. Letters of intent are largely not binding and are subject to the satisfaction of conditions, such as the negotiation of definitive written agreements. Typically, in this phase of the process, the basic structure of the transaction, the purchase price, and the manner of payment are determined.

Due Diligence

In almost all sale transactions, the buyer will conduct a review and investigation of the seller’s business. The purpose of this review is to confirm the information previously provided by the seller and to allow the buyer to gain a thorough understanding of the business to determine whether it is truly willing to buy the business on the terms identified in the letter of intent. The buyer will want to confirm that it is not going to inherit any unexpected liabilities or problems, such as healthcare regulatory issues or lawsuits. To comply with the information requests from the buyer as it conducts its due diligence review, the seller will be required to assemble many documents and voluminous amounts of financial and other information. The burden of providing this information to the buyer will be substantial and could distract management from their day-to-day duties of running the practice.

Upon completion of the due diligence process, the buyer will either confirm that it is willing to move forward with the transaction “as is,” or, if the due diligence review reveals troubling information, the buyer can either demand changes to the transaction (such as a reduction of the purchase price) or be unwilling to proceed with the transaction altogether.

Negotiating Definitive Agreements

The parties will need to negotiate and agree on certain definitive written agreements, which will govern the transaction. First and foremost, this will include a purchase agreement, such as a stock purchase agreement or an asset purchase agreement. In addition, there may also be various ancillary agreements, such as noncompetition agreements between the buyer and the owners of the selling practice and new employment agreements for the sellers.

Typically, the negotiation of definitive agreements proceeds in parallel with the buyer’s due diligence review.

Closing

At the closing, both sides will sign numerous documents, including those necessary to transfer ownership of the purchased group to the buyer, as well as all ancillary agreements and other documents needed for the transaction. Once signatures have been obtained and exchanged between the parties, the transfer of title will occur and the buyer will tender the purchase price.

Post-Closing

Although the vast majority of the work associated with the transaction will terminate upon the completion of the closing, certain aspects of the sale will require some attention after the closing. For example, there may be purchase price adjustments based upon the final balance sheet or net working capital position of the seller’s business as of the closing date. Typically, these adjustments are addressed in the months following the closing. Also, if any indemnification claims are brought, the parties will need to address those claims and reach a resolution.

Merger and acquisition transactions are complex, time-consuming matters that require a great deal of effort on the part of all parties involved. An orderly process is essential for both buyers and sellers. Sellers will want to take steps to make sure that the transaction is completed in a timely manner while minimizing risk to the ongoing business operations. At the same time, buyers will want to make sure that the value that they are receiving from the seller’s business is commensurate with the purchase price and that the buyer’s goals for entering into the sale will truly be met post-closing.

Steven M. Harris, Esq., is a nationally recognized healthcare attorney and a member of the law firm McDonald Hopkins LLC in Chicago. Write to him at sharris@mcdonaldhopkins.com.

Whether your hospitalist group has five or 500 practitioners, you and your partners might be thinking about whether you want—or need—to enter into a merger or acquisition in the near future. For some hospitalist groups, mergers and acquisitions could be part of a growth strategy designed to increase geographic footprint, market penetration, or bargaining power. These types of transactions will allow larger groups to increase their competitiveness by being able to leverage investments in such items as information technology upgrades across a larger base of business.

For others, a desire to retire or an inability to either afford or justify certain capital investments needed to remain competitive might be leading some players to consider selling their hospitalist groups. Moreover, changes in the healthcare industry, coupled with the anticipation of tax increases, could factor into decisions to sell practices in the relatively near term.

While each transaction is unique, most tend to follow a similar process, incorporating a number of relatively standard phases that must be undertaken in order to complete a transaction. The transaction process typically takes between three and nine months, although preparations are often best begun in advance of the actual deal process.

Preliminary Matters

For hospitalist group owners and executives considering selling their practice, a number of preliminary matters should be addressed in preparation for a sale. First, potential sellers should carefully consider whether they really wish to enter into the sale process. The sale process is lengthy, time-consuming, and costly, and it is often stressful and demanding on the practice’s management. Thus, potential sellers should not undertake the process unless they are serious about selling and have a realistic expectation of what they will receive as the purchase price.

As part of the preparation, sellers should begin by assembling an experienced transaction team. Typically, the team includes key members of the practice’s management, as well as experienced healthcare mergers and acquisitions attorneys and accountants. These experienced professionals can be of great assistance in making sure that a transaction is executed on a timely basis and under terms appropriate for the specific transaction.

Another prudent step is undertaking a tax analysis to determine the implications of the sale on both the selling practice and its individual owners. This analysis should be performed as far in advance of a proposed transaction as possible, in order to allow time for adjustments to be made (if necessary) to limit the tax implications in advance of the sale. Sellers also will want to use this preparatory phase to make sure that the practice’s books and records are in good order in preparation for the buyer’s due diligence review, as well as to address any issues in order to make the practice more attractive to potential buyers. Some sellers might want to have an investment banker or other qualified professional provide a valuation appraisal of the practice to provide a realistic purchase price.

Finding a Buyer

As a seller begins the process to find a buyer, the seller must first consider the approach that it wants to take. Some larger groups are sold through auction-like processes in which a number of bidders are contacted and invited to participate. The advantage of this type of process is that it typically drives prices higher by introducing competition into the bidding process. On the other hand, this type of process has certain disadvantages, such as a longer time frame and increased risk of a breach of confidentiality.

For some sellers, a more targeted approach, with limited participants, might be more desirable. If a fair purchase price can be obtained without involving multiple potential buyers, the process can be completed faster and with less risk to the ongoing business operations.

The process of finding a buyer typically requires the seller to provide potential buyers with confidential information regarding the business so the interested parties can evaluate whether the selling group is even of interest and the amount that they will be willing to pay. However, the selling practice should only provide this confidential information after potential buyers have signed nondisclosure agreements.

Ultimately, the process will lead to the submission of specific proposals from interested parties. Typically, this results in the seller and the selected buyer entering into a letter of intent, a statement of key terms for the proposed transaction. Letters of intent are largely not binding and are subject to the satisfaction of conditions, such as the negotiation of definitive written agreements. Typically, in this phase of the process, the basic structure of the transaction, the purchase price, and the manner of payment are determined.

Due Diligence

In almost all sale transactions, the buyer will conduct a review and investigation of the seller’s business. The purpose of this review is to confirm the information previously provided by the seller and to allow the buyer to gain a thorough understanding of the business to determine whether it is truly willing to buy the business on the terms identified in the letter of intent. The buyer will want to confirm that it is not going to inherit any unexpected liabilities or problems, such as healthcare regulatory issues or lawsuits. To comply with the information requests from the buyer as it conducts its due diligence review, the seller will be required to assemble many documents and voluminous amounts of financial and other information. The burden of providing this information to the buyer will be substantial and could distract management from their day-to-day duties of running the practice.

Upon completion of the due diligence process, the buyer will either confirm that it is willing to move forward with the transaction “as is,” or, if the due diligence review reveals troubling information, the buyer can either demand changes to the transaction (such as a reduction of the purchase price) or be unwilling to proceed with the transaction altogether.

Negotiating Definitive Agreements

The parties will need to negotiate and agree on certain definitive written agreements, which will govern the transaction. First and foremost, this will include a purchase agreement, such as a stock purchase agreement or an asset purchase agreement. In addition, there may also be various ancillary agreements, such as noncompetition agreements between the buyer and the owners of the selling practice and new employment agreements for the sellers.

Typically, the negotiation of definitive agreements proceeds in parallel with the buyer’s due diligence review.

Closing

At the closing, both sides will sign numerous documents, including those necessary to transfer ownership of the purchased group to the buyer, as well as all ancillary agreements and other documents needed for the transaction. Once signatures have been obtained and exchanged between the parties, the transfer of title will occur and the buyer will tender the purchase price.

Post-Closing

Although the vast majority of the work associated with the transaction will terminate upon the completion of the closing, certain aspects of the sale will require some attention after the closing. For example, there may be purchase price adjustments based upon the final balance sheet or net working capital position of the seller’s business as of the closing date. Typically, these adjustments are addressed in the months following the closing. Also, if any indemnification claims are brought, the parties will need to address those claims and reach a resolution.

Merger and acquisition transactions are complex, time-consuming matters that require a great deal of effort on the part of all parties involved. An orderly process is essential for both buyers and sellers. Sellers will want to take steps to make sure that the transaction is completed in a timely manner while minimizing risk to the ongoing business operations. At the same time, buyers will want to make sure that the value that they are receiving from the seller’s business is commensurate with the purchase price and that the buyer’s goals for entering into the sale will truly be met post-closing.

Steven M. Harris, Esq., is a nationally recognized healthcare attorney and a member of the law firm McDonald Hopkins LLC in Chicago. Write to him at sharris@mcdonaldhopkins.com.