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Drug manufacturers may have a duty to their shareholders to
maximize profits, but hospitals and health systems have an obligation to
patients to provide optimal care. Meeting that obligation can be a challenge
when medications aren’t available because of unaffordable prices and shortages that
may arise from the business strategies of pharmaceutical companies.
These divergent missions explain the rationale behind Civica
Rx, a not-for-profit generic drug company started by some of the largest health
systems in the country, including Catholic Health Initiatives, HCA Healthcare,
Intermountain Healthcare, Mayo Clinic, Providence St. Joseph Health, SSM
Health, and Trinity Health. These seven systems, which include about 500
hospitals, have joined three philanthropic organizations—the Laura and John Arnold
Foundation, the Peterson Center on Healthcare, and the Gary and Mary West
the initial governing members of the new company, which began operating in
Offended by unreasonable spikes in prices for commonly used
drugs, Dan Liljenquist (pictured at right), senior vice president and chief strategy officer at
Salt Lake City-based Intermountain Healthcare, initiated the idea of a company
that could offer these drugs to healthcare organizations at affordable prices.
“That was the genesis behind Civica, to potentially have a
non-profit company enter this space to make sure that these essential generic
medications, whose formulas are owned by society, remain in the public domain
available and affordable to everyone,” Liljenquist says.
Civica is constructed to produce enough profit only to recapitalize
and maintain the business, not pay dividends to shareholders, says Liljenquist,
board chair for the new company. This approach represents a way for hospitals
and health systems to combat efforts by some drug manufacturers to exert unfair
control over drugs and spike prices, he says.
“Essentially, this is a social asset designed to police
against bad behavior,” he says.
In keeping with this mission, Martin VanTrieste, an industry
veteran with more than 34 years of experience in pharmaceuticals and formerly
the chief quality officer for pharmaceutical company Amgen, agreed to lead Civica
as CEO without compensation.
In addition to the 10 original groups, as of late October two
more organizations were in the final stages of becoming governing members and
15 organizations were scheduled to become additional founding members.
Governing members, including the three philanthropies, have
the power to appoint the board of directors. Both governing and founding
members can appoint members of the drug selection advisory and medical trends
advisory committees. Governing members have committed $10 million each in the
The bulk of participation in Civica will be composed of
partnering members, which can be hospitals and health systems of all sizes. Partner
members are required to contribute a onetime fee of $300 per licensed bed. So
far, leaders from 120 hospital and health systems have expressed interest in membership.
Exhibit: National Drug Spending, 2007-16
The company will operate under four guiding principles
designed to create a fair, unbiased process for acquiring medications,
Liljenquist says: “Nobody owns the business, everybody is going to get their
fair share [of medications], everybody’s going to get the same price per unit
regardless of the volume they commit to, and finally everybody will get the
exact same contracting terms.
“We thought of every which way that this organization could
benefit one group of members or subset of members or member over anybody else
and tried to control for that.”
Key elements of the business model are pricing transparency
and a pre-contract purchase commitment. Drug prices will be the same for all
Civica members, regardless of the volume purchased, while members will contract
with Civica to buy the drugs for a specific duration. These two conditions will
provide hospitals with more predictable pricing and drug manufacturers with
more stable production numbers, Liljenquist says. Civica will contract with manufacturers to make the drugs at the outset, with the company initially focusing on 14 hospital-administered generic drugs that will be FDA-approved.
“Capacity exists to make these drugs in the current
so we don’t need to start from scratch building
our own manufacturing plants,” says Ben Carter (pictured at right), CFO of Trinity Health, based in Livonia, Mich.
For competitive reasons, Civica is not disclosing which
drugs will be made, but among the criteria are inclusion on the World Health
Organization’s list of essential medicines, issues with shortages, and price
increases of at least 50 percent.
Production of the first drugs is estimated to begin in early
2019, with the products available for distribution at some point during the year.
Although the company has not released information on how
much the venture will yield in overall annual cost savings, reductions on
individual drug costs may be as much as half. “In
some cases, we think the savings to hospitals could be greater than 50 percent; in
other cases, the drug cost savings
may be minimal, but with the
problem of availability solved, many systems
will save in other ways,” says Lou Fierens (pictured at right), executive vice president for administrative
services with Trinity Health.
For hospitals and health systems, the greater affordability and
accessibility will mean not only direct cost savings in drug purchasing but also
savings on operational costs, Fierens says.
“The kind of decisions that our caregivers are having to
make about revising treatment protocols, substituting
one medication for another, all of these
things cost—not directly, in terms
of the acquisition cost of the medication, but in the
time we have available to provide care,”
“There are a lot of ways to define cost apart from acquisition cost. It takes caregivers offline,
trying to work on things they shouldn’t have to be working on that aren’t
really involved in directly providing care for the patient.”
Because the drugs available through Civica will be embedded
in other hospital charges, patients mostly likely will not see individual
pricing for the drugs on their statements, Liljenquist says, meaning the impact on patients
may not be so noticeable. However, patients can become more informed about the
price of drugs because pricing will be accessible to the public on the Civica
website. The company is in discussions with payers about coverage terms for the
Creation of the start-up was announced in January. Since
then, work has been ongoing to validate the business model and explore opportunities
with drug manufacturers, pharmaceutical ingredient suppliers, and other supply
chain partners, Liljenquist says. Much of this preliminary work has also
involved creating bylaws and articles of incorporation.
“Getting the organization up, funded, and
incorporated quickly has
been the most challenging
piece of this effort so far," Fierens
says. “And the pressure is on to
complete all of these structural tasks quickly because
the clock is ticking. Every day you walk into our pharmacies and you see white
boards that list shortage
drugs right down to the
specific number of remaining dosages. There is urgency around creating
this solution, and
we are trying
to get through that part of it as
quickly as we can.”
The task now, Liljenquist says, is getting enough members
who will make a commitment to purchase a certain amount of drugs. Committed
buyers will make it easier to build a supply chain. “The real value we are
locking is the commitment to buy,” he says. “We think we’ll have a good chunk
of the market to move, and that will help us de-risk this venture
Initial feedback to the start-up from colleagues and the
industry in general has been overwhelmingly positive, say these governing
are more than enthusiastically embracing this disruptor,”
says Trinity Health’s Carter. “It’s being
set up to help solve a problem that has plagued the industry for
the last several years.”
The initiative itself speaks to
the ability of diverse organizations to unite around mutual
need and interest and to collaborate
successfully, he says. “It’s a positive reflection on the industry that so many competitors could
really come together on this and stick together to create something that
will be extremely beneficial to society,” he says.
“It’s part of our DNA to solve
problems,” Fierens says. “By creating a kind of a public asset around
generic medications, we think we
have created the right solution for the time. Based on the
response we’re getting nationally, I would suggest we’re on the right track.”
Carter Dredge (pictured at right), chief transformation officer for St.
Louis-based SSM Health, says most of the comments he has received have been
questions about the membership models and the process to join Civica. The
barriers to participation are intentionally low because of the common need;
hospitals of all sizes are affected by the issue and should have access to
lower-priced drugs, Dredge says.
“A lot of our pharmacy staff have to spend some considerable
time and effort trying to access these drugs. It’s just a big pain point,” Dredge
Dredge says the governing
members, including SSM Health, that have contributed start-up funding are taking
risks, especially while other organizations can become partner members without
the capital input yet receive the same pricing as founding members.
“We say, ‘True,’ but
someone’s got to step up and make it happen,” he says. “When we looked at this
problem we realized that absent a major public policy change, which was
unlikely to occur, there needed to be a private-sector solution. If it was going
to be a private-sector solution, we needed to have critical enough mass to
enter big and enter over a longer time period to avoid things like predatory
Although the new initiative will
not completely resolve the pharmaceutical cost problem, Dredge says, the Civica
business model should stand as an example of how issues in the healthcare
industry can be addressed.
“It’s an example where innovation,
collaboration, overall compassion, and philanthropic
intent come together in a unique way. I don’t think it’s insignificant,”
Dredge says. ”As we continue to flesh out this type of a business model, I
think there are many applications in the future that could use it as well.”
Sidebar: Additional Strategies for Managing the Drug Cost Problem
Karen Wagner is a freelance healthcare
writer based in Forest Lake, Ill.
Interviewed for this article: Ben Carter, CFO, Trinity Health,
Livonia, Mich.; Carter Dredge, chief transformation officer, SSM Health, St.
Louis; Lou Fierens executive vice president, administrative services, Trinity
Health, Livonia, Mich.; Dan Liljenquist, senior vice president and chief
strategy officer, Intermountain Healthcare, Salt Lake City.
For questions about Civica Rx, go to: https://civicarx.org/contact.
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A senior leader of VitalWare talks about the need to create a comprehensive pricing strategy for consumers and how to get started.
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Two of HealthTrust’s senior leaders talk about strategies for optimizing the hospital workforce to improve productivity and reduce waste.
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6 Patient Revenue Cycle Metrics You Should Be Tracking (and How to Improve Your Results)
Patient financial engagement is more challenging than ever – and more critical. With patient responsibility as a percentage of revenue on the rise, providers have seen their billing-related costs and accounts receivable levels increase. If increasing collection yield and reducing costs are a priority for your organization, the metrics outlined in this presentation will provide the framework you need to understand what’s working and what’s not, in order to guide your overall patient financial engagement initiatives and optimize results.
10 Ways to Reduce Patient Statement Volume (and Reduce Costs)
No two patients are the same. Each has a very personal healthcare experience, and each has distinct financial needs and preferences that have an impact on how, when and if they chose to pay their healthcare bill. It’s no longer effective to apply static billing techniques to solve the complex challenge of collecting balances from patients. The need to tailor financial conversations and payment options to individual needs and preferences is critical. This presentation provides 10 recommendations that will not only help you improve payment performance through a more tailored approach, but take control of rising collection costs.
Reduce Patient Balances Sent to Collection Agencies: Approaching New Problems with New Approaches
This white paper, written by Apex Vice President of Solutions and Services, Carrie Romandine, discusses the importance of patient segmentation and messaging specifically related to the patient revenue cycle. Applying strategic messaging that is tailored to each patient type will not only better educate consumers on payment options specific to their billing needs, but it will maximize the amount collected before sending to collections. Further, targeted messaging should be applied across all points of patient interaction (i.e. point of service, customer service, patient statements) and analyzed regularly for maximized results.
The Future of Online Patient Billing Portals
This white paper, written by Apex President Patrick Maurer, discusses methods to increase patient adoption of online payments. Providers are now seeking ways to incrementally collect more payments due from patients as well as speeding up the rate of collections. This white paper shows why patient-centric approaches to online payment portals are important complements to traditional provider-centric approaches.
Payment Portals Can Improve Self-Pay Collections and Support Meaningful Use
Increased electronic engagement between healthcare providers and patients provides significant opportunities for improving revenue cycle metrics and encouraging patients to access EHRs. This article, written by Apex Founder and CEO Brian Kueppers, explores a number of strategies to create synergy between patient billing, online payment portals and electronic health record (EHR) software to realize a high ROI in speed to payment, patient satisfaction and portal adoption for meaningful use.
Large Health System Drives 10% UP (Patient Payments) and 10% DOWN (Billing-related Costs)
Faced with a rising tide of bad debt, a large Southeastern healthcare system was seeing a sharp decline in net patient revenues. The need to improve collections was dire. By integrating critical tools and processes, the health system was able to increase online payments and improve its financial position. Taking a holistic approach increased overall collection yield by 10% while costs came down because the number of statements sent to patients fell by 10%, which equated to a $1.3M annualized improvement in patient cash over a six-month period. This case study explains how.
ICD-10: Managing Performance
With the ICD10 deadline quickly approaching and daily responsibilities not slowing down, final preparations for October 1 require strategic prioritization and laser focus.
Clarity Drives Collections
Read how Gwinnett Medical Center provides clear connections to financial information, offers multiple payment options for patients, and gives onsite staff the ability to collect payments at multiple points throughout the care process.
Orlando Health Gains Insight into Denials, Reduces A/R Days with RelayAnalytics Acuity
Read how Orlando Health was able to perform deeper dives into claims data to help the health system see claim rejections more quickly–even on the front end–and reduce A/R days.
Revenue Cycle Payment Clarity
To maintain fiscal fitness and boost patient satisfaction and loyalty, healthcare providers need visibility into when and how much they will be paid–by whom–and the ability to better navigate obstacles to payment. They need payment clarity. This whitepaper illuminates this concept that is winning fans at forward-thinking hospitals.
Streamlining the Patient Billing Process
Financial services staff are always looking for ways to improve the verification, billing and collections processes, and Munson Healthcare is no different. Read about how they streamlined the billing process to produce cleaner bills on the front end and helped financial services staff collect more than $1 million in additional upfront annual revenue in one year.
Wallace Thomson Hospital Automates to Maximize Limited Resources
Effective revenue cycle management can be a challenge for any hospital, but for smaller providers it is even tougher. Read how Wallace Thomson identified unreimbursed procedures, streamlined claims management, and improved its ability to determine charity eligibility.
7 Steps for Building and Funding Sustainability Projects
Before launching an energy-efficiency initiative, it’s important to build a solid business case and understand the funding options and potential incentives that are available. Healthcare leaders should consider taking the steps outlined in the whitepaper to ease the process of gaining approval, piloting, implementing, and supporting sustainability projects. You will find that investing in sustainability and energy efficiency helps hospitals add cash to their bottom line. Discover how hospitals and health systems have various options for funding energy-efficient and renewable-energy initiatives, depending on their current financial structure and strategy.
Key Capital Considerations for Mergers and Acquisitions
Health care is a dynamic mergers and acquisitions market with numerous hospitals and health systems contemplating or pursuing formal arrangements with other entities. These relationships often pose a strategic benefit, such as enhancing competencies across the continuum, facilitating economies of scale, or giving the participants a competitive advantage in a crowded market. Underpinning any profitable acquisition is a robust capital planning strategy that ensures an organization reserves sufficient funds and efficiently onboards partners that advance the enterprise mission and values.
Key Capital Considerations for Mergers and Acquisitions
The success of healthcare mergers, acquisitions, and other affiliations is predicated in part on available capital, and the need for and sources of funding are considerations present throughout the partnering process, from choosing a partner to evaluating an arrangement’s capital needs to selecting an integration model to finding the right money source to finance the deal. This whitepaper offers several strategies that health system leaders have used to assess and manage capital needs for their growing networks.
Trend Watch: Providers adapt as value-based care moves from hype to reality
Announcements from several commercial payers and the Centers for Medicare and Medicaid Services (CMS) early in 2015 around increased efforts to form value-based contracts with providers seemed to point to an impending rise in risk-based contracting. Rather than wait for disruption from the outside in, health care providers are now making inroads on collaborating with payers on various risk-based contracting models to increase the value of health care from within.
Yuma Regional Medical Center case study
Yuma Regional Medical Center (YRMC) is a not-for-profit hospital serving a population of roughly 200,000 in Yuma and the surrounding communities.
Before becoming a ZirMed client, Yuma was attempting to manually monitor hundreds of thousands of charges which led to significant charge capture leakage. Learn how Yuma & ZirMed worked together to address underlying collections issues at the front end, thus increasing Yuma’s overall bottom line.
Reforming with a New 50-Bed Acute Care Facility
Kindred Hospital Rehabilitation Services works with partners to audit the market and the facility’s role in that market to identify opportunities for improvement. This approach leads to successes; Kindred’s clinical rehab and management expertise complements our partners’ strengths. Every facility and challenge is unique, and requires a full objective analysis.
5-Minute Briefing on Revenue Integrity Through HIM WhitePaper Hospitals FS
As the critical link between patient care and reimbursement, health information enables more complete and accurate revenue capture. This 5-Minute White Paper Briefing shares how to achieve cost-effective revenue integrity by your optimizing HIM systems.
5-Minute Briefing on Accelerating Cash Flow Through HIM WhitePaper Hospitals FS
Speedier cash flow starts with better CDI and coding. This 5-Minute White Paper Briefing explains how providers can improve vital measures of technical and business performance to accelerate cash flow.
5-Minute Briefing on Reducing the Cost of RCM WhitePaper Hospitals FS
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Providers Focus Too Much On Revenue Cycle Management
The point of managing your revenue cycle isn’t just to improve revenue and cash flow. It’s to do those things effectively by consistently following best practices— while spending as little time, money, and energy on them as possible.
Lucille Packard Children’s Hospital Stanford Case Study
How Lucile Packard Children’s Hospital Stanford increased payments received within 45 days by 20% and reduced paper submission claims by 70% by using ZirMed solutions.
Using Predictive Modeling To Detect Meaningful Correlations Across Claims Denials Data
The reasons claims are denied are so varied that managing denials can feel like chasing a thousand different tails. This situation is not surprising given that a hypothetical denial rate of just 5 percent translates to tens of thousands of denied claims per year for large hospitals—where real‐world denial rates often range from 12 to 22 percent. Read about how predictive modeling can detect meaningful correlations across claims denials data.
ZOLL and Emergency Mobile Health Care Case Study
Emergency Mobile Health Care (EMHC) was founded to be and remains an exclusively locally owned and operated emergency medical service organization; today EMHC serves a population of more than a million people in and around Memphis, answering 75,000 calls each year.
Maximizing Medicare Reimbursements White Paper
Since the Physician Quality Reporting Initiative (PQRI) introduction, CMS has paid more than $100 million in bonus payments to participants. However, these bonuses ended in 2015; providers who successfully meet the reporting requirements in 2016 will avoid the 2% negative payment adjustment in 2018, so now is the time to act! Included in this whitepaper are implications of increasing patient responsibility, collections best practices, and collections and internal control solutions.
Denials Deconstructed: Getting Your Claims Paid
Getting paid what your physician deserves—that’s the goal of every biller. Yet even for the best billers, achieving that success can be elusive when denials stand in the way of success, presenting challenges at every turn. Denials aren’t going away, but you can learn techniques to manage and even prevent them.Join practice management expert Elizabeth W. Woodcock, MBA, FACMPE, CPC, to: Discover methods to translate denial data into business intelligence to improve your bottom line, determine staff productivity benchmarks for billers, and recognize common mistakes in denial management.
Automation and Operational Improvement Drive Sustainable Results
Physician practices must improve organizational efficiency to compete in this era of reduced reimbursement and escalating administrative costs.
Revenue Cycle Management Resolves Migration Implementation Issues
Many healthcare organizations are pursuing next-generation health information systems solutions. Learn more about Navigant's work with University of Michigan Health System.
Partnering For Success – Provider Achieves Strength in Stability
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Building a Clinically-Integrated Network
As value-based payment models evolve, providers are challenged to maintain superior clinical outcomes while controlling costs.
Winning in the Post-Acute Marketplace
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Building A Common Vision with Employed Physicians
HSG helped the physicians and executives of St. Claire Regional in Morehead, Kentucky, define their shared vision for how the group would evolve over the next decade. As well as, develop the strategic and operational priorities which refocused and accelerated the group’s evolution.
Practice Performance Improvement
The client was a nine-hospital health system with 14 clinics serving communities in a multi-state market with very limited access to care, poor economic conditions, high unemployment, and a heavy Medicare/Medicaid/uninsured payer mix. In most of these communities, the system was the sole source of care.
Though the clinics were of substantial size (they employed 98 physicians) and comprised of multiple specialists, the physicians functioned as individuals and the practices lacked any real group culture.
Clinical Integration Without Spending a Fortune
Clinical integration can be expensive, but it doesn’t have to be, as this four-step road map for developing a CIN proves. Does it have to cost millions to initiate a clinical integration strategy?
Contrary to popular belief, we have clients who have generated substantial shared savings and a significant ROI over time, without massive investments. Yes, some financial capital is required for resources the CIN providers can’t bring to the table themselves. But the size of that investment can be miniscule relative to the value it produces: improved outcomes and documentation for payers.
Adding Value to Physician Compensation
Today’s concerns about physician compensation are the result of the changing healthcare environment. The transition to value is slow, but finally becoming a reality. Proactive hospitals want to ensure that provider incentives are properly aligned with ever-increasing value-based demands.
This report focuses on the three big questions HSG receives about adding value to physician compensation; Why are organizations redesigning their provider compensation plans? What elements and parameters must be part of successful compensation plans? How are organizations implementing compensation changes?
Effective Revenue Cycle Management in Your Network
Revenue Cycle Management has become an even more complex issue with declining reimbursements, implementation of Electronic Health Records, evolving local carrier determinations (LCD), and payer credentialing [The emphasis on healthcare fraud, abuse and compliance has increased the importance of accuracy of data reporting and claims filing).
The efficiency of a medical practice’s billing operations has critical impact on the financial performance. In many cases, patient billings are the primary revenue source that pays staff salaries, provider compensation and overhead operating cost. Inefficiencies or inaccurate billing will contribute to operating losses.
Succeeding in Value-Based Care
This publication identifies and outlines the necessary characteristics of a fully-functioning clinically integrated network (CIN). What it doesn’t do is detail how hospitals and providers can participate in the value-based care environment during the development process.
One common misconception is that the CIN can’t do anything significant until it has obtained the FTC’s “clinically integrated” stamp of approval. While the network must satisfy the FTC’s definition of clinical integration before single signature contracting for FFS rates and contracts can legally start, hospitals and providers can enjoy three key benefits during the development process.
Therapy: Benefits at All Levels of Care
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Cost Accounting: the Key to Cost Management and Profitability
Managing the cost of patient care is the top strategic priority of most hospital CFOs today. As healthcare shifts to more data-driven decision making, having clear visibility into key volume, cost and profitability measures across clinical service lines is becoming increasingly important for both long-range and tactical planning activities. In turn, the cost accounting function in healthcare provider organizations is becoming an increasingly important and strategic function. This whitepaper includes five strategies for efficient and accurate cost accounting and service line analytics and keys to overcoming the associated challenges.