Value Based Payment

Seaside Medical Group Case Study

November 12, 2014 1:57 pm

Issues addressed in this case study include:

  • Moving a physician group from fee-for-service towards a value-based focus
  • Addressing physician compensation changes in a medical group
  • Forming a multi-organizational clinically integrated network (CIN)
  • Sharing finances in a CIN
  • Governing and managing a CIN
  • Providing the CIN’s infrastructure
  • Establishing relations with payers and health systems 

Assessing the situation

Seaside Medical Group was formed with the merger of three smaller groups ten years ago. The group has added two new small primary care groups in the past two years. Seaside now has 380 providers (310 physicians). The group includes multiple specialties (the current make-up is 58% primary care, 42% specialists). The group is highly regarded throughout the state.

Four years ago, Seaside decided to move aggressively towards population health management. The group’s president noted, “If we do nothing, our reimbursement will simply go down each year for most RVUs. If, on the other hand, we could work to take and manage the physician—and maybe even the hospital and pharma—portion of the premium dollar, we could control our own destiny.”

Seaside leaders knew there were risks. However, this seemed to be the course with the best chance to maintain Seaside’s position as a lead provider organization in its market. Seaside’s president also sought to eliminate silos in clinical information: “Some people think that information is power—this is just wrong. Shared information is what generates positive outcomes.”

Seaside’s leaders visited several other groups that were working to be leaders in population health management. They recognized that they would need a new infrastructure in order to make this happen. They also recognized that a substantial investment would be required to build this infrastructure.

Tool: A Care Network’s Population Health Tool 

Assessing options

Key issues for Seaside in moving forward in population health were: 

  • Where to get the required investment capital 
  • How to accumulate the optimal patient population

Seaside’s leadership considered four approaches to accessing the funds to invest in population health management infrastructure:

  • Joint venturing with a health system
  • Joint venturing with a payer
  • Teaming with a venture capital firm
  • Borrowing the funds

Seaside ultimately decided to joint venture with a payer. The payer was a co-investor in a joint venture company to own the infrastructure. This payer was also the physician group’s first value-based payment contract.

Next, the group looked for other physician groups to join in spreading the overhead cost and in assembling a larger patient population. Some groups were invited and accepted proposals to merge into Seaside. Other groups were not considered to be good merger candidates, or were already owned by area hospitals, but were still good candidates to participate in a CIN. 

Seaside and its joint-venture partner established a management services organization (MSO) to provide electronic medical record support, claims and EMR data analysis, and other support services. 

Moving forward

Seaside Medical Group recognizes that both the medical group and the CIN will evolve over time. Other issues continuing to evolve include: 

  • Culture: emphasizing the need for a more team-oriented approach to care
  • Analytics: defining specific care populations and treating them in a consistent manner
  • Compensation: incentivizing quality and cost-efficiency as well as productivity
  • Payer contracts: seeking increased value-based contracts
  • Finances: determining distribution of revenues within the CIN

Tool: Example of a CIN’s Revenue Distribution Model 

Seaside’s network has expanded to cover a 10-county area. A new entity, Lowlands ACO, has been formed. Seaside’s president notes, “We are not sure the ACO is going to be a big financial success. However, we like having the legal position of being an ACO, which clearly helps establish that we are providing clinically integrated care. This also covers a patient population that would otherwise be hard to reach.”

Seaside and its partners now are involved in value-based contracts, including

  • 4 commercial contracts
  • 1 gain-sharing ACO
  • 3 Medicare Advantage contracts
  • 1 narrow panel option with a health plan on the state exchange

“We are still learning,” noted Seaside’s president. “And we are likely to be on a fast learning curve for several years. But we appear to be on the right track. We also believe we are doing the right thing for patient care. In the meantime, we like our bonuses, and it sure is easy to recruit.”

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