Co Management Agreement – Changes in payment systems are putting pressure on hospitals to deliver value. Value is defined as quality, for a reasonable price. As hospitals and health systems strive to reduce the cost of delivering care while increasing the quality and patient experience, more alignment strategies are being explored.
Shared management and bundled payment are two strategies used by hospitals to coordinate with physicians to improve quality and lower costs.
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I. Co-management Defined Co-management is a quality-oriented approach in which hospitals and physicians jointly “manage” a specific set of services. Hospitals pay doctors to collaborate to manage the patient experience of quality, efficiency and experience. The scope of management services is determined jointly by the group involved in diagnostic procedures and outpatients.
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The legal arrangement may take the form of a new company or an agreement of all parties that defines the structure and scope of responsibility. This structure meets all federal, state, and anti-Stark laws. Kicking the ball. A fair market valuation is done on the size and scope of the service line to determine the management fee.
The doctors at the hospital are invited to participate in the joint management process. Payment is in the form of a fixed fee, an hourly rate to cover their monthly work activities. Variable payments are available as incentives, if agreed targets are met. The agreement is then reviewed annually, in scope, participating physicians and goals for the year.
It is important to determine the joint arrangement that fits precisely within the Stark port and secures the kick. In December 2012, the HHS Office of Inspector General issued Advisory Opinion No. 12-22, related to the cardiovascular management agreement and found it appropriate. In that particular agreement, the group was paid a fixed fee and incentives. The opinion serves as a good reference that explains the steps to be followed to comply with the safe harbor set forth in 42 CFR 1001.952 d.
II. Defined Payments While national reform discussions continue, there is much uncertainty about how health care will be accessed and paid for in the future. Bundled payments have emerged as payment mechanisms within the Medicare program and among private payers. For this discussion, Medicare’s combined payment efforts will be used to illustrate the concept. For more than twenty-five years, efforts have been made to bundle hospital and physician payments based on inpatient diagnoses.
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Government efforts to move towards bundled payments have a long history. In 1990, CMS began the Medicare Coronary Artery Bypass Surgery pilot program with four hospitals. This program includes the stay in patients and doctors treating these patients. The results of this project remain important.
In January 2012, the Congressional Budget Office released a report that reviewed the results of Medicare’s value-based purchasing model. Medicare Coronary Artery Bypass showed a 10 percent economic savings for Medicare, but the report said other value-based payments showed little or no savings for Medicare. The most recent bundled payment program implemented in Medicare was the Acute Care Demonstration Program launched in four states in January 2010. Additionally, in August 2011, CMS announced a new program as part of the Bundled Payment for Care Improvement initiative. Award-winning program participants are scheduled to begin making installment payments in the summer of 2013.
The idea behind bundled payments is to align the incentives of doctors and hospitals with patient care. Hospitals are responsible for the cost of care but doctors control most of these costs. The doctor determines which products and services to use and the duration of hospitalization. The new model involves the hospital taking a discount on the facility’s current stock price, and allowing the hospital to share the savings with doctors. Physicians have the opportunity to earn an additional 50 percent of their total professional fees for that patient care, based on improvements in cost, quality and patient care. This economic alignment that pays for cost effectiveness and quality is called benefit sharing. A benefit program that has achieved OIG approval demonstrates the value of economic alignment of hospitals and physicians to control costs while maintaining quality.
III. Differences Between Shared Arrangements and Bundled Payments This comparison chart shows the differences between shared arrangements and bundled payments. At a high level, shared management refers to a program in which doctors qualify to participate in a fixed annual payment for time spent and a bonus sponsored by the hospital. On the other hand, bundled payments are programs that focus on the performance of individual Medicare patients from the quality of care and the use of resources. The table mentions the patient part in bundled patients only.
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IV. Expected Results Collaborative management is a physician alignment strategy that puts physicians at the table with hospitals. If managed properly, physicians will make the transition from considering the hospital as a separate entity to thinking of the program as its own. Incentives run annually and on program performance, so they also focus on the group and how the band operates around the world. The doctor looks at the view of the hospital, and vice versa. Doctors are required to make recommendations on business decisions, such as personnel, marketing and purchasing decisions. For many, this is their first look at the reality that hospital management teams face with budget and performance expectations.
This joint effort has proven to be effective in the adaptation of hospital doctors, but also of other doctors in that specialty. With all physicians active in the hospital invited to participate, ideas are shared, protocols are discussed and processes are improved. Physicians are placed in groups with specific project objectives. Immediately, they have a discussion about the quality of care. The difference narrows, and performance improves.
Bundled payment initiatives build on similar concepts but require an additional level of commitment and trust between physicians and hospitals.
Shared management agreements work when they bridge that gap, creating opportunities to see other people’s perspectives and work together. For this reason, they are a good stepping stone to a bonded payment relationship. Without a basic level of trust, payment separation can be a difficult road to navigate.
Co Management Agreement Pitfalls And Best Practices: A Case Study
Bundled payment metrics move shared management from a service focus to individual physician practices on a patient basis. In an integrated payment, each physician can receive a payment that benefits by achieving quality goals and lower costs without participation from all physicians in a particular specialty. However, in published studies of bundled payments and stand-alone profit-sharing programs, there was substantial participation from the majority of physicians participating in these arrangements.
V. Are they mutually binding? Although joint management and bundled payments are two different strategies, the elements of each model are the same. Some in the industry predict that shared management structures will disappear with the expansion of bundled payment programs. Our hypothesis at the beginning of the research in this paper is that bundled payments will replace shared management as an organizational strategy. We also believe that going forward, those hospitals considering bundled payments that are not yet participating in shared management will skip this step.
Bundled payment practices require physicians to eliminate diversity and work with interdisciplinary teams to achieve high value. Many of the required elements are designed into the joint management agreement. In today’s practice, we look at both together. Based on our interactions with hospitals across the country, the recognition of the Bundled Payment pilot in models 1-4 has not affected the number of shared management agreements we have seen across the country. They are not at this stage seen as mutually exclusive strategies.
VI. In conclusion, as long as the incentive component of the shared management agreement rewards measures that are different from the bundled payment scheme, the two can coexist from a regulatory perspective. Both strategies require hospitals to “share” or “invest” efforts in one method; in the long run, hospitals may not be able to afford both. In the early stages of the adoption of bond payments, it seems that the two can go hand in hand and return more than the investment. We believe that over time, the model will be sufficient to achieve the desired clinical results and goals. Which model is possible depends on the dynamics of the market and the strategy of the organization. In general, we believe that these strategies will coexist in the near future, and will not be the same. Over time, there may be a clear winner, but it is too early to predict. It is likely that both will remain important strategies based on market dynamics.
Co Management Verses Bundled Payment — Are These Alignment Strategies Mutually Exclusive?
Joane Goodroe was the independent consultant responsible for developing the first benefit sharing model approved by the OIG. He has worked in bundled payments since 1990. He continues to consult with hospitals and physicians about new forms of care and integration. Contact him at jgoodroe@jgoodroe.com
Gail Peace is president and CEO of Ludi, Inc., a company that helps hospitals and health systems automate, monitor and proactively manage physician-hospital contracts. Miss. Peace has 20 years of experience in health care, developing new structures in collaboration with doctors and hospitals. Contact her at gail@ludiinc.com.
Additional articles on bundled payments include: CMS Acceptance of Bundled Payment Models 1 Application 4 Key Considerations
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