Cleveland Clinic, Rothman, CORE and OrthoCarolina Team Up

Operating under the name of the National Orthopaedic & Spine Alliance LLC (NOSA), the Cleveland Clinic in Ohio, the Rothman Institute in Pennsylvania, the CORE Institute of Arizona and OrthoCarolina in North Carolina, have teamed up to improve the delivery of orthopedic and spine care across the nation and establish industry benchmarks for quality and value.

Times Are Changing

Healthcare organizations which were built on volume and fee-for-service in the past decades will have to adapt to a rapidly approaching wave of a value-based reimbursement systems under Obamacare. How soon will this happen—2014.

On September 10, 2013, four of the best known and most widely regarded orthopedic and spine care systems in the U.S. (which were all founded and run by surgeons) have come together to form the first-of-its-kind clinically integrated orthopedic physician hospital organization (PHO) in the U.S.

But the motivations behind this new alliance are not just economic. Equally if not more important is excellence in healthcare delivery based on setting benchmarks and demonstrating value. Indeed, the organizers of this important new alliance tell OTW that the success of their PHO will be depend on establishing strict clinical protocols and setting criteria which measure performance and demonstrate value to payers, employers and patients.

In addition to the four systems mentioned in the announcement, the organizers also executed a letter of intent (LOI) with two other powerhouse providers—OrthoIndy and OrthoCalifornia, Inc. Under the terms of the LOI, these groups would also be participating providers in the PHO. OrthoCalifornia’s physicians are part of Hoag Orthopedic Institute’s medical staff. According to the announcement, additional members who comply with the Alliance’s protocols and criteria and fit geographically may also be invited to join in the future.

On day one nearly 600 physicians will be part of the Alliance. Organizers have said that they will see their first patients in January 2014.

NOSA’s Board President and Chairman of the Cleveland Clinic Orthopaedic and Rheumatologic Institute, Joseph Iannotti, M.D., Ph.D., said, “This is a monumental step in ensuring that patients around the nation in need of orthopedic or spine care will be able to receive it and have peace of mind knowing there is a high-quality provider located nearby. The fact that these leading groups are working together to offer the highest quality, peer-reviewed service that employers and patients can have access to is really unprecedented.”

Iannotti said NOSA will be the first clinically integrated network of independent centers of excellence in orthopedic and spine surgery that have agreed to define and follow best practices, share clinical outcome data in addition to patient quality and safety data across a broad spectrum of procedures.

Standardized, Evidence-Based Care Protocols

CORE Institute’s (Center for Orthopedic Research and Education) Chairman and CEO David Jacofsky, M.D., is a leader in developing an integrated system which follows a strict protocol for surgeon practice and procedures based on previously measured outcomes. CORE’s protocol, according to Jacofsky, has demonstrated cost savings.

The only rub with some surgeons is that they seem to think that some of their clinical decision-making is taken out of their hands as strict protocols must be followed, but these are based on a group consensus of the evidence in the published literature. They are also measured.

“The CORE Institute is a national leader in the deployment of standardized, evidence-based care protocols managed via a proprietary IT infrastructure that allows meticulous tracking of quality metrics and key performance indicators, ” said Jacofsky. “The organization has experience with pay for performance, bundled payment concepts, and full at-risk capitation.”

Jacofsky believes this PHO will help define the way in which top orthopedic groups are able to share data and improve quality in a more comprehensive, automated, and integrated way and will redefine the way in which employers can access medical care for employees based on outcomes data.

He added that surgeons should recognize that their professional fees are only a small part of the overall procedure costs, but ultimately drive significant spending. He notes that many health insurers and Medicare are experimenting with bundled payments, which creates an incentive for the physician and health system is to optimize the outcomes and the cost of the entire episode. “One major way to do this is by reducing variation in care and focusing on the aspects of care outside of the surgical suite.”

Patients, Employers and Providers

Organizers state that the alliance will benefit patients, employers and participating providers in these ways:

• Patients – gives them access to a network of top-tier programs, which are geographically dispersed across the country
• Employers – allows employers to provide a consistent level of quality care for employees conveniently located throughout the U.S. and align with a network of physicians who are focused on quality care and cost control
• Participating Providers – establishes quality standards and ensures quality improvement and benchmarks through data sharing, in an area where few quality benchmarks exist today.

After an employer has joined NOSA, the alliance will give employees seeking orthopedic care a phone number which puts them in touch with staff members who will deliver “concierge-level service” regarding their treatment plan, including helping the employees with travel to and from centers. The alliance is also offering employees follow-up care utilizing evidence-based guidelines and which tracks cost and quality outcomes for each patient.

Iannotti said employers will be offered a single contract which provides access to all providers. Other providers who want to join the alliance must first agree to share data regarding outcomes and quality improvements.

NOSA plans to publish clinical outcome, patient safety and patient satisfaction data using an annual outcome publication—not unlike the current Cleveland Clinic publication system, he said.

Governance

The PHO will be governed by a board, led by Iannotti. There are also three primary operating committees.

• Quality Committee – To establish metrics, by which all participants will be measured, reviews compliance and develops new ways to improve PHO performance. Daniel Murrey, M.D., M.P.P., CEO of OrthoCarolina is the chair
• Financing Committee – To monitor PHO financial performance. Mike West, CEO of Rothman Institute, chair
• Nominating/Membership Committee – To identify potential participating providers. To evaluate those prospective providers for fit with the PHO’s vision and ability to meet outcome standards. Jason Scalise, M.D., vice chairman, National Physician Integration of the CORE Institute, chair.

Physician Hospital Organizations

While the formation of an orthopedic and spine based PHO is new, the concept of the PHO is not.

PHOs were created in the early 1990s as a legal entity generally formed by physicians and one or more hospitals with the intention of negotiating contracts with payers and sharing in the financial rewards of controlling costs. An estimated 15 to 20% of hospitals had a PHO in 1994, and many others planned to start one, according to a Medicare report.

According to the trade group, Health Care Lawyers, a PHO is a viable alignment model, with three big “ifs”:

• First and foremost, if it’s clinically integrated (meaning doctors and hospitals collaborate to provide better care at lower cost) not to leverage higher fees from payers, so that the PHO can offer a compelling value proposition to payers
• Second, a PHO can succeed if it meets independent doctors’ professional and economic needs
• Third, a PHO can work if the right market conditions exist, notably that health plans are willing to share savings with clinically integrated providers who deliver care more efficiently.

Avoiding Price Fixing, Showing Cost Effectiveness

For both parties, a clinically integrated PHO enables them to join together lawfully in contract talks with payers. They will also be better positioned for new Medicare and Medicaid payment models that require hospital and physician cooperation, such as global payments, bundled payments, episode-based payments, accountable care organizations, and reductions of readmissions.

Once formed, the PHO contracts directly with managed-care plans, which now have a one-stop-shopping type of arrangement with the PHO in one contract. The managed care plan simultaneously arranges for the PHO provision of hospital tertiary-care and specialty-physician services. The managed care organization (MCO) would no longer need to enter into several agreements with individual specialists; instead, the MCO would have an agreement for the entire scope of services from the PHO.

In a 2009 article entitled “Clinically Integrated Physician-Hospital Organizations” Barry Bader writes, “To be seen as cost-effective by purchasers, the PHO must have active utilization management, sophisticated information systems, and intensive involvement of physicians in developing standards of care. PHOs have not yet developed this infrastructure. To avoid concerns of antitrust, the PHO must entail significant elements of risk sharing for both parties.”

In a 2010 paper titled “Physician-Hospital Integration in the Era of Health Reform” prepared for California Health Care Foundation, the authors noted that PHOs were not initially successful at developing the infrastructure needed to manage utilization cost-effectively, and they failed to sign many contracts with health plans. What’s more, the Federal Trade Commission (FTC) found fault with the way most PHOs negotiated fees for doctors, finding that in practice they amounted to price fixing.

In a consent order issued in 2006, the FTC opened a door by allowing Advocate Physician Partners to continue contracting through the program of “clinical integration” it had started several years earlier. In this ruling, staff opinion letters, and other statements, the FTC offered guidance to other PHOs on how to join forces lawfully in a way that drove better quality, greater efficiency, and lower overall cost.

Birth of Clinical Integration

Thus was born the Clinically Integrated PHO.

The FTC in essence said it would not pursue antitrust charges against PHOs that were truly organized to achieve collaboration among physicians and hospitals to “control costs and ensure quality.”

By early 2010, wrote the authors, integration was again on the upswing in response to Obamacare and the introduction of accountable care organizations and expansion of other value-based payment methodologies.

But they had a warning as they said some industry stakeholders are cautious about embracing physician-hospital integration, because there is data to suggest that integration may lead to higher costs through increased market leverage with payers.

The costs of integration, which include practice acquisition, administration, information technology, operating infrastructure development, and ongoing practice support, can also pose a barrier. Also, given that most payers do not substantially reward for efficiency or quality, it is difficult for most organizations to begin the necessary care redesign without reducing revenue.

Riding the Wave

Because of the growing consensus that fee-for-service is a major contributor to ever-rising costs, new payment methodologies are emerging that emphasize managing cost and quality of care for an identified population of patients or diagnoses. This has led to an increase in physician-hospital integration to better coordinate care and align their financial incentives.

Looks like NOSA has the resources and expertise to catch the wave.