Doctors and Hospitals Revisit a New Definition of Clinical Integration

By William DeMarco, August 25, 2009

I was just asked to provide a brief comment on the question for MCOL’s Thought Leaders newsletter on the question - "Have you observed any emerging trends, developments or initiatives of note with Integrated Health Care Delivery Systems?"

Here’s my more complete response:

In my travels observing workshops and client work and in my general reading I am seeing a change in the definition of what was once called integration.

Early on integration was defined as a means for physicians and hospitals to deal with capitation as a joint inpatient/outpatient service center versus having insurance companies pit providers against each other. This step towards a joint PHO framework involved legal issues of antitrust and market power and community benefit, but once structured, people had the idea that demanding more money because they offered comprehensive services was the goal. What was NOT discussed was reimbursement and gain sharing, which would have led to discussions on what we now call lean engineering to make sure that what the PHO charged the insurer was higher than the actual cost to provide services. In other words they were able to share savings with the insurance company. But integration usually stopped at the legal step and many PHOs failed as capitation was not the norm and hospitals got out of the risk business.

Now I am seeing a resurgence of interest in this, partly brought on by the scrutiny of the Federal Trade Commission who is reviewing many false PHOs who are operating under the assumption that they can still collectively bargain with payers without taking risk. This is an incorrect assumption for both PHOs and IPAs who must either be financially at risk or clinically integrated to proceed with any kind of collective negations with plans. Any other options may be seen as non competitive behavior and there are still IPAs and Super PHOs losing out because they do not have a fundamental understanding of what the federal government means by integration.

This reason, along with several others, is now motivating doctors and hospitals to revisit a new definition of clinical integration.

For example:

Payment Integration  

Many of these hospitals are reading the recent MedPac report that is recommending physician and hospital payments be combined like a Global payment based upon diagnosis. Medicare is going in this direction, as are some of the newer Pay for Performance models being developed. . By using episodes of care versus fee for service or traditional capitation, providers can start matching populations and identify gaps in process. To accept this global payment means there needs to be payment integration and a billing capability for both hospital and physicians as part of their managed care agreements.

Clinical measurement and reporting  

There continues to be discussion that P4P programs can be considered by the FTC as partial clinical integration and will make an organization exempt for an antitrust challenge as long as they are participating in Clinical measurement programs. This is also a platform for lean engineering by, again, allowing savings for the efficiency and effectiveness improvement to stream back to the providers IN ADDITION to their normal pay.

Value Based Purchasing

As employers begin revisiting direct contracting or discovering benchmarking information from “Leapfrog” and/or “Bridges to Excellence”, these larger employers are looking for reports on quality and safety from the health plans. Providers want to make sure their efforts are not mis-reported so they are preparing basic reporting data for employers to see as well as using HealthCare Compare data to begin their internal Performance based contracting efforts. Smart Health plans are helping the providers achieve the goals in basic process compliance for diabetes and heart treatments but are also able to report to hospitals valuable data on readmissions and other normative data based upon regional paid claims data.

Probably the biggest change is the understanding that most of the IT information systems in hospitals are obsolete under the new “ meaningful user” definition. Meaningful user requires web based practice management and hospital billing to permit payers and providers to do immediate real time link ups for billing and reporting. Current systems are closed systems, meaning they are designed to create data in-house only and do not connect to the community at large.

Patient and community demands

Many of us believe that the biggest trigger will not be in physician EMRs but consumer Personal Medical Records (PMRs). As more and more patients ask for their x-rays on digital CD and their medical records be put on a thumb drive, and ask that the doctors use the internet to correspond lab values and other updates to their medical history, doctors are truly beginning to understand that the real definition of integration is connecting with the patients and outside community, not just data reporting in their practice. As Health Vault and Revolution Health sell these services through insurance companies and provider organizations, we see this will change the use of data and redefine the relationship between providers and payers who have this capability versus those who are behind the curve in adopting integration as a community value.