Five Steps to Realizing Value in a Clinical Co-Management Agreement

Intelligent design during the planning phase is essential

Published: Tuesday, October 27, 2015 - 15:34

Healthcare reform has undoubtedly created more integrated delivery and payment models based on a culture of quality-focused and cost-efficient clinical management. In one example, many healthcare systems have begun implementing clinical co-management arrangements (“CCMAs”) to accomplish the physician alignment and integration required to achieve these goals.

CCMAs help address the need for integrated quality of care by incorporating physician leadership into cost management and quality oversight and by utilizing pay-for-performance incentives to improve the quality of clinical performance. However, CCMAs that are not properly designed in the planning phase will fail to achieve desired outcomes for the health system, physicians, and patients. Below are five steps to help ensure the CCMA brings value to its stakeholders:

1. Create quality-cost alignment with program incentives

The primary reason for entering into a CCMA is to align physician and hospital goals for quality of care and cost control. By implementing CCMA incentives that align with third-party payer pay-for-performance programs (e.g., value-based payments), hospitals are able to motivate physician behaviors that contribute to improved quality outcomes and enhanced quality reimbursement for the hospital. Furthermore, targeted operational improvements, such as first case on-time starts or specific cost-control targets result in improved coordination, cost savings, and more efficient care.

2. Engage hospital physician leaders

Without physician engagement, even a well-structured CCMA will not be successful. Physician leadership is essential to lead changes in care delivery at the clinical level. Physicians also contribute heavily to the needed culture of care within the service line and must, therefore, demonstrate a commitment to quality outcomes. In order to do this, physicians should be involved in decision-making and truly have a voice in the delivery of care.

3. Implement a meaningful data analytics platform

Well-meaning physicians and well-designed metrics alone are still not enough to guarantee a successful CCMA. In a CCMA, physicians are asked to make healthcare delivery decisions and hold one another accountable for service line improvement based on available data. Without meaningful data, physician leaders can’t change behaviors or know where to focus their efforts. Physicians and service-line leaders need meaningful data analytics software to identify cost and quality outliers in real-time to implement impactful changes.

4. Realign existing PSAs

Health systems also ensure value in CCMAs by funding co-management payments with dollars committed to existing professional services agreements (PSAs). For instance, service line medical director duties and related compensation should be wrapped into the base management fee. Some CCMAs even require emergency department call coverage or specialty-hospitalist coverage to be provided as an eligibility requirement for participation in the CCMA. The hospital thereby uses the rolled-up PSAs as funding for the CCMA, leading to a higher ROI.

5. Establish fair market value and commercial reasonableness

It’s important to remember that CCMAs exist between hospitals and physicians with referral relationships. Along with the many legal considerations for establishing a CCMA, healthcare systems must ensure that CCMAs comply with current healthcare laws and regulations, including the requirement that compensation arrangements not exceed fair market value and commercial reasonableness standards. Care must be taken to safeguard against double-payment of employed physicians or independent contractors receiving compensation under separate agreements from the CCMA. Furthermore, healthcare systems should recognize the existence of many variations in the contractual requirements and duties that impact fair market value. Important considerations for determining fair market value CCMA compensation include, but are not limited to, the following:
• Size of the service line managed
• Level of administrative duties required of the physicians
• Source of funding for performance management compensation
• Number of participating physicians

Because CCMAs are designed with the specific needs of a particular hospital, no two programs are exactly alike. As always, we advise hospitals to engage healthcare legal counsel and valuation analysts with experience with these arrangements to help navigate the regulatory and financial hazards.

About The Author

Schaeffer Smith

Schaeffer Smith is a manager in healthcare services at HORNE LLP. He is a member of the healthcare services valuation department and specializes in compensation valuation for employment, medical director, call coverage, clinical co-management, pay-for-performance, stipends, and other physician contracting arrangements.