University of Alabama Birmingham Funds Flow Model Society

University of Alabama Birmingham Funds Flow Model Society of Surgical Chairs American College of Surgeons Kirby I. Bland, M. D. UAB Department of Surgery October 4, 2015 Page 1

Introduction § Why was Funds Flow developed at UAB? § What were the early outcomes? (FY 2014/2015) § What changes are needed for the future? § Maintaining focus on the academic and clinical performance? w Model planning required multiple visits to Stanford? Page 2

UAB Funds Flow – Rationale for Change § Changes required due to: Health Care Reform, Changing Reimbursement Models. Survival of UAB Health System Clinical and Academic Missions. § UAB outcomes anticipated: 1) Organizational Leadership Alignment across AMC. 2) Transparency of Finances (Departments/Divisions). 3) Alignment of Incentives. 4) Clinical Integration with Quality Outcomes. Initiatives consistent with: AAMC Report – Advancing the Academic Health System for the Future. Page 3

UAB Funds Flow Oversight Committee Balance of Chairs and Hospital Leaders § JOL: Health System CEO Dean of SOM HSF President § UABHS: Health System CFO System COO EVP of Hospital § Exec. VP HSF (Practice Plan) 5 Clinical Chairs 2 Senior Faculty (non voting) w. RVU Committee GME Committee Physician Extender Committee Surgery & Medicine Chairs: Permanent Members Clinical Overhead Committee Compensation Committee Page 4

Drivers for Funds Flow § Clinical Chairs were drivers to create Funds Flow: w To ensure sustainability of all Academic Missions. w Financial Integrity of Health System. Page 5

Drivers for Funds Flow § Previous Hospital “Mission Support” Process: w Did not align HSF Practice with Hospital. w Gaming of Requests: “To ask for more than you need”. w Weak accountability, predictability and sustainability. w Some Departments in Financial Difficulty, despite receiving “Mission Support. ” Page 6

Complexity of Former Funding – Prior to UAB Funds Flow UAB Health System UAB Hospital HSF UAB School of Medicine Mission Support Professional Fees Other Clinical Support VIVA/Triton SOM Research Grants SOM Department Clinical Expenses Capitated Revenues Page 7

UAB Funds Flow Model – Began FY 2014 for All 17 Clinical Departments REVENUE: FY 2013 Hospital Mission Support Amount + Additional $23 Million in FY 14 Professional Fee Revenues Central Funds Flow Account EXPENSES Departments • w. RVU Revenues • Expense Reimbursements Centralized Clinical Expenses • Clinical Staff • No Charge Back • Malpractice • Direct Clinic Expenses • Billing Office • Practice Plan Overhead Page 8

UAB Funds Flow Model § Previous hospital support eliminated. § All clinical costs were centralized. § Comp/w. RVU rates: AAMC/UHC < MGMA rates. § w. RVU Revenues-3 year Rolling-Avg of MGMA comp/RVU. § 70% of Median MGMA by Specialty; w Surgery: 10 Divisions 21 Rates(current) Page 9

Increased Hospital Support to Departments Initial Year of Funds Flow Historical Hospital Support to All Departments Page 10

UAB Funds Flow Model § Professional Fees and Clinical Expenses remain for non-UAB hospitals, e. g. Children’s Hospital of Birmingham. § Physician Benefit & Dept. Administrative Cost Reimbursement. § Funds Flow Withhold (10% of RVU Revenues). - 20 At-Risk Metrics to achieve return. - Combination of Practice Performance Metrics: Satisfaction Quality Finance § Departments required to develop w. RVU based Compensation Plans: Academic Clinical & Educational Page 11

Work of the w. RVU Committee § Initial assignment of w. RVU rate based upon MGMA specialty. § Evaluates requests by Departments for Change of Assignments. § Developed methodologies to address sub-specialties not listed by MGMA: eg; Neuro-Oncology Urologic Oncology § Addressed rate variations where differing specialties performed the same services: ENT/Head & Neck - Rate: $ 39. 67/ w. RVU Oral Max/Head & Neck - Rate: $156. 86/ w. RVU Page 12

w. RVU Committee § Issue: Greater w. RVU revenues for Return vs. New Patients Rheumatology had 10: 1 Ratio of Return vs. New Visits: 1 hr. New E&M (low comp rate) 4 returns/hr New Visits: Weighted average 2. 63 w. RVUs per hr. (2. 63 x 1 visits/hr) Return Visits: Weighted average 5. 76 w. RVUs per hr. (1. 44 x 4 visits/hr) Page 13

w. RVU Committee § Solution: Modified w. RVU rate weighting to incentivize New vs. Return visit. • Trial Project underway in Rheumatology. New visits : weighted at 300% of RVU Rate. Return visits : weighted at 85% of RVU Rate. Page 14

UAB Funds Flow Model – Key Components Faculty Compensation/Incentive Plan (eg. Surgery) Base Salary + Incentive for Faculty w. RVUs x w. RVU Rate x. 80 (Division OH 20%) $250, 000 VA Salary Support 50, 000 Teaching Salary Support 25, 000 Medical Directorship 15, 000 Endowed Professorship 50, 000 UAB Academic Component 15, 000 Base Salary $405, 000 $250, 000/$54. 28 = 4, 606 w. RVUs Incentive > 5, 000 w. RVUs= $54. 28 x w. RVUs x 65% Page 15

What Were the Overall Results of Funds Flow? w Created a Shared Governance Structure to Oversee, Implement and Administer UAB Funds Flow (Oversight Committee). w Aligned practice efforts between the HSF & the Hospital. w Enhanced the Financial Performance of UAB Medicine. Page 16

Results of Funds Flow for ALL Departments? w Removed Infrastructure and Clinical Expense from Department responsibility. w Enhanced the Financial Performance of the Clinical Departments. w Permitted the Implementation of an Academic Enrichment Fund for the School of Medicine. Page 17

Results of Alignment (FY 2014) s At-Risk Withhold for ALL Departments : A most successful component of Funds Flow. Achieved 93 percent payout of At-Risk Dollars: $14. 1 m of $15. 1 m. Achieved 99 percent of Quality Metrics. Achieved 95 percent of Financial Metrics. Achieved 48 percent of Patient Satisfaction Metrics. w Surgery outcome: (FY 15) 90 - 95% of withhold = $3. 3 M Page 18

Hospital + Practice Plan: Overall Financial Performance – (FY 14 & FY 15 YTD) n Financial s Performance for the HSF and the Hospital FY 14 Combined Operating Margin • Favorable to Budget: $15 million • Positive Variance (FY 13 – 14) of $3. 9 million s FYTD 15 Combined Operating Margin (thru June 2015) • Favorable to Budget: $52 million • Positive Variance (FY 14 – 15) of $69 million Page 19

Clinical Operating Margin: 17 Departments Use of Funds: Faculty Recruitment Faculty Compensation & Incentives Research & Education Support Academic Enrichment Funds Flow Modelled Funds Flow Started Page 20

$6. 4 M $6. 1 M $5. 1 M Clinical Operating Margin- Departments in Funds Flow FY 15 TOTAL w. RVUs Surgery >885 K Page 21

Cash Reserve Balance- All 17 Departments in Funds Flow of $29 million Funds Flow Started Page 22

UAB Funds Flow UAB Medicine Funds Flow: What could have been done better? Page 23

UAB Funds Flow Issues § Communication of “ 70% of MGMA Median”: Private Practice + Academics RVU rates for Faculty. § Too much focus on w. RVUs at the expense of the other missions (research, publications, grants, education, etc. ). w No initial GME Support – Unresolved. w Resolution: GME Committee to address. § Multiple Specialties may perform the same procedures – but, receive different conversion factors. w Neurosurgery Spine – Orthopaedic Spine – Unresolved. w Resolution: w. RVU Committee to address. Page 24

UAB Funds Flow Preparing UAB Medicine Funds Flow for the Future Page 25

Future Changes for Funds Flow § Funds Flow to Incorporate Value-Based Care: UAB Care § Acknowledge and address multiple missions of an Academic Medical Center: w Alignment of Faculty Compensation Plans to Funds Flow Model to address these missions. Page 26

2017 Modeling a more Balanced System that also focuses on Value-Based Purchasing Weighting of Departmental Funds Flow Revenues + 60% RVUs/Service 1. Budgeted RVUs 2. Budgeted Clinics 3. New Patients UAHSF + 20% Quality 1. Value Based Purchasing 2. Population Health UAB School of Medicine 20% Academic TBD by SOM University Hospital 12 UAB Pillar Goals Across All Entities Page 27

Final Thoughts § Funds Flow was one of the most ambitious initiatives implemented in AMC 21. w Initially considered program that would evolve over 3 to 4 years. UAB Medicine and Stanford continue evolution in this model. § Funds Flow has improved the clinical operating margin and reserves of the Departments. w Departments receive w. RVU revenues regardless of payor mix. w Department Chairs distribute Revenue: Advice of Directors for Recruitment, Retention and Academic Mission. Page 28

UAB University Hospital Page 29