10/23/2013

J. Wayne Meredith, MD Wake Forest Baptist Medical Center the Association of Academic Surgical Administrators 26th Annual Conference October 7, 2013

Times have changed

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The Sweet Spot • After  antibiotics • Before  managed care

Health Care Changes

• 1300 decisions to be made by  HHS secretary • 30,00 pages of regulations

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John McConnell, MD hired as Medical Center’s first CEO

Medical Staff met with NCBH Board Members

2005

2007

President of WFUHS and President & CEO of NCBH retire

2008

2010

WFBMC Integration Agreement approved and signed

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Wake Forest Baptist Medical Center surgical specialties rankings 2012

2013

Cancer – 26th

Cancer – 12th

Neurosurgery – 42nd

Ear, Nose & Throat – 20th

Urology – 41st

GI Surgery – 25th Neurosurgery – 30th Urology – 35th , Peds 33rd Heart Surgery – 46th Orthopaedics – 48th, Peds 44th

FY2002

FY2012

% variance

95

138

45%

Visits

180,633

280,048

55%

OR Cases

25,926

32,872

27%

$59,161,618

$82,985,948

40%

Faculty

Collections

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Mortality Index  WFBMC vs. UHCs Q&A Top 10 1.40

Sept 2011‐Jun 2013 Ages 18+

1.20

Mortality Index

1.00

WFBMC

0.80

0.60

UHC Top Ten: Colorado  Emory  Kansas  Utah Beaumont‐ Royaloak  Emory Midtown  Mayo Rochester  NYU  Arizona  Denver Heatlh 

0.40

0.20

0.00

WFBMC Mortality Index

2011 2011 2011 2011 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2013 2013 2013 2013 2013 2013 ‐09 ‐10 ‐11 ‐12 ‐01 ‐02 ‐03 ‐04 ‐05 ‐06 ‐07 ‐08 ‐09 ‐10 ‐11 ‐12 ‐01 ‐02 ‐03 ‐04 ‐05 ‐06 1.06 1.17 1.21 1.11 1.01 0.95 1.09 0.99 0.95 0.91 0.99 0.96 0.99 0.97 0.85 0.90 0.76 0.75 0.65 0.63 0.55 0.55

Q&A Top 10 Mortality Index 0.65 0.80 0.70 0.66 0.70 0.64 0.65 0.60 0.64 0.63 0.64 0.58 0.61 0.62 0.65 0.62 0.62 0.60 0.67 0.57 0.60 0.59

Medical Center Legal Integration

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Guiding Principles • The best way to achieve our historic individual mission is to  create a fully integrated governance, operational and financial  structure for Wake Forest Baptist. • Singular Vision and Mission • Balanced excellence • All aspects of North Carolina Baptist Hospital (NCBH) and Wake  Forest University Health Sciences (WFUHS), including  subsidiaries, will be under the Management Agreement • Strategic, financial and operational plans will be developed to  maximize the success of the Medical Center as a whole. • Equal operating income sharing 17

Guiding Principles • Effectively, the functional operating Divisions of Wake Forest Baptist  Medical Center (WFMBC) will be the integrated Clinical Enterprise (Wake  Forest Baptist Health), the Academic Enterprise (Wake Forest School of  Medicine), and Commercialization Enterprise (Wake Forest Innovations  and Innovation Quarter*).  Overall performance will be assessed within  this construct. • Clinical programs will be organized to optimize patient care (first),  operational excellence, revenue and expense. • Support for education and research programs will be at benchmark levels. • Although important roles for the NCBH and WFUHS/WFU Boards  continue, the internal and external face of the institution will be singular:  WFUBMC *Wake Forest Innovations and Innovation Quarter was created as an operating division in 2012  and includes scientific business services, technology development/transfer/company start‐ups,  and the development and management of the research park. Most of the assets of WFI are  owned by WFUHS, but income is general medical center revenue.

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General Structure • • • • • • •

Contractual model with indefinite term NCBH and WFU are 50% members (“owners”) of WFUBMC NCBH and WFUHS remain as corporate entities No transfer or sale of assets at present No transfer of employees at present Governance is integrated (next slide) Operations, management, contracting become centralized within  Medical Center (WFUBMC) • Extends to all aspects of NCBH and WFUHS (e.g. imagining joint  ventures, dialysis units, faculty and community physician owned  practices) 19

Integrated Management Model:  Legal Members

NCBH 50%

WFU 50%

WFUBMC Board of Directors CEO Integrated Governance, Operations, &  Finance through Medical Center  Integration Agreement

WFUHS NCBH (Lexington and Davie County Hospitals are subsidiaries of NCBH)

Wake  Forest  University  Physicians

School of Medicine

Research  Park 20

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Integrated Management Model: Operational and Functional Members

NCBH 50%

WFU 50%

WFUBMC Board of Directors CEO Integrated Governance, Operations, &  Finance through Medical Center  Integration Agreement

Academic Enterprise: Integrated Clinical Enterprise  (Wake Forest Baptist Health: Hospitals,  Outpatient, Physician Practices, All Patient care ventures)

Wake Forest University  School of Medicine,  Graduate School (shared  with WFU) Research Park,

Note: the research park and related activities became a separate operating division in 2012-Wake Forest

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Innovations

Reserved Powers (excerpts) • Appointments to Medical Center Board • Changes to the Medical Center Integration Agreement (MCIA) • Approval of new debt (i.e., non‐budgeted) exceeding  $25 million or  materially affecting coverage/liquidity ratios • Relationship between NCBH and Baptist Convention • Approval of annual Medical Center operating and capital budgets  (no line‐item vetoes) • Approval of non‐budgeted capital expenditures exceeding  approved Medical Center budget by more than $20 million or 10%  of budget, whichever is greater • Any material proposed affiliation with other medical schools,  universities, hospitals or health systems • WFU: Granting of degrees and faculty appointments, concurrence  in appointment of the Dean • Any change to WFUBMC, NCBH, Wake Forest University Health  Sciences or School of Medicine  legal or trade name

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Operational Issues • Medical Center CEO also serves as Chief Executive of NCBH  and WFUHS • To extent practicable, all contracting ‐‐ managed care and  other payers, professional services, and vendors ‐‐ will be  centralized at the Medical Center • For present time, NCBH and WFUHS licenses, CONs, provider  agreements, EIN, Joint Commission accreditation remain with  the entity currently holding them.

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CEO Roles/Evaluation • Overall responsibility/accountability for Medical Center  operations • Appointed, reappointed, dismissed pursuant to Medical  Center Bylaws, employment contract • CEO evaluation and dismissal process can be triggered by  either WFU (President), or the WFUHS, NCBH or WFUBMC  Boards • Serves as senior corporate officer for all operating entities  (including NCBH and WFUHS) • Serves as Chief Academic Officer of Medical Center • Appoints Dean of SOM (with the concurrence of the WFU  President) • Reports to WFU President as WFU EVP for Health Affairs 24

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Miscellaneous • Indefinite term: important for bonds • Agreement to reevaluate functioning of management model  36 months following implementation (this was done in June  2013, with only minor changes) • Dispute resolution/unwinding involves mediation, attempts to  return parties to pre‐integration status.

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Faculty Governance • All current SOM structures remain, e.g. Faculty  Executive Council, Clinical Chairs, Basic Science  Chairs • Enhancement: Elected Faculty Council (academic) • Need to determine how clinical chair input moves  from “Practice Plan” to Health System. Note: The practice plan was functionally merged into the Health  System in the fall of 2010. Faculty governance now achieved  through internal HS Committees.

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WFUBMC Integration ‐ Key Financial Elements

Key Financial Elements • Integration will facilitate accelerated benefits realization • "All money is gold“ • Maximize consolidated Medical Center financial performance • Focus becomes Medical Center income statements instead of  entity specific • 50/50 sharing of total unrestricted operating income • Single debt structure • Investment management coordination, although investment  income is retained at the entity level • Unified managed care contracting 28

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Key Financial Elements • Maintain strong balance sheets for Medical Center, NCBH and WFUHS • Medical Center, NCBH and WFUHS boards approve Medical Center multi‐ year financial plans and annual budgets • Income statement at Medical Center level • Capital spending, source of funding and days cash also at NCBH and  WFUHS level • Other reserve powers for major financial transactions • Continue to produce NCBH and WFUHS financial statements • Academic support at benchmark levels 29

Value-Based Health Care Right Care, Right Time, Right Place, Right Cost High Acuity WFBMC

Specialty Centers

WFB-Davidson Component Mini-System

Regional Hospitals Affiliates

• Heart/Vascular • Cancer • Brenner • Neuroscience • Trauma • Critical Care • Transplant

• Diabetes • Cardiac • Amb. Surg

INTERMEDIATE COST

INTERMEDIATE COST

Low Acuity

Primary Care W-S Region

WFB-Davie Component Mini-System

Regional Physician Network

HIGH COST

LOW COST

INTERMEDIATE COST

LOW COST

E.D.

LOW COST

Transitional Care: FaithHealthNC

Rehab / Skilled Nursing Home / Community Partners LOW COST

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Challenges • Culture trumps strategy, structure, even reason • Moving integration operationally down the  organization •

Role of departments- changing • • • • •

Centers of excellence –usual suspects Integrating the 3 functions‐ clinical training discovery Site for recruitment Recognition by the profession if not the industry GME

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Department as a Value Center • Profit center familiar • Really challenged as $/unit drops and profit  drops • Ie loss of faculty income and ultimately faculty • Define outcomes • RVUs, growth, quality, innovation, training,  discovery • Define cost • so much easier in a margin model

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Not always as it seems

Just keep digging

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