The BayCare Experience: Physician Joint Ventures

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The BayCare ExperiencePhysician Joint Ventures

• Paul R. Summerside, MD
• Chief Medical Officer
• BayCare Clinic, LLP
• President, Board of Managers
• BayCare Aurora, LLC

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Aurora BayCare Medical Center (ABMC)

• ABMC is an acute care hospital that opened in
  2001
• Joint Venture of BayCare Clinic (a physician
  partnership) and Aurora Health Care (a
  not-for-profit organization)
• 40 Physician ownership
• 167 Beds including the following services
• - General Medical and Surgical - Womens
  Health
• - Adult ICU/eICU - Obstetrics
• - Cardiovascular - Level III Neo-natal ICU
• - Neuroscience - Pediatric Inpatient
• - Orthopedic - Inpatient Rehabilitation
• - Emergency Services including a Level II Trauma
  Center - Oncology
• Located in Green Bay, Wisconsin
• 1,100 employees
• Operates under the Planetree philosophy patient
  centered care in a healing environment

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BayCare History

• 1996 - Independent Specialty Practices Form MSO
• 1998 - Letter of Intent w/ AHC
• 1999 - Integration of MSO to BayCare Clinic
• 1999 - Finalize JV Operating Agreement
• 2000 - Break Ground on ABMC Hospital
• 9/01 - Opening ABMC Tertiary Hospital
• 2003 - ABMC Reaches Calendar Year Profitability
• 2004 - ABMC Pays off Operating Line and
  Accumulates Cash Reserve
• 2007 - ABMC 5th Consecutive year w/ gt 12 margin
  and begins seventh expansion

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Joint Ventures.Why?

• Am I in trouble?
• Am I at risk?
• Will I be at risk?
• Risk Avoidance 10x Pleasure Pursuit

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Change
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Hospital System Anxieties

• Fixed Costs
• Physician Loyalty
• Capital Needs
• Regulatory Concerns
• Safety/Quality
• Payor Mix Risk

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Understanding Motivation

• Maslows Hierarchy of Needs

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Physician Fears/Needs

• Loss of lifestyle
• Loss of Control
• Loss of Colleagues
• Loss of Respect

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Hospital Finance
PROFIT
COST
Millions
LOSS
REVENUE
0 Volume
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Physician Finance
REVENUE
Thousands
PROFIT
COST
LOSS
0 Volume
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Physician
I Move
I Stay
Risk Corridor
Thousands
REVENUE
PROFIT
COST
LOSS
0 Volume
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Hospital Finance Fears
Ortho Happy
Ortho Sad
PROFIT
Risk Corridor
COST
Millions
LOSS
REVENUE
0 Volume
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Clash of Cultural Values

• Institutional Greatest Good for the
  Greatest Number (Missions)
• Physician My Income, My Overhead,
• My Time, My Patients (Goals)

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Physician Fears

• Reliance on benevolent dictatorships
• w/ a Mission
• Psst remember RESPECT and Control!

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Physician/Hospital Engagement
--Eric Berkowitz
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The Renter vs. Owner
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Neurological Spine Costs Among Six Centers
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Keys to Successful Join Ventures

• Key personnel like each other
• Understanding partners cultural values
• Respect of partners value
• Willingness to relinquish control.
• (If you love them, set them free!)

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If you want to be a lion tamer. you better at
least like the animals.
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The Value Proposition
People will do what you ask if they perceive
that doing what you seek will serve what it is
that they personally value. --Dwyer
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Aligning Incentives (Fears!)

• Hospital System Anxieties
• Fixed Costs
• Physician Loyalty
• Capital
• Regulatory
• Safety/Quality
• Payor Mix Risk
• Loss of Profitability and Mission

• Physician Anxieties
• Loss Lifestyle
• Loss of Control/Quality
• Loss of Colleagues
• Loss of Respect

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BayCare Aurora Experiment

• Ownership
• 40 BayCare Physicians
• 60 Aurora
• All Stark Controlled Revenues in the JV
• Governance (MAD) Board
• Five Aurora and Five BayCare
• 70 Super Majority Rule
• Partner Veto all Self-Dealing
• Non-competition

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BayCare Aurora Experiment

• Results
• BayCare Clinic
• 1999 53 specialists
• 44 million net collections
• 2007 100 specialists
• 40 physician extenders
• 105 million net collections

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BayCare Aurora Experiment

• BayCare Aurora LLC
• 1999 Two Surgery Centers
• 8 million gross revenues
• 2007 Tertiary Hospital System
• 200 million gross revenues
• Largest Taxpayer in County

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IP and OP Discharges Since 2002
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Patient Satisfaction Inpatient Services
Source Aurora Loyalty Index Data Through
Q2 2007
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Patient Satisfaction Outpatient Ambulatory
Source Aurora Loyalty Index Data Through
Q2 2007
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• In the Absence of a Great Dream
• Pettiness Prevails.
• --Peter Senge