The MPA Virtual Partnership

The MPA Virtual Partnership is a financial relationship that aligns the priorities of physicians and hospitals to establish a collaborative environment that rewards cost savings and improved care. Cost savings increases hospital margins and physician income is increased by a share of the savings that physicians generate for the hospital through improved quality and good economic stewardship.

The MPA Virtual Partnership permits the equitable distribution of revenue between hospitals and physicians and supports hospital/physician alignment with independent physician practices or within integrated health systems, PHOs, and ACOs. It is independent of the reimbursement relationships with payers and can operate in the existing payment environment without altering revenue agreements, or as part of GlobalPRIME™ or another broader payment reform initiative.

The basic MPA Virtual Partnership relationship is established between hospitals and Managing Physicians, with MPA acting as a neutral third-party intermediary to ensure that performance is evaluated fairly and funds are distributed equitably. Managing Physicians are the primary medical decision makers and providers of care (e.g., the surgeon). They are most responsible for resource utilization and outcomes of care.

In a MPA Virtual Partnership, the Managing Physician assumes responsibility for a budget that represents the best estimate of the cost of caring for each patient. When the cost of care is less than budgeted, the Managing Physician receives a share of savings. However, the Managing Physician accepts limited exposure for cost overruns by withholding a designated percentage of each of their billed services that can be used to reimburse the hospital in the event of cost overruns (if necessary, the MPA Virtual Partnership can be modified to operate without the withhold requirement). Withholds are held in an escrow account for periodic reconciliation and funds remaining in the escrow account after the reconciliation are returned to the physicians.

The expected cost of a patient’s care is based on models derived using a national database of good quality providers with efficient resource utilization. The cost for each patient is risk-adjusted using the patient’s condition prior to treatment to account for the additional resources necessary to care for sicker patients. This eliminates the incentive to treat only healthier patients. The models are then standardized to average performance at the hospital, making the total budget revenue neutral to current practice patterns. Cost reductions resulting from good economic stewardship and improved quality now translate directly into hospital savings.

The reconciliation of actual costs to a predetermined budget creates an incentive for resource conservation and penalizes over-utilization. The MPA Virtual Partnership employs a carve-out payment for required services and a warranty to penalize under-utilization. Treatment and services that both the hospital and Managing Physician agree are essential in the care of all patients are paid on a fee-for-service basis without a withhold. Therefore, failure to provide required care reduces the Managing Physician’s income. Clinical practice guidelines and protocols may serve as the basis for required care.

The budget calculated for each patient includes a warranty payment that covers expenses associated with potentially avoidable adverse outcomes. The warranty is based on the frequency and costs of adverse outcomes. A lower frequency and severity of adverse outcomes increases the amount of warranty payments retained by the Managing Physician, creating a financial reward for high quality care. Managing Physicians face financial losses when under-utilization increases adverse outcome rates or costs associated with treating adverse outcomes. However, a per case stop-loss is used to prevent a catastrophic event from wiping out an otherwise good performer.

During reconciliation, the sum of the actual hospital costs for each physician’s patients are compared to the sum of the predicted hospital costs for those patients. If actual costs are less than predicted, savings are divided between the physician and the hospital. The maximum amount the physician can receive is indexed to the percentage of that physician’s withhold. If the actual hospital costs are more than predicted, overruns are deducted from the physician’s escrow account. MPA, as a neutral third-party intermediary, performs the necessary analyses and financial reconciliation.

The MPA Virtual Partnership is a powerful new technique for aligning hospital and physician priorities, improving quality, and reducing cost. Without requiring the intermingling of administrative control, both hospitals and physicians proportionally assume risk and share rewards. As a result, the MPA Virtual Partnership avoids anti-kickback restrictions. Hospital and physician collaboration offers substantial benefits for both parties.

For further information, please contact us.