~ 

McAFEE&TAFT 

A PROFESSIONAL CORPORATION .\:/~l" \ 

10TH FLOOR. TWO LEADERSHIP SQUARE 

211 NORTH ROBINSON. OKLAHOMA CITY, OK 73102-7103 

(405) 235-9621 • FAX (405) 235-0439 

www.mcafeefaft.com 

May 26,2011 

__ J 

MICHAEL E. JOSEPH 

WRITER DIRECT 

(405) 552-2267 

mike.joseph@mcafeetaft.com 

ORIGINAL 

\I-\.. lRADE COMM/S 

~<0X-\\REc6gW1t/~ 

FEDERAL EXPRESS 

Donald S. Clark 

Secretary 

Federal Trade Commission 

600 Pennsylvania Avenue, N.W. 

Room 135-H 

Washington, D.C. 20580 

MAY Z 7 2011 

5SJ.j~q3 - 'uhit~ 

Re: Norman Physician Hospital Organization 

Dear Mr. Clark: 

Enclosed is a request for an advisory opinion that we are submitting on behalf of Norman 

Physician Hospital Organization and its members. The enclosures include: 

• One manually executed letter requesting an advisory opinion; 

• Two paper copies of the letter; 

• One electronic copy on compact disc; and 

• One copy of the letter with confidential information redacted. 

We appreciate your prompt attention to this request. 

Very truly yours, 

~.~-J Michael E.~~p( _. 

Enclosures 

6989442 JDOC 

OKLAHOMA CITY TULSA 
McAFEE&TAFT 

A PROFESSIONAL CORPORATION 

10TH FLOOR. TWO LEADERSHIP SQUARE 

211 NORTH ROBINSON • OKLAHOMA CITY, OK 73102-7103 

(405) 235-9621 • FAX (405) 235-0439 

www.mcafeetaft.com 

_ ............ 

PUBLIC 

May 26, 2011 

FEDERAL EXPRESS 

Mr. Donald S. Clark 

Secretary 

Federal Trade Commission 

600 Pennsylvania Avenue, N.W. 

Room 135-H 

Washington, D.C. 20580 

MICHAEL E. JOSEPH 

WRITER DIRECT 

(405) 552-2267 

mike.joseph@mcafeetaft.com 

ORIGINAL 

Re: Norman Physician Hospital Organization 

Dear Mr. Clark: 

Pursuant to FTC Procedure Rules 1.1 through 1.4, 16 C.F.R. §§ 1.1-1.4 (2010), we 

request an advisory opinion regarding proposed, prospective activities of Norman Physician 

Hospital Organization ("NPHO") and its members. Specifically, NPHO proposes to restructure 

operations and further develop a clinically integrated, centrally managed organization that offers 

market efficiencies and facilitates innovation in the efficient delivery of high-quality health care 

services to patients. As described below, NPHO will operate in a manner that creates a high 

degree of interdependence, interaction, and cooperation among the participating physicians and 

healthcare providers in order to improve quality of care and control costs. We ask the FTC to 

auvise huw the FTC staff wuulu analyze this anallgeIIlellt and the recommendations, if any, that 

the FTC staff would be likely to make if NPHO develops contract proposals, negotiates contract 

terms, and enters into contracts with third-party payers for the provision of the clinically 

integrated services described in this letter. 

Part I of this letter provides background information about NPHO and its two founding 

members, Norman Physicians Association ("NPA") and Norman Regional Health System 

("NRHS"). Part II provides information about market characteristics and demographic 

information, including an overview of location and service area characteristics, NPHO service 

area hospitals, and physicians in the NPHO service area. Part III addresses NPHO's clinical 

integration plan, including purposes and background of clinical integration; future plans for 

enhanced clinical integration, including participation requirements and costs; organizational 

arrangements necessary for clinical integration; and community benefits of clinical integration. 

Part IV describes the contracting issues, including the historical approach to contracting, the 

proposed approach, and an explanation of why joint contracting is essential for meaningful 

clinical integration. Part V provides a brief legal analysis and commentary. 
-2-

I. BACKGROUND AND OVERVIEW 

A. Norman Physician Hospital Organization 

NPHO is based in Norman, Oklahoma, which is part of the greater Oklahoma City 

metropolitan area. It was founded in 1994 by NP A and NRHS as a physician-hospital 

organization. NPHO's purpose is to provide, arrange for, and coordinate the delivery of high 

quality, readily accessible, cost-effective health care services to residents of the communities 

served by the physicians, hospitals, and other healthcare providers that comprise NPHO. Since 

its inception, NPHO has helped to link health insurers, health plans, third-party administrators, 

and employers to an established network of healthcare providers and professionals who share a 

common interest in providing optimal healthcare. NPHO is organized as an Oklahoma limited 

liability company and is owned equally by its two founding members, NP A and NRHS. 

Additional information regarding NPHO can be found on its website: www.normanpho.com. 

NP A is an Oklahoma limited liability company whose members are physicians that are 

members of the medical staff of affiliated NRHS hospitals. NRHS is operated by Norman 

Regional Hospital Authority, a public trust, and includes the following hospitals: Norman 

Regional Hospital in Norman, Oklahoma; Moore Medical Center in Moore, Oklahoma; the 

HealthPlex campus in Norman, Oklahoma; and Family Medicine Centers in Norman, Moore, 

Newcastle, and Blanchard, Oklahoma. NRHS has obtained a single hospital license from the 

Oklahoma State Department of Health covering Norman Regional Hospital, Moore Medical 

Center, and facilities at the HealthPlex campus, each of which is otherwise a separate facility. 

Purcell Municipal Hospital, which is a separately licensed hospital located in Purcell, Oklahoma, 

is a participating hospital in NPHO. For convenience in this letter, we have referred to Norman 

Regional Hospital, Moore Medical Center, the HealthPlex facilities, and Purcell Municipal 

Hospital as the "Hospitals." 

NRHS and NPA shared equally in the initial funding of NPHO, and they continue to 

share in the cost of . and capital needs. The cost of operations_ 

is covered principally through withholds of fees 

paid to NPHO for services provided in accordance with contracts entered into directly between 

NPHO and several employers. In addition, individual physicians and medical group practices 

are required to pay NPHO significant fees for the implementation and maintenance of electronic 

medical records and an electronic interface software system. Each participating physician also 

pays membership dues to NPA in the amount of $150 per year. While NPHO maintains a lean 

operation and expects to continue to do so in the future, the operating costs of NPHO - which 

can be expected to increase as the clinical integration plan is implemented - reflect a meaningful 

investment by NPHO's members in the organization. NPHO believes that additional investment, 

along with a substantial investment of time by participants in order to accomplish NPHO's 

objectives, will result in significant clinical benefits and efficiencies in the organization's goal to 

provide cost effective, quality health care services to patients. 

A chart showing the organizational structure and relationships among NPHO members is 

attached as Exhibit I to this letter. A copy of the NPHO Operating Agreement is provided as 

Exhibit II to this letter. 
-3-

1. NPHO Historical Operations 

NPHO was organized as a non-exclusive association of physicians in partnership with 

Norman Regional Hospital for the purpose of collectively providing cost-effective, quality health 

care services to the residents of the region. Initial physician membership of NPHO was 

comprised of approximately 125 physicians. This included multiple groups of Pediatricians, 

Family Practitioners, Internal Medicine physicians, and Obstetricians-Gynecologists. 

Membership also included physicians specializing in Anesthesiology, Cardiology, Dermatology, 

General Surgery, Gastroenterology, Neurosurgery, Neurology, Oncology, Ophthalmology, 

Orthopedic Surgery, Otorhinolaryngology, Pathology, Podiatry, Psychiatry, Radiology, and 

Urology. 

Since its inception, NPHO has offered specialized benefit plans developed for use by 

employers, third-party administrators, commercial health care payers and other purchasers of 

care ("Payers"). These special benefit plans have created savings for those Payers, which should 

in turn be passed along to the ultimate health care consumer, the patient. NPHO growth was 

accomplished through the addition of more direct employer accounts and by entering into 

contracts with PPOs, HMOs, and other commercial insurance Payers. 

2. NPHO Membership Today 

As of August 1, 2010, 237 physicians who practice in 38 specialties participate in NPHO. 

All of these physicians are members of NP A. Participation in NPHO is open to licensed 

physicians who are willing to commit to the goals, objectives, and plans of the organization. 

NPHO plans to continue to add physicians who practice throughout the service area. 

Each physician member of NPHO joins through an application process that requires 

submission of a letter requesting membership in NPA and, as a result, membership in NPHO. 

An interested physician submits a completed application to the NP A Board of Directors, which 

reviews the application and votes on acceptance of the applicant as a member. If an applicant is 

accepted, NPA bills the new member a $350 membership fee and $150 annually for dues. After 

the physician pays dues and enters into a contract with NP A, the physician signs all other 

necessary documentation relating to NPHO membership. Membership fees and dues represent 

the primary source of . for NP A. NPHO revenue for its 

activities 

expects withholds to increase slightly in order to provide sufficient working capital to 

accomplish the clinical integration plan and objectives described in Part III. 

Most of the physicians in and around Norman have chosen to participate in NPHO. 

However, NPHO members represent less than 10% of all physicians in the NPHO service area 

(which, as described in Part II, is roughly coextensive with the greater Oklahoma City 

metropolitan area), and less than 10% of the total number of physicians in anyone specialty in 

the NPHO service area are members of NPHO. In addition, a number of physicians who 

maintain medical practices in Norman, Moore, Purcell, and other parts of NPHO's primary 

service area do not participate in NPHO. For example, one neurosurgeon who chose not 

participate believed he would not make enough money. Another pediatric specialist chose not to 
-4-

participate because he was the only pediatrician in the area offering a particular subspecialty and, 

therefore, could charge higher rates for his services. 

3. NPHO Governance and Management 

NPHO is managed by a Board of Managers comprised of eleven representatives, one of 

whom is the president of NRHS, two of whom are appointed by NRHS (with one vacancy at 

present), and eight physicians elected annually by the members of the NP A. Physician managers 

are elected annually by the members of NP A. The physician representatives include four 

primary care physicians representing general internal medicine, family practice, pediatrics, and 

obstetrics-gynecology, and four physicians practicing unduplicated specialties. The chairperson 

of the NPHO board is always a physician who typically also serves as chairperson of NPA, 

which assists in assuring organizational alignment. Each physician manager serves for a period 

of three years and may be re-elected for additional terms. A table listing the members of the 

NPHO Board of Managers is attached as Exhibit III to this letter. 

NPHO currently maintains a staff of eight, including a full-time Executive Director, parttime Medical Director, full-time Quality Assurance Director, a contracts supervisor, a Director of 

Physician Informatics, and three full-time technical personnel who provide information systems 

training and support to participating health care providers and professionals. Additionally, 

NPHO contracts with a physician who serves as the Medical Informatics Officer. A brief 

overview of the background of each NPHO staff member is set forth in Exhibit IV to this letter. 

4. NPHO Contractual Arrangements 

NPHO is a non-exclusive network. Physicians who are members of NPHO may enter 

into contracts directly with Payers and are not required to limit their contracting arrangements 

through NPHO. NPHO does not impose any restrictions or limitations on the ability of NPHO 

physicians to become members of other physician networks or other provider networks. Some 

NPHO physicians are members of other physician networks. 

NPHO maintains a comprehensive credentialing oversight process for all participating 

health care professionals to ensure quality medical care and services are provided within its 

network. NPHO's credentialing requirements satisfy the standards of The Joint Commission and 

guidelines of the National Council of Quality Assurance. 

To the extent the services of specialists or other health care professionals are not 

available through NPHO physicians, patients and Payers may obtain those services directly from 

other physicians and health care professionals. In those situations, NPHO physicians will 

typically refer patients to other specialists in the greater Oklahoma City area for care. NPHO 

does not enter into contracts for those services. For example, if patients require care or treatment 

by pediatric gastroenterologists, pediatric oncologists, pediatric cardiologists, pediatric 

pulmonologists, or other pediatric subspecialists who are not members of NPHO, then NPHO 

pediatricians and other NPHO physicians will refer patients to those subspecialists for care. 
-5-

B. Norman Physicians Association 

NPA was fonned as an Oklahoma nonprofit corporation 1987, seven years before the 

creation of NPHO. The focus of NPA was to offer and promote high quality, reputable medical 

and dental care to employers and other consumer groups at the lowest rate commensurate with 

the provision of high quality care. NP A also coordinated and administered contracts between its 

members and various Payers, and developed and operated a utilization review program for its 

members. 

NP A members are licensed physicians, dentists, and podiatrists who: 

• 

• 

• 

• 

• 

• 

• 

satisfy the current admission criteria for the medical staff of affiliated Hospitals; 

comply with the credentialing plan of NPA; 

pay required fees, dues, and assessments; 

want to supply cost-effective, high quality medical care to qualified individuals; 

agree to be bound by and maintain the standards of medical care developed by NP A; 

execute a Participation Agreement with NP A; and 

are approved by the Board of Directors of NP A. 

NPA is governed by an eight-member Board of Directors elected by the membership. 

The Board of Directors is responsible for managing and conducting the business of NP A. It has 

the authority to select and remove officers, agents, and employees; to conduct, manage, and 

control the affairs and business of NP A; to incur indebtedness on behalf of NP A; to assess and 

collect membership fees and dues; and other powers necessary to manage the business affairs of 

NP A. The election of directors and the approval of any action by the members require the 

affinnative vote of a majority of the members present in person or by proxy at a meeting. A 

copy of the Bylaws of NP A is included as Exhibit V to this letter. 

As noted above, NP A members are assessed an initial membership fee and annual dues. 

The Board of Directors may assess additional dues from each member through the of 

withhold from fees the 

Membership may be tenninated, without 

reimbursement of membership fees, when a physician no longer satisfies any of the membership 

eligibility requirements. 

C. Norman Regional Hospital Authority and Norman Regional Health System 

NRHS traces its origin to Nonnan Municipal Hospital, a 61-bed hospital that opened in 

1946. In 1984, Nonnan Municipal Hospital changed its name to Nonnan Regional Hospital to 

better reflect the expanding geographic boundaries of the communities it serves. The stated 

objective of NRHS is to offer easily accessible, cost-efficient health care services that prevent 

diseases or lessen their severity, while promoting health and wellness in the communities served. 
-6-

Currently, NRHS is comprised of: 

• Norman Regional Hospital, a 337-bed acute care hospital located in Norman, 

Oklahoma, that offers a wide range of inpatient, outpatient, and emergency services; 

• Moore Medical Center, a 46-bed community hospital located in Moore, Oklahoma; 

and 

• HealthPlex, a new acute care hospital and medical campus in Norman specializing in 

cardiology and cardiovascular care, orthopedics and spine care, services for women 

and children, and emergency care. 

Before 1969, Norman Regional Hospital was owned and operated by the city of Norman. 

In 1969 Norman Regional Hospital Authority was created to operate Norman Regional Hospital. 

The hospital is now owned in part by Norman Regional Hospital Authority and in part by the 

city of Norman. Under a Lease Agreement dated April 1, 1970, the city leased the hospital 

campus to Norman Regional Hospital Authority. In March 2007, Norman Regional Hospital 

Authority acquired Moore Medical Center through a bankruptcy auction bid. In 2008 NRHS 

initiated construction of the new HealthPlex facility. Norman Regional Hospital, Moore Medical 

Center, and HealthP1ex operate under a single hospital license issued by the Oklahoma State 

Department of Health. 

NRHS is governed by the Board of Trustees. Trustees are appointed for terms of three 

years by the Mayor of Norman and confirmed by the Norman City Council. 

The Norman Regional Hospital campus is situated on approximately 30 acres. Nursing 

beds are located in four towers: a five-story tower constructed in 1968 and expanded in 1972; a 

five-story tower constructed in 1981; a three-story tower constructed in 1992; and a three-story 

tower constructed in 1995. In addition to the inpatient care towers, the main campus also 

includes a Cancer Management Center, an Education Center, three support buildings, an 

ambulance facility, and a hospitality house. 

Moore Medical Center includes the hospital and two medical office buildings. It is 

located approximately 8.6 miles from the principal campus of Norman Regional Hospital. 

Norman Regional Hospital Authority developed a third inpatient hospital and related 

campus - the HealthPlex - on a 95-acre site located four miles west of the original Norman 

Regional Hospital campus and five miles south of the Moore Medical Center campus. Among 

other facilities and services, the HealthPlex includes a 36-bed heart hospital, a 36-bed women's 

and children's hospital, and a 28-bed orthopedic and neurosurgical hospital. 

Purcell Municipal Hospital is a 39-bed community hospital located in Purcell, Oklahoma. 

Purcell Municipal Hospital is not owned or operated by Norman Regional Hospital Authority, 

but is a participating hospital in NPHO. 

A table highlighting services provided by the Hospitals is provided in Exhibit VI to this 

letter. 
-7-

The medical staff of the Hospitals is comprised of physicians, oral surgeons, and 

podiatrists who represent a broad range of medical and surgical specialties. Nearly all members 

of the medical staff of the Hospitals are NPHO participating physicians. 

NPHO participating physicians are not required to refer or admit patients to NHRS 

facilities, Purcell Municipal Hospital, or other health care providers that participate in NPHO. 

Referral and admission decisions are based on the medical needs of the patient and patient 

preference. While these guidelines will continue to drive future referral and admission decisions, 

it is anticipated that enhanced clinical integration of NPHO will increase utilization of NPHO 

participating providers and help to assure that patients, insurers, health plans, employers, and 

health care providers benefit from NPHO's Clinical Integration Plan, as described in Part III. 

If participating hospitals do not offer the programs, facilities, or capacity to provide 

medically necessary care for patients of NPHO physicians, then NPHO physicians will typically 

refer the patients to other hospitals in the Oklahoma City metropolitan area that can provide the 

needed services. NPHO does not maintain contractual relationships with other hospitals relating 

to the provision of care to patients. 

II. MARKET AND DEMOGRAPIDC INFORMATION 

This section and Exhibit VI to this letter contain market and demographic information. 

As this information shows, the NPHO service area overlaps almost entirely with the boundaries 

of the Oklahoma City metropolitan area and the Oklahoma City Combined Statistical Area 

("CSA"). The NRHS Hospitals make up less than 10% of the hospitals in the CSA, and NPHO 

discharges are similarly small percentages of the discharges of the Oklahoma City area hospitals 

as a whole. Likewise, NPHO physicians make up a small fraction of the physicians in the CSA. 

As a practical matter, patients across the NPHO service area and the Payers that NPHO 

physicians contract with enjoy numerous adequate substitutes for NPHO services. 

The remainder of this section reviews and summarizes certain pertinent information 

regarding location and service area characteristics; NPHO service area hospitals; and physicians 

in the service area. Exhibit VI includes additional information about: 

• Service area demographic information (Exhibit VI.A) 

• Population and density data, and narrative profile, of NPHO Service Area (Exhibit 

VI.B) 

• 

• 

• 

• 

• 

• 

Patient Populations and Insurance Coverage Estimates (Exhibit VI.C) 

Employers and employees in the service area (Exhibit VI.D) 

Available data regarding Health Insurance Plans, HMOs, Discount Medical Plans, 

and Third-Party Administrators (Exhibit VI.E) 

Medical, surgical, diagnostic, and ancillary services provided by participating 

hospitals (Exhibit VI.F) 

Other ancillary service providers (Exhibit VI.G) 

Physician Shortages in Selected Specialties (Exhibit VI.H) 
-8-

A. Location and Service Area Population and Characteristics 

NPHO Hospitals are located in central Oklahoma, in Cleveland and McClain counties. 

The medical clinics and offices of the NPHO physicians and the facilities of other participating 

health care providers are located in Norman, Moore, Blanchard, Newcastle, Purcell and Noble. 

Based on hospital patient origin data, NPHO serves a six-county area, including patients from 

Cleveland, Garvin, Grady, McClain, Oklahoma, and Pottawatomie counties. As seen in Exhibit 

VI.A and Exhibit VI.B, according the U.S. Census Bureau, an estimated 1.13 million persons 

resided in the six-county NPHO service area as of 2008. Almost 85% of these residents reside in 

Oklahoma and Cleveland counties. 

The contiguous six-county NPHO service area encompasses a land area of 4,511.8 square 

miles with 759.5 residents per square mile. These counties are interconnected through a system 

of interstate highways, state highways, and major roads, all of which share comparatively low 

traffic density and provide easy and unusually efficient access from one area to another. Indeed, 

Oklahoma City (which is in Oklahoma County) is an integral point in the U.S. Interstate 

Highway system; the area is bisected north and south by 1-35 and west to east by 1-40 and 1-44. 

The NPHO service area overlaps significantly (if not entirely) with the boundaries of the 

Oklahoma City metropolitan area and the Oklahoma City CSA. With an estimated 2008 

population of 1.206 million, the metropolitan area is comprised of seven counties: Canadian, 

Cleveland, Grady, Lincoln, Logan, McClain, and Oklahoma. The CSA also includes the microurban area of Shawnee (Pottawatomie County), which brings the region's population to 1.275 

million. Patients can cross the Oklahoma City CSA in nearly any direction in a drive of no 

longer than 45 minutes to an hour. 

Demographic data for NPHO's six-county service area is available in Exhibit VI.A. 

Population data, land area information, and a narrative profile, by county, is available in Exhibit 

VI.B. Median household income and poverty statistics and insurance coverage estimates for the 

NPHO service area, also broken down by county, is available at Exhibit VI.C. A summary of 

NPHO service area employers and employees, and health insurance plans, are available at 

Exhibit VI.D and VI.E, respectively. 

B. NPHO Service Area Hospitals 

According to the Oklahoma State Department of Health, 35 licensed hospitals are located 

in the six-county NPHO service area. Hospitals are licensed by the Department of Health as 

acute care/long term care hospitals, psychiatric hospitals, and rehabilitation hospitals. Of the 

total licensed hospitals in the six -county area, 24 are acute care hospitals, four are long term care 

facilities, two are psychiatric hospitals, and four are rehabilitation hospitals. There are no critical 

access hospitals in the NPHO service area. 

Of the 24 acute care hospitals, 16 are considered to be general acute care hospitals and 

eight are specialty hospitals that limit services primarily to surgery, orthopedic, cardiology, or 

women's services. Nineteen of the acute care hospitals are located in Oklahoma and Canadian 

counties, the two service area counties with the greatest concentration of service area residents. 

Bisected by 1-35 and 1-40, and encompassing a 1,246 square mile area with 697 persons per 

square mile, these two counties account for 84% of the estimated 2009 NPHO service area 
-9-

population and 95% of NPHO service area physicians. Residents of the four surrounding NPHO 

service area counties may reach nearly any metropolitan area hospital or physician in less than an 

hour of travel time. 

o 

Norman Physician Hospital Association 

Location of Acute Care Hospitals 

McClain 

Acute care hospitals in the NPHO service area include a total of 4,429 staffed beds. 

Collectively, these hospitals admitted about 213,000 patients in 2006. As seen in Tables 1 and 2 

below, as of 2006, Hospitals affiliated with the NPHO represent approximately 9.96% of total 

beds operated by acute care hospitals in the NPHO service area and 9.44% of reported hospital 

admissions. As shown in Table 3, below, Norman Regional Hospital, Moore Medical Center, 

and Purcell Municipal Hospital captured a combined market share of 13 % of NPHO service area 

acute care hospital discharges. Table 3 also provides a breakdown of patients discharged from 

the six-county area by county and hospital, which reveals that combined hospital market share 

ranged from a low of 2% of Oklahoma County discharges to a high of 60% of McClain County 

discharges. 
-10-

Table 1 

Service Area Acute Inpatient (Non-Federal) Facilities, 2006 

Acute Care Facility County Beds Admission 

:'s~~l~t;Ar¢~M!l~ketk; . ,·}t,·' ',,'.' <,:", .' .. ,'" '.: ',' '{:'~i~{:.:;:c, . .: 

>.,';'/'::":,c." .,," , .... .).;.'. . , ,,' '::.":.,.,,,. ',"., , 

. '

Grady Memorial Hospital Grady 55 2,767 

Purcell Municipal Hospital McClain 30 1,436 

Bone and Joint Hospital Oklahoma 11 786 

Community Hospital Oklahoma 49 1,412 

Deaconess Hospital Oklahoma 273 12,686 

Edmond Medical Center Oklahoma 92 3,903 

INTEGRIS Baptist Medical Center Oklahoma 570 24,230 

INTEGRIS Southwest Medical Center Oklahoma 358 16,128 

Lakeside Women's Hospital Oklahoma 23 2,677 

McBride Clinic Orthopedic Hospital, LLC Oklahoma 78 2,820 

Mercy Health Center Oklahoma 338 17,910 

Midwest Regional Medical Center Oklahoma 255 16,919 

Moore Medical Center Oklahoma 46 3,533 

Northwest Surgical Hospital Oklahoma 9 594 

Ok. Center for Orthopedic & Multi-Splty Oklahoma 10 160 

Oklahoma Heart Hospital Oklahoma 78 7,410 

Oklahoma Spine Hospital Oklahoma 18 1,769 

Orthopedic Hospital Oklahoma 8 190 

OU Medical Center Oklahoma 587 30,203 

St. Anthony Hospital Oklahoma 499 19,212 

Unity Health Center Pottawatomie 160 6,464 

TOTAL Non-NPHO Hospitals 3,988 193,375 

Table 2 

NPHO Service Area Acute Inpatient (Non-Federal) Facilities, 2006 

Acute Care Facility County Beds Admission 

S¢UJ.;el\rea Mltr~etc:,:'~~: ··;~~)T·. '::',"';' ' . ". ,:., ~:':: ; :.: .~ . ,,'::: 

Norman Regional Hospital Cleveland 365 17,293 

Lindsay Municipal Hospital Garvin 26 1,034 

Pauls Valley Hospital Garvin 50 1,840 

Total NPHO Hospitals 441 20,167 

Total Non-NPHO and NPHO Combined 4429 213,542 

NPHO Percentage of Total Service Area 9.96% 9.44% 
Hospital 

Bone and Joint 

Community 

Hospital 

Deaconess 

Hospital 

Edmond Medical 

Grady Memorial 

Healdton 

Municipal 

Integris Baptist 

Inte~is Southwest 

Lakeside 

Lindsay Municipal 

McBride Clinic 

Orthopedic 

Mercy Health 

Center 

Mercy Memorial 

Midwest Regjonal 

nMqpie M~ajcal~{<:;; .. 

Table 3 

Discharges by Acute Care Hospital and County, 2006 

(NPHO Hospitals Highlighted) 

Cleveland Garvin Grady McClain Oklahoma Pottawatomie 

62 17 27 9 334 40 

272 46 88 34 438 38 

648 47 195 65 9,423 137 

102 10 40 9 2,681 47 

3 43 2,063 4 23 1 

0 1 0 0 1 0 

1,716 274 636 211 13,163 431 

2,638 84 574 190 10,782 211 

231 9 89 11 1,581 22 

351 96 10 1 21 48 

236 56 92 42 904 116 

737 87 305 57 10,914 175 

12 117 4 0 28 6 

1,173 29 60 25 12,906 846 

'. ' . 2,312 29 iI9 '>/&.,;~3, '.';}';' 79~~' /;'};; ,;\,~/ 48 

. 1~rdfib.aIi W~gi.onfif:&·< ,. 10;979 1,293 1,~97 ~'998 ;-;)~~" gHfs F .>;;,j/':::< .••.... '406 

Northwest Surgical 45 2 17 5 288 12 

Oklahoma Center 36 5 8 3 51 7 

for Ortho 

Oklahoma Heart 282 180 340 60 2,059 351 

Oklahoma Spine 117 34 71 19 557 48 

Orthopedic 26 2 5 0 80 11 

Hospital 

OUMedical 2,072 306 574 187 17,341 789 

Center 

Pauls Valley 9 1,598 8 18 18 0 

General 

PlItce,ll Mun!¢ipal '. .... ,., . ·········,.326 .· .. ),6$:. (~', '25', .', 71fr;.··· Z6 . 

..::. >'- . --, .. :,,:~. -.:' 37: 

Seminole Medical 4 1 0 0 3 31 

St. Anthony 1,559 155 434 92 12,976 626 

Unity Health 63 3 1 3 68 4,283 

All Other 571 113 693 78 2,988 359 

TOTAL 26,591 5,300 7,677 2,893 101,276 9,199 

NPUQ Market· '·~$1.% ' •. ·.s\·'aO% 17%', . .; 60% ':, /2% "'~%~ Sh£t· ,Ce',I •. ':.,:; ,-;"':~~-':-~:':' . ,.' " ",.J' . 

:::~. -'-"":" 

/ -::./;:: .. : .. >:,.- '. . ~-.. :;;:~/ ...... "":"<"' } ..... ",,' . 

-11-

Subtotal 

489 

916 

10,515 

2,889 

2,137 

2 

16,431 

14,479 

1,943 

527 

1,446 

12,275 

167 

15,039 

,,<'~:/.: 3,333 

)\15,683 

369 

110 

3,272 

846 

124 

21,269 

1,651 

1,39Z 

39 

15,842 

4,421 

4,802 

152,936 

]3% 

. ... : ..... ;, .. : . 

The data in the tables show significant competition and suggests a high cross-elasticity of 

demand between the hospitals operating in the six-county area. By any of these measures, 

NPHO Hospital market share is constrained by competitors in the Oklahoma City CSA. 
-12-

C. Physicians in the Service Area 

As with hospitals, when evaluating physician data, NPHO (whose physician members are 

members of the medical staff of NRHS or Purcell Municipal Hospital, with clinical privileges at 

one or more of the NPHO Hospitals), make up a small fraction of the greater Oklahoma City 

CSA physicians. Specifically, as shown in Table 4 below, as of August 1, 2010, 237 physicians 

participated in NPHO. Information obtained from the Oklahoma Board of Medical Examiners 

and Oklahoma Osteopathic Association indicates that approximately 2,950 active physicians 

under the age of 75 are licensed to practice medicine in the NPHO six-county service area. 

Thus, physicians affiliated with NPHO currently comprise about 8% of service area physicians. 

Approximately 53% of active physicians under the age of 75 practicing in Cleveland and 

McClain counties are NPHO providers. 

Many NPHO participating physicians also hold medical staff appointments at other 

hospitals in the Oklahoma City metropolitan area, exercise clinical privileges at other area 

hospitals, admit patients at other area hospitals, and provide patient care services at other area 

hospitals. For example, NPHO participating physicians hold medical staff appointments, 

exercise clinical privileges, admit patients and provide patient care services at INTEGRIS 

Southwest Medical Center (Oklahoma City); Midwest Regional Medical Center (Midwest City); 

OU Medical Center (Oklahoma City); St. Anthony Hospital (Oklahoma City); INTEGRIS 

Baptist Medical Center (Oklahoma City); Mercy Medical Center (Oklahoma City); Deaconess 

Hospital (Oklahoma City); Oklahoma Heart Hospital (Oklahoma City); Pauls Valley General 

Hospital (Pauls Valley); Grady Memorial Hospital (Chickasha); Unity Health Center (Shawnee); 

and other area hospitals. Additionally, NPHO participating physicians hold medical staff 

appointments, exercise clinical privileges, admit patients, and provide patient care services at a 

number of ambulatory surgery centers in the Oklahoma City metropolitan area 

Table 4 below provides a breakdown of the number of participating NPHO physicians by 

specialty. It does not include physicians employed or assigned by NorStar (the company 

responsible for providing emergency physician coverage at the Hospital) who work on a parttime basis at the Hospitals. 

Table 4 

Norman Physician Hospital Organization 

Participating Providers by Specialty 

August 1, 2010 

I Specialty Providers I Specialty I Providers I 

··1!rimary.(3are; .' :,.;'.'" .,' ....... ,. M~dlcalSpt!cialists .. '. " 

Family Medicine 30 Cardiology 9 

Internal Medicine (General) 18 Dermatology 3 

OB/GYN 17 Endocrinology 1 

Pediatrics (General) 11 ENT 6 

Surgical SpecioJists': '/~.( £:, j/'i Gastroenterology 6 

Thoracic Surgery 1 Geriatrics (1M) 1 

General Surgery 9 Infectious Disease 1 
-13-

GSNascular Surgery 3 Neonatology 5 

General Surgery!Breast 1 Nephrology 2 

Neurosurgery 2 Neurology 4 

Ophthalmology 5 Oncology !Hematology 5 

Orthopedic Surgery 10 Physical MedicinelRehabilitation 3 

Plastic & Reconstructive Surgery 1 Podiatry (DPM) 3 

Urology 3 Psychiatry 7 

'iliis.PltaiJ1ise'ft'~1C '. . ;. '<!\~,t:\· . . . .. ', •. , '. r, .. ,a ... ' "!,,, .. ' .~:h.: :."';"/'. . .. " ...... .: ....... c)." Pulmonology /Critical Care/lntensivist 7 

Anesthesiology 11 Radiation Oncology 4 

Anesthesiology (CRNA, MSN) 17 Rheumatology 3 

Emergency Medicine 12 Wound Care 3 

Hospitalist (1M) 6 Other 0 

Pathology 4 

Radiology 8 TJ1J@i~~/\' ." ,,;},'f' .' ... "~':;<';?'<f';;'< . '.';'; :Z37j,~; 

Table 5 below sets forth information about all physicians under 75 years of age across the 

six-county NPHO Service area, broken down by specialty area. 

Table 5 

Service Area Physicians by Specialty (Age <75) 

I Specialty I Providers I Specialty Providers 

pri",i{~ tJij/re :£,.' •. ,<:, .... Medical S.p1~tillists >l"r;,:, :".;(?:~:.;:iDF;;. 

Family Medicine 461 Cardiology 97 

Internal Medicine (General) 342 Dermatology 34 

OB/GYN 156 Endocrinology 16 

Pediatrics (General) 180 ENT 42 

Slltgicat$;peciitlists "~;';; ',:, ,~:%C{~;i:'~liF:;:.·r Gastroenterology 34 

Thoracic Surgery 14 Geriatrics (1M) 9 

General Surgery 116 Infectious Disease 12 

GSNascular Surgery 4 Pediatric - Neonatology 16 

General Surgery!Breast 112 Nephrology 17 

Neurosurgery 36 Neurology 50 

Ophthalmology 86 Oncology!Hematology 23 

Orthopedic Surgery 135 Physical Medicine/Rehabilitation 17 

Plastic & Reconstructive Surgery 27 Pediatric Medical Subspecialty 32 

Urology 48 Podiatry (DPM) NA 

Hospital}iJa!$~d .. :,. '.'::' :.'.'. ': ,.'. Psychiatry 157 

Anesthesiology 223 Pulmonology /Critical Care/Intensivist 39 

Anesthesiology (CRNA, MSN) NA Radiation Oncology, Therapeutic Rad 20 

Emergency Medicine 151 Rheumatology 18 

Hospitalist (1M) 6 Wound Care (Multiple Specialties) NA 

Pathology 81 Other 102 

Radiology 153 ·T()TAL;;.,·~F .... ,,)W~' .. ... '" . ~ -_ .. . "'2;950' 
-14-

Further infonnation regarding medical, surgical, diagnostic, and ancillary services 

provided by participating Hospitals is available at Exhibit VI.F. Information regarding other 

ancillary service providers is available at Exhibit VI.G. Infonnation reflecting physician 

shortages in selected specialties as applied to the 2010 estimated population of the NPHO service 

area is compiled in Exhibit VI.H. 

III. CLINICAL INTEGRATION PLAN 

A. Purposes and Background 

While NPHO has not fully reached its potential for clinical integration, clinical 

integration has been a major focus of NPHO almost from its inception. For many years, the high 

cost and limitations of the resources available to support clinical integration served as barriers to 

plan development and implementation. During a planning retreat five years ago, the NPHO 

Board of Managers initiated a detailed evaluation of the potential benefits of clinical integration 

and concluded that clinical integration would result in the following benefits to patients, 

providers, and purchasers of health care services: 

• Improved care through the rapid electronic transfer of patient clinical infonnation 

among the participating providers responsible for the diagnosis of illnesses, injuries, 

and diseases, along with collaborative development and implementation of treatment 

guidelines and plans. 

• Improved patient outcomes through the development, implementation, and 

monitoring of evidence-based clinical practice guidelines that reflect good practices. 

Guidelines established and actual perfonnance would be benchmarked against NPHO 

provider peers at the regional and national levels. 

• Improved utility of data resulting from NPHO's ability to collect, analyze, and 

communicate data compiled from providers and Payers. 

• Reduced cost of care through sharing of laboratory, imaging, and other tests and 

corresponding elimination of the unnecessary duplication of these services. 

• Improved patient satisfaction through the elimination of repetitive completion of 

registration paperwork, and timely provision of infonnation regarding current 

treatments, resulting in more effective care management. 

• Improved care and reduced cost of care by reduction in medical errors, better 

infection control rates, shorter hospital stays, lower Hospital re-admission rates, 

earlier disease detection, and better disease control procedures. 

• Improved patient access to care through immediate referrals, electronic patient file 

sharing, and e-prescribing. 

• Elimination of the need for Payers to complete independent and redundant 

credentialing and peer review processes. 

• Elimination of the need for Payers to create, implement, and monitor independent and 

redundant quality improvement processes, while improving provider participation. 
• 

• 

-15-

Creation of a competitive advantage for Payers and self-insured employers through 

documentation of enhanced outcomes, reduced cost, and increased patient 

satisfaction. 

Position NPHO to participate more fully with Medicare and Accountable Care 

Organizations. 

Further, as a result of historic working relationships among NPHO Members, the Board 

recognized that NPHO was well positioned to rapidly implement and quickly achieve the 

benefits of clinical integration. Accordingly, the Board authorized the leadership of NPHO to 

move forward with the development of a plan to use the power of clinical integration to deliver 

better health care to patients. 

During the subsequent planning process, NPHO Chairman Stephen Connery, MD and 

NPHO Executive Director Gary Clinton attended conferences in Las Vegas, Atlanta, and 

Orlando hosted by the American Association of Integrated Healthcare Delivery System that 

detailed the impact of clinical integration through the use of electronic medical records and better 

collaboration among physicians. These concepts were also discussed at numerous NPHO Board 

meetings and annual NP A meetings. Planning guidance was also requested of NPHO legal 

counsel. 

Electronic Medical Records. Selection of an electronic medical record system has been 

a cornerstone of the NPHO Clinical Integration Plan to date. In 2007, after the NPHO staff 

evaluated several options for the electronic medical record and related electronic information 

interface, NPHO selected the Medicare-approved electronic medical record solution developed 

by eClinicalWorks, a company based in Westborough, Massachusetts, now serving 40,000 

providers in all 50 states. 

In addition, the company has developed an electronic information interface, Electronic 

Health Exchange (eEHX), which allows for the two-way communication of clinical information 

between a physician's office and hospital information systems. eEHX is the foundation of the 

Oklahoma Physicians Health Exchange (OPHX®). eEHX serves as a local "hub" for the 

coordination of patient data so that NPHO providers can collectively and more effectively 

monitor and manage patient care and promote patient safety, while reducing costs due to the 

continuity and coordination across providers. eClinicalWorks includes an electronic prescription 

system that interfaces with local pharmacies. OPHX® will allow NPHO providers to 

appropriately share outpatient information with participating providers across the state. 
-16-

In 2008, NPHO hired a full-time support person to service its network members by assisting with 

the installation of the technology, training physicians and staff, and providing ongoing 

maintenance and supportto physicians for eClinicalWorks and eEHX. In addition to purchasing 

the software licenses for its network providers, including ancillary providers, NPHO pays the 

18% annual maintenance fee for the electronic data services. NPHO plans to continue offering 

this support to its network members at its expense, while participating physicians incur the 

installation costs for their individual offices. NPHO's financial investment in eClinicalWorks 

and eEHX was approximately 

NRHS has also committed to facilitating NPHO's utilization of electronic medical 

records. In 2007, NRHS purchased and implemented the Medi-Tech System to transition the 

NRHS facilities to an electronic medical record system. NRHS, in conjunction with NPHO, has 

been able to provide interfaces between eClinicalWorks and Medi-Tech so physicians have bidirectional reporting on laboratory, radiology, and other hospital reports. NRHS also hosts the 

eEHX® (OPHX®) software for exchange of information between physicians, the hospitals, and 

emergency departments. OPHX® is also connected to the RHIO (Regional Health Information 

Organization) through SMRTNET, providing NRHS with a single source for information about 

patient care delivered by health care providers that do not participate in NPHO. 

Clinical Practice Guidelines. NPHO is currently utilizing the Healthcare Effectiveness 

Data and Information Set ("HEDIS") for clinical practice guidelines. HEDIS is a 

comprehensive set of standardized performance measures developed by the National Committee 

for Quality Assurance. HEDIS is a tool used by more than 90% of America's health plans to 

measure performance on important dimensions of care and service. 

The primary goal of the NPHO Clinical Integration Plan is to improve patient care and 

resulting clinical outcomes. Secondary goals include increased efficiency of care delivery and 

corresponding reductions in the cost of providing care. The electronic medical record system 

sets the framework for continued and enhanced clinical integration. But the full benefits of 

clinical integration have not yet been achieved. 

Organizational Structure. In support of the clinical integration plan, NPHO has created 

a separate organizational structure for clinical integration that will work under the direction of 

the Board of Managers to accomplish identified goals. Key organization steps that NPHO has 

taken thus far include: 

• Appointed Jim Love, MD, to serve as Medical Director; 

• Contracted with Brian Yeaman, MD to serve as the Medical Informatics Officer; 

• Hired a registered nurse to serve as the Quality Assurance Director; 

• Established a "Mentor's Committee" to oversee global quality improvement planning 

including approval of protocols, monitoring of implementation and enforcement of 

adherence to guidelines; and 

• Created "Specialty Advisory Groups," which include all members of NPHO, to 

establish specialty specific clinical practice guidelines and consult on tracking, 

collection, and analysis of data to identify improvement opportunities. 
-17-

B. Plans for Continued and Enhanced Clinical Integration Going Forward. 

Attached as Exhibit VII to this letter is a copy of the proposed, new Participation 

Agreement that NPHO plans to distribute to its members. The NPHO board has approved the 

new form of Participation Agreement, but NPHO has not yet entered into the new Participation 

Agreement with any member. Under the proposed, new Participation Agreement, each 

participating physician must agree to actively participate in, and fully comply with, NPHO's 

clinical integration plan, policies and procedures, including: 

• 

• 

• 

• 

• 

participate in NPHO's electronic medical record and electronic information interface 

or an acceptable data equivalent; 

participate in quality assurance and utilization management programs; 

comply with clinical practice protocols and guidelines; 

participate in peer review; and 

utilize NPHO physicians and practitioners, as well as NPHO hospitals and health care 

facilities, for the care and treatment of patients, subject to the patients' medical needs 

and preference. 

The NPHO Board of Managers and Members believe that continued and enhanced 

clinical integration will allow NPHO to reduce waste and improve communication among 

practitioners, with resulting improvements in patient care, reduction in health care costs, and 

enhanced competition with other area health care providers. It will also provide NPHO with a 

built-in mechanism to achieve a community electronic medical record system at low cost and 

with local technical support. As the AMA has recognized, clinical integration may offer the 

most efficiency in multi-specialty settings (like NPHO) "in which primary care physicians 

coordinate patient care with specialists and the various specialists coordinate care among 

themselves."l 

While clinical integration is a somewhat imprecisely defined concept within the health 

care industry, NPHO believes that its goals for clinical integration can best be achieved if certain 

core elements are included: 

I See American Medical Association, "Competing in the Marketplace: How Physicians can Improve Ouality and 

Increase their Value in the Health Care Market through Medical Practice Tntegration," al 10 (2nd Rd.) 2010, 

available at http://www.ama-assn.orglamal/pub/upluad/mm/368lcumpeling-in-markeLpdf. 
• 

• 

• 

• 

• 

-18-

a unified electronic medical record links each participating physician and provider, 

offering the potential for improved patient care, reduction in waste, reduction in 

medical errors, better assessment of care, and enhanced communication among 

practitioners; 

all participating physicians and providers participate in meaningful and ongoing 

improvement activities, including developing and utilizing clinical practice 

guidelines, monitoring patient care outcomes, and sharing data with other 

participating physicians; 

the organizations hold physicians and other providers accountable for achieving 

efficiencies in providing care, continuously assessing care in an effort to improve care 

processes and reduce waste; 

all participating physicians and providers demonstrate a significant commitment of 

time and financial resources; and 

all participating physicians and providers are required to participate in all agreements 

with Payers. 

The following sections address how NPHO plans and proposes to achieve these objectives. 

1. Realizing the Full Potential of an Electronic Medical Record System 

A robust electronic medical records system will allow physicians to share clinical 

information concerning patients and enable physicians to collaborate in and coordinate patient 

care by providing immediate access to medical data. Going forward, NPHO's electronic medical 

record system will be a critical component of NPHO's infrastructure to facilitate implementation 

of NPHO's clinical integration plan. It will facilitate data collection, outcomes measurement, 

utilization management, and performance reporting required by Medicare and other Payers. 

As of this time, NPHO has invested in 130 licenses for its participating physicians to 

install and use eClinicalWorks and eEHX on their office systems. To date, 130 physicians and 

other health care professionals have purchased those licenses. Upon implementation of the 

proposed, new clinical integration plan, all physician members will be required to install and use 

eClinicalWorks and eEHX (or an acceptable data equivalent). As explained below, to do so 

Physicians will be required to make a significant financial investment to update their existing 

hardware and office computer systems, and then install the technology for use. They will also be 

required to invest significant "sweat equity" and staff time in terms of training, implementation, 

and use in order to take full advantage of the benefits of the electronic medical records system. 

While in its early stages of use, when fully implemented the electronic medical record 

system developed by eClinicalWorks will enable health care providers and professionals to 

manage patient flow, immediately access patient records in-house or remotely, electronically 

communicate with referring and consulting physicians, and securely send clinical data. Unified 

with its practice management solution, the electronic medical record system will allow users to 

easily review and complete patient histories, past visits, current medications, allergies, laboratory 

tests, and diagnostic tests. Its registry reporting and clinical decision support features elevate the 

role of the system from passively collecting information to actively helping physicians provide 

optimal medical care. 
-19-

With increased use of eClinicalWorks, physicians should be better able to monitor and 

manage care for patients, promote patient safety, reduce costs, and improve overall patient health 

because of better continuity and coordination in patient care. NPHO will have mechanisms in 

place to monitor individual physician use of electronic medical records, and eClinicalWorks will 

allow performance reports based in part on practice patterns. Data on NPHO physicians 

(including utilization, outcomes, etc.) will be made available to the NPHO board, the Quality 

Assurance Committee, and the entire panel of participating physicians. NPHO staff, at the 

direction of the NPHO board, will track and identify the data, and share the aggregate data 

among the appropriate parties. Key components of the electronic medical record system include: 

The Oklahoma Physicians Health Exchange (OPHX®) will allow NPHO to extend the 

benefits of the electronic medical records beyond the participating physicians to include hospitals 

and potentially other providers. The interface creates the ability for health care providers to 

securely share facets of patient care, including electronic referrals, patient record summary, lab 

results and registry reporting. Using the OPHX®encourages community-wide reporting and 

registry that facilitate outcomes analysis and increases compliance by measuring actual time and 

cost performance and care improvements, creating efficiencies that benefit purchasers of health 

care and their recipients. 

Use of eClinicalWorks as a common platform for a community-wide health record 

efficiencies. eClinicalWorks has built-in 

will facilitate referrals among participating physicians, minimize errors in 
-20-

sharing medical history and demographic data, and minimize duplication of laboratory and 

radiology testing. This capability will enhance care with every patient referral. 

Further use of OPHX@ will allow NPHO to 

Additionally, OPHX@ plans to participate in SMRTNET, a statewide network that is 

being developed in Oklahoma. SMRTNET affiliation will allow further savings by allowing 

access to some patient medical information that is generated or maintained by health care 

providers who do not participate in NPHO. Because many NPHO patients receive care outside 

of the NPHO network, inevitably important medical events (such as surgeries, allergic reactions, 

immunizations, ER visits, and other events) occur without the knowledge of NPHO network 

providers. SMRTNET will provide an additional opportunity for NPHO physicians to access 

that information and, thus, to improve care for patients. OPHX® allows the Nurse Director of 

Quality Assurance to examine patient files and make sure that physicians are following HEDIS 

protocols, which is performance evaluation based on applicable evidence-based clinical 

performance measures and benchmarks. 

By joining the SMRTNET network, NPHO anticipates realizing even greater efficiencies 

arising from expanded use of electronic records management. For example, participation in 

SMRTNET will improve the coordination of patient care among patients in the Oklahoma City 

metropolitan area, reducing the likelihood of unnecessary laboratory testing, improving 

medication reconciliation, reducing hospital readmissions, decreasing some practice 

administrative costs, and improving patient satisfaction, while lowering the cost of health care in 

the region overall. 

Continued investment from and participation of NRHS and other ancillary service 

providers will also help to ensure that improvement initiatives cross the entire continuum of care, 

improving access to all services, while better managing their utilization. 

2. Selectivity of Physician Members 

NPHO recognizes that the ongoing selectivity of only those physicians who are 

committed to NPHO's goals and requirements is essential to the Clinical Integration Plan's 

success. The proposed, new Participation Agreement will require participation in the Clinical 

Integration Plan as a condition of membership in NPHO. Once implemented, the new 

Participation Agreement will obligate physicians to participate in all NPHO agreements, care 

improvement activities, and electronic medical record initiatives described in this letter. NPHO 

will also require that physicians agree to implement and be subject to performance evaluation 

based on applicable clinical performance measures and benchmarks. 

Physicians will initially be allowed to participate in or continue to participate in NPHO if 

they satisfy the c.redentialing criteria, but their membership will be denied if they do not enter 
-21-

into the new Participation Agreement, and expelled if they sign the Participation Agreement but 

ultimately and chronically fail to comply with that Agreement. While NPHO is not being 

especially "selective" per se in the first instance - by excluding in a significant way local 

physicians from participation in the proposed program - NPHO's new, proposed program will 

impose a number of requirements that are likely to discourage some physicians who are not fully 

committed to the program from continuing participation and, thus, assure that those who do 

choose to participate will be fully committed to its goals and requirements. 

NPHO physicians will at first be largely self-selected by those physicians who recognize 

the efficiency, value, and clinical benefits of an integrated practice and, therefore, agree to the 

proposed, new Participation Agreement. Then, going forward, NPHO anticipates that some 

NPHO physicians will "opt-out" on their own accord, as some physicians may not want to be 

subject to the participation obligations. Importantly, in addition to this form of self-selection, 

NPHO will implement comprehensive review processes to ensure physician commitment to 

NPHO's objectives. These measures will largely take place under the auspices of the Quality 

Assurance Committee, which will endeavor to be a fair arbiter of the Quality Assurance Plan. 

3. Development of Clinical Performance Measures - Quality Assurance 

Committee 

NPHO plans to expand current quality improvement initiatives to accelerate 

improvements in the delivery of health care services that could not be achieved if physicians 

worked independently. NPHO will obtain input, advice, direction, and recommendations from 

all NPHO participating physicians to ensure that the measures tracked are appropriate and 

meaningful. To this end, NPHO has already formed a Quality Assurance Committee and has 

recently hired a full-time nurse to help design and implement the program. Going forward, 

NPHO expects that the Quality Assurance Plan will include incentives and mandate corrective 

action, potentially including education, counseling, financial withholds or penalties, and, in some 

cases, expUlsion from NPHO for physicians whose practices are incompatible with NPHO's 

objective of offering high-quality, clinically integrated care in an efficient manner. 

Clinical Practice Guidelines and Disease Management. As noted above, NPHO is 

currently utilizing HEDIS clinical practice guidelines. While the details remain to be specified, 

NPHO is in the process of developing clinical practice guidelines and believes that the utilization 

of the electronic medical record system by the Quality Assurance Committee and NPHO staff 

will allow it to supplement nationally-recognized performance measures with additional 

evidence-based practice guidelines across a number of specialties. 

For example, NPHO is beginning the process of implementing disease management 

processes for reducing health care costs, improving quality of life for individuals, and preventing 

or minimizing the effects of a disease (usually a chronic condition) through integrative care. To 

date, NPHO staff, through its recently hired quality assurance nurse, has acted primarily in a 

data-collecting mode. Going forward, NPHO initially will consider monitoring some of the 

chronic disease processes that most affect its patients: coronary heart disease, chronic 

obstructive pulmonary disease, kidney failure, hypertension, heart failure, obesity, diabetes 

mellitus, asthma, cancer, arthritis, and other common ailments. NPHO envisions health care 

costs decreasing and quality of care improving as a result of this effort. NPHO also believes that 
-22-

the collaboration required for implementing the benchmarks and disease management processes 

will be an excellent means of fostering interdependence between NPHO physicians.2 

Quality Assurance Committee. As previously noted, a Quality Assurance Committee 

will manage and oversee quality improvement activities. At least one full-time quality assurance 

nurse will review patient charts and records for adherence to the HEDIS disease-state, evidencebased medicine guidelines adopted by NPHO and the Quality Assurance Committee. The 

Quality Assurance Committee will seek to identify instances of both overutilization and 

underutilization of services, and work with physicians to address these issues. For its disease 

management program, NPHO will begin with nine disease states, with an expectation of 

increasing to as many as 50 disease states over time. 

The NPHO will develop clinical guidelines with the goal of reducing morbidity and 

mortality and minimizing unnecessary costs. NPHO will initially focus on disease states that 

affect the largest number of patients (such as hypertension) and on diseases that carry the highest 

morbidity (such as diabetes). The selection of specific disease states will be made at the 

physician specialty level. For example, the primary care specialists may choose to focus on 

diabetes care, while the surgeons may decide to focus on post-operative infection issues, and 

obstetricians may choose to focus on C-section rates. This will ensure broad participation by 

participating physicians and will ensure that guidelines are developed by those with the expertise 

to implement them. The Quality Improvement Committee will provide input and oversight, but 

the initial oversight will be placed on the specialists. NPHO expects that over time new 

guidelines will be established as old ones become incorporated into standard practice, thus 

ensuring ongoing improvement. 

The Quality Assurance Committee will provide the general management and oversight of 

the clinical practice guidelines and disease management processes. The Quality Assurance 

Committee, with the use of ad hoc sub-committees as necessary, will: 

(a) set the measures for individual and group performance; 

(b) monitor individual physicians' compliance with the network's standards; 

(c) counsel physicians to improve their performance, as necessary; and 

(d) evaluate aggregate network performance against stated goals and, as necessary, reevaluate and modify the stated goals and processes. 

In the process of establishing the performance goals and standards, specialists will have 

the opportunity to participate in the Quality Assurance Committee's (and any sub-committees') 
-23-

development and implementation of the measures. Committee participation will be mandatory, 

which should assure broad participation in the development of clinical practice guidelines. 

To facilitate monitoring, NPHO staff, at the direction of the Quality Assurance 

Committee, will perform medical records audits remotely via the Electronic Health Exchange 

software (eEHX/OPHX®). NPHO will generate regular reports on individual and aggregate 

physician compliance rates. NPHO anticipates that the reports will include the following 

information: (a) individual physicians' compliance rates under applicable measures; (b) 

comparison of the physicians' compliance rate with their previous performance (i.e., an 

individual baseline comparison) and with their peers; and (c) calculation of a cumulative 

compliance rate for each clinical measure for all physicians for whom the measure is applicable. 

To ensure compliance, reports will be shared with NPHO physicians as a group. Internal 

publication of this data should not only make individual physicians and NPHO as a whole 

accountable for their performance, but will also highlight the benefits of NPHO's practices to the 

marketplace and facilitate physician interdependence. Moreover, in recognition of the fact that 

an inability to consistently enforce the Clinical Integration Plan would frustrate the NPHO's 

stated goals, NPHO will require, as a condition of participation, that physicians agree to be 

subject to performance evaluations based on compliance with appropriate and applicable clinical 

performance guidelines. 

While NPHO is in the earliest stages of determining the precise metrics that will be 

measured, it expects to identify physicians who appear to be high-cost providers or inappropriate 

users of resources, to measure physicians' compliance with clinical practice guidelines, and to 

track intra-network referral rates. Mter the precise metrics are determined, NPHO anticipates 

that physicians will receive regular performance evaluations from NPHO staff, and those who do 

not adhere to guidelines will be formally subject to a series of progressive corrective steps, 

beginning with education, counseling, and corrective action plans, and, as necessary, moving on 

to reprimands and financial penalties, with removal from NPHO as the ultimate action. 

Historically, NPHO has not had to deal with physicians who perform at unacceptable levels. 

However, NPHO will implement an active and ongoing program to evaluate participating 

physicians and create a high degree of interdependence, interaction, and cooperation among the 

physicians to control costs and ensure high standards of care. Non-compliance may also be 

managed using financial withholds or penalties. 

To further encourage compliance with the Clinical Integration Plan, NPHO anticipates 

the use of appropriate incentives. For example, based on data collected, NPHO may seek to 

negotiate with Payers for fee increases based on its efficiency and quality initiatives, for sharing 

in cost savings, or other financial incentives. Moreover, if the Clinical Integration Plan is 

successful, NPHO as a whole expects to be able to receive higher physician reimbursement rates 

from Payers because of the demonstrated benefits to patients and Payers. To be clear, NPHO's 

anticipated higher fee levels or shared cost savings are part of a program that seeks, and has the 

real potential to achieve, overall greater efficiency and improved care, resulting in ultimately 

lower costs of medical care for Payers. Increased reimbursement rates, as part of a clinical 

integration plan, should not raise a concern for competition if it is part of an overall goal of 

providing improved patient outcomes and lower total costs. Cost savings and quality 

improvement require a significantly higher lise or physician resources to (lchieve. Tncre()sefl 
-24-

reimbursement will be justified in part because of the increased use of resources, including 

increased physician and staff time commitments and technology costs. 

The comparison and evaluation of aggregate network performance data will be an 

essential component of NPHO's Clinical Integration Plan. The Quality Assurance Committee 

will review regular reports on the Plan's progress, and will periodically re-evaluate whether the 

standards of care and efficiency goals are being achieved. The Committee will retrospectively 

review whether particular measures were effective in modifying physician behavior, and whether 

such measures and processes helped NPHO reach its goals of improved and more efficient 

patient care. 

3. The Costs of Clinical Integration 

Although NPHO physicians will not operate under common ownership, some level of 

financial integration and interdependence will occur by virtue of required investment in the 

electronic medical records system, withholds (which will likely increase depending on the 

revenues generated as a result of the new plan), membership dues, and time commitment. 

Financial integration will likely be increased to some degree, as the percentage of revenues 

generated by NPHO increases and is specifically linked to quality through clinical integration. 

While the Clinical Integration Plan is still in many respects in the early stages of 

development, NPHO believes that full implementation of the Clinical Integration Plan will 

require that NPHO retain at least two specified full-time-equivalent employees - one quality 

assurance nurse and one eClinicalWorks trainer - dedicated to the implementation and execution 

of the Plan. This will come at an estimated annual cost of . $150 000 for salaries 

Each physician who plans to become or continue as a member of NPHO going forward 

will be encouraged to obtain a license for the electronic medical record and electronic interface 

software as further described below will also be to make and vU,,,"V"U,," 

One-Time Costs for Electronic Medical Records System 
-25-

Annual Costs 

In addition, each physician that obtains a license for the eClinicalWorks software will 

also have to obtain extensive training for the physician, office manager, nurse, receptionist, and 

billing person. The time commitment and allocation of staff resources for implementation is 

substantial. NPHO estimates that the dollar value of lost patient revenue due to time spent on 

training of physicians and their staff in the utilization of the electronic medical records system 

will exceed $3,000 per physician. 

Finally, physicians will be required to commit substantial time in developing, 

implementing, and monitoring compliance with clinical practice guidelines. As noted above, 

NPHO will initially take volunteers to participate in the Quality Assurance Committee and assist 

the Committee on an ad hoc basis with such tasks as providing medical education and 

information about clinical practice guidelines and disease management protocols; conducting 

medical records audits and making recommendations for improvement; assisting with risk 

management; and mentoring other NPHO physicians. NPHO expects that virtually all of 

NPHO's members will actively participate in the implementation of some component of the 

Quality Assurance Plan. It would require speculation in advance of the implementation of the 

Quality Assurance Plan to estimate the time commitment required. NPHO believes that, on 

average, this commitment will be equal to or greater than the requirements for implementing the 

electronic medical records system. 

C. Organizational Arrangements for Clinical Integration 

NPHO leadership, designated members of NPHO committees, and mentors, along with 

NPHO staff (including the additional staff members that NPHO proposes to be hired), will be 

responsible for implementation of the Clinical Integration Plan. Their duties will be as follows: 

• The Medical Director will provide medical leadership for the Clinical Integration 

Plan working with NPHO participating providers, committees, and staff to direct 

timel y and consistent implementation. 

• Chaired by the Medical Director, the Mentor's Committee will oversee global quality 

improvement planning. Membership of the committee will be comprised of physician 

leaders elected by their respective clinical departments within NRHS. 

o The members will include one General Internist, one Family Practitioner, one 

General Surgeon, one Obstetrician/Gynecologist, one Pediatrician, one specialty 
• 

• 

• 

-26-

Surgeon (representing, but not limited to, one of the following surgical 

specialties: Cardiovascular Surgery, Otorhinolaryngology, Neurosurgery, and 

Orthopedic Surgery), one specialty Internist (representing, but not limited to, one 

of the following medical specialties: Cardiology, Nephrology, Neurology, 

Endocrinology, Gastroenterology, and Pulmonology) and one Emergency 

Medicine specialist. 

o The Mentor's Committee will be responsible for establishing and approving 

evidence-based medicine clinical guidelines that may cross specialty lines, 

approving performance targets and enforcing adherence to approved guidelines 

through mandated educational activities, increased monitoring, financial 

withholds and, if necessary, removal from participation in NPHO. 

o The Mentor's Committee will continue to approve additional clinical practice 

guidelines. The Mentor's Committee may also develop a patient satisfaction 

survey. The results of this survey may be used as one measure of quality of care 

for NPHO providers. 

Specialty Advisory Groups (SAGs) will be established for each medical department 

of NRHS and will be chaired by the chief of each department. All of the NPHO 

physicians will be members of the appropriate SAG and will be required to actively 

participate in the SAG. The groups will meet at least once annually to establish or 

review clinical practice guidelines and performance targets applicable to their 

respective specialties and report their decisions and performance targets to the 

Mentor's Committee. Meetings will also serve as a forum for monitoring peer 

performance and working with peer's to address significant deviations. 

The Medical Informatics Officer has specialized in the management and processing 

of data, information, and knowledge in the health care arena and will help to 

transition the NPHO participating physicians who invest in electronic medical records 

and electronic interface from their current data and record-keeping environment. The 

current Medical Informatics Officer also serves in a similar capacity for the 

Oklahoma Hospital Association and will ultimately assist NPHO to network with the 

local RHIO and other RHIOs across the country. 

The Director of Quality Assurance will assist the Mentor's Committee and support 

the activities of each SAG. The Director of Quality Assurance will participate as a 

non-voting member of each SAG. 

o She has begun supervising the collection of performance data, and will report 

summary results to the Mentor's Committee and individual data to individual 

providers. 

o As clinical practice guidelines are developed, she will also perform chart audits to 

assess compliance with guidelines. 

o In addition, she will assist with the promotion of the benefits of clinical 

integration by engaging in discussions with Payers to maximize understanding 

and use of clinical integration. 
• 

-27-

o The Director of Quality Assurance will also work with the NRHS Utilization 

Review/Quality Assurance Department to facilitate improvements in care and 

utilization where appropriate. 

o Additionally, she may work to develop programs to promote the mission of 

NPHO, including direct patient education, a disease registry to target high risk 

populations of patients for special intervention, disease management programs, 

readmission prevention protocols, and physician education. 

The Executive Office of NPHO will be responsible for the administrative functions of 

the Clinical Integration Plan, including the coordination of personnel managing the 

clinical integration process, maintaining membership rosters and status, administering 

annual payouts of earnings to successful providers based on pre-determined criteria 

and formulas established by the quality improvement team members, cataloging of all 

protocols, preparing minutes of meetings of the SAGs and Mentor's Committee, 

conducting contract negotiations, arranging withholds to create a reimbursement pool, 

and recruiting and supervising additional support staff as needed. The Executive 

Office will also work with purchasers of health care to elicit feedback on the utility of 

current efforts and to guide future efforts at improvement in care. At the discretion 

of the Board, NPHO may pursue public relations and advertising activities designed 

to bring quality initiatives to public attention. 

NPHO Organizational Chart 
-28-

An extensive time commitment will be required on the part of physicians serving in 

leadership positions and as members of the various committees identified. NPHO pays Board 

members a nominal fee for attendance at Board meetings. With the exception of the PHO Board 

Chair and the Director for Medical Informatics, NPHO does not compensate physicians for their 

administrative services. 

Clinical integration is a complex endeavor. It requires planning, expenditures and 

implementation at multiple levels of medical practice. NPHO has hired four full-time staff 

members for electronic medical records management and training, rewritten its Physician 

Participation Agreement to increase physician involvement and facilitate contracting on behalf of 

member physicians, developed the OPHX® system, affiliated with SMRTNET, developed 

outlines for organization of contracting specialty and quality improvement committees, and 

begun "dry run" data extraction in anticipation of monitoring clinical quality data. 

NPHO has yet to complete a number of important activities, such as: 

• 

• 

• 

• 

• 

• 

• 

D. 

Establishing the Mentor's Committee and recruiting physicians to serve on the 

committee. 

Developing the final details on clinical practice guidelines. 

Establishing the Specialty Advisory Groups (SAGs) and coordinating an annual 

meeting. 

Determining membership for the Quality Improvement Committee. 

Deciding the details relating to reimbursement for practitioners comply with clinical 

practice guidelines and other aspects of the Clinical Integration Plan. 

Marketing the Clinical Integration Plan to physicians and other providers. 

Executing the new Physician Participation Agreement. 

Community Impact of Clinical Integration 

Clinical integration should have a favorable impact on NPHO participating providers, 

Payers who contract with NPHO and patients in the community served by NPHO providers. 

• 

• 

• 

Participating health care providers should experience increased practice efficiency 

through consolidated NPHO contracting efforts, reduction of paperwork, greater ease 

of scheduling, improved patient diagnosis and treatment plans through timely receipt 

of diagnostic information and availability of patient care guidelines, seamless 

referrals to specialists and admission to ancillary and hospital providers, reduction of 

staff time required to duplicate medical records, and timely scheduling of patient care 

services. 

Payers should experience an immediate benefit from centralized NPHO credentialing 

and contracting, as well as increased satisfaction among beneficiaries. In addition, 

over time, NPHO's improvement initiatives should help to eliminate unnecessary 

duplication of services, avoid preventable hospitalizations, reduce medical errors, 

improve infection control rates, decrease hospital length of stay, lower re-admittance 

rates, and provide for earlier disease detection, resulting in lower cost of care. 

Patients should benefit from all of the above with the over arching benefit of improved 

levels of care and better patient outcomes. Patients should also experience more 
-29-

timely scheduling of primary and specialty care appointments, reduction of repetitive 

completion of registration paperwork, and improved access to medications through eprescribing. Patients should also see improved adherence to preventive service, such 

as mammograms and colonoscopies. The community should also benefit from 

clinical integration efforts through an overall improvement in community health 

status. In addition, enhanced control over health care costs and the potential for cost 

reductions will serve as economic development tool for the recruitment of new 

businesses and jobs. 

By way of example of the community benefits to be achieved as a result of NPHO's 

clinical integration, NPHO is currently participating with the University of Oklahoma in a 

$500,000 Agency for Health Care Quality grant to assess the impact of the use of an electronic 

medical record on quality improvement and cost reduction. This should help to demonstrate the 

favorable impact for the benefit of Payers and patients alike. A copy of the research study 

summary is provided as Exhibit VIII to this letter. 

NHRS has also been awarded a Beacon Community Grant to demonstrate the impact of 

electronic medical record and electronic health information exchange on the quality and cost of 

healthcare. The Health-E Pyramid Project builds on current adoption of electronic medical 

record by NHRS and NPHO to integrate a Personal Health Record (PHR) interface with unique, 

patient-interactive features into SMRTNET. The PHR will provide patients with one centralized 

location to digitally access their health care information and services, increasing patient 

education, awareness, accountability and compliance with treatment plans. A detailed narrative 

for the Beacon Community Grant and Health-E Pyramid Project is provided as Exhibit IX. 

IV. CONTRACTING ISSUES 

NPHO currently contemplates that it will establish a contracting committee with primary 

care and specialty representation. NPHO believes that the benefits of clinical integration will be 

enhanced by allowing a contracting committee to commit all members of NPHO to those 

contracts that the committee believes serve the best interests of NPHO members, with 

reimbursement levels reflecting these improvements in cost and quality. The contracting 

committee will be charged with evaluating each proposed agreement to determine whether 

NPHO goals can be achieved within the framework of each specific plan. 

The plan for future Payer contracting through NPHO encompasses the following steps. 

First, a Payer would contact NPHO with respect to a contract. The NPHO Executive Director 

will obtain information about contract terms from the Payer and will inform the Payer that 

NPHO is contracting as a single integrated network of providers. If NPHO is able to reach 

agreement with the Payer following negotiations, then NPHO would enter into the contract, 

requiring all NPHO participating physicians, Hospitals, and ancillary providers to participate. 

NPHO believes that this should create efficiencies for the Payers in terms of contract 

negotiations, provider credentialing, and network development. In addition, for reasons 

addressed above, Payers and their beneficiaries should benefit from better and more efficient 

clinical care. 
-30-

A. Historical Approach to Contracting 

From inception, NPHO used a messenger model to facilitate contracting between 

participating providers and professionals, on the one hand, and area insurers, health plans, thirdparty administrators, and employers, on the other. 

The NPHO Executive Director has served as the messenger. The Executive Director 

meets with the individual Payers and discusses economic and non-economic terms of the 

contract. If specific provisions raise a concern to of the Executive Director, a change or 

clarification may be requested. Mter this process is complete, the Executive Director sends a 

letter to NPHO physicians summarizing the terms of the contract and the fee schedule that the 

Payer has offered. An Accept/Reject form with the name of the participating physician is 

included with the summary, giving the physician the opportunity to either accept or reject 

participation in the offering. The physician is not considered to have accepted until the form has 

been returned. The Executive Director does not participate in price negotiations or make any 

recommendations regarding fees and charges. 

NPHO has signed agreements with a variety of Payers, including PPOs, HMOs, and 

Medicare Advantage plans, and directly with employers that are large enough to be partially selfinsured and utilizing third-party administrators. These are fee-for-service arrangements. As of 

August 1, 2010, NPHO has 24 separate agreements with various Payers. Exhibit X includes a 

table showing the number NPHO physicians participating in the various networks, which ranges 

from 107 to 237. 

B. Proposed Approach to Contracting 

Going forward, physicians will continue to join NP A and NPHO through the NP A 

application process described above. NPHO proposes that it will manage and direct the 

contracting process with Payers, including negotiation of all contract terms. 

Physicians, hospitals, and other health care providers and professionals who are 

interested in participating (or continuing their participation) in NPHO will be required to enter 

into a new Participation Agreement with NPHO. Under the proposed, new Participation 

Agreement, health care providers and professionals will be required to actively participate in 

quality assurance programs and activities of NPHO. Historically, NPHO has not required 

participating health care providers and professionals to participate in any specific provider 

network. Instead, NPHO health care providers and professionals have historically decided 

independently whether or not they wish to participate in any specific network or networks. 

The proposed, new NPHO Participation Agreement provides that participation in NPHO 

is non-exclusive so that each health care provider and professional may contract directly with 

health insurers, health plans, third-party administrators, and employers to participate in their 

respective networks. NPHO will not require any participating physician to negotiate and 

contract exclusively through NPHO. As a result, NPHO health care providers and professionals 

may continue to provide care to patients outside the provider networks established by NPHO. 
-31-

As noted in Part IILB above, the NPHO board has approved the new form of 

Participation Agreement (see Exhibit VII), but NPHO has not yet entered into the new 

Participation Agreement with any member yet. If a physician who is a member of NPHO plans 

to continue as a member of NPHO, the physician will be required to enter into the new form of 

Participation Agreement. 

Under the proposed, new Participation Agreement, in addition to the electronic medical 

record and clinical commitments noted in Part IILB above, each participating physician must 

agree that if NPHO has entered into an agreement with a Payer, the physician will provide 

covered services under NPHO's agreement with the Payer and will not separately contract with 

that Payer for the provision of covered services. Additionally, the participating physician must 

accept the terms and conditions of each Payer agreement, including terms relating to prices, fees, 

charges, reimbursement, withholds, and risk pools, where applicable. The Participation 

Agreement further provides that a participating physician may otherwise participate in any other 

health network and provide medical services independently of NPHO, as long as such 

participation does not preclude the physician from complying with the terms of the NPHO 

Participation Agreement. 

The proposed, new Participation Agreement will permit NPHO to market products to 

Payers that are approved by its Board of Directors; use its best efforts to enter into Payer 

agreements with financial incentives for use of participating physicians; and use its best efforts to 

secure agreements that require Payers to provide members a greater level of coverage of 

services, if such services are obtained from participating health care providers. 

C. .loint Contracting is Subordinate, Ancillary, and Reasonably Related to the 

Clinical Integration Plan 

NPHO believes that this proposed joint contracting with Payers on behalf of its 

competing physician members is subordinate, ancillary, and reasonably related to its plan to 

clinically integrate its members' provision of services and to deliver coordinated care by a group 

of health care providers committed to the Plan because it will provide a stable and identifiable 

roster of physicians and facilitate in-network referrals, thus increasing patient volume and 

harnessing network effects and economies of scale, while providing efficiencies and reducing 

transaction costs to both physicians and Payers. Finally, NPHO will take steps to limit any 

anticompetitive "spillover" effects from the proposed joint contracting. 

Providing a Stable and Identifiable Roster of Physicians. All NPHO physicians will be 

required to participate in all Payer contracts negotiated by NPHO, and NPHO believes that 

clinical integration will be facilitated by this requirement. Specifically, NPHO believes that this 

requirement will help to assure that the panel of physicians providing services under the program 

is clear, identifiable, and consistent and unlikely to vary from contract to contract. 

Ensuring a consistent panel of physicians will necessarily be complicated by periodic 

physician attrition, as well as the periodic addition of new physicians and perhaps dismissal of 

non-compliant physicians, but the fundamental goal of having a stable, clearly identified, and 

consistent panel of physicians will not change. In any event, joint contracting would be better in 

this regard than the nearest alternative - the messenger model. 
-32-

Facilitating In-Network Referrals. Mter the new Participation Agreement is in place, 

NPHO will operate as a single integrated network with all participating providers working 

together to achieve clinical integration. Accordingly, NPHO physicians will be required to refer 

patients to other NPHO physicians when it is medically appropriate to do so and the patient is 

amenable to the referrals. NPHO believes that joint contracting will reinforce the in-network 

referral requirement because, if different physician panels represented a subset of NPHO's 

membership for each Payer contract, physicians are more likely to have to refer to physicians 

outside the NPHO network. 

Increasing Patient Volume and Harnessing Efficiencies of Scale. Related to the topic 

of in-network referrals, to best integrate the program's quality improvement initiatives into the 

physicians' practices and to reap the full benefit of the network effects of the electronic medical 

records system, NPHO believes is desirable to maximize the number of patients in each 

physician's practice. In this regard, the more patients that each NPHO physician sees, the more 

interdependent they become with other participating physicians, because all physicians indirectly 

benefit from the network effects of additional data points and experience gained from treatment 

of each patient. With increased patient volume, joint contracting will necessarily encourage 

increased information (and improved clinical practice). Each additional data point provides 

broader benefits to all network physicians, patients, and Payers. Without joint contracting, 

NPHO's ability to obtain information on both patients and physicians would be more difficult, 

the results of its data collection less robust, and its evaluation of that data and implementation of 

practice protocols - key components all - would be undermined and rendered less effective. 

Absent joint contracting, the physicians may lack the patient volume that would provide 

sufficient incentives for their substantial investment in the success of the integrated program. 

NPHO believes that the more patients a physician sees in the proposed program, the more likely 

the physician will be willing to invest the necessary time and effort in the various aspects of the 

program's operation. 

Providing Efficiencies and Reducing Transaction Costs to Payers and Physicians. 

Joint contracting as part of a broader suite of clinically integrated services should be attractive to 

Payers not only because it helps to control costs and minimizes transaction costs, but also 

because it provides going-forward to health of 

contact. As evidence of these· benefits 

Joint contracting will likewise provide an incentive to physicians to join the network, as 

physicians will not only benefit from the clinical network effects, but will also be able to 

delegate this function to a central organization and avoid the negotiation process, which is often 

disruptive to their practice as it requires them to get up to speed on various contractual matters. 

On the whole, this allows doctors to focus their time and energies on patient care, rather than 

contracting matters, which should ultimately benefit both patients and their physicians. 
-33-

Limiting Anticompetitive "Spillover" Effects. The FfC has noted that it would have 

serious concerns if a proposed clinical integration would facilitate physicians' agreements to sell 

their services outside of the joint venture network.3 To be clear, NPHO physicians will not 

collectively set the prices they will charge to any patients who are not covered by the health 

plans with which NPHO bargains. NPHO will take steps to ensure this, including limiting its 

physician members' access to competitively sensitive information (such that only non-physician 

staff will see actual physician prices). Additionally, NPHO will inform physicians of restrictions 

to ensure that harm to competition does not occur from the possibility of coordinated interaction. 

Finally, NPHO hospitals and physicians do not have a large market share in the NPHO service 

area, and NPHO is a non-exclusive network. It would make little sense for a non-exclusive 

network with very limited, if any, ability to exercise market power to go to the expense of 

implementing a clinically integrated collective negotiation arrangement in order to reduce output 

or increase prices if, as here, Payers could simply avoid contracting with NPHO. 

In sum, the success of NPHO's program depends significantly on all of its physician 

members participating in all of its contracts. Achieving NPHO's goals - collecting and 

harvesting robust and meaningful data, providing practical and effective clinical guidelines and 

disease management protocols, and ensuring efficient care - would be far more difficult if 

different physicians were participating in different Payer contracts, referral patterns had to be 

adjusted accordingly to keep patients within the applicable network, patient volume was lower, 

and information on patient treatments and health care provider behavior were less robust and 

uniformly available. Absent the joint contracting, the planned benefits, while theoretically 

possible, are not practical given business realities. 

v. LEGAL STANDARD AND CONCLUSION 

The FTC and DOl's 1996 Statements of Antitrust Enforcement Policy in Health Care 

("1996 Health Care Statements") explain that clinical integration may be demonstrated, by way 

of example: 

by the network implementing an active and ongoing program to evaluate and 

modify practice patterns by the network's physician participants and create a 

high degree of interdependence and cooperation among the physicians to control 

costs and ensure quality. This program may include: (1) establishing 

mechanisms to monitor and control utilization of health care services that are 

designed to control costs and assure quality of care; (2) selectively choosing 

network physicians who are likely to further these efficiency objectives; and (3) 

the significant investment of capital, both monetary and human, in the necessary 

infrastructure and capability to realize the claimed efficiencies.4 

3 See, for example, the FrC/DOJ 1996 Statements of Antitrust Enforcement Policy in Health Care, Statement 8, § 

B, available at http://www.ftc.gov!bc!healthcare/industryguide/policy/statement8.htm. 

4 Joint 1996 Health Care Statements 8, § B.l. The Joint 1996 Health Care Statements emphasize that these are 

only examples, rather than "the only types of arrangements that can evidence sufficient integration to warrant rule 

of reason analysis." 
-34-

NPHO submits that, with implementation of its Clinical Integration Plan, it will be a fully 

clinically integrated, centrally managed joint venture offering substantial market efficiencies and 

facilitating innovation in the delivery of health care services to patients as described in 

Statements 8 and 9 of the Health Care Statements. Its proposed joint contracting system is not 

inherently anticompetitive and should be analyzed under a truncated rule of reason analysis, 

rather than per se prohibited. 

Specifically, and by way of review, through its electronic medical records system, 

proposed clinical guidelines, disease management program, Quality Assurance Committee, 

monitoring and enforcement mechanisms, and substantial financial and "sweat equity" 

commitments, NPHO will operate in a manner that creates a high degree of interdependence, 

interaction, and cooperation among participating physicians and health care providers in order 

improve access to care, enhance quality of care, and control costs. NPHO has created an 

infrastructure of pooled resources; has approved and is beginning to monitor and establish 

protocols and evidence-based clinical practice guidelines; and has formulated a plan that should 

result in delivery of improved quality of care in a more efficient manner that the participating 

providers and professionals could not otherwise achieve independently. 

NPHO is implementing an active, dynamic, and ongoing Clinical Integration Plan. 

Components of the Plan include outcomes reporting, managing the care continuum, reducing 

costs, information sharing, creating clinical practice guidelines, monitoring utilization, 

controlling compliance with clinical practice guidelines and related protocols in an effort to 

provide better patient care and treatment, and taking corrective action when necessary. The 

anticipated results include improving access to care, enhancing quality and efficiency of care, 

and ultimately improving the health of the communities served. Participation requires a 

significant investment of time and capital in the necessary infrastructure and capability to realize 

the anticipated benefits and effectiveness. The use of the eClinicalWorks electronic medical 

record is critical to clinical performance and organizational viability. It positions the 

participating providers and professionals to better manage patients, successfully control costs, 

limit practice variations, and achieve significant differentiation in the market. Also, the 

electronic medical record will enable the participating providers and professionals to adopt and 

effectively execute clinical practice guidelines and new concepts anticipated from comparative 

effectiveness research initiatives. 

The attributes of NPHO under the Clinical Integration Plan will transform from a 

traditional physician-hospital organization into one with: 

• 

• 

• 

• 

• 

• 

Information continuity 

Care coordination and transition 

Peer review and teamwork for high-value care 

Easy access to appropriate care 

System accountability 

Continuous innovation 

The Plan allows the participants to re-position their services to align with market trends, 

as well as transparency in quality and cost in order to demonstrate better outcomes and 

successfully compete in a value-based purchasing environment. It facilitates meaningful use by 
-35-

participating hospitals, physicians, and others of a fully integrated and coordinated electronic 

medical record. It bears the commitment from medical leadership to share outcomes data - peer 

to peer - and evaluate the findings in a coordinated and quality-focused manner. It presents an 

opportunity for medical leadership to intervene and make improvements where outcomes data 

reveal that quality is not at targeted or required levels. And it ensures that medical leadership 

will receive continuing and useful training, education, and support to successfully manage high 

integration and top quality challenges. 

The proposed collective negotiations with Payers, including price negotiatIOns, are 

subordinate and reasonably necessary to achieve substantial efficiencies arising from clinical 

integration. Joint negotiation through NPHO will ensure that a sufficient, stable, and identifiable 

number of physicians across multiple specialties will continue to participate in NPHO. It will 

facilitate in-network referrals and ensure adequate patient volume to benefit from economies of 

scale and incentivize physician involvement. It will allow participating physicians the 

opportunity to reduce transaction costs, including costs of legal review, that are incidental to the 

contracting process, in part offsetting the substantial time and financial investment made in 

connection with NPHO participation. Additionally, collective negotiations will allow NPHO to 

offer a single, comprehensive, integrated network, allowing for pricing in the aggregate, instead 

of separate contracts. Finally, NPHO will take steps to limit any anticompetitive "spillover" 

effects from the joint contracting, such as coordinated physician agreements with regard to nonnetwork Payers. 

NPHO's proposed, new Clinical Integration Plan involves a powerful platform for 

hospitals, physicians, other health care professionals, and other health care facilities and 

institutions to build relations and foster integration. NPHO believes that its proposed joint 

contacting should be considered ancillary and subordinate to the joint venture, reasonably 

necessary to the Clinical Integration Plan's success and the efficiencies it will make possible, and 

thus analyzed under the rule of reason. 

REQUEST FOR ADVISORY OPINION 

On behalf of NPHO, we request an advisory opinion as to how the FTC would analyze 

NPHO's activities if, based on the foregoing information and proposed clinical information plan, 

NPHO develops contract proposals, negotiates contract terms (including price terms), arranges 

contract participation, and enters into contracts on behalf of NPHO participating health care 

professionals and providers. 

If you have any questions, please contact either me or Dan Loeffler 

(dan.loeffler@mcafeetafLcom, (405) 301-7406). 

Very truly yours, 

Michael E. Joseph 
cc: Mr. Markus H. Meier 

Mr. David Narrow 

Mr. Daniel A. Loeffler 

-36-
Exhibit I 

Organizational Structure 

The following chart shows the organizational structure and relationships among NPHO 

members: 
Exhibit II 
Exhibit III 

NPHO Board of Managers 

The following table lists the members of the NPHO Board of Managers. 

Norman Physician Hospital Organization 

2009 Board of Managers 

, ?". ",;" , · ..... )''';~:z,t,{{< . N~m~··· .... !,(y<',. .' I'iit; <'2".: Teriif.~*pit~s ... ;" ' . ' '"';. :.. ~ 

Stephen Connery, M.D., Family Practice (Chairman) 2011 

Robert Holbrook, M.D., Gastroenterologist 2011 

Tadgy Stacy, M.D., Pediatrician 2011 

Joe Voto, M.D., Anesthesiologist 2011 

Carol Anderson, D.O., Ob-Gyn 2012 

Tom Connally, M.D., General Surgeon 2012 

James Love, M.D., Internal Medicine 2012 

Chris Paskowski, M.D., Otorhinolaryngologist 2013 

Meegan Carter, VP Revenue Cycle NRHS Board Representative 

David Whitaker, President & CEO NRHS Board Representative 
Exhibit IV 

Norman Physicians Hospital Organization Staff 

A brief overview of the background of each NPHO staff member appears below. 

Gary P. Clinton, D.Ph. has served as the Executive Director of NPHO since 1995, 

helping to guide and manage the organization through various stages of evolution and 

growth. Beginning his healthcare career as a pharmacist, he has owned or managed 

several healthcare organizations including a pharmacy, durable medical equipment 

provider, and home health agency providing him with the clinical and business 

backgrounds necessary to function as an effective leader of NPHO. He is a graduate of 

the University of Oklahoma. 

Stephen E. Connery, MD has chaired the NP A and NPHO since 2004. Board certified 

in family practice, Dr. Connery has operated a private practice in Norman since 1989 and 

maintains medical staff privileges at Norman Regional Hospital, and Seminole Hospital 

in Seminole, Oklahoma. He also serves as chairperson of the medical staff evaluation 

committee at Norman Regional Hospital. Dr. Connery received his graduate medical 

education and family practice residency training at the University of Oklahoma College 

of Medicine. Professional memberships include the American Medical Association, 

Oklahoma State Medical Association, and American Association of Family Practice. 

Kathryn Roberts, R.N. has served as the Director of Quality Assurance for NPHO since 

February, 2009. In this role, she is responsible for the design, development, 

implementation, maintenance, and evaluation of all quality improvement programs and 

initiatives for NPHO. She develops all policies, procedures, protocols, and guidelines, 

utilizing national standards of evidence-based medicine. Additionally, she assists the 

NPHO Board regarding performance improvement. As the Director of Quality 

Assurance, she also plays a primary role in all clinical integration efforts. 

Audene Eubanks is the Supervisor, Contracts and Accounts Payable for NPHO. She 

also coordinates special NPHO projects and serves as a liaison with the physician 

members. In addition, she is responsible for the NPHO website encompassing: links to 

the NPHO participating providers; a health resources guide for patients and family 

members; and secured physician access to NPHO information. Before joining NPHO, 

Ms. Eubanks worked for 11 years as a medical assistant with responsibility for patient 

evaluation and treatment, billing office management, and employee training. 

Lynnette Chafin brings over 20 years of clinical and physician practice management 

experience to her position as eClinicalWorks Trainer. She is certified as an 

eClinicalWorks trainer and provides physician practices with the support necessary to 

evaluate, tailor, implement, and operate the eClinicalWorks electronic medical record 

system. 

Leigh Anne McGregor brings over 20 years of clinical and physician practice 

management experience to her position as eClinicalWorks Trainer. She is certified as an 

eClinicalWorks trainer and provides physician practices with the support necessary to 
-2-

evaluate, tailor, implement, and operate the eClinicalWorks electronic medical record 

system. 

Rhonda LeMay is a trained eClinicalWorks "super user" who assists with the initial 

implementation of the electronic medical record in physician practices and provides 

ongoing staff and physician support. She has 16 years of experience in the medical field 

and uses her knowledge of front office, back office, and clinical functions to ensure 

smooth physician office transition to electronic medical record. 

Brian Yeaman, MD is the director of physician informatics for NPHO and installation of 

eClinicalWorks in Norman. He is leading the effort in Norman to create the local 

network through NRHS and NPHO and has played a key role in the quality improvement 

and quality assurance processes of the clinical integration model. The local network 

design and governance has been facilitated by SMRTNET and NPHO. Dr. Yeaman is also 

the chief medical information office at the NRHS and is the Medical Director for the 

GOCHC SMRTNET effort. Dr Yeaman trained at Tufts University in Boston and 

continues to operate a family practice at the Norman Clinic. 
Exhibit V 
Exhibit VI 

Market and Demographic Information 
Characteristic 

Population, 2000 

Population, 2008 

Land area, 2000 

(square miles) 

Persons/square mile 

Persons 65+, 2007 

White persons, 2007 

Black persons, 2007 

American Indian & 

Alaska Native persons, 

2007 

Persons of Hispanic or 

Latino origin, 2007 

Foreign born persons, 

2000 

High school graduates 

(age 25+), 2000 

Bachelor's degree or 

higher (age 25+), 2007 

Mean travel time to 

work (min., workers 

age 16+), 2000 

Homeownership, 2000 

Median household 

income, 2007 

Persons below poverty, 

percent 2007 

Exhibit VI.A 

Norman Physician Hospital Organization 

Service Area Profile 

Oklahoma Cleveland 

660,450 208,016 65,519 

706,617 239,760 69,616 

709.9 536.1 787.7 

931.5 388.1 83.1 

12.4% 9.1% 13.9% 

74.5% 83.1% 79.6% 

15.5% 4.9% 3.3% 

3.3% 7.9% 11.4% 

12.3% 7.2% 3.1% 

7.2% 4.4% 1.1% 

82.5% 88.1% 79.3% 

25.4% 28.0% 15.5% 

20.9 22.3 25.0 

60.4% 67.0% 72.1% 

45,513 

51,066 

1101 

46.4 

12.4% 

88.2% 

3.0% 

5.2% 

4.3% 

1.1% 

79.5% 

14.4% 

26.9 

75.7% 

$41,598 $51,052 $38,614 $43,341 

15.9% 10.0% 18.8% 14.1% 

27,210 27,742 

27,247 32,365 

807.5 569.7 

33.7 48.7 

17.6% 13.0% 

85.9% 89.7% 

3.0% 0.9% 

7.7% 5.6% 

4.3% 5.7% 

1.6% 2.6% 

73.0% 79.3% 

12.0% 15.7% 

23.4 27.3 

73.8% 81.4% 

$38,360 $48,654 

16.6% 10.0% 
Exhibit VI.B 

Norman Physician Hospital Organization 

Profile of the Oklahoma City Metropolitan Area and NPHO Service Area 

2000-2008 2008 Persons 

2000 2008 Population Land Area per Square 

County Population Population change (square miles) Mile 

·~j,Q,$~~i'~e~Are~:t~{ni\·P"~}·.·.·.·,··' . ':;?,~~;}\ ...... '.' '~ F~:f };' ~)2~h> .~\ .' 

Cleveland 208,016 239,760 15.3% 536.1 447.2 

McClain 27,742 32,365 16.7% 569.7 56.8 

Garvin 27,210 27,247 0.1% 807.5 33.7 

Grady 45,513 51.066 12.2% 1,101.0 46.4 

Oklahoma 660,450 706,617 7.0% 709.9 995.4 

Pottawatomie 65,519 69,616 6.3% 787.7 88.4 

SA Total 1,034,450 1,126,671 8.9% 4,511.8 249.7 

':Pl(J.M~tropolititij;,;Are~·'!;'·:;·::f;;c;>L?;·······: :";-:i,·t:'~;i\.", '. .'~\);. 'S. ?~,.' ... ~ ·l~~;.·.H~~\ 

Canadian 87,697 106,079 21.0% 899.71 117.9 

Cleveland 208,016 239,760 15.3% 536.1 447.2 

Grady 45,513 51,066 12.2% 1101.0 46.4 

Lincoln 32,080 32,153 0.2% 957.7 33.6 

Logan 33,924 38,102 12.3% 744.5 51.2 

McClain 27,742 32,365 16.7% 569.7 56.8 

Oklahoma 660,450 706,617 7.0% 709.9 995.4 

OKC MA Greater 1,095,422 1,206,142 10.1% 5,519 218. 

OKC 

;iOJ(C Cc)mJ>ine~le$t~tisti,~Ji~~i;ZAddit'QI).of ShawneeMicroUrban;Ar¢fllPoJtaw~t6Ihi~~G:6'unty": 

Pottawatomie 65,519 69,616 6.3% 787.7 88.4 

OKC CSA Total 1,160,941 1,275,758 9.9% 6,306.2 202.3 
Exhibit VI.B (Cont'd) 

Norman Physician Hospital Organization 

Profile of the Oklahoma City Metropolitan Area and NPHO Service Area 

Oklahoma City 

Oklahoma City is the capital and largest city in Oklahoma, with city limits extending 

beyond Oklahoma County into urban, rural, or suburban areas in Canadian, Cleveland, and 

Pottawatomie counties. The city's estimated 2008 population was 551,789. Of the city's land 

area of 607.0 square miles, 322.3 square miles are urban, resulting in 871.5 residents per square 

mile. Oklahoma City is one of the most important livestock markets in the U.S. and receives 

economic and employment support from several prominent energy companies, varied light and 

heavy industries, Tinker Air Force Base, and the federal government. Oil, natural gas, and 

petroleum products are major components of the economy. 

Moore 

Moore is a suburb with estimated 52,361 residents in the south Oklahoma City 

metropolitan area with city limits extending into southwestern Oklahoma County and northern 

Cleveland County. The city surrounds 1-35 between Oklahoma City and Norman. Moore's 

population density has grown from 1,892.8 residents per square mile to an estimated 2,412.9 in 

2009 reflecting a 27% population increase since the 2000 census. Moore is centrally located 

between the state's capital to the north and the University of Oklahoma to the south. The city 

has experienced recent growth in residential additions and commercial developments. 

Norman 

Norman is located in Cleveland County, approximately 20 miles south of downtown 

Oklahoma City and immediately south of Moore. Norman is a well-established "college town" 

with approximately 30,000 students. It is also the state's third largest city with a growing fulltime population of over 106,000 residents. The city's 2006 estimated population density was 

540.6 residents per square mile. 

Norman is the home of the National Storm Prediction Center, National Severe Storms 

Laboratory, the National Weather Center, and many weather-related private businesses. In 

addition to several research companies, the city has a variety of major employers and industries, 

including SouthWest NanoTechnologies, York International/Johnson Controls, Hitachi, Astellas 

Pharma, Albon Engineering, Xyant Technology and Office Max's National Sales Center. 

Purcell 

Purcell is south of Norman along the 1-35 and US-77 corridors. The city is a retail hub of 

45,600 residents, including residents of neighboring communities and unincorporated rural areas 

of McClain and southern Cleveland counties. The area's commerce benefits from several multimillion dollar horse farms. 
Exhibit VI.C 

Patient Populations and Insurance Coverage Estimates 

As illustrated in the table below, U.S. Census data indicate that median household 

incomes in the service area range from a low of $38,360 in Garvin County to a high of $51,052 

in Cleveland County. Consistent with median household income data, almost 40% of Garvin 

County households earn less than $25,000 per year as compared with about 25% of Cleveland 

County households. Pottawatomie County has the highest percentage of persons living in 

poverty. 

Norman Physician Hospital Organization 

Median Household Income & Poverty 

% Households 

MedianHH 

Pottawatomie 34.4% 

State Average $41,551 

16.6% 

14.1% 

10.0% 

15.9% 

18.8% 

15.8% 

Resident age distribution and household incomes drive the percentage of county residents 

covered by Medicare and Medicaid. According to the Oklahoma Health Care Authority, almost 

220,000 NPHO service area residents were covered by Medicaid in 2007, with another 134,000 

covered by Medicare. The estimated percentage of residents who are uninsured approximates 

200,000, ranging from a low of 15.8% of McClain County residents to a high of 19.6% of 

Pottawatomie County residents. The economic downturn in the last two years has likely 

increased the percentage of uninsured in all NPHO service area counties. 
Cleveland 

Garvin 

Grady 

McClain 

Oklahoma 

Norman Physician Hospital Organization 

Insurance Coverage Estimates 

16.4% 14.3% 9.7% 

17.3% 24.6% 17.5% 

16.0% 19.6% 13.6% 

15.8% 14.2% 12.9% 

18.2% 21.6% 12.2% 

Pottawatomie 19.6% 25.0% 14.1% 

-2-

75.8% 

57.7% 

66.6% 

72.7% 

66.0% 

60.7% 

NPHO serves the entire population of the NPHO service area, including the underinsured, uninsured, indigent, and self-insured through many forms of medical care. Among the 

most frequently used facilities are the Emergency Departments of NRHS and Moore Medical 

Center. Indigent patients and self-insured with limited resources can also utilize the Health for 

Friends Clinic across the street from Norman Regional Hospital. 

Most, if not all, NPHO participating physicians participate in Medicare and serve the 

Medicare population, but the Medicaid population is not as well served. This is primarily due to 

the fact that Medicaid is difficult to work with and hard to obtain reimbursement for services. 

Most physicians would prefer to see a patient on Medicaid without compensation in their offices, 

rather than work through the process of securing payment from Oklahoma's Medicaid program. 

redact3.doc 

Norman Physician Hospital Organization 

2008 Market Discharges by County and Payer Class 

V N Workers Other 

2 
Exhibit VI.D 

Service Area Employers and Employees 

Nearly 525,000 individuals in the NPHO service area were employed as of February 

2008, with the unemployment averaging 3.5%. In Oklahoma County, Tinker Air Force Base, the 

U.S. Postal Service, INTEGRIS Health, City of Oklahoma City, Oklahoma City School District, 

W.H. Braum & Company, OU Medical Center, Federal Aviation Administration, AT&T, OGE 

Energy, SSM Health Care of Oklahoma, Putnam City Independent School District, Edmond 

Public Schools, Mercy Health Center, Moore Public Schools, Homeland Stores, and United 

Parcel Service each employ 2,000 or more individuals and collectively represent 29% of total 

county employment. 

In Cleveland County, the University of Oklahoma is the largest employer in the area, 

followed by Norman Regional Hospital. Other major employers in Cleveland County include 

Norman Public Schools, Chickasaw Nation Industries (Riverwind Casino), York International, 

and the City of Norman. The top 23 employers in Cleveland County collectively employ only 

14.5% of county employees. A large percentage of employers in Cleveland County employ 

fewer than 50 employees. Chickasaw Nation Enterprises is one of the largest employers in 

McClain County, along with Purcell Municipal Hospital. 

Although a few manufacturing companies are located in the service area, the largest 

employers typically include local government, small community hospitals, small businesses, and 

farms. 

Based on the experience of NPHO, an increasing percentage of area employers, both 

large and small, obtain insurance coverage for their employees through health plans and 

networks established by third-party administrators, with a decreasing percentage of employers 

maintaining self-funded plans. 

NPHO currently serves as the primary healthcare provider network for the PPOs of three 

employers in the service area, including NRHS, Oklahoma Electric Coop, and the student 

population of the University of Oklahoma's Norman campus. NPHO also serves as the 

secondary healthcare provider network for several employers with employees in the service area. 
Exhibit VI.E 

Health Insurance Plans, HMOs, Discount Medical Plans, Third-Party Administrators 

Information regarding employee enrollment by health insurer is generally viewed as 

proprietary and not readily available. However, health insurance plans, HMOs, Discount 

Medical Plans, and third-party administrators are regulated by the Oklahoma State Department 

of Insurance. While the data obtained from the Department of Insurance and provided below 

reflect the state as a whole, the information is illustrative of the market served by NPHO. 

According to the 2009 Annual Report and Directory issued by the Department of 

Insurance, the following top 10 accident and health insurance companies have a combined 

market share of over 70% of the $1 billion in premiums written in Oklahoma for group accident 

and health insurance policies. 

Norman Physician Hospital Organization 

Top Oklahoma Accident and Health Insurance Companies 

;ePIDpany')J\~:,/{1;:~>,:\. ':'!~J;~,: .... '. 1,.'i':(Direc,t'·~remilinrs':' '~;:~ark~t"Share;'~: ·!.j,'CmnUlative% ,~ 

United Healthcare Insurance 249,245,727 23% 23% 

Aetna Life Insurance 169,289,023 16% 39% 

Principal Life Insurance 169,112,491 16% 55% 

Time Insurance 31,295,034 3% 58% 

Metropolitan Life Insurance 29,279,597 3% 61% 

American Fidelity Assurance 28,403,124 3% 64% 

Hartford Life & Accident 26,882,047 3% 66% 

Insurance 

Connecticut General Life 22,749,114 2% 68% 

Golden Rule Insurance 22,285,619 2% 70% 

Unum Insurance of America 22,212,976 2% 72% 

All Other 292,844,420 28% 100% 

Total 1,03.599.172 100% 

HMOs in Oklahoma wrote about $2.9 billion in health benefit premiums in 2009 including: 

• $1.4 billion in premiums for group and individual coverage 

• $.59 billion in premiums for federal employees health benefits 

• $.7 billion in premiums for Medicare beneficiaries 
Exhibit VI.E (Cont'd) 

Norman Physician Hospital Organization 

Top Oklahoma HMOs 

·CgmpanY .. Mt::··· . '·,;U;1,j'2:h;<:u~.:<:.' :;.'?' Qi~.~~rfreniillms '. ,,:. ··::M;~tket Shai~,;r . •..CupIlUatjve % 

Healthcare Service Corporation 1,366,531,365 47% 47% 

CommunityCare 626,017,668 22% 69% 

PacifiCare 340,528,140 12% 81% 

Aetna Health, Inc. 137,163,761 5% 86% 

GlobalHealth, Inc. 100,553,538 3% 89% 

HCHC Insurance Services 67,207,526 2% 91% 

Company 

Delta Dental Plan of Oklahoma 65,828,369 2% 94% 

Sterling Life Insurance Company 55,958,412 2% 96% 

Coventry Health and Life Insurance 51,478,375 2% 97% 

BlueLincs Inc. 22,717,209 1% 98% 

All Other 54,040,248 2% 100% 

Total 2,888,024,611 100% 

The Department of Insurance also regulates discount medical plan organizations that 

contract on behalf of plan members, in exchange for fees, with a healthcare provider or provider 

network for access to medical services at a discounted rate and third-party administrators that 

collect premiums and settle claims for health or life insurance coverage. The Department of 

Insurance 2009 report lists 26 discount medical plans and 288 third-party administrators. NPHO 

has helped to facilitate agreements between NPHO members to participate in the provider 

networks established by CommunityCare, Aetna, BlueLincs, and PacifiCare, as well as other 

smaller insurance plans. 

Information regarding enrollment by specific insurance plan is considered proprietary by 

most plans and is not readily available. However, based on data obtained from the Oklahoma 

State Department of Health, residents of the service area generated about 154,000 hospital 

discharges in 2008. Of these, about 40% were covered by Medicare, 2% by Commercial carriers 

including managed care plans, and 22% by Medicaid. About 6% were classified as 

uninsured/self-pay. 
Exhibit VI.F 

Norman Physician Hospital Organization 

Medical and Surgical Services Provided by Participating Hospitals 

Norman Norman Moore 

Regional Regional Medical Purcell 

Health System Hospital Center Municipal 

Hospital Service (NRH&MMC) (NRHS) (NRHS) Hospital 

iY:~dical!SurfdffitJ$J{rYices '.1~i,};i€!)::: "<.. : .• . .... ';;0:,: ,~: .~ .... .'i~;lb 'S(;1;S~:' ., ,., ... . . "j.\"" 

~esthesiology X X X X 

BariatricIW eight Control Services X 

Cardiovascular Services X X 

Cardiology X X X 

Cardiac Catheterization Laboratory X X 

Thoracic Surgery X X 

Cardiac Rehabilitation X X 

Chemotherapy X 

Medical/Surgical Critical Care X X X 

Cardiac Intensive Care X 

Neonatal Intensive Care X X 

Geriatric Services X 

Hemodialysis X 

Endoscopic Department X X X 

Obstetrics/Gynecology X X X X 

Birthing Room/LDRP X X 

General Medicine X X X X 

General Surgery X X X X 

Ambulatory Surgery Center X 

Oncology X X 

Outpatient Surgery X X X 

Orthopedic Services X X X 

Computer Assisted Orthopedic Surgery X 

Orthopedics X 

Pediatrics X X X 

Pediatric Medical Surgical Care X X X 

Behavioral Health Psych Consultation X 

Psychiatric Emergency Services X 

Psychiatric Geriatric Services X 

Tobacco Treatment/Cessation Program X 

Neurological Services X X 

Nuclear Medicine X X 

Pain Management X X X 

Pulmonary Medicine X X X 

Shaped Beam Radiation System X 

Tissue Transplant X 

Trauma Center (Certified) X 

Urology X X X 
Exhibit VI.F (Cont'd) 

Norman Physician Hospital Organization 

-2-

Diagnostic and Ancillary Services Provided by Participating Hospitals 

Norman Norman Moore 

Regional Regional Medical Purcell 

Health System Hospital Center Municipal 

Hospital Service (NRH& MMC) (NRHS) (NRHS) Hospital 

~fJjuignostilS~iifl~:es ',,::,C';',i; ',' " /'>;:{"r:~:Eit, >->," '/'~;/' \~';':jX~t ?~iiF~~f~(~;~]l'{~:' ,', , " ',' 

~"~ ,Ii,:;\, ",>;'{)';f 

Diagnostic Imaging X X X X 

Diagnostic Radioisotope Facility X 

BreastlMammography X X 

Full Field Digital Mammography X 

CT Scanner X X 

MRI X 

Ultrasound X X X X 

Pathology X X 

~-n,c:{[lary $ubp6tt& Otbet'Seff{ttii(!;' '."-';-:; ,-,-",-, 

'/?'~;;F;';';L,< <:-'.,;,';:': -', "'/;;';:"'," ' ">: '::",,:"'.:-'.::":/ ',:,;,:, 

Occupational Health X X 

Occupational Therapy X X 

Physical Therapy X X X X 

Physical Rehabilitation Outpatient X X X 

Services 

Respiratory Therapy X X X X 

Renal Dialysis X X 

Intermediate Nursing Care X 

Swing Bed Services X X 

Sleep Disorder Center X X 

Speech Therapy X X 

Ambulance Services X 

Ambulatory Surgery Center X 

Hospital-Based Outpatient Care X X 

Services 

Freestanding Outpatient Care Center X 

Immunization Program X X 

2 redact3.doc 
Exhibit VI.G 

Ancillary Service Providers 

As noted in the table below, other healthcare providers affiliated with NPHO include a wide 

array of outpatient diagnostic, treatment, and rehabilitation services providing Payers and 

patients with increased access to care. 

Norman Physician Hospital Organization 

Ancillary Service Providers 

Medical Plaza Endoscopy Unit 

Physicians Surgical Center 

West Norman Endoscopy Center 

Norman Endoscopy Center 

Norman Behavioral Health 

Apple Medical 

Norman Regional DME 

. ..... 

Lifecare Oklahoma, Inc. 

Home Health Care 

Lifecare Oklahoma Hospice, Inc. 

Moore Medical Center 

Norman Regional Hospital Diagnostic 

Services 

Norman Regional HealthPlex 

Maysville Rural Health Clinic 

Immediate Care of Oklahoma (3 locations) 

Pulmonary Clinic 

Brookhaven Diagnostic Imaging Center 

Moore Medical Center Diagnostic Imaging 

Norman Open MRI 

Norman Regional HealthPlex 

),: Norman Radiology Services, Inc . 

Norman Regional Hospital Diagnostic Services 

Norman Regional Radiology Services 

<~~ Norman Regional PET/CT Center 

Orthopedic & Sports Medicine Center 

Purcell Municipal Hospital Radiology 

Norman Regional Lab Service (3 locations) Norman Regional Cardiac Rehabilitation 

Norman Regional Hospital Norman Regional Occupational Medicine 

Purcell Municipal Hospital Laboratory Norman Regional Physical Performance Center 
Exhibit VI.H 

Physician Shortages in Selected Specialties 

Application of physician demand models based on the current utilization and distribution 

of physicians across the U.S. to the NPHO service area population suggests that there are 

currently shortages of selected physician specialties. Shortages have been exacerbated by the 

growth of specialty hospitals and ambulatory surgery centers in the market, making it difficult to 

maintain specialty coverage for the general, acute care hospitals. In addition, about 20% of 

NPHO service area physicians are age 60 and over, and they are likely to retire in the next five to 

ten years when demand for healthcare services by the Baby Boom generation will reach its peak. 

Physician supply and demand reports published by the Health Resources and Services 

Administration (HRSA) of the U.S. Department of Health and Human Services in October 2006 

and December 2008 indicate that the supply of Total Patient Care Physicians (including 

residents) in the U.S. will increase by 13% from 2005 to 2020, falling short of the projected 

required growth rate of 22%. Given changing physician practice patterns and the potential for 

early retirement, these estimates may be conservative. 

The table below applies HRSA current supply requirements to the 2010 estimated 

population of the NPHO service area and indicates that the market may already be experiencing 

shortages in internal medicine, pediatrics, general surgery, and obstetrics/gynecology before 

consideration of the broader service area population that relies on the Oklahoma City 

Metropolitan Area for healthcare services. Continued population growth, combined with 

physician retirement and aging of the population, will extend physician shortages across many 

other specialties. 

Norman Physician Hospital Organization 

NPHO Service Area Physician 

2010 SA Requirements 

Current High Economic 

Active Physicians by Specialty (Age<75) Supply Baseline Growth 

Total 3,177 3,304 

Total Non-Patient Care 178 179 

Total Patient Care 3,000 3,125 

Primary Care 1,108 1,140 

General Family Practice 461 449 462 

General Internal Medicine 342 460 473 

Pediatrics 180 199 205 

Medical Specialties 375 391 

Cardiology 97 90 93 

Other Internal Medicine 285 298 

Surgical· Specialties 670 704 

General Surgery 120 167 175 

OB/GYN 156 167 171 

Ophthalmology 86 79 86 

Orthopedic Surgery 135 102 108 

Other Surgery 70 74 

Otolaryngology 42 41 45 

Urology 48 45 45 

Note: Numbers in red indicate current shortage areas. 
Exhibit VII 

/ 

I 
Exhibit VIII 
Exhibit IX 
Exhibit X