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Big Changes Prep Medical Center for New Financial Realities

March 17, 2014

Despite the high cost of its EHR conversion, Wake Forest Baptist Medical Center's CFO says the spending is justified because improving the organization's population health strategy, data collection and sharing capabilities will be critical for successful healthcare delivery in the near future.

Healthcare leaders know their industry is rapidly evolving to a reimbursement structure that rewards value instead of volume. To keep pace, hospitals and health systems are having to rethink their business and care delivery models to reduce the overall cost of providing care while simultaneously improving outcomes.

Edward Chadwick, executive vice president for finance and chief financial officer at Wake Forest Baptist Medical Center, a 1,004-bed academic health system based in Winston-Salem, NC, says these goals are central to his organization's big-picture strategies.

For starters, the $2 billion system broke down the silos that existed between its medical center and its school of medicine to dismantle the administrative barriers that kept it from functioning as efficiently as possible.

"Four and a half years ago, we went through a major transformation to prepare for a new model in healthcare," Chadwick says. "We actually created a truly integrated academic health system with the belief that it would put us in a better position for a future world."

"We developed a long-term financial plan that showed the trajectory of where our financial performance needs to be if we are to be able to make significant progress," he adds. "We are focused on supply chain, clinical care redesign, and moving toward population health management."

The heightened emphasis on organization-wide finance goals has also paid big dividends clinically, Chadwick says.

"We went from having eight to 15 nationally ranked programs, and at the same time, we dropped our mortality rates dramatically. We have made great progress in a lot of areas, not just financially."

Preparing for Population Health Management

In 2013, Wake Forest Baptist invested heavily in a new electronic medical record despite being at a pretty advanced stage with its existing EMR system in order to be in a stronger position to manage population health.

"Even though we were a HIMSS level 6 EMR adopter, we decided to flip the switch and go to Epic," Chadwick says, adding that "with the big bang EMR installation, 95% of the system went live at one time."  

"We actually lost money last year because of the disruption and the costs associated with the go-live," he says. "We didn't plan on losing that much money. We knew the EMR conversion would be painful because they always are, and in this case, it was our mother ship and all of our physicians' offices so it was 95% of our revenue. It ended up being for a variety of reasons more painful than anticipated."

Despite the high cost of the EMR conversion, Chadwick believes it was necessary in order for Wake Forest Baptist to improve its population health strategy and data collection and sharing capabilities—which will all be critical for successful healthcare delivery in the near future, he says.

"Everyone is talking about chasing big data. We are not just talking about it. We have a lot of capabilities, and in my mind that is how you actually create value and find what the relationships are that you need to have with other organizations because our own health system data is insufficient," he says.

"We have an opportunity to go beyond our own data set to create a larger data set, which results in a combination of things like comparative effectiveness, understanding the cost and quality of different clinical approaches, looking at cross correlation... We are now figuring out how to transition the big data machine into being able to manage populations."

Chadwick believes building scale through collaborations with other healthcare organizations will also be increasingly important for the delivery of good population health management—particularly when it comes to data—and says providers are more open than ever to the idea of working together.

"For the first time, people are talking more openly and expressing a willingness to partner with other organizations, and I believe there is a tremendous upside to this industry to being able to create value through scale. Data is the perfect example. With data, scale really matters. Small players can't do it on their own," he says.

Cutting Supply Chain Costs

Along with creating new data and clinical proficiencies, Chadwick says Wake Forest Baptist is looking for ways to reduce the cost of delivering care.

"Our view is in a future world cost matters, and you can no longer be a high-cost institution. We are making a lot of efforts in terms of getting to costs," he says.

One area being targeting is supply chain, specifically high-priced physician preference items. "We did identify that we may have PPI we can spend less money on. If we can spend less money acquiring supplies, we can reduce the cost of care without having to reduce the number of nurses at the bedside," Chadwick says.

Supply chain is also an area where the organization is benefitting from its new integrated model, Chadwick says. "We had a whole finance and administrative structure for the school of medicine and a parallel operation for the medical center. We are integrated now so we have one resource management group to support all that we do."

By consolidating their supply chain efforts, the system is now saving about 20% on supplies, he adds.

Helping Patients Understand Their Coverage

As more patients begin to access coverage through the health insurance exchanges, Wake Forest Baptist is ramping up its efforts to provide patient education on health plans.

"I think we have more opportunities in terms of navigators. We are putting a real push in financial counseling to help people understand their coverage opportunities," Chadwick says.

While the Patient Protection and Affordable Care Act promises to provide more people with access to health insurance, the quality of the plans being offered through the exchanges vary greatly, Chadwick says, adding that this causes confusion for patients and collection challenges for providers.

"More people are moving into health plans that have very large self-pay obligations, and over time, more employers will be moving people to the public exchanges. While we haven't seen much yet because it's brand new, I believe it is going to have a tremendous impact."

Positive about the Future

Despite all the work that is yet to be done and the many challenges facing providers, Chadwick is optimistic about the future of healthcare.

While attending the JPMorgan Healthcare Conference in San Francisco in January, he witnessed a new energy among his peers to do the work necessary to push the industry forward, he says.

"I was proud and impressed because until last year the industry wasn't really moving, and I believe last year people really started pushing on the gas."

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