With 40 hospital and health system chief executives attending HealthLeaders Media's second annual CEO Exchange, my challenge is to analyze their insights on reimbursement and the impact of health reform, and overall cost reduction and efficiency—their top priorities.
At a time of unprecedented change for hospital and health system leaders and their organizations, nearly 40 top leaders from hospitals and health systems around the country gathered this week for the second annual HealthLeaders Media CEO Exchange at the Boca Raton Beach Club in Florida.
Against a backdrop of value beginning to usurp volume as the driver of ultimate success, the CEOs of major healthcare organizations gathered in small groups to discuss clinical realignment, new trends in payer relationships, and evolving cost reduction strategies.
The group sessions gave CEOs a forum to discuss innovations, gain perspective, and share ideas on strategies that have worked, and those that have not, in an attempt to speed the transitions that all healthcare organizations need to make.
To build the agenda for the two days of small-group discussions, HealthLeaders surveyed the attendees beforehand on their priorities and plans. Two challenges rise overwhelmingly to the top: reimbursement and the impact of health reform, and overall cost reduction and efficiency. The CEOs also named these their top financial priorities for the year ahead.
The survey results generally match the priorities of attendees at our CFO Exchange which took place in August. It assembled an equal number of financial leaders. But it's worth noting that CEO Exchange attendees are perhaps even more fixated on cost reduction and efficiency than their peers in finance.
For me, this event is a gold mine of insight that will inform my stories in both HealthLeaders magazine and online until next year's event. For now, my top struggle is to distill some of the insights I've already learned from the first day of sessions into something that will help you think differently about the problems your hospital or health system is facing.
It's a lot like trying to take a drink from a fire hose, but I'll try to share a few insights with you here.
Growth is Top of Mind
For starters, the concern over cost reduction notwithstanding, our top leaders seek growth. When we asked attendees to describe their health system leadership strategy in a single word, "growth" rose to the top, followed by "entrepreneurship," "transformational," "futuristic," and "population" (as in population health management).
These are not the sentiments of people who plan to withdraw into a shell during uncertain times. They recognize that, like it or not, they must move toward taking risk in payment. Rather than waiting for payers to implement risk-sharing, they're working on their own innovations in this area. In fact, many organizations are creating momentum toward taking on risk through managing their own employees' healthcare costs with the idea of managing their own healthcare spending down.
The Baylor Quality Alliance, for example, starts with its own employees, according to Steve Newton, west region president at Baylor Scott & White Healthcare in Grapevine, Texas. He says they have already achieved some impressive results.
A Self-Insurance Pilot
"Our self-insured population has 35,000 covered lives, we're connecting IT with 600 employed doctors in a private label ACO, and we've achieved a cost reduction of 5% in the past year through adopting certain clinical pathways and getting all the specialty groups to follow clinical guidelines based on algorithms that were developed under evidence based medicine, and that also happen to cost less money," he says.
"It's a pilot project, but with the scale, we have enough points of access. Scaling that kind of thing is the fundamental challenge. The question is whether we can effectively aggregate our clinical assets to be ready to share risk."
Just more than half (54%) of respondents say they've planned a "selective" growth strategy over the next three years, with another 39% saying their growth strategy would be "aggressive." Only 7% plan caution in growth.
Capital Spending Projections
One reason for growth is to build scale, in a defensive reaction to shrinking reimbursements and other challenges facing healthcare organizations today. HealthLeaders Media continues to cover the ongoing M&A trend. Yet among CEO Exchange attendees, hospital acquisition falls at the bottom of planned 2014 capital budget expenditures.
The top expenditure is medical equipment such as surgical robotics (selected by 27% of respondents), followed by IT/EMR investment (20%), brick-and-mortar expansion of outpatient facilities (17%), and physician acquisition/investment (17%). Another 9% plan brick-and-mortar expansion of inpatient facilities, which perhaps reflects the emphasis most healthcare organizations feel they need to make on moving care out of the more expensive areas of treatment, if possible.
Shared-Risk Strategies
In response to healthcare reform, many healthcare leaders—but not all—are experimenting with value-based contracts with payers. A quarter of CEO Exchange respondents say they are investing significantly in large-scale, active commercial contracts (for more than 5,000 lives), while another 36% say they are participating in limited pilots (with fewer than 5,000 lives). But 21% have conducted no more than initial conversations, and 18% are playing wait-and-see.
Several organizations are trying to pressure payers in their markets to work with them on sharing risk, trying to take the initiative in moving toward value based purchasing of healthcare. They're trying multiple strategies, but engaging directly with employers is one that seems promising.
Medicare Advantage programs seem to be a low-risk way to test alignment and understand what benefits the facility, the provider and the patient. In the Puget Sound area, Catholic Health Initiatives has bought two Medicare Advantage plans. Several are also active in the Medicare Shared Savings program.
Pat Charmel, president and CEO of Griffin Health Corp, in Derby, Conn., is coming up on the first anniversary of their participation in the program, and has built an alliance of hospitals that are considered high-quality, low-cost, based on its 12 years managing Medicare Advantage patients.
He says the experience with Medicare Advantage has served as a great learning lab for understanding the risk aspect of running a health plan, even if operating a health plan ultimately proves unnecessary.
The Health Plan Option
Others are coming close to being able to operate their own health plans, but are being cautious. With a large employee base, says David Brooks, president of St. John Hospital and Medical Center in Detroit, hospitals are ideally positioned to experiment with risk, as they are effectively at risk already with their own employees. They can look at utilization just like a health plan, and can adjust benefits just like a health plan.
Regardless, hospitals and health systems, at least those represented at the CEO Exchange, are not standing still. They're trying to innovate in order to survive and thrive in a much different environment. What I've shared here is only a small taste of what we've all heard over the past two days of session. My fellow editors and I will endeavor to bring you further insights from our 40 attendees over the coming weeks, so stay tuned.
Philip Betbeze is the senior leadership editor at HealthLeaders.