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Healthcare Reform Then, and Now

 |  By Philip Betbeze  
   October 26, 2012

This article appears in the October 2012 issue of HealthLeaders magazine.

Longtime veterans of healthcare can easily remember a previous time of intense change in healthcare in the form of managed care in the 1990s.

"The approach was, we'll buy them and they will become engaged, and we know how to run them because we run a big hospital," says Brent Wallace, MD, chief medical officer at Salt Lake City–based Intermountain Healthcare.

That experiment ultimately didn't work out too well for many hospitals and health systems as it became apparent that many of them overpaid for the practices they did acquire, and both patients and physicians rebelled against managed care and its blanket preauthorization rules.

"Hospital folks don't have the skills to manage that effectively," he says. "For that reason, hospitals lost bucketloads of money and many divested practices they had acquired. We didn't do that. We set up a totally separate management structure, and because of that, although we sustained some losses, they were not nearly to the same degree as most organizations."

He says hospitals are following that lead this time as they acquire practices.

"Another thing that's different is that when we went through the HMO era, we had insurance companies setting up rules that would govern and restrict certain procedures and tests," he says. "The docs were constantly bumping up against preauthorization."

This time, he says, management has a better understanding "than 20 years ago about the usefulness of those modalities. So we're in a better position with physicians who make decisions about what's appropriate utilization."

The second difference is in the organizational structure of ACOs, he argues.

"If you operate them correctly, you have physician leadership devising the criteria on which we will base the appropriateness of those things rather than coming out of the black hole of an insurance office," he says. "Time will tell if it will succeed, but I'm hanging hopes on that."

Whether such an investment in transformation makes sense for many hospitals and health systems is linked to whether the investment in such new roles and care structures will ultimately justify the cost.

"The answer is yes and no," says Wallace. "The critical issue is timing for most hospital executives. The majority of healthcare leaders, unlike the majority of physicians, know that this is going to happen. What today is a revenue generator tomorrow is a cost center."

But the question is when that is going to happen and whether those executives have any control over the timing.

"Our team has been dealing with that question with the payers in this area," he says. "When we set out a timeline over the next few years, the first step for us is the goal of
having all hospital payments be DRG [diagnosis related group] payments—no discounted fee-for-service."

The biggest hesitancy is timing, says Wallace, adding that making the determination is difficult because, on one hand, executives might drive their organization toward doing everything right for population-based payment but still getting reimbursed on a fee-for-service basis. The flip side is, if you don't do enough and suddenly the payment system is flipped, then you can't make it happen.

"My personal guess is it's going to happen faster than most people think," says Wallace. "There's enough wheels in motion that it will happen in next two to five years."

One of the things standalone hospitals and smaller systems can do is approach large systems in the area and ask to collaborate on quality.

"Even though we may be competitors economically, we shouldn't be competitors in quality," says Wallace, adding that he's fully aware that some larger systems may be
hesitant to do this.

"But you can at least share in some of the quality improvement things you're working on and look at protocols. That's medical knowledge, and some larger organizations have developed those tools."

Even as a large organization, Intermountain is convinced that the key to financial success is to focus on quality care delivery, says Wallace.

"If we're only focusing on economics, we'll fall short."

 


This article appears in the October 2012 issue of HealthLeaders magazine.

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Philip Betbeze is the senior leadership editor at HealthLeaders.

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