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HL20: Douglas Hawthorne—A Chance to Do Something Big

 |  By Philip Betbeze  
   December 13, 2013

In our annual HealthLeaders 20, we profile individuals who are changing healthcare for the better. Some are longtime industry fixtures; others would clearly be considered outsiders. Some are revered; others would not win many popularity contests. All of them are playing a crucial role in making the healthcare industry better. This is the story of Douglas Hawthorne.

This profile was published in the December, 2013 issue of HealthLeaders magazine.

"Changing how a community lives happens slowly and surely, but we have a chance to do something big."

The way Douglas Hawthorne sees it, hospitals are used to being accountable to patients for about 4.5 days. He wants that to change—as quickly as possible.

Those 4.5 days represent the average length of stay in the hospital for the inpatients at Texas Health Resources, the health system that Hawthorne has helped build over his 42 years at the same organization. When he started as an administrative resident in 1971 at Presbyterian Hospital Dallas, Hawthorne certainly couldn't envision that the organization would grow to become Texas Health, a behemoth in a land of behemoths, with 25 hospitals that are owned, operated, or joint ventured with the system that resulted from the 1997 merger of Presbyterian, Arlington Memorial Hospital, and Harris Methodist Health System. Never mind imagining that he would be the one leading the organization, which reported $3.7 billion in total operating revenue in 2012.

Yet the hospital is far from his focus for strategic growth at Texas Health.

"As we examine our future, it's about health and well-being as well as sick care," Hawthorne says. "That's the driving force for the conversations we have around here. The acute care model is not a sustainable one in its current form."

Instead, noting growing issues with diabetes and heart disease, Hawthorne envisions Texas Health as a one-stop shop for individuals, employers, and even municipalities to improve their health. For a few years now, he's been making big bets that his health system will be responsible for, and will make its financial future on, caring for individuals over a lifetime. Making that change in focus pay off financially is the critical challenge, however.

Over Hawthorne's lengthy tenure, the organization has continued to add pieces, often leading the way nationally in acquisition of hospitals, physician practices, and innovative contracting with other pieces of the healthcare continuum. He and his team have shown repeatedly that they are willing to make big bets on where the puck is going in healthcare, and those bets have almost always paid off.

They are seven years into a 10-year strategic plan that seeks to transform the delivery of healthcare from hospital-based to community-based, with a business model that includes pieces like education, wellness, prevention, and primary care on one side (the hospital is in the middle) and rehab, home, long-term, palliative, and hospice care on the other. The goal is to make Texas Health a "national benchmark health system," and given how others have copied this strategy since the Patient Protection and Affordable Care Act was passed four years after Texas Health's transformation was activated, the move seems brilliant in hindsight.

Yet that doesn't mean it hasn't provided its challenges, and it's still too soon to understand which pieces make financial sense and which ones don't because the moves Texas Health has made have almost always been ahead of an income stream to support them, says Hawthorne. Will the strategy pay off? Hawthorne is confident it will.

"No question what we're doing is beginning to pay off as we watch utilization," he says. "We'll claim some of that has been because of offerings outside the walls of our traditional hospitals where people can get resources to treat them if necessary, but resources where they can care for themselves, too."

He's talking about investments by the health system in exercise facilities and areas for nutrition education and personal behavior modification.

"We're beginning to see momentum around communities wanting to have the tools for well being."

If this sounds far away from focusing on metrics like inpatient bed days, revenue per adjusted discharge, and the like, it's because Hawthorne says health systems have to move away from that fee-for-service mentality in order to survive what he says is already a massive reorientation in the way medical care is provided. Part of that shift has to do with legislation like PPACA, but Hawthorne says employers and patients themselves are demanding that health systems seek ways to prevent maladies as well as treat them once they appear. Still, seven years into a wholesale transition, he's under no illusion that this shift in mentality will be quick.

"The exciting part is we are seeing change. Where we want to go may be a full generation from now, but you have to start somewhere," he says. "Changing how a community lives happens slowly and surely, but we have a chance to do something big."

But will the cost of innovation overwhelm even a large system like Texas Health, which still relies on inpatient care to a significant degree?

"It's a great question and our board asks how we're doing this businesswise constantly. The hospital has been our livelihood."

Hawthorne says the changes are gradual but sweeping.

"We've stepped in gradually with payers to the point at which we now have an ACO contract with Aetna, and a draft of one with Blue Cross. We can't give up the revenue base that's been the lifeblood of the organization in terms of hospitalization, but filling beds is no longer how you assess the business model for us."

The question for Texas Health—as well as many other hospitals and health systems—is how to create revenue by keeping people well.

Hawthorne says Texas Health is getting a lot more buy-in from the business community, "which is realizing that by investing in options like this, they'll have happier, more productive employees," he says. "They get it, and they know as well as we do that they have to make modifications in payment methods to include reimbursement for helping keep people well. It's a fine balance."

Not that he wants to err on the side of caution. Turning a battleship takes time, after all, but it also takes decisive moves.

Hawthorne says the organization has been cautious with its investments in financially uncertain areas.

"In some cases, we've pulled back in some of our programmatic efforts around building the continuum. We've had a couple of partnerships where their capacity looked to be positive, but once we started operation, the expectations were not being met, so we've had to discontinue lines of service that we've started."

Pressed for examples of areas that still need a lot of work, Hawthorne concedes that some of its efforts around integrating best clinical practices with independent physicians continue to be challenging.

"We haven't given up but in this area, it's a bit of the Wild West mentality," he says. "Aligning with physicians when there's no real major economic hurt going on with them … it's so difficult to persuade them to look at a future state of healthcare that's dramatically different. Yet we'll continue to try to align with independents through clinical integration."

He cautions fellow health system leaders to lead with an element of patience in terms of recasting the business model for the future, but he stresses the value of deliberate and ongoing strategic planning.

"You have to have a vision for the future. It may not be clear, but always look forward to opportunities," he says. "It's better to model the change than to have someone tell you how to change. Have courage to create opportunities."

Philip Betbeze is the senior leadership editor at HealthLeaders.

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