HealthLeaders Media: Lodi Health is reinventing itself from a patient care point of view. You have added cardiac rehab facilities, primary care clinics, you've invested heavily in follow-up care, and you've added a multitude of programs to adapt to a value-based reimbursement system. How have you chosen your investments?
Harrington: We have a series of clinics, about 14—mostly primary care—and we're trying to organize all of the physicians into a medical group. The group is formed, but we're working on the governance issues. About 4–5 physician leaders are taking the lead on determining compensation. One other initiative we're doing is a private ACO with Blue Shield. They're partnering with local IPAs and Dignity Health. We've been talking for about eight to nine months about doing a shared savings program for CalPERS [California Public Employee Retirement System] retirees. There are about 16,000 enrollees in the county, so this is kind of a narrow network shared savings model. What it means is we're getting our feet wet without a bunch of risk involved.
HealthLeaders: So it looks like you're doing all the right things, but with Medicare and Medi-Cal reimbursements trending downward, what's your strategy for replacing that expected lost revenue?
Harrington: We hope to have a number of very philanthropic donors who will give us millions of dollars! Seriously though, we look at ourselves in the mirror and know our limitations. We decided we were going to try the CMS bundled payment initiatives. We chose total joints [replacements]. We do 130–150 of those a year, and about half are for Medicare patients. It's an opportunity to learn and redesign care without a bunch of exposure, and through it, we're trying to get experience in how to handle a bundled payment.
We actually joined an advanced payment model ACO based out of Sacramento County as well. Eight of our primary care physicians put in applications, starting January 2014. It's the only one in California, but it appears they still have a lot to do get the work going. These kinds of projects are becoming the norm. About two years ago, we were starting to see reimbursements ratchet down, and at the same time we were trying to figure out what we need to do to downsize our operations and expenses in order to be at that Medicare reimbursement level or below to survive. We figured we had about $600 per adjusted bed day to cut down over a two-year period.