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Healthcare Leaders Prep for the ACO Model

Philip Betbeze, for HealthLeaders Media, September 14, 2010
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But they're on their way.

SSFHS is a part owner of a managed care organization, Advantage Health Services, a for-profit HMO, which should help the system better manage risk successfully. However, Diamond admits the HMO will need to be heavily capitalized in order to manage risk in a mission-critical situation where reimbursement is at stake.
In addition, SSFHS has made a huge, approximately $125 million investment in an Epic clinical information system throughout the system's hospitals and affiliated providers, which Diamond says will move the SSFHS toward a single patient information system that is essential to managing the patient experience—whether outpatient, inpatient, or through follow-up primary care. It has a number of employed physicians—about 550—but is moving toward more.

Diamond sees huge investments on the horizon, requiring some very critical strategic decision-making.
"We're very strong financially—AA rated—and our facilities are fairly modern," he says. "We're not leveraged up to our eyeteeth and we don't feel comfortable taking on a huge amount of debt. But can we make our margins work to begin to fund this massive investment? Our system had about a 4% margin last year, but we'll need far greater margins than that to finance what's coming. We're seeing our commercial payment market shrink and, if anything, that will continue. Right now, we can get some cross-subsidization margins, but that's disappearing."

Specialization

In many ways, Chicago's Sinai Health System is typical of many inner-city hospitals in that its payer mix is poor (60% Medicaid, 20% Medicare, 13% self-pay, and 7% commercial), and so is the neighborhood it inhabits. The 319-staffed-bed hospital system boasts a teaching hospital, level 1 trauma center, level 3 neonatal unit, a 200-physician owned practice consisting mostly of specialists, and a 100-bed rehab hospital. Because of that diversity of offerings, President and CEO Alan H. Channing says Sinai has some of the components of an ACO, but is staking its future on a couple of big bets.

Still, he must live in the here and now. And that's not very pretty from a reimbursement standpoint. At least he knows he can likely survive until healthcare reform takes effect.

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