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Healthcare Leaders Seek Strategic Sweet Spot

Philip Betbeze, for HealthLeaders Media, June 17, 2013

Murphy and his leadership team recognize that in addition to its core competency of acute care hospitals, UnityPoint Health must expand to an organized system of care in each of its regions that brings care at the most appropriate time to achieve optimum cost and quality results.

 "We'll have to adjust where we place our capital. That's why we'll have to work in regions, so independent and employed physicians are all looking at populations, stratifying the risk, while we'll be looking at additional partners we need to bring to the table."

Approach No. 2: The player-coach  

James LaBelle, MD, the chief medical officer at Scripps Healthcare—a San Diego–based four-hospital system with 1,411 total licensed beds and $2.6 billion in total operating revenues—is in the midst of engineering transformation as well. But that transformation involves many moving parts and can't be accomplished quickly. Like Murphy, he sees a three- to five-year period of reengineering processes, reimbursement, and partnerships with outside organizations before Scripps can "flip the business model."

The first phase of transformation, which LaBelle estimates is 85% complete at Scripps, centers on standardizing the supply chain: physician preference items and pharmaceuticals. He calls that work low-hanging fruit. The second phase centers on reengineering care on the care units, primarily in the inpatient setting. It involves driving out the waste in the inpatient unit and standardizing the clinical processes that support them. He estimates Scripps has completed 15% of that work.

"The really hard piece is the third phase of our process, which is taking the efficient systems we have and flipping the business model so that instead of being in a heads-in-beds business model, we're reimbursed for population health," LaBelle says.

That requires new competencies in reengineering the continuum by disease state, he says. Put differently, he says Scripps as a healthcare system only adds value at the level of the medical condition.  

"The patient doesn't necessarily care about the individual encounter, but the improvement of their condition over the entire episode of care," he says.  

Even now, in most of healthcare, the predominant reimbursement is around those encounters, and not in driving value at the medical condition over the cycle of care. Capitation, which has long held sway in California even after it was largely abandoned in many other regions, starts to get there, but even a renewed focus on utilization management and outcomes is more of a general indicator of performance, and not around particular disease states, he says.  

"This third transition will be data- and knowledge-heavy," he says.

While many of his colleagues at health systems around the country have taken to saying that primary care is king in healthcare reform, LaBelle says that's the wrong metaphor.  

"In order for the transition to occur, the primary physician can't be a king, but a player-coach," he says.  

This physician has to coach other members of his or her team to manage a much larger population of patients, supported by chronic disease management infrastructure. Patient interactions with such physicians will not be one-on-one, but the physician will manage a population of patients with a team.  

"That transition will be as hard as the one the specialists will undergo in terms of being accountable for outcomes and appropriateness," he says. "A lot of primary care physicians experience frustration about not being able to manage complicated chronic diseases because they need to see 30 patients a day. The work becomes a lot more meaningful if you can move them toward that."  

Still, he's concerned that Scripps has the right partners as some of the simplest primary care becomes commoditized.  

"It's being commoditized right in front of our eyes. Look at Rite-Aid," he says. "When do we want to admit that the commodity part of the physician workload doesn't really add value?"

What adds value to the patient is physicians' judgment around complex presenting conditions. If your strategy as a hospital or health system is to acquire primary care physicians, that's only the beginning.  

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