The new head of the AHA's governing council representing small or rural hospitals discusses his most pressing challenges: addressing the shortage of health professionals, advancing population health, and preserving the critical access hospital designation.
Paul R. Bengtson,
CEO, Northeastern VT
Regional Hospital
Healthcare providers across the country will face a challenging environment in the coming year as ground-changing reforms take effect. For any number of reasons, however, meeting those challenges will be even harder for providers serving rural areas.
The patients they serve tend to be older, sicker, less educated, and poorer.
Access issues are far more challenging in rural areas, where the closest hospital or physician's office is more often miles away.
Every rural provider trying to recruit a physician, a nurse practitioner or any of a number of specialists understands the intense competition for clinicians.
Smaller and remote hospitals and other providers often cannot easily access the capital or the expertise for technology upgrades and interoperability mandates that can create economies of scale, improve care and reduce costs.
Many rural hospitals, through no fault of their own, over-rely on Medicare, Medicaid, and other government payers with lower reimbursements than private payers, which also makes it more difficult to offset the costs of charity care
I could go on, but you catch the drift.
Despite all of the challenges, Paul R. Bengtson, CEO of Northeastern Vermont Regional Hospital, a critical access hospital in St. Johnsbury, is upbeat about the work that rural providers accomplish.
"We are like many other critical access hospitals and the programs that we have here are very sophisticated and many are on the cutting edge of high quality," says Bengtson, who this month began a one-year term of office as chair of the American Hospital Association's Section for Small or Rural Hospitals in 2014.
"We have programs that are directed at improving the health of the populations we serve. I am excited just in general to pursue the Triple Aim: to improve care, to improve the health of the population, and to lower healthcare costs. We are a rural hospital, but we are working on all fronts."
The 21-person governing council represents small or rural hospitals in the AHA's policy process and member services initiatives, and through it, Bengtson says he's been exposed to "a large number of really smart and creative people working in rural healthcare settings all across the country."
'Crisis Mode'
"Having said that, many rural providers are in what I would call a crisis mode because the systems and many situations and the economy are rather fragile," he says.
Bengtson says in some rural areas "it is next to impossible to recruit qualified physicians."
"Just by way of statistical reminder, 20% of America's population is living in rural areas and we have probably less than 10% of America's physicians serving that population," he says. "That is true for a variety of reasons, but in some areas it is very difficult to recruit the kinds of physicians that are needed, particularly primary care physicians."
Bengtson sees that as "a real problem because we've got over 2,000 rural counties in America that are designated as health professional shortage areas. That does make the work really hard. One of the toughest jobs is going to be to replace the workforce we have now."
Bengtson says one of his priorities as leader of the AHA's Small or Rural Hospital's Section will be to advance population health.
"I want us to be learning from each other. I do see where the Small or Rural Governing Council has a think tank operation where we can figure out who's doing what that is going to be most effective to bring good programs to rural populations in the future, with the intent of improving care, with the intent of improving the health of the population and lowering costs," he says.
Emphasis on Population Health
"I would like to see a lot more emphasis on population health improvement; meaning hospitals in rural areas reaching outside of the walls, connecting with private practices, public agencies, departments of health, wherever possible to have a collective impact on the health of the populations they serve. Yes, we have to improve the quality of care in the hospitals themselves. But I am after improving the health of the population. That has always been important to me, and it will be this year too."
I asked Bengtson if he thought that the federal government, Congress, and other healthcare powerbrokers held a proper appreciation for the work of rural healthcare providers under challenging conditions.
"That varies greatly across the country. In the most rural of states like Vermont, the legislature, [and] the power brokers get it because they're in immediate contact with their constituents. Nobody runs around here anonymously doing things that are not good for the population," he says.
"But it is interesting across the country and there is a lot that I frankly don't understand. I don't know that people in powerful positions don't get it. I have to say I am not happy about the politics of healthcare when I think there is so much that can be served through the mission of healthcare. But politics and money make a difference. I am not sure that people don't get it, but I see a lot of action that would cause me to think they either don't get it or don't want to get it."
Preserving CAH Status
One of the best ways that the federal government can show its appreciation for the work of rural providers would be to outright reject or at least very carefully scrutinize any reconfiguration of critical-access status for small and isolated hospitals.
"If we lost our critical access hospital status that would have a very bad affect on the people we serve," Bengtson says "We have a primary service area of least 30,000 people, and there would be a lot of people around here who would automatically lose access to a lot of needed services. Would the hospital go out of existence all together? No. But it probably would have to morph into something that would be much less than what it is capable of doing now."
"Frankly, the benefit of what we have to offer the population would be much diminished and also the population would be very disappointed. When I ask people 'what do you need from us?' their answer is almost uniformly 'be there. Be there now. Be there in five years. Be there in 10 years. Be there in 20 years for my family.' That is what people are looking for."
Refuting "conventional wisdom" and citing slowing healthcare cost growth, the Federation of American Hospitals says healthcare industry consolidation improves services and care coordination, and ensures continued access to care.
A Federation of American Hospitals-commissioned report claims, not surprisingly, that hospital consolidation improves care quality and access and that the critics who claim these "hospital realignments" drive up healthcare costs are relying on old data that does not consider the sweeping effects of healthcare reform.
"Consolidation has probably always been a good thing, but in terms of today, it actually is the mother of necessity," says Chip Kahn, president/CEO of FAH, the Washington, DC-based group representing investor-owned and managed community hospitals and health systems.
"The expectations of consumers and patients, the revenue pressures to have enough resources for hospitals, the accountability and technological requirements and obligations that hospitals have today, and the expectation that we are going to be moving toward really taking care of the patients over a continuum of care change the dynamic."
"All too frequently, conventional wisdom suggested by media coverage is that hospital realignment, mergers and consolidations systematically result in pricing power, with anti-competitively higher prices for those needing care," the report states.
"Yet, in terms of prices for consumers, this study's extensive review of the literature finds no consistent statistical relationship between consolidation patterns and hospital prices across the studies. What also can get lost is that these claims about hospital merger effects often rely on outdated data that do not reflect today's dynamic market conditions."
Instead, the FAH report says consolidation improves services and care coordination, and ensures continued access to care that is not disrupted by financial straits that threaten to shutter hospitals that go it alone.
Also not surprisingly, America's Health Insurance Plans begs to differ.
"The evidence shows that increasing provider consolidations results in higher prices for consumers," says AHIP spokeswoman Clare Krusing. "The rhetoric about provider consolidation is that there is greater efficiency, but there is government data and research that shows the reality is higher prices for consumers. The rhetoric is efficiencies but the reality is higher prices."
"AHIP is missing the point," Kahn said. "You have to look at the big picture. All they are focusing on is simply their payment for the covered lives in their insurance book's business. They are not really concerned, I don't think, about the access of those people to hospital care," he added.
If hospitals are going to be available for all Americans, then we have to be honest with ourselves that Medicaid and Medicare and maybe even the plans that are coming in under the new exchanges are not paying sufficiently and are putting pressures on hospital revenues to such an extent that consolidation and hospitals needing to right-size is where we are going."
"The other side is if you go to the AHIP blog, most of the research that they base their conclusions on is old, based on data from the 1990s or the turn of the century. The environment then is not what the environment is today."
Krusing says AHIP cites a number of reports from independent sources that have been written in the past two or three years, all of which support the payers' claims that consolidation drives cost growth.
"I'm looking at something from PwC that came out in 2013 and it shows hospital merger and acquisition activity [PDF] has increased nearly 50% since 2009, reaching its highest point in 10 years," she says. "Even that report highlighted that the result of this trend of consolidation there are higher prices. This is a trend that continues. The research continues to show this. What is most striking is when you see what is happening across the country and there are tons of articles that actually show within the last year to 18 months that when patients go to these provider groups, their prices are increasing."
Kahn counters that the arguments about consolidation driving cost growth loses some steam with the news that healthcare cost growth has slowed to record lows. "It's probably the economy, but consistently economists and government officials and other studies are showing that a structural change is taking place," he says.
"Hospital services are paid for through this tremendous hydraulic that is Medicaid and Medicare payments, no payment, and then various types of private payment," he says.
"As far as we are concerned and as far as our study illustrates, to keep this hydraulic greased so that there are enough resources to provide the access that people expect and the quality that people expect, the freestanding hospital can't make it. You need to look at the big picture of hospital survival and the availability of hospitals. That is the point we are trying to make," Kahn said.
Until recently most physician compensation models focused on straight salary guarantees or pure productivity-based models. Those trends are falling by the wayside.
Physician compensation models are changing and evolving in practices and hospitals across the nation as providers transition away from fee-for-service reimbursements and toward value-based care and population health.
What's it going to take to make these models work?
Kristian Brokaw, a manager with the PwC's Human Resource Services practice, says the key constants for any physician compensation model include a focus on quality outcomes and building a sense of "citizenship" within the practice.
"Physician compensation is complicated and every changing. I realize that is a blanket statement but it really goes to the simple fact that these models need to be updated and changed every one, two or three years," Brokaw said at a PwC webinar this month.
Until recently most physician compensation models focused on straight salary guarantees or pure productivity-based models.
"Those tend to be going by the wayside," he says. "What we see now are more physician models that are designed to try to do everything. They are taking too many behaviors into account. At that point we get to the law of diminishing return. Because if there are 20 or 30 different metrics, that is way too much and there is nothing for physicians to truly put their focus on."
"Specifically, today's comp models are really designed for three key elements; first, to drive behaviors; second we need to build a culture; finally we need to ensure we are not just market-competitive. We want to be leaders in the market and attracting top talent."
Brokaw describes three phases in the process of transforming from fee-for-service to value-based compensation, all of which involve the move away from base salaries and towards increased incentives or risks. "In the introductory phase the majority of the revenue is still coming from the fee-for-service billing and low productivity from one provider doesn't directly impact other providers," he says.
"Pure procedure compensation models become problematic as organizations take on increasing amounts of risk. In the middle, as we look at the different models, what stands out is activities that once were profitable have the potential to negatively impact reimbursement reimbursements in the future. As we put our focus on readmissions and outcomes we need to keep that in mind."
"Finally, as we move to the population health phase, per patient per month and patient management and wellness are the keys to driving this. Your physicians have to be motivated to accept this risk. Productivity models needs to align with the objectives of the population that we are now managing."
Brokaw says a typical compensation model he's seeing now offers 80% base pay and 20% incentive, a ratio that will undoubtedly change as healthcare reimbursements evolve toward risk.
"The incentive side is in aligning this with the organizational cultures and behaviors we want to drive, based around quality patient satisfaction, alignment with our objectives, developing that culture, and citizenship," he says.
"As you think about those different buckets and creating the culture collaboration and transparency and how do you move to a model where all of your physicians are involved and they are working with each other to better their performance, you have to move away from an individual-based model and move to one that takes things into different accounts in different areas."
Brokaw stresses four key elements that should be in any compensation plan:
Aligning incentives to the new care model;
Incentivizing quality and "customer" outcomes;
Creating accountability for quality and outcomes; and
Promoting teamwork and collaboration
"We use the word customer. In the past we have always been patients," Brokaw says. "But more and more organizations are looking at their patients as customers because these customers realize they can go out and find care elsewhere—so how do we treat our customers?"
And as practices wean themselves of traditional fee-for-service models, physician leaders should ask themselves how their new compensation models will change unproductive or disruptive behaviors while building camaraderie and citizenship among physicians—traits that will become critical under value-based care.
The best way to get that result is to make the process transparent for every physician in the practice.
"Education is truly key," Brokaw says. "The physicians will have to be educated on how the model works down to the nth degree and you are going to have a lot of questions and a lot of great conversations. Finally, to make this model work it goes back to that development of a physician champion. You have to have them from the moment you start developing this model to the moment it is fully implemented."
"If they aren't out there talking to their colleagues and getting buy in," she says, "it will never be as successful as it could be."
In our September Intelligence Report, healthcare leaders, by far, cited physician engagement as the most difficult aspect of managing physicians. What elements of physician engagement have been most challenging at your organization and how is leadership addressing it?
Chris Van Gorder
CEO
Scripps Health, San Diego, CA
On engagement and culture: Engagement has not been an issue for us. Maybe it is because we have a physician leadership cabinet that we established 14 years ago where all of our elected chiefs and vice chiefs meet with us monthly to work on all the issues affecting the healthcare system. We established our ScrippsCare accountable care organization and brought all of our independent practice associations and medical group physicians together several years ago and they are extraordinarily engaged.
On expanding engagement: Technically the physician leadership cabinet is an advisory body but I would argue that it is the second most powerful organization at Scripps, second only to the board of trustees. And that was easy. That was just bringing them in and transparently sharing information. We did the same thing with our affiliated medical groups through what we call the physician leadership academy.
On trust and authority: Engagement is not just a word. You have to give physicians decision-making authority. If they have the same information, they make the same decisions we would have made but they make it faster. I feel better about the decisions in the end because I know that the clinical needs of the patients are being met. They aren't just business decisions being made. They are joint decisions. I am not going to abdicate my role as CEO but I am willing to share it with them. If you are not willing to share it then engagement is really going to be difficult.
David Tilton
President and CEO
AtlantiCare Health System
Egg Harbor Township, NJ
We looked at this in the context of the Baldrige journey we were on at the time. An important moment for us happened when we began to view physicians not as independent but as members of our workforce. With that we began to give the physicians the responsibility, the authority, and the accountability around key elements of our strategic and operational plans.
We brought them in at the top of the first inning rather than the bottom of the ninth. That just added to the full engagement of these physicians and their ownership of the efforts we have.
Physician-to-physician puts it on a very high professional level in an area where I don't play. I would like to, but I am not a physician. It's about professionals establishing a standard of performance and saying, "In this particular situation, you don't seem to be participating at that level." When those conversations are not prompted by the CEO or an administrator but by professionals talking to one another, it gains momentum and it changes the whole professional environment within an organization.
Like anything else it is never perfect and it is always evolving. We continue to shine a bright light on those professional relationships and demonstrate our willingness to make this a better practice environment for our physicians.
Jeffrey DiLisi, MD, MBA
Vice President and Chief Medical Officer
Virginia Hospital Center
Arlington, VA
To provide high value, quite simply you want to provide the highest possible quality at the lowest possible cost. And to do that you need physician leadership and to have good physician leadership you need physicians who are engaged and in tune with the idea of providing value and are likely in tune with the hospital's mission statement.
We have employed more physicians to try to provide more value to our patients and to our community, and we see that with our employed physician group. But you can't only have your employed physicians engaged. So how do you get the rest of the physicians engaged? To me it's about being very transparent about what our data looks like. That is one of the things I do personally as CMO. We have a very detailed physician quality scorecard that we put together every month. We want all of our doctors to know, whether they are employed or not, how well we are doing and what we look like with that communication-with-doctors metric on the HCAHPS survey. What are our mortality rates? What are our readmissions rates? If you can get the data in front of them and get them focused on the things we need to do better, it is easier to get them engaged. That has been effective as well for our nonemployed physicians in getting them engaged.
Scott Trott
Vice President of Payer Management and Faculty Services
UNC Health Care System
Chapel Hill, NC
What we've done in the last five years is really promote more physician executives in the system oftentimes creating new positions or formalizing their expected roles within the organization in ways that maybe weren't apparent before.
I have always had a physician committee to do managed care contracting–related guidance because I've been engaging them to help them understand what is happening in the financial world for them. We've tried to really enhance that committee and all of our physician governance committees' roles within studying the general directions for our healthcare system. There has been a lot more cross pollination of physicians getting involved more in what I would call hospital operational decision processes than we ever had before.
The CEO of our system is Bill Roper. He is an MD. He has invited or appointed physicians to be part of our senior leadership team. So they are sitting with him and hospital executives helping chart and debate things of importance to our health system. He engages doctors who weren't necessarily department chairs. They aren't necessarily division leaders. They are just either really astute clinicians or otherwise in some of those kinds of environments where they have helped build enthusiasm. We tell them: "We want to listen to your input. We want you to help guide us through this."
Kristine Aznavoorian, RN, MS, had been a practicing pediatric nurse in Boston for five years when she encountered subspecialists known as Pediatric Sexual Assault Nurse Examiners. Now she works with young victims of heinous crimes.
Kristine Aznavoorian, RN, MS, had been a practicing pediatric nurse in Boston for about five years when she became aware of the subspecialists known as Pediatric Sexual Assault Nurse Examiners, or pedi-SANEs.
"It fascinated me," Aznavoorian recalls. "These children are looking for certain help, and I really enjoyed that thought of helping them in a very crucial and traumatic time of need."
Now, in addition to her work as a pediatric emergency nurse at Boston Children's Hospital, Aznavoorian also works part-time as a pedi-SANE for the Massachusetts Department of Public Health at the Essex County Children's Advocacy Center, where she investigates two or three sexual abuse cases each week.
For pedi-SANEs, there is no such thing as routine. The one constant, though: Dealing first-hand with the young victims of heinous crimes is never easy.
"Every case is different," says Aznavoorian, who has been a pedi-SANE for two years. "Every child deals with a traumatic event a little differently. It depends on the developmental level of the child, how old they are. It plays into how they are going to handle the situation, but it is across the board."
In some cases, if there is an opportunity to gather physical evidence of sexual assault for prosecutors, Aznavoorian asks the victim or their families for permission to perform a physical examination.
"The older the children are, the more they kind of get what is going on exactly," she says. "And depending upon what their unique situation is depends upon if they are going to be open to coming to see me, or if they are open to having an exam done. I never know what kind of child we are going to get and if they are going to be willing to see me or even talk to me."
"I try to go in as if I were with any of my patients, such as when I work as a staff nurse in the emergency room. I go in. I introduce myself. I am as friendly as possible. Children feel afraid if they feel certain vibes from medical professionals so I try to give off an open and friendly vibe. Every child reacts a little differently," Aznavoorian says.
"We try to keep the parents in the room. As the children get a little older and become adolescents then maybe they want a little more privacy and they don't want the parents around. But when they're younger we typically have the parents stay because they know their child well and they know best how to comfort their child," she says. "It takes a lot of patience, especially with younger children. But you work as slowly as possible just to make sure they are not afraid. We have a 'stop' rule. If the child is scared or upset or crying, we stop. We don't force the children to do anything they don't want to do. When it comes to evidence collection and an examination, we just try to do it as efficiently as possible without traumatizing the child any further than they already have been."
It's important work. But it is also stressful.
"The burnout factor is actually a concern within our program. It's tough work. I definitely don't take things home with me. I do my job. I focus on the family and the child," Aznavoorian says. "We have monthly meetings where we share our feelings with the rest of the pedi-SANEs and talk about the struggles that we having doing the job and the work that we do. We rely on each other to talk about the tough days and the good days."
The rewards aren't monetary. The satisfaction comes with knowing you have played a role in helping a child recover from a potentially devastating ordeal.
"The older the children are the more they realize that what happened was wrong or wasn't supposed to happen. They tend to think that as a result something is wrong with their body and that people can tell what happened to them just by looking at them," Aznavoorian says.
"This particularly is true with the adolescent population and the young teens. They think something is wrong with them. It's happened to me on numerous occasions where I examine these children and they look at me and say, 'Really? You can't tell something happened?' I say 'No, I can't tell. Your body is perfectly normal just like every other 11-year-old body would look like.' And they are so excited about that. That is what keeps me doing what I do every day."
Wellmont Health System CEO and President Margaret "Denny" DeNarvaez discusses the Tennessee-based system's search for a potential buyer. Not having an immediate need to make a deal is key, she says, because "it is more important to do it right than to do it fast."
Margaret "Denny" DeNarvaez
Wellmont Health System CEO and President
When Wellmont Health System announced this month that it was looking for a partner, the Kingsport, TN-based health system, with seven hospitals serving Upper East Tennessee and Southwest Virginia, said it had "launched a process to evaluate strategic options for the organization's future, including the possibility of aligning with another health system."
Wellmont CEO and President Margaret "Denny" DeNarvaez spoke with me recently about the challenges facing her health system and finding the right partner amid the global shift towards provider consolidation.
HLM: What prompted Wellmont to search for a partner?
DeNarvaez: Quite frankly, we feel like we are in a good position both financially and with our clinical standing in the area to be seeking a partner at a time when we don't need to seek a partner. We are looking proactively at what is out there that would enhance our position and our ability to provide care.
And we're doing that in a time where we don't have a gun to our head and we can be thoughtful about what those partnerships might look like and who they might be with and what they might bring to us beyond what we can do by ourselves.
HLM: What can't you do on your own?
DeNarvaez: It's really more with respect to what we know is going to happen in the next few years than it is an immediate need. There is nothing per se today that we are not able to do as a result of our financial position. But we look downstream and we see the significant reimbursement cuts that continue to come and we look at the penalties that will also continue to increase, year over year, for failure to meet certain standards.
The reality is the headwinds in healthcare are going to be pretty strong. To combat that there is going to be a change in the business model for healthcare. Many folks will be taking on risk so they can advance healthcare in a different fashion from what we have traditionally done. To do that we definitely believe a partner would be a preferred option.
We are in an area that does not have the population that is necessary to take on risk. It's common wisdom that you need a minimum of 50,000 lives and many people would say much more than that. We are in a total market area of 400,000 people. So obviously that is going to be very difficult.
HLM: What are Wellmont's selling points?
DeNarvaez: We are market leaders in the areas where we do business by far—a two-to-one preference. We are running very strong facilities both clinically and financially. When it comes to cardiology and oncology, there is nothing shy of transplants that we aren't doing. They will be very surprised at the level of sophistication of the physician community and the caregivers and the technology.
They will be excited when they see the level of sophistication of the board. These are not folks just being fed information from management. They are knowledgeable about the difficulties in healthcare and they also know what they want for the community."
They will be impressed with our senior team. I have been at the CEO level for over 20 years and this is the strongest management team I have ever worked with. It's helped position us in a challenged fiscal market.
Those who have gotten to know us just a little bit are always stunned to see what we have done at the level of reimbursement in this area with the payer mix we have. That may be an area where they would see that we could help them. That is one of the things we hope, too, that it's not a one-way partnership.
We are looking for things, but we will be able to show them how to work in an environment that is very challenging and yet produces the kinds of results we are producing. There will be plenty they will be impressed with.
HLM: Are you looking at an affiliation or an outright acquisition?
DeNarvaez: We have no preconceived notions of what the partnership should or shouldn't be. We will have a financial advisor go through this process with us because we need to reconcile what we may want versus what a partner might want.
We are aware that for some partners, a clinical affiliation might be of interest. It may not be for some entities. And it may not meet our needs either. We want the right partner who meets our needs and we can get the kind of commitments to the community and the health of the community that we are looking for. We are not looking to acquire another entity. We would be willing to be acquired another entity.
HLM: Is this a hard sell for your community?
DeNarvaez: I have been proud of our community. For the most part we were concerned about being very vocal with our community in advance of actually beginning this phase of the investigation. But it is a community asset and we felt it was the right thing to do. They have responded with gratefulness that we have kept them apprised of what we are doing and that this isn't going on in a smoke-filled backroom.
The community includes successful businessmen who understand that size and scale matter, getting both intellectual and fiscal capital matters. I personally haven't heard anything but positive comments. That's very telling about using an approach that is not going to be done haphazardly.
It's going to be done very thoughtfully. And it is meant to be in the best interests of the community. We have a sophisticated board that is trusted by the community and that goes a long way toward making them feel comfortable about the process and the people who are driving it.
HLM: Both Tennessee and Virginia have rejected Medicaid expansion money. Was that a factor in your decision to seek a partner?
DeNarvaez: It wasn't the factor, but there is no question that it was a factor. Generally speaking it is just another indication of how hard it is to have a solid fiscal plan when in our case, 70% of our revenues come from a government source that is very much subjected to that type of decision making.
By a flip of the pen one way or the other, millions of dollars of revenue can be taken or diminished. If we were 10% Medicare and 5% Medicaid as a payer mix, that would be a different conversation. Medicare makes up over 50% of our payer mix and Medicaid makes up 13% and we have 9% or so in complete no pay. When you have that sort of a payer dynamic, it also is more subjected to these types of changes that have come very rapidly and don't allow you enough time to change your infrastructure to respond to it.
HLM: Are you concerned about the funding status for rural hospitals?
DeNarvaez: We had to close one of our rural facilities for a combination of issues. Probably more significant than the financial losses, although they were significant, was the inability to recruit and retain physicians. That is a growing issue because our economic challenges regarding what the government is going to do also translate into physicians who don't wish to work in an environment where they don't know from one day to the next what their economic challenges are going to look like.
And frankly even if they are employed by the health system, they also know the health system would have to make dramatic changes if disproportionate share went away. That would be a significant crisis for many hospital systems, not just our own. And the rural facilities are by far the most impacted in those discussions because there is a heavier concentration of Medicaid.
HLM: What is your timetable for some sort of partnership?
DeNarvaez: This month we will send a (request for proposal) to three financial advisor firms. In short order we will make a decision as to which one will be our advisor for this second phase. They will help us determine a list. I don't know if that list will have two candidates or 10 candidates. We will have a small group from the board and myself doing our homework to interview those folks and make sure we are talking the same talk and that we are interested in one another and interested in the same things about one another.
There is no real time table for that. If it takes us six months from start to finish to find the best partner, so be it. If it takes another six months to find what the right transaction is with that partner, so be it.
It's one of the beauties of being proactive in this regard. We don't have a timetable. We don't have a gun to our head. And we do think it is more important to do it right than to do it fast. We do believe that in 2014 we would be pretty far down the line selecting a partner and a transaction to be done.
HLM: Is there a deal breaker or a deal maker with potential partners?
DeNarvaez: There certainly are criteria that we will be testing for. One is that they are consistent with our own mission vision and values. To be candid, the more they look like us, talk like us, and act like us, the easier this will be. We are very committed to our service and quality agenda and we want a partner who is equally concerned with that. Culture will matter.
We are clearly going to look for a financially sound entity. We are a BBB+ plus bond rated entity. Those that would be interesting to us would be A-rated entities and above. We don't want to sign up with a partner who might also be looking for a partner. We want a partner who is committed to the technological advances that we have been committed to.
We have made a huge investment in Epic electronic records. We want a partner who is equally sophisticated in their medical and intellectual property. We want to know what they are invested in, what they have done with it, how they have used these tools.
We want a partner who can help us recruit physicians. We have strong service lines and strong medical staffs but when someone retires it is not obvious where a replacement is coming from. We have a strong commitment to physicians as leaders.
There are other criteria, but those are the ones that come to the top of mind right now. Clearly, as we listen to their stories, as we listen to who they are as an entity, we are going to look for certain markers that match up with our philosophy.
Many of the people in the 18-to-24-year-old demographic who've signed up for coverage under health insurance exchanges may be among the least healthy in their cohort, says Moody's Investors Service.
Despite assurances from the Obama Administration that growing numbers of "young invincibles" are signing up for coverage on the health insurance exchanges, skeptics including analysts at Moody's Investors Service remain fearful that the risk pool will remain skewed towards older and sicker Americans.
Last week the Department of Health and Human Services released the latest enrollment figures for the exchanges through late Dec. 28. While the pace of the sign-ups increased about seven-fold in December—nearly 1.8 million people signed up for coverage that month—only about 24% of the new enrollees were in the coveted 18-34-year-old age group.
HHS officials said they saw an eight-fold increase in the numbers of young adults signing up for coverage, but the totals so far are well below the 40% threshold that Obama Administration officials had hoped for. With that in mind, Moody's Investors Service said this week that the preliminary healthcare exchange demographics are a credit negative for health insurers.
"The enrollment statistics show that only 24% of those who have enrolled in the exchange for private healthcare insurance are in the critical 18-34-year-old age group, well short of the 40% target based on the proportion of eligible people in this age group," Moody' said.
"The way the exchange products are structured and priced, a sizable portion of these healthy individuals must enroll so their lower claim costs can subsidize the higher anticipated claim costs of less healthy individuals."
Moody's said health insurers mandated to provide coverage for a risk pool that is skewed towards older and less-healthy people would see higher medical costs and reduced earnings in 2014, and would find themselves pressed to raise premiums in 2015. "Neither outcome bodes well for a vibrant insurance exchange, which insurers had been counting on for increased revenues and income," Moody's said.
The bond rating agency noted that WellPoint, Inc. (Baa2 stable) and Health Net, Inc. (Ba3 positive), are particularly exposed to potential losses because they have aggressively taken part in the exchanges.
HHS officials said there is still plenty of time for young adults to sign up for coverage before the enrollment period ends on March 31.
A new marketing effort was launched this month to encourage younger people to enroll. And Obama Administration officials noted that Massachusetts saw similar enrollment patterns with younger people when that state mandated universal coverage several years ago.
Still, Moody's analysts were not assuaged.
"Despite the Obama administration's optimism, we continue to have doubts about the enrollment outlook based on the economics of the situation for those not receiving a government-provided subsidy to offset premiums," Moody's said.
"The economics for healthy young individuals do not provide much incentive for them to sign up. For those not eligible for a subsidy, a low-cost plan on the insurance exchange will cost more than $100 per month and will carry a high deductible of several thousand dollars. On the other hand, the penalty for not having health insurance during 2014 is minimal (for an individual, it is limited to the greater of $95 or 1% of income)."
Clare Krusing, spokeswoman for America's Health Insurance Plans, says payers aren't making any rash assessments about the risk pool in the middle of enrollment. "We are still in January and we still have to go through the entire open enrollment process to really understand and at the end of the six-month period what those numbers are going to mean for the marketplace," she says. "But there is broad agreement that you have to have broad participation from young and healthy people for all of these reforms to work."
Moody's said it suspects that many of the people in the 18-to-24-year-old demographic who've signed up for coverage may be among the least healthy in their cohort or they may be covering specific healthcare expenses in the coming year, such as young couples needing maternity benefits. If suspicions prove to be correct, the cohort will not provide the financial support needed to cover the higher medical costs of older enrollees, Moody's said.
In addition, Moody's said a considerable percentage of the 18-34-year-old demographic could potentially cancel its policies after a few months. "The probability of cancellation may be higher for those who purchased a policy as a result of a marketing push rather than a perceived need," Moody's said.
"Although these individuals may have been convinced of the value of a comprehensive health insurance package, the monthly premium requirement, along with a lack of need to obtain medical care, may cause them to re-evaluate."
In need of financial stability, Wellmont Health System is reviewing its options, including possibly aligning with another health system. California-based Daughters of Charity Health System believes "new ownership is in the best interest" of the communities it serves.
Wellmont Health System is looking for a partner.
The Kingsport, TN-based health system, with seven hospitals serving Upper East Tennessee and Southwest Virginia, announced this month that it has "launched a process to evaluate strategic options for the organization's future, including the possibility of aligning with another health system."
Wellmont CEO Denny DeNarvaez says the myriad pressures and uncertainties in the healthcare sector have created an especially challenging environment for smaller, more isolated health systems. The challenges, named in a statement released by Wellmont, include the increasing sophistication of information technology and its cost, quality mandates, demand primary care services and population health management, lower patient volumes, reimbursement cuts and performance penalties under the Patient Protection and Affordable Care Act.
"Unlike many health systems, Wellmont is fortunate to be in a position of clinical strength and relative financial stability thanks to the great work of our physicians, co-workers and leadership," DeNarvaez said. Nevertheless, Wellmont must improve its financial position by millions of dollars during the next several years, she added. "The board and the administration are committed to continue pursuing all internal options to ensure the financial stability of our health system for the future.
Wellmont's challenges are particularly acute in Upper East Tennessee and Southwest Virginia, a service area that grapples with low Medicare payments and a high volume of Medicaid and uninsured populations. In fiscal 2012, Wellmont had a community benefit of $94 million, which included $77 million in uncompensated care, as well as free programs and services provided to the community, and cash and in-kind donations to community groups. Making matters worse, Virginia and Tennessee have not expanded Medicaid coverage.
The Wellmont Board has created a special committee to assess its options.
Daughters of Charity Health System (CA) Seeks Buyer
Los Altos Hills, CA-based Daughters of Charity Health System has announced that it is soliciting proposals from Catholic, public, non-profit and for-profit organizations either to buy the system's individual hospitals or the entire health system.
DCHS President/CEO Robert Issai said in prepared remarks that the decision came after a long review of the options available to preserve services at the health system, which includes six hospitals located along coastal California from San Francisco to Los Angeles.
"After careful consideration, our Board, management team, and advisors have determined that the sale of our hospitals is the most sound and responsible business decision," Issai said. "Like other health systems across the country, we recognize that the way health care is provided today—where it is offered, how it is paid for, how it is measured—is changing dramatically, and we believe that new ownership is in the best interest of the communities we serve."
Last year DCHS formed an affiliation with Ascension Health, which remains in effect. Issai said that DCHS has benefitted from the affiliation, but that it won't merge with Ascension Health.
DCHS Board Chair, Sr. Marjory Ann Baez, DC, called the decision to sell the healthcare ministry "difficult, particularly for the Daughters of Charity. But the realities of modern healthcare are harsh, and after prayerful discernment, it became clear that the responsible thing to do is to find new ownership, blessed with the resources necessary to thrive."
DCHS has already begun pursuing the sale of its hospitals in Northern California and is starting the process for its Southern California hospitals and the health system as a whole.
HCA TriStar Buys Grandview MC from Capella
HCA's TriStar Division has announced it is buying Grandview Medical Center from Capella Healthcare. Financial terms were not disclosed.
The 70-bed Grandview Medical Center is located in Jasper, TN, near Chattanooga, and serves five counties in Tennessee, Georgia, and Alabama. The hospital will become part of the Parkridge Health System in HCA's TriStar Division. With the acquisition of Grandview, the Parkridge Health System will grow to five hospitals in the Chattanooga market.
"The addition of Grandview Medical Center will enhance our ability to serve the Chattanooga market and deliver the highest quality patient care possible close to where people live and work," Steve Corbeil, president of HCA's TriStar Division, said in prepared remarks. "We look forward to welcoming Grandview to TriStar and Parkridge Health System."
The transaction awaits regulatory approvals but is expected to be completed by the end of March.
Data collected from 11 states strongly suggests that the question to ask about the patient-centered medical home model is not whether it reduces healthcare costs and improves outcomes, but how well.
Forgive me for preaching to the choir, but another round-up of studies released this week re-confirms what we already know: Patient-centered medical homes improve health outcomes and reduce costs.
In fact, the question is no longer "will they work?" Evidence increasingly settles that question. Now the questions center around just how effective PCMHs can be in reducing costs and improving outcomes.
Consider the findings in an analysis released this week from the Patient-Centered Primary Care Collaborative. It's a composite of peer-review and industry-generated studies, showing that the PCMH model is reducing costs of care, unnecessary emergency department and hospital visits, and increasing the use of preventive services and improving population health.
These findings are more than regional success stories. The study includes data from 20 PCMH projects in 11 states from New Hampshire to Alaska, and national data from PCMHs serving active-military and veterans, which show that 60% of the PCMH evaluations reported decreases in cost of care or use of unnecessary services, while 30% saw improved population health.
Diabetes Care Results
The Colorado Multi-Payer PCMH Pilot Model that focused on diabetic care posted particularly impressive result over three years, which included:
A 15% reduction in ED visits, compared with 4% for a control group;
18% fewer inpatient admissions compared to an 18% increase for the control group;
No increase in specialty referrals compared with 10% increase for the control group; and
A return on investment ranging from 2.5:1 to 4.5:1 for every dollar spent by WellPoint on the pilot.
In addition, 95% of the patients said the care was efficient and well organized and 97% said they would recommend the program to family and friends.
The Blue Cross Blue Shield of Michigan Physician Group Incentive Program reported that practices with full PCMH implementation had savings of $26.37 per patient per month and a 5.1% higher "prevention composite score" than colleagues in traditional practice settings.
While not every PCMH pilot can claim these levels of success, virtually every pilot examined by the Collaborative demonstrated improvements over the traditional fee-for-service practice model that provides incremental, episodic care and incentivizes volume.
No Easy Path to PCMH
These measureable results reflect the remarkably simple concept behind PCMH, which is to proactively manage patient chronic care to reduce expensive episodic care. The results are healthier, engaged patients and reduced costs.
We are hearing from any number of providers across the nation, however, that the actually journey to become a PCMH is not easy. The process is rife with snafus with electronic medical records, interoperability roadblocks, reimbursement challenges, and grueling federal mandates and timelines.
It's important to remember that these PCMHs are largely pilot projects that are providing the first rough drafts of how a value-based care model will work. The PCMH is still a work in progress, but it's already demonstrated that it can reduce the cost of care, reduce ER visits and inpatient admissions, improving population health, access to care and patient satisfaction. Even with the rough spots, that seems like a reasonable trade-off.
There is nothing to suggest that any start-up woes in the PCMH model are permanent. In fact, it seems reasonable to presume that PCMHs will continue to improve care and efficiencies while reducing costs as they gain more experience and refine the model.
Early Finding Stand Up to Scrutiny
Clearly, the Collaborative has a bias here in placing PCMHs in the best possible light. But I don't think they're cooking the data and I would be happy to speak with any skeptics who can show me that the PCMH model doesn't work. Of course, skeptics should be prepared to provide their blueprint for "bending the cost curve" in healthcare.
Obviously, I am an unabashed fan of the PCMH. The returns may be preliminary, but the trends are inarguable. It is gratifying to see that a complex but innovative care model which makes so much sense is delivering on its potential for improving care while reducing costs. Even better, we should fully expect that these results will improve in the coming years.
For now, the composite results gathered by the Collaborative are very impressive. PCMH advocates shouldn't be afraid to crow about the findings. As Walt Whitman once wrote: "If you done it, it ain't bragging."
Physicians' associations generally support improving access and transparency in Medicare reimbursement records within the proper context and with privacy protections, but caution that "you can't always use this data as a proxy for quality."
The federal government has issued a new policy for public disclosure of physicians' Medicare payments.
Jonathan Blum, principal deputy administrator for the Centers for Medicare & Medicaid Services said in a statement posted Tuesday by CMS that the modifications, posted in the Federal Register, will improve transparency and accessibility for the public while maintaining the privacy of Medicare beneficiaries.
The policy takes effect 60 days after its publication in the registry, which is expected this week. Blum says CMS will evaluate requests for individual physician payment information or requests for information that combined with other publicly available information that could be used to determine total Medicare payments to a physician on a case-by-case basis.
CMS will also generate and make available aggregate data sets regarding Medicare physician services for public inspection.
"Given the advantages of releasing information on Medicare payment to physicians and the agency's commitment to data transparency, we believe replacing the prior policy with a new policy in which CMS will make case-by-case determinations is the best next step for the agency," Blum wrote.
"However, CMS also recognizes the valid concerns raised by many stakeholders over protecting the integrity of the data. As CMS makes a determination about how and when to disclose any information on a physician's Medicare payment, we intend to consider the importance of protecting physicians' privacy and ensuring the accuracy of any data released as well as appropriate protections to limit potential misuse of the information. And as always, we are committed to protecting the privacy of Medicare beneficiaries."
Physicians' Reactions
Representatives from physicians' associations said Tuesday they were still reviewing the new policy, but that they generally support improving access and transparency in Medicare records as long as the data is placed in its proper context.
Reid B. Blackwelder, MD, president of the American Academy of Family Physicians, says the his organizationhas been involved in the comment process for the modifications and continues to support the move towards greater transparency in medical records and billing.
"There can be a lot of value in releasing payment data, especially if it is focused on ensuring and improving quality of care," Blackwelder says. "The key continues to be the correct use. The trouble with data is [that] it's numbers. We emphasized the real need to ensure appropriate context. We want to make sure they just don't release numbers because you can get a lot of assessments or conclusions drawn that may not be true unless you have appropriate context and consideration."
Shari Erickson , vice president of governmental and regulatory affairs at the American College of Physicians, says the college also embraces "the move towards more data transparency overall in the healthcare system. That is going to be needed particularly as we move into this bold new world of value-base payments. You really are going to need more transparency to do that effectively."
Like Blackwelder, however, Erickson says putting the data in its proper context is critical. " There are definitely some protections and caveats that should be looked at with any data source that is being reported on, " she says.
Pay Data Not 'A Proxy for Quality' "There should be reasonable transparency around the process of the data collection and reporting of that data so we know where the data comes from and what it means and what are its limitations. All of those things need to be up front anytime data is reported to the public. It needs to be reported in a meaningful and hopefully useful way for the public and the audiences that it is intended for."
Jennifer Gasperini, senior government affairs representative for the Medical Group Management Association, says everyone wants transparency. "The trickier issue is how we are measuring some of these things," she says. "For that reason you can't always use this data as a proxy for quality. It is something we will be looking at and continuing to watch."
Blackwelder says he doesn't believe the rules modifications will have much of an effect on the day-to-day operations of most physicians' offices. "We feel very strongly that with any release of data that the physician has an opportunity to review and ensure that the data is correct. Otherwise there isn't going to be anything a physician is going to notice in day-to-day practice," he says.