Nearly two years after its entry into the Michigan market, for-profit LifePoint expands its footprint with deals in two rural communities.
LifePoint Hospitals has finalized affiliations with two rural hospitals in Michigan's Upper Peninsula, and the for-profit hospital company says it will continue to look for other provider partners as it builds a network in the remote region.
Leif Murphy, CFO and executive vice president at Brentwood, TN-based LifePoint
"We are actively working to build the network of providers in that market," says Leif Murphy, CFO and executive vice president at Brentwood, TN-based LifePoint. "Our strategy is to own and operate community hospitals, and most of our hospitals you will find in rural markets that look just like the Upper Peninsula. It is where we bring great value in terms of our operating model and the delivery of services that those communities really need."
Last week LifePoint announced that it would purchase Bell Hospital, a 25-bed critical access hospital in Ishpeming, MI, about 14 miles west of Marquette. In a separate deal, LifePoint said it would enter a "joint venture" with Portage Health, which includes a 36-bed community hospital and a 60-bed skilled nursing unit in Hancock, MI, about 100 miles northwest of Marquette.
The negotiations were announced earlier this year and both deals must be approved by Michigan's attorney general.
In 2012, Duke LifePoint, a joint venture between LifePoint and Duke University Health System, purchased the 315-bed Marquette General Hospital, which serves as a tertiary care hospital for the region.
"Our goal will be to make sure that Marquette is delivering a level of service that will ensure that Portage and Bell will send all of their referral business to Marquette, but Marquette will have to earn this," Murphy says. "Marquette is our tertiary hospital that provides those complex clinical services: heart, cancer, orthopedics. Portage and Bell are secondary hospitals that are not maintaining today some of those more tertiary service lines."
Murphy says Duke will not have a direct ownership interest at Bell and Portage, "but they will be involved in the quality and patient safety programs and the coordination and building of the network throughout the Upper Peninsula."
LifePoint's affiliation with Duke at Marquette General Hospital was an attractive selling point when negotiating with trustees at Bell and Portage. "They want to provide the absolute best care for their patients in their market," he says. "With the clinical expertise that Duke will bring to the tertiary hospital at Marquette when they are referring their patients into Marquette as a tertiary hospital, they will know they'll have Duke services and quality and safety programs all in play."
As part of the final acquisition agreement with Bell Hospital, LifePoint will make $5 million in capital investments to the critical access hospital over the next decade, including an improved IT infrastructure and equipment and facility upgrades. Bell also will have access to support and resources to help it recruit and retain physicians, enhance its clinical services to meet the changing needs of its community, and improve its operations.
In addition, proceeds from the sale will eliminate Bell's debt, leaving an additional $4 million that Bell plans to use to support community charities, LifePoint and Bell said in a joint media release.
"Bell Hospital looks forward to beginning this next chapter in the rich legacy of our hospital," Floyd Bounds, Bell Hospital CEO, said in prepared remarks. "We are excited for the months ahead and for the opportunities we will have to be a part of creating healthier communities across the U.P. with LifePoint. This is truly an exciting day for our hospital, physicians, employees, and patients."
Murphy says LifePoint is not overly concerned about suggestions that the federal government may reconsideror revoke the status of hundreds of critical access hospitals across the United States.
"It is one more analytical part of every puzzle," he says. "Whether or not the exceptions will continue will have no bearing on our commitments to the hospital."
In the deal with Portage, LifePoint will own 80% of the joint venture and Portage Health will retain a 20% ownership stake. Governance will be equally shared, and an eight-member board with equal representation from Portage and LifePoint will be established to ensure that the community has an active voice in Portage Health's future.
Over the next decade, LifePoint will invest $60 million in capital improvements at Portage, including upgrades for technology and equipment and improved facilities. The $40 million in proceeds from the deal and retained assets from Portage Health will support the retained businesses and create a locally governed charitable foundation, according to a joint media release.
"As we considered Portage Health's future, our board vetted a number of strategic partner options," Portage Board Chairman Steve Zutter said in prepared remarks. "This joint venture with LifePoint offered us a unique opportunity to share ownership of Portage Health and gain access to significant resources to grow and expand our services. We are excited for the future."
Allan Baumgarten, an analyst who writes regularly about the healthcare sector in Michigan and other states, provided a snapshot of the Upper Peninsula hospital market in an email exchange with HealthLeaders Media.
"There are about 12 hospitals in the UP, including several that are small, critical access hospitals. The Duke/LifePoint joint venture acquired Marquette General last year, which is by far the biggest hospital in the UP. The deals with Portage and Bell were first announced in February and March. I don't think there is much difference between describing the deals as full acquisitions or joint ventures. I suspect the JV converts to full LP ownership in a few years. Not sure who they see as competitors—some of the other small hospitals are owned by Aspirus, a Catholic system with its largest hospitals in Wausau, WI. The next closest large hospitals would be either in Petoskey, where the McLaren system from Flint has acquired the hospital, Munson in Traverse City, or maybe one of the Trinity/Mercy hospitals in Cadillac."
The volume and value of hospital mergers and acquisitions increased in the third quarter of 2013 when compared with the same period in 2012, although the fundamental reasons for the market consolidations are essentially the same, according to a PwC report. Healthcare sector churn is far from settled.
The volume and value of hospital mergers and acquisitions increased in the third quarter of 2013 when compared with the same period in 2012, although the fundamental reasons for the market consolidations are essentially the same, PricewaterhouseCoopers says in a new report (PDF).
The total number of hospital merger and acquisition transactions globally increased from 12 in Q3 2012 to 19 in Q3 2013, an increase of 58.3%. Conversely, for the first nine months of 2013, overall deal volume dropped 6.6%—from 60 in YTD12 to 56 in YTD13. Overall deal value increased significantly from $38 million in Q3 2012 to $12.3 billion in Q3 2013. This is the result of hospital system acquisitions valued at more than $1 billion in Q3 2013. Excluding those mega-deals, PWC says the remaining transactions were smaller and may not have disclosed deal value information based on these being private or not-for-profit transactions.
The merger and acquisition activity was led by Community Health Systems Inc.'s $7.6 billion acquisition of Health Management Associates and the completed merger in September of Scott & White Healthcare and Baylor Health Care Systems.
Dan Farrell, a partner at PwC, says uncertainties around the Patient Protection and Affordable Care Act continue to press consolidation in the healthcare market place: building economies of scale, capital needs, and improving market share. The PPACA creates ramifications for healthcare delivery and reimbursements and capital needs.
"I don't think much has changed in terms of the fundamentals from last year to this year. Everyone is bracing themselves for what they are predicting will be the changes around the Affordable Care Act," Farrell says. "Not too much certainty has been given through today, so people are still placing their bets on where they think things are going to fall out."
Farrell says the concerns of providers around concepts such as accountable care organizations lies not so much in whether or not the new value-based reimbursement model will work, but what optimal structure ultimately will take shape.
"There are two dynamics that everyone can agree on with ACOs and the impact of the ACA," he says. "One, you need to increase your scale because you are going to deal with a lot more at-risk contracts. So, where you have at-risk arrangements, scale can minimize the potential financial risk.
"A little more technically complex is the need to extend your continuum of care, specifically around hospitals and physician practices. Payers are looking at building out their continuum of what they control beyond the four walls of the hospital and into other areas such as home health, long-term care, and skilled nursing. So we see a lot of deals that are focused either around: one, increasing the scale or, two, extending the continuum of care."
While the value and volume of healthcare mergers and acquisitions will vary from quarter to quarter, Farrell says the underlying catalysts will remain in place for the foreseeable future.
"You see the same themes, which is health systems or large national players looking to find lower cost settings of care outside of the hospital," he says. "Once again, coming full circle you have people looking at taking at-risk contracts and accepting more of a population health view and where they do that they want to make sure they are capable of providing care in the lowest possible care setting."
The current healthcare sector churn is far from settled. "As long as there is still some significant uncertainty from the payer/provider perspective, you are going to have people placing their bets on the roulette table on where they think things will shake out," he says. "We had the technical glitches with the insurance exchange implementation, and the effectiveness and structure of the ACOs are still an undecided area. Many people are still considering where they think the sectors individually are going to head. We see transition activity that represents that uncertainty."
The 20 states rejecting Medicaid expansion are leaving billions of dollars in federal funds on the table, even as the taxpayers of those states pay for the expansion costs for states that accept the deal.
The 20 states that are rejecting Medicaid expansion under the Patient Protection and Affordable Care Act are leaving billions of dollars in federal funds on the table, even as the taxpayers of those states pay for the expansion costs for states that accept the deal, a new study from the Commonwealth Fund shows.
"In states that don't expand their Medicaid programs the people in their state who are below 100% of poverty will not be eligible for new options for health insurance under the ACA," says Sara Collins, vice president, healthcare, at the Commonwealth Fund. "Taxpayers across the country are contributing to this program, but for the states that don't expand their programs it means that they are not getting those benefits that the residents in other states are getting. There is both a healthcare loss for individuals who aren't eligible for any of the new options under the law and there is a significant economic loss for states that don't move forward."
The study—How States Stand to Gain or Lose Federal Funds by Opting In or Out of the Medicaid Expansion—examines federal taxes paid by state residents. States with the highest net losses include Texas, which will see a net loss of $9.2 billion in 2022; Florida, which will lose $5 billion; Georgia, which will lose $2.9 billion, and Virginia, which will lose $2.8 billion.
The study is the first to calculate the net cost to taxpayers in states turning down Medicaid expansion. Using data from the Urban Institute projecting Medicaid enrollment and spending under the law in the year 2022, researchers estimated the effects of states' decisions about whether to accept the health reform law's expansion of the Medicaid program to residents with incomes at or below 138% of the federal poverty level ($32,499 for a family of four).
The expansion became voluntary for states after the U.S. Supreme Court's 2012 ruling. Medicaid is mostly funded by the federal government, which pays 100% of the expansion costs through 2016. The federal contribution will be reduced to 90% by 2020, where it will remain after that.
The Commonwealth Fund study estimates that if all states expanded Medicaid under the law, as many as 21.3 million people would gain coverage by 2022. In addition to improving access to care and financial security for the newly insured, healthcare providers in states would benefit from reduced uncompensated care costs, the study suggests.
Collins says the study may actually be low-balling the costs to residents of states that reject the Medicaid expansion, because it does not factor in the value of cost-shifting as a hidden tax to pay for uncompensated care. "It actually is an underestimate in some ways because local tax dollars finance uncompensated care at hospitals," she says. "To the extent that those federal dollars would replace that, those local expenditures that local taxpayers are still financing would otherwise be covered were people to have health insurance coverage."
Collins says there are signs that some states are beginning to reconsider their rejection of Medicaid expansion, now that they face the loss of billions of dollars in federal aid.
"Over time, states are going to look at the costs both in terms of lost health insurance coverage for residents but also the significant economic impact on their states and on their safety net hospitals, who will continue to have to serve people who are uninsured even though there is federal funding available for them," she says. "The argument and rationale for expanding Medicaid is pretty strong on multiple counts. We may see a similar trend that we saw in the original Medicaid program, that all states eventually participated in the program just as they did eventually with the Children's Health Insurance Program."
Robert Bosl, MD, has for the past 33 years served about 2,500 patients around the town of Starbuck, MN. This annual award recognizes what is right in rural healthcare delivery, but it also inadvertently shows us much of what is wrong.
Robert Bosl, MD
Since 1992 the physician staffing company Staff Care has honored a Country Doctor of the Year. The award is given to one physician each year, but it could easily be awarded to thousands of dedicated physicians serving rural America.
The award recognizes what is right in rural healthcare delivery. It also inadvertently shows us much of what is wrong.
On the one hand, the Country Doctor of the Year personifies the self-sacrifice of rural physicians. Many of the winners are in their 50s or older and have spend their entire careers serving generations of neighbors in small communities, often working 50 or 60 hours a week or more, in addition to on-call duties.
And that's the problem. Rural healthcare delivery has placed a staggering burden on these physicians, even if they aren't complaining about it. Many haven't had a vacation in years. It speaks volumes that the grand prize for winning the award is a two-week vacation, during which time Staff Care will supply a temporary physician.
The Country Doctor of the Year winners I've interviewed over the years say they do what they do because they recognize the need—that if they don't provide healthcare, it won't get provided. That is a big part of what keeps them going. They genuinely love their work and they get great satisfaction from it. At the same time, many of these docs see themselves as relics and say they don't blame younger physicians for wanting a better life-work balance.
The 2013 Country Doctor of the Year winner is right out of central casting for the Hallmark Channel.
Robert Bosl, MD, a decorated combat medic during the Vietnam War, has for the past 33 years served about 2,500 patients around the town of Starbuck, MN, which he describes as a real-life Lake Wobegon. According to Staff Care, Bosl, 66, a family physician, gets up at 5 a.m. every day to round his patients at Stevens Community Medical Center 20 miles away. He is usually on call seven days a week, 24 hours a day and provides a range of care, from obstetrics to geriatrics, making house calls during winters in a car with over 200,000 miles.
When the Starbuck hospital shuttered in 2005, Bosl took out a personal loan on his house and invested his life savings to build a modern clinic so that Starbuck's citizens would continue to have local care.
Did you get that? It bears repeating. When the hospital closed, he built a clinic to provide care for Starbuck's citizens, many of whom are elderly and on Medicare.
"I am kind of a dinosaur. I am not a saint but I might be something of a martyr," he says with a chuckle. "I was on call over the Thanksgiving weekend. I delivered a baby. I did a D&C. I did a colonoscopy. I did an appendectomy. I saw all sorts of extra patients just by being on call. It is something that all needed to get done. After the weekend you take a deep breath and say, 'Oomph! There must have been a full moon out.' But you just go on and it's one patient at a time, and whatever needs to get done gets done."
Bosl takes great satisfaction and pride in his work, but he also understands that not every physician is cut out for it. Not only are the hours demanding, global changes in care delivery beyond physicians' control are making times even more challenging for rural providers.
"There are outside forces that really make it difficult to do what I have done," he says. "For somebody coming out of residency, they cannot anymore go to the bank and say, 'Hey, I am a doctor. Loan me all the money you got so I can start a clinic!' That doesn't work. Logistically it is hard and a lot of the younger guys and gals coming out don't have an interest in that any longer. All they want to do is practice medicine—and yes, they do look more at an 8-to-5 job than some of us old fogies."
To encourage young physicians to practice in rural America, Bosl says the first thing he'd tell them is that they don't have to be like him and expect to be on call 24/7. What's harder, he says, is conveying his enthusiasm for practicing medicine in a rural environment. "There is no profession that is more challenging. You never know what is behind door number two. The intellectual stimulation is always going to be there," he says. "I don't recall ever leaving an exam room and feeling that I had no impact on the patient, or feeling that I didn't enjoy the encounter. Yes, there are times when a patient can be difficult. … But to actually practice medicine one-on-one with a patient is so rewarding intellectually and emotionally."
"The long hours aren't going to burn us out. Seeing many, many patients isn't going to burn us out," he says. "The problems come in with governmental intervention or more often insurance company interventions that require physicians to waste time dealing with prior authorization or medication changes—a lot of things that physicians really have the expertise to make some of these decisions. To make them take the time out from actually seeing patients to convince somebody with much less training at an insurance company to switch a medication seems counterproductive."
Bosl says he expect to continue practicing medicine until he feels he no longer can. "Especially as I am aging, people start wondering about it. 'Doc, we know you aren't going to be around forever, but how long are you going to keep doing this?' I feel like until my mad cow disease or old timer's disease kicks in and I can still do a good job, I will stick with it. When the day comes that I feel like I am losing something, that I am not as sharp as I used to be, then I will need to back off."
Bosl says he has no regrets about his chosen career, despite what others in healthcare might think.
"The prestige sometimes is fascinating. Sometimes the family doc is looked down upon as low man on the totem pole who maybe wasn't smart enough to become a neurosurgeon," he says. "Personally it doesn't bother me. I wouldn't want to be a neurosurgeon. Operating on the brain all day would become pretty boring. I wanted a new challenge every day. Financially, I do okay. I don't make what a radiologist or an orthopedist makes but I make an adequate living, and yes, I work a lot but I make time for myself. Wednesday nights I play men's league basketball. In the summer I try to get out golfing once a week. I live on a lake and I have a boat. Life is good. Every day is good."
Leaders of 250 safety net hospitals protest that the statutory cuts to Medicaid disproportionate share hospital funding—more than $18 billion through 2019—are unjustifiable since about half the states have rejected Medicaid coverage expansion.
The nation's safety net hospitals this week launched another long-shot bid to halt "crippling" disproportionate share payments.
In a letter Monday to House and Senate leaders, 102 executives representing 250 safety net hospitals across the nation protested that the statutory cuts to Medicaid disproportionate share hospital funding—more than $18 billion through 2019—"simply cannot be justified," now that about half the states have rejected Medicaid coverage expansion.
The safety net executives, members of the America's Essential Hospitals organization, reminded Congress that when the Patient Protection and Affordable Care Act was written, lawmakers assumed that a full national expansion of Medicaid would reduce the need for DSH funding. The U.S. Supreme Court upset that balance by allowing states to opt out of expansion.
"Nationwide, hospitals provide more than $40 billion in uncompensated and under-compensated care each year. Medicaid DSH is a lifeline of support that helps to offset just some of that cost," the hospital executives said in the letter to the chairs and ranking members of the Senate Finance and House Energy and Commerce committees. Now, the executives said, there is "no connection between the cuts and the number of uninsured or amount of uncompensated care across the country."
Jim Nathan, CEO at Lee Memorial Health System
In addition to providing access to care for vulnerable and poor people, the safety net executives said Medicaid DSH paymentsalso allow "our hospitals to provide services that are vital to our communities, including top-level trauma care, burn care, and neonatal intensive care. If these crippling cuts are not stopped, our hospitals will be forced to curtail essential services, ultimately limiting access to care and cutting jobs."
Jim Nathan, CEO at Lee Memorial Health System in Fort Myers, FL, and one of the executives who signed the letter, says DSH payment cuts are just one funding reduction that will hurt the mission of safety net hospitals and other not-for-profit providers.
"It's the accumulation or the cumulative effect of all the cuts coming from every direction and DSH payments are just one of them," Nathan told HealthLeaders Media.
He estimates that Lee Memorial, which operates five hospitals with a total of 1,423 beds, will lose about $50 million a year in various cuts from sources that include DSH reductions and sequester-mandated cuts to Medicare.
"People say, 'What services are you going to cut?' The reality is it is not so much cutting services. It is slowing the train down on providing services," Nathan says. "That would mean longer delays in the emergency department. It means less staffing. It means facilities getting older. It means in a growth area like ours not having sufficient beds to keep up with the growth. It means not being able to do as much for outreach that we would like to do for prevention. It means not having the funds available to make the changes to value-based purchasing at the pace that we would like to make."
Florida's legislature has rejected the Medicaid expansion dollars and Nathan says there is nothing to indicate that state lawmakers will change their minds anytime soon.
"So much of those cuts that we are expecting to see happen were supposed to be repackaged in dollars that would be sent back to Florida for the insurance expansion. Some of our legislators have said to me, 'You are foolish to think the federal government would do that,' and I say, 'Wait a minute. The federal government is doing what they said they would do. It's the Florida Legislature that is not accepting the money to come back.'"
"Here we are the state with the second-highest percentage of uninsured in the nation and we are thumbing our nose at the federal government trying to help not only these poor people but also to help everybody because we shift that cost to the insured. It is not free to the shrinking population of commercially insured patients. We are destroying employer-sponsored health insurance with this massive hidden tax to care for the uninsured."
Nathan concedes that a plea to Congress or the federal government to save DSH payments will likely be denied, especially when the requests come from hospital executives in states that rejected the Medicaid expansion.
"It is a legitimate question of the feds to ask, 'Why should we do anything for Florida when you haven't done anything for yourself? We have a great program for you,'" he says. "We are getting almost no response from our own legislators. They don't want to talk about it either. But we really don't have much choice but to raise the issue."
"The other question is if Florida is not going to play in the Medicaid expansion, is there some other creative way that we can leverage those dollars back to the state—because they're really Florida dollars?," he says. "I believe we are in the best position right now that we may ever be in to negotiate a deal with the feds. They want us to be successful. They have already left the door open to do something outside of traditional Medicaid, where you might be able to use the money to buy insurance for these people. That is a good thing."
Nathan believes that 2014 will be a challenging but manageable year at Lee Memorial because the health system has spent the last three years trimming about $125 million in various costs. The impact of DSH cuts will be felt in the years after.
"In 2015 and 2016, it starts to become very a big wild card for us with the changes in insurance and the shift to value-based reimbursements and the big insurance companies needing to do something dramatically different because of the laws they are under," he says. "The unknowns of the exchanges, the unknowns of the expansion, shifting all of Florida to Medicaid managed care virtually overnight—even though we haven't proven yet that it works—will make 2015 and 2016 really major transition years. It is not going to happen like a light bulb on and off instantly, but it could be pretty rapid because three years is really no time when you put it in that context."
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 Charles Ornstein.
This profile was published in the December, 2013 issue of HealthLeaders magazine.
"When reporters write about problems within the healthcare system, the goal is that the problems will be fixed."
It's hard to make an argument against transparency in healthcare.
When pressed, hospitals, insurers, nursing homes, physicians, and government officials all say they're "for it" and go on about how transparency will play a critical role in "bending the cost curve" by allowing patients to become wise consumers of their healthcare dollars.
When it's time to go public, however, that altruism often evaporates, as few really want anyone else to know how much they charge for something, or how much they get paid for it, or if they're having quality issues. So that heralded release of information is delayed, or it's hidden in a massive data dump, or it's placed into a context that most consumers could never fathom.
Charles Ornstein and the investigative reporters at the independent, nonprofit news organization ProPublica—often also working with the nonprofit Association of Health Care Journalists—have led several initiatives in the past three years that create easier access to critical healthcare data on quality and cost.
"The goal of transparency is first to ensure that the public is informed, that they have all of the information easily at their disposal when they have to make important and personal healthcare decisions," Ornstein says. "Secondly, it is to create discussion about if our healthcare system is as safe as it can be, and if it is not, what can be done to make it safer. Finally, the importance of putting the information out in an easy-to-use and easy-to-analyze way is that you provide a level of context that wasn't necessarily there before."
In 2010 Ornstein and his ProPublica colleagues launched the Dollars for Docs online tool that allows the public to see if their physicians have a financial relationship with pharmaceutical companies.
"We created that because drug companies had begun putting in online information about their payments to physicians but they didn't do it in a way that was easily searched or aggregated or analyzed," Ornstein says. "We thought we could do it in a way that brought transparency to the topic rather than translucency."
In August, 2012 ProPublica launched a site that facilitates public access to nursing home inspection reports. "The goal was to take the data the federal government was collecting on its Nursing Home Compare website about nursing home inspections but make it much easier for people to search through information," Ornstein says.
Earlier this year Ornstein, who serves as an AHCJ board member, and the AHCJ finalized a two-year effort to make hospital inspection reports readily accessible online. "Up until now people have had to file Freedom of Information Act requests with the Centers for Medicare & Medicaid Services for their local hospitals' inspection reports," Ornstein says. "You would not expect a member of the public to do that. Even many journalists wouldn't do that because it takes time and you don't know what you're going to get. The idea was the federal government collects this information. It may not use it. It may not look at it. But journalists certainly should have this information at their disposal so that they could assess the quality of their local hospitals and rather than just judge them on reputation or patient satisfaction they can actually see what health inspectors found."
Ornstein says the transparency movement in healthcare is accelerating. "Part of the reasons for that are the changes in our healthcare system," he says. "As additional costs and decision making are pushed to consumers, they have to have the information available to make a decision. They have to have cost information if they are on the hook for a greater share of the cost, and they will also want to have quality information so they can determine if the trade-off is worth it."
That growing public demand for access to healthcare information is still running into resistance from some in the medical establishment.
"There are those who still have a very paternalistic view of the healthcare system, which is [that] nobody is smart enough to understand the way it works except for those who run it and they should be putting in place whatever they believe is necessary to protect the patients and it is not the role of pesky journalists or inquisitive patients to take them to task," Ornstein says. "But these initiatives, which are putting information in the public domain, necessarily require hospitals to look at these things themselves and to hopefully correct problems before they harm patients."
Ornstein believes those objections will dissolve as transparency demonstrates that it can help improve quality and patient safety even as it reduces costs. "When reporters write about problems within the healthcare system, the goal is that the problems will be fixed," he says. "If you are able to write a story about hospitals that make mistakes, you would hope that not only would the hospital you are writing about fix the problem but that other hospitals would read about it and would make sure it doesn't happen at their hospital."
While the uncertainty around healthcare reform and lower reimbursements will prove a challenge in the near future, hospital leaders also see opportunities to succeed within local markets.
Mina Ubbing President and CEO
Fairfield Medical Center
Moody's Investors Service has for the sixth straight year forecast a "negative" outlook for the nation's not-for-profit hospitals. While the uncertainty around the Patient Protection and Affordable Care Act and lower reimbursements will prove a challenge in the near future, hospital leaders also see opportunities to succeed within their local markets.
Mina Ubbing,president/CEOof Fairfield Medical Center in Lancaster, OH,says the 200-bed, independent community hospital just went through the bond rating process this spring and emerged with a "stable" rating. But she says the "negative" outlook for the industry is understandable.
"There are certainly lots of challenges, and the biggest one truly is the uncertainty of what happening in healthcare reform and the Affordable Care Act," Ubbing told HealthLeaders Media. "There is the whole challenge with the online enrollment. There is a lot of pushback on the narrow networks. You are going to see some antitrust issues coming out of that. So everything is in a state of flux. If I were a lending rating agency, that uncertainty would bother me the most."
In a report issued last month, Moody's cites drops in revenues and inpatient volumes for the negative outlook, and says it expects that not-for-profit hospitals' median revenue growth in fiscal year 2013 will fall to a range of 3% to 3.5% (significantly down from FY2012's 5.2% growth rate) and will remain low in 2014.
While reduced inpatient admissions are cause for concern, Ubbing says she is particularly concerned about site-of-service legislation in Congress that would equalize reimbursements for care provided regardless of the setting.
"You are doing so many things today on an outpatient basis that you didn't used to. There are some cost savings in that just by its nature," she says. "But that shift by itself is not as concerning to me as the idea of the level payment regardless of site of service. The reimbursement difference is predicated on the idea that hospitals have to be 24/7, 365 days, and nonselective of patients. That issue, should that come to the fore, I would be much more concerned about than the outpatient shift."
Ubbing says the uncertainty is a negative for the not-for-profit hospital sector but that individual health systems are rising to the occasion.
"You partner where you can. You get as efficient and lean as possible," she says. "We have a number of independent hospitals in southeastern Ohio. Some of our conversations are around how can we work better together. Can we have a virtual system that would drive down costs and that would have reasonable buying power and negotiating power in the marketplace so we are viable with payers and vendors? That is some of what we are working on right now with our colleagues who in some cases are as much colleague as competitor geographically, to see if we can't make it."
With the focus on patient volumes and reimbursements, Ubbing says few leaders are addressing the larger question of what healthcare consumers want. "That is going to be a factor in terms of how they want healthcare delivered. And what the consumer wants is going to dictate where the money goes," she says.
Tim Maurice, CFO at UC Davis Health System
Tim Maurice,CFO at UC Davis Health System in Sacramento, CA, acknowledges "a lot of unknowns looking forward, but I feel like we are in a fairly stable position out here."
"Our volumes have not declined as they have in other areas, largely because our market is pretty competitive and pretty well managed," he says. "We operated UC Davis very close to full inpatient capacity so we haven't seen the decline in inpatient volumes that have been experienced in other parts of the country. Because of competition over the years, we are in the situation where we don't have a lot of excess capacity in the market. The market is stable in that regard."
Maurice says UC Davis has enjoyed "a very strong credit rating over the years, and we expect that to remain stable because we've been very skilled at managing our costs and effectively maintaining our commercial market share and managing through the declines in government reimbursement. We know that they are coming."
"What we are primarily focusing on is finding economies of scale at a five medical center health system across California," he says. "We are one of the largest health systems in the state, yet we have plenty of opportunity to collaborate and join forces in terms of operating more efficiently and finding best practices among ourselves. That has been our primary focus."
Maurice says the PPACA rollout has been relatively successful in California, particularly the health insurance exchanges coordinated under Covered California, where UC Davis is participating in two of the four plans available in its market. Maurice says UC Davis continues to look for partnership opportunities with other hospitals in the area.
"It doesn't necessarily mean acquisition. It could be other forms of partnership, such as cancer center networks that we are very successful with here at UC Davis with community hospitals in the area, or other forms of partnerships," he says. "We also have developed our primary care network at UC Davis and have over 300 physicians across 16 sites in the Sacramento area who provide primary care that support our faculty practice plan."
But like Ubbing, Maurice is concerned about particular aspects of healthcare reform. "We definitely would not like to see the contraction of government reimbursements with the uncertainty related to the exchanges and the effect on the commercial markets," he says. "We are hoping the disproportionate share payment reductions in particular are reconsidered in terms of the size and scale of the reductions. Those are the biggest challenge we see from the government."
Ubbing says that over the long term, hospital administrators "must have their facility at its maximum possible value-added, so that everything you do to reduce costs and gain efficiencies and everything else is not a wasted transaction, no matter how the future unfolds."
"You want to be in a position to be negotiating for a buy-out or whatever at an advantage, where you are bringing value- added as opposed to a bailout kind of transaction," she says. "You have to do the same thing for either one of those outcomes down the line, and that is certainly something we consider."
Despite the threat of lower inpatient volumes and reimbursements, Ubbing and Maurice both remain upbeat about the future.
"There are always opportunities," Maurice says. "We do feel we have a lot of opportunities to manage effectively and provide high-value care in our communities."
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 Kristine Aznavoorian, RN, MS.
This profile was published in the December, 2013 issue of HealthLeaders magazine.
"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."
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."
Evidence is mounting that when physicians know the laboratory costs of tests prior to ordering them, they show a decrease in ordering rates, and not only for high-cost tests.
A new study adds to a growing body of evidence suggesting the potential for significant healthcare cost reductions when physicians know the up-front cost of ordering routine lab tests.
The latest study involved 215 primary care physicians at Atrius Health, an alliance of six non-profit medical groups, and a home health and hospice agency in Massachusetts that uses an integrated electronic health record system. Physicians in an intervention group received real-time information on laboratory costs for 27 tests when they placed their electronic orders, while physicians in a control group did not.
Changes in the monthly laboratory ordering rate between the intervention and control groups were compared for 12 months before and six months after the intervention started. Six months after the intervention, all physicians taking part in the study were asked to assess their attitudes regarding costs and cost displays.
Lead researcher Thomas D. Sequist, MD, found a significant decrease in the ordering rates of both high and low cost range tests by physicians to whom the costs of the tests were displayed electronically in real-time. This included a significant relative decrease in ordering rates for four of the 21 lower cost laboratory tests, and one of six higher cost laboratory tests.
"What we are trying to do is promote value amongst our clinicians. We are not trying to cut back on needed healthcare, but we provide so much care to patients that [some] is actually not needed," Sequist says. "At the same time much of the care that is needed isn't getting provided for them. What we are really trying to do is have our doctors look through this lens of value."
Among 27 laboratory tests examined in the study, interventional physicians demonstrated a significant decrease in ordering rates compared to control physicians for five tests. This included a significant relative decrease in ordering rates for four of 21 lower cost laboratory tests and one of six higher cost laboratory tests. A majority of physicians reported that the intervention improved their knowledge of the relative costs of laboratory tests.
"What our survey showed is that most doctors are really interested and willing and engaged in the idea of how much things cost as part of an overall value equation for the care we are delivering, but they have no idea how much things cost and how they would start to bring those things into the decision-making process," Sequist said.
"Secondarily, if you showed them these real-time costs as a part of educating them, does it have an impact on their decision making process? We found in particular for things that are lower cost but higher volume are more discretionary in nature, so doctors may be ordering them more reflexively or feel like they are common things that all or many patients should have done. When you starting showing doctors the cost it may help them think a little more about the value of the tests, the combination of how much it costs and how much it is improving that patient's health outcome."
"Whereas when you look at the things that are less discretionary, the more expensive tests that get offered infrequently, when we showed the cost to doctors they tended to have less of an impact on utilization, probably because the doctor at the point of ordering a less frequent but more expensive test has probably thought a little more about the added value of the test and by the time they ordered it they really believed the patient needed to have it done."
Sequist's study adds to a growing body of evidence suggesting that significant savings can be achieved by eliminating needless lab tests. In October neurosurgery residents at the University of California San Francisco Medical Center demonstrated that a reduction by nearly 50% in the use of five common lab tests has no effect on patient care.
The reductions generated $1.7 million in savings for payers in fiscal 2011–12, and another $75,000 in decreased direct costs for the medical center, according to a study in Journal of Neurosurgery.
In theone year before the project, the residents identified 45,023 of tests for serum levels of total calcium, ionized calcium, chloride, magnesium, and phosphorus in the neurosurgical service. In fiscal year 2011–2012, this number was reduced 47% to 23,660. The residents' findings were part of an in-house initiative at UCSF that encourages clinicians to identify department-specific cost savings and quality improvements in care delivery.
In April, researchers at Johns Hopkins University School of Medicine reported in JAMA Internal Medicine that that when doctors are told the price of some diagnostic laboratory test as the tests are ordered, they respond like informed consumers and either order fewer tests or shop around for cheaper alternatives.
The Johns Hopkins study identified 62 diagnostic blood tests frequently ordered for patients at The Johns Hopkins Hospital. Researchers divided the tests into two groups and made sure prices were attached to one group from November 2009 to May 2010 at the time doctors ordered the lab tests.
They left out the pricing information for the other group over the same time period. When the researchers compared ordering rates to a six-month period a year earlier when no costs were displayed, they found a nearly 9% reduction in tests when the cost was revealed as well as a 6% increase in tests when no price was given. The net charge reduction was more than $400,000 over six months.
The week's largest healthcare deal announcement involves the largest health system in northwestern Illinois. Other news of merger talks comes from central New York state and Wisconsin.
Northern Illinois' Cadence Health and Rockford Health System have jointly announced that they're in merger talks.
"The Rockford Health System Board of Directors has engaged in a deliberate, comprehensive and strategic process to identify a partner to further strengthen the clinical services we provide to Rockford and the region," RHS CEO/President Gary Kaatz said in prepared remarks. "Cadence and Rockford Health System match up on all criteria, including commitment to local governance, superior clinical services and best practices, and a focus on community benefit."
RHS and Winfield, IL-based Cadence will spend the "next several months" refining the partnership, which would be subjected to regulatory review and approval.
Cadence CEO/President Mike Vivoda called the two health systems "like-minded organizations, both with a singular vision of providing excellent patient care with outstanding clinical outcomes guided by the highest standards of quality and safety. Together, we can build a leading multi-regional health system that meaningfully improves access to care, elevates quality, and lowers cost to deliver the best care and value to the communities we serve."
RHS is the largest health system in northwestern Illinois and southern Wisconsin, with nearly 1 million patient visits each year. The system includes: Rockford Memorial Hospital, a regional, tertiary care hospital with 396 licensed beds and a medical staff of more than 440 physicians; the Rockford Health Physicians physician group with 168 physicians in 34 medical specialties; the Visiting Nurses Association, providing home care, hospice and medical equipment; its fundraising arm, the Rockford Memorial Development Foundation; and Van Matre HealthSouth Rehabilitation Hospital, a 55-bed freestanding rehabilitation hospital.
Cadence provides healthcare to the more than 1.1 million patients in Chicago's western suburbs. The system was formed in March 2011 as a result of the merger between Central DuPage Health System based in Winfield, and Delnor Community Health System based in Geneva, IL. Cadence Health employs more than 7,400 people and includes Cadence Physician Group, a local network of more than 250 primary care physicians and specialists on the medical staff at CDH or Delnor Hospital.
Rome (NY) Memorial Hospital Explores Collaboration with Bassett Medical Center
Rome (NY) Memorial Hospital and Bassett Medical Center said they have signed a non-binding letter of intent to develop a collaborative relationship. Now the two health systems will open a due diligence process of at least six months to finalize an agreement that would enable RMH to become a corporate affiliate of Bassett while remaining an operationally distinct hospital with local autonomy, RMH President/CEO Basil J. Ariglio said in prepared remarks.
"Two years ago, our Board of Trustees made the decision to explore opportunities to collaborate with other organizations to prepare for the changing healthcare environment," Ariglio said. "We developed specific community objectives based upon feedback from a cross-section of community constituencies and initiated discussions with several organizations."
Ariglio said the RMH board voted unanimously to pursue the collaborative with Bassett "because we share a common vision of what's necessary to improve the delivery of healthcare services in our region. Establishing a relationship with Bassett will also help Rome expand primary care access and address physician shortages.
Bassett President/CEO William F. Streck, MD, said an affiliation would come as healthcare delivery evolves into the new reimbursement models that reward population health outcomes and value over volume. An affiliation would give RMS and Bassett opportunities to exchange best practices that reduce costs and provide better outcomes for patients.
Bassett Healthcare Network is an integrated health care system serving an eight-county region covering 5,000 square miles in upstate New York. Bassett includes six corporately affiliated hospitals, skilled nursing facilities, health centers and health partners in related fields. With 130-licensed acute care beds, RMH would become the second largest hospital in the Bassett system. RMH has its own 80-bed skilled nursing facility and affiliated primary and specialty physician practices.
UW Health and Aurora Health Care Announce Collaborative Talks
UW Health and Aurora Health Care say they are discussing how the two integrated health systems can work together using accountable care conceptsto improve healthcare delivery and lower costs for Wisconsin and the region.
Talks will include ideas for enhancing the mission of the UW School of Medicine and Public Health, which has had a 30-year partnership in medical education with Aurora. Both systems said in a media release that they can build on their collective strengths in clinical quality healthcare that is among the most cost effective in Wisconsin and a commitment to enhancing the health of populations.