Central Florida's second-largest hospital chain, which was known in recent years as Orlando Regional Healthcare System, has announced that it has changed its name to Orlando Health. The name change for the $1.5 billion system cost approximately $300,000 and was the result of 18 months of market research and preparation, said John Hillenmeyer, the hospital system's chief executive officer. The eight facilities under Orlando Health's will retain their current names, but each will be branded as part of Orlando Health.
Many hospitals and healthcare facilities have come face-to-face with the reality that factors largely out of their control, like insurance reimbursement and government funding, will ultimately determine whether they survive—perhaps in a different form with a new owner or in a downsized facility—or shut down.
This environment creates huge challenges for chief executive officers to stay one step ahead of the executioner, as the current situation only offers the dark promise of higher operating costs and dwindling margins.
To CEOs, it can seem like a never relenting recurrence of Nightmare on Elm Street, as many healthcare leaders are kept up at night by the impending threat of:
Increasing competition from freestanding, investor and physician-owned diagnostic and treatment facilities.
The growing cost and complexity of technology and IT infrastructure.
The need to constantly improve quality and patient safety.
Continuing shortages in the labor supply.
The existence of nearly 47 million uninsured Americans.
State-level challenges to the not-for-profit status of well-run nonprofit healthcare systems.
Federal and state pressures on Medicare and Medicaid reimbursements.
These and other environmental trends are impacting the hospital industry as never before. While healthcare nationally continues to grow in dollar value and as a percentage of GDP (from 8.8% in 1980 to 16.1% in 2007), the hospital share of the national healthcare budget has dropped precipitously. In 1980, for every $100 spent on healthcare, over $41 was spent on hospital services. In 2007, that number dropped to $29. This ongoing trend will only result in continuing revenue pressure on hospitals at a time when demands for capital have never been greater--resulting in a "capital shortfall" where use far exceeds available resources.
Over the next few years, hospital industry experts expect a period of prolonged difficulty, characterized by increased revenue uncertainty and cost pressures, reduced access to capital, and a continued erosion of public and political support. Coupled with the ongoing operational challenges of aging physical plants and equipment, as well as the environmental challenges mentioned earlier, there is growing concern for the health of the industry and its long-term ability to meet the needs of the communities it serves—especially the poor and underserved.
A Movement towards 'Deeper Waters'
Within the last few months several major healthcare facilities located on the eastern seaboard, ranging from nonprofit acute-care hospitals to imaging centers to nursing homes, have filed for Chapter 11 bankruptcy protection. Simply put, they ran out of cash. Decreased reimbursement and rising costs, with an overabundance of indigent care, aging facilities, and expensive technology, are responsible for this deteriorating trend, with indications that more bankruptcies loom on the horizon.
Increased Chapter 11 filings will likely become a common occurrence in states like New York, New Jersey, California, Florida, Michigan, Texas and Hawaii, which have high healthcare delivery costs and declining economies. In addition, the advent of the "Federal Initiatives Deficit Reduction Act of 2005," created to establish a Medicaid Integrity program, will have a large impact on imaging centers because the federal government has lowered its reimbursement to them, which threatens their operating margins and future stability. It also appears that the government feels some states have an overabundance of healthcare facilities and only the strong will survive. Organizations will need to have a lean operating expense and a continued commitment to generating marketing referrals and getting their new business bill out and collecting on it.
As a result of all of the above considerations, I see the following sectors under attack:
Nonprofit acute-care healthcare entities with aging facilities, outdated equipment, and slow management process. Those with limited access to cash and high indigent patient populations--primarily those in urban centers—will continue to face difficulties.
Senior living centers including nursing homes and assisted-care facilities. The nursing home industry has had its up and downs, but without question reimbursement will continue to decrease, as will operating margins. The nursing home sector has many old facilities that lack the resources to update their buildings. And the assisted-living industry will continue to face an increase in market competition for private-pay patients.
Imaging centers. This group will continue to be hit hard. Reimbursement rates for imaging procedures have already declined 40% to 50% since January 2007 as a result of the Deficit Reduction Act and the government's conclusion that too many centers exist and consolidation is necessary in order to reduce unnecessary imaging procedures from being performed. There will also be a dramatic slowdown in the number of facilities purchasing new technology (CT/PET) over the next 24 months, resulting in a flooding of the market with aging overvalued equipment. Imaging centers operating expenses, supplies, and labor will likely increase. As a result, high patient volume will become crucial to handle debt payment and the increasing restrictions on referral practices, as the drop in reimbursement rates will force centers from doing three to four scans per day to performing 10 to 12 to cover expenses.
Other Likely Scenarios
It's not all gloom and doom. I also believe that:
Long-term acute-care centers, which in the recent past have experienced declining reimbursement rates and cutbacks, will make a slight turnaround and continue to be in demand. I believe CMS will change its view of them and arrive at the conclusion that it likes the patient-care model and short stay.
Continuing-care retirement centers will enjoy continued growth and begin to exploit opportunities in this portion of the senior living sector. The ideal model is a small nursing home, assisted-living center, apartments and outpatient center housed on one large campus.
Pharmacy companies will continue to fight for increased market share and aggressively pursue acquisitions.
Medical equipment manufacturers will have increased competition from China and select European countries.
Healthcare companies and networks will seek affiliation partners to gain market share.
It's going to be a turbulent time for the healthcare sector. Only the savviest healthcare leaders will weather the storm unscathed.
Michael Sandnes is the director-healthcare services practice for Executive Sounding Board Associates, in its Baltimore office. He leads turnaround and crisis management engagements with emphasis in the areas of profit restoration/improvement, organizational restructuring/planning and M&A integration in the healthcare arena. He can be reached at msandnes@esba.com.
A few weeks back, I wrote about a study confirming the obvious: Long ambulance rides increase your risk of death ("The Nearest ED is How Far?"). I wrote that piece based on the premise that patients were still being brought to the nearest emergency department—it’s just that those facilities happen to be farther away in some instances because the number of EDs has decreased by more than 400 during the past 15 years. But what if people in your community were choosing to drive 30 minutes past your hospital's ED to go to a larger hospital up the road? This comment from a hospital employee in Missouri is not the first time that I have heard about patients risking their health to drive themselves to a hospital farther away than their local community hospital:
Wanted: privately insured patients. The article on the nearest emergency department sent my mind in another direction when you mentioned the patient with insurance using the ER when his physician was unavailable. I am employed at a small, rural, Medicare-dependent facility with only 30 beds, and because so much of our patient volume is from Medicare, Medicaid, and uninsured patients, there is a considerable lack of funds here most of the time. The idea of more privately insured patients is one that I wish could be promoted within the community—even through the county commissioners as being part of the importance of attracting new industry to our rural area. These businesses would hopefully be able to afford company insurance for their employees, thereby increasing the percentage of privately insured patients walking through our doors. We are about 35 miles from a larger facility and many patients bypass us when they need a hospital. Some even jump in the car and race to a hospital farther away in the event of a possible heart attack or other life-threatening emergency instead of coming to us or calling an ambulance that would bring them here (as the nearest facility). To them, "bigger is better." But what they don't realize is that the trip itself could kill them.
Michelle H.
Missouri
These next two letters are in response to my column, "Share or Else."
Need specialists? Try telemedicine. Attempting to get appropriate specialty physicians into rural areas has not met with success for a long list of reasons over many decades now. The 21st-century answer to this lies in adopting connectivity via electronic means, namely telemedical interventions up to and including eICU connections between a major center, clinics, practices, and critical-access hospitals.
While the initial system implemented in the early '90s in Georgia failed, the current system, established by our insurance commissioner continues to grow in utilization. This not only provides specialty-directed care in conjunction with the patient's physician, but removes expensive and time-consuming travel from the patient's burdens. Because these expenses are seldom covered by third-party payers, it is seldom mentioned in relation to the cost of healthcare. However, it is a real cost and limits care for rural patients.
Jim Hutchinson, MD
Joint recruiting. Your suggestion of having a joint recruitment effort with a traveling doctor is good. However, finding one who is willing to travel is quite difficult. Six months ago, we and a fellow hospital about 150 miles away shared the expenses of a recruiter whose focus is on our two communities. The advantage of this over using a recruiting firm rests with fear and economics. A recruiting firm knows that they have to sell the doctor to a client ASAP or lose him or her to another search firm. In essence, mentioning "rural" to a candidate looking for a big city or better climate is dangerous to the company’s economic health. Our recruiter does not care and has brought us mostly qualified candidates. While it is still a very tough sell, at least we get to talk to more folks and raise the odds of success.
Martin Richman
President
Jamestown (ND) Hospital
I'd like to thank all the readers for their comments. Addressing workforce shortages and declining reimbursement will continue to challenge hospital executives, so I'd love to hear about what is working at your facility or about the obstacles that your facility is facing. Please e-mail me at cvaughan@healthleadersmedia.com.
Carrie Vaughan is editor of HealthLeaders Media Community and Rural Hospital Weekly. She can be reached at cvaughan@healthleadersmedia.com.
Note: You can sign up to receive HealthLeaders Media Community and Rural Hospital Weekly, a free weekly e-newsletter that provides news and information tailored to the specific needs of community hospitals.
Richland Parish Hospital in Delhi, LA, has become the first rural healthcare facility in the state to transmit patient information to a statewide health information exchange. The hospital successfully sent data to the Louisiana Rural Health Information Exchange, which serves as a repository for patient information. The Delhi Hospital transmitted clinical information, patient information and radiological images via Health Level 7 messaging. The ability to consult with a specialist remotely would save a patient in Delhi about a two-and-a-half-hour drive to Shreveport, said hospital representatives.
Physicians and managed care don't agree on much, but there was finally one area in which they could find common ground—the advanced medical home concept.
Praised by both constituencies as a way to improve patient outcomes and quality while reducing costs, the advanced medical home movement was sailing along calm waters until this month. Now, it is bouncing on the surface and its crew is feeling a little nauseous.
These choppy waters are a result of the American Medical Association/Specialty Society RVS Update Committee (RUC), which recently submitted its medical home recommendations to the Centers for Medicare & Medicaid Services.
The recommendations have been bashed by many who question RUC's predicted physician time commitment to coordinate care and the lacking care management reimbursements.
This kind of opposition is new to the medical home concept. The idea gained steam earlier this year with DMAA: The Care Continuum Alliance's Advancing the Population Health Improvement Model and The Commonwealth Fund's report Bending the Curve: Options for Achieving Savings and Improving Value in U.S. Health Spending. Both documents spoke of the potential cost savings and quality improvements involved in a comprehensive, coordinated team approach.
Meanwhile, RUC established its Medical Home Workgroup in February after CMS' request to review the concept. At that time, I wrote an article for my monthly newsletter Disease Management Advisor not about if the medical home was going to catch on, but how disease management could play a key role in its development.
Now, with the release of one document, the concept has come into question. While healthcare officials debate RUC's recommendations, the state of Pennsylvania has moved forward with its own medical home plan, which is part of Gov. Ed Rendell's chronic care model.
Six insurers are involved in a three-year program that will cover 220,000 patients in southeastern Pennsylvania. The insurers will collaborate with more than 150 primary care providers to track patient care and conditions that supporters say will reduce costs for chronic care by improved control and averted emergency room visits and admissions, and improve:
Access to care
Patient self-management skills
Quality of care measured by evidence-based clinical processes
Outcomes measures
Independence Blue Cross, one of the insurers involved in the project, anticipates making physician payments in the $5 to $6 million-dollar range.
Ruth Stoolman, public relations manager at Independence Blue Cross, says the investment will depend on how many practioners participate and the level of documented transformation their practices achieve through the National Committee for Quality Assurance's Physician Patient Connections—Patient-Centered Medical Home (PPC-PCMH) certification.
Stoolman says the major aspects of the medical home model include:
Use of a team approach that includes physicians, nurses, case managers, and health educators
Open access scheduling to enhance patient access to timely care and to allow physicians more time to see sick patients
Improved patient education and promotion of self-management of chronic conditions
Improved communications (including e-mail and phone)
More decision support for patients
Outside practice coaches to help implement the necessary changes and help guide the practices on how to achieve their goals
Independence Blue Cross' project will offer free technology to participating practices that will allow the health plan and practices to track, monitor, and remind patients about health information, and identify gaps in care.
"It should be emphasized that patient education is a critical component of the PCMH—empowering patients to understand their conditions and take an active role in their care. No matter how successful physicians are in reaching all the stated NCQA goals—unless their patients are actively involved in managing their care, any notable improvements in quality outcomes will be limited," says Stoolman.
Advocates for the Pennsylvania program hope the collaborative will serve as a benchmark in how the model is designed and implemented.
Yet there is another issue for medical home supporters to address. Many people in healthcare simply don't understand how a medical home works or how it can improve healthcare. We conducted an online poll of readers of this site over the past month asking them what they thought about the medical home concept. The results show that many are still unclear about the tenets of a medical home.
In fact, 44% of those who answered the poll could not define an advanced medical home. Twenty-four percent suggested the concept is the future of healthcare, while another 21% predicted there would be some success, but not enough to change healthcare. Only 4% answered that the concept will fail.
As our poll shows, step one in the process should be defining the term "advanced medical home," and properly informing the stakeholders. Once that is achieved, the next step is physician reimbursement and that will be the ultimate challenge that will decide whether the medical home winds up on the rocks or continues toward the horizon.
Les Masterson is senior editor of Health Plan Insider. He can be reached at lmasterson@healthleadersmedia.com .
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A recent internal campaign has patients and professionals at Tufts Medical Center in Boston talking—about cartoon-style talk bubbles.
Like many other facilities, Tufts has run hand washing and other patient safety campaigns in the past, but none had the staying power needed to spark a change.
“Hospitals tend to crank out safety initiatives,” says Dan Dunlop, president of Jennings, an ad agency based in Chapel Hill, NC. “Tufts had done two prior hand-washing campaigns but they became part of the background very quickly.” The team wanted to create something that would stand the test of time by using varied messages. They also wanted something that was unique to the institution, he says.
“That was the reason why we chose [speech] bubbles,” says Dunlop. “We knew we wanted to avoid the cliché hand images because we wanted to be able to communicate other messages beyond hand hygiene down the road. The great thing about the bubbles is that they can carry any message we want. Six months from now we could focus on handwriting abbreviations.”
The campaign, which appears throughout the hospital in bathrooms and above soap dispensers and sinks, targeted not only employees, but also families and patients. “The bubbles resonated with all of us because they were so unique,” says Mary Sullivan Smith, Tuft’s vice president of patient care services and chief nursing officer. “We wanted to level the playing field and create an environment where professionals could feel comfortable asking each other to wash their hands and where patients felt comfortable [asking] professionals to wash their hands.”
Collateral for the campaign included posters at entrances and in elevators, flyers explaining the initiative.
The tone of the messages is also unique. Most feature off-the-cuff and lighthearted statements and some even featured the faces of well-known colleagues. “It was a fun way to say that Tufts has embraced the campaign and that it has to be a part of the culture,” Dunlop says.
Since the campaign has launched research shows that hand washing compliance has increased dramatically.
Kandace McLaughlin is an editor with HealthLeaders magazine. Send her Campaign Spotlight ideas at kmclaughlin@healthleadersmedia.com If you are a marketer submitting a campaign on behalf of your facility or client, please ensure you have permission before doing so.