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Analysis

Growth Opportunities: How Health Systems Position Themselves Under Pressure

By Christopher Cheney  
   December 10, 2019

Healthcare providers are doing what they can to prepare for growth despite the industry's challenges.

This article appears in the November/December 2019 edition of HealthLeaders magazine.

Market conditions are putting intense pressure on the acute healthcare sector. The shift from the fee-for-service business model has driven down inpatient admissions as patient volumes move to lower-cost settings and payers clench tight fists on reimbursement rates.

This economic scenario causes two challenges, says Michael Browning, MBA, CFO of Columbus-based OhioHealth.

"First, not-for-profit hospitals and health systems are no longer seeing 3%–4% increases in service volume. In many situations, they are seeing reductions in volume. Second, payers are no longer giving what many would deem a fair increase in reimbursement rates," he says.

Health systems and hospitals are facing a stark choice: cut costs or pursue growth strategies—with growth seen as the more attractive option, Browning says.

"With flat revenues and lower service volumes, growth strategies become more and more important for organizations to be able to afford the infrastructure that they have developed over the years. Many of us have several hospitals and extensive infrastructure; and, in order to afford the replacement of that capital and to give our employees inflationary raises, we're all trying to improve the growth strategies in our markets," he says.

With healthcare organizations under pressure, leaders are looking for ways to position their businesses for growth. This year, here are the opportunities that rise to the top.

Growth Strategy: Postacute Care

Postacute care presents an opportunity for growth in the healthcare market as home care grows and there is anticipation of increased demand for skilled nursing services as the country's population ages.

This year, ProMedica completed the integration of HCR ManorCare, which is a postacute care provider that the Toledo, Ohio–based nonprofit health system acquired in July 2018 for $3.3 billion with real estate investment trust WellTower.

ProMedica's new postacute care business division operates in 27 states, with 171 skilled nursing and rehabilitation centers, 54 assisted living communities, 108 home health and hospice agencies, and 51 outpatient rehabilitation clinics. Since the 2018 acquisition, HCR ManorCare has brought more than $100 million in cash to ProMedica.

In addition to integrating HCR ManorCare facilities with ProMedica's health system, says David Parker, president of ProMedica HCR ManorCare, the organization is working with several other health systems to build out and develop postacute services within the healthcare enterprises, with ProMedica HCR ManorCare as their postacute care partner.

ProMedica's new capability to provide healthcare services across the entire continuum of care is a powerful negotiating tool, he says.

"It might be in a joint venture, or it might be us providing a postacute solution on a hospital campus. Those conversations have advanced at a rapid pace since the merger with ProMedica. Health systems are more likely to be engaged in those conversations because they see our ability to blur the lines between levels of care in the acute and postacute settings," Parker says.

ProMedica HCR ManorCare facilities are already in business relationships with 2,000 hospitals, he says.

An increasing number of health systems and hospitals are positioning themselves for growth in postacute care, says David Burik, MM, a managing director in the healthcare practice at Navigant Consulting, which was recently acquired by Guidehouse, a portfolio company of New York–based Veritas Capital.

"As more and more sophisticated care is going to the home setting, home health is a good business. As hospitals look at their current business, and they wonder whether there is deeper penetration for any of those businesses, they are taking another look at homecare and postacute care in general," he says.

The SNF and home health sectors are expected to grow over the next decade. According to the Centers for Medicare & Medicaid Services Office of the Actuary, through 2027, spending on SNFs is expected to increase 5.4% while spending on home health services is expected to increase 7.0%. National health spending, meanwhile, is expected to increase at 5.5% annually. 

In the postacute care setting, Parker says there are many opportunities to improve clinical care and master new reimbursement models. "We're all trying to figure out the added value of finding new ways to deliver care, and how that will be reimbursed through Medicare, health plans, and the private market."

The most important challenge for ProMedica HCR ManorCare is determining how the organization can be more efficient, create quality outcomes, and generate value for patients, health systems, and payers, he says.

"We're connecting specialty physicians and surgeons who are working in our acute care space and throughout our provider community with our skilled nursing facilities and within home health and hospice through ways such as telehealth, digital imaging, and other resources that are allowing us to deliver better care more efficiently and more cost-effectively for the payer. These initiatives also drive better outcomes," Parker says.

ProMedica, which also has a health plan business division, is well positioned to succeed in postacute care settings, he says.

"With all these divisions within our company, we can have some test cases that we can work on in both Toledo and across the country. Then we can use that experience with other health systems and other payers to make it deployable in other markets," Parker says.

Motor City market reflects SNF growth strategy

ProMedica HCR ManorCare is taking a long-term approach to financial sustainability in SNF care that is based on the organization's business trends and an expectation of more admissions as the nation's population ages, Parker says. "We're expecting the market is going to change with the demographics, and we'll start to see occupancy and volume increase over current levels."

He says ProMedica HCR ManorCare is pursuing this long-term strategy in the greater Detroit market, where the organization has eight SNFs. One of these facilities is a 125-bed SNF that does almost 220 admissions and discharges per month, with an average length of stay of about 19 days.

ProMedica HCR ManorCare's rehospitalization rates (16%) are below the national average. The national average is about 17%, Parker says.

"We have physicians who are making rounds daily. We have nurse practitioners who are in the facility daily. And we are delivering a level of care that is far different than what was delivered just 10 years ago," he says.

Parker says the vision for the Detroit SNF market mirrors ProMedica HCR ManorCare's national SNF strategy—admitting patients based on their clinical needs through a clinical skill inventory and making sure patients are moved through the continuum of care to the right level of care at the right cost with the right outcome.

Growth Strategy: Telemedicine

In recent years, telemedicine has been a prominent growth area at Cleveland Clinic, says Peter Rasmussen, MD, medical director of digital health at the Cleveland-based health system.

"Telemedicine is definitely a growth opportunity," he says. In fact, telehealth is an essential element of Cleveland Clinic's goal to double the number of patients it serves within the next five years, he says.

Three areas have been particularly effective in generating telemedicine growth, Rasmussen says.

1. Telemedicine is an opportunity for improving patient access: "We use telehealth as an access tool predominantly. Our forte is in expert diagnosis that requires advanced imaging or diagnostic services, and in high-end surgical care. In that regard, telehealth is a way for us to access those potential patients," he says.

2. Telemedicine is an avenue to provide online, on-demand service: "Particularly in the winter months in the cold and flu season, patients with significant upper respiratory tract infections will access our Cleveland Clinic Express Care Online platform to help them understand whether they have the flu, and whether they would benefit from in-person testing or flu medication therapy," Rasmussen says.

3. Telemedicine can increase patient visits: "A great example is the movement disorders arena. It's very challenging for a patient with advanced Parkinson's disease or other movement disorders to travel any distance to see a neurologist for evaluation and treatment," he says. "By using virtual visits, patients can see their expert more frequently than they would in an office environment."

In 2018, the number of annual virtual visits at Cleveland Clinic grew 68%. The health system is posting several other impressive numbers in telemedicine:

  • In Ohio, Florida, and Nevada, more than 40 clinical departments are offering scheduled telehealth visits
     
  • About 60% of virtual patient visits are being delivered in a scheduled fashion
     
  • The patient satisfaction score for telehealth visits is 91%
     
  • Cleveland Clinic is projecting that 50% of outpatient visits will be conducted virtually within the next five years

From both clinical and financial standpoints, telemedicine is one of the fastest growth areas in the healthcare sector.

In 2018, the global market for telemedicine was valued at $38.3 billion, and the market is expected to be valued at more than $130 billion in 2025, according to Global Market Insights.

A survey published in July 2019 by San Francisco–based Doximity found the number of physicians reporting telemedicine as a skill doubled from 2015 to 2018. Among physician specialties, radiologists and psychiatrists showed the highest level of interest in telemedicine job opportunities, the survey found.

Telepsychiatry: Reaching 'patients at scale'

Telepsychiatry is a significant growth area within telemedicine.

Telemedicine is a good fit for behavioral health for several reasons, says David Whitehouse, MD, MBA, medical director at New York–based AbleTo Inc., a provider of virtual behavioral health services.

There are practical advantages with telepsychiatry compared to in-person office visits, he says. "Imagine a new mother with postpartum depression dealing with the demands of her new baby while also trying to navigate the logistics to schedule a therapy appointment."

Telepsychiatry also can help bridge the gap between the country's shortage of therapists and an overwhelming demand for behavioral health services, he says.

"Telemedicine helps us make the best of behavioral healthcare widely available, allowing us to reach many more patients at scale. Areas of the country that might not have been able to attract top-flight practitioners to move there can now bring the best of the best into their homes. It also helps get undiagnosed people the access to services they need," Whitehouse says.

Telepsychiatry can play an essential role in providing access to behavioral health services in rural areas of the country, says David Fingerhut, PhD, MS, MA, director of mental health services at Indianapolis-based Activate Healthcare and an assistant professor of clinical psychology in the Department of Psychiatry at Indiana University School of Medicine in Indianapolis.

"Here in Indiana, we have a similar geography to many other states, where you have multiple metropolitan areas and wide swaths of territory that are rural. In many rural communities, you don't have a mental health provider within 50, 60, or 70 miles. Conducting telemedicine opens avenues to treatment in these rural areas," Fingerhut says.

Marina Montez, MS, LPC-S, owner and practitioner at Bluebonnet Counseling Services in San Antonio, says telemedicine—which accounts for about half of her client visits—is well suited for her therapy work with children and adolescents.

"Treatment is usually six months long to address the negative thinking the child may be experiencing. With telehealth, I am no longer dependent on a parent bringing a child to an appointment—it's a lot of work to get your child to a therapist's office. If a parent must miss work, the reality is that they only have so many days they can take off. With telehealth, it is very cost-effective for the parent to have a child in therapy—people can do it."

Financially, telemedicine has helped grow Montez's therapy practice. "I started out as a sole proprietor, and telehealth made it possible for me to become an agency and hire clinicians to work for me," she says.

Bluebonnet Counseling Services offers telemedicine visits through South Jordan, Utah–based AdvancedMD, which has not only a telehealth platform but also business function support, Montez says. "At the end of the session, I can bill for it, and the claim is pushed through a clearinghouse. There is a scrubber to make sure that the claim is clean, and it is pushed on to the insurance companies for payment."

Therapy sessions at Bluebonnet Counseling Services cost $90 per hour, she says. "With the insurance, the payers pay the same amount whether the patient comes into my office or I see a patient on telehealth. So, seeing patients through telehealth does not impact my bottom line. The insurance pays $70 for my visits; so, there is a $20 copayment as well."

Telepsychiatry is a prime example of recent advances in behavioral health, Fingerhut says. "I am much more optimistic about where behavioral health is going than ever before, and I'm very excited to see where we go from here."

Photo credit: David Parker is president of ProMedica HCR ManorCare in Toledo, Ohio. (Tom McKenzie/Getty Images)

Christopher Cheney is the senior clinical care​ editor at HealthLeaders.


KEY TAKEAWAYS

The shift to value-based care and stingy payer reimbursement rates have made achieving a positive operating margin challenging at health systems and hospitals.

To maintain profitability, healthcare organizations are being forced into cost cutting or pursuing growth strategies.


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