Douglas Zehner speaks about the changing healthcare marketplace and moving toward value-based payment models.
In late July, RWJBarnabas Health appointed Douglas A. Zehner, CPH, MSHA, as a regional CFO overseeing Newark Beth Israel Medical Center, Children's Hospital of New Jersey and Robert Wood Johnson University Hospital Rahway.
Zehner is a healthcare finance veteran, beginning his career with HCA Healthcare in the 1990s, before taking on operational and financial executive positions at health systems in Denver, Washington, D.C., and New Jersey.
Days after his appointment, Zehner spoke with HealthLeaders about the opportunities and challenges of overseeing three Garden State hospitals and the difficulties of moving from a fee-for-service model to a value-based position.
This transcript has been lightly edited for brevity and clarity.
HealthLeaders: What do you anticipate will be the biggest opportunities and challenges for the hospitals you're overseeing?
Zehner: What we're seeing as a health system is what a lot of health systems are seeing, which is a move toward value and trying to understand the market from a bigger perspective. A lot of that requires actively working toward trying to migrate into outpatient and ambulatory settings. I'll have the opportunity to work through what some of those sites might look like, where we should put them, how we should scale them, and how to have them be supported by a network of hospitals … [and] participating in strategic conversations and hospital finance strategy sessions, trying to come up with game plans to make sure we have a solid financial base.
HL: You've been in this industry for a while, so what has changed in financial strategic thinking for health systems?
Zehner: We've been talking about value for a long time and it has made people nervous from the get-go. It's a little bit of a black box and people are not sure how to get from a fee-for-service model to a value-based position. We, as hospitals and health systems, have had this sense, and maybe it's hubris, that we can probably do better taking care of our communities if we positioned ourselves correctly to be able to do so.
But it's not simple and there are many competing priorities in trying to determine what the right project should be to make our communities better.
The measuring sticks for hospitals still are our classic fee-for-service–related statistics: admissions, outpatient visits, and ER visits. Things like that are still the metrics used to look at the financial health of an organization. What we've done is layer in new statistics, like readmission management and the indicators that would direct your CMS star rating, which have made their way into the CFO speak. They are new and a little more nebulous to manage because a readmission risk exists with every person that leaves the hospital.
HL: How do you measure or put into place value-based initiatives while maintaining your bottom line in a fee-for-service environment?
Zehner: It's difficult. There are payment mechanisms for doing better and things you would describe as value-based care, whether they be chronic condition management codes in the ambulatory setting or the Star ratings, which affect your reimbursement.
You recognize that you're probably going to have to make investments to try to advance the hospital in those [quality reimbursement] measures. You can do the math pretty easily on the investment, but the inputs and outputs are not always as connected as, 'This person came into the emergency department and, therefore, I'm going to get $200 back from this payer.' It's more like, 'I'm going to invest in this community health worker to try to keep these folks from needing to come back to the emergency department.'
HL: How do you think widespread M&A activity is reshaping both access and cost of care?
Zehner: My suspicion is that [health systems] are nervous and have growing concerns, which is an access problem that can lead to changes in the cost of care for a community. [A merger] can make it more expensive for a community, it can eliminate access, which doesn't actually make the cost of care go up, but it makes it harder to get.
My read is the communities of New Jersey and most of the communities in the U.S. want access to care. They would prioritize and [would rather] increase the cost of care if they could maintain access. I think you see some of the M&A activity is an effort to try to maintain these access points.
I guess that's happening more frequently as some of these larger systems have been able to look at the map and say, 'We're not over here, which means we're not getting access to this community support.' At Newark Beth Israel Medical Center, we're trying to take some of our specialists that are rarer in the marketplace and put them in more places. We're trying to give Monmouth, St. Barnabas, and Jersey City, and all these other sites that are inside the health system, access to specialties that wouldn't be easily available to them without premium dollars.
Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.