Vital Healthcare Capital has launched a nine-figure drive to jumpstart spending on care for a costly cohort of underserved patients and to invest in the development of frontline healthcare workers.
Deep-pocketed investors are bankrolling a bold effort to revolutionize healthcare delivery for high-risk patients.
"It's one of our concluding big bets," says Sara Kay, head of advocacy and health equity programs at Bermuda-based Atlantic Philanthropies, the world's largest limited-life foundation.
Sara Kay
The private foundation, established in 1982, has disbursed grants valued at more than $7 billion and is slated to cease grant activity by the end of 2016. As part of last year's spend-down activity, it awarded a $12.5 million grant to Boston-based Vital Healthcare Capital (V-Cap).
Financing efforts to retool care delivery for high-risk patients, including people with multiple chronic conditions who are the high-flyers of healthcare spending, "is the biggest opportunity to affect how care is delivered," says V-Cap CEO Steven Weingarten. "These high-need patients have been underserved by our siloed system of care, while consuming the highest amount of resources."
Launched in May 2014, V-Cap is a 501(c)3 nonprofit financing organization. It offers three types of loans:
Business financing for working capital, infrastructure and equipment, and cash reserves linked to regulatory requirements;
Facilities loans such as acquisition and construction financing for healthcare facilities, particularly in disadvantaged communities;
Bridge loans to help healthcare providers respond rapidly to opportunities to serve at-risk patients.
"We're not just limited to facilities and traditional service needs. We have flexibility," Weingarten says.
Last month, V-Cap announced the formation of a $30 million fund to accelerate the organization's lending activity. Managers of the fund plan to establish a $100 million revolving-loan fund over the next five years.
Weingarten says V-Cap is willing to understand and probe the changing context of the healthcare market whereas a traditional lender "may not take the time to understand a [healthcare] organization and its sources of strength."
Partnering to Balance Risk
V-Cap loans are targeted to range from between $500,000 and $5 million and larger projects are "typically [looked at] with other lending institutions," he says.
The nonprofit lender's largest loan to date, which was also its first financing project, followed the joint lender model. The $10 million loan to Boston-based Commonwealth Care Alliance (CCA) in June 2014 was made with financial support from the Robert Wood Johnson Foundation in Princeton, NJ.
CCA is a not-for-profit healthcare payer that features a prepaid care delivery network for about 16,000 Medicare- and Medicaid-eligible beneficiaries in Massachusetts. Most of the beneficiaries are medically complex patients, which make CCA an ideal candidate for V-Cap financing. Atlantic Philanthropies' Kay says CCA patients receive "much better, much richer" care than the vast majority of their peers across the country.
V-Cap exemplifies the kind of transformative "big bets" that Atlantic Philanthropies is wagering as the foundation whittles away its endowment. "The concluding round [of grant disbursement] is not limited by past practices or guidelines. The V-Cap grant falls into this category because it is market-changing, Kay says. "This grant is different in nature and size. Even for a foundation, this is a large grant."
In the past, Atlantic Philanthropies has focused on programmatic grants. "This grant is marketplace-facing and functions as an impact investment. It's more valuable to the grantee because it doesn't have to be paid back, so it brings others in by reducing their risk of loss."
V-Cap and Atlantic Philanthropies share the same values and ambitions. "We have a social justice mission, so that's kind of our sweet spot," she says, noting V-Cap's commitment to investing in healthcare organizations that provide high-quality service to high-risk patients in disadvantaged communities.
"At-risk patients are the people who tend to be poorly served by the healthcare system we have because it's so fragmented. By focusing on these at-risk groups, we feel we are going to make the healthcare system better for everyone."
"Forcing the whole system into a more integrated framework," Kay believes, "is better for everybody."
The foundation also embraces V-Cap's focus on workforce development in the healthcare industry, Kay says. "The healthcare sector is one of the fastest-growing sectors in the U.S. economy. It's important to develop the care models [alongside workforce development]. It's an incredible employment opportunity. Part of V-Cap's mission is to create good jobs… in this growing market segment."
Workforce Development
Last month, V-Cap's workforce development mission drew $5 million in financing from New York-based JPMorgan Chase & Co. "Healthcare is one of the key areas of opportunity," says Chauncy Lennon, managing director of global philanthropy for the banking behemoth, which holds assets totaling $2.4 trillion. "There are a lot of middle-skilled jobs in healthcare. The rest of the economy is U-shaped, with high-end or low-end jobs. In healthcare, you have a lot of technically skilled positions. They're skilled, pay good wages, have good career growth, but don't require a bachelor's degree."
V-Cap's focus on workforce development for frontline caregivers was a crucial selling point for gaining JPMorgan Chase's financial backing, Lennon says. "There's a way to succeed while investing in your workers," he says about efforts to design training programs for the kind of mid-level jobs that employers are struggling to fill. "V-Cap is working directly with employers and helping them adopt the right strategy around recruitment and training."
JPMorgan Chase is urging healthcare providers and payers to "take the high road" strategy for workforce development, insisting that cutting wages is a losing game plan for all industry stakeholders. "You can provide service, make profits, and pay workers at the same time," Lennon says.
V-Cap is seeking to support workforce development efforts that include "compensation that is going to create a new set of good-paying jobs," Weingarten says. "Organizations in the pipeline of transactions" include healthcare providers who want financing to help raise pay for frontline workers and to launch training programs.
There are daunting hurdles to transforming the delivery of healthcare services to high-needs patients, but raising capital should not be problematic, Kay maintains. She notes the significant resources held at large health systems and payers and to the nation's 17%-of-GDP healthcare spend, which just broke the $3 billion mark. "It's hard to believe there isn't enough money."
Medicare's final rule on its mandatory hip and knee replacement bundled-payment program includes several concessions to hospitals and orthopedic surgeons.
With this month's release of the final rule for the Comprehensive Care for Joint Replacement program, a pair of hospital associations is cautiously optimistic about the mandatory bundled-payment program for hip and knee replacement procedures.
Joanna Hiatt Kim
The changes made by the Centers for Medicare & Medicaid Services "will better enable hospitals to be successful in the program," says Joanna Hiatt Kim, vice president of payment policy at the Chicago-based American Hospital Association.
Jessica Walradt, senior payment reform specialist at the Washington, DC-based Association of American Medical Colleges, says CMS's decision to delay implementation of the mandatory program from Jan. 1 until April 1 "was definitely something we were happy to see."
In addition to the implementation delay, the federal agency made several substantive changes to CJR, [the acronym for the bundled-payment program has been switched from CCJR to CJR] which sweeten the program from the provider perspective. They include:
Risk stratifying hip reconstruction episodes of care for cases involving a hip fracture
Reducing the number of regions set for mandatory participation in the CJR program from 75 to 67
Slowing the pace of change from local-based to regional-based benchmark pricing
Reducing the level of downside risk in Year Two and Year Three of the program to 5% and 10%, respectively
Hiatt Kim praises CMS for exempting CJR from two Medicare fraud laws, the Anti-Kickback Statuteand the Stark Law. "It protects hospitals that form alliances [and those that] share accountability for shared spending with those collaborators. The program would not have been successful without those waivers," she says.
Risk stratifying CJR for hip fractures will increase the reimbursement level for those procedures because they tend to be complex and prone to complications. This is a crucial change to the bundled-payment program's Final Rule, Hiatt Kim says. "They're breaking out hip fracture patients. That will make sure hospitals that treat a high [volume] of hip fractures are not penalized."
'CMS and Hospitals are in This Together'
CMS should have gone further she says, noting that hospitals that serve the most fragile patients, such as frail seniors, will be challenged to hold the line on episode-of-care spending. "We are fearful that lack of risk adjustment is going to penalize hospitals with more complex patients, and reduce participation in the program," Hiatt Kim says. "We will continue to look at ways for CMS to risk adjust this program more comprehensively."
While CMS has made several steps in the right direction to improve CJR, more improvements are necessary, she says. "The biggest concern is that hospitals are at different points in this process. Some are ready, and they are going to do very well. Others are not ready, and it will absolutely be a challenge for them."
The number of conciliatory changes CMS made to the proposed version of CJR indicates that federal officials are willing to adjust their most ambitious bundled-payment initiative, Hiatt Kim says. "CMS did realize this is different from their other payment systems, and they obviously need hospitals to be successful."
"At this point," she says, "CMS and hospitals are in this together."
Bullish on Bundles
Donna Cameron, FACHE, managing director at Chicago-based Navigant Healthcare, a consultancy, says CJR is a new and improved version of Medicare's first foray into bundled payments, the Bundled Payments for Care Improvement (BPCI) initiative.
"We see BPCI as a framework for how bundled payments are going to play out in 67 markets," she says and adds that that CMS limiting risk stratification in the bundled-payment program is unlikely to be a fatal flaw. "Data that CMS is gathering from BPCI shows increased quality, decreased length of stay, and lower post-acute care costs. Even though the methodology may not be a perfect payment model initially, we are typically seeing reductions in post-acute care costs and hospital readmissions."
An essential element of BPCI and CJR is data, Cameron says.
BPCI and CJR participants gain access to a wealth of Medicare claims data across multiple settings, including acute care, post-acute care, and home care, which generates comprehensive patient service-utilization data for hospitals and surgeons, she says. "The claims data informs them not only about what is happening in the hospital but also what's happening in the post-acute care setting."
Accessing and analyzing extensive claims data is one of five items on a "short list of key success factors" for CJR, Cameron says. "Use the data. We now have data for the 90 days we are serving the patients. The data gives us information that, historically, hospitals have not had to across the care continuum. The data shows where there are opportunities to improve care."
The other items on Cameron's short list of CJR bundled-payment success strategies:
Engaging physician leaders as pivotal participants in the design of 90-day episodes of care for hip and knee replacement, which includes pre-operative care, surgery and acute-hospital stay, post-acute care, and home care
Establishing post-acute care networks based on quality and cost-control standards
Enhancing care coordination and care navigation to boost transitions across the care continuum
Embracing a "leading practices" care philosophy over adoption of best practices "because best practices continue to change"
Hospitals will adapt and engage at differing paces. "We're really encouraging clients to get started right away so they can gain some momentum," Cameron says. "We are encouraging our clients to get going. There is no downside risk in the first year. A lot of learnings have already occurred in the BPCI program."
When CMS launches its first mandatory bundled-payment program in the spring, CJR appears poised to accelerate the pace of the federal agency's efforts to link payment to value.
Finance leaders need to consider a variety of metrics as health systems increasingly adopt strategies for urgent care.
This article first appeared in the November 2015 issue of HealthLeaders magazine.
As the healthcare industry shifts from service volume to service value, operating urgent care centers is emerging as a strategic imperative for health systems across the country.
"In the late 1970s and early '80s, urgent care was a cottage industry that bloomed then faded. Urgent care is once again peaking," says Sean McNeeley, MD, network medical director for Cleveland-based University Hospitals Urgent Care.
The University Hospitals health system operates 16 hospitals and more than 30 urgent care centers throughout northeast Ohio and reported total operating revenues of $3.5 billion in 2014.
Over the past three decades, UH has taken a do-it-yourself approach to developing urgent care centers, as opposed to building and operating the facilities with an urgent care organization partner, McNeeley says. "We have essentially followed urgent care as an industry."
UH started riding the latest urgent care wave in 2000, when Lee Resnick, MD, a cofounder of the Naperville, Illinois–based Urgent Care Association of America, led an effort at UH to open new urgent care centers, McNeeley says, adding those efforts accelerated in 2008. "University Hospitals as a whole looked at access as part of its Vision 2010 initiative. … We started to expand urgent care to create greater access."
Although the scope of services at UH urgent care centers has increased over the past 30 years to include services such as x-ray imaging and blood work, improving patient access remains a key goal in the health system's strategic planning, he says. "We plan urgent care centers on access as the main criteria, making sure that we have our market share and that our footprint is where we want it."
The emphasis on patient access at UH urgent care centers is reflected in the facilities' open scheduling and business hours—from 9 a.m. to 9 p.m. on weekdays and 9 a.m. to 5 p.m. on weekends.
Beyond the bottom line
Assessing the financial impact of urgent care centers is as much art as it is science, McNeeley says. "It isn't an easy mark."
Lee Resnick, MD
With low margins and high competition relative to emergency rooms, urgent care is rarely a major source of revenue for health systems. "In and of itself, you can't expect an urgent care center to be a profit center, but it can produce sufficient downstream revenue. The goal is to be revenue neutral or net positive," he says, noting that UH urgent care centers as a whole have been able to break even financially in recent years. "We have to see a significant number of people. You can't do one patient an hour and survive in urgent care."
There are financial-dashboard metrics that can be monitored at urgent care centers. In addition to patients transferred from urgent care to a UH emergency room, McNeeley says other urgent care metrics with a financial impact on the health system include imaging services such as ultrasound exams and lab work that is sent out to UH facilities.
Some of the most important financial impacts of UH's urgent care centers are difficult to quantify, he says. "Access and patient experience is the main value of our urgent care centers. … Putting a dollar figure on that is really hard."
UH is gauging the financial impact of the health system's urgent care centers with multiple factors, McNeeley says. "First, you look at the bottom line. Second, you look at the number of urgent care patients, which generates exposure for our brand in the community. Then you look at transfers to the ED, labs, imaging, and referrals to other UH providers. This all generates money for the system. … When you look at the finances, just looking at the bottom line is short-sighted."
Urgent care centers can play a key role in boosting a health system's brand, he says. "You need to be efficient, friendly, and provide high-quality service. You're part of a health system, and you represent them at the front door. It may not show clearly financially, but it makes a big difference to your health system."
Developing partnerships
For health systems with less storied histories in urgent care, finding an experienced partner to help build and operate urgent care centers is an attractive alternative to the do-it-yourself approach.
Ron Stiver, MBA
Last year, Indianapolis-based Indiana University Health established an urgent care partnership with Premier Health, which is headquartered in Baton Rouge, Louisiana, and offers management, consulting, and joint venture services. The partners are opening three urgent care centers this year and plan to jointly operate at least 10 of the facilities in Indiana by 2017, according to Ron Stiver, MBA, president of system clinical services at IU Health, which reported net patient service revenue of $5.3 billion in 2014.
"This is a direct outgrowth of the five-year strategy we set last year … to expand and grow primary care," he says, noting other elements of the IU Health strategy include developing patient-centered medical homes to improve case management for patients with comorbidities, as well as on-site and near-site clinics to serve workers at several large Indiana-based employers. "We really wanted to put a focus on our primary care base, and the urgent care centers are part of that strategy."
Although IU Health is not expecting the new urgent care centers to generate significant net-positive revenue for the health system, several gains are anticipated, Stiver says. "We expect our urgent care centers to pay for themselves, and to provide access and convenience."
"We really wanted to put a focus on our primary care base, and the urgent care centers are part of that strategy."
The urgent care centers will open several opportunities for the health system's physicians. "New primary care physicians could start at the urgent care centers and move up," he says, adding that IU Health also plans to offer physicians the opportunity to "moonlight" at urgent care centers. "In part, we want to be a place where physicians want to work. We're in a service industry. There are recruiting battles out there in the urgent care and emergency department areas, and in primary care."
Steve Sellars
The main metrics IU Health will be monitoring at the urgent care centers are the financial viability of the clinics, service quality, and patient and physician satisfaction, Stiver says, adding that site selection is the first step in helping to ensure a clinic's success. In particular, IU Health is seeking to locate its new urgent care centers in communities with concentrations of patients who have insurance coverage linked to the health system. IU Health offers several health plans, including Medicare Advantage coverage and commercial coverage for health system employees. "It is a factor that we definitely looked at when siting our urgent care centers," he says.
Steve Sellars, CEO of Premier Health and president-elect of the Urgent Care Association of America board of directors, says the partnership between IU Health and Premier Health is based on a model that his company has perfected over the past 16 years.
"First," he says, "we focus on efficient operations—putting processes and procedures in place to operate an efficient model that ultimately results in lower patient wait times and higher patient throughput. Second is building customer loyalty. Third is setting the right financial projections." Sellars notes that several factors impact whether an urgent care center can generate sufficient revenue to sustain operations, including "payer strategy," patient volume, and costs such as staff, supplies, and equipment.
Patient volume looms large over the financial viability of urgent care centers, Sellars says. "At the end of the day, we have to have enough people walking through the door. … The average reimbursement is in the $120–$125 per visit range, which is significantly lower than reimbursement in the emergency room, which is in the $700–$800 range. Urgent care is high-volume, low-margin."
Premier Health's urgent care model features joint ventures with health systems and hospitals that have strong brand recognition, he says. "Most of our urgent care partners are hospitals with established brands in the communities we want to serve. We try to utilize the hospital brand; that is definitely part of our strategy."
In addition to capitalizing on the patient volume that urgent care centers can generate when the facilities operate under the banner of a strong health system or hospital brand, joint ventures have helped Premier Health to expand its footprint. "Each time we open an urgent care center requires a significant financial investment," Sellars says, noting the start-up costs include equipment, supplies, and the "build-out" of the clinic space. "Our partnerships involve sharing of capital expenses and other costs, which is beneficial to us versus going it alone."
The cost to open an urgent care center ranges from $500,000 to $800,000, he says, with the cost level depending mainly on whether a facility is sited at an existing retail property or requires construction from the ground up. "If you're including the construction cost for a new building, the number is going to be on the high end."
Premier Health assesses the financial standing of potential health system and hospital partners before entering any joint venture, Sellars says. "We partner with health systems that demonstrate a financial position of strength. If you are building a network of centers, you want to make sure that each of the partners has the wherewithal to follow through."
Most of Premier Health's joint ventures are 50-50 deals based on a "partnership agreement" that establishes a governance board with equal representation, he says. "In 16 years of operating partnerships with health systems, we never have had an issue that had to go to a tie-breaking vote, knock on wood. That goes to the front end, and making sure there is alignment with the partners to begin with."
Like McNeeley at University Hospitals, Sellars says there are financial metrics for urgent care centers that are relatively easy to monitor, such as patient volume and expenses, and financial impacts that are much harder to quantify.
"More generally, we look at the impact on the health system beyond the bottom line. How are we improving access to care? How are we improving our partner's brand name recognition? Are we alleviating emergency room overcrowding? Are we helping prevent readmissions at the hospital? Is there better coordination of care to help keep patients out of the ER? Then, because most health systems are self-insured, you start getting into things like cost savings for health system employees."
The lines are blurring between payer and provider perspectives on total cost of care as healthcare's payment model shifts from volume to value. Now, using a payer's methodology, providers are mastering TCOC accounting.
For decades, commercial payers have been trying to track the total medical-services "spend" of individual beneficiaries and beneficiary cohorts on an annual basis.
Providers are catching up.
The total cost of care [TCOC] calculation accounts for a beneficiary's spending in every healthcare setting along the entire care continuum, and can yield operational and competitive advantages to those who know how to apply it.
Katherine Hempstead
"Payers use [TCOC] to identify their most expensive beneficiaries. They use it to evaluate how providers are performing," says Katherine Hempstead, health insurance program director at Princeton, NJ-based Robert Wood Johnson Foundation.
Under fee-for-service medicine, providers have had far less compelling incentives than payers to focus on TCOC. "As a provider, you have to be in a risk relationship for it to be relevant," Hempstead says. Growth in risk-based contracting such as bundled payments has hospitals and physician practices focusing on costs more intensely than ever, she says.
But [providers are] "increasingly involved in risk contracts. Basically, in bundling, you are bidding jobs. You have to give a number and be able to make that number; and to make that number, you have to know your costs… You don't want to be systematically losing money on each procedure."
Now, using a payer's methodology, providers are mastering TCOC accounting.
Rooted in Insurance
Founded as a health insurance cooperative in 1957 and operating today as an integrated health system based in Bloomington, MN, HealthPartners is the national leader in measuring TCOC. HealthPartners provides medical and dental insurance to 1.5 million beneficiaries in Minnesota, Wisconsin, and the Dakotas, with a seven-hospital health system serving more than a million patients.
In January 2012, the National Quality Forum endorsed cost and resource use indexes developed at HealthPartners, marking the first attempt to standardize TCOC measurement across the country.
And in 2013, the Portland, Maine-based Network for Regional Health Improvement (NHRI) launched the Total Cost of Care Pilot program, which is designed to collect TCOC information for primary care practices. The initiative started with regional partners in five states and has added partners in six more states this year. It enables participants to share TCOC information so they can compare themselves against their peers and bear down on costly elements of their practices.
"Physicians need to see where they are spending. This information helps them manage overall costs," says Ellen Gagnon, senior project and operations director at NRHI, and project leader of the Total Cost of Care Pilot program.
For primary care practices, TCOC accounting can be a powerful decision-making tool, says Meredith Roberts Tomasi, program director at Oregon Health Care Quality Corporation, a founding partner in the Total Cost of Care Pilot program. "This information can verify assumptions they already had and guide improvement efforts," she says.
For example, TCOC data can identify cost-saving opportunities for coding improvements and it can ferret out high-priced specialists. And, she adds, "accountable care organizations want to share this information to address cost variability. It's really up to the practices to decide how this information is used moving forward."
Identifying Cost-Cutting Opportunities Analyzing TCOC information helps primary care physicians compare their practice's costs to the average costs of other practices in their markets, allowing them to "drill down on those costs," says Doug Rupp, senior healthcare analyst at Oregon Health Care Quality Corporation. "Identifying high costs creates opportunities to reduce inefficiency and waste. When you find physicians with lower costs, we can learn from them."
The longtime secrecy surrounding healthcare-service pricing deals between payers and providers is one of the biggest hurdles in tracking TCOC, Gagnon says.
"Historically and still, what health plans pay to health systems and providers has been closely held information—confidential and protected. That has made [controlling costs] more difficult than the patient experience and quality goals of The Triple Aim… We are moving out of the infancy stage [in accounting for provider costs]. More standardization will reduce the complexity of reporting. What's really challenging is bringing multiple payer information sets together."
TCOC data can help primary care physicians benchmark costs, peg the average cost to care for a group of patients, and assess the factors that impact negotiated prices for medical services, Rupp says. "[TCOC] is different than price and it's different from what goes into services."
Intermountain Healthcare's Cost Quest
Rather than tracking TCOC to gauge the total annual healthcare spend for the patient population in their markets, a handful of health systems have been measuring and monitoring the total cost of their medical services. This form of cost accounting helps health systems track total spending by healthcare setting, as opposed to TCOC's actuarial objective to track the total spending of patients over an entire healthcare market.
Salt Lake City-based Intermountain Healthcare has been tracking the cost of procedures, materials, and patient services since the early 1980s, says Greg Poulsen, senior vice president and chief strategy officer at the not-for-profit integrated health system. He compares Intermountain's cost-accounting methodology, to supermarket pricing.
"It's like a smorgasbord," Poulsen says. By pricing out the cost of 18,000 procedures, materials, and services, Intermountain "can understand, in real time, the costs of two different physicians… We can calculate the cost of having twins rather than [the cost of] having a single baby."
Greg Poulsen
For providers, there are several operational and competitive advantages to tracking costs closely, he says. "We've been doing it nonstop for 30 years. It gives good analytical capabilities and an early warning system for changes, whether they're good or bad. [Instances of] identifying new approaches have yielded cost improvements and quality improvements simultaneously."
High prescription drug prices have been healthcare-industry headline fodder since the marketing of the hepatitis drug Sovaldi in 2013. Intermountain detected the oncoming wave of costly medications at least a year earlier, Poulsen says. "We started to see the first wisps of that about three and a half years ago in some areas. Sovaldi and Harvoni are the [iconic costly drugs] now, but we saw cost increases in generic drugs. We were able to identify some of those. We identified that there were a number of drugs that had been around a long time or generic drugs that had all of a sudden become more expensive."
With a wealth of cost information stretching back three decades, Intermountain can conduct valuable analytical exercises, he says.
"We can slice it and analyze it in ways that we now know may be useful, which is what we did in the area of mental health integration [with primary care]. What the data shows is the cost of primary care goes up somewhat, not surprisingly. But hospital visits go down dramatically. The number of ER visits goes down significantly. If you look at the whole, it ends up saving thousands of dollars per year [per patient]. It's good to have real cost savings information available. The lack of this information has led to some of the strange cost anomalies we have seen, with high prices at some doctors [practices] and hospitals. That ends up in the lay press as shocking information."
As the retooling of the healthcare industry with telemedicine capabilities advances, the technology is supplementing rather than supplanting traditional modalities of medical service delivery.
As a veteran of the newspaper business, I have experienced the fear and loathing of outsourcing firsthand: market-driven consolidation of an industry and the rounds of layoffs that follow.
The outsourcing of some medical services through the use of telemedicine appears to be moving in a kinder and gentler direction.
Bloomington Radiology of Normal, IL, started contracting telemedicine services from Eden Prairie, MN-based vRad about eight years ago. A measure of handwringing at the radiology practice accompanied the deal, says Practice Administrator William Wilson. "It was a nervous move for a variety of reasons, but it's turned into a source of supplementing the practice," he says.
William Wilson
For Bloomington Radiology, the partnership with vRad has boosted staffing of the practice and expanded the range of services the practice offers.
The ability to rely on vRad radiologists to cover shifts on nights, weekends, and holidays has been a significant business gain for the practice, Wilson says. "It provided an opportunity to provide services 24/7… and costs far less than having an in-house person cover those shifts."
With a telemedicine partner, Bloomington Radiology is capable of providing more services with fewer staff radiologists, he says. The practice peaked at 15 staff radiologists several years ago, but employs 11 physicians now while delivering a 10% increase in service volume. The vRad partnership also helps control staffing costs, Wilson adds. "We know exactly what our costs are going to be with vRad… The work gets done. There are no 'I'm sicks' and no 'I quits.'"
With vRad radiologists available at all times, Bloomington Radiology is providing patients every kind of subspecialty exam except advanced pediatric care, he says. The practice provides services at three hospitals, including a facility that treats a high volume of neurology patients, and the ability of vRad to expand Bloomington Radiology's neurological exam capacity has become crucial to the practice's success. "That demand is really hard to handle, but vRad helps us meet [it]."
Despite all of telemedicine's advantages, Wilson says there will be limits within radiology for the foreseeable future. "I'm a huge advocate of outsourcing, but it has to be proper outsourcing." It is critically important, he says, for radiology practices to have staff radiologists working closely with their local hospital partners. "Relationships are everything in this business. You have to be careful in outsourcing the group's functions."
Telemedicine's Scale, Scope, and Efficiency
With 350 physicians, vRad provides services to 2,000 healthcare facilities in the United States and 10 other countries, according to Chief Information Officer Shannon Werb.
The majority of vRad clients are radiology practices that need "subspecialty coverage in the middle of the night," he says. "We're the market leader. We have made considerable investments in technology. We provide the complete service 24/7."
The telemedicine outfit provides more than clinical services, says David Trachtenberg, vRad's chief solutions officer. "We're more than a clinical provider; we provide insights for our clients," he says.
vRad has access to a wealth of radiology exam information and collects data that allows clients to track performance metrics and compare that data against their peers. "We're an information provider to help clients make better decisions, whether that's on the cost side or the revenue side… Clients are actually managing their service lines with the information we're able to provide them," Trachtenberg says.
'We're Active. We're Involved.'
Bloomington Radiology uses vRad analytics to help show its hospital partners how they can improve their performance. vRad tracks key metrics such as exam volume, which can identify hospital physicians who are ordering the most radiology exams. "It shows that we're active; we're involved," Wilson says.
The scale, scope, and efficiency of vRad's services generate financial gains for health systems, hospitals, and radiology practices, Trachtenberg says. "We're able to deliver services in a much more cost-effective manner because of our scale," he says, noting the costs associated with recruiting and paying full-time subspecialists such as neuro-radiologists. "We provide [that expertise] on-demand."
Benjamin Strong, MD, who serves as vRad's chief medical officer, says the telemedicine outfit offers a uniquely broad range of clinical services, including 24-hour coverage for several hospital neuro-stroke centers. "It is very important to these hospitals to have this service… It is an unreasonable expectation that hospitals and radiology practices will have the full gamut of services," he says, "We run the whole gamut."
Telemedicine for Language Interpretation
Atlanta-based Northside Hospital health system began ramping up its use of virtual remote interpretation (VRI) on iPads last December. "We've been heavily using this technology for almost a year, says Interpretation Services Coordinator, Darrin Bearden. "Because we’ve only used the technology for a year, we can’t yet attest to the financial benefits – but I do know we are more efficient."
In a partnership with Clearwater, FL-based Stratus Video Interpreting, Northside started using VRI in the health system's Atlanta hospital emergency department about three years ago to help serve patients who communicate in American Sign Language. "Last December, we introduced 145 iPads all at once," he says.
A decline in the average duration of interpreter encounters with patients shows that the VRI service has improved efficiency. The hospital tracks the duration of in-person, telephone and VRI interpretation encounters. "I've seen the average duration go down five minutes. We did the same amount of work [on iPads] in less time."
Northside operates three hospital campuses and "is currently purchasing physician practices all over Metro Atlanta. We're also purchasing imaging centers," Bearden says. Sending an interpreter to an off-campus physician practice is usually not cost-effective when accounting for the costs of travel, parking, and waiting for the physician visit to begin. "It's not cost-effective for us to send someone. [With VRI], we're only paying for what we really need. It reduces that down-time cost."
'Looking for the Balance'
With Stratus offering VRI for 17 languages and Northside serving a patient population that speaks 90 languages, the health system has no plans to stop hiring staff members to conduct in-person interpretation. Bearden says there will always be a need to have staff interpreters.
"It's an enhancement to our services. Traditionally, we had the telephone and the in-person. Obviously, those are two extremes… I do not want to get rid of the in-person interpreters. In-person communication is a more caring, empathetic approach. I'm looking for the balance between the video and the in-person interpreters."
As telemedicine matures in the years to come, the outsourcing balancing act is likely to play out in every sector of the healthcare industry.
"What has emerged, more and more, are atypical relationships that aren't focused on ownership; they're focused on leveraging the strength of our partners," says one senior executive.
This article appears in the October 2015 issue of HealthLeaders magazine.
For health systems across the country, clinical affiliations have emerged as an attractive alternative to mergers and acquisitions, which come with ownership stakes attached.
Most health system clinical affiliations feature relationships with local medical service providers that help the hospital group cost-effectively fill gaps in the organization's care continuum, such as partnerships with independent urgent care centers. Junior partners gain several financially related benefits from health system clinical affiliations, including service volume growth and the ability to maintain most, if not all, of their independence.
"There is a tremendous amount of potential from partnerships," says Thomas Blincoe, executive director of outreach for The Ohio State University Wexner Medical Center and executive director of Ohio State Health Network, a regional affiliation of 15 community hospitals centered around Ohio State University Wexner Medical Center in Columbus. "What has emerged, more and more, are atypical relationships that aren't focused on ownership; they're focused on leveraging the strength of our partners."
For the fiscal year ending June 30, 2015, OSU Wexner Medical Center posted total gross revenues of $7.3 billion.
Two of the country's largest hospital associations are applauding recent changes to the two-midnight rule, but they say the Medicare payment regulation for short hospital stays remains a work in progress.
The beginning of the end could be in sight.
Changes to the two-midnight rule announced Oct. 30 are welcomed, but fall short of fixing the Centers for Medicare & Medicaid Services' regulation, according to two hospital associations.
Controversy has swirled around the rule from the start, with many healthcare providers calling for the hospital admission guidelines to be significantly revised or scrapped.
Priya Bathija
"It's been a long process to get to this point, where CMS is making meaningful changes. It's a good first step and a move in the right direction," says Priya Bathija, senior associate director for policy at the American Hospital Association.
A bit of history before diving into the changes: In October 2013, CMS officials implemented new guidelines to determine when a short hospital stay qualifies for payment under Medicare Part A, which reimburses hospitals at a higher rate than Medicare Part B. Under the guidelines released two years ago, hospital stays spanning less than a period of two midnights were not considered appropriate for Medicare Part A reimbursement.
The original rule riled providers and presented hospitals with a revenue problem. CMS heard the discontent and in early 2014 announced that enforcement of the rule would be delayed while it sought to clarify admission guidelines.
The updated rule, set to go into effect Jan. 1, has two key elements.
First, hospital stays that span a period of less than two midnights could be eligible for reimbursement under Medicare Part A based on a physician's clinical judgment, which will be subject to review on a case-by-case basis. According to the changes announced Oct. 30 as part of the 2016 Outpatient Prospective Payment System final rule: "The physician's decision should be based on such complex medical factors as patient history and comorbidities, the severity of signs and symptoms, current medical needs, and the risk of an adverse event," the 2016 OPPS final rule states. "The decision to admit the patient as an inpatient must be supported by the medical record."
Last week, a CMS spokesman told me that other factors will also be considered, including "the need for diagnostic studies that appropriately are outpatient services in rendering their payment determination. Additionally, CMS will examine and evaluate applicable claims data and any other data available in order to determine whether any patterns of case-by-case exceptions exist that may be adopted as national exceptions."
In the second major change, the initial federal review of disputed hospital admissions under the two-midnight rule is being shifted from Medicare's Recovery Audit Contractor (RAC) program to the agency's Quality Improvement Organization (QIO) program. Hospital officials have been highly critical of having RACs control the entire review process. These officials have accused auditors of overly zealous enforcement because they bank a percentage of short hospital stay reimbursements that are deemed inappropriate for Medicare Part A billing.
Both of the changes to the two-midnight rule are positive, to a point, Bathija says.
Welcome Changes
"Our members are currently using a variety of tools to determine whether someone should be admitted as an inpatient [and be eligible for Medicare Part A reimbursement]," she says. "We believe CMS should allow for a wide variety of tools."
In the 2016 OPPS final rule, CMS officials have struck the right balance in giving physicians leeway for exercising clinical judgment for short hospital stays, Bathija says. "That is the right language. We are happy that CMS has left this broad."
Ivy Baer, senior director for government relations and public policy at the American Association of Medical Colleges in Washington, DC, says allowing physicians to exercise clinical judgment in administering short hospital stays is a leap forward. "I would not characterize the change as an exception to the two-midnight rule, but as a recognition of the importance of physician judgment… regarding the appropriate care and care setting for any particular patient. There are no specific criteria, nor should there be, as relying on judgment requires a case-by case decision."
Tweaking the rule to account for clinical judgment is appropriate, but CMS is moving too quickly, Bathija says, noting that AHA has asked the federal agency to delay the rule changes until March 31. "We need to re-train physicians on how to determine patient [admission] status."
Taking RACs out of the initial review process of claims that may violate the two-midnight rule is a "very positive change," Bathija says. "It will diminish the high volume of denials from the RACs. We're hopeful there will be a smooth transition."
Unlike the animosity that has been building between hospitals and RACs, most hospitals have good relationships with their QIOs, which use physicians to review claims, she says.
While the AHA applauds inserting QIOs into the initial review of claims disputed under the two-midnight rule, the hospital association has adopted a watchful-waiting stance, Bathija says. "One of the key unknowns is the referral process from the QIOs to the RACs. At this point, we don't know how that is going to work."
The CMS spokesperson told me that the agency expects a sharp reduction in RAC involvement in claims disputes involving the two-midnight rule, at least in the short run:
"QIOs will refer providers to the recovery auditors based on patterns of practices such as high rates of claims denial after medical review or failure to improve after QIO assistance… Accordingly, we do not expect substantial recovery auditor medical review activity for such claims for several months. CMS believes this will result in a common understanding for when inpatient admissions are appropriately payable under Part A consistent with the two-midnight rule."
Skepticism Remains
The AHA and AAMC are cautiously optimistic about the changes to the two-midnight rule, but other members of the medical community are skeptical at best.
Ronald Hirsch, MD, FACP
CMS should be more specific about how physicians exercise clinical judgment on patient admission status, says Ronald Hirsch, MD, FACP, a vice president at Chicago-based Accretive Health and former medical director at Advocate Sherman Hospital in Elgin, IL. "CMS has provided two criteria for when this exception can be used: 'rare and unusual' with no definition of how rare something must be, and 'risk' and 'severity of signs and symptoms' without any indication of how high a risk or how severe the signs and symptoms. Without concrete guidance on these, I would advise hospitals [to] never use this exception."
More changes to the two-midnight rule seem inevitable, he says.
"No system will ever be perfect; for any iteration there will be confusion and potential ways to game it, but simplicity should be the goal. The [Oct. 30] changes made things more confusing. Every exception added creates more confusion. Instead of adding exceptions, CMS should adjust reimbursement for those services."
"For example," says Hirsch, "instead of an exception for unexpected mechanical ventilation, CMS could have just increased the outpatient payment for any patient that required mechanical ventilation. With this new exception, CMS could have designated specific one-day stays that are high-risk and/or severe, and increased payment for those specific diagnoses, such as acute myocardial infarction or stroke."
Apparently, the final chapters of the two-midnight rule saga have yet to be written.
For more details, see the CMS final rule that is set to be entered into the Federal Register this week.
Health system revenue cycle teams are deploying several strategies to maximize revenue in financially lean value-based business models, such as building strong financial relationships with patients to boost point-of-service and billing collections.
This article appears in the October 2015 issue of HealthLeaders magazine.
With the shift from volume to value in healthcare, efficiency gains and a widening scope of responsibility are transforming revenue cycle operations. Health system revenue cycle teams are deploying several strategies to maximize revenue in financially lean value-based business models, such as building strong financial relationships with patients to boost point-of-service and billing collections. Information technology is playing a key role in the transformation process.[Sponsored by Bank of America Merrill Lynch]
In the "Great Capitation Debate of 2015," a semi-fictional duo goes head-to-head with opposing perspectives on the dawning of the value-oriented era of healthcare.
With public payers accelerating adoption of value-based payment models and commercial payers launching their own value-based initiatives, the delivery of medical services is shifting away from fee-for-service payment, the economic model that has dominated the healthcare industry for generations.
James "Larry" Holly, MD
The shift away from fee-for-service payment has reignited interest in capitation, one of the economic building blocks of the health maintenance organization era in the 1980s and 1990s.
To debate the issue and peer into the future of the healthcare industry, I've assembled a semi-fictional duo with opposing perspectives on the dawning of the value-oriented healthcare era. The format gives each debater about 500 words to answer a handful of questions about the role capitation could play in the evolving economics of the healthcare industry.
Arguing for capitation, and maintaining that its time has come with a vengeance for a second time is James "Larry" Holly, MD, CEO of Beaumont, TX-based Southeast Texas Medical Associates (SETMA).
Reginald Thump Image: TLB Designs
Arguing against capitation on the belief that it is no more than a partial substitute for unfettered fee-for-service medicine is Reginald Thump, wealthy Manhattan businessman and candidate for president of the United States.
HLM: Is healthcare capitation here to stay this time around?
Thump: First ofall, let me say I don't have a plan for the future of the healthcare industry, but I have a vision for a plan, which is great for the American economy and great for the American people.
Traditional capitation is a hugely problematic payment system—hugely problematic. Under this model, a healthcare provider receives a fixed payment for every patient, regardless of health, and the provider is expected to provide all of the care that patient needs.
If providers get very sick patients, they can go bankrupt. This creates unfortunate incentives to cherry pick patients and to deny patients needed care.
Not even health insurance companies are willing to accept true capitation payments for Medicare patients. All payments to Medicare Advantage plans are risk-adjusted. Yet many Medicare Advantage plans try to pay providers on a traditional capitation basis, which means the health insurance company profits by giving more risk to the providers than the health insurance plan takes from Medicare.
The new health insurance exchanges have risk-adjusted transfer payments to protect health plans from adverse selection, but capitation contracts do not have similar protections for providers. Health plans have large reserves to protect themselves from random variation in costs, but providers have no similar reserves to manage risk under capitation.
On the other hand, health systems and multi-specialty providers can take risk-adjusted global payments from Medicare or a commercial health plan. Under risk-adjusted global payment, the provider receives more money for sicker patients to reflect the fact they need more care.
No individual physician can accept capitation or even a risk-adjusted global payment. Capitation or risk-adjusted global payments have to be accepted by a large group of physicians, an independent physician association (IPA), or a health system. And that means there still has to be a way to pay the individual physicians and hospitals for the services they deliver. Many physician IPAs accept capitation payments from health plans, but they still pay individual physicians using fee-for-service, which means fee-for-service is here to stay.
Holly: Capitation will last "this time around," but only if it is joined with a value-based payment system with quality-outcomes bonuses and analytics-based demonstration of continuous performance improvement.
SETMA, founded in August 1995, began working in a capitated, global-risk care model in March 1996 through an IPA. By 2000, a fifth (20%) of our payment came from capitation, which grew to a present-day 40%.
When we began in 1995, we measured performance by volume, including charges, collections, patient visits, and X-ray and laboratory tests. By October 1997, we were failing financially. We had not changed the cost curve and our IPA was losing money every month.
SETMA decided to "capitate" laboratory services for IPA members, a decision that cost SETMA $50,000 in profit a month. It was hard, but it was critical to the success of our IPA and to changing to a value-based model of care. With this capitation approach, the IPA was solvent and growing in 90 days.
HLM: Are there adequate information technology capabilities in the healthcare industry to amass, analyze, and distribute the data necessary to support capitation?
Thump: Data systems are much better now than in the past, but data systems are only as good as the data that the dummies running healthcare have been collecting.
In many cases, key characteristics of patients that affect how much it will cost to care for them are not collected, which is huge! HUGE. For example, the stage of cancer is a key factor determining the cost of cancer treatment, but stage of cancer is not coded even under ICD-10. So a data system that depends on ICD-10 codes will not be able to accurately determine whether the cost of cancer care is too high or to predict whether a capitation payment will be adequate to cover the costs of treatment.
The importance of an IT system depends on whether it is the primary method being used to control costs, or whether all of the individual physicians are working to control costs within their practices. If the individual physicians are working to control costs, then the data system is only needed to help with care coordination.
Holly: Healthcare IT is mature enough to provide support for capitation, analytics, and pay-for-performance contracting.
The foundation of successful capitation is analytics. One of the deficiencies with the previous experience with capitation was that primary care providers often simply referred patients to specialists without seeing them.
In May 1999, SETMA defined 10 principles of practice growth and medical record development. In 2000, we expanded our statistical analytics to populations of patients.
Combining capitation with population management and performance improvement creates a perfect platform for payment by quality rather than quantity, or payment for value rather than volume. This approach eliminates the historical abuse of capitation.
HLM: Can a sustainable customer-experience model be crafted to support capitation?
Thump: Absolutely. You just do it!
If the global payment structure is used to pay individual providers in ways that support better patient care, the patient experience can be better. Under a properly structured payment model, patients will not be denied care by a distant bureaucracy's dummies trying to control costs.
But you have to cut a good payment deal. Whether payment is through fees or capitation, if payment is high enough, a good customer experience can be offered. If payment is too low, patients will have a bad customer experience.
Holly: Patient-centric healthcare is the ideal model for "sustainable customer-experience" in a capitation environment.
Transformation is self-sustaining, generative, and creative. In this context, SETMA believes that efforts to transform healthcare may fail unless four strategies are employed:
The methodology of healthcare must be electronic patient management.
The content and standards of healthcare delivery must be evidenced-based medicine.
The organization of healthcare delivery must be based on patient-centered medical homes.
Capitation is the best payment methodology for healthcare delivery paired with additional reimbursement for quality performance and cost savings.
HLM: Is capitation unsustainable in some local markets, or is it a universal payment model for the healthcare industry?
Thump: Capitation or global payment is designed to support the entire range of services that a group of patient needs. In rural communities, not all of the services are delivered locally, which makes it difficult for any local provider to accept responsibility for the cost and quality of all services.
Capitation is not a universal payment solution for healthcare. In some markets, it will be a two-time loser.
Holly: Finally some common ground with Thump! The limitations of capitation are based on volume of patients, not volume of services. There is nothing unique about one market or another, except in the case of rural areas, where the numbers of patients are so small that they may make payment by performance and cost savings difficult to compute.
New Jersey's Blue Cross Blue Shield affiliate is taking a cooperative approach to episodes-of-care contracting with orthopedic surgeons and other medical service lines, generating care benefits for patients and sustainable financing for healthcare providers.
With Medicare making many hip and knee replacement procedures subject to mandatory bundled-payment contracting, Horizon Blue Cross Blue Shield of New Jersey has created a bundled-payment offer that is far more attractive to physicians.
"Horizon actively engaged the physicians first—before initiating the program," says Stephen Zabinski, MD, a practicing surgeon at Shore Orthopaedic University Associates and co-author of a January 2015 bundled-paymentsreport in The Journal of Arthroplasty.
Stephen Zabinski, MD
"It's been a positive experience working with them," he told me.
Zabinski's Somers Point, NJ-based practice is one of five charter members of the bundled-payments program for hip and knee replacements that began at Horizon about five years ago, according to Lili Brillstein, Horizon's episodes of care program director. "It has changed the nature of the relationship. I've heard a lot of doctors say they have a lot of satisfaction with the Horizon program," she says.
She says Horizon has one of the widest arrays of bundled-payment models nationwide, including contracts for cardiology, colonoscopy, obstetrics, oncology, and orthopedics. Bundled payment for congestive heart failure (CHF) and oncology services are the newest models at Horizon. "They're all growth programs," Brillstein says.
In the journal report, Zabinski and co-author James Doran concluded: "We have been able to successfully decrease the cost of the [hip and knee replacement] episode of care in comparison to our historical averages prior to 2011. This cost reduction has primarily occurred through decreased length of inpatient stay, increased discharge to home rather than to a skilled nursing or inpatient rehabilitation facility, reduction in implant cost, improvement in readmission rate, and migration of cases to lower cost sites of service.
"Participation in the bundled payment program has resulted in higher practice reimbursement through shared savings payments. Our practice's total joint volume during this time has grown and patient satisfaction and functional outcomes have remained strongly positive."
Surgeon's Critique of CMS Bundled Payments
Flexibility is one of many advantages of working with Horizon as opposed to the Centers for Medicare & Medicaid Services (CMS), Zabinski says. "Horizon New Jersey is a smaller entity than the federal government, so it's much easier to work with them and request modifications of the program."
In particular, the surgeon says, financial components of the Horizon hip and knee replacement program are more flexible than CMS' Comprehensive Care for Joint Replacement (CCJR) model, which is set to take effect Jan. 1, 2016.
A crucial consideration for physician practices is that Horizon's bundled payment contracts cushion the financial blow of cost-outlier cases, he says. In stark contrast to CCJR, the Horizon contracts also exclude complete joint replacement for the most costly acute episodes of care, such as fall-related broken hips and bundle-budget-busting "revision" knee replacements that require implants and lengthy recovery times.
"Dealing with outliers is not addressed in the Medicare model. If you don't throw out the outliers, the government wins. … The Medicare model doesn't allow for ambulatory surgery center procedures. … The Medicare population is a bunch of different patient populations," Zabinski says, noting that an active 67-year-old with no chronic conditions is a far cry from an 87-year-old with multiple chronic conditions who needs joint replacement to improve quality of life. "What one person needs is often not the same as what another person needs."
Zabinski has several other reservations over the proposed rules for CCJR:
Benchmarking blemishes such as a two-year historical performance standard and inadequate allowance for practices that start bundled-payment contracting at high efficiency levels. "When Medicare comes in and applies that model to me, I have nowhere to go," says Zabinski. His practice has adopted the care-redesign elements of the Horizon bundled-payment program for all patients, including preoperative patient engagement to screen patients for risk factors such as obesity and diabetes, wellness interventions to limit risk factors, and empowering physicians to quarterback care management. "Ultimately, the physician is engaged in the care of the patient more than the hospital."
CCJR's mandatory imposition in dozens of urban markets nationwide in January is too much too fast, he says. "I don't have much of an issue with this being a mandatory program, but I think it should be phased in. It's set to go into effect January 1, 2016, and many practices are not going to be ready for it."
Putting hospitals in the administrative driver's seat for bundled payments is an "egregious error" in CCJR. "There must be a hospital-physician co-management structure in place."
Changing the Dynamic Between Provider and Payer
For bundled payments to be successful at physician practices, "there's real transformation that has to occur," Brillstein says. Horizon urges physician practices to embrace episode-of-care payment contracting, data-sharing, and best practices for quality and care management, and to post positive clinical outcomes. "It's quite remarkable. We really are changing the dynamics between two sparring partners."
Horizon's bundled-payment contracts feature upside risk only, quarterly retrospective reporting and reimbursements, patient stratification, and efficiency-promotion measures. "Invariably, there are savings to be found," she says, noting that standardization and optimization lower costs.
Horizon's oncology bundle has a sophisticated patient-stratification mechanism out of necessity, she says. "In cancer, it can be very different if you are Stage 1, Stage 2, or Stage 3. [Cost of care also] depends on the kind of the tumor. It's biomedical stratification."
Horizon is set to launch monthly respective reporting by the end of 2015. "We're very close to it."
Finding the Triple Aim in Bundled Payments
Horizon's bundled-payment contracts for hip and knee replacement exemplify how value-based payment models can be crafted economically and benefit patients, Zabinski says.
"Patient satisfaction and quality care is aligned with cost reduction. … The better a patient is prepared for surgery, the better the clinical outcome. There is improved surgery technique and decreased complications. You can increase quality, increase patient satisfaction, and decrease costs all at the same time."
Value-based payment models have the potential to improve the historical shortchanging of U.S. patients, he says. "Our health system has been tremendously wasteful. [The healthcare industry has provided] suboptimal care at high cost. In the cases of CHF and diabetes, these conditions have not been managed the way they should be managed."
Horizon views bundled-payment contracting as a step forward for the healthcare industry and patients alike, Brillstein says. "It's more like managed care was meant to be: collaborative."
