Health systems are boosting their level of investment in startup companies and new technologies.
Health systems have been hotbeds of innovation investment for two decades, but their interest in bankrolling startup companies and new technologies appears to be reaching a fever pitch.
"This is a very popular trend right now," says Paul Wallace, MBA, managing director for Heritage Group, a Nashville-based firm that has been investing in healthcare innovation for 30 years.
Market forces and regulatory pressure to launch reform efforts are compelling health systems nationwide to jump on the innovation investment bandwagon, Wallace says.
"They want to be seen by their market, their employees, their doctors, and their boards as innovative. As we move from volume to value, these organizations are going to be making significant changes in the ways they deliver care. They need to make sure they are leaders and not followers."
He says health systems have three primary innovation investment strategies: external funds such as Heritage Group, internal investment houses, and an "ad-hoc" approach. "There's been a proliferation of these multiple platforms over the past few years."
Earlier this month, Heritage Group announced it had closed its second nine-figure healthcare innovation investment fund at $220 million. Heritage Healthcare Innovation Fund II exceeds the value of Fund I by more than $50 million, Wallace says. "It's considerably larger."
Heritage Group has raised capital from more than a dozen health systems that operate more than 550 hospitals, including Adventist Health System, Intermountain Healthcare, Memorial Hermann Health System, Sutter Health, Tenet Health and UnityPoint Health.
"We're backed by strategic partners rather than financial partners," Wallace says. "All of my limited partners are interested in solutions for patients, increasing quality and delivering value… If we can't bring value to the table, we're going to look for other opportunities."
An Internal Approach to Innovation Investment
In the internal healthcare innovation investment category, there are several established health system players, with a handful matching or exceeding Heritage Group's level of committed capital:
Kaiser Permanente Ventures: More than 15 years of innovation investment experience, high-profile limited partner investors such as Tufts Health Plan, and about $400 million in committed capital
Partners HealthCare, Partners Innovation Fund (PIF): Established in 2007 with a commitment of $35 million from two of Partners HealthCare's hospitals, Brigham and Women's Hospital and Massachusetts General Hospital; focused on innovations in therapy, diagnostics, information technology, and medical devices. PIF has attracted more than $800 million in startup capital for the fund's investments
Cleveland Clinic Innovations: CCI has helped launch more than 75 companies; the investment house has more than 2,700 patent applications, with about 700 issued patents; and companies associated with CCI have drawn more than $910 million in equity investment
Yale-New Haven Health System, which has three hospital campuses in southern Connecticut, is one of the recent entrants in the internal healthcare innovation investment market.
In 2014, YNHHS and several Yale University partners such as the Yale School of Management launched the Center for Biomedical and Interventional Technology.
CBIT specializes in startup and gap funding as high as $50,000 per project. Yale's internal healthcare investment house has identified and supported more than 100 faculty- and student-driven medical device projects such as new technology for scoliosis braces.
At CBIT, developing innovative products that benefit patients and cut healthcare costs is just as important as generating return on investment, says Executive Director Christopher Loose, PhD.
"The funding projects we participate in, like Connecticut Innovations Pipeline, seek projects that are within 12 months of being ready to raise funding to develop new technology that has a solid business justification and can have huge patient impact. The best ideas both improve patient health and take costs out of the healthcare system," he says.
ROI is more of a practical goal than an investment imperative for CBIT, Loose says. "It is important that a new product concept has a favorable ROI that will justify the follow-on investment needed to take the product through development, approval and launch so that it reaches patients who need it."
During last month's National Symposium on Value Innovation at Yale, Yale-New Haven Hospital CMO Thomas Balcezak, MD, MPH, said the health system's participation in CBIT is patient-driven.
"We're not an investment company, but I do know we have problems we need to solve," he said. "Because this is not our core business, we need strategic partners that we can leverage to improve the clinical care that we deliver."
YNHHS, Balcezak said, is relying on CBIT to help answer a key innovation investment question: "Where do we need to partner with organizations that improve value at the bedside for our patients?"
CBIT focuses on patient need when targeting projects for financial support, Loose says. "CBIT looks to the size as well as the intensity of the unmet need in prioritizing projects. It often takes the same cost and effort to solve a small problem as a big problem with a new biomedical technology."
In North Carolina, WakeMed Health & Hospitals is seizing on a geographical advantage to engage in ad-hoc innovation investing, says Michael Browning, executive vice president and CFO of the Raleigh-based health system. "We are in the Research Triangle in North Carolina, where there is a lot of innovation that is amazing," he says.
"We are investing in companies that are developing technology that is aligned with healthcare. People are coming to us and asking, 'Will you help us put this together?'"
First, he says, "they need investment of financial resources to develop technology, but then they also need our assistance with piloting and supporting the product. One of these companies has the capability of providing very quick access to a primary care physician on your smartphone. This is available today."
"With today's younger generation," he continues, "they want immediate access to a physician and their smartphone is their tool of choice. It is important for us to be part of this innovative way to treat patients. It will be an avenue for us to align practitioners and patients with our organization. Being part of the Research Triangle has opened my eyes to how innovation and technology are an integral part of the future of healthcare."
WakeMed's senior leadership team is considering whether to advance from ad-hoc innovation investment to a more permanent internal approach, Browning says.
"In the near future, we will be assessing a proposal to allocate a portion of the investment portfolio to healthcare innovation."
Athenahealth's annual survey of health plans puts a premium on metrics that gauge healthcare providers' experiences with their payer partners.
For the first time, Cigna has earned the No. 1 ranking for overall performance in Athenahealth's annual PayerView Report of for-profit and nonprofit health plans.
The 11th edition of the EHR, practice management, and population health services company's PayerView Report ranked 215 health plans on eight performance metrics. Last year's report ranked 166 payers on nine metrics, with Bloomington, MN-based HealthPartners earning the No. 1 honor.
Healthcare providers' experiences with their payer partners looms large in the PayerView Reports and is a primary focal point at Cigna, says Julie Vayer, vice president of total health and network operations at the commercial payer.
"Cigna has thousands of people who work hard every day to do right by our customers, clients, and healthcare providers. This is particularly important to us since the experience providers have with us affects both customers' perceptions of Cigna and our ability to be providers' partner of choice in emerging value-based care models."
The Top 10
Blue Cross Blue Shield health plans dominated the rest of the Top 10 of the 2016 PayerView Report:
According to the report: "Three factors appear to be largely responsible for [BCBS] success:
Leveraging collaboration across the Blue Cross Blue Shield association and parent company;
Encouraging a focus on quality improvement efforts, including sharing of best practices; and
Centralizing guidance on key initiatives (e.g. ICD-10)
The Blues scored well on several performance metrics such as claims denial rate, posting a 6% average denial rate compared to a 9.2% average denial rate for all health plans that were surveyed.
Connecticut-based Cigna has about 37,000 employees in 30 countries, according to the company's 2014 Corporate Responsibility Report, which pegged total revenue at $34.9 billion in 2014. The company's large scale poses a challenge in terms of claims administration performance, Vayer says.
"Being a large national payer means we process a huge number of claims across multiple product lines and states. That makes our job enormously complex as we strive to process claims accurately and quickly."
Investing in technology, administrative capabilities and personnel have been critically important to rising to the scale challenge, she says.
"This includes specific investments to further improve claim accuracy, since we know how critical that is to providers. However, while technology is important, it's not the only factor that drives performance."
"We have also focused on embedding the right business logic into our systems so that administrative issues are minimized for customers and providers," says Vayer.
"And they can focus on getting and delivering the right care. And we've also invested in our people, because it takes well-trained people in addition to technology to get results we can all be happy with."
Methodology
The assessment methodology of the 2016 PayerView Report is based on nine measures of claims-handling proficiency:
Cigna scored well on all three of the metrics with the highest weights, Vayer says.
"Our goal is for providers to view us as being easy to do business with. We see our performance on several key metrics that account for 50% of the PayerView score—days in accounts receivable, first-pass resolve, and denial rate—as validation of our efforts. These metrics have the most weight because they're the ones that matter most to healthcare providers."
The most ambitious attempt in a generation to redesign the way physicians are paid for providing services to Medicare beneficiaries is a work in progress.
Physicians are far from the only healthcare providers facing high stakes in the proposed rule for Medicare's Merit-Based Incentive Payment System (MIPS) and associated regulations for alternative payment models (APMs).
MIPS and APMs are the heart and soul of the Medicare Access & CHIP Reauthorization Act (MACRA) of 2015 that Congress enacted last year to replace the widely reviled Sustainable Growth Rate (SGR) formula for physician reimbursement.
Officials at the American Hospital Association say the proposed rule for MACRA released on April 27 is just as important for health systems and hospitals as it is for physicians who receive reimbursement payments from Medicare.
"We have been watching this particular rule with a great deal of interest," says Akin Demehin, senior associate director for policy at AHA.
"It really comes down to the fact that hospitals currently employ somewhere in the neighborhood of 240,000 to 250,000 physicians, and we have contractual relationships with another 290,000 to 295,000. So hospitals and their physicians are partners in delivering care in their communities. This rule matters a great deal to hospitals as well as physicians."
MACRA rules are going to play a key role in helping to guide all healthcare providers away from business models structured for fee-for-service medical care to value-based business models, says Melissa Jackson, who also serves as a senior associate director for policy at AHA.
"As we see the field shift away from volume-based care into more care that rewards high value, the incentives are for hospitals and physicians to work more closely together," she says.
"We're seeing shifts in the relationship—where even when physicians are not employed, hospitals and physicians are forming tighter affiliations. So, particularly with the incentives that are embedded in the new physician payment system under MACRA, and the emphasis on the alternative payments models and value-based payment, that helps align incentives across hospitals and physicians."
"Although this is physician payment, there's a growing sense among our members that 'us is them,' that this really impacts hospitals," adds Jackson.
The 962-page proposed rule for MACRA provides details for implementation of MIPS and APMs. Highlights of the proposed rule include:
The first performance period for the new payment system is slated to start in 2017, with payment adjustments beginning in 2019. "This time frame is needed to allow data and claims to be submitted and data analysis to occur," the proposed rule says.
The categories of clinicians who would be eligible for Medicare reimbursement through MIPS are physicians, physician assistants, nurse practitioners, clinical nurse specialists, and certified registered nurse anesthetists.
Scoring of APMs would be based on four MIPS performance standards: quality, resource use, clinical performance improvement activities, and "advancing care information." CMS says the primary goal of the advancing care information standard is to replace the existing Meaningful Use program with a new approach that "increases flexibility, reduces burden, and improves patient outcomes."
Clinicians would only qualify for APM payment incentives if they participate in an "Advanced APM," which would have three main characteristics: the APM would be required to use CMS-certified electronic health record technology, payment would have to be based on quality measures similar to those used in the MIPS quality performance category, and the APM would have exposure to downside risk.
Clinicians participating in an Advanced APM would be exempt from MIPS, which has a separate payment incentive system.
The proposed rule sets criteria for Advanced APMs, but it only names a handful of existing CMS APM models that would qualify for Advanced APM status, including Track 2 and Track 3 of the Medicare Shared Savings Program (MSSP), Next Generation ACO, and Comprehensive Primary Care Plus (CPC+).
AHA Sees Devil in Proposed MACRA Rule's APM Details
Demehin says the proposed rule is a step forward in the effort to replace SGR with a value-based payment system for Medicare reimbursement of clinicians.
"We were strong supporters of the MACRA legislation and were happy to see the repeal of the SGR. We do think this new law and these new programs hold tremendous promise to support the field in its movement toward delivering value-based care and innovative payment models."
The AHA, however, is concerned that the proposed rule has defined Advanced APMs too narrowly, says Jackson. "We were really hoping CMS would be more expansive in how it defined financial risk. Certainly, we were disappointed that CMS stuck to a definition that requires a provider to take on downside risk. That automatically excluded all the Track 1 ACOs in the MSSP, and it excluded a number of other interesting models."
"If you look at the models that are left," she says, "there are very few physicians who will qualify… We know from our members that those who participate in these payment models invest a significant amount of time and resources upfront, and we had hoped that CMS would acknowledge that when they defined risk."
This year, there are more than 900,000 actively practicing doctors in the United States, according to the Kaiser Family Foundation. CMS estimates the number of eligible clinicians who will receive payment incentives through Advanced APMs will range from 30,600 to 90,000. As noted above, eligible clinicians include several categories of care providers in addition to doctors such as clinical nurse specialists.
Harold Miller, president and CEO of the Pittsburgh-based Center for Healthcare Quality & Payment Reform, says he is cautiously optimistic that CMS will identify more Advanced APMs in the final rule for MACRA later this year. "The criteria for an Advanced APM will hopefully be clearer in the final rule and allow for more APMs to qualify," he says.
Under the proposed rule, MIPS APMs such as Track 1 of MSSP occupy a middle ground between MIPS and Advanced APMs, Miller says. MIPS APMs give clinicians a path to be exempt from MIPS, but they still hold physicians accountable to meeting quality standards.
MIPS APMs will probably not come with a payment incentive under MACRA, he says. "Everybody is going to be subject to quality improvement and trying to control costs."
'This is the Direction we are Going'
With MACRA moving forward, the time has come for healthcare providers to embrace value-based payment models, says Bill Kramer, MBA, executive director for national health policy at the San Francisco-based Pacific Business Group on Health. "We've been disappointed at the slow adoption of bundled payments and other alternative payment models," he says.
Value-based payment is expanding in the healthcare industry, and it is here to stay, Kramer says. "Providers have known about this for a long time. The signals are now clear—from both public and private payers—that this is the direction we are going."
Miller is also eager to see value-based payment expand in the healthcare industry, but he says CMS should avoid taking a "piecemeal" approach to payment reform.
"MACRA is designed to reduce the number of people going to hospitals and to cut the money being spent in hospitals. CPC+ is specifically directed at reducing the number of hospital visits… There is a danger of pitting the hospitals against the physicians."
June 27 is the deadline to submit formal comments to CMS on the proposed rule for MACRA.
As out-of-pocket costs for patients continue to increase with no end in sight, healthcare providers are stepping up efforts to assess patients' financial resources and their propensity to pay their hospital bills.
The rise of consumerism in healthcare is boosting a practice common in other pricey sectors of the economy: credit checks.
"We're seeing more credit checks, and the primary driver is the increased shift in responsibility from the health plan to the individual patient," says Jeffery Hurst, senior vice president and senior finance officer at Orlando, FL-based Florida Hospital, a member of Adventist Health System. Adventist operates 44 hospitals in 10 states.
The proliferation of high-deductible health plans in the employer-sponsored insurance market and the Patient Protection and Affordable Care Act exchanges is pushing healthcare providers to scrutinize the ability of patients to pay their medical bills, he says. "The industry is struggling, as the patients are, to figure out how we deal with these higher out-of-pocket responsibilities."
Florida Hospital has collected data that shows a strong correlation between a patient's FICO credit score and propensity pay medical bills. According to data from Hurst's revenue cycle team: For patients with credit scores below 550, propensity to pay ranges from 39% for account balances below $100 to 8% for account balances from $1,000 to $5,000. For patients with credit scores greater than 800, propensity to pay ranges from 98% for account balances below $100 to 97% for account balances from $1,000 to $5,000.
Credit bureaus such as Experian,TransUnion, and Equifax offer revenue cycle solutions that include payment predictor tools for health systems, hospitals, and physician practices.
Florida Hospital's Hurst says that determining a patient's ability to pay medical bills is important for healthcare providers for two reasons—financial outcomes and appropriate investment of resources.
The best financial outcome for Florida Hospital is not always collecting on a bill, with financial assistance and enrollment in Medicaid also on the table as options for patients with limited resources, he says. "It's our objective to reach the optimal resolution with every person we see… What I never want to do is send a charity care patient to bad debt."
Determining a patient's ability to pay is a critical element of allocating revenue cycle resources, Hurst says. "There's no point chasing after someone if they fundamentally don't have the ability to pay."
Credit Checks Add Capability to Revenue-Cycle Tool Box
Credit checks are just one of many tools available to healthcare providers seeking to determine a patient's propensity to pay medical bills, says Gerry McCarthy, president of the Healthcare Solutions division of TransUnion.
Providers are "interested in past financial behavior of the patient… That is the single largest indicator of patient financial behavior. Collectively, all of the data points enable providers to offer financial counseling and potentially find charity care or other payer reimbursement," McCarthy says.
At Florida Hospital, the revenue cycle staff combines credit checks with internal data. "All we pull is a credit score," Hurst says, "and then we combine that with internal data—balance amount and health plan—to determine the appropriate workflow for the account." There are several workflow categories for Florida Hospital's patient accounts, including payer status categories such as uninsured, insured, and Medicare patients.
Florida Hospital is " working on an advanced model that includes your payment history with our health system," Hurst says, a move that reflects its expectation that consumerism in healthcare is here to stay.
CMS is looking for payers willing to align their payment structures, quality metrics, and data sharing with those of Medicare to meet the goals of its two-track successor to the Comprehensive Primary Care initiative.
Federal officials are intensifying their efforts to promote and lead transformational change at primary care practices across the country.
Four years ago, the Centers for Medicare & Medicaid Services launched the agency's first national primary care reform program, the Comprehensive Primary Care (CPC) initiative, which is set to end in December. Last week, CMS announced a two-track successor to CPC, Comprehensive Primary Care Plus (CPC+).
On April 14, CMS conducted a webinar to introduce CPC+ to the program's key stakeholders: physician practices, payers and healthcare information technology vendors. Laura Sessums, MD, the CMS Division of Advanced Primary Care director, led the webinar.
"We know practices around the country have varying levels of experience and readiness to jump into the care delivery redesign that we envision; hence, we offer two tracks with different eligibility and care delivery redesign requirements," Sessums said to kick off the webinar.
As of October 2015, more than 400 primary care practices were participating in CPC, which has seven "regions" encompassing eight states: Arkansas, Colorado, New Jersey, New York, Ohio and Kentucky, Oklahoma, and Oregon.
When CPC+ launches its five-year span in January 2017, there will be as many as 2,500 primary care practices in each of the two tracks of the program across 20 regions, Sessums said. The regions will be selected by June 30 on the basis of payers who are willing to participate in the program, she said.
"CPC+ will be a multi-payer model to ensure practices have sufficient financial resources from the majority of payers who insure the patients they serve to support the staffing and other resources required to deliver the care we expect in CPC+," Sessums said.
Achieving alignment between Medicare, Medicaid and commercial payers has been essential for primary care practices to achieve success in the CPC initiative.
For CPC+, Medicare is "looking for payers willing to align their payment structures, quality metrics and data sharing with those of Medicare to meet the goals of CPC+," Sessums said.
Payment alignment, is sought in the three features of CPC+ payment, she said:
A care management fee.
For Track 2 only, at least a partial alternative to fee-for-service that can help practices deliver clinical care more efficiently and in a more patient-centered manner that does not necessarily require an office visit.
An incentive payment based on performance outcomes for each track.
The payment model for Track 1 of CPC+ is relatively simple compared to Track 2:
For Medicare beneficiaries, there will be a per beneficiary per month (PBPM) care management fee ranging from $6 to $30. The care management fee will be based on a four-tier risk-stratification scale tied to Medicare's Hierarchical Condition Category (HCC) model.
Standard Medicare fee-for-service payments.
A Medicare performance-based payment incentive pegged at $2.50 PBPM will be paid to primary care practices at the beginning of a CPC+ performance year. Medicare could claw back this payment incentive if practices fail to meet quality and utilization performance thresholds.
The payment model for Track 2 is potentially more lucrative for participating primary care practices:
For Medicare beneficiaries, there will be a PBPM care management fee based on a five-tier risk-stratification scale. The lowest four tiers mirror the risk-stratification scale for Track 1, with fees ranging from $9 to $33. In the fifth tier, Medicare will pay a $100 PBPM fee to practices for complex patients such as people with dementia.
Practices will receive Comprehensive Primary Care Payments (CPCPs). These payments will be a hybrid of Medicare fee-for-service and a value-based reimbursement model.
A Medicare performance-based payment incentive pegged at $4 PBPM will be paid to primary care practices at the beginning of a CPC+ performance year. Just as with Track 1, Medicare could claw back this payment incentive if practices fail to meet quality and utilization performance thresholds.
Practices will have to submit a letter of support from at least one healthcare IT vendor that outlines vendor commitment to boost advanced healthcare IT capabilities at physician practices.
Sessums outlined eligibility requirements for the two tracks of CPC+. "Track 1 is appropriate for practices ready to build the capabilities to delivery comprehensive primary care." Track 2 "is appropriate for practices poised to increase the comprehensiveness of care through enhanced health IT, to improve the care of patients with complex needs, and to inventory resources and community support to meet patients' unmet pyscho-social needs."
CMS plans to begin the CPC+ selection process for primary care practices on July 1, with participants announced in October. If more than 2,500 practices apply to participate in either track, CMS will use a lottery selection process.
Playing for High Primary Care Stakes
CMS should be applauded for attempting to revolutionize primary care, but CPC+ is a high-risk endeavor for the federal agency and for the primary care practices that will be participating in the program, says C. Timothy Gary, JD, MBA, CEO of Nashville, TN-based DW Franklin Consulting Group.
CMS has achieved a significant measure of success prodding health systems and hospitals to adopt value-based payment models such as accountable care organizations because those organizations have the financial resources necessary to development essential capabilities, including actuarial and data analytics muscle. The vast majority of primary care practices are relatively resource-poor, Gary says. "Physicians are in the best position to control costs; but at the same time, they don't have the infrastructure to manage the cost of a patient population."
In addition, accessing and interpreting data will be a daunting challenge for practices participating in CPC+, he says. "The real issue is getting actionable information to physicians and getting it in a form that they can feel good and safe applying to individual patients."
CPC+ has many elements similar to aborted attempts to introduce capitation to the healthcare industry three decades ago, and the program could suffer a similar fate if CMS botches the rollout of the agency's ambitious primary care reform effort, Gary says.
"I'm hoping they put enough data and information out there that it gives the system time to figure it out, and I hope they do it quickly… If they roll this out and it fails, either financially or in patient outcomes, physicians will be gun-shy."
The largest primary care practices will have the highest likelihood of success in CPC+ because they will be able to bank the biggest PBPM payments, says Chad Mulvany, director of healthcare finance policy, strategy, and development at the Westchester, IL-based Healthcare Finance Management Association. "If your practice is large enough, then those payments become more meaningful," he says.
For all practices that participate in CPC+, coding will be the critical factor in maximizing PBPM payments, Mulvany says. "Those payments are driven by HCC, which is driven by ambulatory coding… Practices have to understand patient needs and make sure the resources are there to ensure a good outcome. The accuracy of ambulatory coding becomes exponentially more important."
CPC+ is a high-risk gamble for CMS if there are high-profile failures in the program next year, but the agency has built up experience playing for high stakes, he says. "There has been risk in every program where CMS has stubbed its toe coming out of the gate.
While strategic plans require a long view, they need to be monitored and revised as needed.
This article first appeared in the April 2016 issue of HealthLeaders magazine.
To thrive, or at least survive, the revolutionary shift away from fee-for-service healthcare to value-based models, health systems, hospitals, and physician practices need to have a strategy.
"It's a very interesting time in healthcare, but the complexity has really ramped up in the last five years," says John DiCola, executive vice president of enterprise strategic development at Englewood, Colorado–based Catholic Health Initiatives, which operates in 19 states with 103 hospitals, and generated operating revenues of $15.2 billion in fiscal 2015.
At the same time, CHI is trying to operate with a five-year "planning horizon," DiCola says, noting "we certainly revise the strategy more than that." In 2011, he says the health system set three primary strategic goals that remain in play: achieving clinical and operational excellence, creating clinically integrated networks with population health capabilities, and unlocking the value associated with the new CINs.
At CHI, there are several key elements to "closing the loop on strategic planning with financial planning," DiCola says, including assessing the capital requirements linked to strategic objectives, allocating capacities, making sure the organization has a multi-year financial plan aligned with its strategic plan, and remaining open to course corrections. "Strategic planning is not set in stone—it's a living thing."
Over the past five years, CHI has had to adapt the health system's strategic planning efforts to accommodate the shift to value-based healthcare service contracts, changing market dynamics such as commercial insurance mergers, and growth opportunities through mergers, acquisitions, and clinical affiliations, DiCola says. "We consciously identified the need to move into a more urban direction for growth."
The 2013 acquisition of Houston-based St. Luke's Episcopal Health System is a prime example of CHI utilizing a merger-and-acquisition strategy to establish a significant presence in a new urban market. "Because of its size, it created a new region," he says, noting the impact of the St. Luke's acquisition on the parent health system's organizational structure. CHI St. Luke's Health features six acute care hospitals, a cancer center, and several health clinics in the Houston metropolitan area.
M&A as growth strategy
Growth through mergers and acquisitions has been a keystone of strategic planning for more than a decade at Phoenix-based Banner Health, says Dan Weinman, vice president of strategy and planning of the seven-state system that operates 29 acute care hospitals and reported net revenue of $7 billion in 2015.
"Banner has a comprehensive strategic planning process and corresponding core principles that include strategic growth, quality, service excellence, consumer engagement, and health management. We have had a '2020 Vision' that has been our long-term strategic plan for over 15 years. That has been our road map, and we only recently revised this as we have evolved our vision with a commitment to population health management and improving the health of the communities we serve through consumer-oriented, affordable delivery models and products," Weinman says.
"Banner Health was created in 1999 from a merger between Samaritan Health System and Lutheran Health Network, and our 2015 expansions involved the acquisition of the University of Arizona Health Network in Tucson, and Payson [AZ] Regional Medical Center, so it would be fair to say that mergers and acquisitions have played a critical role in Banner Health's existence and evolution, and support our strategic growth agenda. M&A has been and continues to be instrumental in expanding and enhancing our geographic footprint, care continuum delivery, and health management opportunities. We also use M&A to complement or develop needed competencies or expertise," Weinman says.
Banner has been developing an "M&A Playbook" since 2008, when the health system acquired Sun City, Arizona–based Sun Health in a deal that featured the acquisition of two acute care hospitals and a research institute. "The Playbook is infrastructure for change," says Bryce Carder, Banner's system vice president for information technology business services.
Banner's M&A Playbook is a collection of electronic documents that helps guide the health system's "integration teams" as they focus on key areas such as information technology and human resources, Carder says. "It's not a three-ring binder on someone's desk."
The M&A Playbook's "Handoff Document" for the HR integration team has more than 40 line items that require descriptions or explanations from the team's leaders. About half of the HR Handoff Document is focused on basic facts and figures, such as the HR team's point of contact at the entity targeted in an M&A deal and the number of employees at that entity. The other half of the Handoff Document is broken into categories, including talent acquisition, HR operations, benefits, compensation, and cultural discovery. Each category has multiple elements. In the case of cultural discovery, the Banner HR integration team is responsible for assessing previously conducted employee surveys and determining whether the targeted entity has an operational culture that is compatible with Banner's operational culture.
Banner's M&A Playbook has been designed to promote standardization, but there is flexibility that allows for the integration teams to craft deal-specific solutions, says Beth Stiner, divisional vice president of human resources for Banner-University Medicine. "The Playbook is agnostic so that it can evolve to every situation," she says.
Last year's agreement between Banner and University of Arizona Health Network includes an HR challenge that is not addressed in the M&A Playbook, Stiner says. "Physicians in Tucson are either employed by Banner or the university. As a result of this partnership, we have had to look at our benefits packages across both organizations to ensure that physicians practicing in a single medical group have comparable offerings."
Banner's IT integration team for the University of Arizona Health Network merger is also facing a challenge that requires thinking outside the M&A Playbook box, Carder says, noting the university uses Epic Systems Corporation software to manage electronic health records, and Banner uses EHR software developed by Cerner Corporation. "They had just made a significant investment implementing Epic. We are spending time to look at what they have and the impact of implementing our operational model and staying with Cerner," he says. "We're still in the planning phases. We've taken six to eight months for our internal leadership teams to see what we have … to make a decision on which path to take."
Banner has strategies to become a world-class health management company caring for whole communities through consumer platforms and an integrated delivery network, Weinman says. "While we still pursue traditional care delivery M&A opportunities through the merger and acquisition of health systems, hospitals, and medical groups, our focus on strategic partnerships that complement or support our population health management vision has resulted in expanding interests and relationships in the insurance, ambulatory, health management, telehealth, retail, and consumer sectors," he says.
Communicating complex plans
Downers Grove, Illinois–based DuPage Medical Group is implementing strategic planning initiatives on several fronts, CEO Michael Kasper says. With 2015 net revenue slated at $575 million and this year's net revenue expected to exceed $600 million, he says DuPage is reaping the benefits of not only setting successful strategies but also effectively communicating strategic goals to the physician practice's doctors, who hold a 100% ownership stake in the organization.
"To take an organization that is physician-owned and -directed, and move it in any direction, it takes time and effort. You need to make sure you are communicating early and often," Kasper says.
With a $250 million investment deal announced in December 2015 that is designed to expand DuPage's practice management company, DuPage Practice Management Solutions/Midwest Physician Administrative Services, and plans to accelerate delivery of telemedicine services, Kasper and his leadership team have faced a daunting internal communications challenge over the past year, he says. "If you don't communicate effectively, it could put the right answer at risk."
The growth-oriented investment deal that DuPage cut in December with Boston-based Summit Partners "is at the heart of our historic strategic planning process and the future of the practice," Kasper says.
DuPage has set two strategic goals for the infusion of $250 million in equity and debt from Summit Partners, he says: creating an "equity engine" financial model at the physician practice as opposed to a financial model pinned entirely on individualized compensation for physicians, and expanding the revenue streams at DuPage's practice management company.
Growing the practice management company's capabilities is a crucial element to sustaining broader organizational growth, Kasper says. "Our retained earnings model was not going to be enough to sustain the growth of the organization."
The equity boost from Summit Partners is designed to help DuPage shift away from the organization's "faux equity" financial model, he says. "Before this deal, partners put in $11,000 when they joined the practice, then partners got $11,000 when they left. … Expanding our medical services organization has created an opportunity for equity value."
DuPage has set an aggressive strategic goal for expansion of the practice's telemedicine services, Kasper says. "Our goal is to be the industry leader in virtual healthcare—not just in technology and tools but also leading the education of patients to accept the telehealth channel."
Patients had about 3,000 telemedicine visits with DuPage physicians in 2015, he says. "We would like to see that grow exponentially."
The biggest bang for physician practices seeking to increase telemedicine capabilities is in the area of follow-up visits with patients after a surgical procedure or other treatment at an acute care facility, Kasper says. "There has to be some level of oversight, and someone has to see the patient. In many cases, it is not feasible for doctors or patients to have 14 daily visits postdischarge from a hospital. I don't want a high-risk, fragile patient on the road driving to see the doctor."
The DuPage leadership team is well aware that achieving the practice's telemedicine strategic goal will take significant amounts of time, effort, and financial resources. "We have a long way to go. We're the only industry that still relies on pagers and facsimile machines. As long as we are using 1980s technology, we cannot call ourselves a technologically advanced industry," he says.
Ironically, one of the most difficult strategic planning obstacles at DuPage has been convincing the practice's physician owners to embrace innovations that will supplant healthcare service delivery models that have historically generated strong financial results, Kasper says. "It's always hard to change when you're successful, and this was a very successful organization. We did not have a burning platform, but we were able to convince our physicians that the burning platform was around the corner."
Hundreds of hospitals are apparently unprepared for Medicare's Comprehensive Care for Joint Replacement reimbursement model, survey data shows, but proponents say there is still time to get on the bundled payments bandwagon.
Federal officials are not fooling around when it comes to bundled payments.
On April 1, the Centers for Medicare and Medicaid Services imposed mandatory participation in bundled payments for hip and knee replacement procedures for about 800 hospitals under Medicare's Comprehensive Care for Joint Replacement (CJR) reimbursement model.
In two hospital surveys released last month, the majority of hospitals polled report they are not ready for CJR. A FORCE-TJR survey found 56% of hospital orthopedics programs report being unprepared for CJR. Last week, the Washington, DC-based consultancy Avalere Health released survey results indicating that 60% of the hospitals required to participate in CJR could lose money in the bundled payment model when downside risk begins in January 2017.
Despite these dire survey results, Christopher Stanley, MD, vice president of Englewood, CO-based Catholic Health Initiatives, says bundled payment late-adopters can catch up with the early-adopters such as hospitals and orthopedic surgeons who have been participating in Medicare's Bundled Payment for Care Improvement (BPCI) initiative. "Take advantage of these first three quarters. Look at this as an opportunity," he suggests.
CHI, which operates more than 100 hospitals in 19 states, is prepared for CJR mainly because the health system has a couple years of experience with BPCI, Stanley says. But the sprawling nonprofit healthcare provider is far from complacent. "Even though we are very advanced in this and have been doing it for two-and-a-half years, we are constantly re-evaluating and changing our programs. This is not a short-term project. This is a fundamental shift in how healthcare is provided and how it is paid for," he says.
Fred Bentley, vice president of Avalere's Center for Payment & Delivery Innovation, is not surprised at the widespread lack of preparedness for CJR. "[Providers] have really been focused on the care of patients in the four walls of the hospital and not really on the post-discharge side. They have been focused on growing their orthopedics volume and their referrals, and now they're going to be focused on the entire episode. And that's a big shift."
Under the CJR bundled payment model, each participating hospital will be given a target price for hip and knee replacement procedure episodes, which include the cost of post-acute care. The cost of hip and knee replacement procedure episodes for Medicare patients varies widely across the country, from $16,500 to $33,000, according to CMS.
Keys to Unlocking CJR Success
"What happens in the post-acute space is critical to success," Stanley says.
As CHI has ramped up its involvement in bundled payments for hip and knee replacement procedures, garnering a deep understanding of post-acute care and working closely with skilled nursing facilities (SNFs) have been major challenges for the health system. "There was high variability in the discharge destination," he says, noting 10% of joint replacement patients were being discharged to SNFs in one CHI market compared to 50% of patients being sent to SNFs in another market. "We rarely had any insight into it. Now, we're really aligning all of the incentives."
Pre-operative preparations also play a major role in achieving financial success in bundled payments for joint replacement, Stanley says. "It's not just as simple as saying, 'Where are we discharging patients to?' We make sure the patients are tuned up on the front end."
CHI provides several pre-operative services for patients before they have hip and knee replacement procedures, including smoking cessation, diabetes management and weight loss programs.
Mining the wealth of data that Medicare provides to hospitals participating in CJR is another critically important area, Stanley says. "Hospitals need to focus on using the data you get from CMS for both baselines and how care is provided month-to-month."
At one of CHI's hospitals, the readmissions data for hip and knee replacement procedures shocked the orthopedics department, he says. The hospital and its orthopedic surgeons thought the readmissions rate was about 7.5%. "When they looked at the data, they found out their readmissions rates were 15%."
To meet or beat target pricing in CJR, hospitals need to engage all of the stakeholders in the care continuum and set effective "care pathways," Stanley says. Those stakeholders include orthopedic surgeons, advanced practice nurses, SNFs, rehabilitation facilities and home health agencies.
"That care model piece is the hardest to do. Hospitals rarely work with their physicians and community providers on the 30- to 90-day post-operative period."
Physician engagement is critically important for hospitals that are behind the CJR curve, Bentley says. "There's still a lot of work that hospitals can be doing to partner with their physicians… to standardize care and adhere to care protocols. They just have to get more and more efficient at what they're doing."
Gainsharing with physicians is an effective strategy for hospitals participating in CJR to achieve standardization, he says. "They are developing gainsharing arrangements with surgeons. That is getting surgeons to move from using the favorite implant they like to use, and getting the whole program down to three or four implants."
Standardization and adherence to care protocols can be a tough physician-engagement hurdle to clear, Bentley says. "The accusation is that this is cookie-cutter medicine, but that changes when they have skin in the game."
Executives at this year's Revenue Cycle Exchange in San Diego say they're making significant progress accounting for alternative payments models, transitioning to new electronic health record systems, and boosting patient experience.
This article appeared in the May 2016 issue of HealthLeaders magazine and was based on Christopher Cheney's online column from March 28, 2016.
There is light at the end of the revenue cycle transformation tunnel.
Southwest General launched Medicare's bundled payment program for congestive heart failure in January 2015. "There was a million dollars at risk, and the question was, 'Do you budget for that? Do you budget for the potential shared savings? One of the reasons we chose CHF was that the data showed that if we were successful, we had an opportunity to get a check from Medicare for over $1 million," says Jill Barber, MHA, director of managed care and payer strategy at Middleburg, Ohio-based Southwest General Health Center, a 358-bed facility.
"And again," she says, "the question was, 'Do you budget for that? Do you plan for that?' What we chose to do is just say, 'If we lose, there will be some other contingency planning to fall back on.' Still a risk, but not incorporated into the budget. We actually felt we were going to be successful. For us, CHF and that $1 million opportunity represented a 'fish-in-a-barrel' opportunity. How hard could it be? We needed to save Medicare $80,000 and the rest would be for us."
As part of the effort to ensure bundled payment success, post-acute strategy is key. At the onset of the bundle, Southwest General closed its skilled nursing facility. "We didn't want to force leaders in our organization to be focused on volume and keeping days of stay ramped up and bodies in beds, which is the exact opposite of working with an alternative payment model like bundled payments. For many reasons, we chose to close our SNF and work with our community SNFs because there was capacity in the market."
Southwest General Health Center has made great strides over the past year in operating and financially managing bundled payments, says Barber. "One of our biggest results has been that our board members, our physicians, and our community members have a better idea of what's going to happen with alternate payment models. They're more comfortable with us taking risk. This is not nearly as scary as it was a year ago," she says.
Since starting the Medicare CHF bundle, she says the revenue cycle team at Southwest General has risen to multiple challenges, including legal and financial obstacles linked to apportioning gainsharing with physicians and satisfying auditors. As the community hospital has taken on more bundled payment initiatives such as joint replacement, more challenges have arisen. "You have to plan per episode. We have a CHF strategy for bundled payments, we have a joint replacement strategy for bundled payments, we have a strategy for sepsis bundled payments, and never are any two of these the same."
While Southwest General fell short of its $1 million CHF gainsharing goal for 2015, the hospital is expecting a $300,000 check from Medicare for 2015 and much better performance this year.
"And by the way, this is not just about finances," Barber says. "We did achieve the triple aim. We increased quality, we decreased costs, and we also increased patient satisfaction."
Launching an EHR Without Losing Your Shirt
The loss of revenue during the installation of a new electronic health record system ranks near the top of every revenue cycle leader's worst nightmares.
From June 2014 to September 2015, Columbus-based OhioHealth installed the Epic EHR at seven hospitals, 343 physician practices, eight urgent care centers, and three medical buildings. "We called it Big Bang," says Jane Berkebile, system vice president of revenue cycle.
"A lot of the problem with these EHR implementations is lost revenue, so we decided OhioHealth was not going to do that. We were going to make sure our revenue was intact," she says.
Berkebile's revenue cycle team pursued a multi-pronged strategy to limit revenue flow disruption, including efforts focused on charge generation, revenue reconciliation, revenue education across the organization, and integrating the clinical staff into revenue cycle functions.
"We decided to bring in a consultant for this portion of the project—revenue and revenue recognition as well as training and educating the organization about revenue. That was the best step we could have made. We have exponentially paid for it with the success from the entire project," she says.
"We wanted to establish a collaborative environment, not only with the consultants, but also with our entire IT staff, the Epic representatives onsite helping us with the implementation, our Finance Department, our clinical departments, and our physicians. We tried to bring everybody into the fold thinking about revenue."
OhioHealth was adamant about having a robust testing regime. "We insisted that we process 5,000 claims for every facility. We brought in our own frontline billing staff from revenue cycle to do the testing."
The EHR implementation results were impressive.
When the first two OhioHealth hospitals went live with Epic, regular revenue flow was re-established within 10 days. "By the time we got to hospitals three, four and five, we were back to our expected revenue by Day Four. So as you can see, as we got a few hospitals under our belt, we really started clicking."
Engaging Patients as Financial Partners
Revenue cycle teams are just beginning to achieve significant progress in improving the patient experience with the financial element of their care, says Mark Norby, chair of revenue cycle at Rochester, MN-based Mayo Clinic, which which has 4,200 staff physicians and scientists at facilities in Arizona, Florida and Minnesota.
"Our focus in the revenue cycle has not really been about the patient. It's been about churning out bills, which is important, but our staff has not been thinking about the consumer the way they think about themselves as consumers," he says.
"When we look at our patient satisfaction, clinical care is off the charts. When we see what our satisfaction scores are in the revenue cycle, they're average, but we're not average. We need to be above average," Norby says.
More than a year ago, Mayo's revenue cycle staff started paying closer attention to information from patients, including focus groups and recording conversations in the revenue cycle department's call center. They heard complaints about too many billing statements and confusion over the health system's website pages related to billing and insurance. "It's just chaos. It just goes to show you that we did not design this stuff with the consumer in mind. We designed it for ourselves."
Over the past year, Mayo has launched several initiatives targeted at improving patients' financial experience, he says. "We're going to change. We're only going to send statements to patients when they owe something. The key there is going to be fewer statements, you owe something to us, and it's going to be easy for you to understand."
Mayo also is committed to providing greater price transparency to patients such as an online cost estimation tool that will eventually provide real-time information on health plan benefits eligibility, including co-pays and deductibles, Norby says. "That's really what we believe patients want. They want to know, 'How much am I going to have to pay.' They don't care quite so much about the sticker price if they don't have to pay for it."
Livonia, MI-based Trinity Health, which operates more than 80 hospitals in 21 states, is making a subtle change in its revenue cycle staff that could have a major impact on patient experience, says Michael Grant, MBA, regional director for patient financial services in Indiana and western Michigan. "In planning a long-term strategy, our people said they were not financial counselors but more like benefits counselors," he says of the initiative to create a "benefits advocate" job title.
Dropping the financial counselor job title in favor of the benefits advocate designation recognizes that the position requires extensive healthcare benefits know-how such as Medicaid enrollment, Grant says. "These have been entry-level positions; but with all the things we're asking of them, they can't be entry level positions."
Benefits advocates play a critical role in revenue cycle teams, he says. "You're getting people at their most vulnerable time. We do surgery on patients' bodies, but we also do surgery on their wallets and bank accounts. You need someone who has knowledge, intelligence, and a heart."
With payment reform, technology advances, and other market forces shifting medical service delivery away from the hospital setting, home care presents both business opportunity and risk.
As hospitals reach outside their walls to be more closely involved in the entire care continuum of patients, home care presents some tantalizing opportunities.
With Medicare reimbursement changes providing a financial foundation for change, home care is increasingly becoming a critical component of integrated health systems, says Sheila Schubert, administrator of home health for Hollywood, FL-based Memorial Healthcare System.
“For a very long time, people have known this is the way medical care should be delivered. This has been predicted for more than 20 years, and now it’s really happening. We’re doing IV drips at home. We’re monitoring patients at home. Services that used to be done in the ICU are now being done in the home,” she says.
Schubert joined the staff at Memorial Healthcare five years ago and has worked in home care for two decades. “People are so much more comfortable if they can receive good care and be in their home.”
Memorial Healthcare, which has offered home-care services to patients since 1992 and operates five acute-care hospitals in southern Florida, is well-positioned for growth. “All of the components of a home health agency to serve the community were in place, including a staff trained in home health,” she says.
Recent changes in Medicare reimbursement rules such as the Hospital Readmissions Reduction Program and new payment models such as pricing services based on episodes of care are major drivers of change in home health.
In response, Memorial Healthcare has shifted away from its per-visit payment model for home care toward bundled payment models that are designed to promote quality and good clinical outcomes. Schubert anticipates “bundled payments based on diagnosis for acute care and post-acute care across the care continuum. We will be paid based on the quality of care and outcomes.”
The biggest bang for the home-care buck is in the area of cost avoidance, such as reductions in avoidable hospital readmissions. “Home care has taken the lead to make sure there are smooth transitions,” she says.
While cost avoidance may not be as exciting in the C-Suite as revenue growth, limiting unnecessary medical expenses is one of the keys to delivering value-based care. “It’s not that home care has to be a money-maker. It’s that home care improves health in the community and supports the health system,” she says.
Entering the Home-Health Market Through Acquisitions
Home care has followed a different, but no less significant evolutionary path at Pittsburgh-based Allegheny Health Network, which entered the home health market in 2014 through the acquisition of four companies. Each of the acquired companies had experience in a prime home-health specialty: home nursing, infusion therapy, medical equipment, and hospice.
“We own and operate all the home-health segments,” says Brian Holzer, senior vice president for diversified services at AHN, which runs seven acute-care hospitals in western Pennsylvania. “Once we acquired all the companies, we built a new care coordinator model.”
Care coordinators are a crucial component of Healthcare @ Home, the business unit that manages AHN’s home-health services, he says. Instead of having a handful of care coordinators at each home-health subsidiary, there are about 40 care coordinators on the Healthcare @ Home staff who help the subsidiaries coordinate all home-health services for each patient. “We have four home-health companies, but a single point of contact for the patient,” Holzer says.
Offering the full suite of home-health services gives AHN competitive advantages over standalone home-health companies, he says.
“High patient volumes driven out of the health system give us the volume we need to run home health. As a standalone agency, you’re not going to be able to quarterback the process. And health systems have the resources to make investments. We have sustainable volumes that our home-health companies can count on, and that allows us to invest.”
Healthcare @ Home is already showing signs of generating value for AHN. In 2015, the annual rate for all-cause 30-day hospital readmissions fell 5%, and the readmissions rate for high-risk patients such as those with congestive heart failure dropped 8%, Holzer says.
As a fully integrated health system with a strong Blue Cross Blue Shield corporate partner, Highmark Inc., AHN has financial advantages over standalone home-health organizations. Holzer explains: “There are two ways to generate value from home health, fee-for-service profits from your home-health companies and the value that comes from reducing unnecessary medical expenses. We’re in a position to do both—operate at a profit and drive down unnecessary medical expenses.”
Home Care Key Player in Shift Away from Hospital-Based Services
In a potentially existential irony for hospitals, reaching outside the campus walls is threatening to become a claustrophobic experience as the healthcare “space” in the community grows and the healthcare “space” in the hospital shrinks.
“The awareness of other people who can support health has expanded beyond the doctor in the hospital to nursing facilities and home health now. It will continue to expand to all other providers in the community as time goes on and technology improves,” says Marybeth McCaffrey, JD, a principal at the University of Massachusetts School of Medicine’s Center for Health Law and Economics.
“The advances are just beginning and are related to transitions of care, documentation, and transfers between facilities. Then there’s mobile health improvements, where providers are working to leverage information people are collecting in the home.”
As more and more medical services are moved from the hospital setting to settings dotted across the community, the operational and financial stakes for hospitals are reaching epic proportions, says David Friend, MD, MBA, managing director and chief transformation officer at New York-based consultancy BDO’s Center for Health Care Excellence & Innovation.
“The hospital,” he says, “is taking care outside the four walls into the community, which addresses the care continuum issue. It begs the question: What happens in the four walls of the hospital? It begs the question: What are hospitals going to do in the future?”
From a financial perspective, home care presents both an opportunity and a challenge. “We want to make sure the patient does not bounce back to the hospital, but there are significant investments for effective home care,” he says. “For a hospital, it makes a lot of sense to have home care. Either you own it, or you have a partner. A lot of folks don’t have the capital to play in the space anymore.”
Bundled payments that encourage providers to deliver services with high quality and low costs are going to revolutionize the healthcare industry, particularly in the post-acute care sector, Friend contends. “Hospitals are looking for skilled-nursing partners and home-health partners who have these capabilities, and the mom-and-pop home-health agencies don’t have these capabilities.”
Shifting away from per-visit payment models is a huge step forward for home care, he says. “There’s going to be a lot more creativity. No more, ‘Paying for 10 visits.’ [Providers] will be paid for making patients better.”
As patients adapt to their heightened financial responsibilities, health systems and hospitals must help make sure patients pay for as much of their bills as possible.
This article first appeared in the March 2016 issue of HealthLeaders magazine.
With more healthcare costs shifting to patients through high-deductible health plans and other trends, health systems and hospitals are facing the need to develop a new skill: asking patients for more money. To rise to this challenge, revenue cycle innovators are engaging patients as financial partners from hospital registration to bill collection, and every point in between.
"In today's healthcare environment, everybody owes something for their healthcare, and this is a cultural shift," says Jane Berkebile, system vice president of revenue cycle for OhioHealth in Columbus. In the fiscal year ending June 2013, OhioHealth posted total revenue at $2.1 billion, with net income pegged at $348.7 million.
This cultural shift includes a patient learning curve laden with risk for healthcare providers, she says. "Very few people budget for healthcare expenses. It usually comes as a surprise for them. … If someone has a health incident and they have a $10,000 deductible, that's a big shock to them."
As patients adapt to their heightened financial responsibilities, health systems and hospitals must reach out early and often to help make sure patients pay for as much of their bills as possible, Berkebile says. "We're more likely to get paid if there is at least an expectation that there is an out-of-pocket expense and we expect the patient to pay it."
While rising to this bill-collection challenge, healthcare providers must avoid pressing their patients too hard, she says. "We walk a very fine line. … We don't want to be seen as having heavy-handed tactics. It's more a conversation."
Point-of-service collections
A robust effort to engage patients as financial partners can generate impressive revenue cycle results, including higher point-of-service collections, lower bad debt, and less spending on financial assistance, Berkebile says.
OhioHealth posted $22 million in POS cash collections at the health system's four central Ohio hospitals in 2015, she says. "We stress the need for communication with patients. We set targets. We track the dollars we collect."
POS cash collections have increased every year at OhioHealth since 2009, when the figure was $9 million, according to health system records.
Berkebile says POS cash collection is a key focus for the training and education unit within OhioHealth's revenue cycle team. The training and education unit has about nine full-time staffers, and it provides instruction to revenue cycle team members and many employees outside the department who work with patients. "It is critical that all of our physician practices know the policies for registration, point-of-service collection, and messaging to the patient. The last thing you want someone to do is say, 'Don't worry about paying for that.' "
Financial partnering with patients helps minimize bill-collection bad debt at OhioHealth, which tracks bad debt on a monthly basis. Bad debt accounts for less than 2% of gross patient revenue "across the whole organization," she says.
"Bad debt as a percentage of gross patient revenue is considered excellent if at or below 2% of gross patient revenue. Starting at a target of 2% of GPR, we have continued to whittle that down as we have made progress. As we bring on new facilities, our initial target is always 2% GPR."
Assessing the propensity of patients to pay also helps to contain the budget line for financial assistance at OhioHealth, Berkebile says, noting many low-income patients benefit from the financial counseling services offered at the health system, such as Medicaid enrollment facilitation.
In Ohio, the expansion of Medicaid under the Patient Protection and Affordable Care Act has been a boost for OhioHealth and the health system's low-income patients. "That's a benefit to the patient," she says of the access to medical services that comes with Medicaid enrollment, adding that the health system's "charity care has been cut roughly in half" since Ohio expanded Medicaid to provide coverage to more low-income adults in January 2014.
A positive financial experience
As patients become increasingly important economic players in healthcare, providers who fail to focus on the financial interactions with their patients do so at increasing risk, says Corey Meyer, director of patient access and virtual health at Lancaster General Health in Pennsylvania. "In any other industry, a bad experience with the financial transaction will send the consumer looking for an alternative. Why would healthcare be any different?"
Lancaster General Health has a total of 689 staffed beds between its acute care hospital, its rehabilitation hospital, and Women & Babies Hospital. In 2013, the health system posted total revenue at $827.1 million, with net income pegged at $92.5 million.
An August 2014 survey of 500 healthcare patients shows a clear link between billing experience and financial consequences, Meyer says. The survey, which was conducted by Connance, a Waltham, Massachusetts–based vendor of predictive analytic technology solutions, found that 74% of patients who gave their billing experience a top score paid their bills in full, compared to a 33% payment rate for patients who were less than satisfied with their billing experience.
A positive billing experience also has a major impact on patient loyalty, the Connance survey found. For patients who gave their billing experience a top score, 95% reported they would return to the same hospital for another elective medical procedure. For patients who were less than satisfied with their billing experience, only 58% said they would return to the same hospital for another elective procedure.
"Patients have choice in where to get care, as well as a choice about whether to get care at all. If a patient has a great clinical experience but their financial experience is not great, data suggests the patient will be very unlikely to recommend the hospital to a friend, or pay their bill in full," Meyer says. "We are focusing on the entire financial experience from price estimation, to properly capturing insurance information, providing easy-to-understand bills, and offering multiple payment options including online payment and self-service payment plans."
There is a heavy price to be paid when financial relationships between healthcare providers and patients go sour, according to Mayo Clinic billing experience data presented in June 2015 at the annual conference of the Healthcare Finance Management Association in Orlando, Florida.
Yvonne Chase, manager for patient access and business services at Mayo Clinic Arizona and Florida, shared data from a 2011 study that found 93% of patients who are satisfied with their billing experience are also satisfied with their clinical experience. When the billing experience is negative, only 63% of patients are satisfied with their clinical experience.
With major campuses in Minnesota, Arizona, and Florida, Mayo Clinic served 1.3 million patients in 2014, including 128,000 hospital admissions. In 2014, Mayo Clinic posted total revenue at $9.8 billion, with net operating income pegged at $834 million.
Strategies for partnering
Devoting time and resources to cultivating customer service capabilities is one of the primary keys to success in engaging patients as financial partners, Meyer says.
"There are many investments to consider, but first and foremost would be our people and the patient experience. We need to have great people who can properly engage patients when they call or interact with us in person. The financial experience goes best when we collect proper insurance information from the patient and are able to provide financial information in plain language early in the process.
"We get great feedback from patients who receive calls from our financial estimators prior to a scheduled service explaining their benefits and out-of-pocket expenses. Many of those patients choose to provide a down payment for their scheduled service because we have built the trust," Meyer says.
In addition to traditional channels such as registration and collections, the OhioHealth revenue cycle team has multiple customer service touch points to connect with patients at every step in the billing process, including a Monday-through-Saturday call center and financial advisors at every hospital in the health system, Berkebile says.
The OhioHealth customer service call center serves a hotline function for anxious patients who are seeking financial information about an upcoming medical procedure, she says, noting electronic communication with commercial payers is essential to access deductible and coinsurance information. "Patients can contact us ahead of time, and we can give them an estimate of charges and coverage."
Eligibility-verification and cost-estimation tools are key building blocks for engaging patients as financial partners, Chase says. "This way we can verify the specifics not covered by insurance and the patient's out-of-pocket expenses based on what is ordered by the physician."
OhioHealth employs dozens of financial advocates, with at least two at the health system's smallest hospitals and as many as 10 at the largest hospitals, Berkebile says. "We can really sit down with patients and help them understand the responsibility."
For nonelective inpatient cases, the financial advocates meet with patients as soon as possible following estimation of payer coverage and out-of-pocket costs, she says, noting clinicians are consulted to make sure patients are fit to hold a conversation. "We begin that dialogue, and we are standardized in our scripting and messaging. We ask for the copay and deductible until it gets paid."
Overcoming challenges to financial partnering The first hurdle that confronts many revenue cycle teams as they seek to build financial partnerships with patients is internal resistance, Chase says, noting nervousness about the potential for a negative reaction to a more active effort to collect patient bills. In practice, concerns over offending patients and driving them to competitors are found to be unwarranted, she says. "We find patients who we are transparent with regarding costs have a much more positive patient experience."
To help make elevated patient financial responsibility financially sustainable for healthcare providers, revenue cycle teams need to establish streamlined processes for patients to follow, Meyer says. "We need make the financial experience simpler and less overwhelming for patients. Reducing surprises by explaining insurance benefits and options up front can reduce the sticker shock and can help engage patients in their care." Mindset is a mammoth hurdle to clear as healthcare providers conduct financial conversations with patients, he says. "Healthcare is something that no one really wants to buy. If I need a new couch or a new car, there is excitement in the purchase. Additionally, I will do some research on the item and the costs. With healthcare, it is not something that people want to spend money on or wade through cost information." Building an expectation of patient financial responsibility can be delicate, but it is not an entirely foreign concept, Berkebile says. "It's getting patients to understand that healthcare costs money. When I take my cats to the vet, I have my checkbook out."
To effectively engage patients as financial partners, revenue cycle teams must balance bill collection with compassion, she says. "The main challenge is the patient's stress or anxiety related to the case. We're saving lives. We're working with people. We're not going to turn people away for medically necessary care."
