Not only does Carl Armato, CEO of Novant Health, headquartered in North Carolina, want his health system's employees to read his blog, more importantly, he wants them to engage with him through it.
He blogs about everything—from folksy stories to healthcare industry information—but every Monday edition of his blog focuses on the 14-hospital nonprofit health system's mission, vision, and values, and how he's observed employees' contributions to achieving them.
Armato uses the blog to remind the system's more than 26,000 employees about systemwide goals for the year. The goals help determine employee bonuses that are distributed companywide.
He credits the two-way communication the blog fosters with his employees to big improvements in team member engagement. For example, last year, Novant's team member engagement score improved from the 49th percentile to the 74th. [See correction.]
Another goal was to improve CMS quality indicators to greater than the 80th percentile. The organization finished the year in the 87th percentile, and achieved an 83% reduction in serious safety events.
Following are the highlights of Armato's recent conversation with HealthLeaders about Novant's culture, its employee bonus program, its consolidation under one brand, and the seven-year CEO's struggle to achieve engagement and alignment with both patients and employees.
"Every Monday I post a blog to stay connected with team members. It's one of the best decisions I've made because it's one of the things, along with frequent rounding, that makes me accessible. The blog has a chat feature so people can chat back. Since I've been CEO, I've written between 300–400 of them. I remember writing about our employee bonus program early in my [seven-year] tenure. Caring for our team members is one of the most important things the executive team does. A challenge with an old version of our incentive plan was that some of the factors the clinics were evaluated on were different from those in the rest of the organization. That wasn't wrong on its face, but it didn't foster team unity, and our team members shared that with me. I probably got 100 other comments about what they'd like to see different. So, I took that advice and made changes."
"When we're doing well financially and hit the strategic imperatives, it's due to the team members. It's their efforts in saving dollars every day with their intentional efforts. We decided to reinvest much of those savings in employee bonuses. That's how we began the discretionary bonus that aligns every team member around the organization's overall success. When I took over, there were hundreds of brands throughout the organization. We brought all that together to become Novant. There were also probably that many incentive plans, so basing the incentive plan around organizationwide goals brought alignment around what was really important. For example, we've rewarded our team members for improvement in engagement and quality."
"Every now and then I get feedback on compensation, where people talk about how much went to executives versus team members. But 80% of the bonuses are for director and below titles. So, if you think about that, that's a lot of individuals who received a bonus. All eligible team members, whether part-time or full-time—if they're not facing disciplinary action—they received a bonus."
"We've got everyone in our 500 clinics and our 14 medical centers focused, and they're aligned to what's important to our consumers. We have to be world-class at caring for our employees so they can be world-class caring for the patients we serve. Why? We're committed to the remarkable patient experience. We focus on more consumer-centric digital engagement with consumers. We have 840,000 people using our portal, but we're focused on how we can use more predictive analytics to partner with them before they have a health crisis. So, we're investing there. For example, we have 90,000 diabetic [patients who] we're working on predicting the likelihood one will enter the ER, and also partnering with external companies to figure out how to use predictive analytics to keep people out of the hospital and safe."
"My background is as a CPA/MBA,and when I was with what is now [global consulting firm] EY and then with another health system for 10 years, I was what I might call the fix-it guy. I was one of the people they sent to difficult situations. I thought I had to micromanage that and I felt the weight of doing that personally. My early learning was to empower others. Now, I don't mind sharing the stage and giving people the authority to do their jobs. I've watched people and our organization soar because I focus on cultivating culture. It's where I spend a lot of my time: rounding, answering the blog, ensuring we're addressing issues like physician and nurse resiliency. Or how we're handling health disparities. I want to cultivate culture where people can have a voice in how we're going to transform healthcare in a transparent way."
"I'm proud of our resiliency in the face of change, particularly with our clinicians. They've changed their delivery model to open up access and be more affordable. As for me, I'm 53, I started this job young, and I'm having fun engaging the workforce. I'm excited about what I do."
Correction: In the fourth paragraph of this article, "patient experience" was replaced with "team member."
Mark Cherry, principal analyst at Market Access Insights for Decision Resources Group, says his team wrestles with questions of how to best evaluate the strength of health systems over the long term.
"Even still, we measure market share by inpatient volume," says Cherry.
"Everyone's focusing more on outpatient care, but how do you put that in a number that's easy to compare?" he asks. "In addition to market share, how complete is it as an ecosystem? Can you stay within that integrated delivery network for all your needs? How well do they capture the patient experience so [patients] never leave?"
"10 years ago, health systems were still thinking larger equals leverage and not necessarily about efficiencies."
While it's difficult to consolidate these new metrics into an all-encompassing number, Cherry and others are attempting to make such judgments more quantitative. Cherry's team uses five pillars to measure the strength of a healthcare system:
Continuum of care
Each health system is scored on those pillars—ranked at an early, middle, or advanced stage.
But beyond those more objective evaluation tools, Cherry says determining the long-term trajectory of health systems' overall business requires a nuanced approach.
For instance, how well does your health system cover its region? Is every potential commercial insurance customer within five to 10 miles of a retail clinic or micro-hospital? Does your clinically integrated network influence a wide swath of physicians and align them through value-based contracts of some sort? If so, maybe your narrow network is essential to commercial health plans, which is critical.
"Maybe your narrow network doesn't seem so restrictive for patients," says Cherry, who adds that patients are getting more involved in healthcare decision-making every day. "Maybe your narrow network seems almost like a club."
"10 years ago, health systems were still thinking larger equals leverage and not necessarily about efficiencies," he says. "But lately, it's been more work with insurers to lower premiums, which is the whole point of narrow networks."
Half the country is growing in population while the other half is contracting, says David Burik, managing director and payer/provider consulting division leader with Navigant. So, market share strategies are different depending on location.
"If you're in Rustville, USA, versus Nashville, for example, in one the tide is ebbing while in the other it's flowing. It's hard to outperform the community you serve," he says. "To grow in a mature place, it's about consolidation and integration; to grow in the other place, it's about getting to the new subdivisions first."
Beyond that, though, health systems should look to cannibalize themselves, says Burik, because if they don't, others quickly will.
"You need to adjust your pricing structure and take a look at your cost structure," he says. "Also, there are hospitals and health systems who think they can match Amazon, but a lot more are trying to figure out how to get referrals from there."
A recent example of cannibalization comes from retail medicine. Health systems didn't invent it, but many created partnerships with drugstores such as CVS and Walgreens that have been mutually beneficial, Burik says. Walgreens would have owned and operated its clinics independently, but now it leases or partners with local health systems.
Thanks to this collaboration, Walgreens gets prescriptions while the hospital gets a new low-cost access point. He envisions similar partnerships with companies like Amazon, possibly with referrals of some sort, although how they might look and behave in each market is uncertain at best.
Inpatient share is relatively easy to measure, but with more services moving outside the hospital, it's a less reliable indicator of market share.
Here are some of the new measures CEOs are using to help illustrate the health of their organization:
Patient access: This is measured in part by ambulatory services growth, physician practices, and other service locations such as laboratory and sports medicine.
Physician claims data: Outpatient surgery volume and growth as well as traditional office visits are important, but so is engagement through other means, such as telemedicine.
Regional presence and narrow network necessity: Health systems are busy trying to build a cohesive network of services to make them a must-have for insurers' narrow networks. That means an array of services conveniently located to the large majority of insurers' patients.
Physician recruitment has always been one of the biggest strategies to move market share, says Keith Alexander, the former systemwide senior vice president and regional president at Houston's Memorial Hermann Health System, who is now an independent consultant.
While at Memorial Hermann, Alexander managed both the ambulatory division and four hospitals at the health system and used a variety of tools to measure market share, but outside of the inpatient arena, getting reliable data is a huge challenge, he says. And the proxies that used to be good measures of market share, like discharges, are now less valuable tools.
"There are a number of proxies, and some companies try to aggregate physician claims data and ER visits to get an idea of market share," he says. "But all the stuff that's moving outpatient is a challenge."
Sports medicine, outpatient surgery, urgent care, and laboratory services remain great opportunities to grow market share, but health systems must become more sophisticated in measuring their impact on the ecosystem. Disruptors, Alexander says, are companies that can bring all those modalities, along with health and wellness, together.
"Look at what Optum, CVS, Aetna, Humana, and now Apple and Amazon are doing," he says. "We're talking billions of dollars of investments, and none of them are buying hospital beds. They're buying physician practices, urgent care, surgery centers, and they're building digital health."
Smart health systems should be imitating these steps to create virtual integrated delivery systems centered around convenience, access, price transparency, efficiency, quick throughput, and easy online scheduling.
Health system CEOs have always worked to meet their mission of caring for the poor and underserved and improving the health of their community. They often cite that mission as their top priority. But in truth, they are evaluated by how well they grow revenue and margin, both of which come through expanding market share.
Market share used to be easy to define. CEOs counted on a reliably increasing reimbursement model that exceeded inflation and an aging population that meant more hospital days every year. No longer. But even though market share growth is much more complex now, failing to achieve that growth could mean termination.
To win the market share battle, healthcare organizations must first redefine what it is (see the sidebar on new market share proxies) and then build strategies that take advantage of the shifts in healthcare delivery. Here's how three healthcare leaders are doing it.
Northwell: 'The consumer is the determinant of success'
Michael Dowling, president and CEO of Northwell Health in Great Neck, New York, acknowledges the need to provide access, value, and convenience for consumers who are increasingly looking for a wide-ranging array of services offered by a single health system. The key to this strategy is the consumer as the focal point of healthcare decision-making.
Northwell is currently investing heavily in home health and digital care access, including a major initiative in telemedicine, but tying it all together into a seamless consumer experience is critical.
"You need hospitals as anchors, but the strategy is very consumer-focused in providing access and convenience," Dowling says. "We've been doing this for 10 years, and it's one of the reasons we've grown to being one of the biggest players in the New York City market. It's the interconnection of all these pieces that makes all the difference."
Although it's not a perfect analogy, Dowling says Northwell wants to emulate Starbucks' approach to market coverage. It's not a location on every street corner, but it's close.
"The traditional way of looking at market share isn't valid anymore."
—Chris Van Gorder
Also, getting critical market share mass in a variety of modalities is necessary to becoming the viable narrow network that employers and insurers are looking for. Smart health systems are spending more on smaller facilities, like micro-hospitals, or on freestanding ERs, homecare, urgent care centers, and telehealth capabilities. Such investment aims to meet the everyday health needs of consumers, not just provide for their increasingly rare inpatient stays.
This means focusing on organic growth that complements or even stands alone from the inpatient realm rather than buying hospitals, for example. Specialized areas of investment in both inpatient and outpatient care are the usual profitable service lines, such as orthopedics, neurology, and cardiac care, says Dowling.
He says he seeks two kinds of market share when it comes to reimbursement: Medicare and Medicaid, and commercial. Both kinds are needed to serve the community comprehensively, he says, but only one of the two makes a margin. Patients don't see that distinction, though, and Northwell must serve them all.
"[Commercial] is what everyone's going after," he says. "So, you try to be the preferred provider. You take market share from competitors by developing the physician relationship and by the expansion of ambulatory. We've built a massive ambulatory network with over 650 locations. It's a marketing and consumer experience strategy. If patients are not happy with experience, they will go somewhere else, so it's multifaceted."
Hospital-centric organizations used to measure market share in terms of inpatient volume or discharges, but as more services have moved outside the hospital environment, those have become less reliable measures of success.
"We're all moving toward understanding that the consumer is the determinant of success, rather than just the patient care business," says Dowling. "The consumer is going to be determining how they want care and where, and since more of it is not needed in the hospital, you have to create locations for cancer care and imaging and surgery where it can be done on an ambulatory basis."
Scripps: Accentuate your strengths
Chris Van Gorder, the longtime president and CEO of Scripps Health in San Diego, is content with a level of uncertainty around market share, and says that growing it depends partially on instinct in a time of upheaval.
"Market share's an odd thing. Everyone still wants to gain commercial market share, of course," he says. "But today we're not so focused on the inpatient side. We're doing total hips on the ambulatory side. So, the traditional way of looking at market share isn't valid anymore."
Even though the discharge-based methodology isn't as relevant as it used to be, it's still important. Rating agencies still use discharges as an important tool to measure financial health, and with the relative lack of precise alternatives, discharges can be an important factor in how they determine borrowing capacity and interest rate terms for healthcare organizations.
"As an industry, we have to figure that out," Van Gorder says. "Rating agencies use discharges, but you could be reducing that number and getting stronger as an organization."
Scripps went through its rating agency sessions about three months ago and has seen a small decline in those traditional market share measures, but Van Gorder says those measures don't tell the full story anymore. Scripps' market is dominated by three major players: itself, Kaiser Permanente, and Sharp HealthCare, so fluctuations in discharges are often small and at the edges.
Rating agencies are smart enough to recognize that healthcare is changing, Van Gorder says. For example, they know it's the right strategy to move to ambulatory, and Scripps experienced growth in covered lives in its health plan, which is part of Scripps' strategy to build its own narrow network. But even rating agencies are frustrated that there's no metric to enable consistent comparisons, he says.
"We still talk about market share because I still need to make sure the hospitals are occupied enough. Half-full hospitals are the fastest way to go bankrupt," he says.
Scripps is strong in cardiovascular services, particularly interventional cardiology. "So, we focus on maintaining our strength in that area and in ortho, which is becoming much more ambulatory than it used to be," says Van Gorder.
One area where it's not as strong is cancer, he says, even though Scripps is a major oncology provider in San Diego. To maintain and even buttress that market share, the health system has partnered with Houston's MD Anderson Cancer Center to build a new comprehensive cancer program that started treating patients this summer.
"[MD Anderson] is building a network strategy, and they have 23,000 people just working on cancer, so we are taking advantage of their knowledge to make us stronger," he says. "It was a market share play, but it's much more than just that, with increased access to research and clinical trials." (See related sidebar on seeking out partnerships.)
Facing fierce competition in ambulatory, Van Gorder says the health system is focusing on areas where it's strongest and trying to grow there.
In all areas, he says Scripps must aggressively focus on cutting costs, because he sees cost as a proxy for quality. In fact, he notes, cost may be the major limitation for most health systems in growing market share for the foreseeable future.
"People are paying more out of pocket to come in, and insurance companies have gotten so good at narrow networks," he says. "People tell me you can't lead with cost, and I say no. Cost is a quality indicator."
Grady: Investing in specialty services
Safety-net hospitals, such as Grady Health System in Atlanta, have historically been overrun by mission patients—that is, patients who do not bring margin, such as Medicaid patients. But its leadership has recognized that the health system needs to be more competitive in commercial patients.
For Grady, that hasn't meant investment in traditional service lines, but instead investment in highly complex tertiary and quaternary services that can't easily be found elsewhere in its market, says John Haupert, its president and CEO. With seed funding from philanthropic sources, Grady has made multimillion-dollar investments in stroke and neurological surgery, interventional cardiology, and surgical subspecialties.
"In our case, it was a matter of survival. If all your patients are Medicaid or unfunded, you're not going to be in business. Part of Grady coming back to life 10 years ago involved developing strategies to grow in funding the mission," says Haupert.
The complex cases that have come from Grady's recent investments weren't previously present in the market. Unlike many organizations, Grady needed to create additional inpatient capacity to maximize those investments in capital and talent. It will soon be operating around 700 occupied beds; 10 years ago, it was barely operating 400. It's building new outpatient facilities as well, expanding ambulatory surgical and oncology capacity across the street to free up space in the main facility where its cancer center is now.
"In the next three years, we'll have 750 beds in operation," Haupert says. "We've gone from 9% to 20% commercial. That helps with sustainability."
Merger will bring together private equity firm's RCCH HealthCare Partners and LifePoint to form a rural hospital company with 84 hospitals in 30 states.
The merger that will combine LifePoint Health and RCCH HealthCare Partners shows that public markets may be undervaluing healthcare assets.
Apollo Global Management, a private equity firm that made the $5.6 billion deal possible, already owns RCCH, and the deal will combine the two hospital operators. Apollo plans to pay $65 in cash per share of LifePoint stock, which is more than 35% higher than the price they closed at Friday, the last day of trading before the deal was announced. Its shares had lost 27% in the past year.
But the public markets may reflect shortsightedness.
Private equity has found healthcare a hot bet on in recent times. Multiples are high, but as the LifePoint deal makes clear, many feel bargains are to be had.
LifePoint's strategic model is somewhat unique, which may prove to be a positive to the private equity firm. It does acquire hospitals and health systems outright, but will also structure deals as partnerships.
LifePoint is not wedded to a single type of partnership. It will partner directly with local hospitals that seek management expertise in return for a share of the local health system's assets and profitability.
It also has partnerships with larger health systems, such as Norton Healthcare in Louisville, and its 14-hospital partnership with Duke University Health System is groundbreaking in that it combines the operational skills of a for-profit hospital company with the clinical skills and reputation of a top-shelf academic medical center. Originally intended to leverage Duke's reputation in the Carolinas, the model has since extended to states far from Duke's home base.
It remains aggressive in its niche, which is rural hospitals, and is at the forefront of the consolidation trend. Rural hospitals have less competition than their suburban or urban counterparts.
As a CNBC reporton the deal notes, hospitals operate under lower tax rates than the typical company, and are insulated from possible trade wars that threaten the profitability of more internationally focused businesses.
The new company, which will be taken private under the LifePoint name, will be led by current LifePoint Chairman and CEO William F. Carpenter III, reflecting Apollo's confidence in his vision.
More broadly, the deal represents yet another vote of confidence in healthcare as an attractive investment option despite what the public markets may reflect.
Overall, since the recovery from the financial crisis of 2008, private equity's greatest challenge has arguably been finding attractive investment opportunities. A recent piecein Forbes about private equity's infatuation with retail healthcare argued that one reason healthcare is so attractive to private equity is that the sector is high-margin and fragmented, which is a siren song to dealmakers.
To them, healthcare still represents an opportunity for bargains in a sea of overpriced assets.
A previously announced merger brings together Maryland and Ohio health systems under one name as one CEO is chosen to lead them.
Two Catholic health systems that announced a merger in late February have moved quickly to name a CEO that will lead the combined companies.
John M. Starcher Jr., president and CEO of Cincinnati-based Mercy Health, will serve as president and CEO of the new organization—Bon Secours Mercy Health—while Rich Statuto, president and CEO of Marriottsville, Maryland-based Bon Secours Health System, will serve the combined organization as an advisor for the next year, the organizations announced Monday. Statuto will retire in 2019.
"Our new ministry ... is positioned to be more successful than Mercy Health and Bon Secours ever could be as separate entities," said Starcher, in a press release. "We will expand our services and programs, provide greater access in our markets to help and serve more people."
Related: Mercy Health and Bon Secours Announce Merger
He says the combined entity will provide almost $2 million a day in community benefit. The new name will be effective when the merger becomes final this fall. In his advisory role, Statuto, who has served as Bon Secours CEO for 13 years, will focus on strategic growth and innovation.
The new name will not immediately affect current names and brands at individual facilities, which will continue use their current brands in signage, uniforms and badges.
Mercy Health and Bon Secours rank in the top performing quartile of Catholic health systems for low cost, high quality patient care.
The combination creates the country's fifth largest Catholic health system, and the release claims the merger should allow it to leverage economies of scale by integrating resources and teams across the ministries, but no layoffs were announced.
The new entity will own or manage 43 hospitals and employ 57,500 people.
Chris Allen, who currently serves as chair of the Bon Secours Board of Trustees, will chair the new entity, while Katherine Vestal, PhD, current chair of the Mercy Health Board of Trustees, will serve as vice chair.
The overarching governing entity or Public Juridic Person, which has canonical oversight for the system, will be called Bon Secours Mercy Health Ministries and will be chaired by Sister Pat Eck, C.B.S.
Statuto has been active in leadership positions at both the Board of Trustees for the Catholic Health Association of the United States, as well as Premier, a publicly traded healthcare improvement company started by 181 hospitals, health systems and healthcare organizations, where he currently serves as chair.
"I am confident in John's ability to lead Bon Secours Mercy Health as we combine our healthcare ministries to form a new organization," said Statuto, in the release. "While I look forward to retirement and spending time with my family, I am fully committed to the success of our newly formed ministry."
Tina Freese Decker rose through the ranks to lead the health system where she started her career. Now she takes over for an 18-year veteran.
Digital tools and access are means to an end for Spectrum Health's new CEO, Tina Freese Decker, who was named the Grand Rapids, Michigan health system's CEO on Tuesday. Freese Decker, who has been with Spectrum since 2002 in a variety of roles, was most recently executive vice president and chief operating officer of the 12-hospital, $6 billion (revenue) health system.
She'll start September 1 succeeding Richard Breon, who has led the system for 18 of its 20 years of existence, and who will retire August 31.
While she plans to develop a so-called 2030 vision plan with the system's board, other leaders, physicians, and employees, her initial goal for the health system is to further develop a philosophy of personalized health.
"I'm thrilled," she says. "I know this organization and I know our community, so I can move at a nimble pace. And because I’m connected with other organizations throughout the country, I know what the industry is facing, so I can be open to new strategies."
In a conversation about her new responsibilities, Freese Decker elaborated on what she's excited to bring forward in her tenure as the integrated delivery system's top leader:
The pieces are there:
"I’ve been here 16 years in a variety of roles in strategy and operations. My goal has always been to lead a health system, and I really appreciate the opportunity that being an integrated health system presents."
Digital and virtual a means to an end:
"Digital and virtual health interactions are really important because they feed a larger strategy of personalized health. We want to provide a convenient, high-quality, and affordable experience for individuals. Access points that are more convenient enable that personalized health approach."
Diversity of ideas feed effective strategy:
"I plan to have listening tours and connect with all our sites to help enhance our culture of trust and transparency. I want input from the board, the community, physicians, nurses, and employees. I have some ideas for our 2030 vision, but I want this to be a process so all of us together are driving toward those goals. I'll continue rounding. It's important to be visible and engaged with our team and the people we serve, so we know the strategies we work on will actually make a difference."
"We all know disruption is at our doorstep—accelerating [innovation's] pace and strategic growth opportunities are critical—and we have to make sure we’re empowering physicians and team members to engage in that process. Change is not an indictment of the past. Our approach needs to be more collaborative because we can create win-wins with partners. I want to see more of that to help solve the challenge of social determinants of health."
Mentors will be a resource:
"Rick (Breon) is staying in Grand Rapids. He’s one of my mentors and will always be available for a phone call. I’ve seen his approach close up and that's helped me develop my own approach as a leader. Another key mentor is John Mosely (EVP, Special Projects at Spectrum), who's very different from Rick. What’s most important to me is distilling the focus to a partnership strategy and win-win solutions. I've also learned a lot from my parents. My dad owns a small business and his perseverance and loyalty is awesome, and my mother is so creative and dedicated. From her, I got a great model for working with people."
In her previous roles, all at Spectrum, Freese Decker led:
A $300 million transformation of Spectrum's care model, including an Epic installation
An operational efficiency project in operations across 12 hospitals and nearly 200 service sites
An integration of Spectrum Health’s business entities: Priority Health (health plan), its medical group and hospital group
A culture change by encouraging leaders and employees to embrace a spirit of curiosity and pursue innovation, and trust that they are supported
A virtual medicine strategy and implementation of MedNow (telehealth)
An employer advocacy group says government action is necessary to develop effective and efficient healthcare delivery, but regardless, healthcare providers should expect more activism in healthcare delivery.
Pacific Business Group on Health CEO David Lansky testified Wednesday to a key Senate committee that government action is needed to develop an information infrastructure that will drive the evolution of a more effective and efficient healthcare system.
Providers would be well advised to be prepared whether Congressional action is ultimately taken.
Members of the Pacific Business Group on Health, a purchaser coalition made up chiefly of large employers that purchase healthcare services for their employees, spend more than $100 billion a year on healthcare services for about 12 million employees and their dependents, but Lansky says even that heft can't fully realize the changes that are needed to judge whether health services are being delivered efficiently and whether optimal health outcomes are achieved.
"As a result, neither consumers nor purchasers can identify and reward high quality care, and healthcare providers and suppliers are given little incentive to compete or continuously improve their performance," he told the Senate Health, Education, Labor and Pensions committee in prepared testimony.
Lansky argued that public and private payers need to collaborate more on holding healthcare accountable for outcomes.
To make that happen, he asked lawmakers to create an information infrastructure and use federal purchasing power to drive value-based competition. Public programs pay for about half of the healthcare purchased each year in the U.S.
"The techniques of value purchasing could drive the evolution of a more efficient and effective health system, but those approaches will not be effective until we have meaningful transparency of cost and outcomes data," he said.
It’s difficult to recommend how healthcare leaders should react strategically to Lansky's specific points based on testimony to a Senate committee, but they should note the way the wind’s blowing on being able to demonstrate value and quality outcomes, as many already have.
It's not the first time PBGH has reached out to government for help in injecting value principles into healthcare. If government payers adopt similar strategies, they’d better be prepared. Among conclusions from Lansky's testimony, even without the government support he seeks, value will continue to inch forward. Healthcare leaders should expect:
More direct contracting: Cutting out the insurance middleman has worked well in many cases, Lansky said. This is one area where healthcare providers can act on their own to move toward value.
"Many of our members, as very large purchasers, have found that they can achieve more effective payment and delivery arrangements by working directly with provider organizations rather than through large insurance carriers," said Lansky.
More consumer incentivesto encourage high-value care: This is another area where healthcare providers can influence their own path toward quality. "In our Employers Centers of Excellence Network program, employees of Walmart and Lowes stores, for example, face zero cost sharing if they choose to go to a carefully selected, high quality hospital for surgery," he told the committee. Lansky argues more information is critical to drive more providers to base their business on value, and that similar principles could be effective in many public programs.
More transparency and performance information: PGBH members provide cost and quality transparency information to their employees already, especially in programs that include high deductible health plans. But there are significant concerns about the usefulness of the tools as well as consumer engagement with them. "Patients also want to know what outcomes they can expect from care, and whether outcomes vary across providers," Lansky said in his testimony.
More instruction on effective delivery of care from employers: Purchasers once subscribed to the managed competition model in which the purchaser held the health plan or provider system accountable for outcomes and total cost of care for a population but didn't consider it their business to tell providers how to deliver care, Lansky said. But that's changing. Many PBGH members engage vigorously with provider partners to ensure conformity with evidence-based guidelines, Lansky said, and thus providers should expect employers, and perhaps government, to be more prescriptive about improvement priorities, methods and measures.
Even large employers that join forces in groups like PBGH don’t have the combined size and scale to compel widespread change given the confusion and conflicting incentives that volume-based reimbursement from government payers still causes, but health care providers who want to be ahead of the curve in what's probably coming should probably listen to them.
The idea of narrow provider networks has a negative connotation, but here's how to turn it into a positive.
One way health plans and employers are trying to hold down costs is through narrow networks.
By guaranteeing interaction and revenue opportunities from a patient population, the idea is that health systems will provide greater discounts for their services, and patients and employers will save on premium spend.
So why aren't narrow networks more popular?
Narrow networks have been successful in holding down costs, but for many patients, a narrow network has a negative association with limiting their choice.
But what if the idea of the narrow network, especially one that covers a variety of sites of care—from primary care to home health to hospice—is promoted as a positive?
The Amazon Effect
Business people like to useAmazon as an example of a bogeyman that can put them out of business. Indeed, Amazon has done that to a variety of businesses in bookselling and general retail, and now it's set its sights on healthcare, perhaps starting with drugstore chains.
But the leaders running Amazon don't view choice, which narrow networks limit, the same way health leaders do.
Amazon knows that their customers have a choice, but they want to make it more difficult for customers to choose their competitors by offering them everything they can at a competitive price, with easy delivery options.
Healthcare is more complex, and more variables enter into the decision of where to seek care, but strategically, health systems should do the same as Amazon by building out their ecosystem, thus making it preferable for patients to stay in it, says Rod Hochman, MD, president and CEO of Providence St. Joseph Health, a seven-state, 50-hospital health system based in Renton, Washington.
In his view, his competition is no longer other hospitals, doctors, nurses, and clinics, as it has been in the recent past.
Instead, other huge players, such as drugstore chains, insurers, and even tech companies such as Amazon are becoming direct competitors. Insurers are adding provider services to their portfolios.
UnitedHealth Group is one example of an insurer becoming a healthcare provider through its Optum subsidiary, which has bought physician groups that will compete head-to-head with traditional health systems like Providence St. Joseph.
By providing multiple, easy access options for patients to stay within the system for their healthcare, Providence St. Joseph hopes to increase patients' loyalty so that they won't mind, and may even prefer, staying within a narrow network.
"Competition has become more asymmetric," says Hochman. "It used to be that you knew who your competitors were in the local market. We fought over patients and shook hands at the end of the day. It's not that way anymore. The typical boundaries that we used to see in the past are no longer there."
To anticipate and counter these threats and make narrow networks more attractive to patients, Hochman says Providence St. Joseph and other health systems should:
Strengthen what you do well traditionally: that's your hospitals, physician practices, and high-end care in general. Ensure that quality, ease of access, and primary and follow-up care are available within the network.
Ingrain your system as a trusted partner: This means establishing a reputation in quality, customer service, and in a variety of care settings outside the acute space as a trusted manager of a patient's care—from birth to death. At Providence St. Joseph, whose own health plan has a million members, that means managing care for most of the local population in all its markets by providing a guiding hand to patients in part through technology and geographical coverage.
Build and utilize an internal transformation group: Exceptional patient care is only part of the equation. Service and guidance to help patients navigate a confusing healthcare system—and this includes the financial element—is paramount. Providence St. Joseph's transformation group focuses on digital service elements such as direct-to-patient portals and electronic health record management.
Steal Strategy From the Competition
Providence St. Joseph's transformation group is focusing on becoming an internal service company.
Hochman compares the effort to "creating our own Optum at Providence Health. Fundamentally, [UnitedHealth Group] made a decision that staying exclusively in the insurance business is not sustainable. We've made a similar decision that staying only as a provider is not sustainable."
To that end, Providence St. Joseph is further extending its reach and scale by focusing on clinical research initiatives as well as funding and nurturing the startup companies that can sometimes result from that research.
Another way to leverage Providence St. Joseph's scale is by tackling cost and affordability on a coalition basis. Hochman anticipates building a coalition of hospitals, pharmacy providers, and independent providers to agree on ways to make healthcare more affordable.
"Just last year we saved $110 million in costs over what Providence and St. Joe's would have had as separate organizations, and much of that savings came from services, supply chain, clinical excellence, and IT," he says.
All of this work serves to build a healthcare ecosystem that patients hopefully won't want to leave.