Health systems are creating preferred networks and monitoring provider services to cut length of stay, reduce readmissions, and improve outcomes.
Just a few years ago, most hospitals discharged their patients and didn’t check on them again unless they showed up in the ER or were readmitted. But now, as government and private payers alike seek to improve care coordination, post-discharge patient care can no longer be ignored.
Through accountable care organizations and clinically integrated networks, health systems have access to data that can help them identify variation among postacute providers. These health systems can also spark performance improvement among their postacute partners by having them compete against each other for discharge volume.
In a recent press call with healthcare performance improvement company Premier Inc., two early movers shared the tactics that helped them drive better outcomes and financial results.
Preferred Providers
St. Luke's University Health Network in Bethlehem, PA, began building a preferred postacute provider network in 2013, said Donna Sabol, RN, vice president and chief quality officer.
That year, leaders at the seven-hospital health system decided to fully participate in a voluntary Medicare bundling initiative that covered 84 procedures and the follow-up care associated with those procedures.
Developing a truly accountable postacute provider network was an urgent priority. “We saw it as a learning opportunity in preparation for mandatory bundles,” she said.
To ensure early success, St. Luke’s evaluated its internal needs for staffing, technology, data analysis, care coordination and gainsharing with invited postacute care organizations, and invested in those capabilities.
Registered nurses and physical therapy providers from St. Luke's worked with postacute providers to develop care protocols. Using its EMR, the health system identified bundle patients upfront so the specialists coordinating their care could supervise patients’ care on admission to the hospital and follow them for 90-days post-discharge.
There was room for improvement—data showed patients with commercial managed care averaged half the postacute length of stay of traditional Medicare patients.
Postacute partners needed training, so St. Luke’s embedded physicians in those providers and began sharing quarterly performance data as well as blinded data from other providers in the region.
St. Luke’s made clear from the beginning that postacute providers would be competing for a spot on the health system’s “preferred” list based on performance. The initial list included 16 partners, but was winnowed to nine by April 2016.
Organizations can be added to or removed from the preferred list based on ongoing semi-annual performance reviews.
Since 2013, the health system’s average length of stay in skilled nursing facilities has dropped from 36-40 days to 14-19 days. Meanwhile, 90-day readmission rates have decreased from 34.4% to about 21%.
Acute care sites can’t insist patients choose one postacute provider over another, but they can heavily influence that choice by prominently featuring organizations that follow the same agreed-upon care parameters as the hospital or health system. Postacute providers will compete for that volume, said Sabol.
One Number to Call
Presbyterian Healthcare Services, an integrated delivery system in Albuquerque, NM, piloted an advanced illness management program in 2015 that focuses on the 5% of its Medicare Advantage patients with the most serious illnesses.
Since piloting the program in 2015, Presbyterian has enrolled 600 of the sickest MA patients, said Nancy Guinn, MD, medical director of Healthcare at Home, a unit of Presbyterian Healthcare Services. These patients represent about 50% of the total costs of the system’s Medicare Advantage plan.
Potential candidates for the program are identified by case managers or health assessments, and are given one phone number to call for all services. They can use the number to arrange for in-home case management, for example, or to connect with a practice devoted exclusively to house calls.
The program tracks outcomes such as ED visits, hospitalizations, falls, urgent home visits, and hospice. Since its inception, the program has provided 553 urgent home visits, 372 of which avoided ED visits and subsequent hospitalizations. Initial reports on total cost of care show savings of $700-plus per member per month, Guinn said.
No postacute partnership is the same. Both of these examples are snapshots of the types of interventions that can yield results, but they demonstrate the immense power of true accountability to improve outcomes and cut waste.
Survey respondents' answers highlight possible risks to patient safety and good outcomes, and the need for better care coordination.
A survey of more than a thousand seniors shows the gaps in care coordination for some of the nation's most costly and most vulnerable patients, and highlights the need for better, more innovative care management.
The Harris Poll survey found that 85% of respondents had been diagnosed with some type of health condition. More than 64% said they have seen at least three healthcare providers during the past year.
However, 69% of respondents said they rely on themselves or a family member to coordinate their care, and 63% who have been hospitalized said no one helps coordinate their care for the first few months following discharge.
Less than half of those surveyed (43%) reported that they were asked about the treatments or medications prescribed by other doctors, highlighting possible risks to patient safety and good outcomes.
However, nearly all seniors (95%) said they are satisfied with the care they receive from their provider—typically a primary care physician or his or her staff (85%).
More than three-quarters of seniors said their healthcare provider takes an active role in helping them manage their health (78%), gives them the support they need to live healthier lives (84%), and is a partner in helping them take care of their health (82%).
That doesn't mean they wouldn't appreciate more help or recognize the need for it. Some 28% said they would like their healthcare provider to have a person in their office call them regularly to ask if they have questions about treatment or medications.
More than half (52%) said they want their provider to offer access people or programs that could help them understand their current treatment plans and manage their health.
The survey was conducted between September 26 and October 13, and included 1,005 respondents in the United States age 65 or older. It was commissioned by Anthem subsidiary CareMore, an operationally independent, senior-focused health plan and medical group.
"Responses to the survey reinforce the importance of engaging patients by providing access to a comprehensive health care team and services to enable access to optimal care and coordination," CareMore stated in its overview of the survey.
Toby Cosgrove, MD, discusses his concerns about the regulatory burdens on healthcare providers ahead of serving on the president-elect's "strategic and policy forum."
This is the first in of a series covering the Shaping of Healthcare's Future in the Trump era. As the new administration prepares to take office, HealthLeaders Media will continue to talk with healthcare leaders about the challenges and opportunities for the industry that lie ahead.
The single voice representing healthcare on President-elect Donald Trump's "strategic and policy" forum belongs to Delos "Toby" Cosgrove, MD, president and CEO of the Cleveland Clinic.
Although details about what the group will discuss in its monthly in-person meetings are not yet known, Cosgrove says he's honored by the selection and humbled that he will be able to represent healthcare to the president.
Forum members are charged with offering insights on how government policy impacts economic growth, job creation and productivity. The 19-member group will bring together leaders from business, finance, and technology and is scheduled to start its meetings in February, after the inauguration.
Following is a lightly edited transcript of a conversation between Cosgrove and HealthLeaders Media on his thoughts about the group and its purpose.
HLM:You said you had heard from other healthcare leaders. I won't ask you who, but talk generally about some of their concerns with respect to the ACA and value-based care?
Cosgrove: They haven't been that specific, the ones who have reached out about the group.
Occasionally people have come to me and asked me to talk to them about this or that, but so far they haven't been major healthcare leaders.
First of all, there's a recognition by this group that if you're going to talk about strategy and the economy, you have to talk about the biggest employer and biggest industry in the U.S., which is healthcare. So that certainly is part of the agenda for the group.
The second thing that cannot be avoided is that we have to begin to think about the ACA and what the ramifications of that are not only for the healthcare industry, but also for the U.S. in terms of jobs, employment, the economy, and the health of patients.
Essentially, when healthcare sneezes, the U.S. gets a cold. I care deeply about its future as it affects 100% of the population.
HLM: Given its large share of the economy, why was only one person from healthcare named to the committee?
Cosgrove: I don't really know what the thinking was about putting the committee together. Trump vetted [a list of] individuals, some of whom he did not want, and some of whom he added. I don't know if I was on the list to begin with or whether I was added.
HLM: The president-elect promises to cut red tape. What are healthcare leaders telling you about regulations they'd like to see done away with or modified?
Cosgrove: Well, we've got a tremendous number of quality metrics that we're held to on a regular basis. I think we report something like 120 quality metrics to the federal government on an annual basis, and we have somebody inspecting our organization every day of the year. It's a real burden.
It seems like one side of Washington wants to improve efficiency, and the way most industries have done it is through consolidation.
The Justice Department seems to be taking the opposite tack, certainly for providers. [It] has been trying to derail increasing efficiency by being worried about competition.
I won't speak about insurers because I think that remains to be seen.
HLM: Have you met President-elect Trump? If so, what were the circumstances?
Cosgrove: Yes. I first met the family when I operated on his brother [Robert] a number of years ago. I've also met him on other occasions, such as when we [Cleveland Clinic] were doing a fundraiser at Mar-a-Lago.
HLM: Were you surprised to get this call?
Cosgrove: Totally. The day before Thanksgiving I got an email from Steve Schwarzman [CEO of Blackstone, a global investment firm, and chair of the policy forum], telling me what he was doing and asking me to call him.
I called him the day after Thanksgiving and we had about a 30- to 45-minute conversation about it and then I talked with people here at Cleveland Clinic and got their approval.
HLM: Do you know any of the others on the forum personally?
Cosgrove: I've known or met most of them previously. Some of them are acquaintances and some are friends. I have spoken about healthcare with several of the members. I met some through meetings, through mutual friends or introductions, from business interactions, and even from vacation.
Three of the leaders have spoken at Cleveland Clinic for our Ideas for Tomorrow speakers' series. I'm truly looking forward to working with the members of this group.
HLM: Do you know if President-elect Trump plans to attend these sessions?
Cosgrove: Well, supposedly these are meetings with him on a monthly basis. Whether that ends up being monthly or less frequently, I don't think we know at this time. We meet first in February.
HLM:What are some of the most important healthcare policy areas you feel the administration should address quickly?
Cosgrove: It's important to address the rising cost of healthcare, high drug prices, and wellness to reduce the burden of chronic diseases. The health of our nation is only as good as the health of its citizens. We need to move from sick care to healthcare.
HealthLeaders: What's your top piece of advice to healthcare CEOs worried about big changes from a Trump administration?
Cosgrove: As I told [Cleveland Clinic leaders], there are two things we have to do on the continuing march we've been on.
One, we have to improve quality. And two, we have to make healthcare more affordable. Those are no-regret moves regardless of what kind of policy we have. I'd be happy to talk more about this once I know exactly what it's going to be about.
Trump "Strategic and Policy Forum" Members
Stephen A. Schwarzman (Forum Chairman), Chairman, CEO, and co-Founder of Blackstone Group
Paul Atkins, CEO, Patomak Global Partners, LLC, and former commissioner of the Securities and Exchange Commission
Mary Barra, Chairman and CEO, General Motors
Toby Cosgrove, CEO, Cleveland Clinic
Jamie Dimon, Chairman and CEO, JPMorgan Chase & Co
Larry Fink, Chairman and CEO, BlackRock
Travis Kalanick, CEO and Co-founder, Uber Technologies
Bob Iger, Chairman and CEO, The Walt Disney Company
Rich Lesser, President and CEO, Boston Consulting Group
Doug McMillon, President and CEO, Wal-Mart Stores Inc.
Jim McNerney, Former Chairman, President, and CEO, Boeing
Elon Musk, Chairman and CEO, SpaceX and Tesla Motors
Indra Nooyi, Chairman and CEO, PepsiCo
Adebayo Ogunlesi, Chairman and Managing Partner, Global Infrastructure Partners
Ginni Rometty, Chairman, President, and CEO, IBM
Kevin Warsh, Shepard Family Distinguished Visiting Fellow in Economics, Hoover Institute, and former member of the Board of Governors of the Federal Reserve System
Mark Weinberger, Global Chairman and CEO, Ernst & Young
Jack Welch, former Chairman and CEO, General Electric
Daniel Yergin, Pulitzer Prize-winner, Vice Chairman of IHS Markit
Documentary film chronicles one rural health system's journey toward a vision for population health, and its recipe is deceptively simple—but not cheap.
Building a culture of wellness through focus on specific health measurement pays off, an ongoing project in Minnesota shows. The conundrum is, who pays for it when the benefits are so disparate?
The Heart of New Ulm tells the story so far of a rural health system in Minnesota that began a 10-year project in 2008 to see if it could demonstrate the impact of targeted population strategies around heart health.
Among the results so far:
A 7% improvement in hypertension
Reduced smoking and heart attack rates
Improved physical activity and nutrition
Allina Health's New Ulm (MN) Medical Center and Toby Freier, its president and CEO, launched the Heart of New Ulm Project based on the premise that changing individual behavior through simple interventions can have an exponential impact on the health of a population.
The project is a collaboration of the medical center, the Minneapolis Heart Institute Foundation, and the community of New Ulm, MN, which has a population of approximately 13,500 and is located about 90 miles southwest of Minneapolis.
Measuring ROI
The film details the project's progress in improving the health of an entire community. With modern data analytics capability, it's possible to measure the impact of such programs, Freier says, making return on investment much clearer.
He hopes the project can serve as a national model for other systems that have questions about the ROI in population health.
The documentary, which chronicles the first seven years of the journey, was created by Health Catalyst, a Salt Lake City-based data warehousing and analytics company that provides those services to New Ulm Medical Center's parent, Allina Health.
The project was initially championed by renowned cardiologist Kevin Graham, MD. Graham pioneered a Level 1-heart attack protocol that improved outcomes in transfers from rural areas to tertiary centers.
The goal was to get to zero heart attacks in the community, which Freier acknowledges is unrealistic, but "we needed a bold goal to get robust innovation," he says.
"Eight years in, we've learned you can't just tweak the medical system. You have to be pretty bold."
That work includes interventions, screenings, and measurement of outcomes over time. New Ulm's highly integrated health system made the town an ideal candidate for the project, according to Freier's recollection of Graham's thinking (Graham suffered a debilitating stroke in 2010).
Most people in New Ulm receive care through the medical center, which has documented that care in a single EMR for the past 11 years. "That provided us the opportunity to use innovative surveillance tools with which we actually monitor their health on a regular basis," Freier says.
Screening Participants
Researchers invited all adults age 40-79 within the city's ZIP Code to participate in screening. Of the 7,855 people invited, 5,198 were screened. The health system collected participants' blood and noted risk factors such as diabetes, obesity, and hypertension to create a full medical baseline in the EHR.
Of the group screened, 3,400 individuals were enrolled in the Move to Improve community challenge program, a free eight-week challenge to help them increase their activity level and improve their food choices to help reduce their overall risk for heart attacks.
The goal was to get the group to commit to at least 150 minutes of physical activity each week. Community resources, including restaurants and employer work sites, were enlisted to help promote healthier lifestyles.
Follow-up screenings, including additional blood draws, have been done twice since the initial screening.
The results so far show a general improvement on blood pressure (from 79% of participants at their target blood pressure in 2008 to 84% of participants now). The number of patients with LDL cholesterol levels at their goal for the project improved from 68% to 72%.
Participants' mean triglyceride levels decreased eight points, while the number of patients at goal for triglycerides increased from 66% to 70%, according to the Minnesota Heart Institute Foundation.
The bulk of the improvements occurred in people who were not at goal at baseline, and the cost of care is now 14% below the benchmark of the Allina Health System.
Those apparently modest improvements in statistics represent years of extended life, says Freier. Through that lens, investment of $1 million a year seems like a bargain. But it's never that simple.
"Most other healthcare systems look at that investment and say that's a nonstarter," says Freier. "I wouldn't expect others to spend that. This was groundbreaking research about how to build this."
Instead, other health systems could fund interventions that the New Ulm project identified as worthwhile. Other systems might be able to do the bulk of monitoring and interventions for as little as $200,000 annually, Freier says.
For New Ulm Medical Center, it also helps that nearly 50% of its revenue is in value-based reimbursement arrangements.
"Sustainability of initiatives like this will take more than direct funding of the healthcare system," Freier says. "What can cities, public health, and schools bring to the table? ROI isn't solely on the back of the healthcare system. It should be a community investment.
"Too often we feel we need to be in control as a healthcare provider, but it has been a great learning experience and has given us so much appreciation for our community leaders," he says. "This could be a national model for population health."
The CMS star rating system for hospital quality may have more to do with community factors than hospital care quality, a report suggests.
Hospitals claim that the Center for Medicare & Medicaid Services' quality star rating system unfairly portrays hospitals in low-income communities as poor in quality. Now, a report published by the Journal of the American Medical Association appears to back them up.
The report compares a WalletHub study that attempted to quantify "stress ratings" of 150 cities, and correlates its findings with CMS's hospital star ratings of 657 hospitals in those cities. The rankings were released in late July.
Researchers say there is a strong correlation between hospitals with lower star ratings and cities labeled "high stress" on the WalletHub ranking list. WalletHub's "most-stressed cities" ranking is based on publicly available data on poverty, unemployment, the divorce rate, and adults' health conditions.
Large teaching and disproportionate share hospitals were found to be more likely to have lower star ratings than rural and smaller hospitals.
Hospitals have protested the methodology behind the rankings ever since, saying they mask the impact on health quality of factors over which hospitals have little control, such as the level of poverty and crime in the community.
Lead researcher David Nerenz, PhD, director of the Center for Health Policy and Health Services Research at Henry Ford Health System, found that cities at extreme ends of the continuum, such as Detroit, MI and Newark, NJ (most stressed), were highly associated with lower star ratings.
Cities such as Madison, WI, and Sioux Falls, SD, at the low end of the stress rankings, had hospitals with significantly higher CMS star ratings. Henry Ford Hospital, the Detroit health system's flagship hospital, and two other Detroit hospitals received one-star ratings from CMS.
The findings suggest that the ratings depend more on the health or "stress levels" of cities as measured in the WalletHub study, and of the patients they see rather than the quality of the interventions hospitals perform on those patients, according to the JAMA research.
Nerenz, who serves on the 17-member Medicare Payment Advisory Commission (MedPAC) that advises Congress on issues affecting the Medicare program, and others have tried to convince CMS and government representatives that the rating system needs further refinement and risk adjustment.
Only 2.2% of the nation's hospitals received the highest rating of five stars.
Most successful ACOs "shamelessly steal" ideas from others, says the CMO of outpatient services and ACO strategy at Methodist Health System. Her organization belongs to at least seven collaboratives.
There's no single prescription that will deliver positive results for an accountable care organization. The remedy lies in a variety of strategies and tactics that will engage physicians and patients in improving efficiency and patient care quality—the accountable part of ACO.
That's why it's so important for hospitals and health systems to collaborate and learn from each other.
So important, in fact, that an analysis from Premier Inc., claims that Medicare could have saved three times the amount it did and achieved higher quality scores in 2015 if all Medicare ACOs had performed as well as those in the company's Population Health Collaborative.
Since 2012, members of that collaborative, despite making up only 6% of Medicare ACO participants, have contributed 20% of total savings in the program. But it's far from the only choice for healthcare service providers to learn from each other about tactics and strategies to improve value.
Melissa Gerdes, MD, vice president and CMO of outpatient services and ACO strategy at Methodist Health System, which is a Premier Collaborative member, says help from other organizations wrestling with the same issues is invaluable.
Over a three-year performance period between 2012 and 2015, Methodist's Medicare Shared Savings ACO, the Alliance for Patient and Physicians, has saved Medicare $44.1 million resulting in a shared savings payment to the health system of $19.8 million.
Methodist Holds Membership in Multiple Collaboratives
That level of achievement would not have been possible, says Gerdes, without help from other organizations also developing value-based care strategies. In fact, Methodist, which has roughly 15,000 lives under the Medicare Shared Savings Program and an additional 55,000 lives under four commercial value-based contracts, belongs to as many as seven such collaboratives, learning from and contributing to each.
"They're very instrumental in our success," she says of the groups. "We make up very little of what we do ourselves, but we learn from peers and experts and steal shamelessly their ideas. That mitigates the experiment-and-fail process."
Critically, such collaboratives offer not only ideas on strategy, but on tools to get a handle on the huge amount of claims data that must be sorted and evaluated to identify top areas of potential savings or quality improvement.
Mining Claims Data for Cost Savings
"When you're in a value-based contract, you get a large dump of claims data for the lives you're managing, but it's all raw claims data," says Gerdes. "You need a business intelligence tool to make sense of it."
At Methodist, she and her team use business intelligence tools from Premier and other sources that help slice that data into meaningful and actionable information that can be used to make accurate predictions on ROI from a multitude of actions it recommends to intervention teams.
Business intelligence tools helped Methodist determine that its post-acute spending was three times the national average, which offered a potential $40 million savings opportunity in year one if that spending could be brought to the national average.
Focusing on post-acute as a whole was too large an action item, but home health came up as the highest potential ROI priority within post-acute, where there was huge spending variance.
Execution of a performance improvement plan with the help of a facilitator dropped home health spending from three times to twice the national average in just two years.
Gerdes, who has led Methodist's ACOs for five years, gives a lot of credit for better-than-average results to Methodist's membership in so many learning collaboratives.
"There still is no one way to do any of this," she says.
In a world where the consumer is king and transparency is an expectation, health systems are taking their cues from the online retailer in strategically remaking their service offerings with customer service and value in mind.
This article first appeared in the December 2016 issue of HealthLeaders magazine.
The consumer's responsibility to pay directly for a larger portion of his or her healthcare through increased deductibles and coinsurance charges is an undisputed fact.
Many words have been written about this reality, but a less obvious consequence of the unrelenting trend is a realization of the patients' increasing power to change how healthcare is administered, albeit in ways that are still unclear.
What does seem clear is that organizations that don't prepare for a world in which acute hospital care is increasingly commoditized and deemphasized will ultimately lose control of their destiny. Innovative leaders know that their organization's future success will be built not only on great reputation and better-than-average outcomes but also on customer service, price competitiveness, and an appeal to consumer loyalty through service and efficiency.
For many organizations, necessary strategic adjustments will need to be massive if the trend toward more out-of-pocket consumer responsibility for costs continues to accelerate at its current rate. A recent Deloitte report shows that even now, out-of-pocket healthcare spending outpaces aggregate consumer spending on new motor vehicles, clothing and footwear, and telecom and Internet services, for example. Consumers still spend more on groceries, but the gap is closing. A 2015 report from U.S. News & World Report's proprietary Health Care Index shows that deductibles, the amount of cash beneficiaries must spend before their health insurance kicks in, have the highest growth rate of any of the components that make up the index. Finally, the Kaiser Family Foundation shows that the percentage of covered workers enrolled in a plan with an annual deductible of $1,000 or more has risen to 46% compared to 10% in 2006.
What are the implications of that growth in out-of-pocket consumer costs on hospital and health system strategies?
At least one effect may rest in the irony that their ability to grow revenues and margins becomes impaired as consumers do more shopping, and express through their wallets their demand for better value in their spending. As other consumer-oriented industries have demonstrated, in healthcare the stickiness of your ecosystem should develop into the new currency for success.
Adapting and evolving
Howard P. Kern took over this spring as president and CEO of Sentara Healthcare from longtime CEO David Bernd, who grew the system from a $600 million revenue organization when he took over in 1995 (then Sentara Health System) to nearly $4.7 billion when he retired in March. While growth of the not-for-profit, integrated 12-hospital, Norfolk, Virginia-based delivery system will still be important under Kern's leadership (he served for 18 years as president and chief operating officer at Sentara before taking the top job), he plans to focus a lot of attention on the health system's relationship with the consumer. In fact, one strategic priority involves building an Amazon-like agenda into the organization, which includes a 450,000-member health plan.
"In the future, competition will be around the consumer and the relationship we can develop with the consumer over their lifetime," he says. "Today we tend to look at our delivery system as designed from provider side out, but we need to design it from the customer side in."
He predicts that in as little as five years from now, consumers will be much bigger drivers of healthcare consumption and choice than they are today. He says the successful organization needs to internalize the fact that high-dollar, expensive services that used to drive the train will do so less and less. Healthcare systems need no less than a fundamental reset of their priorities. In other words, they need to meet consumer needs first, and clinical and provider needs follow.
"The consumers, as much as we're trying to give them transparency, they take that for granted—and that's not to say we won't continue to focus on it, but we need to win on the customer experience," he says. "It's almost an Amazon-like agenda. It won't surprise me if in 10 years we will have organizations like Walgreens helping consumers achieve value through the continuum, so we need to evolve. Our competitors may become our partners."
Indeed, what's value as consumers define it?
Kern discusses the idea of putting the consumer first, which might seem intuitive, but in healthcare, given the provider's arm's-length relationship with the consumer that has developed along with the third-party payment system, it is certainly not. That has to change, he argues.
Kern cites the example of a recent Sentara initiative that achieved a goal of better customer experience at little cost. Of the organization's five major clinical goals for 2015, four revolved around quality targets, such as reducing deep vein thrombosis or reducing bloodstream infections, but the one that involved the most debate was around improving turnaround time for mammogram results that indicated a need for a biopsy.
Average turnaround time, at two-and-a-half to three weeks, was "way too long," says Kern.
Clinicians understood why the organization wanted to improve the metric, but they also made a compelling case that turnaround time doesn't matter clinically.
"But having to sit there and wait for that kind of answer is torture," Kern says.
So the organization set a goal to get 80% of such tests to a definitive diagnosis within seven days of the test's administration.
"Radiologists were very sensitive toward that goal," he says, "but it boils down to capacity and systems management and getting systems aligned."
Though Sentara didn't fully achieve the goal last year, more than 50% did get a definitive diagnosis that fell within that seven-day window. The 80% goal is again on the table for 2016, and Kern says Sentara achieved that goal in the second quarter of this year.
Proving value
While cheaper isn't always better, healthcare leaders would do well to remember that the more expensive doesn't necessarily mean better. For some time, "big-name" institutions have been able to extract higher prices for care because of their reputation, even if they couldn't prove that reputation stemmed from better outcomes than their competitors. Increasingly, organizations will have to make the case that their care may be more expensive because it is better, but they just can't state that. They have to prove it, says Aurelio Fernandez III, president and CEO of Memorial Healthcare System in Hollywood, Florida.
"Of course, the educated consumer will shop based on both price and outcomes, so we still have to price at a level that is, honestly, where the consumer is willing to pay a slight premium for that care," he says. "We'll have price transparency, but we're not pricing below market to get additional volumes. Price has to cover the cost to provide the care."
Fernandez says there's still lots of discounting going on among other providers in his market because it is overbedded, and safety-net organizations are at a disadvantage because they are the healthcare provider of last resort. Still, he's optimistic that consumers won't necessarily choose the cheapest option for care, but that when all variables are transparent, they'll choose the best value and outcomes will be a big part of that equation.
"We like the educated consumer. For that reason, we're investing a lot in tech, and the consumer will use that to meet their health needs."
"The consumer needs information that will influence their decision-making for their healthcare needs," but the health system is prepared to show the consumer many variables besides price to help them make that decision, he says.
For example, he says, for routine but complex procedures such as cardiac catheterization, joint replacements, and coronary artery bypass grafts, consumers should be given the full picture of the outcomes for a particular facility. Outcomes—many of which Memorial publishes on its website—tend to be better for organizations and providers that are able to do higher volumes of such procedures.
"We like the educated consumer. For that reason, we're investing a lot in tech, and the consumer will use that to meet their health needs," he says. "We'll add more and more outcomes on our website to enhance what we are already showing, although we're pretty comprehensive."
Hospital administrators hope the unexpected election result will bring regulatory relief and no financial headwinds.
The electoral college has spoken, and the markets' verdict for hospitals was swift and sudden. Hospital stocks were down double digits in the wake of Donald Trump's presidential win and have not recovered much on fears the new administration's policies will punish hospitals.
After all, you can't say "Affordable Care Act," which has been a net positive for hospitals, these days without hearing "repeal and replace" in the next breath.
But healthcare leaders are resilient, and they hope cooler heads will prevail as the Republican Party appears poised to remake, if not repeal, a law it professes to disdain entirely.
Here are five wishes several hospital and health system leaders hope the new administration will grant as the turbulent healthcare industry ratchets up to an even higher level of upheaval.
1. Greater Affordability
Affordability is a stated goal of any administration's work on healthcare, but how it's achieved is where differences in ideology become apparent.
Toby Freier, president of Minnesota-based New Ulm Medical Center, a 50-bed hospital within the 13-hospital Allina Health nonprofit chain, says huge strides are being made in rural communities on affordability.
"There's great value being provided by rural providers already, and with the right support and a framework for funding reimbursement for things like telehealth that leverage tertiary systems into rural communities, rural providers can help on affordability and better outcomes," he says.
"I'm hoping the next administration gets that connection and that the pathway to greater affordability can be achieved. At the same time, [hospitals] have to demonstrate higher value for the healthcare we're providing and we have to own up to affordability issue."
Nancy Howell Agee, president and CEO of Carilion Clinic in Roanoke, Virginia, a seven-hospital nonprofit system, says all involved in healthcare reform must understand the frustration and concern about healthcare costs.
"We cannot ignore that some people feel marginalized and are very worried about the growing cost of healthcare," she says. "It's our responsibility to minister to that need."
2. Reduction in Regulations
This is an area where hospitals and health systems and a Trump administration may find common ground. From MACRA to MIPs, innovation is encouraged.
But some say innovation can be strangled by overly complex and conflicting government regulations. Howell Agee is hopeful the complexity will be lessened. Under the ACA, "the rollout of regulations…has been staggering," she says.
3. Renewed Emphasis on Consumer-driven Care
Nevertheless, Howell Agee says that Trump's apparent lack of tolerance for burdensome regulations and bureaucracy, seems to indicate that high deductible health plans (which are not directly affected by government regulation) will continue.
This would mean that hospitals and health systems would need to continue to develop their abilities to reach consumers directly and make their value cases convincing.
"It seems likely that consumer-oriented healthcare will accelerate," she says.
4. No Reduction in Coverage
Perhaps the biggest fear of hospital and health systems executives is that a Trump administration will roll back Medicaid expansion and perhaps dismantle the Obamacare exchanges, which were experiencing problems well before the election.
"I hope we don't take a step backwards [away from] the goal of coverage," says Freier.
Health system executives have a responsibility to help encourage better coverage so that bad debt levels don't strangle them financially. But the flip side of that equation is doing their part to keep healthcare affordable.
Freier says he's encouraged that a Trump administration seems interested in looking into the skyrocketing prices of some prescription drugs, which have also hurt hospitals.
Although Virginia has not expanded Medicaid, it's been a financial boon to hospitals in states that have. Agee agrees that maintaining coverage that an estimated 20 million Americans gained through the Affordable Care Act is essential for both hospitals and patients.
"The key construct of the ACA, [meaning] more insured Americans, is crucial if we are to continue on a pathway for a healthier America," she says.
5. Better and More-targeted Incentives for Top Performers
Freier says he hopes that in future reforms, lawmakers strive for both value and greater access and recognize the challenges providers are navigating in terms of trying to better coordinate care. Those who overcome those hurdles should be rewarded.
"We're already managing a fast pace of change in a short period of time," he says. "There's more that can be done to align incentives and appropriately reflect the risk of a given population."
John Phillips, president of Methodist Mansfield Medical Center, a 254-bed hospital in the nine-hospital, Dallas-based Methodist Health System, says rewarding hospitals and health systems that are demonstrating value is key.
"Continuing to reward those providers who are truly fostering patient centered care delivery, improved patient outcomes and a lower cost is the right direction for healthcare and those we serve," he says.
Moreover, Phillips says the dialog among healthcare providers about the direction of the industry has never been more robust and he offers a vision of unity of purpose regardless of the swift change in priorities that are likely to affect the industry in short order.
"Let's use this opportunity to find solutions for our staff, physicians and patients as opposed to letting any change pull us apart," he says.
A letter of intent for CHRISTUS Health to acquire Good Shepherd Health System has been signed, though many details, including the purchase price, must still be finalized.
Good Samaritan Health System has found a faith-based partner in CHRISTUS Health.
After Duke-LifePoint terminated a proposal to buy Good Samaritan earlier this fall, the health system went back to the drawing board in its efforts to find an affiliation partner. Six weeks later, it found a willing suitor in CHRISTUS Health.
The two systems have signed a letter of intent for CHRISTUS to acquire Good Shepherd, though many negotiations, including its purchase price, must still be finalized.
The previous deal with for-profit Duke-LifePoint, a for-profit joint venture between LifePoint, based in Brentwood, TN, and Duke University Health System, was canceled in early October after more than four months of negotiations, leaving board members of the health system, which was an estimated $145 million in debt at the time, disappointed.
Good Shepherd, based in Longview, TX, says the CHRISTUS deal is more attractive because the cultures of the two nonprofits are more similar.
CHRISTUS has 60 hospitals and long-term care facilities and 175 clinics and outpatient centers in 60 cities in the U.S., Mexico, Chile, and Columbia, while Good Shepherd has hospitals in both Longview and Marshall, as well as a multispecialty physician network; freestanding emergency centers; a range of outpatient services; and a medically integrated wellness facility, the Institute for Healthy Living.
The agreement culminates Good Shepherd Health System's search to find an affiliation partner, which was initiated by the system's board of directors and leadership team in August 2015.
"We feel strongly that CHRISTUS Health is the best potential partner for our organization," Good Shepherd President and CEO Steve Altmiller said in a press release.
"After our experience searching for the right fit, it became clear that… a not-for-profit partner based here in Texas could provide Good Shepherd with both the resources to expand the care we currently provide and strengthen our hospitals for the future."
CHRISTUS, a Catholic system, has recently expanded across Northeast Texas.
In May 2016, Trinity Mother Frances Hospitals and Clinics, an eight-hospital system headquartered in Tyler, joined CHRISTUS Health as CHRISTUS Trinity Mother Frances Health System. CHRISTUS Health also operates CHRISTUS St. Michael facilities in Texarkana and Atlanta, TX.
"We know how important the Longview, Marshall, and surrounding communities are to the fabric of Northeast Texas," said Ernie Sadau, president and CEO of CHRISTUS Health, in a statement announcing the deal.
"We are not only looking forward to welcoming these facilities and these communities into the CHRISTUS family, but also the opportunity to bring together two not-for-profit organizations focused on providing the highest quality, compassionate care. We believe this agreement will ensure that Good Shepherd Health System continues its mission to improve the health of the communities it serves."
Good Shepherd Health System and CHRISTUS Health will immediately begin work to complete the final phase of due diligence, which includes negotiating the terms of a definitive agreement and beginning state and federal regulatory reviews. Both expect the process to be completed by early 2017.
According to the Longview News-Journal, Good Shepherd would bring roughly $400 million in annual revenue to the deal, while CHRISTUS would assume all of Good Shepherd's debt. No layoffs are expected among employees in good standing at Good Shepherd. JP Morgan acted as advisor to CHRISTUS in the deal.
Two experts who testified at a bipartisan congressional hearing say the law is so outdated and full of exceptions that it thwarts healthcare modernization efforts and encourages perverse economic behavior.
Now that the election is mercifully behind us, healthcare CEOs are hoping that the lame-duck Congress will act to modernize the so-called Stark law.
They argue that many of Stark's prohibitions have outlived changes their usefulness or are covered by other statutes. Further, many contend the laws conflict with the Affordable Care Act's implicit requirement that healthcare entities work together to manage care.
Ron Paulus, MD, president and CEO of Mission Health in Asheville, NC, and Troy Barsky, formerly with the Department of Health and Human Services, testified last summer before a bipartisan Congressional committee that much of the Stark law is so outdated and full of exceptions that it thwarts healthcare modernization efforts and encourages perverse economic behavior.
They're hopeful the upcoming Congressional session will provide an opportunity to modify or repeal Stark, which is actually a patchwork of federal laws and exceptions intended to prevent physician self-referral.
Paulus says the law paralyzes potential incentives between health systems and independent physicians, and prevents actions that would clearly benefit the patient.
Mission Health wanted to provide genetic counselors in private obstetricians' offices when it's discovered that a fetus will die at birth or shortly thereafter. The service would have been free to grief-stricken patients, but because the Stark laws would consider the counselors a benefit to the private obstetrician, the program was nixed, he says.
Paulus also contends that Stark prevents hospitals from rewarding independent physicians for process improvements that could improve care quality and efficiency. Mission wanted to institute an incentive program to reduce readmissions, he says, but again he had to drop that idea because of Stark.
"Had we moved forward, we would have had to reward the same amount to those whose readmissions quadrupled as to those who eliminated them," he says. "That's the quandary of working with non-employed physicians."
Current fraud and abuse laws already provide protection from self-referral, while Stark punishes unintentional violations where benefits of any self-dealing are far from evident, Paulus claims.
In multiple acquisitions of small hospitals in which he has been involved, the acquirer had to self-disclose unintentional Stark errors found in due diligence that violated the letter of the law, but not the spirit.
'Bureaucratic Overhead it Creates is Nuts'
"We paid a lot less in fines than we would have if we had not self-disclosed, but we still paid hundreds of thousands for truly no-harm, no-foul errors," he says. "It's simply not possible for small organizations to have the checks and balances and oversight to avoid every possible administrative error."
Even for large sophisticated organizations like the $7 billion (revenue) Mission Health, Paulus says relationships have to be policed as in a military state.
"Let's say an administrative assistant knows a doc who is not employed is going to be meeting with me and she decides to order lunch. We now have a Stark violation. The bureaucratic overhead it creates is nuts."
Barsky, a partner at Crowell & Moring in Washington, DC, served at HHS from 2002-2013 and was director of the Division of Technical Payment Policy from 2009-2013. He says repealing Stark is probably not an option politically, but modification is possible.
"[Stark] has stifled innovation because there's confusion on the application of the law and confusion on enforcement activities," he says.
One way to improve Stark would be to create broad waivers for providers participating in new payment models. "There's no waiver authority under MACRA, so there's a lot of confusion in the provider community over whether that can be successful because folks worry about Stark," he says.
Hospital CEOs are afraid to embrace new payment models because they know potential Stark law violations—even minor ones—can bankrupt their organization. Their reluctance is well founded, as the DOJ is aggressive, and CMS has not defined critical terms in the Stark laws, including "fair market value" and "commercially reasonable."
Paying Attorneys, Consultants to Stay in Compliance
"Hospital systems don't know what the law means anymore," he says. "There's such a confusion that no one knows how to comply, and compliance costs alone are astronomical. We want hospitals to spend money on high-quality care, but they're spending lots on attorneys and consultants to avoid running afoul of Stark."
The False Claims Act offers significant protection against fraud, and the anti-kickback statute serves as protection against paying bribes or kickbacks to induce referrals, Barsky says.
From a political standpoint, Paulus and other hospital chiefs would settle for what is possible. He says members of Congress have told him privately that rare bipartisan agreement could bring modifications to Stark during this session.
A revision "would enable me to provide appropriate incentives that are based on performance just like I do with my management team," he says. "If you move the ball you get a reward. If you don't you move backwards. Why should docs have to be employed in order to be rewarded?"