Risa Lavizzo-Mourey, MD, the first woman to lead the $10 billion private foundation, has served in the position for 14 years.
President and Chief Executive Officer Risa Lavizzo-Mourey, MD, the first woman and first African-American to lead the $10 billion Robert Wood Johnson Foundation, will leave her 14-year post as soon as a successor can be selected, the organization announced Tuesday.
"Risa's commitment to improving the health of this nation during her tenure as CEO is simply unparalleled, and she has led this foundation with an extraordinary sense of purpose and passion," said Roger Fine, chairman of the RWJF board of trustees.
"It is difficult to see her leave, but we are fortunate that she will remain at the helm until a successor is in place."
Lavizzo-Mourey, 61, has been named eight times to the Forbes list of most powerful women in the world. During her tenure, Lavizzo-Mourey enacted a key program aimed at reversing the nation's childhood obesity epidemic. RWJF committed $500 million to this priority in 2007 and, launched a national movement to raise awareness of the issue and to find solutions through funded research, communications campaigns, and changes to public policy.
Encouraged by progress that includes stalling the growth of the obesity rate of children 2 to 19 at 17%, and reducing the obesity rate of children 2 to 5 from 13.9% to 8.9%, RWJF committed another $500 million to sustain the movement for another decade in 2015.
First Lady Michelle Obama adopted the cause through her Let's Move! campaign.
The Foundation continues to actively work alongside different sectors to address the issue, including schools, industry, cities and local communities, policymakers, and organizations seeking to ensure all children have access to healthy food and opportunities to be active.
A Legacy of Healthcare Access
A daughter of physicians, Lavizzo-Mourey also built upon RWJF's longtime support for programs aimed at helping individuals obtain healthcare coverage, providing relevant research, consumer outreach, and technical assistance to states implementing the Affordable Care Act.
Also under her leadership, RWJF created the Commission to Build a Healthier America, a national independent, nonpartisan group of leaders who examined what factors outside of the medical care arena influence health.
After collecting data and holding listening sessions across the nation, the Commission issued a landmark report in 2009 titled "Beyond Health Care." The report underscored findings that good health depends more on where people live, learn, work, and play rather than medical care alone, and issued a list of national recommendations to improve health at the local, state, and federal levels.
Korn Ferry, an executive search firm, will help the Foundation's board in its search for her successor.
Prudent healthcare executives and boards are busily rethinking the size, composition, and focus of their governing bodies.
This article first appeared in the September 2016 issue of HealthLeaders magazine.
Upheaval characterizes the business of healthcare over the past few years. Roughly since the passage of the Patient Protection and Affordable Care Act in 2010, executives and boards have slowly recognized the reality that healthcare spending will not remain an ever-growing pie where the size of your slice depends on the volume of procedures and admissions you can generate. The timing of when and how extensively that change comes varies by market, but just as executives have to change focus and dive into areas that are unfamiliar, so also do boards have to adapt to sweeping change.
Because of consolidation in the healthcare industry, many organizations have found it necessary to reduce the size of their board or eliminate some legacy boards altogether. Some committees are also fair game for elimination or reorganization due to shifts in priorities. At the same time, boards are being pushed to take a more active role in corporate affairs. As the need grows to streamline corporate structure, so it also grows to streamline board structures to ensure the organization's processes are as efficient as possible. This requires not only eliminating duplicative committees, but also redefining the expertise boards need, and perhaps even reducing some seats.
The reality for prudent health system boards is that they have to change as the incentives and the healthcare business landscape does. Those changes include a greater focus on value and quality in healthcare, but they don't stop there. Board members want to change size, composition, and focus to help the institution they love and represent adjust, but they're not always sure where to start.
Effectiveness
Chris Lowney's time as the chair of Catholic Health Initiatives' Board of Stewardship Trustees roughly mirrors the age of the PPACA. During six years on the board of Catholic Health Initiatives, a 103-hospital health system with operations in 18 states, the former J.P. Morgan managing director says the health system has had to do a lot of restructuring to try to streamline governance. Some of that work would be necessary regardless of the changes in the way healthcare services are evaluated and paid for because they're in response to acquisitions or new partnerships, but generally, Lowney says he started his term as board chair in 2013 with an agenda aimed at making governance throughout the system more effective.
"Not long after I took over the board, we commissioned work to help generate some suggestions on how we might be more effective," he says. "We made changes based on that."
Part of the revamp came from a desire to focus discussion time on issues, challenges, and strategic problems in a more open way. Previously much of board time was expended on the presentation and reaction to various reports from management and committees.
"We used to have reports from every committee at every board meeting. Now we no longer do that," Lowney says. "It was uncomfortable to make that change for some of us, because that's the way we were used to working, but it chews up so much time, there was not a lot left for the more open strategic discussion we wanted."
Now such reports are assigned to the consent agenda. Board members are expected to read and process them prior to meetings. Another concrete change from the assessment was that the board disbanded the strategy committee.
"It did a good job for us, but not long after I took over as chair we disbanded it because we felt like so much of the full board's discussion already revolved around strategic issues that we weren't served by having a separate committee," he says.
Recalibration takes time
CHI's board, though it is responsible for a system with operating revenues of $15.2 billion reported in fiscal year 2015, faces challenges similar to those with which almost all hospital and health system boards are having to come to grips.
"An increasing number of boards are asking the question: 'Are we structured in competency, number, and culture to lead a nine- or 10-figure business going forward?' The time it takes to recalibrate can be fairly significant."
Michael Peregrine, a partner with McDermott Will & Emery in the law firm's Chicago office, and an expert in corporate governance, says smart boards are spending considerable time and effort in self-evaluation, and in determining from a size and composition perspective whether it is well situated to lead the institution in the challenges ahead. Peregrine says he was not involved in CHI's work.
"An increasing number of boards are asking the question: 'Are we structured in competency, number, and culture to lead a nine- or 10-figure business going forward?' The time it takes to recalibrate can be fairly significant," he says.
Much of the upheaval can be attributed to the mushrooming competencies required to effectively run the business, especially as many aspects of the care continuum that hospitals and health systems once cheerfully ignored are increasingly important strategically as the clinical and financial incentives for outcomes-based reimbursement align. That drives the need for innovative acquisitions and partnerships, and sows the seeds for board overlap and confusion.
"All of a sudden the competencies required to run this business are really diverse—there are lots of structures and partnerships," says Peregrine.
Boards have to evaluate how to effectively provide oversight. Does it have the right people, expertise, and perspective, and are they engaged? Do some committees and legacy boards need to be merged or disbanded?
"Many are struggling with 'overboarding' right now," he says.
"You've got to get beyond shared governance after a while and move toward unified governance. The right time is when you have a sense the board is struggling to keep up with the agenda and provide oversight."
Another problem that can face boards in what's already a time of uncertainty is the difficulty of merging two boards when the organizations they govern merge. Sometimes, that's put off well beyond an ideal time frame. But Peregrine says those situations mark a great opportunity for health systems to make their boards self-perpetuating versus constituency-based, or political. That's tough to get beyond, because political forces can be brutal, but Peregrine says "clever boards" are getting beyond this problem quickly out of necessity.
While both parties often pick half the board in such situations, Peregrine says "bold CEOs" know they need their boards to get beyond "us versus them." A joint board, conversely, focuses on the shared mission of the combined system.
"You've got to get beyond shared governance after a while and move toward unified governance," he says. "The right time is when you have a sense the board is struggling to keep up with the agenda and provide oversight."
Sometimes that happens after self-evaluation; sometimes management sees that some board members can't keep up due to a variety of circumstances. This is particularly true of community systems that evolve into regional systems, Peregrine says. "Those board members sometimes struggle with a regional focus and with finding expertise in more diversified areas like insurance and technology."
Size vs. expertise
Adding that expertise can sometimes work at cross-purposes with reforms that seek to manage down the size of boards into something more manageable. It's not unheard of for even small health systems with three or four hospitals in one small region to have as many as 30 people on the board thanks to legacy commitments that came with mergers, acquisitions, or close partnerships. That need for expanded expertise is something CHI has struggled with, says Lowney, but it has also made progress.
Meanwhile, managing down board size has been a challenge for Aspirus Inc., parent company of an eight-hospital health system in Wisconsin and Michigan, says its president and CEO, Matthew Heywood. Aspirus's forward-thinking board solved that problem before he arrived in 2013, and he's grateful they did.
Prior to his arrival, the system had become what Heywood calls a confederation rather than a true health system with a cohesive strategic focus.
"Our board focused at the time on being more a board for the hospital in Wausau, our 250-staffed-bed, 14-county tertiary center, as opposed to being a board for the entire organization," says Heywood.
The corporate organization has only grown more complex. Aspirus now includes a health plan, among other businesses outside the acute care space. Certainly integration of those capabilities would have been more difficult, and managing them today would be as well without the exercise that created both a corporate board and separate board for the hospitals and clinics from the previous 20-person board.
"What happened was the previous board got sucked into the tactical day-to-day management of the hospitals and the clinics. It wasn't really functioning and as successful as it could be, so they decided to create a corporate board of 10–12 people and a separate board for the hospitals and clinics. That allowed the corporate board to pull itself out of the day-to-day management and make itself more strategic," Heywood says.
The separate nature of the boards allows Heywood and the corporate board chair to focus on making sure it has the right people, and that the board is on the lookout a year ahead of time to replace those whose tenure is ending to help maintain the skills the board needs.
"I'm on the governance committee, and as a person is rolling off we start a year in advance looking for that new board member," Heywood says.
CHI's Lowney agrees that finding the broad expertise most health systems now need is proving challenging even for big systems.
"We've keenly felt we need more and other kinds of expertise on the board, and it's not like there's expertise we used to need that we no longer need," he says. "We feel we also need people who know insurance, who are consumer engagement experts, and who have expertise in big data."
That presents a conundrum for organizations that want to keep the group at a discussion-optimal size, but, on the other hand, might need to add different skills and experience. Board members at CHI are limited to a maximum of three, three-year terms. That might sound like a long time, but people frequently have to step off early for other reasons, he says. And while the current board can help find expertise in their own areas, that's not true for areas that are not already represented.
"Our current talent knows their own peers to nominate, but that network doesn't necessarily suffice when we need, for example, a Silicon Valley person who is at the cutting edge of data," Lowney says. "We're grappling with that."
Further, an organization like CHI not only has its corporate board, but many regional boards "because we believe there's real value added by our local and regional boards," says Lowney. "The business end is pretty disrupted, and there's lots of change in the business dynamics of healthcare."
That has immediate implications for relative accountability and job responsibilities at the local and national level. Over the past year, CHI boards have gone through exercises aimed at getting sharper about what metrics for which those local boards should be accountable.
About a third such metrics relate somehow to quality and safety, Lowney says. One is bottom line finance-related. One is the level of charity care.
It's important to balance your own biases, he admits.
"I've been on the board six years, and as an investment banker, my gut instinct is that everything in the world revolves around money. Our journey as a board has taught me that what we have to talk about first is quality in a broad sense—outcomes, patient satisfaction, how engaged and satisfied our physicians are."
CHI's board doesn't have committee reports at every board meeting now—in fact, the only committee that does give a report at the board meeting is the quality committee. Local and regional boards act similarly, he says.
"The most important thing to us as a system is quality, and so the most important thing they can do is ensure we get great outcomes," he says. "When I first joined the board, we'd come to quality and people would start using acronyms on very technical medical stuff, and I'd follow it but half assume the docs on the board would carry the water on the discussion. But we can't operate that way. I say this to board colleagues: If there's a number there and you can't understand it and management can't explain it to you, that's their fault."
Quicker action
Peregrine says much of the problems with boards today extend from one issue: slow decision-making.
But he says what clients often miss with that assessment is that there is a conflict that must be balanced between streamlining decision-making and reducing the size of boards.
"Streamlining is valuable, but downsizing boards, meetings, or contact between the board and management does not necessarily work at the same time the organization is diversifying," he says. "Management wants to limit their load, but at the same time, the law expects more time as the business gets more sophisticated."
For example, audit, finance, and compliance are all in one committee for some organizations, but Peregrine says be careful where you streamline.
"Are you really able to give justice to all those responsibilities in that structure? As boards become bigger and more diversified, the demands on board members are increasing, and much more is expected. You're a director of a nine- to 10-figure business. Expectations are much higher. It's not like the old days where you are a member of the board but the CEO did all the heavy lifting."
For his part, Lowney says all the changes surrounding governance in healthcare can seem overwhelming.
"But that's one of the ironies. The things that make it very challenging and sometimes frustrating to be on this kind of a board is what also makes it exciting and rewarding," he says. "There's so much change around us, and nobody can just read a blueprint to make it succeed."
Exits by major insurers highlight structural problems that will require major adjustments.
Adverse selection is killing the public health exchanges.
Media coverage of major health plans leaving Obamacare has obscured the fact that more than 9 million people have enrolled in the public exchanges since they were opened two years ago, and more than 11 million otherwise uninsured people now have coverage via Medicaid expansion.
Unfortunately, economics are causing premiums to skyrocket and insurers to forgo the exchanges.
It's not profitable to be there in most states, judging by the actions of the major payers. Aetna, Cigna, and UnitedHealth all have left or plan to leave many of the Obamacare plans under which they'd offered individual coverage.
In a blog post for the Wall Street Journal, Kaiser Family Foundation President and CEO Drew Altman writes that in 31% of counties that participate in the public exchanges, beneficiaries will have one plan option next year.
Premiums for that option might rise dramatically unless beneficiaries choose the lowest-cost plan, where they are insulated by government subsidies.
The problems forcing the payers' exits are structural, so any solution must be structural, according to Cain Brothers, a New York-based investment bank that specializes in healthcare.
In their analysis, Cain Brothers directors Court Houseworth and Edward Fishman, and 4sight Health CEO David W. Johnson, say that even though the plans risk losing money, this is the wrong time to abandon the exchanges from a public policy perspective.
They advocate alternatives to entice private insurers back into the exchanges with a mix of tax credits and cost-sharing reductions that would also make the plans more attractive to consumers.
In areas where competition is limited, the analysts recommend a public option alternative, although they concede that the idea would meet with resistance in Congress.
Ultimately, enrollment has to grow for the marketplaces to work, but the individual mandate is not effective as a "stick." Premiums often cost twice as much as the penalty for going without, and there is essentially no penalty for people who sign up after they become sick.
Many Americans have therefore made the economic calculation that it doesn't pay to have insurance from the Obamacare marketplace.
That isn't always the case: The Cain Brothers analysts note that Blue Cross and Blue Shield of Florida is making a profit as large populations of previously uninsured people gain coverage.
BCBSF recorded a gross profit of $471 million on its ACA plans in 2015. More than 90% of Florida enrollees in those plans receive premium subsidies and more than 70% receive co-pay and deductible assistance.
Also, BCBSF officials stress the effectiveness of retail centers that direct prospective enrollees to the right plan, helping them secure federal health insurance subsidies and guiding their health and wellness behavior.
At the state level, carrots and sticks could encourage insurers to participate in the exchanges, the authors say. A more robust blend of provisions for risk-adjustment, reinsurance and risk-sharing corridors would help to stabilize prices and markets.
Finally, the risk pool could be improved by expanding enrollment to healthier and younger members through a mix of attractive prices, consumer outreach, auto-enrollment and potentially stronger tax penalties.
The proposed standards include harnessing prescription drug utilization data to improve the predictive ability of CMS's risk adjustment models, and aim to establish transfers to spread the risk of high-cost enrollees.
Those changes could help, but they are likely far short of what's needed to ensure robust participation by potential enrollees and insurers. It seems Congress would have to act to ensure the Obamacare exchanges survive.
No matter who wins the election in November, it is doubtful that Congress will fix this divisive component of the ACA, and it's not clear if enough can be done administratively to save the exchanges.
Memorial Healthcare System's CEO says it is "investing a lot in tech" to further inform consumers as they make healthcare decisions. "We'll add more and more outcomes [data]… although we're [already] pretty comprehensive."
At the conclusion of a months-long national search last April, former chief operating officer and interim President and CEO Aurelio Fernandez was confirmed in a unanimous board vote to take off the interim tag and lead Memorial Healthcare System for the foreseeable future.
The $2 billion (revenue), six-hospital public health system serves South Broward County, Florida (it's official name is the South Broward Hospital District).
Fernandez discarded the interim tag he wore for three months at a delicate time.
He was the candidate widely preferred by employees in a very public national search that saw over time, every external candidate withdraw.
It will be tough to fill the shoes of his predecessor, Frank V. Sacco, a 28-year CEO who worked for the health system in various capacities for 42 years.
In a wide-ranging interview, Fernandez, 64 answered questions about his plans for the health system as he begins to work quickly at coalescing a vision with the cooperation of physicians and the health system's 12,700 employees. The following has been lightly edited.
HealthLeaders: What's the biggest challenge you face?
Fernandez: We have to factor in the [independent] physician practice and its relationship to each of our institutions. Hospitals can't move forward without integrating the needs of the medical staff. We need to hear what their issues are as partners and not just as customers of the hospital.
Hospitals bring discipline and structure that's imperative to provide the level of care you need as a provider. But especially in a competitive market like south Florida, it's important to understand how the economics work… the dynamics that direct patients to go from one provider to another.
That goes beyond quality of care and goes to the ability to provide care at prices the market bears. I understand medicine has to be provided in a cost-effective manner so that may mean more alignment of and consolidation of certain specialties.
HealthLeaders: You mentioned care at the price the market will bear. How can a safety net health system compete in that world?
Fernandez: We are a six-hospital chain with high-end services. All of these services are very expensive. How we deliver in contract negotiations in a marketplace that has strong market incentives boils down to how we get the physician community to partner with us.
We have a clinically integrated model that is currently overseeing a large segment of the local population: 100,000 lives. In order to deliver on our shared savings model, we need to align incentives with the medical community.
We have to convince them that it's in their best interest to align with our healthcare system. I believe the medical community has recognized from a quality perspective that we're most desirable. We have an excellent story, because we have excellent outcomes. Others out there are telling the same story but we have transparency on outcomes, and do well there.
HealthLeaders: But what about the financial side of that equation?
Fernandez: 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.
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.
Here there is a large concentration of for-profits that drive market forces. Because there's excess capacity, you have the economics of discounting to point that's below costs, which puts folks like ourselves in a difficult predicament.
HealthLeaders: You said that the informed consumer will help bridge that gap. How so?
Fernandez: The consumer needs information that will influence their decision-making. If a patient is going to have a procedure, he or she is interested in how [our facilities] compare.
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.
We'll add more and more outcomes to enhance what we are already showing, although we're pretty comprehensive. We would love to show all physician outcomes, but that becomes difficult when you're not an employed doc. We can do the employed. We have a large clinically integrated network (Memorial Health Network) and a joint venture with Holy Cross, another hospital in the area.
In that network are 28 quality matrices the physicians need to follow and if you have savings of 'X' dollars but your quality does not reflect what's expected, you will not receive [shared savings] distributions.
The participation of young, healthy individuals in the health insurance marketplace is important to its long-term success. But the latest numbers from Texas may not be enough to keep the Obamacare exchanges afloat.
The percentage of so-called "young invincibles" in Texas without health insurance has dropped by a third since the implementation of the Patient Protection and Affordable Care Act.
The percentage of Texas young adults (18 – 34) without health insurance dropped from 33% to 21% between September 2013 and March 2016, according to a report issued by Rice University's Baker Institute for Public Policy and the Episcopal Health Foundation.
The young adult population now has a lower uninsured rate than that of the 36 – 49 age group.
But it still may not be enough.
Recent decisions by many health insurance companies participating in the Obamacare exchanges to drop out after this year have been blamed on the fact that such healthy individuals have largely stayed away from participation in the insurance pools. This drive up rates as sicker and less healthy patients obtain insurance in greater numbers than healthy people.
"The ability of many young invincibles to remain on their parents' plans likely explains a substantial part of the drop in the uninsured," said Vivian Ho, a professor of economics at Rice and professor of medicine at Baylor College of Medicine, in a press release.
Indeed, participation of young invincibles in the ACA health insurance marketplace is important to its long-term success, the report contends.
Researchers said the lack of sufficient numbers of young invincibles and other healthier adults enrolled in ACA marketplace plans is a factor in anticipated increases in 2017 premiums and the withdrawal of large insurance carriers from some state health insurance marketplaces.
"The composition of risk pools, including a mix of healthier and less healthy participants, is vital for the long-term sustainability of the ACA health insurance marketplace," Ho said.
A Call for Outreach
Elena Marks, EHF's president and CEO and a nonresident health policy fellow at the Baker Institute, said outreach and enrollment organizations should develop new approaches to reach young adults in Texas, especially those who paid the escalating tax penalty fee for being uninsured.
"Another promising strategy is to encourage enrollment groups to assist young adults who are aging out of Medicaid and CHIP (Children's Health Insurance Program) and help transition them to ACA marketplace insurance plans or other coverage," Marks said.
"Youth-friendly e-outreach during the upcoming open enrollment period may also be effective."
Ongoing discussions with large employers including Disney have led Florida Hospital to examine granular surgical data in an attempt to wring out unnecessary costs.
Editor's note: This story was updated on August 19, 2016 to better reflect the nature of Florida Hospital's ongoing long-term collaboration with Disney on cost of care issues.
Neil Finkler, MD, understands the burning platform facing healthcare organizations: Payers and employers insist on reduced cost and improved outcomes.
How you get there is your problem, but clearly, payers are increasingly getting serious about driving volumes to organizations that can demonstrate better outcomes at lower costs.
That means hospitals have to get equally serious about the issue.
Finkler, senior vice president and chief medical officer at Florida Hospital Orlando, the 1,289-licensed-bed flagship hospital of a seven-hospital system, has been working with granular surgical data in an attempt to understand how to effectively reduce costs and improve quality by standardizing surgical practices.
Florida Hospital's annual margin of about 10%—$380 million on revenues of $3.8 billion—puts it in an enviable position, but employers are increasingly pushing it and other healthcare organizations to cut healthcare cost growth that far outpaces inflation.
This is a national problem that calls for multiple solutions that must be customized to the organization. Finkler says that's one reason why the health system has been so rigorous in the development of its clinically integrated network, and, more specifically, in removing variation in the practice of medicine.
Finkler says Disney and other large employers in the Orlando area have been discussing the issue of cost and seeking solutions in tandem with local healthcare organizations for years, and those partnerships are starting to yield real results.
Disney is number 57 on the Fortune 500 list, and the top employer in the Orlando area, but other employers have similarly large footprints, such as the Orange County Public Schools and, interestingly, Adventist Healthcare, the parent company of nonprofit Florida Hospital.
The Challenge: Do Better
"The way we've done business in the past is broken," says Finkler. Costs are too high and the outcomes are not good enough.
Hospitals have to be willing to do things differently to bend the cost curve, he says. If not, employers will move patients to other states where costs are lower and outcomes are better. It's a simple business decision that large employers have been increasingly willing to take in recent years.
Florida Hospital had already been working on eliminating variation and looking at how to drive costs down through evidence and data on what led to certain outcomes. 'It started with colorectal surgery, but Finkler has a mandate to work with other surgeons to instill those principles across the organization.
"In a new world where we'll be responsible for populations, including Disney's, how could we do it where we provide best outcomes at lowest cost?" asks the Harvard-trained gynecologic oncologist. "It's really the physicians who have to be responsible for that."
So why start with colorectal surgery?
Essentially, because that group of doctors came to Finkler first, eager for data that would prove how well they care for patients and how cost-effectively they do it compared to, say, general surgeons.
"It's a relatively small group, and very interested in data," he says. "I've known them all for years and I knew they would act upon the data and that they were interested in what the impact would be in world where we were all at risk."
Using Data to Analyze Cost and Quality
Florida Hospital aggregated the data it needed with the help of Ethicon, a Johnson & Johnson company that develops surgical products, but which can also crunch data on outcomes.
Finkler says Ethicon helped the health system figure out where the increased costs were coming from. The bottom line: there was wide variation in both cost and outcomes among the surgeons.
Focusing only on colon surgeries, the biggest disparity in cost and quality was whether the surgeon did the procedure in an open setting or in a minimally invasive one. Those who used the latter had costs per procedure that were substantially lower, and so were their complication rates.
Another determinant of lower costs, which in this case relate directly to outcomes, was in the volume of such procedures the surgeons did.
Comparing surgeons who did more than two of a list of eight common colorectal procedures per month versus those who did fewer yielded data that showed those who did more tended to do them better and less expensively, says Finkler.
Also, with help of that data, Finkler has persuaded colorectal surgeons to agree to use a single source for supplies based on the procedure. They've also agreed to help train surgeons on minimally invasive techniques.
"All that will save big money per case and determine whether we've moved the cost curve while maintaining quality outcomes," he says.
The plan is to quickly ramp up such analysis to other services and service lines in the health system in anticipation of strengthening its CIN and its attractiveness to payers and employers.
"We anticipate millions of dollars of savings, says Finkler. "Millions. We're all responsible for dollars and soon, the Disneys of the world will be paying a per member, per month fee to someone. If we can save $2,500 per case by converting to minimally invasive, that goes directly to the CIN. And all of sudden everyone in that network has an interest in what everyone else is doing and what their outcomes are."
Providers not only need to develop efficient care bundles to secure attractive reimbursements, but they also need to stress to patients the importance and the value of sticking with the system for the full course of care.
Most hospitals and health systems have a good idea of what it costs them to provide the components of care episodes, but even now, ask many of them to show the costs to them of a given course of treatment, and you'll likely get blank stares, or a lengthy explanation of how that's impossible because of the many pieces of a course of care that take place outside the hospital and that are affected by any number of variables that make the cost of that course of care vary widely.
That does make the task difficult. But it is possible to do it. And it's increasingly necessary.
The big reason it is important is that health systems are increasingly forced by government payers to take on mandatory payment regimes that pay for a course of care, not for the individual pieces that comprise it. Some commercial plans are following suit and some large employers are far along this path—doing deals directly with health systems that provide a level of cost-certainty previously unheard of. But if you're going to provide cost certainty for a customer, you'd better know what it costs you to do so.
Cost certainty for the payer often means cost uncertainty for the payee. If hospitals and health systems, which increasingly will be paid based on this bundle of services, can't determine the longitudinal cost of care for certain episodes, neither can they effectively identify gaps in care that raise costs, and they can't easily identify areas that need the most attention and improvement, says West Johnson, a principal with KPMG's Healthcare Provider Solutions practice based in Atlanta. Hospitals and health systems will also be much more likely to lose gobs of money if they can't determine the gaps in care that lead to cost overruns.
Johnson identifies at least two areas on which healthcare provider CEOs and their leadership teams need to get a handle to be able to demonstrate to payers and even individual consumers that cost risk falls on the providers, not the payer or the patient. Knowing the longitudinal cost of care for a variety of episodes is critical, and so is the ability of care providers to get patients to stick with their organization for the full course of care.
"Ultimately no one has a truly 360-degree view of the patient," says Johnson. "The challenge, using the hospital as an example, is that they have the most granular data all the way to procedures and tests for a lot of patients, but a patient will go to multiple hospitals and certainly multiple docs. So they have individual data but not longitudinal."
In order to calculate the longitudinal cost of care, healthcare organizations that take risk in bundles need structured data and a way to aggregate the likely services a patient will need during a course of care, based on service lines.
"Hospitals certainly can't tell you the aggregate underlying costs of a course of care, even within their four walls," he says. "The approach we take to it is a hybrid approach based on the claims we have access to and the grouping technology that lets you group a common episode of care from pretreatment, treatment, and post-treatment across providers."
Getting that longitudinal cost of care is a huge benefit, but it's less valuable if you can't get patients to stick with your organization and its collection of owned or partnered organizations. Johnson says longitudinal cost of care information makes clear the benefits of keeping patients entirely within the organization's ecosystem whenever possible.
"This is an area where we are ahead of where many are: giving the provider a lens not only into their own treatment, but what the aggregate is for a patient who stays within their care system, compared with those who migrate in and out," Johnson says. "If you're advanced clinically, they will stay in the system pretreatment and post-treatment, and they end up with lower aggregate costs."
Whether hospitals and health systems plan to own postacute providers or not, how your organization interacts with them after discharge will play an ever more critical role in both clinical and financial outcomes.
This article first appeared in the July/August 2016 issue of HealthLeaders magazine.
Why does postacute value matter for acute care hospitals and health systems?
Does it matter because they get dinged on reimbursements from Medicare thanks to penalties that kick in should a Medicare patient be readmitted within 30 days for the same condition? Those penalties can be significant. In the 2016 fiscal year, the fourth year of the Hospital Readmissions Reduction Program, some 2,592 of the nation's hospitals were penalized a combined $420 million from October 1, 2015, to September 30, 2016.
Does it matter because commercial health plans are starting to jump on the penalties pioneered by the federal government? In some cases, yes, commercial plans have moved in that direction, but that's a patchwork and baby-step process.
Acute care hospitals and health systems see that making large investments in everything from care coordination to patient monitoring to helping postacute providers with electronic medical record interoperability will be necessary to achieve their goals. Is that why postacute value matters?
It's important for all of these reasons—just not necessarily right now.
The truth remains that even though readmissions penalties hurt, they pale in comparison to the revenue a hospital receives for an admission. So to a large extent, hospitals are still on balance losing money for their investments in care coordination and other interventions to help prevent readmissions.
So why, generally, are healthcare leaders investing so heavily in making sure the hospital and its clinicians play a key role in supervising postacute care—making sure providers are doing everything clinically indicated to prevent readmissions?
"We really are doing this for patient care reasons," says Pam Stoyanoff, executive vice president and chief operating officer for the nine-hospital Methodist Health System in Dallas. "The incentives still aren't there to do this for business reasons. Even if we get readmission penalties, they are still small compared to what you get for an admission."
Managing lives
Managing postacute care is tied into the move toward value-based purchasing. Value-based purchasing, at its heart, attempts to inject risk for patient outcomes into the reimbursement equation. With so many variables at play in the patient's arc of care for a particular condition, any attempt to link healthcare purchasing and value measures is fraught with difficulty, especially at this early point in the trend. Indeed, hospitals have decried Medicare's blunt attempts to inject risk into reimbursement for hospitals through readmissions penalties. The drive toward value seems destined to continue.
Despite these mammoth uncertainties, most organizations are in the process of divining—many years after passage of the Affordable Care Act—how quickly to make a 180-degree transition from volume-based reimbursement to value. Stoyanoff says the Dallas-Fort Worth market is behind on this transition for a variety of reasons, but Methodist wants better outcomes for its own sake.
"The local economy is really strong and has been for a long time," she says. "Demographics are positive, the population is growing at a high pace, and there's no certificate of need in this state so there's still a big entrepreneurial spirit out there and employers and healthcare providers and insurers are faring pretty well economically."
That means except for Medicare, Methodist is facing little economic pressure to invest in postacute sites, labor, and other infrastructure necessary for value-based care. She says the health system still employs less than one-fifth of its physician base, behind the rest of the country.
"It's happening but slowly," she says. "Our transition is around the Methodist Patient-Centered ACO and our involvement in Medicare Shared Savings as well as some limited narrow-network commercial insurance plans."
Methodist is now in the fourth year of participation in the Medicare Shared Savings program and has saved the federal government money each year of participation. It received $6.2 million the first year and shared one-third of that with its physicians. One-third goes to Methodist, and the other third goes toward building more value-based infrastructure, Stoyanoff says.
She says the organization has learned largely through the lives it's managing through that plan. Overall, Stoyanoff says the health system is at risk for between 35,000 and 40,000 MSSPs, employees, and some commercial lives in a value-based manner, although that number is "not dramatic compared to the number of lives we serve in total," she says. "We believe in value-based care, but we're not necessarily getting paid for it."
But what does managing lives entail? If you've seen one system's method, it's likely unique, but some lessons are universal.
"We did it via the MSSP and creating an ACO," she says. "You will have to invest in a strategy, too. We had to commit to an investment of $3 million–$4 million to build an infrastructure to manage lives and think of it as R&D."
That included hiring new people and putting a physician in charge of the initiative full time. Then the work begins creating metrics by which you're going to measure everything.
"You can start by managing your own employees' lives," she says. "Most of us are self-insured, so practice on yourselves. Test out quality metrics, computer systems, investments in software—there's a lot of it out there."
Though in a vastly different region, with a vastly different reimbursement climate, the work being done at Crouse Hospital in Syracuse, New York, is surprisingly similar to what Methodist is doing in Dallas.
A lot of how fast Crouse makes the transition to value-based care has to do with how fast the payers are moving, says Kimberly Boynton, the hospital's president and CEO.
Crouse has tried to be ready by creating Crouse Health Network, a physician network with both Crouse-employed and independent physicians, aimed at creating relationships with commercial payers.
"We already have an at-risk contract to lower costs with the local Excellus BlueCross BlueShield plan, and we are also part of a Medicare ACO," she says. "All these pieces become very important in building value-based care. We're not at the beginning; we're somewhere in the middle. We've got the physicians, we've got a couple of risk contracts, and we hope to add more with nationwide payers in the near future. Simultaneously we're refining our care protocols."
Key metrics include quality measures and cost per case in the hospital, she says.
"We view postacute as critically strategic for value-based care."
They're also changing the way they work with postacute care providers, and that's where the majority of cost reduction and quality improvement will take place, she says. For example, in nursing homes, Crouse is working toward placing nurse screeners at the facilities to quickly and frequently evaluate patients in cooperation with the main hospital to try to limit unnecessary readmissions, and who will set up and follow up on plans of care and patient education.
Own some, influence some
The key to strategic decision-making in getting value out of postacute care is the decision of whether to own or partner with providers of skilled nursing, rehab, home health, and other sites of postacute care.
"We view postacute as critically strategic for value-based care," says Methodist's Stoyanoff.
She explains that in the health system's experience with Medicare Shared Savings, it's shared materially in the savings each year of the program, but she says the first couple of years' success came not from reducing hospital costs but by reducing costs in postacute care, especially in home health.
With more than 500 home healthcare providers in the market, the choices are overwhelming for patients in Methodist's service area. Although Methodist can't require patients to choose any particular postacute provider, including home health providers, it uses a preferred provider list when discharging patients that informs them or their caregivers about their choices.
Certain providers don't meet the information-sharing and care protocol agreements that preferred providers do, which are often listed higher and are ranked based on metrics that are revised quarterly. Methodist's list also uses a star ranking, from one to five stars.
"We try to influence as much as possible within what we're allowed to do," Stoyanoff says. "That has helped us."
Part of Methodist's strategy for gaining some influence over how patients are cared for postdischarge included forming a home health agency in a joint venture two years ago with a competitor, Texas Health Resources, also based in the Dallas-Fort Worth metroplex. She says generally with that organization, care transitions are better, although other agencies also carry a five-star rating. So far, home health and rehabilitation are the only segments in which Methodist has delved into owning a piece of the postacute care continuum.
"We do feel like it's easy to get into home health, and as we've grown that agency, it's helped us reduce costs," she says.
Home health had been the largest subsection of costs within Medicare where Methodist was off from national standards, she says. The joint venture has improved that metric considerably.
Two of the four main Methodist hospital campuses, soon to be three, have leased out space to a variety of different postacute providers who are located on the campuses. Those modalities include hospice, long-term acute care, and skilled nursing. Stoyanoff says colocating these providers has brought incremental rent revenue for space that was under-utilized, and their proximity makes it easier to follow and intervene with patients before they might otherwise be admitted for an acute episode. She says the leasing idea is one area in which Methodist is being innovative with its foray into value-based reimbursement.
"I don't see a lot of health systems doing that," she says. "You get some money for space you're not using, and it brings those providers on-site."
That proximity can help with end-of-life care decision-making, especially when a death in the acute care space can count against the hospital's mortality scores, she says.
"It can be really difficult to get a patient to move to hospice, but when the facility is on campus, it's easier," she says.
Areas Methodist is not interested in owning include skilled nursing and long-term acute care.
"Those business models are just really different, and there are a lot of them out there," she says. "They can take the risks for the business model, and we can work as partners from a referral perspective."
Crouse, for its part, does not own any home health modalities, but it does have partial ownership of two of the skilled nursing facilities in the Syracuse area. Crouse does have preferred provider relationships with two home health agencies and an infusion company.
"Those are partnerships without ownership because that's not our forte, and we feel there are agencies here in town that do a wonderful job in these areas and that's their business," says Boynton.
She says partnership provided Crouse with great benefits for patients, and because it has more than one preferred provider, "we actually have more control than if we had just one," she says.
"Both know they have the obligation to respond to us when it's necessary, and they have to be at the top of their game as far as technology and information flow," she says. "Information flow is really a significant piece. We work very closely with them to set up disease-specific protocols."
As for other modalities, she says Crouse has not found it necessary or even desirable to own when those services are readily available, and providers agree to treat patients according to clinically proven protocols.
"They don't need a parent, so to speak," she says. "We've worked with them on how they recruit the nursing professionals, how they follow the proper protocols, and they work with us to make sure the patients have good outcomes."
CMS's latest bundled payments program is beset by "unrealistic expectations" and needs to be modified to account for patient acuity and other factors that can skew reimbursement, says one expert.
First, some good news: Expect a rollback of the aggressive implementation timeline for the cardiac care bundled payments program announced by CMS Monday.
Now, the bad news: Preparations, including developing strong relationships with other pieces of the cardiac care continuum, need to start now.
Regardless of whether your organization is in one of the 98 randomly selected geographic regions ultimately selected for mandatory participation in the program, no one should waste the probable delay.
So says Colin Luke, a partner at the Birmingham, AL, office of Nashville-based law firm Waller. The complexity of the cardiac care bundle program surprised him, even given his experience helping systems navigate regulatory compliance matters related to CMS's bundled payment programs for total joint care and cancer care.
"The complexity was beyond what I expected and the degree to which the hospitals will bear the burden is greater than expected," says Luke.
Hospitals' administrative expenses to participate in the mandatory program will likely exceed any possible financial rewards available during the course of the proposed rule, he says. It runs through 2021. After that, CMS expects to tweak and expand the bundling program nationwide.
But first, there is a public comment period that closes at the end of September.
Administrative Hassles Eyed
Luke expects hospitals to take a view in the short term that participation in the program as detailed in a CMS fact sheet will dramatically increase their administrative burden while rewards for such investments won't be seen until far down the line.
"I doubt many [hospitals and health systems] believe in the short term that participation is going to be worth the extra expense and administrative hassles," he says.
"CMS has figured out how to make a hospital accountable for non-employed, non-contracted, non-affiliated providers that are responsible for most of the downstream and parallel care. Even without downside risk (in the first 15 months or so of the program), hospitals are exposed to unrealistic expectations."
Luke says the program lacks critical adjustments for outliers and a lack of adjustment for the complexity of the initial cardiac case, and expects a large volume of public comment to focus on that area. He expects "substantial" numbers of comments that reference "significant issues" with ambiguity around the ability to recover what he calls significant administrative costs.
"It wouldn't surprise me if [the timeline for implementation] gets rolled back because providers will need sufficient education and resources in those geographic areas to make the program manageable," he says.
More Meaningful, Less Bureaucratic
"Instead of just encouraging collaboration, [the program] needs significant mechanisms for paying for that collaboration. My general sense is that this demonstration project was not developed with sufficient provider input and the whole process could be more inclusive."
"Hospitals and physicians are generally supportive of coordinating care and working together for good of the patient, but want to do so in a more meaningful, less bureaucratic sense."
Luke says what he calls a quick rollout of these programs results from CMS's self-imposed deadline to tie 50% of Medicare payments to alternative payment models that reflect quality or value by 2018.
Patrick Conway, acting principal deputy administrator and chief medical officer of the Centers for Medicare & Medicaid Services, told media in a conference call Monday that one of the policies in the proposal to increase cardiac rehabilitation had particular promise in helping patients recover and regain health following a cardiac episode.
Only 15% of heart attack patients currently receive rehabilitation services, Conway noted, despite the fact that participation in such programs can lower the risk of a second heart attack or death.
That's where Luke says statistics can be misleading and in this case underscore that big changes need to be made to the proposal to account for patient acuity and other outliers that may skew statistics and thus, reimbursement.
"Some are too sick to participate or have other comorbidities that affect participation that may have resulted in death before they could participate," he says.
Luke says that much of the innovation around developing symbiotic relationships among entities that have not been previously financially intertwined is already happening in the private sector, which should provide some help in preparing for the new CMS bundle.
If your organization is being proactive in this way, you should have a head start if your geographic region is ultimately one of the 98 selected.
Closing or keeping open a money-losing hospital can be a career-limiting event. So one smart CEO and his board chose a third option.
Baton Rouge General CEO, Mark Slyter, knew that losing $2 million a month at one of the health system's hospitals was unaffordable and that it was a crisis. But what to do?
Baton Rouge General's Mid City campus had become the city's default safety net organization following the dismantling of Louisiana's unique charity care system over a period of years. The net effect was that huge financial losses were transferred to other hospitals—and Baton Rouge General's Mid City campus was arguably ground zero.
The main problem wasn't necessarily the hospital, but the ED, and specifically, the fact that so many people who didn't need to be seen in that setting were coming.
More importantly, one in three patients had no insurance of any kind: no commercial, no Medicare, and no Medicaid (until July 1, 2016).
And speaking of commercial insurance, only 13% of the patients coming to Mid City's ED had that. Slyter calls the state of affairs in early 2015 "an emergency situation."
But instead of closing the hospital, a decision that would have been draconian and very difficult politically, Slyter and his team found another way—one that allowed the health system to embrace value—by closing Mid City's ED and redeveloping the hospital around gaps in the health system's care continuum.
Data backed up the decision.
"We found that of the people who were visiting the ED there, four of five patients could be treated more effectively elsewhere and were really not emergency patients," Slyter says. "They could be seen in a lower-intensity and lower-cost setting."
Thanks to taking time to figure out the patient mix and what those patients really needed, and reorienting the hospital toward that data, the health system could not only limit its immediate cash burn but position it much better for population health principles.
Many citizens protested the decision, but Mid City's ED closed in late April 2015, and the transition began. Is it still a hospital? Merriam-Webster makes no mention of an emergency department in its definition of a hospital, but having one is certainly a requirement in most payer and Medicare definitions of a hospital.
So by those definitions, Mid City is no longer a hospital, but it still hosts inpatients in certain services, and has added more services in the post-acute realm, so it's far from a shell of itself, says Slyter.
"We looked at the ED closure not only as an opportunity to address unsustainable financial needs but to address care more effectively and move us down the path of value, which is where we're convinced we're going as a system," says Slyter.
"Our plan was to reinvent Mid City and make it more focused on community need, but also add to the continuum of care which we have here, at the Bluebonnet campus."
The reinvention largely encompasses ambulatory, not acute care, and focuses on seniors and other patients with chronic health conditions as well as those with behavioral health needs.
Inpatient behavioral health services actually expanded at Mid-City, with 19 beds added to care for patients age 50 and older with depression, bipolar disorder, and dementia, among other diagnoses, and plans include expanding Mid City's Behavioral Wellness Center outpatient services for adults and adolescents.
Mid City will also house the Health Innovation Center, a pilot program that will provide comprehensive, team-based care. It will include behavioral health, pharmacy counseling, primary care, nutritional counseling, education and health coaching to patients with complex medical needs such as diabetes or heart disease.
The health system has also expanded primary care clinic access at its Mid City Medical Clinic, including walk-in and weekend appointments. For uninsured patients, the clinic offers a flat nominal fee and reduced lab rates. It also houses a hospice facility, home health, skilled nursing and the system's School of Nursing.
"This was a short-term challenge, but we incorporated it into our long-term planning," Slyter says.