As his board nears naming a successor, the longtime CEO of a South Florida public hospital looks back on more than four decades of service that started in housekeeping.
This article first appeared in the April 2016 issue of HealthLeaders magazine.
Frank V. Sacco, Memorial Health Care System's president and CEO, took a pay cut in 1974 to take a job as one hospital's assistant director of housekeeping. He will leave the same South Florida organization (he hopes) in 2016 as the CEO of a six-hospital public health system that no longer relies on its community for tax support.
The board is 60 to 90 days from naming his successor, and in addition to being younger, that person will need to be more patient and tolerant than he is. When asked how he views his impending retirement, his one-word answer, delivered without hesitation is telling:
"Eagerly."
"I made my decision over the summer to retire. I'm still passionate and engaged, but I felt it was time to step aside and let someone younger and with more patience and tolerance than I have to take over."
Certainly, given his long and distinguished history at the organization, no one was going to tell Sacco, 68, that it was time to go. Certainly not after having grown a taxpayer-supported health system from one hospital with $115 million in revenue to a thriving $2 billion integrated delivery system with no need for local tax assistance.
Indeed, who's going to tell a guy like that to go other than the man himself?
Sacco left a management training program outside healthcare to join the South Broward Hospital District, dba Memorial Hospital, in 1974, after a tour of Korea in the army as a medical supply officer.
"I was going to take any position to get me back into the hospital," he says. "I had to take a pay cut, but I said if they would give me the chance to prove myself, I'll take a chance too. Two and a half months later, they made me director of safety and security and kept giving me additional assignments."
Building a Continuum of Care
Eventually, after getting his master's degree in health administration at Florida International University, and rising through the ranks, Sacco took over as president and CEO in 1987. That's when the real transformation of the health system began.
Memorial Health Care System got to work on building a continuum of care, partly through taking direct responsibility for its uninsured population. To do so, Sacco says the system had to grow not only in the pieces of the care continuum it owned, but also toward the suburbs, where a better payer mix could be obtained.
It built a nursing home in 1989, opened Memorial West Hospital in 1992 and designated the Joe DiMaggio Childrens' Hospital. In 1995 it acquired through Columbia/HCA, what is now Memorial Hospital Pembroke. It opened Memorial Hospital Miramar in 2005 and in 2006 purchased Hollywood Medical Center from Tenet Healthcare. That's now called Memorial Hospital South, and the original Memorial is now known as Memorial Regional.
"So what we've done is create an adult tertiary and quaternary hospital, a pediatric tertiary and quaternary hospital, and adult rehab hospital," Sacco says. "We added home health in 1992 also."
Sacco downplays the strategic genius of the many moves now, saying that healthcare's business model is slowly shifting to the model Memorial was forced to adopt when it took over care for the uninsured from the county.
Tax Subsidies Eliminated
Still, one accomplishment is almost unheard of: Over the course of Sacco's tenure, the health system has eliminated the local tax subsidy it had previously relied on. That's a big deal, especially for a public hospital downtown in competition with several for-profit operators more advantageously located in the suburbs.
Since Sacco has been in charge, two such hospitals in the county went out of business, Memorial acquired two, and built three more, if you include the DiMaggio Children's Hospital.
"We have a strong management team, we have fiscal discipline, and basically we just kept concentrating on putting the patient first and our volumes kept increasing and eventually we became the provider of choice," he says.
Many, if not all, public hospital administrators would love to see that fairy tale repeated in their markets. It's true that South Florida, generally because of its demographics, is a good place to run a hospital. But for-profit operators couldn't make a go of it in many cases.
Sacco argues that the only reason his tenure has lasted as long as it has is because of his insistence on running the organization as a business that needed a margin to survive. In the case of Memorial Health Care System, that meant taking risks and adding business locations and lines.
"If we had stayed isolated as a 700-bed public hospital, we'd have had an erosion in our pay-mix because the area was getting poorer. So we needed to go into the suburbs. It was a big part of our strategy to make us less dependent and ultimately nondependent on taxes," Sacco says. "When it got approved, then along the way we also had a strategy of building a children's hospital and becoming a really full service health system."
He calls the development of the children's hospital critical as well to the organization's long-term balance sheet because most children have some type of health insurance coverage.
"Those parts gave us ability to leverage our managed care skills and make us a big frog in small pond. We did population health 20 years ago," he says. "There's risk-based reimbursement for Medicare in South Florida, and primary care physicians are driving that through contracts with Humana, CarePlus, [and] Summit and you basically range anywhere from capitation to risk-sharing of part B and part A. We have a lot of those in our market."
'Tons' More to Do
The health system also created Memorial Health Network. Now in its third year of a commercial shared savings contract, has shared savings contracts currently with Aetna and Florida Blue Cross, and Sacco says it is "getting close" to similar shared savings contracts with United Healthcare and Cigna.
Sacco says there's "tons" left undone for the next CEO, and when asked to reflect on any major mistakes he survived in his lengthy tenure, he claims both were personnel-related.
"Without mentioning names, they were the two people I did the most vetting on at the executive level," he says. "One was a hospital administrator and the other a system CFO. The system CFO cost us dearly. It was the only year in my 28-year tenure that we lost money."
The reason for all his vetting, which ultimately came to naught, was that those people were from outside the health system—he didn't know them.
"The best hires I made were people we grew or people I knew," he says.
Despite the success of his long tenure, Sacco is glad to hand off his "evolutionary" progress to a successor who faces a "revolutionary" future environment, he says, adding that reimbursement models will be in a constant state of change as the federal government pushes value and as the commercial market continues to consolidate.
"I predict there will be deregulation of state certificate of need (in Florida), leading to greater competition," he says. "There will be greater transparency in pricing and quality—a ton of challenges."
For now, Sacco will be glad to watch those challenges from a distance of 150 miles or so—he plans to retire to Ormand Beach to spend time with his first grandchild, born last fall.
"Also, my son's getting married in April," he says. "Then I'll wait and see."
While shared decision-making for elective procedures could negatively affect volumes, leaders need to consider that, like value-based reimbursement, it's coming. So is it better to get ahead?
This article first appeared in the January/February 2016 issue of HealthLeaders magazine.
Healthcare leaders routinely mention the importance of patient engagement and experience. And a solid majority (85%) considers the patient-as-consumer trend to be an opportunity, according to the 2016 HealthLeaders Media Industry Survey. But it's pretty clear that provider organizations don't always share with these consumers all the information they need to make an informed decision. Why not?
Well, it's complicated. The industry has only recently begun to retreat from the paternalistic model that put the physician clearly, and solely, in charge. Another reason is a problem endemic to healthcare under fee-for-service: Screwy financial incentives mean healthcare providers are paid for intervention, not nonintervention. Yet to some, serving the patient's best interests means educating him or her about all the possible repercussions, from a decision to pursue, for example, elective surgery, even if that means the patient ultimately decides to pass on the procedure, leaving the provider with little reimbursement, if any.
David Arterburn, MD
As the payment system slowly changes, so does institutional interest in shared decision-making, a concept by which care teams help patients understand the potential impacts they may face from an elective surgery, essentially helping them decide?based on their own goals, the rehab time and effort, and the likely outcome of the procedure?whether they ultimately will decide to go through with it. Under a capitated system, the incentives to engage patients align nicely. Under fee-for-service, which is still the majority payment system for most providers despite a recent push toward value-based purchasing, not so much.
Weighing considerations
For the provider, whether it's a hospital, a surgeon, or a health system, there are many concerns with implementing a shared decision-making program, not the least of which is the potential financial impact. If implementing such a protocol for patients considering elective surgery cuts volumes significantly, all but the most integrated health systems would suffer financially. It's also a cost to staff such a program, even if it consists of just a few people. But if shared decision-making is in the patient's best interest, all other concerns should be secondary, right?
So says Group Health Cooperative, a Seattle-based member-governed, nonprofit healthcare system that coordinates care and coverage; nearly two-thirds of its 600,000 health plan members receive care at Group Health Medical Centers in Washington and north Idaho. Group Health has incorporated shared decision-making in elective procedures since the mid-2000s, says David Arterburn, MD, a senior investigator and consultative internal medicine physician with Group Health Research Institute, the nonproprietary, public interest research center within Group Health Cooperative.
"Group Health was in a good position to make use of this in part because its model of reimbursement is not tied to volume of procedures or diagnostic tests," he says. "In a fee-for-service setting where a provider's salary is based on throughput or volume, it can seem threatening because a fair bit of the evidence suggests well-informed patients are less likely to choose invasive treatments."
Peter Goldbach, MD
Group Health started its shared decision-making program with bariatric surgery and has moved on to incorporate the process in a variety of possible procedures, such as joint replacement. Arterburn is charged with making sure all the medical information presented to patients as part of the process is fair and balanced in terms of the appraisal of risks and benefits of such procedures.
"We work heavily with leadership at physician practices and hospitals to identify clinical champions and leaders to help us work with their colleagues around engagement," says Arterburn. "This is about patient knowledge, satisfaction, and clinical quality because there's strong evidence from 115 randomized trials that show these aids improve the quality of patients' decisions."
Getting the evidence
For some highly integrated provider organizations like Group Health, shared decision-making has been a critical piece of their patient education programs for elective surgeries for years. Mayo Clinic, for example, has taken the process so far that it offers a Shared Decision Making National Resource Center to help other organizations incorporate the concepts.
"There's been a renaissance in terms of provider interest in shared decision-making," says Peter Goldbach, MD, chief medical officer at Health Dialog, a Rite-Aid company that offers care management and analytical services to health plans, providers, and employers. "What I would call early adopters on the provider side?typically these entities were interested because they thought it fit their mission, and it was something they thought they should do in terms of increasing patient quality as well as unwanted variation in utilization."
Now with value-based reimbursement, we are experiencing a renewal in shared decision-making, he says.
Goldbach says patients are often asked to make healthcare decisions in the face of what he calls avoidable ignorance. Medical experts have found that patients often have had only a fraction of the evidence they need to make an informed decision about something as invasive as major elective surgery.
"The Dartmouth Atlas shows the likelihood of patients to receive healthcare services, and that leads one to believe that the patient's ZIP code is more important than their medical condition in whether they receive more healthcare services," he says.
Goldbach says providers can take on this task without much investment, but they have to want to do it at the top leadership level.
"The management team has to be on board and accept responsibility for owning the process," he says. "You can't just list it on your website. It has to become part of normal patient education."
Goldbach says he has empathy for leaders who, for the most part, are still judged on the bottom line, and who still have significant, if not the large majority, of operations under fee-for-service reimbursement.
"But we are meeting leaders who nonetheless are convinced this fee-for-value thing is here to stay and you need to get out in front of it, actively making investments now," says Goldbach.
He says the federal government has provided significant leadership on the subject. Announcements from Medicare about rapid movement toward value-based reimbursement protocols should provide advance warning that much of healthcare providers' reimbursement will shift to value and, further, that they should branch out from having only the bottom line as a gauge of success.
Capitation is an important tool, but it's not the only tool. Section 3506 of the Patient Protection and Affordable Care Act supports shared decision-making through funding an independent entity that would develop and certify standards and patient decision aids. In addition, the U.S. Secretary of Health and Human Services can fund, through grants or contracts, development and evaluation of such tools. Hospitals, according to the law, are eligible for grants to implement these tools. The Centers for Medicare & Medicaid Services is also empowered to test such shared decision-making models.
Still, the hard work is up to providers.
"It's no easy task to bring any kind of cultural change," says Goldbach. "But one thing about the medical community is they respond to incentives, and to education."
Workflow integration
Weaving shared decision-making into the workflow is one of the big challenges to successfully changing the culture, says Arterburn. Consider: Every time a patient is referred for elective surgery, a decision aid, and possibly counseling, gets ordered. For example, no patient recommended for knee replacement undergoes surgery without receiving a decision aid.
"Delivering evidence-based information is one hand of the shared decision-making process," Arterburn says. "The second part is having well-trained providers who understand how to incorporate these decision aids, and in how to have a shared decision-making conversation."
One step often not emphasized is assisting patients in evaluating options based on their own goals and concerns as they relate to the risks and benefits of different treatment options. Two patients may have the same acuity level of osteoarthritis, with very similar severity and mobility issues, but those two patients may have different assessments of risks and benefits. One may be very risk averse. Another may have a different lifestyle or needs and may feel a greater urgency for the procedure.
"One major barrier we face is payment reform that values communication and high-quality decision-making on a level that would make it even more attractive to fee-for-service–setting providers, or at least most providers, to engage in this regardless of what the patient chooses," Arterburn says. "Some providers will tell you they're doing this, but once you train them, you realize they're not actually doing shared decision-making as it's intended to be performed. We're fighting an uphill battle currently. We're seeing slow dissemination of shared decision-making outside organized care systems where finance and care delivery are integrated."
Resistance from patients and physicians
It comes down to being able to count on clinical champions.
Amy Fox, RD, CDE, a registered dietician and program director at Sutter Weight Management Institute in Sacramento, California, credits clinicians with buying in to Sutter's shared decision-making program and making it a success. SWMI is part of Sutter Health, a network of doctors, hospitals, and other healthcare service providers that reported 2014 operating revenues of $10.9 billion.
Despite the program, bariatric surgery volumes at Sutter are on the rise, but Fox stresses that the institute's goal has nothing to do with volumes.
"That might be an outcome, but my goal is not more surgery; my goal is founded in the fact that better-informed patients make better decisions and are better partners in their own healthcare," she says.
Part of the program involves requiring prospective patients to participate in a group class, led by a clinician, on possible outcomes from a decision to have the surgery. Unsurprisingly, she says, at first her difficulties were with the surgeons.
"The surgeons still have some reservations about it. They feel like it is a barrier to surgery; they feel they already told the patients everything they needed to know," Fox says. "But this is not meant to be education in the sense of clinical terms. This is about how the surgery will affect their life going forward. It's not my decision, and I'm not sure I can share it with you. It's also not all informed consent; it's informed decision-making."
She says another barrier is the patients themselves. Often what's difficult about teaching the class, she says, is that patients always want to ask the instructor's opinion.
"As an instructor, you have to have it firmly implanted in your head that this decision is not about me, I help [the patient] explore," she says.
Fox says the program is working well thanks to the executive leader buy-in she had.
"My main executive sponsor did a lot of research on it when I was trying to convince him that it would work. He was very supportive of the concept with the physicians."
That said, evaluating the success of such a program is difficult.
"When I say it's working really well, that's from a purely clinician point of view. We are continually collaborating with the surgeons to improve and refine the process," she says, noting that more than 30% of patients who complete the program go on to choose surgery.
There's no real objective metric to determine success of the program, yet anecdotally, patients appreciate it, she says, adding that the technique would be useful for "anything elective." Sutter is considering expanding it from bariatric surgery to other procedures.
"My definition is purely patient feedback. This feels more coordinated, like there's a process that educates the patient," Fox says. "In elective medical procedures, I just see it as huge, because the patient knows what's going to happen. It lays out the whole journey and lets them choose what path they want to take. Now that he or she has a clinician telling them what to expect, that puts it on their level, and makes it more real."
After an acquisition, integrating new principles across a health system takes time—and a plan. SSM Health's new value-based task force pulls innovation and expertise out of their silos.
St. Louis, MO-basedSSM Health bought into the value-based revolution quite literally when it bought Dean Healthcare, a Madison, WI-based leading integrated delivery system, complete with clinic, hospital and health plan, in September 2013.
Bill Thompson
The acquisition was seen by many as an attempt not only to expand the four-state health system's footprint, but also its eventual transition to value-based care and population health, led by many of the lessons and strategies Dean had incorporated into its model as an integrated delivery system.
But such a transformation involves culture change, so it wasn't that simple. Over time, SSM President and CEO Bill Thompson learned that buying into value-based purchasing and population health principles isn't the same as integrating them into a system that is more attuned to fee-for-service reimbursement and all of the operational differences imbued in the two opposing models.
Integrating new principles, and the structures that encourage them, across a health system takes time—and a plan. That's where the newly unveiled value-based task force comes in.
"We've actually rebooted our whole value-based purchasing process because we found it difficult to get it off the ground and working well," Thompson says.
This time, Thompson, and the man he selected to lead the planning and implementation of a new structure based on value, believe they are onto something.
Shane Peng, MD
Shane Peng, MD, was named executive vice president and president of physician and ambulatory services at SSM in 2013 after serving as vice president and senior medical director at Sentara Medical Group in Norfolk, VA. Like many other integrated health systems that are struggling to find footing with respect to population health and value-based care, he says SSM tended to get distracted with projects and experiments around the edges of value-based care.
Approaching the transition essentially as a series of trial-and-error experiments prevented fully committing to the coordination and communication needed to transform the entire organization, he says.
The second struggle is related to the first: Because of the scattershot approach to value-based care in the recent past, SSM lacked the right focus to show improvement because what expertise the system had in value-based reimbursement and clinical practices resided in silos, says Peng.
"That expertise sits in care delivery, hospitals, in postacute care and IT, and finance and strategy have to support it," Peng says. "But the challenge has been it's hard to integrate all those key folks to approach it from a holistic fashion."
In short, he says, SSM has a "huge opportunity right now," and its doesn't have the luxury of building out the infrastructure that's needed to compete for that opportunity over many years. Instead, it has to transform quickly.
To kick-start the transition, Peng called a system-wide summit in late 2015.
"Remember we are in six markets and four states, and we have care delivery from the acute side, medical group side, and postacute, along with all the supporting structure, like finance, strategy, and HR."
5 Working Groups That summit brought a decision to break into five working groups based not on the departments individuals were in, but on a wide cross-section of talents. They are:
1. Value Contracts Optimization
Led by the system CFO and contracting professionals, within the group are operators and clinicians from the hospitals, medical group, care delivery and people from strategy.
"This is a very diverse work group that really calls into question each region's current list of value-based contracts and how much money have we left on the table with them, how much we're at risk for payback or penalties."
Their task was to develop a grid with the key metrics to gaining value across all the contracts.
"Now we know the key indicators we have to move to achieve those dollars," says Peng. "It will allow us quantify and monetize the activities we need to do to be successful."
2. Metrics and Analytics
Led by the regional president of the physician's organization, this group includes members from IT support, a variety of clinicians, again, individuals from contracting, and people from SSM's current analytics infrastructure, including representatives from Dean Health Plan.
"Being a payer, they have actuaries and can analyze risk data," Peng says. "Their task is to say hey, now that we know these metrics are the ones we have to improve on for success in this particular contract, what does care delivery need from analytics to drive the changes necessary?"
3. Care Management
Care management isled by the president of hospital operations and supported by leaders from the hospitals, the physicians' organization and postacute care.
"Within care management we have a great deal of variation even within the same city," Peng says, noting that hospitals may not be standardized on discharges or other functions. "The challenge is [whether stakeholders can] create that standardized approach for care management, which is the most critical part of value based care," says Peng. "It's hard to make improvement amid variation."
4. Core Competence and Infrastructure
Led by the president of physician and ambulatory services, this group's role is to evaluate and develop the core competencies, infrastructure, and processes required to drive success in value-based care.
5. Information Technology
Led, not surprisingly, by the system chief information officer, this group includes representatives from a wide swath of responsibilities within the clinical and management areas at SSM and is charged with assessing, developing, and deploying the information technology necessary to ensure the value-based care initiative is successful.
One breakthrough from the groups in just three months of work, Peng says, came in the form of a grid created from the input of all five working groups. All SSM contracts are listed by region and are broken down into opportunities to monetize, Peng says.
Executing on all of it should add up to around $40 million—straight to the bottom line. That grid is used by the analytics and metrics work group to understand how the contracts actually work, and helps SSM understand how best to "reverse engineer" its care delivery by creating processes that will lead to success in 2016 and beyond.
Once again, Wisconsin is the model region for SSM because it has what Peng calls "all three legs of the stool"—hospitals, physicians, and its own health plan.
"When the three units integrate and function as one, it's a very powerful organization," he says.
While the reality is that some regions within SSM will never have all three components of the integrated delivery network, Peng says they will learn what health plans want delivered through intimate knowledge of Dean Health Plan.
"That puts us in a better position to partner with any health plan, government or otherwise, to drive better care for our patients," Peng says.
"There is opportunity for us to industrialize the process. For example, we have [Medicare Shared Savings] ACOs in three markets. They're the same contract. In the past, each region kind of did their own thing and tried to reinvent the wheel. By looking at it from more of a system perspective and discerning what kind of value a centralized support function brings versus regional activity, there's great opportunity to bring in efficiency standardization and ultimately higher performance."
Memorial Sloan Kettering's new cancer surgery center incorporates five years of rethinking a patient's journey through various surgeries. It places an emphasis on reducing patient recovery time and anxiety and overall, creating better outcomes.
Sure, the Josie Robertson Surgery Center, a 16-story edifice on Manhattan's Upper East Side, is a gleaming new jewel at the world-famous private nonprofit Memorial Sloan Kettering Cancer Center. The 179,000-square-foot outpatient surgery center, funded by a $50 million gift from Josephine (Josie) Robertson and her husband Julian opened Jan. 5 and features all the latest technology, the newest thinking in industrial engineering on patient movement and flexible work spaces.
But its best innovation might be invisible.
That's because the clinicians treating cancer patients at the 471-bed hospital didn't just want a fancy new surgery center when they started planning it five years ago.
Vincent Laudone, MD
Instead, they took it as a rare opportunity to redesign and standardize care protocols for a variety of cancers such that patients would be able to go home sooner, says Vincent Laudone, MD, Chief of Surgery at the Josie Robertson Surgery Center.
He says in the five years of planning before the opening of the new center, clinicians did plenty of research on why some patients—a little more than half, were able to go home immediately following surgery, while others were staying at least one night.
Indeed, the majority of patients who spent at least one night in the hospital following surgery spent more than one night there. One of the main reasons, was that there was no standard postoperative care protocol based on type of surgery. Instead, post-op instructions were solely left up to the surgeons themselves in the form of their orders.
Standardizing Care
"We studied the variability," Laudone says. "Why is it some can go home the day after while some won't? We identified those things we could improve on, and this has been a refinement process, but the results speak for themselves. Now, for example, prostatectomy patients who were going home after one night five years ago can now be reliably discharged the same day 95% of the time."
In determining how best to standardize care, Laudone says clinicians focused on the following services: breast surgery, plastic surgery, limited urology surgeries, prostate and kidney surgeries, gynecologic oncology, lymph node removals, and head and neck surgery such as thyroid and cancers of the mouth.
Laudone says the process of refining and standardizing care protocols started by simply cataloguing standard orders for each physician to find the variability. That started a focused set of discussions and consensus building around specific procedures aimed at eliminating variation where possible.
"Some of what we did stemmed from a need to standardize the clinical pathways for patients," says Laudone. "Traditionally surgeons have dictated the care given to the patient after surgery and that's where a fair amount of variability can occur."
Physicians' orders include when the patient is to be ambulated, when the patient should be fed, and what should be given for pain management.
"All of those things, when looked at clinically, [include] certain measures which are much more amenable to getting the patient ready for discharge at a certain point in time," says Laudone.
Now surgeons at Memorial Sloan Kettering have a standard order set based on the particular surgical procedure that should be applied to all patients who receive that procedure.
Clinically Driven to Reduce LOS
But physicians' orders weren't the only tool to help cut down on length of stay. Further modifications in care protocols call for including the patient's caregiver as an active participant in the process. Caregivers receive educational information and are encouraged to stay with patients throughout their hospital stay. It helps immeasurably having them present to encourage the patient and for post-operative education and understanding, Laudone says.
"They are critical to helping the patient feel well-prepared to leave the hospital," says Laudone. "This starts well before the postoperative period."
Further standardization has been applied to anesthetic regimes with a focus on what surgeons can do interoperatively for to lessen postoperative pain.
"Suddenly the focus for the anesthesiologist is not just during the operation," Laudone says.
Where once managed care attempted to reduce length of stay as a blunt cost-cutting tool, Laudone says today's attempts to reduce hospital stays are clinically driven.
Evidence shows patients do better when they can recover at home when possible, he says, but as importantly, standardization in general allows for easier comparison of patient outcomes because more variables are eliminated or controlled.
Laudone says part of the information they're able to gather on outcomes is based on reams of data generated from patient and caregiver surveys following such standardized surgical and post-surgical processes.
"Being able to collect outcomes at a very granular level for everything we do is the way to transform cancer surgery worldwide," says Laudone.
"We have installed and are continuing to develop systems to allow us to do that. For example we're in the process of sending out daily symptom scores to patients after they finish surgery to assess exactly what happens to patients when they leave a facility. The assumption is if you don't hear from them, they're probably doing OK. But we don't know that to be true and there's wide variation on what OK means," he explains.
He says the cancer center's biostatistics department can analyze that data and allow surgeons to translate the findings into further refinements in clinical care.
"We intend to fully share in the public sphere what we learn from because that information just isn't out there right now."
Investing in community-based services by adding them to payment bundles can reduce readmissions and save significant expense, research suggests.
Hospitals and health systems are under the gun to reduce readmissions. They've been penalized for them since 2012. And that's led many to invest in care management, navigation, and stronger incentives for postacute providers to help keep patients out of hospitals.
It's not enough, says Andrey Ostrovsky, MD.
He says that adding nonmedical personnel into the value equation is critical to bending the cost curve, and he gives two reasons:
Medical personnel don't interact with the patient often enough post-discharge,
Even if they did, their services are far more expensive than what is needed to help keep patients from needing to come back for an acute stay.
Ostrovsky is, of course, talking his book. As CEO and founder of a company called CareAtHand, which uses predictive modeling to forecast when patients are most at risk for a hospital visit, he and his colleagues offer data-driven predictive analytics to suggest mostly non-medical interventions that should reduce the probability of a particular patient needing a return hospital visit.
Andrey Ostrovsky, MD
'It's Not Just about Doctors and Nurses'
He has a pretty impressive set of statistics to back him up, including a peer-reviewed study in the Annals of Long-Term Care: Clinical Care and Aging, which he co-authored. It shows at least a modest effect from using technology and what he calls an "existing underutilized work force" to reduce medical expense while at the same time improving outcomes.
"Some exciting research is confirming that there is bending of the cost curve by investing in home and community services. Currently, the majority of interventions around bundles are medical interventions," he says. "We're trying to ease the blow on health leaders with the fact that it's not just about doctors and nurses all the time, which is what we've been used to with bundling."
He makes a critical distinction between the interventions he's describing and skilled nursing and home health care sites. Many hospitals are seeking to shore up their performance through incentive contracts and preferred provider lists for those care sites that adhere to treatment protocols and interventions the hospital knows will help prevent some readmissions.
"It's awesome that these are being applied to [skilled nursing] and home health, but they're still performed by skilled clinicians," Ostrovsky says.
"The notion of moving bundles to home and community-based services beyond skilled care gets at what are the real causes of good health. I'm a physician who has been raised with the biases of doctors. We are the end of the line when someone's going downhill. We know the stuff with diseases, but when it comes to meeting the person or consumer where they are, they're mostly not in the hospital."
In fact, he says, research suggests that among the determinants of health, only 15% to 30% comes from medical care.
The beauty of HCBS (home and community-based services), he says, is that most of the providers already exist, and that hospitals and health systems, or other bundle "conveners," can leverage them relatively easily compared with other investments they may have to make to better manage the bundle, such as spending on information technology as well as labor investments in clinicians.
Coordination is Key
Ostrovsky says "front door entities" such as agencies on aging and centers for independent living can make serious inroads into helping improve patient health. Such agencies can help leverage everything from home care to home-delivered meals, transportation, and behavioral health recommendations.
They do this already, of course, but not in a coordinated way with healthcare providers. That's at least in part because of misplaced or nonexistent incentives.
With exceptions, these organizations have not traditionally worked together with hospitals—or any other entity, for that matter—on specific interventions to reduce the probability of a hospital visit. But the potential is there for them to have big impacts on preventing an admission or readmission.
Nursing oversight of such efforts is critical, but Ostrovsky argues that no matter the convener, nonmedical care team members have to be involved to really start to reduce healthcare costs.
He argues that by better leveraging these agencies and groups, and by coordinating care with them, health systems can get many patients out of expensive long term skilled nursing environments and into the home setting.
This would significantly decrease the cost burden to a Medicaid managed care organization, for example, as well as to the patients and families themselves.
"It's going to take work, but this is very doable," Ostrovsky says, referencing the necessary merger of medical and nonmedical interventions. "We need to have broader education of providers, hospitals, skilled nursing and home health—all the folks who could convene bundles—and be on the hook for them. These assets in the community are serious providers who can substantially decrease the cost of administering the bundle."
Not all such providers are created equal, of course. Their capabilities vary widely, and they speak a different language and have a different culture than medical providers, he says. Which is why close coordination and supervision of their activities with patients needs to be part of any hospital or health system's foray into convening bundles, if that's the route they choose strategically.
"It takes a very unique hospital or health system to be risk-taking enough to do this on their own," Ostrovsky says. "Bundling is not easy. You need deep understanding of the financing mechanism. That said, patient navigators are like $13 an hour and can be impactful as long as supervision is there. Leading hospitals are realizing this, and the technology is really the last piece. Our take on it is that when hospitals acknowledge the financial incentives of bundles, they will increasingly use less-expensive assets to do this."
At self-insured Houston Methodist, a population health pilot designed for staff members saw 50% of high-risk participants move into the low-risk pool within the first six months.
Houston had a problem.
Julia Andrieni, MD, went to Houston Methodist from UMass Memorial Medical Center two and a half years ago to see if the work she had helped pioneer under former Massachusetts Governor's namesake 'Mitt Romney' insurance plan, would also work in a market where population health wasn't necessarily dictated by payment policy.
Romneycare, you'll recall, was the model after which Obamacare, (the Patient Protection and Affordable Care Act) was patterned.
Julia Andrieni, MD
"In Massachusetts, I was there at a time when everyone had to have primary care overnight under the Mitt Romney plan," she says. "We realized immediately the need for new models of team-based care, the patient-centered medical home, [advanced-practice registered nurses, and] nurse practitioners as we were developing our primary care network."
So why come to a market where none of that was in place?
"I love a challenge," she says.
Signing on with Houston Methodist, the hospital where Michael DeBakey, MD, pioneered open-heart surgery, was especially exciting and challenging for Andrieni, given the hospital's history as a surgical specialty-oriented medical center.
As the new vice president of population health and primary care, she was tasked not only with building population health-based teams and treatment protocols, but also with building up a primary care network that didn't really exist when she arrived.
In the northeast, Andrieni says hospitals and physicians were already accountable for outcomes. "It started with process measures, then moved to outcomes measures," she says. "The expectations were that you had to reach them."
In contrast, fee-for-service is booming in Houston, just like the local economy, despite the recent oil market crash. That means a lot of independent physicians aren't feeling the pressure from payers to be in any type of risk arrangements.
Yet Houston Methodist brought Andrieni in because senior leadership realized that their days of risk-free provision of services are numbered, and without a primary care network, the health system is vulnerable.
Here and now, Andrieni's experience in risk contracting is on the back burner as she works to build an employed primary care network and an alignment model for those who want to stay independent.
Those physicians, in addition to the employed cohort, make up the Physicians Alliance for Quality, an internal physician organization at Methodist. Employed and independent doctors work together to improve handoffs and the care continuum generally, and independents pay a small membership fee to be part of it.
The Alliance then helps them with meaningful use targets, other pay for performance programs, and helps them achieve financial incentives for quality care. Since Andrieni arrived two and a half years ago, the Alliance has grown to 218 aligned and about 70 employed physicians.
Data-driven
"We're doing it from the perspective of improving outcomes and lowering risk. We're very data-driven," Andrieni says.
Though building the Alliance has been her top priority, Andrieni's experience with population health has proved valuable as well. New employees at Houston Methodist get a discount simply for undergoing a routine biometric screening. Andrieni was no exception.
But the discount was for getting the screening. Nothing was really done with the data the screening collected. Andrieni decided to work with the human resources department (Methodist is self-insured) to construct a population health pilot that would make use of all the data collected during biometric screenings of staff members.
"So I took one of our community hospitals, San Jacinto, and used those employees as the population."
She used the nursing care navigator program, developed to aid transitions in care, to flag hypertension, diabetes, and nicotine use among other risk factors, to develop individualized health programs for those at risk. The program was voluntary, but helped train those in the navigator program on how to improve health for a defined population.
They risk-stratified the group and high-risk individuals could opt in to certain health programs. Those employees were also offered wireless home health monitoring devices that reported readings to a centralized dashboard that the navigators could monitor and export to the person's primary care physician. The pilot program ran from July 2014 to August 2015.
"Population health is a new model of healthcare delivery that's very data-driven with appropriate interventions for high risk groups," Andrieni says. "Our most important mission is prevention. But we didn't know what was going to happen."
Results
Here's what did happen: Within the first six months, 50% of high-risk patients moved into the low-risk pool. The high-risk group represented about 7% of the total population, while those classified as "rising risk" were between 15% and 20% of the population.
So that significant reduction of the risk should pay off in myriad ways, and it should have some staying power.
"People who used those devices wanted to keep them, and they became engaged in their own health, which made this stuff sustainable," she says. "They became aware, and motivated by health."
This month, the program, no longer a pilot, will roll out to all six hospitals in the Methodist system.
As part of the rollout system-wide, Andrieni has worked to build up physician commitments by asking them to be "population health partners" for Methodist's employees and dependents. They have to agree to same-day access for employees and beneficiaries, but they have a reimbursement incentive based on the volume of people they take care of and their outcomes.
Andrieni says she structured the program like a commercial payer would. If physicians take high-risk patients, there's a multiplier added to their reimbursement. If employees enroll in the so-called "guided track," they get a premium discount.
"Other employers will be interested in this," says Andrieni.
She's thinking ahead because she says a health system can't simply flip a switch and do well under risk-based reimbursement arrangements.
"It's about readiness. You never know when you will have to go from one world to the next," she says. "We can live in the world where we live and still develop our strengths in population health. We can offer this to employers independent of insurers. And we expect to see decreases in hospitalization and ED use."
A Competitive Advantage
Sixty-seven percent of Houston is self-insured, most corporations have robust wellness departments, and most of their employees are in the low-risk group already, Andrieni says. But there's little or nothing for improving the health outcomes of people who have serious or risky health conditions.
"That's an opportunity for us," she says. "We want to become essential to these employers."
Andrieni says that if Methodist can prove its interventions have worked with its own population, she thinks other employers will be interested. Either way it may provide a competitive advantage.
"We're not feeling the pressure from payers, and maybe in time the landscape will change, but we will have developed these tools. One of the reasons our alignment model has grown so quickly is because independent physicians want to be part of something completely about improving outcomes and quality of care," she says. "This is completely clinical. I'm not talking to them about utilization."
Medicare Advantage provides hints on how CMS's Next Generation ACO model will work.
CMS unveiled its hotly anticipated blueprint for the Next Generation ACO model this week, and named the 21 organizationsthat are prepared to join the new program, but many questions are still left to be answered.
One thing we do know, is that the federal government is rapidly dialing up the risk meter for healthcare organizations that are willing to try the new program.
Most critically, the 21 organizations chosen to kick off the model are able to take as much as 100% risk, and beneficiaries are able to "voluntarily align," with an ACO. That means they will still be able to access care from any doctor or hospital that accepts Medicare, but that the ACO will work with them to try to coordinate care better, even if patients decide to go outside their preferred network.
Bill Bithoney MD
But electing a preferred network is a key change. Even though it appears to obligate the patient to do nothing, if nothing else, it makes attribution for the networks somewhat stickier and clearer. In some ways, it's similar to Medicare Advantage, although MA programs restrict where patients can receive care.
Not for the Inexperienced
The Next Generation ACO model is optional and by application only for all providers, as well as for patients. For CMS, incorporating more risk into Medicare payments is a top goal, while prospective attribution, though not as sticky as some providers would prefer, is viewed as a positive change from the retrospective attribution of previous Medicare ACO incarnations.
In that sense, says Bill Bithoney MD, consulting managing director in BDO's Healthcare Advisory practice, there were few surprises within the announced specifics of the program and its participants.
"What surprised people who haven't followed this or who haven't really paid attention—is the high level of risk it's possible to take," says Bithoney. "CMS is clearly moving on a pathway to having more providers at risk. That's the biggest dramatic thing. [Next Generation] ACOs can take up to 100% risk as opposed to Medicare Shared Savings, for example, which has only a 2% or 1% downside. What we're seeing is CMS moving more toward a Medicare Advantage-like 100% risk profile."
A second track choice allows organizations to take up to 80% of shared savings—or losses.
Bithoney, who has managed a Medicare Advantage ACO, and who now specializes in the development of ACOs, adds that the change in attribution that allows the patient to designate an ACO is a big improvement over prior CMS offerings, such as the Pioneer ACO program and Medicare Shared Savings.
"The attribution change is a huge benefit," he says. "If you know who [the patients] are before you begin to be responsible, you can design programs for intervention."
Jim Giordano
For instance, if you know that of the population attributed to your organization (based on a patient opt-in through CMS's Voluntary Alignment form) 20% are diabetics and that 9.8% of those are at high risk of myocardial infarction based on other risk factors, an organization can design a specific program to modify obesity and diabetes and congestive heart failure and immediately intervene on those patients.
"You know where your risks are," quips Bithoney.
Knowing those risks has proved to be a problem under previous Medicare ACOs.
There are four possible payment mechanisms under the Next Generation ACO model.
One is with normal FFS claims.
One is normal FFS plus an additional per beneficiary, per month payment that is recouped against shared savings or in addition to losses (which would allow for investment in infrastructure to manage these patients).
One offers a mechanism for population-based payments, similar to the Pioneer program, under which providers are paid a reduced FFS amount and a per-beneficiary, per-month payment equal to the FFS reduction percentage.
One makes capitation an option in year two of the program, which runs for three years to 2018, with two optional performance years in 2019 and 2020.
Bithoney is encouraged that CMS has introduced the possibility of prospective payment to assist with infrastructure development. That money can be used for activating networks, cloud computing, meaningful use (although that's "effectively over")—whatever organizations need to exchange data across the continuum.
"These things run on actionable intelligence," says Bithoney. "They really do depend on prospective attribution of patients so they can address risks."
The More the Better
Jim Giordano, a partner with Kurt Salmon and former hospital CEO who helps healthcare organizations develop and implement value-based payment and population health management strategies, is gratified that there are many CMS models now that will allow health systems to participate in value-based purchasing. But he says the Next Generation ACO program is only for organizations that have already demonstrated maturity with the concept.
"They have already made investments to build strong infrastructures, and many have experience with Pioneer or other ACOs," he says.
Despite the ability to take 100% upside or downside risk, he calls Next Generation ACOs a stepping stone to two-sided risk, but not the final destination. A Medicare Advantage plan, for example, might represent one "final destination," in that patients have skin in the game in the form of disincentives for leaving their network for care.
Regarding maturity of the organizations that undertake the Next Generation challenge, he says they'll be more successful if they've already demonstrated success under less risky structures.
"The real opportunity for gainsharing comes when the ACO is treated as part of a portfolio that includes other risk arrangements," says Giordano. He adds that two-sided risk structures have the potential to change some liability issues, so additional considerations regarding malpractice and corporate structure must be addressed.
For his part, Bithoney agrees that culture change is tough to achieve without multiple risk arrangements—or at least having a significant book of business across the organization under risk arrangements of some kind.
"Some who participated in [Bundled Payments for Care Improvement] have said if they do one bundle, it doesn't change the tenor of the entire organization. It may just reach one department and not transform care by penetrating the organization," he says. "So we've told people to take multiple bundles and build the infrastructure that addresses benchmarks for care in the EMR."
He dismisses concerns that multiple benchmarks might sow confusion among clinical staff—essentially creating several classes of treatment protocols for patients. He says it doesn't really work that way.
"These are typically benchmarks you would want to meet anyway, regardless of payer," he says. "If you can meet them, you'll do well."
He predicts that as risk structures mature, more and more providers will develop insurance components, and the reverse is true as well, with traditional insurers beginning to own pieces of the care continuum.
He says because of the unsustainability of fee-for-service healthcare, for those who have not felt the reach of risk contracts either with commercial payers or with CMS, it’s only a matter of time.
"Ultimately, population health and value-based purchasing will win out because it must."
A new service that immediately links physicians and patients by video puts the focus on what the customer wants, not on what's easiest for the health system, says its chief consumer officer.
Piedmont Healthcare is looking to solve its access problem and build long-term loyalty by possibly cannibalizing some of its primary care business.
Piedmont On Call, launched in December,is a bit of a test. But even though the telemedicine service allows consumers to bypass the system's traditional primary care practices in favor of on-demand video care delivered by non-Piedmont physicians on smartphones or tablets, the Atlanta-based health system's chief consumer officer is already convinced it will serve the system as a whole quite well.
"The number one issue or problem with patients is access and convenience," says Matt Gove, Piedmont's chief consumer officer. "It's also the thing we have the hardest time delivering."
Designed to help consumers get quicker treatment for a variety of urgent, yet low-acuity healthcare needs, Piedmont On Call provides board-certified physicians for consultation from 8 a.m. to 8 p.m. for $100 per virtual visit. It's the result of conversations started with potential partners more than two years ago, he says.
Two questions come immediately to mind. First, will consumers use it? Second, will it steal volume from Piedmont's 150 primary care docs and 50 specialists over 50 locations in the Atlanta area?
Gove predicts the answers to those questions are an unqualified yes and not much. Yet he says they are not exactly the right questions over the long term for Piedmont as an organization.
"We already own the healthcare trust of the community, and we've earned that trust over 110 years. What we've not been doing is adapting our system to the way customers want to use us," he says. "That's what On Call is about."
And he says, while volume may be affected to some degree, the service is an "obvious and easy" way for Piedmont to put a tool into customers hands that will help them solve some of their healthcare needs that in-person visits can't adequately meet. At least, not as the consumer targeted for the service sees it.
"I don't expect this to have any substantive effect on primary care volume or ER volume, but there's a growing segment of the population that want to be able to use this because they're schedule's busy and we don't have anything for these people."
Gove says the new product stems from a broader change he and his team are trying to engineer within Piedmont, and that is a focus on what the customer wants, not on what's easiest for clinicians or the health system.
Video interactions with physicians, which Piedmont says happen within 120 seconds of a request, are not covered by insurance and Piedmont is careful to stress that they're not meant to replace regular visits with a primary care physician.
But Gove is not worried too much about cribbing from regular PCP visits because he says the people seeking each type of service don't overlap much. "This customer is part of a generation where everything's on demand," he says.
Matt Gove
The application consumers use to access a physician was developed by Atlanta-based Alii Healthcare, which partners with Piedmont to offer the service. The physicians who work with the app are local emergency physicians contracted by Alii, and trained to triage and diagnose quickly. Gove says Piedmont leadership is still discussing internally how its employed physicians might integrate with the service at a later date.
"Customers get their cues from other parts of the world," says Gove. "They can have this kind of experience with other service providers, and wonder why they can't have it with us. We have a multipronged approach to fixing our access problem, but this is a big part of it."
In four years at the health system, Gove says he's had to train other senior leaders to expect more from the marketing folks. One way to do that is with the Piedmont On-Call initiative, "where we can put consumer-focused, revenue-generating experience to work," he says.
"At many healthcare organizations, it's like stepping into a time capsule where everyone believes brand advertising is the height of marketing, where plans aren't built around achieving strategic goals for the business, and where [patient] experience is the domain of clinicians."
That can lead to marketing initiatives that have very little to do with what the customer actually wants or expects from the organization as a whole, he argues. On the contrary, this initiative will help Piedmont attract customers it's not getting now, and will help effectively deal with the health system's number one existential threat, according to Gove: Low-acuity retail medicine.
"When you're inside a system it's hard to believe that. I talk to bright and accomplished physicians who lead institutes of care and help them understand that what they are doing is super important, but it isn't as meaningful if we can't bring patients into the system—if we lose the top of the funnel," says Gove.
In that sense, he sees the recent push by drugstore operators CVS Health and Walgreens to enter primary care through quick-care clinics as his top competitive targets. This battleground is hugely important because he envisions a day where a CVS Health could use its muscle with patients to steer referrals for more complex procedures or care, such as in cardiology.
By using telemedicine as a tool to capture the patients at the "top of the funnel," Piedmont helps ensure it will get an early jump on those possible future referrals—without needing the drugstores' help.
As for competitive pricing, Gove says that the retail model of offering primary care services for less than $100 is ultimately unsustainable. "Services that provide a visit with a licensed physician for less than $100 are doing it at a loss. Most of the ones you see doing that are the venture-backed apps."
Piedmont's model is still cheaper than urgent care, and most patients are using HSA dollars, (60% of potential consumers have a plan with at least a $1,000 deductible) he says, which count toward the deductible for most insurance. Ultimately, Gove says he wants to use tools like Piedmont On Call to give customers what they need to make the right decisions for themselves, but meeting that need also positions Piedmont Healthcare well competitively.
"This not only helps us succeed now in world between fee-for-service and value," he says, "but also will put us in better position to manage these patients' care long-term."
With important strategic decisions increasing in frequency, boards need specific skills and experience to help evaluate their options and avoid mistakes.
This article appears in the December 2015 issue of HealthLeaders magazine.
Hospitals are evolving. Indeed, where many of them used to be focused exclusively on high-acuity care and strategies to improve volume, today's metrics that matter are shifting under the feet of both leadership and boards. Even as the leadership team seeks to remake the hospital into something far more important—an organization essential to improving health for the local population—boards must also adapt.
Whether the health system is large or small, board oversight is critical to ensuring that local healthcare isn't lost in the effort to transform, or that the organization doesn't financially implode as a result of the wrong strategic decision. As financial incentives morph into a framework more oriented toward improving and maintaining health rather than just treating the acutely ill, it's the board's responsibility to help the organization get back to the basics of the mission to improve the health of its home.
North Shore-LIJ Health System, headquartered in Great Neck, New York, and covering the New York metro area, is typical of a large health system that's worked hard on growth and transformation of the business in recent years. A relatively sleepy hospital system as recently as the 1990s, North Shore-LIJ has moved into the insurance business and has grown through mergers or acquisition into a 19-hospital system with a robust variety of joint ventures to help cover care outside the hospital's walls. The effort, broadly, reflects the vision of leadership and the board that scale and vertical integration would be essential to compete in a healthcare environment where value is king.
The release of the price data by Blue Cross Blue Shield of North Carolina has caused some pushback from providers in the state.
This article first appeared in the December 2015 issue of HealthLeaders magazine.
Healthcare price transparency is a laudable concept. Patients want it because they are contributing a larger share of the cost of care each year, through larger deductibles and larger out-of of-pocket maximums. The stumbling block for providers is that accurate pricing of healthcare services is nearly nonexistent. Provider organizations negotiate prices with payers, but one side often has a disproportionate influence, and what individual patients pay depends on their insurance.
Now, however, a payer is forcing the issue in a way that puts hospitals and health systems on the defensive.
"Lots of different stakeholders are demanding we produce more transparent information."
Blue Cross Blue Shield of North Carolina made news earlier this year when it decided, like the Centers for Medicare & Medicaid Services before it, to publish prices it pays to specific sites of care for specific procedures.
"Lots of different stakeholders are demanding we produce more transparent information," says Brian Caveney, MD, JD, MPH, vice president and senior medical director at BCBSNC. "Certainly the employer group insurance market is still big and important, so employer groups and their benefit consultants are particularly vocal about wanting information about where they should be steering their employees, and they're expecting the health plans to do that not only through benefit design but also through price transparency."
The release of the price data has caused some pushback from providers in the state, Caveney says, but he adds that most health plans have been making this information available to premium-paying members prior to last January's release. Individuals in the general public shopping for health plans under the Patient Protection and Affordable Care Act exchanges, however, had very little such knowledge.
"We thought that releasing this data to the general public could educate them," Caveney says. "It's relevant to know not only whether a particular site of care is in network but also to know about the potential costs potential buyers might incur if they bought these services and went to those providers."
The decision surprised many hospital and health system executives in the state, among them Linda Butler, MD, vice president of medical affairs and chief medical officer at Raleigh-based Rex Healthcare, a member of UNC Health Care, which reported net patient service revenue of $2.35 billion in 2013.
"It's relevant to know not only whether a particular site of care is in network but also to know about the potential costs potential buyers might incur if they bought these services and went to those providers."
Butler, who had no advance notice of the disclosure, told HealthLeaders Media earlier this year that the numbers can be misleading and don't always present the complete picture of what goes into the price listed. For instance, a search for colonoscopies will list prices, but the procedures have different CPT codes. "Giving you a defined price is much more complex than just giving you a range, and sicker patients will cost more," she says.
Spencer Lilly, president of the 874-bed Carolinas Medical Center in Charlotte, the flagship hospital of Carolinas HealthCare System, where he is also senior vice president, says he has yet to see any material change in patient volumes in the Carolinas marketplace that are directly associated with Blue Cross's efforts in this area, but he is concerned that patients may not be getting a full picture of the value of their care if cost is their only consideration.
"Carolinas HealthCare System supports efforts across our industry that provide patients with useful and accurate information on quality, service, and cost," he says. "As transparency and estimation tools are developed, we advocate that comparisons are inclusive of the entire value spectrum. It can be misleading to patients if cost is the only attribute, especially if cost is not a reflection of what the patient will actually pay."
So far, says Mission Health President and CEO Ron Paulus, MD, the release of BCBSNC's prices paid list has not had a material impact on the health system, or on consumers, for that matter.
The recurring theme from patients who have reached out to the six-hospital health system based in Asheville, says Paulus, is that they don't how to interpret the information, that it's confusing and doesn't seem particularly relevant.
"We have spent some considerable time trying to explain to consumers, physicians, and others what the data mean, but truthfully, in its current form, the data don't mean much of relevance to a typical consumer who wants to know: 'What will I pay and what is the difference in clinical outcome and service quality that I can expect from my encounter?' " he says.
He adds that Mission Health fully supports the concept of reliable, actionable, informative pricing, service, and quality information for consumers, and says the health system has "numerous initiatives" underway in various states of development to support patient engagement and activation much more broadly.
"We know that patients [who] are more engaged in their care feel more empowered, have better clinical outcomes, and cost less," he says. "The open question is, how do we engage consumer-patients more effectively? We are working hard in this area but have a long way to go. We are committed to making the journey."
Does top leadership at hospitals and health systems need to worry about price transparency on a strategic level? In a word, yes, says Tomas Mikuckis, a principal in the health and life sciences division of consulting firm Oliver Wyman.
He says those who pay for patient care—patients themselves, employers, and the government—are moving quickly toward price and quality comparisons for services that are easily comparable, such as certain orthopedic procedures, colonoscopies, and, of course, imaging, to name a few. He calls those services highly transactional, and their prices are heading down.
Another, less-recognized factor propelling the transparency trend is that as physician organizations and ACOs of all stripes enter into risk arrangements with payers—where the provider of care is responsible for the total cost of that care, and where the provider takes risk on performance—the cost of the service becomes much more important to the primary care physician.
"If, as a physician, I have three hospitals to choose from and one is more expensive than others but of similar quality, that is one lever I can use to manage the health of that patient I'm at risk for," Mikuckis says. "Consumer tools may take a while to catch on, but the physician angle is important. Whoever is at risk will shift referral patterns, especially with the growth of products and networks that are more at risk for referral management."
The perils of price disintermediation
The point is, many services in the healthcare universe are shoppable. As patients become more like consumers and begin shopping around, prices for profitable services—many of which hospital executives have previously counted upon to subsidize money-losing specialty programs—will rapidly ratchet down.
The ability of certain high-margin procedures "to support your business going forward is very much in jeopardy," Mikuckis contends.
He says up to two-thirds of healthcare services will become price-sensitive in the next decade. Therefore, he says, providers need to work quickly to get a true handle on what it costs them to provide each of an array of services, so that prices are based on the foundation of cost. This requires providers to become much more sophisticated on the cost to deliver from a basic allocation game, he says.
For instance: What does an incremental MRI cost? The answer depends on a lot of factors, but some organizations have been able to better allocate the fixed cost of an MRI machine, for example, by charging less for people who agree to come in at off-peak times when the machine would otherwise not be used at all.
"If you have a true understanding of the cost to deliver a service, you can get more sophisticated on what you charge," Mikuckis says.
A possible bright side for providers may be that some services are underpriced, too. Again, that's where knowing what it costs to provide the service is invaluable information.
In addition to services that are able to be commoditized, which Mikuckis estimates at 40% of all healthcare services, there are services that are not as easy to commoditize: services provided at centers of excellence for certain types of care, organ transplants, and treatments for certain cancers, where quality and outcomes may trump price quite a bit, he says.
Some providers may be undercharging for those complex services and overcharging for the basic services, he says. An academic medical center, perhaps, shouldn't be charging $2,000 for a radiology service to support charging $30,000 for "service X." Maybe you should cut the price of radiology and charge $50,000 for service X.
"There will be evening out of simple stuff, but if you are a leader in certain complex areas, you should be charging based on the actual cost," says Mikuckis. "And there is a broader piece of it. If you have a better understanding of the cost to deliver and what the market will pay, you can make strategic decisions on what to get out of or grow based on core capabilities you already have in place. Pricing rigor internally can provide valuable input for those broader strategic decisions."
Caveney goes even further on what he says is the shoppable spectrum in healthcare. He says BCBSNC's pricing tool for patients carries prices for about 1,200 procedures the health plan considers shoppable. It's no accident that those 1,200 procedures represent more than 80% of nonemergency healthcare costs, according to BCBSNC analysis.
Mikuckis says the insurer could easily provide prices for up to 5,000 conditions, but there are diminishing returns from going beyond 1,200. "We didn't want to overwhelm the public, and probably will slowly add more and more. We're not trying to shame anyone here. We're trying to do what our customers are demanding."
Cost transparency information may sting in the short run, but it can also benefit providers, Caveney says.
"We have a bunch of providers in North Carolina who can share in the upside if they can demonstrate savings in total cost of care," he says. "The best way for primary care to share upside is to be very careful where they send their patients."
Rather than resist the transparency trend, providers and payers can work together to their mutual benefit—and that of patients, Caveney says. "This is just the way the world is moving. The data are not perfect. Some hospitals do see sicker patients and price is not the end-all and be-all. But we want to improve cost and quality with and for the hospitals and health systems, not in spite of them. That will help keep patients here locally."