Insurer mega-mergers get a lot of attention because of their sheer size, but much more significant are the hundreds of under-the-radar, smaller deals by which hospitals and health systems hope to achieve vertical integration.
Two of the biggest healthcare news stories of 2015 broke this summer surrounding the planned mergers between Humana + Aetna and Anthem + Cigna that would cut the big five health insurers to the big three. The ramifications of those mergers, should they be approved by regulators, will be significant. Those two deals, which represent horizontal integration of the market, will get talked about a lot because of their sheer size—Aetna says it will pay $37 billion for Humana, while Anthem will pay $48 billion for Cigna.
Much more interesting than those giant mergers, however, is what's bubbling beneath the surface. By that I mean the hundreds of smaller deals by which hospitals and health systems hope to achieve vertical integration. News about them trickles out nearly every day, but doesn't reach the crescendo of the health plan deals. But the smaller partnerships are a more telling barometer of things to come.
Michael Dowling
I'd argue that these deals going on under the radar will do more to remake how healthcare is consumed in 2016 and beyond. Why? Well, put simply, the insurance megamergers are mostly about cutting administrative costs and, above all, maximizing shareholder value. Whether that goal conflicts with regulators' current mood on what constitutes a monopoly is the only real unknown, for now, and that verdict won't be in for a while.
Boring.
But infinitely more interesting are the numerous combinations struck as providers seek to gain the greater scale and scope necessary to compete for contracts from those insurers and others, as well as being positioned to deliver better on an increasingly value-focused CMS, which has promised to tie 90% of all traditional Medicare payments to value by 2018. These hundreds of smaller deals are illustrative of an industry that's being remade beneath the surface as 2016 is upon us.
If providers haven't already plunged into the health plan market, you can bet that they are looking seriously at building the right partnerships and infrastructure to move that direction. These deals are where innovation can be found.
"We know that quite a few of the things we do will fail, but we misuse the word 'failure,' " Michael Dowling, president and CEO of North Shore-LIJ Health System (soon to be Northwell Health), told me earlier this year. "When you improve based on [failures], you learn the failure is largely a success."
CEOs Aren't Stupid
Although the pace might seem slow, vertical integration will continue in 2016. Hospitals and health systems know their specialty, acute care, is under siege financially, and vertical integration is where they can be innovative, and critically, where they can grow.
BJC HealthCare in St. Louis is just one organization I interviewed earlier this year on affiliations—agreements between health systems to work together on specific initiatives that fall short of an actual merger. I thought BJC's president and CEO, Steven Lipstein, articulated the promise of the BJC Health Collaborative well when he told me that "by coming together in a collaborative, we can maintain our healthy balance sheets without having to convert our most agile asset, which is cash, into our least agile assets, which are property, plant, and equipment."
Steven Lipstein
From such affiliations many strategic initiatives are possible that wouldn't otherwise be available, like ACO creation, building a continuum of care in the region, incorporating new value-based plans directly with employers, sharing of other resources, leveraging different sites of care to equalize patient volumes among facilities, and, of course, starting a health insurance plan, just to name a few. The possibilities are certainly wide-ranging.
Many organizations are pursuing affiliations not only as a way to expand their regional scope and the continuum of care, but also as a bulwark against increasing consolidation in the payer community.
Forming a provider-owned health plan, either for an established health system like North Shore-LIJ or some confederation of hospitals and health systems, will be a major theme of 2016, says Paul Keckley, PhD, managing director in Navigant's Healthcare practice.
"We will see another wave of consolidation across the provider side for the purpose of starting a provider-owned health plan," he says. "You've got a few that are already scalable on their own."
Still, provider executives will be cautious, he says. Discounted fee-for-service is still the dominant payment mechanism, after all, and CEOs should want to be fast followers rather than the "experimenter in chief," as he describes those leaders who are on the cutting edge of a healthcare business model that's turning upside down. Few can reliably predict the pace of that change.
"CEOs aren't stupid. They read the pronouncements from CMS, but at the end of the day, as they sit with the CFO and COO, they realize that to meet a 4% operating margin, we have to do a lot of work the way we've always done it," Keckley says. "'We need to do it leaner. We'll do a few bundles—the ones that are easy. Let's do the ACO a little bit.' These CEOs know that healthcare never changes as fast as we say and it always costs more. The only thing they know for sure is they have to lower their cost structure, figure out a way to work with the docs, and they have to get a deal with a health plan or sponsor their own. The rest is just noise."
Where Can You Add Value?
Many employers are ready and willing to move with the right partner, too. Wherever hospitals and health systems operate, it's important to make sure to add value.
Take Bob Ihrie, the senior vice president of human resources at home improvement retailer Lowe's Companies, Inc., who I interviewed about patient navigators earlier this year. He and other employers are right to be wary of the big health insurance mergers. Lowe's has already pioneered several direct-to-provider deals in an attempt to limit the power of the insurance middleman.
The Aetna-Humana and Anthem-Cigna mergers "are certainly a concern for us," Ihrie told me. "Not necessarily the size but whether the mergers are really looking to streamline costs and be more efficient and produce better outcomes. So far, as I'm looking at them, there's not a lot of evidence it's directed to taking out the waste as much as it is getting market pricing power."
Even if a 'big three' take over the world of commercial health plans, Lowe's will use them only to construct networks and to pay claims efficiently. Beyond those administrative tasks, there's "very little that we use [commercial insurers] for," says Ihrie. "That's their strength and others have lots of other strengths."
The message is that providers have a different role in the healthcare value chain.
"I think we've finally got some real momentum on people understanding our strategy and helping us control claims," Ihrie says, speaking broadly about Lowe's employees as well as the company's partners in healthcare delivery. He says innovation will come from hospitals and health systems willing to look at new ways to work together with employers, as well as patients themselves.
"A lot of 'little somethings' are going to happen," he predicts. "We're looking for creative people to help us out on programs that are helpful for both sides."
With important strategic decisions increasing in frequency, boards need specific skills and experience to help evaluate their options and avoid mistakes.
This article first appeared 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.
Mark Claster
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.
"Boards clearly are lagging behind because they might not have the necessary expertise that's now needed with some of these new ventures."
New business, new experts
That vision requires expertise that the health system's board didn't always have, says Mark Claster, the chairman of the board at North Shore-LIJ, which will officially change its name to Northwell Health beginning in 2016.
"Boards clearly are lagging behind because they might not have the necessary expertise that's now needed with some of these new ventures," he says.
Claster, president of Carl Marks & Co., and a partner with the New York City company's consulting and investment banking arm, Carl Marks Advisors, says the need for new skills became apparent to North Shore-LIJ as the board and some of its committees began to evaluate and execute on some business opportunities, from smaller joint ventures with physician practices and federally qualified health centers to a huge strategic move to enter the health insurance business in 2014. Before that particular evolution could happen, says Claster, the board needed what he calls very specific expertise in a complicated business to help understand the risks and potential rewards, as well as what the board didn't know.
"We have a lot of intellectual property also," he says. "These aren't typical things community boards of hospitals are used to looking at. As health systems evolve and wellness becomes more of a concept in moving from fee-for-service to value-based reimbursement, people are going to be required who can gauge and evaluate the progress of those ventures."
"Clearly, things are changing so quickly; you need to be nimble and decisive, there's no question about that."
He says at least in North Shore-LIJ's experience, governing through what amounts to a 135-member board—a legacy of hospital acquisitions or mergers throughout previous years—is a luxury, especially in a global talent center like New York, because of the diversity of experience such a large board brings. But that size can also be a disadvantage in terms of ability to act, which is why he says North Shore-LIJ is really governed at the committee level.
"We're run by committees," he says.
The finance, quality, due diligence, and audit and compliance committees—just to name a few—have their own meeting schedules and report to the 30-member executive committee, which meets monthly and in certain situations has the ability to act on behalf of the full board, which meets only quarterly.
"Clearly, things are changing so quickly; you need to be nimble and decisive, there's no question about that," Claster says. "Opportunities present themselves and you need to act. That's why we have that due diligence committee. When you do enough deals or ventures—call them whatever you want—management understands what the board needs in order to make a decision."
Where's the fit?
Whereas North Shore's board wrestles with how to move the organization successfully toward new lines of business, other organizations, such as Pekin (Illinois) Hospital, a 107-bed facility near Peoria, are trying to figure out whether to continue on as independent organizations, or whether they will move toward affiliation with or even acquisition by a bigger parent. None of those questions will be answered tomorrow, says Ronald H. Miller, board chairman of the hospital and a retired CEO of ethanol producer Aventine Renewable Energy who now runs his own consulting firm, Prisma Advisors LLC.
First recruited to the board in 2003, Miller served nine years before rotating off, thinking he'd done his community duty. But he was recruited back as chairman in 2014 and holds the position today.
"We've been fortunate throughout history to maintain a fairly strong balance sheet, so that's a luxury to manage the business, but we've had periods of time on the operating side that were up and down," he says.
One such period, in particular, stands out to Miller.
Dire financial straits that resulted from a poorly considered foray into a renovation of a former mall for ambulatory services and physician offices around the turn of the century led to the replacement of the CEO and an association with Quorum Health Resources to recruit a new CEO and CFO, as well as what Miller calls a "deep dive" more recently on ways to improve the hospital's business. Since then, with the board's oversight, the hospital has been managed at the CEO and CFO level by QHR (a national consulting and management services business headquartered in Brentwood, Tennessee), and several of those top leaders have cycled through.
To some degree, says Miller, the association with Quorum, which is ongoing, brings broad expertise on a number of possible strategic options for the hospital, many of which are constantly being evaluated. With help from a professor at Peoria's Bradley University who specializes in strategic planning, the board also went through an assessment of skills it likely needs as healthcare moves toward value-based reimbursement and greater IT capability, among other areas of expertise needed to exist in such a reimbursement system.
Remembering how much the decision on the mall renovation cost the hospital in both opportunity cost and capital is a touchstone for Miller and the rest of the board as they seek the added value of outside expertise. Miller says the attitude is that the board wants to be supremely careful with strategic decision-making and doesn't want to squander the laborious rebuilding of its credit profile following the losses from the failed mall experiment.
Of the 11-member board, three are always physicians—including the president and president-elect of the medical staff. The other eight, like Miller, tend to come from the community either as leaders or experts in their field.
One area that was lacking in recent times was IT.
"We struggle a little bit in that area, so we were able to bring in a lady from Caterpillar who is involved in their IT applications group, and she has been very helpful already," says Miller, referring to the international heavy equipment company headquartered in Peoria.
On the service side, Pekin tends to try to stay conservative, focusing on areas where it knows it has a strategic local advantage. For example, that means no open-heart surgery program or any plan to build one. Pekin's location in the Peoria area means it's constantly under threat of encroachment by bigger neighbors. As a result, Pekin has successfully focused on services including gastrointestinal, orthopedics, some general surgery, and of course, primary care.
"There's constant debate on our strategic direction. Should we affiliate? Should we be acquired?"
As part of that commitment to primary care, Pekin is using part of its carefully rebuilt credit position to construct a new $12 million medical office building on the east side of town, where the growth is, says Miller. Up to 30 providers will eventually locate there from scattered places around the area.
Despite these recent decisions, which Miller says should help shore up the hospital's immediate financial future as well as serve as a physician alignment tool, that doesn't mean the threat from being small and specialized has abated.
"There's constant debate on our strategic direction," Miller says. "Should we affiliate? Should we be acquired? We're going to have to spend, here in the next five years, a significant amount of dollars to upgrade the hospital, but we've got a balance sheet to carry it through should we stay independent."
That underlying strength puts the organization in a good place. For Pekin Hospital, affiliations could be attractive, but it will be a careful evaluator. Until recently it was affiliated with OSF St. Francis Medical Center in Peoria, but that business agreement ended this past summer.
"Whether we do something like that again or we do something stronger, I don't really know, but we do have local autonomy on how we decide to move forward. It is a double-edged sword," Miller says. "We have to do it better, we have to know what service lines we're in and what we will look like 20 years from now. This community needs good healthcare. Who owns it is not important to me, as long as it stays here."
Regardless of the size of the organization they represent, boards must navigate a fine line between governing and managing, North Shore-LIJ's Claster says.
"The board is supposed to set strategic direction. They may get a lot of input from management, but if a board has to do management's job for them, then you have the wrong management," he says. "Especially in healthcare, you rely on management to educate you to some degree on why they want to go the direction they want to go in, and the board has to independently evaluate. That's what a board's role is: to govern."
In a world full of choices, developing a patient's trust in a partnership to improve his health may be the bond that endures.
This article first appeared in the November 2015 issue of HealthLeaders magazine.
What does patient engagement really mean today? As patients take a more active role in managing their own health, healthcare organizations are challenged to enact strategies that improve customer loyalty. Increasingly, that challenge can be met with an infrastructure that encourages wellness and appropriate utilization built from sharing transparent information with patients about your organization's outcomes and expertise.
Patients want a partner in their healthcare decision-making that is focused on what's right for them. At the same time, healthcare organizations are conflicted. With a population health–based strategic emphasis, they can't afford to have profitable procedures go to retail competitors while footing the bill for expensive acute care interventions on the same patients.
As healthcare strategists, marketing chiefs, and experience officers plot the next few years for their organizations, they must think expansively about transparency, consumerism, digital engagement, and other trends that are changing how patients choose where they get their healthcare. In a world full of choices, developing a patient's trust in a partnership to improve their health may be the bond that endures.
Health systems are uniquely positioned to learn from both sides of the healthcare cost and quality equation. Start using that to your advantage.
Temple University Medical Center is not in the best of neighborhoods. It's in an urban area, North Philadelphia, with high crime and deep poverty. Temple doesn't want to be in an ivory patient tower, and it doesn't view treating the patients it sees from its home neighborhood as a burden.
Larry Kaiser, MD
But it does need to figure out how to better serve its community, says Larry Kaiser, MD, president and CEO of Temple Health, the 721-bed academic medical center's parent. That's especially true as fee-for-service reimbursement from the Medicare and Medicaid population begins to fade toward managed capitation.
"We are the de facto community hospital for north Philadelphia," Kaiser, also dean of the Temple University School of Medicine, says. Unsurprisingly, Temple Health serves a majority government payer mix, with Medicaid alone making up 41% of the mix.
Low Reimbursement Forces Value
The majority of state Medicaid programs are notoriously poor payers, so Kaiser argues that his health system has been under value-based reimbursement for some time, because it loses money on many of the services provided to Medicaid beneficiaries.
In last's column about capitation and consumerism, I offered a couple of examples
of the many health systems that are taking advantage of their unique position as both a major employer and a healthcare provider to learn how they can better manage their own employee healthcare costs.
Kaiser long ago bought into that argument. But while his health system is trying to optimize operations for a value-based reimbursement model, and is working on interventions to limit admissions, the irony is that the health system is still largely paid under a fee-for-service methodology.
Academic medical centers, with their usual array of high-end specialty services, may continue to be relatively insulated from the shift toward value-based care, but Kaiser says that won't last forever, and Temple Health still faces a threat if it can't adapt its culture and ethos toward value.
"The other business we're in, as an AMC with high-end specialty care, is not quite as threatened. But I do worry about some of the efforts in the community where physicians are being incentivized in shared savings models to reduce their costs," Kaiser says. "I wonder whether people will be referred for specialty care as often as efforts focus on keeping costs at a minimum."
Kaiser can feel the tectonic shift in incentives coming, although not imminently.
Even now, there are a couple of huge exceptions to Temple Health's largely fee-for-service-based revenue mix. As a one-third owner of the 250,000 member Health Partners Plans, a nonprofit that offers Medicaid, Medicare, and Children's Health Insurance Program (CHIP) managed care plans, Temple and its co-owners, five other Philadelphia area hospitals and health systems, are in a unique position to influence a move toward capitation, Kaiser says.
He would like to do more to help speed the transition. As a provider, Temple Health also has or is in the process of negotiating capitated contracts with incentives based on quality and patient satisfaction with Cigna Healthspring in its market.
Problems with Consumerism
Consumerism is a big challenge going forward, says Kaiser. "People are looking for convenience."
For organizations that are academically focused, like Temple Health, that can be an issue, but not a critical one. Still, Kaiser is mindful of the inroads consumer-focused organizations like CVS Health and Walgreen's want to make in managing chronic disease.
To try to hold its own against such competition, and as a move toward integrating more of the care continuum under its roof, Temple was first to market among the academics in the Philadelphia area with four branded urgent care clinics. Kaiser says people recognize the Temple "T," but location is a major concern on how those facilities perform financially, and the health system is "challenged" in the urgent care market, he says.
Like many other providers, Temple is focusing on its own employees to learn lessons about the levers employers can use to help employees meet their healthcare needs most efficiently. It uses a company called Accolade to help employees manage their healthcare benefits and needs.
The service is necessary as employees begin to bear more of the first-dollar costs of the healthcare they consume. Kaiser says the tools not only improve patient experience, but that the company's health assistants—called in when employees are at risk or already suffering from chronic disease—intervene to help patients improve their risk profiles. Accolade's health assistants are rewarded and incented by whether they form relationships of trust and whether they actually help improve outcomes.
"That's what we reward them on," says Alan Spiro, MD, chief medical officer and chief health assistant at Accolade. "The minute you have a health assistant who communicates that it's important for that client to save money, trust is destroyed. Because when they're sick, people aren't worried about saving their company money."
Spiro says that approach will ultimately save money as a side effect of helping patients access the care they need, not the care they might think they need.
For example, he contends that loneliness is one of the top reasons people come to the emergency room.
"Many of these people's admissions are not related to any specific disease, they're related to being isolated," he says. "In aggregate, helping avoid those admissions will save a lot of money. We decrease readmission rates by around 43% in certain populations because we pay attention to social and psychological issues that go along with illness that are not well addressed in insurance or health delivery systems."
Prepare for Capitated Contracts
Kaiser is pleased with the health system's results from its relationship with Accolade. But for him, part of the effort that is underappreciated is the downstream lessons and insights Temple Health can use from its own employees in planning for how health assistants and navigators like those Accolade uses help disrupt and change utilization patterns.
"From my perspective, we need to be prepared for capitated contracts, and part of the challenge is to provide care in most cost-efficient manner," he says. "We're not the most appropriate setting for many of the episodes of care confronted in the capitated population, and there's no question that centrality of care has shifted from inpatient setting not only to outpatient, but also to the home. Our intent is to promote wellness while at the same time hopefully reducing costs, so in that sense, we realize the biggest cost is an inpatient admission."
In healthcare, there are two ways to decrease costs. You can either decrease the unit price of a service, or you can decrease the number of services. Unit price is being addressed in a variety of ways, like value pricing that pushes unit prices down, and the increasing use of physician extenders.
Spiro says the kind of work that will reduce the amount of expensive services includes health advisors, wearables, coaching, and any number of interventions indicated by the data it has accumulated on its clients. But it has to come holistically or it won't work.
"If we want to decrease the volume of services in the long term, the best way is to decrease unnecessary services and increase necessary ones," says Spiro.
Part of that effort, even with Temple Health's own employees, is helping people understand when they should more appropriately visit urgent care as opposed to the emergency room, for example.
"Part of this is an educational process and why we think working with Accolade has been particularly important," Kaiser says. "We're self-insured, so those costs go right to the bottom line. Accessing the right care is difficult even for people who work in healthcare."
Another benefit, says Kaiser, is the recognition that many employees of the health system as well as university employees don't use Temple Health.
"Many employees don't live in this area. Our network of primary care physicians is not necessarily where these people live, but it's been very helpful to have a source of guidance in making people aware they can get outstanding care within their own system."
Capitation is no longer a dirty word. It's an important component of moving healthcare reimbursement toward value. How can provider organizations get there?
Years ago, capitation became a dirty word.
It was a term used concurrently with the equally dirty acronym HMO, which got its reputation in the '90s from the perception that such organizations sacrificed medically necessary care on the altar of cutting healthcare costs, no matter the method. Undeniably, those practices included denying claims and care for members in a blunt attempt to save on healthcare expenditures, and earned HMOs their negative reputation.
Diane Holder
Maybe it wasn't the ideas of capitation and managed care that were poor, though, just the execution. In some parts of the country, such as California, capitation has never fallen out of favor. Furthermore, the tools that were available to manage care in the '90s were rudimentary compared to the modern data-crunching abilities of organizations that control the premium dollar. Now, with sharper insights from better use of claims and other data, capitation seems broadly possible again on more than a regional scale.
At its heart, capitation is the opposite of fee-for-service, in that it incents economically rational behavior that considers cost as an important part of the care equation. As such, capitation is an important component of moving healthcare reimbursement toward value, say many experts. Access to data about populations, then, will be key to reaching a "fair" capitation rate.
If some form of capitation is the endpoint of healthcare reimbursement transformation, as the HealthLeaders Media Intelligence Report on "Payer-Provider Strategies: New Rules for Facing Risk Together" suggests, how can providers move incrementally toward preparation for success in that landscape without upsetting their finances to such a degree that the organization itself and its many funding needs are compromised? Incremental movement seems necessary, as healthcare providers must smooth the transition between two models that are economically diametrically opposed.
Diane Holder, CEO of UPMC Health Plan in Pittsburgh, served as lead advisor for our payer-provider research report. Her organization receives more than $5.5 billion a year in total capitated dollars across employer payment, Medicare, and Medicaid. "The industry is not flipping overnight from fee-for-service to capitation en masse," she said in the report. "That just isn't going to happen. What people are struggling with is the glide path in moving from volume to value."
So how can consumerism and capitation work together?
Deductibles are getting ever higher for people covered by commercial plans. All healthcare consumers are limited by what's available in their HSA, if they have one, and beyond that by the cash in their bank accounts to pay their deductibles and coinsurance. That puts pressure on providers to compete on price, at least in many areas of healthcare that are elective.
But it doesn't put much pressure on the upper reaches of claims—that is, those expensive services that most often occur once the deductible is met. Consumers aren't doing much shopping in those areas. That's where better care management, better transitions, better data, and, yes, capitation, can make a big difference on costs.
Smart healthcare organizations are learning these lessons from the employer point of view.
Kimberly Boynton, president and CEO of Crouse Hospital in Syracuse, NY, told me prior to the HealthLeaders Media CEO Exchange this fall that this area is where hospitals and health systems are uniquely positioned to innovate. On one hand, hospitals and health systems are providers of healthcare. As some of the largest employers providing full medical benefits, however, they're also consumers. Crouse is investing in wellness by making sure each employee has a primary care physician, and that they're getting well visits, diagnostic testing, and placement into disease management programs where appropriate.
Kimberly Boynton
"We're starting [these] with our own employees because they will pay off in the long term," Boynton says. "We've hired additional people, we've made IT investments, and we've hired coaches for disease management that we're paying for that we didn't in the past. Our plan is we start with them and get together a program that we can take to other employers."
While not a form of capitation, the injection of high-deductible health plans to the mainstream offers a lot of lessons on what value will look like in healthcare, as well as the kinds of programs needed to limit healthcare cost increases as near as possible to the actual rate of inflation.
As has always been the case, providers will struggle to get a piece of that premium dollar. But under capitation, instead of counting on ever-rising prices for units of service, hospitals, health systems and physician groups will have to learn how to keep patients healthier, and thus in lower-cost settings, to keep a greater portion of that dollar. Who has control of how that dollar is divided is still obviously a huge issue, but with price and quality transparency, that can be worked out. Some health systems are turning to technological partners to get smarter about the changing dynamics, and to help bridge the transparency gaps between employer, patient, and provider.
"We have some large provider systems as customers," Kristin Torres Mowat, vice president of strategic alliances and data operations at Castlight Health, told me in an interview. Castlight helps self-insured employers manage healthcare spending and benefits administration through a variety of technological tools. "These health systems are taking an expansive view of their changing world and participating in these programs to give them a competitive advantage in their markets and even reach beyond if they are already value-based."
Will experimenting with your own employees on capitation and value-based healthcare actually provide a competitive advantage? It's debatable, especially as the competition shifts from other hospitals or health systems to a variety of competitors, including national drugstore chains, supersized payers, and venture capital-based startups. But it will be a clear competitive disadvantage not to try.
Health plans are bringing back capitation, and providers who are not ready could be bypassed.
This article first appeared in the November 2015 issue of HealthLeaders magazine.
Anthem CEO Joe Swedish announced to an April luncheon of the Nashville Healthcare Council that total cost of care contracting is one of three critical concepts the giant insurer is trying to promote in 2015 and beyond. The others are related—provider collaboration and consumer focus—but all three goals tie into the concept of risk-based reimbursement.
The idea is that reimbursement contracting based on total cost of care metrics incents providers to manage costs and quality in ways they haven't had to since the last time they operated under a capitated contract, if they ever have. Capitation puts hospitals and health systems on the hook to codevelop new, more accountable systems of care with other healthcare providers, whether they be other hospitals, physicians, postacute providers such as skilled nursing or rehab, or other sites of care. At its most basic, capitation means a single per member, per month payment for managing all of a population's healthcare needs—and the costs associated with those needs.
Few seemed surprised at Swedish's statement, even though with the exception of parts of California and other geographically restricted areas, capitation had been largely abandoned by insurers since the mid to late '90s. Yet today, they are increasingly using it as a major tool to help slow the rise in the cost of healthcare. One of capitation's major modern success stories is senior-focused CareMore Health System in Southern California that started as a physician practice. It used total cost of care contracting to expand into a 26-clinic company with its own integrated health plan before being acquired by Anthem in 2011.
It's back
That capitation is back, and that largely, hospitals and health systems are accepting of the idea that some form of total cost of care contracting is coming to them, is a recognition that putting providers at risk broadly for the quality and efficiency of their care is now a fait accompli.
Sachin H. Jain
Models are payer-specific, but broadly, total cost of care contracting is aimed at refocusing members of the partnership on prevention, coordination of care, health maintenance and avoidance of complications, and reducing overutilization of modalities such as imaging and unnecessary hospitalizations or surgeries.
If the vision can be achieved, it will depend on partnerships with providers—in some cases, very close partnerships.
CareMore is one successful such vision. Now a subsidiary of Anthem, it started out as an elder-focused physician practice in Southern California that, over time, morphed into a health plan and delivery system serving seniors based on care protocols initially piloted at the physician practice, says Sachin H. Jain, MD, the division's chief medical officer.
"This is an organization that can model the future of healthcare," says Jain, who first heard of CareMore when he was with the Centers for Medicare & Medicaid Services, helping launch the Center for Medicare & Medicaid Innovation. Jain, who served as a senior advisor to the administrator of CMS during the first Obama administration, has also been a special assistant to the national coordinator at the Office of the National Coordinator for Health Information Technology, chief medical information and innovation officer at Merck, and practicing physician at the VA Boston Healthcare System prior to joining CareMore in January.
So given his background, what's he doing at a small, albeit innovative, California health plan for seniors? One reason: There was plenty of buzz about CareMore at CMS while he was there, Jain says.
"They built programs with breathtaking clinical outcomes and cost results," he says. "Four or five years later when I got a phone call asking if I would consider coming out to California, I said heck no … I'm an East Coast guy. But when a mutual friend said he was calling about CareMore, I told him, 'That's a different story.' "
Unique, but becoming less so
Jain calls CareMore unique in healthcare, which he says is what it needs in a time of transition.
"Here, we have the freedom to think broadly not only about healthcare delivery, but also the payment models and organizational structure to enable that," he says. "My passions, in order, are clinical medicine, policy, and business and management, and very few organizations allow you to do all three simultaneously and manage the intersection of those things with equal vigor."
He says focusing on seniors was a good starting point because that's where the majority of healthcare's cost is. As a site of integrated delivery and payment, he says organizations like CareMore are geared toward the prevention of catastrophic outcomes that many seniors are forced to deal with because a broken healthcare system doesn't help them with health—it focuses on procedures. For example, payers are funding a large portion of dialysis services because so little was done when patients were showing signs of hypertension or diabetes.
"There's a huge gap in people's understanding the interconnectedness of care..."
"How do we prevent them from getting to that place where they ever need dialysis?" he says.
"That's exciting. And then, how to expand these principles to other populations."
CareMore spreads those principles by partnering with other organizations and demonstrating the scalability of its basic structure, which hinges on a prevention benefit for patients that includes not only extended office hours, wellness programs, and patient monitoring, but also educating patients about a continuum that depends on interchange of information and putting them in participatory programs to help improve their health preconditions—hopefully preventing interventions that are more invasive and expensive.
"There's a huge gap in people's understanding the interconnectedness of care. Effective healthcare delivery is not the individual pieces; it's the sum of the parts," Jain says. "Our patients understand they're in a system of care, so, for example, if they are hospitalized outside our continuum, we repatriate patients to one of our hospitals; our settings. It's the system that produces world-class outcomes, not the individual parts of it."
CareMore's clinical model, in its original form, divides its elderly patients into two groups: the frail and chronically ill, and the nonfrail. The key principles of success under this model require that integration and coordination of care for patients and sites of care is not voluntary—managing complexity requires constant knowledge of the condition and resources must be available to adequately intervene.
Adherence to those principles make it possible to take a model developed in Southern California for the frail elderly and adapt and modify it to serve Medicaid patients age 14 and older in Memphis, says Jain, as a new CareMore-led Medicaid program in partnership with fellow Anthem subsidiary Amerigroup being implemented there is proving, he says. In Memphis, the company has taken a population that many primary care physicians don't want. It has expanded hours of access and implemented close monitoring with patients, and provides assistance with things as seemingly mundane as patient transport issues. Of course those things cost money, and paying for them is nearly impossible with fee-for-service reimbursement, but for a capitated population, such investments pay off handsomely from both health and financial perspectives, Jain says.
"We're a delivery system first, and we're a model of paying for delivery second, which I frankly think is how care should be delivered," says Jain. "Most clinicians who come here, after having practiced in other environments, agree on that. And it's quite refreshing for people looking at it from the outside."
Other adaptations
Memphis is not CareMore's only foray outside its California beginnings. One way of adapting it for other geographies is through CareMore Inside, most visible in a new partnership with Emory Healthcare in Atlanta.
"Emory, a renowned academic medical center, is now building CareMore care centers, hiring CareMore-type clinicians to deliver the extensivist model of care and our chronic disease management programs regardless of the payer," Jain says.
None of this would be achievable under other forms of reimbursement, he says. Even the equations underpinning ACOs break down if one can't measure the cost of certain interventions and bill for it, he says. The CareMore model is not burdened with such strictures.
"We have a saying at CareMore: Capitation is freedom," says Jain. "It's true. In models like ours that pay for transportation or air conditioners, there's no payment code associated with those things in fee-for-service. We're launching programs that would be very difficult to launch under any other model. In our environment, where we're both the delivery system and the payer, it works."
Steve Hamman
One program he says would otherwise be impossible is a diabetes prevention program benefit for members.
"In the senior population, progression is preventable for more than half of patients, yet we don't have diabetes prevention in practice in most of the country, with a few exceptions," Jain says. Yet such programs are a bedrock of making a model like CareMore's work.
"We've got dietitians at the care centers and we stream at-risk patients into a program. We started talking about it in March, and in June, we launched. That's the beauty of capitation—the total cost of care view of it."
Growing importance
CareMore is only one example where total cost of care contracting is making quick headway. Steve Hamman, as senior vice president of enterprise network solutions at Health Care Service Corporation, the licenser of Blue Cross programs in five states, is charged with coordinating and implementing the operational aspects and ongoing operations of total cost of care agreements in some of its markets.
He calls total cost of care contracting "absolutely a core component of what we do."
Such contracting has a long history in one of HCSC's markets in Illinois, with about 100,000 members and 75 different risk-bearing entities that agree to accept professional and outpatient diagnostic risk in the form of capitation. Hamman and his team are charged with tailoring such programs for the variety of market types served by the five health plans under HCSC's banner in Illinois, Oklahoma, Montana, New Mexico, and Texas.
He says total cost of care contracting is gaining traction because of three primary components in its Blue Advantage program in Illinois: demonstrably higher quality compared with HCSC's broad PPO, often even with the same providers; member satisfaction that is at least as good as the PPO product; and costs that are lower by 26% per member, per month.
"Those are results. Not just concepts," he says. "When you put the right incentives in place, you get the right outcomes."
He focuses on the fact that member satisfaction is at least as good in the capitated group as it is with those in the PPO, which he says is counterintuitive, because the capitated plan limits patient choice.
"When you put the right incentives in place, you get the right outcomes."
For patients in the total cost of care group, all care is managed by the primary care physician entity they choose. The insurer has delegated 100% of case and utilization management to that physician.
"So it lends itself to engagement from physicians, one of the main drivers of higher patient satisfaction," he says.
The provider engagement models using their PPO benefit design are better because of things they've learned with the capitated plan, says Hamman. That means HCSC can take components of what works well and apply those attributes to the less restrictive PPO benefit design to better manage its overall cost and improve the patient experience.
"One premise of using total cost of care is using it as a baseline on which we can then structure the new care models," he says.
For example, once populations are identified and attributed in an ACO or patient-centered medical home structure, HCSC can use that denominator of patients to measure provider performance. Calculating the risk-adjusted total cost of care and quality performance measures of that provider entity against a baseline over time forms the foundation from which incentives are measured. That allows the team to create a control group using the same methodology as a means to measure and refine the overall care model effectiveness.
Implementing modern capitated contracts—given a checkered history—means learning lessons from what didn't work in the 1990s, Hamman says.
"Too many HMOs cut the capitation check back then and just hoped everything went well," he says. "Not having the appropriate incentives in place most likely led to the perception of withheld care or bad patient satisfaction."
Much of the failure of capitation back then stemmed from a lack of transparency around the cost of care, he says. HCSC has learned that lesson, he insists.
"Now, we provide them with not only the data but also help in translating that data into actionable information and the tools they need to succeed in these models."
It's one thing to identify the patient population for which providers are accountable, but it's at least as important to help providers understand the interventions they need to make, says Hamman. That means providing them with analytics, care management techniques, and outreach to the highest-risk patients.
To help ensure success for both sides under capitation, HCSC takes on the role of provider education, Hamman says, adding that the biggest impact of the cost of care is and will remain the physician's pen. Where they refer and, more important, understanding the cost and quality impact of those referrals is at least as much the insurer's responsibility as the provider's. Radiology, lab, and other commodity-type services like colonoscopy can have a huge impact on the cost of care, Hamman says.
In most cases, they have had few problems with physicians changing where they refer based on the information on cost and quality provided by HCSC.
"That's been very encouraging," he says, especially given the aggressive time frame HCSC is pursuing in incorporating total cost of care contracting as a bigger piece of its overall book of business.
Whether it's the employer base or government programs like managed Medicaid or Medicare Advantage programs, there's very little tolerance for the trajectory healthcare costs are on today, he says.
"We need to act fairly rapidly in looking to engage with providers who are willing to reconsider how healthcare is delivered."
There will be winners and losers, Hamman says.
On one end are those who are trying to hang on to the fee-for-service infrastructure to retain as much of the revenues as they can under the old model, while some are very eager and understand the necessity to change.
"Those are who we want in our core network," he says.
If your healthcare organization is weak on antibiotics stewardship, it's not meeting its most basic goal: Do no harm.
Antibiotic resistance is everyone's problem, and yet it's no one's.
It's impossible to tell with any degree of accuracy how any one physician's prescription activity is fouling the effectiveness of critical lifesaving drugs or contributing to the rapid development of antibiotic-resistant superbugs.
But on a grand scale, the problem of antibiotics overuse is plain: It's causing unnecessary suffering and death. For healing organizations then, it seems antibiotics stewardship should be a top priority for those in the c-suite who are in a position to do something about it.
Too frequently isn't.
"Frankly, this conversation is invisible in most corporate suites, but it's very important," says Cliff Deveny, MD, senior vice president of physician services and clinical integration at Englewood, Colorado-based Catholic Health Initiatives, which operates health systems in 19 states.
Deveny was speaking at theABX Crossroads national symposium earlier this month in Nashville, which I attended. The conference was aimed at exploring the clinical, financial, and operational challenges facing healthcare providers in the "post-antibiotic era," and sought to define practical strategies to help clinicians elevate this issue to the forefront in the c-suite.
Deveny says that thanks to the global nature of the antibiotics resistance problem, it can be easy to push it to the back burner at individual organizations. It's up to pharmacists, hospitalists, infection control specialists, and healthcare administrators to educate boards and senior executives to the importance of addressing the problem on the organizational level.
This is not a problem to be blamed exclusively on the healthcare industry. To be sure, the livestock industry, a terrible abuser of antibiotics, is another culprit of the rapid development of antibiotic resistance. A paper published just this week in the journal Pediatrics says the livestock industry's use of antibiotics is affecting doctors' ability to treat life-threatening illnesses in children.
Still, hospitals and health systems are prime examples of an industry that's not doing enough.
Powerful Stories
"It's critical for you all to have the message, the examples, and the stories of why this is so important," Deveny told a roomful of about 200 attendees from across the country.
The data is powerful. The same Pediatrics paper says that more than two million Americans develop antibiotic resistant infections each year and more than 23,000 die from them. The results are harrowing. They're chronicled in the individual stories of pain, loss and even death that result from the superbugs that have developed much more quickly than they should due to antibiotics overuse.
Deveny mentioned Daniel Fells, once a starting tight end for the New York Giants, now likely never to play again thanks to a deadly MRSA infection he got from a cortisone shot. In fact, he's lucky to be alive. Here's another one about former Tampa Bay Buccaneers and New York Giants kicker Lawrence Tynes.
Yes, the investments in education and clinical standards to combat antibiotics overuse can be expensive and the return on those investments can be hard to impossible to quantify. But if antibiotic resistance is to become less of an issue, they must be made.
And for organizations that are busily trying to shift and mold incentives toward the idea of improving the health of entire populations, such investments are table stakes. You can't say you're improving the health of your community if you're not serious about attacking antibiotic resistance organizationally.
If you need any more convincing of how much suffering antibiotic resistance causes, look no further than here. Remember, these are the survivors.
A Cruel Outcome
Here's a personal story of one of my good friends from college who isn't. Albert is not his real name, but I'll use it here. Albert befriended me the first day I showed up at my freshman residence hall in college. He brought me home once or twice when he knew I was going to be alone for the weekend. I met his parents, his sister. I was a groomsman in his wedding. We kept in touch over the years. He called me this June to catch up and told me that after he experienced headaches and vision problems, his doctors discovered a mass in his brain.
They found out it was malignant after the surgery. But the cancer didn't kill him. Albert died this summer due to a preventable surgical site infection. He's a statistic now, but less than six months ago, he was a successful 45-year-old electrical engineer, with a wife and two kids to whom he was devoted.
Everyone understands that major brain surgery is highly risky. But the initial surgery was successful, which made what happened next especially cruel. I spoke to Albert the day following his first surgery. He was himself, he was feeling well, and he had just eaten a hamburger. He got to go home the next day.
The prognosis for him, at least in the short term, was excellent. Within a few days, however, he was back in the hospital with an abscess—an infection at the surgical site. He lasted two more days following emergency surgery to address that abscess. Then he was gone.
Granted, there's no guarantee my friend wouldn't have died eventually from the cancer. But we will never know. What we do know is that he certainly died sooner, and in more pain, than he would have had he simply elected not to have the surgery. Is that a choice people should have to make in 2015? A roll of the dice on whether to suffer with operable brain cancer rather than subject yourself to the not unlikely chance that you will contract a deadly infection from a surgery meant to heal?
If you're running a hospital or health system, your challenges are real and significant. Healthcare is being disrupted on all levels, and your top goal is keeping your organization healthy financially and strategizing a way forward to ensure its continued existence. You can't help the community if you can't keep your doors open.
All that makes it easier to shift this problem to the back burner and pay more attention to problems and challenges that may directly affect your health system's revenue, yet perhaps nothing else is such a chronic public health issue, and potentially involves your organization so directly.
So let's just state this plainly. If you're not paying attention to antibiotic stewardship, and actually doing something about it clinically, your promises that your health system is committed to improving the health of the community ring hollow.
Senior executives frequently tout improving the health of the community as one of their highest and most sacred goals—in fact the reason for their organization's existence. Yet evidence is overwhelming that overuse of antibiotics by physicians may be among the top threats to public health now and into the future.
And hospitals and health systems aren't doing enough about it.
Hospitals, as they develop closer partnerships with post-acute care providers, are positioned to make key strides in antibiotic stewardship, says Kavita Trivedi MD, a consultant and former adjunct clinical professor of medicine at Stanford University School of Medicine.
"Focus on long-term care settings," she says. "It's an egregious situation happening in many nursing homes. On any one day, up to 8% of patients will be on antibiotics and patients have a 50% chance of being on them during a year."
She relates an example of a nursing home she recently worked with at which 104 patients were being treated with antibiotics for urinary tract infections even though only 8% of them met the clinical criteria for prescribing such drugs. That could be changed if nurses trained on antibiotic appropriateness were frequently monitoring the use of antibiotics at partner nursing homes, she adds.
"We are all at risk," Deveny says. "New levels of urgency, discipline, and rigor are required. Do we have the same ability as the bugs to adapt based on our environment?"
Unlike superbugs, healthcare is resistant to change.
"Clinicians are all very comfortable within our own silos and are well-intentioned, but we don't communicate and work together very well," he says. "As a physician, I was trained not to be accountable. If I screw up, I bring you back and I charge you again. How screwed up is that?"
You can access all the material from the speakers at the conference right here. It's worth your time, and your patients' health, to spend a little time on what they have to say about strategies to put to work in your organization right now.
"We're putting more and more people in danger and increasing costs," says Deveny. "Our promise to take care of you and not let you down is starting to fail."
Leaders must address organizational deficiencies before 2% of Medicare payments will be at risk in 2017.
This article appears in the October 2015 issue of HealthLeaders magazine.
Like it or not, HCAHPS scores are about to get a lot more attention from hospital and health system senior leadership.
It's not that they have ignored the scores in the past. Results from the Hospital Consumer Assessment of Healthcare Providers and Systems survey have been publicly reported since 2008, so hospitals have had plenty of time and some incentive to address their current and future impact on their reputation and on reimbursement and, more holistically, to use them to try to deliver a better customer experience to their patients.
The problem is one of priorities. Some leaders have placed HCAHPS improvement initiatives lower on their list, given that penalties for poor performance have ratcheted up slowly over time.
Crunch time
In 2015, time is essentially up. In fact, HCAHPS scores will determine up to 2% of a hospital or health system's Medicare payments by 2017, and it's already to 1.5% in 2015. That's a lot of potential money. So improving the patient experience is getting plenty of attention as time grows ever shorter.
"It doesn't make sense to leave money on the table that we could be investing back in patient care because we're not achieving the scores we could be achieving," says Lauraine Szekely, senior vice president of patient care services and chief nursing officer at Northern Westchester Hospital in Mount Kisco, New York. Northern Westchester has achieved the highest rating from CMS (five stars) for patient satisfaction, she notes. "The financial part of this is not our primary mission but it's certainly important."
The survey has been pilloried since its inception for what it is not. Results from patient responses to its 27 questions don't deliver a measure of quality, and were never meant to. It's also not comprehensive, and many criticize that the survey twists motivations among healthcare providers so that they "teach to the test." Its focus on the word always regarding a patient's interactions with staff is a continuing area of disagreement.
Many of these challenges can lead to cynicism about the measures, and to attempts to game the system. But regardless of HCAHPS' failings, it delivers a piece of information that patients may use to decide where to receive care; so, for that reason alone, how a hospital does on it is an increasingly important and direct factor in its level of reimbursement. Perhaps the best way to describe HCAHPS is that it measures a customer's satisfaction—and as such, it's a valuable, if sometimes annoyingly incomplete, measure of a service attribute that most agree healthcare has largely lacked historically.
Many organizations have prepared for the survey's impact by engaging their staff in initiatives designed specifically to improve areas the survey measures. Others have taken an approach that team-based care—where specific interactions are embedded in team-based training—is the best approach.
Communication and real-time intervention
Communication around a patient's plan of care, developed, when possible, before admission, has helped elevate HCAHPS performance over time at Northern Westchester, says Szekely.
The organization has spent a lot of time and effort on process redesign and on creating care teams responsible for upholding those processes once the redesign is finished, she says. Part of that accountability stems from color-coding progress on patient satisfaction goals. Red, yellow, or green color-coding helps with continuous improvement around goals and national averages. "We break HCAHPS scores down by unit, so there are overall and unit goals, color-coded for ease of navigation," she says.
Another philosophy that has helped improve patient satisfaction is the organization's shared governance management philosophy. Management and staff work together to cascade goals down to the unit level, which means leaders are working with frontline staff on process redesign teams, Szekely says. Process redesign is informed by data and patient focus groups to determine where the current process is breaking down.
"And once a process is designed, the redesign team turns into a process team," she says. That means the same people who designed a process are responsible for maintenance of and adherence to it.
Beyond that, she says, the staff and leadership have both adopted the idea that they should spend lots of time "proactively rounding, asking patients what they need from us," she says. "We round while we're doing everything— while administering medication, in interdisciplinary huddles, with rehab staff, nursing, case management, nutrition, pharmacy—and the hospitalists spend time huddling and looking at the plan of care and discharge plans, making sure we're progressing that plan of care."
Szekely says built into the service excellence program is real-time work to alleviate patient dissatisfaction before it's reflected in a poor survey response.
"We have the service recovery model posted right in the room, so if there's a problem that anyone on the staff can't immediately resolve, they can call the patient advocate who can get right on it. So instead of waiting for the patient to be discharged and maybe getting a letter from the patient, we can recover while the patient is with us so we can turn that around," she says.
Process redesign and patient feedback
Terrie Sterling is executive vice president and chief operating officer at Our Lady of the Lake Regional Medical Center, and has been working for more than 10 years on the patient experience at the 719-staffed-bed hospital in Baton Rouge, Louisiana.
A three-star organization as ranked by the HCAHPS rating system, Our Lady of the Lake has made dramatic improvement since 2008, when, as Sterling admits, the hospital ranked near the bottom. This was unexpected for the 2008 and 2010 recipient of the Performance Excellence Award from the Louisiana Quality Foundation and Hospital of the Year winner in both of those years as named by the Louisiana State Nurses Association.
Terrie Sterling
Sterling says service was one of the organization's core values well before HCAHPS and patient experience became buzzwords of the industry, but that they weren't tying that aspiration to enough rigor and discipline in performance. At the time, the concept of team-based healthcare was foreign, largely. She says that, with the help of Press-Ganey, the organization began to hardwire team-based tools like the daily huddle and other evidence-based principles that are proven to improve patient experience.
"We really had to work on being more deliberate that patient satisfaction is the main goal," says Sterling, whose clinical background is in nursing. "Clinicians don't get excited about an HCAHPS score."
Much of the work started under the theme of "everyday excellence with the next patient," Sterling says. "That resonated with staff: The responsibility is to the patient in front of you, and that's where our mission is real."
Beyond tying patient experience to the organization's Catholic mission of healing, the nuts and bolts of receiving good feedback from patients stems from what the patient expects to accomplish. That's not always easy to distinguish from what the staff wants the patient to accomplish, Sterling says, because the two can be quite different.
Members of the care teams on the units use what Sterling calls an evidence-based approach to rounding, which happens whenever they are in contact with a patient. Members of the team ask a standard set of questions. One of them is: Is there something I can help you with today? One patient told an environmental services worker that he hadn't spoken with his granddaughter since he'd been in the hospital and really wanted to. Even though it was outside his area of expertise, that employee took responsibility for making sure that request was accomplished that day.
"We started with the golden rule, and we transitioned to the platinum rule, which is to treat the person not the way we would want to be treated, but the way they want to be treated," Sterling says.
As for focusing on the test—the HCAHPS scores—Sterling says they try to stay away from that.
"We try really hard to make sure nothing around patient experience is seen as 'the next initiative,' " she says. "This is a normal evolutionary journey."
Plenty of effort has also gone into process redesign, incorporating feedback not only from the staff but also from patient comments from the surveys. Our Lady of the Lake, says Sterling, invested in transcribing those comments for review by the care teams. Those are incorporated into Lean competencies around processes on which the hospital has partnered with General Electric, a pioneer of process improvement. "Our team members were demonstrating the spirit of healing—that's our tagline—but we partnered with GE to help us around accountability for outcomes and where we had process gaps," she says.
Data shows that as the ER and OR patient experience goes, so goes the rest of the downstream scoring, says Sterling, so they focused on eliminating time spent in these areas that was not "value added."
After nine months of redesigning the ER experience, the improvement team has identified four "wraparound" processes that feed into the ER, and they're working on reengineering those. Critical to the whole effort, not surprisingly, has been listening to patient feedback and acting upon it, she says.
"The first thing we had to do is see the feedback—just the education with the staff and getting them to make a binder of surveys and read them was invaluable. Then we added huddle and other structural pieces. The scores mean one thing, but to hear the voice of that patient is really powerful."
Setting goals, rewarding performance
Sterling says another positive development has been to strengthen Our Lady of the Lake's service line strategy by putting a person in charge of experience design for a multitude of common elective procedures: "Hips, knees, open-heart surgeries, those things we do large numbers of—even the harm measures, as you reduce those you're satisfying the patient. All of those are tied to patient experience and families feeling confident their trust is well placed."
Huddles incorporate teamwork and esprit de corps through regularly updated documents that guide the huddles. The documents come out each Friday, says Sterling. Huddle meetings start with a prayer, discussion of the service standard, and then someone on the team is designated to relate a success story. Organizational birthdays are also included, because employee satisfaction is second only to patient satisfaction, she says.
"When we started that, a neuro-surgeon told me he thought it was just goofy, but when it came to his, he later told me he was surprised at how special it made him feel," she says.
Northern Westchester has taken employee satisfaction and the motivation it engenders a step farther. There are team goals and individual goals on patient satisfaction, and individual goals based on duties. Both are part of employees' incentive compensation. For example, there's a hospital goal and an individual goal for patient experience. Incentive compensation is based on those two scores.
"Everyone on the team, for example, in food service—the nursing and food director and lead dietitian—all have the same goals in their incentive comp," says Szekely. "The success of one is dependent on the success of another, which makes it a true team and which focuses team members on what's good for the patient, not the department."
Northern Westchester's electronic medical record makes clinical documentation almost all automated.
"We use that to do reminders and cues for the staff," Szekely says. "Healthcare is a very person-dependent process, so we want to make sure alerts and reminders and documentation flow easily and assist communication."
Each patient room has what Szekely calls patient access tablets, which are really iPads that give the patient access to clinical information in a patient-friendly format. The same device controls entertainment for the room, ensuring they'll use it. Also very helpful for responsiveness, she says, is a hands-free Vocera communication device issued to both patients and staff.
"This is not only for staff-to-staff but staff-to-patient communication. It goes directly to their nurse."
What's really important in high achievement with HCAHPS is a little investigative reporting as to why scores are where they are, Szekely explains. "You don't want to fix the wrong problem, so that's why we spend time talking to physicians, staff, and patients, and look closely at comments and complaints.
"We even interview patients at the beginning of their stay, which sets up what we're going to work on to make sure we're really designing around what the patient wants and not what the staff wants," she says.
"If process isn't enabling staff to deliver care amid all those obstacles, culture alone won't improve those HCAHPS scores."
A raft of new tools that rely on massive amounts of data are helping employers and their employees demystify the healthcare value equation. Even small employers and their employees are benefiting.
Employers are getting a lot smarter about healthcare. If you run a hospital, health system or physician group, chance are you already know this, especially if you have dealt directly with a large employer lately.
On a high level, big multinational companies have beensteering their employees to narrow networks or "centers of excellence" for a few years now. Such programs allow large companies to take advantage of their ability to drive volume in striking one-on-one deals with health systems. As part of these deals, such employers have invested in the resources to evaluate quality and processes of the best healthcare organizations.
But using data to make healthcare choices is no longer only for the biggest companies. Smaller companies are making greater inroads, too. They're getting help turning that data into strategy through vendors that have sprung up to address a glaring need among all employers to reduce healthcare spending.
The increasingly common alternative, say many, especially for small companies, is jettisoning employee health insurance entirely. By necessity, they're getting ever more sophisticated about helping their employees choose wisely, saving money for both the employer and the employee. They're also using these vendors to make wise decisions at the employer level.
Crescent Parts and Equipment, a 115-employee heating and air conditioning wholesale company based in St. Louis, with 15 locations in Missouri and Illinois, is one small company that is using online tools tailored to patient data and shopping incentives, among other strategies, to help employees to be better healthcare shoppers.
Mark Lammert, Crescent's chief financial officer, says those tools are insufficient, though. Education, engagement, and personal advisors help complete the circle. "Whether they realize it or not, healthcare really has an unfair advantage over the employee and employer because we haven't had data or the tools to figure out what it means," he says.
Increasingly, they do now.Here's how the little guys are doing it:
1.Self Insurance
Self-insuring used to be for only the largest companies, but several factors are making it more possible for smaller companies to go this route. In the past decade, Crescent moved from a fully insured, $500 individual deductible plan to a self-insured $10,000 deductible plan with an accompanying health reimbursement arrangement and third party administrator.
Within the past 19 months, the company began incorporating a captive health insurance company used by several small employers called Wellth to cover claims higher than $40,000. Though United Healthcare acts as TPA for Crescent, the company self-insures the first $40,000 of a claim, with reinsurance from Wellth covering any claims beyond that level.
Accompanying that move was a move toward using a company called HooPayz to help employees with healthcare decision-making and billing issues.
"We've asked [employees] to take on more risk than previous years with higher deductibles," says Lammert. "We, as a company are also taking more risk, so it makes sense to give them the best tools to manage their own healthcare costs through a third party who can give them unbiased advice. Employees are flying blind otherwise."
Thanks to these transitions, Crescent has been able to hold premiums stable for the past five years, he says. And this year, the company will be able to offer 30% off regular employee premiums in return for getting an annual physical, a biometric screening, and participation in the company's wellness program.
2.Decision Support and Patient Advocacy
As employers and the tools their employees use to make healthcare decisions get more sophisticated, so must healthcare organizations get more sophisticated in attracting new business through better quality and lower costs versus their competitors.
And the scope of those competitors is widening. No longer do you compete just in your city or town. You may be competing statewide or even nationally, and you might not even know it. Even on Crescent's small scale, procedures have moved from where they would have been performed to less expensive sites of care.
Yet it's highly doubtful that any of the hospitals and health systems affected by its strategy knows why one lost volume and one gained. It's a fair assumption you're already losing, or gaining, critical business from such strategies.
HooPayz, the company that works with Crescent employees on decision-making through online tools and personal advisors, debuted only the first of this year, with one client. Now it has 25, with members in 36 states, so such services are clearly filling a critical need for small employers. It's far from the only company offering these services, which also include access to billing experts who can help patients navigate erroneous billing, which Lammert says account for a third to half of all bills his employees receive from healthcare providers.
"Employers are looking for a new lever that doesn't include continued cutting of benefits," says Susan Lang, the founder and CEO of HooPayz. "If you've narrowed the network, the formulary, set up your HSA, and you're self-funded, you're running out of levers. We're creating additional levers that are beneficial to employees and that are not another negative."
Crescent has paid about $5,800 for Hoopayz's online tools and advisers to be available to its employees for the full 2015 calendar year, and saved a little more than $64,000 since the beginning of this year, when counting both employer and employee savings, says Lammert. That's quite an ROI for a program in its infancy.
3.Location, Location, Location
Sometimes, big savings can be realized by something as simple as traveling to St. Louis for a procedure rather than having it done in the employee's hometown. One employee saved $7,000 by travelling less than 60 miles to St. Louis for his procedure.
"That saved him money and saved the company money," says Lammert.
Lang, who has done previous stints as a senior executive with both BJC Healthcare in St. Louis and Express Scripts, says hospitals should understand that companies like hers are having a big impact on influencing where care takes place.
"As long as there's a huge discrepancy [between] what we pay BJC in St. Louis versus a smaller hospital like St. Luke's [a 493-bed standalone nonprofit in the St. Louis suburb of Chesterfield] we will have work to do," says Lang, of HooPayz. "I don't see us getting to a collapse of pricing in medical services in my lifetime, but certainly there's big opportunity for the next decade."
Two top CEOs share their philosophies on fostering an environment of entrepreneurship at their organizations.
This article appears in the September 2015 issue of HealthLeaders magazine.
While healthcare innovation is alive and well in the United States on the clinical level, innovation in administration and the delivery system has been sorely lacking for decades, says Michael Dowling, president and CEO of the 19-hospital North Shore-LIJ Health System, which has an enviable track record of growth in its traditional acute care offerings, as well as a solid attempt at vertical integration through its owned insurance plan and multiple pre- and postacute care sites.
Over the past decade and a half or so of Dowling's leadership, the health system has grown to 54,000 employees with an operating budget of $7.8 billion, but growth doesn't necessarily reflect innovation, he says. In fact, growth to such a large size has a better chance of inhibiting innovation on the delivery side, which is why Dowling is so focused on making sure he fosters a work environment that encourages innovation and risk-taking.
Unlike deciding whether to acquire a physician practice, an insurance company, or a competitor hospital, a CEO can't develop an innovative culture with his or her signature. It's a softer skill, and the best an organization's top leader can hope to do, according to Dowling, is set the stage.