So far largely unseen and unfelt, the effects of making provider pricing data public are about to impact hospitals and health systems in a big way. I'm not going to lie to you—this is going to hurt.
The rise of services that attempt to compare prices in healthcare is hurtling toward disrupting your revenue cycle and your margin.
Are you ready?
It's an exceedingly difficult question for hospital and health system executives to answer for a couple of reasons. One is that most of them, at least based on my informal surveying, have seen little evidence of comparative shopping for healthcare services. They may get a phone call every once in a while from someone shopping for an MRI price or a hip replacement surgery, for example, but those are few and far between.
But I don't think you can gauge the momentum behind this trend by individual patient phone calls. Eventually, leaving quality out of the equation for a second, you'll be able to gauge it by seeing patient volumes going to competitors because your organization has higher prices, or vice-versa.
I predict that many healthcare senior leaders won't realize this search for transparency in the name of cutting healthcare costs is affecting them until it affects them radically. In that sense, to borrow a phrase from the Black Power movement of the 1960s, the revolution will not be televised.
Leaders are wary of its power, however, and they should be. Employers are demanding better transparency and the ability to compare prices among a wide variety of organizations, and they're putting big money behind that desire.
Betting on getting a slice of that big opportunity, plenty of startups, as well as established health plans, are ramping up their technology and their sophistication to help patients choose wisely based on price.
But how can you prepare for and react to something that's currently not affecting you? It's not as if there's a shortage of things to worry about as healthcare reform reaches toddlerhood.
During an impromptu discussion among CFOs at a HealthLeaders Media event I hosted a couple on a different topic, the panel members worried about these services to a strong degree, despite the fact that they haven't seen much impact from them—yet.
All agreed there will be ever more pressure on the organization's bottom line in the medium-term future.
Enter the Facilitators Castlight Health, a pure-play company that offers health information over the Internet to help people figure out their medical options, with much of the information aimed at lowering the veil on price and encouraging patients to choose lower-cost options, completed an initial public offering in March.
Despite the fact that the company had only $13 million in revenue (not profit) last year, the IPO valued the company at about $1.4 billion! This for a company that currently loses money on relatively paltry revenues. Growth prospects, many investors are saying with their precious investment capital, are sky-high.
Of course, we've seen this before with potentially disruptive technology companies. Many don't deliver on their promise. But Castlight is not alone. Other early-stage tech companies also have stratospheric valuations that may or may not ultimately be realized.
This is an underserved niche and smart investors think if a company can figure out how to peer through the opacity and complexity behind healthcare pricing, there's big money to be made.
Patients increasingly don't need much pushing to use these tools. At least for those insured by their employers, the share of their healthcare costs that is coming out of their own pocket is growing and will continue to grow, so they're as eager to lower their own costs as their employers are.
What Castlight is doing has the investment community extremely excited, perhaps irrationally so. But that one example shows how eager employers are to get a handle on one of their most variable and unpredictable cost vectors—healthcare spending.
Castlight says it has helped its corporate customers save as much as 10% a year by using its technology. And though its valuation seems crazy, its stock price has only dropped slightly since March when the shares debuted.
It is far from the only player in this game. There's also Change Healthcare, and Healthsparq, and others, and big insurers are experimenting with these technologies themselves, with an aim toward offering such tools to their customers as a value-add?that is, free.
What that means for the prospects of early-stage pure play companies is uncertain, but some comparative decision-making on healthcare based on cost seems here to stay.
Effects of Price Transparency
Other efforts, such as Medicare's recent data releases about hospital payments for certain services, are making headway in this area as well. Big corporations have signaled they are believers that this type of transparency works.
Lowe's, Wal-Mart, PepsiCo, and other large corporations already ship patients around the country to deliver them for procedures at specific organizations. The initiative is not solely based on price, but it's a big component.
There are ways to prepare, but in many cases, unless you already provide relatively high quality at a competitive price, the preparation may be painful. What hurts hospital leaders is that they don't necessarily know in detail how their offerings stack up against their competitors.
And competitors aren't just local anymore. They're national and in some cases, even international, which belies the old saying, "all healthcare is local." Hospital leaders owe it to their organization to look at some of these comparisons themselves, and understand how they stack up against the competition.
Some hospitals and health systems, finding they can't compete well under their current cost structure, will be forced to lower prices, and that will impact their ability to continue to fund services that already lose money, or curtail their activities on community benefit, or even lower their charity care, both activities which produce little, or even negative financial return for the organization.
Tough decisions will be required as hospitals and health systems with higher relative prices find they have to adjust to retain business.
Those adjustments, for some, will be extremely painful.
Inpatient care is still a bedrock of almost all health systems, but its role in the care continuum is changing dramatically.
This article appears in the May 2014 issue of HealthLeaders magazine.
Trying to envision the hospital of the future in the context of the changing healthcare landscape is a bit like trying to envision the future of the internal combustion engine in the automobile industry: They won't go away, but they'll be a smaller and smaller piece of the whole as time goes on.
The successful healthcare entity of the future might include one inpatient hospital or several, but that modality of care—the most expensive—is also likely to decline in importance to the whole as the dust settles from the vast array of changes healthcare reform brings with it.
In many respects, the movement away from the inpatient setting for many organizations is long underway. Many describe this shift almost as an investment diversification strategy: You don't want the majority of the income for your organization coming from a declining business line.
But what was once a diversification strategy has morphed into much more. As health systems seek to influence all sites of care for populations of patients, developing and integrating lower-cost sites of care is perhaps the most critical piece of creating a financially successful health system for the world of 10 years from now and beyond.
But what does this mean for the future of inpatient care? Many organizations are expanding quickly into the outpatient arena, managing and coordinating care among a variety of settings, and even considering developing a completely vertically integrated organization that includes a health plan. Others are anticipating that, with drastic changes in reimbursement, they may be better off actually cutting services to focus on those they provide most efficiently.
Of course, there's no universal template that will create the appropriate mix of services, access locations, and clinical modalities for all systems any more than there ever was. But positioning the organization for survival—let alone growth—is critical, and determining the proper place for inpatient investment is vital.
Strategic positioning
Most experts and senior leaders seem to agree that the inpatient setting will decline and outpatient care modalities, which are cheaper and more convenient for patients generally, will ascend. In order to provide healthcare sustainably well into the future, that has to happen, but it doesn't mean that transition will be easy on healthcare organizations.
"It's fair to say that in any large urban market, you're going to see significant shifts in bed days per thousand over the next five to 10 years," says Keith Alexander, CEO at 426-licensed-bed Memorial Hermann Memorial City Medical Center, one of 12 hospitals in the Houston-based Memorial Hermann system.
In fact, Alexander possesses data that projects the decline. Bed days per capita are already falling, even in a market—greater Houston—that adds the equivalent of the city of Detroit (700,000) to its population every 10 years. Over the past five years, the number of admissions per thousand in Houston has dropped to "well below 100 per thousand," Alexander says. "Our projections have that going down to low 80s over the next 10 years. That's a function of shifting more and more toward outpatient, and from CMS moving inpatients more to observation status, among other things. It's a phenomenon all over the country."
The recent oil and gas boom, which is driving Houston's population growth, is to some degree masking the declines in admits per thousand, Alexander says. That affords Memorial Hermann an opportunity that can't necessarily be duplicated everywhere—right-sizing its inpatient facilities not necessarily by downsizing them, but by growing its market share.
"Even if the overall total inpatient population is falling, we'd like to grow our market share relative to our peers," he says.
At least at Memorial Hermann, filling inpatient beds, ironically, depends on the success of the outpatient and population health strategy. Three years ago, system CEO Dan Wolterman and Memorial Hermann's board decided to dramatically change the organization's business strategy from a fee-for-service–based structure to one based on a fixed payment, or population health strategy. That kind of work takes time for a $4 billion health system with 20,000 employees in 145 locations in southeast Texas.
Alexander says that the private sector will lead the change and that the federal agencies—the Centers for Medicare & Medicaid Services and the U.S. Department of Health and Human Services—will follow.
"We're seeing that here in Houston as some of the large employers wanted a shift toward more of a fixed payment," says Alexander.
Instead of getting a 10% rate hike from their insurance company each year, such employers are joining ACO structures—a partnership involving health systems, physicians, and insurers or third-party administrators. Critically, such structures feature financial risk-taking from healthcare organizations. Employers reason that by participating in an ACO, they can cap their health insurance costs for the next two to three years.
"That's enormously appealing to a large employer," says Alexander.
John Haupert, president and CEO of 953-licensed-bed Grady Health System, the safety-net health system in Atlanta, says the same thing is going on in his market, but that the ways systems are approaching a changing business model are widely different even in the same market. For example, he mentions WellStar Health System, a Marietta, Ga.–based organization that includes five hospitals and more than 12,000 employees.
"There's a great example of that occurring here, in that WellStar Health is building a whole network of medical malls—multipurpose broad-based clinic-type places," he says. "Those are based on wellness, prevention, and primary care—dealing with the front end. And they're minimizing the investment they're making on the hospital side. These are beautiful, aesthetically pleasing medical malls—all so we can avoid needing that hospital bed. They're doing the best job in the local area here."
But Grady, in large part because it serves a population that consists of a larger share of uninsured patients and patients covered by Medicare or Medicaid, is molding the way it delivers care slightly differently. For example, Haupert says inpatient admissions are growing at Grady as people who previously had been uninsured obtain coverage through the health insurance exchanges. That means significant inpatient bed expansion into "shell space," but that requires no new inpatient construction. The bulk of investment, even at Grady, is going into partnerships that expand its presence outside the inpatient setting.
"We're building more primary care medical homes with help from the federally qualified health centers, but it's the same premise [as WellStar's strategy]: The more we can be out in the community, be preventive, and get in front of chronic disease, the better."
Playing the other side
Memorial Hermann's heavy investment in an outpatient-based effort is only a part of its strategic plan to control more of the continuum. It's actually purchased an insurance company, obtained a state license, and hired a former Cigna executive as CEO for that unit.
"We've had to purchase claims processing software and significant information systems," says Alexander, in order to effectively partner with private insurers such as Aetna and Blue Cross Blue Shield of Texas. Those partnerships help all entities better analyze and respond to real-time claims data so that they can more effectively intervene with patients and tailor their care. The ultimate goal being to obtain lower-cost and higher-quality outcomes.
"We can see utilization rates of members because of these systems, so our ACO can more effectively be positioned for fixed payment," he says.
It's growing quickly. The ACO launched in January 2012 with fewer than 40,000 lives. Now, it has more than 300,000, which makes it the fourth largest ACO in the country, Alexander says. Even so, "we're just starting to turn the ship toward fixed payment," he says. "A high majority of patients are still fee-for-service, but we're building and investing substantial sums in our internal infrastructure to manage a per-member, per-month premium."
Alexander says the turn toward fixed payment is slow but inexorable.
"Our measures of success or market share for the past 50 years have always been things like admissions or births or surgeries or ER visits, but our mind-set is shifting now. Over time, our number of covered lives will become our most commonly used measure of market share."
And Memorial Hermann's goals are nothing if not ambitious there. The current market share leader in admissions, at 25%–28% of the Houston market, wants the equivalent of that in covered lives. "Houston is about 6 million people so you can quickly translate that to about 1.5 million covered lives," Alexander says, but ultimately being successful at managing that many people means Memorial Hermann's focus will shift dramatically to keeping those patients out of its own hospitals.
Cutting services?
Among other things, it will mean that Memorial Hermann will likely have to consolidate tertiary services. So, for example, hypothetically speaking, rather than having five or six cardio programs spread among 12 hospitals, it may eventually consolidate to two or three. The same consolidation would apply to other specialist services like neonatal intensive care units, he says.
"Inpatient volumes may shrink, but the notion of consolidating them to a smaller number of centers with high volumes will maintain patient safety," he says. Where Alexander sees extraordinary growth will be in home health, and Memorial Hermann is well-positioned there. The organization is the current market leader in home health, but it controls only 4% of the 750-agency Houston market, which, like the home health industry in general, is very fragmented.
"Home health will be transformed more than anything over the next 10 years; we'll see dramatic M&A and venture capital will flood that space," he says, predicting rapid consolidation.
Home health is poised for growth because the best and often cheapest place to take care of chronic care patients is in the home, with telephonic case management technologies and iPad devices helping coordinate care, for a couple examples.
"The best place to care for people with chronic diseases—such as the obese, diabetic, or kidney patient—is at home," Alexander says.
Haupert agrees that hospitals and health systems will have to think about consolidating or even eliminating money-losing services.
"If the reimbursement is not there, hospitals will limit services to those that happen to be profitable. We had a discussion here in facing some governmental funding cuts that if they happened, we might cut mental health," he says. "It's a big cost and the reimbursement doesn't work. Ultimately, the cuts didn't come, and we were able to maintain a much needed service for the community."
As for care coordination, Grady isn't investing in coordination of care directly, but more often through partnerships.
"We've spent a lot of time building relationships with FQHCs to develop what we're calling a safety-net collaborative for care," he says, adding that Grady's care coordination model is built to cross traditional "silos" to help break them down and ensure that clinical staff understands that the responsibility to the patient's well-being doesn't end when he or she leaves a particular unit, or even when that patient may obtain healthcare outside Grady's system."
That model will manage the patients wherever they are within any modality of care. Grady is moving subspecialists into its outpatient clinics so that it becomes less likely such patients will require acute specialty care in the hospital. It's the beginning of engineering value-based healthcare and managing the health of populations.
Inpatient demand not dead
Palomar Health's president and CEO, Michael Covert, is still questioned about the wisdom of opening an entirely new hospital for the San Diego–based health system's 288-staffed-bed Escondido campus in 2012 despite concerns that inpatient care is on a downtrend.
The system has faced tough questions as the expected patient demand has so far failed to fully materialize, but Covert is convinced it was the right move. Besides, the system was trying to meet California's strict seismic standards for hospitals (compliance deadlines for which have since been extended).
"What we're seeing in the hospital today is continued emphasis on complex care as well as palliative and end-of-life care," Covert says. "That's still the big bulk of dollars spent on healthcare. Our success will hinge on our ability to manage that in the future, so I'm not envisioning less use of the hospital. I would define it as tighter, with lower length of stay, better throughput, and better management of care outside of the hospital."
Another big reason for building a new hospital was that the competing proposal, a renovation of the existing facility, would have meant removing a third of the hospital's staff from service during the renovation period. Also, the decision to build the new $956 million hospital was reached during San Diego County's economic boom years of the early to mid-2000s, when projected population growth was between 6% and 12% compared to the current 1%–2%.
Covert says volume will still grow due to population growth, just not as strongly as projected when the decision to build was made. The system initially experienced losses when the new facility opened in 2012, and some layoffs followed in 2013, but even amid high startup costs and disappointing volume projections, patient volume has grown.
Bond insurer Fitch affirmed Palomar Health's A+ bond rating in December 2013, citing as reasons to maintain the key rating the system's leading market share and management efforts to stabilize the system's finances following high expenses associated with the transition to the new facility. Despite the challenges since its conception, Covert says the new facility gave Palomar a one-shot opportunity to design with evidence-based principles in mind.
"We had been looking at evidence-based-design principles associated with The Pebble Project [a design collaborative of the Center for Health Design that includes healthcare organizations, architects, and other industry partners]. But no one had done this to the size and magnitude in one place. We created that fabled hospital."
The hospital incorporates solutions based on the latest evidence on the health effects of lighting, noise, and sustainability, Covert says, adding that it was done not only as a means to improve care but in anticipation of flexibility for the future.
"We knew this one shot would have to accommodate a lot of the citizens' needs for years to come," he says. "We'll see a lot of consolidation of services, greater connectivity among health systems, and some shrinking of services, yet the demands of communities will still be as great as they've been in the past."
Reprint HLR0514-4
This article appears in the May 2014 issue of HealthLeaders magazine.
Pursuing expensive inpatient volume in the traditional sense is a strategic dead end. Any new construction undertaken by hospitals and health systems should be based on adaptability, patient flow, and efficiency gains—not bed count.
I've spent a good deal of time the past several weeks interviewing senior healthcare leaders for my story in the May issue of HealthLeaders magazine about the hospital of the future. But in truth, that headline might be a bit of a tease.
As it turns out, the hospital of the future doesn't look much like a hospital at all. Instead, it's a cohesive amalgamation of plenty of outpatient modalities that represent growth in healthcare. Inpatient care, increasingly, represents stagnation and shrinkage, in the business sense.
In the past, a story about the hospital of the future has meant investigating healthcare organizations' access to capital, and their ability to fund expensive new patient bed towers with all-private rooms and top technologies, in a race to grab volume from competitors.
Under that operating scenario, the sky was the limit, in terms of what organizations were willing to do to attract volume.
That calculus has changed drastically.
In a recent survey on healthcare design trends conducted by Minneapolis-based Mortenson Construction, 95% of the healthcare organizations surveyed said most of the projects they are undertaking are predominantly ambulatory in nature.
"If, in theory, the [Patient Protection and Affordable Care Act] has now got 7 million people engaged in healthcare insurance who didn't have that previously, the inrush of patients will be outpatient-based," says Larry Arndt, general manager of healthcare in the company's Chicago offices. "What's not needed is bed space or heavy procedural space."
A Strategic Dead End The PPACA, employers, and commercial health plans have made clear that pursuing expensive inpatient volume in the traditional sense is a strategic dead end. That doesn't mean new patient towers won't go up, but it does mean their construction will be based on adaptability, patient flow, and efficiency gains, not bed count.
As few as five to seven years ago, says Arndt, a healthcare leadership team would take a capital improvement project through a planning and programming phase in which they followed a traditional approach. The team would utilize widely standardized metrics and program their building based on what they're doing now, with no consideration of the future, Arndt says.
By contrast, within the last five years, more leaders have been embracing the concept of lean operational improvement.
In order to be competitive in a limited amount of reimbursements, they have had to become more efficient. So instead of the traditional approach of programming new construction based on how the organization operates today, instead, it attempts to map out its current patient flows and discover how to become more efficient. Only then will the team look at how to build around that improved and more efficient model.
Indeed, a whopping 22% of respondents to Mortenson's February survey said they were "doing nothing" construction-related right now, and only 5% were planning for a traditional replacement hospital.
Instead, a majority said they are focusing new construction on building clinics that can feature just about any outpatient modality except surgery, Arndt says.
Healthcare Shifts to Outside They're focusing on combining dialysis, radiology and other treatments that can be provided in one location. And they're funneling more of their capital budget to items that are outside the realm of new construction, like home health and what Arndt calls e-home healthcare—in other words, technological solutions that help patients access their caregivers outside of any facility.
"Our customer understands that healthcare is moving more toward healthcare outside a facility," says Arndt. "That means more money is being invested in health information technology. Also, you see more constellation or satellite projects, for example, a small 15,000-20,000 square-foot clinic in a neighborhood. That allows patients to travel a shorter distance to a less congested environment, but yet allows connection to the bigger facility if needed."
Modular construction is a trend that Arndt sees developing quickly. It's in the process of designing a clinic for a client that will feature modular walls, to make it more flexible for the changes in care protocols that are assured, but that healthcare's leaders aren't sure how will ultimately affect their competitive offerings.
In one clinic, doctors want to be able to meet with patients in groups, for example. Modular walls mean physicians can occasionally meet with groups of patients instead of individually, or vice-versa. Their space is less limiting.
"The clinic can adapt," says Arndt.
Prefabricating buildings is also gaining steam in healthcare, he says.
"Money is being invested much more wisely than it has been in the past," he says. "For the design/construction field, we have to be more lean too."
Part of that lean attitude means offering customers 3-D modeling that starts with design partners, such as the people who will be staffing the building, to optimize work flow.
Adapting Takes Time "We can prefab things we couldn't years ago," he says. An example might be a bathroom "pod" that can be built offsite and installed on site. Full exam rooms can be prepared the same way, and models can be constructed to test care protocols with the team that will be working there.
Arndt's customers, he says, can be categorized two ways. Either they're thinking broadly about adapting to the future without knowing exactly what it's going to bring, or they're standing idly on the sideline until they understand better how the PPACA and other drastic changes in how healthcare is provided and paid for will affect their bottom lines.
Neither approach is necessarily better than the other, but waiting just puts off the action that needs to be taken. It can be a prudent approach, but even in healthcare, what works can change quickly. Designing, building, and adapting still takes time.
Hospital CEO has been the dream job for healthcare administrators for decades. But the top job increasingly isn't the top anymore, as organizations merge, holding companies morph into operating companies, and metrics for success change. Can you adapt?
Hospital CEO has been the dream job toward which thousands of healthcare administrators have strived for decades. Opportunities for advancement have usually been good, and jobs at the top have been relatively plentiful and relatively stable, for at least a couple of generations. The role of hospital CEO has always carried status—in many communities, the hospital CEO leads the area's largest employer, after all. You're considered a pillar of your community, and the remuneration hasn't been bad, either.
At that level, you get to run the show, make strategic decisions, and demonstrate your skills, often acquired over decades in lower levels of responsibility in that organization or others.
But the pipeline to the top might be drying up, or at least not running anywhere close to the capacity it did until recently. Part of that is because the top job increasingly isn't the top anymore, as smaller organizations continue the quickening pace toward consolidation with larger and larger partners. Even in organizations that have already been subsumed into larger organizations, the freedom to operate independently of the larger organization is rapidly being constrained as those holding companies morph into operating companies.
So now, all of those positive attributes of the hospital CEO job are in flux.
Are hospital CEOs becoming an endangered species?
I won't go so far as to claim that. But as hospitals become the last resort for healthcare organizations whose metrics of success hinge not on how many patients they can funnel through the system at x dollars per patient day, but in how efficiently those patients are cared for, the job of running the hospital isn't the top of the food chain anymore. That trend is only going to continue to play out, and talent may follow.
As the site of the most expensive and most interventionist care, hospitals are increasingly seen as last resort in the healthcare continuum: if other, less expensive interventions fail, the hospital is the default, but it's the last place an at-risk health system wants its patients to be.
That's not to say top leaders won't still be necessary to run the hospital side of the business. But as current and upcoming leaders aspire to the top hospital spot, they ought to be aware that skills needed in the future of healthcare administration are changing.
New performance and compensation metric
For many current hospital CEOs, the transition can be disheartening. Turnover is up,partly because of the increasing pace of experienced CEOs retiring because their future leadership role seems likely to be diminished. Instead of focusing on executive strategy, as a subset of a larger system, that CEO's most important function might be employee and physician relations and implementing a strategy thought up by someone else in a faraway office. Hospital CEOs face a narrower scope of control. Once, the CEO might have cut joint venture deals with influential physicians or provided the vision for the new patient tower, and his or her incentive compensation was determined by easily understood financial metrics. Any part of compensation based on outcomes defined quality as a patient satisfaction score.
Now, she might be less involved in strategy and facilities and her compensation—at least the incentive part of it—is based on patient outcome measures that are much more complex. Quality scores are derived much more granularly.
Compensation committees, at least the more innovative ones, are basing incentive compensation on SCIP measures, evidence-based medicine follow-through, and whether the organization he runs is exceeding the norm on those measures or not. For a health system CEO, as much as 40% of compensation may be based on these measures.
These metrics may be measured over several years, with compensation awarded as targets are reached in a so-called rolling bonus cycle. That approach may more effectively measure success in multiyear projects like an IT rollout or establishing a new medical group. Quality is getting easier to measure because it's being defined for executives by their payers. They can argue with doctors about what quality really is, but they're being measured by these metrics.
As for strategic contributions to the organization as a whole, individual hospital CEOs—whose titles are increasingly being morphed to "president" at many larger organizations—are also being measured on whether they've grown their organization's integrated solutions. Did they meet targets on physicians in their integrated environment? Did they execute the integration strategies the larger organization set forth? If they have a health plan, did they get a certain number of members? Did they meet certain targets for IT integration?
On the other hand, talent is talent, and those who can change with the times will still get great leadership opportunities. With all these big physician groups now becoming part of the whole in many regions, someone has to run them. An old saw says that running a practice is nothing like running a hospital and folks who can run one can't generally run the other very well. My prediction: this adage will become less and less true as both organizations' success depends on variables outside the profit-and-loss statement, and both types of organizations are increasingly evaluated on quality and customer service. And besides, isn't that what integration is at least partly about?
There will always be jobs in healthcare leadership. But the nature of the leadership required is changing dramatically. Titles may change, too, and the roles and expectations.
Tom Scully, a former administrator of the Centers for Medicare & Medicaid Services is no fan of the healthcare reform law, but has found one thing to like about it: "It draws incentives away from volume-based reimbursement to quality-based because the government has its money at risk."
Tom Scully,
Former CMS Administratior
Tom Scully is no cheerleader for the Patient Protection and Affordable Care Act.
"The problem with the ACA is they massively overfunded it," he says. "You can't create an entitlement that goes to 400% of the poverty level. That represents 60% of Americans."
Now a general partner at private equity firm Welsh, Carson, Anderson & Stowe, and general counsel at law firm Alston & Bird LLP, Scully says that oversubsidization is one reason the health insurance exchanges, despite the well-publicized problems with healthcare.gov, eventually exceeded expectations on enrollment.
The exchanges finished the open enrollment period with a total of around 8 million enrollees nationwide. But that's nothing compared to what will likely happen down the road, says the former administrator of the Centers for Medicare & Medicaid Services under President Bush from 2001–2003.
'An Enormous Problem Going Forward' "The ACA will be way more popular going forward and people will sign up in droves because of reasons I don't like: because they're oversubsidized," he says. "Once the smoke clears in another year, I think the thing will be way too big and will be an enormous problem for us going forward. But people like free stuff."
He's talking about whether the federal government will be able to afford the new entitlement. But another issue, whether enrollment will skyrocket and destabilize the employer-based healthcare system, is settled in his mind: It will.
What's particularly important about the transition he sees coming is the speed of it. The more the word gets out to the guy who's making $70,000 a year with a family of four that he can get 75% of his premium paid for in an exchange program, the more quickly the shift will happen, he says. Employers will begin dropping coverage for their workers much more dramatically.
"Employers will shift to that too, and I think they should," he says. "I've never been a fan of employer-based healthcare, but in the long run, as long as it happens gradually, it's not a bad thing."
He speaks with some experience based on what happened with the prescription drug program (Medicare Part D), enacted during his administration at CMS. "With the drug program, we knew a lot of employers would dump their retirees and they did."
But that involved retirees, not current workers—a big distinction, he says. He echoes the contention of many Republicans, as well as a report from the Congressional Budget Office, that details the powerful incentive for workers to hold on to the subsidy on health insurance provided for in the PPACA.
'Asking for Trouble' "The store manager at Target making $70,000 won't want a promotion to making $74,000 because he'll lose the subsidy," says Scully. That disincentive has been a huge talking point in the run up to the midterm elections, as both sides spin the CBO report to their advantage. Republicans say it means the PPACA will destroy jobs. In reality, it's more nuanced than that.
The CBO report suggests that because of the subsidies, net hours worked during the period from 2017 to 2024 will decline by 1.5% to 2%. That's not the same as saying 2% of jobs will be lost. Instead, because of the fact that the subsidies are so large, employees will choose to supply less labor.
"That means there's a big marginal lack of incentive to earn the next dollar for an awful lot of people," says Scully.
For part-time workers, for example, who receive supplemental nutrition assistance benefits (food stamps) and housing vouchers and a big healthcare subsidy, "your incentive to make the next dollar is very minor, sometimes zero," Scully says.
"I've had this debate with my Democratic colleagues and they say when you scale something like this up that has to happen, and that's true, but when you go up to 400% of the poverty level you're asking for trouble. People are going to like it and they'll probably vote for more, which is a little bit dangerous."
Especially when the stated reason for the PPACA was not only to provide better access for the previously uninsured, but to cut healthcare costs, and especially, the unsustainable inflation rate for healthcare services.
Not All Negative All that aside, Scully says one big positive from the law is that all of the enrollees through the health exchanges have ended up in private health plans, which have a widening variety of levers with which to drive down overutilization and improve care coordination and quality, while fee for service has the opposite effect.
The difference is simple, he says.
"If you give someone a checklist that says we'll pay you $3 for this, $4 for this and $5 for that, they'll check a lot of boxes," Scully says. "If you say we'll pay you 7 bucks for a good outcome, they'll do their best to do it for $6.95."
As chairman of a company that helps health plans and health systems better coordinate that care so that they can keep more of a bundled payment for good outcomes, Scully has done the due diligence. NaviHealth manages post-acute care for health plans and health systems, and has extensive experience in bundled payments through CMS's Bundled Payments for Care Improvement Initiative.
He thinks such "conveners" can take advantage of the similar incentives, through BPCI, that exist in Medicare Advantage, a program his administration introduced to CMS that's driven more coordinated care and less volume based care. Called Medicare Plus Choice when Scully was in charge, the Medicare Advantage share has gone from about 3% of the Medicare population to nearly 31%.
"A huge chunk of seniors has gone from government, price-fixed fee-for-service, which is a flaw in itself, to the capitated private plan model," he says.
Similarly, states have rapidly moved toward Medicaid managed care over the past decade or so.
"Ten years ago 20% of Medicaid recipients were in managed care programs and now it's like 76%," he says. "Almost every governor has realized that fee-for-service price setting Medicaid doesn't make any sense and they've contracted with Medicaid managed care plans. That resulted in a much better-run program and a lot more competition on price and quality—to the degree Medicaid can do that with their rates—among hospitals and doctors."
Similarly, the exchanges, whether they're run by the federal government or the states, enroll people in private health plans.
'Huge Progress'
"While there are many things I don't like about [the PP]ACA, what many people are missing is that the shift to private at-risk health plans has been huge progress. It draws incentives away from volume-based reimbursement to quality-based because the government has its money at risk. Medicaid and Medicare used to pay every doctor the same. When you do that you'll get competition for volume."
To a certain extent, Scully's 'talking his book,' in investor parlance, but as a former policymaker, he sees great promise in bundled payments, something that, because of all the moving parts, seemed close to impossible not so many years ago.
"The reality is that Medicare should do pre-acute bundling and they should do post-acute bundling and they should do acute bundling," he says. "Then they should bundle all three of them together, call it Medicare Advantage and get the hell out of the program."
This article appears in the May 2014 issue of HealthLeaders magazine.
Trying to envision the hospital of the future in the context of the changing healthcare landscape is a bit like trying to envision the future of the internal combustion engine in the automobile industry: They won't go away, but they'll be a smaller and smaller piece of the whole as time goes on.
The successful healthcare entity of the future might include one inpatient hospital or several, but that modality of care—the most expensive—is also likely to decline in importance to the whole as the dust settles from the vast array of changes healthcare reform brings with it.
In many respects, the movement away from the inpatient setting for many organizations is long underway. Many describe this shift almost as an investment diversification strategy: You don't want the majority of the income for your organization coming from a declining business line.
But what was once a diversification strategy has morphed into much more. As health systems seek to influence all sites of care for populations of patients, developing and integrating lower-cost sites of care is perhaps the most critical piece of creating a financially successful health system for the world of 10 years from now and beyond.
But what does this mean for the future of inpatient care? Many organizations are expanding quickly into the outpatient arena, managing and coordinating care among a variety of settings, and even considering developing a completely vertically integrated organization that includes a health plan. Others are anticipating that, with drastic changes in reimbursement, they may be better off actually cutting services to focus on those they provide most efficiently.
Of course, there's no universal template that will create the appropriate mix of services, access locations, and clinical modalities for all systems any more than there ever was. But positioning the organization for survival—let alone growth—is critical, and determining the proper place for inpatient investment is vital.
Strategic positioning
Most experts and senior leaders seem to agree that the inpatient setting will decline and outpatient care modalities, which are cheaper and more convenient for patients generally, will ascend. In order to provide healthcare sustainably well into the future, that has to happen, but it doesn't mean that transition will be easy on healthcare organizations.
"It's fair to say that in any large urban market, you're going to see significant shifts in bed days per thousand over the next five to 10 years," says Keith Alexander, CEO at 426-licensed-bed Memorial Hermann Memorial City Medical Center, one of 12 hospitals in the Houston-based Memorial Hermann system.
In fact, Alexander possesses data that projects the decline. Bed days per capita are already falling, even in a market—greater Houston—that adds the equivalent of the city of Detroit (700,000) to its population every 10 years. Over the past five years, the number of admissions per thousand in Houston has dropped to "well below 100 per thousand," Alexander says. "Our projections have that going down to low 80s over the next 10 years. That's a function of shifting more and more toward outpatient, and from CMS moving inpatients more to observation status, among other things. It's a phenomenon all over the country."
The recent oil and gas boom, which is driving Houston's population growth, is to some degree masking the declines in admits per thousand, Alexander says. That affords Memorial Hermann an opportunity that can't necessarily be duplicated everywhere—right-sizing its inpatient facilities not necessarily by downsizing them, but by growing its market share.
"Even if the overall total inpatient population is falling, we'd like to grow our market share relative to our peers," he says.
At least at Memorial Hermann, filling inpatient beds, ironically, depends on the success of the outpatient and population health strategy. Three years ago, system CEO Dan Wolterman and Memorial Hermann's board decided to dramatically change the organization's business strategy from a fee-for-service–based structure to one based on a fixed payment, or population health strategy. That kind of work takes time for a $4 billion health system with 20,000 employees in 145 locations in southeast Texas.
Alexander says that the private sector will lead the change and that the federal agencies—the Centers for Medicare & Medicaid Services and the U.S. Department of Health and Human Services—will follow.
"We're seeing that here in Houston as some of the large employers wanted a shift toward more of a fixed payment," says Alexander.
Instead of getting a 10% rate hike from their insurance company each year, such employers are joining ACO structures—a partnership involving health systems, physicians, and insurers or third-party administrators. Critically, such structures feature financial risk-taking from healthcare organizations. Employers reason that by participating in an ACO, they can cap their health insurance costs for the next two to three years.
"That's enormously appealing to a large employer," says Alexander.
John Haupert, president and CEO of 953-licensed-bed Grady Health System, the safety-net health system in Atlanta, says the same thing is going on in his market, but that the ways systems are approaching a changing business model are widely different even in the same market. For example, he mentions WellStar Health System, a Marietta, Ga.–based organization that includes five hospitals and more than 12,000 employees.
"There's a great example of that occurring here, in that WellStar Health is building a whole network of medical malls—multipurpose broad-based clinic-type places," he says. "Those are based on wellness, prevention, and primary care—dealing with the front end. And they're minimizing the investment they're making on the hospital side. These are beautiful, aesthetically pleasing medical malls—all so we can avoid needing that hospital bed. They're doing the best job in the local area here."
But Grady, in large part because it serves a population that consists of a larger share of uninsured patients and patients covered by Medicare or Medicaid, is molding the way it delivers care slightly differently. For example, Haupert says inpatient admissions are growing at Grady as people who previously had been uninsured obtain coverage through the health insurance exchanges. That means significant inpatient bed expansion into "shell space," but that requires no new inpatient construction. The bulk of investment, even at Grady, is going into partnerships that expand its presence outside the inpatient setting.
"We're building more primary care medical homes with help from the federally qualified health centers, but it's the same premise [as WellStar's strategy]: The more we can be out in the community, be preventive, and get in front of chronic disease, the better."
Playing the other side
Memorial Hermann's heavy investment in an outpatient-based effort is only a part of its strategic plan to control more of the continuum. It's actually purchased an insurance company, obtained a state license, and hired a former Cigna executive as CEO for that unit.
"We've had to purchase claims processing software and significant information systems," says Alexander, in order to effectively partner with private insurers such as Aetna and Blue Cross Blue Shield of Texas. Those partnerships help all entities better analyze and respond to real-time claims data so that they can more effectively intervene with patients and tailor their care. The ultimate goal being to obtain lower-cost and higher-quality outcomes.
"We can see utilization rates of members because of these systems, so our ACO can more effectively be positioned for fixed payment," he says.
It's growing quickly. The ACO launched in January 2012 with fewer than 40,000 lives. Now, it has more than 300,000, which makes it the fourth largest ACO in the country, Alexander says. Even so, "we're just starting to turn the ship toward fixed payment," he says. "A high majority of patients are still fee-for-service, but we're building and investing substantial sums in our internal infrastructure to manage a per-member, per-month premium."
Alexander says the turn toward fixed payment is slow but inexorable.
"Our measures of success or market share for the past 50 years have always been things like admissions or births or surgeries or ER visits, but our mind-set is shifting now. Over time, our number of covered lives will become our most commonly used measure of market share."
And Memorial Hermann's goals are nothing if not ambitious there. The current market share leader in admissions, at 25%–28% of the Houston market, wants the equivalent of that in covered lives. "Houston is about 6 million people so you can quickly translate that to about 1.5 million covered lives," Alexander says, but ultimately being successful at managing that many people means Memorial Hermann's focus will shift dramatically to keeping those patients out of its own hospitals.
Cutting services?
Among other things, it will mean that Memorial Hermann will likely have to consolidate tertiary services. So, for example, hypothetically speaking, rather than having five or six cardio programs spread among 12 hospitals, it may eventually consolidate to two or three. The same consolidation would apply to other specialist services like neonatal intensive care units, he says.
"Inpatient volumes may shrink, but the notion of consolidating them to a smaller number of centers with high volumes will maintain patient safety," he says. Where Alexander sees extraordinary growth will be in home health, and Memorial Hermann is well-positioned there. The organization is the current market leader in home health, but it controls only 4% of the 750-agency Houston market, which, like the home health industry in general, is very fragmented.
"Home health will be transformed more than anything over the next 10 years; we'll see dramatic M&A and venture capital will flood that space," he says, predicting rapid consolidation.
Home health is poised for growth because the best and often cheapest place to take care of chronic care patients is in the home, with telephonic case management technologies and iPad devices helping coordinate care, for a couple examples.
"The best place to care for people with chronic diseases—such as the obese, diabetic, or kidney patient—is at home," Alexander says.
Haupert agrees that hospitals and health systems will have to think about consolidating or even eliminating money-losing services.
"If the reimbursement is not there, hospitals will limit services to those that happen to be profitable. We had a discussion here in facing some governmental funding cuts that if they happened, we might cut mental health," he says. "It's a big cost and the reimbursement doesn't work. Ultimately, the cuts didn't come, and we were able to maintain a much needed service for the community."
As for care coordination, Grady isn't investing in coordination of care directly, but more often through partnerships.
"We've spent a lot of time building relationships with FQHCs to develop what we're calling a safety-net collaborative for care," he says, adding that Grady's care coordination model is built to cross traditional "silos" to help break them down and ensure that clinical staff understands that the responsibility to the patient's well-being doesn't end when he or she leaves a particular unit, or even when that patient may obtain healthcare outside Grady's system."
That model will manage the patients wherever they are within any modality of care. Grady is moving subspecialists into its outpatient clinics so that it becomes less likely such patients will require acute specialty care in the hospital. It's the beginning of engineering value-based healthcare and managing the health of populations.
Inpatient demand not dead
Palomar Health's president and CEO, Michael Covert, is still questioned about the wisdom of opening an entirely new hospital for the San Diego–based health system's 288-staffed-bed Escondido campus in 2012 despite concerns that inpatient care is on a downtrend.
The system has faced tough questions as the expected patient demand has so far failed to fully materialize, but Covert is convinced it was the right move. Besides, the system was trying to meet California's strict seismic standards for hospitals (compliance deadlines for which have since been extended).
"What we're seeing in the hospital today is continued emphasis on complex care as well as palliative and end-of-life care," Covert says. "That's still the big bulk of dollars spent on healthcare. Our success will hinge on our ability to manage that in the future, so I'm not envisioning less use of the hospital. I would define it as tighter, with lower length of stay, better throughput, and better management of care outside of the hospital."
Another big reason for building a new hospital was that the competing proposal, a renovation of the existing facility, would have meant removing a third of the hospital's staff from service during the renovation period. Also, the decision to build the new $956 million hospital was reached during San Diego County's economic boom years of the early to mid-2000s, when projected population growth was between 6% and 12% compared to the current 1%–2%.
Covert says volume will still grow due to population growth, just not as strongly as projected when the decision to build was made. The system initially experienced losses when the new facility opened in 2012, and some layoffs followed in 2013, but even amid high startup costs and disappointing volume projections, patient volume has grown.
Bond insurer Fitch affirmed Palomar Health's A+ bond rating in December 2013, citing as reasons to maintain the key rating the system's leading market share and management efforts to stabilize the system's finances following high expenses associated with the transition to the new facility. Despite the challenges since its conception, Covert says the new facility gave Palomar a one-shot opportunity to design with evidence-based principles in mind.
"We had been looking at evidence-based-design principles associated with The Pebble Project [a design collaborative of the Center for Health Design that includes healthcare organizations, architects, and other industry partners]. But no one had done this to the size and magnitude in one place. We created that fabled hospital."
The hospital incorporates solutions based on the latest evidence on the health effects of lighting, noise, and sustainability, Covert says, adding that it was done not only as a means to improve care but in anticipation of flexibility for the future.
"We knew this one shot would have to accommodate a lot of the citizens' needs for years to come," he says. "We'll see a lot of consolidation of services, greater connectivity among health systems, and some shrinking of services, yet the demands of communities will still be as great as they've been in the past."
Reprint HLR0514-4
This article appears in the May 2014 issue of HealthLeaders magazine.
Healthcare CEO and NFL head coach are both high-pressure, high-visibility, results-driven, highly competitive, and well compensated occupations with high turnover rates. Think twice before you answer.
By the time you read this, thousands of fans will have goosed the Thursday night TV ratings and have found out who their favorite NFL team picked in the first two rounds of the annual draft. The league itself devotes copious amounts of time and effort toward publicizing what a few years ago was little more than a little-hyped back-office function.
But the real action at the top of the organization in the NFL starts happening on Black Monday in late December or early January, when the coaching carousel starts up. Fans of unsuccessful teams over the recent year wait expectantly to see whether their team's head coach will soon be looking for work (and many hope he will be) and speculate on who could effectively replace him.
Successful teams watch as the unsuccessful poach the assistant coach ranks on their own teams to fill the vacancies.
This is no surprise. Professional football is the most popular sport in the country, by a country mile. The NFL has not yet turned the annual coach sacrifice into a media event—not yet.
Hired to be Fired But fans, TV sports pundits, and talk radio hosts speculate on coaches' viability from game to game, from draft to draft, from practice to practice, and from minute to minute. Even the New Yorker pays attention to the remarkably short shelf-life of most NFL coaches. As a coach, no matter your previous success, you're hired to be fired, the saying goes.
It comes with the territory. Professional football coaching is a high-pressure, high visibility, and results-driven business, and success—or failure—is there to see for anyone who is interested. Head coaches also are highly compensated, which puts a microscope on their achievement—or lack thereof.
Source: Carr Consultants
So what does this have to do with healthcare?
The average healthcare CEO tenure is shorter than the average NFL head coach's.
I was initially shocked to learn this. Hospital CEOs have worse job security than a group whose job security is constantly in question—and microscopically evaluated.
Turnover among hospital CEOs was historically significant in 2013. It has hovered between 14% and 16% yearly since 1981. But it spiked in 2013, to 20%. That means one in five CEOs was replaced in 2013, a record high.
Why is this happening at a higher rate than normal?
Well, put simply, healthcare is in a state of upheaval, and leadership is no exception.
Autonomy Waning Let's dive in a little further and look at some reporting I've done on the issues behind this. Certainly, CEOs are, as a group, an older segment of the population. And like the rest of their demographic cohort, a huge number of them are part of the baby boom generation, which is nearing or at retirement age.
Consolidation of hospitals into health systems and health systems into bigger health systems is part of the equation. Many CEOs who once led these formerly independent organizations don't want to work under circumstances of reduced responsibility and autonomy, and hey, they're pretty close to retirement anyway, so why not bait a hook and get out the golf clubs?
Another issue is that many large health systems that had previously worked as a holding company are making the transition toward being more of an operating company now.
What comes with that is less autonomy for former CEOs, and increasingly, if they're being asked to stay, their jobs are morphing to other titles and most importantly, to other responsibilities that are more in cohesion with the strategy of the whole—not their own local agenda. That's dispiriting to many CEOs.
Healthcare is a highly regulated industry, of course, so even a great leader can have a tough time against competition that is becoming national and global very quickly. She can be hamstrung by state regulation that isn't keeping up with the evolution of the industry while competitors operate without those constraints.
Jobs Dwindling He could be hard-hit financially by the fact that his state has decided not to expand Medicaid through the PPACA. It can be tough for a hospital leader to find a place for his or her organization in this rapidly evolving world of scale and value seeking.
Further, the healthcare industry is morphing toward being less hospital-centric, and that means healthcare leadership is morphing along with it. Talent is needed that can develop sticky ways to interact with, and ultimately better serve, the patient in a more holistic manner than hospitals are used to operating.
That's a bigger deal than it seems—as coordination of care with entities outside the hospital becomes increasingly more important, talent is following the trend. Hospitals are not a growth industry anymore, and increasingly talent doesn't see hospital leadership as an end in itself, career-wise. In many respects, given the increasing pressure in the job and reduced autonomy and responsibilities, maybe it's not even a means to an end anymore.
Finally, there are simply fewer CEO jobs out there. If you lose your job as a CEO, there are fewer landing spots.
A well-worn joke is that the NFL stands for "not for long" if you don't produce. Hospital leaders these days understand that better than most.
While advance medical directives can be a benefit to patients, families, and healthcare costs, misinterpretation of these documents by clinicians is common, says a prominent emergency medicine physician, and can lead to irreversible medical errors.
I recently wrote about the idea of making advance directives a condition of obtaining Medicare benefits. Such a move, one major healthcare CEO told me, would be a great way to help reduce the cost of care for patients at the end of life, where so much expensive treatment with dubious results takes place.
It's a good idea… in theory. In current practice, there are some problems, says Ferdinando Mirarchi, DO, who is chairman of the department of emergency medicine at UPMC-Hamot in Erie, PA.
My recent conversation with Mirarchi added some much-needed nuance to the debate about how wise it is, both for patients and physicians, to have these documents in play without greater safeguards and training of clinicians to better interpret what the patient really wants from his or her care when incapacitated.
Mirarchi believes that the standardization and interpretation of advance directives pose grave threats to patient care and to physicians, and he speaks from experience.
"I almost killed a patient," he says, matter-of-factly.
The first physician on the scene when a patient presented at the ED unconscious, he "was at the point of not treating her because there was a living will and a DNR."
A cardiologist who noticed the dithering at the patient's bedside, screamed "What are you doing?!" at Mirarchi, and roughly shoved him out of the way.
A Misunderstanding of the Documents "At that time he delivered the appropriate treatment and saved her life," Mirarchi says. "I was following this paper they presented. If it wasn't for him reaming my butt, this never would have had the impact that it has with me. The lesson is, you can easily end up killing patients who have ultimately treatable conditions."
The reason lies with the misunderstanding, at the clinical level, of advance directive documents. Regardless of what patients put on these forms, they probably want to be treated for any condition for which recovery is possible, yet it's not clear to doctors and nurses what they want, and they often interpret the documents differently.
"This thing of misunderstanding of documents is hugely important," says Mirarchi, who adds that his father died of sepsis because his caregivers interpreted his advance directive—a do not resuscitate order—to mean that he was not to be treated for bedsores that developed from his incapacitation.
"My father ended up dying because of it," Mirarchi says. "They left him in a bed to the point at which he developed bedsores that became septic," which ultimately, became his cause of death.
Mirarchi subsequently discovered that there is very little research into how advance directives are interpreted, not only by the physicians and nurses treating patients, but by their own designated surrogate decision-maker, often the spouse.
"These documents have good intended purposes [but] there can be bad unintended consequences from them," he says. "In medicine, a large percentage of practicing physicians look at a document like that and define it as a DNR order."
These orders are routinely misunderstood in medicine, he says, and his research backs up that assertion. To patients, an advance directive might contain assumptions about comfort and end-of-life care (as it did with me).
Documents Lack Federal Standardization But if you present critically ill somewhere and you can't speak for yourself, the presumed assumption, given the presence of an advance directive, may mean that clinicians will withdraw treatment from you—even if you have a treatable condition. It all depends on the person interpreting the document, says Mirarchi.
"I'm in the minority on this," he concedes, "but from my experience in clinical practice and studying it, there is a nationwide patient safety concern with the documents. They lack federal standardization."
A lot of positive change could come if physicians and nurses knew that when presented with such a document, a pause is in order. Mirarchi, with legal help, developed a checklist poster that he says at least helps clinicians make better decisions based on what's in the document, as well as some advice on interpretation.
"I see people all the time who can't speak for themselves that have very treatable conditions and potential[ly] functional outcomes," he says. "To not treat them would be a medical error."
As for himself, Mirarchi has not and has no plans to complete a living will or advance directive. He does however, have a named surrogate, who is his wife.
"I met with my attorney and as part of my estate planning, he had my living will created. When he presented it to me he kind of laughed and said, 'I'm not sure you're going to sign it,'" says Mirarchi. "He was right. I didn't. Until more safeguards are in the process, I wouldn't complete one."
An Advocate for Safeguards That doesn't mean he thinks advance directives or living wills are necessarily bad ideas, or that they don't have huge potential to save on expensive, end-of-life care for patients who have no reasonable hope of recovery. And he knows that such documents can't be made perfect. But given his experience and research, he believes there are too many potential drawbacks for him personally.
"Every form is going to have a problem and I don't care anymore what people tell me about new processes," he says. "Every one of these forms has someone interpreting it. Their understanding will carry forward and impact care and treatment."
All of that said, and given his hesitancy to do a living will or advance directive of his own, Mirarchi still wants to be able to advocate for their proliferation.
"But first I need to advocate for safeguards," he says. "They do have a lot of benefits, and I'm not discouraging anyone from doing one, because there's no question they do save money and resources. Those patients who are not gaining any benefit from treatment are very expensive. But first I need to advocate for safeguards."
So what am I and others like me to do? We want to do the right thing, we want not to be a burden to our families or the healthcare system, but we also don't want to die from a treatable condition because our advance directive has been misinterpreted.
Although my form is one that I downloaded, and Mirarchi correctly asked if I had any assistance of guidance filling it out (I hadn't), I still feel it outlines my wishes appropriately. I've made clear to my wife that if there's any chance of recovery, I want her to authorize treatment.
I trust her.
I could go home and tear up my advance directive, but at some level, I have to hope that's enough.
Recent research that casts a pall on the cost and quality effectiveness of the patient-centered medical home is far from the final word on what patients—especially older, expensive ones—say they want from their physicians.
A few weeks ago I wrote about the compelling research published in the Journal of the American Medical Association that showed no effect on healthcare costs from the patient-centered medical home designation and little improvement in quality of care.
The results reported by JAMA are more than a little concerning for people who theorize that team-based, well-coordinated care is more efficient and less costly, and ultimately benefits patients' health.
They're especially concerning for physician practices that feel they need to make the substantial investment required to achieve PCMH designation. Increasingly, that designation—particularly the top achievement, Level III—is being required of primary care practices in order to attain incentives from payers and other healthcare partners.
Though the research reaches troubling conclusions in both ROI and improvement in quality, it certainly does not end the debate or the push for PCMH designation from payers and others.
In an attempt to find as neutral a source as I could regarding this research and the uncertain future of the PCMH, I spoke recently with Christopher Langston, PhD, program director for the John A. Hartford Foundation, a nonprofit based in New York that attempts to improve the health of older adults.
The foundation provides grants for research and education in geriatric medicine, nursing, and social work. It conducted a recent poll of older Americans who overwhelmingly supported the ideas embodied in the PCMH construct, and he also found the results from the JAMA article "troubling."
"I think highly of the people who conducted this study," he says. "They didn't do that study thinking it wasn't going to work."
For that matter, no one undertakes the substantial investment in the tools and human capital necessary to achieve PCMH designation thinking it's not going to work either. But the results speak for themselves. Or do they?
Not the Final Word Langston cautions that while the study measured the before and after performance of 32 early-adopting practices over a three-year period between Jun 1, 2008 and May 31, 2011, it is not the final word on the effectiveness of the medical home construct, especially as far as patient preferences are concerned.
While the JAMA study's findings show little progress toward the goals of the PCMH, its results don't necessarily reveal the true picture of the benefits the medical home can deliver in both cost and quality spectrums, says Langston. In other words, the jury is still out, in his mind.
"In the methodology, only half the participating practices actually reached Level III [the highest PCMH designation]—only 16–so are we really evaluating the patient-centered medical home?" he asks. "The medical home lays out the walls and ceiling but doesn't decorate the room."
What distinguishes the failures from the successes in primary care, he says, is going to another level of specificity of the elements in the PCMH that are intended to help patients better access the care they need and keep themselves healthier.
Langston says an example of what he means is the IMPACT intervention model of evidence-based depression care that the Hartford Foundation trialed almost 10 years ago. IMPACT uses a lot of the structural elements of the medical home: a patient registry, structured assessment tools, a nurse to work the registry, and a particular depression scale that is reapplied to patients later in their care to understand whether they're getting better or not.
"Like with the PCMH, you have to know how to use it and what the rules are. For example, if someone doesn't improve in four weeks, we'll change their dose," he says, to illustrate the specificity of follow up care necessary to fully take advantage of the medical home's capabilities. "That's the kind of 'furniture' that I don't think the PCMH provides overall. The structure needs to be filled in in a fairly systematic and thoughtful way."
Help Needed According to a 2002 study in JAMA, IMPACT more than doubles the effectiveness of depression treatment for older adults in primary care settings. And patients receiving this type of care had lower average costs for their medical care—about $3,300 less even after factoring in the extra cost of IMPACT care—than patients receiving usual care.
The lesson, according to Langston: Don't evaluate things before they're ready. Second, even if every practice had been at Level III, it really matters what the clinical content is, and most practices are not good enough inventing that on their own; they need help.
If they don't get that help, and get bogged down in investments, disagreements about division of labor, and other organizational struggles, the investment in the patient centered medical home is not money well spent. The recent JAMA study, he says, has no real way of knowing the fidelity with which the practices are implementing the model.
"What they knew is what the practice said about whether they've gotten better about referring to other sources, such as for diabetes," he says. "There's no measurement of whether that really happened."
Also, such a study would be more valuable with a segmented population, he adds.
"They tried, but they only had commercial patients, they didn't have the full range," he says. "For example, they don't have people in the last years of life. It's harder to show benefit unless they had the full range and complexity of patients."
He adds that in the case of the PCMH, misimplementation can be worse than nonimplementation.
'Worst of Both Worlds' "This is a case where half a loaf is not better than no loaf," Langston says. "If you hire someone but they don't know how to use the rules right, you have that added expense, but you don't get the return on investment. It's the worst of both worlds because you have the added expense but you don't achieve outcomes. What really matters is measuring outcomes, tracking them, and rules about what you do when someone doesn't get better," he says.
Langston believes that the despite the headline findings in the research study, the PCMH is far from discredited. In fact, its many attributes are highly sought after by older adults, who like the concept of team-based care. He cites the Hartford Foundation's recently released poll results as evidence.
Among the top findings, he notes, is that only 27% said they currently receive well-coordinated care. Of that group, some 83% said that team care has improved their health.
And among older adults who are not currently receiving this type of care, 61% said they believe team-based care would improve their health and 73% want this type of care. The research was conducted nationwide over four days in January and February, and surveyed 1,107 adults 65 and older.
"Not very many older people are getting the elements to the PCMH," says Langston. "Those who do think it's very helpful to improving their health, which we think is a pretty high standard for people to endorse. Even people who weren't getting it thought these elements had a potential to benefit their health."
Of course, it's a poll, not a peer-reviewed study, but as the most expensive cohort for healthcare spending, shouldn't policymakers—and physicians, for that matter, listen to people over 65 about what they want from their healthcare too?
One of healthcare's most prominent CEOs has a great idea for cutting healthcare costs—forcing Medicare recipients to complete a living will and medical power of attorney as a condition of receiving benefits. Unfortunately, implementing common sense measures like this is among the things Congress is worst at.
All right, I'll admit it. I've been avoiding writing this column for weeks.
My thought: As soon as I've done my own advance directive, I can actually write this thing and advocate it. Until I do, I can't write the column.
The result: Life got in the way and I've been sitting on a great column for weeks.
I've been avoiding it for the same reasons most people don't write advance directives for themselves—they don't like to think about their own ultimate demise.
That's unfortunate, but entirely understandable. I'm extremely biased, of course, but I believe myself to be one of the more practical and common-sense people I've ever met (I think my wife agrees, in most respects).
But that's never filtered down to advance directives, and the fact that this column is intended to promote them, and in fact, encourage their enshrinement into law, means I'd better not be a hypocrite about it. Let me just say that the allure of a slam-dunk column provided powerful motivation, and the fact that you're reading about it now means I have done my advance directive.
I should've done it six years ago, when my wife, pregnant with twins, decided it would be a good idea for her to have one. Typically, she followed through. She gently pressured me to do one too, but I never did, and she never pushed too hard. I suppose I'm like most folks. I didn't like talking about it with her then, and I don't like thinking about it for myself now, and hey, isn't there a baseball game on?
So I've run out of excuses. All mine needs now is the signature of two witnesses and my wife.
Make It a Medicare Requirement Banner Health CEO Peter Fine says we, as a nation, should make completing a living will and medical power of attorney a part of the Medicare application process. His reasoning:
It would likely make a big dent in healthcare costs
It doesn't take long
It will help significantly improve quality of life, peace of mind, and dignity for families in time of stress
"Costs would be reduced significantly if you forced every Medicare enrollee to have a healthcare power of attorney or living will and for them to produce this document at enrollment," Fine says. "Having gone through this with my own mother, both my wife and I have living wills, and our kids have copies so in a stressful time, they know exactly what to do."
As we all know, we have a collective healthcare cost problem in this country that provides plenty of fodder for our stories and plenty of challenges for the leaders who run healthcare organizations.
Fine brought up his idea with me a few weeks ago during an interview for an otherwise unrelated story on healthcare prices. A cancer survivor himself, Fine knows from running Banner Health that many of the problems with cost in healthcare happen in the last year of life. In 2006, 25.1% of Medicare expenditures went to patients for care in the last year of life, a number that has not changed significantly since at least 1978.
With advance directives required as a condition of participating in Medicare or even Medicaid, it's likely that many patients and their families would refuse some of this care, and thus, those decisions should have a pronounced effect on healthcare spending.
And for those of you who see "death panels" in this argument, don't even go there.
The beauty of an advance directive is that it lets you, the patient, through your agent, determine how far to go to prolong your life. Nobody else is making those decisions. You can fill out an advance directive that asks caregivers to use all tools available even if there is little to no hope of recovery. That's still your right, you're just being forced to make those choices while you are still able. Because when you aren't able, those choices default to using all those expensive tools.
If you don't have an advance directive, and the latest information I could find shows that less than 50% of even severely or terminally ill patients have one, you're effectively requiring your clinical caregivers to use every means available to prolong your life, even if such treatments are exactly what you do not want.
The only way to even hope that your wishes are followed is to complete one of these simple forms. Of course, that doesn't guarantee you won't be overtreated (advance directives helped make end-of-life decisions in less than half of the cases where a directive existed) but it helps.
Taming an "Insurmountable" Problem Fine argues that healthcare leaders, lawmakers and policymakers tend to look at solutions that are intended to fix an insurmountable problem.
"We tend to look at insurmountable problems like fixing the healthcare system," he says. "That's insurmountable. But I wonder how healthcare would be viewed as a problem to be fixed if we just focused on patients who are 50 or above?"
Fine says he came to the conclusion that living wills would make a significant impact on healthcare affordability through Banner's participation in the Center for Medicare & Medicaid Services' Pioneer ACO program. While many organizations dropped out of the program after the first year, Banner did well and remained in the program for a second year.
Rather than focus interventions on the entire 50,000 Medicare beneficiaries in Banner's Pioneer ACO, leadership focused on what it saw as the problem population, the 5% of that population that used the most healthcare services.
"We were one of the ones who did pretty well," Fine says about Banner's Pioneer ACO results. "That could be dumb luck or focusing on the 5% of the population who are the greatest drivers of costs."
Fine says big strides can be made through this simple requirement, though he acknowledged in an opinion piece recently in the Arizona Republic that making it so could develop into a hot-button political issue—see my note about "death panels," above.
But it's not, he argues in a call to action for his fellow hospital and health system leaders:
"Of course, there might be concern among some about the appropriateness of government involvement in making this intensely personal matter a requirement of applying for Medicare benefits. I would ask these people to consider the fact that the completion of these documents preserves and strengthens individual choice, keeps the highly personal discussion about dying within the privacy of the family and has the real potential to save tens of billions of dollars," Fine says. "This issue plays out in our institutions. We own it. Let's start the dialogue with our elected leaders to fix the problem."
If it took a column deadline to force me to take a hard look at my own mortality.
It'll likely take this proposed requirement to make the two thirds of Americans who don't have an advance directive pay attention. Unfortunately, things like this are ripe for political hay to be made, and as a result, implementing such a common sense requirement is among the things Congress is worst at.
Let's hope the urgency of the healthcare cost problem might surmount those potential hurdles, and get this done. Fine could certainly use other healthcare leaders' support.
