In our annual HealthLeaders 20, we profile individuals who are changing healthcare for the better. Some are longtime industry fixtures; others would clearly be considered outsiders. Some are revered; others would not win many popularity contests. All of them are playing a crucial role in making the healthcare industry better. This is the story of Douglas Hawthorne.
This profile was published in the December, 2013 issue of HealthLeaders magazine.
"Changing how a community lives happens slowly and surely, but we have a chance to do something big."
The way Douglas Hawthorne sees it, hospitals are used to being accountable to patients for about 4.5 days. He wants that to change—as quickly as possible.
Those 4.5 days represent the average length of stay in the hospital for the inpatients at Texas Health Resources, the health system that Hawthorne has helped build over his 42 years at the same organization. When he started as an administrative resident in 1971 at Presbyterian Hospital Dallas, Hawthorne certainly couldn't envision that the organization would grow to become Texas Health, a behemoth in a land of behemoths, with 25 hospitals that are owned, operated, or joint ventured with the system that resulted from the 1997 merger of Presbyterian, Arlington Memorial Hospital, and Harris Methodist Health System. Never mind imagining that he would be the one leading the organization, which reported $3.7 billion in total operating revenue in 2012.
Yet the hospital is far from his focus for strategic growth at Texas Health.
"As we examine our future, it's about health and well-being as well as sick care," Hawthorne says. "That's the driving force for the conversations we have around here. The acute care model is not a sustainable one in its current form."
Instead, noting growing issues with diabetes and heart disease, Hawthorne envisions Texas Health as a one-stop shop for individuals, employers, and even municipalities to improve their health. For a few years now, he's been making big bets that his health system will be responsible for, and will make its financial future on, caring for individuals over a lifetime. Making that change in focus pay off financially is the critical challenge, however.
Over Hawthorne's lengthy tenure, the organization has continued to add pieces, often leading the way nationally in acquisition of hospitals, physician practices, and innovative contracting with other pieces of the healthcare continuum. He and his team have shown repeatedly that they are willing to make big bets on where the puck is going in healthcare, and those bets have almost always paid off.
They are seven years into a 10-year strategic plan that seeks to transform the delivery of healthcare from hospital-based to community-based, with a business model that includes pieces like education, wellness, prevention, and primary care on one side (the hospital is in the middle) and rehab, home, long-term, palliative, and hospice care on the other. The goal is to make Texas Health a "national benchmark health system," and given how others have copied this strategy since the Patient Protection and Affordable Care Act was passed four years after Texas Health's transformation was activated, the move seems brilliant in hindsight.
Yet that doesn't mean it hasn't provided its challenges, and it's still too soon to understand which pieces make financial sense and which ones don't because the moves Texas Health has made have almost always been ahead of an income stream to support them, says Hawthorne. Will the strategy pay off? Hawthorne is confident it will.
"No question what we're doing is beginning to pay off as we watch utilization," he says. "We'll claim some of that has been because of offerings outside the walls of our traditional hospitals where people can get resources to treat them if necessary, but resources where they can care for themselves, too."
He's talking about investments by the health system in exercise facilities and areas for nutrition education and personal behavior modification.
"We're beginning to see momentum around communities wanting to have the tools for well being."
If this sounds far away from focusing on metrics like inpatient bed days, revenue per adjusted discharge, and the like, it's because Hawthorne says health systems have to move away from that fee-for-service mentality in order to survive what he says is already a massive reorientation in the way medical care is provided. Part of that shift has to do with legislation like PPACA, but Hawthorne says employers and patients themselves are demanding that health systems seek ways to prevent maladies as well as treat them once they appear. Still, seven years into a wholesale transition, he's under no illusion that this shift in mentality will be quick.
"The exciting part is we are seeing change. Where we want to go may be a full generation from now, but you have to start somewhere," he says. "Changing how a community lives happens slowly and surely, but we have a chance to do something big."
But will the cost of innovation overwhelm even a large system like Texas Health, which still relies on inpatient care to a significant degree?
"It's a great question and our board asks how we're doing this businesswise constantly. The hospital has been our livelihood."
Hawthorne says the changes are gradual but sweeping.
"We've stepped in gradually with payers to the point at which we now have an ACO contract with Aetna, and a draft of one with Blue Cross. We can't give up the revenue base that's been the lifeblood of the organization in terms of hospitalization, but filling beds is no longer how you assess the business model for us."
The question for Texas Health—as well as many other hospitals and health systems—is how to create revenue by keeping people well.
Hawthorne says Texas Health is getting a lot more buy-in from the business community, "which is realizing that by investing in options like this, they'll have happier, more productive employees," he says. "They get it, and they know as well as we do that they have to make modifications in payment methods to include reimbursement for helping keep people well. It's a fine balance."
Not that he wants to err on the side of caution. Turning a battleship takes time, after all, but it also takes decisive moves.
Hawthorne says the organization has been cautious with its investments in financially uncertain areas.
"In some cases, we've pulled back in some of our programmatic efforts around building the continuum. We've had a couple of partnerships where their capacity looked to be positive, but once we started operation, the expectations were not being met, so we've had to discontinue lines of service that we've started."
Pressed for examples of areas that still need a lot of work, Hawthorne concedes that some of its efforts around integrating best clinical practices with independent physicians continue to be challenging.
"We haven't given up but in this area, it's a bit of the Wild West mentality," he says. "Aligning with physicians when there's no real major economic hurt going on with them … it's so difficult to persuade them to look at a future state of healthcare that's dramatically different. Yet we'll continue to try to align with independents through clinical integration."
He cautions fellow health system leaders to lead with an element of patience in terms of recasting the business model for the future, but he stresses the value of deliberate and ongoing strategic planning.
"You have to have a vision for the future. It may not be clear, but always look forward to opportunities," he says. "It's better to model the change than to have someone tell you how to change. Have courage to create opportunities."
Merger and acquisition activity shows no signs of slowing, yet some hospital and health system leaders see independence as a viable strategy.
This article appears in the December issue of HealthLeaders magazine.
Hospital consolidation is on a tear. Whether the trend is ultimately attributable to a need for health systems to work more collaboratively, to deliver economies of scale, to recapitalize, or, for the more skeptical, to develop greater contracting power with commercial insurers, the consolidation trend is collecting a huge number of hospitals under a dwindling group of operators and shows no signs of slowing.
But there are hospitals and health systems that are determined to stay independent. They may collaborate with other facilities to a greater degree and may borrow expertise from other systems in order to better integrate, but on a governance and asset-ownership level, they want to buck the trend for a variety of reasons.
Moving faster
Some see an element of panic in the recent wave of consolidation. As hospitals and health systems contemplate a drastic-though-slow-moving shift in their business models from volume- to value-based reimbursement, many leaders and boards wonder whether they will be able to survive that switch on their own.
Based on a Booz & Company study and a conversation with Gary Ahlquist, a senior partner with the company, as many as 1,000 of the nation's roughly 5,000 hospitals will seek a merger within the next five to seven years. That shows that many leaders and boards don't appear to want to take the risk of continuing an independent existence. Ahlquist also predicts that hospitals can expect a revenue reduction of 20%–25% over the next 10 years, adding further fuel to the merger mania.
Hospitals and health systems seem to want to inoculate themselves against that revenue reduction by seeking safety in size. After all, it's reasonable that those most susceptible to pressure on revenues will be those that don't have the market clout to back up their reimbursement expectations.
Of course, the merger trend puts different parts of the government at loggerheads, too, as the Patient Protection and Affordable Care Act seems to encourage consolidation based on the effect it's expected to have in coordinating care, while a possible negative effect of consolidation is its impact on rate contracting with commercial insurers, which draws the attention of monopoly-busting priorities of the Federal Trade Commission.
Regardless of the uncertain business realities associated with predicting the future of reimbursement and federal permissiveness on monopoly power of some mergers, many leaders are determined to go it alone. Doug Luckett, president and CEO at CaroMont Health in Gastonia, N.C., goes as far as to say independence is his top strategic goal for the one-hospital system that also includes hospice, urgent care, specialty surgery, and a medical group, among other attributes.
"My top strategic goal is to keep CaroMont a viable and functioning independent health system," he says. "Unless circumstances change greatly, this gives us flexibility and agility and keeps capital invested in the local area instead of competing within a corporate entity."
He says top-line revenue compression is a serious issue that may get worse, and disproportionate share funding, on which his health system depends, faces erosion, as well. At the same time, CaroMont is dealing with North Carolina Medicaid outpatient reimbursements that have been cut by approximately 11% or more. Those are funding challenges CaroMont is facing now, and Luckett expects others to emerge.
"We do need to make margin to recapitalize the system," he says, "but we think it will be an opportunity because 10 of our specialty practices are Level 3 patient-centered medical homes and all our primary care practices are Level 3, as well."
Additionally, the health system has been experimenting with upside risk contracting with payers, and so far, it's been able to increase incremental value every quarter.
"We're moving faster as far as attainment than if we were part of a bigger system," Luckett is convinced.
However, there are concerns. One thing he fears is increased payer pressures and exclusions, and by extension the market clout that bigger players in his region are accumulating through mergers. Ultimately, CaroMont may not be able to resist that trend.
"As long as larger systems get bigger rates just for being bigger, we'll continue to be a target," he says.
Though Luckett says the system is stable for the near future and that it doesn't have to scramble for partners, he does see a need to aggregate the system's expense spending and overhead. CaroMont needs to find a way to reduce overhead in the same fashion as bigger systems and has explored contractual partnerships with bigger entities—even integrated delivery networks—that fall well short of asset transfer.
Some large systems with multiple hospitals have made massive investments in infrastructure so that when they add capacity they absorb much of the overhead costs through a centralized service center and not at the individual hospital level, Luckett says, adding that such systems can relatively easily add noncompeting hospitals to help recoup some of their overhead investment.
"Logistics are logistics, so they may provide us better terms and conditions and price points than traditional vendors," Luckett says. "They win, we win. They defray operating and overhead costs, and we remain independent."
CaroMont has already developed an RFP to establish such a relationship with either an IDN or a vendor.
Despite the strategy of staying independent, which the system is committed to executing, "we never want to get into spot where we run out of options. That's a failure of leadership and management." Luckett says when asked about the remote possibility of an eventual merger.
He concedes that independence may not necessarily continue to be the top priority, however, if the system faces unanticipated pressure from payers or attempts to exclude it from important networks.
"Increased payer pressures or exclusions will change our strategic direction," Luckett says. If that happens, he cautions, the payers will hand over the "master key" to the largest providers because such dominant organizations will control rates at that point.
"Seventeen out of 110 hospitals in our state are independent. Between the metro area to my east and the large system to my west, we're it, as far as size, scope, and tertiary care is concerned," he says. "Once that corridor gets closed, providers will command a higher rate and insurers' leverage will be gone, which is why I don't understand why this grouping is being rewarded. We're not closed-minded about any of it. The FTC is at severe odds with HHS and the White House on consolidation, but the truth is rates are going through the roof."
The growth path and early warning
Methodist Health System President and CEO Stephen L. Mansfield, his board, and leadership team are committed to keeping the Dallas-based organization independent through aggressive growth. Though it has seven hospitals throughout the Dallas-Fort Worth metroplex, just a half decade ago it boasted only two and has gone from around $400 million in revenue five years ago to $1.1 billion in its most recent fiscal year. Still, in Texas, where everything is bigger, Methodist has much bigger systems—Baylor Scott & White Health ($5.8 billion total net operating revenue) and Texas Health Resources ($3.7 billion total operating revenue)—in its own backyard.
"Independence is something we wrestle with a lot," says Mansfield. "We have an obligation to assess that. But we have a strong growth appetite going forward. We'll grow to 35% more than we are today."
Mansfield and his board have agreed on certain "advance indicators" that they monitor to provide a level of early warning that the system might be better off with a merger partner. He monitors metrics on a constant basis around margin levels, budget adherence, medical staff growth, and alignment of medical staff and quality, to name a few of the 13 related directly to maintaining an independent track. He and his staff rate each green, yellow, or red, though he says there's no set formula on how many would have to be yellow or red in order for the system to change its dialogue.
"If we're going to be consolidated, we'd rather do it earlier than late," he says. "We're not shy about having that conversation."
Mansfield has been part of three systems during his career; Methodist is the smallest, but he says its cost structure is better than the two big systems of which he was a part.
When Methodist made a decision to grow from two to seven hospitals, "we made an effort to look at fixed and variable cost per adjusted discharge," he says. "If we didn't reduce both of those, then the acquisition was not a success."
Mansfield, who says he still comes in every day to fight the growth of corporate overhead, says Methodist's management team forced itself to fight that fight.
"It was work, because people want to add more full-time employees, and you have to manage that case by case to keep from letting corporate overhead costs get out of control."
He stresses that capital is a worry, but finding it in a big system is no easier than in a small one.
Going the legislative route
Arthur Gianelli, president and CEO of NuHealth, a safety-net health system in East Meadow, N.Y., with 2012 net patient service revenue of $565 million, is focused on staying independent but has buttressed his options through collaborative partnerships with the dominant health system in his area, North Shore-LIJ Health System, which has an annual revenue of around $6.3 billion.
He says the collaborative deal with North Shore has helped it make Investments in clinical decision-making that may not yield revenue today but will when contracts are risk-based.
"We are at the initial stages of that curve in terms of our contracts and infrastructure."
He says the imperatives in his market, like others, are toward consolidation, but that his board has a strong desire to remain autonomous to provide for its public mission.
"They want that autonomy, but they recognize that standalones are under great pressure, so they have given me parameters of affiliation that are as strong as we can make them while remaining autonomous," he says.
Gianelli has pursued the state legislative route to allow NuHealth to collaborate more closely with North Shore on contracting with managed care organizations such that the two systems could enter risk contracts together and collaborate on strategy and quality.
"North Shore can help ensure we're paid appropriately by commercial managed care organizations for the services we deliver," Gianelli adds. "We suffer from limited bargaining power. We need to be connected to a larger system for our financial structure to work. North Shore is our clinical partner, but to round it out, we need this protection afforded by the collaboration bill that the governor of New York signed into law on October 24."
(The state legislation, drafted in the wake of the U.S. Supreme Court decision in FTC v. Phoebe Putney Health System, was crafted to extend the state's antitrust immunity to NuHealth, according to a statement by Foley & Lardner, LLP.)
Even without legislative help, however, Gianelli says the system is well positioned because it is low cost, but he's concerned that without help from a bigger partner in contracting, NuHealth is too low cost.
"With the passage of the collaboration bill and partnership with North Shore, we hope to be positioned in the local market as a low-cost, high-quality provider and one where the commercial managed care payments are lower than, but competitive with, other hospitals in the area," he says.
Good advice
All three CEOs say their peers should use the new landscape to their strategic advantage, as they have.
"With a smaller chassis and high-touch service with faster adjustments, we can help employers continue to provide employee insurance," says Luckett of CaroMont. "I make that argument, but it falls on deaf ears."
Mansfield cautions fellow CEOs to avoid panicking and doing a deal out of perceived desperation.
"I see so many people who are running scared, and I don't know if they know what they're scared of," he says. "In an uncertain period, it's harder to see your way forward, but focus on things you can control. Work on strategy and if you can execute, pursue that very pragmatically. Not knowing the future is not a good reason for merging."
For Gianelli, he cautions fellow CEOs to avoid making rash judgments because an independent has the advantage of being more targeted and is able to make decisions more quickly than big systems.
"You might want to remain independent, but only an honest assessment will get you there," he says. "You can't start with the conclusion."
Reprint HLR1213-4
This article appears in the December issue of HealthLeaders magazine.
Innovation, partnerships, and execution—not scale—will determine success, says the CEO of Genesis Health System (IA). To the many overtures for consolidation, he is confident that the right answer remains "no."
Doug Cropper sees his health system as crucial to the delivery of care in his market. That sentiment is no doubt true now, but will it continue to be in the future? In a heavily consolidating industry, independent systems may seem an anachronism, leading many observers to disagree with Cropper's view. Such organizations don't have the scale or the war chests to weather a healthcare nuclear winter as the business model transforms from one based on volume to one based on value. Or so goes the argument.
The name of Genesis Health System, which Cropper leads as president and CEO, implies a new beginning, but the fact remains that it's a relatively small system in a land of giants. The system has 660 licensed beds and reported net patient service revenue of $513 million in the year ending June 30, 2013. Yet the Davenport, Iowa–based system's top leader says all it needs to do to navigate healthcare reform is stay its current course.
His view may run counter to those who would have independents rush into the arms of larger competitors, but Cropper, his board, and his leadership team believe they've plotted a course under which Genesis will thrive independently. The health system consistently, and frequently, updates its strategic plan, with a little help from much larger partners who have no interest in owning Genesis's assets.
"That's one of the advantages of small systems. We can move very fast," he says.
But the independence question isn't one that frequently comes up. "We don't talk a lot about independence. The board set an agenda six years ago, where they said they wanted to be independent and regionally controlled," and Cropper says they haven't revisited that determination since.
"We evaluate our competitiveness, but we don't overly focus on independence," he says.
For now, the six-hospital system (including three critical–access hospitals) is concentrating much of its energy on challenges that Cropper believes are essential to its long-term survival and by proxy, its independence. Leaders are taking as a given that they can achieve success amid those challenges on their own. When I asked him to talk about his most vexing strategic issue, he instead offered three:
Physician alignment
Genesis has a total medical staff of about 800 physicians, about 200 of whom are employed. Like many other systems, integration has been much easier with the employed group, but Cropper says the organization is making huge strides with the independents as well.
"With the employed group we have come a long way," he says. "We have engaged a lot of practicing physicians in leadership roles. It's been a lot of effort but it's paying off. With the independent staff, it depends on the group. They're all very different; in some cases, they're our competition in some specialties and the level of cooperation varies group to group."
Cropper says growth of the employed physician base is inevitable, but that he's not as interested in employment as he is in clinical and financial integration.
"Ultimately, our physicians will have to make a choice whether to take risk with us or not," he says.
Readiness to manage population health
Rather than view his system as a potential acquisition target, Cropper sees Genesis as more of the acquirer type.
As part of its strategy to "cheat the scale issue," as Cropper describes it, Genesis joined a partnership in June 2012 with two larger systems in the state under the University of Iowa Health Alliance banner.Its stated goals are to advance quality of healthcare services, improve the health status of patients and communities, and achieve efficiencies that will help member organizations reduce the rising cost of care for their patients.
But what it really does is help smaller systems achieve data and operating efficiencies that they couldn't achieve on their own, but could by pooling resources. In addition to Genesis, the three other partners are Mercy Health Network, Mercy-Cedar Rapids, and University of Iowa Health Care. Together, they make up about 60% of the healthcare market in Iowa. Perhaps more important, the Alliance competes with health insurers by offering two insurance products through the state exchange.
The partnership even reaches beyond local boundaries, as Mercy Health Network's parent organizations are Catholic Health Initiatives and Trinity Health, two of the largest nonprofit health systems in the nation. "So they have a lot of resources, particularly from R&D, that we can tap into," says Cropper.
Though limited in scope, the partnership has four goals:
ACO shared infrastructure
Statewide contracting
Clinical integration across the alliance
Getting closer to the premium dollar
Cropper says all four organizations are committed to remaining independent, but says the University of Iowa Health Alliance is capable of both competing and collaborating with payers.
Dealing with the pace of change
"I think we do pretty well managing change because we're small, but it's tough," Cropper says. "The number of balls in the air is more than I've ever seen."
He doesn't see Genesis or even the larger partnership competing based on its ability to effectively negotiate rates with insurers in the future. Instead, "success will all be around our ability to achieve value at a competitive cost," he says. "Some of that will be on private or public exchanges. Even though some create these big behemoth systems, healthcare is still regionally delivered, and that's where you have to perform from the quality or cost standpoint that will make or break the system in the future. It's not about your market leverage."
Cropper's belief that value, not market leverage, will be king flies against a growing chorus of those who fear that regional consolidation of healthcare services will lead to reduced or nonexistent competition, and raise prices even further into the stratosphere. Consolidation could be the chief driver of the emergence of regional monopolies, which of course would bend the cost curve the wrong direction.
But Cropper doesn't buy it. "We're quite strong on the balance sheet side, so it would have to be a pretty tough environment for us to consider merging," he says. "If we're in that soup, the majority of the country would be there with us."
He goes so far as to say that the only reason to pursue a merger would revolve around whether Genesis is able to deliver quality or value on its own. He is confident in the structures put in place.
"It would have to be finances or quality that would drive us to" a merger, he says. "I get approached all the time, and I have to say no. The alliance would be where we would look first if we ran into that situation."
Douglas Hawthorne, CEO of Texas Health Resources, has repeatedly made big bets on where the puck is going in healthcare, and those bets have almost always paid off. Now his behemoth health system is seeking to take responsibility for caring for individuals over a lifetime. Making that change pay off financially is the critical challenge. From the 2013 HealthLeaders 20.
This profile was published in the December, 2013 issue of HealthLeaders magazine.
The way Douglas Hawthorne sees it, hospitals are used to being accountable to patients for about 4.5 days. He wants that to change—as quickly as possible.
Those 4.5 days represent the average length of stay in the hospital for the inpatients at Texas Health Resources, the health system that Hawthorne has helped build over his 42 years at the same organization. When he started as an administrative resident in 1971 at Presbyterian Hospital Dallas, Hawthorne certainly couldn't envision that the organization would grow to become Texas Health, a behemoth in a land of behemoths, with 25 hospitals that are owned, operated, or joint ventured with the system that resulted from the 1997 merger of Presbyterian, Arlington Memorial Hospital, and Harris Methodist Health System. Never mind imagining that he would be the one leading the organization, which reported $3.7 billion in total operating revenue in 2012.
Yet the hospital is far from his focus for strategic growth at Texas Health.
"As we examine our future, it's about health and well-being as well as sick care," Hawthorne says. "That's the driving force for the conversations we have around here. The acute care model is not a sustainable one in its current form."
Instead, noting growing issues with diabetes and heart disease, Hawthorne envisions Texas Health as a one-stop shop for individuals, employers, and even municipalities to improve their health. For a few years now, he's been making big bets that his health system will be responsible for, and will make its financial future on, caring for individuals over a lifetime. Making that change in focus pay off financially is the critical challenge, however.
Over Hawthorne's lengthy tenure, the organization has continued to add pieces, often leading the way nationally in acquisition of hospitals, physician practices, and innovative contracting with other pieces of the healthcare continuum. He and his team have shown repeatedly that they are willing to make big bets on where the puck is going in healthcare, and those bets have almost always paid off.
They are seven years into a 10-year strategic plan that seeks to transform the delivery of healthcare from hospital-based to community-based, with a business model that includes pieces like education, wellness, prevention, and primary care on one side (the hospital is in the middle) and rehab, home, long-term, palliative, and hospice care on the other. The goal is to make Texas Health a "national benchmark health system," and given how others have copied this strategy since the Patient Protection and Affordable Care Act was passed four years after Texas Health's transformation was activated, the move seems brilliant in hindsight.
Yet that doesn't mean it hasn't provided its challenges, and it's still too soon to understand which pieces make financial sense and which ones don't because the moves Texas Health has made have almost always been ahead of an income stream to support them, says Hawthorne. Will the strategy pay off? Hawthorne is confident it will.
"No question what we're doing is beginning to pay off as we watch utilization," he says. "We'll claim some of that has been because of offerings outside the walls of our traditional hospitals where people can get resources to treat them if necessary, but resources where they can care for themselves, too."
He's talking about investments by the health system in exercise facilities and areas for nutrition education and personal behavior modification.
"We're beginning to see momentum around communities wanting to have the tools for well being."
If this sounds far away from focusing on metrics like inpatient bed days, revenue per adjusted discharge, and the like, it's because Hawthorne says health systems have to move away from that fee-for-service mentality in order to survive what he says is already a massive reorientation in the way medical care is provided. Part of that shift has to do with legislation like PPACA, but Hawthorne says employers and patients themselves are demanding that health systems seek ways to prevent maladies as well as treat them once they appear. Still, seven years into a wholesale transition, he's under no illusion that this shift in mentality will be quick.
"The exciting part is we are seeing change. Where we want to go may be a full generation from now, but you have to start somewhere," he says. "Changing how a community lives happens slowly and surely, but we have a chance to do something big."
But will the cost of innovation overwhelm even a large system like Texas Health, which still relies on inpatient care to a significant degree?
"It's a great question and our board asks how we're doing this businesswise constantly. The hospital has been our livelihood."
Hawthorne says the changes are gradual but sweeping.
"We've stepped in gradually with payers to the point at which we now have an ACO contract with Aetna, and a draft of one with Blue Cross. We can't give up the revenue base that's been the lifeblood of the organization in terms of hospitalization, but filling beds is no longer how you assess the business model for us."
The question for Texas Health—as well as many other hospitals and health systems—is how to create revenue by keeping people well.
Hawthorne says Texas Health is getting a lot more buy-in from the business community, "which is realizing that by investing in options like this, they'll have happier, more productive employees," he says. "They get it, and they know as well as we do that they have to make modifications in payment methods to include reimbursement for helping keep people well. It's a fine balance."
Not that he wants to err on the side of caution. Turning a battleship takes time, after all, but it also takes decisive moves.
Hawthorne says the organization has been cautious with its investments in financially uncertain areas.
"In some cases, we've pulled back in some of our programmatic efforts around building the continuum. We've had a couple of partnerships where their capacity looked to be positive, but once we started operation, the expectations were not being met, so we've had to discontinue lines of service that we've started."
Pressed for examples of areas that still need a lot of work, Hawthorne concedes that some of its efforts around integrating best clinical practices with independent physicians continue to be challenging.
"We haven't given up but in this area, it's a bit of the Wild West mentality," he says. "Aligning with physicians when there's no real major economic hurt going on with them … it's so difficult to persuade them to look at a future state of healthcare that's dramatically different. Yet we'll continue to try to align with independents through clinical integration."
He cautions fellow health system leaders to lead with an element of patience in terms of recasting the business model for the future, but he stresses the value of deliberate and ongoing strategic planning.
"You have to have a vision for the future. It may not be clear, but always look forward to opportunities," he says. "It's better to model the change than to have someone tell you how to change. Have courage to create opportunities."
In our annual HealthLeaders 20, we profile individuals who are changing healthcare for the better. Some are longtime industry fixtures; others would clearly be considered outsiders. Some are revered; others would not win many popularity contests. All of them are playing a crucial role in making the healthcare industry better. This is the story of Steven Sonenreich.
This profile was published in the December, 2013 issue of HealthLeaders magazine.
"It makes no sense that vendors are able to charge different hospitals different rates for the same products."
From Mount Sinai Medical Center in Miami Beach, Fla., Steven Sonenreich isn't afraid of making waves. He shocked many, including another health system CEO, during a radio talk radio show a few months ago by announcing that his health system would start publishing what it charges commercial insurers for procedures—something new that might make healthcare better or at least more affordable.
"We will post our prices relative to Blue Cross and Aetna, our contractual prices," said Sonenreich, during an appearance on WLRN 91.3-FM. He challenged other hospitals to do the same.
"We've all seen the cost of insurance rising at such an alarming rate, and that has caused the expense to the employer and the employee—in terms of employee contributions, deductibles, and copays—to also rise dramatically, and that's of great concern to me as an employer," he says.
The radio show visit was in the wake of the decision by the Centers for Medicare & Medicaid Services to release individual hospital reimbursement rates that, for the first time, allowed independent analysts to compare reimbursement rates among hospitals and health systems across the country, at least on Medicare and Medicaid.
The problem was and is that Sonenreich is not allowed to do what he promised—at least, not exactly.
Why? Contracts with insurers almost always preclude the release of this data on competitive grounds that some regard as dubious.
"The majority of insurers are marketing organizations that want to have the broadest network possible," he says. "They should do more to manage expense for policyholders in order to hold down the cost of health insurance."
Insurers argue that allowing hospitals to know what each other are getting from the insurer puts the insurer at a disadvantage. Maybe so, but conveniently, that custom also obscures whether the insurance company is in fact performing one of its key roles as an arbiter of prices for its customers—employees and employers. It dulls the incentive for the insurer to drive the best bargain, and it's yet another instance of opacity in an industry that is too unsafe and too expensive. Most agree that patients and employers would benefit from healthcare cost transparency as it relates to reimbursement rates, yet it's contractually forbidden.
Since that day on the radio, Sonenreich has walked back those provocative comments because he must. Instead of publishing prices for individual procedures, Mount Sinai will instead soon release its "blended rate" so as to avoid technically violating its contracts with commercial insurers. Sonenreich's determination to increase transparency in hospital-insurer contracting is not altogether altruistic. He's hoping the release will show his system as a low-cost, high-quality provider that could benefit local employers who might include Mount Sinai Medical Center in a so-called "narrow network" that would save costs.
He contends that most of the impetus for consolidation taking place in healthcare today is, for the most part, about monopoly power, and not economies of scale and scope that health system leaders tout when seeking approval for a merger. Yet he can't prove it to the general public because insurers insist on making the prices they pay healthcare providers a secret.
"Consolidation, which some would like you to believe is about efficiencies, has instead hurt competition and raised prices," he says. "When we looked at state data of large systems in our marketplace, the reimbursement and pricing they were able to receive from insurance companies was at times 45% higher than all other hospitals in the marketplace and their cost was 25% greater. So all consolidation did was drive up price and cost."
That's particularly true in south Florida, he says, because of the fact that the market is made up mostly of small and medium-sized employers who don't have the clout to force insurers to resist rising prices.
"When I look at rising cost of insurance for our organization and employees, it's alarming because a major component of price rises has been the consolidation of the hospital industry," he says. "What's occurred is we have many large hospital systems that are using that size to leverage insurance companies for much higher rates. They would like you to believe it's to improve operations, but it's really to drive pricing leverage."
Reimbursement rates for commercial insurers aren't the only place Sonenreich feels like his standalone academic medical center—a 672-licensed-bed hospital with four satellite centers that reported 2012 net revenues of $550 million—can make a difference. Similar "gag" clauses are embedded in contracts hospitals and health systems have with medical device suppliers.
"It makes no sense that vendors are able to charge different hospitals different rates for the same products," he says. "We want the playing field to be leveled. We meet the quality of others, so it's not fair that we should receive 40% less reimbursement for doing the same things others are doing. That makes it very difficult for us to grow our mission."
In our annual HealthLeaders 20, we profile individuals who are changing healthcare for the better. Some are longtime industry fixtures; others would clearly be considered outsiders. Some are revered; others would not win many popularity contests. All of them are playing a crucial role in making the healthcare industry better. This is the story of Jeffrey A. Parker.
This profile was published in the December, 2013 issue of HealthLeaders magazine.
"There's enough money if you run it properly."
Ten years ago, Jeff Parker, after a successful career as a high-level executive at ConAgra Foods, General Foods Corp., and Sara Lee, found himself retired to a South Florida barrier island where, as he puts it, he spent his time "getting older but still wanting to contribute to society."
He decided to put some of his money to good use by endowing a scholarship for 75 students and shortly thereafter became an executive in residence at his alma mater, Jacksonville State University in Alabama. He occupied that chair, but he still wasn't scratching the itch of entrepreneurship and he was disillusioned after helping at least a couple of people at the university's entrepreneurial center develop successful businesses. He never heard from them again.
"Later, I was asked by a dentist to look at and offer some advice for an underperforming, nonprofit dental center for Medicaid children in Anniston, Ala."
Before he knew it, the founder of what was then known as the Calhoun County Dental Center, a retired cardiologist named Warren Sarrell, asked him to lead the nonprofit. He accepted and became CEO.
The original dental center was founded in Anniston, Ala., by the Community Foundation of Northeast Alabama to provide dental care to a subset of the population that private practice dentists frequently refused to see because of low reimbursement—kids in that county eligible for or on Medicaid. Parker was brought on to grow it. And grow it he did.
Now, after eight years of steady growth, the still-nonprofit company employs 250 people, has 34 straight quarters of patient growth, boasts 14 clinics statewide (of which five also have optical capabilities), and is serving as a model for states nationwide seeking to improve dental (and now optical) care for their economically disadvantaged population. Last year, the Sarrell Dental and Eye Centers (named for the founder, who died in 2012) had 135,000 dental visits and 9,000 optical visits for what had been a severely underserved population.
"Six of 10 Medicaid eligible children in this country cannot see a dentist," Parker says, explaining that many dentists don't take Medicaid patients because they do not reimburse at the same level as private insurers or a cash-paying patient.
The idea that Medicaid and the Children's Health Insurance Program don't pay enough is a myth, Parker contends, with evidence to back up the claim. Strangely enough, the organization has succeeded at least in part by driving down dental costs. In fact, the company's average reimbursement per patient has gone from $328 in 2005 to $125 in 2012. Scale has been the key, including electronic health records and digital panoramic x-ray machines. That, and salaried dentists.
"In other words, whatever is state of the art equipment, we have it, and it's paid for, off of primarily Medicaid and CHIP revenues," he says. "We don't rely on cash donations or grants to sustain ourselves. If I can build 14 offices with as good equipment as anyone else, with my major source of income as Medicaid and CHIP, there's enough money if you run it properly."
Good dental health has been cited as a key variable of whether someone is less or more susceptible to future, more serious health challenges, and the focus on prevention resonates in the imperative in all of healthcare to reduce spending and improve care. Parker has had battles with the state dental society for years over protecting their turf. Peace between the two groups has been the rule of late, because even though Sarrell is allowed to see adults and those who are not on Medicaid, the center does not actively recruits these patients.
Parker claims that Sarrell's model of dentistry—which forgoes the small-office, mom-and-pop profit motive of most private practice dentists—is largely what has allowed the organization to be so economical. It's also what attracts the best and brightest young dentists to practice there, he claims.
"I think it is difficult for anyone in America to rationalize how the CEOs of Cedars-Sinai, Children's Hospital of Atlanta, or even the University of Tennessee Medical Center, can do neurosurgery, heart transplants, and liver transplants and no one questions them," he says. "However, in over 40 states, the Dental Practice Act restricts a business person from using a nonprofit dental clinic for the underserved using licensed dentists to clean teeth and fill cavities. Personally, I feel this is a national disgrace."
Sarrell has about 60 dentists, 90% of whom live in the Birmingham area, the state's largest city. With only two offices in Birmingham, Sarrell rotates dentists among the far-flung clinics. All of the dentists undergo chart review from a chief dental officer, so dentists know they will be audited, which, along with straight salary compensation, eliminates any incentive for overtreatment.
"The overwhelming majority of our dentists are paid a straight salary," he says. "There is no incentive but to do the right thing every time for our patients."
To facilitate better outreach and recruitment of patients, the company employs a full-time community outreach person with college degree in every community it serves.
"We are recruiting the top students from the top universities in our region to Sarrell Dental, notably because of our competitive salary and benefits," he says. "But a differentiating factor is that we can also help some of the poorest children from some of the poorest counties in America."
Other states have taken notice. Parker says Sarrell is on the cusp of expanding outside Alabama, and he's now more satisfied than ever about his "retirement job."
"Some kid or parent thanks me all the time for getting dental care for their kids. There are different ways of getting paid, and that's a heck of a good one," he says. "We have had more than 500,000 patient visits without a patient complaint to the Alabama Dental Board."
While the CEO is still ultimately responsible for strategic direction, increasingly, health systems are creating the position of chief strategy officer, who guides the planning, execution, communication, and sustainment of that strategy.
This article appears in the November issue of HealthLeaders magazine.
As healthcare undergoes seismic shifts in its business model, many healthcare CEOs have realized they need help on the executive team. Increasingly, that help is coming in the form of leaders who can focus exclusively on something that in many organizations has been the CEO's exclusive responsibility: long-term strategy.
While the CEO is still ultimately responsible for strategic direction and follow-through, increasingly, health systems are creating the position of chief strategy officer, a person who guides strategic planning and is responsible for executing, communicating, and sustaining that strategy. Think of them as business development gurus who are generalists; their projects are long-term in nature. That's one reason a good CSO is hard to find and often will come from within the organization: The right person will need to possess well-rounded knowledge of how the organization functions now in order to envision a higher-functioning future state.
Despite the benefits of the inside candidate, many experts suggest that the chief strategy officer role may be a good fit for executives who are making the transition to healthcare from other industries, given the importance of fresh thinking, strategy, business development, and marketing that is central to the CSO's role. Many systems, however, are reluctant to take that risk.
Significantly more challenging
Greg Poulsen got involved with strategy work at Salt Lake City's Intermountain Healthcare 18 years ago—already 12 years into his career at the 22-hospital system. Then, he was the senior vice president of planning. In part due to his longevity with the organization, he was uniquely qualified because of a reasonably broad understanding of what works and what doesn't, he says. Now, as the CSO for the past five years, he's been elevated to the C-suite—a tight circle of advisors close to the CEO. He attributes that not to his own expertise necessarily, but to the dramatic shifts in the way healthcare business is conducted and the need for health systems to adapt to that change.
"The thing that's changed the most over the past five years that has elevated strategy work is the rapidity with which the world around us is changing," he says, adding that not all of the changes are positive. "Some of it is purposeful change in a consistent direction, but much is turbulent in that it goes one way one day and another the next, and figuring out the correct path is significantly more challenging than when I started."
Certainly many positions in the C-suite are morphing as healthcare leaders try to embrace the fact that systems are getting bigger with consolidation, that massive changes to reimbursement loom, and that health systems are taking on new responsibilities outside their traditional area of expertise—inpatient care.
Adriane Willig, a consultant with Oak Brook, Ill.–based Witt/Kieffer and an expert on strategy officer executive searches, says even in the current environment, not all organizations have this position and not all need it, although those that want to survive independently, regardless of size, probably should.
"The title is a newer version of what a strategy executive does, but it's an indication they are part of the senior team," she says. "Given the changing dynamics, it's critical for hospitals to be looking at the future and paint that vision, so having someone who can focus on planning for that uncertain future is becoming more critical."
Historically in many organizations, strategy has been done collectively by the CEO in conjunction with the board and often helped by outside consultants, says Willig, but that's no longer sufficient for many organizations. Foremost among their responsibilities, strategy officers are focusing on developing a framework for the entire organization, which even at a standalone hospital is a complicated place. The layering on of nontraditional offerings such as hospice, skilled nursing, a health plan component, or physician practices, just to name a few, brings another level of complexity. Finally, the CSO is charged with differentiating his or her hospital or health system based on value and quality—two metrics that, let's face it, are still relatively new to healthcare.
"In order to do that, they need to understand the whole spectrum of the business," Willig says.
The CSOs have to process information from disparate pieces and understand how to evaluate, using strong analytical skills, whether the organization has the right pieces for effective clinical integration, for example. Further, CSOs need to understand payers and the health insurance exchanges, and how to focus on driving their organization's differentiators into a competitive advantage with payers. They also need to understand technology, Willig says.
"You can't have a strong strategic plan without technology, and that's all coming out of the top strategy person or CSO," she says. "They have to understand everything from the technology to the mergers and acquisitions, as well as finance and operations. So it's a complex skill set and a person can't be a heavy hitter with all of these expansive skill sets." Which means the role of the CSO is still very organizationally driven in terms of what he or she needs to bring to the table, and why individual's responsibilities and influence seems to vary so widely among organizations that may seem similar in makeup.
The CSO most often reports directly to the CEO, but in some larger organizations, he or she might report to the COO, Willig says.
From nice to have to critical
Strategy is a small piece of what the CEO does on a daily basis, so adding a CSO should be a critical priority for helping the organization step out of the day-to-day margin issues and tight battles with operational efficiencies and instead look ahead. What's unusual, says Willig, is that salaries for CSOs, despite their range of responsibilities, still aren't commensurate with traditional C-suite salaries.
"That's a generality," she says, "but think back to about five years ago when the market started tanking, this then-new position was one of the first few to be let go."
After all, you can't focus on strategy, marketing, and clinical integration when you need to make the weekly payroll, but since the financial crisis and recession, Willig thinks CSOs are becoming more valued than ever. In most organizations where the CSO title still exists, it's not a glorified marketing position. Those jobs got washed away.
"Organizations are coming around to the fact that this is a need-to-have role now," she says. "It's the fact that we're operating in a competitive marketplace with much thinner margins than before. That's forcing everyone to take a much more aggressive and progressive view of what businesses they're in and what businesses they need to be in. You can't be everything to everyone; the market is changing so fast that organizations are realizing they need someone whose job is to focus on the future."
That future focus is one reason Julie Carmichael is aboard as the CSO at St. Vincent Health in Indianapolis. Part of Ascension Health, St. Vincent has 22 hospitals in Indiana, including several joint ventures. The organization's fourth CSO in 12 years, Carmichael has a 25-year background in healthcare, starting at the state hospital association in policy and moving on to run an organization that represented 20 suburban health organizations before joining St. Vincent about a year ago. She laughs as she notes that she has never worked in a hospital. That may be a positive, as a big part of her role is helping the organization grow beyond hospital care.
"We're really trying to figure out what our business model of the future needs to look like," she says. "We're trying to evolve our business into a more sustainable model for the long term, so we're moving toward a population health model."
What that means for Carmichael is tricky work, such as changing the way the organization approaches partnerships with physicians, developing its retail strategy, and moving away from the traditional campus into more accessible locations.
"We're looking at what types of services we need to put there to make our community more healthy," she says. "How do we evolve our payer strategy to accept different kinds of reimbursement? How do we develop new partnerships with payers in the marketplace? And there's always something going on around M&A. So the scope here is fairly broad."
Carmichael adds that while St. Vincent's hospital business is still strong—and a key piece to its mission--she suspects that as the organization pivots toward a focus on managing populations and taking financial risks on those populations' health status, "I'm not sure the majority of our margins will come from inpatient care. People are busy and want to access healthcare closer to home so transitions are important."
She says making those changes in strategy is so complex that health systems that are larger than one or two hospitals need the role of CSO to sequence strategies properly, if nothing else.
"Hospitals are not reputed to be the most nimble organizations, but that requirement is changing," she says. "Adding a CSO might be critical to retooling capabilities so we can do those things well and quickly."
If a CEO assumes his or her existing talent has the time to design and execute strategies that are different than the business as it exists today, that might be a big mistake, Carmichael says.
"Everyone's plates are really full on top of running a hospital or being responsible for operations. It's not easy to find time to focus on the future," she says. "Of course it varies from organization to organization, but if someone is struggling to execute on strategy, then a CSO might be a good addition."
Driving accountability
Intermountain's most visible internal initiative, says Poulsen, distinguished from accountable care, is called shared accountability.
Poulsen is charged with inculcating that philosophy organizationwide.
"The concept of accountability needs to span all the providers of healthcare—docs, hospitals, and ancillary providers—but also needs to engage the consumers of healthcare—patients or prospective patients—which we don't think have adequate visibility in the accountable care framework. The role of the CSO should be aligning people's interests and engaging all parties in dialogue and discussion."
He acknowledges that his role is perhaps different from that of other healthcare CSOs. Some view their role as oriented around growth. Some view it as being focused on appropriate mergers and acquisitions. Others might be attempting to increase the number of people their organization serves. Others may be trying to restructure the way care and services are provided.
"The attributes you want in your CSO are dependent on what the organization would like to move forward with," he says.
Overall, CSOs must be able to bring a broad vision of what can happen in their organization beyond what has already happened, Poulsen explains. Healthcare organizations are often constrained by what has and hasn't worked in the past, but in the world of a dramatically different future value incentive, "we have to reexamine old notions and ideas and potentially change what we think in dramatic ways," he says.
"We're changing what we define as success," he says. "What's a good outcome when statements of operation come out? Historically most have been successful when revenue is increasing. In the future, fee-for-service revenue becomes part of the problem and not the solution," Poulsen says, suggesting that high revenue growth could be considered synonymous with wasteful practices to payers as they try to encourage hospitals and health systems to focus on value.
But regardless of the talents that make for a good CSO, one is unassailable.
"To me the most important criterion is the person is capable of gaining respect of other members of the senior team. If that's not the case, it won't work," he says. "If you're fulfilling that role correctly, the CSO will encourage the organization to do things that are uncomfortable. That won't go well unless other members of the team are going to embrace that. The CSO and his team need to do an enormous amount of listening."
Still, the role of the CSO seems destined to grow in stature.
"I get a lot of phone calls from other healthcare organizations and headhunters. That said, most CSOs I rub shoulders with have been with their organizations for quite some time," he says. "That's because when you've worked with an organization and been part of shaping its direction, you become personally invested and it makes it extremely difficult to walk away."
Reprint HLR1113-5
This article appears in the November issue of HealthLeaders magazine.
There's a pretty fair divide among organizations that operate comfortably under a capitation reimbursement arrangement—and those that don't. Which one are you?
Opportunity knocks, or so the saying goes. Perhaps, like me over the years, you've also noticed that the focus is always on whether you will be the one who answers that knock. But could greater opportunity lurk within the one who is doing the knocking?
If that sounds Confucian, (or makes you think of Breaking Bad) I apologize, but I think it fits the state healthcare today. For instance, if you're talking about being ready for capitation—and it's coming, regardless of the current payer environment in your local area or region—perhaps your hospital or health system could be in the position of doing the knocking. That is, being ready for it before your payer demands it. That puts you in the position of being the one who knocks.
Commercial insurers are certainly getting fond of various structures that feature capitation. Under such strategies, the health plan pays the administrator, whether it's a physician practice, a hospital or a health system, to manage all the care needs for a particular patient or group of patients, for one price per member. If what is spent on patients over the course of the year is less than the capitated payment, the provider of healthcare services keeps the difference.
Capitation has one important feature above all others—cost certainty for the purchaser.
The strategy is seen as a strong, and relatively simple, motivator for hospitals and health systems to really dive into population health-focused management strategies and features the ultimate cudgel—the margin motive. The risk of capitation, as you've no doubt been hearing, falls on you and your organization.
That's basically how it works, but there are many nuances to consider under a capitated arrangement. Let's take a look at some of the structures gaining traction discussed during our annual CFO Exchange in Colorado Springs last August. For more of this discussion, see one of three special reportson this event.
Gain Share, Upside Only One health system in the upper Midwest has a partnership with a group of physicians that will be charged with managing the health of about 40,000 lives. This plan is a gainshare arrangement under which the health plan will review the health system's attributed population for per-member, per-month cost compared to its competitors in the market.
If the health system performs better than the statewide average, the health plan will share that gain with the health system, 50/50. That represents only upside risk for the provider so far, so they're pretty excited about it, knowing they are lower cost than most of their competition. However, a potential drawback to such a plan is that early returns may seldom be duplicated as costs and efficiencies introduced experience the law of diminishing returns. Such a structure may not last, long term.
Narrow Network Exchange Product The same system is currently submitting a bid at the request of a statewide Blue Cross health plan that represents 50,000 lives or so. This would be a narrow-network-type arrangement through the health insurance exchange under which the health system is expected to compete with other systems under a per-member, per-month payment system. The winning bidder and the health plan would share both upside and downside risk, but given the fact that there are a lot of unknowns with this population consisting of many previously uninsured individuals, the system sees the plan as potentially high risk.
Not so high risk as to preclude competing for the contract, however. Again, capitation is at the heart of both plans, but despite the risk, the health system is competing for the contract in order to gain valuable experience at the management of population health.
Capped, and Tied to MLR Another health system in the Northeast will get the chance to see how it does with the health of 200,000 covered lives as it begins a risk deal that caps both upside gains and downside losses tied to the medical loss ratio.
The health system can't lose more than $30 million on the plan, but can't make more than that either. It's a three-year deal where the caps move based on the MLR, but it represents a big risk for a system used to receiving fee-for-service payment for the majority of its commercial contracts.
Again, the idea is that by using its network and its full-time physicians to manage care and coordinate it better, this health system will be able to limit any revenue drain. But it's still a risk based on how well they manage that population's health. The details are different, but do the incentives and disincentives sound familiar?
What all of the CFOs expressed in our discussions regarding capitation-based reimbursement is the need for either a system-owned owned health plan or a long-term partnership with an existing payer that evolves based on changing benchmarks.
It goes without saying that such organizations would have to have excellent clinical integration—and that means not just on the inpatient side—but with physician practices, skilled nursing facilities, and even federally qualified health centers.
Even with shared risk programs, capitation will be the vehicle to eventually move providers, whether they're a physician practice, a hospital or health system, or some combination of the three, into a contract that forces them to take on more risk for outcomes.
Commercial insurers can come knocking on your door, or you could be the one who knocks. Which position would you rather take?
To patients, the benefits of implementing a senior emergency department program like the one at Summa Health System are unquestionable. To CEOs whose hospitals or health systems are struggling for revenue, there may be hesitation.
Hospital and health system leaders are always on the lookout for ways to improve quality of care, patient satisfaction, and ED utilization. By those measures, the senior emergency department program being piloted at Akron's Summa Health System is an unqualified success.
But viewed through a financial lens, the cost benefits can be a mitigating factor—at least as long as fee-for-service healthcare maintains its strong hold on revenues and profitability.
That means the benefits from such a program can vary, depending on the business model of the hospital or health system that's using it. The fact that a senior ED program can reduce admissions can be a tough hurdle to clear for many top executives whose hospitals or health systems are struggling for revenue.
At Summa, which has its own health plan, the economic benefits can accrue to the health system as a whole even if they initially hurt revenues on the hospital side of the business. That's because the program has demonstrated that it can reduce hospital admissions. The decision to invest in a senior ED program must be studied carefully to make sure that hospitals aren't cutting their own financial throats by implementing them.
Long-Term Value But if you believe that moving from volume to value generally will pay benefits for your hospital or health system as healthcare reform matures, developing such a program seems like a no-brainer. The benefits to the patient are unquestionable, given Summa's results. For improving patient care and satisfaction, it's a clear win.
But first, let's take a look at the program itself and the findings of a two-month study. Scott Wilber, MD, medical director of senior emergency care and director of emergency medicine research at Summa, says the health system has been thinking about adding a senior track to its ED for years. The idea germinated from the health system's ACE (acute care for the elderly) unit, which started in the 1990's, when Wilber was a resident.
"About five years ago, we started talking about the idea of a geriatric ED," he says. By fall of 2012, coincident with an $85 million, system-wide ED renovation program, the geriatric ED was operational.
Study Results
And the results are promising. Based on a two-month study comparing January 23–March 23, 2013 with the same period a year prior, the program:
The test group is surprisingly similar from year to year.There were
2,286 visits analyzed for 2013 with a mean age of 78 years
2012 data were drawn from 2,260 eligible visits, also with a mean age of 78
Sixty percent were female in 2012 and 58% in 2013
Only patients treated between 8:30 a.m. and 8:30 p.m. were studied
The senior ED is not so much a physical location as it is a program, Wilber stresses, adding that if seniors knew they were being directed to a separate facility based on age, many would probably resist such treatment.
"As my dad said to me when we were coming up with this idea, he wouldn't really want be in there," says Wilber. "The beauty is that for patients it's fairly transparent. So it's not a physical location, but a program."
That said, there are some physical differences in the rooms set aside for the senior ED, but along with the renovation of its EDs system-wide, Summa made the whole ED amenable to senior patients whose mobility and other functions may be compromised. Wilber and his team piloted the senior ED at Akron City Hospital, the system's largest, and they are now rolling its processes out to two other hospitals in the system.
Patients all come in through the same process, but seniors are triaged preferentially into beds that feature bedside toilets, nonskid floors, and appropriate lighting, he says.
Financial Impact
Of course, with fee-for-service payment still dominating, reducing admissions can have a negative effect on finances, says Wilber, but Summa as well as other organizations should keep their eye on what's best for the patient over short-term economic pain.
"At this point, we want to move toward value-based reimbursement and care delivery and yet we're not fully there. When we reduce readmissions, the health plan and ACO think it's great. But understandably, the hospital CEO doesn't think it's great," he says.
"I think that we realize that simply admitting every patient who presents to the ED who is older is not the best way to deliver healthcare moving forward. No matter how things shake out with value-based purchasing, we still have to make the commitment to the right care, at the right place, and at the right time."
Program Costs
Although Summa spent $85 million on redesigning and renovating its EDs system-wide, developing a senior ED doesn't have to require a lot of investment, Wilber says. And it's still a new program, but Wilber thinks Summa's results should push more senior executives and CMOs to investigate what it would take to innovate ED services at their own facilities.
"Around 30 organizations have developed [a] senior ED program similar to us," Wilber says.
Senior ED programs can take on a lot of different characteristics, but the physical plant is not the best part of the equation, he stresses. Instead, it's the alternatives for delivery of care that can provide the most benefit to the patient.
Wilber presented detailed findings of Summa's experience with the senior ED program in October at the American College of Emergency Physicians' annual conference in Seattle, and he and his team are putting together a white paper now that he expects will serve as a prescription for what developing a senior ED program will entail.
"The most important thing for leaders to know is that it is more than just changing the physical plant," he says. "Education and thought and planning on how to do things differently is where you get results. Across the country, ED physicians are ready to embrace this new role and each place will be a little different in how they do these things."
With 40 hospital and health system chief executives attending HealthLeaders Media's second annual CEO Exchange, my challenge is to analyze their insights on reimbursement and the impact of health reform, and overall cost reduction and efficiency—their top priorities.
At a time of unprecedented change for hospital and health system leaders and their organizations, nearly 40 top leaders from hospitals and health systems around the country gathered this week for the second annual HealthLeaders Media CEO Exchange at the Boca Raton Beach Club in Florida.
Against a backdrop of value beginning to usurp volume as the driver of ultimate success, the CEOs of major healthcare organizations gathered in small groups to discuss clinical realignment, new trends in payer relationships, and evolving cost reduction strategies.
The group sessions gave CEOs a forum to discuss innovations, gain perspective, and share ideas on strategies that have worked, and those that have not, in an attempt to speed the transitions that all healthcare organizations need to make.
To build the agenda for the two days of small-group discussions, HealthLeaders surveyed the attendees beforehand on their priorities and plans. Two challenges rise overwhelmingly to the top: reimbursement and the impact of health reform, and overall cost reduction and efficiency. The CEOs also named these their top financial priorities for the year ahead.
The survey results generally match the priorities of attendees at our CFO Exchange which took place in August. It assembled an equal number of financial leaders. But it's worth noting that CEO Exchange attendees are perhaps even more fixated on cost reduction and efficiency than their peers in finance.
For me, this event is a gold mine of insight that will inform my stories in both HealthLeaders magazine and online until next year's event. For now, my top struggle is to distill some of the insights I've already learned from the first day of sessions into something that will help you think differently about the problems your hospital or health system is facing.
It's a lot like trying to take a drink from a fire hose, but I'll try to share a few insights with you here.
Growth is Top of Mind For starters, the concern over cost reduction notwithstanding, our top leaders seek growth. When we asked attendees to describe their health system leadership strategy in a single word, "growth" rose to the top, followed by "entrepreneurship," "transformational," "futuristic," and "population" (as in population health management).
These are not the sentiments of people who plan to withdraw into a shell during uncertain times. They recognize that, like it or not, they must move toward taking risk in payment. Rather than waiting for payers to implement risk-sharing, they're working on their own innovations in this area. In fact, many organizations are creating momentum toward taking on risk through managing their own employees' healthcare costs with the idea of managing their own healthcare spending down.
The Baylor Quality Alliance, for example, starts with its own employees, according to Steve Newton, west region president at Baylor Scott & White Healthcare in Grapevine, Texas. He says they have already achieved some impressive results.
A Self-Insurance Pilot "Our self-insured population has 35,000 covered lives, we're connecting IT with 600 employed doctors in a private label ACO, and we've achieved a cost reduction of 5% in the past year through adopting certain clinical pathways and getting all the specialty groups to follow clinical guidelines based on algorithms that were developed under evidence based medicine, and that also happen to cost less money," he says.
"It's a pilot project, but with the scale, we have enough points of access. Scaling that kind of thing is the fundamental challenge. The question is whether we can effectively aggregate our clinical assets to be ready to share risk."
Just more than half (54%) of respondents say they've planned a "selective" growth strategy over the next three years, with another 39% saying their growth strategy would be "aggressive." Only 7% plan caution in growth.
Capital Spending Projections One reason for growth is to build scale, in a defensive reaction to shrinking reimbursements and other challenges facing healthcare organizations today. HealthLeaders Media continues to cover the ongoing M&A trend. Yet among CEO Exchange attendees, hospital acquisition falls at the bottom of planned 2014 capital budget expenditures.
The top expenditure is medical equipment such as surgical robotics (selected by 27% of respondents), followed by IT/EMR investment (20%), brick-and-mortar expansion of outpatient facilities (17%), and physician acquisition/investment (17%). Another 9% plan brick-and-mortar expansion of inpatient facilities, which perhaps reflects the emphasis most healthcare organizations feel they need to make on moving care out of the more expensive areas of treatment, if possible.
Shared-Risk Strategies In response to healthcare reform, many healthcare leaders—but not all—are experimenting with value-based contracts with payers. A quarter of CEO Exchange respondents say they are investing significantly in large-scale, active commercial contracts (for more than 5,000 lives), while another 36% say they are participating in limited pilots (with fewer than 5,000 lives). But 21% have conducted no more than initial conversations, and 18% are playing wait-and-see.
Several organizations are trying to pressure payers in their markets to work with them on sharing risk, trying to take the initiative in moving toward value based purchasing of healthcare. They're trying multiple strategies, but engaging directly with employers is one that seems promising.
Medicare Advantage programs seem to be a low-risk way to test alignment and understand what benefits the facility, the provider and the patient. In the Puget Sound area, Catholic Health Initiatives has bought two Medicare Advantage plans. Several are also active in the Medicare Shared Savings program.
Pat Charmel, president and CEO of Griffin Health Corp, in Derby, Conn., is coming up on the first anniversary of their participation in the program, and has built an alliance of hospitals that are considered high-quality, low-cost, based on its 12 years managing Medicare Advantage patients.
He says the experience with Medicare Advantage has served as a great learning lab for understanding the risk aspect of running a health plan, even if operating a health plan ultimately proves unnecessary.
The Health Plan Option Others are coming close to being able to operate their own health plans, but are being cautious. With a large employee base, says David Brooks, president of St. John Hospital and Medical Center in Detroit, hospitals are ideally positioned to experiment with risk, as they are effectively at risk already with their own employees. They can look at utilization just like a health plan, and can adjust benefits just like a health plan.
Regardless, hospitals and health systems, at least those represented at the CEO Exchange, are not standing still. They're trying to innovate in order to survive and thrive in a much different environment. What I've shared here is only a small taste of what we've all heard over the past two days of session. My fellow editors and I will endeavor to bring you further insights from our 40 attendees over the coming weeks, so stay tuned.
