I couldn't think of a better headline than borrowing from the provocative title of a new book, Patients Come Second by Paul Spiegelman, CEO of the Beryl Companies and Texas Health Presbyterian President Britt Berrett. The reason: We all know that in a new era of supposed accountability for hospitals and healthcare systems, the patient is supposed to be the first priority.
That should have been the case despite whatever financial methodology is being used, but, perverse incentives being what they are, maintaining volumes became more important than maintaining patients' health.
That's one reason the title, as healthcare embarks slowly, haltingly, into a new era, is so shocking.
But the two authors are being strategically provocative, to shed light on the fact that healthcare culture is often dysfunctional enough that in itself, it harms patient care. And that bothers them. Because culture is underappreciated in healthcare, they argue. Both Spiegelman and Berrett lead organizations considered by employees to be top places to work by a variety of measures.
"The irony is that the internal culture of hospitals is not very strong, especially since people have generally come to work there with a heart for service," says Spiegelman. "We have to understand that it's dominated by leaders who weren't really brought up in their silo of leadership school to know how to build a team, or play nice, or empower people to do their job."
Instead, healthcare has historically operated as a command-and-control environment, they both argue. Instead, leaders should adopt a philosophy of "trust and track," as Spiegelman says, which frees up leadership teams and those working in their area to improve care from the bottom up.
Berrett says the constant focus on the patient's well being, ironically, can lead to harm if the culture can't back up that focus.
"Too often we, as healthcare providers, are so focused on the patient, that we forget to take care of ourselves," says Berrett. "That can lead to burnout, bullying, and disharmony. It's pervasive. You can do that for awhile, but eventually people become disenchanted."
Moving from what Spiegelman and Berrett call transactional leadership to transformative leadership requires leaders to focus on the "why" of the new initiatives they're pursuing. These are diametrically opposed, incentive-wise, from what the rank and file, and even clinical leaders in the organization, are used to.
That includes explaining that the moves are for the greater good, not necessarily because doing so will pad the hospital or health system's financial coffers.
Berrett says many of his peers, at least when he first started speaking on the topic, would dismiss his focus on having fun in the workplace, team-building, and the big picture. They told him his leadership philosophies were "soft," and that they couldn't make much difference.
"Just the soft stuff?" Spiegelman retorts. "No, this is the hard stuff. There's nothing about productivity, financials, or performance in here."
Anyone can make decisions based on business fundamentals, they say. What's harder is building the culture that will sustain such initiatives.
Yet getting culture right can have a huge impact on those important areas.
"The fact is, we wouldn't be having this conversation if the economics of healthcare weren't changing," says Berrett. "Up to 7% of Medicare reimbursement will be at risk, and that puts most hospitals and health systems at risk for survival."
Culture should be most refined process in your organization, they argue. Yes, developing a culture of teamwork, purpose and fun is all common sense stuff, but leaders—at least in healthcare—haven't realized how important it is.
"All a bunch of new age crap?" Berrett asks. "No. You would think this is intuitive, but it's really not intuitive. The science is profound and research significant."
Leading like that also, much to leaders' surprise, says Berrett, requires less focus on bureaucracy.
"If we engage a team doing this with a purpose—a greater vision for the purpose behind what they're doing, the bureaucracy takes care of itself," Berrett says, equating internal bureaucracy to the creation of stifling rules to keep motorists safe from the worst drivers. "But if everyone's in alignment, you have [fewer] rules."
As part of their research, the two have created a website to measure an institution's "cultural IQ" through a series of questions. Once leaders see the results from their own team, it engages them in necessary conversations "that you might not have otherwise had," says Berrett.
Compiled together, they hope, the results can lead to even better techniques on developing a culture of inclusiveness and teamwork.
OK, you might say, I'm convinced. This culture development stuff is all much easier said than done. But the authors have little sympathy.
"This won't happen overnight," Spiegelman says. "The challenge is to find the leaders who get it. Some of that might be generational—and establish a long-term strategy. It takes three to five years to turn around culture."
As for that provocative title, Spiegelman is unapologetic and insists he means it.
"The title is something that came from the philosophy I have in my own business," he says. "If you focus on employees first, that drives customer loyalty and you can invest profit back in your people and the cycle continues. You hear patient, patient, patient, but there's a blind spot that our leaders have. Customer satisfaction comes from employee satisfaction."
Moody's, the giant credit rating agency, recently reported good news about upgrades in healthcare credit ratings for the quarter, and then proceeded to dump a bucket of cold water over everything.
Despite the fact that upgrades exceeded downgrades in the nonprofit hospital and health system sector by a ratio of 3.3-1 in the third quarter, Moody's says the high number of upgrades is the result of an increase in merger and acquisition activity. It is not due to a fundamental change in underlying negative credit conditions, the agency suggests.
That makes sense. One quarter does not portend a trend.
But broadly, mergers are supposed to drive efficiencies, and to some degree, efficiencies can have a big impact on margins. So how to gauge the state of the healthcare game as the chess pieces rearrange themselves as never before?
Lisa Martin, senior vice president in the Moody's Healthcare Group, says that regardless of the news about credit upgrades, "it just so happens that in this quarter, there were more positive rating actions than negative."
Overall, then, business still stinks?
"The drivers are some of the revenue pressures that hospitals are under," Martin says. "Revenue is tightening. Many are looking for ways to reduce costs to offset that and move from fee-for-service to more value-based reimbursement. They're improving costs and increasing quality and in order to do that, you need scale."
Yes, we know all that.
At what point will the math start to work again?
Martin won't say. She just knows that the environment is so challenging for the foreseeable future that some hospitals—even some systems—will be paying higher premiums on their debt because of the perceived risk of the business. It boils down to how successful these mergers are on the whole, and nobody has a good read on that, she says.
"To the extent that these M&As reduce costs, that can be a positive," says Martin. "The potential downside is that after the initial consummation, the hospitals and health systems become distracted by integration and are unable to achieve those benefits. There are also issues with volumes and physician loyalty."
Again, this is nothing you, as a leader in your hospital or health system, aren't already acutely aware of.
So let's not get carried away with this report. Yes, the environment is challenging. It's difficult to achieve the margins that will be needed to ensure the long-term viability of your hospital or health system.
But Moody's ratings are a tool for bond buyers to evaluate you—nothing else. While you can't do anything about the predicted earnings malaise facing healthcare in general in coming years, you can do something about your specific situation.
Some of these headline-grabbing mergers will be successful. Some will fall apart. Healthcare doesn't exactly have a stellar track record of combinations. That's where you and your colleagues can separate yourselves from the pack.
On the margin, healthcare might be a worse bet than it used to be for bond buyers. You'll have to pay slightly higher interest rates because of that perception. But beyond that, it's up to what you do.
What's your strategy for succeeding long-term? Are you beefing up your outpatient book of business? Are you hiring your docs? Are you meeting or exceeding quality targets? Are you coordinating and documenting care appropriately?
Those all depend on you and your team's execution, and that can be a comforting thought in a sector that is undergoing such dramatic upheaval.
In the end, a report about hospitals' creditworthiness is just a piece of information. And your creditworthiness may not even be as big an issue now as it has been traditionally.
Times are tough, but you can still control your destiny. Even if you don't rate highly on the bond market, private equity and other forms of obtaining investment capital are on the rise.
If nothing else, that investment interest from nontraditional sources suggests that amid all the doom and gloom about declining reimbursements as far as the eye can see, there's hope.
At least someone thinks margins won't be crunched forever.
This article appears in the October 2012 issue of HealthLeaders magazine.
Where are you placing your bets in the new reimbursement game? As the shift to value-based purchasing of healthcare services nears, in fits and starts and at different speeds in different areas, leaders of hospitals, health systems, and physician practices know they need to rethink quality, safety, and reimbursement. Given the uncertainty of an array of carrot-and-stick incentives from federal and state payers, coupled with the vagaries of the regional or local commercial insurance and employer market, it's little wonder that healthcare leaders are discussing their options in the language of gambling. It's not unusual to hear leaders ask each other: What cards can we play to lessen our risk profile?
Unlike gambling, however, the success or failure of these bets will not be revealed in the flip of a card or roll of the dice, but in how well individual decisions can be integrated into a cohesive strategy. Not all these strategic wagers will pay off, but leaders are tying their organization's future to expensive state-of-the art technology, different divisions of labor and acquisition of nontraditional talents, and investment in innovative structures of care that will allow them to compete in a more transparent and coordinated healthcare environment.
The scramble for scale
Marquette General Health System President and CEO Gary Muller and his board faced a critical long-term challenge. As the largest hospital (with 276 staffed beds) in Michigan's mostly rural and geographically isolated Upper Peninsula, Marquette General Hospital would seem to outsiders to be competitively well-situated to endure any number of shocks associated with a generally decreasing reimbursement environment and to be able to weather the nationwide push toward accountable care. But a closer look reveals a worrisome outlook, says Muller.
"Our board is highly educated in healthcare and started to see that the future was not looking good as an individual system, even though we're making money," says Muller. "We were not generating the capital we needed for the future."
The hospital still has mostly semiprivate rooms instead of the private rooms that patients increasingly demand; the system's pension plan, while funded, would have become underfunded in three years; and leaders were facing a daunting array of investments in clinical and financial technology.
"We also have some 63 specialty services despite a population base of 320,000, so by staying independent, we were looking at the specter of reducing services," says Tom Noren, MD, the health system's chief medical officer.
Leadership started looking carefully for a deep-pocketed partner. With the help of a consultant, MGHS came up with attractive candidates from Michigan-based nonprofits and some university health systems. But in the meantime, in February 2011, for-profit operator LifePoint Hospitals, a Brentwood, Tenn.–based system with more than 50 hospital campuses across the United States, put together a joint operating company with Durham, N.C.–based Duke University Health System: Duke LifePoint Healthcare.
MGHS signed an agreement with Duke LifePoint in July that transfers ownership to the joint venture and eliminates the hospital's debt and funds its pension program. "It's what our board wanted in starting with quality," says Muller. While the deal seems like a traditional acquisition, he says it will bring additional processes and expertise that will allow quality and outcomes measures to be more fully integrated into clinical practice at MGHS, allowing it to benchmark against Duke and top hospitals in the country. At the same time, LifePoint specializes in rural operations, Muller says, which means much of its processes, technology, and outcomes measures will be integrated into MGHS operations. Those facets will allow the organization to more easily enter into value-based commercial health plan negotiations that the Michigan's payers are increasingly seeking.
"This all forms a basis for value-based purchasing by improving quality and service and lowering costs," says Muller.
The partnership is unusual, in that the Duke LifePoint joint venture, until now, has largely been concentrated in the South, primarily in North Carolina and Virginia. But Muller says the opportunity in Michigan to create a regional health network in the Upper Peninsula, geographically isolated from the rest of the state, was too enticing to pass up.
"Duke LifePoint did their due diligence, too, and they were looking at a top 50 cardio hospital that has every service that any major medical center has except burns and transplants. They also saw an opportunity to capture business that's leaving the UP," says Noren. The transaction closed at the end of August.
MGHS' dilemma was not unlike the difficult choices facing many leaders of hospitals, health systems, and physician practices surrounding independence, the ability to meet accountable care targets being demanded by both CMS and commercial payers, and the evaluation of strategic alignments with potential partners in the continuum of care. Many are finding they can't do it alone, that scale is a highly limiting factor in their ability to participate in value-based reimbursement structures, and that national scope and a focused philosophy of aligning physicians and labor resources in a battle-tested format will be critical to their success long term.
Some key partnerships that will pave the way for a shared future of value-based care protocols at the local level had already been hammered out.
Superior Health Partners, which is a separate nonprofit organization formed by MGHS in 2010 as the basis for Superior's accountable care organization, has eight affiliate agreements with other smaller UP hospitals as well as a major partner in Blue Cross Blue Shield of Michigan. MGHS leaders see SHP as a laboratory for organizing care in a geographic area that they hope can be exported to other parts of the state, says Noren. He and his physician leadership team did a lot of the groundwork in preparing physicians and getting their cooperation through Noren's "service lines" vision of team-based care (see HealthLeaders, November 2011), but lacked the capital to fully build it out with the technological and labor resources necessary to ensure financial stability. That, among other attributes, made MGHS an attractive acquisition for a large player like Duke LifePoint Healthcare.
"Superior Health Partners' organized system of care, which is the evolution of medical home and pay for performance, speaks to the regional management of populations," says Noren. "That's our ACO lookalike. Meanwhile, we have set ourselves up beautifully with our patient registry, to jump into a CMS Medicare shared savings ACO. We want to minimize the risk we need to take by being incredibly well prepared for it."
Change equals uncertainty
If some of what MGHS and other healthcare entities are doing seems experimental and risky, it's only one of many different organizational models being created, whether governmental or in the private sector, that aims to deliver better outcomes at lower cost. It's a daunting task, says David Ebel, a director and senior CFO consultant for Atlanta-based Warbird Consulting Partners, whose healthcare experience includes 10 years as CFO at Mayo Clinic in Rochester, Minn.
"The contrast between paying for services and paying for minimizing services, particularly at the individual level, is an absolutely huge change and complete reversal of the revenue model for healthcare over the last 100 years," he says.
The only certainties surrounding this inversion in payment methodology is that there will be change and that there will be unintended consequences for those changes, Ebel says. Changes in how CMS and commercial payers are organized are themselves breeding a wide variety of organizational models for healthcare delivery.
"There are physician-organized accountable care trials, hospital-based accountable care initiatives, and payer-based initiatives," Ebel says. "This differs market to market, so there's not a specific model we're moving away from or moving to, and it's not at all clear that all will succeed or that any will."
Making the transition to a completely new payment model carries provider risk that's unprecedented. "You can come to a bad end either by clinging too tightly to the current model or by putting all your eggs in a basket of dramatic change when that's not really the way you're being paid," he says.
Big bet No. 1:
Give physicians leadership roles
Large physician practices are finding ways to insert themselves into leadership roles because the hospital is not necessarily always needed as the lead organization in accountable care. If you want to lead change in your market and retain your market clout, however, it probably doesn't pay to wait too long, Ebel cautions, sharing a story about a hospital that, after much deliberation, finally decided that it wanted to put together a primary care network and become head of an ACO.
"Lo and behold, most of the providers had already signed up with a specialty physician organization that wanted to be its own ACO," he says.
Simon Prince, MD, president and CEO of Beacon Health Partners in Manhasset, N.Y., heads one of those physician organizations that wants to lead the shift. In early 2010, Beacon began adding independent private practitioners to its physician network. Critically, barriers to entry are low—providers need only commit to upholding the clinical standards of the organization and have a certified electronic medical record, care protocols, and reimbursement models that are tied to quality and patient outcomes measurements. Though some of those requirements seem daunting, practices can remain independently owned and structured. The idea, says Prince, is to give independent physicians a route toward becoming regionally prominent.
Getting started early is extremely important for physician-oriented accountable care organizations, he says.
"We started our IPA from really nothing—a bunch of independent private practices—in summer 2010," he says. "We made a deal with Empire BlueCross BlueShield that helped to galvanize the group and get us to the next level. After putting that infrastructure in place, we decided to participate in the Medicare shared savings program, and we were selected, which really serves to push all the initiatives forward for us."
One of those initiatives is a coordinated patient-centered medical home initiative, for which Beacon has a new medical director. There are pros and cons to this structure, Prince admits, especially the fact that the group is not affiliated with major hospital systems.
"That makes it attractive to those who want autonomy, but the lack of being under one tax ID and of oversight on their salaries make it a tougher lift to get them on a coordinated EMR and do what we need to do to push the
agenda forward," he says.
The group is focusing on partners in the disease management, care management, and IT space, but at least for now is eschewing deals with what Prince calls "big institutional partners" like hospitals and health plans. He says the aforementioned BlueCross agreement is operational and reimbursement based, rather than strategic. Right now, the focus is on improving care and being able to prove they've done so.
He's counting on the fact that most of his partners are starting to understand that the push toward proving a practitioner's value-add is not a passing fad.
"We're not going to get enhanced rates and shared savings bonuses for doing nothing," he says. "The biggest risk is in not doing it. We have to, unless you want to join a hospital or health system and cash in your chips. It's just not sustainable to do it the old way."
Big bet No. 2: The risk in doing nothing
Indeed, when asked about the challenge of accepting risk on patient outcomes in any accountable care model, whatever its particulars, those interviewed for this story almost always turned the question around in a similar way that Prince framed his answer. The biggest risk is in doing nothing.
Rick Lopez, MD, chief medical officer of another physician-run ACO, Atrius Health in Newton, Mass., sings the same tune, although he points out that Atrius started its journey well ahead of other physician-led ACO concepts. "The risk of remaining on the sidelines is that the train will pass you by and you'll be even further behind in two to three years," he says.
Atrius has a long history of managing under global payment and accepting risk. Ten years ago, about 40% of Atrius's revenues were global payment. Now that number is about 65%, he says, so Atrius has built, over time, infrastructure to support that system.
"It's not going from 0 to 60," he says. "We were already going 45 mph."
He says if there was a time when Atrius was bold strategically, it was in retaining that infrastructure in the early part of the last decade, when "we were driving toward a totally fee-for-service environment. In that model, a lot of groups took down their infrastructure to manage care because things were moving in the other direction, and this infrastructure is expensive. If you're just in fee-for-service and it's about churning out services, then clinical pharmacists and care managers and IT systems are just overhead. A lot of places reduced or eliminated those and it took courage and mission to say, 10 years ago, ‘No, this is part of who we are, and we'll hold on to this.' "
Lopez says creating an accountable care strategy is a difficult calculus no matter which group leads the effort or when it starts, because of the many moving parts. Atrius has to work with skilled nursing facilities, for example, to develop a network for its patients with clear-cut standards and accountability. Information technology is another big component, he says, because interoperability helps ensure that transitions in care sites and protocols occur and that no duplication of services occurs. The IT infrastructure required significant investment in a proprietary data warehouse and in analytics.
"This investment is necessary so we can understand high-risk patients, their status, who needs outreach, and in tracking our performance overall." The benefit of that investment has been to provide Atrius with the actionable data it needs for population management, says Lopez.
"We provide information that cascades down to the physician level that supports our quality and care management programs," he adds. "Information included is for all patients from our EMR and administrative claims data for our risk patients." Examples include identification of high-risk patients, high-utilization patients, patients with "defects" in their quality metrics who need outreach, and rosters of patients with certain disease characteristics that require ongoing monitoring, maintenance, and outreach.
On the cost side, the data warehouse and analytics tools reveal data such as case costs of various types and utilization rates, as well as support in contracting with hospitals and payers. The tools can also model the pros and cons of new business arrangements. Finally, the tools can provide analysis of data for practice variation patterns that are amenable to quality and efficiency improvements, Lopez says, carefully noting that those are only some of the applied uses for the data warehouse.
Atrius is also very open to partnerships and affiliations with hospitals, citing the need to develop collaborative relationships with "a multitude" of hospitals and closer collaborations with a smaller set of preferred hospitals to deliver value for patients.
"We've done a lot of work meeting with hospitals regularly, and in publishing a scorecard, which measures them on a series of qualities," he says. "We'll be able to share with them data that they may not have seen before because we have exchange data about how they compare with the other 19 hospitals on the list."
The overriding goal is continuous improvement. Atrius has invested heavily in Lean process improvement over the past four years, which gives leaders the ability to adapt and implement changes as they figure out better ways to manage both patients' costs and their care. He says organizations that have fully embraced Lean seem to have been able to remove waste from the system in a dramatic fashion.
"Because we have incorporated Lean methods into everything we do, it's difficult to separate out the savings from Lean specifically," Lopez says, adding that Atrius has seen a decrease in the growth of its total medical expenses in the past two years from double-digit growth down to low single digits.
"Who knows what it will evolve to in the next five years," he says. "But if you're doing it on less cost and patients are happy, regardless of your payment mix, you're going to be well positioned."
He concedes the task of creating accountable care structures in Massachusetts—which has large integrated systems, five of the 32 CMS Pioneer ACOs (including Atrius), and a long history of managed care and prepaid delivery that has persisted beyond the 1980s and '90s—may be considerably less difficult than elsewhere, especially for physician-controlled ACOs. But he says the biggest issue with the transformation is not procedural, regulatory, or dependent on market-moving organizations such as health plans or the government leading the process. It's culture change.
"You can hire a dozen care managers and spend a few million dollars to put in an EMR or data warehouse, but if people and physician leadership aren't compelled that this is an important mission, it's really going to be hard to move the organization forward," he says.
Big bet No. 3: Standardization
As the chief medical officer at Intermountain Healthcare—long upheld by politicians and others as a model of accountable care execution and strategy—Brent Wallace, MD, has done a lot of the groundwork toward establishing an accountable care structure at the 22-hospital system based in Salt Lake City. Yet Intermountain declined to participate in CMS' Pioneer ACO program. Does that mean it is backing off the strategy of taking on risk and reward?
Not at all, says Wallace. He says even though the system has achieved a lot in accountable care, especially surrounding improvement in costs and outcomes that can evolve from a strong commitment to information technology, he's still having a lot of difficult conversations with physicians over the need to participate in some of the system's internal initiatives toward accountability.
"We are working toward accountable care, "but we're defining it with physicians as shared accountability between Intermountain, physicians, and patients," Wallace says, adding, "I can't stress how important it is to develop among the physicians—especially those affiliated with the organization—an understanding that there's a need for change. The status quo is not really an option, and a large number of physicians in this country don't recognize that. The second cornerstone of that change actually needs to be a focus on quality care before you can get to establishing a medical home or ACO or any of these other things. If they don't understand a lot of what we try to do is aimed at accomplishing those ends, they look at it as the newest flavor of the month."
For the past 15 years, Wallace says, rather than experimenting with reimbursement directly through ACO vehicles created by others, Intermountain has focused on standardization among its hospitals and outpatient sites, developing guidelines for care protocols, measuring the protocols' impact on patients and physicians, and using data and analysis to offer feedback to physicians and other caregivers.
Interestingly, as Intermountain has developed focus in areas such as beefing up evaluation of how the flow of funds might change as the organization moves into population-based payment, it has not as yet signed broad agreements with payers on shared accountability, although its employed medical group does have some value-based structures with other payers. However, he says, "these are pretty low risk, taking the form of additional payment for certain metrics being attained."
Part of the reason for the system's slow pace of adding value-based structures, especially bundled payments, with its payers is because it can experiment with its own captive health insurance company, SelectHealth.
"We're working on how to appropriately incentivize everyone in the care delivery process," Wallace says. Although Intermountain's hospitals have worked with SelectHealth on bundled payments for total knee replacements, for example, "it is amazing how complex this is even for a fairly well-defined episode of care. I doubt that we will be actively pursuing bundled payments with other payers unless they push us toward that methodology."
Still, there's room to experiment with a captive commercial plan. There's a team working on shared decision-making between doctors and patients, for example.
"A lot of expenditures are semi-elective," Wallace says, mentioning such interventions as total knee replacement and cataract surgery. "It's really important to do a much better job than has been done historically on educating patients on benefits and risks with those interventions. Rather than being a situation where a physician has a procedure they could do that will get them paid more, you really get the patient well educated so they are involved in making a more rational decision. Our belief is that as we do that, a number of patients will say, ‘Not yet.' "
Meanwhile, Intermountain is having exploratory conversations with physicians about how to change their compensation methodology. That is less difficult for Intermountain's more than 900 employed physicians; independents still need
some convincing.
"There's a concern that if we do that, we will decrease the amount of work they have—that is fee-for-service thinking," says Wallace. "Our belief is that our docs are still going to be plenty busy, even if the number of procedures per population we're doing is less."
Intermountain's service area is blessed with population growth, and with the entry of the baby boomers into Medicare, Wallace says Intermountain will therefore have a larger population of patients for which it is providing care, all of which preserves volume for its physicians.
"They get it, but they don't reflexively think about it. We're trying to help them understand the realities of those population dynamics," he says.
Big bet No. 4: major investments
Banner Health in Phoenix fits the mold of a health system that has bought into the accountable care structure wholeheartedly, says executive vice president and chief medical officer John Hensing, MD. Again, a recurring theme is that sitting on the sidelines or "watchful waiting" is not a valid strategy.
Banner, one of the largest nonprofit hospitals in the country, with 23 hospitals in seven states, has been focusing on organizing its employed physician base—Banner Medical Group—but Hensing says that has mostly come on an ad hoc basis as physicians have expressed interest in being employed rather than independent. By far the biggest investment the system has made for its value-based care strategy has been in electronic medical record system and data warehousing capabilities.
"The medical group is an aligned group of clinicians that can focus on clinical excellence, but certainly the biggest test so far is the formation of the infrastructure and medical leadership that's required to form a delivery network that involves hospitals, the medical group, and independent physicians, so that we can participate in the marketplace of the accountable care model," he says.
As one of 32 Pioneer ACOs under CMS, Banner is seeking expertise in contracting, network development, and redesigning care delivery around the outpatient environment to avoid hospitalization and expensive medical interventions. In the payer space, it has joined a partnership with Aetna that should help achieve some of those metrics. Under the partnership, Aetna shares much of the population management and care gap identification, particularly in the ambulatory environment, to help Banner take on medical cost risk.
"That IT technology is quite new, and we call it the Aetna stack, and we're just beginning to understand those capabilities," Hensing says.
Though the Aetna partnership is important, Hensing is careful to say that Banner's is an open system, in that its strategic plan was never intended to be exclusive to one payer. Banner is managing Aetna's population in two ways, one with a narrow network product by which Banner is the predominant delivery system for all care, and also through a relationship that allows a so-called attributable model.
"With that one, we negotiated a reward and penalty for achieving certain targets of clinical performance," Hensing says.
Using that model as proof of concept, Banner has created a similar relationship with other major payers. Hensing says Banner recently successfully completed a similar narrow network product with Blue Cross Blue Shield of Arizona and recently completed discussions with Health Net for a narrow network product. With both, Banner will be using Aetna's infrastructure to apply to any population for which Banner has assumed risk.
"If our inpatient business remains the same, we'll continue to wring out cost, but that's not the big opportunity," Hensing says. "We're going to want to focus a lot of resources on managing people where they are and keep them out of trouble if possible. We've finally gotten into an arrangement whereby if we do a really good job, we'll have resources to do it better tomorrow based on how we're going to be paid for these services."
The big question facing Hensing and Banner is whether they can successfully retrain people to lead teams to help manage the most expensive members of the populations—those who consume "tremendous resources"—by 2014.
"We keep saying 2014, because 2015 is when we will really be assuming major risk," Hensing says. "So right now we're still quite early in a lot of our work. We don't have ambulatory protocols in place, we're not utilizing the full features of the Aetna stack, and we need to bring to maturation the leadership model in our own medical group."
Some pundits have suggested that hospitals should try to hire or contract all the medical underwriting and actuarial expertise they can to prevent such partnerships from becoming too one-sided, but Hensing scoffs.
"Having people who understand medical cost risk and clinicians experienced in medical management of defined populations is vastly more important than an actuary telling us how much risk we have."
But speaking of risk, Hensing also weighed in on the risk of so dramatically transforming reimbursement.
"The path we have been on is actually a low-risk path. Is there short-term financial risk if we stub our toe in risk assumption? Yes, there clearly is. But we view that as short-term only. With our ownership of a Medicare Advantage plan and a risk-assuming PHO [physician hospital organization], we've already got expertise that afforded us the confidence that even the short-term financial hits would not be deep and create harm to the organization. The worst thing, and the most high-risk, would be to continue by maintaining the status quo of nonpreparation for change."
You probably knew that either instinctively or through experience, but now there's plenty of data to back up the contention. According to a Booz & Company analysis, only 41% of all acquired hospitals outperformed their market two years after the deals were consummated.
Here are the particulars of the study: Booz analyzed a representative sample of 220 hospitals that were acquired between 1998 and 2008 for which pre and post-transaction hospital performance data was available.
They calculated changes in operating income andoperating margin for the acquired hospital over the period two years before the transaction and two years post transaction.
OK, so what does it all mean?
Get Strategic Essentially, it means the healthcare industry overall is reactive right now, when it really needs to purposeful and strategic, says Booz partner Sanjay Saxena, who has advised on many mergers both inside and outside the healthcare industry. "You see someone for sale, and suddenly there's a frenzy of activity concerning whether to go after them," he says. "If you look outside the healthcare industry, companies are very purposeful, and have acquisition playbooks with lists of other companies they want to buy."
This all sounds obvious, he says, but healthcare doesn't have this type of metrics-driven future game planning. In part that's because historically, the industry has not had to compete on value the way others have.
But it's not as if healthcare mergers are short on metrics. After all, these are transactions that are debated and deliberated all the way from the local newspaper to the board level, to the community, and even to the legislative level.
Detailed financial documents are shared among the parties before acquisitions are final. So how do so many fail to achieve the synergies many of the new partners love to boast of when an acquisition is announced?
Clarity, Not Urgency Saxena says it all starts with what you ultimately want to achieve as an organization, and a sense of clarity—not urgency—about how the pieces of any acquisition will fit into that vision. That kind of long-term vision works for both acquirers and especially for those looking to be acquired, he says. "The first thing the smaller guys need to do is make sure they can't go it alone or through sharing some capabilities with someone else," he says, referencing collaborations short of a merger. "Can they survive? Is there a need or niche in the market they're fulfilling? If not, their reason for existence as a standalone entity might not be there."
Maybe you serve the underprivileged. Maybe you're in attractive geographical areas that big players might not already be in. If you don't have those advantages, maybe you do need to court an acquirer.
"What are the strategies of the folks they would be partners or bought by, and what do they have that might fit into that? Continue to invest in those elements so they are attractive to potential acquirers," says Saxena.
The study does not include data for longer time periods, suggesting the data has been selected to deliver a bit of a headline number. But given even these statistics, it's clear that mergers should be contemplated with caution. The study does offer some detail about specifics of mergers that have worked out financially. To wit:
Combinations involving academic medical centers had significantly lower outperformance rates versus all transactions (20% as acquirer, 18% as target)
Hospitals acquired by large systems (15+ hospitals) had a 51% outperformance rate vs. 34% for hospitals acquired by smaller systems (<15 hospitals) suggesting some support for scale.
Dating Comes Before Marriage Saxena suggests that time should be spent assessing something he calls "capability fit" before agreeing to a merger.
"Capability fit is really meant not as functions but as sets of activities which differentiate you and which you are good at in the marketplace," he says. "When there's a degree of coherence and consistency you see a great deal of success."
For instance, it's incoherent for a high-cost player, like an academic medical center, which has built around innovation and being leading edge, to try to become the value player by trying to appeal to the Medicaid population or small, price-sensitive employers, Saxena explains.
"They're not consonant with ability to be low-cost and affordable, and often the acquired entity takes on all the bad habits of the acquirer."
Don't Be a Wallflower
But here's what's interesting: Many hospitals and health systems are at least considering that full mergers aren't in the best interest of either party. That's why we continue to see innovation on the partnership front, something the study doesn't attempt to address, but Saxena will.
"The point you raise about minority ownership ranging from arms-length contracts to joint ventures and affiliation agreements is important," he says, equating such deals to "dating."
"Let's just say there's a lot of dating going on right now."
But what about those who may not be particularly well-positioned for the future, but happen to dominate their local markets? They shouldn't wait too long before exploring their strategic options, Saxena cautions. In other words, don't be a wallflower at the dance.
"If you wait until you're in a precarious position, you've probably waited too long," he says. "If you're just resting upon a strong balance sheet, you're arguably not adding the kind of value you need to in the community and you're existing for the sake of existing.
Those executives should be out in the marketplace looking for partners and doing scenario planning exercises where with a certain trigger they'll go one way or another and agreeing on those triggers with their boards."
Should any of those "triggers" be set off, a sense of urgency would come into play around creating a transaction, he says. In the case of smaller hospitals, you could call it a "living will."
"That would serve them well and ensure they get the most value from a transaction and can name their terms," he says. "If you wait too late, it's just a fire sale and you've destroyed value in the community."
This article appears in the October 2012 issue of HealthLeaders magazine.
Longtime veterans of healthcare can easily remember a previous time of intense change in healthcare in the form of managed care in the 1990s.
"The approach was, we'll buy them and they will become engaged, and we know how to run them because we run a big hospital," says Brent Wallace, MD, chief medical officer at Salt Lake City–based Intermountain Healthcare.
That experiment ultimately didn't work out too well for many hospitals and health systems as it became apparent that many of them overpaid for the practices they did acquire, and both patients and physicians rebelled against managed care and its blanket preauthorization rules.
"Hospital folks don't have the skills to manage that effectively," he says. "For that reason, hospitals lost bucketloads of money and many divested practices they had acquired. We didn't do that. We set up a totally separate management structure, and because of that, although we sustained some losses, they were not nearly to the same degree as most organizations."
He says hospitals are following that lead this time as they acquire practices.
"Another thing that's different is that when we went through the HMO era, we had insurance companies setting up rules that would govern and restrict certain procedures and tests," he says. "The docs were constantly bumping up against preauthorization."
This time, he says, management has a better understanding "than 20 years ago about the usefulness of those modalities. So we're in a better position with physicians who make decisions about what's appropriate utilization."
The second difference is in the organizational structure of ACOs, he argues.
"If you operate them correctly, you have physician leadership devising the criteria on which we will base the appropriateness of those things rather than coming out of the black hole of an insurance office," he says. "Time will tell if it will succeed, but I'm hanging hopes on that."
Whether such an investment in transformation makes sense for many hospitals and health systems is linked to whether the investment in such new roles and care structures will ultimately justify the cost.
"The answer is yes and no," says Wallace. "The critical issue is timing for most hospital executives. The majority of healthcare leaders, unlike the majority of physicians, know that this is going to happen. What today is a revenue generator tomorrow is a cost center."
But the question is when that is going to happen and whether those executives have any control over the timing.
"Our team has been dealing with that question with the payers in this area," he says. "When we set out a timeline over the next few years, the first step for us is the goal of
having all hospital payments be DRG [diagnosis related group] payments—no discounted fee-for-service."
The biggest hesitancy is timing, says Wallace, adding that making the determination is difficult because, on one hand, executives might drive their organization toward doing everything right for population-based payment but still getting reimbursed on a fee-for-service basis. The flip side is, if you don't do enough and suddenly the payment system is flipped, then you can't make it happen.
"My personal guess is it's going to happen faster than most people think," says Wallace. "There's enough wheels in motion that it will happen in next two to five years."
One of the things standalone hospitals and smaller systems can do is approach large systems in the area and ask to collaborate on quality.
"Even though we may be competitors economically, we shouldn't be competitors in quality," says Wallace, adding that he's fully aware that some larger systems may be
hesitant to do this.
"But you can at least share in some of the quality improvement things you're working on and look at protocols. That's medical knowledge, and some larger organizations have developed those tools."
Even as a large organization, Intermountain is convinced that the key to financial success is to focus on quality care delivery, says Wallace.
"If we're only focusing on economics, we'll fall short."
This article appears in the October 2012 issue of HealthLeaders magazine.
This article appears in the October 2012 issue of HealthLeaders magazine.
The University of South Florida's Morsani College of Medicine in Tampa has been training physicians since its charter class enrolled in 1971, but apparently Morsani and other medical schools have not done enough. The physician shortage continues to grow, and the general media rarely misses a chance to pound the public with dire projections—as though the answer is to simply push more students through the education pipeline.
One problem with that simplistic thinking is that the pipeline is constrained by all manner of complex relationships. The Association of American Medical Colleges predicts there will be a shortage of 90,000 physicians nationwide by 2020. But that headline number obscures the complex nature of the physician shortage problem by suggesting that either there aren't enough medical schools or that the ones we have are not big enough. Add to that mix the knowledge that under existing predominant care patterns, the Patient Protection and Affordable Care Act will exacerbate the problem by making so many more people eligible for health insurance.
Additionally, some of the shortage can be attributed to other factors:
Physicians are changing their willingness to work long hours
New residencies aren't being created as quickly as new medical schools are
Medical schools and hospitals where impressionable physicians get their early training are doing a less-than-optimal job of preparing new doctors for a rapidly changing workplace in which teamwork with other medical professionals will be at least as important as technical proficiency
The residency problem
Stephen Klasko, MD, who is both CEO of USF Health and the dean at Morsani, says part of the problem in minting new doctors stems less from a lack of medical schools and more from a lack of creativity in developing new residencies.
"The fact is a plethora of states are building new medical schools, but they haven't created new residencies," he says. "Florida has four relatively new medical schools and almost no new residencies."
That's because new residencies are funded primarily by the Centers for Medicare & Medicaid Services—the same federal agency that's under extreme cost pressure for the provision of benefits to its millions of individual beneficiaries.
Most medical schools centralize the residencies available to their students at one or just a few local hospitals. USF traditionally has sent most of its 750 residents to the hospital across the street—the 1,000-bed Tampa General Hospital—as well as the 206-bed H. Lee Moffitt Cancer Center & Research Institute, also in Tampa and two Veterans Administration hospitals in the area.
Klasko and his leadership team are hoping to change that, however.
"Instead of centralizing our 750 residents, we'll double that number in the next four years creatively," he says, pointing to the need to distribute that larger number among more facilities.
For example, USF's Morsani is in the final stages of setting up a residency program at Lakeland (Fla.) Regional Medical Center and NCH Healthcare System in Naples, Fla.
"We brought in a CMS expert who showed them how they could get up to 200 residents and get them funded," says Klasko. "The community hospital might not have funding or infrastructure to explore this, so we're coming out to those hospitals and saying we'll provide both."
Klasko is also working on a similar residency program at a 300-bed Florida hospital that he would not name because discussions are not final, and has also embarked on an innovative residency program out of state with Lehigh Valley Health Network, an Allentown, Pa.–based system with two hospitals and $1.5 billion in revenue.
To address the physician shortage program, Klasko says, "the state does not have to build a medical school for half a billion dollars. That's wasteful."
The Lehigh Valley program attempts not only to increase residencies for USF medical students, but also to change the way physicians are trained—that is, focused more on team-based healthcare (see HealthLeaders,
June 2011).
The training problem
Klasko's objections notwithstanding, perhaps new medical schools can be part of the solution; but even those hospital and health system leaders who are heavily involved in creating new medical schools agree that doing so is only a partial solution—an extremely expensive partial solution.
In central Texas, a rapidly growing part of the state without a medical school nearby, Seton Healthcare Family is partnering with the healthcare district, known as Central Health, to build a new teaching hospital, while the University of Texas at Austin, with the approval of the University of Texas System Board of Regents, will build a new medical school in Austin. Seton, which operates more than 90 clinical locations, including five major medical centers, and is owned by Catholic healthcare giant Ascension Healthcare, says a projected shortage of 700 physicians in central Texas will result simply from the fact that the area will add more than a million in population by 2020.
Seton, for its part, will contribute $250 million to rebuild its aging University Medical Center Brackenridge as a state-of-the-art teaching hospital. UT Southwestern in Dallas will expand its residency program and the UT system will spend $25 million a year for the program—contingent on receiving contributions of an additional $35 million a year from "public sources," including Seton.
Seton already spends $45 million on residency programs each year. If everything goes right, says Jesus Garza, president and interim CEO at Seton, the school will have about 50 students initially, and the first class could begin studies in 2015.
"Austin is an attractive place to recruit physicians," says Garza, "but studies have shown that 80% of residents stay where they're trained."
He anticipates that while the medical school and closer residency programs will be part of the area's physician shortage solution, physician training will also have to undergo major changes so tomorrow's doctors will work in a more team-based atmosphere that brings other disciplines—such as nurses, pharmacists, and other allied healthcare providers—into direct responsibility for certain aspects of patient care that have traditionally fallen to physicians. The idea is to free up physicians to deal with more clinically critical tasks.
"As the healthcare system shifts to do more preventive care, that will be the area of most concern," Garza says. "Physician training needs to be multidisciplinary, needs to feature a team approach, and nurses and others will have to work at a higher level. We'll need to stretch our human resources."
Extended roles of nonphysicians is a direction toward which many hospitals and health systems are moving, says Clese Erikson, director for the Center for Workforce Studies at the Association of American Medical Colleges, a medical school trade organization.
"You can see that with the increased number of ACOs and efforts with ‘hot-spotting' [aggressive primary care intervention on the sickest patients]." Bringing nurse practitioners into the communities where the highest utilization patients
are, for example, can help prevent unnecessary utilization, she says.
Such efforts, if successful, might bring much-needed nuance into the discussion of the physician shortage, including disruptions in the types of physicians needed in the future.
Erikson says such efforts might mean healthcare in the medium-term future might be more primary care intensive and may change demand for specialists, but that such efforts—despite the fact that they appear to improve quality of care and seem to reduce downstream utilization of expensive healthcare services—are in such an early stage that it's difficult to define their workforce implications.
"It's too early to say, but I would be surprised if it could eliminate all the shortages," she says.
Changing expectations about work-life balance
Another piece of the shortage puzzle involves the importance many young medical school graduates have placed on leisure and family time. Where in the past a physician might find a 60- or 80-hour workweek common and expected, not so today's graduates.
"This generation of physicians views that person as a caricature," says USF's Klasko. "We are creating a group of physicians with more of a shift mentality, which will increase both the need for numbers and being creative."
Klasko, an OB-GYN, says for example that many in his specialty do not want to be as available to patients as their predecessors were and cites statistics that show that almost 60% of OB-GYNs are practicing part-time.
"If there is a workforce that wants to be on call once or twice a month," he says, "hospitals will not have enough doctors to cover obstetrics and we will need participation between obstetricians and nurse midwives."
He says powerful people, and hospital and health system senior executives count among that number, have to force a national dialogue about how to address the problem, because the lack of coordination between accrediting bodies and funders of physician graduate medical education means they can't seem to find common ground.
"None of these agencies talks to each other. It's like if the Orlando Magic players all practiced in different gyms and then showed up to play together for games," he says. "We haven't solved the shortage because we haven't wanted to."
Hospital and health system leaders have the power to change that dynamic. But, Klasko says, they need to decide whether they really want to solve the physician shortage or whether they want it to continue to be used as an agenda item for self-interested medical societies to lobby for more funding. He says
physicians have to get over themselves, in a way, in recognizing that ceding some responsibilities to allied medical providers doesn't have to mean a shrinking reimbursement pie for physicians.
"The knee-jerk reaction from medical societies is that this is bad, but they're thinking about it in their old guild mentality," Klasko says.
Instead, they should be having a clinical discussion about what's appropriate for physicians to do, and what others can do safely and effectively.
"Some of the medical societies are trying to block this," he says. "I've asked them, ‘What's your primary care strategy?' I'm often met with silence."
He says many hospitals that have never had a residency program could benefit by adding one, but that they face many issues in starting one, including the fact that their own physicians might not want to teach young doctors who will stay in the area to compete against them in the future. While having a residency program might differentiate a hospital, ensure a supply of future doctors, and improve its quality and safety record, establishing one is difficult, expensive, and potentially career-threatening.
"Part of the transition we're in requires that we all recognize there's a crisis and we have to transform," he says. "If you don't use residency to create a teamwork environment, don't be surprised when they get out and they don't act as a team."
Reprint HLR1012-5
This article appears in the October 2012 issue of HealthLeaders magazine.
The day began like any other for Dawn Rudolph, president and CEO of Saint Thomas Hospital in Nashville. She had a raft of meetings with various groups and a full calendar, as usual. All that changed within hours as the scope of a public health crisis that she had never seen became clear.
St. Thomas's emergency room is where the contamination of compounded steroid drug from a Massachusetts pharmacy was first suspected. That contamination, as has become clear over the past few weeks, can be deadly.
The fungus found in vials of an injectable steroid drug used to treat back pain caused some patients to develop an extremely rare version of fungal meningitis, and sick people are still being discovered. More than 17,000 doses of the steroid were shipped to clinics in 23 states. At least 15 people have died in six states. And at least 203 people have been sickened.
But none of that was clear at first.
Similar to military leaders operating in the so-called "fog of war," at the beginning, Saint Thomas had nothing to rely on other than their internal expertise and a surge plan developed for natural and public health disasters.
The hospital's first steps came from those drills, Rudolph says. "Once we knew it was happening, the general medical staff was informed, and we provided them with talking points," she says.
This was an effort of the communications department, not only to inform the public, but to inform the medical and hospital staff of the scope and nature of the problem as they currently understood it, she says. That was important when rumors took flight in the early stages of the crisis, even among family of caregivers at the hospital.
Subsequent testing by the hospital's doctors and the Centers for Disease Control and Prevention in Atlanta discovered that the illnesses were related to the drugs, and suddenly, Rudolph found herself and her hospital at the center of one of the biggest prescription drug scandals in recent memory.
Saint Thomas is far from the only hospital affected by the outbreak. It just happened to be the first to notice widespread problems with patients who had been injected. And it's at the epicenter of a whole new area of worry and potential liability for hospitals nationwide.
The clinic that unwittingly injected the contaminated drugs, the Saint Thomas Outpatient Neurosurgery Center, is not affiliated with the hospital, even though it is located within the building.
But Rudolph says the majority of the patients who were sickened were initially treated in Saint Thomas's emergency department. Once the connection was made to the tainted drugs, the clinic took the responsibility to notify all its patients who might have been exposed. That left Rudolph and her clinical and administrative leaders and to deal with the rest.
She quickly found out that the public doesn't necessarily make distinctions about the ownership of an unaffiliated clinic, especially one that carries the hospital's name. The public knew it happened on Saint Thomas's campus.
To try to get ahead of the situation, Rudolph organized coordination calls with the clinic outlining who was responsible for what, and tried to determine the best course of action as it became evident that the crisis would grow larger.
The clinic took care of notifying patients, but the hospital was responsible for doing what it could for infected patients. At one point, Saint Thomas was treating up to 45 patients a day who had received the injections—not a small feat for the 29-bed ED.
As a CEO in a crisis situation, Rudolph says it's most important not to be in the way, especially as far as the clinical care teams were concerned. Her role, as she saw it, was to be involved in all the conversations going on about the crisis, so that she could have an up-to-date global view of the situation.
"We have wonderful leaders in infectious disease who could work with the Tennessee Emergency Management Association and the CDC, so I stayed out of the way there," she says. The COO and CNO coordinated ER and ED and internal support, "to make sure we're keeping our daily operations running and anticipating how this might evolve."
Being at the center of a mushrooming public health scare wasn't something she expected, but she says "being in hospital operations for 20 years, we're certainly familiar with operating in the face of a disaster. Still, this was a fairly unprecedented situation around care protocols, so we had to figure out how that might affect our already developed emergency plan. I had to be the person who is observing."
Not only was she observing, but she was also making herself available to anyone who had anything to do with managing patient care in the face of the crisis.
"Certainly, in hospitals and health systems, we have to be able to surge, meaning that you have to know where your entry points are in the hospital and develop an incredible amount of teamwork," she says.
"That starts before any crisis and you're always trying to surround yourself with good people—people who know their operations resources and can think creatively in the moment, articulate their concerns, and look ahead."
That ability to anticipate challenges is hugely important, she says, because every crisis is so different, and always unexpected.
"We have our manuals and whatnot, but when you have an event, you have to bring the team together, scope the problem, and give them accurate information on what we're dealing with in the immediate future," she says.
It's important to plan for the short term—"the next four hours, for example," she says. "What am I missing? That's a question I always ask in meetings," she says, opening the floor up to anyone involved. "People can offer a lot in the problem-solving process."
Among first things everyone in the hospital did was check their supplies. "Our hospital does not use compounding pharmacies," she says, "so there was no need for a stopgap measure" regarding revised care protocols.
One the immediate crisis was contained, however, Rudolph had to deal with bruises the hospital had sustained to its own reputation following a time of intense national media scrutiny.
Remember: While it is true that the hospital does not use compounding pharmacies, the general public makes no distinction between shots administered within the hospital and shots administered by a similarly named, but unaffiliated clinic situated on the same campus.
"We needed to get the story right over time, but that didn't overwhelm us because we knew in the halls we were doing the right thing in preparing daily for what we needed to do," she says. "Still, don't be surprised by the psychological effect when the institution goes through any event like this."
By that, she means erroneous reports by local media, for example, which initially tied the crisis to a viral meningitis case in the area, suggesting that the hospital—and its staff—may have been at fault.
"The staff knew it wasn't accurate, but that was a psychological blow," she says. "There's an adrenaline rush when these things happen, and it does affect staff. They need to talk about it."
Several meetings were scheduled with staff to make clear the facts of the story.
"You need the ability to say here's the talking points you can address with your family, who might be worried about you," she says. "People were picking up pieces of the story and they needed to feel confident."
While Saint Thomas has regained its footing and Rudolph says a sense of normality is returning, patients are still being treated at the hospital for meningitis associated with the injections and will be for some time.
In hindsight, which Rudolph says she can afford right now, she would have made at least one major change to the way the administrative team, including herself, handled the crisis.
"I would have immediately grabbed an administrative person and had them pull a chronological list of what had occurred that day relating to the crisis," she says. "We did that in spots, but things evolve fast. I would have said, ‘you're designated to be the record keeper and check in several times a day with team leads,' because it was so multidimensional."
That's because accurate communication is of the utmost importance, behind only patient safety and care, during a crisis, she says.
"I'm still spending more time walking the halls, talking with people and being able to hear their side of the story," she says, noting that her calendar is still cleared. "You clear your calendar and can be anywhere you need to be to make connections. Make it your priority."
Waste is the enemy. Not health plans, not employers, not Obamacare.
That was the message from hospital and health system senior executives who participated in discussions about cost control at our annual CEO Exchange in LaJolla, CA, last week.
We invited a select group of top leaders to this event. Yet for all their talents, they recognize that they have very limited ability to influence what happens under healthcare reform. They can't change readmission penalties, for example.
Waste, on the other hand, is internal. It's something they can presumably control. Maybe that's why they were so excited about their accomplishments and about what is left to accomplish. It was refreshing being the moderator of a discussion that for once, didn't focus on outside influences.
Instead, our discussion was proactive, with energized CEOs sharing insights about specific internal interventions they're leading at their hospitals and health systems to help drive cost from the system while improving quality.
We started with the premise that revenue cycle and supply chain initiatives over the past several years have yielded results, but are, in a sense, "over." Senior leaders have seen the results and know what to expect from them.
While that turns out to only partially be true, what got these CEOs excited was talking about process re-engineering.
"The real opportunities going forward will be in utilization—clinical utilization," said Paul Kronenberg, MD, CEO of Crouse Hospital in Syracuse, NY.
To hear shop talk from this group around process re-engineering was somewhat of a surprise. You get used to thinking of CEOs as somewhat disengaged from the messy details of healthcare. You think they prefer to focus almost exclusively on the big picture.
In other words, they hire others to handle these matters. But what I found was a group of CEOs who are intimately engaged with strategies aimed at cutting overutilization. This means we were absolutely right in targeting the high cost of waste as a key strategic issue in which they are intimately involved.
Overutilization of healthcare services, supplies, and labor is kind of like that itch on your back that you just can't scratch. You know it's there, and it's a huge distraction. You know you have to get on with your other work, but you just can't quite put that itch out of your mind. I came away from this discussion knowing that a certain group of senior leaders has procured back-scratchers, and they know how to use them.
Crouse, for example, has made it a priority to engage significant medical staff in its clinical utilization program.
"We hired quality officers that are full time physicians in surgery and medicine who are looking not just at quality, but at utilization tied to quality," Kronenberg says.
One of Crouse's quality officers frequently sends out "did you know?" statistical emails to his colleagues referencing cost savings opportunities because often physicians don't realize the true power of their ordering pens. For example, if each ordered one less test per patient it would save the hospital over a million dollars a year.
Kronenberg says the point is not to deter doctors from ordering necessary tests, but to help physicians to remember to check whether a potential test might have recently been performed on the patient.
Another area of emphasis is on blood utilization. Hospitals could save "about $1.06 million per hospital per year" without changing patient outcomes, says an economic report from Premier. Crouse has taken the extraordinary step of including a blood utilization officer, who is a physician, on staff to help standardize guidelines surrounding transfusions. This move has reduced the hospital's transfusion costs significantly.
The next big frontier is variation in supplies, Kronenberg says.
Mark Brenzel, CEO of Lake Cumberland Regional Hospital in Somerset, KY, a LifePoint hospital, has a supply committee made up of clinicians. They're hammering suppliers. Several manufacturers are no longer in the hospital because they wouldn't meet targets on price.
His physicians agree that quality has not suffered and value has dramatically increased, Brenzel says.
While he concedes his revenue cycle is fairly lean, Ron Paulus, MD, CEO of Asheville, NC-based Mission Health, says there's tremendous opportunity for cost savings surrounding physician preference items.
Much of his re-engineering work involves culture change, which on the surface is simple, but unquestionably is ephemeral. Mission starts with the premise of getting each patient to the desired outcome, without harm, without waste, and with an exceptional experience.
To do that better, he's employed facilitators to go through processes with patients step-by-step, so that no opportunity to eliminate waste is missed. And that includes movement. I'll explain: Mission's ED workers might walk 4 or 5 miles a day in the course of doing their jobs.
Maybe 3.5 miles of that is wasted effort. By constructing detailed value stream maps around what workers—from frontline check-in folks to surgeons—are actually doing during the day, they can consider changes to work habits that produce real cost savings. Mission backfills labor needs during the evaluations so that frontline staff can fully participate.
These value stream maps are created from both the patient's and the clinicians' perspective. Sometimes that means following patients from beginning to end as they make their way through dozens of visits.
The process sounds time-consuming and expensive, Paulus concedes, but when you consider the power of changing a practice that may be multiplied thousands of times over the course of a year, you start talking about real savings when those habits are broken—habits that don't add value in the first place.
From the data generated from these mapping exercises, Paulus says team leaders are empowered to "eliminate what you can, and what you can't eliminate, you automate. Third, if you can, you delegate to a lower-level employee, and fourth, you engage patients in what they can actively be integrated into," he says. "Those are foundational components. From that data you get surprising insights."
And surprising cost cuts. Paulus's teams go into every redesign with a 15% cost reduction target in mind. The emergency department and medical-surgical departments have already undergone this redesign, with the OR and critical care on the horizon.
What's important about all of these activities, and they are a small sample from more than 20 CEOs who participated in our discussions over two days, is that they're at least co-led by clinicians, not executives with no medical training.
And by effectively preparing early for what others will do to you, that is, reduce your revenue stream through reimbursement cuts, you'll be ready to survive and thrive in a new, less generous reimbursement environment.
This is just a taste of the insights gleaned from the 2012 CEO Exchange event that we'll be sharing with you in the coming months through a range of Impact Analysis reports. Look for one on Sustainable Cost Reduction Strategies, in which I'll share dozens more ideas with you in which your peers are succeeding. I can't wait to get started.
Hand-pick 30 of the most innovative CEOs in healthcare and invite them to gather for three days of intense discussions. What do you get? Rare access to an unprecedented concentration of thought leadership. We'll be parsing it and sharing it for weeks and months to come.
I'm nothing if not economical with my time. That's because with three little kids, I don't have a lot of it. That's one reason why our inaugural invitation-only HealthLeaders CEO Exchange event this week in California is so exciting.
With all the ideas flowing back and forth between our editorial staff and 30-odd healthcare CEOs, I'll make good use of my time. Here's why: What takes me days and weeks of persuading from schedule managers, executive assistants, and an unyielding calendar can be accomplished in three days of virtually unlimited access to some of the most innovative leaders in healthcare.
The level of learning, insights, and story ideas that will come from our time together will be sky-level. I just hope I can take it all in. And you'd better hope my colleagues and I can take it in as well, because in the coming weeks and months, we'll be sharing with you what we've learned during three days of intense discussions surrounding physician alignment and integration, cost reduction strategies, and mergers and acquisitions.
Just like we did last year with our inaugural CFO Exchange, which we repeated last month in Kiawah Island, SC, we'll break out the most interesting and salient points our guests make about the many changes the healthcare business is undergoing right now.
Producing such an event is no small undertaking.
Healthcare CEOs are some of the busiest executives in the world right now as they look to fundamentally reshape the way their organizations do business in the coming years. Many have likened the transformation to having one foot on the dock and the other in a boat with a racing engine, but that analogy doesn't even begin to illuminate the changes through which these people will have to lead their organizations in the coming decade.
Last year, in one session with the CFOs, we focused on the new era of cost control outside of traditional areas such as the supply chain and physician preference. Panelists talked about the cost drivers in their hospitals and health systems, the cost reduction strategies in which they are finding the most success, and the relationship between clinical quality and cost reduction.
One hospital internally funded an innovation center, through which it developed analytical tools that can, in essence, predetermine whether or not a patient has heart failure even before the physician knows it. They can also apply from that a social variant algorithm to determine to what extent that patient will be at risk for readmission within 30 days.
As I mentioned, this is cutting edge stuff.
The CEOs aren't just coming together under our auspices for our benefit. They'll learn from each other what works and what isn't quite ready for prime time. We'll also share with them our current research—ideas that may help them navigate the uncertain future.
Finally, through special reports like the ones mentioned above, we'll share their insights with you. It's the next best thing to being there, and it's just one of the ways we're helping leaders do their jobs in an increasingly difficult, but exciting and transformative era in healthcare.
When the medical home comes up for discussion, I'm reminded of an old and tired joke about hospitals that is a sly twist on the old saying, "if you've seen one, you've seen them all." Of course, you've all heard it: "If you've seen one hospital, you've seen one hospital."
In other words, they're all remarkably different in culture, how they operate, how they treat patients, what's important to them and how they survive. My story in this month's HealthLeaders magazine looks at least partly into how hospitals make the case to patients for the switch in treatment protocols. But I'm even more intrigued by how health systems and physician practices measure this important metric: How do patients perceive the various medical home philosophies out there?
No two are alike, yet the goal is the same: Get the patient, the patient's family, and the patient's caregivers to participate directly and actively in the success of their care. When you put it that way, it seems like a slam dunk.
Of course, this mostly pertains to those patients who have the most complex conditions and who require constant monitoring, such as diabetics, those with chronic heart failure, cancer, and innumerable other chronic long-term maladies.
There's not much involvement—or need for involvement—from a medical home perspective for a healthy 22-year-old, for example. The medical home patients that benefit most, and who can benefit most from a cost perspective, are those whose treatment is the complicated and expensive.
Of course, that's one reason the medical home philosophy and regulations were developed, because these patients were too often receiving suboptimal care and or unnecessary care, which increases both suffering and costs. That's a lose/lose proposition if I ever saw one.
But often, too little time is spent on the way patients view the changes they are expected to make under the medical home organizational philosophy. I was intrigued by the fact that most of the sources with whom I spoke treated the medical home concept not only as an opportunity to reorganize the ways they deliver care, but also to educate patients on why the way their care was changing was better.
That's because on the surface, to the patient who is not privy to all of the technological and organizational revision that is behind how their visit is conducted, it might seem as though they are being shunted off to lower-level employees so the physician doesn't have to spend as much time with them.
In reality, they're getting much more individualized attention—in most cases. It's up to the provider to explain why the new way they're interacting with their physician is preferable.
Instead of showing up unprepared for an appointment likely booked months previous, patients get phone calls, pre-visit planning meetings, lab visits, and the like in preparation for the physician visit so that time is used more productively.
Physicians no longer need to answer insurance questions or other low-productivity activities because that's all been taken care of prior to the visit. Such pre-visit interactions might involve a social worker, a nurse, a nutritionist, or all three. And with an electronic medical record populated with the latest results, visits with the physician are more productive and offer fresh data for the doctor to review with the patient.
If more people are paying attention to you and your issues, offering real solutions to some of the problems you're experiencing as a patient rather than waiting for the three-month or six-month physician follow-up, aren't you more likely to take an interest in managing your care?
Most of the sources I interviewed for my story feel that's the case. And the early results from their changes in practice are encouraging. Their stories are a reminder that while significant changes need to be made, it's more important than ever for hospitals health systems and physician practices to ensure the message that this is all about better healthcare, is received by the patient, and that it comes through loud and clear.