No, this isn't a story about the latest CEO to face a no-confidence vote from his physicians. In today's healthcare world, that kind of revolt seems quaint.
It's about how you're going to be able to thrive in a lower reimbursement environment that requires you to find and implement big efficiencies.
You're probably pretty comfortable with the way your lieutenants report to you in your organization. Sure there are issues, but for the most part, you and your team get things done.
I'm not exaggerating when I say we are experiencing a seismic shift in what you're ultimately compensated and rewarded for in healthcare, whether from the commercial or government payer side. Perhaps, in light of that fact, you should look at performing a similar seismic shift in your organizational hierarchy.
While researching this topic for an upcoming story in HealthLeaders magazine, I talked to several top executives at leading healthcare organizations across the country. To be sure, most of them are large, multi-hospital, multi-site organizations, but their lessons also apply to smaller systems and even standalone hospitals. The old way of strategic planning and execution just isn't going to cut it anymore. You can be proactive about it or you can wait until there's no other choice but to blow up your management team—either way, you're going to have to change.
"Ok smart guy," you're probably saying to yourself, "what do you know about how best to organize my top executives?"
Well, honestly, not much, but I do talk to a lot of people who have proved over time that they know what they're doing by demonstrating quality outcomes and patient experience scores, and yet, they realize their current structure is not preparing them to deal with accountability for those metrics as well as many others. So I give them the benefit of the doubt when they tell me that they're reorganizing their reporting structure to centralize authority and reduce the independence of individual sites to do things that would be best done with the clout and expertise of the entire system, such as technology upgrades, bricks and mortar, and labor issues. That approach provides more flexibility and keeps organizational goals, as opposed to individual site goals, at the forefront.
Now you're probably saying, "if I do that, my docs will revolt, and I'll be out of a job."
That once might have been the case. But in many of the organizations with whom I chatted for my story, much of the reorganization results in placing physicians in positions of responsibility and power in the organization, where once they might have had big voices but little accountability on the business rationale for what they were arguing for.
No one understands the importance of data better than a physician, so it's a little ironic that hospitals were pushing physicians to follow evidence-based treatment guidelines and protocols while eschewing that philosophy in the purchase of drugs, equipment, technology, labor and other myriad expensive things any healthcare facility must purchase.
For instance, today's CMO is much more than a guy who's popular with all his physician friends. Instead, he or she is a voracious consumer of evidence. That's not just on treatment guidelines, it's also in determining where to put the latest imaging machine or whether it makes sense to buy it. In the past, equipment might have gone to a hospital that was conveniently located near a high-volume physician who would be using it, regardless of the market's need for it, or the ability of system-wide scheduling to avoid unnecessary delays.
Many hospital systems in the past have been systems in name only. Essentially there's a small core group of professionals at corporate headquarters, but individual executives at the local level made virtually all decisions regarding their facilities independently. That model appears to be going the way of the dinosaur. In any case, it's time to start thinking about how your system is going to change to meet the new realities, which are lower reimbursement and higher accountability.
Are you looking for ways to meet that challenge with new voices, new organizational structures and new protocols? If not, you should be. The leaders are.
I don't usually do a lot of public speaking, but recently, I had the pleasure of being the luncheon keynote speaker for about 180 healthcare M&A experts at the Southwest Healthcare Transactions Conference in Dallas. I also don't write promotional material in this space--and I hope even this column doesn't come off like that--but I hope you'll indulge me a little as I tell you about something we're doing here that might interest you.
As I mentioned, I'm not a frequent public speaker. As an editor and reporter on a nationwide healthcare leadership beat, most of my speaking goes on behind a keyboard or, more often, a phone headset. I arrange interviews, ask my specific questions about a healthcare trend or strategy with an expert or top healthcare executive, and--within a half hour, usually--that's that.
One conversation reaches one, maybe two, other people. I glean the interesting bits of these conversations, tie a bunch of these interviews together, and "make the sausage," in industry parlance. Of course, the story that results is (hopefully) read by thousands, but I don't get to see them read it or hear what they liked or didn't like about the story.
Prior to going to Dallas last month, I was feeling a little intimidated. I was thinking to myself, "I'm no expert compared to the people who will be in that room. What can I tell them that they don't already know?"
Plenty, as it turns out.
Have you ever experienced one of those moments of clarity when you realize how helpful a service your company offers is to the people who use it?
Maybe not, but I had one of those with our HealthLeaders Media Intelligence division, which we started about 18 months ago. Let me back up a minute. In late 2009, we decided to take a big leap as a company and form a research and intelligence division.
While my colleagues and I spend a lot of time working our various beats: Leadership, Technology, Finance, and several others, we realized that there's only so much outreach a single editor, or even a group of single editors, can do to develop the dual roles of increasing our knowledge while establishing trusting relationships with the senior executives in healthcare whom we depend on.
Those folks, and their candid responses to our questions, are essential to telling the stories about strategy and solutions in this complex world of the business of healthcare. But we needed a way to touch many more executives on many more topics, in a shorter amount of time.
Since then, the intelligence division has really ramped up. We offer the results—and analysis--of at least 12 surveys a year. Best of all for us, it helps identify where you stand on certain issues and trends, as well as what you're interested in learning about. Best of all for you, access to the surveys and the analysis is free.
But back to my date with public speaking. I talked to the group about the results of one of our recent surveys, Hospital Mergers & Acquisitions: Opportunities and Challenges. After the presentation, several people in the audience came up to tell me that they enjoyed it, and that they had learned something new that day. Color me surprised. And that's when it hit me: this stuff is really valuable to a lot of people.
Hopefully, it will be valuable to you too. I encourage you to check out our extensive list of reports and surveys and stay on the lookout for a new one each month. I would also encourage you to look into being part of our growing survey pool, known as the HealthLeaders Media Council.
I hope you have an enjoyable Memorial Day weekend, and please take some time to give thanks in your own way to those in the armed services who have made sacrifices to protect our country.
No matter how much senior healthcare executives might discount the government's ideas and regulations surrounding accountable care organizations, the fact that care can be provided more efficiently and at less cost is undisputable. But that doesn't mean you have to follow a Centers for Medicare & Medicaid Services-approved recipe to get there.
For skeptics, there's Fairview Health Services in Minneapolis. Leaders at the system knew, based on quality metrics, that it provided the highest quality care in the region, says Dave Moen, MD, the president of Fairview Physician Associates, the health system's physician alignment division. But the system isn't concerned with what acronym is used to describe its demonstration of value to its patients and payers. The big question was how to get paid for it.
"We had the highest quality and the lowest cost in the area," he said, relating that negotiations on a new contract between Fairview's CEO and his counterpart from Medica, a 1.6-million member health plan based in Minnesota, had reached a standstill.
Rounds Webcast: Coordinating Systems of Care Order today.
To their credit, the two didn't result to sniping at each other through the media. Instead, they changed the conversation.
What came out of it was a $10 million incentive, combined with a shared savings mechanism aimed at cutting costs and improving quality in the new contract between the two organizations. Fairview wasn't content to stop with one payer contract, however. It pushed for the model to be included in all its contracts with payers.
"We took that model for shared savings and quality and gradually embedded the concepts into all of its commercial insurance contracts," said Moen, starting in January of this year. "It covers all lives associated with that payer, but there are some outlier provisions."
Clinically the shared savings model has already demonstrated improved outcomes in managing diabetes, hypertension, and cardiovascular disease, says Moen.
He is optimistic that key components of the commercial contracts would work well in a Medicare or even a state Medicaid shared savings model. Fairview leadership presented the model to CMS, and is hopeful that components can be included in the so-called "Pioneer" track unveiled by CMS last week.
"It's not perfectly aligned, but directionally it's going the same way," Moen says.
Rounds Webcast: Coordinating Systems of Care Order today.
Many health systems are building coordinated "systems of care" that mimic or parallel certain aspects of the vision behind Medicare Shared Savings. La Crosse, Wisconsin-based Gundersen Lutheran Health System has been rated among the "best values" in all Medicare regions by achieving higher quality and lower cost through a combination of physician leadership and governance, IT investment, integrated delivery and a focus on not-for-profit culture, says CEO Jeff Thompson, MD.
Gundersen's care coordination program has been able to reduce inpatient charges of the sickest 1% of patients from more than $18 million to less than $8 million in three years. The program cares for patients regardless of risk status, whether they are part of the Gundersen's plan or fee-for-service, Thompson says.
Building the blocks for coordinated, high-value systems of care will be the focus for Thompson and Moen next month as they are both among the panel of presenters at the HealthLeaders Media's Rounds event live from Gundersen Lutheran Health System, on June 9. Both will present their lessons and strategies and be available for live feedback during a virtual Q&A session.
Scores of well-respected health systems have complained that accountable care organization regulations are too stringent, too restrictive, and above all, too risky to consider participating at this point. That’s because they require substantial investment in capital and labor without a guarantee of a return on that investment.
Even given the declining future of a fee-for-service reimbursement structure, CEOs have concluded that it’s more predictable to stick with what you know, given the alternative, than to jump aboard the Medicare ACO train before it’s really ready to leave the station.
At least CMS is listening. Already, after only a month and a half of carping—both in public forums like HealthLeaders as well as, presumably, in private conversations with CMS movers and shakers like CMS head Don Berwick—hospital and health system leaders have already pushed the agency to at least partially change the requirements of participating in a Medicare ACO.
This week, CMS unveiled a new three-track process to win adherents, and ultimately, it hopes, broad participation in the program. One track consists of three-day learning sessions to be staged in four sessions around the country.
I encourage you to look at my colleague Cheryl Clark’s fine analysisof the changes that are being made in the rules. From her excellent work in getting candid responses from hospital and health system leaders, it looks as though even the changes announced this week might not be enough.
This kind of carping from major health system leaders only underscores the huge difficulty --some might say impossibility -- of attempting to create a one-size-fits-all solution to the challenge of high healthcare costs and associated poor quality in a cottage industry such as healthcare.
However, commercial solutions are far from enough. For one, many of them seem to rely heavily on the idea that shifting more of the costs for care to the individual employee will help bring down healthcare costs. My answer is that yes, it probably will, but it’s too late, with the astronomical costs of basic healthcare, to count on the public to force down prices and improve quality simply because they have to pay for it.
Never mind the fact that even people with a commitment to good health will put off seeing their doctor because it’s too expensive. It’s like those dealer-funded oil changes that come with the purchase of a new car. If oil changes cost several hundred dollars instead of $30 or so after the dealer incentive runs out, do you think lots of people would stretch their oil to the breaking point? They would, and they will with healthcare too.
But before I get too far off track, the good news is that CMS seems willing to adjust, and so do providers, who are certainly interested in finding different ways to improve reimbursement for the good work they do.
Sure, CMS must deal with different challenges than private businesses in negotiating solutions that will be different enough to entice providers to participate -- from the physician office level to the multi-hospital health system. In this case, CMS could learn a valuable lesson from commercial insurers: It takes a variety of possible solutions requiring constant -- or at least regular-- adjustments, to achieve the goal of lowering costs and improving quality.
WEBCAST: Effective ACO & Clinical Integration Strategies
When: June 7, 2011 at 1:00 PM ET
Go beyond the ACO regs furor to uncover commercial and Medicare alternatives for your ACO strategy. Taking the time to evaluate your opportunities and position yourself appropriately will pay off for the next generation of clinical integration. Join healthLeaders Media for a 90-minute webcast including Q&A with leading experts savvy on the legal and business operation of ACOs in commercial markets and CMS programs other than Medicare Shared Savings (MSSP).
Hospital and health system leaders are quickly recognizing the shortage in business training that they face in their physician ranks, especially at the leadership level. But there's a difference between recognizing a deficiency and determining what, if anything, to do about it.
Do you promote someone into a clinical leadership position -- such as a chief medical officer -- without that training, with the idea that the physician will go on to get an MBA while on the job?
Physicians are highly motivated and smart, but often, doing their job and asking them to get another advanced degree is understandably too much. Are there other, less intensive ways for these physicians to get the business and leadership training they need? Or do you simply refuse to put anyone in that position who doesn't have the business degree or training already?
Both approaches are risky. There simply is a ton of competition for physicians who already have leadership training and experience, putting all but the most financially well off institutions at a disadvantage in attracting candidates from such a small pool. If you put someone in who doesn't have the training, who's to say how successful they will be at convincing their fellow doctors to follow evidence-based medicine guidelines, or to work in teams, for example?
Jeff Collins, MD, is one of the latter group. He had no business or leadership training before being promoted to a position that he says really should require it. Collins is CMO of the eastern Washington region at Providence Health & Services, a 28-hospital system based in Spokane.
"In 2006, the previous vice president for medical affairs retired and I was recruited by the medical staff," he says. "On Friday I was an internist and Monday I was the CMO."
Providence had developed a leadership academy program internally that helped doctors in positions like Collins' to get a little training in management. At the same time, Collins was encouraged by a colleague to apply to a program developed by GE and the Health Management Academy that provides training and mentoring to high potential, health system-level physician leaders to prepare them for assuming top leadership positions within their health systems. The program features some of the Six Sigma principles that made the GE management style synonymous with business efficiency and leadership development. Collins was among the first group of physicians to go through the program.
At first, he was skeptical.
The group of seven "students" met twice a year with GE "teachers" for structured didactic sessions to learn about marketing, strategic planning, and finance, he says. They worked to define a project and worked on it over two years. Through the process of working on the problem -- in Collins' case, medication reconciliation -- the group defined interventions and followed up with data.
"At first, it seemed a little bit Mickey Mouse," says Collins. "But very helpful was that it reinforced a discipline to approaching projects. People like me never saw an opportunity I didn't like. It's easy to get swept up in enthusiasm for fixing problems, but essential to solving them is refining goals and measuring success."
I usually shy away from long quotes, but Collins gave me perhaps the best, most concise explanation of what has happened with society's implied contract with physicians that I've ever heard, and it shows quite concisely how business training can help physicians understand how they fit into the big picture of healthcare costs and outcomes today:
The bargain we had with society is that physicians acted on the basis of best science or best evidence. Society said, 'you know what's best, so you decide.' That led to very little discussion on risks and benefits with patients because we were presumed to know what's best. Medicine has become distanced from the application of best evidence. As the public has become more aware of that, including government and insurance companies, we have more regulations, which further decreased our autonomy. What that says is that over time, individuals' clinical autonomy became a cause of suboptimal performance relative to clinical science. That led to wide variation, which brought the attention of insurance companies and led to their managerial control with guidelines, protocols and regulations. That's been a source of frustration. Paradoxically, in the pursuit of autonomy, we've lost it, and to reframe that, we have to function in ways that will reduce variation around best practices. Even though I believe medicine is collaborative undertaking, physicians have the responsibility for what goes on. As healthcare has become more complex, that model really doesn't work anymore and physicians aren't good followers. The task is challenging, but we can learn a lot from other industries."
Collins completed the program in April 2010, and credits it with helping him become more "appropriately focused," he says. "It's sort of like thinking ahead on how we'll know we'll be successful."
He says the program isn't perfect, but it's a good alternative to the demands placed on physicians by an MBA program. One nuance about physician business and leadership training is that it's essential for changing the way physicians, who are at the heart of every decision on care, approach healthcare.
"Transformation is going to require physician leadership and we just don't have it," he says. He stresses that business and leadership training as healthcare moves to a team-based approach is essential not only for CMOs, VPs of medical affairs or medical directors. The need for the ability to blend leadership and management knowledge with the understanding about patient care that physicians have is essential for committee chairs and quality directors, among other titles, as well.
"They're doing more of this in medical schools, but that will help the next generation," he says. "More systems devoting time and resources to physician leadership, but the prevailing attitude among physicians is that this is something you do when you retire. There's almost a stigma. It's not highly valued among physicians yet."
But that's changing, because physicians and health systems are learning much more about how myopic it is to continue to see the individual physician -- not the care team or evidence -- as the final arbiter of medical interventions.
Think back to 2008. A huge recession was upon us, brought about by a series of events for which healthcare shouldered no blame. But like the rest of us whose lives were turned upside down by the event, healthcare was suffering.
Low patient volumes, a locked up debt market and a suddenly overstaffed workforce (based on substantially reduced inpatient volumes) were only a few of the major problems confronting senior leaders in healthcare.
The emphasis then was on the now, and many senior leaders told us in our annual HealthLeaders Media Industry Survey that they were forgoing strategic planning for the time being. This step seemed a prudent one, as many of the assumptions senior leaders once used to build a successful long-term strategy seemed not to apply anymore. At least, there were more pressing problems to solve.
But it's not a smart move to continue to lag in strategic planning. If you cut back on strategic planning via layoffs or by moving employees to other tasks to focus on immediate concerns, now's the time to rebuild, if you haven't already done so. Big changes are coming not only to the reimbursement system, but also in the ways healthcare organizations must evolve to change their care delivery methods. You can't make those moves without a well-thought-out, deliberate plan.
I thought I would revisit this topic in an attempt to learn how one of the best organizations seeks to ready itself for the future, and that led me to Danville, PA-based Geisinger Health System, which stakes its reputation as an innovator in being able to spot trends and improve the health of the communities they serve.
Of course, while much of that reputation depends on the quality of the clinical care delivered at Geisinger, we've already seen that patients can't necessarily distinguish between a good and a poor clinical experience. They certainly are much more adept, however, at distinguishing between healthcare providers that waste their time versus those that don't and between systems that are convenient versus difficult to deal with.
At Geisinger, much of the work in determining access points and the necessary investment in those access points is done through the strategic planning team.
Thomas Charles, Geisinger's vice president of strategic planning, says there are four basic components to the system's strategic planning efforts:
The market: This is what most people think about when they think about strategic planning. It involves the surveying of the external environment and your facility's place in it. Geisinger strives to be the glue that ties together a patchwork quilt of healthcare options for the community, says Charles, and to do that, it must try to work in concert with physician groups, allied healthcare providers, and even other acute care hospitals to make sure that patients can access quality care close to home. It may serve as some comfort to learn that even a multidimensional, nationally known health system can't do it on its own.
"Because of our integrated structure, we can offer a full continuum in many communities," Charles says. "But expanding that to include our partners as well is important because we see that as a fundamental mindset in terms of providing care to populations."
Geisinger is active in 31 counties, with a hospital in Wilkes Barre, the flagship medical center in Danville, and large ambulatory facilities in State College. "Those are our three hubs but we have partners in a broad geography," Charles says. "Because of how dispersed we are, we interface with a lot of other providers."
For example, Geisinger, says Jackie Paul, senior vice president of strategy and business development, works on program development together with a couple of institutions which in the past could have been considered strong competitors. But now, "our specialists go there and work in their institution to work on procedures," she says. "Those are planned together based on their need, and where we have the capacity to help, we do."
2. Quality: Geisinger is focusing on quality care as the movement toward paying for quality accelerates, says Charles.
"This movement toward paying for outcomes to population health management to figuring out ways to deliver care that is high value and convenient are fundamental themes driving our evolution going forward," he says.
A big challenge to quality care is represented in clinician workforce-related trends -- especially with physicians and mid-level practitioners, he says. Across the country, substantial numbers of physicians are late in their careers. Geisinger's strategy on quality reflects the fact that demand for care will continue to increase, which means it may be provided in different settings by people other than physicians.
Also, like other systems, Geisinger is dealing with retirements as well as the new entrants into that part of the workforce who have different (read, less frenetic) perspectives on professional life and personal life balance. All this is a fancy way of saying that today's physicians don't want to be tied to their offices for 60-70 hours a week.
Innovation: In this case, the need for innovation stretches to customer service. "If we want to try to keep the care close to home for the patient, how do we work with our community partners, those physicians that are non-Geisinger and community hospitals that are non-Geisinger?" asks Paul, rhetorically. She says her guiding principle is keeping in mind what's best for the patient.
In every part of Geisinger's service area, there are widely different types of care that need to be given for such a wide range of population, she says.
"You can have urgent care centers, community practice sites, acute care, e-visits, and some combination of telehealth, and that's where our group is working with rest of our institution," she says. "What are our strengths in this location? What should it look like? Does it have enough primary care? Does it have enough of a variety of specialists? This kind of planning requires filling in gaps.
"What care is not being delivered that might benefit the patient?" she says. "This is not just about shifting settings."
Legacy: This concept might be the most difficult to grasp, as it is the most long-term in nature, says Charles.
"The approach we use as a governing principle is what's in the best interest of the patient and then try to tailor care delivery in way that gets right resources to the patient in best way," he says.
At Geisinger Medical Center in Danville, it makes sense to focus on the highly complex procedures, says Paul. Less complex procedures might make sense for community hospitals or urgent care sites that may or may not have any ownership structure with Geisinger. In the end, say Geisinger's strategic planners, their goal is to support the legacy of the institution as being one focused on the quality of care received by its service area rather than as a big, dominant medical center that simply seeks the most profitable services and leaves scraps for competitors.
So what about results? In the past year alone, Geisinger has recruited more than 120 physicians, and has recently developed the following key programs:
·Brain tumor institute
·Epilepsy monitoring unit (linked to its nationally known program for surgical treatment for intractable epilepsy)
·Expansion of its largest outpatient campus, to include the addition of an ambulatory surgery center, and 54 more physicians over the next five years
"It's not like strategic planning is the reason Geisinger is such an outstanding health system," Paul says. "We're a piece that has smart innovative people involved who are trying to help apply a little strategy, planning, and discipline to make sure all these great things are integrated and we're able to leverage it all so we can change the face of healthcare."
Scott Davis, vice president of consulting and business development with Geisinger, works closely with Charles and Paul in formulating and executing the health system's strategic plan.
"Our process is proactive, evolving not as a static document that sits on a shelf," he says. "We have a constant and tremendous level of assessment and filtering processes to synthesize all that's going on in the market regionally and nationally to provide guidance to our leaders. That keeps care local, nonthreatening, benefits community providers, and aligns us for what we do best, which is quaternary care."
Yes, you read that headline correctly. Although what constitutes an accountable care organization has been defined, at least temporarily, by CMS, many of the forces that are actually doing the work of pushing hospitals, health systems, and allied health providers, into ACOs is being done by commercial insurers.
Of course, to change the way they pay for healthcare takes only a decision by an individual company. The feds, on the other hand, must go through revisions, public comment periods, and a phased-in restructuring of payments and incentives that will take years.
Commercial payers aren't waiting.
They're not calling these programs ACOs, and they're not, in the sense that they meet a government-decreed standard of care. But whatever you call them, they're making healthcare providers more accountable for patients' overall health. So while the government's work is glacial, by comparison, commercial contracting's work on accountable care is lightning-quick.
I came to this realization as I interviewed senior leaders from hospitals and health systems for this month's cover story in HealthLeaders magazine. I started by asking questions about whether my sources were planning on being ACOs as the government defines them. Most of them weren't sure, but they certainly had their own plans in place, and were executing on them, to be accountable for patients' health, simply because their payers were demanding it.
Though many of them were highly interested in what the regs for ACOs would be (I conducted my interviews in late March, well ahead of the release of the proposed federal ACO regs) many of my sources weren't spending too much time worrying about the specifics.
Almost offhandedly, they would continually mention pilot programs embedded in their commercial payer contracts that are a mix of innovative ways to measure value and healthcare quality. There's a kaleidoscope of programs to do this work, and some of them are mentioned in the story, but I think the overall takeaway from this trend is that it's not just the cash-strapped and debt-ridden federal government that recognizes there is a problem with the way healthcare is provided and paid for under the fee-for-service system.
This is a positive sign. It means that unlike in the past, most healthcare organizations are looking for ways to become more efficient and provide more value for the huge sums of money spent on interventions. Maybe they finally believe that in the future, after years of warnings, that healthcare cost increases will be unsustainable and tightly contained via a variety of tools that might or might not have anything to do with how the biggest payer, the government, structures things.
To be sure, most of these programs will undergo changes yearly as payers and providers search for ways, and occasionally butt heads, over what constitutes 'value-added' interventions. But this is happening right now, in 2011, rather than in 2014 or 2019.
Aric Sharp has more than 15 years of experience running large multispecialty physician groups in the Midwest, and though he and his physicians are excited about the possibility of becoming an accountable care organization, they are probably not going to undertake the time and investment necessary to achieve it.
Why not? Sharp says as the proposed rules are written now, making the jump to an ACO model as defined by The Centers for Medicare & Medicaid Services represents a bridge too far. "We have a strong interest in being a part of an ACO and yet with the way the rules were set, our interest is diminished," he says.
Let's look at this a little further, because if Quincy Medical Group, a 130-physician multispecialty clinic in Illinois isn't interested, the government might have a problem on its hands as it tries to reshape how healthcare is provided and paid for.
QMG, an American Medical Group Association member, seems a perfect candidate to implement an ACO. It is independent, has a catchment area of about 300,000 patients (at least 5,000 are required for ACO participation), and from Quincy--about two hours north of St. Louis--reaching anything other than a critical access hospital requires a couple hours' journey in any direction.
Sharp is QMG's CEO, and he admits to having read—skimmed in some places—all 429 pages of the regulations. I report on healthcare, and even I haven't yet made it all the way through.
But Sharp was very interested in participating until he started thinking about risk and when his organization will be ready to take on that puzzling part of the ACO equation. That's what's giving him pause.
According to the initial regs, ACO hopefuls can apply to enter the program with downside risk immediately or after the second year. But Sharp says that unless an organization has a fair amount of experience designing and dealing with risk, that's a difficult sell because "the infrastructure for many markets won't be there by year three."
And what about that infrastructure? In many cases, it will be expensive, from software to hardware to significantly different labor profiles, ACO hopefuls can expect to spend more, at least initially, to keep up with the leading edge of healthcare administration.
A second point is the level of the payoff threshold for either of the two models starts with achieving from 2% to 3.9% savings over traditional fee-for-service costs for the group of patients enrolled in the ACO. "That seems very high," says Sharp. "Pay-for-performance demonstration groups have struggled to get to 2%," he says.
A little more on risk: ACOs with fewer beneficiaries will have to achieve a higher savings rate than those with more. That's a problem, says Sharp.
"If we're really focused on drawing much of the system into value-based reimbursement, it seems essential to have it level across all markets--at least in the beginning--evolving toward a sliding scale in the future."
Another thing is that the savings rate is between 50-60% lower than the CMS's Physician Group Practice demonstration project, he says, which ended in 2010 after five years.
"Most organizations will look at that and cast a careful eye on evaluating the costs on the infrastructure side," he says doubtfully. "Is that enough to attract me to at least be having an opportunity to get some sort of return on the investment?"
A ray of hope seems to lie in a proposed extension of the PGP demonstration project—at least for 10 physician groups that are petitioning CMS to revive the program for two years. Perhaps if the extension is granted, other practices will be allowed to use it as a tool to prepare for ACOs. The program would be modified to more closely align incentives for quality care and cost control to that used for ACOs.
The ACO rules are not yet final, of course. My guess is that the government wants to fill in lots of the gaps through the public comment period, which ends June 6. (Incidentally, I'll start the over/under line on total pages at 858 when final regs are released.)
If, however, some of the risk rules aren't modified, it will be clear that the government intends to start ACOs with a relatively small group of superstar organizations.
The initial regs were careful to note that CMS would likely not approve all applicants to the program. But if they want robust participation, maybe the folks at CMS should schedule a phone call with Aric Sharp or someone like him. I know he'd be happy to give them a few suggestions.
That's the question Wayne Smith and his board at Community Health Systems have to be asking themselves in the wake of a complaint filed in federal court by unwilling takeover target Tenet Healthcare. Tenet accuses Community of
for admitting patients that it claims should have been placed under observation. All of a sudden a nasty fight over the proposed acquisition has gotten much nastier. In effect, Tenet has said to government regulators: "Here's the evidence, go get them so they'll leave us alone."
Suddenly the rejected $6-a-share initial takeover bid by Community late last year looks awfully cheap. That's because the price of making this acquisition, should it succeed or fail, is going much higher, and not just in terms of Community's offering price per share.
I've covered healthcare for a long time, but I've not seen a proposed acquisition get any nastier than this one.
In an attempt to circumvent Tenet's management team, which contends the offering price by Community severely undervalues Tenet, Community is attempting to get its own slate of 10 directors electedto Tenet's board at the company's annual meeting scheduled for November. If they're able to do that, the acquisition faces few hurdles as far as shareholders are concerned.
In essence, a vote for Community's nominees is a vote for the merger. That means the opponents of the merger are effectively fighting for their corporate lives, and they're willing to use heavy artillery such as this complaint.
Speaking of which, in the allegations, edited lightly for style and brevity, Tenet claims that:
CHS systematically bills cases as higher-paying inpatient admissions that would have been billed as lower-paying outpatient observations in most U.S. hospitals. Tenet claims this is part of Community's strategy.
When patients present themselves to hospitals, they are seen and discharged; placed in outpatient observation status; or admitted as inpatients. Doctors make the treatment decision, with input from hospital employees. More than 75% of U.S. hospitals use one of two objective systems as the basis for these determinations. CHS uses its own set of "Admissions Justifications" called the "Blue Book."
The difference in Medicare payments between an outpatient observation stay and an inpatient admission is substantial. Medicaid and managed care generally pay more for inpatient admissions than for observations, but actual rates depend on contracts. Only Medicare fee-for-service data is publicly available.
CHS' use of observation status is less than half the national average rate for U.S. hospitals. There is no legitimate explanation for the difference.
No other publicly traded hospital company follows a similar practice.
Again, these are Tenet's claims, and Community has yet to respond to them systematically, which they certainly will. But they are potentially explosive—and expensive to deal with.
Maybe this lawsuit is a sign of desperation from Tenet. After all, if its management team were confident that shareholders view the takeover attempt as a severe undervaluation of Tenet, taking this fight to Defcon 1 would not be necessary.
Nevertheless, Community will have to spend significant resources attacking Tenet's case. Even if it dropped the acquisition bid today and there are no signs it will, Community might have to spend a lot of money not only defending itself against Tenet's claims, but should the feds want to conduct their own investigation, that's a whole other problem to deal with. Tenet's also going to get a big bill for this war, win or lose.
We've yet to see a coordinated response from Community, which saw its stock drop from around $40 per share to around $25 Monday after news of the filing broke. It had recovered to around $32.50 by yesterday, but that big drop, should Tenet prove its case, will likely cause a flood of pesky shareholder lawsuits from its Community's own shareholders to recover that lost value.
You can be sure that Community's response to the complaint is coming. It'll be interesting reading, but if anyone is sure to get rich off this saga, you can bet many of them will have law degrees hanging in their offices. Because there's the price of acquisition, but there's an entirely different bill to pay when that acquisition is hostile.
I talk to a lot of senior leaders at hospitals and health systems. Lately, when asked to boil down the biggest challenge they face in coming years, the first words out of their mouths -- every single one of them -- are almost always the same:
"We've got to find new ways to squeeze cost out of the system."
Well, I've got one for you, and it's not even all that difficult to achieve: energy costs. Earth Day, is coming up, and it's as good a time as any to see if you can make some of the same changes that helped Cleveland Clinic win an Energy Star Partner of the Year award in 2011.
Cleveland Clinic spends about $1.73 a second on energy across all its facilities in Ohio, Nevada, and Florida. It's an incredible statistic, but it doesn't mean much by itself. In fact, it might seem quixotic to try to save pennies on electricity while there are bigger targets to pursue. But it's not, says John D'Angelo, the senior director of facilities at Cleveland Clinic.
"Our first building was built in 1921, and some that we've purchased are even older than that," he says. "If you look at nothing else, look at lighting."
As of 2011, for example, Cleveland Clinic has zero T-12s installed. That moniker might not mean much to you—it didn't to me—but they are very inefficient overhead lighting ballasts, says D'Angelo.
"Most organizations can get a 1- to 1.1-year payback on changing out that lighting, but nobody's looking at changing them out because the lights are still working."
Another area of opportunity lies in changing incandescent bulbs to LED or compact fluorescent bulbs. Cleveland Clinic changed out 20,000 incandescent bulbs to LEDs and several hundred thousand incandescents to compact fluorescent bulbs.
Another area of big potential savings revolves around HVAC systems, says D'Angelo. He initially thought he didn't have the manpower to increase maintenance on the HVAC. But he paid for it with savings from the lighting initiative. Changes include more frequent changing of air filters and programming to eliminate simultaneous heating and cooling, a problem which can occur often in large buildings such as hospitals.
"We rely on our automation systems and our partners who program them for us to make sure our systems aren't fighting against each other," he says.
The mistake that most people in his position make, says D'Angelo, is trying to deliver an energy conservation message without the backing of the C-suite.
Without executive-level support, advocates for conservation "end up being the lone voice from the top of the mountain," he says.
His CEO, Toby Cosgrove, MD, is an enthusiastic backer of the initiative, publicizing it internally, and he actually presents energy use metrics regularly to his board, D'Angelo says.
"We took that initial impetus from the C-suite and went to key leaders and got them to assign a volunteer to the energy committee, which deals with real-world issues on how we purchase gas and electricity and how we engage our groups. What we discuss in the energy committee gets translated out."
The savings are potentially pretty large. Cleveland Clinic is on the back end of a three-year program in which it has saved $19 million since 2008
That doesn't meant the energy spending has decreased, however. Cleveland Clinic spends essentially the same amount on energy that it did in 2008. But energy costs have risen significantly since then, and total avoided energy use measured in BTUs is a number that's almost inconceivable: 223,667,369,000. That translates into another big number: 60,456,265 pounds of CO2 equivalent saved in 2010. If that's still too big, it's the same as taking 5,280 cars off the road for a year.