Healthcare leaders focused on three big-picture topics while meeting with their peers at the HealthLeaders Media CFO Exchange.
More than 40 financial leaders from provider organizations across the country gathered in August at The Broadmoor Resort in Colorado Springs, Colorado, for the fifth annual HealthLeaders Media CFO Exchange.
These executives represented large health systems with national scope, including Chicago-based Advocate Health Care and Catholic Health Initiatives, headquartered in Englewood, Colorado; regional heavyweights such as Banner Health, based in Phoenix, and Baylor Scott & White Health, headquartered in Dallas; community hospitals such as Firelands Regional Medical Center in Sandusky, Ohio, and South Nassau Community Hospital in Oceanside, New York; health systems that are community pillars, including Froedtert Health in Milwaukee and Rex Healthcare in Raleigh, North Carolina; safety-net hospitals including Truman Medical Centers in Kansas City, Missouri, and The MetroHealth System in Cleveland; academic medical centers such as Boston Medical Center and UC Health in Cincinnati; and for-profit organizations, including Capella Healthcare in Franklin, Tennessee, and Birmingham, Alabama–based Trinity Medical Center, affiliated with Community Health Systems.
As in previous years, attendees help shape the agenda for the two-day event. Three big-picture discussion topics emerged from advance discussions and surveys.
Preparing for the future of healthcare. What do healthcare leaders need to know—about their operations, markets, and regulatory jurisdictions? Healthcare reform is a work in progress. Across the country, fee-for-service revenue remains dominant and the timing of the shift to value-based payment is unknown. CFO Exchange attendees increasingly expect to contend with both reimbursement models indefinitely, which will require a tricky balancing act. Meanwhile, new types of disruptive competitors are encroaching in many markets. Using analytics to understand operations is the foundation for any system improvement. But sufficient data on clinical and financial aspects is elusive, even as the cost of healthcare analytics rises.
The clinical transformation toward value-based healthcare. What should leaders be doing today to prepare their organizations for future delivery models? Each health system must understand its own capabilities to reduce the cost of care while improving quality. CFO Exchange attendees bemoaned the lack of financial success from most accountable care organizations. But efforts continue everywhere to reduce variations in care, improve efficiency and outcomes at the same time, and engage and align employed and affiliated physicians alike.
Business, payer, and clinical partnerships. Who should leaders join with? The consolidation wave in healthcare continues, but with a twist: The number of traditional mergers or acquisitions is nearly matched by looser affiliations, according to HealthLeaders Media research. For hospitals and health systems, establishing partnerships is a key strategy to manage the financial impact of momentous changes in the healthcare industry. CFO Exchange attendees discussed the pressure to partner: to develop clinical affiliations across the care continuum, and to build alliances with payers (both external and internal) to develop risk-based payment models.
The CFO Exchange discussions will be explored in depth in Insights Reports available on our website (www.healthleadersmedia.com). Look to these guides, as well as similar reports from our other Exchange events for CEOs, CNOs, population health executives, and revenue cycle leaders to steer your own organization.
Fee-for-service revenue remains dominant among healthcare provider organizations, but leaders expect a shift to value-based payment models over the next few years. Financial executives are challenged to make the right bets on shared savings, bundled payments, and shared risk models to ensure their organizations' financial viability.
Fee-for-service revenue remains dominant among healthcare provider organizations, but leaders expect a shift to value-based payment models over the next few years. They are testing models such as shared savings, bundled payments, and shared risk. The true degree of risk in these arrangements is unknown, as are the specific outcomes of the different models. Financial executives are challenged to make the right bets and to be sure their organizations have the necessary skills. The coming years are a bridge between the fee-for-service present and the pay-for-performance future, during which leaders must ensure their organizations' financial viability. [Sponsored by Bank of America Merrill Lynch]
Revenue cycle leaders bridge financial, clinical, and operations functions. A report from HealthLeaders Media Revenue Cycle Exchange.
This article first appeared in the May 2015 issue of HealthLeaders magazine.
Revenue cycle leaders at hospitals and health systems oversee the complex interplay of financial necessity, clinical work, and regulations. To them falls the detail work of collecting payment from insurers and patients, bridging the gap from the finance office to physicians to ensure that clinical activities are properly documented, and negotiating with the information technology and analytics groups for the tools to wrestle data into submission. The tasks necessary for an effective revenue cycle have expanded and become vastly more complex.
At HealthLeaders Media's first Revenue Cycle Exchange, held in late March at the Omni Barton Creek Resort in Austin, Texas, 21 leaders gathered from provider organizations around the country. In small-group sessions moderated by editors from HealthLeaders Media and HCPro (our sister company), these executives shared insights regarding their problems and solutions. Exchange attendees chose the discussion topics through a survey and series of advance calls, coalescing on three big-picture topics.
More than 40 chief financial officers, invited by HealthLeaders Media, meet to discuss their healthcare organizations' concerns and strategies to address industry developments.
This article appears in the October 2014 issue of HealthLeaders magazine.
More than 40 financial leaders from provider organizations across the country gathered in August at the Grand Del Mar in San Diego for the HealthLeaders Media CFO Exchange. Now in its fourth year, the CFO Exchange exemplifies HealthLeaders Media's peer-driven approach for solving problems and sharing solutions.
As in previous years, attendees helped shape the event agenda. Three big-picture discussion topics emerged from advance discussions and surveys.
The bottom line
As financial pressures mount for health systems and hospitals, financial leaders seek ways to protect the bottom line with new strategies for making meaningful, sustainable cost reductions and for keeping pace with a quickly evolving industry. This challenge has become more difficult for many organizations in 2014, as patient volumes have declined and reimbursements ratcheted tighter. Financial leaders are looking for cuts high and low: Almost all CFO Exchange attendees say their organizations are redesigning clinical protocols to reduce overutilization of expensive resources, and all of them expect to cut supply chain costs over the next three years.
The prevention and treatment of hospital-acquired infections depends less on procedures and more on culture, leadership, and organizational commitment, say five healthcare leaders who recently joined with HealthLeaders Media for an in-depth conversation.
Although healthcare-acquired infections have received widespread attention from hospitals, healthcare associations, and regulators, they remain a serious patient care issue and an avoidable high expense. The 2010 goal set by the Centers for Medicare & Medicaid Services to decrease HAIs by 40% by 2013—which would result in 1.8 million fewer injuries to patients—was not met.
Starting October 1, 2014, hospitals with the highest rates of preventable HAIs will be penalized 1%, adding to existing federal penalties. Hospitals and health systems can invest in educating clinicians and cleaning staffs, enforcing proven measures such as hand washing, and installing systems to monitor rates following interventions.
Yet HAI prevention and treatment depends less on procedures and more on culture, leadership, and organizational commitment, say five healthcare leaders who recently joined with HealthLeaders Media for an in-depth, three-hour conversation.
Health and Human Services Secretary Kathleen Sebelius is resigning after a five-year tenure of landmark achievements and technical fiascos. President Obama will nominate Sylvia Mathews Burwell, the director of the Office of Management and Budget, to replace her.
Health and Human Services Secretary Kathleen Sebelius will announce her resignation Friday after a five-year tenure bookended by passage of the landmark Patient Protection and Affordable Care Act and the checkered rollout of the Healthcare.gov website.
Kathleen Sebelius
Secretary, HHS
President Obama accepted Sebelius's resignation earlier this week. She is one of the president's longest-serving cabinet members. On Friday morning he will nominate Sylvia Mathews Burwell, the director of the Office of Management and Budget, to replace her, White House and HHS officials said.
Sebelius, 65, has overseen the biggest changes to government healthcare programs since the launch of Medicare and Medicaid nearly 50 years ago. The PPACA, passed a year into her tenure, continues to remake U.S. healthcare. But Sebelius will be remembered as the public face of Healthcare.gov, which she championed and then came under fire for a succession of problems.
The nomination of Burwell, 48, is being cast as a shift toward tight management. She took the reins at OMB last April, after having served under President Clinton as Deputy Director of OMB, Deputy Chief of Staff to the President, Chief of Staff to the Secretary of the Treasury, and Staff Director of the National Economic Council.
Between her federal administrative roles, Burwell was president of the Walmart Foundation and president of the Global Development Program at the Bill & Melinda Gates Foundation.
Sebelius steps down of her own accord and after health insurance enrollment jumped to 7.5 million through the online exchanges, exceeding forecasts and the first-year enrollment goal. Reports say that she approached Obama last month about leaving, suggesting that the March 31 enrollment deadline provided an opportunity for change.
But Burwell's confirmation is not assured. The PPACA continues to be a flashpoint in the polarized Congress.
HHS spent about $886 billion in 2013— one quarter of all federal dollars. The majority went to Medicare and Medicaid, which are operated by HHS's Centers for Medicare & Medicaid Services. Other agencies within HHS include the Food and Drug Administration, National Institutes of Health, the Centers for Disease Control & Prevention, and the Agency for Healthcare Research & Quality.
Senior financial executives gathered for HealthLeaders Media's annual CFO Exchange say their top priorities include managing overall cost reductions and changes to reimbursement models as a result of healthcare reform.
Nearly 40 financial executives from hospitals and health systems around the country have gathered at the Broadmoor resort in Colorado Springs, CO for two days of small-group discussions on the critical issues facing their organizations and the healthcare industry.
This is HealthLeaders Media's third annual CFO Exchange.
To build this year's agenda, we surveyed the attendees beforehand on their priorities and strategies. Two priorities rose overwhelmingly to the top:
Overall cost reduction and efficiency
Reimbursement and the impact of healthcare reform
The CFOs also named these dual priorities as the most challenging, which presages a difficult year ahead.
Goals These financial leaders reported a 10% goal, on average, in reduced operating costs over the next 3-5 years. That figure has remained consistent over the three years of the CFO Exchange. Their organizations have pursued a range of cost reduction and performance improvement programs, with varying success.
Most effective is setting overall system goals and metrics. Nearly equal numbers of CFOs reported positive results as were neutral on the effectiveness of Lean and Six Sigma programs to identify process waste, and dedicated improvement staff and resources.
At the bottom of the list was employee- or unit-based programs with incentives, which the CFOs were either neutral about or had not tried.
Spending Priorities Spending priorities planned for the 2014 budget led off with medical equipment (such as advanced imaging and robotics) at 30% of capital budgets, on average. Next: brick-and-mortar expansion for outpatient facilities (21%), IT/EMR expansion (19%), and bricks and mortar expansion for inpatient facilities (18%).
HealthLeaders Media's third annual CFO Exchange brings together nearly 40 healthcare finance executives from across the country Photo: Dana Thomas
In working with payers, three-fifth of the CFOs said they expect a "mixed" relationship in the coming years, described as "we have contracts to reduce costs and improve patient care, but we still struggle to get paid." Smaller percentages described symbiotic relationships and negative dealings.
Regarding value-based contracts with payers, the largest share of CFOs said they had had initial conversations with payers about ACOs, but agreements had not been set. Smaller but sizeable numbers said their organizations had invested significantly in active commercial contracts that cover more than 5,000 lives, or that they are participating in limited pilots with less than 5,000 lives.
Strategies Despite the challenging environment—or perhaps in response to it—nearly three-quarters of the financial leaders gathered for the CFO Exchange describe their organizational growth strategy over the next three years as "selective." Another 28% say the strategy will be "aggressive." Only one CFO has outlined a cautious strategy.
We asked CFO Exchange attendees to describe their organizations' leadership strategy in a single word. Two words jumped out: innovation and aggressive.
We will be reporting on these discussions in the coming days and weeks, and using the CFOs' insights to deepen HealthLeaders' coverage of the business of healthcare.
Our latest monthly Intelligence Report, which draws on the 6,000-plus healthcare executives who are members of the HealthLeaders Media Council, is titled "Healthcare IT: Tackling Regulatory, Clinical, and Business Needs." Why, then, is it mentioned in our weekly finance column?
Because healthcare IT is expensive. And the report reveals that it's becoming an ever bigger drain on hospital and health system bottom lines. And that an ROI from healthcare IT will be hard to find, despite the fervent hopes of healthcare executives.
Today, 40% of the 250 respondents say the operating IT budget takes up 2-3% of their organizations' overall operating revenue. But the respondents—who represent a range of C-suite leaders and VPs, including CEOs, CFOs, COOs, and CIOs—expect an upward shift in the near future. More than half (56%) say the operating IT budget will account for 4% or more of overall operating revenue, and a fifth expect IT spending to take 6% or more.
Those percentages are historically high for healthcare, but not necessarily for other industries. You could argue that healthcare is simply catching up.
But what is that extra spending going toward? The top driver, ticked off by 52% of respondents, was regulatory reporting requirements, most notably ICD-10. The American Health Information Management Association (AHIMA) has long argued that ICD-10 codes will lead to better patient care, and it's certainly true that better coding can lead improve reimbursements, but in the end that's a lot of money to pay for more coders.
Still, a majority of survey respondents (58%) say their organizations invest in IT, meaning they expect a financial return, rather than simply spend on IT (indicated by 42%).
But while the survey indicates overall trends and expectations, the comments by individual executives reveal how they view healthcare IT. "IT will always disappoint if you expect a return," says the president of a large physician organization. "Most CFOs will say they haven't seen a ROI on the investments made in IT as an industry compared to industries like banking," says Donna Abney, executive vice president of Methodist Le Bonheur Healthcare, whose organization helped shaped the Intelligence Report.
Some executives blame the government; the CEO of a medium-sized hospital says, "The required expenditure on IT to meet government mandates far exceeds any financial benefit it will produce for the hospital. The Meaningful Use standards are there to serve the government/payers' purposes." Others blame technology vendors; the CMO of a medium-sized health system says, "IT is not yet flexible enough or open enough to show a true ROI. The proprietary nature of most vendors has a very negative effect on building and creating a truly patient-focused record and a healthcare IT system that gets us out of the 1970s in terms of technology."
Despite the varied takes on IT ROI, the survey respondents seem united about one thing: IT holds great promise for improving the mission and function of healthcare. "Technology helps improve patient care, ensure compliance, and facilitates analysis for continued improvement to patient care, which in turn helps in cost reductions and better bottom line," says the president of a medium-sized hospital.
That's why healthcare organizations spend on IT. But how they get from the present to this happy future state will vary; some executives will enjoy a strongly positive ROI on their IT investment, while others will spend, spend, and spend.
Value-based purchasing has begun to take hold, with federal incentives for lower-cost care and best performance and disincentives for unnecessary care. Many of the VBP metrics will be a tall order for healthcare systems, especially HCAHPS.
Yet healthcare executives also see great upside in VBP. In the HealthLeaders 2013 Industry Survey, VBP rated as the number-two opportunity for organizations, garnering 64% of the vote from the 823 respondents.
Geisinger is ready to help its counterparts realize the opportunity. Last week, Geisinger announced the launch of xG Health Solutions, a spinoff company that will offer the Geisinger approach to value-based care for a price.
xG aims to help clients achieve better care at lower cost. In announcing xG, Geisinger President and CEO Glenn D. Steele Jr., MD, PhD, said, "It is generally accepted in the healthcare industry that somewhere between 30 to 40% of the care that is provided is not only unnecessary, but may actually cause harm to patients."
Danville, PA-based Geisinger, an integrated delivery system that bills itself as the nation's largest rural health provider, is widely recognized for its quality of care, low cost, and innovations such as early EMR adoption. This identity is behind the creation of xG, says its new CEO, Earl P. Steinberg, MD, MPP, Geisinger's executive vice president of innovation and dissemination. "[Steele] is tired of hearing many people say that Geisinger is a one-off, that has a dozen unique circumstances that enable it to provide the caliber care that it provides and that, while it's interesting how it does it, it's irrelevant because it's not generalizable. He doesn't believe that. And so I was hired 18 months ago to figure out how to take what Geisinger has innovated and learned to export that to other healthcare delivery systems."
The xG toolkit was described at the launch as consisting of five pieces: consulting services; population health data analytics, interpretation, and reporting; patient-and population-focused care management; health information technology optimization; and third-party administration services.
But Steinberg focuses on two of these pieces as the absolutely key capabilities. The first is data analytics for the patient population. "By data analytics, I mean data acquisition, integration, cleaning, analytics, interpretation, and reporting—both clinical and actuarial. First and foremost, if you don't have that piece, you're flailing," he says.
Steinberg is in a better position than most to understand the importance of a data analytic underpinning. He was a co-founder of Resolution Health, a patient data company that was purchased by health payer WellPoint, Inc., where Steinberg worked as senior vice president for clinical strategy, quality, and outcomes before joining Geisinger in June 2011.
Many provider organizations have data but no analytics, or IT but no data, he says. For example, "a sophisticated EMR may have never done analytics." Without the analytics in place, health systems cannot gain a deep understanding of their patients, much less accomplish population health management.
The second key ingredient of xG's recipe is hyper-focused care management. "Specially trained, embedded case managers are a powerful weapon," Steinberg told me. "I call them ‘commando RNs.' That connotes a personality that is active and takes initiative. They take charge of the most complicated patients. They're extremely valuable in improving care in a very cost-effective manner."
Population health analytics and focused case management, plus consulting to assess a healthcare system's needs, form the core of xG's offerings. "Out of the box, you can't do everything at once, so we concentrate on those things where Geisinger has something particularly valuable," Steinberg says.
xG's approach has already been pilot-tested at two healthcare systems in West Virginia and Maine. Geisinger brought its health data analytics expertise and systems, parachuted in commando case managers, and took over third-party administration so it could examine claims data. "The early utilization impacts are strikingly similar to what we have observed at Geisinger," Steinberg says.
But will xG offerings provide a good ROI for healthcare systems? Maybe, says Steinberg. "It depends on where they're starting from." Primary care is a prerequisite to value-based care, and organizations lacking that base would have to make an investment.
Another aspect beyond xG's purview has to do with negotiations between provider and payer. "The key is to be in a financial arrangement where you get a cut, as opposed to giving it all to the payer," Steinberg says. In the value-based world, provider executives must ensure that they're not only delivering good value for patients but also retaining value for their own organizations.
Population health management is the future for health systems. It's how they're going to navigate reimbursement cuts and abide by healthcare reform while improving patient care at the same time. That's what healthcare leaders are saying and being told.
The PHM concept makes sense, especially from a clinical standpoint: work across the care continuum to coordinate care and improve the overall health of a community, including the chronically ill and expensive frequent-flier visitors to the ED.
But in hashing out the details, some health systems and practitioners will be winners and others will be losers—and it's too early in the game to know for sure which will be which. That's the counsel of executives of leading systems whom I spoke with recently while preparing for an executive Roundtable discussion on population health.
To begin with, "It's important to pick the right dance partners," says Earl Steinberg, MD, who is executive vice president for innovation and dissemination and chief of Healthcare Solutions Enterprise for Geisinger Health System in Danville, PA. Health systems must enter into networks with physician groups, post-acute care facilities, and even competitors to ensure the broad spectrum of patient care that will be required.
These networks will succeed or fail on the strength of their leadership, says T. Clifford Deveny, MD, senior vice president for physician practice management at Catholic Health Initiatives, the 73-hospital system based in Englewood, CO. "Someone has to become the convener and create a vision, a burning platform, for why we have to move to population health management," he says. The convener may be the health system board or perhaps the lead insurance payer.
Without this guiding force, the trust necessary to shared risk and data is likely to be lacking. "This is difficult ... It's not 'Can't we all get along,'" Deveny says. Trust takes time and a "matured relationship." "The sharing of information is going to drive a lot of this ... and if there's not trust to exchange information, then everything breaks down."
Most deeply affected by shifts to PHM will be physicians—employed and independent, primary care and specialists all to some degree. "'Primary care transformation' is our internal term for the cultural change that needs to happen" for primary care physicians, says Christopher Stanley, vice president of care management for Catholic Health Initiatives. "The specialist world will be quite different than it is now. There will be different payment mechanisms. How will specialists work in a team around bundled payments?"
Tim Petrikin, executive vice president, ambulatory care services, for Vanguard Health Systems, the for-profit system headquartered in Nashville, says that healthcare executives must work to modify existing clinical workflows. Already, Vanguard is sending workflow coaches to address how its physicians must act differently under PHM.
Such workflow and behavior changes "take a long time to build. If you're not thinking about it now, it will be impossible to rush later," Petrikin says.
But all the current efforts toward population health management are no more than experiments, caution these executives. "All of this is a work in progress. No one knows how it will turn out," Steinberg says. Deveny adds, "We're not far enough into it with new products to see failure yet."
A transcript of the executive Roundtable will be published in HealthLeaders magazine and online in April. Use the insights to give serious consideration on how your organization will fit into the new PHM world.
