To keep up with big changes in how healthcare is administered, financed, and organized, top leaders are finding a need for new talents and organizational structures.
This article first appeared in the June 2016 issue of HealthLeaders magazine.
Healthcare reform as a term has become so ubiquitous that it is almost indefinable. At first, and broadly, it meant removing the waste in an excessively expensive healthcare system that too often added to the problems of the people whose health it aimed to improve. Then it became legislative and regulatory, in the form of the Patient Protection and Affordable Care Act and its incentives aimed at improving the continuum of care and expanding the pool of those covered by health insurance.
Now, for many in the industry, healthcare reform has matured into a business imperative: the process of ingraining tactics, strategies, and reimbursement changes so that health systems improve quality and efficiency with the parallel goal of weaning us all off a system in which incentives have been so misaligned that neither quality nor efficiency was rewarded.
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That leaders finally are able to translate healthcare reform into action is welcome, but to many health systems trying to survive and thrive in a rapidly changing business environment, the old maxim that all healthcare is local is being proved true. Making sense of healthcare reform is up to individual organizations and their unique local circumstances. Fortunately, there are some broad themes and organizational principles that are helpful for all that are trying to make this transition. What works in one place won't necessarily work in another, but the innovation level is off the charts as healthcare organization leaders reshape what being a leading healthcare organization means as well as what it requires.
No blueprint to follow
In some ways, Methodist Le Bonheur Healthcare in Memphis is fortunate. As a health system with 2013 total revenue of $1.66 billion, it holds a dominant position in its market. But because that market remains "99% fee-for-service," says Michael Ugwueke, MPH, DHA, FACHE, its president and chief operating officer, Methodist's long-term position dominating its market may be in doubt.
Without value-based contracts, the benefit of the work Methodist does to reorganize care and improve outcomes currently accrues to the payer; yet without the work to reorient to risk-based contracts that are likely in the future, Methodist will be woefully underprepared, he says.
In addition to his system president and COO role, Ugwueke also is CEO of the five Methodist Le Bonheur acute care hospitals and will take over the system CEO role when current CEO Gary Shorb retires at the end of 2016. So thinking long term comes naturally.
"We're trying to gear up and create a burning platform," he says. "We're communicating it through components of HCAHPS or readmissions, but even with that, what we try to watch against is [that] you can spend a whole lot of money and time working on readmission issues compared to the return you're going to get."
He adds that organizations can easily spend millions reorganizing roles and care protocols only to be on the hook for tens of thousands in penalties. But at some point, that math will change, and Ugwueke thinks it will change rapidly. Medicare has made it clear that by 2018, most payment will come from alternative payment mechanisms, not traditional fee-for-service Medicare.
"So even if it's at a loss, we try to do this," he says. "The job of a leader is not to rely on just what's happening now. He has to look two to three years ahead and help determine the infrastructure that we have to build."
Similarly, Steve Long feels no real burning platform—yet. But he certainly has no illusions that volume will always drive success at Hancock Regional Hospital in Greenfield, Indiana.
But it does now.
"We're finishing up our best financial year ever, and it's entirely based on volume," says Long, who is president and CEO of the 92-licensed-bed nonprofit just outside of Indianapolis. Hancock Regional's business model is fundamentally not very different than it was five years ago. But while the bills continue to be paid through volume, Long is investing in value because he knows it's coming.
"Frankly, the government is broke, so we know we'll have to be engaged in these alternate payment mechanisms, so it's important," he says.
However, that doesn't change the fact that what Hancock Regional has to devote to reorganization and talent acquisition pales in comparison to that of peers at larger organizations.
"We're a relatively small suburban and semirural hospital, and we don't have bench strength to engage in contracts that would allow us to take on risk as a group. So we're engaging with nine other predominantly county-owned hospitals in a joint effort around population health analytics and payer contracting—focused on employers—that would allow them to begin to pay for both value and population health."
Long says the hospitals that are part of the group, known internally as the Suburban Health Organization, see how other markets are deep into value-based contracting, and have a desire to lead the effort in their home markets rather than having such structures imposed on them, but they want to maintain independence on many levels.
He's open about his concerns as a leader of a small healthcare organization, even in the relative safety of joint contracting with several other organizations.
"The one thing that worries me the most is that our payer contracts will not keep up with where the government wants us to go so that our investments in population health will not be reimbursed," he says. "Frankly, the payers are as addicted to fee-for-service as we have been. If we save a bunch of money, they'll pocket it. The incentive is to get us to do care management and not change the contract really and pocket the difference."
One possible inoculation against such fears, says Gerry Meklaus, a managing director with Accenture in the Philadelphia office, is to avoid jumping into accountable care without having built the physician organization to lead care protocols and management, as well as educating those leading that organization. He recommends that healthcare organizations learn and make changes to care protocols based on their own beneficiaries and dependents. Any positive momentum with that population immediately accrues to the health system itself, as a self-insured entity.
"We like to think of more advanced systems having a plethora of providers who come together as a team—advanced practice providers, pharmacists, nurses, and others—but even with that type of more advanced model, physicians ultimately guide what happens to patients," says Meklaus. "Without physicians coalescing around population health, you'll have to step back and create that collaborative, which can be expensive and time-consuming. You will have missed opportunities."
He says health systems that do not have a commercial contract or who do not want to participate in CMS' Medicare Shared Savings program should use their own populations for a learning laboratory. Further, and more esoterically, physicians have to feel that their leadership is foundational to the ultimate success of the organization, and that means they have to come to agreement on treatment protocols and standardize such activity formally, based on evidence.
"I see a lot of organizations beginning to recognize that, but not to the extent they need to," he says.
New titles, responsibilities
Despite the uncertainty surrounding the investments that need to be made to change the business model toward value, Ugwueke is forging ahead by giving prominence to care coordination on his leadership team. He recently appointed Sandra Bailey as vice president of care coordination; she will for at least some time serve in a dual role, as she is also vice president and CEO of Methodist Extended Care Hospital.
"Their job becomes to look at the continuum from the hospital to outpatient to the long-term care side to all the other ancillary services the patient may need," he says. "That way we have a seamless way to move patients at the appropriate time. That's a skill set we need to have."
Ugwueke says he feels a sense of urgency that belies the slow rate of change in his home market. He starts with the idea that, eventually, much if not most of the health system's reimbursement will have some basis in capitation.
"If you are capitated, you have accountability, and incentives are well-aligned," he says. "Our question is, how quickly can we get to that level?"
Time is of the essence, he says, because the Centers for Medicare & Medicaid Services can make rapid changes in reimbursement protocols that don't require Congressional action.
"And once Medicare is fully into this, the private payers will follow."
Ugwueke says he takes lessons from those who are further ahead but is not beholden to fill his executive team with a host of new titles: chief innovation officer, chief patient experience officer, chief population health officer.
"Personally, I'm not so much enamored of titles," he says. "I'm more interested in what the people will do. I look for what skill sets we need and where gaps exist."
Some of those gaps include care management capability, as Ugwueke has already addressed, says Accenture's Meklaus, and the financial acumen to negotiate a new breed of managed care contracts.
"The ability to structure contracts and generate a cohort of physician leaders who can work side by side to create an energized and engaged network of people is critical."
"Folks who have run independent physician associations (IPAs) or similar risk-bearing organizations have negotiated for some degree of risk," Meklaus offers as an example of where to find individuals with the needed skills. "The ability to structure contracts and generate a cohort of physician leaders who can work side by side to create an energized and engaged network of people is critical."
Many organizations are doing this through the patient-centered medical home construct, Meklaus says, even though many stop short of actual certification from the National Committee for Quality Assurance.
Mark Stauder, president and chief operating officer at Inova Health System, a five-hospital system based in Falls Church, Virginia, says his health system, which boasts many value-based contracts, is looking for best practices regardless of their source.
"At this point, we're used to working with others, collaborating and taking best practices from across the country that are evidence-based and embedding them in the system," he says, referencing a relatively recent unified electronic medical record migration.
More critically, he says, the health system, even though it has embraced value-based contracting, has been challenged with recruiting and building new talent and skill sets. Stauder says one way they've tried to bridge that gap and both develop and acquire population health expertise is through Signature Partners, the health system's 2,100-physician clinically integrated network, which is led by Russ Mohawk, president and CEO of health plans and population health services at Inova. His role and that of the executive team at Signature Partners involves improving the ambulatory environment and strategically positioning Inova for success under risk-based reimbursement at least partially through further new talent acquisition.
"The future is clearly population health," Stauder says.
With that in mind, Inova has welcomed a senior leader in charge of its Medicaid health plan, INTotal Health, which has 60,000 covered lives, and a leader in charge of its joint venture commercial health plan with Aetna, Innovation Health.
"We've moved down the risk continuum fairly far with these additions over the past three years," Stauder says. "We're fully at risk for the Medicaid program. On the Innovation Health side, which is a 50-50 joint venture, we have 200,000 lives, and half of those are full-risk, premium-based lives. The other 100,000 are from large self-insured employers where Innovation Health is the third-party administrator."
Stauder says Inova both built and recruited the talent it needed to make these substantial forays into value-based care. Although Inova recruited Mohawk, its Medicaid health plan CEO John Muraca (who has 25 years of Medicaid managed care experience), and its Innovation Health CEO David Notari (35 years in commercial health plans), Inova is placing a heavy emphasis on developing leaders internally, with physicians of particular interest. A former Inova internist, for example, Signature Partners' Chief Medical Officer Matthew Poffenroth, MD, has been involved in the population health space for more than 10 years, with two years at Inova.
"We're embracing the change that's required," says Stauder.
SSM Health President and CEO Bill Thompson says his organization is "rebooting" its approach to value-based care after a previous attempt fell short of what was needed.
"We really took a pause to reassess what we needed and where we needed it," he says.
A value-based task force was created to assess how best to approach the roughly $40 million SSM has at risk currently and the much higher amounts the 20-hospital system expects to have at risk in the future. The 35 representatives on the task force, who came from leaders and clinicians within SSM, decided the organization needed a systemwide leader who had strong expertise in value-based purchasing, so the organization recently started the search for a senior vice president of value-based care and payments, which Thompson compares to chief transformation officer or chief population health officer at other health systems.
"We consciously chose that title because we want the individual to prepare us for future relationships, expanded bundles, full capitation, and other operational risks we take from various payment methodologies," Thompson says.
He says the health system is looking for a physician who has some experience in care improvement, but is open on whether this person would come from a hospital system, a medical group, or insurance company.
"This is one of those skills that is high demand, but all of us realize this will be critical expertise we'll need," Thompson says.
Through its Dean Health subsidiary in Wisconsin, SSM already has 250,000 lives for which it is fully capitated, so urgency to bring the expertise that resides in that state to the rest of the organization is very important, Thompson says.
"We rolled out the Medicare Advantage plan there on January 1, and we've learned we have a lot of improvement opportunities in care management," he says. "So we've hired a dozen new people in Wisconsin in anticipation of that."
"We need to know more than we ever have about our patients, particularly those who we are at risk for. We need to gather it, risk-stratify the patients, do the appropriate interventions, and learn how those interventions are improving the health of an individual in a population."
A further innovation that should lead to better competitiveness and performance on value-based care principles is being led by Shane Peng, MD, SSM's president of physician and ambulatory services. He chairs the internal Value-Based Care and Payment Task Force, which was created from a summit with representatives from SSM's four states, six markets, and its acute care, medical group, and postacute care businesses, along with support structure representatives from finance, strategy, and human resources.
A hunger for analytics
The task force led by Peng focuses on five areas, but one critical area is around analytics, Thompson says.
"We need to know more than we ever have about our patients, particularly those who we are at risk for," he says. "We need to gather it, risk-stratify the patients, do the appropriate interventions, and learn how those interventions are improving the health of an individual in a population."
He says that information resides in the electronic medical record, claims filings, and in demographic information and health risk assessments. That means the organization is actively looking for and hiring people who have experience with data management and clinical analysis.
"We have to find a good way to translate that information into a usable format for the clinician," Thompson says. "An intermediate step toward personalized care is taking the information that comes out of analytics and redesigning the care process."
Accenture's Meklaus, though not speaking about SSM specifically, agrees that an analytic structure is essential, and that means health systems have to procure those solutions because, in most cases, they don't have the necessary solutions in their IT portfolio, he says.
"This is along the lines of what you see in payers, but the difference is they're on a different level at health plans in that they're actively deployed across millions of lives," he says.
Those are not the right pure population health suite solutions for a health system that might have less than 100,000 lives in its business plan, he says. Part of what's needed is experience. For example, people familiar enough with a smaller-scale environment—such as those who have run IPAs or a medical group that has taken risk and has somewhere in the neighborhood of 50,000-250,000 lives, says Meklaus.
"If you've been managing that level of covered lives, you're in the same ballpark of most ACOs," Meklaus says.
Ugwueke puts a finer point on the issue of data and how it can be used to help performance under risk.
"I'm not sure the issue is data—the issue is what format you get it in," he says, referencing a hodgepodge of where important data lives within the component organizations that make up Methodist Le Bonheur.
"All the physician offices that we're aligned with have different EMRs, so there's no way to tie the hospital to what happens in the outpatient area," says Ugwueke. "We have to find a way to bridge all of that, a way to distill it to get knowledge as to what is happening with our patient population. Very few places have it."
Those that do largely are organizations that did not dismantle their health plan operations back in the 1990s.
"I'm sure they lost a lot of money along the way, but they're now in a much better position than those trying to rebuild out that infrastructure," Ugwueke says.
But data is not the panacea either, cautions Hancock Regional's Long.
"I've been in healthcare a long time, but we really need the clinical people to help us understand how processes drive outcomes," he says. "I can look at data and provide feedback, but it's that clinical expertise that has been so important for value-based purchasing as we think about it with our contracts."
SSM Health is beginning to try to make sense of the wealth of data it controls through its task force on value-based care. One recent breakthrough came in creating a grid under which all the organization's value contracts are listed by region and broken down into opportunities to improve and monetize.
"The indicators show us our current performance and the improvement necessary to make the value-based contracts successful," says Peng.
The grid helps break down the key performance indicators SSM has to improve upon to be more successful under such contracts. The opportunities, Thompson says, could total as much as $40 million over three years.
The analytics and metrics work group uses the grid to understand how these contracts actually work and how SSM can best reverse engineer its care delivery to improve performance. What helps is that improved care leads to financial improvement—the two were seldom so closely linked in the past.
"We are being very deliberate, but we ramped this up quickly because we want to be successful in 2016, not two years later," says Peng.
The opportunity, SSM leaders say, is in industrializing care processes.
"For example, we have Medicare Shared Savings ACOs in three markets," says Peng. "They're the same contract, but in the past each region did their own thing and tried to reinvent the wheel. By looking at it from more of a system perspective and discerning what kind of value a centralized support function brings versus regional activity, there's great opportunity to bring in efficiency standardization and ultimately higher performance."
Nontraditional partnerships
One fact that does not escape most senior leaders is that better performance under value-based contracts comes through extensive partnerships with nontraditional organizations. Those might include everything from home health agencies to behavioral health to local health departments.
"If the hospital or health system is the founder of the ACO, the CEO will have a significant role to play in navigating it, funding some of the initial costs, and bringing the right folks to the table," says Methodist Le Bonheur's Ugwueke.
Beyond that though, he says he is counting on the cooperation of the health system's physicians. He considers Methodist "very lucky in a sense" because it has an IPA that has been around for more than 30 years with more than 2,000 physicians as members, "We partnered with them to create a PHO called HealthChoice," says Ugwueke. "We've flipped that PHO to become our clinically integrated network, so neither the CEO nor myself had to do a whole lot to create it from scratch."
Ugwueke says despite the lack of progress on accountable care contracting in his market, he believes it can flip relatively quickly.
"I tell our folks we are not in a bubble; we are part of the global community. What's the catalyst for the market turning overnight? It can happen. I believe it's likely we'll get to capitation, but I can't tell you when," he says.
Inova is much further along the value curve than Methodist Le Bonheur, but the Virginia organization's strategies are quite similar. About one-third of Inova's 2,100-physician ACO consists of employed physicians, and two-thirds are community-based.
"That setting is where most patients will spend the majority of their time," Stauder says. "We have to have an outstanding hospital setting to make sure we are maximizing safety and quality and improving standardization."
Inova owns some postacute services but partners with many more. It has its own children's hospital, inpatient rehab, and its own home health, but for services such as skilled nursing, it partners with a select group of providers to help coordinate on postacute care.
"We'll never be able to do everything, but we can be very effective by creating the framework for partnerships and collaboration," Stauder says.
Long says such relationships are important for a basic reason: Is the hospital assisting in improving the health of the population we serve or is it being detrimental?
He's hired a person to help develop those partnerships— a former teacher who can be a liaison between the hospital and social service agencies, the schools, and public health agencies.
"She has connections with all those agencies we find important," he says.
The role of education
Beyond reorganizing organizational structure, making sense out of the vast amounts of data hospitals and health systems control, and creating innovative relationships with nontraditional partners, most leaders say they have to be careful not to neglect the need to educate clinicians and the rest of the work force on the reasoning behind so many changes they're having to make in how those people do their jobs.
"Physician-led and professionally managed is our organizational goal," says Ugwueke.
To achieve that goal, he says the health system's three-year-old Physician Leadership Academy helps tremendously. Some 75 physicians have taken courses on topics such as conflict resolution, negotiation skills, strategic thinking, making projections, financials, what quality means, and doing pro formas. He says graduates are expected to be champions in bringing their colleagues along the value journey.
"These are things they're not formally taught in medical school," Ugwueke says. "We have strategically placed these physicians. They are leading most service lines in a dyad approach, and seven physicians are on the organization's strategic committee."
Stauder says that although Inova has hired experience from the insurance field for some of its top value-based talent, it's relying on building most of the talent it needs through internal education.
"Most of them have come up through medicine or management," he says.
"It's important that everyone understands their role in the larger integrated delivery system, the interdependencies and teamwork that need to be displayed in improving safety, quality, reducing costs, and, frankly, keeping people healthy."
Its 1,800-physician ACO, Signature Partners, is led by a physician internist who's been in managed care and the evolving population health space for more than a decade. Also, a physician is its chief technology officer and the leaders of divisions focused on informatics and big data and analytics have been developed internally through its Inova Leadership Institute, says Stauder.
The Leadership Institute is an ongoing commitment in that there isn't a graduation date after which those who are involved move on. All 800 leaders in the institute come together once a quarter to review today's strategy, operational performance, and changes for tomorrow's; where the organization is performing well and where it's not; and what that 800-member team should focus on most over the next quarter, says Stauder. They spend a full day together each quarter for skill building and breakout sessions.
"It's important that everyone understands their role in the larger integrated delivery system, the interdependencies and teamwork that need to be displayed in improving safety, quality, reducing costs, and, frankly, keeping people healthy," he says. "The more they're involved with the priority setting, you create organizational goals and expectations and everyone understands their role in helping drive those goals."
Some education comes straight from the real world, in terms of understanding how nontraditional partnerships can both succeed and break down, says Long. Hancock Regional, ironically, has to give up some independence to remain independent, he says, referencing the 10-hospital Suburban Health Organization.
"We're not a system; we're an affiliation," he says.
A subset of six hospitals in the group work together in two separate ACOs, which are managed together. Eventually, Long would like to see all hospitals in the network work together to negotiate as a group with health insurers for value-based contracts.
"The big thing is you give up some autonomy, and that's a very hard row to hoe where we've been independent for so long," he says. "We don't want a system. We believe an independent community-owned asset could tailor care better than a system could do. But we realize certain things require scale."
Philip Betbeze is the senior leadership editor at HealthLeaders.