Healthcare leaders are recognizing the need for efficiency in supporting nonemergent care in the emergency room.
This article first appeared in the May 2016 issue of HealthLeaders magazine.
Emergency departments are optimized to provide emergency care, of course. The timing of medical emergencies cannot be predicted, so EDs must be ready to provide care always. The open-door policy brings patients who need emergency care, patients who worry that they might need emergency care, and patients who don't need emergency care at all. This third category is resilient—a fact of ED life. So, even though ED operations are designed for emergency care, they also must optimize the activities that support patients who do not need emergency care. While the effective handling of patients with emergent conditions remains a principal focus, to deliver that care, EDs need techniques to be effective with nonemergent patients, as well.
Optimize the whole flow
Transferring patients to inpatient floors is identified as a top bottleneck for in-ED flow by 70%, the item mentioned most frequently. Although EDs have a variety of tactics for accommodating patients pending their move to an inpatient bed, the presence of such bottlenecks is inevitable, and their resolution often requires active participation by other hospital departments.
Of course, there are cases where additional ED capacity or additional inpatient beds are required, but more often, capacity is not the issue, says Trisha Cassidy, chief strategy officer for AMITA Health, whose facilities include four hospitals, a center for behavioral health, and seven immediate care centers in the northwest suburbs of Chicago.
"My hunch is that in most of the country there's not a shortage of inpatient beds. There may be a flow issue of when discharges happen, or when ED admissions happen, but I think that's probably a utilization issue as opposed to a capacity issue."
At the top of the list of techniques for managing ED throughput are fast track or split flow for low-acuity patients (67%), streamlined registration for arriving patients (57%), and direct or immediate bedding (51%).
Daniel Nadworny, RN, MSN, clinical director of operations for ED and urgent care at Beth Israel Deaconess Medical Center in Boston, with 672 licensed beds and approximately 1,250 full-time and part-time physicians, sees these high levels of response as indications of widespread attention to the whole ED patient flow, instead of intense focus on freeing ED beds via transfer to inpatient floors or discharge from the ED.
He says, "For so long, it was just 'Get them out, get them out.' Now, we're looking at how we have opportunities to improve from start to finish. The focus for a long time had been on disposition. But now we're being thoughtful of the whole process."
Addressing avoidable ED visits
More than half of respondents (59%) include coordinating with primary care providers among their tactics for minimizing avoidable visits to their EDs, the item mentioned most frequently. While a common tactic is for care coordinators or other ED staff to help find a provider for those without a primary care physician, Nadworny notes that a primary care provider/patient relationship may not be enough. Lack of availability of the primary care physician is behind some avoidable visits.
"Quite often I see that a patient has called the primary care physician, but appointments are not available, so the patient is referred to the emergency room. If your first decision point is that the patient doesn't need the emergency room, but then the reason for sending the patient to the emergency room is there isn't an available primary care appointment, then that's a missed opportunity."
More than half (53%) rank primary care physicians first in effectiveness in helping patients make more appropriate use of EDs. But the effect primary care providers may have on helping patients make appropriate use of the ED may be diminished, as mentioned earlier, by the lack of primary care availability and by recommendations to visit the ED that are sometimes offered when a timely appointment is not possible.
For 42% of survey respondents, urgent care centers are among the tactics used to minimize avoidable ED visits. At AMITA Health, urgent care centers coordinate closely with primary care. "In our system," Cassidy says, "the urgent care clinics are connected to a primary care office. They do everything they can to make sure that the patients who come to urgent care have a primary care physician."
Nadworny notes that the urgent care center can place a patient on a path of coordinated care. "Our urgent care providers are making decisions not only for the condition of the moment but also decisions about how to plug that patient into the healthcare system. That gives us a new benefit. Urgent care is not only a point of care but also a point of entry to the organization. So that person now is getting not just the urgent care coverage, but they're getting introduced into the network and getting more definitive care set up for them."
Patient knowledge, patient preference
Four-fifths (81%) of healthcare leaders from organizations with urgent care clinics or that are planning urgent care clinics say that the need to provide a setting for patients with nonemergent conditions is among their top motivations for pursuing an urgent care clinic. More than half (52%) say they want to improve access through extended hours.
The broader trend behind taking advantage of additional care settings and paying more attention to care coordination is that providers are helping patients to become more aware of their choices. So both patient and provider play a role in the patient receiving care in the appropriate setting.
Compared to last year's survey, there are decreases in the percentages of healthcare leaders who expect increases in uninsured/self-pay (50% to 41%, down nine points) and nonemergent ED patients (45% to 32%, down 13 points).
Cassidy observes two dynamics at work: "A couple of things are happening now that a significant number of patients who were uninsured are now on the exchange. Number one, some are learning how to use their health insurance and are calling a primary care physician instead of going to the ER. When you're not insured, it's not always easy to get a physician appointment." Second, insured patients see a difference in out-of-pocket costs, as well. "Patients are beginning to recognize the difference in the bill if they go to the ER or if they go to a doctor's office."
More than one-third of respondents (38%) coordinate with community social services to minimize avoidable ED visits. The ED staff at Penrose-St. Francis, which operates Penrose Hospital and St. Francis Medical Center with 522 licensed beds combined as well as four urgent care centers in the Colorado Springs area, holds quarterly meetings with a task force of community-based resources.
Says Cynthia Latney, PhDc, MSN, RN, NE-BC, chief nursing officer and vice president of patient care services, "There is a community task force consisting of agencies for mental health, substance abuse, and other community resources. We come together on a quarterly basis so our hospitals and community leaders can talk about how to share resources, how to communicate, and how to enhance transfer of patients."
When it comes to efficiency and patient flow, emergency departments will never lose their focus on the importance of transferring patients from the ED through admitting and onto an inpatient floor. But the attention that healthcare leaders are paying to care alternatives, case management, and care coordination indicates that ED decision-makers are examining the supply side of patient flow as well.
Payers and providers are recognizing the need to work collaboratively on at-risk programs.
This article first appeared in the March 2016 issue of HealthLeaders magazine.
Of the many changes necessary to accommodate healthcare reform, the switch in accountability be-tween payer and provider may be one of the most fundamental. Accountability is changing as long-standing fee-for-service payments make the shift to risk-based compensation models.
The financial component of risk-based reimbursement can be thought of as the payer and provider sharing positive or negative results depending on the provider delivering better care for lower cost. The industry is moving from a system where virtually all factors contributing to the revenue stream are known to one where important factors are unknown. That introduces, at least for providers, the risk of financial failure. In the face of such uncertainty, payers and providers are moving forward slowly.
Overall, 41% of respondents to the HealthLeaders Media 2016 Payer-Provider Strategies Survey say that they are participating in at-risk programs such as ACOs that offer both upside and downside risk. Nearly two-thirds (64%) of organizations with net patient revenue of $1 billion or more participate in at-risk programs with both upside and downside risk, which is a higher degree of participation than medium-revenue (47%) or low-revenue (27%) organizations.
Although 18% of respondents say they are not involved in any at-risk programs, that includes a high proportion of those who are in organizations with net patient revenues lower than $250 million. More than one-quarter (26%) of low-revenue organizations do not participate in at-risk programs, compared to 8% of medium-revenue organizations and 7% of high-revenue organizations.
Robert Sehring, central region CEO of OSF HealthCare System, which consists of 11 acute care hospitals and a children's hospital serving patients in Illinois and Michigan, says, "I suspect low-revenue organizations would be more challenged to invest to the extent necessary in things such as data analytics and care management."
Those who are investing expect a return. "If your organization has invested in building the infrastructure and creating opportunities to bend that cost curve and reduce unnecessary admissions, you certainly want to have financial relationships that let you share in the reward of those reductions," Sehring explains. Indeed, concern about matching reward and risk is the area of conflict with payers mentioned most frequently by organizations with $250 million or more in net patient revenue. Fifty-five percent of medium-revenue organizations and 54% of high-revenue organizations report the concern that payers receive unearned benefit from providers' work is among their top areas of conflict with their top-tier payers, while just 24% of those with low revenue place that concern in the top three.
Taking on risk is the aim, but in the here and now, issues related to revenue and cost top the list of items included most frequently by providers as areas of payer-provider conflict: the inability of providers to increase fees (42%), payers' failure to adequately address cost curve (41%), and negative consequences as a result of plan redesign (41%).
Ann Boynton, director of payer strategies and value-based contract management for UC Davis Health System, says, "There's so much focus on the dollars at the top—the top three in particular. At-risk issues are not where the day-to-day struggles are."
Higher percentages of medium- (26%) and high-revenue (21%) organizations than low-revenue organizations (13%) say that payer progress on at-risk programs is too slow. Looking at those who say that payer progress is too slow, Juan Serrano reminds us that the direction is a new path for payers, as well. His comments for this report came as he was Catholic Health Initiatives' senior vice president of payer strategy and operations; he is now president and CEO of Munich Health North America.
"It's difficult to implement a coherent shared-value proposition that relies on payment reform, payment change, sharing of critical information, and aligning new incentives for each stakeholder in the equation. It's hard work," he says. "In some cases, payers have started up a new segment within their insurance company to deal specifically with the provider community and to begin to partner and explore opportunities."
On the provider side, Serrano notes the high experience level of those providers who have made at-risk payment models work. "When I look at the integrated providers that are working, they've typically been at it for years, sometimes decades." While such providers may serve as examples, emulation is difficult. "Many in the provider community are interested in value-based reimbursement … but not necessarily equipped to do it."
The importance of data
The shift to at-risk payment models means that organizations will depend on data in new ways. "Data continues to be king," says Sehring. Industry trends in the use of data include assessing risk for patient populations, identifying segments of patient populations that warrant provider attention, tracking progress as care is delivered, and monitoring efficiency along the way. "You need to start with robust data and then you need the analytics capabilities in order to be able to make the necessary connections."
Nearly one-third (30%) of respondents use payer data to support their risk-assessment function, including 39% of those with net patient revenue of $250 million or more. And 31% say that access to risk-adjusted patient data is among the top areas from which they derive benefit from their relationships with payers, while 29% say the same for access to aggregate claims data.
Payer claims data can augment a provider's view of its patient population when the right steps are made. "It's not just about taking a dump of the payer data and dicing and slicing that in order to produce some information," Sehring says. "Rather, can you take that data, link it up with your internal clinical data from the electronic medical record and health risk assessments, if you have them, and other data in order to paint a more complete picture of that patient and that patient population?"
Such an enhanced set of data, he says, can support functions such as risk stratification, identifying gaps in care, and examining wellness status. "It's being able to combine data, to analyze it, and then push it out to providers at the right time. Then it's not just information, but it's actionable information."
Providers that work with payer data can use some help doing so. Although support for risk-related analytics is included as a top benefit from payer relationship by only 19% overall (seventh place), such support is the item included second most frequently by organizations with $1 billion or more in revenue among the payer activities that provide them with the most benefit.
"There's a steep learning curve in terms of understanding what to do with the information that is made available by the payers," says Serrano. "The payer community has to become more transparent in organizing data and making it available to providers. And the provider community has to be-come more adept at receiving and hosting data, as well as understanding how to interpret it and manage with it. And providers need to layer in data from additional sources within their systems that may not typically have been mined before. Finally, providers need to figure out how to make that information consumable by the end user."
Data and analytics are keys to understanding risk. And if the financial foundation of the industry is shifting to risk-based payments, providers must acquire the data and acquire the interpretive skills. Says Boynton, "It's really important when you're trying to scope out what your own risk tolerances are." Taking on risk needs more of a foundation than making cost projections by looking at historical performance. Boynton cautions, "You can't just say, 'These patients cost us this much last year; we'll just assume that's what it's going to cost this year.' You have to really understand what's going on with the patient population for which you are assuming risk. Aggregate claims data will really provide insights into what the major issues are that are facing a provider's patients."
Access to claims data is among the top three items for negotiation for 54% of high-revenue organizations, and it is the item mentioned most frequently by that segment. And although access to claims data is seen as an objective by providers when in negotiations with payers, Serrano reminds us that data transfer can be complex. He says, "Sometimes we interpret unwillingness to share data as reluctance. But in reality, if we dig a little deeper, we see that organizing the data, making it consumable, and warrantying the data to be correct and defensible takes time, effort, and money—investments to get to the point where the data is actually reliable and can be shared effectively."
Most respondents (52%) want to pursue value-based metrics in their next payer negotiation—the item included most frequently. The core questions to consider, says Boynton, are related to revenue. "If there's money tied to this, how much is it? And how much do I have at risk?" The answers to those questions can influence strategy and tactics. With metrics known, she says, "Providers can begin to put the pieces together to say, 'Here are the areas that we're going to really focus on.' "
In addition to their importance as starting points for strategic and tactical appraisal of at-risk agreements, metrics are on top of the chart of negotiation objectives because the determination of appropriate metrics can be an iterative process—not quite trial and error, but adjustments may be necessary. Providers want to ensure that metrics do not leave them vulnerable in some way.
Boynton offers an example of how an organization with a relatively small at-risk population might be more vulnerable to randomness, particularly regarding conditions that might incur high costs. She says, "There's a level of randomness, so that no matter what you do, the smaller the population, the greater that impact is likely to be." That example leads to more fundamental questions. Providers want to know, she says, "How are you judging me? What do I need to know about how you're judging me?"
There's no shortage of metrics in healthcare, and the use of metrics associated with at-risk performance has the potential to be even more problematic than the metrics associated with executive compensation. The issue can be especially difficult because providers work with many payers, and payers work with many providers.
Says Sehring, "We probably have pay-for-performance or some version of metrics and analytics with probably 10 or 12 different payers. You would like to see a standardized set of metrics that are important to the payer and important to the provider that we could agree upon across all of these different relationships. That's not where we are today."
Implementing a diverse set of metrics across a provider's more or less static medical staff can be problematic. At OSF, the printout of the spreadsheet that the ACO group uses to track performance occupies two 11" x 17" sheets of paper. Sehring says, "We can't put that in front of our providers and say, 'Here is what we want you to focus on.' "
As the industry moves toward population health, the concept of risk will extend along the care continuum, meaning that providers may not have, as mentioned above, a more or less static medical staff. The industry is responding to increases in the administrative and tactical burdens associated with delivering value-based care through an increase in narrow networks and clinical integration.
Assessing accountability
What are we accountable for, and to whom are we accountable? On a top-line basis, there are three parties involved in healthcare accountability: the provider, the payer, and the patient. We are seeing that the industry's shift to value-based care reorders accountability. Serrano says, "It's obviously a challenge to realign accountabilities when healthcare economics have been built on a foundation of fee-for-service, with little in the way of utilization controls." The shift of risk to providers, he says, "is fundamentally intended to bring more accountability to the provider community. We also continue to encourage accountability on the part of the healthcare consumer as we transition to new reimbursement methodologies."
If an organization is accountable and under contract, the contract must define performance. In addition to the complexities of having many metrics and many partners, there is the issue of recording accurate descriptions of services and communicating about the delivery of services. Says Serrano, "In order to effectively manage global risk, global capitation, or any other economic models, we need to become more data rich than we are even today."
Serrano says that additional attention will be needed from both provider and payer. "Payers and providers simultaneously need to become more sophisticated and more precise in coding, billing, and administration of data. We have to understand how to behave in a more accountable way with respect to how we are delivering services, referring patients to other providers, and how we're staying connected to patients. We need to help them achieve overall health and well-being. This activity goes far beyond the procedure or the therapy or intervention that we might have delivered at a point of service."
Some gain important exposure to the mechanics of delivering value-based care, put themselves on a path to making known some of the many unknowns, and develop stronger ties with payer partners by participating in ACOs. Says Boynton, "To make ACOs successful, it requires a much greater level of trust to be able to work in that environment, and a much higher level of commitment from all the organizations that are involved."
The ACO model may be laying a foundation for standardizing metrics, too. Sehring sees signs that Pioneer ACO participants recognize that the scope of the program has built a foundation of experience that may be extended. "Many of the providers who are involved with the Pioneer ACO try to use those metrics with other payers. They say, 'Here is a large group of benchmark data that is used by CMS in probably 300 or 400 different ACO relationships. Let's start with these as a basis, sort of a guidepost on how we want to approach metrics.' "
With the Centers for Medicare & Medicaid Services as a leading driver, the industry is moving toward risk-based payment models. Despite broad exposure to risk-based models of one kind or another, the fee-for-service payment model shows considerable resiliency, so providers and payers can expect an extended transition period. As new working relationships emerge, the transition will require changes to data recording, data collection, data exchange, and data analytics. These activities—previously done somewhat independently—will be accomplished with at least the acknowledgment of the needs of the other parties in the risk-sharing arrangements.
Although each party in the transition—payers, providers, and patients—will be involved in many aspects of change independent of each other, achieving the objectives of better outcomes and reduced cost will involve closer collaboration.
Collaborating on risk-based contracts can and does work. And although the scale may be small when considering the industry overall, those who are involved must dedicate considerable resources to the activity.
As the healthcare industry transforms, healthcare leaders are facing new value-based incentives, as well as requirements for new skill sets.
This article first appeared in the November 2015 issue of HealthLeaders magazine.
Recasting organizational objectives to address shifts to value-based care has two major effects on executive compensation. First, incentive programs have to shift to reflect new directions. Second, attention to fundamental changes in compensation through at-risk reimbursement and capitated payments requires new executive skills, which in many cases will mean additions to and departures from the team that leads the organization.
Such moves within the executive ranks often are accompanied by a degree of disruption. And, in cases where new executives are sought to fill new roles, organizations are finding that they must be able to clearly define a set of responsibilities for which they may have little firsthand knowledge. Further, they will be recruiting from a limited and in-demand set of candidates, which can place upward pressure on executive compensation across the board.
Incentives: Finance on top
The executive team is accustomed to focusing on the numbers. Because financial stability of the organization will always be a top concern, compensation programs tilt their variable components toward financial performance. But financial performance is now becoming linked to the shift to value-based performance, which increases the use of executive performance parameters based on various aspects of clinical performance.
With operating margin/cash flow placing as the top-mentioned incentive for both individual (76%) and group incentives (71%), we can see the dominance of financial objectives in executive compensation. The percentage including operating margin or cash-flow targets among individual targets varies little by organization size. But this is not the case for patient engagement/satisfaction and clinical performance, which are the individual goals mentioned second and third most often. Higher percentages of medium- (76%) and high-revenue (74%) organizations than low-revenue organizations (58%) have patient engagement or satisfaction targets. Likewise, higher percentages of medium-revenue (64%) and high-revenue (60%) organizations than low-revenue organizations (49%) have clinical performance targets.
James F. Hargreaves, senior vice president and financial advisor for Morgan Stanley Wealth Management and former head of the compensation committee for the board of directors of Johnstown, Pennsylvania–based Conemaugh Health System, explains that attention to finances is especially acute in low-revenue organizations, which helps us understand why we see relatively low percentages in low-revenue organizations offering incentives based on patient engagement and clinical performance. He says, "Making money is number one. That keeps them going. So while they might want to look at these other things, they can't get by the financial targets."
Conemaugh serves more than a half million patients each year through the Conemaugh Physician Group and Medical Staff, a network of hospitals, specialty clinics, and patient-focused programs in west central Pennsylvania. Hargreaves was serving on the Conemaugh board as the organization gained strength financially, and explains how emphasis changes with financial success. "The more successful we became, the lower the finance-based percentage became, and the higher other incentives became. When you get your financial shop in order, when you get your purchasing in order, when you get your insurance negotiations in order, and so on, then you can move some of these other things up to a higher priority. If those basic financial things don't happen, you always ask, 'Are we going to make enough money to be able to continue operating?' "
In medium- and high-revenue organizations, patient engagement or satisfaction targets are included in individual incentives nearly as often as operating margin/cash flow targets. For instance, 74% of high-revenue organizations use patient engagement or satisfaction targets, nearly equal to the 79% of high-revenue organizations using operating margin or cash flow as individual targets.
Parameters that may be more closely associated with healthcare reform are included less frequently overall, but we still see more emphasis in high-revenue organizations. For instance, population health management is an individual incentive for 45% of high-revenue organizations, nearly twice the rate of medium-revenue (24%) and more than triple the rate of small-revenue organizations (13%). Growth in lives under risk contracts is an individual incentive at only 10% of organizations overall, but 16% of high-revenue organizations.
David C. Pate, MD, JD—president and CEO of St. Luke's Health System, a nonprofit organization operating seven hospitals and a network of clinics covering all of Idaho and eastern Oregon—explains how emphasis on finances may add to the challenge not only of shifting to reform-related goals as incentives but also actually adopting reform-related strategies.
"Every hospital and health system has a finance committee," Pate says. "They're looking at their numbers, and they know that those finances are still driven by volume of services. So it's pretty hard for them to tell their management team that they want them to go full speed ahead, getting ahead of the market in driving toward pay-for-value, when they know that's going to adversely affect their financials and maybe their bond ratings. You can see the spot that they're caught in."
Over time, overall compensation demonstrates modest increases. In 2013, nearly half (48%) of respondents reported compensation of $200,000 per year or more. This year, 54% earn $200,000 or more. Pate, lead advisor to this Intelligence Report, suggests that industrywide transformation efforts may be pushing compensation levels up. "Some executives choose to retire, or retire early because they realize that, while they knew how to drive the ship under fee-for-service, they're less prepared to do so going forward."
Sometimes, he observes, it is the board that recognizes how some current executives "are not well-situated to drive the future, so boards are changing out some teams." Often, new executive hires, especially those with skills that address healthcare's new directions, are brought in at higher compensation levels. Says Pate, "We've been creating new roles to help drive the new world of healthcare, and people to fill those roles are few and far between. So they may be commanding higher salaries."
In the upper ranges, respondents reporting salaries of $400,000 or more has increased to 21% this year, up seven points since 2013's 14%.
The challenge of moving in new directions
Slightly more than one-third (68%) say that their organization's executive compensation packages are pretty well aligned or perfectly aligned with their organization's strategies. Of course, that means that 32% say their compensation packages are slightly or seriously misaligned with strategies.
Included in this somewhat troubling percentage are 36% of the CEOs participating in the survey, individuals whose closeness to the board presumably gives them a substantial role in contributing to both the organization's strategy and the organization's compensation policy. St. Luke's Pate suggests that the pace of change causes compensation practices to be out of sync with strategy. "Not all organizations develop the sense of urgency that's needed to address change, so they're now experiencing an increasing level of tension, seeing that they are out of sync in terms of how they are compensating versus the direction they're saying they need to go."
Generally, at-risk compensation—the incentive program—helps align compensation with the organization's strategy. Nearly one-third (30%) say changes in incentives are needed to address financial aspects of healthcare, but they see no plan in place to change. The perspective on incentives addressing the clinical aspects of healthcare is only slightly better, with 23% saying that change is needed but no change is planned. Hargreaves says, "These organizations may be traveling down a road of being far more reactive than proactive. That can create all kinds of problems in lots of areas."
Resolution is more than a matter of recognizing the problem and fixing it, partly because modifying compensation programs is a long-term activity. Hargreaves notes, "It takes time to step away from doing it the way you've always done it in the past and realize that, if we're going to be successful in the future, we're going to have to do things differently."
As with the misalignment noted earlier, a high percentage (26%) of CEOs say change is needed in order to address financial objectives, but they see no change coming within their organization. Although the percentage of CEOs is slightly lower than the percentages from other executives (31%), one expects CEOs to see the direction of the organization and the industry, and to be actively driving plans to move the organization in the right direction. Says Pate, "This reflects a little bit poorly on those CEOs, because, together with their board, they are charged with driving the executive compensation strategy. This is especially the case regarding financial objectives, because those haven't changed as much as many of the other parameters affecting compensation have."
As important as incentives can be in providing a focus for groups and teams, 43% say their organization has not modified or is not expected to modify such incentives in light of the shift from fee-for-service to pay-for-value. Organizations that know change is pending but will not or cannot make steps to modify their systems may face serious challenges.
"This is an indication that we're going to have trouble getting organizations to really focus on new models if they don't change the incentives, especially if incentives in place now are just reinforcing the old fee-for-service objectives," says Pate. He acknowledges the requirement that incentives track revenue flow, and the difficulty inherent in modifying incentive programs without a great deal of information about new revenue streams. "You can't expect people to act against their own economic self-interest for prolonged periods of time. People are willing to make sacrifices here and there. It's a big issue—given that we have these traditional models of compensation, what should be the model of the future?"
Carol Burrell, president and CEO of Northeast Georgia Health System, a nonprofit community organization serving northeast Georgia through the 557-staffed-bed Northeast Georgia Medical Center in Gainesville and an 80-staffed-bed hospital in Braselton, is specific about what may happen if individual compensation elements are based on factors not well understood and, as a result, executives have goals that eventually prove to be unreachable. "I think you can get away with that for a year or two, but if you're a visible organization such as we are, an organization that's nationally recognized, you're ripe for the picking with recruiters," she says.
Finding the right balance
Two-thirds of respondents (67%) include the need to balance quality and financial goals among their top three challenges related to executive compensation, an aspect of compensation policy that affects organizations of all revenue levels fairly evenly. This weighing of clinical and financial objectives places at the top of the chart, providing an indication that although healthcare leaders understand the industry is moving toward improving outcomes while reducing cost, they struggle a bit when they attempt to modify compensation programs to reflect that.
Of the four goal-related challenges respondents evaluated, 49% include determining metrics for pay-for-value tasks among their top challenges. Presumably, organizations are well versed in establishing financial metrics, and executives may be more practiced at tracking financial objectives. That helps us understand why a smaller percentage of for-profit (41%) than nonprofit (51%) organizations find determining value-based metrics troubling.
"For-profits typically have been much more financial- and metric-driven. Executives in the for-profit environment are looking at numbers and details on a daily basis because they have to drive to those numbers," Burrell observes.
But it's not merely a matter of having comfort and experience tracking the financial aspects of running a business. Healthcare reform asks us to look at clinical performance in new ways. Says Pate, "You start with the things that you know, and what we know is the sick-care business. We look at readmission rates, which assumes that the patient was admitted to begin with. Length of stay implies they're already in the hospital. What should the measures of population health be for the future? Is it looking at things like the average body mass index or the range of BMIs for the population you're serving? Is it looking at smoking rates? What are future measures going to be? That's the tough thing, and I don't know anyone that's got those down yet."
Seeing that 49% of respondents are challenged by determining metrics for pay-for-value tasks, Pate says, "a lot of organizations are not sure what to prioritize, what to set up as the key metrics."
New assignments, new team members
One-fifth (21%) have added new C-level positions in response to the industry's shift to value-based care, including 33% of organizations with net patient revenue of $1 billion or more. As one might expect, higher percentages of executives hired for new positions will be in the population health and IT areas. We see that 15% expect to add a population health executive, and 10% expect to add a chief analytics officer. More than one-third (39%) of low-revenue organizations have implemented little or no change to their C-suite due to their attention to value-based care, compared to 27% of medium-revenue organizations and 21% of high-revenue organizations.
"The larger organizations have the cash flow to do it and are able to see how it can benefit in either cost savings or better patient care down the line," Hargreaves explains. "Sometimes it's a lot harder for the smaller organizations to do that."
About those who plan little or no change, Burrell says, "those may be organizations that are less progressive and maybe are not thinking as strategically as others." She notes that even small steps toward focusing the C-suite in a value-based direction are important now. "Value-based care is coming whether we like it or not, and it's a difficult thing to change overnight."
Pate questions the resolve of some of the 49% who are accommodating change by asking current executives to take on new responsibilities. "It's a bit discouraging," he says. "What may be happening is that some organizations are not making the investments that they need for the future. If what they're trying to do is just get their current people to do more, and to ask them to try to live in two worlds, I would question how successful that can be."
Although the nature of the skills needed is highly dependent on circumstances, two-thirds say that physician alignment experience is among the top three skills that will help a CEO succeed in the next five years. "The specter of bundled payments hangs out there. The physician alignment situation is going to become more and more critical the closer we get to the bundled payments," says Hargreaves.
Pate has witnessed an earlier trend of appointing CEOs with a great deal of hospital operations experience. A subsequent trend (which included him) placed physician leaders in the CEO spot. "Most recently," he says, "we see examples where boards are saying, 'You know what? It's neither of those. We need some fresh thinking. We need somebody to come in here who actually isn't steeped in healthcare knowledge that will take a fresh look with fresh eyes.' "
Healthcare leaders are developing clinical integration models to address clinical and financial transformation.
The healthcare industry is challenged by the need to transform both the clinical and financial aspects of care delivery. Among the challenges leaders are facing is that the financial foundation of the industry is heading toward a variety of risk-sharing payment mechanisms, but for most, fee-for-service reimbursement remains the source of a sizeable portion of revenue.
Healthcare leaders who responded to our Physician Alignment Survey indicate strong movement toward clinical integration, and expect to place increased emphasis on shared savings programs, bundled payments, and at-risk contracts as components of their physician alignment activity. Such shifts in alignment practices suggest that healthcare leaders are addressing how care delivery is becoming more collaborative. Executives are planning changes to their alignment practices because they see signs that those with integrated and aligned medical staffs will be rewarded.
Maximizing financial performance is the item included most frequently as a business objective behind physician alignment strategies, cited by 61% of respondents. Nearly as many (60%) say that standardizing care for predictable costs is one of their top three objectives.
One would expect financial performance to be at or close to the top of a list of business objectives. And addressing cost is a principal contributor to financial success. But addressing cost through care standardization can be a great deal more challenging than more conventional methods of cost containment, because care standardization requires physician support, which, to an extent, requires that physicians surrender a degree of autonomy. Indeed, engaging physicians in care transformation is the third most frequently mentioned patient care objective, cited by 46%. And standardizing care for quality improvement, a conventional component of most healthcare quality improvement programs, is mentioned as a top patient care objective by 58%, nearly as many who mention standardization for cost savings.
Advisors indicate that objectives such as care transformation (included by 46%) and care coordination (40%) are liable to increase in priority over time. "The goal is to transform the care delivery system. So it was a little bit surprising that that number was that low," says Seth Kronenberg, MD, chief medical officer for 506-bed nonprofit Crouse Hospital and president and medical director for Crouse Medical Practice in Syracuse, New York, an organization that serves 23,000 inpatients and 150,000 outpatients in central and northern New York.
Michael Wiltermood, president and CEO for Enloe Medical Center, a 235-staffed-bed nonprofit hospital in Chico, California, adds, "If you include population health management with care coordination, you would see that number go up as we get better and better about working together." In fact, Wiltermood suggests that care coordination and care transformation are the major patient care drivers of physician alignment. "I think you could make the argument that those two together actually are the major objective and that the other things are subsets."
Regarding employed physicians, employment contracts with incentives is the alignment mechanism mentioned most often (60%). But nearly as many (55%) say they are using clinical integration as an alignment mechanism for employed physicians—not surprising given the high percentages that include care standardization for cost savings (60%) and quality improvement (58%). Nearly as many (52%) are using clinical integration for alignment with independent physicians. In fact, the use of all alignment mechanisms (except, of course, employment) tracks very closely between employed and independent physicians. For instance, 25% use shared savings agreements with employed physicians, while 26% use shared savings with independents.
Michael Wiltermood
The drive to integration and collaboration supports the concept of using alignment models that are common between employed and independents, and the need is immediate, especially for organizations involved in shared savings programs.
"It's basically out of necessity to build it that way," says James Parobek, senior vice president of operations for Texas Health Physicians Group, with more than 830 medical professionals operating out of more than 250 locations in the Dallas-Fort Worth area. "We're not going to have enough doctors that we can employ. We couldn't afford to employ all the specialists we need to make sure we get shared savings to actually occur, to make sure that bundled payments happen. Our medical staff and specialty referral network are made of many independent physicians. You're not going to be successful if you can't figure out a way to do clinical integration with them, ACOs with risk sharing, shared savings, and bundled payments. If you don't figure out a way to do those top four items with independents, you're not going to have shared savings for your employed doctors this year."
Of course, the emerging need to take on risk drives physician alignment activities, too. Says Wiltermood, "This whole strategy of alignment is stepwise. First, you acquire practices. Then you achieve a level of integration and [address] quality measures. But ultimately the goal is to be in a position to get into shared risk agreements as a hospital/physician group."
Healthcare leaders expect substantial increases in the degree of use of ACOs, shared savings, and bundled payments as alignment mechanisms, for employed physicians and independents alike. For example, 21% of organizations use bundled payments for employed physicians now, and 41% expect to emphasize bundled payments for alignment over the next three years. The responses for use of bundled payments for independents are 22% now and 36% over the next three years.
Parobek notes that these results may indicate that healthcare leaders are anticipating a long-expected move by payers. He says, "I think the main reason for the jump in the shared savings and bundled payments is that people are expecting that insurance companies are going to change the way we're getting paid, which will allow for those vehicles to happen. Insurance companies are already talking about bundled payments. Because they're talking about it now, people may be expecting that in three years there'll probably finally be those vehicles."
James Parobek
Survey results show that higher percentages of health systems than hospitals use methods now and expect to emphasize those methods in three years, across all alignment mechanisms. The lead by health systems is seen most dramatically with clinical integration: 77% of healthcare leaders from health systems now include clinical integration among the alignment mechanisms used for employed physicians, compared to 44% from hospitals. The difference is as pronounced for independents: 68% of health systems now use clinical integration, compared to 42% of hospitals.
But the gap may not be as pronounced in the future, because, in some areas, higher percentages of hospitals than health systems plan to emphasize alignment mechanisms. For instance, a higher proportion of healthcare leaders from hospitals expect to increase their emphasis on shared savings over the next three years. In three years, 38% of hospitals expect to emphasize shared savings for employed physicians, compared to 14% who use that alignment mechanism now. Thus, the increase in emphasis for hospitals is 24 percentage points. The corresponding increase for health systems is 10 points, going from 37% now to 47% in the three-year time frame.
Clinical integration as a platform for reform
Organizations are positioning themselves to address both the care and payment aspects of healthcare reform. Closer working relationships help facilitate both objectives, and integrating care providers into networks is a way of formalizing closer relationships.
Clinical integration is an organizational structure that allows participants (which may include competitors) to join together to negotiate fees. Participants agree to share quality-of-care improvement objectives and techniques. Shared efficiency objectives are intended to yield cost savings, which benefit network members. IT tools monitor and support, so infrastructure elements such as EHRs are part of clinical integration. Participating physicians often sacrifice a degree of autonomy in order to accommodate the network's governance structure.
As noted, more than half of respondents (55%) now use clinical integration as an alignment mechanism for employed physicians, and 52% use clinical integration for independents. And nearly two-thirds (60%) of those who use clinical integration as an alignment mechanism with either their employed or independent medical staff have a clinically integrated network. Four-fifths (80%) of those 60% say their clinically integrated network is complaint with Federal Trade Commission and/or Department of Justice regulations.
Among organizations that participate in clinically integrated networks, survey respondents expect near-term (three-year) growth in the level of clinically integrated medical staff of 48%, which is nearly five times the expected growth rate of the staff itself. In the same three-year period, healthcare leaders expect their overall medical staff population to increase in size by 10%.
In the busy Dallas/Fort Worth area, Parobek expects overall medical staff growth to be in line with the expectations reported in our survey. But Texas Health's shift to clinical integration is expected to exceed what survey respondents report.
"We can only have clinical integration with our employed physicians. We've got 550 employed providers right now. Our clinically integrated network probably in two years is going to be north of 2,000 physicians, which will include employed and independent physicians. That growth is a lot more than 48%." The Intelligence Report's regional breakout shows medical staff growth over three years for the western region of 18%, with clinically integrated staff expected to grow by 85%.
Parobek suggests that expected expansion of the ranks of clinically integrated physicians is a sign that payment reform is underway. "Medicare Shared Savings Plans and Medicare Advantage Plans are shared risk savings plans in place now that doctors and hospitals are able to do together. That's happening, and that's expanding.
"Bundled payments are occurring right now in some areas," he says. "So we know that that's already started, and clinically integrated networks are another variation of that. ACOs have started to form, so there's a mechanism for these things to happen."
Parobek adds that the model of health systems contracting directly with employers provides still another reimbursement vehicle that favors clinical integration. "I think we're going to see a whole lot of growth in this area. It took 10 years for the groundwork to be laid, but it's now starting to pay off."
Despite important strides in the industry, Kronenberg points to CMS' time frames for switching to value-based payments, and wonders whether the shift toward clinical integration will be swift enough.
"Medicare has a goal that by 2016, 85% of their payments are supposed to be value-based. By 2018, it's going to be up to 95%, I think. By then, a lot of it is going to be shifted to value-based, but you're still going to have only 70% of your medical staff involved in clinical integration. That definitely seems like a slow pace," Kronenberg says. "Maybe they're kind of hedging their bets a little bit. Because if you truly believed in payment reform, I would think your number would be 90% or something. This may be recognition that it's going to be a difficult process."
Alignment and feeling ownership
Many frequently mentioned business objectives behind alignment strategies can be supported by clinical integration. Nearly half of respondents (46%) include establishing primary care as a foundational element in their care continuum among their top three physician alignment business objectives, for instance.
Likewise, emerging but compelling business objectives such as positioning for risk contracts (36%) may be better pursued with a medical staff largely aligned into a clinically integrated network. As we have seen, the move toward clinical integration is clear, but only 33% today include forming a network to deliver value-based care among the top three patient-care objectives for their physician alignment strategies.
Nearly half (46%) include engaging physicians in care coordination among the top three clinical objectives behind their physician alignment strategies. But one-quarter (24%) say that physician engagement is the most difficult aspect of aligning physicians, the item at the top of the chart. Says Kronenberg, "This result demonstrates what we all believe: that physician engagement really is the toughest piece. It's not financial issues. It's getting physicians engaged in the process and willing to practice within the formal confines of a clinically integrated network."
Indeed, acceptance of value-based compensation is cited as the most difficult aspect of aligning physicians by only 5%. Seeing that 47% include early physician involvement among their top two most effective physician engagement tactics, Kronenberg says, "Traditionally we thought, 'Let's develop the system and present it to the docs.' Well, that is not as effective as when they're involved in the decision-making process early on. Then they really feel ownership. That is being recognized as a key piece."
Nimble and responsive
The time for close alignment is now, even though the paths to care delivery and financial transformation are not yet clear. For Wiltermood, alignment provides the flexibility to respond to requirements as they emerge.
"We feel that whatever happens going forward—a big push toward population health or risk sharing agreements or whatnot—a physician alignment strategy is going to be critical to our success. We need to be able to pivot in whatever direction the payers go, and respond competitively. Organizations that have their physicians aligned with them, that have developed quality improvement strategies, and that have some measure of clinical integration—I think those are going to be most successful."
While the alignment mechanisms used for employed and independent mirror each other, Wiltermood sees a benefit in employing physicians. "We need to attract and retain physicians," he says. "Physicians are looking for stronger relationships with hospitals. I think they're looking as much for security, standardized benefits, and employment packages as they are for professional fulfillment. We have to get those for physicians and get the payback, which is improved quality of care, improved efficiencies, and the ability to contract. With aligned physicians, we can bring a healthy provider group to insurance plans. If you don't have that capability, sooner or later you're going to be on the outside looking in."
As healthcare leaders recognize the importance of the care continuum, they need to rethink responsibility for care coordination.
This article appears in the July/August 2015 issue of HealthLeaders magazine.
Care coordination in the form of patient transfer is a relatively mature activity, at least in the acute care environment. But new attention to value-based care and at-risk reimbursements means that care coordination is poised for development and growth.
Just over two-thirds (68%) of healthcare leaders say their organization has a care transition function that supports patient transfers to or from hospitals, which is the setting with the highest percentage of supported transfers. Other settings cited range between 40% (for clinics or federally qualified health centers [FQHC]) and 55% (for home health agencies), which gives hospitals a clear but not commanding lead.
Despite the growing expectation that primary care physicians should occupy pivotal spots in care coordination activity, primary care practices are in the middle of the group, with 53% of respondents saying their organization has a care transition function that supports patient transfers to and from primary care. "That means that half the people out there are being coordinated without [a primary care] physician's direct involvement," says Gaurov Dayal, MD, former president of healthcare delivery for St. Louis–based SSM Healthcare, which operates 19 hospitals, an insurance company, nursing homes, home care, hospice, telehealth, and a technology company.
Examining new roles
The presence of care transition activity is related to participation in narrow networks. Slightly more than one-third (35%) of respondents say their organization is in a narrow network, and 31% are not. For every one of eight care venues examined, higher percentages of those whose organizations participate in narrow networks than those that do not say their organization has a care transition function. The difference in care coordination activity between narrow network participants and nonparticipants is especially great for outpatient specialty care (64% vs. 41%), outpatient primary care (66% vs. 46%), and rehabilitation facilities (55% vs. 38%).
Although virtually all interactions between patients and providers can benefit from care coordination, providers tend to focus their efforts (and resources) on patients most in need. Survey results show that diabetes (68%) and heart failure (65%) are conditions for which providers most often currently (or expect to within three years) assign a part-time or full-time staff person to coordinate care. Diabetes and heart failure stand out—COPD is mentioned third most frequently, by 49%.
But as we consider condition-related targeting, Grace Hines, RT, MBA, corporate vice president of systems integration for Sentara Healthcare, a nonprofit health system comprising 12 acute care hospitals and more than 100 sites of care throughout Virginia and northeastern North Carolina, reminds us about the interrelated nature of health problems. "As much as we know these conditions and how to control them," she says, "you've got to get the diabetic patient or the heart failure patient engaged so they can be part of the solution. Often that means you've got to delve into behavioral health issues, too … because many patients have something preventing them from doing what they know is the right thing to do."
So, although only 39% of respondents say they have or expect to have a staff person assigned to coordinate the care of patients with behavioral health conditions, those involved in care coordination should expect to encounter a range of conditions, including behavioral health.
A by-product of targeting is that a small number of patients receive the attention of care coordinators, and a great number of patients are not assigned to a care coordinator—they are on their own to coordinate care. Hines notes that Sentara has an outreach program that assigns quality assurance RNs to work with private practice physicians.
"Quality RNs work with providers to identify aspects of care that can be better managed to improve quality and costs. They explore how best to use the tools and resources of the network to impact patient engagement for the vast number of patients not assigned to a care manager," she says.
Within the acute care environment, the highest levels of clinical integration are seen with outpatient primary care and specialty care (76% and 68%, respectively). Slightly more than one-third of hospitals (36%) and health systems (38%) are clinically integrated with skilled nursing facilities, a count that is bound to increase because relationships between acute care providers and SNFs are the focus of considerable attention due to readmission penalties.
James Newbrough, president of OhioHealth's Home Care Division, says that CMS data helped OhioHealth, which operates 11 hospitals and more than 50 ambulatory sites, notice how close per-patient outpatient spending is to per-patient inpatient spending. "The largest areas [for spending] were SNF and home health," he says. "That probably was a trigger for a lot of people. The lowest-hanging fruit, the biggest opportunities we have to impact postacute spending are SNF and home health."
The SNF environment can be a challenge for care coordination teams. According to Hines, "Even though it is extremely important to go to the right skilled facilities with the right skill sets and capabilities in order to keep that patient from being readmitted to the hospital, there's a big gap in coordinated care. We're finding that they have been understaffed and under-resourced. As a provider team, we're going to have to figure out how to extend our reach and resources to work hand in hand with skilled nursing facilities to engage them in management of patients." The survey results provide a perspective of the very gap Hines mentions. In spite of the industry's attention to SNFs, only 22% of acute care organizations are deploying clinicians to skilled nursing facilities.
Dayal acknowledges that healthcare leaders must examine where the borders with acute care are, not only with SNFs but also with community services. He asks, "Where does our responsibility end? Is making sure that someone is eating healthy and has access to food a healthcare system issue or a societal issue? When we start talking about a population, it's not like a hospital saying that when somebody leaves they're done. [Care is] so interconnected that it's going to require some level of understanding of how the different components connect together and where one's role ends and where the other's begins."
Indeed, although there is plenty of room for improvement among all settings, skilled nursing facilities occupy the bottom of the chart that displays how healthcare leaders appraise the strength of their organizations' care transitions, with just 55% saying their care transition with SNFs is sufficiently strong, and 42% saying they are not sufficiently strong. Nearby on the bottom of the chart are care transitions with outpatient primary care (41% not sufficiently strong) and outpatient specialty care (43% not sufficiently strong). And that may be only part of the story.
Newbrough cautions that not only should healthcare leaders consider the success of the transfers they know are occurring, but they must also develop a sense of whether their care continuum partners are, indeed, receiving the referrals they should. He uses palliative care as an example, noting that 64% of organizations report that their care transitions are sufficiently strong. "It could be that only one out of four patients who should be referred to palliative care or hospice are actually being referred," he says. "Generally, we don't have a strong process for identifying these patients and getting them into those palliative care programs."
"We are the masters of unscheduled care," says one emergency medicine leader. Efforts to stem patient flow should be undertaken while recognizing the patient's role in the decision to seek treatment. Internal and external approaches are required.
This article first appeared in the May 2015 issue of HealthLeaders magazine.
In addressing ED flow problems, one can look at the demand side (ED visitors), the supply side (inpatient beds, usually), and the efficiency of what happens within the ED itself. Of course, there are circumstances where approaching the demand side of ED volume makes sense, but efforts to stem patient flow should be undertaken while recognizing the patient's role in the decision to seek treatment, and the patient's self-appraisal of the urgency.
Alex Rosenau, DO, FACEP, CPE, is senior vice chair of the department of emergency medicine for the Lehigh Valley Health Network of Allentown, Pennsylvania, which includes five hospitals, five emergency rooms, 17 community clinics, 12 health centers, and 10 ExpressCARE locations. He notes that it is not known whether a patient is nonemergent until that patient has been seen by physicians or other qualified medical professionals and a disposition has been made. The patient determines the need to be seen, and the ED staff determines the patient's condition and makes decisions about what steps to take to stabilize the patient.
"If you feel you need to be seen, I'm happy to see you," Rosenau says. "We are the masters of unscheduled care, in the end. And most unscheduled care is a perceived emergency on the part of the patient."
Increasingly, healthcare leaders recognize the need to develop robust tools to integrate clinical and business data to enable meaningful analytics, but getting there is a challenge.
This article first appeared in the April 2015 issue of HealthLeaders magazine.
Information technology provides healthcare organizations with an essential infrastructure. But from an evolutionary perspective, healthcare IT has its roots in finance and administration, with clinical IT applications developing along a separate path. The shift to delivering value-based care challenges IT in two principal ways.
First, as organizations respond to the industry's push toward capitated or at-risk payments, decision-makers depend on analysis that is based on both clinical and financial data, so organizations are challenged to integrate data. Second, as early reimbursement penalties morph into broader-based responsibility for health outcomes, and attribution of patients to providers becomes common, the performance of care partners becomes a concern. Both factors push healthcare IT teams to work with broader sets of data to support a new set of decisions in new ways.
Although the labels may look pretty much the same, there will be a big difference between the way organizations apply analytics now and the analytics applications in the near future. "The analytics work that we will do in the future will require deeper competencies and be at a different level of discovery than today's work," says George T. Hickman, FCHIME, LCHIME, LFHIMSS, CPHIMS, CHCIO, executive vice president and chief information officer of Albany Medical Center, which includes the 734-bed Albany Medical Center Hospital, Albany Medical College, and a 425-physician practice.
This HealthLeaders Media research report reveals that while there is evidence of improved relations, trust still has not fully enveloped the payer-provider dynamic.
This article first appeared in the March 2015 issue of HealthLeaders magazine.
When asked whether the results of the HealthLeaders Media Payer-Provider Strategies Survey warn of contentious relationships and indicate the presence of an emerging foundation for sharing risk, Alan J. Murray, president and CEO of North Shore-LIJ CareConnect Insurance Company, Inc., of East Hills, New York, says, "I don't necessarily see that there is a seismic shift in the trust level."
CareConnect is a provider-owned health plan that was created by North Shore-LIJ Health System in 2013, with a network that includes more than 16,000 providers at hospitals and physician practices throughout downstate New York. A key point of interaction between payers and providers has been the submission of claims by the provider and the adjudication and payment of claims by the payer. These are not simple transactions—they reflect both the complexity of care and the complexity of the insurance business.
Although some of the back-and-forth is due to errors on the part of one side or the other (e.g., coding errors), as Murray suggests, trust can be a problem. More than one-third (39%) of providers say that trust with commercial payers needs to be improved.
The drive toward delivering value-based care provides compelling motivations for healthcare organizations to join forces, creating an active environment of mergers, acquisitions, and partnerships.
This article appears in the January/February 2015 issue of HealthLeaders magazine.
The effect of the push and pull of healthcare reform is manifested in the industry's continuing appetite for consolidation and partnerships. Ultimately, because providing care is very much a provider-patient activity, the infrastructure for care delivery has a local flavor, which means that, compared to other industries, the healthcare industry can be characterized as fragmented. However, the drive toward delivering value-based care provides compelling motivations for healthcare organizations to join forces, creating an active environment of mergers, acquisitions, and partnerships (MAPs).
The top financial objective for such MAP activity is to increase market share within the geography that the organization serves; the choice was selected by 68% of the respondents to the 2015 HealthLeaders Media Mergers, Acquisitions, and Partnerships Survey. In a similar vein, 58% include expanding geographic coverage as an overall financial objective. Both motives have long been principal paths toward acute care revenue growth.
The latest HealthLeaders Media research report looks at structures and strategies for executive compensation as the industry shifts from volume- to value-based models.
This article first appeared in the November 2014 issue of HealthLeaders magazine.
Because the healthcare industry is embarking on reform-prompted structural and financial overhauls, classic and comfortable production-based executive incentives are under scrutiny. Modifying executive compensation parameters is not easy, partly because moving in new strategic directions implies adopting new performance metrics. Compensation committees with a strong desire for stability may find that if they resist change, their strategic direction and their compensation packages will become misaligned at the top levels of the organization.
Joseph Pepe, MD, president and CEO of CMC Healthcare System in Manchester, New Hampshire—which includes the 330-licensed-bed Catholic Medical Center, the New England Heart Institute, as well as a number of subsidiaries—is helping the CMC board take a new direction when updating executive compensation. "The compensation committee is looking at this now, trying to find out what's fair," he says. "They are used to focusing on what like institutions are doing. I'm trying to get them a little bit out of their comfort zones, suggesting that we look beyond overall revenue, although I think that is a consideration.
"Instead," Pepe says, "we should look at what we want to achieve for the future. For example, if the future depends on the capabilities of improved operational efficiency, clinical integration, quality outcomes, and care management, then why not develop metrics around these so that there's incentive pay based on where we need to go in the future?"
