Healthcare leaders look beyond pilot programs to shape a strategy for population health management.
This article first appeared in the October 2014 issue of HealthLeaders magazine.
Population health management has earned the industry's attention. A combined 80% of healthcare leaders participating in our survey are underway with such programs; nearly half are fully committed and underway in improving the overall health of a defined population (49%), while another 31% are underway with a pilot program to do so.
But with so many saying they are pursuing population health, we have to wonder to what extent. Seeing a relatively small percentage (10%) with actuaries on staff could indicate that not many are developing the skills necessary to assess exposure to risk, which will be a necessity as population health management matures. Among the investments that will be required are elements such as care coordination, team-based care delivery, and IT infrastructure. Although survey respondents tell us in their comments that the lack of funding is holding back their population health developments, pilot programs are likely to remain small unless providers develop a level of comfort with financial risk to match their emerging command over the clinical aspects of population health management.
Healthcare leaders face challenges on multiple fronts as they try to redefine physician-hospital alignment for a value-based system that is just taking shape.
This article first appeared in the September 2014 issue of HealthLeaders magazine.
More and more, alignment decisions are pivotal strategy decisions. Although many dynamics are at work, the core concept is that emerging changes to the financial underpinnings of the healthcare industry will reward organizations that provide care more efficiently and deliver value.
The changes required go well beyond optimizing the cost components of the efficiency equation. While shared objectives are commonly part of physician-hospital alignment mechanisms, performance objectives and compensation have been largely based on revenue and production. Now, with efficiency in mind, many aspects of reimbursement for care are in transition.
In turn, that prompts an examination of the conventional role of healthcare administration in setting policy and managing the enterprise, with the result that many leaders are pursuing ways to incorporate physicians and other members of the clinical team in decision-making that hinges not on the number of procedures or office visits or patients seen, but on keeping a population healthy.
Previous concepts about physician autonomy are being examined. New approaches to physician alignment must acknowledge the role of physicians as partners in care transition, as supportive participants in efficiency measures, and as leaders.
HealthLeaders Media research results suggest that care redesign and care standardization can lead to increased provider productivity and can help drive waste out of the care delivery system.
This article appears in the June 2014 issue of HealthLeaders magazine.
Cost containment and revenue cycle activities involve buttressing the organization's fiscal health through smart spending and ensuring funds that are owed to the organization are, after all, delivered to the organization. Traditional approaches to cost containment often are part of the annual budgeting process, directed by the finance team within administration. The conventional activity of the revenue cycle function is largely to confirm the accuracy and completeness of submissions to payers and troubleshoot claims denials.
With challenges to reimbursements—including the pending need to bear risk and deliver value-based care, and a payer community that has become more aggressive about claims denial—leaders are looking for cost containment and revenue cycle to contribute to financial health in more strategic ways. Intelligence Report research results suggest that care redesign and care standardization can lead to increased provider productivity and can help drive waste out of the care delivery system. IT and analytics remain tactical tools to improve revenue cycle results. And with clinical documentation, some are focusing their improvement efforts on the hospital floor, helping the clinical team ensure that services delivered are completely and accurately recorded.
At the largest organizations, those with net patient revenue greater than $1 billion, more than half cite care standardization (55%) and care redesign (53%) as being among the top sources of cost-containment gains. Smaller organizations generally rely on more traditional means to achieve gains, and only 26% (small) and 36% (medium) cite care redesign as among their top high-dollar factors in cost containment.
Change is often difficult, and when the process to be redesigned is a clinical process, buy-in from the clinical team is necessary. Daniel J. Moncher, FACHE, MBA, executive vice president and CFO for Firelands Regional Medical Center, a 233-staffed-bed nonprofit hospital with a medical staff of 200 in Sandusky, Ohio, describes the challenge. "[Some might have the perspective] that administration is telling them how to treat their patients," he says. "But remember, they're the ones at the bedside. They're the ones with the training. They're the ones that have the ultimate responsibility for treating the patients."
Ann Madden Rice, CEO of the University of California Davis Medical Center, a 619-licensed-bed acute care teaching hospital in Sacramento, California, says the key to earning support for clinical initiatives is to focus on clinical results instead of financial results. "Alignment isn't going to happen because you're telling physicians you're saving money. It's pretty hard to be passionate about that. But alignment will happen if they can see the quality benefit and see that their patients are more satisfied with the care they've received and have better outcomes."
Income and outflow: Optimize both
The percentage of respondents identifying revenue cycle as the bigger overall factor in maintaining or improving contribution margins (32%) and those identifying cost containment as the bigger factor (34%) are nearly equal. But in the three-year time frame, a higher percentage of respondents expects that cost-containment efforts will be a bigger overall contributor than revenue cycle to their organizations (41% in three years compared to 34% now).
A higher percentage of small organizations than large expects to benefit from cost containment in the future: More than one-third (39%) of those with net patient revenue below $250 million expects bigger contributions from cost containment in the three-year time frame, compared to 28% now.
Rice notes that pressure on operating margins requires that organizations focus on both revenue cycle and cost containment. "We need to be laser-focused on both issues. It's important to get every dollar that we're entitled to through our revenue cycle improvement efforts, and at the same time manage our costs ever more effectively."
Revenue cycle and effective documentation
Research findings underscore the importance of effective documentation to revenue cycle success. Improving documentation is dominant among the standard steps used to optimize revenue cycle performance now for 72%. And 55% expect that documentation improvements will be the revenue cycle activity to deliver the most financial benefit over the next year, again making it the top overall choice. Says Rice, "Improving documentation has been on our to-do list for decades, it seems, but it continues to be very, very important. And the electronic health record has made some improvements in that, but you still have to have well-trained professionals to accurately capture what they did for a patient, the services they provided, and then get that converted into a billable activity."
For some, the emphasis has shifted from the billing transaction itself to the entry of the documentation of the care into the record at the point of delivery. Says Jennifer Nichols, senior director of revenue cycle operations for Kaleida Health, a four-hospital health system serving the Buffalo, New York, area, "The focus used to be on the transaction, the billing act.
Now we're making sure that we are accurately reflecting all the good work that we did up until the point of billing. [We want to make sure] that we're billing based on the most accurate and complete information." Nichols adds that clinical documentation improvement activities have benefits beyond the revenue cycle function. "Beyond the immediate financial benefits, quality documentation plays into value-based purchasing, as well. In the long run, quality scores are improved by enhanced and appropriate documentation. And there are very few service lines that would not benefit from a very focused and effective clinical documentation integrity program."
Healthcare leaders recognize that IT can help them target claims denials. Thirty-five percent now use IT to target inappropriate claims denials, and another 32%, including 35% of respondents from hospitals, expect to begin using IT to target inappropriate claims denials within the next year. Changing regulations and the need to keep up with payers provides the impetus for many, Nichols suggests. "What is changing is how quickly regulations are evolving and how rapidly the payers seem to be able to respond. Payers are becoming so much more sophisticated about mining the data that's coming into them. For us it's a focus to do more predictive analytics around denials, and address denials before they occur rather than just reacting to them," she says.
As care delivery must transform in light of healthcare reform, so must administration transform, Nichols says. "We see organizations transforming clinically to meet quality outcomes, to meet payer and other reimbursement requirements, to be competitive in an ever-tightening landscape, to be attractive to other clinical partners, and to be the choice of referral for physician practices in the area. It's not possible for us to transform clinically without transforming financially as well." And to successfully adapt to the changes, she says, "As an industry we have to recognize that revenue cycle begins in the clinical area. Even when we centralize upstream administrative areas like scheduling, it is clinical services that drive the process."
As Nichols suggests, the focus for more organizations is on minimizing denials through complete and accurate documentation at the point of service, on the hospital floor.
Factors that thwart containment efforts
Far and away, government mandates is the factor cited most often by industry leaders (39%) as providing the biggest barrier to achieving sustainable cost reductions. But only 17% of large hospitals pick government mandates as their top barrier to sustainable cost reductions, compared to 49% of small hospitals and 39% of medium hospitals, an indication that some have yet to come to grips with mandates.
Nichols approaches mandates with resolve: "I can't necessarily change government mandates. But I can change how I can respond to them." Still, government mandates have a cumulative effect—there are so many. Nichols notes that many small increments in reimbursement penalties can add up to a large amount at risk. "Any individual financial penalty would not necessarily be unbearable. But there is a whole series of things lining up right now. Taken together, it becomes very, very serious. [It's going to be] 9% at risk at the end of 2017. That could be a game changer for many institutions. It may make the difference between viability and nonviability for them."
Rice suggests that the high percentage of respondents troubled by mandates may be an indication that administrators and clinical staff who should be attentive to patient care may be distracted by compliance and reporting issues. "Seeing government mandates, which are outside of our control, as the biggest barrier at 39% is very concerning. That may affect our ability to take care of the large number of patients who need our services."
Nearly one-quarter of large hospitals (23%) say that physician-hospital relationships are the top burden preventing sustainable cost reductions. Buy-in to cost initiatives presents a barrier, as well. Overall, 15% say that physician-hospital relationships hold them back, and 13% say an unsupportive culture is a barrier.
Moncher of Firelands connects patient satisfaction with the organization's financial health, and notes that the whole organization is expected to participate. "We can be great with quality, we can care for people, and we can get them to their next level of care or home in a technically competent and successful manner, but if patients leave here and they're not satisfied with their experience, it's going to hurt us long-term." This relationship between patient care and financial performance is becoming part of the organization's culture, thanks to its Head and Heart program, which was conceived about a year ago by Firelands' quality executives to stress the importance of empathy in dealing with patients. The program was reviewed and approved by the board of directors, and is actively supported by the organization's CEO to address organizational culture and the potential impact on revenue.
Bringing analytics to bear
Forty-three percent of respondents expect that IT investments aimed at revenue cycle improvements will outstrip IT investments aimed at cost containment over the next three years. This is especially the case at small organizations: Nearly half of the respondents from organizations with less than $250 million in net patient revenue (49%) expect that IT investments supporting revenue cycle will be higher than IT investments supporting cost containment, while that dips to 42% and 35% for medium and large organizations, respectively.
Nichols identifies three factors that may contribute to smaller organizations being more inclined to make revenue cycle–related IT investments. "First," she says, "some tools that used to be very expensive are starting to become more affordable to smaller and midtier hospitals. Second, smaller organizations are probably slightly behind larger organizations in deployment of IT-based revenue cycle solutions" and need to catch up. And then there is know-how. "There's better understanding [in the industry] of how technology tools can help, more sophistication about using analytics to support revenue cycle." Adopters at this stage will likely have a shorter learning curve than earlier users.
Nearly half of respondents (49%) expect to see top financial benefits in the next three years by using analytics to support productivity monitoring. This includes 57% of large hospitals. While only 10% of respondents claim to have integrated clinical and financial data, another 57% are underway. The success of cost-containment efforts on the clinical side of the business may depend on increased clinical efficiency, which makes productivity monitoring and the integration of clinical and financial data vital.
Impact of efficient clinical design
Pursuing financial health through care redesign and care standardization provides results that may not be as direct and may be more tenuous than financial benefits from straight-ahead cost-cutting activities or revenue cycle improvements. Further, we can expect initiatives that involve clinical efficiencies to take more time than conventional cost-cutting efforts to deliver results. For these reasons, taking a broader perspective on financial health means assuming additional levels of risk.
For Rice, determining the organization's position on risk is part of the CEO's job. "We're in a risky business. And doing nothing is taking the biggest risk of all. This involves not just looking at the ROI, and not just looking at how quickly an investment is going to pay back, but we have to ask, 'What's the risk if you don't do it?' "
At UC Davis, taking on small projects with less exposure is one way of limiting risk as one moves forward. "We're trying to get more of our staff involved in smaller rapid projects so that we can make incremental progress," says Rice. UC Davis' CFO, Tim Maurice, MBA, accepts the limitations of conventional benchmarking or budgeting, and looks at the inputs to financial health in what he calls a "holistic" way. He asks, "Are we going to continue to do cost containment the way we've done it before, which is to [establish a] benchmark and if we don't hit the benchmark, make cuts? Or are we going to take a more holistic approach and look at what are we trying to achieve in terms of quality and effectiveness, determine what inputs are needed to achieve that quality, and reduce those inputs that don't add value?"
When costs can't be cut any more, and when revenue has been optimized, organizations have to focus on efficiency, which means examining processes and removing waste. We see that this next step in fostering financial health is complicated and risky. But we see that many organizations are dealing with the complexity and shouldering the risk, which means those that don't may face a serious competitive disadvantage.
Reprint HLR0614-3
This article appears in the June 2014 issue of HealthLeaders magazine.
While many functions of the emergency department must be reactive in nature, with proper preparation, an effective response can ensure optimal outcomes.
This article appears in the May 2014 issue of HealthLeaders magazine.
While many functions of the emergency department must be reactive in nature, with proper preparation, an effective response can ensure optimal outcomes.
Much of what happens in the emergency department is related to how many and what kind of patients come through the doors. And while patient volume and acuity may be predictable, to an extent, for the most part, those are factors that the ED team cannot fully control. But with proper preparation, an effective ED response can ensure optimal outcomes, improved patient satisfaction, and efficient throughput with reduced wait times.
"I divide factors that contribute to wait times into two categories: those which the ED can control and those which it can't," says Darren Shafer, DO, the service line medical director of emergency medicine, urgent care, and the Albuquerque (N.M.) Ambulance Service for the eight-hospital, Albuquerque-based Presbyterian Healthcare Services.
One-quarter (25%) of the respondents to the HealthLeaders Media 2014 ED Strategies Survey report annual visits in excess of 70,000 patients. That includes 43% of health systems but only 17% of hospitals. Facility size certainly is a factor: More than half of large hospitals (51%) see more than 70,000 patients per year in their EDs. Overall, more than half (55%) say their ED is always or often overcrowded, and size, again, is a factor: 71% of respondents with net patient revenue of $1 billion or more say their ED is always or often overcrowded.
Longer wait times are one consequence of overcrowding. While one-fifth of all respondents (19%) report an average time patients spend in the ED before being seen by a healthcare professional of less than 15 minutes, in EDs characterized as always or often overcrowded, the average time patients spend in the ED before being seen by a healthcare professional is 46 minutes. In EDs characterized as occasionally, rarely, or never overcrowded, average waits are 23 minutes.
Because there is an element of unpredictability about patient volumes, there also is an element of unpredictability about wait times. But unlike patient volume, there are many ways to address wait times. Here's why ED leaders pay a lot of attention to wait times: "Even if a patient is not back in a bed, for instance, if they're in our waiting area and not being seen by a doctor, they're still our responsibility," says Judy Horton, RN, director of emergency services for the 726-bed Texas Health Harris Methodist Hospital Fort Worth.
Peter P. Semczuk, DDS, MPH, vice president of clinical services at Bronx, N.Y.–based Montefiore Medical Center, which operates six hospitals on five campuses, including the 745-bed Montefiore Medical Center, says, "One of the things that keeps me up at night, that's absolutely top of mind, that I worry about all the time, is patients that are left in the waiting room. It really frightens me because bad things happen to patients in waiting rooms. We want you inside, around the clinical team that's caring for you."
Joseph S. Prosser, MD, MBA, CPE, FACPE, vice president and chief medical officer of Texas Health Harris Methodist Hospital Fort Worth and three other hospitals in the Texas Health Resources system, conveys a similar sentiment: "Our mission is to have no patient wait in the waiting room."
At Montefiore and elsewhere, stationing experienced clinical staffers right in the waiting room is a way of ensuring that those who need care the most will get timely attention. "We think the triage process should begin in the waiting room," says Montefiore's Semczuk. "I think that is the single most important thing that we can do as ED leaders to increase efficiency." Doing triage in the waiting room has another benefit besides launching patient flow and treatment. "The biggest benefit," he observes, "is you've got someone watching patients all the time while they're waiting."
Focus on patient flow
One way or another, care at virtually all EDs starts with triage. Nearly three-quarters of respondents (72%) say their triage activity supports ED throughput efficiency. Streamlined registration (63%) and channeling low-acuity patients to a fast-track area (65%) are other leading techniques to increase throughput efficiency.
On the top of the list of efficiency techniques to institute next: 38% expect to speed up transfers for patients to be admitted. ED-to-inpatient transfer is the bottleneck identified most frequently, by 61% of survey respondents, including 69% of those who characterize their ED as always or often overcrowded. "If I look back at the challenging cases we've had in the last year or so, almost every single one of them have to do with an admitted patient that was waiting a prolonged period of time for an inpatient bed," says Semczuk, lead advisor for this Intelligence Report.
Prosser from Texas Health Harris Methodist Hospital Fort Worth says its team pursues transfer or discharge from the very beginning: "We are doing discharge planning from the moment a patient comes in the emergency room." To make room for more ED patients when inpatient occupancy is high, Texas Health admits certain patients who then occupy screened-off hallway beds. Says Prosser, an advisor for this report, "That way we can get a patient out of the emergency department and take them up to the floor until a bed opens up. The patients actually want to do that—they want to get out of the emergency room and upstairs in the hospital where they're being managed by nurses and staff that are familiar with their pathophysiology."
Staffing for throughput
Semczuk sees the trend toward using more midlevels, nurses, PAs, and allied health professionals for patient care in EDs, and says, "I think it's a mistake." About a decade ago, he says that
Montefiore recognized that "Many of the people that were seeing sick patients in our ED were people who had full-time jobs as hospitalists or internists or nurse practitioners. [We felt that] those who were not trained in emergency medicine were not investing the time and effort to learn emergency medicine. What we needed to do was to staff our emergency departments with residency-trained emergency medicine physicians. Now patients know that if they come here, they're going to be seen by a board-certified emergency medicine physician who has dedicated his or her life to this field. They're not going to be seen by someone who happens to work a shift that day in the emergency department."
Nonetheless, 46% expect to invest in midlevel caregivers for their EDs within the next three years, nearly twice as many who expect to invest in physician staff (25%). Shafer, from Presbyterian Healthcare Services, offers this perspective: "Midlevels may not be able to see patients with quite the same acuity as a physician would, but by having them here, we can greatly extend the ability of the physician to cover more patients. Because it's going to be a cost savings, in healthcare we're going to see it more and more. The way the economics are, that's the future."
Semczuk reminds us, though, that those who have specific training can be very productive. "I encourage leaders to think about hiring more doctors at the expense of the midlevels. Doctors are incredibly productive when they're working in an emergency room setting if they're board-certified—they could easily see three or four patients an hour."
Redirecting patients
Another way to foster efficient throughput is to minimize the number of nonemergent patients who visit EDs. At the top of the list of tactics to minimizing avoidable ED visits is limiting prescriptions for opioids, a method used by 66%. In addition, nearly half (45%) track patients who visit EDs seeking opioid prescriptions. More than half (54%) help minimize avoidable ED visits through better coordination with primary care practices and clinics.
One quarter (24%) redirect nonemergent patients, and 29% say that they expect to begin redirecting nonemergent patients within the next three years. Care coordinators and patient navigators are one way to accomplish this.
Shafer explains, "Not only do our navigators work within our system, but they also are in touch with all the other clinics in the city—low cost, no cost, or physicians starting up a private practice. They find out who's got any capacity to see patients and which patients they are taking." Shafer admits that referring nonemergent patients without insurance or who otherwise have no ability to pay for care presents a problem. "We have to be cautious," he says. "We might have to absorb that cost within our own healthcare system."
Shafer notes that navigator follow-through ensures that physicians accept the concept of redirecting nonemergent patients. "As physicians in the emergency department, a doctor will worry that this is our one chance to make the diagnosis on a patient, so we might order a full set of labs and other tests. However, if we know the patient is going to be seen and evaluated by another set of medical eyes within the next 12 to 24 hours, and continuity of care is going to be established with that patient, we don't need to do as intense a workup in the ED because we know that that's going to be taken care of."
Care continuum relationships
Healthcare leaders endorse communication as a way of fostering relationships along the continuum of care. Two-thirds (68%) are improving or expect to improve communications with primary care practices. And 61% are improving communication about their patients through improved integration of care partners' EHRs.
One-third of EDs (33%) have a strong working relationship with community-based clinics, a slight increase over last year's 28%.
Texas Health is in the Dallas-Fort Worth area, and the increased demand for healthcare that is accompanying population growth is straining primary care capacity at the same time it is increasing ED volume. Says Prosser, "Conceptually, if people are educated that they have other avenues of care, then they're going to choose those avenues rather than come to an emergency room and sit around for several hours. But part of the challenge in our community is that the primary care physicians are already busy, and by the sheer population growth, demand is outstripping supply, so patients have trouble getting into primary care offices."
Investments in care
Prosser notes that smooth transfers are a benefit of closer working relationships with care continuum partners. "We have worked with some of our postacute facilities to improve communications so that they will accept patients in transfer more readily, and with [EHR] information exchange, patient transfer is smoother and more efficient."
Shafer says information enhances care partnerships, fostering teamwork. "With EHRs, primary care providers can see exactly what happened in the emergency department. They see what tests were done, so they don't have to repeat any tests. If a diagnosis wasn't made and the patient was merely stabilized, they can see exactly what the next steps are in terms of the workup. This way, the ER becomes a full team member in care, whereas previously it was more episodic, and the ER didn't know what was going on in primary care."
Information technology helps EDs track performance and track patient status. Overall, 40% of survey respondents expect to make ED-related IT investments over the next three years. Says Semczuk, "We collect some 40 different indicators on our ED performance. I cannot imagine managing 370,000 visits a year without having a lot of data at my disposal because, without measuring it, we can't manage it." Making decisions and providing care in such a fast-changing environment can be aided by tracking real-time status of the in-ED patient population. Says Prosser, "In our emergency room, computer screens show who's been registered but hasn't been seen. Physicians either see those people or they mark on the computer that they're the next one in."
Telemedicine is finding a place in EDs, too, with 36% expecting to invest. At Presbyterian, telemedicine helps support behavioral health assessments and diagnoses, which is significant, given that 49% of survey respondents indicate that psychiatric patients occupying beds represent a major source of ED bottlenecks. Shafer describes how telemedicine helps: "Behavioral health patients can take up a tremendous amount of time in the emergency department. You can be holding a bed for hours and hours when you haven't made a disposition, and you have to get a consult done. Finding someone to be able to do that consult can be really challenging."
Some busy EDs can remove a bottleneck if they have an in-ED pharmacy, but overall, only 11% intend to invest in an in-ED pharmacy, indicating that for many, the level of service from their existing pharmacy setup is suitable. In-ED labs (9%) and imaging (8%) have similarly low readings. Fourteen percent of those whose EDs are always or usually overcrowded intend to invest in an in-ED pharmacy, compared to 8% of those whose EDs are occasionally, rarely, or never overcrowded.
Reprint HLR0514-3
This article appears in the May 2014 issue of HealthLeaders magazine.
This report reveals how data analytics can drive meaningful cost containment strategies without negative impacts on quality of care or patient satisfaction.
This article appears in the December 2013 issue of HealthLeaders magazine.
Conventional wisdom is that cost-cutting is a painful, even futile, way to respond to reduced reimbursements. One can only cut so far before placing sustainability in jeopardy. Nonetheless, healthcare executives are very much focused on reducing the costs of providing care, with 39% saying their cost-cutting programs have resulted in savings of at least 6% every year for the past three years. More than half (56%) say they expect total cost reductions over the next three years to be 6% or more, as well.
Concurrent with conventional containment activities such as inventory and supply-chain monitoring, most organizations pursue other approaches to improve the bottom line such as workforce efficiency and smarter utilization. Success at cost-containment initiatives depends on measuring and monitoring and, increasingly, using data to guide decisions.
Labor costs, avoiding layoffs
While labor generally represents the largest portion of cost in the healthcare industry—60% for many—workforce reductions are avoided by most organizations in favor of workload balancing. Although workforce reductions are mentioned by 17% as the highest dollar value contributor to cost containment, the second most frequently mentioned technique in achieving staff-related cost reduction in this fiscal year, efficient use of labor, is a more common tactic.
Nearly half (45%) saw their best labor-related cost reductions through more efficient use of clinical labor, and an additional 8% achieved their highest labor-related cost reductions though more efficient use of nonclinical labor.
Vincent G. Capece Jr., president and CEO of Middlesex Hospital, a 180-staffed-bed nonprofit community hospital in Middletown, Conn., relies on productivity standards to optimize staffing levels. "Labor represents the largest percentage of our operating expense, but it's our most vital resource because we are the people who deliver care.
Our organization is the people. Our goal is to try to accomplish the expense reductions we have planned without having any layoffs. Instead, we're trying to manage much more tightly than we have in the past. Our managers get detailed reports on a shift-by-shift basis as to how many resources they're using, labor resources in particular, and how those resources compare to the resources they should be using. They have to explain variances."
Watch supply chain
Purchasing and supply-chain efficiencies are the most common nonlabor process-related cost-saving techniques, providing the highest-dollar-value reductions for 25% of respondents. In addition, nearly one-fifth (19%) see their biggest nonlabor cost savings through improved utilization of clinical resources—using tactics such as tighter inventory control and keeping close tabs on the use of lab services and imaging services.
Louis Papoff, CFO for physician services for the Chicago and Detroit markets of Dallas-based Tenet Healthcare Corporation, summarizes the economics of inventory. In addition to the outlay for the supplies themselves, he says, "You incur expenses for the storage of inventory. Additionally, you incur staffing expense to manage that inventory, and excessive inventory negatively impacts cash flow."
Inventory control initiatives depend on staff buy-in, so, as with labor efficiencies, communication and physician alignment can be keys to success.
For C.R. (Bob) Hudson, chief financial officer at Henry Mayo Newhall Memorial Hospital, a 238-staffed-bed, not-for-profit community hospital in Valencia, Calif., comanagement agreements have been pivotal in motivating the organization's physician corps. (Because of California's Corporate Practice of Medicine Act, Henry Mayo Newhall has no employed physicians.)
"We have comanagement arrangements with many physicians and surgeons that put money on the table for them if they help us significantly reduce our supply acquisition costs," he says. "The physicians get together and agree to use this one product or this one vendor. That gets our volume up. And by having the physicians in a position where they can get some skin in the game and get some rewards, we are seeing them work with us to get some real significant discounts. With bundled payments and with comanagement agreements and shared risks and rewards, we're finally in a position where we're starting to align the physicians' interest with the hospital's interest."
Assess clinical service cost, contribution
More than one-third of respondents (36%) say they are very or somewhat likely to drop clinical services in the next year to reduce costs or enhance operating margin. Both service lines and supporting clinical services such as lab and pathology services will garner additional scrutiny. Capece observes that "there are very few services that don't provide any contribution" to the organization's margin.
He notes that the healthcare industry is very fixed-cost intensive and most services help cover some portion of fixed cost. In addition, he says, "Even the least profitable services, for the most part, cover the direct cost of providing care. If you stop providing outpatient psychiatric services, for instance, how much overhead could you shed as a result of that? In most cases, it would be very little, if anything." So direct costs and variable costs stop when a service is discontinued, but most indirect costs and fixed costs continue.
Influence of IT
Healthcare leaders have to examine the care they provide in light of business realities. To do so, most organizations are actively pursuing the integration of clinical and financial data. Respondents have either integrated clinical with financial data already (10%) or have a development program underway to do so (58%), with the specific objective of using data to help reduce costs.
"It can be difficult to develop a system that allows you to tie clinical data with financial data," Hudson says. "But once you've got it developed, it's really beneficial to be able to drill down and tell what programs are profitable, what payers are profitable, and what doctors are profitable. You're able to really start focusing in on expense monitoring, productivity monitoring, and identifying areas that need attention."
IT will play a key role in helping leaders find cost-cutting opportunities. One-third of respondents (33%) say they will see the most savings via better monitoring of expenses and costs.
Reprint HLR1213-3
This article appears in the December 2013 issue of HealthLeaders magazine.
As the healthcare industry shifts from volume to value, hospital and health system leaders need to consider new skill sets, new business models, and new incentives for the C-suite.
This article appears in the November issue of HealthLeaders magazine.
At its most basic, population health involves improving the health status of a given population by ensuring that members of the population are receiving the healthcare they should be receiving. How? First, one has to define the population. Then one must know what care the population is receiving. Next, identify gaps by comparing the care the population is receiving with the care the population should be getting.
Finally, the care delivery system must be able to address care gaps. Although the tactical implications of these simple statements are considerable, the first order of business for many healthcare providers is to try to sort out financial issues.
The major structural shifts affecting the healthcare industry are manifested in executive compensation programs, which are starting to reflect the industry's new value-based direction. Survey results show that compensation programs emphasize collaboration, foster working with new financial models, and reward clinical performance.
Rewards based on financial performance still count, of course, but our report advisors expect that compensation based on clinical volume metrics will be on the wane. Because most industry evolution scenarios indicate organizations will collaborate a lot more, some organizations and individuals will require new skills for success in new directions. Collaboration skills are highly desired, as are physician alignment skills. And the new financial realities mean that some "old" skills, such as cost containment expertise, remain highly valued, as well.
Financial and clinical metrics
Compensation has not been static, but increases are modest for most. Half (51%) expect an increase in total compensation next year. For 60% of those who expect compensation to rise, increases will be 3% or less. But we should not interpret modest compensation growth as a sign of stability. The financial foundation of the healthcare industry is in flux, and compensation committees are redirecting the attention of healthcare leaders through changes in compensation programs, mostly with changes in incentive programs.
"We've always had a financial discussion," says Joseph Pepe, MD, president and CEO of CMC Healthcare System in Manchester, N.H., which includes Catholic Medical Center, a 330-licensed-bed not-for-profit hospital, "but in the past quality and patient satisfaction tended to be in the background with most boards and in most C-suites."
As Pepe suggests, operating margin, a longstanding compensation stalwart, is mentioned by 67% as a basis for incentive compensation. Virtually the same percentage say that their incentive payments are based on patient satisfaction (64%) and clinical performance targets (63%). This combination of financial performance and clinical performance at the top of the chart of incentives is virtually identical to the responses provided last year. These same items top the list of incentives for what leaders expect next year, too, with nearly identical percentages.
Although only 20% of respondents say that the transition to value-based reimbursement metrics is part of their incentive program, Pepe, who serves as lead advisor for this report, sees broad support for value-based metrics among both current and future incentives, especially when considering the popularity of metrics such as patient satisfaction and clinical performance.
"Incentives are slowly moving to the value world," Pepe says, "and I think over the years to come that gap will close, and you'll see the value metrics surpassing volume metrics." One-quarter of survey respondents (25%) say that the transition to value-based metrics will be part of their incentive program next year.
New structures, new incentives
Akram Boutros, MD, FACHE, CEO of the MetroHealth System, a 731-licensed-bed health system based in Cleveland, approaches a complex long-term objective by breaking it into manageable short-term steps. He explains, "You know, everybody wants to do population health management. But population health management is so overwhelming that many people have decided not to do it. So we work it back. We want to do population health management three or four years from now. We ask ourselves what we have to do to get that. And then we walk it back from our future goal to today, and we develop the steps."
MetroHealth expects to become an ACO starting in 2014, a step toward population health management. Boutros, an advisor for this report, explains that performance-based compensation specifically related to collaborative care will likely be folded into other metrics, especially early on. "While collaboration along the care continuum will be strategic to us, it could be baked into the financial results of the organization, or could be baked into the quality quadrant. For us right now, it is not one of our metrics. Do I see it as a critical part for success in the future, or do I see it as a metric in 2014 or at 2015? Absolutely."
As MetroHealth makes the change from volume to value, Boutros also expects to track the proportion of outpatient to inpatient services, "so that we're rewarding the transition at the pace that we've determined that's best for that institution."
To support his hospital's foray into ACOs, Pepe has put in place near-term goals that will support both care coordination and at-risk payments. "The goal for executives will be that we need to turn over a certain number of practices to a medical home. That will be part of how we get compensated in the future." Also, Pepe has made the effort toward collaborative care institutionwide by switching physicians from volume-based incentives to incentives based on clinical quality measures.
"We changed all the contracts of the primary care physicians from being based purely on RVUs, to incentives based on population health parameters such as quality, preventive measures," Pepe says. Physicians also have metrics related to how well they work with clinical staffers such as physician assistants and nurse practitioners. "That's a good part of their incentive compensation as well, to help us align everyone together."
Advisor Bonnie Bell, executive vice president of people and culture for Texas Health Resources, a Texas-based health system with 25 hospitals and 3,800 licensed beds, summarizes the quandary that compensation committees across the industry are facing as they strive to ensure that their incentive programs are in sync with the strategic directions their organizations are taking. "We are all creating this at the same time, together, as we look at or look away from traditional measures. In terms of looking for appropriate measures, finding benchmarks—they don't exist. And we don't have a common language or nomenclature around measurement yet," she says.
As a result, many early incentives that address, broadly speaking, healthcare reform, depart from outcome measures that have been so important in defining clinical performance recently. "Our new metrics are very process driven," Bell says. "They are not traditional specific outcome metrics, benchmarked to a national database. But they do get us along the way."
Pepe has moved his executive team and physicians off of volume measures altogether. "When you look at what we're incentivizing, it's not just about the bottom line, the operating margin. It is growing the continuum of care, increasing the number of primary care lives, and covering quality aspects like maintaining our 30-day readmission rate below the state's or the nation's.
It's increasing the percent of staff that gets flu vaccines. It is increasing the HCAHPS top-box score for cleanliness of hospital environment, and increasing the CGCAHPS top-box score for giving easy-to-understand instructions. These are all part of our incentives that we never would even consider before. Before, it was all about volume—how many surgeries, how many people need ED, and how many admissions that we were having. None of those are among our goals this year."
Care continuum skills needed but missing
Advisors acknowledge that addressing new challenges will require new skills. Says Bell, "Our board spends a lot of time talking about the behavioral competencies that will lead to success. And when I say behavioral competencies, I'm talking about things like the ability to successfully forge new kinds of business models, or to demonstrate bold and innovative thinking."
As was the case in last year's survey, physician alignment is the skill mentioned most frequently as being important in ensuring CEO success, mentioned by 61%. Nearly half (49%) include the ability to optimize results along the continuum of care as a skill needed for a CEO to succeed in five years, an increase of 10 percentage points over last year's survey. Both skills are mentioned most frequently as skills that their CEO is lacking.
Among non-CEOs, cost containment (64%) and performance metrics (58%) topped the list of skills that are required for C-suite success. But nearly half mentioned the ability to optimize performance along the continuum of care (48%) and physician alignment (45%). And care continuum skills and physician alignment skills top the list of non-CEO skills that are missing. Says CMC's Pepe about care continuum skills: "This is an important team skill that traditionally has not been present in the C-suite. CEOs are going to rely heavily on non-CEO C-suite executives obtaining this skill in order to move down the road of bundled services and value-based care."
Bringing skills to C-suite
When assessing how best a CEO can add the missing skills that are needed, more than one-third (36%) say that their CEO could rely on the skills available with non-CEO staff, while 30% say that training could fill in the CEO skills gap. Training is the skill-acquisition method mentioned most frequently (by 51%) as the most likely scenario for adding those skills among non-CEOs.
It's generally acknowledged that exposure to the clinical environment helps executives with both physician alignment and collaborative care activities. Filling the skills gap by bringing in new C-suite talent from outside the organization is considered by about 13% or 14% of respondents.
Recruiting physicians with leadership skills or leaders with clinical skills can be problematic for some because of supply and demand issues. As Bell points out, "We're not the only one looking for physician executives. In this market we're doing it more aggressively than others, but I talk to my national peers who are doing the same thing. The hunt is on. Right now, demand definitely is outstripping supply."
Staff development is another way to bolster executive skills. Texas Health and others run physician leadership programs for staff physicians and members of their employed physicians' group. MetroHealth's Boutros reminds us that the existing leadership team knows the organization and its culture, so he favors developing or supporting the current team. "I believe new CEOs should either bring in executives now with the right set of skills, or provide opportunity for the executives who are here today who understand the culture and who have longevity with the organization. Or give your executives support in their departments to be able to manage new challenges. So you either do it by hiring new people or you do it by supporting the people who already are here. The latter is the way I prefer."
Noting that 36% of respondents say their CEO will address needed but missing skills by relying on the staff (the top response), Boutros observes, "It says to me the CEO is using more teamwork and less self-reliance. In the past a CEO might have said, 'I'm going to be the captain of the ship. I'm the only guy who's going to be able to do it.' Now CEOs are saying it is really about a team effort."
CMC's Pepe also sees the CEO position as one requiring communication and collaboration skills. "I think education of the board and the ability to align physicians and other hospital staff are extremely important skills. Today and in the future, a CEO has to be a good communicator and collaborator. CEOs who are demanding control and are authoritative really do not have a major role in today's health systems."
The move to value
In just a couple of years, CMC has shifted the basis for its incentive program from 100% volume-based to one that is largely value-based. "We're still living in a volume world," Pepe says, "but I think at CMC we're way ahead of the pack when it comes to knowing where we want to go and putting our money where our mouth is. A lot of people talk about value, but they're still being incentivized almost wholly in the volume world. It's a big change, and it's a culture change, but when I talk to [our] executives, managers, and directors, they understand that we're doing this in interest of the population we serve and the community we serve. They get it. I realize that we're still living a good portion in the volume world, but we have to start making these changes or we won't be prepared for the future."
Reprint HLR1113-3
This article appears in the November issue of HealthLeaders magazine.
Healthcare providers appear willing to embrace the new model of population health, but the first order of business for many is to sort out the financial issues.
This article appears in the October issue of HealthLeaders magazine.
At its most basic, population health involves improving the health status of a given population by ensuring that members of the population are receiving the healthcare they should be receiving. How? First, one has to define the population. Then one must know what care the population is receiving. Next, identify gaps by comparing the care the population is receiving with the care the population should be getting. Finally, the care delivery system must be able to address care gaps.
Although the tactical implications of these simple statements are considerable, the first order of business for many healthcare providers is to try to sort out financial issues.
With 61% of respondents to our Population Health Survey saying they have selected a patient population and are working to improve the health of that population, it is clear that healthcare leaders recognize the importance of population health management.
However, improving the health of a defined population requires a complex set of activities, many of which are new to healthcare providers. As one might expect with an initiative that seems to have the flavor of a concept rather than a business plan, our research demonstrates that providers have more command over disciplines that have a ring of familiarity, and we see lower comfort levels with newer tasks.
For instance, more than half of respondents (57%) are offering a wellness program now or within the next 12 months. But fewer (48%) expect to take on data analytics functions, a task that most would consider to be more challenging than data integration.
Reduced utilization
Providers face a set of finance-related decisions, mostly having to do with the risk-sharing assumption that gives healthcare reform its foundation. "Health reform is all about practicing population-based medicine. And the only way we're going to bend the cost curve is by keeping people out of the hospital, reducing unnecessary utilization," says advisor David B. Nash, MD, MBA, founding dean of Philadelphia-based Jefferson School of Population Health—one of six schools and colleges that constitute Thomas Jefferson University, which partners with Thomas Jefferson University Hospitals to care for its patients along with healthcare education and research. "So that means we have to be in the health business, not the sick business. To do that, we're going to have to think about what our community connections are like."
What Nash is talking about has consequences beyond building better relationships along the care continuum; the implications are that acute care facilities may have reached their limits of growth. "It's all about care outside the four walls of the hospital. We're talking about no new buildings, no new towers, no new cath labs," he says.
According to report advisor Earl P. Steinberg, MD, MPP, CEO of xG Health Solutions and executive vice president of innovation and dissemination for Geisinger Health System of Danville, Pa., a not-for-profit rural healthcare provider with 1,363 licensed beds in six hospital campuses, the key question is, "How do you deal with the fact that reduced utilization is going to hurt you in your financials?"
Examination of costs
Overall, 29% of respondents identify payer risk or cost sharing as the vehicle most likely to provide a financial incentive to pursue population health management, the top-mentioned item.
Along with the risk-sharing aspects of population health comes the requirement to extend the examination of costs beyond internal costs. Says report advisor Marion McGowan, RN, executive vice president and chief population health officer for Lancaster General Health, a 631 licensed–bed not-for-profit health system serving Lancaster County, Pa., "In the past, we only knew what it cost for patients in places that we owned and operated. If a patient were to go to a skilled care facility for care after a knee replacement, we didn't understand what that cost was, even though we were referring them there."
Obtaining an understanding of costs (and provider productivity and clinical outcomes) incurred by partners and others in the care continuum assumes a level of data interoperability that few have in place today.
Recasting your market potential
Health systems facing reduced utilization may pursue additional admissions to try to solve the problem. The drive to maximize admissions is hardly a new activity, but when considering population health management, one must examine the competitive landscape with an eye toward potential partners and potential competitors.
"You have to have the ability to attract patients to fill those beds," says Steinberg. When they can, some organizations can backfill to compensate for attrition with patients needing higher-value, higher-margin services. But the task in the future will be more involved than a conventional review of services and service lines because it will be important to anticipate how newrelationships might change the competitive landscape in postreform markets.
"You have to be strategic about what your program development efforts are," Steinberg warns. "There may be a limited number of key partners. In certain markets, you're going to see teaming relationships, or you will see payers establish narrower networks."
Fair share of value created
Part of the accommodation for lost patient revenue should be negotiated on the basis of lower overall costs that will be the result of improving the health status of the population. Says Steinberg, "Providers will have to contract with payers in a way that gives them a share of the value that they create."
And while healthcare providers may have a thorough understanding of how to deliver care, they will find themselves negotiating with payers who understand populations and risk inside and out.
Nash points out, "The payer community, especially the managed care payer community, has been on this gig for 30 years. They are the only ones with an economic incentive aligned for prevention and wellness."
If it sounds like providers might be at a competitive disadvantage, that's going to be the case for many. But providers can make moves now that will help them become better informed and stronger at the negotiating table. Two-thirds of survey respondents (68%) say they are well positioned to be among a payer's population health management partners, including 73% of those from health systems.
Lancaster General's McGowan includes payers among her resources for learning. Lancaster General has been in touch with national payers, managed care organizations, and regional and local health systems with their own health plans. "Our discussions have been very rewarding," she says, "and have given us insights about whether this is even financially doable. They're sharing more openly so we can understand what is meant by assuming risk while advancing care."
Pace and scale
The pace and scale of the shift toward population health management have financial implications.
>Pace of change. McGowan identifies the pace of change as an important variable, cautioning about becoming financially vulnerable by shifting away from fee-for-service too early. "How do you migrate from a discounted fee-for-service environment, where you're paid for production, to one where you're paid for value while assuming a certain level of financial risk? It's not just how you do it. It's at what pace. The question of sustainability through the transformation process is a big one."
>Scale requirements. Hospitals and health systems are examining their served markets and admission levels to glean insight into scale requirements. Lancaster Health serves a community of 500,000, and counts annual admissions at just under 40,000. "We have about 18,000 patients in fee-for-service Medicare," says McGowan, "patients who are managed by primary care physicians who are fully aligned and employed by us. Some may say that may not be enough scale to take financial risk like the health plans take, because they spread the risk over a region or over the nation."
Among the options to consider for increasing scale are partnerships and joint ventures, mergers and acquisitions, and becoming more integrated with care partners. McGowan observes, "Some think that you have to be really big. Some think that you have to be fully owned and integrated with a health plan like those providers that own a plan." She notes that in Pennsylvania, where Lancaster competes, two high-profile health systems are developing scale by acquiring additional hospitals.
Providers know healthcare
Payers may know the data, the population, risk, and risk assessment. But healthcare is the domain of providers. Early steps toward population health can yield valuable learning about both the nature of risk and the nature of the changes required to deliver healthcare in a more efficient fashion.
"Payers are not well orchestrated across the care continuum. Providers have touch points with patients throughout their lives, within the community," McGowan says.
Providers working together in an ACO agreement, for instance, can align themselves with population health objectives while gaining exposure to delivering care in a shared-risk environment, she says. Working toward population health objectives means that partners will modify care delivery in concert. For instance, nearly half (49%) expect to deploy health coaches or patient navigators within the year, a sign of willingness to invest along with partners in the care continuum. Respondents expect to improve access to primary care through outreach with community organizations (45%), primary care redesign (42%), and pursuing relationships with clinics and walk-in centers (40%).
According to McGowan, providers should expect to make some investments to enhance the care-delivery system. "There will be a number of things like the care processes and the support associated with managing high-risk patients or people with chronic conditions." She sees the patient-centered medical home as an environment that is adaptable to population health management, possibly evolving out of primary care practices. "Providers can expect to help rebuild the primary care office, perhaps reengineering primary care into patient-centered medical homes, so that care providers can do a better job at managing panels of people and spend more of their time on health promotion."
Data and analytics
Two-thirds of survey respondents (66%) expect to invest in integrating clinical data across the care continuum, and 53% expect to add to their data analytics capability. While the investments are likely to be substantial, Steinberg observes that access to data is a necessary component of population health management. "It's not just the expense," he says. "There has to be cooperation from the payers. Providers need data from payers. Some payers are providing it, some payers aren't. Some payers are providing it in a form that's usable; others are providing it in a form that winds up just chewing up time while you try to make sense of it."
More than half of the respondents (56%) say their organizations need training in data analytics, and 44% need training in population statistics. Nash describes how physicians might be guided by a system with well-developed registry and reporting functionality. "As a physician, I ought to be able to assess instantly and graphically how I'm doing in the care of a population of patients and how my care compares to a peer group at the local, regional, and perhaps even national level." Getting useful functionality requires more than buying and installing software. "I'm going to need a whole new type of information technologist," Nash says.
The expectation that IT tools will be available to monitor and guide population health activities on several levels is what will help Lancaster General's pending ACO function as a population health training ground. Says McGowan, "The accountable care organization serves as the vehicle, but we are doing it because of the new intelligence we will gather around the opportunity to improve not only value, but quality." Still, McGowan is concerned about software costs. "Because they're just becoming available, the tools are very costly."
Population health management presents many challenges, particularly with data and data analytics, new and unfamiliar partners or working relationships, and pressure to reduce costs and increase efficiency. But the overarching requirement when examining population health is that healthcare institutions have to prepare themselves to bear risk. And at its core, the requirement to bear risk is financial in nature, so all of the tendrils of population health management must be examined first from a financial perspective. For some, the financial examination may be the grim task of examining sustainability.
Reprint HLR1013-3
This article appears in the October issue of HealthLeaders magazine.
Population health and accountable care models continue to gain traction as the industry shifts away from the traditional fee-for-service provider payment structure.
This article appears in the September issue of HealthLeaders magazine.
The 2013 Physician-Hospital Alignment Survey demonstrates that healthcare organizations are recasting their priorities to meet the expected requirements of industry reform. And, as the annual HealthLeaders Media survey reveals, not only are there changes in emphasis regarding employment models, but also there is increased pursuit of collaborative relationships and at-risk payment models. Leaders are showing increasing interest in undertaking initiatives in population health and accountable care models.
Looking at population served
Maximizing admissions has been a long-standing objective of hospital-physician alignment efforts. As the healthcare industry shifts away from fee-for-service, more treatment will take place in outpatient and ambulatory environments and the patient mix will change in those settings as well as at acute care hospitals.
Leaders at hospitals and health systems will probably rely more on their specialists, which will make it important to offer a targeted set of specialty services and to have a primary care network with sufficient coverage to provide the necessary referrals.
Pamela Stoyanoff, executive vice president and chief operating officer for Methodist Health System, which operates five hospitals and 1,161 licensed beds in the Dallas area, summarizes the classic approach to building referrals: "You have to shore up referrals, and physicians in your primary care network are the ones who are giving specialists their referrals. I think that's one reason so many health systems are buying big physician primary care practices."
Motivating physicians to participate in quality and safety initiatives is included among the top three physician alignment objectives by 73%, more than any other objective. But nearly half of respondents (47%) say one of the top three objectives behind their physician alignment strategy is to maximize the patient population served, which doesn't necessarily mean maximizing admissions.
"We've done a lot of things to try to improve access to care, which gets patients the right care at the right place at the right time, " says Scott Nygaard, MD, chief medical officer at physician services for Lee Memorial Health System in Fort Myers, Fla., which serves Lee County through four acute care hospitals. "We're trying to create a better delivery system."
Is fee-for-service sustainable?
Alignment discussions are taking on a flavor of collaboration or mutual accountability, fostered by doubts on the part of many in acute care settings about whether the fee-for-service business model is sustainable.
"Physicians are trying to understand how they go from being just a commodity and become a value-added partner," says T. Clifford Deveny, MD, senior vice president for physician services and clinical integration for Catholic Health Initiatives, an Englewood, Colo.–based not-for-profit health system that operates 86 hospitals in 18 states.
When the very financial foundation of the industry is on the table, a different discussion can take place. Deveny, lead advisor for this report, says, "One issue is: How do you transform the physicians into accountable leaders, leaders who will help devise the models, or drive the models, or create financial sustainability? Physicians can't be passive."
Even though it is more common, still, for both parties to approach the alignment topic with income preservation in mind, larger groups with financial stability may provide an early view of what is to come in a more competitive environment.
"There's been a lot of discussion around income preservation and keeping physicians happy," Deveny observes, "but mature physicians are saying, 'We're financially sustainable. We know where we're going. We're looking for a partner, a hospital system partner.' That tends to be a better discussion, but I would say that's the rare instance where you're seeing that type of a discussion."
An emerging competitive environment
When large groups with financial stability and access to a patient population of sufficient size come to the bargaining table, it is not necessarily the hospital's bargaining table. Deveny says, "Along the front range of Colorado and in California, I've seen large organized primary care physician practices that are taking a large amount of risk directly from insurance companies, typically through the Medicare Advantage plans."
Command over the referral base will increase the competitive stature of such large groups. "Because they're organized and they're controlling a large amount of dollars, in a sense they have created almost a commodity situation with specialists and with hospital systems," Deveney says. "And because their patients are loyal to them and [reduced] payments are motivating the private care doctors to send people to the highest-quality, lowest-cost venue, they're using data to move patients to different venues of care."
Deveny calls this the advocate model of primary care, in which acute care facilities are "beholden to the new requirements and the new expectations of the primary care physicians." At this stage, he does not know how extensible the model is. "Will they develop in other markets, or will the lack of capital or the lack of physician leadership to create the necessary culture keep it from happening?"
Stoyanoff, an advisor for this report, says that even though only 32% of respondents place physician retention among their top three physician alignment objectives (sixth highest of eight response options), retention is a top mission for her. "In most of the markets I'm in, physician retention is a big reason behind our physician alignment strategy. We need to create effective models."
Deveny expects that the new dynamic will improve outcomes and lower costs. "Where the physicians become organized and are using data, they're in a position of strength. They've got a choice on health systems, and they can move populations overnight, based on cost and quality. I think it's going to be a healthier environment for everybody—we should have healthier communities and at least some flattening of the cost curve."
Which model? All of the above
Near-term shifts in organization models indicate that hospitals and health systems will place more emphasis on collaboration. One-fifth of respondents (22%) include clinical integration among their top three staffing models now, but three years out, twice as many, or 46%, expect to be involved in clinical integration.
"We're going to be doing more partnering with physicians rather than employing or just underwriting them," Deveny says. "It will be a shared-risk or pay-for-performance structure. We're going to come together, share data, and present ourselves as a network. Collectively, we will either all succeed or fail." On-staff physicians will have to be more collaborative as well. Clinical comanagement agreements stand at 15% now, and respondents say that will increase to 30% in the three-year time frame.
As clinical integration and clinical comanagement gain more support in the coming years, medical staff appointments, hospitalists, and paid directorships are finding fewer proponents. Overall, the result of these shifts is a broadening of support for a variety of models. Says Deveny, "The bottom line is that people do see physician engagement as being important. And they don't see employment as a be-all, end-all. Survey results confirm that there is still a lot of diversity of thought, and not everybody's betting the farm on one model."
Nygaard of Lee Memorial, a report advisor, keeps the mission in mind as alignment choices are examined. "If we can prove that we're providing pretty good access, whether through employment or partnerships, I'm not really wedded to a given model per se," he says. "How do we know when we've succeeded? When we've fulfilled our mission, which is to meet the healthcare needs and improve the health status of the people of southwest Florida. I'm open to a lot of those staffing models, but we have to achieve the goal."
"Healthcare reform provides a huge impetus for looking at other models," Stoyanoff says. "When you're implementing population health management or an ACO, you have to have physicians working with you. Physicians are not going to want to be part of every ACO on the planet. They'll start to pick and choose, and you want them to pick you."
Independents remain viable
Although much has been made of a physician hiring frenzy, survey responses show that independent physicians have critical mass and do not appear to be threatened in the near term. "A lot of the physicians still prefer not to be employed," says Stoyanoff. "Even though the numbers of physicians we're all employing are growing, there are still a lot of entrepreneurial physicians out there."
As Stoyanoff suggests, survey results do show expected increases in employed physicians and decreases in independents. The average percent increase in employed physicians in the three-year time frame is 40%. Over the same time period, the average percent decrease in independent physicians is expected to be 29%.
But with the average number of employed physicians standing at 246 per respondent compared to 693 per respondent for independents, the latter will be in the majority three years hence, despite the expected decrease. "I've doubled the number of employed physicians," Stoyanoff says, "but that's still only 10% of what we have. There still are a lot of independent physicians out there."
A learning process
When respondents talk about current and near-term initiatives, the talk is about collaboration and risk-sharing. Today, 41% of respondents are involved in an ACO, up from 26% in last year's survey. Within three years, 55% will be pursuing or involved in an ACO.
Stoyanoff acknowledges that, for Methodist Health System, learning is an important benefit to be derived from making such steps.
"A lot of healthcare institutions are wondering about learning to manage patients along the continuum of care," she says. "We are focusing primarily on the development of our ACO, which started a year ago. And we are in a Medicare Shared Savings Program, so we're learning how to manage lives from a global perspective."
Other collaborative care models are gaining traction, according to survey respondents. More than half of respondents (52%) are now undertaking initiatives related to a patient-centered medical home, up from 39% a year ago, and 58% expect to be there within three years. Similar growth is seen for the population health model, which was a current initiative of just 25% last year, now stands at 33% of respondents, and will reach 51% within three years.
Hospitals and health systems also are learning about at-risk payments. Higher percentages of employed physicians are being compensated for clinical quality and patient satisfaction metrics, and the level of incentive is increasing, too. Now, 17% of respondents report that compensation for clinical quality and patient safety for employed physicians is in excess of 10%. That percentage will increase to 44% in the three-year time frame.
"That's something that we're all going to be emphasizing over the years to come," says Stoyanoff. "Employing physicians is still an expensive endeavor, so even in an employment model, we like to have a portion of their salaries at risk for performance targets." Again, she recognizes learning opportunities when establishing at-risk incentive programs: "It's making a lot of organizations struggle because we don't necessarily know how to go about establishing those metrics, or have experience tracking them, or even know which ones we should choose, but it is something that we're all going to concentrate on."
Maturing relationships
Deveny notes that early steps are being made with physicians, steps that include accountability and data-based decisions. As relationships mature, he says, "We all have the obligation to show our value to our communities and to the people who are going to be purchasing healthcare."
Deveny anticipates a patient-as-consumer focus. "Medicare Advantage is a good example," he says. "One by one, you've got to convince every one of those enrollees that they want to give up Medicare and move to your Medicare Advantage plan, and you're going to have to have strong reasons for them to move. That's why I say physicians can't be passive. We won't be in the income preservation business anymore. We've got to require more out of both parties, but then the health systems have got to be just as accountable to the physicians on performance."
Reprint HLR0913-3
This article appears in the September issue of HealthLeaders magazine.
This article appears in the March 2013 issue of HealthLeaders magazine.
As healthcare leaders pay more attention to what their patients want and need, the tactics for caring for cardiology patients are changing. Those responsible for cardio service lines are placing more emphasis on patient behavior. Closely and loosely aligned partners, often practicing in the community and not in the hospital, are playing pivotal roles in expanding the patient referral base in new ways. And even though there is more emphasis on care outside the hospital, for the most part, healthcare leaders expect stability in cardio revenues and contribution margins, partly as a by-product of industry consolidation.
Shift toward prevention
Half of the Intelligence Report respondents (50%) say that prevention programs are critical parts of their cardio service lines. Wellness programs are important to nearly as many, 47%. That's today. Looking forward three years, prevention (62%) and wellness (54%) top the chart, while inpatient drops from 69% to 35%.
Laura Robertson, RN, chief executive officer of the 111-staffed-bed Banner Heart Hospital in Mesa, Ariz., explains one way her organization extends care into the community. "[We've been through] a big transformation of care. We brought in a postacute care skilled nursing facility and home care. With them we designed cardiac units in their skilled nursing facilities and [established] cardiac teams to manage patients through home care. [Now they are] more successful at assessing, understanding what to do, managing both resources and patients in the home."
Revenue stability
With a shift away from inpatient care for some services, what happens to cardio revenues? Sid Kirschner, executive vice president of Piedmont HealthCare and president and CEO of Piedmont Physicians Organization, looks at patient care in pretty broad terms. "Wherever a patient enters our system, [we] have to be able to treat that person for all of their cardio needs for the rest of their life. We could get someone who is healthy and goes to a cardiologist; as time evolves, other problems develop. Our system is designed to handle all those issues."
Piedmont's wellness programs prompt early medical encounters with the population at large, maximizing the opportunities to establish relationships with patients. Does that sound like marketing? Kirschner calls it "a mutual benefit endeavor. You want to capture the patient as early as possible in your cycle. It's a combination of preventive health benefit for the patient as well as a marketing program. So now that you have the patient, as the patient ages and has a problem, the patient is in your system."
Banner Heart's Robertson observes that population characteristics support such a long-term view. "There will always be cardio patients who need procedures," she says. "Cardiac disease isn't going away. Look at diabetes incidence, the aging population, obesity. The risk factors for cardiac disease are so prevalent."
If one examines the make-up of the revenue stream, one sees continuing revenue in imaging, mostly on an outpatient basis. Says Kirschner, "If you really track reimbursement, most of the volume is outpatient testing after the first visit. You do an initial MRI or CT scan and then there is appropriate follow-up." This may be why imaging is cited by 35% of respondents as a technology they expect to add to their cardio service line in the next three years. The appeal of imaging is even stronger among smaller enterprises: 42% of organizations with net patient revenue of less than $250 million expect to add imaging technology, while just 19% of organizations with NPR of more than $1 billion will be doing so, as they focus more on remote monitoring technology (60%) and hybrid rooms (55%).
Contribution: Mostly positive
For most, the cardio service line remains a leading service line in terms of financial contribution. The mean positive contribution margin reported by respondents is 19%. Nearly half of respondents (45%) expect a minor increase in contribution margins from cardio in the next three years. On top of that, 21% expect a major increase. No wonder 74% of healthcare leaders expect to expand their cardio service lines in the next three years.
While only 1% of respondents expect a major decrease in cardio service line margins, a notable share (11%) expects a minor decrease.
Collaboration and alignment
More attention to collaborative care means more attention to physician alignment. Many provide collaborative care through comanagement programs (31%) or joint ventures (17%), but the fully employed model is used in 33% of cardio service lines. Robertson notes the benefits of the medical staff model for cardiology. "More than ever, we are aligning with medical staff. For the cardio service line, you need cardiologists who are committed to your facility to bring business, ensure quality and service, and manage costs." And today, interventional cardiologists are in demand, especially with more procedures done in an outpatient setting. Nearly one-third of respondents (31%) plan to hire interventional cardiologists to drive business to their cardiology service line. "Interventional cardio is the real driver of reimbursement," Robertson says. "They'll do the procedures like catheters and stents. A noninterventional cardiologist can do a diagnostic catheterization, but they can't do any interventions."
Carol Mascioli, vice president of clinical services at the 680-bed Baptist Hospital in Miami, explains how inclusion helps her organization earn buy-in from a 100% voluntary cardio physician team. Baptist Hospital is developing a protocol for patients arriving at the emergency department with atrial fibrillation. Baptist wants to identify which patients with the condition can be treated or observed in the ED and sent home, instead of being admitted as a matter of course. The effort started with a broad clinical team, including nursing leaders, the ED medical director, the clinical cardiology medical director, the electro physiology medical director, hospitalists, and the anesthesia medical director.
"Our goal was to tackle the reason they came to the emergency department, correct that, and then get the patient back to their primary care physician or cardiologist for additional evaluation," Mascioli says. Being inclusive about developing such a protocol "may slow down some processes, but if it's related to quality improvement, we make sure we have participation across the spectrum." She predicts complete buy-in to the atrial fibrillation effort because the same clinical team has accepted a jointly developed chest pain process and heart failure process. She observes that all of the 30 or so doctors on the cardio team are voluntary. "It doesn't require an employment model to get collaboration. We do it."
Boosting admissions
As healthcare leaders look to enhance their cardio services and expand their reach, though, they should keep in mind an important customer dynamic about visits to the doctor. As Kirschner explains, "A patient doesn't mind driving a long distance for a unique service, as long as routine care is local." Indeed, because 75% of respondents want to be a regional cardio destination center or local cardio leader, their current challenge will be to offer a competitive set of subspecialties while increasing their outpatient services.
Michael Zeis is research analyst for HealthLeaders Media. He may be contacted at mzeis@healthleadersmedia.com.
Reprint HLR0313-3
This article appears in the March 2013 issue of HealthLeaders magazine.
This article appears in the January/February 2013 issue of HealthLeaders magazine.
In healthcare, the IT group is in a pivotal position to enable its organization's response to reform and other industry changes by putting in place an infrastructure that can guide administrative and clinical leaders alike to deliver better outcomes at reduced cost.
But the hurdles to be overcome in reaching those goals can be considerable. First, healthcare IT groups strain under near-term reporting burdens. Second, as the industry moves away from a fee-for-service revenue foundation to a value-based purchasing model, many healthcare IT groups may find that they have to respond to a slew of internal demands for reporting and analysis. The investments required are many, and the return on investment often is unclear. Finally, for a long time, the IT needs of the industry, especially on the clinical side of the house, have been met with highly targeted software applications. The consequence is that many organizations find they have to accommodate a variety of software packages and data structures, which presents vexing problems now that both business and clinical analytics depend on using an integrated set of data.
Near-term reporting burdens More than half of respondents (52%) say that meeting regulatory reporting requirements is among the top three drivers of their organization's IT efforts. Indeed, even now, the October 1, 2014, deadline for implementing the CMS ICD-10 code sets is demanding significant resources.
"Inside our IT shop right now, the anticipation of the workload associated with ICD-10 is overwhelming," says Donna Abney, executive vice president of Methodist Le Bonheur Healthcare, a seven-hospital, not-for-profit healthcare delivery system with 1,709 licensed beds based in Memphis, Tenn.
ICD-10 tops the list of IT challenges for respondents, with nearly two-thirds (64%) of healthcare leaders saying that accommodating ICD-10 represents a major challenge. The second most frequently mentioned challenge was a tie, with 42% citing the requirements of the Patient Protection and Affordable Care Act overall, and the same percentage identifying physician documentation as a top challenge.
Internal analysis and reporting demands
Of course, IT teams have to respond to much more than regulatory and other public reporting requirements. More than one-third of respondents (39%) note that IT support for care coordination is among their top strategic drivers of their organization's IT efforts; that figure is even higher (51%) among those from health systems. Similarly, nearly one-third (32%) indicate that clinical decision support is a key strategic driver.
The ability to focus on forward-thinking and complex IT development activities such as care coordination at the same time as responding to pressing regulatory reporting requirements suggests that there may be haves and have-nots when it comes to making IT investments.
Indranil "Neal" Ganguly, CHCIO, FHIMSS, FCHIME, vice president and chief information officer for CentraState Medical Center, a not-for-profit health organization with a 284-bed medical facility and 450 board-certified physicians in Freehold, N.J., sees the need to separate oneself from the needs of the moment, no matter how compelling they may be: "Those who are always asking themselves which fire to put out might have trouble looking to the future and doing some visionary planning."
Overall, 80% of healthcare leaders expect their IT budgets to increase in the next three years; that's not surprising considering the increasing reporting requirements and the system development activities needed to support the shift to value-based purchasing.
There are indications that health systems are more supportive of forward-focused applications than hospitals or physician organizations. Two-thirds of leaders from health systems (67%) place business intelligence and analytics among their principal areas of IT investment over the next three years, compared to 39% of respondents from hospitals and 44% of respondents from physician organizations.
Higher percentages of health systems than hospitals and physician organizations will be investing in clinical decision support and the integration of clinical and financial data.
The irony of extending IT into clinical areas over the past several years is that, once clinical users get such access, they like what they see and ask for more. So a by-product of success in clinical areas is an increase in user requests, which adds to the competition for resources. As Ganguly observes, "IT departments are spending a lot of time now churning through requests, some of which may not be as valuable to the organization. We have to put prioritization models in place and get a strong sense of governance about how we run this piece of the business, because we have limited resources."
Challenges, rewards of data integration Michael Ugwueke, MPH, DHA, FACHE, executive vice president and chief operating officer of the Methodist Le Bonheur Healthcare system, notes how information needs have changed: "In the past, CEOs were judged on how they ran a facility from a financial standpoint. We looked at metrics and ratios." Healthcare reform has added clinical performance and patient satisfaction to the performance measures that top administrators need to monitor, and Ugwueke will rely on IT to keep him up to date, based on what is more and more becoming an integrated set of data.
"Going forward, finance is only a piece of it," Ugwueke states. "You have to be good in all these areas. The only way you can become good at it is to have some type of dashboard or information system that is capable of helping you understand the data so that you can take action to address shortfall areas." He will also depend on IT to document the use of care paths. "I need to know how care paths are making a difference in improving the quality of care that we provide to patients. Ultimately, that's how we'll be judged."
Generally speaking, clinical IT is "younger" than financial IT. In many organizations, clinical areas have used special-purpose software packages designed for their disciplines. This heritage of using multiple software packages from a variety of vendors makes the integration task considerably more complicated.
Says Chris Snyder, DO, chief medical informatics officer for Peninsula Regional Medical Center, a 317-bed nonprofit hospital serving Maryland's Delmarva Peninsula: "Usually financial data is very robust and functional. Often clinical data typically is not; it can be very fragmented."
In addition to providing administrators with the information they need to guide the organization, integrated data can guide clinicians as they deliver care. "We are starting to merge clinical and financial data to spot variances in outcomes and care, and look for gaps in care that may benefit both the patient and the hospital," says Snyder.
Once such analysis demonstrates its value, the desire is to deliver the information faster. Snyder continues, "Now that we are documenting electronically, almost instantly the potential is there to provide information without IT analysts being involved." Next for Snyder and Peninsula: "We are working toward predicting the resources needed by a population of patients. Financially, that is where we as an industry are going to realize some cost savings."
Reprint HLR0213-4
This article appears in the January/February 2013 issue of HealthLeaders magazine.
