Hospital and health system leaders know the reimbursement transformation is coming—even if it hasn't reached them yet—and they are beginning to form alliances with regional providers to find strength in numbers.
This article appears in the May 2014 issue of HealthLeaders magazine.
As the healthcare industry moves toward value-based payment models, many provider organizations are realizing that they need a population health management strategy and that going it alone may not be the best path forward. Forming a partnership with other providers allows institutions to share best practices, combine resources, coordinate IT efforts, strengthen supply chain purchasing power, and reduce the overall cost of providing care to their patient population. Here, we look at the approaches of three organizations.
Stratus Healthcare
Four years ago, William T. Richardson, president and CEO of Tift Regional Health System, a Tifton, Ga.–based institution with 346 staffed beds and $287 million in fiscal year 2013 revenues, realized the need for aligning forces with other providers after his organization underwent a health readiness assessment with an outside consultant.
"This was before all the indications that are in place now showing that change is really going to happen this time," Richardson says. "We felt we needed to begin taking steps to prepare for the changes we thought were coming. We didn't have scale or size as a small system in south central Georgia, and we felt that we needed scale."
Richardson started by reaching out to Central Georgia Health System to propose the idea of a partnership, and in July 2013, Stratus Healthcare was formed to create a regional network of likeminded hospitals and health systems.
Stratus now includes 29 hospitals and 15 health systems, Richardson reports.
"I identified those organizations in our region who we thought were like us and invited them to join us in a larger collaboration," he says. "Everyone is looking for a niche to achieve scale and size by combining strengths and financial resources. It's been more successful than I originally anticipated. The organizations that are with us want to remain independent. At the end of the day, we do feel that healthcare is local."
Richardson adds that an important element to establishing a successful partnership is cultural compatibility between organizations.
"I would double underscore that point," he says. "You need to select partners who view the world the same way you do and who have a patient-centered approach and are willing to test new models."
Stratus consists of four subcommittees that report to the board of directors, Richardson explains. Those subcommittees focus on clinical services and best practices, IT and interconnectedness, shared services such as supply chain purchasing, and strategic initiatives.
"Strategic initiatives could be anything else such as looking for other partners, maybe larger systems to join Stratus to help us achieve our goals," Richardson says.
"The ideas that come out of all four subcommittees will be funneled up to the board, and we will determine what the most important projects will be, and how to capitalize those projects," he says, adding that there will also be work groups focused on these four main areas.
"It's a work in progress," he says. "We don't know exactly where it is going to go. There will be a lot of experimentation and a lot of learning from each other."
While Richardson doesn't know precisely how Stratus will move forward, he does know that as the healthcare industry evolves quickly over the next few years, it will no longer be possible for providers to remain complacent.
"Doing nothing is not an option, and if it is what your organization is doing, you are going to find yourself in trouble," he says. "My energy as CEO is pretty much focused on this transformational journey."
Covenant Health Network
Richard Afable, MD, executive vice president of the Southern California region of Irvine, Calif.–based St. Joseph Health—which has 3,621 licensed beds and $4.4 billion in annual net revenues—says St. Joseph Health affiliated in February 2013 with Newport Beach, Calif.–based Hoag Hospital to provide better care to their collective community. Afable also serves as CEO of the affiliation between St. Joseph Health and Hoag.
While both health systems are based in Orange County and traditionally vie for market share, the need to develop better population health management capabilities trumped concerns over competition, says Afable.
"Both organizations believe in the value of and need for healthy communities, a lower cost of care, and greater quality of care, mostly around reducing variations in outcomes," he says. "Those are the inherent principles in our partnership, so we came together and are building the alignment and coordination necessary to meet those goals."
"We are beginning to work together more collaboratively—and with less of the past expectations of competition and trying to take market share—and win by the old standards of healthcare delivery," he adds. "We believed that this vision of working together was so compelling that we would overcome the challenges around competition."
Like Richardson, Afable believes partnering with an organization that is culturally similar to his own is critical. "What is also important is both organizations are faith-based, not-for-profit, community service organizations that have a very strong commitment to the care of the vulnerable populations within our communities."
The organization is using 2014 as a "ramping-up period" to better determine what the model will look like and how the organization will function, according to Afable.
Although there is still a lot to decide, he says the new care delivery model must be "built more around data analytics and predictive modeling. It used to be about collecting a premium and trying to hold down utilization as much as possible. That is not the model of population health, but it is a cornerstone. Now we have to do very good actuarial and predictive analysis so we can have the best ability to create a budget for caring for individuals and populations. We want to be able to determine what we would expect as far as the resources that are necessary when the best care is provided."
While population health management is a move away from the traditional fee-for-service payment structure, Afable believes provider organizations that figure out how to do it well can still make money.
"Using patient engagement and innovation, we can actually improve the cost to provide care and the outcomes of that care in such a way that we can create a margin," he says. "We believe like most people today that you have to have a model that improves outcomes, creates value, and improves financial results for providers by creating profitability. If better care and better service result in reduced financial viability in the long run, you might as well just roll it up now and be done with it."
AllSpire Health Partners
Another organization that has recently partnered with regional providers to bolster its population health management efforts is Reading (Pa.) Health System, which joined with six other systems that encompass 25 hospitals in New Jersey and Eastern Pennsylvania to form AllSpire Health Partners in September 2013.
Clint Matthews, president and CEO at Reading Health, which had $913 million in total operating revenue in fiscal year 2013 and includes the 735-bed Reading Hospital, sees population health management as a crucial component to handling a new payer environment.
"To me it means moving away from the singular approach of per-episode care to one individual to understanding that we need to care for groups of people for periods of time," says Matthews. "With the provision of care comes the payment for care, and it's moving from volume-based to value-based compensation."
"We foresee population health management as an area we can better manage through AllSpire because we will have a larger universe and be able to share best practices and manage down the overall cost of the infrastructure," he adds. "I anticipate that AllSpire will be very helpful as we are dealing with population health management for the purposes of risk stratification."
AllSpire's board of directors includes board members and the CEOs from all the member organizations and also consists of development committees and a management committee.
"Each organization has contributed executives to help study what impact we can have as well as identify opportunities for improvements in each system and the group as a whole," Matthew says.
Richard W. Jones, CPA, Reading Health's senior vice president, CFO, and treasurer, says that because six of the seven AllSpire members use Epic for their electronic health records and other technologies, the group has "a natural ability to share, to establish protocols, and to learn best practices from each other."
"We believe AllSpire offers opportunities to leverage purchasing power and to leverage our ability to utilize information systems in a way that will provide economic benefits … and best practices in how to use health information for the benefit of our patients. That is a big opportunity in and of itself," Jones says.
Reading Health will initially focus its population health management efforts on its own employees.
"The first thing we are going to do is look at the population of our own employees and use them really as a laboratory to hone our skills at managing populations by engaging primary care physicians more directly and incentivizing patients to participate in their own care," Jones says, noting that employees will receive an inducement to complete a health risk assessment, although it will not be mandatory.
Along with achieving employee buy-in for its new population health management strategy, Reading Health is also seeking to educate its physicians to encourage engagement.
"We have developed a clinically integrated network for the purpose of improving quality of care, managing the cost of care, and improving access to care," Matthews says. "We've integrated our independent physicians with our employed physicians and other ambulatory providers. … Our physicians know there are opportunities to provide better services by cooperating with each other and communicating better. They are on board and are excited by the opportunity."
Measuring success
Although it's too soon for any of these frontrunners to measure results, they all say they will be looking for expanded clinical best practices, enhanced IT capabilities, greater economies of scale, and improved patient outcomes at a lower cost for indications of success.
Jones and Matthews say they are "absolutely optimistic" that Reading Health will achieve its goals as part of AllSpire and expect to see more partnerships of this nature as the healthcare industry moves to more risk-based payment models.
"We think that these types of affiliations will become more commonplace as reimbursement structures change," Jones says.
Reprint HLR0514-7
This article appears in the May 2014 issue of HealthLeaders magazine.
Rene Letourneau is a contributing writer at HealthLeaders Media.