5 health systems zeroing in on exec teams, administration

At least five health systems announced changes to executive ranks and administration teams in February and March. 

The changes come as hospitals continue to grapple with financial challenges, leading some organizations to cut jobs and implement other operational adjustments. Changes to executive ranks include reorganizing executive responsibilities and executive appointments.

The following changes were announced within the last two months and are summarized below, with links to more comprehensive coverage of the changes. 

1. Philadelphia-based Penn Medicine is eliminating administrative positions. The change is part of a reorganization plan to save the health system $40 million annually, the Philadelphia Business Journal reported March 13. Kevin Mahoney, CEO of the University of Pennsylvania Health System, told Penn Medicine’s 49,000 employees last week that changes include the elimination of a “small number of administrative positions which no longer align with our key objectives,” according to the publication. The memo did not indicate the exact number of positions that were eliminated.

2. Sovah Health, part of Brentwood, Tenn.-based Lifepoint Health, has eliminated the COO positions at its Danville and Martinsville, Va., campuses. The responsibilities of both COO roles will now be spread across members of the existing administrative team. 

3. Cox Medical Group, a subsidiary of Springfield, Mo.-based CoxHealth, has made several leadership changes to support the health system’s new operating model. The new model is focused on key service lines — such as cardiovascular services, orthopedics and primary care. Four things to know.

4. Valley Health, a six-hospital health system based in Winchester, Va., eliminated 31 administrative positions. The job cuts are part of the consolidation of the organization’s leadership team and administrative roles. They were announced internally on Feb. 28. 

5. Roseville, Calif.-based Adventist Health will transition from seven networks of care to five systemwide to reduce costs and strengthen operations, according to a Feb. 15 news release shared with Becker’s. Under the reorganization, the health system will have separate networks for Northern California, Central California, Southern California, Oregon and Hawaii. The reorganization will result in job cuts, including reducing administration by more than $100 million.

Questioning the value of the integrated delivery system

https://mailchi.mp/175f8e6507d2/the-weekly-gist-march-3-2023?e=d1e747d2d8

During one of our regular check-ins with a health system CEO this week, the conversation took a turn for the existential. Lamenting the difficult economic situation in the industry, the continued shift of care to ambulatory disruptors, and the mounting pressure to dial back money-losing services, he shared that he was starting to question the fundamental business model

“Many years ago, we set out to become an integrated delivery system. But I’m not sure we’ve succeeded at any of those things: we’re not integrated enough, we don’t act like a system, and we don’t seem to be delivering the kind of care consumers want.” A stark admission, but one that could apply to many large health systems across the industry.

In theory, those three “legs of the stool” should create a virtuous flywheel: greater integration across the care continuum (perhaps in a risk-bearing model, but not necessarily) ought to allow systems to deliver quality care at the right place, right time. And a system-oriented approach ought to allow for efficiencies and cost-savings that enable care to be delivered at lower cost to patients.

Instead, the three components often create a vicious spiral: care that’s not coordinated across an integrated continuum, with little success at leveraging system-level efficiencies, resulting in unnecessary, duplicative, and variable-quality care delivery at excessive cost.

Capturing the value of integrated delivery systems will ultimately require hard work, and not just lip service, on all three pieces. Meanwhile, scaling a broken model will only exacerbate the problems of organizations that are neither integrated, nor systemic, nor delivering care that is high value.

UnityPoint Health and Presbyterian Healthcare Services announce intent to merge

https://mailchi.mp/175f8e6507d2/the-weekly-gist-march-3-2023?e=d1e747d2d8

On Thursday, Des Moines, IA-based UnityPoint Health and Albuquerque, NM-based Presbyterian Healthcare Services revealed they have signed a letter of intent to explore a merger. The UnityPoint and Presbyterian brands would continue to operate in their local regions, but the combined system would manage $11B in annual revenue, over 40 hospitals, and nearly 3K physicians and advanced practice clinicians.

The Gist: A UnityPoint and Presbyterian link up would seem to follow the playbook of the recently closed Advocate Aurora and Atrium merger. Mergers between large, noncontiguous health systems are currently popular as a means to achieve the benefits of scale without tripping the alarms of federal antitrust regulators. 

UnityPoint has been seeking a merger partner for years; most recently its plan to combine with Sanford Health fell through in 2019. It may have found a like-minded partner in Presbyterian, as both systems have made significant investments in risk, including establishing mature ACOs, developing their own Medicare Advantage plans, and expanding their hospital at home programs. 

We’re expecting to see a number of these cross-state system mergers announced over the course of 2023, as large regional players seek combinations that allow them to scale into super-regional, or even national, delivery platforms.

Biden Administration withdraws permissive hospital antitrust guidance

https://mailchi.mp/12e6f7d010e1/the-weekly-gist-february-24-2023?e=d1e747d2d8

 Earlier this month, the Department of Justice (DOJ) and the Federal Trade Commission (FTC) quietly released joint revisions to three healthcare antitrust policy statements which it now considers “overly permissive”. While two of the policies date back to the 1990s and relate to information sharing, the most significant, published in 2011, stated that certain ACOs were “highly unlikely to raise significant competitive concerns”. Instead, the FTC and DOJ say their policy will be to review these arrangements on a case-by-case basis. 

The Gist: While unlikely to alter the ACO landscape significantly, this new guidance signals a departure from Obama-era policies that gave outsized priority to ACO development in cost-reduction efforts. Until now, ACOs were passed over for scrutiny, while regulators focused on more traditional hospital mergers in an attempt to prevent outsized market leverage.

Moving forward, the Biden administration must strike a delicate balance between policies that encourage greater coordination amongst independent healthcare entities working together to improve patient care and lower costs, and the market leverage that such coordination can generate

A resurgent interest in outsourcing

https://mailchi.mp/12e6f7d010e1/the-weekly-gist-february-24-2023?e=d1e747d2d8

Unsurprisingly, given the mounting economic pressures many health systems are facing, we’re beginning to hear more discussions among executives about outsourcing non-core services as a way of containing costs. Whether it’s contracting with an outside company for things like laundry and dietary services, or more extensive outsourcing to vendors for revenue cycle and IT services (such as the much-ballyhooed partnerships with Optum that have grabbed headlines recently), we’ve seen a resurgence of interest in finding ways to offload key areas of non-clinical operations.

In some ways it makes sense: we’ll stick to our knitting, and let someone else handle areas that they’re probably better at. But a recent comment from one system CEO captured our concern about the outsourcing trend. “For us, outsourcing is like Lucy and the football…we’ve been here before.

What we’ve learned is the complexity of managing the vendor relationship often outweighs any potential cost savings. And in the end, we never seem to garner enough savings to make it worth the effort.” 

As to the broader “partnerships” around revenue cycle, IT, and population health, she added, “We’d never give up control of those aspects of the business—they’re too important. Plus, I’m not sure how you’d ever unwind it once you’d let your own staff become employed by a vendor. We’ll be keeping a close eye on these outsourcing deals as the year goes on, and we’d love to hear your experience with the strategy as well.

A battle of (growing) titans in healthcare  

https://mailchi.mp/12e6f7d010e1/the-weekly-gist-february-24-2023?e=d1e747d2d8

We’ve updated our annual comparison of the relative size of the largest healthcare companies, with the graphic below comparing 2022 revenues to 2019 for a sense of how different companies and industry sectors weathered the pandemic. 

The annual revenues of the five largest health systems in 2022 pale in comparison to the industry’s true giants—and the gap only widened over the pandemic. The largest health systems averaged just 5 percent annual growth since 2019, while the largest companies in each other healthcare subsector have grown revenues by over 10 percent annually.

Unsurprisingly, the pandemic drove Pfizer’s revenue to a record $100B in 2022—over half of that was driven by the company’s COVID vaccine and antiviral treatment, Paxlovid. Amazon’s 2022 revenue was nearly double its pre-COVID level. While very little of that growth came from healthcare, it enabled the company to fund investments like its all-cash $3.9B purchase of One Medical, which closed this week.

Even the nation’s largest health systems cannot compete with that kind of firepower, and looking beyond revenue paints an even more difficult picture. According to Kaufman Hallalthough the median hospital has grown its revenue by 15 percent, it has seen expenses climb 20 percent, and lost 26 percent of margin since 2019

Lawmakers stress urgency of healthcare worker shortage

https://www.healthcaredive.com/news/lawmakers-fixes-healthcare-workforce-shortages/642994/

Addressing the education pipeline is one thing that legislators could focus on to improve nurse and physician shortages, medical school and health system leaders said.

As the healthcare industry continues to face pandemic-driven workforce challenges, lawmakers are exploring ways to boost the number of clinicians practicing in the U.S.

“A shortage of healthcare personnel was a problem before the pandemic and now it has gotten worse,” Chairman Sen. Bernie Sanders I-Vt., said during a Thursday Senate HELP committee hearing. “Health care jobs have gotten more challenging and, in some cases, more dangerous,” he said.

The country faces a shortage of up to 124,000 physicians by 2034, including 48,000 primary care physicians, according to the Association of American Medical Colleges.

Hospitals are currently facing shortages of registered nurses as burnout and other factors drive them to other roles. 

For example, 47-hospital system Ochsner Health in New Orleans has about 1,200 open nursing positions, Chief Academic Officer Leonardo Seoane said at Thursday’s hearing.

The workforce shortaged led Ochsner to close about 100 beds across its system during the past six months, leading to it use already-constrained emergency departments as holding bays for patients, he said.

Like other systems, labor costs have also been a concern due to a continued reliance on temporary staff to fill gaps. Ochsner’s non-agency labor costs grew just under 60% since 2019, while its costs for contract staff grew nearly 900%, he said.

“Our country is perilously short of nurses, and those we do have are often not working in the settings that could provide the most value,” Sarah Szanton, dean of Johns Hopkins School of Nursing said.

“This was true before the pandemic and has become more acute,” she said.

While many nurses left permanent roles for higher-paying contract positions during the pandemic, others have turned to jobs at outpatient clinics, coinciding with a shift toward non-hospital based care.

Registered nurse employment is nearly 5% above where it was in 2019, with nearly all that growth occurring outside of hospitals, Douglas Staiger, a professor of economics at Dartmouth College, found in his research and said at the hearing.

One major concern: Driving current and projected shortages in hospitals that lawmakers can address is the educational pipeline, medical school and health system leaders said.

Educational programs for nurses and physicians face site shortages and educators who are often allured by other higher-paying jobs in the industry.

Nursing educators in Vermont earn about $65,000 a year — about half of what nurses with similar degrees working in hospitals earn, Sanders said during the hearing. He asked members to consider expanding the Nurse Corps and nurse faculty loan repayments, among other programs.

Supporting partnerships between universities and hospitals to create more training opportunities is another way Congress can help, along with addressing high costs of tuition, James Herbert, president of University of New England, said during the hearing.

“Scholarship and loan repayment programs are critical to make healthcare education more accessible for those who would otherwise find it out of reach,” Herbert said.

That includes expanding and improving Medicare-funded physician residencies, he said.

Creating a more diverse workforce that looks more like the population it serves is another important task, and one lawmakers can address by supporting historically black colleges and universities.

Federal funding could help improve classrooms and other infrastructure at HBCUs “that have been egregiously are underfunded for decades,” in addition to expanding Medicare-funded residencies for hospitals that train a large number of graduates for HBCU medical schools, said James Hildreth Sr., president and CEO at Meharry Medical College in Nashville.

The American Hospital Association submitted a statement to the HELP subcommittee and said it also supports increasing the number of residency slots eligible for Medicare funds and rejecting cuts to curb long-term physician shortages.

Other AHA supported policies to address current and long-term workforce shortages include better funding for nursing schools and supporting expedited visas for foreign-trained nurses.

AHA also asked lawmakers to look into travel nurse staffing agencies, reviving requests it made last year alleging that staffing companies engaged in price gouging during the pandemic.

Last year some state lawmakers considered capping the rate hospitals can pay agencies for temporary nursing staff, though none ended up passing legislation to do so.

CommonSpirit to acquire 5 Steward hospitals, expanding reach into Utah

https://www.healthcaredive.com/news/commonspirit-acquire-steward-utah/642917/

Dive Brief:

  • CommonSpirit Health announced Wednesday that it will acquire regional health system Steward Health Care in Utah for $685 million.
  • The deal marks CommonSpirit’s entry into Utah, expanding the hospital operator’s footprint to a total of 22 states.
  • CommonSpirit will acquire five hospitals from Steward, along with more than 40 clinics and other ambulatory services, the system said. The deal is expected to close later this year. CommonSpirit’s Centura Health will manage the Utah sites.

Dive Insight:

The acquisition comes on the heels of a thwarted attempt by HCA to purchase Steward Health Care last year.

The Federal Trade Commission was successful in blocking the deal after the agency alleged that a tie-up between the head-to-head competitors would harm patients around Salt Lake City by raising prices and lowering care quality.

CommonSpirit said the deal represents a “significant long-term growth opportunity” and extends the system’s reach into a new region that already has an established presence with a variety of services, including acute, post-acute and ambulatory care.

The Catholic health system released financial results Wednesday for the period ended Dec. 31, the nonprofit’s second quarter, which showed a $474 million operating loss. The system said labor shortages, higher staffing costs and a recent ransomware attack dragged on its results.

“CommonSpirit is taking a number of steps to bolster its financial sustainability,” the system said Wednesday.

But officials would not comment on whether those steps may include job cuts.

So far, the ransomware incident has cost the system $150 million, it said Wednesday. The figure includes lost revenue due to the interruption to business and costs to remediate the issue.

CommonSpirit said it is working with insurance carriers but is unable to predict the timing or amount it may receive following the cyber incident.

Cyberattackers gained access to CommonSpirit’s network last fall in a breach that interrupted access to electronic health records and delayed patient care in multiple regions. CommonSpirit later told regulators that the breach exposed the private health information of more than 623,000 people.

Wednesday’s acquisition news follows CommonSpirit’s recent announcement that it is dissolving its long-term joint venture with AdventHealth. For more than two decades, the two operated hospitals in Colorado and western Kansas. The two will now manage their respective hospitals.

Medicaid enrollees largely unaware of upcoming redeterminations, survey finds

https://www.healthcaredive.com/news/medicaid-redeterminations-restart-enrollees-unaware-Robert-Wood-Johnson/643158/

Dive Brief:

  • About 64% of adults in a Medicaid-enrolled family in December said they did not know they may lose coverage once pandemic-era policy ends and eligibility checks resume on April 1, according to a survey from the Robert Wood Johnson Foundation.
  • The percentage of respondents who said they heard nothing about upcoming Medicaid renewals rose from June, when 62% said they knew nothing about the changes, the survey found.
  • Awareness was low across the board regardless of geographic region or a state’s Medicaid expansion status, according to the survey.

Dive Insight:

The federal government barred states from resuming Medicaid eligibility checks amid widespread job losses and other challenges during the pandemic.

Once eligibility checks resume, as many as 18 million people are expected to lose coverage, according to the Robert Wood Johnson Foundation.

About 7 million of those people are expected to gain coverage through the individual markets or employer-sponsored plans, though 8 million will not and will likely become uninsured, according to a report from Moody’s Investor Services.

Awareness levels regarding looming redetermination checks remained low and varied only slightly regionally, the report found.

Similarly, above 60% of respondents reported unawareness of Medicaid redeterminations both in Medicaid expansion states and those that haven’t expanded Medicaid, “which suggests the need for widespread outreach and education efforts,” the report said.

“Reducing information gaps about the change is a critical first step,” the report said.

In non-expansion states, people will need help learning about navigating marketplace options, while in expansion states they’ll need information on how to stay enrolled, the report said.

The suspension of eligibility checks led Medicaid membership to rise substantially during the pandemic, growing from 70.7 million members in February 2020 to 90.9 million in September, according to the Moody’s Investor Services report.

The end of the policy is expected to deal a blow to payers that have touted recent enrollment growth while hospitals could see more self-pay patients and “higher bad debt” for facilities, the Moody’s report said.

14 health systems with strong finances

Here are 14 health systems with strong operational metrics and solid financial positions, according to reports from credit rating agencies Fitch Ratings, Moody’s Investors Service and S&P Global.

1. Ascension has an “AA+” rating and stable outlook with Fitch. The St. Louis-based system’s rating is driven by multiple factors, including a strong financial profile assessment, national size and scale with a significant market presence in several key markets, which produce unique credit features not typically seen in the sector, Fitch said. 

2. Berkshire Health has an “AA-” rating and stable outlook with Fitch. The Pittsfield, Mass.-based system has a strong financial profile, solid liquidity and modest leverage, according to Fitch. 

3. ChristianaCare has an “Aa2” rating and stable outlook with Moody’s. The Newark, Del.-based system has a unique position with the state’s largest teaching hospital and extensive clinical depth that affords strong regional and statewide market capture, and it is expected to return to near pre-pandemic level margins over the medium term, Moody’s said.

4. Cone Health has an “AA” rating and stable outlook with Fitch. The rating reflects the expectation that the Greensboro, N.C.-based system will gradually return to stronger results in the medium term, the rating agency said. 

5. Harris Health System has an “AA” rating and stable outlook with Fitch. The Houston-based system has a “very strong” revenue defensibility, primarily based on the district’s significant taxing margin that provides support for operations and debt service, Fitch said. 

6. Johns Hopkins Medicine has an “AA-” rating and stable outlook with Fitch. The Baltimore-based system has a strong financial role as a major provider in the Central Maryland and Washington, D.C., market, supported by its excellent clinical reputation with a regional, national and international reach, Fitch said. 

7. Orlando (Fla.) Health has an “AA-” and stable outlook with Fitch. The system’s upgrade from “A+” reflects the continued strength of the health system’s operating performance, growth in unrestricted liquidity and excellent market position in a demographically favorable market, Fitch said.  

8. Rady Children’s Hospital has an “AA” rating and stable outlook with Fitch. The San Diego-based hospital has a very strong balance sheet position and operating performance and is also a leading provider of pediatric services in the growing city and tri-county service area, Fitch said. 

9. Rush System for Health has an “AA-” and stable outlook with Fitch. The Chicago-based system has a strong financial profile despite ongoing labor issues and inflationary pressures, Fitch said. 

10. Salem (Ore.) Health has an “AA-” rating and stable outlook with Fitch. The system has a “very strong” financial profile and a leading market share position, Fitch said. 

11. TriHealth has an “AA-” rating and stable outlook with Fitch. The rating reflects the Cincinnati-based system’s strong financial and operating profiles, as well as its broad reach, high-acuity services and stable market position in a highly fragmented and competitive market, Fitch said. 

12. UCHealth has an “AA” rating and stable outlook with Fitch. The Aurora, Colo.-based system’s margins are expected to remain robust, and the operating risk assessment remains strong, Fitch said.   

13. University of Kansas Health System has an “AA-” rating and stable outlook with S&P Global. The Kansas City-based system has a solid market presence, good financial profile and solid management team, though some balance sheet figures remain relatively weak to peers, the rating agency said. 

14. Willis-Knighton Health System has an “AA-” rating and stable outlook with Fitch. The Shreveport, La.-based system has a “dominant inpatient market position” and is well positioned to manage operating pressures, Fitch said.