Category Archives: Outpatient Migration

‘We’re going to come out of this winning:’ Northwell CEO on labor challenges and the system’s biggest growth area

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https://www.beckershospitalreview.com/hospital-management-administration/were-going-to-come-out-of-this-winning-ceo-michael-dowling-on-northwells-labor-challenges-growth-areas.html?utm_medium=email&utm_content=newsletter

New Hyde Park, N.Y.-based Northwell Health began 2023 with a low, but positive operating margin, but labor costs are expected to increase again this year on the back of recent union activity in the state. 

To offset such increases that were not anticipated in the 2023 budget, Northwell is evaluating opportunities to reduce expenses and increase revenue across the health system, which includes 21 hospitals and about 83,000 employees.

Michael Dowling, CEO of Northwell, spoke to Becker’s Hospital Review about the health system’s biggest challenge this year, how it approaches cost-cutting and why outpatient care is its biggest growth area.

Editor’s note: Responses are lightly edited for length and clarity.

Question: Many health systems saw margins dip last year amid rising inflation, increased labor costs and declining patient volumes. How have you led Northwell through the challenges of last year? 

Michael Dowling: We ended 2022 with a low, but positive margin. We’ve been coming back from COVID quite successfully, and we’re back pretty much in all areas to where we were prior to the pandemic. Volumes have returned and we’re very busy. We came into 2023 with a positive budget and a positive margin. We anticipate that you’re always going to have challenges and disturbances, but it’s important to stay focused and deal with it. We have a very detailed strategic plan, which outlines our various goals, and we stick to it. 

Q: What is your top priority today?

MD: The biggest issue for us today is labor costs. We have lots of union activity in New York at the moment. There were various nurse strikes in New York City at the beginning of the year. None of our hospitals were involved in those deliberations, but some of those hospitals agreed to contracts that have increases that were not anticipated in anybody’s 2023 budget. That’s going to have an effect on us. We have negotiations ongoing with the nurses’ union, and have 10 unions overall. About 90 percent of Northwell’s facilities have unions, so the bottom line is we are going to have expenses as a result of these contracts that were not anticipated in the budget. I don’t know the final number on these contracts yet, but it’s definitely going to be more than what we anticipated. 

The unions in New York get a lot of government support and have become very empowered and quite aggressive. The bottom line is there’s more expense than we anticipated in our budget, so we need to figure out how to address that. We’re looking at everything across our health system to find expense reductions or revenue enhancements to be able to make up for the increased labor costs and be optimistic about ending the year with a positive margin. But we’re in a good place and are not like some other health systems that are struggling financially. 

Q: Where are the biggest opportunities to reduce expenses or increase revenue to offset the increased labor costs?

MD: It’s a combination of a lot of things. We have a detailed capital plan that we may slow down. We hire about 300 people a week, so maybe we’ll target that hiring into specific areas and not be as broad based as we thought we could be. We will examine if we have specific programs or initiatives we can curtail without doing any damage to our core mission. It will end up being a portfolio of items; it won’t be one big thing. On the revenue side, we’re working very hard to increase our neurosurgery, cardiac, cancer and orthopedic businesses. Over the next couple of months, all of those things will be taken into consideration. The bottom line is we are going to come out of this winning.

Q: Looking three or four years down the line, where do you see the biggest growth opportunities for Northwell?

MD: Our biggest growth is in outpatient care. A lot of surgeries are moving outpatient, so we have to get ahead of that. Some think we are only a hospital system, but only about 46 percent of our business is from our hospital sector today. Home care is going to grow phenomenally, especially given the new technology that’s available. Digital health will also dramatically expand. 

We’re also looking at expanding into new geographic areas and markets. It’s about positioning your offerings in places close to where people live, so you reduce the inconvenience of people having to travel long distances for care when it should be available to them closer to home. When you do that, you increase market share. We’re constantly increasing our market share by being very aggressive about going to where the customer is and providing the highest quality care that we can. Part of that is also being able to recruit top-line, quality physicians. When you do that, you attract new business because you have competencies that you didn’t have before. It’s a combination of all of these things, but there’s certainly no limit to the opportunities in front of us. We’re not in a world of challenges; we’re in a world of opportunity. The question is are we aggressive enough and do we have enough tolerance for some risk? We need to be as aggressive as we possibly can to take advantage of some of those opportunities. 

Q: What is the biggest challenge on the horizon for Northwell?

MD: The biggest challenge is the huge growth in government payer business — Medicare and Medicaid. The problem with Medicaid — especially in a union environment — is it doesn’t cover your costs. The government is a big part of a potential future issue there. By increasing Medicaid, the more of your business becomes Medicaid and the worse you end up doing, unless you can increase your commercial payer business to continue to cross-subsidize. We also have a lot of union negotiations over the next couple of months, which will put a strain on our 2023 budget, but we will resolve it.

Q: How do you see hospitals and health systems evolving as CMS, commercial payers and patients continue to push more services to outpatient settings, where they can arguably be performed at a higher quality and lower cost?

MD: I think it’s going to continue to grow. For example, Northwell has 23 hospitals — 21 of which it owns — yet it has 890 outpatient facilities. We’ve been ahead of this curve a long time. Our primary expansion is in ambulatory care, not in-hospital care. Like I said, only 46 percent of Northwell’s total business is its hospital business. If you’re relying on the hospital to be the core provider of the future, you’re going to lose. You’ve got to take a little bit of a hit by going out and expanding your ambulatory presence. But the more you expand ambulatory and grow in the right locations, the more you increase market share, which brings more of the necessary inpatient care back to your hospitals. Our hospitals are growing and getting busier in addition to our outpatient centers because we are growing market share. If we enter a new community and see 100 people, five of them will need to be hospitalized. That’s a new market. Ambulatory cannot be disassociated from its connection to the inpatient market. 

Q: Many financial experts are projecting a recession this year. How might that affect hospitals and health systems, and how can they best prepare? 

MD: Even if we do have a recession, it doesn’t mean that people don’t get sick. In fact, people’s problems increase. Our business does not slow down if we have a recession; our business will probably increase. On the revenue side, it won’t necessarily affect our government reimbursement, which we don’t do well on anyway. The things you worry about during a recession is if employers give up the coverage of their staff. Then those employees with no insurance may go on a state Medicaid program, and that might affect hospitals. 

In the healthcare sector, even in a recession, the need for hospital services actually increases. No recession could be as bad as what we experienced during COVID, yet we managed it. We had a problem that we didn’t even understand, and we worked through it. I think healthcare deserves an extraordinary credit for what was done during COVID. If there is a recession, we will deal with it. It’s just one of those things that happens, and we will respond to it in as comprehensive a way as we can. I can’t control it, but I can control our response. Leadership to me is about having a positive disposition; basically saying that whatever happens to you, you’re going to win. 

Adverse events in inpatient care still common

Posted on by • Posted in Adverse Events, Adverse Outcomes, Drug Administration Errors, Employee Staffing Shortage, Labor Shortages, Outpatient Care, Outpatient Migration, Outpatient Surgery, Preventable Errors, Quality, Quality Measures, Quality of Care, Quality Reporting • Leave a comment

https://mailchi.mp/59374d8d7306/the-weekly-gist-january-13-2023?e=d1e747d2d8

Published this week in the New England Journal of Medicine, this concerning study found that seven percent of all inpatient hospital admissions feature at least one preventable adverse event, and that nearly a quarter of all adverse events are preventable, with drug administration errors the most frequent. While the complexities behind studying adverse events make it difficult to measure progress over time, the authors assert that these episodes are still far too common, and advocate for establishing standard approaches to measure the frequency of adverse events more reliably. 

The Gist: Health systems had been making at least some progress in their decades-long effort to reduce adverse events before COVID turned the industry upside down, drawing clinical leaders’ focus to the crisis and upending industry benchmarks. 

Today’s short-staffed, traveler-dependent labor force presents yet another challenge to hospitals aiming to achieve quality benchmarks. COVID has also accelerated the outpatient shift, heightening the importance of tracking quality metrics in non-hospital settings. 

As more complex procedures are performed in ambulatory surgery centers, and more hospital care is administered at home, there’s also a concern that hospital-based quality measures are not telling the whole story on the state of patient safety. 

A rethinking of quality metrics and processes to measure and prevent adverse events across the continuum is long overdue.  

Here’s how hospitals can chart a path to a sustainable financial future (Part 2: Hospital of the Future series)

Posted on by • Posted in Affordability, Ambulatory Care Services, Ambulatory Surgery Centers (ASC), Cost Management, Cost Reduction, Financial Stewardship, Financial Strength, Financial Transparency, Financial Viability, For-Profit, Health System, Home-Based Care, Home-Hospital Care, Hospital, Hospital Industry, Inpatient Care, Nurse Staffing, Nurses, Outpatient Care, Outpatient Clinic Model, Outpatient Migration, Physician, Physician Practice Management, Price Transparency, Price Variation, Pricing Leverage, Rural Health, Rural Health Clinics (RHC), Rural Hospital, Strategic Plan, Streamlining Operations, Telemedicine, Telemedicine Strategy • Leave a comment
https://www.advisory.com/daily-briefing/2022/12/22/radio-advisory-143?utm_source=member_db&utm_medium=email&utm_campaign=2022Dec22&utm_content=member_headline_final_ecpost_x_x_x&elq_cid=4838956&

Radio Advisory’s Rachel Woods sat down with Optum EVP Dr. Jim Bonnette to discuss the sustainability of modern-day hospitals and why scaling down might be the best strategy for a stable future.

Read a lightly edited excerpt from the interview below and download the episode for the full conversation.https://player.fireside.fm/v2/HO0EUJAe+Rv1LmkWo?theme=dark

Rachel Woods: When I talk about hospitals of the future, I think it’s very easy for folks to think about something that feels very futuristic, the Jetsons, Star Trek, pick your example here. But you have a very different take when it comes to the hospital, the future, and it’s one that’s perhaps a lot more streamlined than even the hospitals that we have today. Why is that your take?

Jim Bonnette: My concern about hospital future is that when people think about the technology side of it, they forget that there’s no technology that I can name that has lowered health care costs that’s been implemented in a hospital. Everything I can think of has increased costs and I don’t think that’s sustainable for the future.

And so looking at how hospitals have to function, I think the things that hospitals do that should no longer be in the hospital need to move out and they need to move out now. I think that there are a large number of procedures that could safely and easily be done in a lower cost setting, in an ASC for example, that is still done in hospitals because we still pay for them that way. I’m not sure that’s going to continue.

Woods: And to be honest, we’ve talked about that shift, I think about the outpatient shift. We’ve been talking about that for several years but you just said the change needs to happen now. Why is the impetus for this change very different today than maybe it was two, three, four, five years ago? Why is this change going to be frankly forced upon hospitals in the very near future, if not already?

Bonnette: Part of the explanation is regarding the issues that have been pushed regarding price transparency. So if employers can see the difference between the charges for an ASC and an HOPD department, which are often quite dramatic, they’re going to be looking to say to their brokers, “Well, what’s the network that involves ASCs and not hospitals?” And that data hasn’t been so easily available in the past, and I think economic times are different now.

We’re not in a hyper growth phase, we’re not where the economy’s performing super at the moment and if interest rates keep going up, things are going to slow down more. So I think employers are going to become more sensitized to prices that they haven’t been in the past. Regardless of the requirements under the Consolidated Appropriations Act, which require employers to know the costs, which they didn’t have to know before. They’re just going to more sensitive to price.

Woods: I completely agree with you by the way, that employers are a key catalyst here and we’ve certainly seen a few very active employers and some that are very passive and I too am interested to see what role they play or do they all take much more of an active role.

And I think some people would be surprised that it’s not necessarily consumers themselves that are the big catalyst for change on where they’re going to get care, how they want to receive care. It’s the employers that are going to be making those decisions as purchasers themselves.

Bonnette: I agree and they’re the ultimate payers. For most commercial insurance employers are the ultimate payers, not the insurance companies. And it’s a cost of care share for patients, but the majority of the money comes from the employers. So it’s basically cutting into their profits.

Woods: We are on the same page, but I’m going to be honest, I’m not sure that all of our listeners are right. We’re talking about why these changes could happen soon, but when I have conversations with folks, they still think about a future of a more consolidated hospital, a more outpatient focused practice is something that is coming but is still far enough in the future that there’s some time to prepare for.

I guess my question is what do you say to that pushback? And are there any inflection points that you’re watching for that would really need to hit for this kind of change to hit all hospitals, to be something that we see across the industry?

Bonnette: So when I look at hospitals in general, I don’t see them as much different than they were 20 years ago. We have talked about this movement for a long time, but hospitals are dragging their feet and realistically it’s because they still get paid the same way until we start thinking about how we pay differently or refuse to pay for certain kinds of things in a hospital setting, the inertia is such that they’re going to keep doing it.

Again, I think the push from employers and most likely the brokers are going to force this change sooner rather than later, but that’s still probably between three and five years because there’s so much inertia in health care.

On the other hand, we are hitting sort of an unsustainable phase of cost. The other thing that people don’t talk about very much that I think is important is there’s only so many dollars that are going to health care.

And if you look at the last 10 years, the growth in pharmaceutical spend has to eat into the dollars available for everybody else. So a pharmaceutical spend is growing much faster than anything else, the dollars are going to come out of somebody’s hide and then next logical target is the hospital.

Woods: And we talked last week about how slim hospital margins are, how many of them are actually negative. And what we didn’t mention that is top of mind for me after we just come out of this election is that there’s actually not a lot of appetite for the government to step in and shore up hospitals.

There’s a lot of feeling that they’ve done their due diligence, they stepped in when they needed to at the beginning of the Covid crisis and they shouldn’t need to again. That kind of savior is probably not their outside of very specific circumstances.

Bonnette: I agree. I think it’s highly unlikely that the government is going to step in to rescue hospitals. And part of that comes from the perception about pricing, which I’m sure Congress gets lots of complaints about the prices from hospitals.

And in addition, you’ll notice that the for-profit hospitals don’t have negative margins. They may not be quite as good as they were before, but they’re not negative, which tells me there’s an operational inefficiency in the not for-profit hospitals that doesn’t exist in the for-profits.

Woods: This is where I wanted to go next. So let’s say that a hospital, a health system decides the new path forward is to become smaller, to become cheaper, to become more streamlined, and to decide what specifically needs to happen in the hospital versus elsewhere in our organization.

Maybe I know where you’re going next, but do you have an example of an organization who has had this success already that we can learn from?

Bonnette: Not in the not-for-profit section, no. In the for-profits, yes, because they have already started moving into ambulatory surgery centers. So Tenet has a huge practice of ambulatory surgery centers. It generates high margins.

So, I used to run ambulatory surgery centers in a for-profit system. And so think about ASCs get paid half as much as a hospital for a procedure, and my margin on that business in those ASCs was 40% to 50%. Whereas in the hospital the margin was about 7% and so even though the total dollars were less, my margin was higher because it’s so much more efficient. And the for-profits already recognize this.

Woods: And I’m guessing you’re going to tell me you want to see not-for-profit hospitals make these moves too? Or is there a different move that they should be making?

Bonnette: No, I think they have to. I think there are things beyond just ASCs though, for example, medical patients who can be treated at home should not be in the hospital. Most not-for-profits lose money on every medical admission.

Now, when I worked for a for-profit, I didn’t lose money on every Medicare patient that was a medical patient. We had a 7% margin so it’s doable. Again, it’s efficiency of care delivery and it’s attention to detail, which sometimes in a not-for-profit friends, that just doesn’t happen.

The outmigration of orthopedic surgeries 

Posted on by • Posted in Health System, Hospital, Hospital Industry, Orthopedic Surgery, Outpatient Care, Outpatient Migration, Outpatient Surgery, Strategic Imperative, Strategy, Strategy Clinical • Leave a comment

https://mailchi.mp/11f2d4aad100/the-weekly-gist-august-12-2022?e=d1e747d2d8

One of COVID’s many effects on the health system business model has been the accelerated migration of care to outpatient settings, with orthopedic surgeries, such as knee and hip replacements, leading the way. For this week’s graphic, we partnered with Stratasan, a Syntellis-owned healthcare data analytics firm that provides market intelligence for strategic planning, to track how quickly joint replacements have shifted to hospital outpatient and ambulatory surgery centers (ASCs) over the last five years.

Using data from Stratasan’s proprietary All-Payer Claims Database, we found that by the end of 2021, only one in four knee replacements and one in three hip replacements were performed in inpatient facilities, down from over 95 percent in 2018. A major catalyst for the shift was the removal of the procedures from Medicare’s Inpatient Only list, first knee replacements in 2018, then hip replacements in 2020.

This change triggered an outpatient shift across all payers; COVID’s dampening effect on inpatient demand only exacerbated the trends. Patients who undergo these surgeries in an inpatient hospital tend to be sicker, older, and more likely to be on Medicare. This translates to an altered payer mix for these procedures, with hospitals seeing a drop in lucrative commercial payment and an uptick in lower Medicare reimbursements.

Amid rising expenses and slow-to-return volumes across the board, this outpatient migration presents another significant challenge to health systems’ financial bottom lines, and they must either find ways to recapture revenues in ambulatory settings, or watch a once reliable source of revenue walk—gingerly—out their doors.