Top 12 takeaways from the 2018 JP Morgan Healthcare Conference — while the destination is uncertain, the direction is clear

https://www.beckershospitalreview.com/hospital-management-administration/12-things-you-need-to-know-from-the-2018-jp-morgan-healthcare-conference-while-the-destination-is-uncertain-the-direction-is-clear.html

The recent breathtaking flurry of mega-mergers coupled with increasingly challenging market forces and an ever shifting political landscape has cast a cloud of confusion regarding where the U.S. healthcare delivery system is heading.  

So, where do you go to find the map?

Every year, the JP Morgan Healthcare Conference provides an incredibly efficient snapshot of the strategies for large healthcare delivery systems, the hub for healthcare in the U.S. Most of these organizations are also the largest employers in their respective states. The conference took place this week in San Francisco with over 20 healthcare systems presenting, including Advocate Health Care, Aurora Health Care, Baylor Scott & White Health, Catholic Health Initiatives, Geisinger Health System, Hospital for Special Surgery, Intermountain Healthcare, Mercy Health in Ohio, Northwell Health, Northwestern Medicine, Partners HealthCare System, WakeMed Health & Hospitals and many of the other big name brands in the market. Each provided their strategic roadmap in a series of 25-minute presentations from their “C” suite. If you’re looking for the GPS on strategy and a gauge on the health of healthcare, this is it.  

How do their strategies differ? What direction are they heading in? There is a great line from Alice in Wonderland that goes, “If you don’t know where you’re going, any road will take you there.” You would think that line applies perfectly to the U.S healthcare system, but the good news is it actually doesn’t.

While the exact destination for everyone is TBD, the direction they are heading in is actually pretty clear and consistent. It turns out that they are all using a very similar compass, which is sending them down a similar path.

So, what are the roadside stops health systems consider absolutely necessary to be part of their journey to creating a more viable and sustainable value-based business model?

Based on the travel plans for over 20 of the largest and most prestigious healthcare delivery systems in the country, here’s your GPS and list of 12 things you “must do” on your journey.

1. You Must Scale

Clearly the headline at #JPM18 was the flurry of major announcements regarding major mergers. With that said, two of the mergers were front and center: teams were there to present from Downers Grove, Ill.-based Advocate and Milwaukee-based Aurora, which will be a $10 billion organization with 70,000 employees, as well as San Francisco-based Dignity Health and Englewood, Colo.-based Catholic Health Initiatives, which will be a $28 billion organization with 160,000 employees. The size and scale of these mergers is pretty stunning. While the announcement of these and the other recent mega-mergers has forced many into their board room to determine what the deals mean to them, the consensus at the conference was this: There are a number of different paths forward to achieve scale. Some, like Baylor Scott & White in Texas, have aggressive regional expansion plans. Others are betting on partnerships to provide the same or even more value. Taking a pulse of the room, two things were clear. The first is there is no definition of scale any more in this market. The second is that, despite this flurry of mergers, “getting really big” is not the only destination.  

2. You Must Pursue “Smart Growth” and Find New Revenue Streams

Running counter to the merger narrative in the market, Salt Lake City-based Intermountain provided a good overview of the movement to what is called an “asset light” strategy of “smart growth.” This is a radically contrarian approach to the industry norm, which is the capital intensive bricks and mortar playbook of buying and building. As part of their strategy, Intermountain will open a “virtual hospital” delivering provider consultations and remote patient monitoring via telehealth. The system will also launch a number of healthcare companies every year, leveraging their considerable resources in a manner they believe will produce a higher yield. Other health systems outlined a similar stream of initiatives they have in motion to diversify their revenue streams and expand their business model into higher margin, higher growth businesses. One example is Cincinnati-based Mercy Health, which achieved strong growth and leverage via their investment in a revenue cycle management company. Advocate in Illinois formed a partnership with Walgreens. Together, they now operating 56 retail clinics and Advocate has seen a significant impact on driving new patients and downstream revenue to their system. The bottom line is all now recognize that they must think and act differently to be able to continue to fund their clinical mission and serve their community.

3. You Must Measure and Manage Cost and Margins

While some are moving aggressively to get scale, everyone is looking to more effectively use the resources they have and get more operating leverage. Margin compression was a consistent theme, with many systems now moving into consistent, stable operating models around managing margins versus launching reactionary initiatives when they find a budget gap. What is emerging is a new discipline and continuous process around managing cost and margins that is starting to look similar to the level of sophistication we have seen in the past for revenue cycle management. To that end, there has been major movement in the market to implement advanced cost accounting systems, often referred to as financial decision support, which provide accurate and actionable information on cost and help organizations understand their true margins as they take on risk-based, capitated contracts. Some during the conference referred to it as the “killer app” for the financial side of driving value. Regardless of what you call it, all are moving aggressively to understand the denominator of their value equation.

4. You Must Become a Brand

Investing in and better leveraging their brand has become a strategic must for health systems. The level of sophistication is growing here as providers shift their mental model to viewing patients as “consumers.” Aurora in Wisconsin cited their dedicated Consumer Insights Group and outlined their “best people, best brand, best value” approach that has been incredibly effective both internally and externally. At the same time, the bigger investments for many health systems relative to brand are more on brand experience than brand image, with a focus on understanding and radically rethinking the consumer experience. As an example, at Danville, Pa.-based Geisinger, close to 50 percent of ambulatory appointments are scheduled and seen on the same day. And every health system is making meaningful investments in their “digital handshake” with consumers, creating and leveraging it via telehealth as well as mobile applications to enhance the customer experience.

5. You Must Operate as a System, Not Just Call Yourself One

One clear theme at #JPM18 is different organizations were at different points along the continuum of truly operating as a system vs. merely sharing a name and a logo. There are a number of reasons for this, but you are increasingly seeing tough decisions actually being made vs. just kicking the can down the road. There has been a great deal of acquisitions over the last few years coupled with a new wave of thinking relative to integration that is more aggressive and more forward-looking. This mental shift is actually a very big deal and perhaps the most important new trend. Many health systems are heavily investing in leadership development deep into their organization to drive changes much faster.   

6. You Must Act Small

The word “agile” is quickly becoming part of everyone’s narrative with health systems looking to adopt the principles and processes leveraged in high tech. Chicago-based Northwestern Medicine is an example of an organization that has grown dramatically in the last five years, now approaching $5 billion in revenue. At the same time, they have still found a way to operate small, leveraging daily huddles across the organization to drive their results. The team at Raleigh, N.C.-based WakeMed has achieved a dramatic financial turnaround over the last few years, applying a similar level of rigor yielding major operational improvements in surgical, pharmacy and emergency services that have translated into better bottom line results.

7. You Must Engage Your Physicians

Employee engagement was a major theme in many of the presentations. With the level of change required both now and in the future, a true focus on culture is now clearly top of mind and a strategic must for high-performing health systems. That said, only a handful articulated a focus on monitoring and measuring physician engagement. This appears to be a major miss, given that physicians make roughly 80 percent of the decisions on care that take place and, therefore, control 80 percent of the spend. One data point that stood out was a 117 percent improvement in physician engagement at Northwestern. Major improvements will require clinical leadership and a true partnership with physicians.

8. You Must Leverage Analytics

Many have reached their initial destination of deploying a single clinical record, only to find that their journey isn’t over. While health systems have made major investments big data, machine learning and artificial intelligence, there was a consistent theme regarding the need to bring clinical and financial data together to truly understand value. Part of this path is the consolidation of systems that is now needed on the financial side of the house with a focus on deploying a single platform for financial planning, analytics and performance. The primary focus is to translate analytics not just into insights, but action.

9. You Must Protect Yourself

As organizations move deeper into data, there is increased recognition that cybersecurity is a major risk. Over 40 percent of all data breaches that occur happen in healthcare. During the keynote, JP Morgan Chase CEO Jamie Dimon shared that his organization will spend $700 million protecting itself and their customers this year. Investments in cybersecurity will continue to ramp up due to both the operational and reputational risk involved. Cybersecurity has become a board room issue and a top-of-mind initiative for executive teams at every health delivery system.

10. You Must Manage Social Determinants of Health in the Communities You Serve

Perhaps the most encouraging theme for healthcare provider organizations was the need to engage the community they serve and focus on social determinants of health. As Intermountain shared: “Zip code is more important than genetic code.” To that end, Geisinger refers to their focus on “ZNA.” They have deployed community health assistants, non-licensed workers who work on social determinants of health and have implemented a “Fresh Food Farmacy,” yielding a 20 percent decrease in hemoglobin A1c levels along with a 78 percent decrease in cost. Organizations like ProMedica Health System in Ohio have seen similar results with their focus on hunger in Toledo. WakeMed has an initiative focused on vulnerable populations in underserved communities that has resulted in a significant decrease in ER visits and admissions and over $6 million in savings.

11. You Must Help Solve the Opioid Epidemic

The opioid issue is one that healthcare professionals take very personally and feel responsible for solving. It came up in virtually in every presentation, and it’s an emotional issue for the leaders of each organization. This is good news, but the better news is that they are taking action. As an example, Geisinger invested in a CleanState Medicaid member pilot that resulted in a 23 percent decrease in ER visits and 35 percent decrease in medical spending, breaking even on their investment in less than 10 months. While many would rightly argue that the economic rationalization isn’t needed for something this important, the fact that it’s there should eliminate any excuse for anyone not taking action.

12. You Must Deliver Value

The Hospital for Special Surgery in New York is the largest orthopedics shop in the U.S. and a great example of how value-based care delivery is taking shape. Perhaps the most revealing stat they shared is that 36 percent of the time patients receive a non-surgical recommendation when they are referred to one of their providers for a second opinion. This is exactly the type of value-based counseling and decision-making that will help flip the model of healthcare. Some systems are farther along than others. Northwestern currently has 25 percent of its patients in value-based agreements, but other systems have less. As the team from Intermountain re-stated to this audience this year, “You can’t time the market on value, you should always do the right thing, right now.” Well said.  

 

 

 

The No. 1 takeaway from the 2019 JP Morgan Healthcare Conference: It’s the platform, stupid

https://www.beckershospitalreview.com/hospital-management-administration/the-no-1-takeaway-from-the-2019-jp-morgan-healthcare-conference-it-s-the-platform-stupid.html

If you want to understand the shifting sands of healthcare, you’ll find no better place than the nonprofit provider track during the infamous JP Morgan Healthcare Conference that took place this week in San Francisco.

Over 40,000 players were in town from every corner of the healthcare ecosystem. However, if you want to hear the heartbeat of what’s happening at ground level, you needed to literally squeeze into the standing room only nonprofit provider track where the CEOs and CFOs of 25 of the most prominent hospitals and healthcare delivery systems in the country shared their perspectives in rapid-fire 25 minute presentations.

This year those presenters represented over $300 billion, or close to 10 percent of the annual healthcare spend in U.S. healthcare. These organizations play a truly unique role in this country as they are integrated into the very fabric of the communities that they serve and are often the single largest employer in their respective regions. In other words, if you work in or care about healthcare, understanding their perspective is a must.

Every year I take a shot at condensing all of these presentations into a set of takeaways so healthcare providers who aren’t in the room can share something with their teams to help inform their strategy. So what do you need to know? Glad you asked, here you go.

Shift Happens — Moving from Being a Healthcare Provider to Creating a Platform for Health and Healthcare in Your Community

Trying to synthesize 25 presentations into a single punch line is pretty stressful. I listened to every presentation, debriefed with other healthcare providers in the audience afterwards and then spent the next 48 hours trying to process what I heard. I was stumped.

But then, finally, it hit me. To take a new spin on an old phrase, “It’s the platform, stupid.” To be clear, even though I’ve been in healthcare for close to 30 years, “stupid” in that sentence is absolutely referring to me.

So the No. 1 takeaway from the 2019 JP Healthcare Conference is this — for healthcare providers, there is a major shift taking place. They are moving from a traditional strategy of buying and building hospitals and simply providing care into a new and more dynamic strategy that focuses on leveraging the platform they have in place to create more value and growth via new and often more profitable streams of revenue. Simply stated, the healthcare delivery systems of today will increasingly leverage the platform and resources that they have in place to become a hub for both health and healthcare in the future. There is a level of urgency to move quickly. Many feel that if they don’t expand the role that they play in both health and healthcare in their community, someone else will step in.

Folks in tech would think of this as the difference between a “product” strategy (old school) and a “platform” strategy (new school). Think of this as the difference from cell phones (Blackberry) to smartphones (iPhone and Android devices). One was a product, the other was a platform. Common platforms that we’re all familiar with such as Facebook, Amazon, Google, Apple and even Starbucks have always 1) started with a very small niche, 2) built an audience, 3) built trust and 4) then added other offerings on top of that platform. By now there is no need for a “spoiler alert.” We all know that this strategy works and these companies have created a breathtaking amount of value. The comforting news for hospitals and healthcare delivery systems is that many have already completed the first three steps and have many of the building blocks they need to leverage a “platform” as a business strategy. The presentations at the JP Morgan Healthcare Conference made it clear that most are now actually taking that fourth step to separate themselves from the pack.

There is enormous upside to those who understand this pivot and take advantage of this change in the market. Dennis Dahlen, CFO of Mayo Clinic, shared his perspective on this: “Thinking differently in the future is essential. In many ways, at Mayo, we are already operating as a platform today, but we have to continue to leverage this approach to uncover additional ways that we can be a hub for both health and healthcare in our community.” Mayo’s platform includes leveraging research, big data, expert clinic insights and artificial intelligence to create new value for Mayo’s clinical practice as well as new opportunities for Mayo’s partners.

To be clear, the mental shift here is massive. It’s the difference of being on defense (where most healthcare providers are) to be being on offense (which is where they know they need to be). Executive teams have focused their time, energy and resources on driving and supporting inpatient admissions via a traditional bricks and mortar presence coupled with the acquisition of physician practices. The difficulty of thinking through what it means to truly be “asset light” and taking a different approach shouldn’t be underestimated. The good news is that the recent financial results of many health systems have improved, providing a little breathing room for investments to enable this shift in strategy. Those who don’t may fall way behind.

A New Way of Thinking — What it Means to be a Hub

Being a hub is essentially bringing together people with common interests to spark innovation and facilitate work getting done more efficiently. Examples include Silicon Valley as a “tech hub,” Los Angeles as an “entertainment hub,” New York as a “financial hub,” Washington, D.C. as a “hub for politics” and how essentially every college town is or can become a “research hub.”

Given that hospitals and health systems are the largest employers in their community, they are already set up to become a hub. In the past, they leveraged that position to simply care for the sick. Increasingly in the future, these organizations will be health and healthcare hubs for innovation and building new companies, for bringing the community together to tackle issues like hunger and homelessness, for education and training, for research and development partnerships, for coordinated, compassionate and longitudinal care delivery for treatment, for support groups for specific chronic conditions, for digital and virtual care, and for thoughtful and effective support for mental and behavioral health. Changes in the care delivery market over the last 10 years have put the right building blocks in place to make this happen.

Hiding in Plain Sight — The Single Biggest Change in Healthcare We May Ever See Has Already Happened

Taking advantage of becoming a hub and leveraging the strategic concept of being a platform requires new thinking, new structures and new skill sets. The great news for healthcare providers is they have already made the toughest move of all in order to set this in motion.

Over the last decade, there has been a massive level of consolidation with hundreds of hospitals and thousands of physician practices being acquired every year. While more mergers and acquisitions will still happen, this stunning and fundamental restructuring of healthcare delivery has taken place and there is no turning back. This is likely the single biggest shift relative to how healthcare is structured in this country that will take place during our lifetime, and it barely gets mentioned. The strategy many were chasing was primarily being driven by a “heads in beds” pay-off that was both based on offense (“an easier way to grow”) and defense (“we better buy them before someone else does”). That said, as this consolidation happened most healthcare delivery systems were really just an amalgamation of stand-alone hospitals set up as a holding company that provided no real leverage other than more top-line revenue.

During the JP Morgan Healthcare Conference, it was clear that most have made the shift from a holding company into a single operating entity. Chicago-based Northwestern Medicine shared a very refined playbook for quickly bringing acquisitions onto their “platform,” and the results are pretty stunning as they have transformed from a $1 billion academic medical center into a $5 billion regional healthcare hub in a handful of years.

And over the last few years, these organizations have gotten super serious about making the toughest decisions right away. The mega-merger of Advocate Health and Aurora Health, the largest healthcare delivery systems in Illinois and Wisconsin respectively, was accompanied by a gutsy decision to fast-track the implementation of Epic at Advocate to get the leverage of a single EHR platform across the system. While many focus on the cost of the transition and the shortcomings of some of the applications, what gets missed is the enormous long-term leverage this provides regarding communication, integration, continuity of care and, of course, access to data and the potential to improve clinical and financial performance. This creates a “platform-like” experience for both employees and customers. 

So, the twist in the story is that the pay-off for consolidation will likely be very different and perhaps much better than many had originally intended. They have the building blocks in place to be a health and healthcare platform for their community. But now they need to figure out how to truly take advantage of it.

Your Action Plan — 6 Ideas from 25 Healthcare Delivery Systems on How to Leverage Your “Platform”

During their presentations the 25 non-profit provider organizations opened up their playbooks on how others can leverage their platforms and the idea of becoming the hub for health and healthcare in their respective communities. Here is what they shared.

1. Create the Digital Front Door — or Someone Else Will

The big shift in play right now is the moving away from traditional reliance on transactional face-to-face interactions with individual providers. Building relationships and trust is something that has been a core competency and core strategic asset for hospitals in the past. In the future, this simply won’t be possible without leveraging digital platforms as we do in every other aspect of our lives today. As Stephen Klasko, MD, CEO of Philadelphia-based Jefferson Health, shared, the real strategy will be to deliver “health and healthcare with no address.”

Many provider organizations are moving aggressively to create digital front doors. Kaiser Permanente delivered 77 million virtual visits last year. Intermountain introduced a virtual hospital that provides over 40 services and has delivered over 500,000 interactions. Nearly every health system leverages MyChart or a similar personal health record platform. There is an enormous amount of risk for hospitals and health systems that don’t take action here, as traditional healthcare providers will be competing with more mainstream and polished consumer brands for the relationships and trust of the folks in their community.

As the team from Spectrum Health shared, “87 percent of Americans measure all brands against a select few — think Amazon, Netflix and Starbucks.” Google, Apple and Facebook as well as Walgreens or CVS are all going after this “digital handshake,” and are big threats to healthcare providers. There is no question that some of these organizations will be “frenemies,” where they are both competing and collaborating. Healthcare organizations will need to approach any partnerships mindful of that risk.

2. Drive Affordability and Reduce Cost — or Risk Being the Problem

As the burden of the cost of care increasingly shifts to the patient’s wallet, healthcare providers will need to play in driving affordability. Coupled with the recent federal requirement to post prices online, there is a great deal of visibility around the price of care, even if the numbers are way off the mark. Understanding and reducing the total cost of care is now viewed as a requirement. As legacy cost accounting applications relied on charges as a proxy for cost and were limited to the acute care setting, most provider organizations have or are now in the process of deploying advanced cost accounting applications with time-driven and activity-based costing capabilities including a number that presented during the conference, such as Advocate Aurora Health, Bon Secours Mercy, Boston Children’s Hospital, Hospital for Special Surgery, Intermountain Healthcare, Northwestern Medicine, Novant Health, Spectrum Health and Wellforce.

This was one of the hottest topics during the conference, and there was significant buzz regarding having a single source of truth for the cost of care across the continuum. Vinny Tammaro, CFO of Yale New Haven Health, commented, “We need to align with the evolution of consumerism and help drive affordability in healthcare. How we leverage data is mission critical to making this concept a reality. Bringing clinical and financial data together provides us with a source of truth to help both reduce the cost of care as well as reallocate our finite resources to high impact initiatives in our community.” Organizations like Intermountain Healthcare, which implemented a 2.7 percent price reduction in exchange pricing, are taking the next step in translating cost reduction into lower prices for consumers. And now healthcare systems are starting to work together to create additional leverage via Civica Rx, which now includes 750 hospitals joining forces to help lower the cost of generic drugs.

3. Tackle Social Determinants of Health — or You Won’t Be the Hub for Health in Your Community

It is always less expensive to prevent a problem than it is to fix it. The good news is that the economic incentives for hospitals and healthcare delivery systems to both think and act that way are beginning to line up. They are certainly there already for providers that are also health plans such Intermountain, Kaiser Permanente, Providence St. Joseph Health, Spectrum Health and UPMC. They are also in place for providers that have aggressively taken on population-based risk contracts such as Advocate Aurora Health. With that said, it feels like every health system is starting to lean in here — and they should.

Being the central community hub for these issues makes a ton of sense. The way that Kaiser framed it is that while they have 12 million members, there are 68 million people in the communities they serve. Taking that broader lens both allows them to make a bigger impact but also broaden their market. Many organizations, such as Henry Ford Health System, are taking on hunger via fresh food pharmacies. Geisinger shared how a 2.0 reduction in Hemoglobin A1c reduction leads to a $24,000 cost reduction per participant in their fresh food “farmacy.” So while hospitals are perfectly positioned, have the resources and know it’s the right thing to do, they are now also beginning to understand the business model tied to targeting the social determinants of health. There is also strong strategic rationale associated with taking on a broader role of driving health versus only providing healthcare.

4. Create Partnerships for Healthcare Innovation — or Lose the Upside

Spectrum Health has a $100 million venture fund. Providence St. Joseph’s Health announced a second $150 million venture capital and growth equity fund. Mayo Clinic Ventures has returned over $700 million to their organization. Jefferson Health has a 120-person innovation team focused on digital innovation and the consumer experience, partnering with companies to build solutions. These are all variations on a theme as virtually every organization that presented is leveraging their resources to make a bigger impact and drive additional upside from their platform. “We have close to 900 agreements with over 500 partners,” stated Sanda Fenwick, CEO of Boston Children’s Hospital. “Our strategy is to be a hub for research, innovation and education in order to help evolve how care is delivered. This can only be done by collaborating with others.”

5. Become the Hub for Targeted Services and Chronic Conditions — or They Will Go Elsewhere

Perhaps the best example here is the work of Hospital for Special Surgery, the largest orthopedics shop in the world. It is has become a destination for good reason — fewer complications, fewer infections, a higher discharge rate to home and fewer readmissions. The most compelling data point is that when patients come to HSS for a second opinion, one-third of the time they receive a non-surgical recommendation. The same type of shopping is increasingly going to happen for chronic conditions.

Healthcare delivery systems that take a more holistic yet targeted approach have significant potential. They will need to think more deeply about the end-to-end experience and become immersed within the community outside of the four walls of the hospital. Other players in the community, such as CVS Health and Walgreens, would say they have a platform — and they would be right. The platform that healthcare providers have built and are building will absolutely be competing against other care delivery platforms.

6. Leverage Applied Analytics — or You’ll Lose Your Way

In order to enable everything listed above, the lifeline for every health and healthcare hub will be actionable data. Applied analytics is a boring term that is actually gaining traction and starting to dislodge buzzwords like big data, machine learning and artificial intelligence relative to its importance to healthcare providers.

Similar to how analytics are being used in a practical way in baseball to determine where to throw a pitch to a batter or position players in the field, healthcare providers are pushing for practical data sets presented in a simple, actionable framework. That may seem obvious, but it is simply not present in many healthcare organizations that have been focused on building data warehouse empires without doors to let anyone in. Many organizations, such as Advocate Aurora Health, Bon Secours Mercy and Spectrum Health, have deployed more dynamic business decision support solutions to access better insight into performance and care variation. This allows them to assess opportunities to reallocate resources to invest in more productive ways to leverage their platform.

While leveraging a platform as a business strategy is new to healthcare providers, the good news is that building blocks are already in place. It’s time to leverage that platform to drive better outcomes and more affordable care in the community. And now is the time to get started.

 

48% of CFOs don’t have a succession plan

https://www.beckershospitalreview.com/finance/48-of-cfos-don-t-have-a-succession-plan.html?origin=cfoe&utm_source=cfoe

OR Efficiencies

Though CFOs are usually known for their careful attention to detail, 48 percent of them  have not identified a successor, according to a study in The Wall Street Journal.

Robert Half Management Resources surveyed 1,100 CFOs in  various industries. Of those respondents who have not created a succession plan, nearly two-thirds said they had no plan because they did not intend  to step down soon. They also cited the need to focus on other priorities and the absence of qualified candidates.

Jenna Fisher,  head of the global corporate sector at executive search firm Russell Reynolds Associates, said  the percentage of CFOs with succession plans represents a dramatic improvement from five years ago, when she estimated less than 10 percent of her clients had CFO succession plans.

“The role of CFO has become more salient,” Ms. Fisher said.

 

 

 

Scaling the “specialty care business” across the health system

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Over the past month we’ve been sharing our framework for helping health systems rethink their approach to investment in delivery assets, built around a functional view of the enterprise. We’ve encouraged providers to take a consumer-oriented approach to planning, starting by asking what consumers need and working backward to what services, programs and facilities are required to meet those needs. That led us to break the enterprise into component parts that perform different “jobs” for the people they serve. We think of each of those parts as a “business”, located at either the market, regional or national level depending on where the best returns to scale are found (and on the geographic scale of any particular system). So far we have described how a consumer-oriented health system should be organized at the market level, with expanded access and senior-care businesses providing lower-cost care in an outpatient setting for many services that were previously delivered in an acute-care hospital, and how the profile of the local hospital needs to change in response.

This week we shift our attention to health system services that can be scaled at the regional level, starting with specialty care, the medical and surgical specialty services that comprise many hospital service lines. Today nearly every community hospital is a “jack of all trades” with the same portfolio of services: obstetrics, cardiac care, orthopedics, and cancer care are the marquee service lines. Incentives, both market-based and internal to the health system, have encouraged this. Hospitals build services aimed at capturing the same handful of profitable (and usually procedurally-focused) DRGs. And many health systems reward local hospital leaders on the profitability of the hospitals they run, creating no incentive for those leaders to shift profitable volume to other hospitals in the system, and often resulting in redundant, inefficient, and sub-scale specialty care services.
 
We believe many specialty care services could be improved by moving care “up and out” of the community hospital. As we described before, a large portion of routine surgical care could be moved “out” of the hospital to lower-cost outpatient centers, supported by short-stay capabilities and expanded home health. At the same time, more complex specialty care should move “up” in the health system and be concentrated in regional “centers of excellence”, where expensive talent and expertise can be scaled, and systems can aggregate the volume needed for highly-efficient operations that lower the cost of delivering complex specialty care.

While the center of excellence model is not new, it’s often little more than a marketing slogan. Few systems have deployed it for operational efficiency, redirecting specialty care patients to high-volume-centers—and shuttering their low-volume or sub-standard local programs. Even fewer have invested in the infrastructure needed to effectively coordinate care between a regional center and local providers: telemedicine for effective provider collaboration and consultation, effective information sharing, and strong local care management support. One question inevitably arises: will patients travel for care? As individuals bear a larger portion of the cost of care, they do seem to be willing to travel longer distances in pursuit of better value. Understanding how the consumer “travel radius” changes with higher levels of financial accountability, and how that radius differs among services, ought to rank high on the priority list of systems looking to determine what business to consolidate at regional centers.

 

 

Troubled Tennessee Hospital Chain Says It’s On The Way Out Of Rural Areas

https://www.nashvillepublicradio.org/post/troubled-tennessee-hospital-chain-says-it-s-way-out-rural-areas#stream/0

Community Health Systems now owns 118 hospitals in 20 states while divesting facilities in small towns, where hospitals of all kinds have struggled in recent years.

Community Health Systems now owns 118 hospitals in 20 states while divesting facilities in small towns, where hospitals of all kinds have struggled in recent years.

The selling spree is primarily meant to pay down the company’s outsized debt load left over from when Community Health was growing as fast as it could. But the hospital chain was also strategically pulling out of small towns, including several in Tennessee.

CEO Wayne Smith told investors gathered at this week’s annual J.P. Morgan Healthcare Conference in San Francisco that it’s almost entirely left communities with fewer than 50,000 people — once its calling card compared to competing hospital chains.

“So our markets look a lot more like HCA and Universal and Tenet than they did in the past,” Smith said late Wednesday during a company presentation. “We’re no longer a non-urban, or for some of you all a rural, hospital company.”

As it’s repositioned, Community Health’s stock price tumbled to nearly two dollars a share, stoking concern of whether the company could even recover.

The hospital chain has continued to see shrinking admissions and ER visits, but executives assured investors this week they’ve regained their footing.

“Those divestitures have helped us in terms of paying down our debt, improving our margins, improving our cash flow, which you will see more of in 2019,” Smith said.

 

 

 

Healthcare Triage: Rural Hospital Closures Impact the Health of a Lot of People

https://theincidentaleconomist.com/wordpress/healthcare-triage-rural-hospital-closures-impact-the-health-of-a-lot-of-people/

Image result for Healthcare Triage: Rural Hospital Closures Impact the Health of a Lot of People

Rural hospitals in the United States are having an increasingly hard time staying in business. Which is not great for the health of people who live in areas that no longer have a hospital.

This episode was adapted from a column Austin wrote for The Upshot. Links to sources can be found there.

 

 

 

 

As Hospitals Post Sticker Prices Online, Most Patients Will Remain Befuddled

https://khn.org/news/as-hospitals-post-sticker-prices-online-most-patients-will-remain-befuddled/amp/

As of Jan. 1, in the name of transparency, the Trump administration required that all hospitals post their list prices online. But what is popping up on medical center websites is a dog’s breakfast of medical codes, abbreviations and dollar signs — in little discernible order — that may initially serve to confuse more than illuminate.

Anyone who has ever tried to find out in advance how much a hospital test, procedure or stay will cost knows the frustration: “Nope, can’t tell you” or “It depends” are common replies from insurers and medical centers.

While more information is always welcome, the new data will fall short of providing most consumers with usable insight.

That’s because the price lists displayed this week, called chargemasters, are massive compendiums of the prices set by each hospital for every service or drug a patient might encounter. To figure out what, for example, a trip to the emergency room might cost, a patient would have to locate and piece together the price for each component of their visit — the particular blood tests, the particular medicines dispensed, the facility fee and the physician’s charge, and more.

“I don’t think it’s very helpful,” said Gerard Anderson, director of the Johns Hopkins Center for Hospital Finance and Management. “There are about 30,000 different items on a chargemaster file. As a patient, you don’t know which ones you will use.”

And there’s this: Other than the uninsured and people who are out-of-network, few actually pay full charges.

The requirement to post charges online in a machine-readable format, such as a Microsoft Excel file, came in a 2018 guidance from the Trump administration that builds on rules in the Affordable Care Act. Hospitals have some leeway in deciding how to present the information — and currently there is no penalty for failing to post.

“This is a small step” toward price transparency amid other ongoing efforts, Centers for Medicare & Medicaid Services Administrator Seema Verma said in a speech in July.

But finding the chargemaster information on a hospital’s website takes diligence. Patients can try typing the hospital’s name into a search engine, along with the keywords “billing” or “chargemaster.” That might produce a link.

Even when consumers do locate the lists, they might be stymied by seemingly incomprehensible abbreviations.

The University of California San Francisco Medical Center’s chargemaster, for example, includes a $378 charge for “Arthrocentesis Aspir&/Inj Small Jt/Bursa w/o Us,” which is basically draining fluid from the knee.

At Sentara in Hampton Roads, Va., there’s a $307 charge for something described as a LAY CLOS HND/FT=<2.5CM. What? Turns out that is the charge for a small suture in surgery.

Which services, treatments, drugs or procedures a patient will face in a hospital stay is often unknowable. And the charge listed is just one component of a total bill. Put simply, an MRI scan of the abdomen has related costs, such as the charge for the radiologist who reads the exam.

Even something as seemingly straightforward as an uncomplicated childbirth can’t easily be calculated by looking at the list.

Comparisons between hospitals for the same care can also be difficult.

An uncomplicated vaginal delivery charge at the Cleveland Clinic’s main campus is $3,466.

Looking for that same information on the Minnesota Mayo Clinic’s online chargemaster page shows two listings, one for $3,030, described as “labor and delivery level 1 short” and the other for $5,236, described as “labor and delivery level 2 long.” But, what’s a short labor? What’s a long one? How is a patient who didn’t go to med school supposed to know the difference?

Also, those are just the charges for the actual delivery. There are also per-day room charges for mom and the newborn, not to mention additional charges for medications, physicians and other treatments.

To get at the total estimated charge, California requires hospitals to report charges for a select number of such “bundles” of care, called “diagnosis-related groups,” or DRGs, in Medicare jargon.

At the University of California-San Francisco’s hospital, for example, there are two chargemaster line items for vaginal childbirth: One is $5,497 and the other is $12,632. But there’s no indication how these differ. Consumers might then turn to the “bundled” cost based on those DRGs, where the ancillary costs are included. That lists the total charge for an uncomplicated childbirth at an astounding $53,184.

A UCSF spokeswoman said no officials were available to comment on this figure.

Though chargemaster rates are quite different from the lower, negotiated rates that insurers pay, they do become the basis for what patients pay who are without insurance or who are treated at hospitals outside their insurer’s network. Out-of-network patients are often surprised when they get what are called “balance bills” for the difference between what their insurer pays toward their care and those full charges.

Still, even knowing chargemaster rates “would be entirely unhelpful” in fighting a high balance bill, said Barak Richman, a law professor at Duke University who has written extensively about balance bills and hospital charges.

“Chargemasters are enormous spreadsheets with incredibly complicated codes that no one short of a billing expert would be able to make sense of,” he said.

Nevertheless, some experts say that merely making the charges public shines a light on the often very high — and widely varying — prices set by facilities.

Even if those charges are only “what hospitals would like to receive,” posting them publicly could make hospitals “totally embarrassed by the prices,” said Anderson at Hopkins.

Billing expert George Nation, a finance professor at Lehigh University, said that rather than posting chargemaster lists, hospitals should be required to provide the average prices they accept from insurers. Hospitals generally would oppose that, saying negotiated rates are a trade secret.

It’s unclear that the lists will have much impact. “It’s been the norm here in California for over a decade,” said Jan Emerson-Shea, vice president of external affairs for the California Hospital Association. Even so, “from a practical standpoint, I’m not sure how useful this information is,” she said. “What an individual pays to [the] hospital is going to be based on what their insurer covers.”

That could include such things as the annual deductible, whether the facility or physicians involved in the care are in-network and other details.

“The hospital piece is just a small piece,” said Ariel Levin, senior associate director for state issues at the American Hospital Association.

Still, “the biggest concern is it falls short of that end goal because it really doesn’t help consumers understand what they are going to be liable for,” she said.