Tag Archives: Hospital

California Hospital Giant Sutter Health Faces Heavy Backlash On Prices

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The state’s top cop is suing Sutter, accusing one of the nation’s biggest health systems of systematically overcharging patients and illegally driving out competition.

Cooking dinner one night in March, Mark Frizzell sliced his pinkie finger while peeling a butternut squash and couldn’t stop the bleeding.

The 51-year-old businessman headed to the emergency room at Sutter Health’s California Pacific Medical Center in San Francisco. Sutter charged $1,555 for the 10 minutes it treated him, including $55 for a gel bandage and $487 for a tetanus shot.

“It was ridiculous,” he said. “Health insurance costs are through the roof because of things like this.”

California Attorney General Xavier Becerra couldn’t agree more. The state’s top cop is suing Sutter, accusing one of the nation’s biggest health systems of systematically overcharging patients and illegally driving out competition in Northern California.

For years, economists and researchers have warned of the dangers posed by large health systems across the country that are gobbling up hospitals, surgery centers and physicians’ offices — enabling them to limit competition and hike prices.

Becerra’s suit amounts to a giant test case with the potential for national repercussions. If California prevails and is able to tame prices at Northern California’s most powerful, dominant health system, regulators and politicians in other states are likely to follow.

“A major court ruling in California could be a deterrent to other hospital systems,” said Ge Bai, an assistant professor at Johns Hopkins University who has researched hospital prices nationwide. “We’re getting to a tipping point where the nation cannot afford these out-of-control prices.”

Reflecting that sense of public desperation, Sutter faces two other major suits — from employers and consumers — which are wending their way through the courts, both alleging anticompetitive conduct and inflated pricing. Meanwhile, California lawmakers are considering a bill that would ban some contracting practices used by large health systems to corner markets.

Sutter, a nonprofit chain, is pushing back hard, denying anticompetitive behavior and accusing Becerra in court papers of a “sweeping and unprecedented effort to intrude into private contracting.” Recognizing the broader implications of the suit, both the American Hospital Association and its California counterpart asked to file amicus briefs in support of Sutter.

In his 49-page complaint, Becerra cited a recent study finding that, on average, an inpatient procedure in Northern California costs 70 percent more than one in Southern California. He said there was no justification for that difference and stopped just short of dropping an expletive to make his point.

“This is a big ‘F’ deal,” Becerra declared at his March 30 news conference to unveil the lawsuit. In an interview last week, he said, “We don’t believe it’s fair to allow consolidation to end up artificially driving up prices. … This anticompetitive behavior is not only bad for consumers, it’s bad for the state and for businesses.”

To lessen Sutter’s market power, the state’s lawsuit seeks to force Sutter to negotiate reimbursements separately for each of its hospitals — precluding an “all or nothing” approach — and to bar Sutter employees from sharing the details of those negotiations across its facilities. Becerra said Sutter has required insurers and employers to contract with its facilities systemwide or face “excessively high out-of-network rates.”

Heft In The Marketplace

Overall, Sutter has 24 hospitals, 36 surgery centers and more than 5,500 physicians in its network. The system boasts more than $12 billion in annual revenue and posted net income of $958 million last year.

The company’s heft in the marketplace is one reason why Northern California is the most expensive place in the country to have a baby, according to a 2016 report. A cesarean delivery in Sacramento, where Sutter is based, cost $27,067, nearly double what it costs in Los Angeles and New York City.

For years, doctors and consumers have also accused Sutter of cutting hospital beds and critical services in rural communities to maximize revenue. “Patients are the ones getting hurt,” said Dr. Greg Duncan, an orthopedic surgeon and former board member at Sutter Coast Hospital in Crescent City, Calif.

Sutter says patients across Northern California have plenty of providers to choose from and that it has held its average rate increases to health plans to less than 3 percent annually since 2012. It also says it does not require all facilities to be included in every contract — that insurers have excluded parts of its system from their networks.

As for emergency room patients like Frizzell, Sutter says its charges reflect the cost of maintaining services round-the-clock and that for some patients urgent-care centers are a less costly option.

“The California Attorney General’s lawsuit gets the facts wrong,” Sutter said in a statement. “Our integrated network of high-quality doctors and care centers aims to provide better, more efficient care — and has proven to help lower costs.”

Regulators in other states also have sought to block deals they view as potentially harmful.

In North Carolina, for instance, the state’s attorney general and treasurer both expressed concerns about a proposed merger between the University of North Carolina Health Care system and Charlotte-based Atrium Health. The two dropped their bid in March. The combined system would have had roughly $14 billion in revenue and more than 50 hospitals.

Last year, in Illinois, state and federal officials persuaded a judge to block the merger between Advocate Health Care and NorthShore University HealthSystem. The Federal Trade Commission said the new entity would have had 60 percent market share in Chicago’s northern suburbs. Still, Advocate won approval for a new deal with Wisconsin’s Aurora Health Care last month, creating a system with $11 billion in annual revenue.

Antitrust experts say states can deliver a meaningful counterpunch to health care monopolies, but they warn that these cases aren’t easy to win and it could be too little, too late in some markets.

“How do you unscramble the egg?” said Zack Cooper, an assistant professor of economics and health policy at Yale University. “There aren’t a lot of great solutions.”

A Seven-Year Investigation

California authorities took their time sounding the alarm over Sutter — a fact Sutter is now using against the state in court.

The state attorney general’s office, under the leadership of Democrat Kamala Harris, now a U.S. senator, started investigating Sutter seven years ago with a 2011 subpoena, court documents show. Sutter said the investigation appeared to go dormant in March 2015, just as Harris began ramping up her Senate campaign.

Becerra, a Democrat and former member of Congress, was appointed to replace Harris last year, took over the investigation and sued Sutter on March 29. His aggressive action comes as he prepares for a June 5 primary against three opponents.

Sutter faces a separate class-action suit in San Francisco state court, spearheaded by a health plan covering unionized grocery workers and representing more than 2,000 employer-funded health plans. The plaintiffs are seeking to recoup $700 million for alleged overcharges plus damages of $1.4 billion if Sutter is found liable for antitrust violations. Sutter also has been sued in federal court by five consumers who blame the health system for inflating their insurance premiums and copays. The plaintiffs are seeking class-action status.

San Francisco County Superior Court Judge Curtis E.A. Karnow granted Becerra’s request to consolidate his case with the grocery workers’ suit, which is slated for trial in June 2019.

The judge sanctioned Sutter in November after finding that Sutter was “grossly reckless” in intentionally destroying 192 boxes of evidence that were relevant to antitrust issues. As a result, Karnow said, he will consider issuing jury instructions that are adverse to Sutter.

In a note to employees, Sutter chief executive Sarah Krevans said she deeply regretted the situation but “mistakes do happen.”

In an April 27 court filing, Sutter’s lawyers criticized the state for piggybacking onto the grocery workers’ case. “The government sat on its hands for seven years, exposing the public to the alleged anticompetitive conduct. … Rather than driving the agenda, the Attorney General seeks to ride coattails.”

Outside court, California legislators are taking aim at “all or nothing” contracting terms used by Sutter and other hospital chains. The proposed law stalled last year amid opposition from the hospital industry. But consumer and labor groups are seeking to revive it this year.

In the meantime, Frizzell said he will probably wind up at one of Sutter’s hospitals again despite his disgust over his ER bill. “Most of the hospitals here are Sutter,” he said. “It’s difficult to avoid them.”

When M&As Go Wrong

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Considering a merger? Make sure the prospective partner’s financial liabilities and operational challenges are apparent by the time the due diligence phase is completed.

When providers identify a potential M&A candidate and perform due diligence, there are no guarantees that a formal agreement will be concluded. In fact, there are a number of financial and operational ways that a potential deal can be derailed.

According to the 2018 HealthLeaders Media Mergers, Acquisitions, and Partnerships Survey, respondents report that the top three financial reasons an M&A involving their organization was abandoned before or during the due diligence phase are concerns about assumption of liabilities (21%), costs to support the transaction were too high (19%), and concerns about price (19%).

Note that the full extent of a prospective organization’s financial liabilities may not be apparent until the due diligence phase is completed, which may explain why this aspect plays a major role as a deal breaker.

Operational challenges

Respondents say that the top three operational reasons that an M&A involving their organization was abandoned before or during the due diligence phase are incompatible cultures (30%), concerns about governance (24%), and concerns about the operational transition plan (21%).

Interestingly, based on net patient revenue, a greater share of large organizations (47%) than small (25%) and medium (17%) organizations mention incompatible cultures, an indication of some of the challenges providers face when integrating large organizations with disparate cultures.

Pamela Stoyanoff, MBA, CPA, FACHE, executive vice president, chief operating officer at Methodist Health System, a Dallas-based nonprofit integrated healthcare network with 10 hospitals and 28 family health centers, says that organizational culture exists both at the senior leadership level as well as throughout an organization, and problems can arise because sometimes they can be different.

“You have two senior leadership teams sitting in a room trying to agree on deal points and reach a philosophical agreement. Oftentimes, you have cultural compatibility at the senior level (those who are consummating the deal) but find that culture throughout the remaining levels of the organization is not as conducive to a merger. That is something you don’t necessarily see until later, after the deal is done,” she says.

 

Children’s Hospital Oakland doctors revolt against UCSF partnership

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Children’s Hospital Oakland doctors revolt against UCSF partnership

Children's Hospital Oakland doctors are photographed in front of the hospital in Oakland, Calif., on Wednesday, May 2, 2018. The doctors are upset over the integration of UCSF and Children's Hospital Oakland. They believe UCSF is receiving preferential treatment over the Oakland facility. (Doug Duran/Bay Area News Group)

Doctors in Oakland are revolting against the much-hyped partnership that combined UCSF Benioff Children’s Hospital and Children’s Hospital Oakland, saying the four-year-old deal is turning the world-renowned East Bay hospital into a second-class facility to its San Francisco sibling.

Doctors are fleeing the East Bay hospital, claiming UCSF has prioritized San Francisco, locating most of its specialists and leadership at its new Mission Bay campus over the Oakland facility.

Fewer kids are being hospitalized in Oakland, down about 11 percent since the 2014 merger, according to doctors. Currently, no new patients can get routine psychiatric appointments or can see a lung specialist in Oakland, a community with the highest rate of asthma in Alameda County, the doctors say.

The doctors say a new 89,000-square-foot outpatient clinic opening this month predated the affiliation and hides the problems.“There’s a lot of anger. The anger is palpable,” said Dr. Stephen Long, a pediatric anesthesiologist who has worked at the Oakland hospital for four years and has represented his colleagues in communication with UCSF executives. “At the time (of the affiliation), it was sold to us in a different way. We were told we’d be stronger not weaker. They sold it to us like a healthy marriage, but where it is now feels like a Cinderella adoption.”

Hospital officials dispute the claim saying the Oakland facility is a valued partner and the deal has improved the care and finances.

“There’s a strong commitment in the entire organization to keep a strong presence in the East Bay,” said David Durand, Oakland’s chief medical officer. “We’ve been here for 100 years and we anticipate being here another 100 years.”

Durand said hospital care is shifting to outpatient care rather than treating people inside a hospital, and the Oakland facility saw a 12 percent increase in outpatient care from two years ago, treating about 220,000 kids last year and sending them home.

The new outpatient clinic will increase capacity to 99 exam and treatment rooms, he said, adding that surgical services in the East Bay increased 7 percent over the last two years.

“If UCSF truly values outpatient care, then why are there no (lung specialist) or psychiatry appointments?” Long said, speaking of two departments that have been integrated, others are in the works. “Why has it become so difficult to retain doctors in Oakland or recruit new ones to serve our community?”

Durand said there’s a national shortage in pediatric lung specialists and far fewer mental health providers than patients need in any community. The hospital has about 60 mental health providers, and last year Oakland handled about 60,000 outpatient mental health visits, he said, but there’s always more need.

He added that the Oakland doctor uprising may also be tied to contract negotiations.

Kristof Stremikis, director of market analysis and insight for the California Health Care Foundation, said the UCSF integration is not unique.

“It’s something happening not only across Northern California, but across the state and country,” he said.

Stremikis said the consolidation can create more efficiency and allow the joint venture to command a market and leverage that into higher prices.

The long simmering unrest reached a head on March 6 when Oakland doctors sent a letter, signed by 120 physicians, to UCSF Chancellor Sam Hawgood, addressing their concerns.

The doctors declared “no confidence” in the integration plan and expressed concerns the changes would increase a “health disparity.”

UC

Hawgood wrote back, saying change can be “difficult,” but that the Oakland hospital plans to improve its finances, the facility and the care to the area’s most needy children.

“Our combined mission of service to all children is not — and will not — be compromised,” Hawgood wrote.

Juan Luis Chavez was frustrated that his 2-year-old son Juan Pablo needed an emergency to get required surgery for his lung condition because he had to wait four months to see a lung specialist in Oakland.

The boy, diagnosed with a lung disease called bronchopulmonary dysplasia, was scheduled for surgery in March to close a hole that had developed between his stomach and his skin, but his surgery was canceled when there were no available appointments, his father said.

“We were concerned,” Chavez said. “We had planned for it for quite awhile … when he leaked it was messing up his skin pretty badly.”

Meanwhile, continued meetings between UCSF management and Oakland doctors have not assuaged concerns.

Dr. Julie Saba, a senior cancer scientist at the Research Institute, said the research arm of the Oakland facility has suffered “catastrophically” since the transition. She said so many researchers have left that there is a 30 percent occupancy in available research space, which has led to a major funding drop.

“It has devastated our ranks,” she said. “Our scientific environment is at a catastrophic level.”

She’s worried with insured patients funneled to San Francisco and poorer patients seen at Oakland, the East Bay facility will suffer financially, which will impact the type of care those kids get in Oakland.

“I don’t want to put any intention behind it, all I know is without a significant change with the current plans, this will end up being a second class hospital with poor physician retention and no paying patients,” Saba said. “Like something out of the 1950s.”

 

 

 

Geisinger officials explain the business case for making DNA sequencing ‘routine’

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Geisinger Health System faciliity

It wasn’t that long ago that the cost of DNA sequencing was measured in the millions of dollars.

Even a few years ago, when the cost fell closer to a few thousand dollars, it was largely used for research purposes or reactively as a tool for patients who’d already fallen ill.

Now, Geisinger President and CEO David Feinberg, M.D., said the time and cost is finally right to make whole exome sequencing a “routine” part of screening for patient diseases.

“We didn’t want to wait,” Feinberg said, adding the sentiment was shared by doctors.

On Sunday, he announced the company would expand the testing, starting with a pilot of about 1,000 patients within the next six months before scaling the service to all patients in its facilities across Pennsylvania and southern New Jersey. “We just thought there would be too many lives lost if we waited until we really wrapped it all up in a neat bow in a research capacity.”

And, Feinberg said in a call with reporters on Monday, Geisinger will pay for the tests.

“We believe, but we have not yet proven, that this is cost-effective meaning the cost of the test is going to be offset by catching people earlier in their disease course or eliminating a disease,” Feinberg said.

Officials estimate the cost per patient per test are between $300 and $500.

About half of the $7.5 billion health system’s business involves its integrated care model involving its own doctors and insurance, but officials said it will cover the cost of the test no matter who insures the patient.

In all, Geisinger said it has set aside a few million dollars from both donors and its insurance arm to scale the use of the tests.

“Our gut feeling is that we’ll be able to show that it’s sustainable and actually a decrease in costs overall,” Feinberg said.

So far, in a research collaboration with Regeneron Pharmaceuticals that involved amassing data from 200,000 people, Feinberg said the organization found it could identify medically actionable findings in the genome before patients became sick in about 3.5% of patients. Officials said they eventually expect as many as 10% to 15% of patients might benefit from testing.

Just how will it actually work? Currently, when a patient goes into their doctor’s office and their cholesterol is checked, they are asked if they’ve had a colonoscopy or mammogram.

“We just want to add to that list: ‘Well, I think it makes sense to do whole exome sequencing on you so we can understand your genes and prevent something,” Feinberg said.

The cost of the wraparound services to this sequencing such as the cost of all the genetic counseling, the analytics, the return of results to patients is expected to be covered by insurance coverage in the same way as if a patient who has a positive test finding and requires a follow-up visit with a doctor, he said.

“We think we’ve worked out the process so that when those mutations do become discovered when we see them in our patients and population, we have a process of getting that information back to the doctor and back to the patient and really sophisticated ways of doing genetic counseling, so that we can scale it,” Feinberg said.

 

 

 

It’s not just physicians and nurses, non-clinical staff are in short supply for medical practices too

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More than 60 percent of respondents say their organizations have a hard time recruiting non-clinical staff, MGMA says.

Nursing and physician shortages aren’t the only staff challenges providers are facing. According to a new STAT poll from the Medical Group Management Association, a majority of healthcare organization leaders said their group can’t find enough qualified applicants for non-clinical positions either.

The poll was conducted on May 1, 2018 with 1,299 applicable responses.

More than 60 percent of respondents said their organizations had a hard time recruiting non-clinical staff. The reasons include larger organizations offering better pay, low unemployment rates and difficulty recruiting in rural areas. One respondent said “recruiting millennials is a completely different game” and another cited lack of future career advancements in the billing and coding field.

“Lack of medical training in colleges and technical schools and reliance on ‘on the job training’ means less qualified non-clinical applicants,” MGMA said.

Other reasons include competition from other medical groups, hospitals and health systems as well as competitive pay from other industries that trigger turnover.

One-third responded they haven’t experienced this shortage, citing low turnover. Those respondents also said they had increased wages to retain staff, MGMA said.

A past poll has shown this high-turnover is prevalent in front-office staff, which some experts have argued are the face of a practice and the first ones to interact with patients, often setting a tone for the care episode making it a crucial influence of patient satisfaction.

When there is high turnover, new employees are often not as well-versed in office policies and procedures because they likely haven’t been there very long. This can lead to mistakes, inaccuracies and bumpy interactions with patients who expect staff to know operations inside and out. It can also lead to costly errors not just on the part of new employees, but veteran staff who are busy training and juggling multiple tasks at any given moment. The trickle down effect could mean patients wait longer to be seen, appointments go longer and collections and claims may be riddled with mistakes.

Medical group leaders know that it isn’t just doctors and nurses who make their practices successful and run smoothly, so they would be well-advised to treat retention of non-clinical staff with urgency.

Since a third of respondents reported lower turnover after raising wages for non-clinical staff, decision-makers for practices may want to consider researching current competitive rates for these positions and potentially raising wages such that staff would be less inclined to seek higher-paying employment elsewhere.

Practices also might consider how else to boost employee benefits and the workplace environment so that employees experience greater satisfaction. Turnover leads to operational hiccups, less efficient service for patients and lower satisfaction rates.

“While finding qualified candidates is a challenge for medical groups, practice leaders can begin by assessing how they are approaching retention of their best employees and mitigating turnover before it becomes an issue,” MGMA said.

 

Massive UC workers’ strike disrupts dining, classes and medical services

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A massive labor strike across the University of California on Monday forced medical centers to reschedule more than 12,000 surgeries, cancer treatments and appointments, and campuses to cancel some classes and limit dining services.

More than 20,000 members of UC’s largest employee union, the American Federation of State, County and Municipal Employees Local 3299, walked off their jobs on the first day of a three-day strike. They include custodians, gardeners, cooks, truck drivers, lab technicians and nurse aides.

Two altercations involving protesters and people driving near the rallies were reported at UCLA and UC Santa Cruz. At UCLA, police took a man into custody Monday after he drove his vehicle into a crowd, hitting three staff members. They were treated for minor injuries at the scene and released, said Lt. Kevin Kilgore of the UCLA Police Department.

The system’s 10 campuses remained open, largely operating on regular schedules, and protests were peaceful and even festive.

At UCLA, workers marched through campus in green union shirts that said “We run UC” and held signs calling for equality, respect and more staff. Some brought children and walked dogs. Drivers honked in solidarity. Hundreds of workers rallied in front of the Ronald Reagan UCLA Medical Center, taking taco breaks under green balloons.

Oscar Rubio, a UCLA food services worker, said that staffing at some dining hall stations has been cut from five workers to three, leading to more injuries for those who remain.

Top UC officials “make more money … while we suffer,” Rubio said. “We’re not asking to make like they make. We’re asking to support us enough to pay our rent.”

The walkout is expected to widen Tuesday, when two other unions will join sympathy strikes. About 14,000 members of the California Nurses Assn., who work at UC’s medical centers and student health clinics, are set to walk off their jobs, along with 15,000 members of the University Professional & Technical Employees, who include pharmacists, clinical social workers, physical therapists, physician assistants and researchers.

The union and university reached a bargaining impasse last year. Subsequent mediation efforts have failed to produce an agreement on wage increases, healthcare premiums and retirement terms. A recent union study on pay disparities angered workers, said AFSCME spokesman John de los Angeles. The study used UC data, union officials say, to show that starting wages of blacks and Latinos were about 20% lower than white workers in comparable jobs.

“The strong showing sent a clear message to administrators that our workers are very concerned about inequity and they’re willing to be on the picket line until UC comes up with a proposal to address their concerns,” De los Angeles said.

UC officials say they cannot confirm the study’s accuracy. They criticized the union’s demands, which include a multiyear contract with annual pay raises of 6%, no increase in healthcare premiums and continued full pension benefits at the retirement age of 60. The university is offering 3% annually over four years, which officials say is equal to raises given to other UC employees. UC also wants to raise the retirement age to 65 for new employees who choose a pension instead of a 401(k) plan and to raise monthly health insurance premiums by a maximum $25.

“Unfortunately, the only thing union leaders accomplished today is hurt the care we provide our patients and the services for our students,” UC spokeswoman Claire Doan said in an email Monday. “It will do nothing to change UC’s position on AFSCME’s unreasonable demands for excessive raises and benefits.”

At UC’s request, a Sacramento County Superior Court judge issued a temporary restraining order Friday barring certain essential employees, such as pharmacists and respiratory therapists, from participating in order to protect public health and safety. AFSCME also assembled a “patient protection task force” to respond to life-threatening emergencies.

UC’s five medical centers hired contract workers to fill in during the strike and scrambled to reschedule exams and treatments. UC San Francisco rescheduled more than 12,000 appointments for surgeries and treatments, including chemotherapy and radiation.

UC Davis rescheduled several hundred appointments, including more than 100 cancer surgeries and 150 radiology exams. But campus spokeswoman Kimberly Hale said 78% of UC Davis health workers showed up for work. UC San Diego directed emergency room patients to other hospitals.

At UC Santa Cruz, where more than 150 protesters assembled at both entrances Monday, Chancellor George Blumenthal canceled most morning classes. Services were limited for hours at the student health center and some libraries and dining halls. Santa Cruz Metro buses did not enter the campus, dropping riders off at the entrance.

Samuel Walcoff, a sophomore studying computer science, said he had to trek up the hills to get to his afternoon lab and scrounge for food.

“I’m not at all opposed to people protesting and striking, but to have students who are powerless pay the price is extremely unfair,” he said.

At UC Berkeley, however, freshman Ella Smith said she supported the workers even though there was no Peet’s Coffee service inside the Golden Bear Cafe.

“Us not getting our morning coffee does not compare to the injustice UC workers face due to the inequity and inequality in their work experience,” she said in an email.

Some faculty members chose to teach off-campus to avoid crossing the picket line or to use the strike to discuss labor rights.

Paul Spickard, a UC Santa Barbara professor, has invited striking workers to speak Tuesday to the more than 300 students in his modern world history class.

“The UC system has been starved of money by the state,” he said in an email. “We have chosen to pay even lower wages to staff … than to faculty. That is shameful. They are our colleagues and the university would not run without them.”

Reyna and Dennis Avila both work at UCLA Medical Center — he as a hospital assistant, she as a secretary, monitor technician and nurse’s assistant. To juggle their schedules with one car and different work shifts, the couple leave their home in Inglewood at 2:45 a.m. Dennis starts work at 4 a.m. while Reyna sleeps in the car until her shift begins at 7 a.m. He takes the car home, and she returns by bus.

Reyna said her pay increases over two decades at UCLA have not kept up with rising rent.

“It’s gotten harder to make ends meet,” she said.

 

 

 

Building the bench: Hospitals and health systems prepare for boomer retirement wave

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http://www.modernhealthcare.com/article/20180505/NEWS/180509944

 

TriHealth asked its vice president of finance to shadow executives at an affiliated health system.

Sending a senior executive off-site to expand his perspective was part of the Cincinnati-based health system’s leadership institute, which aims to develop the skills of some 1,000 administrative and physician executives and prepare them for new roles.

While many executives move around within their organization’s network, the approach aimed to expose the employee—who had spent much of his career at TriHealth—to another corporate culture and operations.

“We obsess about spending $2 million on a CT scanner, but we can’t find a way to spend $10,000 on investing in our leaders,” said TriHealth CEO Mark Clement, who launched the system’s leadership institute about ½ years ago. “I would argue that investments on improving talent within our organization produce dividends far greater than a piece of equipment.”

For many providers, it’s the end of an era. Hospital, health system and physician group executives are seeking new leaders. They are prompted by an exodus of top healthcare executives, a generational transfer of power highlighted by the departures of senior managers like Dr. Toby Cosgrove, former Cleveland Clinic CEO; Michael Murphy, CEO of Sharp HealthCare who is retiring in 2019; and outgoing Mayo Clinic CEO Dr. John Noseworthy.

Millennials have claimed the largest share of the U.S. workforce, with 35% of workers in 2017, according to the Pew Research Center. As more boomers eye retirement, providers will look to fill a void of institutional knowledge.

Organizations are actively searching for what’s next and who will take them there. Industry consolidation is accelerating that conversation. But there is wide variation on their approach and level of preparation.

There’s a lot at stake, both from a cultural and financial perspective, said Mark Armstrong, vice president of consulting operations at Quorum Health Resources. Good managers translate to engaged employees, he said.

But only about 33% of U.S. workers are actively engaged in their jobs, and a mere 15% of employees strongly agree the leadership of their organization makes them enthusiastic about the future, according to a 2016 poll by Gallup. The firm estimates that disengaged employees cost the U.S. $483 billion to $605 billion each year in lost productivity.

“Even when systems know someone is retiring, it is interesting how few of them still don’t have an assertive plan in place,” Armstrong said. “Any kind of turnover can be disruptive, especially if there has been a trend of declining performance. It’s not unusual for a ratings agency to have heightened concerned when a CEO leaves.”

Almost every system grapples with a huge retention problem, which can make it difficult to plan ahead, said Alan Rolnick, CEO of Employee Engagement and Retention Advisors. The most costly departures are often experienced nurses, he said.

“It’s not just the cost of replacement but the loss of institutional knowledge,” Rolnick said.

TriHealth’s leadership program highlights potential candidates within the system who could fill upcoming vacancies. It puts executives on a multiyear track that assesses potential areas for improvement and exposes them to systemwide quarterly leadership training sessions and other development opportunities. The company’s vice president of finance, Brian Krause, spent a week at BJC HealthCare in St. Louis, relying on connections TriHealth had with the organization. Krause is also planning on spending some time at the University of Pennsylvania Health System, as well as a few other systems.

Since launching the institute—which is conducted with the help of the consultancy Studer Group—TriHealth’s employee engagement improved from the 26th to the 74th percentile, which has helped the organization generate a 3.5% operating margin—one of its highest margins in recent history, Clement said. Its patient experience scores are also up from the 50th percentile to the 75th, helping to drive an increase in admissions, bucking the national trend.

Ideally, promoting from within will ensure cultural and operational continuity and motivate executives, Clement said. “When you bring new senior executives in from other organizations, it can be a threat to the culture,” he said. “For an organization like ours that has invested a lot of money in building a culture based on value, engaging team members and flattening the organization, it’s often best to promote from within.”

Outside perspectives

Ascension has development programs similar to TriHealth, including quarterly leadership meetings and a series of classes. The St. Louis-based health system pairs its administrators with clinician executives in each of its markets. It shuffles executives within its vast hospital network to provide new perspectives and fill roles in regions where it can be hard to recruit qualified employees.

Ascension also recently launched a diversity inclusion campaign that seeks to cultivate minority leaders.

“The types of leaders are changing,” Ascension CEO Anthony Tersigni said at the American College of Healthcare Executives’ 2018 Congress on Healthcare Leadership in March. “The time for guys like me who started as a hospital operator is passing.”

The CEO of a Fortune 100 company told Tersigni several years ago that he spends about 30% of his time on leadership development. Tersigni, who at the time only spent a fraction of that on cultivating executives, said that interaction completely changed his perspective. Ascension has since partnered with a number of universities to build a better leadership curriculum and management pipeline.

“Disruption in the healthcare industry is not going to come from the hospital across the street, it has been coming from outside the industry,” Tersigni said. “We need to understand how they think, how they act, how they make decisions, because it is a lot faster than healthcare can dream of.”

Renton, Wash.-based Providence St. Joseph in 2017 partnered with the University of Great Falls in Montana, in part, to create a stable pipeline of managers to feed into the integrated health system. The university, which was renamed University of Providence, will include professional and certificate programs for Providence St. Joseph’s more than 111,000 employees.

The health system has also implemented mentoring and leadership development programs that have increased its women executive cohort by 50% over a three-year period.

“Diversity begets diversity,” said Dr. Rod Hochman, CEO of Providence St. Joseph, adding that women and minority leaders will help the system better understand its most vulnerable populations. “We are looking for folks with different perspectives who can help lead us through this time of change.”

Whether the successors are internal or external, establishing a strong executive pipeline requires a proactive and standardized approach, and the board should take the lead, industry analysts said.

A health system should identify the competencies it needs to lead the team going forward and where the gaps are, said Craig Deao, a senior leader at Studer Group. “The three keys leaders of tomorrow need to have are getting people to do things better—performance improvement; getting them to do new things—innovation; and helping people do those things—engagement,” he said.

Managing the process rather than the people will translate to more innovative and engaged employees, according to Rolnick. It starts with communication, he said.

“Today, the average employee of a hospital has no idea of the strategic direction of their organization and what their role is,” Rolnick said. “You have to tell them as much as you can, and be open and honest.”

Beyond employee engagement, executives need to understand how to interact with patients. As the industry adapts to thinking of patients as consumers, that requires a different lens, Deao said.

“People need to understand how to shape behavior and apply concepts of psychology to running the business,” he said.

Help from outsiders

While many systems have traditionally preferred to promote from within, that dynamic is changing as providers place more value on the skills industry outsiders offer. Notably, an executive from a major technology company will join Ascension later this year as its new chief digital officer.

Healthcare is becoming more consumer- and technology-oriented. Health systems are also focusing more on nutrition, transportation, education, fitness and other social factors that influence an individual’s health.

Novant Health, for instance, is launching a new leadership program that looks to train untapped community leaders in Charlotte-Mecklenburg, N.C. The program involves a combination of teaching sessions and mentoring that aims to reach individuals who otherwise wouldn’t have access to programs that hone their leadership skills, said Tanya Blackmon, executive vice president and chief diversity and inclusion officer at Novant.

While there is a significant learning curve, experience in consumer insight, marketing or technology can better equip individuals to tackle healthcare’s current challenges, said David Schmahl, executive vice president of consultancy SmithBucklin and chief executive of its healthcare and scientific industry practice.

“The experience people are obtaining in leadership roles outside the healthcare field is critical,” he said.

The role of healthcare leadership has evolved into a platform used to convey a moral foundation, spanning conversations from racism to gun control. They have to balance their role as an influencer while dealing with budgets, managing their boardrooms, implementing both long-term visions and short-term goals, and maintaining an engaged workforce.

The average tenure of healthcare executives and managers is also decreasing, particularly among CEOs, nurses and physicians, which exacerbates labor shortages. A C-suite executive’s pay is still tied to financial metrics, but quality, safety and patient satisfaction are becoming a more prominent determinant.

While Novant’s initiative isn’t necessarily geared to develop successors, it signifies how the definition of a leader is evolving.

“We are looking at trying to tap talent across all spectrums,” Blackmon said. “We’re not leaving any area untapped.”

 

Kaiser’s operating income climbs to $1.1B in Q1

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https://www.beckershospitalreview.com/finance/kaiser-s-operating-income-climbs-to-1-1b-in-q1.html

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Oakland, Calif.-based Kaiser Permanente reported higher revenues and operating income for its nonprofit hospital and health plan units in the first quarter of 2018, according to recently released financial documents.

Kaiser saw revenues increase to $20.3 billion in the first quarter of this year. That’s up about 12 percent from revenues of $18.1 billion in the same period of 2017.

The boost was attributable in part to the system’s health plan unit. Since Dec. 31, Kaiser has added approximately 472,000 health plan members. As of March 31, Kaiser had about 12.2 million members.

Kaiser reported operating income of $1.1 billion in the first quarter of this year, up from $1.04 billion in the same period of 2017.

After factoring in nonoperating income, which declined year over year, Kaiser ended the first quarter of 2018 with net income of $1.4 billion. That’s compared to the same period of 2017, when the organization reported net income of $1.6 billion.

 

71% of Healthcare Orgs Say Mergers and Acquisitions Will Increase

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http://www.healthleadersmedia.com/leadership/71-healthcare-orgs-say-mergers-and-acquisitions-will-increase?utm_source=edit&utm_medium=ENL&utm_campaign=HLM-Best-SilverPop_05042018&utm_source=silverpop&utm_medium=email&utm_campaign=20180504_HLM_BestOf%20(1)&spMailingID=13437465&spUserID=MTY3ODg4NTg1MzQ4S0&spJobID=1400286374&spReportId=MTQwMDI4NjM3NAS2

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Compelling results from the new HealthLeaders Media Intelligence Report indicate that M&A activity levels will remain strong for some time.

Healthcare industry merger, acquisition, and partnership (MAP) activity remains strong, with little change in momentum after years of consolidation activity.

According to the 2018 HealthLeaders Media Mergers, Acquisitions, and Partnerships Survey, 71% of respondents expect their organizations’ MAP activity to increase within the next three years, a compelling result indicating that MAP activity levels will remain strong for some time. Only 20% say they expect MAP activity to remain the same, and only 2% expect this to decrease.

“I believe that the healthcare market is still under a lot of pressure from continuing reimbursement and regulatory challenges,” says Pamela Stoyanoff, MBA, CPA, FACHE, executive vice president, chief operating officer at Methodist Health System, a Dallas-based nonprofit integrated healthcare network with 10 hospitals and 28 family health centers.

“The competitive landscape is also changing, with companies entering the healthcare space that haven’t been there before, like Amazon, and unique partnerships forming like Optum buying the Health Care Advisory Board and CVS buying Aetna,” she says.

Sustained activity levels

The case for sustained activity levels over the next few years can be seen in the following: 36% of respondents say that their organization’s MAP plans for the next 12–18 months consist of both exploring potential deals and completing deals underway.

If you combine this result with the response for exploring potential deals (32%), the total reveals that 68% of respondents say they are exploring potential deals, a strong indicator for future MAP activity. Only 12% of respondents say they will be completing deals underway and mention no plans for future MAP activity.

Another aspect that reflects bullish sentiment is the dollar value of MAP activity, with 73% of respondents expecting the dollar value of their organization’s MAP activity to increase within the next three years.

Only 15% expect MAP dollar value to remain the same, and only 2% expect it to decrease. These results are considerably more positive than last year’s survey results, which were increase (55%), remain the same (34%), and decrease (12%).

 

Former finance director gets prison time for stealing $3.9M from UNC hospital

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https://www.beckershospitalreview.com/legal-regulatory-issues/former-finance-director-gets-prison-time-for-stealing-3-9m-from-unc-hospital.html

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The former finance director for High Point (N.C.) Regional Hospital, part of Chapel Hill, N.C.-based UNC Health Care, was sentenced May 3 to 8.5 years in prison for embezzling $3.9 million from the hospital, according to the Department of Justice.

Kimberly Hobson worked in the accounting and finance department at High Point Regional Hospital for more than 20 years, most recently as finance director. She was fired after the hospital discovered her embezzlement in July 2017, according to the Winston-Salem Journal.

Ms. Hobson was charged with wire fraud, bank fraud and aggravated identity theft. She pleaded guilty in February.

Over a 10-year period, Ms. Hobson wrote checks to herself and her family members, which were deposited in her personal bank account. She also sent payments from hospital accounts to her personal loans and credit cards, used a hospital-issued credit card for personal expenses, and substituted her bank account for the direct deposit accounts of nine other employees, according to the DOJ.

“Today’s stiff sentence serves notice that white collar criminals will be brought to justice,” said U.S. Attorney Matthew G.T. Martin of the Middle District of North Carolina. “Thank you to the law enforcement officers with the Department of Treasury, U.S. Secret Service, Guilford County Sheriff’s Department, and High Point Police Department who have worked diligently to uncover Ms. Hobson’s fraud and seek restitution for the hospital.”