MARKET SHARE STILL MATTERS: 3 WAYS TO WIN

https://www.healthleadersmedia.com/strategy/market-share-still-matters-3-ways-win

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For CEOs, market share is critical. But measurement of it, and tactics to grow it, are getting more complicated as patients connect with providers in more sophisticated ways.

Health system CEOs have always worked to meet their mission of caring for the poor and underserved and improving the health of their community. They often cite that mission as their top priority. But in truth, they are evaluated by how well they grow revenue and margin, both of which come through expanding market share.

Market share used to be easy to define. CEOs counted on a reliably increasing reimbursement model that exceeded inflation and an aging population that meant more hospital days every year. No longer. But even though market share growth is much more complex now, failing to achieve that growth could mean termination.

To win the market share battle, healthcare organizations must first redefine what it is (see the sidebar on new market share proxies) and then build strategies that take advantage of the shifts in healthcare delivery. Here’s how three healthcare leaders are doing it.

NORTHWELL: ‘THE CONSUMER IS THE DETERMINANT OF SUCCESS’

Michael Dowling, president and CEO of Northwell Health in Great Neck, New York, acknowledges the need to provide access, value, and convenience for consumers who are increasingly looking for a wide-ranging array of services offered by a single health system. The key to this strategy is the consumer as the focal point of healthcare decision-making.

Northwell is currently investing heavily in home health and digital care access, including a major initiative in telemedicine, but tying it all together into a seamless consumer experience is critical.

“You need hospitals as anchors, but the strategy is very consumer-focused in providing access and convenience,” Dowling says. “We’ve been doing this for 10 years, and it’s one of the reasons we’ve grown to being one of the biggest players in the New York City market. It’s the interconnection of all these pieces that makes all the difference.”

Although it’s not a perfect analogy, Dowling says Northwell wants to emulate Starbucks’ approach to market coverage. It’s not a location on every street corner, but it’s close.

“The traditional way of looking at market share isn’t valid anymore.”

—Chris Van Gorder

Also, getting critical market share mass in a variety of modalities is necessary to becoming the viable narrow network that employers and insurers are looking for. Smart health systems are spending more on smaller facilities, like micro-hospitals, or on freestanding ERs, homecare, urgent care centers, and telehealth capabilities. Such investment aims to meet the everyday health needs of consumers, not just provide for their increasingly rare inpatient stays.

This means focusing on organic growth that complements or even stands alone from the inpatient realm rather than buying hospitals, for example. Specialized areas of investment in both inpatient and outpatient care are the usual profitable service lines, such as orthopedics, neurology, and cardiac care, says Dowling.

He says he seeks two kinds of market share when it comes to reimbursement: Medicare and Medicaid, and commercial. Both kinds are needed to serve the community comprehensively, he says, but only one of the two makes a margin. Patients don’t see that distinction, though, and Northwell must serve them all.

“[Commercial] is what everyone’s going after,” he says. “So, you try to be the preferred provider. You take market share from competitors by developing the physician relationship and by the expansion of ambulatory. We’ve built a massive ambulatory network with over 650 locations. It’s a marketing and consumer experience strategy. If patients are not happy with experience, they will go somewhere else, so it’s multifaceted.”

Hospital-centric organizations used to measure market share in terms of inpatient volume or discharges, but as more services have moved outside the hospital environment, those have become less reliable measures of success.

“We’re all moving toward understanding that the consumer is the determinant of success, rather than just the patient care business,” says Dowling. “The consumer is going to be determining how they want care and where, and since more of it is not needed in the hospital, you have to create locations for cancer care and imaging and surgery where it can be done on an ambulatory basis.”

SCRIPPS: ACCENTUATE YOUR STRENGTHS

Chris Van Gorder, the longtime president and CEO of Scripps Health in San Diego, is content with a level of uncertainty around market share, and says that growing it depends partially on instinct in a time of upheaval.

“Market share’s an odd thing. Everyone still wants to gain commercial market share, of course,” he says. “But today we’re not so focused on the inpatient side. We’re doing total hips on the ambulatory side. So, the traditional way of looking at market share isn’t valid anymore.”

Even though the discharge-based methodology isn’t as relevant as it used to be, it’s still important. Rating agencies still use discharges as an important tool to measure financial health, and with the relative lack of precise alternatives, discharges can be an important factor in how they determine borrowing capacity and interest rate terms for healthcare organizations.

“As an industry, we have to figure that out,” Van Gorder says. “Rating agencies use discharges, but you could be reducing that number and getting stronger as an organization.”

Scripps went through its rating agency sessions about three months ago and has seen a small decline in those traditional market share measures, but Van Gorder says those measures don’t tell the full story anymore. Scripps’ market is dominated by three major players: itself, Kaiser Permanente, and Sharp HealthCare, so fluctuations in discharges are often small and at the edges.

Rating agencies are smart enough to recognize that healthcare is changing, Van Gorder says. For example, they know it’s the right strategy to move to ambulatory, and Scripps experienced growth in covered lives in its health plan, which is part of Scripps’ strategy to build its own narrow network. But even rating agencies are frustrated that there’s no metric to enable consistent comparisons, he says.

“We still talk about market share because I still need to make sure the hospitals are occupied enough. Half-full hospitals are the fastest way to go bankrupt,” he says.

Scripps is strong in cardiovascular services, particularly interventional cardiology. “So, we focus on maintaining our strength in that area and in ortho, which is becoming much more ambulatory than it used to be,” says Van Gorder.

One area where it’s not as strong is cancer, he says, even though Scripps is a major oncology provider in San Diego. To maintain and even buttress that market share, the health system has partnered with Houston’s MD Anderson Cancer Center to build a new comprehensive cancer program that started treating patients this summer.

“[MD Anderson] is building a network strategy, and they have 23,000 people just working on cancer, so we are taking advantage of their knowledge to make us stronger,” he says. “It was a market share play, but it’s much more than just that, with increased access to research and clinical trials.”

Facing fierce competition in ambulatory, Van Gorder says the health system is focusing on areas where it’s strongest and trying to grow there.

In all areas, he says Scripps must aggressively focus on cutting costs, because he sees cost as a proxy for quality. In fact, he notes, cost may be the major limitation for most health systems in growing market share for the foreseeable future.

“People are paying more out of pocket to come in, and insurance companies have gotten so good at narrow networks,” he says. “People tell me you can’t lead with cost, and I say no. Cost is a quality indicator.”

GRADY: INVESTING IN SPECIALTY SERVICES

Safety-net hospitals, such as Grady Health System in Atlanta, have historically been overrun by mission patients—that is, patients who do not bring margin, such as Medicaid patients. But its leadership has recognized that the health system needs to be more competitive in commercial patients.

For Grady, that hasn’t meant investment in traditional service lines, but instead investment in highly complex tertiary and quaternary services that can’t easily be found elsewhere in its market, says John Haupert, its president and CEO. With seed funding from philanthropic sources, Grady has made multimillion-dollar investments in stroke and neurological surgery, interventional cardiology, and surgical subspecialties.

“In our case, it was a matter of survival. If all your patients are Medicaid or unfunded, you’re not going to be in business. Part of Grady coming back to life 10 years ago involved developing strategies to grow in funding the mission,” says Haupert.

The complex cases that have come from Grady’s recent investments weren’t previously present in the market. Unlike many organizations, Grady needed to create additional inpatient capacity to maximize those investments in capital and talent. It will soon be operating around 700 occupied beds; 10 years ago, it was barely operating 400. It’s building new outpatient facilities as well, expanding ambulatory surgical and oncology capacity across the street to free up space in the main facility where its cancer center is now.

“In the next three years, we’ll have 750 beds in operation,” Haupert says. “We’ve gone from 9% to 20% commercial. That helps with sustainability.”

 

Should My Health System Launch a Health Insurance Plan?

https://gisthealthcare.com/health-system-launch-health-insurance-plan/

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Here are a few things providers whose vision and strategy include launching a health plan should consider

In 1929 the stock market crashed and the US collapsed into the Great Depression. Coincidentally, it was also in 1929 that Baylor Hospital in Dallas Texas devised a plan that would provide access to health care services to patients and give patients the ability to pay for their care so the hospital could remain viable.

In the nine decades since Baylor Hospital helped create what is known today as Blue Cross, hospitals, physicians and other providers of health care services have regularly asked themselves the questions: Should we develop and own a health insurance plan? Should we take financial risk for care we provide? Should we partner with physicians and/or with a health insurer?

Since the passage of the Affordable Care Act (ACA) in 2010, hospital and physician executives have considered these questions with new motivation. Several have jumped in, but only a few health system-sponsored plans launched in the ACA era are nearing profitability. Others have deferred, waiting to see what develops, wanting to digest lessons from Medicare’s ACO program, direct contracts with employers, and ACO arrangements with commercial payers. The latter has been difficult to achieve even for risk-motivated providers, as many dominant commercial plans are reticent to enable providers to manage risk—and in the long run, create a direct competitor. This has provided new motivation for health systems and large physician groups to evaluate a provider-owned plan.

Today’s mantra is “we are moving from volume to value!” Though the words are fresh, the concepts and concerns are much the same, as are the risks and rewards. Having served in executive roles in provider owned health plans for nearly 40 years, 19 years at Kaiser Permanente, and 21 years at Sentara Health Care, I have observed multiple cycles of providers rushing into the health plan business followed by the rapid exit of providers who fail in managing risk. Here are a few “Be’s…” providers whose vision and strategy include launching a health plan should consider:

Be cautious, but not cowardly

Be courageous, but not careless

Be cognizant, but not cocky

 

These “Be’s…” need some explanation.

Commentary:

A five-year business plan that anticipates start-up costs, operating losses and regulatorily required “risk-based capital” will give executives an “eyes-wide-open” going-in perspective. A Board-approved business plan that is both conservative and credible will plan on operating losses for several years.

When the first members are enrolled in the new health insurance plan, the operating losses will begin. Yes, every start-up health plan will experience losses for a period of time. Detailed preparation and thoughtful execution will not eliminate losses in the early years, but they will hasten the march to profitability.

Commentary:

Getting the right people, and the right number of people on this bus is imperative. Expert people are available, but they are probably not current members of your team. Inexperienced talent and under staffing this strategic initiative will result in disaster.

The total value of your health insurance plan includes much more than bottom line performance. Provider sponsored plans can lead the market in customer satisfaction, quality of care metrics and “total cost of care.” Table stakes for operating a health plan include enrollment, billing, claims processing and financial systems. These systems can be purchased or partnered. However, to maximize value, wise investment in population health IT should be implemented as soon as possible. State of the art population health tools will enable providers to close gaps in care and improve both health outcomes and financial performance. Later on, investing in consumer-centric digital health applications will optimize the customer experience and offer value a provider sponsored plan can bring to the market in a unique manner.

Growing the membership as fast as possible is vital. Without substantial membership, providers will have little reason to focus on changing the model of care. Rapid membership growth can occur in a variety of ways, but the best way is to win contracts for large populations. Securing a Medicaid contract, enrolling the provider’s employees and winning two or three large group commercial accounts, and Medicare Advantage/CMS ACO depending on the players in the MA space in a given market are all good strategies for rapid growth. The sequencing of membership type is less important than the rate of growth.

Commentary:

Given the losses suffered by providers who took risk in 1990’s, and the spotty performance of provider sponsored health plans in today’s CMS ACOs and commercial offerings, you are probably thinking, why do I think we can do better?  Being aware of other’s failures and successes will embolden Boards and CEOs to accept the risk because they recognize the rewards.

A few lessons to be learned from Kaiser include:

  • The imperative of physician leadership and commitment
  • The efficiency of integrated services
  • The clarity of the connection between quality of care and the cost of care

Lessons to be learned from provider sponsored health plans, both those that have succeeded and those that have failed, include:

  • The tolerance and patience for early losses
  • The balance between integration and separation of the health plan and the providers
  • The clarity of purpose and mission. Having a health plan to fill hospital beds is not a sustainable mission

Additional Considerations:

Beyond financial results, most provider sponsored health plans tout other benefits that speak to both the mission of the organization and the financial performance of the enterprise in total. Such benefits include, but are not limited to:

  1. Improved performance in quality, service and total cost of care
  2. Enhanced understanding of the consumer/customer
  3. Control of the premium dollar

Of these added benefits, perhaps the benefit derived from the control of the premium dollar is least intuitive and most important. Here is a simple way to think about this issue:

If XYZ Health Insurer brings in $100 of premium, they will pay a hospital about $40 for inpatient and outpatient services. If the hospital is well run, it will make 4% or $1.20 on the $40 of revenue.

However, if the hospital owns the health insurance plan, and the insurance plan is making a 2% margin on the premium of $100 ($2.00), then the enterprise will earn $3.20, 2% on the premium and 4% on the “inter-company” transfer between the owned health insurance company and the hospital. (NOTE: this is a simple example. The actual arrangements between the hospital, its owned health insurance plan, and the contract with the non-owned health insurance companies will determine the actual results, but the principle is demonstrated with the simple example.)

To be sure, the challenges in owning and operating a health insurance plan are both daunting and different from operating a hospital system. However, the rewards can be worth the effort.

One provider sponsor health insurance plan generated enough net income over a five-year period that the “dividend” to the sponsoring health care system was deployed by the system to build not just one new hospital, but three!

Nearly 90 years after Baylor created the first Blue Cross health insurance company, it merged with Scott & White Clinic, which owns a health insurance plan. Baylor Scott & White is well-positioned to thrive as a fully integrated delivery system. If your system is asking “Should we launch a health plan?” please reach out. I’d be happy to share more of the lessons I’ve learned in my decades as CEO of provider sponsored health plans and discuss your system’s opportunity.

 

 

8 healthcare leaders share their No. 1 piece of advice

https://www.beckershospitalreview.com/hospital-management-administration/8-healthcare-leaders-share-their-no-1-piece-of-advice.html

Good leadership advice is meant to be shared. Here eight healthcare leaders — including CEOs, CFOs and chief strategy officers — offer the No. 1 piece of advice they would give other leaders in their field.

1. Rob Bloom, CFO of Carthage (N.Y.) Area Hospital. “The best advice I have is to find the courage to change what must be changed and accept those things that cannot be changed in the short term. Regardless of whether a hospital is profitable or struggling, there will be challenges. The difficult task is to determine where to focus resources while accepting criticism for problems that will not change the short-term viability of the organization. You have to learn to trust your judgment and resist pressures from others that might tempt you to alter your course based on their lack of understanding. It is very much a triage process: Stop the bleeding first, then worry about infection later.”

2. Mona Chadha, chief strategy officer of San Francisco-based Dignity Health’s Bay Area. “One of the key strengths of being a good leader is really listening and leading people by example. That to me is one of the successes. Then, do some thinking outside of the box. That’s been my mantra of success in the past.”

3. JoAnn Kunkel, CFO of Sioux Falls, S.D.-based Sanford Health. “The very first CFO I worked for in 1990 always said, ‘you’re only as good as your team. … I’d never be able to be successful without having you and the team working with me.’ [That CFO] was a very thoughtful and inclusive leader. He gave me opportunities to be part of the team and think strategically and develop into a leader. So since then, it’s always been my belief that we have a very strong team that should always participate. If we have someone that needs help, we have multiple individuals ready to step up. And working together makes us all better. My advice would be: It’s important to remember you are only as good as your team. Sometimes I think when you get into these leadership roles you can forget that. You always want to be inclusive, give credit to the work and the team and the efforts that help make you successful in your role.”

4. Michael McAnder, CFO of Atlanta-based Piedmont Healthcare. “I think what I’d say is try and look for the long-term play. You can’t manage this business on a day-to-day basis. You have to have a clear direction and stick with it. I think that’s probably the thing our CEO Kevin Brown has done really well. I have never worked at an organization with a one-page strategic plan before. Every meeting starts with it, and we use it at every presentation. That consistency has brought clarity. It’s also why we’ve gone from five hospitals to 11 in the three years I’ve been here. That resonates with other organizations when we talk about our plan. It’s really important. In addition, obviously, you have to act with integrity and character. If you’re in a position where you can’t do that, you have to make a different decision about whether you can keep working for someone.”

5. Alan B. Miller, CEO of King of Prussia, Pa.-based Universal Health Services. “I often give a few pieces of advice to other CEOs and leaders, including:

  • Character is destiny — a person with good character will always be better off in life. Choose your friends carefully because you are known by the friends you keep.
  • Hard work is critical. If you are going to do something, do it well.
  • Hire the best team possible. Build trust, and rally the team to focus on a common goal.”

6. David Parsons, MD, CMO of Portland-based Northwest Permanente. “Listen to the people you lead and be honest about which problems you can solve and which ones you can’t. People usually don’t mind being told no as long as you are direct and honest about the reasons why. People detest ambivalence.”

7. Mike Pykosz, CEO and founder of Chicago-based Oak Street Health. “Be persistent and be motivated by your mission. One thing we found really early was everything is a lot harder and takes a lot longer than you think it will. Things that make a lot of sense to you and are super logical will always take a little longer. [Success] requires breaking down a lot of little barriers, including a lot of inefficiencies, a lot of complexities and mindshare. But whatever it is, be persistent and have faith that if you’re trying to do the right thing, and if you stay at it, you’ll be able to break down those barriers and accomplish these things.”

8. Michael Wallace, president and CEO of Fort Atkinson, Wis.-based Fort HealthCare. “I’d say visualize the outcome you want and then go get it. I also like the phrase ‘try hard, fail fast, move on, start over.’ You’re one step closer to a solution if the last one didn’t work. But don’t let perfect get in the way of good. I like to be 8 for 10 rather than 3 for 3. Failure is the byproduct of trying to move an organization forward. If I get 8 of 10 things right, I am going to end up further along, closer to my vision than if I wait to be sure about everything to get that perfect 3 for 3.”

 

 

More than a quarter of major health systems plan Medicare Advantage launch, though many lack confidence

http://www.healthcarefinancenews.com/news/more-quarter-major-health-systems-plan-medicare-advantage-launch-though-many-lack-confidence?mkt_tok=eyJpIjoiWkdSaE9UZzRPV0poTW1FeCIsInQiOiJTK1lnZEdEakdOVlZNYWRBSzF5M3o1d3BRWmpQXC8ydVBYN2lFY01mUEQwbnhTVjBIU2NScmdIMWtXcjN3NGpXb1NoSG53clwvXC90TzJ1QWFPRWpoeGFtXC9jSHl4TFwvbDgwMEZYaU1kVmxRa1NCNHloRk9lK0VUZFBkVEVuV1hHTytIIn0%3D

 

Executives say the top reason for launching a Medicare Advantage plan is the opportunity to capture more value.

A new survey from Lumeris found that 27 percent of major U.S. health system executives intend to launch a Medicare Advantage plan in the next four years. Despite that, confidence among these same execs is lacking, with only 29 percent reporting they felt confident in their organization’s ability to make the launch successfully.

“These survey findings are consistent with our conversations with healthcare executives across the country who are feeling a sense of urgency around Medicare Advantage strategies, but also realize that this type of work is vastly different than traditional health system operations,” said Jeff Carroll, executive director of health plans at Lumeris, by statement.

In April, The Centers for Medicare and Medicaid Services announced it was releasing Medicare Advantage encounter data for the first time by request from the CMS Research Data Assistance Center. The MA encounter data, starting from 2015, provides detailed information about services to beneficiaries enrolled in a Medicare Advantage managed plan. It will give researchers insight into the care delivered under MA plans and will help them improve the Medicare program, CMS said. Annual updates are planned.

According to the 90 executives Lumeris surveyed from major health systems, the top reason for launching a Medicare Advantage plan is the opportunity to capture more value by controlling a greater portion of the premium dollar as compared to fee-for-service Medicare.

Other key drivers cited include market and regulatory trends supporting Medicare Advantage. In particular, shrinking Medicare margins could threaten the viability of hospitals and health systems as the senior population continues to grow and becomes a larger proportion of providers’ patient panels.

The respondents also recognized that launching a Medicare Advantage plan will be challenging due to the complexities of operating an insurance plan, which are far different than the capabilities required to successfully operate a health system.

They also shared concerns about the significant financial investment required and an overall lack of expertise in the health plan space. The majority of respondents, 59 percent, indicated they were likely to use outside resources to launch their plans — and that those resources are very likely to include a vendor partner that can mitigate operational risk.

“Launching and managing a Medicare Advantage plan requires skills beyond the core competencies of most health systems, which is one reason many provider-sponsored plans fail in the first few years,” Carroll said. “Through those failures, it has become clear that providers who select the right partners increase the likelihood for greater success in a shorter period of time.”

 

Do Most Hospitals Benefit from Directly Employing Physicians?

https://hbr.org/2018/05/do-most-hospitals-benefit-from-directly-employing-physicians

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How can hospitals and health systems generate a return on their investment in their physician enterprises? According to the most recent figures, from the American Medical Association, over 25% of U.S. physicians practiced in groups wholly or partly owned by hospitals in 2016 and another 7% were direct hospital employees. Yet, according to the Medical Group Management Association, hospitals’ multi-specialty physician groups lost almost $196,000 per employed physician.

As a result, some larger health systems’ physician operations are generating nine-figure operating losses, which are major contributors to the deterioration in hospital earnings.  It is time for hospitals or health systems to rethink their strategy for their physician enterprises.

Let’s first revisit why independent physicians were receptive to becoming employees and why hospitals and health systems felt the need to hire them.

The surge in hospital employment of physicians predated Obamacare by at least six years, and had two key drivers. The first was independent baby-boomer physicians — particularly those in primary care — found themselves unable to recruit new partners. Newer physicians, heavily burdened by student debt, were not inclined either to take on entrepreneurial risk or the 60-hour work weeks independent practice entailed.

The second was cuts in Medicare payments for office-based imaging. Thanks to the Deficit Reduction Act of 2005, specialties such as cardiology, orthopedics, and medical oncology that relied on the revenue that imaging generated were hit hard. As a result, many found it advantageous to be employed by hospitals. Under Medicare rules, in addition to professional fees, hospitals can charge a Part B technical fee for their services and therefore can pay practitioners more than they could earn in private practice.

Then, beginning in 2009, the Obama administration’s policies increased the exodus of physicians from private practices to health systems. The “meaningful use” provisions of the HITECH Act of 2009 provided both incentives and penalties for physicians to adopt electronic records, but hospitals and very corporate enterprises had more resources to comply with meaningful-use requirements.

The value-based-payment schemes created by the Affordable Care Act also markedly increased documentation requirements and, as a result, the overhead of practices, driving more physicians into hospital employment models.

There have been a number of reasons hospitals have been hiring physicians. Some, particularly those in rural areas, had no choice but to turn physicians into employees. Retiring independent physicians were leaving large gaps in care in their economically challenged communities. Consequently, hospitals that did not step in to fill the gaps were in danger of closing.

Separately, some hospitals or systems sought to grab business from their competitors by acquiring physicians who hospitalized their patients at competing facilities. These physicians’ inpatient and, particularly, outpatient imaging and laboratory volume generated additional revenues for the acquiring hospital or system.

A third apparent motivation was to corner the local physician market in order to obtain more favorable rates from health insurers. This seemed to have been a major rationale for St. Luke’s Health Systems acquisition of Seltzer Medical Group, Idaho’s largest independent, multi-specialty physician practice group, which led to an anti-trust action.

Yet another reason for making physicians employees was to position the organization for capitated, or value-based, payment. Hospitals believed that “salarying” physicians would help control clinical volumes and thus make it easier to perform in capitated contracts.

Finally, some hospital and system CEOs were tired of negotiating with local independent physician groups or national physician-staffing firms like MedNax and TeamHealth over incomes and coverage of the hospitals’ 24/7 services such as the emergency department, the intensive care unit (ICU), and diagnostic services like radiology and pathology. Building an in-house staff of physicians seemed like an attractive alternative.

Many health systems have gotten into trouble because their strategic rationale for hiring physicians became a moving target.  A hospital system we followed morphed from a ““grab market share” strategy to a “respond to competitive acquisitions” strategy to a “bailout” strategy for loyal independent physicians to a “increase bargaining power with payers” strategy to a “position for value-based care” strategy over a period of eight years. By the time it was done, it was the proud owner of a 700-plus physician group and losses of more than $100 million per year.

Hospitals lose money on their employed physicians because physicians’ compensation plus practice expenses and corporate overhead significantly exceed the collections of practices. These direct losses are, to a degree, an artifact of accounting, because hospitals frequently do not attribute any bonus for meeting “value-based’ contract targets, or incremental hospital surgical, imaging, and lab revenues to physician practice income.

However, even factoring in the accounting issues, much of the losses are attributable to “hosting,” rather than managing, practices effectively.  Many systems employing physicians have done so without developing a cohesive physician organization and lack standardized staffing and operational support functions, such as effective purchasing and supply chain operations, effective scheduling systems, and centralized office locations.

Managing up the return, rather than managing down the loss, is the key to a successful physician strategy. Here’s how to do that.

Establish a clear strategic goal and a target return on investment. Physicians reside at the core of any successful health system. Yet as the Cheshire Cat said in Alice in Wonderland, “If you don’t care where you are going, then it doesn’t matter which way you go!” If you establish strategic goals for the physician enterprise, then the physician organization can be sized and located appropriately. As a result, the physician group may end up either a lot smaller or with a more defensible specialty and/or geographic distribution. Management should then quantify and budget the expected return on the practice’s operational loss.

Strengthen operations. Effective management of the physician group then becomes the essential challenge. For example, revenue-cycle issues such as inconsistent coding or missing data often damage the profitability of the medical group. Are systems in place to assure that medical bills are defensible and correct, and that patients understand what they owe and agree to pay? Seeing that encounters are adequately documented and translated into a fair and timely bill that patients are willing to pay is not rocket science. The return on investment for getting the revenue cycle right is often 3X to 5X.

Revamp compensation and incentives. Medicare’s policy for paying employed physicians will likely come under fresh scrutiny during the Trump administration. It is possible that Medicare’s relatively favorable payment for hospital-employed physicians will be reined in. If that happens, it might require a painful revisiting of employment contracts when they come up for renewal.

Performance incentives in those contracts should also match the strategic goals established above. For example, compensating physicians through a production-based model that encourages them to increase visits, procedures, or hospital admissions, while value-based insurance contracts (like those for accountable care organizations) demand reducing them could damage the overall performance of the health system.

Pursue reality-based contracts with insurers. The Affordable Care Act ushered in a profusion of narrow network, performance-based contracts with private insurers, with significant front-end rate concessions by hospitals. These discounts often far exceeded the potential rewards from the “value based” incentives in the contracts! Larger health systems also rushed to assemble “clinically integrated networks” (CINs), comprising their employed and contracted physicians as well as private practitioners in their markets, to participate in these new contracts. Treating physician group losses and CIN expenses as loss leaders for value-based contracts and then losing yet more money on those contracts, as is happening in many places, doesn’t make sense.

Both enrollment and financial performance under these contracts have been disappointing in most markets. Reviewing and pruning back these contracts, or renegotiating them to provide more adequate rates or to compensate hospitals for patient non-payment is an essential element of an effective physician-enterprise strategy. Hospitals and health systems also should ask: “Is the CIN functioning as intended? Is it adding value that patients notice or is it just an additional layer of administrative expense without compensating benefits for clinicians or patients?

Motivate employed and independent physicians. Finally, hospitals and systems must understand the value they are creating not only for their employed clinical workforce but also for the two-thirds of their physicians who are not full-time employees — those who are contracted, independent participants in CIN’s or in part-time administrative roles. What would motivate all these physicians to want to work with the organization over the long term?

Hospital and systems need a unified physician strategy and operating model that encompasses all these diverse arrangements. Beyond that, they must  engage their physicians in planning and organizing care. Physician are complex, highly trained professionals. They cannot be mere employees; they must be owners of the organization’s goals and strategies.

 

 

 

UnitedHealth’s Evolution From Traditional Insurer Into Multifaceted Business Pays Off

http://www.startribune.com/unitedhealth-group-sees-profit-jumps-boosts-outlook/479981613/

The UnitedHealth Group Inc.'s campus in Minnetonka, Minn.

UnitedHealth Group hikes outlook after quarterly profit easily beats estimates

Strong first quarter, new growth opportunity have the health insurer hiking its yearly outlook.

After chalking up another quarter of better-than-expected profits, UnitedHealth Group officials on Tuesday described the potential for growth through a new venture fund the company is using to invest in innovative health care startups.

Minnetonka-based UnitedHealth first described the venture fund to investors in November and announced in March that Larry Renfro, the chief executive of the company’s Optum division, would lead the effort.