A common complaint among leading-edge providers is the difficulty of keeping one foot in the envisioned future-where providers are paid based on performance-and one foot in the current fee-for-service system that still pays primarily on volume. "That is a challenge for all healthcare organizations right now," says David R. Maizel, MD, corporate vice president, Sentara Healthcare and president of Sentara Medical Group. "How do we straddle this transition?"
That transition looks even more precarious when other unknowns are factored in, including how many additional insured will be added to the ranks, how much reimbursement will actually decline, and whether bundled and other performance-based payment approaches will actually work in the real world.
This is Section 1 in the Fall 2011 Leadership report, Managing Business and Clinical Risks.Return to the full Leadership report
Yet the providers in this section are managing to keep a firm footing. While acknowledging the risks, they are investing time and dollars in major change initiatives designed to help them achieve patient-centered visions of higher quality, lower cost, and coordinated, population-based care.
While each provider in this section has a unique story to tell, similar strategies are being used by many, such as the following.
One of these tactics: Building better partnerships-and trust-between hospitals and physicians, as illustrated in this first case study about St. Anthony's Medical Center.
St. Anthony's Medical Center, a 767-bed hospital in suburban St. Louis, has heavily invested in its cardiac service line in recent years. In 2008, St. Anthony's opened a new Heart and Surgical Pavilion-a four-story "heart hospital within a hospital." It has also been steadily expanding its offerings of state-of-the-art diagnostics and treatments, including minimally invasive heart surgery and radiofrequency ablation.
But the most innovative change occurred this past January, when St. Anthony's partnered with 11 cardiologists to create the Heart Specialty Center.
The newly employed physicians, who now sit on the hospital management team, are specifically responsible for the governance, finances, operations, and clinical care of the medical center's cardiovascular service line-which includes interventional radiology and vascular surgery in addition to cardiac care and cardiovascular surgery.
In addition, the cardiologists manage a hospital-owned outpatient practice. Because their authority spans outpatient and inpatient care, they are able to coordinate the continuum of services for their patients, from prevention and diagnostics to treatment and rehabilitation.
David Morton, MD, medical director of the Heart Specialty Center, says the physicians want their success to be measured by improved quality scores and complication rates, as well as cost-saving decreases in lengths of stay and unnecessary readmissions.
Morton initiated the effort that brought the hospital and physicians together. In his former position as president of a large cardiology private practice, he had become frustrated with the competitive and uncooperative relationships between hospitals and physicians.
"We all feel strongly that unless physicians are involved in running and organizing an entire service line-both inpatient and outpatient-we will never be able to attain high clinical quality while also improving efficiency and lowering costs," he says.Building the relationship. During their search for a hospital partner, Morton and his fellow physicians were offered-and rejected-hospital management contracts in which they could have maintained their private practice. They held out for an employment arrangement with St. Anthony's because Morton believes it seals the fates of the physicians and hospital together.
"It was a big step for St. Anthony's to basically give up control of the entire cardiac service line- nearly 40 percent of hospital revenues," says Morton. "At the same time, we physicians gave up our freedom to go back into private practice when we cut our ties with our old cardiology group. We are both stepping off the cliff together."
St. Anthony's did not buy the cardiology group that Morton founded; rather, the hospital hired 11 members of that practice. The physicians' compensation is tied to their performance. In the hospital's FY12, says Morton, their pay will be based in part on how well the service line performs on 10 surgical and medical quality measures and goals, including decreased mortality for bypass surgery patients.
As head of the Heart Specialty Center, Morton reports directly to St. Anthony's CEO. The Center's executive director, who manages day-to-day operations, reports to Morton. The Center is governed by a nine-member strategic council comprised of seven physicians, the Center's executive director, and St. Anthony's CEO, who serves as liaison between the heart program and other hospital administrators.Reducing supply costs. In addition to attracting patients to St. Anthony's, the physicians are willingly identifying ways to reduce costs. "Given declining reimbursements for physicians and hospitals, it is in our best interest to ensure that we reduce costs in a way that will actually increase the quality of care," says Morton. "We are able to use the monies that we save by reducing inefficiencies and supply costs to expand our facility and to improve care."
One of the first targets for cost savings: supplies. Interventional radiologists, vascular surgeons, and the cardiac catheterization laboratory at St. Anthony's had historically contracted for supplies and medical devices separately, which led to triple inventories for common items, such as interventional catheters, stents, and pacemakers. Now that all three specialties are using common supplies, hospital materials management staff have been able to negotiate volume-based price discounts on these supplies, which is expected to save at least $1 million a year.
Although the relationship is too new to analyze ROI implications, John Skeans, St. Anthony's CFO and vice president of finance, likes what he sees so far. "Partnering with physicians does not always make sense. But given the quality of this group of cardiologists-all of whom can demonstrate proven positive outcomes-this is a financial win for us," he says.
The cardiologists St. Anthony's hired had measured and benchmarked their quality of care over a number of years. "It's one thing to say you are good; it's another to have the data to show it," says Morton.Keeping the patient in mind. Morton and his colleagues have organized the Heart Specialty Center with the goal of providing patient- centered care. "Hospitals are traditionally set up to run the way that the hospital wants, but not necessarily the way patient care is carried out," says Morton. "We have totally flipped that backwards so that now we are flowing with the patient."
In the past, for example, staff members in the preoperative area, operating room, cardiovascular intensive care unit (ICU), and telemetry unit had each reported to a different manager, which set up opportunities for conflict. Now all staff members who serve a cardiac surgery patient report to a single manager.
Similarly, the physicians are adjusting staffing patterns to improve patient outcomes and ensure nurses spend more time at the bedside. In the cardiac cath lab, for example, administrative functions that were being performed by ICU-level nurses have been assigned to other staff members, freeing the nurses to focus on patient care.
Morton advises making organizational changes incrementally to give staff time to adjust to the new way of doing business. "I think the restructuring has been hardest on middle management," he says. "There is a long history of the way hospitals operate, and this is a foreign concept for many managers."Leading the change. The most important lesson learned, Morton says, is that the traditional distrust between hospital administrators and physicians must be overcome for a true partnership to be achieved.
In St. Anthony's case, the physicians and hospital leaders developed a set of guiding principles before they started negotiations, and Morton says that has proved to be invaluable. By agreeing to core values, goals, and a mission for the Heart Specialty Center in advance, all parties had a framework that made decisions about financial, governance, and operational issues much easier.
"For this to work, both of you have to say, 'Okay, this is something that we are going to do together as an entity, working together,'" says Morton.
Like St. Anthony's, St. John Providence Health System in southwest Michigan employs physicians (about 400); however, the vast majority of its medical staff are independent practitioners. Instead of hiring more physicians, the five-hospital system is working with its physician-hospital organization (PHO) to create a situation that will allow medical staff members to remain independent and participate in the accountable care movement.
A major payer in the area, Blue Cross Blue Shield of Michigan (BCBSM), is pushing hospitals and physicians to create organized systems of care (OSC), which is the Michigan Blues' twist on the accountable care organization (ACO) model. BCBSM plans to offer financial incentives to highly functioning OSCs by 2013, and St. John Providence Health System, which is part of Ascension Health, is getting ready.
St. John Providence's PHO-St. John Providence Partners in Care-is taking the lead on organizing about 2,200 physicians to participate in a St. John Providence OSC, while the health system is spearheading the technology investment and adoption needed to deliver organized and accountable care.
"There is a lot of uncertainty around accountable care, and with that comes a lot of concern," says Scott Eathorne, MD, medical director for the PHO. "But these effective partnership arrangements are keeping us focused on setting up the right structure for success."Building on the medical home. Because BCBSM holds so much market share-dominating 70 percent of the commercial market in the greater Detroit area-its initiatives have a powerful influence on the state's healthcare scene. For example, BCBSM has the nation's largest patient-centered medical home effort. Using its own criteria, the payer began designating medical homes in 2009-and about 2,500 physicians have already achieved the Blues' medical home designation.
More than 200 of those designated medical home practitioners are St. John Providence physicians, and others are working to meet the medical home criteria. "We continue to push as many of our physicians as we can to move in this direction because we think it's going to be a requirement for being able to deliver on the Triple Aim of improving the experience of care, improving the health of populations, and reducing the per capita cost of health care," says Eathorne. (The Triple Aim is a program of the Institute for Healthcare Improvement)
An initial assessment by BCBSM of its medical home program suggests that the model is delivering on its promise of reducing costs by keeping patients healthy and avoiding complications. Michigan medical home practices had a 22 percent lower rate of adult inpatient admissions for conditions that could have been managed by good outpatient care in 2011 than traditional primary care practices. Similarly, compared to traditional practices, these medical homes have achieved the following.
The insurer's vision is to expand its medical home initiative so that primary care physicians, specialists, and hospitals work together to coordinate services for a defined patient population. "The OSC work that we plan to do for the next five years is going to build on that patient-centered medical home foundation that has been developed over the past few years with the Michigan provider community," says Tom Leyden, director of Value Partnerships at BCBSM.
To encourage hospitals and physicians to prepare for OSC contracts, BCBSM launched two OSC-specific initiatives this summer: systemwide patient registries and performance measurement across the continuum of care. A third initiative-care processes that span the OSC-is planned for early 2012.
Sharing technology. Clinical IT is obviously key to the coordination of care that is at the heart of medical homes and ACOs, and St. John Providence has taken the lead on getting the IT infrastructure in place.
The five hospitals in the St. John Providence Health System began using an electronic health record (EHR) about three years ago, and computerized physician order entry was installed this summer. While some affiliated physicians have acquired their own EHR technology, or used some IT tools made available by the health system, there has been no attempt to broadly connect the hospital and physicians-until now.
The health system worked with St. John Providence Partners in Care, the PHO, to develop a comprehensive ambulatory clinical IT strategy that is getting under way this year. This includes a health information exchange (HIE), EHR, disease registry, e-prescribing, and a patient portal. "This will facilitate communication between providers, between the providers and the hospitals, and ultimately, between providers and patients through the patient portal," says Eathorne.
The goal of the new strategy is to have about 1,000 physicians who collectively manage the health of nearly 120,000 lives connected electronically by 2013.
All physicians who contract with insurers through the PHO will be expected to adopt technology that allows them to share patient data, although a range of options will be permitted. Those physicians who have their own EHR systems, for example, may use the HIE; others may only use the disease registry function.
Within the limitations allowed by law, St. John Providence is subsidizing the cost of the ambulatory EHR system. BCBSM and other payers are also providing financial incentives to encourage technology adoption, says Eathorne. BCBSM pays incremental bonuses to physicians as they add IT capabilities, such as patient registries or patient portals, that are associated with improved efficiency and quality of care. In addition, the PHO is working with physicians to help them become eligible for meaningful use subsidies.Setting a vision. Leaders of the St. John Providence Partners in Care PHO must get more than 2,000 physicians, most of whom are self-employed, to agree on a new way of doing business-which is no small task. For Eathorne, the experience has proved the value of establishing a vision and guiding principles. The vision for the St. John Providence OSC is to establish a partnership that takes advantage of the size of the physician network and the size and geographic scope of the St. John Providence Health System, as well as its relationship with its parent Ascension Health.
To operate as an OSC, the physicians and hospital must figure out how to share governance, reduce wasteful procedures and diagnostics, coordinate care to improve patients' outcomes, handle financial risk, distribute money, and get around other thorny issues that can be difficult to negotiate.
"People ask, 'Why are we doing this?' By having established that driving vision, we continue to remind ourselves of what we wanted to do collaboratively, and then we can work through some of these difficult issues," he says.
One key to establishing the OSC framework for an effective partnership was bringing the six physician organizations that contracted under the PHO together around a common cause. The result of that effort was the formation of The Physician Alliance, a new physician organization serving the nearly 2,200 St. John Providence-affiliated providers. A 50-50 partnership between The Physician Alliance and St. John Providence Health System is the foundation of the PHO. Various PHO committees are working through the details and establishing the relationships needed to better organize care and fine-tune the business model, says Eathorne.
Another lesson: The changing dynamics in health care require new ways of thinking. Hospitals' traditional status as the hub of the healthcare system may change in the accountable care era, when the payment system rewards physicians for keeping patients out of the hospital.
"We are building this continuum of care that recognizes that individuals are best served when they have a longitudinal relationship with their primary providers," says Eathorne. "It's each hospital's responsibility to understand its role in the continuum, and that, for the most part, inpatient care is a small part of the overall healthcare needs of any given individual."
That said, creating a partnership in which both the hospitals and physicians thrive together is essential to the success of an OSC. "Our goal here is not to put anybody in the red," he says. "It is to work together so that, overall, we are well-positioned for when the full-scale change in the payment structure really occurs."
Similar to St. John Providence, Sentara Healthcare, a 10-hospital system based in Norfolk, Va., had its eyes set on becoming an ACO. But then it saw the Centers for Medicare & Medicaid's proposed ACO rule for the Medicare Shared Savings Program.
The term "ACO" went out the window because Sentara leaders believe that the government's proposed rule presents too many barriers to success. But the health system's commitment to accountability remains strong.
"What we talk about now is the need to do a better job of integrating all the key stakeholders into a model that will move us away from a fragmented approach to care to a much more coordinated approach to care," says David R. Maizel, MD, the system's corporate vice president and president of Sentara Medical Group.
The health system's strategic plan includes three imperatives (see the exhibit below).
Sentara's EHR is a key component to these three strategies. The EHR-which already connects most of its hospitals, physician offices, and other care sites-is creating efficiencies and quality improvements that many health systems only dream about (see Section 4, page 50).
That technology-and the new levels of knowledge it brings because of the ability to capture and analyze data-is being used to create the optimal patient experience. "Everything that we're doing from a transformation standpoint is really driven by our goal of being patient-centered," says Maizel.Setting high goals. Hoping to differentiate itself on quality and cost-and reap pay-for-performance rewards and contracts from payers-Sentara aims to prove itself a top performer in four domains:
"The first imperative is really to be considered in the top 10 percent of health systems in everything that we do," says Maizel.
Sentara has already achieved that status on some patient safety measures, thanks to a systemwide initiative that dates back to 2002. Since that time, central line-related blood stream infections have been reduced by 90 percent across all Sentara hospitals, and ventilator-associated pneumonia has declined by 98 percent.
Sentara, which tallied operating revenues of $3.39 billion for FY10, reported a 5.6 percent operating margin for the year. The system also enjoyed an employee-satisfaction win for the year when its survey vendor issued a "workplace excellence" award in recognition of high scores that reflect an engaged workforce. The award is given to fewer than 5 percent of the vendor's clients.
Transforming care delivery. As it moves from a fragmented care model to a more comprehensive, coordinated approach, Sentara is designing services around four specific patient groups:
"We are identifying specific patient populations and how to really optimize the patient experience for those populations in the most cost-effective way," says Maizel.
To move toward this population health management model, Sentara started with an initiative to redesign primary care, converting practices it owns into patient-centered medical homes. The main goals are to build capacity so as to increase patient access and improve outcomes by serving patients in new ways.
For example, the medical home practices now offer group visits for patients with certain chronic illnesses, such as diabetes. These give patients the opportunity to learn from each other, while freeing physicians to devote more time to managing each patient's specific health needs.
Providers in the pilot practices were initially concerned that the redesign would impact their productivity, and they were skeptical about patients' reaction to the changes, says Maizel. "Our results from tracking the data demonstrate no reduction in productivity. In fact, access has improved," he says. "And patients have noticed the changes and have commented on how much more engaged the staff is in meeting their needs. Patient satisfaction scores remain strong."
Additionally, the medical home practices have improved patient scheduling to accommodate same-day appointments, which help keep patients from going to the emergency department (ED) for urgent-but not emergency-conditions like earaches and sinus infections. Same-day appointments also allow patients with congestive heart failure and other chronic illnesses to receive immediate care, which may head off deterioration that would require hospital treatment. In a pilot for the redesign work at two practices, same-day appointments increased by 97 percent.
The medical home model also helps keep patients who were recently discharged from the hospital from being readmitted. The percentage of patients who were seen by a primary care physician within seven days of a medical discharge doubled at one medical home pilot site and quadrupled at another. The result: 30-day hospital readmissions for patients with certain chronic conditions fell from 24 percent to 12 percent of inpatient discharges.
Because Sentara's eCare EHR system shares information between hospitals and physicians, primary care providers are notified immediately when one of their patients has visited an ED or been hospitalized. In one case, a primary care provider telephoned a patient before that patient was fully discharged from the ED, says Maizel. "The power of technology is pretty evident in a situation like that."
Five Sentara Medical Group clinics have completed the conversion to medical homes, and six others are in the process. By the end of 2012, all of the Sentara-owned primary care practices-about 15 to 20 percent of the primary care providers in the Norfolk-Virginia Beach area-will be redesigned, says Maizel.
Expanding the improvement. Converting its owned primary care practices to medical homes is just the beginning of Sentara's redesign work. "We have started an outreach program to other primary care physicians in the market, regardless of whether they are independent, small practices, or members of larger group practices," says Maizel. "Hopefully we can assist them in implementing some of what we have learned to help raise the bar in terms of how we are providing care to the citizens of our communities."
Beyond that, Sentara will be using lessons learned from the primary care conversions to help redesign its long-term care and home health services as the health system works to improve care across the continuum for all patient populations. "We really need to look at this longitudinally and across all venues of care-and how we transfer the care from one setting to the other," he says.Growing to increase efficiency. Sentara has acquired three hospitals in the past year, growing to become a system of 10 acute care hospitals, six outpatient care campuses, seven nursing homes, three assisted living centers, eight advanced imaging centers, and about 380 employed primary care and specialty physicians.
More acquisitions are coming. Sentara's leaders are looking for hospitals that have been successful in their markets but cannot afford the technology, quality, and clinical integration investments needed to succeed in the era of accountable care. "The reality is that Sentara can leverage the infrastructure that we currently have in place and deploy that to additional locations at a much lower cost than if an individual hospital was just trying to do it in one location," says Maizel. "Partnering with us is a huge value-added proposition for both organizations as we come together and merge."
In the lead-up to a merger, Sentara spends a significant amount of time and energy doing an assessment of the cultural climate of all entities involved in the transaction. It also establishes an integration team with staff from both entities to address the various aspects of the merger, such as human resources, finance, and materials management.
"It's easy to assume the larger entity will dominate or exercise influence in all decisions," says Maizel. "We have learned that each side brings value to the newly consolidated organization, and we need to be open and flexible in our approach."
Some observers believe that small, rural, independent hospitals will be unable to make the transition from fee-for-service medicine to value-based care delivery. The leaders at Winona Health, a fully integrated health system in Winona, Minn., think otherwise.
The system includes a 99-bed hospital, a nursing home, and an assisted living community. Winona Health also employs 45 physicians, which is nearly the entire medical staff, since it consolidated with two physician practices. All components of the health system use the same EHR.
Thus, Winona Health has assembled a well-rounded set of resources to deliver high-value health care. But the term "value" was not even in the healthcare vernacular when Winona started working closely with its medical staff to strengthen the community healthcare system.
The system's leaders were working to ensure Winona had enough physicians to keep healthcare services local and focused on the community's needs, says CFO Mike Allen. "Along the way, our fundamental goals of increasing our scope and preserving services for the community ended up presenting us with other opportunities that we didn't even realize were out there," he says.Building for the community. Several years ago, Winona Health extended an open-ended invitation to local physician practices. The system wanted physicians to know there was a local option if there ever came a time when they wanted to consolidate with a larger organization.
"And that's what happened-the time came," says Allen. A large multispecialty practice merged with Winona Health in 2008, and one year later, a primary care practice followed suit.
Winona Health's primary motivation for acquiring the practices was to keep physicians locally employed in Winona, a community of about 28,000 residents. But the system's leaders recognized that the consolidation of services would diversify and grow its revenues.
We weren't interested in just buying practices and then just having a bunch of different operations," says Allen. "We were interested in truly having an integrated organization. Top-line revenue growth wasn't our primary objective, but as we got into it, we understood there would be many benefits to the community if we did this well-and truly merged."
As the emphasis on value in healthcare delivery is becoming more pronounced, the wisdom of Winona Health's willingness to integrate has become more clear. "Hospitals and clinics-or administrators and physicians-working together in the same organization is critical to success," says Winona CEO Rachelle Schultz. "Whether you're a small, rural, independent hospital or a large metropolitan system, the integration piece is going to be essential for the model that we need in the future."Restructuring service lines. In 2008, Winona Health reorganized its administrative structure into five service lines:
Each service line is headed jointly by a full-time administrator and a practicing physician who devotes 20 percent of his or her time to service line administration. The primary role of the physician leader is to communicate, understand the needs of, and lead the rest of the medical staff through the change process under way in the healthcare system, particularly as it relates to the role of the physician in the future, says Schultz.
"There is considerable physician input into the direction of the hospital and the initiatives we decide to put our time into," says Brett Whyte, MD, the physician administrator for the ED/urgent care service line. For example, physician administrators work on protocol development, peer review, quality initiatives, and the hiring of provider staff.
This organizational structure has proved itself through steadily improving clinical quality and efficiency, says Schultz. The hospital's average inpatient length of stay has decreased in recent years, and its 30-day readmission rate is 2.2 percent, compared to the national average of more than 18 percent. Schultz attributes those successes to Winona Health's coordination of services across the continuum of care.
In addition, Winona Health has received pay-for- performance payments from insurers and from the federal government for its participation in the Physician Quality Reporting System and e-prescribing initiatives.
Facing challenges. Just like other systems, Winona Health has found that some physicians are happy to give up the administrative hassles of running their practices in return for job security and more stable income, but they want the decision-making autonomy they have enjoyed in the past, says Whyte.
"Part of our jobs as physician-administrators is massaging the relationship with all providers into a place that works for both parties," he says. The key, he has found, is involving physicians-and for that matter, nurses, orderlies, and all staff-in decision making so they are vested in making new initiatives work.
For example, when Winona Health set a goal of attaining a Level IV trauma designation from the state of Minnesota, physician administrators tracked quality measures related to trauma management to show Winona Health's performance, which helped staff members get on board. "Medical people like data and begin to believe in an initiative when they see improvement in the numbers," says Whyte.
Another challenge is the financial burden that came with merging with physician practices. "Beyond the acquisition costs, the biggest investment is the time it takes to build relationships, look for best practices, consolidate administrative functions, and assimilate cultures," says Allen. "We have spent and continue to spend a lot of energy around all of these issues because they are drivers for success."
In today's healthcare environment, the revenue produced by the typical outpatient clinic is not sufficient to pay the ever-rising costs of staff, equipment, utilities, and facilities needed to generate that revenue, says Allen. "But if you merge that physician clinic model into an integrated health system that already has a lab, radiology, surgery, and other services, you can find the efficiencies to help reduce or eliminate those losses," he says.
Long term, Winona expects to reap anticipated rewards. "The lesson is to commit to full integration, administratively and clinically, and trust that the efficiencies can be found to make the merger financially worthwhile," says Allen.Embracing integration opportunities. Soon after Winona Health acquired the two physician practices, leaders instituted some changes to gain rapid economies of scale. For example, one of the first moves was to combine outpatient and inpatient laboratory and physical therapy departments.
Winona Health's hospital and clinic business offices have also been combined and will soon be using a single information system that manages the billing processes for inpatient and outpatient services.
The goal: By 2013, Winona Health will be able to produce a single patient-friendly bill that includes ambulatory and hospital charges, says Allen. Key steps to achieving this goal include re-mapping the revenue cycle, creating standardized work processes, consolidating and integrating billing systems with the EHR, and automating as many steps as possible.
On the clinical side, Winona aims to achieve efficiencies and improve quality by creating a seamless continuum of care. "We're trying to create the clinical processes that follow the patient according to his or her specific needs throughout the continuum of care-whether clinic to hospital to home care or to long-term care" says Allen. "These are not separate processes; it is one process of care delivered in different locations."
One step to achieving this seamless continuum: Developing evidence-based order sets for common complaints and diagnoses (for example, chest pain or shortness of breath) that can be used in various settings across the continuum. For example, if Whyte sees a patient with chest pain in the ED, he uses the same protocol that would be applied in an outpatient clinic or nursing home. "I now rely less on my memory to remember all the necessary tests or treatments that each patient needs," says Whyte.
All of these improvements reflect Winona's goal of developing an integrated, coordinated model of care. Leaders of integrated health systems should understand the important role of ambulatory care in the healthcare delivery system as a whole. Hospitals are an important component but not at the exclusion of the rest of the system. Indeed, hospitalizations may signal the failure of meeting patient needs in the ambulatory setting, says Schultz.
But today's regulatory and payment environments make the hospital the dominant engine, creating a barrier to the culture change that needs to happen, she says. "It is a very difficult shift to make mentally because we're operating in a hospital world when we really need to be operating in an integrated, cross-continuum way," says Schultz.Return to the full Leadership report
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