• The Right Path to Integration: Insights from Health Executives

    Lauren Phillips Nov 04, 2014

    Caught between volume and value, two healthcare organizations—one large and one small—are following different strategies to achieve integration, but reaching some of the same conclusions.

    As health care works its way from a volume- to a value- based orientation, hospital leaders need to seize the opportunity to reduce the total cost of care through greater clinical, financial, and operational integration. While there is no one-size-fits-all model of transformation, the status quo is not a viable strategy, according to an American Hospital Association report (Your Hospital’s Path to the Second Curve: Integration and Transformation, January 2014). A hospital or health system may choose to pursue multiple paths through the gap—each with its own risks and rewards—but all require proactive strategic planning.

    The experiences of two California organizations illustrate how hospitals on opposite ends of the spectrum in terms of size, resources, and experience can hope to achieve the Institute for Healthcare Improvement’s Triple Aim (population health, enhanced experience of care, and lower per capita cost) through integration.

    Sharp HealthCare

    Thanks to a strategy of acquisition in the 1970s and 1980s, Sharp HealthCare is big in every way. It is the largest healthcare system in San Diego with acute and specialty hospitals, 2,600 affiliated physicians, two affiliated medical groups, 21 outpatient clinics, as well as urgent care, home care, post-acute, and pharmaceutical offerings. It also has its own health plan.

    Currently in its 13th year of consecutive growth with no acquisitions, Sharp is not far off the $3 billion mark in annual net revenue. It has the largest share of its county’s competitive inpatient market, growing outpatient revenues, and fairly strong margins.

    Continuing to build a continuum. Decades after accepting bundled payments for specialty services, Sharp is trying fresh approaches to growth other than acquisition. Among Sharp’s current strategic priorities is post-acute care management and the development of new partnerships to strengthen the continuum of care.

    For example, Sharp has entered into partnerships with diagnostic and imaging centers and bone marrow transplant services, as well as CVS and their Minute Clinics. “An integrated healthcare delivery system is a marathon, not a sprint,” according to Daniel L. Gross, DNSc, RN, Sharp’s executive vice president of hospital operations. “Acquisition strategies alone do not produce integration, and the continuum need not be wholly owned. But it must exist.”

    For healthcare organizations new to integration and population management, Gross suggests the following path:

    • Develop the care continuum.
    • Gain alignment and commitment from physicians.
    • Assess purchaser motivation and readiness.
    • Develop risk-based contracts, featuring capitation and bundled payments.
    • Develop a health plan and/or new relationships.

    Emphasizing care management. Gross stresses that care management processes must be clearly defined so that transitions are seamless. Toward that end, Sharp’s care delivery model includes:

    • Integrated case management (e.g., acute inpatient, office-based, chronic, and complex-based programs)
    • Systemwide service line models (e.g., oncology, orthopedic, cardiac, behavioral, rehabilitation)
    • New care delivery models (e.g., primary care medical homes, palliative care, population health, telehealth, and telemedicine)
    • Care management-focused data solutions (e.g., robust data warehouses and tracking technologies)

    Setting realistic goals. “Sharp had great capital investments with several not producing an ROI for several years,” says Gross. “For example, our early capitation experiments and foundation medical group endeavors did not break even for a decade.”

    It’s essential that an organization have very specific integration goals—along with a realistic timeline and sufficient resources for reaching those goals, he says. “One of Sharp HealthCare’s priorities is determining what types of capital investments are needed to ensure that we have the tools and information to deliver high-quality, cost-efficient care. Data analytics with easily accessible information at the front line is an imperative.”

    Another important change that health systems are experiencing is the shift in volume from inpatient to high-acuity outpatient populations. As a result, Sharp is modifying the traditional hospital inpatient care delivery model.

    “The historic inpatient is now oftentimes an outpatient experiencing intense treatment in a condensed timeframe with increased technology, discharge planning, and educational needs,” says Gross. “Health systems have to be creative and forward thinking to ensure patient care and financial goals are achieved. Oftentimes, this means placing this population in new patient care units with higher nursing ratios and streamlined plans of care.”

    Bear Valley Community Healthcare District

    In a 2012 study, the California Hospital Association (CHA) identified five categories of hospitals—aggregators, health managers, connectors, innovators, and diversifiers—and highlighted effective transformation strategies for each category (see the exhibit below).


    Bear Valley Community Healthcare District (BVCHD) is a connector. Located in a year-round resort area, it is an independent hospital that is busy exploring opportunities for partnerships in what it envisions as a regionalized system of care.

    The 30-bed hospital, located in Big Bear Lake, Calif., faces multiple challenges, many of which are specific to its rural status (e.g., difficulty recruiting providers) and others that are especially daunting for small community hospitals, including Medicare and Medicaid cuts, ICD-10, and physician alignment. It is also coming off a 15-month slide in both cash and investments, in part the result of a new facility construction paid for out of cash reserves, which it now must replenish.

    Focusing on integration and diversification. BVCHD has taken to heart the CHA study’s conclusions that integration will become more important than scale in driving revenues and reducing costs—and that diversification will be a key lever in gaining profitability and access to capital. Thus, the small hospital is beginning to move towards the integration strategies that CHA suggested for connector hospitals:

    • Aim for a narrow service mix for high-frequency, community-based ambulatory and acute care services.
    • For other services, develop a regional delivery network of ambulatory, tertiary, quaternary, and post-acute care partners based on quality, cost, and proximity.
    • Work with preferred network partners to create “frictionless” connections
      • Develop virtual care collaborations where possible, such as neuro-telemedicine consults, and expedite transfers with appropriate health information
    • Leverage regional network partners to maximize access to resources, such as technology, purchasing, and performance improvement.

    “This may be the biggest single decision our current board of directors will ever make,” explained BVCHD’s CEO, Raymond T. Hino, MPA, FACHE. “We’re looking at reinventing rural health care in our market.”


    Following a nine-step affiliation plan. The first thing BVCHD did was establish an ad-hoc committee of the board of directors, says Hino. This group then developed a nine-step procedure for finding and formalizing new partnerships, one that could well serve as a template for other small and rural hospitals to adapt. As of July 2014, the hospital had worked through the first seven steps:

    • Establish a set of guiding principles.
    • Identify needs in special areas.
    • Prioritize and rank needs.
    • Identify resources to be requested.
    • Evaluate the gap between needs and partner capabilities.
    • Identify preferred partnership/affiliation model.
    • Assemble information packet for potential partners.
    • Issue request for proposals.
    • Make final selection and negotiate a contract with the best partner for the facility.

    Given BVCHD’s priority on keeping local control, says Hino, “we’re intending to focus on arrangements that focus on affiliation rather than consolidation.”

    Similar Conclusions

    Both Sharp and BVCHD have reached some of the same conclusions about what makes for successful integration. One is board commitment. Another is insight into the readiness and reactions of potential partners within the community.

    A third is engagement of key stakeholders in strategy development. “It’s essential to have buy-in from the medical staff, the community, and labor organizations,” says Hino.

    Another belief held strongly by both BVCHD and Sharp HealthCare: Moving forward toward the Triple Aim is the only option—not just for their own organization, but for all hospitals and health systems.

    Lauren Phillips is president of Phillips Medical Writers, Ltd., Bellingham, Wash.

    Quoted in this article:
    Daniel L. Gross, DNSc, RN, is executive vice president of hospital operations, Sharp Healthcare, San Diego, Calif.
    Raymond T. Hino, MPA, FACHE, is CEO, Bear Valley Community Healthcare District, Big Bear Lake, Calif.

    This article is based on the April 16, 2014, HPOE Webinar, Your Hospital’s Path to the Second Curve: Integration and Transformation.

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