Column | Strategic Partnerships Mergers and Acquisitions

New milestones in healthcare’s evolution signal the need for a new look at integrated delivery systems

Column | Strategic Partnerships Mergers and Acquisitions

New milestones in healthcare’s evolution signal the need for a new look at integrated delivery systems


Given the waves of change that have swept over healthcare in recent years, it’s time to step back and think again about integration – and how to maximize its impact and optimize care.

It’s been more than 30 years since physician groups, hospitals and many health plans began forming integrated delivery networks (IDSs). For some (for example, Kaiser Permanente and Geisinger), it has been much longer.a There have been many course adjustments and refinements along the way.

Dean Coddington, Beth Fischer and I wrote our first book describing 10 IDSs, their accomplishments and their differences in 1994. Since then, we and others — both area-specific experts and generalists — have worked with, talked and written about, and helped shape today’s IDSs.

With three decades of change behind them, including one year of unprecedented turmoil, it’s time for IDSs to take a new look at themselves. And for each IDS, the first step in this effort should be to tailor the assessment questions to reflect unique goals and other factors that differentiate it from other IDSs.

Consider those differences. IDSs answer to different interested parties from market to market. Some are actually “systems of systems.”  Some serve a range of populations and communities with specific problems and opportunities. They may be academic or community health systems serving large or small markets with regional or rural boards, with private, community, state or local ownership. Many cross state borders (or even national borders) and need to accommodate different legal issues and ways of doing business.

5  areas of focus for self-assessment

As systems proceed with their self-assessments, they should address, at a minimum, the following issues.

1 The degree to which the system’s macro-elements (e.g., physicians and other caregivers, hospitals and other care environments, and payers) fit together well.  This interconnectedness is the core idea (and to a degree the legal justification) behind an IDS’s existence.

Thus, recognizing that each element has its own economics (its own revenues, expense requirements, revenue cycles, variance of market factors), the assessment should consider the extent to which they complement each other. Key questions to ask are:

  • Do they support each other in hard times? 
  • Do they support the ongoing needs of each other and have clear lines of communication (among managers at the top and on down through several levels of each organization)? 
  • Is there a common culture – or at least is there recognition and appreciation of each other’s culture?
  • Is there an appropriate level of revenue and cost sharing among the three macro-elements?

An important consideration is whether the “glue” that holds the elements together is optimized for today’s environment. Information and communications systems, including current and planned artificial intelligence (AI), should be structured to ensure the hospitals, physicians and payers work well together. When one component leaps ahead, there should be a clear plan for bringing the other two along that makes sense to them.

Attention also should be given to how well the macro-element leaders are working together.

Key questions include:

  • Do the physician and hospital leaders like each other? 
  • Do they have a relaxed, sympathetic and thought-sharing relationship? 
  • Is there meaningful diversity (e.g., gender, age, ethnicity) among them? 
  • Does the system CEO show a lack of favoritism across the three?

2 The strength of the IDS’s performance in its recent stress test with COVID-19. It is important that the system’s macro-elements worked well together in terms of communication, shared values and attention to financial considerations. Points to consider include whether: 

  • They communicate about and distribute the vaccine well together, both internally and externally
  • They are united on issues pertaining to communities, government entities, professional societies and associations 
  • They collaborate well in managing financial performance

3 The balance and performance of IDS’s sub-elements, such as specialist and primary care providers. Regarding the physicians, a key concern is whether their numbers are right-sized for the other elements. Key questions are:

  • Is primary care optimized (for the systems’ X number of specialists, market and hospital system)?
  • Are the ratios of referrals inside versus outside the system within acceptable limits?  
  • Do primary care physicians have a workable professional life – given, for example, the increased physician after-hours work as electronic messaging and documentation continue to grow? 
  • Are specialists of the right caliber, mix and collaborative culture to take the system to its next level?

In today’s healthcare environment, it also is critical that the complement of hospitals and other facilities work well together? With this point in mind, the assessment should look at how well the hospitals cover the market area, and whether they have the optimally sized market area (e.g.,  with sufficient opportunities for growth and increased scale).

The IDS’s payer strategy also should be considered, along with whether it might need to be reassessed. A key question: Is the payer element sized well relative to other elements of the system to allow the system to achieve its growth potential?  (Often the answer to this question is, “no.”) For the many systems that do not include their own health plan, the question is, Should they?

4 The relationship between the IDS’s internal elements and those outside the system. Ideally, there should be appropriate give and take among physicians inside and outside the system, and where appropriate, physicians outside the system should be referring to the system’s physicians, hospitals and payers. Key considerations with respect to this relationship are whether  contractual relations are good and outsiders respect the system.

5 The IDS’s growth trajectory. IDS leaders should assess the extent to which the system is innovating, improving and growing. This part of the assessment should focus on questions such as the following:

  • Is the IDS delivering better care than it did three years ago?
  • Is the system happy with its growth trajectory?
  • Is it performing well financially? 
  • How does the future look for the system? 

Key points of focus include:

  • How well the IDS has hedged its bets against any likely future scenarios (Does it need to do more?)
  • Whether it is meeting community, state and regional needs better today than it did seven years ago 
  • Whether it has a continually improving workforce 
  • The extent to which it takes advantage of the best national and international thinking with respect to innovation, and whether it is contributing to innovation

The overarching goal of self-assessment

The broad purpose of the self-assessment, simply put, is evaluate all of the IDS’s elements as a group to determine how well the system is living up to its promise. Despite their inherent differences, IDSs all have enormous potential. And to the extent that each one can assess and deliver on its potential, everyone benefits.

Footnote

a Kaiser Permanente began in the run-up to WWII, and Geisinger began in 1915.

About the Author

Keith D. Moore, MCP,

is CEO of McManis Consulting, Denver, and a member of HFMA’s Colorado Chapter.   

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