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It’s a long and winding road facing providers, payers and even patients, as all seek to lower cost and improve quality
True story: An executive with a big IDN looked into the IDN’s free text section of their electronic health record database of patient encounters – almost half a million of patients in the population they were servicing – in search of a single word that could reliably predict which patients were least prone to being readmitted to the hospital soon after discharge. (Keep in mind that the Centers for Medicare & Medicaid Services has been penalizing hospitals for avoidable readmissions since October 2012.) She found the word. It wasn’t clinical. In fact, it was the word “mother.” It turns out that patients where “mother” was mentioned in the medical record are the least likely to be readmitted, at least among this IDN’s population, lending weight to the importance of family and a strong social fabric in an effective recovery process. Conversely, the executive looked for one word that could serve as a predictor of which patients were most likely to be readmitted. She found it, in the form of an acronym – WOW, standing for “walker on wheels.” These patients have a much higher risk of falling and hence, of being readmitted. This IDN then targeted proactive care management processes to prevent these readmissions.“This is just a small example of using big data that we couldn’t have done even a few years ago,” said Mark Dixon, former health system executive and now a Minneapolis, Minn.-based healthcare consultant, who told the story at the recent Market Insights conference, sponsored by MDSI, publisher of the Journal of Healthcare Contracting. In his presentation to an audience made up largely of manufacturers and distribution executives, Dixon provided a C-suite perspective on healthcare reform, emphasizing cost reduction, quality improvement and greater access to care. He also spelled out the implications for vendors and suppliers.
Prior to forming the Mark Dixon Group, he served a number of executive roles, including regional president of Fairview Health Services, president and CEO of Community Hospitals of Indiana, and CEO of Abbott Northwestern Hospital.
The driver of most of the changes occurring in healthcare today is simple, said Dixon. Healthcare costs have risen to the point where they threaten America’s ability to compete in the world economy. And, it’s just too expensive for the average family. Healthcare reform is intended to address the issue in four key ways: the HITECH Act, designed to stimulate the implementation of electronic health records; value-based purchasing; accountable care organizations; and insurance reform.
Through value-based purchasing, the government is attempting to reimburse providers NOT on the basis of how many procedures they perform, but on how well they can improve outcomes, reduce readmissions and hospital-acquired conditions, and improve patient experience. “Finally, we’re going to be held accountable for our mission, that is, to improve the health of the communities we serve,” said Dixon. “This is a good thing. We’re finally being paid to do good work and provide value.”
ACOs, not HMOs
Accountable care organizations, or ACOs, are one vehicle the government hopes will hasten the “volume-to-value” movement, said Dixon. The idea is to bring together groups of providers to deliver seamless, well-coordinated, patient-centered, high-quality care. Already 324 accountable care organizations are operating in the country, including those enrolled in the Medicare Pioneer ACO program as well as the Medicare Shared Savings Program. Some are centered around the large IDNs and others are extensions of physician organizations. ACOs differ from the health maintenance organizations and the rush to capitation of the 1990s, said Dixon. “In the 1990s, we were only changing payment systems; we were not fundamentally changing care or reducing variation of practice among physicians and hospitals.” In contrast, accountable care organizations focus on coordinating care across the continuum, aligning incentives, improving the patient experience and rewarding value. Medicare has taken a lead role in stimulating the creation of ACOs, but commercial payers are moving in the same direction, he pointed out.
Fundamental to this change is actually changing the care we provide, said Dixon. Many systems have moved toward team-based, patient-centered medical home (PCMH) models as a fundamental underpinning of this ACO model. “The best people to improve the care are those that deliver it,” he said. PCMHs are all provider-driven, team-based care directed toward the triple aim of improved quality, improved patient and family experience, and reduced population health cost.
ACOs will be expected to monitor patient outcomes as well as variation in the treatment of various populations, such as patients with diabetes or heart failure. Based on data, they will derive clinical pathways, and offer clinicians evidence-based choices for the care they provide. Using data from the electronic health record, they can also identify and then focus additional care management resources on that 5 percent of the patient population that is responsible for 50 percent of the population health claims expenses.
The feds are asking accountable care organizations to share in the savings created initially, as well as moving to upside/downside risk models in the future. They are also offering bundled episode payments, that is, payment per procedure. In other words, the provider receives a fixed amount of money for pre-hospital work, surgery and hospital recuperation, and post-hospital follow-up. Typical episodes might be open heart surgery or back surgery
Integrated delivery networks are responding to cost and quality imperatives too, said Dixon. Most are attempting “radical operational performance improvements.” After all, most IDNs are encountering negative margins on their Medicare patients – their fastest-growing patient population. To make money on Medicare requires significant expense reductions, sometimes in the 10 percent-to-20-percent range, he said. These radical operational improvements also often find IDNs developing what Dixon called “operating company models,” in which many more decisions are made at the system level instead of the local hospital level. Most IDNs are also acquiring physician practices to create alignment with these new models of care. Today, more than 50 percent of the country’s physicians are employed, Dixon said. And IDNs continue to acquire hospitals and merge with smaller systems.
“You need scale to survive in these new models,” he said. To be successful, net revenues of $500 million or even a billion dollars might not be enough anymore. “You need to be in the $5 billion to $7 billion range to have enough scale for these ACOs and new models.”
Truly a journey
Changing course, from volume to value, isn’t easy or fast, said Dixon. “It truly is a journey. We’re still moving from a volume-driven, fragmented-care model, toward a value-driven, coordinated-care model. And it’s not happening all at once.” Despite the gradual shift toward value-based purchasing, IDNs find themselves with one foot in the fee-for-service world, and the other in the value-based world.
To succeed in their efforts to provide better care to more people at a lower cost, providers are trying to activate patients and engage them in their own care, said Dixon. “Patients haven’t had a lot of skin in the game,” he said. One IDN offers its population health patients in its service area 24/7 “Skype-type” access to its emergency department. Parents with a sick kid can video-chat with a physician to see if the situation merited a trip to the ER. “Patients love it,” he said. “You’ve given them the ability to access healthcare on their own terms rather than forcing them to get in their cars and take a half day off work.”
The industry has a tough couple of years ahead, as IDNs struggle to adapt to the changes, said Dixon. “There will be some winners and some losers. Some won’t make it, and they’ll have to close or merge with someone else. Others will get their cost models in place, focus on eliminating readmissions, accept and manage risk. They will have the analytics, so they know where to change their organizations.”
Not all IDNs and providers will be impacted the same, he added. “Different sectors of IDNs are going to behave differently. The response might vary widely across organizations, such as academic medical centers, rural hospitals, children’s hospitals, large integrated systems, and physician-led organizations.”
What suppliers need to know
To be successful, suppliers will need to understand that decision-making is more centralized in large IDNs and ACOs, said Dixon. C-suite executives want to talk strategy, not features and benefits. Suppliers need to figure out – and be able to articulate – the connection between their products and services, and the goals of their provider customers. “There are lots of implications for suppliers, as they move from selling to technical buyers, to selling to economic buyers and value analysis teams. It’s no longer only price-selling, but total cost of care, evidence-based outcomes, value creation. Suppliers need to add true measureable value – measureable is the key adjective here.”
“If you’re successful in this model, you will sell fewer products, so you need to be careful who you’re aligned with,” Dixon told the suppliers. Successful IDNs and ACOs may buy fewer equipment/supplies per unit of service, but they will deliver more units of service – that is, serve larger populations – than others. Suppliers need to focus on solving their customer’s strategic problems.
Market Insights Sponsor: Premier
Premier is the nation’s largest performance improvement alliance of more than 2,800 U.S. hospitals and 90,000 other sites using the power of collaboration and technology to lead the transformation to coordinated, high-quality, cost-effective care. Owned by healthcare providers, Premier operates a leading purchasing network with nearly $5 billion in annual savings. Premier also maintains clinical, financial and outcomes databases based on 1 in every 4 patient discharges. A world leader in measurably improving patient care, Premier has the largest performance improvement collaboratives in America, including one in partnership with the Centers for Medicare & Medicaid Services. Headquartered in Charlotte, N.C., Premier also has an office in Washington. http://www.premierinc.com. Stay connected with Premier on Facebook, Twitter and YouTube.