How Community Hospitals Can Survive and Thrive …...Survive—and Thrive—in Their Markets Seven...
Transcript of How Community Hospitals Can Survive and Thrive …...Survive—and Thrive—in Their Markets Seven...
How Community Hospitals Can
Survive—and Thrive—in Their Markets Seven Tactics for Executives Leading Independent Hospitals Through the
Transition to Value
Health Care Advisory Board Community Hospital Initiative
July 13, 2016
Trevor Goldsmith
Consultant
Health Care Advisory Board
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Source: Health Care Advisory Board interviews and analysis.
The Community Hospital Initiative
Executive Working Sessions
Community Hospital-AMC
Partnerships: June 14, 2016
Community Hospitals in Consumer-
Driven Health Care: August 23,
2016
Community Hospital Population
Health Strategies: Fall 2016
Services and Support
On-Demand Experts Peer Networking Quantitative Tools
Community Hospital Quarterly
Community Hospital Benchmark
Series
Case Studies and Research Briefs
Community Hospital Blog Reports
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Hard Times for Community Hospitals
Basic Economics Threatening Smaller Hospitals and Independents
Source: Moody’s Investor Services, “Preliminary Fiscal Year 2012 Medians for US Not-for-Profit Hospitals
Show Weakened Performance,” May 3, 2013; Health Care Advisory Board data and analysis.
$9,587
$23,194
$6,675
$15,332
Medical Surgical
Over 250 Beds Under 250 Beds
Commercial Reimbursement
Total Margin Scenario Planner Participants
$1.48B
$527M
$402M
$245M
967
414 316
190
Aa A Baa Below Baa
Operating Revenue Bed Size
Hospital Bond Ratings
By Median Operating Revenue and Bed Size
Total Margin Scenario Program
Advisory Board analysis of commercial
reimbursement data from over 800
member hospitals across the country
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Finding the Community Hospital Advantage
Seven Tactics to Guide Community Hospital Growth in a Changing Market
Source: Health Care Advisory Board interviews and analysis.
1 Focus on outpatient growth
2 Embrace principled partnerships
3 Determine your costs and cut waste
4 Prepare for population health with limited investment
5 Creatively engage and enhance physician workforce
6 Reach out to consumers and independent physicians
7 If you need to sell, get ahead of the market
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119.7
103.7
2000-2014
Shift from Inpatient to Outpatient Likely to Continue
1. Focus on Outpatient Growth
Sources: Trendwatch Chartbook 2016, American Hospital
Association; Health Care Advisory Board interviews and analysis.
Inpatient Admissions per 1,000 vs.
Outpatient Revenue Key Factors Driving
Utilization Changes
Clinical advances leading
to less-invasive treatment
Rising-risk patient
detection reduces
frequency of acute events
High out-of-pocket
obligations lower overall
utilization
35%
46%
Inpatient
admissions
Outpatient
revenue
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Picking Your Battles
Which Services Will Your Market Support?
1. Focus on Outpatient Growth
Source: Health Care Advisory Board interviews and analysis.
Identifying Competitive Services
Payment Transformation Challenge
Patient data fragmented by site of service will hobble effective
population health management.
Battleground
• Cardiology
• Oncology
• Orthopedics
• Pediatrics
• Obstetrics
Baseline
• Emergency department
• Primary care
• General medicine
• General surgery
• Imaging
Advanced
• Cardiac surgery
• Neurosurgery
• Transplants
• Technology-intensive
procedures
Increasing Complexity
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Leveraging Scale and Location to Compete
1. Focus on Outpatient Growth
Source: Health Care Advisory Board interviews and analysis.
Three Steps for a Coherent Community Hospital Service Line Strategy
3 Find Compatible Partners
1 Identify Service Strengths
Key Questions
• Which services ‘don’t
travel well’?
• What is the rate of out-
migration for place-
bound services?
• Does the total business
opportunity justify
investment?
2 Develop Continuum
Key Questions
• How can care-
coordination and local
presence keep patients
loyal?
• Which services do you
have to let go?
Key Questions
• Which tertiary or
quaternary partners can
you work with?
• How can you serve as
the access point for
patients to more
complicated services?
• How can you keep
patients anchored to
your locally available
services?
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Non-Traditional Partnerships on the Rise
New Models Aim at Integration Without M&A
2. Embrace Principled Partnerships
Source: Health Care Advisory Board interviews and analysis.
Seven hospitals
form Value Care
Alliance
Five community
hospitals join Stratus
Health Care
EvergreenHealth
enters 20 year
agreement with
Virginia Mason
Four community
hospitals join
Vanderbilt Health
Affiliate Network
26 rural hospitals
form Western
Healthcare Alliance
26 hospitals join
Mayo Clinic
Care Network
Three community
hospitals join Cleveland
Clinic Affiliate Network
Mid-Columbia Medical
Center aligns with
Oregon Health &
Science University
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Partnership Realities Often Fall Short of Hopes
Clinical Affiliations and What They Deliver
2. Embrace Principled Partnerships
Source: Health Care Advisory Board interviews and analysis
For Tertiary Centers and Systems:
• Strengthened referral stream
• Extension into local communities
• Insulation in increasingly competitive
environment
• Better primary care and
population health abilities
• Co-branding
• Access to specialists
• Expert consultation
• Filling out service lines
• Potential to engage in shared
risk arrangements
For Community Hospitals: Poll responses to: “Overall, how
successful have your organization’s
affiliations been?
n = 148, 2016
16%
29% 53%
2%
Very
Not at all
My organization
has no clinical
affiliations
The Advantages Seem Obvious Success Is Not Assured
Sometimes
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How Is the Whole Greater than the Sum of Its Parts?
2. Embrace Principled Partnerships
Source: Health Care Advisory Board interviews and analysis.
Consider How Each Partnership Raises Value
Elements of an
Attractive Network
• Geographic coverage that aligns with
purchaser of interest
• Ability to meet convenience demands
of consumers (after-hours, weekend
access; virtual care; etc.)
• Better outcomes than competitors
• Adherence to evidence-based
clinical practices
• High patient satisfaction ratings
• Strong brand reputation
• Low unit prices relative to competitors
• Willingness to further reduce prices in
return for steerage
• Investment in infrastructure that
signals ability to control cost trend
Clinical Quality
Access Cost
Service Experience
Baseline Requirements
Differentiators
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A Two-Step Strategy for Capitalizing on Efficient Care
3. Determine Your Costs and Cut Waste
Source: Health Care Advisory Board interviews and analysis.
Clinical Efficiency a Top Savings Priority
• Per capita cost of care
• Efficiency and quality of care
Criteria for Network Inclusion
Study in Brief: Setting the Standard for Patient Care
Overview for board members and executives about how to advance a clinical standardization
mindset, where organizations can get started, and what they must do to create and sustain a
consistent level of quality across the enterprise
Hidden Opportunities
1. Margin Protection 2. Value-Centric Growth
• Reduced malpractice premiums
• LOS reduction enhances through-put
38%
30%
32%
Obvious Targets
• Avoidable direct costs
• Missed quality bonuses
• Avoidable P4P penalties
Narrow Networks Gaining Traction
20 Urban Markets, December 2013
“Ultra-Narrow”
Excludes 30% of 20
largest hospitals
“Narrow”
Broad
Excludes 70% of
20 largest hospitals
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Case in Brief: Value Care Alliance
Case in Brief: Britten Healthcare1
Operational Savings Often an Easier Target
3. Determine Your Costs and Cut Waste
Source: Health Care Advisory Board interviews and analysis.
1) Pseudonym.
$300K Year-on-year savings
from inventory
restructuring $2M
Savings from joint RFP
for combined reference
lab functions
• Applies LEAN philosophy to
supply chain
• Puts more than 10K bins
into service
• Piloting direct-stocking program to
remove staff from supply chain
• Audits show overstocking and
inefficient use of inventory
Regional partnership of six
Connecticut hospitals
• Early win with cost savings helps
build momentum for long-term
strategic partnership
• Overall goal to form high-value
narrow network to drive volume
100 bed independent
hospital in Midwest
• Planning similar joint cost saving
with malpractice insurance
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Next Steps and Resources
3. Determine Your Costs and Cut Waste
Data and Analytics Group
Customized Cost Reduction Opportunity Assessment
Revenue Cycle Benchmark Generator
Hospital Benchmark Generator
Customized Episodic Cost Profiler
Research Studies and White Papers
Twelve ‘Must-Do’ Strategies for Protecting Future Margins
The Sustainable Acute Care Enterprise
Bending the Expense Growth Curve
The Medicare Break-Even Project
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Value Market Challenges for Community Hospitals
CMS’s Historic Commitment Poses Special Burden
4. Prepare for Population Health with Limited Investment
Source: Sylvia Burwell, “Setting Value-Based Payment Goals — HHS Efforts to
Improve U.S. Health Care,” NEJM, 2015; Health Care Advisory Board interviews
and analysis.
$5.3M Estimated start-up
costs for ACO at
200-bed hospital
$6.3M Estimated annual
running costs for ACO
at 200-bed hospital
Significant Resources Needed Our target is to have
30% of Medicare
payments tied to
quality or value
through alternative
payment models by
the end of 2016, and
50% of payments by
the end of 2018.”
Sylvia Burwell
Secretary of HHS
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Things that Might Be Ought of Reach
Provider-Sponsored Health Plans Not a Sure Bet
4. Prepare for Population Health with Limited Investment
Source: Health Care Advisory Board interviews and analysis.
12.4 12.7
12.9
13.7
15.3
2010 2011 2012 2013 2014
Growth in PSHP1 Enrollment
Millions
+400K Growth in public
exchange enrollment in
PSHPs, 2010-2014
-10% Aggregate margin for
provider-sponsored health
plans in ACA
marketplace, 20142
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Focusing on De Facto Risk Bears Fruit
Cheyenne Regional Develops Rural Population Health Strategy
4. Prepare for Population Health with Limited Investment
Source: Health Care Advisory Board interviews and analysis.
$33M Estimated reduction in
health care costs,
2012-2015
10% Estimated decline in ED
utilization, 2014-2015
Preliminary Results
21% Increase in blood
pressure management,
2012-2014
Case in Brief: Cheyenne Regional Medical Center
• 222-bed safety-net hospital in Cheyenne, Wyoming
• Won $15M CMS grant to fund rural population health
transformation in 2010, program now self-sustaining
• Actively engaged in implementing alternative payment
models with public and commercial payers
Major Program Elements
Patient-Centered
Medical Homes
Predictive
analytics
Care-transitions
program
Community
partnerships
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Physicians at the Center of Hospital Value Creation
5. Creatively Engage and Enhance Physician Workforce
Source: Health Care Advisory Board interviews and analysis.
Care
Planning
Care
Delivery
Care
Coordination
Value-Added Processes
©2016 The Advisory Board Company • advisory.com
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Source: Advisory Board Survey Solutions’ National Physician
Engagement Database, 2014; Health Care Advisory Board interviews
and analysis.
1) Regression model includes 8 of 28 engagement drivers; r2 = 0.665
2) Regression model includes 14 of 28 engagement drivers, r2=0.638
Physicians Relate to Community Hospitals Differently
Top Drivers by Impact on Physician Engagement Determined by Multivariate Regression Analysis of 28 Engagement Drivers1
1
12
5
4
8
11
--
I am interested in physician leadership opportunities at this organization.
The actions of this organization's executive team reflect the goals and
priorities of participating clinicians.
I have good working relationships with clinicians in my principal practice
area.
I would recommend this organization to a friend or relative to receive
care.
This organization provides excellent service to patients.
This organization supports the economic growth and success of
my individual practice.
This organization supports my professional development.
I receive the operational and business support services (IT,
billing, coding, scheduling) to succeed in my practice.
Driver
Rank
All Other
Hospitals2
Rank
Community
Hospitals1
1
2
3
4
5
6
7
8
2
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Source: Advisory Board Survey Solutions’ National Physician
Engagement Database, 2014; Health Care Advisory Board interviews
and analysis.
1) Drivers shown in rank order by impact
Physician-Community Hospital Synergies Higher
Top Drivers, Community Hospital Impact Model1 Community
Hospitals
All Other
Hospitals Gap
The actions of this organization's executive team reflect the
goals and priorities of participating clinicians. 46.6% 41.7% 4.9%
I would recommend this organization to a friend or relative to
receive care. 76.6% 80.8% -4.3%
This organization provides excellent service to patients. 72.4% 74.0% -1.6%
This organization supports the economic growth and
success of my individual practice. 56.9% 47.0% 9.9%
I am interested in physician leadership opportunities at this
organization. 47.6% 46.3% 1.2%
This organization supports my professional development. 64.7% 61.2% 3.4%
I have good working relationships with clinicians in my principal
practice area. 89.9% 89.5% 0.4%
I receive the operational and business support services (IT,
billing, coding, scheduling) to succeed in my practice. 57.2% 55.4% 1.8%
Performance Variation on Agreement with Top Impact Drivers Percentage of Respondents Agreeing/Strongly Agreeing
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Three Foundations of Physician Alignment
5. Creatively Engage and Enhance Physician Workforce
Source: Health Care Advisory Board interviews and analysis.
“Why should I work for your hospital?”
Strategic Case
“This is how we will win
business together in
the future”
Operational Support
“Here is how we will
help you succeed in
your role”
Quality Case
“This is better for
patients”
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Not Always Getting Credit
Community Hospitals Crucial for Health Care
6. Reach Out to Consumers and Independent Providers
Source: Ibrahim AM, et al., (2016) “Association of Hospital Critical Access Status
with Surgical Outcomes and Expenditures Among Medicare Beneficiaries,” JAMA,
315(19): 2095-2103; Health Care Advisory Board interviews and analysis.
Data Brief: Smallest Hospitals
Provide High-Value Care
• JAMA (2016) retrospective study of
surgical outcomes at Critical Access
Hospitals
• No difference in 30-day mortality rates
at CAHs vs. others
• Decrease in serious complication rates
• Lower Medicare expenditures
Clinical Quality Not Appreciated
Even though we know our clinical
quality is excellent, the word on
the street is still: ‘If you’re really
sick, bigger is better.’” Community Hospital CEO
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Admitting There Is Room to Improve
New Leadership at Cheyenne Regional Takes Dramatic Steps
6. Reach Out to Consumers and Independent Providers
Sources: Health Care Advisory Board interviews and analysis.
Frustrated staff
Poor community image
Uncertain financial future
Cheyenne Regional, circa 2014 “A Year of Turbulence”
22% Of employees “highly
engaged”
ED patient experience 10%
Community and team
orientation has been critical.
Externally, I went on the radio
to learn what the community
didn’t appreciate about us.
Internally, the biggest work has
been having real conversations
with front-line staff around
attitude and skill.” Margo Karsten, CEO
Cheyenne Regional Medical Center
Communication Key to Rebuilding Trust
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Proactive Leadership Yields Success
Responding Before Market Position Deteriorates Is Critical
6. Reach Out to Consumers and Independent Providers
Source: Health Care Advisory Board interviews and analysis.
1) Pseudonym.
Data shows
outmigration for
cardiovascular
services
50% Reduction in
outmigration,
2010-2013
Net patient service
revenue growth,
2012-2014
21% Case in Brief: Slopehill Health1
• Independent 200-bed hospital in Mid-West
• Competition includes 4 system-affiliated
hospitals totaling more than 1400 beds
• Building identity as local hub of high
quality care
Local residents
believe bigger
hospitals provide
higher quality
Community Disaffection Sparks Big Reaction Elements of Executive Plan
Competitive CV service line 1
National affiliation 3
Data-driven rebranding 4
2 Regionalization CEO rallies board
and independent
physicians
around retaining
independence
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Independence Is a Means to an End
“What’s the Tipping Point?” Not the Only Question
7. If You Need to Sell, Get Ahead of the Market
Source: Health Care Advisory Board interviews and analysis.
Independent Interdependent
Management & Governance Autonomous Integrated
Identity & Culture Local Standardized
Capital Plan Agile Stable
Service Portfolio Tailored and
concentrated
Rationalized and
distributed
The Real Value of Local Control
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Principled Acquisition Supports Local Mission
ValleyCare Races Against the Clock to Find Best Partner
7. If You Need to Sell, Get Ahead of the Market
Source: Health Care Advisory Board interviews and analysis.
Scott Gregerson, CEO
An affiliation shouldn’t simply represent an
opportunity to survive, but to improve.”
Case in Brief: ValleyCare Health System
• 241-bed health system in Pleasanton, California
• Acquisition by Stanford Health Care approved by California Attorney
General in April 2015
$50M Committed recapitalization
97% Approval of bid by 2,400-
member corporate board
Lost market share despite
favorable geography
Risked violating bond
covenants
Experienced turnover among
senior leadership
Board of directors proactively
initiated RFP
Board evaluated inquiries
from range of suitors
New partner will maintain
facility, strengthens position
Clear Plan for Partnership Facing Tough Realities
©2016 The Advisory Board Company • advisory.com
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Prejudging Partnership Potential Carries Risks
7. If You Need to Sell, Get Ahead of the Market
Source: Health Care Advisory Board interviews and analysis.
1) Pseudonym.
Complex Competitive Geography
$30M Cash payment by System B for
‘right of first refusal’ to acquire
Colford Health1
System A
System B Colford Health
100-bed independent
hospital in Midwest
Colford and System B have
flourishing cardio partnership
Colford maintains ‘Switzerland’
policy of partnerships with
competitors
Strategic Backdrop to Deal
Systems A and B serious
competitors
Easy Money?
©2016 The Advisory Board Company • advisory.com
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Creating Your Own Strategic Roadmap
Source: Health Care Advisory Board interviews and analysis.
What is your unique advantage as a community hospital? How can your strengths
deliver tangible value to purchasers, including consumers?
How prepared are you to pursue new opportunities and address areas where you
are falling short today?
Which investments will help you succeed under mandatory public payer risk, but
also help you win in the commercial market?
Do you have the right leadership and governance structures in place to enable
meaningful change?
Of focus areas that cannot be redirected but do not match your market imperatives,
which must be de-prioritized, or ceased altogether?
1
2
3
4
5
©2016 The Advisory Board Company • advisory.com
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Further Resources on Community Hospital Strategy
Source: Health Care Advisory Board interviews and analysis.