Rev­enue strate­gies for a new age

New re­im­burse­ment mod­els strive to keep pa­tients out of the hospi­tal, with health­care sav­ings com­ing at a cost to providers

Modern Healthcare - - FRONT PAGE -

The Cal­i­for­nia Public Em­ploy­ees’ Re­tire­ment Sys­tem hap­pily ended 2010 with in­sur­ance rates $15 mil­lion lower than they might have been, thanks to ag­gres­sive ef­forts by hos­pi­tals and doc­tors to curb med­i­cal ex­penses. Catholic Health­care West, now Dig­nity Health, which helped de­liver those sav­ings, ended that year with mil­lions of dol­lars less in rev­enue.

The San Fran­cisco-based hospi­tal sys­tem was among the early adopters of ac­count­able care, a new method to pay for health­care that has won siz­able sup­port across the in­dus­try de­spite one awk­ward fact: Hospi­tal ex­ec­u­tives try­ing to con­trol spend­ing face the costly prospect of ac­tively try­ing to keep pa­tients out of the hospi­tal.

“The bot­tom line is that this is a tough tran­si­tion time for these hos­pi­tals,” says Kris­ten Mi­randa, vice pres­i­dent of provider net­work man­age­ment at Blue Shield of Cal­i­for­nia. The in­surer joined Dig­nity Health and Hill Physi­cians in the ac­count­able care or­ga­ni­za­tion that slashed spend­ing for CALPERS.

Fewer ad­mis­sions and shorter stays at Dig­nity hos­pi­tals ac­counted for the bulk of first-year sav­ings, Mi­randa says. “That is just the re­al­ity,” she says. In­sur­ers are be­gin­ning to test pay­ments such as ac­count­able care that of­fer in­cen­tives, both car­rot and stick, to slow growth in med­i­cal ex­penses. Hos­pi­tals—with their high uti­liza­tion of pricey tech­nol­ogy and teams of highly skilled pro­fes­sion­als work­ing around the clock—are a prime tar­get to curb costs. Of all the places to care for pa­tients, hos­pi­tals ac­count for the great­est share of the na­tion’s health­care dol­lar.

So pol­i­cy­mak­ers and health­care ex­ec­u­tives have be­gun to fo­cus on pa­tients who might be able to avoid a hospi­tal visit with the right as­sis­tance to man­age their med­i­ca­tions or ill­ness.

But hospi­tal of­fi­cials say do­ing so re­quires some fi­nan­cial sup­port. Some are ne­go­ti­at­ing slightly higher pay­ments from in­sur­ers to co­or­di­nate pa­tients’ care. Ac­count­able-care con­tracts of­fer providers a cut of the sav­ings they achieve.

Oth­ers are seek­ing to be­come the sole hos- pital or sys­tem within an in­surer’s net­work in an ef­fort to gain mar­ket share.

In­deed, many ex­ec­u­tives say strate­gies to lower costs will al­low them to com­pete more ag­gres­sively and beat out ri­vals for more of the mar­ket.

Hos­pi­tals may no longer see ev­ery pa­tient who might have once been ad­mit­ted, but will make up some vol­ume with mar­ket gains, ex­ec­u­tives say.

“We think this is the only way to re­main com­pet­i­tive and have a mar­gin in the fu­ture,” says Howard Gold, se­nior vice pres­i­dent of rev­enue and busi­ness de­vel­op­ment for North Shore-long Is­land Jewish Health Sys­tem, based in Great Neck, N.Y.

Ad­just­ing to new mod­els

Fi­nan­cial con­cerns aren’t the only rea­son to keep pa­tients out of the hospi­tal. Hos­pi­tals are un­set­tling and po­ten­tially risky en­vi­ron­ments for pa­tients. Hos­pi­tals look un­com­fort­ably ster­ile but are not; pa­tients risk in­fec­tion from germs that evolved in the hospi­tal’s sickly ecosys­tem.

Still, hos­pi­tals in­creas­ingly face fi­nan­cial

in­cen­tives to re­duce ad­mis­sions. Medi­care, hos­pi­tals’ largest cus­tomer, will be­gin to cut pay­ments to hos­pi­tals with high num­bers of re­peat pa­tients start­ing in Oc­to­ber. Re­search sug­gests that many of those re­peat hospi­tal vis­its could be pre­vented.

Mean­while, new ways to pay for health­care such as bun­dled pay­ments and shared sav­ings, which in­clude fi­nan­cial penal­ties for care that drives health­care spend­ing up­ward, have added ur­gency to the ef­forts.

Hos­pi­tals be­gan to cut costs with the eco­nomic down­turn but have con­tin­ued to do so to pre­pare for new pay­ment mod­els.

Fairview Health Ser­vices, based in Min­neapo­lis, en­tered into its first con­tract to tie pay­ment to qual­ity and cost con­trols about three years ago, says Terry Car­roll, the sys­tem’s se­nior vice pres­i­dent for trans­for­ma­tion and chief in­for­ma­tion of­fi­cer. Con­tracts with pri­vate in­sur­ers have grown more so­phis­ti­cated ahead of fed­eral pay­ment re­form ef­forts, such as Medi­care ACOS and bun­dled pay­ments. Fairview is among the first to test Medi­care ac­count­able care, a group known within the in­dus­try as “Pioneer” Medi­care ACOS.

The sys­tem’s ef­forts to im­prove qual­ity and ef­fi­ciency be­gan be­fore that but are now ex­pand­ing, as is the case with ef­forts to pre­vent hospi­tal ad­mis­sions for pa­tients with con­ges­tive heart fail­ure. The Univer­sity of Min­nesota Physi­cians Heart at Fairview launched a heart-fail­ure clinic about eight years ago that is ded­i­cated to help­ing pa­tients man­age the chronic ail­ment while at home. Since then, re­peat hospi­tal vis­its for heart fail­ure have dropped 67% for pa­tients en­rolled in the clinic.

Fewer read­mis­sions mean lower costs but also lower rev­enue.

“There’s no ques­tion that if we re­duce avoid­able read­mis­sions, there’s a loss of rev­enue that goes along with that,” Car­roll says.

As a re­sult, ef­forts to man­age Fairview’s ca­pac­ity have grown more crit­i­cal, he says.

“By im­prov­ing ac­cess to care in our clin­ics, we have the op­por­tu­nity to grow clin­i­cally ap­pro­pri­ate pa­tient vol­umes and re­fer­rals to our hos­pi­tals.”

Sys­tem of­fi­cials have fo­cused ef­forts on re­duc­ing fixed costs, ad­dress­ing ex­cess ca­pac­ity and low­er­ing the to­tal cost of care, he says.

“We need to de­velop a new op­er­at­ing model that al­lows us to be re­warded for clin­i­cal and op­er­a­tional ef­fi­ciency.”

As the sys­tem seeks that new model, the heart-fail­ure pro­gram is ex­pand­ing across the Twin Cities’ sys­tem and its ef­forts con­tinue to evolve.

The heart-fail­ure pro­gram staff re­cently worked to mod­ify menus at a tran­si­tional fa­cil­ity for pa­tients who leave the hospi­tal but who are not yet strong enough to re­turn home, says Dr. David Lax­son, a car­di­ol­o­gist with the Univer­sity of Min­nesota Physi­cians Heart at Fairview and a man­ager of the heart­fail­ure pro­gram.

Heart-fail­ure pa­tients needed low-sodium di­ets and, with­out them, were re­turn­ing to the hospi­tal more fre­quently.

‘Con­sid­er­able con­ver­sa­tion’

The ef­fort for CALPERS shaved $20 mil­lion off med­i­cal costs, of which $15 mil­lion was passed along to CALPERS. Dig­nity, Hill Physi­cians and Blue Shield of Cal­i­for­nia shared the re­main­ing $5 mil­lion, which helped off­set some lost rev­enue, Blue Shield’s Mi­randa says.

CALPERS re­ported that hospi­tal read­mis­sions dropped 15% dur­ing the first year of the ef­fort, and pa­tients who were ad­mit­ted did not stay as long. The av­er­age pa­tient visit fell by half of a day. Fewer pa­tients had lengthy hospi­tal stays; the num­ber of pa­tients who re­mained in the hospi­tal for at least 20 days was re­duced by half, ac­cord­ing to CALPERS.

To mit­i­gate the loss to hos­pi­tals, the ac­count­able-care part­ners sought to re­fer or trans­fer pa­tients when­ever ap­pro­pri­ate to Dig­nity hos­pi­tals from non-net­work hos­pi­tals, Mi­randa says.

Pa­tients in­cluded in the ac­count­able-care net­work who pre­vi­ously were re­ferred else­where were di­rected to Dig­nity hos­pi­tals; those ACO pa­tients ad­mit­ted out­side the ac­count­able-care net­work were trans­ferred when pos­si­ble, she says.

Mi­randa says the ac­count­able-care net­work also gained some pa­tients be­cause its cov­er­age was priced more com­pet­i­tively. That’s be­cause Dig­nity, Hill Physi­cians and Blue Shield agreed to ab­sorb losses if CALPERS health­care costs in­creased rather than dropped, which al­lowed the in­surer to more ag­gres­sively price ben­e­fits.

Blue Shield of Cal­i­for­nia has since reached five more deals for ACOS with two more un­der de­vel­op­ment. That hos­pi­tals will see the largest change to rev­enue “has been a point of con­sid­er­able con­ver­sa­tion,” Mi­randa says.

She says hos­pi­tals that move early to adopt new pay­ment mod­els should be ap­plauded.

“The next three to four years are go­ing to be tough­est on hos­pi­tals that sur­vived on straight­for­ward fee-for-ser­vice,” Mi­randa says.

Money to spend?

Pol­i­cy­mak­ers have sought to edge hos­pi­tals away from fee-for-ser­vice, a pay­ment model that pays for the vol­ume of ser­vices or hospi­tal ad­mis­sions. Fee-for-ser­vice has been widely crit­i­cized for giv­ing hos­pi­tals and doc­tors an in­cen­tive to per­form more pro­ce­dures or in­crease vis­its.

The Pa­tient Pro­tec­tion and Af­ford­able Care Act calls for al­ter­na­tives to fee-for-ser­vice, in­clud­ing ac­count­able care and bun­dled pay­ments. Some health sys­tems and med­i­cal groups se­lected to be the first to test ac­count­able care will switch from fee-for-ser­vice to cap­i­ta­tion, or a lump sum to cover all med­i­cal costs, start­ing in 2014.

Pri­vate-mar­ket ef­forts to re­vamp health pay­ments and curb health spend­ing have also emerged, such as the Blue Shield of Cal­i­for­nia con­tracts.

North Shore-lij op­er­ates with roughly 5% of its busi­ness un­der com­mer­cial con­tracts that put the sys­tem at fi­nan­cial risk to man­age health­care costs.

That per­cent­age is ex­pected to grow, Gold

says. North Shore will move em­ploy­ees into sim­i­lar con­tracts start­ing next year. The sys­tem, which owns 11 hos­pi­tals, will also seek to test Medi­care bun­dled pay­ments.

Gold says the sys­tem is work­ing to adopt nec­es­sary an­a­lyt­i­cal tools to sup­port cost­con­trol ef­forts, which will tar­get pa­tients in need of fre­quent or com­plex care.

“You go where the spend is,” he says. “You go where the use is.”

Lower costs would cre­ate a profit on op­er­a­tions at more com­pet­i­tive rates to lure pa­tients away from ri­vals, he says. “We ex­pect if we do this right … we’ll have more money to spend,” Gold says.

Per­haps not im­me­di­ately. Gold ac­knowl­edges the sys­tem’s early ef­fort to man­age costs for a small group of pa­tients leaves North Shore-lij with­out the scale and fi­nan­cial cush­ion of larger ef­forts.

That could leave the sys­tem vul­ner­a­ble to losses as it learns from its first at­tempts, but Gold says the ed­u­ca­tion is worth po­ten­tial hits for fu­ture gains.

“We’re will­ing to take that risk,” Gold says.

For In­ter­moun­tain Health­care, pop­u­la­tion growth has helped off­set lost rev­enue as a grow­ing list of well­ness and qual­ity ef­forts have kept pa­tients out of the hospi­tal or less­ened the need for highly com­plex treat­ment, says Greg Poulsen, se­nior vice pres­i­dent for the sys­tem.

But with fewer less-com­plex pa­tients treated in the hospi­tal, beds have filled with those more acutely ill.

“To a greater and greater de­gree, our hos­pi­tals are be­com­ing big ICUS,” he says. That puts greater de­mands on doc­tors and nurses; some re­quire ad­di­tional train­ing to care for the more acutely ill pa­tients.

Less hospi­tal con­struc­tion

Nonethe­less, sys­tem of­fi­cials have scaled back pro­jected cap­i­tal needs for in­pa­tient ser­vices and in­stead will in­vest in out­pa­tient care and physi­cian of­fices, he says.

“If we can get peo­ple to be treated in a more ef­fec­tive way, prob­a­bly ear­lier, and avoid un­nec­es­sary hos­pi­tal­iza­tion, we think that’s good across the board, ex­cept for the hos­pi­tals, per se,” he says.

Hos­pi­tals should have time to adapt to chang­ing vol­ume and de­mands, he says. “Cer- tainly our ex­pec­ta­tion will be less con­struc­tion of in­pa­tient fa­cil­i­ties than in the past,” Poulsen says.

Of course, not all hos­pi­tals op­er­ate in grow­ing mar­kets. Ex­ec­u­tives say they ex­pect cost-cut­ting ef­forts to win over pa­tients with lower costs.

“We think if we do the right thing” by slow­ing health­care spend­ing “peo­ple will take no­tice,” says Ge­orge Wheeler, vice pres­i­dent of man­aged care for Bon Se­cours Health Sys­tem in Virginia. Wheeler says the sys­tem will seek to gain mar­ket share.

But as hos­pi­tals in­vest to pre­vent hospi­tal ad­mis­sions, in­sur­ers must some­how pay for ser­vices that were not pre­vi­ously cov­ered to off­set some lost rev­enue, says Dr. Mar­lon Priest, ex­ec­u­tive vice pres­i­dent and chief med­i­cal of­fi­cer for Bon Se­cours.

As hos­pi­tals com­pete to claim a big­ger share of their mar­kets, the strat­egy could pro­duce new al­liances as well as win­ners and losers. One hospi­tal’s mar­ket share gain is an­other’s loss.

As Leo Brideau, pres­i­dent and CEO of the As­cen­sion Health Care Net­work in St. Louis, told a con­fer­ence in New York: “Not ev­ery­body’s go­ing to make it up on mar­ket share.”

Dr. C. Jen­nifer Dan­kle prac­tices at the Univer­sity of Min­nesota Physi­cians Heart at Fairview in Min­neapo­lis, which launched a con­ges­tive-heart fail­ure clinic in 2003 that has re­duced re­peat hospi­tal vis­its by 67%.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.