‘Be pre­pared to pro­vide high value’

Modern Healthcare - - Q & A -

The most sig­nif­i­cant merger of 2013 knitted to­gether two of the na­tion’s largest for-profit hospi­tal chains—Dal­las-based Tenet Health­care Corp. and Van­guard Health Sys­tems, with head­quar­ters in Nashville. Un­like some other large for-profit sys­tems, Tenet’s lead­ers ex­pressed their will­ing­ness to en­gage in de­liv­ery-sys­tem re­forms and vowed to bring their ex­per­tise in man­ag­ing pop­u­la­tion health to the new en­tity’s com­bined 77 hos­pi­tals, five health plans and five ac­count­able care or­ga­ni­za­tions. Mod­ern Health­care edi­tor Mer­rill Goozner re­cently sat down with Pres­i­dent and CEO Trevor Fet­ter and Vice Chair­man Keith Pitts to dis­cuss the merger and the fu­ture.

Mod­ern Health­care: How is the merger work­ing out? Are you re­al­iz­ing the syn­er­gies you were hop­ing to get?

Trevor Fet­ter: There is a sig­nif­i­cant trend tak­ing place in our in­dus­try to­ward con­sol­i­da­tion and in­te­gra­tion within mar­kets. Van­guard ap­pealed to us be­cause it had built an im­pres­sive port­fo­lio with great hos­pi­tals in mar­kets we found very at­trac­tive, such as Detroit, San An­to­nio and South Texas. They are also very com­ple­men­tary with us, with no over­lap in any mar­ket. But in a state like Texas, we were able to dou­ble our rev­enue and make it the largest per­cent­age of rev­enue in the en­tire com­pany. Also, Van­guard’s strat­egy of clin­i­cal qual­ity ex­cel­lence was very com­ple­men­tary to our own strat­egy. So there are best prac­tices in both com­pa­nies that we are mi­grat­ing from one to the other and across the whole. And I couldn’t be more pleased with where we are now.

MH: What is the com­bined com­pany’s ap­proach to ex­per­i­ments in the Af­ford­able Care Act, like ac­count­able care and pa­tient-cen­tered med­i­cal homes?

Keith Pitts: We par­tic­i­pate in five Medi­care ac­count­able care or­ga­ni­za­tions. One is a Medi­care Pioneer ACO and the rest are Shared Sav­ings Pro­gram ACOs. We also have some pri­vate-pay ACO ex­per­i­ments go­ing on. In ad­di­tion, we’ve been in bun­dled pay­ment for many years in San An­to­nio, and we are now con­vert­ing over across the plat­form, with dif­fer­ent bun­dled pay­ment plans. Both com­pa­nies have been very fo­cused on in­no­va­tion to re­duce read­mis­sions. We have learned a lot from the early stages of ACOs, be­cause those are not like a Medi­care Ad­van­tage plan where you can man­age where pa­tients go. So you re­ally find out when you get the data what hap­pens to pa­tients and where they go. Our fo­cus is on pre­ventable ad­mis­sions or read­mis­sions. We have been spend­ing a lot of ef­fort learn­ing what drives that. For ex­am­ple, there is a di­rect cor­re­la­tion be­tween how fast the pa­tient gets to their doc­tor af­ter dis­charge the first time. If it takes longer, the read­mis­sion rate goes up sub­stan­tially. So just by co­or­di­nat­ing to get those pa­tients in to see their pri­mary care physi­cian within five days af­ter dis­charge, you can make a dra­matic dif­fer­ence.

MH: Ad­mis­sions are de­clin­ing across the coun­try. How does the com­bined sys­tem fi­nan­cially deal with that?

Fet­ter: We have in­vested heav­ily and our businesses are ac­tu­ally grow­ing. Out­pa­tient has been grow­ing sig­nif­i­cantly. There has been mi­gra­tion from in­pa­tient to out­pa­tient. In­pa­tient ad­mis­sions have been down year over year for maybe the past three years. We have been able to off­set that at the bot­tom line by be­ing in­creas­ingly ef­fi­cient in the way we work and with cost re­duc­tion. But there are de­mo­graphic forces out there that are push­ing to­ward a higher rate of uti­liza­tion in the fu­ture. We are very well po­si­tioned for that when it comes. I also was par­tic­u­larly ex­cited about the op­por­tu­nity to par­tic­i­pate in a big way in the in­sur­ance ex­changes. We have po­si­tioned our hos­pi­tals very ef­fec­tively to gain mar­ket share as people en­roll in those ex­change-based plans.

MH: You are very ac­tive in a num­ber of states with a high num­ber of unin­sured res­i­dents, such as Florida, Texas and Cal­i­for­nia. Tell us about your ac­tiv­i­ties to get people en­rolled in ei­ther pri­vate plans or Med­i­caid.

Fet­ter: The first part of our strat­egy was to po­si­tion our hos­pi­tals ef­fec­tively. Lit­er­ally ev­ery one of our hos­pi­tals is in net­work with at least one in­sur­ance prod­uct in each metal type. More im­por­tantly, 97% of our hos­pi­tals are in net­work with a sil­ver-tier plan that is at the low­est- or sec­ond­low­est price point. So we are ready for these pa­tients. We took mat­ters into our own hands in terms of help­ing the en­roll­ment both for Med­i­caid and the ex­changes. Through our Conifer sub­sidiary, we set up a toll-free num­ber that we staffed to help people. And we es­tab­lished part­ner­ships with 350 lo­cal com­mu­nity groups that helped en­roll people. We also used mil­lions of pieces of di­rect mail. We are very pleased with the re­sults so far. I think we are mak­ing a dif­fer­ence in these com­mu­ni­ties, and it will help us, as unin­sured people con­vert to in­sured sta­tus.

MH: What is the Fed­er­a­tion of Amer­i­can Hos­pi­tals’ leg­isla­tive agenda in the im­me­di­ate short term and over the next year?

Pitts: We have in­ter­est in the con­tin­ued cuts in the pres­i­dent’s budget. We are con­cerned with the im­ple­men­ta­tion of the Medi­care two-mid­nights rule. The hospi­tal in­dus­try al­ready has been fund­ing the ACA, so we’re ob­vi­ously very in­ter­ested in get­ting some tra­jec­tory to fill that gap back in. We have over 100,000 em­ploy­ees who go to work ev­ery day to take care of people, so it’s coun­ter­in­tu­itive that we as an in­dus­try could be any­thing but sup­port­ive to try to get ev­ery­body cov­ered. Ob­vi­ously, where we have po­ten­tial cuts, that’s where we’re try­ing to push back be­cause we feel like, as an in­dus­try, we’ve been un­der a lot of pres­sure.

MH: What would you like to see the ad­min­is­tra­tion do on the two-mid­nights rule?

Pitts: We’re still work­ing through that with the ad­min­is­tra­tion. The CMS ac­tu­ary said the im­ple­men­ta­tion would cost the govern­ment money and took some money away from the up­date fac­tor for hos­pi­tals. We be­lieve it ac­tu­ally cost us money. We’re still dis­cussing that, and the CMS has been very re­cep­tive. They moved off the Medi­care Re­cov­ery Au­dit Con­trac­tors’ abil­ity to en­force that rule.

MH: What is the fu­ture of the fee-for-ser­vice sys­tem and nar­row provider net­works? How do you see the payer mar­ket­place evolv­ing?

Fet­ter: It’s hard to know. There’s so much in play. But I do think these themes are prob­a­bly here to stay— in­te­gra­tion, care that’s based on value, and people trad­ing un­lim­ited choice for value, which ar­gues for nar­row net­works, lower prices and higher lev­els of qual­ity. We plan to be very suc­cess­ful in that en­vi­ron­ment, be­cause typ­i­cally, our hos­pi­tals are priced lower than our com­peti­tors, our cost struc­ture is much lower, and we are able to be very ef­fi­cient by virtue of our scale. And we have high lev­els of clin­i­cal qual­ity.

MH: Do you plan to broaden your base of ac­qui­si­tions within mar­kets to ac­quire more physi­cian prac­tices and post-acute care to be­come more of an in­te­grated net­work, or will you move into other new mar­kets?

Fet­ter: I think ac­tu­ally both. We’ve been very ac­tive in the out­pa­tient area in build­ing and buy­ing and cre­at­ing new types of out­pa­tient cen­ters. We have plenty of op­por­tu­nity left in our mar­kets. We’re also en­gag­ing like never be­fore in part­ner­ships with other providers in mar­kets, and that ex­pands our reach with­out ac­tu­ally hav­ing to build or buy some­thing. But I think we’ll also con­tinue to pur­sue ac­qui­si­tions. We have very sub­stan­tial economies of scale. There are ben­e­fits that we can bring to ac­quired hos­pi­tals.

MH: Do you think that some people in the for-profit sec­tor are go­ing to miss the boat on co­or­di­nated care, or do you think that there are other mod­els that they can suc­cess­fully pur­sue?

Pitts: The key thing is that ev­ery mar­ket is dif­fer­ent and ev­ery com­pany is a lit­tle bit dif­fer­ent in terms of its evo­lu­tion in that area. There are com­pa­nies that are prin­ci­pally in ru­ral mar­kets and there are com­pa­nies that have very large, very wellde­vel­oped net­works in other mar­kets. I re­ally have no ba­sis to crit­i­cize. I would say this to any­body, whether you’re an in­vestor-owned or not-for­profit: Be pre­pared to be com­pet­i­tive in your mar­kets and to pro­vide high value.

Fet­ter

Pitts

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