Less care will be provided and paid for in the hospital
“Medical diagnoses that require monitoring and pretty high-intensity care don’t have to be in a hospital setting. That is where the opportunity is.”
James Hinton, CEO of Presbyterian Healthcare Services in Albuquerque, has chaired the American Hospital Association board for the past year.
Since joining Presbyterian in 1983 and in nearly two decades at its helm, he helped create the state’s largest integrated healthcare provider, which includes a health plan and a medical group. Modern Healthcare Editor Merrill Goozner recently spoke with Hinton about his year leading the AHA and the major changes underway in his home state in insurer-provider relations. This is an edited transcript.
Modern Healthcare: What did you accomplish during your leadership year?
A lot of what we have been focused on this last year is how can the AHA help hospitals transform from what they’ve been to what they need to be. That takes a lot of different forms, but it essentially recognizes that hospital utilization in this country is declining. Fewer people go into hospitals as inpatients, and that care is being increasingly delivered in settings that are not as hospital-dependent.
MH: More than half of hospital executives polled by the AHA expect to see revenue remain flat or decline over the next five years. How do you survive in a world where, if you’re successful in achieving the triple aim, you wind up with smaller or stagnant revenue?
I happen to work in one of the lowest-cost regions in the country. So utilization is lower, resource intensity is lower, and interestingly, quality is equal to or as good as places that are spending up to twice as much as is spent in aggregate in New Mexico. Hospitals have to recognize that there is care being delivered for which there may not be a clinical justification. People who pay for care know that. CMS knows that. Medicaid programs know that. Intel (a major employer in New Mexico) knows that. And so you can’t protect that system. You can’t advocate for that kind of use of services.
So then what do you do if you’re a hospital that is relying upon revenue that is not sustainable? I think you do a couple things. One is you go to where the revenue’s going because the money is going to get spent. It’s just going to get spent in some different ways. It’s going to be spent on an outpatient basis. It’s going to be spent in ambulatory clinics. It’s going to be spent on facetime applications that connect patients with doctors but not in a building. It’s going to be spent on advanced IT services that can connect with telephone triage and telephone-nurse advice. So the care is going to get provided and it’s going to get paid for. It’s just not going to get provided and paid for within a hospital.
MH: Are there other opportunities for cost saving?
Systems must make a very disciplined analysis of where your costs are, where your costs need to be and start down that difficult road of pushing down on the hospital expenses. Those savings can be moved into your investment in an ambulatory-care system.
MH: Your integrated system and insurance arm allowed you to provide the entire package for employers like Intel. Is that model the wave of the future?
There are two things happening in the payer world today. I think the government payers, Medicaid and Medicare, are increasingly looking to offload risk onto delivery systems. Our state’s Medicaid program has been full capitation since 1997, and now it is full capitation for long-term care and behavioral health as well. Medicare Advantage would be another example where health insurance companies and insurance companies that are owned by systems like ours are taking full risk.
The Intel example shows that employers are increasingly frustrated with the traditional approaches of contracting with insurance companies to provide employee healthcare and have those costs continue to go up and up. Employers are innovating with how they deliver care and how they connect to delivery systems. They’re also without question going to highdeductible health plans to engage their employees more in the actual cost of care and to create opportunities for savings to be shared with the employee as opposed to
just a health benefit package that creates little incentive to use care in different ways.
MH: You also introduced a hospital-at-home program five years ago. What is the promise in that program and what are the roadblocks to its widespread adoption?
There are a handful of diagnoses where you can construct hospital-level care in a patient’s home. You’re obviously not going to have open-heart surgery in your own home. But medical diagnoses that require monitoring and pretty high-intensity care don’t necessarily have to be in a hospital setting. That is really where the opportunity is.
MH: Some examples?
Pneumonia, congestive heart failure, some types of sepsis. When faced with a decision to admit a patient with one of those diagnoses, physicians in our system can say admit to one of our other hospitals or they can say admit to home. If they admit to home, we bring in hospital beds, over-bed tables, and we convert a room in the patient’s house to look like a hospital room. We bring in the technology for real-time telemedicine interfaces. Physicians round on the patients however many times a day as needed. Nurses and other caregivers round on the patients. Meals are brought in.
The results are pretty interesting. For similar acuity patients, the cost is about $2,000 less, and the quality of the service is judged by the patient to be higher than if they get admitted to the hospital. They also don’t fall as much because they’re familiar with their surroundings, and they don’t have nearly as high an infection rate as hospitals.
The barriers are really that today only patients who come through our own health insurance program are eligible for that. Medicare fee-forservice has not given us a code that we can bill that service. No other commercial insurance is paying for it. We may have a breakthrough here soon with a large commercial payer, but it has been very frustrating.
MH: When do you think we’ll see a preponderance of the system paid through some kind of risk-based contracting?
There are a lot of risk-based payments today. You could make the argument that a DRG is a risk-based payment. It’s not like the industry doesn’t have some experience with budgets. So the question is when will there be more total capitation similar to what we have with Medicaid or Medicare Advantage? I don’t know that I have an answer for that because of the direction that commercial payment is going. It’s really going the other direction from capitation—to more highdeductible health plans, putting dollars in the pockets of employees and hoping that they are more efficient with the dollars.
High-deductible plans and capitation don’t naturally connect. So I would say government payment in the next 10 years will be largely capitated or at risk. My crystal ball is not as clear for the private insurance market.