Becker's Hospital Review

Sign up for the COMPLIMENTARY Becker's Hospital Review CEO Report & CFO Report E-Weeklies at www.BeckersHospitalReview.com or call (800) 417-2035 9 What hospitals can do to get ready Nathan Anspach, CEO of Phoenix-based John C. Lincoln Health Network's accountable care organization, says his organization's solution was to collaborate with physicians, clinicians and pharmacists within the ACO to design a systemwide formulary plan. "We see a pretty significant dollar savings," he says. Expect upfront costs. The law's goal is to lower healthcare costs over the long term, but in the short term, most will feel the changes in their checkbooks. Doug Fenstermaker, a former hospital CFO now serving as managing director and vice president of healthcare at Atlanta-based Warbird Consulting Partners, says he's skeptical of significant savings for providers in the near future, because the cost of implementing the law has a lot of upfront cost. "We're all about the 5 to 60 rule — 5 percent of our members will use 60 percent of the resources of our ACO," Mr. Anspach says. He and his team have addressed that with greater attention on patients with chronic conditions like congestive heart failure and diabetes. It's going to take strong hospital leadership to weather what could either be a windfall or a typhoon. Following is some advice from healthcare leaders and experts for how to prepare for the flood of changes and regulations. "It is hard to tell whether the PPACA will result in a lower amount of GDP being consumed by healthcare and if costs will actually decline. In the short-term, that is not at all likely, as investments in infrastructure to make it all work will skyrocket," he says. While the law aims to improve coordination in the delivery of care and better use of ramped up technology to lower costs, the initial capital cost of that infrastructure will take time to be paid off. Preserve margins with more savings, not more revenue. Bundled payments, Medicare Advantage and shared savings programs with CMS and private insurers can be lucrative for health systems, especially if fewer patients are uninsured. True, that may bring a flood of new patients, says Aurelio Fernandez, executive vice president and chief operating officer of Memorial Healthcare System in Hollywood, Fla., but political instability in his state and the country alike means he's not counting on seeing revenues rise. "I'm not basing our future on the ability of generating [additional] revenues, but on having cost-efficiency," Mr. Fernandez says. Back in 2011, he says Memorial's leaders did a study and learned its cost structure was too high. So in 2012, he says they embarked on a cost reduction initiative that looked at contractual arrangements, staff reductions and eliminating unnecessary services through partnerships. They set a systemwide cost reduction goal of 5 percent, in excess of $75 million, by the end of their fiscal year which ends this April. So far they've reached 85 percent of that goal, even after realizing costs to implement their electronic health record system this year. Track your performance. The sharp drop in Medicare DSH funding will be a blow to systems like Dignity Health. The San Francisco-based organization's Vice President of External and Government Relations Wade Rose says since Dignity Health is among California's largest providers of Medicare services, the cuts will be a challenging obstacle. He and his system's leaders support the law overall, but he acknowledges that expectations are quite high on providers to fix inefficiencies that are easy to identify but difficult to improve because of changes that must be systemically implemented. "The reality on the ground can be very different than the elegant logic of the bill," Mr. Rose says. In response, his team is gathering and analyzing copious amounts of data to learn where they can be more efficient, from speeding up imaging test results to designing a nurse's station to maximize productivity, and tracking the impact of these changes on performance. Mr. Rose says that's why this law might be more successful than efforts of the past — he says 95 percent of the bill has to do with delivery system change, rather than mere funding changes. Look beyond a hospital's four walls. Some of the greatest cost inefficiencies occur after elderly patients leave providers' care. Not following physicians' orders after being discharged from the hospital can lead to higher readmissions, which the health reform law now penalizes through lower reimbursement rates. As a result, many hospitals have focused much of their efforts into transitioning seniors from the hospital to the home, helping them help themselves stay healthy. Keep patients satisfied. Among other metrics, hospitals have begun to see patient satisfaction account for a rise or deduction of up to 1 percent in their Medicare reimbursements. In an era where providers' margins are shrinking for a number of reasons, hospitals can hold on to what's theirs with a focus on patient experience, says Kristin Baird, a registered nurse and CEO of Baird Group, a Fort Atkinson, Wis.-based healthcare consulting firm. "Patient satisfaction, once seen as fluffy or soft, is now an important measure that cannot and should not be ignored," Ms. Baird says. "Consumer Assessment of Healthcare Providers and Systems surveys have leveled the playing field and give the consumer a voice along with other important outcomes. Healthcare organizations recognize now, more than ever, that providing good service directly impacts the bottom line. That realization has not been so clear before." Partner to absorb risk. It's no secret that hospitals are employing more physicians, and that trend of employing or contracting with physicians is likely to continue, says Adam Powell, PhD, a health economist and president of Boston-based healthcare consulting firm Payer+Provider Syndicate. "In 2013, I expect to see acceleration in the wave of payor-provider integration and hospital consolidation that began in 2012. The recent merger between Baylor Health Care System and Scott & White Healthcare is but one example of how integrated delivery systems are expanding by merging with hospital systems. Hospitals are increasingly being asked to own their risk, and merging with payors and integrated delivery systems provides them the know-how to do so," Dr. Powell says. "Providers are hoping that mergers will provide them with both more leverage in negotiating with payors and economies of scale that will enable them to lower their costs." As scrutiny builds over unnecessary inpatient care, Mr. Fenstermaker says hospital systems are likely to divest specialties that aren't core to the business in favor of integrating those services with other systems. For this reason, he says he expects rural hospitals will begin to operate more like ambulatory care clinics and transfer more patients to larger hospitals' specialty centers. The current number of primary care physicians will struggle to meet the anticipated demand brought on by the newly insured, so Mr. Fenstermaker predicts the industry will rely more heavily on physician assistants, practical nurses and technology to compensate for the physician shortage. n REGISTER TODAY! Becker's Hospital Review Annual Meeting CEO Strategy, ACOs, Physician-Hospital Integration, Improving Profits and Key Specialties Co-Chaired by Chuck Lauer and Scott Becker May 9-11, 2013; Chicago Westin Michigan Avenue, Chicago For more information and to register, visit: www.beckershospitalreview.com/4th-annualbeckers-hospital-review-meeting.html

• Cover