Becker's Hospital Review

10 Sign up for the COMPLIMENTARY Becker's Hospital Review CEO Report & CFO Report E-Weeklies at www.BeckersHospitalReview.com or call (800) 417-2035 of healthcare reform and new delivery models will pass. The other group of CEOs knows hospitals must fundamentally change their business model. To them, the healthcare reform law became a platform to have transformational discussions with their board, executive teams and the hospital at large. Transitioning to a new business model takes deep changes to operations, but alert CEOs in the second group aren't shying away from this. Geisinger digs deep when piloting an idea. The system brings together a diverse group of stakeholders from different facets of the organization, including clinical, operational, financial, payer and patient relations. Design teams then work through clinical evidence, map out existing and future workflows, analyze financial incentives and build a business case for the innovation. The system initially tries new care models with patients for whom its health plan and clinical services intersect — Geisinger refers to those patients as in "the sweet spot." The health system will then scale the innovation to broader populations based on its success. It's easy to use innovation as a buzzword, but the process itself is anything but business as usual. True transformation starts with a deep understanding of the severity of the problem and a formalized process to execute ideas. "You can't just put in a new decision support system or make cost reductions," says Ms. Radin. "You actually have to change the operating structure, culture and strategic vision so people understand it at every level of the organization. This is not incremental change. This is transformational." 5. Innovation makes work easier. Despite the amount of time and resources it requires, successful organizations like Geisinger do not approach innovation as "work." Rather, invention and creativity are seen as things to simplify work and improve patient outcomes. Instead of expecting professional staff to work harder using the same processes, Geisinger tries to redesign care delivery in a way that promotes quality and patient satisfaction — but also alleviates burdens for everyone involved. 50 Things to Know About the Hospital Industry (continued from page 1) 4. Of rural hospitals, 1,328 have been designated as Critical Access Hospitals by CMS.2 CAHs are rural hospitals with no more than 25 beds and are at least 35 miles (15 miles in areas with mountainous terrain or only secondary roads) away from another hospital. CAHs are paid differently by CMS than traditional acute-care hospitals; their payments reflect their operating costs, rather than volumes. 5. Academic medical centers are hospitals and health systems with a close affiliation with a medical school. AMCs feature residency and often fellowship training programs and pursue clinical research in addition to direct patient care. They also often are considered tertiary care centers, because of their ability to treat a full range of complex conditions and access to subspecialists. There are currently around 400 AMCs in the U.S.3 6. Safety-net hospitals are a category of hospitals that provide a disproportionate level of charity care compared to other facilities.4 These hospitals receive Disproportionate Share Hospitals payments from CMS to help offset the cost of caring for large numbers of Medicaid, Medicare and uninsured patients who result in uncompensated care. The Patient Protection and The organization does this on the go, too. It doesn't reserve innovative thinking for annual meetings or summits, but in the day-to-day, right when issues arise. "People at Geisinger are working just as hard or harder than other people," says Dr. Strongwater. "But we see innovation as a strategy to make work easier." One specific innovation at the health system illustrates this outlook. In May, Geisinger became one of the first few health systems to give patients access to their electronic medical records — an initiative called OpenNotes. After they visit the hospital or a Geisinger physician, patients can read their medical records and physician notes in full through online access. "The early feedback shows patients love it and providers have not been overloaded with constant complaints about their notes [and handwriting]," says Dr. Strongwater. Since gaining access, he says some patients have stepped in to help improve the quality of their medical records. Patients, intrinsically invested in their own care, will contact the provider to remedy any errors they spot in their medical records, thereby improving patient safety. Conclusion Geisinger is known across the country for its innovations with EMRs, medical homes, care bundling and a range of other novel approaches to healthcare delivery. Much of the system's success is linked to a culture that promotes innovation through self-reinforcement and healthy competition, financial incentives and the outlook that innovation is not work but something to alleviate burdens for patients, families, physicians and staff. As Ms. Radin discussed, healthcare leaders cannot treat innovation passively, but must communicate their expectation that professionals will innovate in the day-to-day. Organizations must also invest in talent development to nurture employees' problem-solving capabilities and be prepared to abandon old operational models and build new ones — not layer new ideas on antiquated operations. n Affordable Care Act calls for DSH payments to be significantly reduced over a period of years; this reduction was written into the law under the assumption that the expansion of Medicaid coverage would reduce the number of uninsured individuals, meaning safety-net hospitals would, in theory, have less uncompensated care costs to offset. However, the Supreme Court's decision to make states' expansion of Medicaid optional could create a financial challenge for safety-net hospitals in states that forgo expansion. 7. A slight majority of hospitals in the U.S. are part of a health system. According to the AHA, 3,007, or roughly 53 percent, of hospitals are part of a health system.1 Note: Statistics from AHA's Hospital Statistics, 2013 Edition reflect 2011 data. The number of hospitals in a system is likely higher today due to the large amount of merger and acquisition activity within the industry that has taken place since 2011. sociates. The average price-to-revenue multiples for distressed or bankrupt hospitals ranged from 0.3x to 0.4x.5 10. The five largest for-profit hospital operators include: Hospital Corporation of America (162 hospitals), Community Health Systems (135 hospitals), Health Management Associates (71 hospitals), LifePoint Hospitals (57 hospitals) and Tenet Healthcare Corp (49 hospitals).6 11. The five largest nonprofit hospital systems include: Ascension Health (100 hospitals), Catholic Health Initiatives (86 hospitals), CHE/Trinity (newly merged entity between Trinity Health in Novi, Mich., and Catholic Health East in Newton Square, Pa. — 82 hospitals), Adventist Health System (43 hospitals) and Dignity Health (38 hospitals). 6 8. In 2012, 94 mergers or acquisitions took place in the hospital industry worth a total of $1.88 billion, the highest value of M&A activity within the industry over the last decade, according to Irving Levin Associates. 12. The five largest nonprofit hospitals in America (by bed count) are: NewYork-Presbyterian Hospital (New York City) — 2,292 beds; Florida Hospital Orlando — 2,141; Jackson Memorial Hospital (Miami) — 1,724; University of Pittsburgh Medical Center Presbyterian — 1,590; and Orlando (Fla.) Regional Medical Center — 1,483.6 9. For hospital sales/acquisitions occurring in 2012, the average price-to-EBITDA multiple was 9.5x, and the average price-to-revenue multiple was 0.76x, according to Irving Levin As- 13. The largest for-profit hospitals in America (by bed count) are: Methodist Hospital (San Antonio) — 1,536 beds; Edinburg (Texas) Regional Medical Center — 816; Henrico Doctor's Hospital

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