Issue link: https://beckershealthcare.uberflip.com/i/235056
24 Becker's Hospital Review CEO Strategy Roundtable ing the best of both. Phil Kambic: It comes back to, "What is a hospital?" Is a hospital just a big box or something much more? My hospital is something much more. We're a standalone community hospital in a blue-collar town in the middle of the rust belt. We have outpatient services, surgery centers — you name it, we have it. We expanded our care continuum and geography to go into these rural areas that have no healthcare. Lynn Nicholas addresses an audience member's question. delivery system. The last few years, we focused on reassigning inpatient [FTEs] to ambulatory. We have the ability to train our own and train from within. We are a $2 billion organization. I've been through a number of layoffs in my career. If we were to lose a large portion of market share or [if there were] a dramatic shift, we may have to stand up to the workforce and say reductions would be necessary. But we have to be careful to what ultimately has happened many times. If there were a board announcement there may be layoffs, it creates an unbelievable amount of fear — an unnecessary fear. When we look at attrition, redeployment, training, we've committed to never do it that way again. Be careful not to create that fear. Change does create fear, particularly for people on frontlines. To reduce 50 to 60 positions for incentive compensation payouts is unconscionable. Catherine Jacobson: We've done all the things everyone else is talking about. We rely a lot on process improvement. We did have one hospital where market volume just went out, and we had to rebase. Utilization came down, and we had to take folks out. That happened about two years ago. To some extent, we redeployed everyone where we could. What we are doing now, we had our best operating margin last year. We just had brought things down. We brought in outside help to assess the next level, and we see it moving toward a cliff. We get paid well in Milwaukee. We're seeing that coming, and we're doing preventive types of things. But labor is going to be relatively minor [adjustment]. It's going to be around flexing. José Sánchez: We went through two painful layoffs to reduce our costs, and we also renegotiated a number of contracts. We have a different strategy in terms of how we keep costs down. We know there are many unnecessary visits to the emergency department, so one way to reduce that is a relationship we developed with a FQHC so patients do not go directly to the ED but to the FQHC. Then, if the patient doesn't have a primary care physician, they are assigned one. We are not really hiring. We just basically replace and integrate at the management level. We're giving managers different responsibilities. Lynn Nicholas: I think if [hospitals] are adding people right now, it's a very short-term strategy and delusional in terms of what is to come. I know Massachusetts is high-cost, but that's because 47 percent of our patient days are in teaching hospitals. The national average is 19 percent. We do a lot more in the teaching setting. We have legislation that requires our total medical expenditures as a commonwealth be no greater than the total domestic growth product of the state. A lot of the care given [in hospitals] is unnecessary, and what we're trying to do is squeeze 30 percent of spend out of the system, wherever it exists. You start cutting out stuff you don't need or [look at] doing it in a lower-cost setting. We've had layoffs across the commonwealth here and there. Our workforce is reducing, but also being repurposed and repositioned. I've been here seven years, and I can think of very few hospitals that haven't had one or more reductions enforced. On consolidation Alan Channing: The opportunity is [finding] where you can get overhead synergies that will reduce [overhead] costs. And because of this coming together this year, [Editor's note: Sinai officially closed its acquisition of Holy Cross Hospital in Chicago in January 2013], we're saving about $10 million. This is the third year in a row we're taking out similar kinds of numbers by restructuring the delivery system. We started to look in a detailed way about what we were doing in each of our departments to make sure we weren't duplicating services. If we had two similar functions, how could we bring them together? We went through an open selection process, so there wasn't one site taking over the other and throwing people out willy-nilly. We really thought it through so we weren't imposing the culture from one campus to another, but tak- We're not an academic medical center. We still have [physician] relationships and a great medical staff that knows when we need to [refer] people versus what we can do internally. I believe we can stay independent, but if somebody came to me and said, "Phil, here's a value proposition and this is why it's so much better for you and your patients to join our system," I would [think about that]. But nobody has been able to show me that yet. Michael Sachs: Complexity does not add value. We have examples where Larry says [Loyola] being part of [Livonia, Mich.-based CHE Trinity Health] Trinity has been [helpful], but Phil runs a standalone community health system that is very diverse and does quite well in its market. So it really depends on what the needs are. If you can reduce the complexity and add value, then be part of a larger system. It works either way. We've looked at consolidation as one way to get pricing and market power. The bad news with that is you have pricing and market power. When you had legacy carriers that had amazing prices and power, you had Southwest Airlines come in underneath them. If you're not careful, you can be very proud of that power and then other organizations will come in beneath [you]. Revenue outside of the acute-care setting is exactly where that could be challenged. Joe Fifer: The loose affiliation and even up through many mergers — when there's not real true consolidation in back room functions [when] you put together these deals, and don't get system synergies, why bother? That is such a short-term strategy. Quite frankly, it's maybe easier that I'm not a CFO in a hospital today, but the idea of joining together to get 10 to 30 percent more in a managed care contract, it's ill-advised. If that's the focus of a merger, [then] that's not a great strategy. If you're going to put together a merger, get economies of scale. Dr. Paul Summerside: You see a lot of consolidation but very little integration, which are not the same thing at all. We try and look very carefully. We're very big on operations, literally and figuratively. If it doesn't improve fundamental operations, it's usually a bad idea. On reimbursement Phil Kambic: One concern out there is the first year of the Patient Protection and Affordable Care Act. I predict 80 percent of people signed up are people who will need Medicaid. Where will the Medicaid patients go? Our emergency rooms.