Sponsored Content: Payment Reform: The Shift from Volume to Value

Left to right: Kevin Burchill, Fawn Lopez, Dana Moore and James Butterick

As part of its implementation of the Patient Protection and Affordable Care Act, the federal government released a proposed rule March 31 about accountable care organizations (ACOs). Through the use of new care-delivery models, such as ACOs, the federal government is pushing healthcare providers to bear financial responsibility for managing their patients' health. To discuss the steps executives at hospitals and health systems should take to prepare for this new environment, Modern Healthcare and Beacon Partners hosted a roundtable discussion on May 4, 2011, at Modern Healthcare's Chicago headquarters. Fawn Lopez, vice president and publisher of Modern Healthcare, was the moderator. Download a PDF of "Payment Reform: The Shift from Volume to Value"

Q: What has your organization done to position itself to succeed in an era of payment reform?

Dana Moore Senior VP and CIO Centura Health Englewood, CO

Moore: At Centura Health, we are working on three primary projects right now. One is the Colorado Regional Care Collaborative Organization, which is a Medicaid reform pilot divided into seven regions. We are in a joint venture for one of the regions and are a provider in a second region. The goal of the pilot is to change incentives and delivery processes to focus on outcomes. The other pilot we are part of is the Prometheus Payment Model, which packages payments around a comprehensive episode of medical care. We also have an internal initiative to coordinate our efforts in four service lines to improve patient care across all of our operating entities. This initiative, Systems of Care, is part of our strategic plan, Centura 2020.

Pedowitz: At Capital Health, where I am the physician champion for the electronic health-record system, we are investigating the possibility of becoming an accountable care organization. We also are turning my primary-care practice into a patient-centered medical home. For the last two years in my medical practice, we have done quarterly reviews of physicians, assessing their quality based on standardized outcome measures. We have recently started to look at cost expenditures, such as unnecessary tests. We also are tracking the continuity of patient care - whether patients come back to us for routine follow up. If patients miss their appointments, we talk to them about the importance of continuity of care and schedule appropriate follow up. We plan to improve communication with patients and reduce unnecessary visits by implementing and utilizing electronic patient portals in the near future.

James Butterick. M.D. CMO Cape Cod Healthcare

Butterick: At Cape Cod Healthcare - a two-hospital, $650-million system - we are very sensitive to Medicare. Our inpatient business is between 65% and 70% Medicare, 10% Medicaid and less than 20% commercial payers. We project that over the next 10 years we are going to lose at least $100 million in revenue. So what we are trying to do is to model and then manage our business based on Medicare alone. Our goal is to look at our expenses and get to the point where we could survive on Medicare alone. We also are working hard on trying to partner with our physicians. We have a physician-hospital organization (PHO) that is about six months old. Our competitive environment in Cape Cod is somewhat odd in that our competitors aren't really the neighboring community hospitals. Our major competition is really downtown Boston.

Q: You talked about collaborating with physicians. How do you determine with whom you want to align or bring on board?

Robert Pedowitz, DO Medical Director Hamilton Physicians Group Capital Health Trenton, NJ

Pedowitz: Capital Health has identified the needs of the community for the next 10 years. There are not a lot of large hospital systems in central New Jersey near Trenton. Patients have had to travel to New York or Philadelphia for significant care that was beyond just the community hospital. To improve access to care and quality for patients, we have brought in top specialists from around the country to practice in central New Jersey. In addition, we are working closely with the doctors in our region to build a strong network of both primary care and specialty physicians. By doing that, we are centralizing care and improving access, particularly for patients in the inner city of Trenton, who could not afford to go to Philadelphia or New York.

Burchill: Organizations need a strategic plan with an understanding of the needs and gaps within their service area on both the primary care and specialty sides. They then need to develop a network to make sure that as many of their patients as possible stay in their own system. If patients need to go out of the network, you want to make sure their electronic medical record goes with them. Obviously, there are going to be some cost concerns as we move forward, but you want to make sure you are picking providers based on quality and access.

Q: How will you measure the success of your efforts to align with physicians and prepare for payment reform?

Q: Let's talk about information technology. To prepare for payment reform, hospitals across the country are implementing electronic health-record systems. But what are some of the barriers to implementing these systems?

Moore: Cost and vision. We made the decision in 2004 that we were going to go with a fully integrated platform across all of our levels of care. That has a lot of pluses and also some challenges, such as when you bring on a physician group that has already invested in a different EHR and we have them convert to our system. The reason we do that, though, is we feel that integration is a powerful way to achieve a single source of truth for any patient who comes into the health system. Also, as we continue to build data warehousing capabilities, it can reduce costs because you don't have to build interfaces to the warehouse with a multitude of EHRs. That was a challenge - to get people on board with that vision and not waiver when the going was tough. Another challenge: we don't want folks to think of IT as the silver bullet that will solve all of their problems. You need to change workflows and processes to survive. For example, how do we go into the medical practice and, leveraging the technology, push workflow so that everyone is operating at the highest level of their respective license? It doesn't take a physician to look at a clinical registry and see who needs an appointment or a test. The front desk staff can make those calls and schedule appointments.

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Pedowitz: The buy-in from physicians. Certainly, the younger doctors are very excited and enthusiastic. With the older, more experienced doctors, we have mixed results. Some give their immediate support; they understand the value of it. Others are very resistant to it. Then there are others in the middle. They accept it, but they are trudging along. They try to resist, and every once in awhile, they will pull out their prescription pad and write for a medication or referral that could have been done instead via the electronic medical record. I also believe the cost burden is a significant factor for many doctors, particularly solo practitioners or those close to retirement, who may have said they would rather retire from medicine or reluctantly join a group than be forced into implementing an electronic medical-record system.

Q: You have talked about managing costs. What strategies have you put in place to finance your current operations while also preparing for payment reform?

Butterick: Efficiency is one of them, making sure we don't have redundant supplies and FTEs (full-time equivalents). We are working with our orthopedists to do a gain-sharing program, for example, to see if we can consolidate some of the supplies. I think that growth is also one of the things we are going to do. We know that there are a lot of residents going to tertiary hospitals in Boston for elective surgeries. We believe we can do just as good a job as those institutions, so there is a growth opportunity for us.

Moore: Our strategic plan - Centura 2020 - guides us. Its three main tenets are strengthening the foundation, which is the core business we have today. So how do we become more efficient? How do we grow? How do we provide a higher quality of care? The second is the Systems of Care, which we have already talked about. And the third is moving upstream: How do we shift from what has been a healthcare model into what will be a wellness-care model? The trick is not doing that too soon and not doing it too late. It is a delicate balance. Several hundred associates, including physicians, developed our strategic plan. There is a strong sense of ownership in that plan. It is bigger than any individual, and I think that is going to be the key to our ministry's success.

Q: Speaking of balance, how do you divert your attention from the day-to-day, fee-for-service world to an evolving global-payment system?

Butterick: We are doing fee-for-service reimbursement in the contracts that we have right now. Managed Medicare is not a big deal on Cape Cod. On the other hand, we contracted with a private company to manage a program called Cape Cod Healthcare Helping Hands, and the whole point is to prevent readmissions. We have an active pharmacist who goes into the home to do medication reconciliation. And a nurse calls every day for at least 30 days and sometimes up to 120 days. We are still between 80% and 90% fee-for-service reimbursement, but we are planning for the future. We also have modeled how we will do under value-based purchasing. The good news for Massachusetts' hospitals is that we will probably do better than the rest of the country. We think Cape Cod Healthcare will do even better than the rest of Massachusetts. We look on a weekly basis at all of the parameters for value-based purchasing. If there are areas where we are starting to fall down, we have SWAT teams of nurses who go back and look at the record.

Burchill: Hospital executives often get hung up on the startup costs - whether it is grant funded or otherwise supported - and do not look at the sustainability of the operation. As you create a new structure - whether it is a health information exchange or an accountable care organization or whatever it is in response to the regulations - you need to consider both the upfront investment as well as the cash flow necessary to sustain the project in the outer years.

Q: What approach have you taken to the concept of bundled payments?

Pedowitz: From the perspective of the patients and the insurance companies, they are going to be very happy with bundled payments because there is a potential for great cost savings. For the doctors, it is a matter of selling it to them. We all should share in the cost of and reimbursement from the management of our shared patients. To sell the concept to physicians, we will need full cooperation and collaboration amongst ourselves. Of course, we will have to have organizations like the American Medical Association and American Osteopathic Association back us up, if not be the driving force to help convert this concept into an effective reality.

Butterick: I think we have the potential to do bundled payments with our orthopedists. As the medical director of quality for the system, I know how good of a job they are doing. I know what their outcome and performance numbers are. We are doing gain sharing, branding and joint advertising with them now to capture market share.

Moore: I think you have to take risks with small pilots, so you can learn how to operate in this new world without putting the entire organization at risk.

Q: What will success look like to you in two years or five years?

Butterick: One of the biggest measures for us will not be how do our hospitals do, but how does our PHO do? We are investing heavily in it. We are expecting a lot of cooperation and we are getting it. How that partnership does in terms of performance with some of these private commercial contracts is really going to determine how successful we have been.

Pedowitz: In the short term - just over the next year or so - we will be successful if we get practices on board with electronic medical records, establish better communication with our patients, and launch an electronic patient portal. In the three- to five-year time frame, we plan to meet the goals for meaningful use of an EHR. We also hope to partner with providers in the community and nationally to establish a shared database that we can use to improve the quality and efficiency of patient care.

Moore: We will continue to work our strategic plan and that will continue to have greater influence over the organization than the current healthcare reform legislation. We will continue to expand our rural-outreach efforts and connect with providers - and not just hospitals but all rural providers. Our physician enterprises will have grown to at least 600 providers. Our health neighborhoods will have spread across the state, providing seamless care. We will have provided value to the state by lowering costs and increasing service and quality and convenience.

Burchill: One of the things that came out of healthcare reform legislation was a lessening of the current rules around mergers and acquisitions. We have seen a proliferation of mergers and consolidations as a result of that. The size, scope and services are going to be very important. The end game three years from now: Bigger systems and tighter networks. I think we are starting to see that transition now.

Steps hospitals should take now to prepare for the advent of ACOs and new payment structures:

Steps hospital executives should take now to prepare for new payment models:

Empower employees and physicians to create your strategic plan, detailing how you will fill service gaps in primary and specialty care.
Establish a formal relationship, such as through a PHO, with physicians and expect them to have the governance lead.
Manage your operations based on Medicare revenues alone.
Invest in electronic health-record systems and data warehouse/decision-support capabilities.

If you want to learn more about how to prepare for payment reform, contact Kevin Burchill, director of Beacon Partners at: kburchill@beaconpartners.com or 781-982-8400 ext. 7460. Website: www.beaconpartners.com.