The following is a full transcript of an April 24 editorial webcast “Hospitals Operating Systematically,” conducted by Modern Healthcare. The panelists were Michael Hulefeld, CEO of Ochsner Medical Center in New Orleans; Dr. Stanton Smullens, chief medical officer at the Jefferson Health System based in Radnor, Pa.; and Florence Spyrow, senior vice president at the Genesis health System based in Davenport, Iowa. In a discussion moderated by Modern healthcare reporter Paul Barr, the three panelists discussed the impact of system membership on clinical and financial performance. The webcast was sponsored by Thompson Reuters. Per editorial policy, sponsors are not involved in the development or publication of editorial content. A link to the webinar can be found at modernhealthcare.com/webinars
Webcast Transcript: Operating systematically Hospitals weigh advantages, disadvantages of belonging to larger organizations
Paul Barr: Thanks and good morning everyone. As mentioned, today we'll be talking to health system executives about how they try to use their participation in the system to help boost their clinical and financial performance. We'll also talk about the pros and cons of being either a member of a system or operating as an independent hospital. After a brief presentation from each guest, we'll open the webcast up to questions from the audience, but feel free to send questions in the system at any time during the webcast. First we'll hear from Michael Hulefeld, CEO of Ochsner Medical Center in New Orleans, which is part of Ochsner Health System, which is also based in the great city of New Orleans. Second up will be Florence Spyrow, senior vice president at Genesis Health System in Davenport, Iowa. Finally, Dr. Stanton Smullens, chief medical officer for Jefferson Health System in Radnor, Pa., will speak. Michael, can you get us started?
Michael Hulefeld: I'd be happy to. Thanks for inviting me to participate, Paul, and good morning to everyone. I will preface my comments by saying I'm a bit under the weather, thus the nasally sounding voice—but I'll do the best I can today. My goal in the next couple of minutes is to just give people an overview of Ochsner Health System and again focus on what do I think the benefits of them given my role within the health system of our evolution to more of a system-based approach in Southeast Louisiana. Next slide.
Just a brief overview of the health system: We were founded about 70 years ago by five physicians, so group practice is really the core of the organization. We describe our organization as a group practice that owns hospitals, and you can see we've got about 900 physicians in our group. We have 35 different clinical locations across Southeast Louisiana. We now have seven hospitals within our network, six of which have been acquired within the past six years. So this evolution for us into the hospital system has been quite rapid and has been very interesting to be a part of. Within those seven hospitals, we have one tertiary and quaternary site, which is the one that I'm the CEO of. We have five more traditional community hospitals, and then we do have one critical-access facility within our network, as well. We own and operate fitness centers, we own a hotel on our main campus, various post-acute-care services. This year we will probably crack the $2 billion in revenue mark just in terms of overall size and scale. And again my role as the CEO of our main flagship hospital, I've been here for 13 years, so I've seen the organization both pre-Katrina as a single stand-alone hospital again surrounded by this group practice and largely managed by the group practice to what we are today as a seven-hospital system. So, it's been great to be part of that evolution. Next slide.
I wanted to really kind of go through what do I think the benefits have been, both from a tertiary and quaternary perspective, what do I think the benefits have been from the community hospital perspective, and then how is it enabling us to kind of maximize our shared services,and our corporate structure, starting first and foremost though with the benefits from the tertiary and quaternary system perspective. One of the things that we really focused on is what do we do where within our network. How do we gain a greater efficiency, how do we not duplicate different services, and how do we evolve our systems? So what's really happened here is that our main facility, our flagship hospital, has been the place where we really tried to coordinate our tertiary and quaternary care, high-end neurosurgery, transplant, high-end cardiac care, high-end pediatric care, and then within our community hospitals, provide excellent care close to home for women's services, traditional medicine services, traditional cardiac services. And so one of the things that's happened here is as we kind of rationalize services across our system, we really ramped up at the quaternary side on transfer business. We've doubled that over the course of the past couple of years. And frankly a lot of that has come from being part of a system of community hospitals working very hard to keep those referrals and that business within our system, so our quaternary site has really benefitted from that. Again, I also think that we've really proven our value to payers and to our community, as you kind of go down the page, with each entity, each hospital really developing its own specific areas of focus so they can provide services at lower costs and higher quality. Again, it's coordination of maintaining the high-end, complex services at our quaternary site and then the distribution of other services across our network has really made a big impact on the quality as well as the cost of care by reducing duplication.
If you go to the next slide, from the community hospital perspective, what's been really interesting to work on is again this: “What do we do where?” concept and the rationalization of services across our system, so, for example, we own one hospital, our Baptist hospital, which is about three or four miles from our main flagship facility. And over the course of the past couple years, we've moved a lot of different programs off our main facility because it didn't—those programs didn't necessarily have to be there. And we've used these other assets, these hospitals differently for areas like sports medicine, for hand surgery, for eye surgery or our pain-management program. Again, important core programs, but ones that don't necessarily have to be at our main facility, yet are given a great identity and provide great services to our patients and to our community three or four miles down the road. So what we're really getting into: How do we optimize all of our assets in the most efficient, high-quality ways? We're actually on the second bullet on this page, also ramping up the capabilities of one of our other community hospitals to help move patients that are more complex from our quaternary site that don't necessarily have to be there. So, for example, we've really grown a great cardiology program at one of our community hospitals, and a lot of the cardiac transfers are going to that community hospital as opposed to coming traditionally to our main facility. Now, if they need surgery, they're going to come here. So we're getting pretty astute at: How do we rationalize our services, and I think, again, that that just has been a tremendous benefit to our community hospital as well. We are, on the third bullet, getting much more focused around providing a consistent level of service and quality across all of our hospitals, so I would say at this point about 70% of all the hospital-based services—anesthesiology, radiology, pathology, hospital medicine—are provided by Ochsner Clinic physicians. We don't see that going to 100%, but we have seen significant improvements in quality at our community hospitals that we've acquired by taking our group and inserting that group into these key hospital-based functions. Next slide, please.
We also believe that being a part of a system has enabled us to invest more in our shared services, and my belief is that shared services can really set us apart. What we found given how quickly we evolved into a hospital system, and again just given the opportunity as it presented itself post-Katrina, we didn't necessarily have enough time to really plan this out over a 10-year period of time. We needed to move quickly. What we found was we also quickly outstripped our previous capabilities related to our shared services, our corporate services. So we're making big investments right now as it relates to putting in Epic, redesigning HR, improving revenue cycle, expanding our medical management functions across our employee base as well as a large capitated patient base. And those are just things that we found as part of a system, we have more opportunities to invest than we had when we were, again, just one stand-alone hospital and group practice. So, in summary, I think those are really the kind of the high-level benefits that we've experienced. And again, I've had the luxury of being here when it was really a stand-alone, single hospital and again where we are today. I can certainly take questions later on as it relates to the drawbacks and the challenges. They certainly do exist—to act as if they don't would be foolish, so, I look forward to the question-and-answer part so we can discuss that.
Barr: Thanks. Me, too. I think you're going to have some great insights given that you have made the transition from single hospital to more of a system-type structure. Before I move on to Flo, I do have a question for you, though. In your slide you mention that each entity and group knows its role. I'm wondering how you came up with a system for handling that because I'm assuming that different groups might sometimes disagree about what their respective roles are.
Hulefeld: Yeah, that's a great question. I think that one of the major focuses that we have is, as a system, is that how do you prove your value? And so what do you bring? And what are you able to provide within a given hospital or given entity in our system that is done at a lower cost at a higher quality? And, so those are how we evaluate programs. So, for example, we don't do cardiac surgery at all of our hospitals anymore, because when we went back and looked at the specific data, not doing enough led to maybe less than ideal quality or higher cost that was appropriate, so we really try to manage this through data with a strong focus on: How do we improve our value, not only within the organization but for our community at large.
Barr: Great. Thank you, Florence, can you please begin your presentation now?
Florence Spyrow: OK, great. Thank you. Move to the first slide. Our system is smaller than Mike was just describing, but has been a system for about the past 10 years primarily. We're a $60 million organization altogether—excuse me, $600 million—organization altogether, and just to give you an idea, I think there's different organizational structures or systems and we own the facilities that are within our system vs. primarily manage them or have other types of affiliations, relationships and so that's helpful to us, particularly in a single governance of one board over our not-for-profit entity. Next slide.
I wanted to tell some stories about the benefits based on different perspectives within our system and some of you may have read an article that was recently out about our impact on a critical-access hospital in Mercer County. We currently own one critical-access hospital and are in the process of purchasing Mercer County and then manage a third. And I see this as a real advantage to community hospitals and very attractive to critical-access hospitals. Mercer County's about 30 to 45 minutes away from Davenport, Iowa. This hospital was losing about $800,000 a year. It was unsustainable for the county. We came in and managed that hospital, and it's now profitable at about $500,000 a year, and we're in the process of purchasing that hospital from the county. As Mike talked about, one of the strengths that Wheaton brings to a critical-access hospital is sharing our shared services and our expertise with those hospitals in a way that they would never be able to purchase or provide those services on their own and additionally give them access to capital and resources that they wouldn't be able to garner. This particular hospital had some issues with regulatory and standardization within their facility that needed to be corrected, and they didn't have the ability to do that on their own. Without our intervention, those community members would be traveling 30 to 45 minutes for healthcare. I am the president of a community hospital as well as my system role. It's a 140-bed hospital. Actually, I'm proud to say located in Illinois, which brings its own challenges from that perspective, but we just finished—to give you an idea—we're a tertiary-care hospital here, not tertiary care, but we're a Level 2 trauma center here and have a path lab. We do not do open-heart surgery. We do not do brain surgery, some of that higher-level types of procedures. But we are the first hospital in our community to totally implement a CPOE system, and we would not be able to do that without the help from our system and the resources that they brought to bear for us. We're struggling right now in Illinois with no payment from the state for the past nine months, with our property-tax exemptions being threatened and continued high malpractice insurance costs across the board. And the system provides the security that we need to move forward and continue to be a viable source of healthcare within our community. We have about 20% of the market share over in Illinois. Our tertiary-care hospital in Davenport has about 80% of the market. Just to give you an idea: We are treated in this community as if we have 80% of the market share, no matter what community we're in, and that helps us a great deal in meeting the healthcare needs of our community. I would emphasize one thing that Mike had to say, and I think a lot of that has to do with really finding your role. We have a systemwide co-management program, for instance, with cardiology, and we are beginning to define exactly what is the role of Illini Hospital in our cardiology program, and then how do we interact with the system. Whenever you're dealing with a system and you're looking at various locations and how they interact, I think the focus always needs to be on: How do we create a win-win both for that local facility as well as for the system as a whole? I also have outpatient services for the system, and I am currently recruiting a vice president about patient services, and I can tell you that, as a system, we are able to attract higher talent than we would if we were a stand-alone facility. I am surprised this time around in recruiting at the number of people that are not only looking at this job, but they're looking at the opportunity from career advancement that will be available to them in the system, as well as financial stability and long-term goals and growth. And I think only a system can provide that to people coming in. That goes for our administrative talent as well as physician talent. We have an expertise now in managing physicians—160 employed physicians, and we're able to recruit and retain physicians here in Illinois in particular—both from a specialty perspective and from a primary-care perspective—that we would not be able to recruit or retain without that connection to the system.
I'll move quickly to the next slide just for a minute. I am going to talk briefly just about the challenges to being part of a system. I think the overall challenge as a system is to leverage the assets of the system for the growth and benefit of all parties while balancing the need for agility and uniqueness at each one of those locations so that your individual location as well as your system not only survives together but thrives, and we're looking at it as Mike alluded to also this idea of standardization across the system. We should be able to say to members of this community—congestive heart-failure patients, AMI [acute myocardial infarction] patients receive the same standard of care, the same standard block of elements of care throughout the system. Particularly for us where we have two different distinct medical staffs, different state regulatory requirements, etc., to be able to do that in a way of which everyone's voice is heard and everyone has the ability to have input, and their culture and standards reflected in that process I think is a challenge. Overall, additionally, being able to be agile to the needs of different communities as you work within the system as well as provide the assets of systemized reporting. We just went through a management reorganization, and two of our goals in that reorganization was the ability to be able to create accountability at the individual hospital or facility level—very, very clear roles while leveraging the assets of the system players in that reorganization so that we could move along our journey farther and faster from a performance excellence perspective. So I'll stop there. I think I took my five minutes, and wait for questions.
Barr: Thanks, Flo, that was interesting. I have one question for you before we go to Dr. Smullens. Do you have a different set of oversight procedures for your critical-access hospital as opposed to those that are under prospective payment system Medicare rules, or do you have different ones? How did you come to that decision to be treated that way?
Spyrow: Can you clarify what you mean by oversight procedures?
Barr: Well, do you have the same standards for measuring quality and performance for critical-access hospitals as you would for, say, a more general acute-care hospital?
Spyrow: Absolutely. Now, not all of the metrics, the quality metrics, in particular are applicable or measured from a federal perspective at our critical-access hospitals. We still measure those and hold them to the same standards of patient experience and quality metrics. In fact, interestingly, our critical-access hospital in DeWitt, that ED has been in the 99th percentile of Press Ganey for many, many years and just recently received an award for that. We are now trying to take some of their best practices. We don't believe the argument that a small hospital can do it much easier than a larger hospital. There are certain techniques and practices that they've embedded in that ED we are now spreading throughout our system, and we can learn from them just as well as they can learn from us. That critical-access hospital also has implemented CPOE in its procedure. So, we treat them very much equally. We believe our commitment to quality of care is the same no matter what community we're delivering that care in.
Barr: Great. Sounds interesting. Dr. Smullens, if you will, can you please begin your presentation now?
Stanton Smullens: Yes. Thank you. Good morning. Thank you for asking us to participate in this webinar. First slide, please. We were recently honored to be named by Thomson Reuters as one of the top 15 healthcare systems in the country and in the top five for revenues above $1.5 billion. So I want to give you a little background about who we are and where we are located. We're actually headquartered in Radnor, Pa., which is a western suburb of Philadelphia. Many of our hospitals are in the suburban areas as well as in central Philadelphia, downtown Philadelphia. And the system consists of several portions. There's Thomas Jefferson University Hospitals, the Main Line hospitals and Magee Rehabilitation, which is one of the premier rehabilitation facilities in the country. Next slide.
Altogether, we have about 19,000 employees and 3,500 physicians. The majority of the hospitals have achieved the American Nurse Credentialing Center Magnet recognition. So this has been very important to us. Thomas Jefferson University is the primary academic affiliate of Jefferson Health System, and we have a AA bond rating with about $3 billion in net revenues. Next slide.
I want to give a little bit of a background about our system in terms of how we've been successful in terms of measuring quality and patient safety and other outcomes. And our board made an early decision that we would be involved with the CMS/Premier Hospital Quality Improvement Demonstration project, which is the HQID. There were about 235 hospitals in this, and extended from October of '03 until the end of September in '09, and basically became the standard and the rationale for going ahead with value-based purchasing through CMS. And you can see it concentrated on improving care in heart failure, coronary bypass grafting, community-acquired pneumonia, acute MI [myocardial infarction], and hip and knee replacement. And these, of course, have become the measures that have become particularly important in terms of how CMS is currently measuring quality. Next slide.
And you can see that JHS member annual goals are set, and they stress the national metrics of patient quality, safety and patient's perception of care. We began back in 2003, 2004, and the Jefferson Health System board set the top decile as the goal using these national benchmarks. And importantly 30% of the CEOs' yearly bonus depends on achieving these quality goals, and many of the C-suite and other managers are also incentivized by these goals, so all of our entire system is focused on these quality and patient-safety goals. We have used the concept of grouping these goals, the appropriate care measures, rather than looking at the individual process measures, so if a patient with an acute myocardial infarction is supposed to get nine different process measures, we measure that they get all nine. So in order to score, a patient has to have all of them, so it's an all or none phenomenon. We find this has been very good in terms of focusing on individual patients and making sure that they get appropriate care. Next slide.
One of the things that we have also put in place, and the board has also asked that this be done, is that we have a very strong involvement of our member boards. Each of our hospitals within our system does maintain an individual board as well as a Jefferson Health System board. And in 2008, taking information from the American Hospital Association's and the Institute for Healthcare [Improvement]—the IHI—we developed seven separate elements which the board has to yearly test that they have gone through these various things that will include various learning activities, it will include making sure that they hear things from patients, types of things that there are annual goals that are set, that there are various kinds of meetings that go on in which these quality things are presented. So these have been very, very important in terms of how we have done—and I think that has been part of the reason we've been successful. In our case, having a large system has worked to our advantage because everyone has a different way of doing things. So we've been able to benchmark and share best practices at all of our quality meetings. So this being able to talk about how different problems have been addressed, how one has been able to solve a particular problem, has been very, very useful so that each of our quality meetings becomes an educational program in itself. I think the fact that we have such a large organization with great depth of clinical resources has encouraged us to keep many of our patients within the system. And the geographical spread has been important for the visibility and the community awareness of Jefferson Health System. I think our affiliation with a medical university encourages the early dissemination of new knowledge and a loyal patient base, and it certainly has encouraged the teaching environment. So, in general, I think it's been—our system has worked well—learning from the strengths of either—of every part of the system. So I've been, at this point, we've been successful and hope that we can continue as going forward. Thank you.
Barr: Great. Thanks. So, before we get started with some questions from the audience, first I'd like to remind everyone that you can submit questions in the webcast console box on your screen, so if you have any question at all, don't hesitate to submit it. We may not get to all of your questions, but we do want to hear from you. My question for you, Dr. Smullens, is with 30% of CEO bonus tied to quality, was it difficult to come up with a set of quality measurements that could be agreed upon by everyone within the system?
Smullens: Initially it was, but as more and more national metrics are being presented and certainly CMS on their Hospital Compare website; there are websites within Pennsylvania that also put quality metrics in place. Basically, we have not devised metrics de novo. We really have looked to national benchmarks and national metrics and have gone that way. So I think the fact that there is an awareness by all of the CEOs—that people are more and more looking at these, that certainly the payments from CMS related to readmissions and all of the other kinds of value-based purchasing very, very quickly dissipated any kind of resistance. We do—when we come up with these processes of developing these, we certainly make sure that everybody is comfortable with them, and all of the different hospitals follow these on their individual hospital score cards.
Barr: Great. Thank you. All right, well I'm going to ask a couple of questions coming in from the audience. This first one I'm probably going to direct to a couple of you. I'll start with you, Michael, at Ochsner. We have a question here: If you could describe some of the functions that are directed from the system vs. those that are delegated to local facilities, for example, the question mentions IT, business development, physician recruiting, marketing and HR.
Hulefeld: Those are several of the ones that we really drive from the system perspective. Revenue cycle and managed-care contracting are certainly things that we centralize to the best of our ability, and have been very focused on the first few years, again, of hospital integration. We do want to negotiate from a purchasing perspective, whether it's a managed-care contract or physician preference item. We want to do that as systematically as possible, so those are certainly functions that we have done systematically. We do have a centralized … components of HR are centralized. There's one compensation department; there's one benefits department. However, we do have employee relations people across all of our campuses deal with more local and individual issues, and so kind of almost a hybrid model, from an HR perspective, again, a very focused, let's not duplicate things like compensation and things like benefits that we will have consistency across our system. We do have also kind of a centralized quality group. We have a physician who leads our quality efforts who reports to our chief medical officer across our health system. We also have a chief nursing officer for our system that our various CNOs report kind of a dotted line through her as well. So we can be consistent as it relates to our quality efforts across all our facilities. Like Flo mentioned, we do have various types of facilities. We have a critical-access facility. We also have a tertiary and quaternary site. But the basic tenet of how we provide quality and how we work our quality are consistent across those various sites. IT, we will have one IT platform. We're in the midst of an Epic rollout, and that will help us from a revenue-cycle perspective on the backend point-of-view. It will also help us capture clinical data consistently across our system in all of our clinics and all of our hospitals, because we think, again, doing things like Epic consistently across our facilities—all of our facilities—provides better patient care, safer patient care, better access to patient information and will enable us to gain more economies as it relates to the work that gets done given how a patient moves across our system from the clinic to the hospital, from one hospital to another hospital. So those are the major ones that we're most focused on. How do we drive those at the system level, yet let's ensure that we're meeting the needs of the individual hospitals and the group practice because otherwise the whole thing breaks down.
Barr: I'm actually going to move on to the next question because we're getting a couple of different people asking about this. And I'm going to direct it to you, Dr. Smullens, if you don't mind, at least initially. We have some people wondering what are some of the cons to being in a system as opposed to operating as an individual hospital?
Smullens: Well, I think one of the biggest concerns is there are different ways that different hospitals do things, and this whole idea of culture is something that people have talked about, and I think that is probably one of the most difficult things. If you try and bring different hospitals together, trying to make them follow a single path can sometimes be very challenging. And we have a medical staff that has many employed physicians, part of the practice plan, part of the employed through Main Line, but also a lot of private physicians. So trying to get the different cultures relating to the physician entities as well as the hospitals has been a challenging activity. I think just trying to get consistency, making sure everybody is accountable, making sure everybody knows what the path is, what the strategies are, I think those are the most challenging activities.
Barr: OK, I'm going to actually ask all of you this question, and, Flo, I wonder what your thoughts are? What do you see as the major disadvantages to being in a system?
Spyrow: I would say, taking off a little bit on what Stan just talked about, is the opportunity to build bureaucracy within the system and not become very agile, to create standardization and kind of control over the quality of care that's being delivered, the patient experience, compliance and regulatory issues, I think there's a tendency to build more bureaucracy and become very, very process-oriented, which then creates less opportunities to be agile and respond to the perhaps unique needs or the cultural differences of each different facility relative to the needs of their patients and the individual medical staff needs and actually the community needs and what they're looking for. So I think that is probably the biggest opportunity for systems not to meet their goals and not to be as successful as they could.
Barr: Great. Thanks, and Michael, you having seen your organization transform itself, did you have any thoughts on this matter as to what some of the disadvantages are to being in a system?
Hulefeld: I would second—nothing really in addition to what Flo and Stan mentioned. I think that this, especially for us, as we're kind of in the build mode right now to catch up with the acquisitions that we've made and the growth that we've experienced. I think the need for consensus can certainly lead to a very bureaucratic approach, and so that is our biggest challenge and the biggest threat from a competitive perspective is that we are in a market where there are several stand-alone hospitals, and they're just quicker than we are. And we have to be very cautious about that and make sure that the tradeoffs we're making are worth it. I think one bit of advice that I would have for folks is, we're learning this as something that Stan mentioned, kind of how do you get everybody aligned? Does everybody know what the strategy of the organization is and have we been clear in communicating that? One of the things that we're doing right now is really beefing up our internal communications functions because when we're in 35 different buildings spread across different geographies, it's very easy for that communications function to break down. And so I wanted to stress that specifically, because that's certainly a challenge for us, and how do you get 13, 14,000 people in 35 locations all headed the same direction?
Spyrow: And the other side of that, if I could just add, the other side of that—
Barr: Oh please do.
Spyrow: —would be that how you get them engaged. We struggle with really engaging, which is the other piece of alignment or the other side of alignment. Medical staff in different regions, employees in different regions, etc., in the process has been getting to alignment.
Barr: Great. All right, here's another question from the audience, and this is actually directed specifically to Michael. Have you been able to reduce costs by pursuing shared services and redesigning HR and the revenue cycle?
Hulefeld: I would prefer to answer that question about a year from now, because the rollout—I don't want to cop out, but the rollout of the HR redesign really begins in September. The revenue-cycle component, we're actually making the investment, and we are seeing some significant improvements … but we're in the midst of this given where we've been, what are infrastructure and capabilities were prior to the acquisition of our various hospitals for the past couple of years, so what we have been able to prove is a significant change in quality. And so when we think about, again, we judge things really based upon value as the typical equation of quality over cost. And so we need to drive more from a cost perspective, especially given what's facing us all from the perspective of reimbursement deductions and changes. Where we're very confident where we've made significant impact is on the quality side through some of the standardization, through a more robust, centralized and then distributed quality mechanism in each of our facilities. I feel really good about the quality changes; I think the cost stuff still needs more work.
Barr: OK. Thanks. Here's a question, Dr. Smullens at Jefferson: What is the capital-allocation process? Is there a competitive application for system funds as well as local hospital discretion?
Smullens: There is. Anything over a certain amount for any kind of capital outlay has to be approved by the Jefferson Health System board. Smaller amounts can be carried out by the individual boards. We have encouraged the individual boards to maintain their community focus, which has been an important part of the success, but larger funds have to come through the Jefferson Health System finance committee; the executive committee has to make sure it's part of strategic plan of the organization before it can go forward.
Barr: Great. Flo, do you have—is your process for capital allocation any different from theirs? Or how does it work for you?
Spyrow: It's a similar type of approval process at a certain level, but we work both systematically as well as individual-facility basis. There are certain things that we set priorities on from a systemwide perspective, and all of the presidents of the different entities get together and make decisions about that—are we going to build facilities in Illinois or in Davenport? What's our IT cost and what are our priorities from a systemwide perspective, etc.? And that goes into a bulk of money. Then there's a certain allocation to the individual facilities to meet their needs, so again we're trying to balance: What do we do as a system and what's the role of the system in this process, and then what's the allocation for the individual facilities to be able to meet their needs relative to program development, etc.
Barr: OK. Thank you. Michael, here's a question from the audience: Who in the hospital resists or resents being part of the system most when transition takes place? Is it doctors, nurses, other staff?
Hulefeld: That's an interesting question. I've never really thought of it like that. I would say that the change management initiatives are probably most robust on the physician side, and I think that that's where we've had to spend more of our time. Again, given our history as a group practice that had one main facility, and now we have evolved the system to group practice at the core of a multihospital system, I do think a lot of our physicians in the group were wondering: Why would we do this and what are the benefits and how does this impact me? So we spent a lot of time really focused on that group and figuring out what are the positives associated with this thing? So we're able to do things like EICU right now that as a stand-alone hospital, we weren't doing things like that. And we were able to grow certain parts of our group practice that created additional redundancy capability. I would say that it was really education of our physician group that took the most time. I wouldn't necessarily say it was resistance; I would just say it was more of an educational process.
Barr: OK. Dr. Smullens, what about from your perspective? Do you—
Smullens: I was thinking about it. I know that one of the issues that we ran into, and still is an issue, is that the physician groups at the various hospitals tend to be competitive, so the question of having to work together with your competitor is something that we're still dealing with. And we've tried to handle that by working on specific areas—trying to bring the chairs together, the particular participants in the various departments together, so that there is specific focus, which brings value to them, and that seems to be something that is worthwhile. I think initially there's also some resistance from administration because some duplication of services were ended so that there was some internal resistance from the bureaucratic setup at each of the hospitals. So those are the kinds of resistances that we've run into, but again focusing on things that bring value to the patients and bring value to the hospital and the individual physicians as much as we can, has alleviated a lot of that.
Barr: Great. Flo, I'm going to shoot to you a different question from the audience. It's somewhat related. In your system, does each facility create its own strategic plan or are strategic plans created at the system level?
Spyrow: Strategic plans are created at the system level. We have a very systematic process for doing that. It starts with a board retreat in the fall. Our fiscal year actually starts July 1, so this would be in preparation for that fiscal year. The board sets certain priorities. Quality and safety has been strongly a priority that the board has set, and then that consistency and standardization goes downwards. We have three focus areas now as a system: performance excellence, which would include quality and safety; strategic growth; and then population health relative to how we are focusing more on our communities than on our hospital care. Those focuses are driven down: we as an executive team and then in more broader physician groups as well as kind of an all-exec team that represents all of our entities. They get together, look at both a systemwide strategic plan and then individual strategic plans. Furthering those goals are developed by the presidents and their teams at each one of those entities.
Spyrow: But it's—
Barr: Go ahead.
Spyrow: No. I was just going to say it's very much a top-down approach with individualization at the individual entity level, but standardization in the goals and expectation and accountability.
Barr: OK. Just to let everyone know, we're getting a lot of great questions in here, and I hope this is fine with everyone, but we're going to try to extend the session by about 15 minutes. Does that work for all the speakers?
Speakers: Yes. Yes it does. Yes.
Barr: OK, great. Thanks. So my next question I'm going to direct to Michael. This is from the audience, and as a system is your medical staff office all centralized? If so is there one set of bylaws for all hospitals, or do they have individuals?
Hulefeld: We do have a central verification office that has been stood up within the past couple of months, so we're new into that process. That said, each hospital does have its own set of bylaws. So we do the verifications and the things that can be done from a centralized perspective in one location so we don't duplicate those services, but we do not have one set of bylaws across all of our hospitals. Now, the big component of that, is our main facility is a closed medical staff, whereas all of our other facilities, especially our critical access, are open medical staffs. So, we don't anticipate moving in that direction anytime in the near future.
Barr: OK. Great. Dr. Smullens, how does it work for Jefferson? Is your medical staff office centralized?
Smullens: No, it's not. A lot of these activities are decentralized. So Thomas Jefferson University Hospital, which has three campuses, is a single staff by and large. Main Line Health, recently, I guess within the last few years, acquired another hospital called Riddle Memorial. That is just now coming into their medical staff as a single entity, so Main Line hospitals do have a single medical staff with a single set of bylaws, but a lot of decentralization exists. And basically it's been really to try, again, to stay close to the communities that these different hospitals serve. So, to that extent, no, we do not have a central physician office, and the credentialing usually is done at the individual hospitals. And the health plans, basically the credentialing again is done at the individual hospital level.
Barr: Great. OK, for my next question, I'm going to direct to you, Flo: How do you make quick and crucial decisions at some of your community hospitals when dealing with what some would call a bureaucracy of corporate structure?
Spyrow: I think there is a lot of accountability that's given to the presidents of those facilities to be able to make decisions relative to the operations at that location. Where we get a challenge is when the decision impacts operations that might be shared services with the systemwide basis or have a broader impact relative to capital, etc. So there's a balance between that flexibility and agility on-site for things that are controllable at the individual sites vs. things that create system resources, and it's something to be honest with you that we continue to be challenged by and struggle by balancing the team approach and the standardized approach. We're big in the Baldrige philosophy of using ADLI [Approach, Deployment, Learning, Integration] and having a standardized approach deployment, etc. on those things that really don't need to be critical decisions, making that distinguishment vs. those things that need to decided on and acted on individually at that individual entity.
Barr: Great. Michael, what about at Ochsner? Have you seen the pace of being able to make quick and crucial decisions slowed as you transform into a system?
Hulefeld: We have. Now I think that, similar to Flo's experience, what we attempt to do is isolate our market-specific decisions, and so if there's a group to bring onboard, if there's a local business strategy that impacts a certain market or a certain physician group or that's isolated at the one hospital, we really leave that to the purview of the individuals leading that, the CEO leading that division or that specific region of the organization. So that is at least from the business perspective, keeping things moving as quickly as we can. I do think that our challenges have been those sorts of decisions that Flo mentioned that impact shared services or expand the organization, and that's where, when I mentioned the cons of being part of a larger system now, I think that that term “bureaucracy” can get thrown out, and I think it's accurate at times and that's something that we really have to stay focused on and rabid about improving.
Spyrow: Can I make this one other comment as just an idea—
Spyrow: —drawing on what Mike had to say? We meet, the executives from all of the different facilities, on a weekly basis together, and we started a priority list of things, decisions that need to be made from a systemwide perspective within the next week. And we develop that list every week, and we all become focused, shared services, individual entities, on making that decision and getting to that conclusion. And then we go through that list to see how successful we were the following week as well as to set other priorities. And I think that tool and that accountability for all of us, getting us on the same pag, has been helpful but not totally resolved the bureaucracy issue.
Barr: OK. Thanks. And, everyone, if you feel you want to add to a question I don't answer directly, feel free to jump in because we want to hear from all of you. Dr. Smullens, this is another question from the audience. Has system membership improved all of your facilities' ability to access financing? That's something we haven't really talked about.
Smullens: Yeah. The financing is done through the system. The bonds are system bonds rather than individual hospital bonds. And I think in that case it has because, as I said, we have a AA bond rating, so being the system, having the quality outcomes and financial results of each of our hospitals putting it together, has made it easier, I think to access capital that way. Yes.
Barr: Great. Flo, has that been true for you as well?
Spyrow: Absolutely, particularly when you look at the critical-access hospitals or you take into account our development of an outpatient campus. Here in Illinois, if we were a stand-alone hospital, in Illinois we would not be able to qualify for the financing. And the system, of course, the more entities that come together, then from a financing perspective, the less risk because you all share that risk, the higher bond ratings in general, and then you can also get capital at a lower interest rate.
Barr: Interesting. Michael, here's a question from the audience. Are the skill sets of a successful system CEO different from those of a successful stand-alone hospital? And whether they are or aren't, in terms of a system CEO, what traits are you looking for?
Hulefeld: That's a great question. What we've tried to foster culturally within our organization is a very noncompetitive approach across our different hospitals. In some of them, we are largely based in New Orleans, and so we've got four hospitals within a 20-mile radius of each other, and it could become quite easy, and a lot of CEOs get to that position through being great competitors, and really kind of growing their business and doing certain things potentially at the expense of others. And so within our system, coordination becomes incredibly important. And working together to achieve systemwide goals, I think it is something that we really look for in people. And obviously the underlining part of that is you can't be a great CEO, either as a stand-alone or part of a system, if you can't communicate well. But I would say that that ability to communicate becomes more important today in a multihospital, multilocation, multiregion sort of system. So, I think those, to me, are a couple of—the ability to work with other people, I think becomes more important in a multihospital, multigroup system. And then also the ability to communicate across various disciplines and not only to your areas of direct control become extremely important. And certainly within our system they have.
Smullens: I have a thought about this. I'm not the CEO, but I think a lot of the quality that you need for a system CEO really depends on how your system is structured. The talents that we would need in our system, might be different from a more centralized, controlled system, so I think a lot of it depends on how you're structured and what the needs of your system are, which, I think, really has a profound difference in what the talents of the CEO are and their experiences.
Barr: Great. Thank you. I'm going to move to a different question, and I'm going to direct this to Flo initially. How does Genesis seek and evaluate additional partners for system expansion?
Spyrow: Well, we're actually working with a partner right now to help us do that in the best way, but we are committed from our board's perspective, to be a regional system. And so we have a certain kind of mile radius in which we're working in because we want to serve the local communities, and we don't have an interest in being a multistate system or a broader regional approach. So we have first defined a region from a board perspective that we're interested in working in. And then second of all, we look at what are some of our prime goals: population health and strategic growth are now driving some of that expansion and who would we look at relative to a partner. And we would also respond to many people who come to us and say, as Mercer County did, “We need some assistance. Would you be interested in working with us and affiliating with us?” On a broader note if I can just say, we're cooperating with another healthcare system in the state of Iowa relative to implementation of an accountable care organization and how we're working together with that, and so we began to broaden some of our perspectives relative to the population health. And how do we align ourselves from both a tertiary perspective as well as a community perspective in meeting the needs of a healthcare population?
Barr: Great. That sort of was what I was going to ask you about, so thanks. Michael, what about you? Are you still in growth mode in terms of seeking and evaluating additional partners for expansion?
Hulefeld: I would say we're much more in optimization mode of what we have given the earlier comments about getting Epic installed, redesigning HR, ramping up revenue cycle to do the things that, now that we've expanded as much as we have, to really optimize what we have. I would say though, that if we were to look at additional opportunities, I would kind of second what Flo said, around that we've got to make sure that anything we do going forward sets us up to really manage population differently or better than we do today. And so I think that's also driving why we've put in Epic everywhere, why we have all of our physicians on the same system. There's a lot behind that obviously, but really the focus is moving more towards population management and really proving the value, and can we if we were to look at additional acquisitions or additional partnership opportunities, what's the value that we bring and what is that organization that we're chatting with, what do they need? Can we help address that need? So it would be very thoughtful, very diligent, but I think job No. 1 for us right now is to really maximize the system that we've become.
Barr: Great. Here's another question from the audience for you, Dr. Smullens. With multiple facilities in the system, have you modified your teaching program strategy, such as moving one program from one facility to another or adding or deleting programs?
Smullens: No, we haven't. The system at this point, we have, for instance, Main Line Health is an affiliate, a strong affiliate of the Thomas Jefferson University, so medical students come out to the various hospitals for various services, but there are stand-alone residency programs both at the Jefferson University Hospital and then in the Main Line as well, typically Lankenau, which is their largest teaching hospital. So we have not done anything beyond the residency or medical students, other than the affiliation with the medical school. We have, however, since we're self-insured, we have had various groups get together. For instance, the obstetricians get together, set up best practices. We have various risk-management activities that they're involved with. We've done it with the emergency room and other areas as well. We're doing general surgery sometime shortly, so that has been a way that we are trying to spread the associations and build relationships among the system, but at this point, although early on—our system's about 15 years old—early on we thought about having a single residency program across all of the parts of the system but it seemed premature at that time to do that, so we backed away from that. I think there are more affiliations going on now, various teaching programs, some of the attendings at the Main Line, many of them have faculty appointments at the medical school. And they will have preceptors, third-year, fourth-year medical students under various services. So, there is active teaching back and forth, but at this point the programs are separate.
Barr: Great. This next question is addressed to all the speakers, and I think it's worth going over. I'm going to go to you with it first, Flo. The question is: Can you please describe the business structure of your system? What was the financial exchange when forming it, and what is the percent of ownership? As a reporter, this is interesting because we often have a tough time getting a handle on that when there's such a deal. Flo?
Spyrow: Well, I'm not sure that I understand the question correctly, but we own all of our facilities. So there would have been a purchase price. We not only own the assets but we govern and own the right to govern that facility. So we are a 100% locally owned healthcare system. If we purchase, for instance, Mercer County Hospital, that would be for a negotiated price. We'd own the assets, and we would manage through one board locally that hospital.
Barr: OK. Michael?
Spyrow: I'm not sure I'm completely answering—
Barr: Oh, I'm sorry.
Barr: Sorry about that. You can finish.
Spyrow: OK. Well, I wasn't sure that I was completely getting at the question relative to the transformation, but, again, we own our assets and govern the facilities that we own out of a local board. We have discussed the opportunity to be more diverse relative to our affiliations with either the physician practices or with hospitals throughout the broader region, and we're exploring that at this point in time. But we have not done any deals different than full ownership at this point.
Barr: OK. What about Ochsner? Do you have different forms of ownership structures within your system?
Hulefeld: No, we're pretty similar to Flo as she described her organization. We're a not-for-profit 501(c)(3) organization that actually some of these facilities we have been mentioning earlier throughout the call today, we purchase from for-profits or from government entities and brought them into our organization, and so we solely own and fully own all of our hospitals. And when we mentioned our group practice, those folks are all employed, again, through the same 501(c)(3) overall structure.
Barr: Great. Dr. Smullens, anything different there?
Smullens: Yeah, ours is different. Our structure is actually that of a holding company in the sense that we have the system bonds, you can say that we own the hospitals, but that's obviously not the same situation. For instance, at this point we're not actively looking to add more members. We do have a strong affiliation with a system called the Aria Health System, which was the Frankford Health System, so that we can do contracting in terms of vendors if the vendors are willing to do that, and most of them are, so that's a real big advantage because then we have a larger volume and can usually get better pricing. So we've tried to do all of those things along those lines as much as we can so all areas of purchasing, pharmacy and other areas. But we don't strictly own—to join the system now we would not buy someone, they would join us and then there would be certain obligations that they would have, certain rights that they would give to the system, which would be related to contracting and finance, insurance, quality benchmarking, those kinds of activities. But by and large the systems are—the individual parts of the system are still separate entities and own their own assets. Now from a consolidated financial report, since we are together in many ways and share clinical activities, we can put those down as a consolidated report. But by and large we don't individually go out and buy institutions.
Barr: OK. Thanks. This next question I'm going to run by Flo. Has your system had to deal with the needs of labor bargaining units when purchasing a facility, and have you had to provide similar pay at different facilities as a result of that or is that not an issue?
Spyrow: That has not been an issue for us, and in our community none of our hospitals have a union presence within them. And you'd have to go pretty far out into the region, up to University of Iowa for instance, to find a union contract. So we've been pretty free from some of those issues and those complications in bringing other facilities into us. As Mike was alluding to initially in his conversation, HR for us from a comp and benefits perspective is centralized, and so when we bring people on to our institutions and they come under the same benefits structure that we have, their pay is handled in a consistent manner based on our policies and procedures relative to how we bring physician offices in and accommodate for their current pay. And then our pay scales, which are slightly different in our critical-access hospitals than some of our other entities, but that's done on a standardized basis.
Barr: Great. What about you, Dr. Smullens? Have you had any experience in that area with having to deal with unions?
Smullens: No, because I think part of our structure, the University Hospital in Philadelphia is unionized. At Main Line Hospital, it has not been an issue of any great sort, so, no, since, again, we're not purchasing hospitals or trying to push people into a single structure—benefits or otherwise—that's not been a problem. To that same token, we do have some centralized decisionmaking regarding benefits, but the individual decisions in terms of the costs and things like that, we would go back to the individual hospitals. No, that's not been a problem in terms of putting the system together.
Barr: OK, great. We're just going to have time for one more question, and I'm going to direct it to Michael. With your becoming a larger system, has your competition felt threatened and tried to band together in some way or respond to your growth?
Hulefeld: I think it's a good question. It certainly has caused a lot of discussions to take place, and I think that they continue to take place, and people have certainly taken notice. Our market, interestingly, remains a relatively fragmented one. If you look at healthcare across the United States, there's still several stand-alone hospitals, so I do think that there is potential for additional consolidation within our market. Whether that was, I think, driven as a result of our expansion, I think you could debate that. I think that there's challenges I think as the future unfolds around the single hospital, especially with a stand-alone hospital, especially within an urban setting. So, I think there will be, I would assume, additional consolidation, but I don't know that it's necessarily around anything we've done here.
Barr: OK, anything along those lines at Jefferson Health? Have you see any competitive response to your system?
Smullens: I'm not sure it's a competitive response to us but certainly the managed-care world of the '90s started a lot of system development. The University of Pennsylvania has a health system. Temple University Hospital has been recently expanding to develop a stronger system. We're blessed with five different medical schools in our city, which certainly made it a mecca for healthcare, but at the same time, each of those different hospitals have five different ways to develop their own system. I'm not sure it's in response to us particularly, but I think it's really just the way the market has been going.
Barr: OK. Well, that's all the time we have for questions, and I want to first thank the audience for submitting some great questions, and I'm sorry if we didn't get to your question. We tried to get to all of them, but we just didn't have time. I'd also like to thank all our speakers here. You've been great, and I appreciate your providing us with the information, also allowing for us to go a little bit long.
Spyrow: Thank you.
Hulefeld: Thank you very much.
Smullens: Thank you.
David May: This concludes today's discussion on the pros and cons of hospitals operating systematically. For those who want to view this webcast again, all attendees will receive a follow-up email with a link to the recording of the webcast available at modernhealthcare.com/webcast. All slides presented during this webcast are also available at that address. Thank you.
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