But as hospital use falls in the short run—even before they get involved in accountable care or shared-savings programs—systems are finding they have less financial resources to invest in the improvements needed to deliver better coordinated care. Meanwhile, feeder physician practices are increasingly being rewarded for keeping people well and out of the hospital. This vicious circle is exacerbating the resource shortage at hospitals and making it more difficult to make the needed investments.
Allegiance's outside consultants—Beacon Partners—analyzed the system's capacity to participate in the shared-savings program, which rewards hospitals with half the savings if total payments for a panel of Medicare patients are less than expected. “They had (care coordination) in place in most settings, but it wasn't coordinated across the continuum,” which meant the hospital didn't have effective communications with community physicians or post-acute care providers, said Bruce Eckert, the national practice director for Beacon.
On the positive side, local physician practices were working on the same electronic health record system, which would make the transition to greater coordination less costly than it otherwise might be. And Allegiance had software already in place for population health management, which is essential if its health coaches were going to be effective in reaching out to discharged patients to ensure they remain compliant on medications and keep their doctors' appointments, which reduces costly readmissions.
But after Beacon presented its analysis, the Allegiance board voted to postpone joining the program. “Given our mix of payers and community charity care … we decided it might put us out of business,” Warren said. “We're not ready yet.”
For the time being, the system is looking instead to forge new affiliations with physician practices and neighboring systems to fill some of its hospital beds. It plans to invest more money to correct its IT deficiencies and beef up its capacity to follow individual cases across different care settings.
It's also plans to improve its capacity to analyze physician practice patterns within its hospitals to identify nonstandard practices that are driving up costs. Yet officials realize that at the end of the day the entire process will result in what Eckert called “demand destruction” for the system.
“The health system is investing money to take money away from the health system,” Warren said. “It's an ongoing battle to strike a balance.”
Still, Allegiance hopes to join the shared-savings program in 2015. One possibility: shrinking the size of the hospital to accommodate the new realities. “We're looking at our capacity and how we can adapt to the new model,” Warren said.
Follow Merrill Goozner on Twitter: @MHgoozner
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