Lahey diverts less-complex patients out of its teaching hospital

(This article has been updated with a correction.)

Spiraling healthcare costs and frequent community hospital closures were the norm when Northeast Health System and the Lahey Clinic announced plans in 2011 to merge and form Lahey Health, an integrated health system covering northeastern Massachusetts.

One significant cost driver is the large percentage of hospital care in Massachusetts provided in tertiary academic medical centers, said Dr. Howard Grant, Lahey Health's CEO. In Massachusetts, about 40% of patients receive care in academic medical centers, compared with about 16% nationally. That's due more to the number and concentration of academic centers in the state than to residents' need for more complex care, he said.

Meanwhile, more than half of Massachusetts' hospitals have closed over the past two decades. For those communities, the shuttering of their hospital means loss of jobs, economic damage and less access to affordable healthcare, Grant said. As a result, “we made the decision to do everything we could to reduce costs and make sure high-quality care was being provided in the right setting,” he said.

That meant, whenever possible, routing most patients to his system's community hospitals—Beverly (Mass.) Hospital and Winchester (Mass.) Hospital, which joined Lahey Health in 2014—and reserving the system's tertiary academic medical center, 327-bed Lahey Hospital & Medical Center in Burlington, for the most complex cases, such as cardiac surgery, transplants and traumas. “It's a very select population that needs to be cared for in that kind of setting,” Grant said.

Lahey Health does this by working with its employed physicians to communicate the importance of care in community hospitals and the criteria for care in a teaching hospital. While there's no mandate for non-employed physicians to follow the model, Grant said they have also been very supportive of it.

Patients who present at Lahey Health's hospitals are evaluated on a case-by-case basis to determine if they should be transported to a more appropriate location for their care. Last September and October, the system made about 80 transports from Lahey Hospital to Winchester Hospital, Grant said. “Most community hospitals rarely receive any transports in,” he noted. “They're usually transporting patients out.”

Still, he stressed that where patients go for treatment is always based on their preference. “We never interfere with a relationship a patient has with a treating physician and we always give them a choice,” he said. “By and large, though, patients and their families have embraced it.”

Lahey Health's approach is one that many experts are touting as key to controlling costs. In an October 2013 article in the Harvard Business Review, Michael Porter, a Harvard Business School professor, and Dr. Thomas Lee, chief medical officer at Press Ganey, argued that an essential component of successful delivery-system integration is choosing the right setting for each service. “There are huge value-improvement opportunities in matching the complexity and skills needed with the resource intensity of the location, which will not only optimize cost, but also increase staff utilization,” they wrote.

Since forming Lahey Health in 2012, volume has grown steadily at Beverly Hospital and Addison Gilbert Hospital, a small hospital campus in Gloucester, Mass., included under Beverly's provider number. While hospital volume has declined overall by about 3% in eastern Massachusetts during the past year, Beverly's admissions have grown 3%. “That's absolutely different from hospitals in our region that are seeing declines of 7% and 6%,” said Phil Cormier, Beverly Hospital's CEO.

Bed occupancy rates at Lahey Hospital & Medical Center also jumped from 90.7% in 2012 to 96.8% in 2014.

One reason Lahey Health has been successful in moving patients to the right settings in the system is its focus on shared governance, Cormier said. When Northeast Health System and Lahey Clinic merged, the newly formed board included four members from each organization, as well as four outside trustees who had no pre-existing relationships.

“The goal from day one was to have a new organization that was not focused on the priorities of legacy organizations,” Grant said.

Implementing the model in a fee-for-service environment hasn't been easy, Grant said, but he is optimistic that Lahey's approach has positioned the system well for shared-risk arrangements that reward high-value care.

“There are tough decisions that all healthcare leaders have to make that are inconsistent with the old business model,” he said.

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(This article has been updated to indicate that in Massachusetts, about 40% of patients receive care in academic medical centers, compared with about 16% nationally.)