Standardizing care reduces costs, improves quality

Since 2005, Joe Landsman has served as president and CEO of the University of Tennessee Medical Center, a 600-bed academic center serving 21 counties. The medical center, which reported total revenue of $707 million and net income of $22 million in 2014, partners with physicians in a 450-physician independent practice association. The center, which is independent from the University of Tennessee, graduates 70 to 80 medical residents a year in partnership with the university's medical school. Landsman was previously UT's chief financial officer and former chairman of the Tennessee Hospital Association. Modern Healthcare Managing Editor Harris Meyer spoke with Landsman about his system's work on developing clinical pathways, how academic centers can compete with other hospitals and the prospects for Medicaid expansion in Tennessee. This is an edited transcript.

Modern Healthcare: What has your organization been doing with clinical pathways and standardization?

Joe Landsman: Over the past three years, we have made an effort to standardize and coordinate the care delivered to our patients across all the different disciplines. We have done that in the form of clinical-care pathways. These pathways are developed by multispecialty teams of our medical staff. We start with evidence-based medicine and a work redesign before we actually build the pathway, which ultimately ends up in our electronic physician order-entry system. We also have pharmacists, physical therapists and nurses involved in the development of the pathways.

We know at what point in the stay we are expecting certain milestones from the patient's perspective, so the patient is educated on what to expect. The first thing we measure is whether we are complying with the pathways. Next is mortality and complications. When you think about the fact that 30% of inefficiencies in our system today are driven by a lack of standardization and a lack of care coordination, these pathways are critically important.

MH: What results have you seen from adoption of the pathways?

Landsman: We've seen a dramatic improvement in mortality for a number of different DRGs, and our complication rate has dropped dramatically as well. Those pathways that are more mature are showing better results than those that are less mature. But they are all moving in the right direction.

MH: How have you engaged your non-employed physicians in this process?

Landsman: We only employ about a third of our active medical staff. It is very much a partnership arrangement with our medical staff. There is rarely a decision made on this campus that the physicians haven't had the opportunity to weigh in on. They have taken up the challenge and are developing the pathways themselves.

MH: Has there been a competitive advantage in the development of pathways?

Landsman: With the movement toward cost and quality transparency, I believe that there will be competitive advantages to this. We are only talking about inpatient now, but we are also breaching into physician offices and the post-acute-care environment. Ultimately, if you want to be a successful healthcare provider at a large academic medical center, the formula is offering the highest quality of care and the safest care in a patient-centered way.

We work in an industry that traditionally has resisted standardization. We have embraced that concept on this campus because we know it will drive quality and safety, service, and efficiency and effectiveness. If we are doing all of those things, we are going to be a good partner for insurers and employers because we will be a low-cost, high-quality provider.

MH: Your organization's total revenue for 2014 increased over 2013 and 2012, but your operating expenses increased at a similar rate. Can you talk about your financial situation?

Landsman: Our volumes have grown dramatically, and we find ourselves having to add more capacity to take care of patients. That has driven the net-revenue growth. What's driven revenue down is that in east Tennessee we have one of the lowest wage indexes in the country, which affects our Medicare reimbursement.

The second component is that Tennessee so far has decided not to expand Medicaid coverage under the Affordable Care Act. That keeps our uninsured population fairly sizable. Right now, it's 6%. The third component is that TennCare Medicaid managed-care reimbursement tends to be lower than the average, and in east Tennessee it is even lower than in the rest of the state.

MH: As an academic center, are you competitive price-wise with your competitors and are you maintaining contracts with insurers?

Landsman: We have been very effective in maintaining contracts in all the networks that are meaningful to us, and as an academic medical center on a risk-adjusted basis, we are in about the same place as the other hospitals in town in terms of cost per Medicare beneficiary.

MH: What is the prospect for expanding Medicaid through Gov. Bill Haslam's Medicaid expansion proposal, which he calls Insure Tennessee?

Landsman: The concept of providing everyone with coverage is noble, and I think everybody believes in it. The governor, after working diligently with CMS, designed a program he felt would fit the state's desires and needs.

Unfortunately, that did not make it through the first legislative committee. There is still a lot of work and education to be done. I think there is still a desire to help these working poor folks to be able to afford health insurance. I hope our legislators continue to deliberate and come up with a workable solution.

MH: Will it be a several-year project to bring Republican legislators around?

Landsman: I wish I knew. I would hope that it would take less time.

MH: How much impact will it have if the U.S. Supreme Court strikes down the Obamacare premium subsidies in Tennessee and other states that are using the federal insurance exchange?

Landsman: The ability of individuals who traditionally have been uninsured to buy exchange plans by accessing federal subsidies has lowered our uncompensated care. It has been about 1% to 2% for us in fewer uninsured patients.

MH: Your organization is not currently active in accountable care, but do you see that changing?

Landsman: We are looking at an ACO partner. We have a number of contracts that have risk components based on performance. I believe those will expand. It all ties back to our standardization journey. If we know what we need to do for each patient, and we do it as quickly as possible, that is going to lower our cost base.

MH: Can you share some lessons you've learned in maintaining staff morale in a difficult and changing healthcare environment?

Landsman: There is a lot of chaos, uncertainty and insecurity in our industry right now. We need to stay calm and focused. We currently are working with the Tennessee Center for Performance Excellence, and we will move into the Baldrige Performance Excellence Program after that. That is providing us with the framework that drives high-performing organizations. It's having a big goal out there. We've learned that if we align everybody around a common goal that they believe in, it keeps us focused and energized.