Since 2002, Michael Dowling has served as president and CEO of the North Shore-LIJ Health System, the largest integrated healthcare system in New York state with 19 hospitals, more than 6,400 beds, more than 400 outpatient physician practices and $7.8 billion in annual revenue. It includes the Hofstra North Shore-LIJ School of Medicine. Dowling previously served as the system's executive vice president and chief operating officer. Before that, he was a senior vice president at Empire Blue Cross and Blue Shield and the state director of Health, Education and Human Services. Dowling has been on Modern Healthcare's 100 Most Influential People in Healthcare rankings eight times. Modern Healthcare editor Merrill Goozner recently spoke with Dowling about his system's expansion efforts, its insurance operation, and his views on federal payment and quality reforms. This is an edited transcript.
Modern Healthcare: What are the greatest financial challenges facing North Shore-LIJ now?
Michael Dowling: We've done pretty well. We're investing a lot in our facilities, we're investing a lot in expansion of ambulatory and outpatient care, and we're investing a lot in education. I could stop investing and it would look better for the short run, but we would be in trouble in the long run. You've got to take a five- to 10-year view.
I'm focusing a lot on how I can generate new revenue streams to offset the long-term reductions in Medicare and Medicaid. That's going to be a problem for every organization in the U.S. You don't have the cross-subsidy options that you had years ago. Now you have to figure out how to become more efficient, how to expand all the programs and develop other sources of revenue.
MH: What are the most promising sources of other revenue?
Dowling: Having an insurance base has great potential but it's a long-term play. You have to grow it slowly. I look upon this as a five-year play before you're going to see any substantial results. We've had ours up for almost a year and a half. That has great potential if you can manage the care effectively and if you get the right membership in your insurance entity. If you have low premiums and high-risk cases, you're going to be in trouble. You've got to watch that all the time.
We're growing the ambulatory business and going into new markets. We've moved into the Westchester area, We're moving into Brooklyn. We're moving east on Long Island in a big way. So it's a mix of different strategies. You've got to be doing all of these things at the same time.
Having a presence in Brooklyn is very, very important, partly because Brooklyn is the new destination place to live in New York. We are in discussions there with a number of the big players and they will potentially be joining us in the next couple of months. Maimonides Medical Center is one which is a big, big place in Brooklyn. We're going through the due-diligence process. It would be a full merger.
MH: What approach are you taking on physician practices?
Dowling: We have close to 3,000 physicians on full salary with performance incentives. That will probably expand some more. By having a very large medical group, you're in a much better position to manage the care, especially when you're an insurance entity and you're taking on risk. We have joint ventures with a number of other physician groups. We have multitudes of these where we own 51% and they own 49%. That's happening more and more. Today, physicians who have formed large groups don't want to be taken over. They know they can't be totally independent, so they'll do a joint venture.
MH: How do you handle care coordination for patients under financial risk contracts?
Dowling: We've created a care-management organization called Care Solutions. When we're on a risk arrangement, that organization manages the care of patients and brings in all of the other players. We make sure patients are in a situation that achieves the best outcomes and is least restrictive. I don't put you in a hospital unless I have to.
MH: Are you also involved in post-acute and long-term care?
Dowling: We are big into long-term care. We have our own nursing homes. We have relationships at all the assisted-living facilities. We've got huge home care. We have an affiliate network of long-term-care facilities. We monitor the quality of care for the patients in the facilities and we monitor the movement of patients. If (facilities) don't hit certain metrics, they're no longer part of our affiliated network.
MH: How is your insurance operation going?
Dowling: Our goal is to double the current number of enrollees within the next year. Beginning in 2016, we are discussing putting our own employees in as well. We've been moving cautiously. It's still losing money, which is fully expected.
Our big focus is on employers. There are not that many big employers in New York. We're working now with one employer I can't name yet that has 5,000 employees. What people are fascinated about is that, when they call our plan, they get a human being who can solve their problems. The CEO of our insurance company is passionate about service.
Having an insurance company becomes a huge catalyst in getting the whole organization to think differently about how we should be doing things. When you collect the premium dollar, you're going to do all of the things a little bit differently than when you're just paid fee-for-service, because of the alignment of the incentives.
MH: Have other insurers been upset that you're encroaching on their turf?
Dowling: No. My attitude is that they're becoming providers too. They're buying doctors. They're opening ambulatory sites. Why the hell should they be upset? It's not like I'm going into their business. They're coming into mine. Fair game, you know? I don't worry about that kind of stuff. I can't let that derail me from what I want to do.
MH: Are you interested in getting into Medicare Advantage?
Dowling: Oh sure. We are going to be within the year. That's very, very important.
MH: How are your labor unions reacting to your moving more care out of the hospital?
Dowling:We have a pretty good working relationship with the unions. That doesn't mean every day is painless, but overall, it's worked pretty well. We have expanded our ambulatory dramatically. You've got to work with the unions on those situations to see what the appropriate relationship should be going forward. Also, there are some partners you want to do deals with that don't want to have anything to do with the union workforce. How do you do that? It's very, very complicated.
MH: What are your thoughts on the Obama administration's payment and quality reforms?
Dowling: It's one thing to say that they want value-based care, but it's another thing to say how they're going to do it. A lot of the value-based payment is basically fee-for-service, but you have to produce certain results. It's not going to full capitation.
The one thing the government could do is stop micromanaging. I have a huge problem with the quality arena, where we have so many quality metrics to meet that it is ludicrous. I wish there were six quality metrics. They should decide, for example, that over the next five years we want to have a 70% reduction in mortality due to sepsis. That's it. You would have the greatest gain in quality you could ever imagine.
Philosophically, I would like to see more and more full capitation over time.