'Anybody who studies quality will tell you that variation is the absolute enemy of quality'

In an era of rapid CEO turnover, Virginia's Sentara Healthcare, an integrated delivery system with a 450,000-lives health plan, 12 hospitals, 3,800 physicians and 28,000 employees, has been a model for long-term stability. But this month, longtime Chief Operating Officer Howard Kern took the reins from David Bernd, who served 43 years at Sentara, including 21 as CEO. Modern Healthcare editor Merrill Goozner spoke with Kern about the transition. The following is an edited transcript.

Modern Healthcare: In taking on this new job, what are the biggest challenges you face?

Howard Kern: The transition has been very smooth. My old boss did a great job preparing me. A great board has been very supportive and the leadership team has been really solid and consistent. Probably the biggest challenge I have, the imperative that the board has set for me, is clinical quality. They want to see Sentara continue on the journey it's been on to drive improved clinical-quality performance.

MH: You began that journey in 2012. But Sentara has always considered itself a high-quality system. What has compelled you to re-emphasize the issue of quality?

Kern: First and foremost, while we had good quality, there was a lot of variation, and anybody who studies quality will tell you that variation is the absolute enemy of quality. We wanted to reduce variation and focus on standardizing best practices.

Second, we have grown as a healthcare system. One of the major promises and value propositions that an integrated delivery system ought to be able to provide is better clinical quality and better learning internally for the organization. So we are on a journey to create that value proposition.

Lastly, I think the pace of improvement in the industry is really starting to accelerate, which is good. We need to make sure Sentara is at that pace or better.

MH: What needed immediate addressing?

Kern: Organizationally, we had cultures in our different hospitals and provider divisions that had evolved from years of being independent. Now they are part of an integrated system. The notion of being part of an integrated system doesn't happen naturally. It's got to be driven through a level of understanding, education and alignment, a shared common purpose. And so, we spent a lot of time culturally building that understanding.

(Now) I think everybody gets it and (has) become more supportive. Absent that, you get everybody stuck in their silos and they're resistant to being told how to do things. The other key imperative is engaging them in the process. Everybody has to have a seat at the table and they have to feel like they're having an opportunity for input and participation.

MH: How did you pull a dozen hospitals together and create that common purpose?

Kern: We implemented a model two years ago called High Performance Design. A couple of key components of that relate to building a horizontal capability across the organization. We have 12 hospitals, four medical groups and an array of ambulatory services. This high-performance design model created a horizontal focus that goes across all those silos to build a core resource of clinical leaders, and administrative and nursing leaders, that focuses on better practices and best practices.

They say this is the best way to do it, and then educate and facilitate the vertical leadership in each of the organizations to execute that well. That's been a key part of what's allowed us to drive better performance and reduce unwanted variation across the system.

MH: How did you get buy-in from physicians?

Kern: Physicians are key. We've engaged physicians in important leadership roles. We've brought in physician leaders from the community. We gave them a seat at the table and they've helped set the goals. The physician leaders are at the table with management, with nursing, helping to define the priorities that we're going to focus on.

In addition to those horizontal teams, in each of our clinical disciplines, our service lines, there's a physician leader and either an administrative or nurse manager partnering together. They bring distinct competencies. Both are leading the vertical team. So physicians feel they have significant levels of input in multiple dimensions.

MH: Do you get pushback on standardization from physicians who say “My patient is different?”

Kern: I had that question posed to me by a physician on our board. First and foremost, we recognize that while you want to reduce variation, some variation is good. You can accept that as long as it's constructed toward learning and improving practice overall. Variation needs to be more intentional versus just random variation, which is where the quality weakness comes in.

Second, this notion of data equality is very important. You've got to invest in good data systems and they've got to be reliable, and there's got to be transparency so that the clinicians see the data and understand how they were developed. You've got to be willing and able to put that data on the table and let them kick the tires and make sure that it's accurate.

MH: How important is the board to your quality-improvement process? How do you engage it and how does it engage you?

Kern: The board is vital in two respects. First, it's the accountable component of the organization that sets the standard. The board is my boss. To the extent it sets this as an important priority, it becomes my priority and it becomes the organization's priority.

Second, (the trustees) have to take an active interest in learning what it means, even as lay people, to have great quality in a health system. They have to participate in the process. Our board has done all of those. It has made it very clear that it's a top priority for the organization.

MH: How important is the health plan and the experience of being a payer to improving quality?

Kern: Being in the health plan business since the early '80s really has helped Sentara be better prepared for this quality journey. Health plans live and die on their data. So, we've been in the data-quality management business since the mid '80s, analyzing member data, claims data and understanding through even predictive analytics where risks are, and how to manage patients across the continuum, particularly in chronic disease areas.

The health plan has been an important facilitator in experimenting and developing new clinical techniques and better practices. They've been an important facilitator and a financer of that process for the system.

Success today in healthcare requires health plans and providers to work together. You're hearing that and seeing that industrywide. Having a health plan that's part of the organization is a built-in natural fit so that the provider entity and the health plan entity are tied at the hip. That works very well for us.

MH: How has the health plan fared with Medicare Advantage and in the individual exchange-based market?

Kern: Medicare Advantage has been a very challenging kind of business. It's all about the kinds of patients you have enrolled as well as the way they're managed. We've been learning a lot, integrating our medical group and provider business with the health plan on how to manage complex seniors who have multiple chronic conditions. We're growing it slowly.

The state exchange, particularly without Medicaid expansion, has been a real challenge as well. I think we have a good plan for how to do it, but there has been some pretty dramatic variation in risk based on how members in Virginia access the exchange and who they utilize. We've struggled with that. We tend to attract the high-risk patient on the exchange because we're a provider-oriented health plan. That's created some adverse risk that we've had to manage.

We're watching with interest what happens at the federal level with some of the risk corridors that were put in by Obamacare. Now they are talking about stripping them out. That could really adversely affect a plan like ours.

MH: Do you see over the next couple of years the move toward value-based reimbursement solidifying, or do you think that we could possibly step back from that?

Kern: The evolution toward value-based care is going to continue. But let's be clear on what it means. Everybody sees that as capitation. If you look at the Medicare program and how CMS is describing their move to value and risk, there are a lot of different definitions. It could be everything from volume-based payment models with quality modifiers.

We do want to go to better value, with value defined as high quality at lower-than-average cost. And that's really the goal everybody should have. I don't think we're going to see as much growth in capitation as everybody assumes. We're capitated in a large part of our health plan business and we also have a large part that's not capitated, typically self-funded employers.

The prospect of doing a better job on the value side means there's going to be less utilization of inpatient hospital days and less utilization of the ER and high-cost diagnostics.

But if you're a high-quality, value-driven provider organization, you also will attract more business. I think the situation is not as dire as it sometimes sounds.