After becoming CEO of the near-bankrupt Mount Sinai Medical Center in New York City in 2003, Dr. Kenneth Davis led a notable financial turnaround with the help of a board filled with some of New York City's wealthiest businessmen. Now, as head of a financially robust system that includes seven hospitals, 7,100 employed physicians and a sprawling network of practices and ambulatory centers that stretches from Westchester County to Florida, he is attempting to lead Mount Sinai into the new era of population health management and affordable care. Modern Healthcare Editor Merrill Goozner asked him about key elements in that transition. This is an edited transcript.
Modern Healthcare: What compelled your decision to downsize Beth Israel Hospital in lower Manhattan?
Dr. Kenneth Davis: It is an old facility that had its last remodeling about 50 years ago. It's licensed for some 850 beds. It has about 400 of those beds filled on any given day over the past year. It's being affected by the secular trends of fewer hospital admissions. We asked ourselves in the context of a large hospital system with seven hospitals, since we have to rebuild this hospital, what should it look like? As we got deeper and deeper into the analysis, we knew it had to be substantially downsized because much of what could be done in the hospital could be done in an ambulatory space, or at home, or in observation beds or in other parts of our system. Due to declining lengths of stay and technology advances and advances in coordinated care, our conclusion was that for non-psychiatric admissions there will continue to be a decline of 5% to 10% a year in inpatient use. We then asked what services performed at Beth Israel could be better performed at centers of excellence throughout the system. We concluded complicated cardiac surgery, complicated neurosurgery and some complex head and neck surgeries could be better performed where we were doing hundreds of these procedures rather than tens of these procedures. Quality would be better, outcomes would be better and lengths of stay would be shorter. So we will be moving our complex surgeries to our other hospitals. We were fortunate to be granted one of the hospital-at-home grants from (the Center for Medicare and Medicaid Innovation). It was us and Johns Hopkins. We learned 40% of the medical conditions that wind up in the hospital we routinely could manage at home. Things like COPD, congestive heart failure, with appropriate home healthcare aides could be very well-managed at home and patient satisfaction would be higher and quality better. When you add hospital at home, centers of excellence and secular trends, we decided we needed a robust emergency room and about 225 other beds, about 125 of which would be psych beds.
MH: What can be moved to nearby ambulatory centers that you also operate?
Davis: We're taking things like endoscopy, intervention radiology and ambulatory surgeries out of the hospital. More than 60% of the surgeries at Beth Israel are ambulatory. Yet right on Union Square, we have a 300,000-square-foot building called the Phillips Ambulatory Center. We're rebuilding it to accommodate a lot more than the procedures that now are in the hospital.
MH: How does this fit in with the move by payers to insist health systems take on risk and manage their patient populations?
Davis: Our contracts are moving toward full risk over the next couple of years. That's why we're convinced we need fewer beds. We are also expanding into the other boroughs. We have Mount Sinai Queens and we just finished a $300 million renovation of that hospital. But it was all to add ambulatory facilities in Astoria. We have Mount Sinai Brooklyn, which used to be called Kings Highway. We're upgrading there, too. We're acquiring practices in both those boroughs. In Staten Island, we purchased the Victory Medical Group.
MH: Why is acquiring the practices important?
Davis: We believe in clinically integrated networks. We don't have to acquire the practice. If the practices that we're looking at simply prefer to be integrated into our IT system and buy into the quality metrics and are willing to engage with us in shared savings and population management, that's all to the good. They can simply be part of our clinically integrated network. But some simply put themselves up for sale. They think the overhead is overwhelming. The savings they get from our managing those practices gives them a favorable position. When those practices become available, we have to evaluate if they're appropriate for Mount Sinai and the system we're building.
MH: Does your board, which includes people like Carl Icahn and Michael Bloomberg, buy into your emerging population health management strategy?
Davis: They understand that neither the state and federal governments nor employers can afford healthcare today. When they see Medicare cuts … they understand our revenue is under pressure. Fee-for-service has no future. They realize what will keep the system robust is population health. There are opportunities for efficiencies in healthcare, especially around metropolitan New York, that we can share with those payers and still have some margin. That said, we have centers of excellence like our cancer center, which has as big a market share as Sloan Kettering. Our cardiac care is the market leader. Our board is tremendously proud of what we do in the most complex areas. Our board takes tremendous pride in our medical school. The fact is we're No. 1 in the country in dollars per investigator from the National Institutes of Health. They take pride in being enormously philanthropic.
MH: Why did you form an alliance with Crystal Run—a very large suburban practice?
Davis: They're very much committed to population health and value as we are. They looked around for the least expensive care provider when they send their patients out. Our rates are more competitive than anybody else in New York City for those complex patients. It makes financial sense for Crystal Run to contract with us for their complex cases.
MH: Why has patient satisfaction become a major issue for you?
Davis: It is critical. I have been at Mount Sinai since 1969. In my younger days, there were many Mount Sinai physicians who thought they were doing a favor by giving a patient an appointment. Patient satisfaction and patient-centered care never crossed their mind. It took decades for the culture to change to put the patient first rather than the physician first. The marketplace in Manhattan is the most competitive on Earth. Now there is a necessity to be patient-centered and have the highest possible patient-satisfaction score. We drill this and train this obsessively.
MH: Have your physicians bought in?
Davis: Now it's total. They realize healthcare is changing. We make patient-satisfaction scores for every physician available to every physician. We make reimbursement dependent on those scores. We have secret shoppers. Every letter of complaint is taken as a pivotal moment. This has become the value system within our hospital system.