Providers compare notes on cost cutting at JP Morgan conference
SAN FRANCISCO—There was an urgent undertone in some health system leaders' descriptions of their cost-cutting measures at the J.P. Morgan Healthcare Conference on Monday.
Aside from the usual polished speeches about quality care and expanding outpatient sites, administrators described their strategies to cut spending and in turn lower costs for patients and health plan members, illustrating providers are responding to both internal and external pressure to lower their role in the country's ballooning healthcare costs.
"We need to be zealots on cost," Robert DeMichiei, chief financial officer of the UPMC health system, told investors.
DeMichiei criticized the fact that other health system presentations, while touching on lowering costs, placed more emphasis on revenue cycle and growth. At Pittsburgh-based UPMC, administrators track cost at every level—cost per operating room hour, cost per claim and so on—and then work to lower those numbers, he said. People aren't going to keep paying 5% to 7% rate increases every year, DeMichiei said.
"We need to disrupt ourselves," he said.
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Salt Lake City-based Intermountain Healthcare has made several big announcements around lowering the cost of healthcare, especially with the launch of a health system-led drug company that will make its own generic drugs, Civica Rx. That company just welcomed 12 new health system members, meaning 750 U.S. hospitals are united around the initiative.
Part of Intermountain's commitment to providing services at a lower cost and being "careful stewards of resources," has meant outsourcing 2,300 jobs to its revenue-cycle management provider, Chicago-based R1 RCM, Intermountain CEO Dr. Marc Harrison told Modern Healthcare in an interview. Harrison said that transition was hard, but said many of those employees would have lost their jobs to automation if not for the decision to outsource them to R1. That's because artificial intelligence and machine learning are playing increasing roles in revenue cycle management, he said.
Intermountain will continue to address costs, and Harrison said he hopes that doesn't result in further swings in employment.
"We're not anticipating big shifts right now, but we're being extraordinarily careful about who we hire and why we hire them, because we don't want to have anybody need to be partnered with another organization unexpectedly," he said.
Lowering the health system's costs have allowed Intermountain to reduce its Affordable Care Act exchange plan premiums by an average of 2.7% from 2018 to 2019, Harrison said. He estimates Intermountain's interventions have saved consumers in Utah $10 million to $15 million.
Before the merger to form Advocate Aurora Health closed nine months ago, both organizations shared the priority of driving down costs, Nick Turkal, the health system's co-CEO, told investors in the health system's presentation Monday.
Dominic Nakis, Advocate Aurora's CFO, told investors that of his system's roughly 3 million patients, about 1.3 million are in some form of value-based contract, and they've performed very well financially, whether in commercial or Medicare.
"We want to accelerate that," he said.
Leaders with CommonSpirit Health, the forthcoming not-for-profit health system that will result from the planned merger between Dignity Health and Catholic Health Initiatives, emphasized growth in their presentation.
"We know that we can't cut our way to success," said Dan Morissette, who will be CommonSpirit's CFO. "Ultimately this is going to be around smart growth for our combined ministry."
Morissette described the synergies expected to come from the merger, including pricing relationships on the supply side and eliminating duplicative administrative functions.
Lloyd Dean, who's currently Dignity CEO and will be the co-CEO of CommonSpirit, told investors he wants CommonSpirit to be the place providers and employees in the audience will want to migrate to, even joking that there will be applications available.
"For those of you that are trying to reduce costs, we are trying to gain quality expertise," he said.
Dean went on to say that CommonSpirit is trying to recruit the best talent, not just from within Dignity and CHI, but elsewhere in the market.
"We are looking to work with many of you in this audience as well as other people in the community," he said.
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