Execs emphasize diversification, not admissions, during J.P. Morgan Healthcare Conference

SAN FRANCISCO—You wouldn’t be far off in calling the J.P. Morgan Healthcare Conference a brag fest for the country’s leading health systems. It’s where they go to showcase what’s going right—never mind what’s not—and for peers to learn from their wins.

In previous years, what’s going right has looked like bars growing progressively taller in what was then a key metric of success: growth in admissions. For presentations this year, most health system leaders left that slide at home, replaced with days cash on hand or revenue. In an environment where everyone is racing to bring down the ever-ballooning cost of healthcare, higher admissions no longer get you a gold star (unless you’re investor-owned).

“It’s no longer the best barometer of your activity as a system, because there are other ways you’re actually serving more patients who never show up in a hospital,” said Jim Hinton, CEO of Dallas-based Baylor Scott & White Health. That might be emails to their doctors, virtual visits or outpatient clinic visits.

More than one executive used the one-foot-in-two-canoes analogy. Health systems are in a tricky spot because they’re trying to lower the cost of care, manage population health and get paid for value, but also protect their bread and butter—inpatient care.

The solution is diversifying revenue so that it’s less from patient care and more from commercialization, partnerships and even grants and research.

“Those can be monetized in ways they didn’t think about historically because the bricks and mortar was good enough,” said Kerrin Slattery, a partner at McDermott Will & Emery.

To that end, Renton, Wash.-based Providence St. Joseph Health wants to reach $1 billion in diversified revenue outside of patient care with at least 30% earnings before interest, taxes, depreciation and amortization—EBITDA—margin by 2022. The system expects to be at $238 million in annual nonpatient-care revenue by year-end. CEO Dr. Rod Hochman said that’s “the pivot you have to make.”

But ultimately, no health system executive was bold enough to say he or she wanted to lower admissions.

“What we really want is people at all levels to disproportionately choose our care,” said Dan Morissette, chief financial officer of Chicago-based CommonSpirit Health.

From there, he said the 137-hospital system will direct patients toward the most appropriate care, whether outpatient or inpatient.

Intermountain Healthcare gauges success around drawing the “right admissions,” said Dr. Mike Phillips, chief of clinical and outreach services at the Salt Lake City-based health system.

“Hospitals are businesses,” he said. “They represent for everybody a fair amount of fixed costs. We want them to be well-utilized.”

Investor-owned health systems, by contrast, were less shy about prominently touting admissions growth and goals. Steve Filton, CFO at King of Prussia, Pa.-based Universal Health Systems, said that’s still the metric industry analysts use to measure success, although he prefers adjusted admissions, a metric that includes outpatient care.

Similarly, Tenet Healthcare Corp. Executive Chairman and CEO Ron Rittenmeyer said admissions are still “really” important. “Admissions are kind of what you’ve got to feed the engine with,” he said.

One path to diversification is cooperation, even if that means partnering with companies that were previously—and in some cases still are—disruptors.

An example that stuck with Eric Klein, the head of Sheppard Mullin’s national healthcare team, was John Muir Health’s partnership with Optum in its physician network. The Walnut Creek, Calif.-based health system has a lot of doctors but less infrastructure to manage them, he said.

Klein was also intrigued by insurer Oscar Health’s and digital startup Livongo Health’s partnerships with providers where they use apps to deliver “nudges” to patients—such as to get screenings—to improve health outcomes.

“It drives volume to providers while also saving money for payers,” Klein said.

And while lots of physicians and health systems see CVS Health and its HealthHub concept as a threat, the pharmacy giant said it actually wants to partner with providers and drive referrals their way.

CVS made 4 million primary-care referrals last year alone.

In the past, it was common to see two-party joint ventures. Today, it’s more like three- or four-party ventures between providers, tech companies, payers and maybe even a device or drug company, said McDermott’s Slattery.

“It’s bringing what were potentially disruptors or people who were going to move your cheese—now they’re viewed as potential partners in a solution and not necessarily a competitor,” she said. “That’s a shift in thinking.”

Providence St. Joseph Health, one of the first health systems to partner with not-for-profit drugmaker Civica Rx, is building a hospital with competitor Los Angeles-based Cedars-Sinai.

St. Louis-based SSM Health is partnering with population health services company Navvis to help the health system manage risk, CEO Laura Kaiser said.

“You can take on risk and have your hat handed to you unless you know what you’re doing,” Kaiser said.

It’s always been cool to talk consumerism at J.P. Morgan, but increasingly, providers are offering up more specifics about how exactly they plan to get people to download their apps.

“We want to be the Amazon Prime of healthcare,” Bert Zimmerli, Intermountain’s CFO, told the crowd during his presentation.

Baylor Scott & White’s team said their app has tallied 430,000 unique visitors each month and files almost 1,000 new accounts daily. It’s the platform on which the health system plans to roll out its health plan and quality products.

Hinton said the challenge is to avoid any kind of patient phone calls or clinic visits that can be done electronically.

Mayo Clinic’s vision is to move care for even its sickest patients into homes, Dr. John Halamka, president of its technology unit, Mayo Clinic Platform, told an audience at the conference. He recently joined Rochester, Minn.-based Mayo from Beth Israel Lahey Health.

“That may be frightening,” Halamka said. “But in a value-based purchasing world, high-quality care at lower cost in a setting other than bricks and mortar is where we all want to go.”

He also reinforced the commonly held belief that consumers who grew up in the digital revolution expect well-connected, real-time care with telemetry from wearables.

That’s why Mayo is connecting multiple third-party companies generating telemetry with Mayo algorithms to deliver care, “especially to the digital natives.”