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.