Virtually every conversation about healthcare costs these days swings around to the concept of affordability. For Catherine Jacobson, a big part of figuring out how to make care more affordable for consumers is addressing the total cost of care. It’s something she’s pursuing with her own workforce at Froedtert Health, an integrated system based in Milwaukee. Jacobson said she’s looking for ways to apply those learnings to other payers. Jacobson joined Froedtert, which has five hospitals and nearly 40 health centers and clinics, in 2010 as executive vice president of finance and strategy, chief financial officer and chief strategy officer. She became president in 2011 and added the CEO role in 2012. She spoke with Modern Healthcare Managing Editor Matthew Weinstock. The following is an edited transcript.
MH: Tell me about your focus on total cost of care and what that means for your patients?
Jacobson: There’s our cost, but then there’s the healthcare footprint we create by how we take care of our patients. And that’s what we really call total cost of care. So it’s not about the hospital discharge, it’s not about the physician visit, it’s not about the surgical procedure, but what is the cost of taking care of that individual patient, then ultimately that population, over a year? And then looking at that trend over time.
Where we have the best data on that is our self-insured employees. We have 17,000 people on our self-insured health plan and we have been watching and trending out per-member, per-month cost on a price-neutral basis. Since we don’t incur our own pricing changes to ourself, we can watch (what happens) if we pull this lever; what is that doing in terms of the total cost of care?
It’s very, very difficult to benchmark that with somebody else because the benefit design is different and the risk of your population is different.
MH: How does that translate to lower costs for patients, thinking about the conversation around affordability?
Jacobson: Wisconsin has a very high prevalence of high-deductible health plans. So these folks really are paying for things out of their pocket. We are trying to get to a shoppable service where you can pick how and when you get that service. How do you help the patient pick the most effective care setting?
For example, we have a decision-support tool on our website right now called Buoy. People can go on the site, put their symptoms in and it looks at: Do you wait for the doctor tomorrow morning? Do you go to walk-in? Do you go to urgent care? Do you go to the emergency room? It’s been up since February of 2018 and 50% of the patients who use it change direction in terms of where they were heading (for care). And they go to the lower cost of care.
MH: What else have you learned about total cost of care from your employee base that you can apply more broadly?
Jacobson: The most effective thing we’re doing right now is transitions of care. We have invested in 24 care coordinators. We focus that resource on our at-risk populations—our own employees, (Medicare) shared savings, our own Medicare Advantage plan.
We’ve seen demonstrable reductions in admissions, reductions in admissions out of the emergency room, reductions in readmissions. With our highest-risk populations, we’ve seen as much as a 40% reduction in the cost of care, just by simply managing that transition of care to a lower-cost setting where we are able to manage that.
We see probably close to 600,000 lives the way we count them, which is any patient who touches us on a three-year rolling average. About 10% of those are in some kind of risk arrangement. We stratify and identify the most high-risk and complex cases to really make sure that every transition of care is covered. It’s quite effective.
MH: What is that doing to your bottom line? If you’re moving them out of a high cost, but also higher revenue …
Jacobson: You’ve got it. We started doing this on the uninsured population early, even before I would say we called it population health. You’re only saving money when you keep a Medicaid patient or an uninsured patient in a lower-cost setting. That’s just a win-win for everybody.
The great thing for us is, the market demand for our services fills every spot. We have a capacity problem. That’s a fantastic incentive for our system. We can say, “Don’t worry one bit. Just do the right thing for the patient. Right care, right time, right place. Just do it.” Because we’ve been able to invest in programs and services that are creating demand.
MH: What kind of conversations do you have with payers around total cost of care and affordability and who benefits?
Jacobson: It’s much easier to have that conversation with Medicare Advantage because the incentives are more aligned. There are things we can do that can help the payer get more premiums from Medicare and they will share savings with you to do that. We know this because we’re the second-largest Medicare Advantage plan in the state.
Our options become much more narrow on the commercial side. It’s really two commercial payers in the market and one is very much aligned with Advocate Aurora Health, so you’re working with one. And whenever you’re working with one, it’s hard if it doesn’t work for them.
The other thing, to be fair to the commercial insurers, if they have a very large self-insured base, it’s very complex for them to come up with incentives.
MH: So what is the motivation to move into more of a risk-based environment?
Jacobson: I do believe that the system is heading in this direction. We may not be getting a specific payment that repays our investments, or our efforts, or anything, or replaces the revenue we’re taking out of the system. It’s almost more about the table stakes to get in and to be able to stay in. And you have to prove your value to be able to do that.
We want to be able to win and make a financial reward to at least repay the investments that we’ve been putting in. So that’s why, if we can’t get that from the normal commercial payers, we made an investment in our own health plan; we can control our own destiny. And we do believe that there’s a better opportunity for provider systems—and almost out of necessity—to do it with government reimbursement, because we don’t get paid full cost.
We’ve made a big push and focus on anything that Medicare is still putting out there around bundled payments or value-based payments. Quite frankly, we haven’t jumped into the Medicare Shared Savings Program or accountable care organizations because we have better control of our data and our levers in Medicare Advantage. We’ve actually doubled down on our participation in Medicare Advantage.
MH: So you are seeing a better return out of Medicare Advantage?
Jacobson: Much better. And more information. More tools. More things that we can do. When we’re working in a Medicare Advantage plan, whether it’s UnitedHealthcare’s plan, or our own, I get real-time data. That does not happen in the ACO world.
MH: Looking more at the provider market, tell me about the growth and increased competition you are seeing.
Jacobson: We were first to announce the micro neighborhood hospital in the market. We love to look at anything that changes and busts up the care model. If you’ve ever been to Wisconsin, we have some of the largest medical office buildings in the country. So we don’t run things in small platforms very well.
We were really intrigued at looking at a hospital, which is a full-service, Level 3 ED. Eight observation beds, eight inpatient beds, and 15,000 to 20,000 square feet. And looking at a different way of staffing it, where maybe the person taking your X-ray can also draw your lab because they’re trained to do both. We don’t do that in our regular hospitals. There’s a lot of use of telehealth and tele-hospitalists, but anchored by our academic medical center emergency room doctors.
We were working with Tandem Hospital Partners.
We think that our strategy may be a little bit different than some of the other strategies that you’ve seen around the country, and different from what Ascension has announced. We see the facilities as complementary in the market; others see them as a way to disrupt a market. We already have a very large ambulatory presence in the southern part of Milwaukee where we’ve built an ambulatory surgery center, urgent care, all the specialties. I don’t need a full-blown hospital down there, but this could really be complementary by adding emergency room care, the ability to keep patients there overnight on short stays and not transfer them to the academic medical center.
MH: How do you get patients to understand what a neighborhood hospital is and isn’t?
Jacobson: We’re already planning that, to explain what it is to them, because maybe the press is seeing us as one more stand-alone ED. We want to impress that it is a fully licensed hospital and touting the expertise of our emergency room doctors unmatched by anybody else in the area. And then, again, we also see the ability to put in complementary specialty programs.
We absolutely acknowledge that these are new and that patients might not understand what they are, might not have the confidence in what they are, so we are putting together a whole community education: “This is the exact same accreditation as this hospital down the street in the emergency room. This is what we can do here.”