Mayo Clinic is in a period of transformation as it catapults its flagship Rochester, Minn., campus into a hub of economic development and reacts to the continued pressures facing rural healthcare. Amid all that, the system’s leadership is figuring out how the Trump administration’s latest proposed rule on price transparency, which would require hospitals to post their negotiated rates, will affect Mayo and, ultimately, patients. Modern Healthcare finance reporter Tara Bannow interviewed Mayo’s chief financial officer, Dennis Dahlen, to discuss his mixed feelings on the latest price transparency push, among other front-and-center issues. The following is an edited transcript.
MH: What’s your perspective on the Trump administration’s proposal on price transparency?
Dahlen: Price transparency is certainly worth pursuing. It’s one element of a free-market solution to healthcare challenges. That said, the degree of difficulty in implementing something that’ll actually help consumers is pretty high.
Mayo Clinic has been—and will continue to be—supportive of transparency efforts. I certainly understand the president’s interest in creating a transparent market with informed consumers. But I think the key is going to be providing information that’s actually helpful to them.
Given the third-party payment design of healthcare financing, a consumer knowing either the billed or contractually discounted price of a procedure, or a day in the hospital, or whatever it is, won’t likely move the dial very far in my view. Because the difference to the consumer—his or her out-of-pocket expense—is probably relatively small.
On the other hand, transparency of contracted rates will certainly be helpful to competitors to gauge each participant’s price position. We don’t know which direction that takes, prices go up or down. It could certainly lead to higher prices.
MH: Talk about how it might lead to higher prices.
Dahlen: If it’s known that others (in the) market have a price advantage, in other words higher pricing, that will become part of the dialogue and the discernment in the negotiations for all other market participants.
And different market participants have different market relevance. Those with high market relevance, that perhaps didn’t realize they were priced differently, may try to take advantage of the new knowledge they have to press prices higher, resulting in an overall price increase on the market.
MH: When the final rule came out to post chargemaster prices, how big of a burden was that for Mayo?
Dahlen: It’s fair to say it was a reasonable amount of work, and in a concentrated period of time. But we did post 100% of our prices in a machine-readable format, as required. Candidly, I don’t believe that effort accomplished very much in terms of supporting price transparency.
MH: Is there something else when it comes to price transparency that you believe might be a better approach?
Dahlen: It’s not an answer to everything, but I am encouraged by some of the work underway on episodic-based pricing, because case prices are readily understandable and useful to consumers.
As healthcare providers, we’re accustomed to case pricing with the Medicare program. Although their design is based on average cost and pricing, it limits the ability of differentiated providers, like Mayo and other academics or specialized care providers, to price highly complex or serious cases appropriately. In other words, not all cases are average and moving to an average doesn’t necessarily result in fair or equitable pricing.
MH: At your hospital in Albert Lea, Minn., the labor and delivery unit has been top of mind for some people. Why did the staffing shortages ultimately force the early closure of that unit?
Dahlen: These are trained staff. They all want to be part of something that’s sustainable and has a future. If you’re a trained and skilled OB nurse, and you like practicing in that field, you like helping expectant mothers and delivering babies, or being part of that labor and delivery process. Then the hospital or the place where you practice announces that in the future, the service is going to be discontinued. You probably will start looking for another place to practice that will give you more longevity. It’s a natural occurrence.
MH: Are you saying you saw people transferring to the Austin, Minn., hospital because they knew that the Albert Lea labor and delivery unit was closing?
Dahlen: There was perhaps a little bit of that, but they were also looking at our other campuses, in Rochester and elsewhere, as well as non-Mayo hospitals.
MH: When you take that more broadly, how does Mayo determine whether a specific service line is still viable?
Dahlen: I’d first say this is done very carefully. Foremost, we consider whether we can clinically provide the service safely and reliably. And the ingredients to safe and reliable care include trained human resources, in appropriate numbers and across multiple professions. Nurses, anesthetists, social workers, lab techs, physicians, all of those contribute to the multidisciplinary team.
Then you need a level of clinical volume that maintains those skill levels. And of course with hospitals, and not all of our rural care settings are hospitals, they have the additional burden of delivering care reliably and safely 24/7. So that’s even a little bit more difficult.
Obviously we’ve had some challenges in southern Minnesota as we attempt to rationalize care between the two hospitals in Albert Lea and Austin. I grew up in a small rural town, so I really do understand, and many others in Mayo do as well, the emotions of closing a service. We take it very seriously and consider every and all options. And we try to communicate clearly.
MH: Are there other regions within Mayo, or other specific service lines you can talk about, that are experiencing similar pressures to what you were seeing with labor and delivery in Albert Lea?
Dahlen: All rural healthcare sites are experiencing similar pressures. Austin and Albert Lea are small cities and population centers. But we serve population centers that are even smaller. And like other rural healthcare providers, we’ve had to become pretty resourceful in finding ways to make these situations work.
I want to call out our staff who work in these clinics and hospitals. They’re really “athletes” who perform multiple tasks to meet our patient needs and our service delivery requirements. They’re just amazingly committed to that mission.
That said, it’s pretty difficult when you’re in a smaller care setting and you’re reliant on minimal staffing, and somebody is sick that day, or somebody decides to take another job, and you’re recruiting for a replacement. It’s really very hard to be, for instance, a single physician in a smaller town, handle the 24/7 call burden, and then be able to do it reliably and safely every single time. You just can’t sustain that over a period of months or years.
MH: I am interested in the subject of risk-based contracting. Something I’ve been hearing from health systems is that commercial payers in some markets aren’t offering those kinds of contracts.
Dahlen: There’s no comparison looking at our commercial payer partners and the CMS. The CMS is more enthusiastic and moving faster. Our largest business relationship is with Blue Cross and Blue Shield of Minnesota, and we announced about a year ago a new five-year contract.
Over that period, we do plan to introduce value-based aspects to it, upside and downside, plus and minus risk. And I would just say we’re fortunate to have a business partner that’s willing to work with us on a trajectory, as opposed to an immediate implementation that aligns our interest as we both get better at implementing value-based contracts.
In general, we are seeing interest from the commercial payers we deal with in implementing value-based solutions, but it’s not on a wholesale basis; it’s on more of a pilot basis or for certain case types, or incentives for overall cost of care.
MH: Are there any updates you can provide on the Destination Medical Center campus?
Dahlen: We’re very pleased that our first Destination Medical Center building—One Discovery Square—is essentially rented out. And we’re contemplating the second building, ahead of schedule. There’s quite a bit of momentum here in Rochester on the Destination Medical Center.
MH: How do you see Motion Medical, the med-tech accelerator, factoring into the equation? Is part of the plan to spin that off into startups?
Dahlen: I can’t comment on an informed basis on what the ultimate goal of the relationship is, but the hope is that by putting (Motion Medical partner) Boston Scientific engineers in close proximity with our Mayo clinicians at a site of care where there’s a very strong patient flow … that will synergize and accelerate discovery of new technology. If that results in new ventures and startups, that would be terrific.
MH: Lastly, how’s the transition been to the new CEO?
Dahlen: Like anything, it is a change in personality. Every human being is different. A CEO at the end of their tenure, as John Noseworthy was—a tremendously successful tenure—to a new CEO who was selected in part because of his ideas for moving Mayo Clinic forward … those are two vastly different paces, and so I’m enjoying the change in pace, but it is a change in pace.