Having sat on the other side of the table for many years, Howard Cutler is well situated to lead payer strategies for Universal Health Services, the nation’s fourth-largest for-profit hospital chain. Cutler joined King of Prussia, Pa.-based UHS in December 2015 as vice president of payer strategies, acute-care division, following stints at Tenet Healthcare Corp. and Main Line Health. Prior to that, he spent nearly a dozen years at Aetna, including Coventry Health Care, which it acquired in 2013. One of the key challenges the industry needs to overcome, he said, is the myriad ways people describe the shift to outcomes-based payment. Cutler recently talked with Modern Healthcare finance reporter Tara Bannow. The following is an edited transcript.
MH: Can you explain your role as VP of payer strategies?
Cutler: Our business is split when you look at our revenue. About half is behavioral health and the other half is traditional acute care. On the acute-care side, I lead a team of people who manage the portfolio of relationships with private insurance companies. We’re doing everything from contract negotiations to relationship management. We’re obviously dealing with disputes when they arise. We’re also on point for collaboration where there are opportunities.
MH: Can you talk a little bit about what UHS is doing in terms of moving from fee-for-service to value-based reimbursement?
Cutler: I spent about a dozen years with Aetna and then almost five with Coventry Health Care which Aetna bought. So when UHS hired me, they had made a decision that this evolution into value-based compensation was real and it was here to stay. I think bringing someone like me in was one way to show that commitment.
When I arrived, there were a couple of things that we chartered a path on. One was ensuring that every time an insurer offers a value-based or pay-for-performance program that we’re adding that to our portfolio and working closely with our chief medical officer, chief nursing officer and vice president of case management … to align our metrics from private insurers with the things the public sector is asking us to do as well. That’s everything from focusing on and reducing our readmission rates to improving our HCAHPS scores.
We’ve developed a mechanism internally where every time we do one of these, we’re trying to make sure we’re consistently applying the kinds of metrics that allow us to bring them together in a way that they’re more meaningful for the organization.
The other piece of the equation—and when I arrived my joke was that I couldn’t spell BPCI (short for the CMS’ Bundled Payments for Care Improvement program) even if you spotted me B and P. But I did have some experience doing case rates and some bundles in the private sphere. So I was asked to become the champion within our acute-care business for participation in the program.
There were some challenges with the legacy program, but the new program launched last year. We have 16 hospitals participating across almost 200 episodes.
We’re also trying to learn through the federal program how we can manage an environment where we’re on a fixed budget, where we’re not only really responsible for what goes on within the four walls of our hospitals, but also what happens when we discharge.
MH: More broadly, what’s your assessment of where the industry is in this shift to a different payment model?
Cutler: I’m a guy who believes the tectonic plates in healthcare financing are starting to shift, but the reality is what my organization sees is it’s not moving at the pace I think many expected it to.
At its most extreme, a hospital or health system could be asked by an insurer to basically manage a population with a fixed budget. Those are things that we saw in the industry in the late ’90s. That’s not a new concept. It’s been reclassified as an accountable care organization.
I fundamentally believe that hospitals and health systems—providers—generally are not equipped to manage very effectively in that sphere, because the reality is we’re not insurers. We don’t look at managing to a fixed budget. Our job is really to make sure we’re providing the right care at the right point of service. ACOs, if organized properly with the right tools, have the ability to do that and some have been very successful.
The sphere of pay-for-performance or pay-for-quality that I see evolving is what I think of as process- or outcome-driven metrics. They’re things like, are we reducing readmissions, are we reducing hospital-acquired infections. Or, what you need to do with a stroke patient, for example, a heart attack patient. Are we following clinical pathways?
The bigger issue I have is there isn’t this drive toward commonality. And so, invariably, just as an example, when I work with United, they give me a Chinese menu and let me pick the ones that ultimately I think are best for my organization. Not necessarily, by the way, the ones where I know I’m going to make the most money, but where I have the ability to move the dial in terms of our organization performing better and ultimately deriving some economic value from that. Others come in and say, “Here’s our program. Take it or leave it.”
MH: That underscores the whole notion that value-based care means different things to different people.
Cutler: We use the terms pay-for-quality, pay-for-performance, value-based compensation. And that’s a fundamental problem … we’re all over the map. I don’t think there is a convergence of views that we should be heading in this direction. That’s just the nature of healthcare in this country.
MH: A lot of people argue that the integrated delivery system is the solution; that providers can’t do this on their own.
Cutler: We acquired a health plan about five years ago and a lot of it was because we wanted to make sure we could learn how to effectively operate in that ecosystem in select markets. It’s the same reason why we’ve gone on a journey to build out ACOs in virtually every market that we do business in today. We recognize that merely being a hospital operator doesn’t allow us the ability to most effectively deliver for populations. We do a great job when people come in the door of the hospital, but a lot of it has to be about how we make sure that the right people don’t end up in the hospital at all.