While providers in some markets are rapidly expanding their outpatient business, the University of Iowa Hospitals & Clinics is in need of more inpatient beds. The Iowa City-based hospital draws patients from across the state and is often at or near capacity. Suresh Gunasekaran, who took over as CEO in November 2018, wants to build a community medicine network to reduce the need for patients to visit the high-cost care setting. He recently met with Modern Healthcare’s editorial board. The following is an edited transcript.
MH: You’ve been in this role for a little over a year now. What’s your impression of the market?
Gunasekaran: The market itself is unique. The organization is unique. I think there’s a lot about Iowa and the University of Iowa that’s a story about healthcare in the U.S., in nonurban markets. And coming from an urban market—Dallas—which is a relatively high-cost market compared to Iowa, it’s been an interesting year.
MH: What makes the Iowa market so unique?
Gunasekaran: The baseline population is a lot smaller. In many ways, when you’re in a low-population market, the transition to value has already happened. It’s almost a closed system. What you’re really trying to figure out every day—whether you’re in a fee-for-service model or a value model—is how do you best ration the resources that you have to make the maximum impact on the community?
We’re the only university medical center (in the state). So by nature, you end up being a certain type of safety-net hospital. And (we) receive zero state funding for the hospital. So you have to compete in the market based on the criteria that everybody else does: quality, service and affordability. And you’ve got to do what the overall market does, which is cost-shift.
In urban markets, you’re blessed with a couple of different things—population growth and large employer competition. You’re blessed with a clinical workforce that finds it attractive to live there and potentially have a long career there.
When you take a look at those criteria in Iowa, those things are still positive. It’s a great place to work. It’s a great place to have a career. But when you look at the 10- to 20-year economic outlook that many private practice physicians want to look at, other urban markets are going to rate higher in terms of native attractiveness.
It’s a very interesting construct of what happens when the economy is virtually status quo. The employers are the employers, the economic growth is the economic growth and the population growth is (flat).
When you switch to value in Dallas, it’s a little bit easier because even if you’re going to reduce utilization of certain types of unnecessary services, there’s a growing population coming in or there is a growing employer base, so you can have a foot in one world, which is reducing utilization, and still survive the economics because there’s a greater volume growth to offset that. It’s a lot easier to create an economy of scale and efficiency so you can make sure that the right care at the right place at the right time happens. That’s not going to happen in Iowa City.
It’s very unique. I don’t know anybody else who has top 10 nationally ranked specialties where the majority of inpatients are not from the local service area. We are 95% full, but the majority of patients are not from Iowa City. In 2020, our biggest need is beds.
MH: Inpatient beds?
Gunasekaran: Inpatient beds and inpatient ORs and ICUs.
There are niches within the market … but if you want an entire system of care, there’s not a huge economic incentive for all the other players in the market to do that. So the continuum falls to us, and we continue to get a lot more complex surgeries coming to Iowa City. There’s a lot of competition for simple joint procedures that you can get in an ambulatory setting. But with an aging population, with not too many young workers moving into the market, suddenly these joint cases are not something you can get done in an ambulatory surgery center. These folks have high diabetes rates or they are older and have cardiovascular disease or other comorbidities and suddenly they’re not ASC candidates; they’re candidates to drive two hours to Iowa City. We’re happy to do it; it’s moving into our sweet spot. But it also, by nature, makes us a higher-cost environment. So when you look at the system as a whole, the total number of orthopedic cases in the state are becoming more expensive cases.
Private groups absolutely want to see site-neutral payments. It is an incentive to get those cases into lower-cost settings. But those are not the kinds of cases that Iowa is producing. The interesting dataset to look at in markets such as this is that there is a tremendous public good in making sure the cases are done at the right place. Coming from Dallas, I understand the value of site-neutral payments. There are a lot of simple joint replacements being done in complex environments in Dallas.
MH: If you were still in Dallas would you be OK with the site-neutral policy?
Gunasekaran: It depends on how the system works. It needs to be done responsibly. The complexity around site-neutral payments is that all sites are not created equal. That’s the point we’re making. You want the right care at the right place at the right time. And the issue is there’s absolutely a need for lower-cost sites to do simpler procedures.
The question then is how do you create incentives for lower-cost care? Site-neutral payments are an interesting concept, but without some sort of risk-adjustment methodology, they’re a little bit fallow because the government unfortunately only has these blunt tools to attack these problems.
The unintended consequences, whether it’s site-neutral payments or 340B or Affordable Care Act revisions, are a challenge. Centers like us absolutely have to do cost-shifting.
We are the largest provider of inpatient mental health services in Iowa. We may lose $75 million to $100 million (in 2019) to do that. If we were to see payment reductions, we would reduce access to these services because there’s only so much money in the system.
MH: How are you managing where patients go once you discharge them and whether or not they’re going to a credible, quality place so that they don’t come back to you?
Gunasekaran: We participate in (the CMS’ Bundled Payment for Care Improvement program) and it’s a challenge for us. We’re doing really well on the cost associated with the pre-op as well as the immediate case cost or length of stay or implant costs, etc. But when you have this challenge of 50% of the people in the bundle aren’t in your hometown, the system starts becoming an issue. We’re under-bedded for inpatient rehab in Iowa and it’s not geographically dispersed.
Our strategic plan is to build a continuum of care for the state. And I wouldn’t be surprised if we ended up having to create economic interests in skilled-nursing facilities, inpatient rehab facilities, and our own home health, just to get the total population performance that we need. The challenge of it would be to create a statewide network.
MH: Does that mean acquisitions, building from the ground up, loose partnerships?
Gunasekaran: Loose partnerships don’t work well for bundles, so it has to be one step closer, because we really are solving for bundles, or even if you macro up, bundles are just one tool. We just want better outcomes for Iowans. At the end of the day, we’re at 95% occupancy. So this is where we have a value-based mandate without having to be in a value-based arrangement. When there isn’t good total cost of care performance, the patient gets bounced back to us regardless of where they started.
A lot of the orthopedic cases that we get, they’re readmissions; some other surgeon who had nothing to do with us did the first surgery and the patient wants to come to us for the second surgery.
MH: What percentage of your orthopedic cases are that kind of scenario?
Gunasekaran: I would say it’s over 20%.
MH: How do you staff so that you become known as a place for preventive care rather than specialty care?
Gunasekaran: You are laying out our strategic imperative for the next decade. We would use some middle-ground language: We have traditionally been focused on sub-specialty care and we want to move to be specialty centers of excellence.
We want to look at telehealth diagnosis. We want to look at self-diagnosis. When primary-care physicians and their patients across the state get in a conversation around back pain, we want them to look toward the University of Iowa for what’s the best practice. They don’t have to come in and see us.
You can’t be Pollyanna about this. We’re in one city in the state. We need to be in multiple cities so there’s an opportunity to do more community-based intake of these kinds of things and work with primary-care physicians.
MH: When you’re running at 95% occupancy, is it feasible to reallocate resources?
Gunasekaran: We’re blessed enough to be in an economic circumstance where at least right now we’re financially stable. The real issue for us is partnership.
What we are fascinated with is the reinvention of community-based medicine: How can you have an academic and community partnership so that a community can get 80% of what they need in a non-academic setting, but 20% of it is built off of the academic backbone?
We would like to do all the complex cardiovascular surgery in one place. We would like to do all the high-end cancer surgery in one place, but as an example, something that will be very transformational for us is to do a lot of our hematology, oncology, cancer infusions in the community.
