In a world that has become dominated by talking points and vapid banter, genuine discussion is often left out of the mix.
This has especially applied to healthcare, which has become a frequently volleyed topic among politicians and figureheads. But what if 12 healthcare leaders had a chance to comment on the challenges surrounding today's healthcare environment candidly?
On Nov. 14, that hypothetical question was realized in a concrete scenario, as Becker's Hospital Review hosted its Annual CEO Strategy Roundtable. Twelve healthcare leaders from every corner of the industry — standalone safety-net providers to healthcare association leaders to multihospital health system executives to a lawyer who helped craft the Patient Protection and Affordable Care Act — met at the Ritz-Carlton in Chicago for a panel-style discussion on clinical integration, the rise in hospital layoffs, consolidation and many other issues affecting the industry as it heads into the biggest year of healthcare reform yet.
Note: The following excerpts have been edited for clarity.
Panelists
• Alan Channing. President and CEO of Sinai Health System (Chicago).
• Joe Fifer. President and CEO of the Healthcare Financial Management Association (Westchester, Ill.)
• Larry Goldberg. President and CEO of Loyola University Health System (Maywood, Ill.)
• Diana Hendel, PharmD. CEO of Long Beach (Calif.). Memorial Hospital, Miller Children's Hospital Long Beach and Community Hospital Long Beach.
• Catherine Jacobson. President and CEO of Froedtert Health (Milwaukee).
• Phil Kambic. President and CEO of Riverside Medical Center (Kankakee, Ill.)
• Lynn Nicholas. President and CEO of the Massachusetts Hospital Association (Burlington).
• Michael Sachs. Chairman of Sg2 (Skokie, Ill.)
• José Sánchez. CEO of Norwegian American Hospital (Chicago).
• Quint Studer. Consultant and Founder of Studer Group (Gulf Breeze, Fla.).
• Russell Sullivan, JD. Partner at McGuireWoods (Washington, D.C.) and Former Staff Director for the U.S. Senate Finance Committee.
• Paul Summerside, MD. CMO of BayCare Clinic (Green Bay, Wis.).
Moderators
• Scott Becker, JD, CPA. Publisher, Becker's Hospital Review, and Partner at McGuireWoods.
• Chuck Lauer. Former Publisher of Modern Healthcare, Author and Public Speaker.
On hospitals and physician integration
Larry Goldberg: We have a fully employed model in our academic medical center. We have a culture of employed physicians. We also work with many community docs who are in private community hospitals we own. They are both very important to us. We are trying to have a series of different models where physicians can work with us depending on their situation. You have to be adaptive to the environment.
The AMC model that we have is much more integrated than just buying practices, and that's probably our secret sauce. All of our docs are on a standardized comp model we have developed. Everyone is working side-by-side across the continuum of care.
We all argue about downstream revenue. What we have done is say, "Let's stop looking at it that way." We don't produce physician [profit and loss statements] anymore. It just alienates our relationships with our docs.
Dr. Paul Summerside: How do you measure profitability? The old-fashioned way is [to] earn it. I'm a big believer in the owner versus renter mentality. People are wired a certain way. It's not just about the money. The money is the end product of ownership. It has everything to do with practice. You ignore the influences of ownership at your peril.
Michael Sachs: The term "buying physicians" sounds like indentured servitude, and I'm against slavery. I think if you approach it from that perspective, it's kind of a negative when you begin the conversation. I admire Larry [Goldberg] for not looking at physician profit and loss [statements].
I look at it from the patient experience [perspective]. You walk in, you need care — do you really check to see whether the physician is employed or independent? I don't really care what the organizational structure is. I think what we need to be doing is thinking about how to create the best patient experience.
José Sánchez: I run a small 200-bed community hospital in Humboldt Park [a neighborhood on the West Side of Chicago]. When we talk about physicians, our strategy is totally different. We cannot afford to buy practices or even employ physicians. We have approximately 300-plus physicians in our hospital, and about 40 of those are employed. The others are voluntary. We have to be extremely cautious about the investment we make into any entity or practice, because we cannot afford to make a mistake. We have integrated a family practice training program with a federally qualified health center. We graduated our first class in June 2008 and were able to retain six of them. These are physicians who are mission-driven and want to work in poor communities. We try to bring them together to participate in quality, patient safety and all personnel discussions.
Catherine Jacobson: I spent 25 years in Chicago. I've been in the Milwaukee market for three years. You couldn't have two more different markets 90 miles apart. Chicago is still very fragmented, onesies-twosies, and Milwaukee is largely an employed model.
Our organization is an academic medical center, but we're also community-based. I live between two worlds. Our community physicians were built out of private specialty practices. One of our challenges was how do we keep that ownership model underneath the health system, and physician-governed? We started right from the get-go [with] our metrics. Eight percent of their compensation is at risk for quality metrics, and we will take that even higher as we move our compensation models along.
Joe Fifer: I'll give you two perspectives. On behalf of CFOs, they are, by and large, struggling [with] how to account for changing how you evaluate the physician employment model. They are nervous about it. From my perspective, one of the things that's not talked about enough in the cost of healthcare today is chronic conditions. That's where all the dollars seem to be, and it's an area where there's the greatest amount of practice variation.
I don't know how you work around that and get financial incentives aligned without aligning practitioners and coordinating care more efficiently. I think it's a must to continue the physician employment trend to coordinate care better and take on new payment models.
Diana Hendel: I'm responsible for hospitals in south Los Angeles County. Interestingly, there are two states [California and Texas] where there's a ban on the corporate practice of medicine. We are not legally allowed to employ physicians. It's probably the only thing we share in common with Texas.
We started a medical foundation. We were the last to develop a medical foundation, so we have been able to learn. We embarked on this three years ago. Less than 10 percent [of our physicians] are employed via the medical foundation.
On labor and layoffs
Joe Fifer: Of course, I've heard handfuls of stories about layoffs. I still think that's the exception. What I am hearing is a slowdown in hiring. There are many organizations that are going through process re-engineering, those kinds of efforts, and some do it with a no-layoff policy. They are trying to reassign and redeploy [staff] to avoid a layoff scenario, but they also are avoiding hiring new people.
Phil Kambic: We're actually hiring. We're just finishing our budget for next year, and we're trying to [maintain] inpatient acute care by repositioning people and not replacing them as they transition out. We're shifting to an outpatient arena very quickly and repurposing our inpatient acute-care setting.
Larry Goldberg: There's a few things. Good news, we've been underpaid for years, so we've had to manage our costs. We're in a favorable position for labor. In some areas, we were actually understaffed and had to staff up. There is a continued due diligence of investments we make, the physician employment model — we scrutinize all those positions. We are slowing hiring as well.
Russell Sullivan: [Editor's note: Mr. Sullivan helped craft the PPACA.] The goal in the development of the ACA really did focus on reduced costs and increased quality. The goals were to reduce costs to businesses, patients and government. Most major provisions are aimed at prodding hospitals and doctor groups to find ways we could reduce costs. They started from that framework.
Quint Studer: You can't fall into the trap of thinking morale will go down because there's a staff reduction. It doesn't have to. You always have to bring it back to the values of the organization. [It's about] providing long-term community service, and you can't do that if it goes out of business.
Then go into why you're [eliminating jobs] and answer the big questions. "Why are we laying off people when we're spending money on consultants, capital investments, advertising and employing doctors?" We have answers, but get those prepared and out early instead of letting [the questions] come to you.
The other thing is, will this affect senior executives? Those who are leaving, what's happening to them? You really have to outline very quickly how you'll handle the people who are leaving in a value-driven way and then bring it back to the [organization's] values.
Diana Hendel: We are mindful of redeployment and retraining as we become an integrated delivery system. The last few years, we focused on reassigning inpatient [FTEs] to ambulatory. We have the ability to train our own and train from within.
We are a $2 billion organization. I've been through a number of layoffs in my career. If we were to lose a large portion of market share or [if there were] a dramatic shift, we may have to stand up to the workforce and say reductions would be necessary.
But we have to be careful to what ultimately has happened many times. If there were a board announcement there may be layoffs, it creates an unbelievable amount of fear — an unnecessary fear. When we look at attrition, redeployment, training, we've committed to never do it that way again. Be careful not to create that fear. Change does create fear, particularly for people on frontlines.
To reduce 50 to 60 positions for incentive compensation payouts is unconscionable.
Catherine Jacobson: We've done all the things everyone else is talking about. We rely a lot on process improvement. We did have one hospital where market volume just went out, and we had to rebase. Utilization came down, and we had to take folks out. That happened about two years ago. To some extent, we redeployed everyone where we could.
What we are doing now, we had our best operating margin last year. We just had brought things down. We brought in outside help to assess the next level, and we see it moving toward a cliff. We get paid well in Milwaukee. We're seeing that coming, and we're doing preventive types of things. But labor is going to be relatively minor [adjustment]. It's going to be around flexing.
José Sánchez: We went through two painful layoffs to reduce our costs, and we also renegotiated a number of contracts. We have a different strategy in terms of how we keep costs down. We know there are many unnecessary visits to the emergency department, so one way to reduce that is a relationship we developed with a FQHC so patients do not go directly to the ED but to the FQHC. Then, if the patient doesn't have a primary care physician, they are assigned one. We are not really hiring. We just basically replace and integrate at the management level. We're giving managers different responsibilities.
Lynn Nicholas: I think if [hospitals] are adding people right now, it's a very short-term strategy and delusional in terms of what is to come. I know Massachusetts is high-cost, but that's because 47 percent of our patient days are in teaching hospitals. The national average is 19 percent. We do a lot more in the teaching setting. We have legislation that requires our total medical expenditures as a commonwealth be no greater than the total domestic growth product of the state.
A lot of the care given [in hospitals] is unnecessary, and what we're trying to do is squeeze 30 percent of spend out of the system, wherever it exists. You start cutting out stuff you don't need or [look at] doing it in a lower-cost setting. We've had layoffs across the commonwealth here and there. Our workforce is reducing, but also being repurposed and repositioned. I've been here seven years, and I can think of very few hospitals that haven't had one or more reductions enforced.
On consolidation
Alan Channing: The opportunity is [finding] where you can get overhead synergies that will reduce [overhead] costs. And because of this coming together this year, [Editor's note: Sinai officially closed its acquisition of Holy Cross Hospital in Chicago in January 2013], we're saving about $10 million. This is the third year in a row we're taking out similar kinds of numbers by restructuring the delivery system.
We started to look in a detailed way about what we were doing in each of our departments to make sure we weren't duplicating services. If we had two similar functions, how could we bring them together? We went through an open selection process, so there wasn't one site taking over the other and throwing people out willy-nilly. We really thought it through so we weren't imposing the culture from one campus to another, but taking the best of both.
Phil Kambic: It comes back to, "What is a hospital?" Is a hospital just a big box or something much more? My hospital is something much more. We're a standalone community hospital in a blue-collar town in the middle of the rust belt. We have outpatient services, surgery centers — you name it, we have it. We expanded our care continuum and geography to go into these rural areas that have no healthcare.
We're not an academic medical center. We still have [physician] relationships and a great medical staff that knows when we need to [refer] people versus what we can do internally. I believe we can stay independent, but if somebody came to me and said, "Phil, here's a value proposition and this is why it's so much better for you and your patients to join our system," I would [think about that]. But nobody has been able to show me that yet.
Michael Sachs: Complexity does not add value. We have examples where Larry says [Loyola] being part of [Livonia, Mich.-based CHE Trinity Health] Trinity has been [helpful], but Phil runs a standalone community health system that is very diverse and does quite well in its market. So it really depends on what the needs are. If you can reduce the complexity and add value, then be part of a larger system. It works either way.
We've looked at consolidation as one way to get pricing and market power. The bad news with that is you have pricing and market power. When you had legacy carriers that had amazing prices and power, you had Southwest Airlines come in underneath them. If you're not careful, you can be very proud of that power and then other organizations will come in beneath [you]. Revenue outside of the acute-care setting is exactly where that could be challenged.
Joe Fifer: The loose affiliation and even up through many mergers — when there's not real true consolidation in back room functions [when] you put together these deals, and don't get system synergies, why bother? That is such a short-term strategy. Quite frankly, it's maybe easier that I'm not a CFO in a hospital today, but the idea of joining together to get 10 to 30 percent more in a managed care contract, it's ill-advised. If that's the focus of a merger, [then] that's not a great strategy. If you're going to put together a merger, get economies of scale.
Dr. Paul Summerside: You see a lot of consolidation but very little integration, which are not the same thing at all. We try and look very carefully. We're very big on operations, literally and figuratively. If it doesn't improve fundamental operations, it's usually a bad idea.
On reimbursement
Phil Kambic: One concern out there is the first year of the Patient Protection and Affordable Care Act. I predict 80 percent of people signed up are people who will need Medicaid. Where will the Medicaid patients go? Our emergency rooms. There are few physicians who are going to see those patients. Now you tell a person they have coverage, but no one will take them. So now they will come to our ER, which is the most expensive place to receive care. We have a residency clinic adjacent to the ER, so we have a place to send them for follow-up visits even if the patients do [end up] in our ER.
Lynn Nicholas: We saw a big influx of volume in our ERs in Massachusetts [after enacting statewide healthcare reform]. It wasn't Medicaid patients, but people who had coverage for the first time. It was mostly young people who didn't have primary care physicians. Hospitals weren't hurt too badly because they had coverage, [but] it wasn't great payment, because many picked bronze plans.
Alan Channing: By way of framing it, we are also a safety-net hospital. We recently took on [Holy Cross Hospital], about five miles away on the west side of Chicago, where there were a million and a half people in our overlapping service area. Medicaid is 60 percent of our business, and our uninsured is 15 percent. So we like healthcare reform.
Larry Goldberg: There are some things you endure and you take a loss on. There's a bigger fundamental issue here. It's somewhat political. All this stuff is incremental. The big issue, in Chicago, is we're 40 percent overbedded. We don't let hospitals close. Rates need to be rationalized, but then what happens when places can't afford to exist? We keep perpetuating this.
Russell Sullivan: The ACA is going to stay in place for the next three years. There will be some changes [via] executive order. The environment for legislating changes in the healthcare space is toxic right now. The terms of the ACA were premised on the fact that 50 states would take Medicaid expansion. Many millions of people would sign on for insurance. The legislation did not include adjustments if those assumptions did not come to fruition.
On innovation
Catherine Jacobson: We sponsor the largest multisystem ACO in Wisconsin with the largest number of lives under management — Quality Health Solutions. We have five separate independent health systems and the Medical College of Wisconsin. We are clinically integrated, so we can represent ourselves to the market. We just received a shared savings contract from UnitedHealthcare. It took about three years to put all that together. We're very proud of what we've been able to achieve.
Larry Goldberg: We're doing lots of things and positioning, but the biggest message I'm trying to send is, "Let's focus on fundamentals." There's a lot of noise and anxiety and projects and experiments happening, but it's…about the patient experience. It is quality. It is access. It is getting our cost structure in line. Stick to the fundamentals.
Our quality scores, financial performance, patient satisfaction scores — none of that was impacted by this outside noise. Keep the focus on doing the right thing. What's all this stuff about? This is what we should have been doing before. We can overcomplicate this.
Michael Sachs: We need to reimagine what the service is [at hospitals]. It doesn't mean coming to see a physician, getting a test scheduled three days later and getting a report seven days later. That's not service. The patient should come in, get a diagnosis, get a treatment plan and treatment should begin. Every [pause] in the care process costs money and outcomes. When we reorganize and take time out of the system, we'll lower costs and get better outcomes.
On nurse relationships
Dr. Paul Summerside: Where you see happy nurses is where leadership and accountability go up. In other words, good nursing leadership, they feel responsible for overseeing their nurses. In places where nurses aren't happy, the accountability goes down. You hear, "The nurses are responsible for this and that, nurses aren't doing this or that," when in reality you haven't done the right thing for those nurses. They are a very emotionally engaged population, and they really respond to when their leadership feels responsible to them.
Larry Goldberg: You correlate patient satisfaction to your relationship with your nurses. The number one driver for employee engagement on our nursing unit, what drives that, is your relationship with you manager. It's about relationships.
José Sánchez: We actually do spend a lot more resources on training nurses than the rest of the organization. For us, it's a major challenge in terms of recruitment and retention. We just finished looking at the salary across the entire spectrum of the city and made adjustments on all those we felt were not in line with the market rate. We've spent a lot of time focusing on the training they need and so forth.
On behavioral health
Alan Channing: Long before we were expected to do community health assessments, we did the largest door-to-door health survey ever documented in Chicago, about 12 years ago. We did it block-by-block, so we ended up with actionable results. We're in the process of redoing it [now]. As a community, the first thing [people] talk about is behavioral health. Everyone has chronic disease issues and we all have programs around that. I think we're all struggling with how the [healthcare] system will deal with [behavioral health issues].
Lynn Nicholas: What affects EDs is they are clogged with behavioral health patients. Once you move from fee-for-service to capitation and global payment, it becomes very clear that the entire behavioral health system is under-resourced, underserved and inadequately structured. I met with our governor last week and said to him that the last peg in his legacy needs to be behavioral health. We need to deal with that, because that piece is not addressed.
On their outlook for 2014 and beyond
Michael Sachs: The world of innovation in healthcare, both in delivery and on the IT-side, is going to substantially change how care is delivered.
Quint Studer: The [new] payment system, on purpose, is meant to disrupt the status quo.
Phil Kambic: Is this glass half empty or half full? I ask my staff all the time. I think there's a ton of opportunity, and you have to be bold.
José Sánchez: The changes in last 20 years or so — from managed care to basically consolidation to evidence-based medicine — and many of these incremental changes we have seen, like EMRs, have been really focused on cost control. The question is if those have added value to patients.
Lynn Nicholas: Genetics account for about 50 percent of determinants of care, 40 percent are societal issues and 10 percent is what we do every day [in healthcare]. Payment reform and moving into global budgets as fast as we can unleashes enormous potential to be creative in that 10 percent and drop for the first time into the 40 percent.
Science, remarkably, is going to begin to influence the genetic part quite a bit. Ninety percent of the scientists in the world who have ever lived are alive today. While we struggle with what affects the 10 percent, there's enormous potential for what will happen. It's very exciting.
Alan Channing: I've not been in many conversations where somebody doesn't raise the question about whether patients have skin in the game. As a safety-net provider, I look at my patients and say, "How can I help you do that?" The language that comes to my mind is: "How are we making ourselves more essential to the community? How are we engaging with the community and with the patients through a variety of mechanisms?"
Dr. Paul Summerside: I'm super excited. I still get up every day pretty excited…[I recommend you] get up every morning and think about operations. Think about just, "What can I do today? What can I do today to make things run a little better?" That wears off on everyone else. If you do those things, you're just going to kick butt in this industry right now.
Diana Hendel: I'm excited, and it was great spending the day with you. I'm reminded of a Barbara Kingsolver quote: "The changes we dread most may contain our salvation." We are the generation changing our health system.
Russell Sullivan: The proliferation of mergers, acquisitions, ACOs, joint ventures and loose affiliations will produce better outcomes at a lower cost, just as Congress hoped.
Catherine Jacobson: I'm also one of those optimists. I've been in healthcare almost 30 years. In the 1990s, we fought change…but now we have more data than we've ever had before.
Larry Goldberg: What we're talking about right now isn't going to happen as fast as we feel. But directionally, this [era] is pretty exciting.
Joe Fifer: I don't think we're talking about the right thing. We had this whole conversation today. Per-month per-member came up at one point, but it was not even fully developed. The total cost of care never came up. What we're focused on are individual successes within this whole continuum. But it feels like we're playing whack-a-mole. As long as we continue to do this, we won't succeed.