Making Ends Meet – Hospitals Challenged by New Era of Fiscal Efficiency

According to recent information from the Centers for Medicare & Medicaid Services (CMS), “healthcare spending trends have flattened, and some of the forecasts of spending from three, four, and five years ago have proven to be incorrect; we’re actually spending fewer dollars than we were,” said Salvador, vice president of Medical Affairs at Baystate Medical Center.

But the shift has been a challenging one, and no one expects it to get any easier.

For example, each year, the American College of Healthcare Executives (ACHE) surveys more than 1,000 hospital CEOs about their top concerns, including governmental mandates, patient safety and satisfaction, personnel shortages, care for the uninsured, physician-hospital relationships, implementing new technology, and other issues. For 10 years running, the broad category of ‘financial challenges’ has topped that list. In fact, it ranked far ahead of the number-two challenge — the tangentially related matter of healthcare-reform implementation — in the last three polls.

“It is not surprising that financial challenges and health-reform implementation are on the minds of hospital CEOs,” said Deborah Bowen, president and CEO of ACHE. “In addition, both government mandates and patient safety remain top priorities as CEOs and leadership teams work hard to improve patient care and redesign care delivery as they face a challenging reimbursement climate.”

Healthcare reform is deeply entwined in the issue of hospital finances, Salvador noted, because the Affordable Care Act (ACA), or Obamacare, crystallizes many of the cost-saving measures hospitals have been moving toward in recent years, such as reducing hospital readmissions, emphasizing preventive health in the community, and reducing unnecessary tests and treatment.

“The ACA is designed to move us in that direction,” he told HCN. “We are in a time of transition in healthcare, where to meet the goals of population health, we have to invest in taking care of patients outside the hospital. So we’re making some of these investments and, at the same time, have to preserve and improve the care we deliver in the traditional sense. That’s the transformation, and that’s what’s causing the results of these surveys.”

But keeping hospitals in the black while meeting patient needs and expanding services is not a new issue; hospitals have long lamented that their expenses constantly overshoot the reimbursements from public and private payers. But a decade-long shift to new, efficiency-based models of care seems to be having an impact on the industry that hospital leaders hope will make a positive difference in the long term.

Salvador noted that, when most people think about the ACA, they think of health insurance, which is only natural.

“There are two parts to ACA — one is insurance reform, and the other is healthcare-delivery reform. Insurance reform, insuring more of the uninsured, is what 95{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} of the press is about,” he explained. “But healthcare-delivery reform is really a set of experiments, of which Baystate was an early adapter.”

One is the move toward accountable care, which replaces the standard fee-for-service reimbursement model — under which hospitals are paid a fee for each procedure, plus additional fees for any complications that would require a readmission — with a system by which a group of different providers are paid a flat fee for keeping a patient healthy, which provides incentives to eliminate unnecessary costs, but also to make sure patients get the care they do need, because a major goal is to prevent rehospitalization.

“The last thing a surgeon or oncologist should be paid for is complications. Right now, if you have more of them, you do better,” Dr. James Mohler, chairman of the Urology Department at Roswell Park Cancer Institute in Buffalo, N.Y., told MedCity News. “What you’re really talking about is paying for outcomes, because that’s what healthcare is about. You want to deliver the right care and do it really well, so that the net cost to the country and to a patient will be less.”

As outlined by the Institute for Healthcare Improvement, a Massachusetts-based organization that promotes innovation and safety in medicine, accountable care has three interlocking goals: improving the experience of care, improving the health of populations, and reducing per-capita costs of healthcare.

Those goals lay out in stark terms, Salvador said, why efficiency in healthcare doesn’t mean lower-quality care. “As care for individuals gets better, population health improves, and cost of care for the whole population decreases.”

The Sisters of Providence Health System (SPHS), which includes Mercy Medical Center, has been talking about accountable care for the better part of a decade and has realigned the way it structures care and payments.

“Through the ACO we have and other contracts we’re involved with, we feel that the future of healthcare is very much focused on population health,” said Thomas Robert, chief financial officer and senior vice president of Finance at SPHS. “Our readmission rates are among the lowest in the Commonwealth, and we are working to build a clinically integrated network with physicians in the community to be able to utilize these efficiencies for the benefit of the community.”

Mercy has implemented several protocols for achieving this balance between quality care and efficiency, from its high-tech Care Connect system — a sort of centralized air-traffic control for the whole hospital, ensuring that patients move through the system without delay — to an increased emphasis on arranging follow-up care, whether it’s home care, skilled nursing, rehab, or simply a primary-care visit.

“That has translated into a better patient experience but also reduced the length of stay, as we get them into a more proper setting, a more cost-effective setting,” Robert said. “And we follow up with the patient to make sure they follow up with these schedules. Again, that all leads to population health. So many times, patients get discharged without proper follow-up, and that’s where readmissions come from. We assist patients after they leave the hospital and make sure their care continues.”

The heart of accountable care, however, is how it’s paid for, and both Mercy and Baystate are participating in the model, backed by the Centers for Medicare & Medicaid Services, of bundled payments to multiple care providers for individual patients.

“We’re early adopters,” Salvador said. “For certain types of patient services we deliver, we agree with CMS to get paid for them on a 90-day bundle, which aligns the doctors, hospitals, and post-acute care providers. We’re all being interested in the same thing: making care the best and most efficient it can be.”

This new era of efficiency certainly doesn’t mean hospitals aren’t moving forward with expanded services and new technology; in fact, Western Mass. hospitals have been in a growth mode for some time. Baystate recently completed a $250 million expansion; Cooley Dickinson Hospital and Berkshire Medical Center are building cancer centers; and even smaller institutions like Noble Hospital have invested heavily over the past few years in equipment, services, and facility renovations (see story, page 18).

“The financial pressures and challenges will not get easier,” Noble President and CEO Ronald Bryant told HCN, “and it will continue to be a balancing act between costs we can support and our needs.”

Robert said SPHS has adopted a philosophy of “incremental investment” to make sure that Mercy and other elements of the health system grow as needed, but budgets remain under control.

“When we go through the capital planning process each year, we take all the wishes that are out there and really prioritize them according to quality and outcome for patients, patient experience, and increasing efficiency,” he explained. “We work closely with physician providers to help us prioritize those capital needs, and we target when we absolutely need to make the expense.”

A good example is Mercy’s recent conversion of its inpatient floors to private rooms. “We knew we couldn’t do the private rooms all at once; funds were not available for us all at once, and we’d also disrupt patient care,” Robert said. “So we started that process in 2011, in four phases, which we just completed. Now 80{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} of our rooms are private — a project that basically took three-plus years to complete.”

The system tries to be creative in other ways with its capital dollars, he noted, like its joint venture with Hampden County Physician Associates and Carew Chestnut Partners to build a $20 million outpatient medical office center at the corner of Carew and Chestnut streets in Springfield.

Because of the partnership, he said, “Mercy did not have to put up any capital dollars. We now have this very important access point on our campus without expending additional capital dollars. It’s really about trying to be creative.”

But efficiency also means tightening belts when it comes to care, Salvador said, and that’s something all hospitals have to deal with — as well as patients, who have become accustomed over the years to being offered any number of treatments and tests when admitted to the hospital.

“One of the interesting things for me is the link between the quality of care we deliver and how much the care costs,” Salvador said. “The challenge for hospitals with the ACA is to prove the value of all the care we deliver.”

From that challenge has sprung a national campaign called Choosing Wisely, led by the American Board of Internal Medicine Foundation with the support of close to 100 specialty medical organizations.

“They have identified a number of common practices that physicians have said we should question the value of — is the money worth the benefit of those practices? We’re seeing hospitals across the country — and Western Mass. is no different — really looking at some of those practices,” Salvador explained, and either justifying their widespread use or determining whether they may be of less patient-care value than they’re worth financially.

“One example is blood transfusions,” he continued. “They’re very common, and in fact they save lives, but evidence has come out recently to question whether using blood in some cases, particularly in certain patient groups, actually doesn’t save lives, doesn’t add value. So we’re seeing a national trend toward using less blood.”

In the same way, participating emergency physicians have questioned the use of high-end imaging for headaches, pathologists have questioned vitamin D testing, and so on.

“Cardiologists have a list, orthopedic surgeons have a list … it goes on and on,” Salvador said. “It also engages patients about their care, and I think that’s always been important. I think we’re getting better at it, and things like this help us do that.”

Salvador said he came to Baystate six months ago to grapple with these very questions, because transforming healthcare is part of the organization’s culture.

“From my perspective, a lot of hospitals across the country are discovering that the answer lies, more than ever before, in our continuing effort to improve the quality of care by delivering the best care with the fewest complications,” he said, emphasizing again the philosophy behind accountable care and the new national push to keep costs down. After all, he said, it’s not quality care that raises costs, but unnecessary care.

“Most of us are working very hard to reduce readmissions to the hospital and deliver excellent care both inside and outside the hospital,” he went on. “When we don’t have patients returning to the hospital, the overall cost goes down.”

It’s easier said than done, but hospital leaders say they’re making real progress toward this more efficient model of care. And that’s got more than just patients feeling better.