KURT SALMON REVIEW Health Care. Strategy. Insights.
IN THIS ISSUE Untangling the value conundrum 4
Reference pricing: forcing hospitals to compete on price 22
If you build it, will they come? 30
Getting back to basics at academic medical center satellites 62
Issue 01 ii From the Editor
We are proud to offer the first health care edition of theKurt Salmon Review as just the latest example of the way in which we continue to challenge our clients to think innovatively about the evolution of our industry. In this annual publication, we will highlight some of our most provocative ideas about the future of the provider sector. You may not agree with all of them, but our hope is that they will stimulate your intellectual curiosity.
We are a firm that believes strongly in the adage that “incentives drive behavior,” and the provider sector is in the throes of the most significant changes to reimbursement incentives in three decades. Every planning principle from the last decade is now being challenged, and new industry truths are emerging.
• Doing “better” can be just as lucrative as doing “more.” • Hospitals need not be the center of the care continuum. • Patient-centric care models can still be physician-friendly. • Controlling physician share is more influential than controlling bed share. • Convenience matters—adopting models that shift time, shift place and shift skill sets is the key to attracting new patient volume. • Changing clinician practice patterns to lower the cost of care is meaningless unless you can share in the value being created.
In this inaugural edition, we discuss a new vision for primary care delivery, positioning physical assets for population health, academic-community partnership efforts and reference pricing, among other issues. We hope you enjoy it, and we’re interested in continuing the dialogue.
Regards,
Andrew Bachrodt Managing Partner 1 TABLE OF CONTENTS issue 01
What a Tangled Web We Weave 4 It boils down to who can actually knit symbiotic relationships together, deliver results and get paid for the value.
And Then There Were Three? 12 Provider sector consolidation will leave most markets with no more than three “mega players,” with the most dramatic changes still to come.
Forcing Hospitals to Compete on Price 22 While not a panacea, reference pricing may prove to be a game changer in the competitive ambulatory market.
2 If You Build It, Will They Come? 30 Cultivating Common Ground 54 New assumptions apply when investing Promising academic-community hospital in facilities that will spend most of their collaborations have begun in a few service functional lives in a value-based world. lines. There’s room for many more.
Primary Care Re-Envisioned 38 Base Model or Fully Equipped? 62 Primary care has never been more important AMCs expanding their care delivery fleets find —or more in need of radical change. efficiencies in less luxurious operating models.
It’s Complicated 46 Why patient complexity is reshaping care delivery—and what it means for hospitals.
3 4 WHAT A TANGLED WEB WE WEAVE HOW TO MAKE VALUE-BASED PARTNERSHIPS AND AFFILIATIONS SUCCESSFUL Developing integrated, value-based care delivery models requires unraveling existing systems and processes and weaving together new ones in new ways. It’s an uncomfortable, disruptive effort with few guidelines, and most hospitals and health systems in the midst of it are finding it messy and complicated.
5 The reality is that many will fail. Mergers Getting agreement among partners about and acquisitions to build scale won’t be how to define value creates a framework for enough to meet population health goals. these new partnerships and prioritizes goals. Integrated care solutions call for larger, Is the partnership about making care more fiscally strong health organizations—not efficient? Making care safer? Improving necessarily with shared balance sheets—to outcomes? Reducing costs and waste? partner with one another and with other area Succeeding on a risk-based contract? providers to jointly develop systems of care An even more challenging aspect, which that offer value-based solutions. few have answered, lies with the potential Difficulties typically arise when goals lack monetary return on the investment. How focus or there is a reluctance to challenge will financial returns be generated? Will they current clinical processes and physician- be distributed equally among hospital and referral patterns, and success won’t be physician partners? When, and in what dictated by who is involved or the structure magnitude? and process they use. Ultimately, it will boil One clinically integrated network approached down to who can actually put these symbiotic this by unraveling its existing care system and relationships together—integrate cultures, refocusing on the 10% of patients generating technologies, geographies and financial a disproportionate share of the insurer’s circumstances—then deliver results and get health care costs. They made behavioral paid for the value of these results. health services a critical component in the Untangle the Value Conundrum care of these patients and estimated that more effective care management would Two of the biggest issues a partnership must reduce the high users’ total spend from $9 clarify relate to value: How will the network million to $6 million. The $3 million savings define value, and how do participants generated will be split equally between the equitably distribute the value that is created health system, the independent physician among the participants? association partners and the insurer. The answers form the framework onto which Besides defining how value will be distribut- all other relationships are woven. ed among partnership members, this
6 network was also strategic in targeting a them flexible, but also prone to fraying if very specific population health goal. they’re not carefully constructed. Each Narrowing the network’s focus as much as partner must be well integrated into the possible in the beginning can help mitigate overall design so the structure retains its some of the early risks and help the entity integrity in the face of difficult decisions and achieve measurable value. (See Exhibit 1.) inevitable challenges.
Tighten the Weave For organizations that want to start slower, Partnerships by nature are looser arrange- staging the partnership can help ease ments than mergers or acquisitions, making everyone in. For example, the health systems
EXHIBIT 1: Five percent of patients are responsible for 50% of health care spending.
MAXIMIZING THE IMPACT OF FOCUSED CARE DELIVERY
2%
16% 82% of total costs come from 20% of population 50% of the population spends little or nothing 32%
50% of total costs come from 5% of population
Next 30% 28%
22% of total costs come from 1% of population
Next 15% 22% First 1% Next 4%
Distribution of Distribution of Beneficiary Population Health Spending
Source: NIHCM Foundation, 2013
7 Common Constructs for and physicians in one new arrangement Custom-Designed Partnerships began by self-insuring their own employees. Partnerships take many forms to uniquely Initially, they share only “upside” savings address local market dynamics. Among (upside risk) as the physicians and the the most common partnerships forming evolving clinical processes are tested and across the country are: evaluated for success. All parties know that »» Health system integration. Hospitals or within two to three years they will move health systems partner or affiliate with together toward accepting both “upside” and other hospitals or health systems to “downside” risk for caring for this specific create a virtual integrated delivery sys- population of employees and dependents. tem to lower costs and improve care. Keep in mind, however, that partnerships »» Clinically integrated network (CIN). aren’t always equitable societies, so the ways Hospitals or health systems create a in which individual partners come together network of care that they manage in may have to vary. Smaller providers and conjunction with independent physi- critical access hospitals, for example, won’t cians or other providers to deliver or necessarily have the same level of capital to contract for care of specific populations. invest in a partnership as a major health »» Population health management organi- system, but may be essential components zation (PHMO). Independent hospitals due to geographic location or strategic and health systems invest jointly with interest in changing care. There must be physicians, and potentially insurers, to alternative options available for these create a health care “utility” that pro- organizations to have “skin in the game” vides the tools to better manage lives. without the same level of financial commit- ment or risk. In turn, it will be necessary for these differential partners to accept certain trade-offs, such as serving on a committee rather than holding a board seat. Outlining these criteria from the outset will not only set out participation expectations and help entities commit beyond the initial invest-
8 ment, but will also help all parties better Focus Near-Term Efforts understand how risk will be balanced across to Build Future Value the network. Population health is an immense goal. Narrowing a network’s initial focus can Ensure Expertise and Interest provide early wins and also help the entity Govern the Group work through any kinks within a lower- A new entity formed by multiple parties is risk, controlled environment. To do so: typically governed by a body representing all 1. At the outset, define “first opportuni- of those who invested, with local physicians ties” for care improvement, e.g., chron- also participating. But this typical approach ic and utilization-based care issues, will not work here. If these partnerships are unnecessary ED visits. established on the belief that dramatic change in the delivery and cost of care needs 2. Start with the founding organization’s own lives (employees and dependents) to happen, then governance expertise must and direct them only to the participat- trump or be equal to investment when it ing physician partners in the network. comes to governing. This is a particularly sensitive spot for 3. Concentrate on a specific subset of partners because it means giving up repre- lives where there are opportunities to improve efficiencies in care delivery sentative board seats, and that creates and focus the partnership’s initial activ- discomfort. But to succeed in unknown ities there. territory, in an area where the partners lack real expertise, partners must be willing to 4. Gather proof points on the impact the give up some of their governance control and network had on waste and duplication, be open to leadership guidance from experts as well as on consumer satisfaction. from other parts of the health care field who 5. Showcase these results to build the have been down the road before. network, gain new business and create To identify the right board mix, the partner- confidence among the partners. ship must be crystal clear in what it’s trying to achieve, then seek out leaders with specific expertise. In some cases, this may
9 Weaving a Partnership That require changing board bylaws to accommo- Won’t Fray at the Edges date non-local or otherwise non-traditional The significant change partnerships board members. are designed to create will cause major In one PHMO, the founding and investing disruption for the hospitals, physicians and others involved; backing out in the partners relinquished several board seats to face of difficult decisions cannot be an add needed expertise, including a retired option. There are a number of ways that insurance executive who had served as CEO partnerships can be structured to ensure of a statewide insurer and the medical all participants are firm in their long-term director of a large East Coast independent- commitment, including: physician association. Adding this level of
»» Risk-based contracting that shares the expertise changed discussions and challenged risk across the partnership the organization’s goals, raising difficult but essential questions that aren’t normally »» Making larger joint investments that heard at health system board meetings. depend on the success of the original CIN or PHMO Physicians too must play a significant role in the partnership’s efforts to improve clinical »» Joining each participant’s clinical net- care. In another uncomfortable truth, work together to share risk partners must recognize that traditionally
»» Creating an organization with some hierarchical physician relationships must level of control that is relinquished bow to the higher purpose of alignment and from the participating organizations, integration. Physician seniority must weigh such as dedicating board seats to ex- less than interest in and engagement in the ecutives or physicians who are outside process. Some partnerships have successfully of the partnership and have specific pulled in the right physicians by creating a expertise to support the new venture job description that details the skill set and time dedication necessary, then interviewing physicians across the organization. As the job typically requires physicians to spend substantial time away from their practice, reasonable compensation is important. In
10 some cases, compensation can run upward AUTHOR of $300 to $400 per hour. Jeffrey R. Hoffman, Senior Partner [email protected] Visualizing the Population Health Tapestry We’re at merely the beginning stages of changing the health care delivery system, so it will be some time before a clear image of fully integrated delivery systems emerges. These partnerships will be the flexible yet multidimensional bases of the future care paradigm and future physician and hospital revenue streams. Those that succeed will have unraveled a broken, fragmented system and created a new one, weaving in both old and new delivery platforms with both old and new leaders to truly disrupt the market, their own organizations and patient outcomes. v
11 AND THEN THERE WERE THREE? Applying Economic Theory to Health Care Provider Consolidation
12 13 According to the “Rule of Three” in business proaching the regulatory limits of market and economics, all major industry sectors, no share growth and shifting their focus to matter how fragmented, ultimately coalesce vertical integration—post-acute care, retail such that no more than three full-line general- and digital health, and insurance. Of course, ist mega players together dominate the new constructs bring new challenges— market.i Most health care provider markets mission dissonance, increased capital today are moving in that direction; some are demands, unfamiliar skill set requirements already there. But the most dramatic changes and heightened political scrutiny. are still to come. These changes are occurring rapidly, impact- In recent years, a steady flow of mergers, ing costs, outcomes, the competitive environ- acquisitions, joint ventures and strategic ment and the way patients access health care. alliances has transformed health care A decade ago there were many markets in markets across the country, giving rise to which no single hospital system had more health networks that continue to grow in size, than 15% market share—even when narrowly geographic reach and economic power. defined by inpatient admissions. In 35 of the While this consolidation process continues to 50 largest metropolitan areas in the United play out differently by region, the first tipping States today, the three largest health net- point is already behind us. By 2020, most works represent more than two-thirds of the markets will be dominated by two or three market. These are multibillion-dollar health major health networks. Tomorrow’s health care conglomerates that collectively drive the network will serve a population spread out way in which care is delivered to their across multiple population centers—even communities. (See Exhibit 1.) multiple states—and connect with patients at From Cottage Industry every point along the care continuum, from to Conglomerates prenatal care to hospice care. The U.S. health care economy is about $3 To date, health network growth has been trillion annually; in GDP terms it would primarily horizontal and focused on adding represent the fifth-largest economy in the more beds, physicians and patients. The world. The provider sector is the largest slice largest health networks are already ap- of the U.S. health care economy and, given its
14 sheer size and significance, its transforma- provider consolidation has seemed immi- tion has implications that are at once nent, but prevailing fee-for-service reim- uniquely far-reaching and deeply personal. bursement models and protectionist The provider sector has historically func- regulatory mandates have always served to tioned as a cottage industry—hands-on and maintain the status quo. Today, the indus- locally based. There have been other periods try’s appetite for partnerships, affiliations, over the past few decades when massive mergers and acquisitions is primarily rooted
EXHIBIT 1: The Rule of Three already applies in many of the largest MSAs.
CONSOLIDATION PROGRESS IN THE TOP 35 METROPOLITAN STATISTICAL AREAS
Seattle-Tacoma- Maine Bellevue Washington
Portland-Vancouver- North Minnesota Hillsboro Montana Dakota VT NH Minneapolis-St. Boston-Cambridge- Oregon Paul-Bloomington Newton New York MASS Wisconsin Michigan CT RI Idaho South Dakota Detroit-Warren- New York- Dearborn Newark-N.Jersey Wyoming NJ Chicago- Cleveland-Elyria Pennsylvania Philadelphia- Naperville-Elgin Pittsburgh Camden-Wilmington Ohio Iowa MD BalDEtimore- Nebraska Illinois Indiana Columbia-Towson Sacramento-Roseville- Columbus Indianapolis- Washington- Arden-Arcade Cincinnati San Francisco-Oakland-Hayward Carmel-Anderson West Arlington-Alexandria Utah San Jose-Sunnyvale-Santa Clara Denver-Aurora- Kansas City Virginia Virginia Nevada Lakewood St. Louis Kentucky California Colorado Kansas Las Vegas- Missouri North Henderson-Paradise Carolina Los Angeles-Long Charlotte-Concord-Gastonia Beach-Anaheim Tennessee Riverside-San South Carolina Bernardino-Ontario Oklahoma Arkansas Atlanta-Sandy Arizona New San Diego-Carlsbad Springs-Roswell Phoenix-Mesa- Mexico Scottsdale Alabama Georgia Dallas-Fort Mississippi Worth-Arlington Texas Population (Millions) Austin-Round Rock Louisiana 1.8–2.4 San Antonio- Tampa-St. Orlando-Kissimmee-Sanford 2.4–3.6 New Braunfels Houston-The Woodlands- Sugar Land Petersburg-Clearwater Florida 3.6–5.5 Miami-Fort Lauderdale-West 5.5–9.5 Palm Beach Consolidated 9.5–20 Still Consolidating
Source: U.S. Census data and Kurt Salmon analysis of inpatient data
15 in the payment emphasis shifting from to value and outcomes, more and more of the volume to value. Reimbursement per unit of payment burden is being pushed onto care is declining, making traditional payment patients, who have an increasingly powerful models less and less tenable. Fee-for-service incentive to participate actively in their own is steadily giving way to population health health care choices and shop for the best payment models, requiring a level of clinical value. If you believe that incentives drive integration and business intelligence that behavior, then a 180-degree flip of the independent entities find difficult to create. reimbursement environment is convincing Also, as payors push back on annual provider evidence that the provider sector is unlikely rate increases and increasingly link payment to slip back into the fragmented state of the past three decades.
EXHIBIT 2: Hospital M&A activity has picked up, but there’s still room for more consolidation.
HOSPITAL MERGERS AND ACQUISITIONS, 2002–2014 120
100
80
60
Number of Deals 40
20
0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: Irving Levin Associates, The Health Care Services Acquisition Report
16 In the provider sector, as in most industries, according to Irving Levin Associates.ii (See the calculus of consolidation is simple and Exhibit 2.) Hospitals large enough to remain straightforward: A market share below 10% independent in the first wave of consolida- is not economically sustainable; a market tion are now determining that it is time to share above 50% becomes anti-competitive. join the party. The shakeout has already Over time, the market achieves balance with reshaped the contours of health care delivery two or three major players, each with a share in most markets. A 2013 study by the Alliance between 10% and 50%. for Health Reform found that 78% of U.S. There were 100 hospital mergers and hospitals were either considering or carrying iii acquisitions in 2014, double the 2005 tally, out a merger.
EXHIBIT 3: Private practice physicians are becoming the exception.
FROM SOLO ACTS TO ENSEMBLE CASTS
70%
60%
50%
40%
30%
Physicians describing 20% themselves as independent practice owners
10% Physicians describing themselves as hospital or medical group employees 0% 2008 2012 2014 Source: The Physicians Foundation, 2014 Survey of America’s Physicians
17 This is not to suggest that the pace of change sector. And some independent providers will be the same from market to market or (hospitals and physicians) are coming up that every independent hospital is doomed with novel ways to remain independent (e.g., to financial difficulty and eventual consoli- via concierge practices). But going down the dation. Even in highly consolidated markets, street to see the friendly primary care the Rule of Three predicts there will always physician with her own shingle or being be a place for specialist providers—free- admitted to the local independent hospital standing children’s hospitals and freestand- for surgery will increasingly be the excep- ing cancer centers are among the most tion rather than the rule, as illustrated in financially robust members of the provider Exhibits 3 and 4.
EXHIBIT 4: The number of community hospitals that are system affiliated has increased steadily over the past 15 years.
NUMBER OF U.S. COMMUNITY HOSPITALS IN HEALTH SYSTEMS
3,500
3,250
3,000
2,750
2,500
2,250
2,000 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: Health Forum, American Hospital Association Annual Survey of Hospitals
18 Pushing Against the Boundaries beginning to see some of the largest provider The horizontal expansion of provider networks—particularly national for-profit networks has historically been constrained systems and some faith-based institutions— by patients’ unwillingness to travel beyond a routinely target out-of-state acquisitions, certain distance for care and the inability of redefining “market” in terms of regions networks to track their patients’ care once rather than single population centers. they’ve left the system. But large networks As they reach the limits of horizontal have become much more adept at distribut- consolidation within a given population ing clinical services appropriately across a center, these networks are also facing intensi- broad region and tracking the care delivered fied scrutiny by state and federal regulators. across the continuum—all with a focus of Invoking the 1914 Clayton Antitrust Act, the providing appropriate care in the appropri- Federal Trade Commission has successfully ate location for the appropriate cost. For challenged proposed hospital mergers in example, most of northeast Ohio has now Georgia, Illinois and Ohio over the past two consolidated into one of two health net- years on the grounds that they would raise works—University Hospitals and Cleveland prices and suppress competition.vi In another Clinic. With limited opportunity to further high-profile case, the Massachusetts attorney expand within the metro Cleveland market, general initially allowed Partners Health- the latter expanded southward by acquiring a Care—the largest provider in the state—to iv stake in Akron General Health System. And proceed with its planned purchase of two the merger of Hackensack University Health in-state systems on the condition that any Network and Meridian Health creates a price increases not exceed the rate of general supersized health care network that links inflation for six years. Despite the agreement, north and central New Jersey and covers the deal met with vigorous opposition from v fully two-thirds of the state. other entities across the state, and Partners Where a health care network’s target service ultimately was forced to reverse course.vii area once aligned with metropolitan Expansion-oriented networks are pushing statistical areas (MSAs), now it is increasing- back hard against regulatory restrictions. ly spread out across an entire state. We are But as the avenues to horizontal integration
19 narrow, these multibillion-dollar conglomer- actuarial risk of a patient population are ates are increasingly considering vertical dramatically different from those required to integration plays, including expansion into deliver clinical care, and some hospitals will pre- and post-acute care entities and invest- invest heavily in the effort only to fail. But ments in new technology and digital health. those who succeed will be in a position to Today, 60% of family doctors and pediatri- capture the value of cost efficiencies and cians, 50% of general surgeons, and 25% of economies of scale, rather than sign that surgical subspecialists are salaried employ- value over to insurance companies. ees, according to the American Medical Health Care Consolidation: viii Association. There has been a rash of Envisioning the Next Wave post-acute care partnerships and acquisitions In a remarkably short period, horizontal in the past two years and even increased consolidation has reshaped the U.S. health expansion into a sector that has historically care provider sector, forcing all stakeholders been beyond the scope of most health care to rethink once-axiomatic assumptions providers—insurance. Many of the country’s about the way health care should be ac- largest provider systems—including Sutter cessed, delivered, evaluated and priced. But Health in California, Denver-based Catholic consolidation is a process, not an endpoint. Health Initiatives and St. Louis–based As networks continue to test the bounds of Ascension Health—are moving upstream into horizontal expansion while experimenting insurance to try to capture the value associat- with vertical expansion, a third dynamic ed with better management of patient care.ix could unravel all of the consolidation activity The impact of all this consolidation on of the past few years. clinical outcomes and patient premiums is While proponents of market consolidation still being debated, and challenges are say it will ultimately enhance the quality of likely—from regulators as well as the care, remove waste and bend the cost curve, insurance industry—but the integration of there is now growing evidence that the the provider and insurance sectors seems to benefits of consolidation are not accruing to be accelerating. Needless to say, the skill sets the patient. Several studies suggest that required to calculate and manage the consolidation is actually having the opposite
20 When industry consolidation does not result in meaningful improvements in value to the end-user, entrenched players become attractive targets for disrupters. effect—lessening competition, providing the ing a boom in the number of potential clout necessary to raise prices and creating disrupters—and these aren’t limited to the “too-big-to-fail” health care networks for garden-variety startups common to smaller which the traditional market-based checks sectors. In the past 12 months, a host of and balances no longer apply. When a Fortune 100 companies have trained their network represents more than a third of the sights on the provider sector—from the health care delivered in a market, there is a repositioning of CVS Health to announce- sense that it is irreplaceable—even in the ments from Apple, Google and Walmart of event of catastrophic financial losses or major health care initiatives. The consolidat- egregious medical negligence. In three ed health care network being created in many separate incidents within a 10-month period markets, with the hospital at the center, may in 2007, surgeons at Rhode Island Hospital have a remarkably short shelf life; the onus is operated on the wrong side of a patient’s on the provider sector to prove the juice is brain. The hospital—the flagship of the worth the consolidation squeeze. v state’s largest health care network, Life- span—was fined and ordered by the state to implement new safeguards.x But had this AUTHOR cluster of wrong-site surgeries occurred at a Farzan Bharucha, Partner [email protected] smaller, independent hospital, it is unlikely that it would have survived. Here too the provider sector can take a lesson from how the Rule of Three has played out in other industry sectors. When industry i Ivey Business Journal consolidation does not result in meaningful ii Irving Levin Associates iii Families USA improvements in value to the end-user, iv Cleveland.com entrenched players become attractive targets v NorthJersey.com vi New York Times for disrupters. And with the size of the health vii Boston Globe care provider sector, there will be no shortage viii American Medical Student Association ix New York Times of interested parties. We are already witness- x New York Times
21 22 FORCING HOSPITALS TO COMPETE ON PRICE REFERENCE PRICING COULD CHANGE THE RULES OF THE GAME. Health care is a major exception to the adage that “you get what you pay for.” Prices can vary widely even within a limited geographic area, with no correlation to quality. Colonoscopies in New York City cost anywhere from $740 to $8,500,i and in some metropolitan areas, basic laboratory tests done in hospitals cost 8 to 14 times more than those done in physician offices or other community- based settings.ii
23 Such seemingly illogical inconsistencies, a way to standardize costs and empower together with the opacity of pricing and consumers to make more-informed health quality data—where reliable data exist care choices.iii at all—have historically been a barrier to Implemented in the appropriate settings, competition in the health care provider reference pricing will impose a new opera- sector and have pushed costs to unsustain- tional reality on providers, forcing them to able levels. rethink and rebuild their pricing models. Reference pricing, long used in Europe to As competition intensifies and new state manage prescription drug costs, may offer legislation puts teeth into demands for
EXHIBIT 1: In the new value paradigm, care providers cannot trade off between quality and cost to maintain value. Consumers will demand enhanced value at the same or lower cost.
THE NEW VALUE PARADIGM
PAST THINKING High NEW PARADIGM
X Value baseline
Y A A Adding costs to improve quality/service
QUALITY Z B Cutting costs at the expense of quality/service AND SERVICE X EFFECTIVENESS: Improved quality/service at the same cost B Y INNOVATION: Improvement in all dimensions
Z EFFICIENCY: Cutting costs without impacting quality/service Low High COST Low
VALUE = (QUALITY x SERVICE)/COST
Source: Kurt Salmon analysis
24 increased transparency, costs will come Reference Pricing Defined down and consumers will be empowered The idea is simple: An insurer or self- in altogether new ways. insured employer caps the amount it will pay for a given procedure. Patients Value for the Win who choose a provider that stays within The current interest in reference pricing that cap are responsible only for their derives in large measure from the growing customary cost-sharing as set forth in availability of reliable, accessible, user- their insurance plan; those who go with friendly data for measuring value—not as a more expensive provider will owe the code for “cut-rate” or “cheap,” but as a difference between the reference price meaningful and quantifiable entity. An as determined by the insurer or employer increase in the quality of a health care and the amount charged. That difference is not counted toward their annual out- procedure without a concomitant rise in cost of-pocket maximums. would yield higher value; so would a reduc- tion in cost without a decline in quality. Reference pricing lends itself most readily Given the variability in pricing for some of to commodity health care services, which the most commoditized procedures, such as account for one-third of total health care spending.iv These are routine, non-urgent colonoscopies and arthroscopic repairs, it is procedures where care quality is more clear that they are vastly overpriced in some likely to be uniform and the risk of markets, thus bringing value down. Refer- complications negligible. They currently ence pricing is designed to bring value back include imaging and lab tests, select up by facilitating informed decision making inpatient procedures such as hip and and directly rewarding value-based deci- knee replacements, ambulatory proce- sions. (See Exhibit 1.) dures, and physician visits. In time, the Indeed, the merits of reference pricing are mechanism could be extended to health care services with more variability in built into the Affordable Care Act, which outcomes, like prenatal care and cancer requires hospitals to publish a list of standard chemotherapy.v charges for their services and update it annually. In April 2014, the Obama adminis- tration went a step further and approved the
25 “Shoppable” Services Public Employees’ Retirement System Commodity, or shoppable, health (CalPERS). Having determined that hospital care services lend themselves better prices for knee and hip replacement surgery to reference pricing than urgent or ranged from $15,000 to $100,000 with no high-complexity services. difference in quality, CalPERS capped the CRITERIA amount it would pay at $30,000 for the »» A well-defined service facility charge and compiled a list of 45 »» Elective, non-emergent hospitals that agreed to meet that reference »» Scheduled in advance price. Within two years, CalPERS saved $5.5 million, the cost of joint replacements »» Commonly provided by many different viii providers (hospitals, freestanding dropped by 26% and the most expensive outpatient centers, physician offices) providers had reduced their fees by an average of $42,000 to around $27,000.ix »» Significant price variability CalPERS has since extended the strategy to several more standard procedures, including use of reference pricing by self-insured colonoscopies and arthroscopies. vi employers. While the CalPERS experience is the most CalPERS Takes the Field persuasive to date, it was not the first. In Reference pricing isn’t yet widespread in 2008 and 2009, Safeway, the national this country, but it is steadily gaining supermarket chain, instituted reference x traction. (See Exhibit 2.) The percentage of pricing for drugs, imaging and colonoscopies. employer-sponsored plans incorporating More recently, Kroger fixed a reference price the strategy nearly doubled from 2011 to of $800 for certain imaging scans in 10 of the xi 2012, and a recent survey by Aon Hewitt 31 states where it does business. found that 68% are expected to adopt it in Reference Pricing: The New Playbook? vii the near future. Over the next few years, we anticipate that To date, the most compelling demonstration reference pricing will increasingly appear of reference pricing’s potential is a pilot in urban and suburban markets where there program launched in 2011 by the California are both an abundance of large employers
26 looking to drive down health care costs and incentive by the employer to incorporate competition among health care providers. cost parameters into its health plan. By It bears noting, however, that setting up and ensuring a sufficient number of claims for a administering reference pricing entails a given service or procedure, it will be number of costs, from creating appropriate possible to establish a meaningful reference analytics and gathering pricing data to price and quality metrics. providing the resources employees need to By the same token, the impact of reference make informed decisions. Thus, acceptable pricing will be greatest in a competitive returns will accrue only when there is a environment—a defined region with critical mass of local employees and an multiple systems, hospitals and freestand-
EXHIBIT 2: Reference pricing for various services, each with fairly uniform care delivery protocols, was analyzed across 230 hospital referral regions.
MEAN REFERENCE PRICE FOR COMMON SERVICES AND PROCEDURES
Hip or knee replacement $28,277
Colonoscopy $1,463
MRI of the spine $723
Echocardiogram $433
CT scan of the head or brain $297
Nuclear stress test of heart $171
Source: Paul Fronstin and M. Christopher Roebuck, April 2014
27 ing facilities—and, importantly, significant price shop, unlike non-Medicare patients, price variations across providers with no who would be responsible for paying any correlation between cost and quality. costs above a reference price. Reference pricing is not without its critics. What seems certain is that the current There are concerns that some low-cost system of hospital-set charges, payor-nego- providers will raise their fees to align with tiated discounts and patient-sheltered reference prices, or that the mechanism payments cannot last forever. Change is will, in some instances, wind up shifting coming—first in the ambulatory space in costs to consumers.xii Some worry that large urban and suburban markets and reference pricing doesn’t factor in cost eventually to the rest of the country. While differences associated with each patient’s still the exception, reference pricing—or a underlying comorbidities and health status, similar price-transparency mechanism— which could lead to more cherry-picking. will in time become the norm. v Some have suggested that the savings benefits are overstated, given its limited applicability to the costliest treatment AUTHOR setting—inpatient care. Leslie Marshburn, Senior Manager [email protected] And then there is the argument that Medicare has been “reference pricing” at the DRG level for years and yet hasn’t meaningfully impacted the way hospitals operate. If the largest single payor in the i New York Times country can’t effect meaningful operational ii NIHCR Research Briefs iii GABI Journal change, why would the adoption of refer- iv NIHCR Research Briefs ence pricing by commercial payors matter? v Ibid.; Health Care Incentives Improvement Group vi Fierce Health Finance Of course, Medicare doesn’t pass along vii Modern Healthcare viii HSC Research Briefs higher costs to the patient; the hospital ix Fierce Health Finance absorbs any costs over the set price. Medi- x HSC Research Briefs xi Ibid. care patients currently have no incentive to xii EBRI Issue Briefs
28 29
30 IF YOU BUILD IT, WILL THEY COME? POSITIONING PHYSICAL ASSETS FOR POPULATION HEALTH Nothing quite captures the simultaneous permanence and uncertainty of the choices health care providers face as much as a solid steel I-beam dangling from a crane. Major physical investment strategies hang in the balance. The high-dollar decision to set that very permanent steel girder into place had better be made through a future-focused lens because it’s going to spend at least 30 years holding up a building that will operate under a care delivery model that may not yet be fully defined.
31 Most executives are grossly underestimating the level to which utilization has the potential to drop.
The industry has spent decades developing dently make some general assumptions about its fixed-asset platform for a fee-for-service the future, which will help health systems plot reimbursement model. Aligning physical out the ideal distribution of assets. assets with the volume-to-value push will 1. UTILIZATION RATES WILL DROP. take time. Exactly how that transition will Provision of “well care” as opposed to “sick happen and how quickly it will take place care” will accelerate over the next five years. are largely unknown, but hospitals and New care delivery and reimbursement health systems must make investment models, a focus on population health, and decisions today about facilities that tomor- increased pressures from payors will shift row will be viewed as cost centers instead of inpatient utilization rates at hospitals revenue drivers. downward, even as the population continues Developing an appropriately informed to grow and age. (See Exhibit 1.) physical asset plan for a value-based delivery While this is generally understood, most network is imperative to avoid significant, executives grossly underestimate the unnecessary capital expenditures and to potential drop in utilization. A March 2014 reduce operating costs. This plan must Kurt Salmon survey of U.S. hospitals and consider ways to: health systems found that 63% of executives »» Develop a delivery system that is attractive and board members expect a decrease in to payors and large employers utilization of all inpatient services over the »» Meet the needs of a large, diverse and next five years (measured by admissions per geographically dispersed population 1,000 population); the average expected »» Reduce per-unit operating costs decrease was 3%. But estimates calculated using Milliman’s Health Cost Guidelines »» Reduce excess clinical capacity (HCGs) find that markets which shift to While the value-based network plan may not well-managed rates may experience as much be implemented immediately, it should drive as a 30% reduction in inpatient admissions decisions on major asset investments as when compared with current levels (which capital requirements surface. We can confi- are already 10% lower than five years ago).
32 EXHIBIT 1: The shift from loosely to well-managed care delivery and new payment models means annual discharges at a large system could be 18% lower than current forecasts.
INPATIENT DISCHARGE PROJECTIONS 2013–2024 180,000
170,000 165,000
160,000
150,000 150,000 -18%
ANNUAL DISCHARGES 140,000 135,000
130,000
120,000
110,000
100,000 2013 2024P
Loosely managed population Moderately managed population Well-managed population Source: Kurt Salmon analysis
This calculation factors in actual, observed 2. EXCESS CAPACITY WILL BE PREVALENT. data from plans and providers with more Assuming utilization rates drop, most mature population health-management markets will have excess beds and diagnostic methods in place.i and treatment capacity. Assuming modest Executives must consider these likely reductions of 10% in utilization and one day reductions and get more conservative with in length of stay, the United States will long-term capital asset planning. The require 100,000 fewer beds, even after transition to risk-based payment will accounting for an aging and growing popula- require removing significant unnecessary tion. Providers will be able to purchase or utilization capacity. lease beds at very reasonable rates. Further,
33 digital technologies will affect how and where suburban growth have moved the target care is provided; physical locations will no population further away from facilities. longer be the automatic default for patients Now it’s time to recalibrate the scale. Before seeking care, and executives will need to shift initiating expensive facility renovations, their strategies to adapt to evolving patient health systems must consider the role each expectations and to prevent costly overbuild- asset will play in their care delivery networks ing. This extra lower-cost capacity must be over the long term. They must balance the factored into the equation when determining number of access points they offer with their the value that renovated or new assets will ability to achieve lasting success. have in the future and whether the system 4. PHYSICAL INVESTMENTS WILL BE SUNK should consider physical expansion. COSTS, NOT REVENUE DRIVERS.
3. PRESSURE TO CONSOLIDATE SITES The costs of renovating or building new OF CARE WILL RISE. facilities pale in comparison to the costs of Most health care organizations will need operating them over their lifespan. With a to significantly lower their cost structures decreased ability to recoup capital invest- to maintain their viability moving forward. ments in a value-based reimbursement This requires reorganizing the care delivery environment, most of these assets should network, aggregating services to simultane- be thought of as cost centers in the future. ously: Among the questions to ask before putting »» Gain economies of scale and ensure high capital toward building or renovating an asset-utilization levels asset are: »» Maintain or enhance quality and patient »» Is there a sufficient population to support satisfaction it, and can we offer services at sufficient scale to create economies? »» Provide convenient access to care »» Do other system facilities nearby serve Many health systems have acquired a hodge- a similar function and market? podge of buildings over the years, leading to » duplicative services in some areas. In other » Can the service be conducted in a lower- cases, changing migration patterns and cost setting?
34 REDESIGNING A WEST COAST CARE DELIVERY NETWORK In a recent engagement with a large and partnerships in select key geographies progressive West Coast health system, Kurt where it had a limited presence. Salmon helped the leadership team design a This evolution will likely save the organiza- framework for reorganizing its care delivery tion over $500 million in capital over the next network to succeed in the new value-based 10 years and significant operational costs, not delivery environment. including any money gained from the sale or The health system found that it could likely lease of the real estate made available by the downgrade three hospitals to ambulatory or consolidation. Equally important, the system subacute sites and reduce the number of believes the redesigned delivery network ambulatory locations by 55%. (See Exhibit can provide better care with the same or 2.) It also found that it needed to form better access for the population it serves.
EXHIBIT 2: Over the next 10 years, a West Coast hospital system will need fewer than half the sites it now operates.
HAVE TO HALVE: AN AMBULATORY EVOLUTION
CURRENT FUTURE
NUMBER CLINIC NUMBER CLINIC SUBMARKET OF SITES ROOMS OF SITES ROOMS
REGION 1 28 1,025 16 1,215
REGION 2 20 465 10 495
REGION 3 25 285 7 355
Source: Kurt Salmon analysis
35 Conservative planning … is recommended, as it is more sensible to build or acquire assets in the future when needs arise than to risk overbuilding today.
»» Is it convenient for patients? utilization and significantly reduce their cost »» Can potential partners in the area provide structures have the potential to go to market a similar or higher level of value? at a substantially lower price point and shift a considerable number of lives and amount »» Are we trying to use capital solutions to of market share to their delivery networks. solve operational problems? Physical assets will have a considerable Health systems must consider how their impact on the process. asset portfolios will evolve in the future to Systems must plan for a future where their guide their investment decisions. Conserva- care delivery networks may need to be tive planning in the midst of this rapidly significantly different. Recalibrating for changing health care environment is value-based network design requires difficult recommended, as it is more sensible to build choices about assets and locations, but it or acquire assets in the future when needs provides the necessary fulcrum for becoming arise than to risk overbuilding today. a high-value health care provider. Doing the The significant opportunity to remove hard work now has the potential to save duplication and waste and to create value will billions of dollars in capital and operating have a dramatic impact on the health care costs down the road. v marketplace. The providers that move early to recalibrate for value-based care delivery will have a distinct market advantage over AUTHOR those that hang on to the old ways of doing Ross Armstrong, Senior Manager business. Executives must change their [email protected] mindset accordingly, steering away from traditional “grow-and-expand” strategies and toward “assess-and-reorganize” strate- gies. Unless hospital executives are incented by system or regional goals instead of the growth and financial health of their respec- tive hospitals, change will be slow going. The health systems that are able to lower excess i Kurt Salmon and Hospital 100
36 37
38 PRIMARY CARE RE-ENVISIONED FIVE KEY CHANGES CRITICAL TO THE MASSIVE OVERHAUL WE NEED
The end of primary care as we’ve long known it is imminent.
The reason, simply, is that the traditional primary care model is ill-equipped to manage patient populations effectively in the new value-based care delivery paradigm. This is evident every time a specialist is paid more than a primary care physician or payment is denied for care coordination or preventive care. Disjointed efforts to align primary care providers and band-aid fixes to the existing primary care model will neither address underlying structural problems nor achieve urgently needed improvements in access, continuity of care, patient satisfaction, outcomes and cost-effectiveness.
39 Current realities demand a radically different before; (4) panel sizes will be significantly care platform—one that is relational rather larger, benefiting patients and providers than transactional, personalized in its alike; and (5) care must increasingly be approach and focused on improving, not just provided at the patient’s convenience. maintaining, patients’ health. Most impor- 1. The Evolving Role of the tantly, primary care must be redirected to Primary Care Physician meet the needs of patients on their terms Within this new construct, and timelines. (See Exhibit 1.) primary care physicians will While the patient-centered medical home continue to play a central role, but no longer (PCMH) model has made initial strides in as individual providers. Rather, they will this direction in recent years, it has fallen function as leaders of coordinated health short in several ways. Operating costs are care teams providing 24/7 personalized care still too high, patient outcomes remain services to a select number of patients. The mixed and there is still too much emphasis often-heard request to “call back during on patients traveling to the medical home regular office hours” will become an artifact to receive care. A study led by the RAND of the past; advances in remote biomedical Corporation, Harvard Medical School and monitoring and reporting will further the University of Pennsylvania found transform the patient-provider relationship, minimal improvements in hospital admis- in many instances precluding the need for sions, emergency department usage or the in-person office visits. In fact, 30% to 40% of cost of care at 32 Pennsylvania PCMHs from traditional primary care patient visits will no June 2008 through May 2011.i longer occur in a primary care setting, thus In contrast, the new primary care model, if minimizing square-footage requirements successful, will be characterized by five key and helping to optimize the balance between changes: (1) Primary care physicians must patient demand and physician supply. play a different role; (2) technological The evolution of the primary care physician advances will fundamentally transform into care team leader is already evident in diagnosis and treatment; (3) patients will be many parts of the country. However, the pace more empowered and engaged than ever of change must accelerate. Compounding the
40 EXHIBIT 1: New technologies and care systems will enable a future primary care model that is relational rather than transactional.
ANATOMY OF A FUTURE PRIMARY CARE INTERACTION
PATIENT PROVIDER
• See and share patient history/ • Easily access patient records health insurance electronically and insurance information electronically PRE-ENCOUNTER • Participate in patient monitoring (e.g., blood testing, vitals, etc.) • Proactively monitor patients; get alerted when vitals fall outside normal range
• Select appointment type, time • Centralized, coordinated SETTING and location via call-in or online scheduling becomes more APPOINTMENT registration of the standard
• Check in via phone application • Provider and care team alerted ARRIVAL or kiosk and then go straight to when patient arrives for visit patient exam room
• Visits are more “treatment” vs. • Treatment options provided “diagnostic” focused reflect evidence-based protocols • 25% of time spent with physician reviewed by provider in advance ENCOUNTER and 75% of time spent with care • Time spent mostly on patient team intervention and required follow-up
• Future visits/follow-up monitoring • Patient record updated in real scheduled or confirmed by care time team CHECKOUT • Follow-up instructions/resources/ • Any billing completed electroni- videos emailed to patient cally or covered through value- based plan
• Ability to communicate with care • Post-visit follow-up sent team remotely via phone, IM, electronically POST-ENCOUNTER email, text, etc. • Prescriptions shipped to house or pharmacy of choice
41 49.8% of primary care physicians describe their morale and outlook on the medical profession as negative.
urgency is the fact that health care systems decision-making support to health care and physicians today are caught between teams. Advanced practitioners, such as clashing reimbursement dynamics: They nurse practitioners and physician assistants, must continue to operate in an outmoded, will assume expanded clinical responsibili- volume-driven, fee-for-service world while ties and patient interactions as it becomes taking steps to accommodate a growing more common for them to diagnose ail- emphasis on value and outcomes. Absent a ments, write prescriptions and make full transition to the new model, care will referrals to specialists. And the primary care remain fragmented, quality inconsistent and physician will serve as the care team CEO, patient access further constrained. Provider with responsibility for keeping patients morale also remains at risk: A survey by healthy; managing the care of the chronically The Physicians Foundation found that ill; and addressing low acute, episodic 49.8% of primary care physicians describe conditions that arise. their morale and outlook on the medical profession as negative.ii 2. The Transformative Impact of Technology Reinvented appropriately, however, the The new primary care model will be primary care role will take on heightened enabled and hastened largely by the significance—a fact being recognized and exponential rate of advances in monitoring reflected, at least to a modest extent, in technologies, telemedicine, electronic ACA provisions that encourage primary care records storage and artificial intelligence. training and in the slow reversal in the last These will have direct implications for five years of a 30-year decline of interest in wellness care, as well as for the diagnosis primary care among medical school gradu- and treatment of many common conditions. ates.iii Care teams will be informed by highly Providers will be able to examine a patient sophisticated evidence-based clinical remotely and obtain real-time data on a wide protocols and will be characterized by range of variables, such as blood pressure, clearly mapped workflows and open chan- body temperature, and glucose and oxygen nels of communication throughout the care levels, as well as diet, exercise goals and continuum.iv Technology applications will prescription compliance. provide increased data, insights and
42 Approximately 20% of traditional primary care visits could be conducted virtually in the future …
HealthSpot,v Higi,vi Soho Healthvii and other prescriptions—and, when indicated, referral companies have pioneered the design and to a specialist—for a wide range of common installation of sophisticated health kiosks in conditions via the Virtuwell online clinic. retail pharmacies and supermarkets, as well Kurt Salmon’s analysis of diagnostic codes as in public settings such as shopping malls offered at Virtuwell-type settings indicates and office building lobbies. Some units, such that approximately 20% of traditional as those placed in select Rite Aid, CVS and primary care visits could be conducted Walmart stores, offer basic health screen- virtually in the future, allowing those basic- ings, symptom checks and wellness advice complexity patients to shift out of the higher- free of charge.viii HealthSpot’s fee-based level care delivery platforms and make room units enable individuals to interact with for a larger panel size. providers via high-definition videoconfer- 3. The Empowered and encing and a suite of connected medical Engaged Patient devices that stream biomedical data and With expanded access to both their store it in the cloud.ix personal health care information Remote patient monitoring (RPM) technolo- and available treatment options, patients gies are already reinventing care protocols in will be empowered to engage more actively some markets. Mobile sensors automatically in their care decisions than ever before. They record patients’ real-time clinical informa- will, in fact, be the stewards of their own tion for instantaneous transmission to information, which will be automatically clinicians, enabling rapid and potentially updated and easily accessible. life-saving medical interventions across long As their engagement deepens, patients will distances. RPM technologies have proven also continue to take on more responsibility especially well suited to helping care teams for the cost of their health care, giving them monitor and manage chronic disease in an incentive to shop for the best value and seniors and provide post-acute care.x pushing health systems to compete on price. At Minnesota-based HealthPartners, a Patients will no longer automatically turn to not-for-profit health system, certified nurse a physician for routine services that can be practitioners provide 24/7 diagnoses and provided by an advanced practitioner or
43 A patient panel of 2,500 may translate into an 18-hour day for an individual clinician.
through a health care app without needing a RVU models is that they reflect the reality face-to-face interaction. that some patient encounters require more xii Physicians, meanwhile, will be forced to time and complex care than others. embrace evidence-based clinical protocols Given that a patient panel of 2,500 may that result in better patient outcomes. This translate into an 18-hour day for an individ- change will result in more personalized care ual clinician,xiii successfully expanding the and greater access for patients. And it will panel to 5,000 or even 6,000 will require free primary care physicians to spend more careful balancing of productivity goals and time with patients with more complex needs. patient needs. If care teams are to achieve that benchmark, a large part of the care 4. The Expansion of the now provided directly by physicians must Patient Panel be handled by advanced practitioners, who More access and improved will coordinate with other team members operational efficiencies will as required. make it possible for care teams to double patient panel sizes, which currently average Of course, realistic panel sizes will depend on between 2,000 and 2,500.xi Admittedly, a their makeup. Patients with high acuity chief complaint of primary care physicians levels and chronic or comorbid conditions operating in a fee-for-service environment is will obviously require more time, care and the financial pressure to spend less time per resources than patients with less-challeng- patient—and risk compromising care—in ing medical profiles. Panels will necessarily order to squeeze in more visits and hit be sized accordingly.xiv productivity targets. 5. Patient Convenience While productivity will remain a key metric, Matters primary care must evolve toward a compen- In the past, primary care was sation model that not only includes relative delivered in a manner that value unit (RVU) metrics but also incorpo- suited the convenience of the physician. rates additional care-management targets, Now it must shift to suit the convenience of including outcomes, cost savings and patient patients who, as telemedicine and other satisfaction. One of the key advantages of technology-enabled options make remote
44 care a reality, will refuse to spend an hour AUTHOR squeezed into a waiting room between the Rob Langheim, Partner office hours of 9 a.m. and 5 p.m. Extended [email protected] hours, even 24/7 access, will be expected, as will shifts in care delivery access points, as electronic access to health records and partnerships with local pharmacies and other emerging providers evolve. In 1979, the Institute of Medicine defined primary care as “accessible, comprehensive, coordinated, continuous and accountable.” That same standard applies today and will not change in the future. But the mechanisms and protocols of primary care—how, where, when and by whom it is delivered—will bear little resemblance to historic models. In short, primary care must be re-envisioned —and sooner rather than later. Fixing it around the edges will take too long, yield scant benefits and fall woefully short of what providers and patients require. An essential i Medical Economics but failing system, primary care is overdue ii Physicians Foundation iii Ibid. for a massive overhaul. v iv Journal of the American Board of Family Medicine v Columbus Business First vi Higi.com vii InformationWeek viii Ibid. ix Ibid. x Ibid. xi Kurt Salmon database xii New England Journal of Medicine xiii California HealthCare Foundation xiv Ibid.
45 IT’S COM
46 PLICATED WHY PATIENT COMPLEXITY IS RESHAPING CARE DELIVERY —AND WHAT IT MEANS FOR HOSPITALS
47 Patient complexity is one of the biggest patients, who typically use fewer resources factors reshaping the health care industry, and have shorter lengths of stay. But they are but it’s not top of mind for most hospitals. starting to explore alternative, lower-cost That’s going to change rapidly as value-based approaches as they transition to population principles and capitated models take hold, health strategies and take on greater reim- incentivizing hospitals to limit inappropriate bursement risk. The shift has already begun, health care utilization. particularly for select surgical procedures in Kurt Salmon expects 20% to 30% of all basic specialties like gynecology, ophthalmology non-maternity inpatient care to transition and urology. More will follow. out of hospitals and into ambulatory settings Complexity 101 in the next five to ten years. Meanwhile, To determine which services are ripe for hospitals will devote an ever-increasing share transitioning out of the hospital setting, of beds to caring for patients at either end of providers must have a complete picture of the complexity continuum—necessitating their current patient complexity. Yet in changes to how resources are allocated, with defining patient complexity, many hospitals investments in intensive care and observa- rely solely on the case mix index associated tion platforms coming at the expense of with the Medicare Severity – Diagnosis general acute care capacity. Related Groups. While a valuable metric on Basic-complexity patients will shift out of its own, using the case mix index in combi- the hospital for multiple reasons: Some who nation with four other factors—patient age, never should have been admitted in the first admission source, charges and length of place will have new alternatives as care stay—provides a more holistic, nuanced models evolve; others will be transitioned to picture. (See Exhibit 1.) lower-cost settings as monitoring and Using these criteria, hospitals can segment treatment technologies evolve and reim- patients into three broad complexity-based bursement focuses less on volume. buckets—high, moderate and basic: Currently, hospital facilities aren’t set up »» High-complexity patients are spread across to cost-effectively treat basic-complexity select service lines (like neonatology,
48 neurology, cardiac, cancer and transplant) typically require a large outpatient clinic and often require multidisciplinary care. As base, lots of imaging and procedure space, a result, they are often resource intensive, and high-end amenities. requiring highly specialized staff, ICUs, »» Basic-complexity patients often drive large ORs, and MRI or PET/CT scanners. emergency room use. These patients »» Moderate-complexity patients represent a typically use low-end imaging and have large portion of a hospital’s elective short lengths of stay. volume and historically have commanded Armed with a more holistic picture of their a higher commercial pay percentage. They patient complexity, hospitals can consider
EXHIBIT 1: Looking at a provider’s case mix index in combination with other factors provides a more holistic, nuanced picture of patient complexity than considering case mix alone.
FIVE FACTORS THAT CONTRIBUTE TO PATIENT COMPLEXITY
FACTOR RATIONALE
Case Mix Index Represents a national average for relative resource consumption for each specific treatment.
Patient Age Within the pediatric population, infants and children one to four years old tend to require more resources. Likewise, within the adult population, people older than 65 are more likely to have complications and therefore also often require more resources.
Admission Source Hospital-to-hospital transfers typically represent higher-complexity cases; walk-in ED admits typically represent lower-complexity cases.
Charges Patients requiring a higher level of hospital resources (reflected by order-of-magnitude charges) often have severe illness, extenuating complications or comorbidities. Note that this factor is useful for internal comparisons only, as charges vary significantly between hospitals.
Length of Stay Patients requiring longer lengths of stay often have more severe illnesses or extenuating complications or comorbidities.
Source: Kurt Salmon
49 how best to care for their patients in the 200 in all, with 50,000-plus licensed bedsi— most appropriate cost setting and determine shows these complexity shifts in action and which patients can shift from an inpatient to offers a snapshot of the changes other states an ambulatory setting. This change ultimate- may face as their own populations age. ly results in a more complex inpatient base. From 2007 to 2013, total discharges in Utilization in Florida: The Anomaly Florida increased by approximately 115,000. That Heralds a National Trend Moderate-complexity and basic-complexity Six years of inpatient discharge data from discharges accounted for 22% and 5% of this every acute care hospital in Florida—over growth, respectively. High-complexity
EXHIBIT 2: From 2007 to 2013, inpatient discharges in Florida grew from 2.39 million to 2.5 million overall. High-complexity patients accounted for 73% of that growth.
PERCENTAGE OF FLORIDA INPATIENT DISCHARGES BY CASE COMPLEXITY
2007 2013 2007–2013 CHANGE
TOTAL DISCHARGES 2,394,000 2,509,000 115,000
Basic Complexity Moderate Complexity High Complexity
Source: Florida Hospital Association inpatient data; Kurt Salmon analysis
50 discharges, on the other hand, accounted the inpatient patient base will continue to for about 73% of overall discharge growth. become increasingly complex and that the (See Exhibit 2.) If we look at this on a patient- traditional patient mix will look very day (instead of a patient-discharge) basis, different in the coming years. high-complexity admissions represented The growth in high-complexity discharges more than 95% of all incremental patient also fueled a change in the overall patient days over that six-year time frame. complexity mix. The resultant smaller This growth in high-complexity discharges percentage of basic- and moderate-complex- in Florida suggests that, regardless of state, ity patients, as illustrated in Exhibit 3,
EXHIBIT 3: Florida discharges have become more complex overall as well as within specialty areas.
COMPLEXITY SHIFTS IN THE SUNSHINE STATE
UROLOGY GYNECOLOGY ENT, SURGICAL 30,542 28,626 42,133 7,833 11,223 10,129 Discharges Discharges Discharges Discharges Discharges Discharges 100% 4% 1% 5% 3% 11% 9% 90% 29% 80% 37% 37% 36% 70% 56% 51% 60%
50%
40% 68% 30% 62% 58% 55% 20% 40% 38% 10%
0% 2007 2013 2007 2013 2007 2013 Basic Complexity Moderate Complexity High Complexity
Source: Florida Hospital Association; Kurt Salmon analysis
51 Hospitals in general are not currently set up to care for the coming wave of high-complexity patients, which requires a different bed mix as well as robust subspecialty support.
highlights the changes certain specialties plexity patients, which requires a different have experienced in complexity mix and bed mix (more ICU, less general acute) as reduced volume as services have shifted out well as robust subspecialty support. of the hospital to ambulatory settings. While this change comes with significant Further, length of stay continues to trend implications for all hospitals, the average downward for all patient types, and community hospital will feel it more acutely. high-complexity patients drive a larger Typically, about 50% of a community portion of patient days compared to the hospital’s patients are basic complexity. percentage of discharges they represent. For Since we expect that 20% to 30% of these example, in 2013, high-complexity discharg- non-maternity basic-complexity patients es accounted for approximately 9% of will no longer be cared for in inpatient ii Florida discharges but 28% of patient days. settings, while at the same time the remain- As the segment of basic-complexity patients ing patients will be more complex and require continues to decrease, a greater portion of more resources, the question becomes: Can patient days will be related to high-complex- the community hospital keep up? ity care, reinforcing the need for a different The way in which many community hospi- mix of resources for the inpatient care tals are currently structured will make caring delivery platform of the future. for this higher-complexity patient base Florida, although grayer than the rest of the extremely difficult, if not impossible. But the country, is a microcosm of a larger national first step in addressing this issue is to trend: Across the country, utilization will understand the full scope of the change that continue to trend downward and patient mix lies ahead. And that starts with hospitals will also change as the pressure to shift diving into their own complexity data, basic-complexity patients out of the hospital making sure one of the most vital stats in the continues to intensify. And as these patients industry doesn’t cause them to flatline.v move out, hospitals will need to find different ways to drive revenue. But hospitals in general are not currently set up to care for the coming wave of high-com- i Florida Agency for Health Care Administration ii Florida Hospital Association, Kurt Salmon analysis
52 AUTHOR Melissa Anderson, Senior Manager [email protected]
53 CULTIVATING COMMON
GROUNDHOW TEACHING HOSPITALS AND COMMUNITY HOSPITALS CAN THRIVE TOGETHER Academic and community health care providers are still too often trying to position themselves as winners in a competition for patients rather than as collaborators in population health. The result has historically been duplicative investments despite geographic alignment and shared patient populations. 54 55 The logical starting place for AMC and community health provider collaboration is to form partnerships around specific clinical service lines and disease groupings.
In Nashville, for example, an academic with costly infrastructure is a losing strategy, medical center, a community hospital and particularly as innovation in digital health a for-profit hospital each offer transcatheter and telemedicine continues to increase the aortic valve replacement (TAVR).i The number of virtual health care access points procedure, which targets a small population in patients’ homes and communities. of qualified patients, requires a multidisci- While providers must deploy digital solu- plinary team of specialists and a hybrid tions in the future, the logical starting place operating room that costs $3 million to $4 for academic medical center (AMC) and million. And in the Washington, D.C., region, community health provider collaboration is changes to proton therapy reimbursement to form partnerships around specific clinical have spurred an arms race for a technology service lines and disease groupings. Partner- that can cost more than $100 million to ing to transform care delivery offers the ii implement. Across the country in the greatest opportunity for population health Northwest, the region’s hospitals have 12 CT progress: Outcomes can be improved and scanners among them, with more in private costs lowered by cultivating synergies in offices, to serve a population that would need both organizations’ traditional core compe- iii only eight even if it grew by 25%. tencies and by sharing infrastructure to The well-intentioned investments in create more efficient delivery platforms. less-invasive procedures have the potential Erasing the Line Down the Middle to achieve the triple aim, but only so much: If The tension between AMCs and community teaching hospitals and community health hospitals has largely stemmed from their care systems can overcome their historic different missions. The former take on the divisions to resolve longstanding turf wars costs of teaching new physicians and and create efficiencies, the impact on future translate research into innovative clinical health care delivery will be even more signifi- care delivery, while the latter tend to cant. If they can’t, they leave themselves provide convenient and efficient care that open not just to unsustainable costs, but to meets communities’ more general health outside competition. Flooding the market care needs.
56 In many cases, these initial partnership opportunities open the door for future integration of services in areas where cultural or historical perceptions are major barriers.
Fundamentally, in a population health provide in the future. These are commonly paradigm, both seek to increase value and non-revenue-generating supportive care prove that their own value propositions are services like financial counseling, patient legitimate. Service line collaboration allows navigation and patient registries. They could the partnership, and the required trust also be community need–based services like among providers, to develop. Efficiencies and rehabilitation and psychosocial services. cultural cross-pollination can eventually Joint fundraising around these new service scale up to encompass more services or to lines allows teaching and community the mutual pursuit of risk-based contracts, hospitals to pool resources toward improv- bundled services and other value-based care ing a program or delivery model without delivery approaches. spreading themselves too thin. It’s also a good start toward integrating planning. Selecting a Middle Ground To effectively drive outcomes, clinically In many cases, these initial partnership integrated service lines coordinate patient opportunities open the door for future care across all care settings, from screening integration of services in areas where cultural and prevention to end-of-life care. In par- or historical perceptions are major barriers. ticular, service lines like cancer, which are Initially, potential partners should move on highly fragmented and multidisciplinary, quickly from more difficult options to find present a significant opportunity for mutual common ground where opportunity exists to benefit. Potential partners should focus on collaborate. These areas include information identifying a service line that each entity technology, telehealth, scheduling and other offers in a slightly different way or to a differ- back-office needs, outpatient network ent audience and find synergies that reduce development, and community education the cost of care, improve care transitions, programs that can serve as footholds into ensure that care is delivered in the appropri- deeper academic-community relationships. ate setting, improve access to subspecialists (Service) Lines in the Sand and otherwise advance the triple aim. Promising collaborations are occurring in Or they can focus on services that neither cancer care and cardiac care. Both provide partner yet provides but both want to more natural delineation than other service
57 lines as to which provider does what along Considerable room exists to coordinate the care continuum. High-complexity, efficiencies, reduce duplication, lower the invasive care can be centralized in a high- cost of care and drive business growth—com- er-acuity setting, while lower-acuity care, munity providers could care for a lower-acu- follow-up and prevention can be owned by ity market share that is currently provided at community providers along the continuum. the AMCs, and AMCs, in turn, could backfill Further, both service lines account for a large with higher-margin, higher-acuity patients. portion of costs nationally. (See Exhibit 1.) Additionally, patients benefit by receiving a
EXHIBIT 1: Spending on cardiac and cancer care has increased considerably, but both service lines lend themselves well to collaboration that could reduce the cost of care.
U.S. SPENDING BY MEDICAL CONDITION 250 CIRCULATORY SYSTEM (hypertension, heart attack, etc.)
200
MUSCULOSKELETAL SYSTEM (arthritis, back pain, etc.)
150 RESPIRATORY (pneumonia, asthma, etc.)
ENDOCRINE (diabetes, high cholesterol, etc.)
NERVOUS SYSTEM (Alzheimer’s, MS, epilepsy, etc.) 100 NEOPLASMS (cancers, tumors, etc.)
50 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: Bureau of Economic Analysis, January 2015
58 consistent patient experience, better and also consolidated functional areas to integration across delivery settings and reduce overhead, including supporting care increased access to the optimal care team. services that are critical to patient quality of Shared service line models succeeding thus life but lack a reimbursement component. far also have, at least at their starting point, Who Rules in Neutral Territory? an opportunity to grow the service. In one These affiliations often include a separately Northeastern city, the academic cancer governed entity. In some cases, a sole provider and the regional community health employee, an administrator, is funded by the system joined forces under a comanagement partners. But leadership must also be agreement to jointly recruit physicians, mobilized at both the academic facility and invest in expanded clinical trial infrastruc- the related community facilities. Coordina- ture and outpatient cancer services, and tion will require cross-functional teams that provide a more cohesive and coordinated represent each partner to develop patient cancer program. This cooperative includes a pathways and care protocols that work shared governing body that advances the seamlessly across partners and that incentiv- common goals of the partnership and strives ize cost-effective care. So will quality: In one to improve quality and reduce duplication of study on cardiac care, heart attack mortality expensive services. rates were 33% higher in hospitals with In one Southeastern city, synergies were less-evident cross-continuum coordination identified in women’s cancer services. A and communication.iv tertiary teaching hospital, a women’s In California, an academic medical center is hospital and a community cancer care working with several community hospitals to provider partnered to create a women’s develop a system of care that relies on cancer program. Common goals were multiple types of physician incentive developed, with a separate joint affiliation programs. Having acquired several physician entity whose sole responsibility was to practices, they’ve chosen not to place advance shared goals—not to promote one academic physicians in those satellite facility or another. The entity shares com- facilities, instead establishing community mon care models and philanthropic efforts incentive models that tend to be more
59 value-driven and cost-sensitive, while AUTHORS keeping faculty at the main campus. Ben Holland, Partner and National Director of Cancer Services Cross-partner physician leadership is critical [email protected] in such efforts. At the same California AMC, a Robert Gregg, Manager newly hired oncologist with considerable experience in both community-based and AMC-based cancer care has been instrumen- tal in developing relationships among community-based physicians and a breast care team of oncologists and plastic sur- geons. This collaborative approach contrib- uted to 40% growth of the program from 2010 to 2013.
Happy Medium Consolidation alone doesn’t create efficien- cy. It takes enhanced working relationships and collaboration, as well as deployment of physician incentive structures that drive care delivery to the most efficient settings. Blending academic and community health care delivery won’t be easy. But if providers can get enough synergies funded in a common manner, and build strength around that, they can create a meaningful budget for a new, shared entity. Key is the creation of an entity that represents the collective vision, an entity governed by i Edwards.com ii NPR, 2013 an advocate for the collaborative goals and iii Kurt Salmon utilization analysis empowered by a shared budget. v iv Agency for Healthcare Research and Quality
60 61 62 BASE MODEL OR FULLY EQUIPPED? AMCs SEEK THE RIGHT CARE DELIVERY VEHICLES FOR THEIR COMMUNITY PLATFORMS
63 Academic medical centers (AMCs) have over community-based satellite hospitals. But the years been adding community hospital many AMCs have also applied their tradi- platforms to their networks, either to expand tional academic operating model to those into a geographically desirable location or to satellites, a model that includes teaching provide a chassis where clinical activity can and research capabilities similar to the main take place away from the main campus. But campus, as well as inefficiencies associated now, against a backdrop of payment reform, with trying to develop subspecialized care. a third reason has emerged: to lower the They’ve essentially tricked out every chassis per-unit cost of care across their networks. in their fleet of care delivery vehicles, adding In their discussions with commercial 4WD and a turbo engine even to vehicles payors, AMCs have long relied on their making fair-weather deliveries. And that brand and reputation to justify a premium, means that as payors increasingly seek the a practice they often extended to their lowest-cost options, AMC satellite hospitals
EXHIBIT 1: A complexity-based segmentation framework helps networks direct patients to the most cost-effective care.
LEVELS OF COMPLEXITY
HIGH Volume that comes to the institution due to its singular capa- COMPLEXITY bilities and resources (e.g., transplants, “botched cases”)
MODERATE Volume for which the institution and its physicians compete directly with other providers and their medical stas (e.g., COMPLEXITY spine, CABG)
BASIC Volume that comes to the institution primarily due to access and convenience, but which could be treated at any other COMPLEXITY hospital facility (e.g., angina, births)
64 EXHIBIT 2: Basic-complexity patients, which make up 10% to 20% of main hub AMC inpatient admissions, could be routed to lower-cost environments.
AVERAGE DAILY CENSUS BY COMPLEXITY AT THREE ACADEMIC MEDICAL CENTER SYSTEMS
100% HIGH 24% 26% 30% MODERATE 80% BASIC
60%
52% 58% 49% 40%
20% 22% 21% 18%
0% AMC System 1 AMC System 2 AMC System 3 Source: Kurt Salmon analysis
will be unable to effectively compete against Resisting the Call of Bells and Whistles non-AMC community providers that will AMCs exist to push the boundaries of themselves be reducing costs. medicine—they are where future clinicians In order for their satellite facilities to both go to train and where much of the research survive and thrive, AMCs need to change the and discovery that will serve as the founda- way they deliver care at their community tion for tomorrow’s cutting-edge care is hospital entities to be competitive with other pursued and developed. But given the high options in their respective markets—indeed, cost of teaching and pursuing research, the the very reason that AMCs are motivated to cost of providing patient care—AMCs’ third build such community-based networks in core function—is similarly high, whether the the first place. complexity of that care is also high or merely basic. And so with an eye to lowering the
65 overall cost of delivering clinical care, AMCs discharges annually that could potentially be have been augmenting their so-called “main seen in the lower-cost environment, patients hub” facilities with community-based who tend to be younger, have shorter lengths satellite facilities that can effectively treat of stay and have medical issues that are basic-complexity patients without the added episodic rather than chronic in nature (for costs of AMC technologies, staffing levels and example, appendicitis, basic spine or joint teaching models. (See Exhibit 1.) procedures, etc.).
The cost-reduction opportunities are Bigger Engines Aren’t Always Better significant. The number of basic-complexity Using a satellite hospital to shift basic-com- patients at main hub AMCs ranges from 40% plexity patients off the main campus has been to 55% of all inpatient admissions and proven to have a positive financial impact on accounts for roughly 10% to 20% of the total AMCs’ overall systems in three ways: census at any given time throughout the year, according to data collected by Kurt 1. Incremental margin improvement Salmon from AMCs across the country. (See due to treating the same patient but in a Exhibit 2.) For a 500-bed hospital, that lower-cost environment. This is primarily means there are some 15,000 to 16,000 a result of the cost differential on a per-day
EXHIBIT 3: AMCs can save significantly by directing more traffic to satellite facilities.
COMPARING BASIC-COMPLEXITY ADMISSION COSTS AT ACADEMIC MEDICAL CENTERS AND THEIR SATELLITES
AMC 1 SATELLITE 1 AMC 2 SATELLITE 2 AMC 3 SATELLITE 3
Number of Admits 24,000 1,500 7,500 3,800 14,700 8,200
Direct Costs per Admit $3,100 $2,000 $1,700 $1,300 $2,700 $1,700
Direct Costs per Day $1,200 $850 $700 $400 $1,100 $800
Source: Kurt Salmon analysis of client AMC inpatient records, 2009–2011
66 EXHIBIT 4: The contribution margin for high-complexity patients can be 10 times higher than lower-complexity patients.
CONTRIBUTION MARGINS, DOLLARS PER ADMIT
AMC 1 AMC 2 AMC 3
High Complexity 21,700 23,100 19,400
Basic Complexity 900 3,400 2,300
Di erence 20,800 19,700 17,100
Source: Kurt Salmon analysis of client AMC inpatient records, 2009–2011
basis. Notably, the margin differential can require the high-intensity resources vary greatly depending upon the payor mix available only at an AMC. This assumes of patients seen at the various campuses and the current inpatient chassis at the main the contracting terms with payors. But based campus is at or near full capacity, and that on data provided from multiple academics there is a market opportunity to treat more that run and staff satellite facilities, Kurt higher-complexity patients at the main Salmon found that, on average, there is a campus if basic-complexity patients are 40% differential in direct cost per patient shifted to the satellite facility. It also day for basic-complexity cases treated at the assumes there is unused bed capacity at the satellite facility vs. the main campus, as satellite facility, which in Kurt Salmon’s illustrated in Exhibit 3. experience is typically the case in most geographies. Although the AMC will not be 2. Backfill opportunity to replace basic- able to replace its basic-complexity discharg- complexity patients with higher-com- es with high-complexity admissions on a 1:1 plexity, higher-margin patients who
67 basis, due to the difference in length of stay, Tactical Trades: Cadillacs for Camrys high-complexity cases typically have a It’s not feasible to shift all the basic-com- contribution margin more than 10 times plexity cases out of the high-cost inpatient greater, on average, than those of basic- chassis and into other vehicles in the fleet; a complexity admissions. (See Exhibit 4.) certain number of patients will always access 3. Deferred capital expenditures by using care through emergency departments, and latent capacity on the satellite hospital physicians who see high-complexity patients campus rather than building additional, will often also treat those same patients even high-cost capacity at the main campus. when they present with cases of a more basic While construction costs vary across the nature. Moreover, it can be difficult to get country, it has become increasingly expensive faculty to move their practices out to to build new hospital capacity. The average satellite facilities; they may, for example, cost to build out a new inpatient tower is now have a hard time seeing the benefits of well in excess of $1 million per bed. practicing in a community hospital environ- ment and may not like being separated from For AMCs, which are designed to teach and the rest of their peers. From an overall conduct research as well as to take care of network perspective, having a mix of high-complexity patients, the per-unit cost academic and community physicians will of their main campus facilities can be make physician alignment vehicles, incen- lowered only so much, given the expensive tives and governance structures more equipment, infrastructure and real estate complicated as well. Even so, numerous required to operate them. But as payors AMCs have shown that it is possible to move from a fee-for-service environment reduce the overall percentage of basic-com- toward a value-driven one, the higher plexity cases seen at the main campus by premiums that AMCs command aren’t utilizing a satellite campus strategy. (See sustainable over the long term. Meanwhile, Exhibit 5.) their community counterparts continue to broaden their service sets and improve In an attempt to reduce costs and improve efficiencies—in other words, to lower their margins, an increasing number of AMCs costs even further relative to AMCs. have been acquiring satellite locations in the
68 EXHIBIT 5: The average basic complexity levels at AMCs with satellites is 38% vs. 49% at AMCs without satellites.
COMPLEXITY-BASED SEGMENTATION COMPARISON OF DISCHARGES
AMCs WITH SATELLITES AMCs WITHOUT SATELLITES 26,062 55,315 28,816 53,965 27,697 28,152 21,822 33,325 37,828 8% 8% 13% 10% 10% 11% 12% 19% 20%
39% 43% 47% 42% 43% 39% 46% 46% 51%
45% 48% 53% 47% 49% 41% 46% 35% 29%
HIGH MODERATE BASIC
Source: Kurt Salmon analysis of client AMC inpatient records, 2009–2011 community, where they can provide ba- World Report Honor Roll list—have at least sic-complexity care at a lower per-unit cost one satellite campus as part of their system. than at the main hub. The number of AMCs The satellites tend to be structured as with at least one satellite facility, defined as a community hospitals with two or three separate inpatient platform owned by an “anchor programs” that have faculty-centric AMC and located within a relatively similar care delivery models; indeed, most of the geography, continues to grow; some of the U.S. News & World Report Honor Roll highest-ranked hospitals and academic members are staffed primarily with faculty institutions in the country—including 16 of physicians, although there is a variety of the 17 hospitals on the 2014 U.S. News & physician models in place and they continue
69 It is inevitable that academic systems will have to move to stringent productivity standards, slimmer staffing models, less pro- tected time and fewer investments in “nice-to-have” technology.
to evolve. But by keeping a faculty-centric investments in “nice-to-have” technology if operating model, the satellites carry with they are to care for patients out in the them all the costs associated with training community. The faculty themselves may be and access to subspecialists. And faculty who the largest barrier to adjusting the model, practice in the satellite hospitals often try to which means that alternative staffing vehicles recreate the luxuries that exist at the main with separate incentive models and struc- hub by demanding items such as cutting- tures may need to be considered in order to edge technologies, 24/7 intensivist coverage create a competitive delivery platform. and protected academic time. The satellite To be sure, questions remain as to who will facilities’ per-unit costs, in turn, are ultimately pick up the tab for the tripartite oftentimes an order of magnitude higher mission—but this battle should not be fought than those of other community hospitals in by creating inefficiencies on strategically their markets. intended low-cost platforms. Ultimately, As payment models continue to evolve, creating efficiency in clinical delivery is the certain AMCs may find it impossible to lower key to effectively competing in a value-based their per-unit costs to a point where, on a world. And nowhere is that more apparent pure dollars-to-dollars basis, they are seen as than in the community-based satellite being competitive with their community facilities of AMCs. v counterparts. But unless the clinical reim- bursement environment continues to
support price premiums for academic AUTHOR pursuits, sooner or later AMC satellites will Jared Averbuch, Senior Manager [email protected] have to let go of many of the luxuries that currently exist within the traditional academic operating model. Over time, it is inevitable that academic systems will have to move to stringent productivity standards, slimmer staffing models, less protected time and fewer
70 71 72 Editorial Board
MELISSA ANDERSON Melissa Anderson is a senior manager and has more than nine years of health care consulting experience across community hospitals, academic medical centers and children’s hospitals. Her areas of expertise are strategy development with an emphasis on strategic planning, merger, affiliation and integration projects, as well as financial feasibility studies and business plan development. [email protected]
FARZAN BHARUCHA Farzan Bharucha is a partner, specializing in strategic, organizational and facility planning for academic medical centers, children’s health systems, medical schools and faculty practice plans. Farzan is an expert in strategy around geographic reach, service line and programmatic priorities, merger and affiliation opportunities, capacity and access requirements, medical staff development planning, care delivery models, and the shift from volume to value. He has both a clinical and a business background, having joined Kurt Salmon in 2003 after completing a master’s degree in pharmaceutics and an MBA in strategy from The Ohio State University. [email protected]
JEFF HOFFMAN Jeff Hoffman is a senior partner and has been advising hospital and health system leaders for more than 25 years. Specializing in affiliation and partnership strategy, organizational development, and clinical integration, he has led many innovative strategy, clinical integration, affiliation and partnership engagements, creating ways for hospitals, health systems and independent physicians to work together to improve care and the bottom line. Jeff has led many organizations in the development of new clinical integration models that form the foundation of population health and value-based payor strategies. He is also a frequent speaker nationally on these topics. [email protected]
73 Contributors
CRAIG ACOSTA Craig Acosta is a senior partner and leads the Health Care Group’s Facility and Capital Asset Planning Practice. For more than 25 years, he has helped health care clients with major capital invest- ment decisions, developing leading-edge methodologies and experiences to support their strategic and operational needs. Craig has led project teams that have planned over $15 billion worth of hospital construction projects, including groundbreaking replace- ment hospitals and major capital projects for the country’s most prestigious health care organizations. Craig holds MBA and MPH degrees from UCLA. [email protected]
ROSS ARMSTRONG Ross Armstrong is a senior manager in Kurt Salmon’s Health Care Group, where he helps hospitals with strategic planning, financial analysis, capital asset planning, payor strategy, and physician group practice development and integration. He has worked with every health care provider sector across a range of geographic areas, and he specializes in physician-hospital alignment and in strategically bridging the gap between volume-driven and value-based care. [email protected]
JARED AVERBUCH Jared Averbuch is a senior manager in Kurt Salmon’s Health Care Group. He leads complex strategic, financial and capital asset planning engagements at academic medical centers and large health systems across the country. Jared joined Kurt Salmon after graduat- ing from Vanderbilt University’s Owen Graduate School of Manage- ment with an MBA emphasizing both finance and health care. Prior to Vanderbilt, Jared worked as a health care consultant at FTI Consulting, specializing in hospital turnarounds while focusing on strategic implementation and financial planning. [email protected]
74 ANDREW BACHRODT Andy Bachrodt is a managing partner and leads Kurt Salmon’s Health Care Group. He has more than 25 years of experience in health care strategy, operations and finance, including 10 years of executive man- agement positions in hospitals with responsibility for strategic planning and operations. Andy has worked with over 80 health care organizations in the development of strategic plans, mergers and acquisitions, strategic capital planning, and physician-hospital integration. He has spoken at conferences for the Healthcare Financial Management Association, Medical Group Management Association, and many industry associations and groups. [email protected]
DAVID CHAMBERLAIN David Chamberlain is a senior manager in the Health Care Facility and Capital Asset Practice at Kurt Salmon. His 20 years of health care industry management, operations and consulting experience includes serving as administrator of subacute and rehabilitation hospitals in Texas and Florida. He has also worked with some of the most highly regarded health systems and academic medical centers in the country, across all phases of strategic facility planning, including clinical program planning, master planning, functional and space planning, and activation planning for new facilities. [email protected]
ROBERT GREGG Robert Gregg is a manager in Kurt Salmon’s Health Care Group, where he focuses on service line planning, clinical integration and network development, and mergers and acquisitions. He also has experience in strategy and business development at a nonprofit regional health care delivery network in California, as well as in health policy, where he was deeply involved in the consideration of the Patient Protection and Affordable Care Act while serving as a legislative aide for the U.S. House of Representatives.
75 Contributors
BEN HOLLAND Ben Holland is a partner and Kurt Salmon’s national director of cancer services. He is a leading expert on oncology-specific solutions, managing strategic developmental programs and expansion initiatives for some of the most prestigious hospitals and cancer centers across the United States. His areas of expertise include service line planning and differentiation, clinical and research program growth, emerging reimbursement models, clinical integration and network development, hospital-physician partner- ships, and organizational design. [email protected]
ROB LANGHEIM Rob Langheim is a partner in the Strategy Practice of Kurt Salmon’s Health Care Group. He has over 10 years of experience in the health care industry and has worked on numerous project engagements with over 45 health care systems across the country, including several leading academic and community health systems. Rob specializes in health system strategic planning, network develop- ment and health reform preparedness. [email protected]
LESLIE MARSHBURN Leslie Marshburn is a senior manager in Kurt Salmon’s Health Care Group. She specializes in corporate strategy and has worked with independent community hospitals, health systems, academic medical centers and health networks. Recent projects include strategic plan development, enterprise-wide ambulatory planning, statewide network development and behavioral health strategy. Leslie holds both an MPH and an MBA from Emory University. Prior to graduate school, she was a human resources consultant who helped health care clients with executive rewards, post-merger integration, and cost and financial management. [email protected]
76 © Kurt Salmon 2015
77 kurtsalmon.com
78