Leaders at Baptist Health Care like to promote the nonprofit system's strong community ties, particularly as it contends with "some deep-pocketed competitors," as Chief Financial Officer Kerry Vermillion describes nearby providers.
Since "we can't outspend them," he quips, the Pensacola, Fla.-based nonprofit organization historically has stressed that it provides better care and builds closer relationships with local physicians, a strategy that's never been more important with the looming shift from fee-for-service reimbursement. The related shakeout, with hospital beds likely being closed around the country, will affect some markets more than others, acknowledges Vermillion, also executive vice president at the four-hospital system.
"Certainly I think our market is somewhat vulnerable," he says. "We would agree, as would most who have knowledge of our market, that we probably have too many inpatient hospital competitors for the future world here. And we're determined to be a survivor."
Until 2009, Baptist employed few doctors other than the system's hospitalists. But in the years since, it has built a cadre of 130 employed physicians. The organization is focused on primary care experience as it pursues a broader population health strategy. Baptist also is trying to leverage some of its specialty strengths, such as cardiovascular, by compensating physicians to travel farther afield to reach new patients.
Like other hospital leaders, Vermillion is trying to anticipate which physician relationships will work best in the world of bundled-payment arrangements, and heightened public focus on quality and value.
How can hospital leaders join forces with physicians, adopting approaches that improve cost-effectiveness while still operating in a world that rewards more procedures and more care? And, as they tighten their working relationship with doctors, how do they do that in ways that foster trust and productivity, without resurrecting the sorts of failures that plagued employment efforts in the 1990s?
This spring, the American Hospital Association's Health Research & Educational Trust released "Metrics for the Second Curve of Health Care," a report that outlines strategies and measures that hospital leaders should monitor as they move from today's volume-based curve to the second value-based curve of medical treatment. More fundamentally, though, trustees have to reboot their decision-making mindset, according to health care consultants working with hospital systems around the country.
Bigger hospitals and mergers aren't necessarily better if the care being delivered falls short of quality and other benchmarks, experts stress. Yesterday's highly recruited surgeon may no longer be a good value if her people skills undercut safe practices in the operating room [see Rethinking a 'Hot-Shot' Doc, Page 10]. And unlike decisions to purchase a new type of high-tech equipment, the sorts of investments that need to be made now in people and other hard-to-measure areas may take years to demonstrate a return on investment.
To refine their focus moving forward, board members should be able to answer a single, and certainly daunting, question, says James E. Orlikoff, a Chicago-based health care governance expert and senior consultant to the AHA's Center for Healthcare Governance: What will your hospital system look like in five years?
"You are not just doing something different," he says. "You are becoming something different. And you've got to be able to have a vision for what you are becoming. If you think you are still going to be a big hospital, but you are just also going to do population health, you are crazy."
Different Definitions, Strategies
Physician employment these days is already more reality than concept. Among family physicians alone, 62 percent were employed in 2013, compared with 29 percent in 1986, according to the American Academy of Family Physicians. Nearly two-thirds of those doctors work for hospitals.
But simply hiring physicians or more closely contracting with them doesn't translate to de facto alignment, says Susan Douglass Quirk, a Colorado Springs-based health care consultant. During a series of interviews this spring, Quirk asked 35 physicians and hospital administrators what alignment meant to them.
"I got 17 different definitions," she says. The administrators generally talked more broadly about aligning mission and values with doctors. Physician feedback tended to focus on the role that alignment could play in improving quality, finances, patient satisfaction and other benchmarks.
Language matters, says William Jessee, M.D., a senior vice president at Integrated Healthcare Strategies. He argues that alignment is only the first in a three-stage process that ends with true integration, the level that already has been achieved by organizations like Cleveland Clinic and Geisinger Health System. Increasingly, hospital leaders are recognizing that simple alignment isn't sufficient to meet cost and quality goals and they must move to the second stage, which is engagement, he says.
Engagement isn't just avoiding "anything that ticks the doctors off," he says. Instead, doctors "are actually actively trying to help support the hospital's objective. And the hospital, in turn, is actively trying to help the physicians be successful."
Or even merely to survive in the evolving health care environment, says Terry McGeeney, M.D., a director at BDC Advisors and former chief executive officer of TransforMED, a nonprofit subsidiary of the American Academy of Family Physicians.
"Most people feel that with health care reform and patient-centered medical homes, and all of the pressures to keep people out of the hospital, that we may have too many hospital beds, particularly in certain markets," he says. "So hospitals either need to think of ways to redeploy those beds or they need to expand their population of patients.
"A lot of hospitals that are merging and buying other hospitals, it's not so much to acquire more beds, but to acquire either doctors or, most of the time, a population [of] patients who are loyal to a certain hospital or market," McGeeney notes.
To determine a hospital's alignment course, leaders first must understand two groups of patients in their marketplace, says J.R. Thomas, CEO of MedSynergies Inc. They are "the patients you have to see because they're in your market, and the patients you want to see," he says. "And knowing the difference, and identifying both groups, is really important."
To analyze the first group, Thomas recommends studying patient demographics and health needs within a 25-minute drive of the hospital. Map the addresses, primary medical concerns and payers of patients who seek emergency care. On top of that analysis, layer the locations of the region's primary care physicians. That will reveal which doctors the hospital should be courting to hammer out a closer working relationship, he says.
To isolate the second group, determine which new patients the system wants to reach, either along economic or specialty lines. Perhaps the hospital wants to promote its comprehensive treatment capabilities to employers to better capture their insured patients, Thomas says. Alternatively, the strategy could be to beef up some medical specialties while downplaying others, he says, because "you can't be everything to everybody."
Texas Health Resources, a nonprofit system of 17 owned and affiliated hospitals, has moved quickly in the last four years to expand its pool of employed physicians. Through the system's physicians group, created in 2009, its employed physician workforce has increased from roughly 80 doctors to more than 500 through various acquisitions, both defensive and proactive, says Daniel Varga, M.D., chief clinical officer at the Arlington, Texas-based system.
Proactive steps included acquiring primary care expertise; the employed group also includes about 250 nurse practitioners and physician assistants. In addition, purchasing physician practices enabled the health system to offer some medical services, such as cardiology or obstetrics, that previously weren't available at some of its smaller facilities, Varga says.
To position itself for value-based competition, Texas Health officials are taking steps to highlight specialty strengths, such as constructing two orthopedic centers of excellence. The centers, which should be open by 2014, are designed "to become a destination site, both locally and regionally," he says.
Leaders also are looking at developing bundled-payment reimbursement for common surgeries, such as hip or knee replacement, Varga notes. Other possible bundles include heart bypass and gallbladder surgeries.
"In our markets, the bundled payment piece is a really critical piece to develop for our specialists," he says, "because a lot of specialists, and I think this isn't just true here but nationally, are feeling somewhat threatened by the [accountable care organization] momentum right now. ACOs are very primary care-oriented."
In recent years, leaders at Baptist Health Care have touted the system's heart-related expertise, after acquiring a key local group of 28 cardiologists and heart surgeons.
The heart specialists, now Baptist employees, can travel to more far-flung areas of need, rather than staying put in their Pensacola offices, to maximize billable patients, Vermillion says. "We pay them what's called 'windshield time' to make it financially worth their while to do that," he says, referring to their hourly compensation for time spent on the road.
The doctors even have been invited into some small hospitals that had previously lacked cardiovascular expertise, Vermillion says. Baptist's specialists care for many patients on-site and can refer those who require more sophisticated treatment or technology to Baptist Hospital, the system's 492-bed tertiary facility in Pensacola.
"Over time, you can change some of those referral patterns," Vermillion notes. "It's very well-correlated [as] to who is willing to put physicians on the ground and actually have a local presence in those communities. It has helped us to grow that practice and to grow our market share outside of just the local Pensacola area."
Once physicians are affiliated more closely with a system, it's easier to track quality and other metrics across the inpatient and outpatient spectrum. But compensation needs to be closely tied to meeting related goals as well, BDC Advisors' McGeeney says.
"Just as hospitals are going to be moving from volume to value, physician compensation needs to move from volume to value," he says. "It isn't going to work unless they both move."
Employing doctors makes it easier to track and redistribute incentives related to meeting goals or shared cost-savings, McGeeney says. But in some regions of the country, primary care doctors will balk at employment, and a network-type arrangement provides a good alternative, he says.
Since 2010, Orlando (Fla.) Health has been building a hybrid physician group model that allows it to employ or affiliate with doctors depending upon respective needs and desires. The initial goal was to bring seven already employed physician groups under one central group, says Wayne Jenkins, M.D., president of the larger physician entity, Orlando Health Physician Partners.
These days about 500 doctors are employed through Orlando Health Physician Group, not including teaching-related faculty. An additional 125 physicians have some type of affiliation and thus fall under the broader Partners group, along with the employed doctors.
Sometimes physicians who align are contemplating eventual employment, Jenkins says. Or they might want to collaborate on a particular treatment initiative. Some vascular surgeons, for example, recently have affiliated to work on reducing length of stay in vascular surgical patients, he says.
Want to determine how integrated your team is? Try developing and agreeing upon quality goals and related steps to reach them, says Patrick Rankin, M.D., chief medical officer at Community Physician Network. The physician group, which also started by pulling together several existing employed groups, now includes about 575 doctors who fall under Community Health Network, a nonprofit system of six acute care hospitals serving central Indiana.
Take congestive heart failure as an example, he says. A cardiologist might have a treatment perspective different from that of a hospitalist or family doctor.
"That's been one of our most daunting tasks," he says. "It forces critical conversations. It forces standardization. It really forces physicians to sit down at the table and talk about: How are we going to function as a team?"
That attention can pay off in measurable patient care improvements, Jenkins says. At Orlando Health, which owns or is affiliated with eight hospitals, a concerted effort by various specialists, including cardiologists, hospitalists and primary care doctors, already has reduced the system's readmission rate, he says. From 2010 to 2012, that rate declined 15.6 percent, from a 2010 baseline of 12 percent.
For Baptist Health Care, attracting new patients through its more mobile heart specialists has allowed the system to invest in new treatment areas, Vermillion says. The system's physicians now can implant the Impella, a temporary device that assists in pumping blood in patients with advanced heart failure. Previously, those patients might have traveled as far away as Atlanta, he says.
Like other hospital leaders, those at Baptist are straddling two reimbursement worlds. But today's hospitals typically don't have much operating room margin with which to experiment, CFO Vermillion is quick to point out. "What we want to avoid is going out of business during the transition period," he says.
Charlotte Huff is a health and business writer based in Fort Worth, Texas.
Sidebar - Rethinking a 'Hot-Shot' Doc
Sidebar - Four Ways to Reboot
Sidebar - Online Exclusive