evolving rural healthcare environment
TRANSCRIPT
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Draft
Evolving Rural Healthcare Environment – Surviving the Crossing of the Shaky Bridge
New Mexico Hospital Association Annual Meeting
Albuquerque, NM September 25, 2014
Matt Mendez, MHA
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About Stroudwater
Who we are
National healthcare consulting firm founded in 1985 by people with a passion for making a positive difference in healthcare. Our multi-disciplinary team offers deep expertise and perspective across a range of areas including finance, hospital operations, nursing, performance improvement, informatics and business development.
How we add value
• Affiliations and partnership planning • Capital planning and access • Physician-Hospital alignment • Strategic Master Facility Planning • Population Health • Revenue Cycle Management • Strategic Planning and Operational Improvement • Rural Practice
Where we serve Active projects in all regions of the country serving major academic and tertiary centers, rural providers, physician groups, and government / quasi-government agencies
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Goals for Today To share a macro, high level strategic perspective on three
main imperatives that rural hospitals must pursue to successfully navigate to the new future state Blocking / Tackling is important must be balanced with
planning for the future To reinforce the need to challenge the status quo Today’s revenue generation playbook will be not be
enough to ensure viability new playbooks will need to be imagined to succeed in the future
To share lessons from clients across country, as well as time spent at the helm of two hospitals
“In times of change, the learners will inherit the Earth while the knowers will find themselves beautifully equipped to deal with a world that no longer exists.” - Eric Hoffer
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“If you don’t know where you are going any road will get you there”
- Lewis Carroll
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Today (FFS)
• Government Payers • Changing from F-F-S to
PBPS • Private Payers
• Follow Government payers
• Management of costs • Independent organizations competing with each other for market share based on volume
Future (PBPS)
• Population Based Payment System (PBPS)
• Steerage to providers with lower costs and better outcomes
• Management of care for defined population
• Providers assume insurance risk
• Aligned organizations competing with other aligned organizations for covered lives based on quality and value
• Network and care management organization
• New competencies required • Network development • Care management • Risk contracting • Risk management
The Premise – Finance System will drive Transition to PBPS
Finance (Macro-economic Payment System)
Function (Provider
Imperatives)
Form (Provider
Organization)
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Fee for Service
Payment System
Population Based
Payment System
Navigating the Shaky Bridge – 3 Critical Steps
1. Efficiency and Quality
2. Physician Alignment
3. Systems of Care
Volume Value Population
Market Approach to Payments
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Lessons from the field…
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Hospital A
• 17-bed not-for-profit, Critical Access Hospital hospital located in the Midwest
• Replaced facility in 2004 under HUD 242 program
• Approximately 90 employees • 9 employed PCPs • $21M Gross Revenue • Independent, loose affiliation with
system • Approximately 30% of Primary
Service Area Market Share • Nearest competitor – 30 miles
Service offerings: • General acute care • Swing bed services • 24 hour Emergency Department • Laboratory • Imaging (X-ray, CT, MRI, Mammography, U/S,
bone densitometry) • Surgical Services • Respiratory Therapy • Speech, Occupational and Physical Therapy • Primary care through 4 clinics (1 attached
and 3 offsite)
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Performance Snapshot – Hospital A
Area Metric Result
Finance
Operating Margin 5.6%
Net Income (Loss) $990K
Days Operating Cash 286
Growth IP (4 yr. trend) 21% decline
Ancillary Services (4 yr. trend) 27% increase
Quality Core Measures Avg. 92%
Patient Satisfaction HCAHPS Average 72%
HCAHPS Likely to Recommend 74%
Ops Efficiency & Quality
Physician Alignment
Delivery System
Transition Readiness
Operational Performance
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Selected Opportunities – Hospital A Inpatient Growth (Acute and Swing Bed)
1. Establish frictionless admission process Reduce / eliminate time restrictions on admissions Establish an intake point person to coordinate referrals admissions
2. Commit to growth strategy Hire a dedicated case manager, or discharge planner to promote the swing bed program
to orthopedists and the rehabilitation patient population 3. Follow ED transfers to identify those patients with potentials sub acute rehab needs 4. Actively promote the hospitalist and swing bed programs to independent providers
340 B Discount Drug Pricing Program
1. Develop relationship with local retail pharmacy or consider options to operate a hospital-owned retail pharmacy if area pharmacies are not receptive.
2. Incorporate potential 340B benefit in future hospital clinic and primary care network growth planning as program revenue can significantly change clinic profitability projections. 10K visits translates into approximately $350K in incremental revenue
Est. Clinic Visits
Medicare and 3rd Party Payer %
340B Eligible Visits
Avg. Rx per Visit
Total 340B Rx’s
Avg. per Rx 340B Increase
340B Incremental Benefit
20k 90% 18k 1.2 11.3k $35 $756k
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Hospital B
• 56-bed not-for-profit, general acute care hospital located in the south
• Approximately 192 employees • Significant deficit of primary care
providers 0 employed providers as of Sept. ‘14
• $38M Gross Revenue • Management agreement with area
system that expires in Fall ’14 • Approximately 29% of Primary
Service Area Market Share • 5 competitors within 30 miles
Service offerings: • General acute care • Swing bed services • Geriatric psychiatry services • 24 hour Emergency Department • Laboratory • Imaging (X-ray, CT, MRI, Mammography, U/S,
bone densitometry) • Surgical Services • Respiratory Therapy • Speech, Occupational and Physical Therapy • Attached wellness center • Primary care through 2 clinics – PCP exodus
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Performance Snapshot – Hospital B
Area Metric Result
Finance
Operating Margin -18%
Net Income (Loss) ($2,545M)
Days in Net A/R 12
Growth IP (4 yr. trend) 11% decline
Ancillary Services (4 yr. trend) 28% decline
Quality Core Measures Avg. 93%
Patient Satisfaction HCAHPS Average 76%
HCAHPS Likely to Recommend 62%
Ops Efficiency & Quality
Physician Alignment
Delivery System
Transition readiness
Operational Performance
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Selected Opportunities – Hospital B Physician alignment / recruitment
1. Pursue alignment strategies with employed and independent primary care providers to position for population health Contract (e.g., employ, management agreements) Functional (share medical records, joint development of
evidence based protocols) Governance (Board, executive leadership, planning
committees, etc.) 2. Target the recruitment of 2 to 4 primary care providers within the
next 6 to 12 months Establish a primary care recruitment pipeline in partnership
with area teaching program Extend Rural Residency Program to establish clinical rotations
that create exposure to new providers Contact the State Office of Rural Health regarding the
possibility of attracting J1 Visa physicians Engage system partner in assisting with the development of
both short term and long term planning efforts Review profitability of services lines
1. Evaluate based on fit with mission and financial contribution to organization viability
2. Strongly consider immediate strategies to increase volume, or discontinue services that are not cash flow positive and a core competency.
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Lessons from a prior life…
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Service offerings: • General acute care (43 licensed / 25 staffed
beds) • 43-bed Skilled Nursing Facility • Home Health • 24 hour Emergency Department • Laboratory • Imaging (X-ray, CT, MRI, Mammography, U/S,
bone densitometry) • Surgical Services • Respiratory Therapy • Speech, Occupational and Physical Therapy
Pender Memorial Hospital
• Founded in 1951 • 86-bed not-for-profit, Critical
Access Hospital hospital located in SE NC
• Approximately 260 employees • 14 active Med staff • $39M Gross Revenue • Affiliated with Wilmington, NC –
based health system
Southeast North Carolina
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8 Year Transformation
What we found What we fixed
Leadership instability 7 CEOs over the previous three years; fragmented leadership team
Leadership continuity – built a talented and capable team
$3M in cumulative losses from prior 9 years Positive operating margin and improved cash flow
No TJC accreditation for 14 years TJC accreditation within first 9 months
No pay raises / wage adjustments for 6 yrs. Initiated wage adjustments + incentive program
Low morale - turnover rate of 46%; unionization attempt within first 90 days
Reduced turnover to below 20% / Improved employee satisfaction
Antiquated and inadequate physical plant and technology
Renovated ED / OR and constructed a free-
standing urgent care / outpatient diagnostic center; imaging upgrades
Medical staff lost confidence, poor relationship with administration
Alignment and improved relations with medical staff
Community by-passed hospital for care Utilization and growth of services
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1. Culture Matters Ability to drive performance is not rate limited by technical aspect of knowing
what to do but limited by leadership’s capacity and bandwidth to drive change Consciously design your culture don’t outsource it, or rely on it to develop
organically Critical elements include: Transparency, Clarity of Vision, and Accountability
Convert “renters” into “owners” and unleash the hidden potential of your associates Go to Gemba (where the work is done) commit to daily patient /
associate rounding Connect your stakeholders with the mission Man on the moon talk Eliminate power gradients (e.g. titles Mr/Mrs., administrative parking, etc.) Adopt a servant leadership style show vulnerability / admit mistakes and
seek ideas and solutions from associates
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2. Plan and Execute well Planning (“easy” part): Good planning begins with a
solid understanding of your current state and a clearly defined problem. Do not get hung up crafting multi-year strategic
plans limit focus to 12 – 18 months Migrate from strategic planning as an annual
event to strategic management review of progress on a monthly basis
Engage all stakeholders (associates, leadership, Board, medical staff, community) in a collaborative manner
Execution (“hard” part): Develop a formal method for how the organization executes and drives change Cross functional and interdependent teams /
councils (e.g. Quality, Satisfaction, Finance) Action team charters with clearly defined scope
and roles Action planning that drives accountability though
the establishment of specific, time-phased and measurable tasks with defined responsibilities that is monitored on a monthly basis
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3. Measure what is actionable Resist temptation to track everything
Identify 1 -2 key metrics per performance category that trigger action / response
Identify performance metrics on Macro (hospital), departmental, and individual basis to establish alignment of goals
Communicate widely / frequently, and hold accountable
Growth ED volume / % admissions / transfers People Turnover, Employee Sat Quality / Safety Core Measures composite score, HAC Finance Operating Margin, Days Cash Patient Sat HCAHPS (Likelihood to recommend)
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4. Cultivate pitchers Revenue generation is not just the C-suite’s job
Develop “Pitchers” instead of “Catchers” foster entrepreneurial mindset within your management team
Set the expectation to interface regularly with medical community on opportunities to better serve their patients, build awareness of new and existing services, and explore new partnerships
Examples: Lab manager sought relationships with area nursing homes and practices, Rehabilitation Services manager developed aqua therapy through a local fitness center
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5. Seek solutions outside of healthcare We have tendency to believe that the best solutions are those that originate
within our walls
Example: air traffic control system as model for OR and ED triage flow management
Network professionally with area businesses to share ideas and solutions
Explore and adopt LEAN as a business model and philosophy that can shift the culture towards a relentless focus on delivering customer value
Jeff Spade and the Carolinas Lean Collaborative (e.g. workflow redesign, reducing wait times, process standardization, etc.)
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“It doesn’t matter what the environment is doing. It matters what we are doing in the environment.”
-Paul Wiles, Retired CEO, Novant Health
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What do we choose to do in this environment?
