Everyone participating in the U.S. healthcare delivery and payment system understands that the COVID-19 pandemic has had a dramatically destabilizing impact on all sectors of the industry. With ICUs filling up across the country and infection rates from the virus exploding beginning early in the year, the leaders of the nation’s hospitals, medical groups, and health systems had to shift quickly to telehealth-based care delivery to the extent possible, while dealing with a shutdown of elective procedures mandated by the Centers for Medicare and Medicaid Services (CMS) that ran from mid-March to mid-May, and cratered the elective-procedure revenues on which patient care organizations depend for survival. But even as patient care organizations in some communities had begun to go back to semi-normal operations, others began to experience dramatic and incredibly difficult surges in COVID-related inpatient admissions.
And things remain highly unstable: a Kaufman Hall report published on Oct. 19 and entitled “2020 State of Healthcare Performance Improvement: The Impact of COVID-19,” found, among other things: that three-fourths of hospital and health system executives surveyed were either extremely (22 percent) or moderately (52 percent) concerned about the financial viability of their organizations, in the absence of an effective vaccine or treatment for COVID-19; one-third of survey respondents saw year-over-year operating margin declines in excess of 100 percent from the second quarter of 2019 to the second quarter of 2020; and most patient care organizations are seeing volumes rebound slowly over time, even as the cost of personal protective equipment (PPE) remains a major problem. What’s more, patient care organization leaders are concerned that once the national emergency is declared ended by the federal government, that any return to sub-parity rates of payment for telehealth-delivered services could further imperil their longer-term revenues outlook.
Meanwhile, beyond the immediate crisis that leaders of the U.S. healthcare delivery system are still facing around the pandemic, industry leaders are reflecting on longer-term issues, as the system shifts further towards value-based payment and away from fee-for-service payment—at a time of great financial and operational instability. The pandemic, those interviewed for this article agree, made it clear just how fragile the patient care organization financial outlook really is, for so very many.
So, how are industry leaders nationwide thinking about what it will mean to lead their organizations, and the healthcare system, forward into the emerging future? Among the key factors involved in strategic planning right now:
• The pace of consolidation across all sectors in healthcare is continuing apace—among hospitals, medical groups, and health plans—as the leaders of organizations of all types continue to seek market advantage.
• Related to that trend, many patient care organization leaders are looking nervously over their shoulders at the ongoing entry of disruptor organizations, particularly such phenomena as medical “minute clinics” being established by such non-traditional entrants to the market as CVS/Aetna, Walgreens, Walmart, and other retail organizations. Should those minute clinics draw significant primary care traffic away from primary care physician practices, one very significant foundation of traditional health system revenues could be diluted.
• Even as all of this activity is going on, federal healthcare officials continue to press provider leaders to move forward on the path of value-based contracting, with the Medicare program and the state Medicaid programs. Various types of provider organizations will be particularly affected by that pressure, including children’s hospitals, which generally rely for the bulk of their reimbursement on the Medicaid program. Physician practices, too, have been buffeted, as the various alternative payment model (APM) programs under CMS, and the Medicare fee-for-service payment program, MIPS (Merit-based Incentive Payment Program); both sets of programs are seeing changes being made to the Quality Payment Program (QPP), whose patient outcomes measures strongly influence how Medicare-participating physicians are paid, whether they are receiving fee-for-service-based or APM-based payment. As the terms of the QPP continue to move forward in flux, physician group leaders are feeling particularly buffeted by the winds of change.
• Yet it is also the leaders of multispecialty physician groups who are moving forward the fastest to embrace value-based contracting, and especially risk-based contracting. In many cases, those medical groups, when independent from hospital-based health systems, are working directly with health plans, without hospital system involvement.
• Above all, agree all those interviewed for this article, a new style of leadership is clearly becoming necessary: one that is more agile, more connected to constant fluctuations in conditions on the ground, and better facilitated by both strategy and technology.
The road ahead: physician groups are innovating—quickly
So, how leaders of different types of organizations are leading their colleagues forward obviously depends on the specific type of organization they’re leading, and its specific circumstances. But leaders of the most advanced physician groups are plunging ahead full force, and are making real strides.
Among members of that segment of medical groups, Kelly Robison, CEO, and Shannon Decker, Ph.D., vice president of clinical performance at the 1,500-physician-plus Brown & Toland Physicians multidisciplinary medical group in San Francisco, see physician groups leading the way to clinical and operational transformation in U.S. healthcare in the next several years. “I see a transformation of the medical model,” says Robinson. “Most medical groups are IPAs [independent practice associations]. And we’re seeing a transformation into more of a model in which physicians get more support from the organization through employment or practice support. In other words, there will be a shift toward greater integration. Second, you’re seeing more risk across broader populations, and more total-cost-of-care-based risk. Third, there are more technology-enabled solutions to help physicians manage their practices, and more practice-based support.” And, says Decker, “COVID has provided the opportunity to get there even faster. People are looking for higher quality and more value. That’s the value-based model—and we’re pursuing that model.”
A number of elements are underlying the shift, Robison says. “I think that physicians by nature tend to be entrepreneurial, and I’ve been in healthcare for nearly three decades,” she emphasizes. “Over the years, the management of healthcare has become so complex, and there’s been such a squeeze on reimbursement, and on top of that, there’s been so much consolidation that now, a physician’s range of choices is so different. So for those physicians who want to remain entrepreneurial, and who want to remain independent and not have their destiny controlled by a hospital-based system, they need some kind of help. And that’s where organizations like ours can help: we can support physicians in their practices, while allowing physicians to retain an entrepreneurial spirit.”
“I’ve noticed an evolution,” Decker offers. “It’s important to recognize that it’s a symbiotic relationship. And when we approach physicians, it’s not about telling them what to do; they already know what to do,” she emphasizes.
Jeffrey LeBenger, M.D., CEO of the 1,700-physician Summit Medical Group, based in Berkeley Heights, N.J., and which serves communities across northeastern New Jersey and in the New York City metro area, says, “Nationwide, I think that physicians are going to see major consolidation in the marketplace. Unfortunately,” he says, in the fee-for-service-based payment system, practicing physicians simply can no longer focus on increasing patient care volume, based on patient visits, even as they “really ramp up their volume to make ends meet. Their reimbursement is low, their costs continue to go up, and the data analytics they need to run their practice, are unbelievably expensive. Hospital systems want to fill beds, increase ancillary-based reimbursement, and want to consolidate. Only certain systems really integrate; most hospital systems just want to consolidate,” he contends.
LeBenger sees a clear alternative to both hospital system-run operations and health plan-run operations. “Payers do try the clinic model and have been somewhat successful, but you are somewhat beholden to shareholders. So we have an option here, and have pursued it—these physician-run practices.” The absolute key to success, he says, lies in creating and building clinically and operationally integrated physician group practices that are taking on risk-based and other value-based contracts, and moving forward to reduce costs and improve patient outcomes, engaging in intensive care management, supported by data analytics clinical performance management.
Of course, physician group leaders are pursuing a wide variety of specific strategies, with some participating in the Medicare Shared Savings Program (MSSP) and Next Generation Program, others collaborating only with private health insurers, and still others working with both public and private payers. Summit Medical Group participates in both federal and private programs, while Brown & Toland participates only in programs sponsored by private health insurers at the moment.
Hospital system leaders dig into the challenges
While every patient care organization has unique challenges and opportunities, there’s no question that the nation’s children’s hospitals face strong headwinds, as they remain heavily dependent on revenues from care delivery to patients that come from the Medicaid program, even as more and more American families fall into poverty, swelling the numbers of Medicaid recipients.
That’s certainly true at Nemours Children’s Health, the multi-hospital system based in Wilmington, Del., and with a major hospital in Orlando, Fla., and dozens of clinics across the Delaware River Valley and in central Florida.
There, R. Lawrence Moss, M.D., the health system’s CEO, sees leadership as essential to clinical, operational, and financial success going forward. What will it take for the leaders of patient care organizations to be successful going forward in the emerging healthcare system? “Courage and getting comfortable with ambiguity will be essential,” Moss says. “With respect to courage, this is a pivotal moment for our country’s healthcare system. And it’s people with jobs like mine who have the opportunity” to lead their organizations forward through change, he stresses. “Neither government nor private industry will tell us what to do. It’s a moment where we could let go of a system where we’ve done reasonably well and developed a comfort level; but is so far from where we could go,” Moss says, referring to fee-for-service payment systems. “I like to use the analogy that you’ve got to let go of one side of the pool to get to the other side. There is no clear path from pure fee-for-service, where we incentivize volume, to where we incentivize health. It’s all ambiguity. And it’s incumbent on people like me to enter into that ambiguity and uncertainty and know we’ll come out better on the other side. It would be easy to fall back to the old ways, to business as usual. It would be an absolute crime if we allowed that to happen.”
With regard to how he and his colleagues are creating the future at Nemours, Moss says that when moving organizations of people forward, “It’s about the why; it’s about making a clear vision of what the future can be, and that ultimately inspires people to change, and is a call to action. It’s not about wading into the details on a specific plan. It’s saying, here’s where kids are today, here’s where they could be tomorrow; we’re the ones who will get them there. And we’re about 85 percent complete with our strategic planning process,” he reports. “We were well into it before COVID, and kept going. And I could sum it up by saying [that it involves] a common vision for the future that is inspiring for better for children.”
And, while children’s hospitals face headwinds even beyond those of adult hospitals, Moss says this: “Children’s hospitals are financially challenged, true, that’s a challenge every day. But that’s a consequence of the way healthcare is structured in the U.S.—we have a fee-for-service system constructed around volume and complexity of care. And children’s care is 7 percent of the system. Most children don’t have much money, and are supported by parents, and that’s why roughly 50 percent of our patients are supported by Medicaid. It’s a systemic issue. But when we incentivize health, that will be a boon for children’s hospitals, because there’s no more economically effective way to make those investments. I have a bar chart that shows the $3.5 trillion budget and 7 percent of that is kids—the future should involve a healthcare budget half [of that] size where we’re getting more health. So the issue for me is how to redo this.”
What CIOs must do
What are the implications of all of this, for CIOs and other senior healthcare IT leaders in patient care organizations nationwide? They are very profound, say leading CIOs; indeed, they speak to the role of the CIO itself. “I think the new role of the healthcare CIO is very different from that of the pre-COVID pandemic era,” says John M. Kravitz, CIO at the Danville, Pa.-based Geisinger Health System, an organization renowned for its culture of care delivery innovation. “The work the CIO needs to perform is strategic in a number of areas,” he says. With regard to organizational leadership, Kravitz says that “The push is to move to a digital strategy for the focus on our customer, and how we make it easier for the customer to get services from Geisinger versus the competition. That means the CIO must work closely with the specific business area to look for digital solutions or develop digital solutions.”
Bobbie Byrne, M.D., CIO of the Advocate Aurora Health Care system, based in the Chicago suburb of Downers Grove and in Milwaukee, agrees. In the wake of much urgent work that has needed to be done to support health system operations during the COVID-19 pandemic, Byrne says that “Beyond that necessary work, CIOs need to achieve very tight alignment with operations on the very few other projects that can be completed. The original 2020 plan is in the garbage can, and we have a much more narrow list of priorities. If it is not on the approved priority list, we do not even talk about it. This can be hard because some people will go around the process and directly to the IT team members that they know to try to get movement on their particular project. IT people like to serve their customers. I am very focused on assuring that we are all rowing in the same direction,” she says.
As for some of the top IT implementation priorities, Kravitz says, “Of course, there are foundational items like an API management platform that enables quick, real-time integration of data from our systems to the customer front-facing systems. This is important to provide real-time integration to the customer need or perceived need.” Further, he says, “Costing is paramount; so, IT governance and IT application rationalization go hand in hand to reduce the size of the portfolio and try our best to keep it small through governance. The idea is fewer vendor partners with much deeper integration to the applications to meet the business needs of the organization. In short, he says, CIOs must be looking for ways to provide a better service at a much lower price point to the organization. We need to show the value to the organization and manage the size and cost of our staff with the ability to track KPI’s and perform better than benchmarks for comparable sized organizations.”
Nemours Children’s Health’s Moss agrees that leveraging information technology to move one’s organization forward strategically will be extremely important. “We’re increasingly operating in a digital world, in healthcare as in everything else,” he emphasizes. “During the first months of the COVID pandemic, we figured out how to make rounds in the ICU, virtually, with the whole family involved, with no use of PPE. We never thought we’d be able to do that a year ago. And we’re investing $20 million a year in our Children’s Health Delivery and Innovation program, where we take $20 million and look at innovative technologies. We have a one-stop app for telehealth, remote disease monitoring, communicating with providers, looking up your medical records, all in one app on your phone. All of healthcare is moving in that direction. We do see ourselves as a leader. And healthcare is always going to be the most personal of human-to-human transactions or interactions. So our focus is using digital technology to advance our goals.”
The governance factor
With so many elements in the operational landscape changing in real time now, and with a seemingly limitless to-do list of IT and other priorities, industry observers agree: governance will be important. Indeed, says Peyman Zand, vice president of advisory services at the Nashville, Tenn.-based IT services consulting organization CereCore, “Strong governance is a must”: patient care organization leaders “must provide explicit attributes and outcomes for their plans. And CIOs really need to pay attention to the people working for them. And it’s not just their own people, either. Everyone’s sending people home to work; so they need to learn how to manage a remote workforce. And so either we’ll staying in a hybrid model, even after the pandemic is over, or we’ll go more into an outsourced environment, with outsourcing or co-sourcing.” The opportunity for enhanced patient engagement is there because of the widespread adoption of virtual care during the pandemic, he adds.
Peering forward, gamely
All of this gets back to the current moment, and its future implications. “The COVID-19 pandemic has been a catalyst; it’s as though we hit the fast-forward button on the evolution of the healthcare system,” says Andy Smith, president of the Naperville, Ill.-based Impact Advisors consulting firm. “And the healthcare system has been staid and conservative” in terms of its historical administration,” he says, “almost by design. But the current situation is calling for a new type of leadership, almost entrepreneurial. And leaders are going to have to partner, are going to have to acquire, be acquired, or be left behind. Overall, we’re going to have to start treating healthcare more like a business, almost like a retail business, because that’s where the threats are coming in from. And it’s been fashionable to bring people in from other industries; but healthcare is unique and rather parochial. So we’ll need a blend of outside and inside thinking, and new expertise.”
“What a unique time this is, for leaders over the last eight months,” says Pete Smith, managing partner at Impact Advisors. “Andy’s been thinking about the long-term health and perpetuation of your organization. But think about what the healthcare system had to do to mobilize in this crisis: everybody had to pivot to deal with a very immediate problem, mobilizing command centers, mobilizing shifts in delivery. It’s amazing what everyone did, really. Leadership really has had to do two things in the past five months—react to a crisis, but also respond to long-term viability issues. Leaders have had to have two strategies, one for near-term and one for longer-term.”
Andy Smith says that the emerging healthcare system “is going to require a different level of leadership; and for the most part, the industry has stepped up. They’ve shifted to telemedicine, they’ve sped up their decision-making. And I spoke recently with an executive who’s saying in his organization, if we haven’t done something in the past six months, why should we go back? We need to keep the pace going.” And, with disruptive new entrants coming in, technology and processes enabling more and more care delivery outside the inpatient hospital and even into the home, and other changes, Pete Smith says that “I think that what you’re going to see is hospital leaders who get that, and who will pivot their organizations based on new models. So you’ll see some winners. You’ll also see additional entrants in healthcare, the Walmarts and Targets, that will eat away at the profitable primary care services; and hospitals that don’t get it will be left with a very high-acute-care business, with very sick patients in inpatient hospitals and a lack of profitable primary care businesses. You’ll see that accelerating, through COVID. We think there will be a lot of mergers and acquisitions.”
Nemours Children’s Health’s Moss sums it all up thus: “What I say to myself every day is this: summon the courage to go bold places, to let go of one side of the pool to get to the other side, and be comfortable with ambiguity, as we go forward.”
