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The future of health care: Bigger health care systems, more preventative care

A banner heralding new relationship with Methodist Hospitals hangs over entrance Valparaiso Family YMCA Friday Dec. 14 2012. | Andy

A banner heralding the new relationship with Methodist Hospitals hangs over the entrance of the Valparaiso Family YMCA Friday Dec. 14, 2012. | Andy Lavalley~Sun-Times Media

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Updated: December 29, 2012 11:14PM



American hospitals are navigating uncharted waters.

“Today hospitals have one foot on the dock and the other on the departing boat,” Indiana Hospital Association President Doug Leonard said. “And we don’t know what lies ahead.”

The unsustainably high cost of health care is what’s spurring health care providers and policy makers to re-examine how health care is delivered in the United States. Hospitals account for 32 percent of all health care spending, so federal policy analysts agree it’s a good place to begin.

Ian McFadden, president and chief executive officer of Methodist Hospitals, said, “America’s health care system is in deep trouble.” McFadden said health care costs are approaching 20 percent of the nation’s gross domestic product, nearly $2.6 trillion.

He said the Centers for Medicare and Medicaid Services, the federal agency that administers Medicare, is shifting its focus to pay for improving health care quality with proactive early prevention and wellness programs instead of just reactive, delayed “sick care” treatments.

McFadden said those efforts to improve quality and support preventive care will eventually lower costs.

Hospitals across the country are changing, rebranding and refocusing their marketing and clinical efforts to reflect an altered health care landscape. And that’s evident in Northwest Indiana, where the region’s four large hospital systems — Community Healthcare System, the Franciscan Alliance, Methodist Hospitals and Porter Health — have been aggressively responding to changes imposed under the federal Affordable Care Act, better known as Obamacare.

For example:

Methodist recently planted its flag in Porter County in a partnership with the Valparaiso YMCA, 20 miles from its nearest hospital location.

Franciscan, the parent company of five Northwest Indiana hospitals, no longer includes the word “hospital” in most of its hospitals’ names. Instead, the hospitals have been rebranded, replacing “hospital”with “health,” as in Franciscan St. Margaret Health.

Community will open a diagnostic center and clinic jointly with a South Bend health system in Valparaiso, though its nearest hospital, St. Mary Medical Center, is located in Hobart.

Valparaiso-based Porter Health has expanded its footprint to Portage, Chesterton and DeMotte.

New model for hospitals

Since the ACA’s 2010 passage, local health care systems have bought large physician group practices, smaller hospitals and hired doctors at record rates.

Hospital leaders said some of the territorial expansion is part of a long-term trend to siphon patients from competing hospitals and some is driven by population growth.

But the ACA is the latest spark motivating hospitals to change. Two local hospital organizations are forming accountable care organizations, otherwise known as ACOs — a new health care delivery model that allows hospitals, physicians and other health care providers to collaborate to improve patient care and reap the savings from eliminating inefficiencies and waste. Why? To better compete in this climate of health care reform.

IHA’s Leonard said hospitals are straddling two different worlds. One is the current “sick care” reimbursement system — the more procedures performed and the more days patients spend in the hospital, the more money hospitals make. For decades hospitals have been competing to attract more privately insured patients to offset losses incurred from treating uninsured and Medicaid patients.

He said hospitals are opening clinics, diagnostic and surgery centers to follow regional population growth. Every hospital is trying to figure out how to succeed under a different reimbursement model: a capitated system.

Hospitals are paid negotiated fees per patient per month for caring for large populations and are responsible for providing all the care for those people, even if the costs exceed their reimbursements. So it’s in the hospitals’ interest to deliver less intensive, preventive care up front, rather than paying for much costlier care later on. If hospitals can save money doing it, they can share in those savings, he explained.

“We’re all products of our incentives,” Leonard said. “And our current process is perfectly designed to get the results we have. But we won’t change the health care cost curve without changing incentives.”

CMS has taken a “carrot and stick” approach, offering incentives for hospitals to purchase costly and sophisticated health care information systems and programs to reduce infections and form ACOs to improve care and cut costs. At the same time, the government is also punishing hospitals for unnecessary hospital readmissions, medical errors and high rates of hospital-acquired infections.

Hospital leaders recognize they can’t achieve goals of improved quality and lower costs alone. They need the collaboration of their physicians and other providers, such as nursing homes and allied health providers. So they have tightened relations with the community physicians who refer patients to their hospitals, in some cases buying the doctors’ practices and hiring doctors as employees.

Going where the
patients are

Gene Diamond, CEO for the northern region of the Franciscan Alliance, said Franciscan is working closely with its physicians and other providers to form an accountable care organization. Hospitals and their physician partners accept financial and clinical risk and are paid capitated fees by Medicare and eventually by commercial health insurers and Medicaid.

Franciscan also completed its purchase of the area’s largest independent physician practice, Medical Specialists, this year and last year bought Hammond Clinic in Munster.

“We’re integrating these organizations and seeing where we can identify opportunities to come into closer alignment to become more efficient and more effective.”

Diamond said Franciscan’s northern region now employs around 300 physicians and another 50 advance-practice nurses and physician assistants. By buying physician groups and employing and integrating doctors in the hospital system, he said Franciscan broadens its provider networks and improves its negotiating position with government and private health plans and local employers.

“This affords us the best opportunity to survive and even thrive in this new world of health care reform. We not only need to be more visible and attractive to the people who need us, but also to the people who are paying for health care: insurers and employers.”

The rebranding of its hospitals to Franciscan Health illustrates its expansion in focus.

“We tried to maintain our identification, not just with the need to provide episodic, acute care services, but health care services across the care continuum.”

Diamond said having a Franciscan presence across Northwest Indiana is key to that strategy. That’s why it staffs health care facilities throughout the region, even where there are no Franciscan Health hospitals. He said locating facilities involves both offensive and defensive strategies.

“We need to protect and defend cities where we already have a strong presence, but also go where our patients are moving,” he said. “We don’t want other folks to go in there and take away our market share.”

Jim Unland, a health care financial consultant and president of the Chicago-based Health Capital Group, said while hospitals compete for market share with rival hospitals, they are under growing financial pressure from federal insurers to provide services that must be authorized by physicians.

“Market share is the key to hospital viability. The linchpin to providing those health care services is physicians,” said Unland. “Hospitals need a big and strong medical staff to generate referrals and to partner with to improve the quality of care and reduce costs.”

He said financial and other pressures are forcing hospitals around the country to merge with larger health systems, compelling doctors to join larger physician groups or hiring on with hospitals. 2011 was a record year for hospital mergers, recording nearly 90 across the country and that trend continues.

Prevention is the future

Methodist’s McFadden said because of reduced reimbursements in the future, hospitals and health systems must learn to survive on less money.

“Hospitals are struggling to bring their costs low enough so they can make money off of Medicare patients, which is currently difficult to do in this market. The only way to do that is by banding and working together to improve patient care.”

McFadden cited the recent partnership agreement with the Valparaiso YMCA, one of several affiliations Methodist enjoys with Northwest Indiana not-for-profit health and wellness organizations.

“We don’t have any hospitals or clinics over there now,” McFadden said. “Porter County is a new market for us in terms of having a market presence. But the Y has 15,000 members, so this is a strategically strong and important move for us. We think wellness and prevention are the future of health care. This is a great way to launch a market presence and partner with an agency whose values we share.”

Bob Wanek, CEO of the Valparaiso Family YMCA, said Methodist will offer physical therapy, health care screenings, educational presentations and a sports medicine physician.

“This affiliation is geared toward health, wellness and prevention, something our 15,000 members understand and are seeking,” Wanek explained.

Wanek said every hospital is looking at emerging markets, where they can bring in their practices and begin to expand their market share.

“This is Methodist’s hub entry into Valparaiso,” he said.

Jonathan Nalli, CEO of Porter Health, said the former Porter hospital began some quality initiatives more than five years ago when it was purchased by Nashville-based Community Health Systems, a for-profit hospital chain. Nalli said the new $210 million hospital has been working closely with physicians to improve care by following government recommended quality measures for clinical care — evidence-based road maps of the best ways to treat certain conditions.

“The government wants hospitals to become more efficient and improve quality of care and patient outcomes,” said Nalli, who said a system-wide Porter Health effort to reduce hospital readmission rates resulted in a great reduction.

Janice Ryba, CEO of St. Mary Medical Center in Hobart, said last year St. Mary’s introduced its Quality Care Navigator Program (see related story), which assigns every patient admitted to the hospital a nurse navigator. Those navigators are patient advocates and personal guides through the complex and confusing health care system. Ryba said they follow patients not just during their hospital stays, but through the post-hospital discharge process, too.

Emergency room nurse navigators also follow up on patients once they leave the ER and return home. Ryba said some nurse navigators even visit patients discharged to nursing homes to monitor their recovery, educate them about their diet and medicines and ensure they make and keep doctor appointments.

“When you engage the community and reach outside the hospital walls, you can make a positive change,” said Ryba, who pointed out that St. Mary’s has reduced costly hospital readmissions by 13 percent.



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