How Trinity aims to improve its financial performance in the next year: Q&A with CEO Mike Slubowski

Operating margin declines characterized 2022 for many hospitals and health systems, which continue to battle ubiquitous challenges that include workforce shortages, declining inpatient volumes and the rising cost of supplies, drugs, equipment and labor.

This year, health system leaders are challenged with developing innovative ways to boost revenue and reduce expenses, but many could be forced to make difficult decisions around service reductions and cuts to keep hospitals afloat.

Mike Slubowski, president and CEO of Livonia, Mich.-based Trinity Health, which comprises 88 hospitals across 26 states, spoke to Becker's Hospital Review about how the health system plans to improve its financial performance, how it is tackling workforce challenges and how the healthcare landscape will evolve as outpatient migration continues. 

Question: It's no secret that many health systems have seen margins shrink amid labor challenges, declining inpatient volumes and record-high inflation last year. What is Trinity's game plan for tackling these issues in 2023?

Mike Slubowski: Just before the pandemic, we were fortunate enough to start our own internal staffing agency, FirstChoice. Nurses and other clinical specialists who don't want full-time employment or need more flexibility in their schedule — rather than having them go work for external agencies and paying a king's ransom — they have a pay program that provides more in terms of hourly rates and offers flexibility in their schedules. We saw a huge opportunity to create our own staffing agency, which includes about 2,000 nurses. It was very helpful at points where we needed external support and it was a way to retain nurses who were going to leave because they were seeking more flexible arrangements. 

This year, we also launched TogetherTeam, an innovative staffing model of three care partners. It included a floor nurse, either a certified nurse assistant or an LPN, and a virtual nurse. Those three partners are the care team for a group of patients. Patients and families love it because they get the attention right away from either the floor nurse or the virtual nurse, who can beam into the room immediately. The floor nurse feels supported because most of them are newer grads and have a more experienced nurse on their team in the virtual nurse. The nurse assistant or LPN covers a lot of the tasks that prevent more experienced nurses from being able to see patients. I call TogetherTeam our "moonshot" because we're rapidly rolling it out across 26 states over the next 12 to 17 months. Not only does TogetherTeam improve patient outcomes and satisfaction and support floor nurses to improve retention, but it leads to a lower cost of care, too. 

We're also continuing our path to common platforms to have world-class revenue cycles and clinical care systems across our facilities. We implemented "TogetherCare, powered by Epic" to get everyone on a single instance of Epic across our health system. We also have a common [enterprise resource planning] system and payroll and HR system. We're focused on leveraging those common platforms to lower costs and improve outcomes. 

We also have a team called "TogetherGrow" that focuses on improving access to care, improving how we reach out to patients who are reluctant to come back for care for chronic conditions, and strengthening relationships with referring physicians. These are some of the initiatives that are focused on improving quality and safety in the care experience and also improve our financial performance to the tune of $1.5 billion over the next 12 months.

Q: Trinity is also experimenting with a daily pay model for staff. How has this pilot program been received? What do you hope it can achieve?

MS: First of all, we are focused on creating the opportunity for a living wage for all our team members. We made substantial adjustments to starting pay and built ladders for people to progress within the health system, not only in their current roles, but being able to train for bigger roles so they can really progress in their careers. But we recognize there are a lot of people who are challenged financially. The pay program is not a loan program; it's earned pay, but people have access to their funds and the cash flow immediately, which has been a real satisfier, especially to some of our lower-paid colleagues and service workers. It has been very successful so far and we're rolling that out systemwide. 

Q: How is Trinity looking at other growth opportunities as care continues to shift from inpatient to outpatient settings? 

MS: You have to shoot to where the puck is going, and ambulatory surgery is rapidly moving to freestanding ASCs, so we have partnerships with a number of physician groups to do freestanding ambulatory surgery. We're starting to open a lot more freestanding ASCs. Care is shifting away from hospital-based ambulatory surgery as well because patients and payers don't want to cover the additional cost of being hospital-based. There is such a proliferation of ASCs being developed by investors or physician-owned groups and health systems like ours. In the future, I think you're going to see an oversaturation of ASCs, which we are already seeing in some markets.

Q: As more and more services move to ASCs and other outpatient settings, how do you see the inpatient environment evolving over the next 10 years? 

MS: There will always be a place for hospitals and inpatient care. I think complex care patients with multiple comorbidities and chronic conditions are still going to require inpatient care. OB is still going to be a short-stay inpatient service in many regards. But I think it is shifting much more towards intensive care and general medical care for complex patients. Some of what used to be short inpatient stay surgical business is shifting to the ambulatory setting. The inpatient component will look different. The other thing everybody seems to be underestimating is that we've been through this public health emergency for three years. At a time when many people were saying that the inpatient environment didn't matter anymore, during the waves of the pandemic we were overwhelmed with patients. From a public health standpoint, there's going to have to be some kind of standby capacity for inpatient care, but how that gets funded will be the big question. 

Q: Many financial experts are projecting a recession this year. How might that affect hospitals and health systems, and how can they best prepare?

MS: We've been living with boom-and-bust cycles through the pandemic — surges of patients, people not coming in for routine care, not having enough staff to accommodate volumes, inflationary impacts up the wazoo, etc. — so it's not like we're not prepared for more uncertainty. Anybody running a health system or any business right now, you've got to build into your plans the capability to manage uncertainty and respond quickly. 

So, we are closely monitoring our capital spending and maintaining our facilities and services for safety for our patient and member experience, but we are also focused on capital spending in areas where we see a more immediate return on investment. We're doing a ton of work on process redesign to bend the cost curve, going back to FirstChoice, TogetherTeam and our common platform work. 

I think we're in a continuous cycle of being hopeful amidst uncertainty. You have to be able to move quickly, but at the same time, in terms of long-term planning, we have to bend the cost curve. Everything we're focused on is how do we improve care and outcomes at a lower cost level and viewing everything that we do around that framework. 

Q: What are your thoughts on "bending the cost curve" in healthcare at a time when commercial payers and other industry players report record profits while many hospitals and health systems are struggling financially?

MS: The healthcare "industry" includes commercial payers, medical device suppliers, Big Pharma and Big Tech, but those parties are seeing double-digit margins and are ironically the farthest from delivering patient care. Healthcare providers, especially nonprofit providers like Trinity, strive to earn a minimum operating margin and cash flow margin to be able to invest in our future. So, from a legislative and policy standpoint, we are going to have to deal with this imbalance in this healthcare "industry" about where that value is added to deliver the hand-on care to patients — whether it's at our sites or virtually. 

There's public policy work that needs to happen. If CMS is offering a 2 percent increase in Medicare rates while we're dealing with 10 percent inflation, the math doesn't work. Furthermore, commercial payers follow CMS' lead, so if Medicare gives 2 percent increases, commercial payers are not going to do any more than that. While we're focused on lowering our cost structure, there's got to be pressure on pricing. Trinity has 17 clinically integrated networks across the country, we've been involved in every CMS pilot program in terms of capitation rates or fixed payments, we've been successful in every Medicare demonstration project at bending the cost curve and improving outcomes for patients, but no one — federal governments, state governments and commercial payers — wants to hand over any more total cost of care responsibility to us. 

In my world, the only way nonprofit providers like us can balance our books is if we have responsibility for managing total cost of care and outcomes, because it truly gives us the capability to connect clinical care to social care and to deal with chronic issues that are a function of social determinants of health. We have proven that we can deliver care at a lower cost and we need to have more of a chance to do that. Legislative direction around that wouldn't cost the government any more money but would certainly give us the capability to earn an acceptable margin to improve outcomes. 

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