Bundled payments, regulation and consolidation: 5 health system leaders weigh in

At the helm of their organizations, hospital and health system CEOs are charged with setting the strategic direction, inspiring innovation and making practical business decisions. However, it is often difficult to pace these long-term duties with the rapid pace of change occurring in the healthcare industry.

"We are going through one of the most disruptive periods of healthcare ever," Chuck Lauer, former published of Modern Healthcare, said at the Becker's Hospital Review 7th Annual Meeting in Chicago. "I'm asked all the time, 'Where are we headed?' Sure, I can describe certain trends, but I don't really know where we're headed."

In a panel discussion, which Mr. Lauer moderated, five leaders from hospitals and health systems across the country offered their takes on some of the greatest factors impacting their organizations' strategies and how they envision the industry's future.

1. Consolidation should be driven by community benefit. Tom Sadvary, CEO of Scottsdale, Ariz.-based HonorHealth, noted that consolidation is impacting every facet of healthcare. However, the impetus behind mergers must always center on improving quality and access to healthcare services for communities, not just to improve a hospital's bottom line.

"Both organizations were very strong and could have remained independent," Mr. Sadvary said of the merger between Scottsdale Healthcare Hospitals and John C. Lincoln Health Network North in October 2013, which produced HonorHealth. "But we did the merger because we saw it as a way to better serve the needs of our populations and to embark on the population health management journey together."

2. CEOs aren't overly bullish on bundled payments. Bundled payments and other risk-based models are gaining speed in several markets across the U.S., but not all healthcare leaders are convinced of their effectiveness.

Michael Wiechart, president and CEO of Capella Healthcare in Franklin, Tenn., sees one major issue with bundled payments — the lack of connectivity. "The issue is, the continuum isn't connected, and I'm responsible for pre- and post-discharge activity, structurally I see a flaw," he said. "Call me a cynic about the effectiveness of it."

Steve Little, president and CEO of Agnesian HealthCare in Fond du Lac, Wis., echoed similar sentiments about bundled payments and the Comprehensive Care for Joint Replacement Model, or CJR, which CMS implemented in 67 metropolitan statistical areas. "We love the CJR project," he quipped. "Why? It doesn't affect us."

But not all healthcare leaders are cynics when it comes to bundled payments. Chicago-based RushUniversityMedicalCenter has directly contracted with employers around spine and joint procedures, and is participating in CMS' Oncology Care Model, according to President Peter Butler. "There's a lot of money there," he said. "While I was skeptical, I think it may in fact have quite a big impact going forward. I wouldn't say I'm bullish, but I would say that it is an important tool that will be part of the spectrum of ways that providers will assume risk."

3. Insurers, like health systems, are trying to redefine themselves — and this can come at a cost to providers. The shift from volume- to value-based care and its emphasis on population health management are priorities for payers as much as they are for the providers delivering care, according to Nancy Schlichting, CEO of Henry Ford Health System in Detroit.

"All payers are in an existential period of redefinition," Ms. Schlichting said. "We work in partnerships around many of their initiatives to improve value. [Insurers] come up with new schemes to try to pay differently, but in some cases, these aren't acceptable levels of payment to drive change."

Henry Ford Health System's health plan, Health Alliance Plan, is small compared to Blue Cross Blue Shield of Michigan, the dominant payer in the Detroit metropolitan area, according to Ms. Schlichting. However, she said Henry Ford's health plan has had success driving value by being agile to market forces, focusing on delivering a great customer experience and "thinking of novel ways to improve the cost of care."

4. The federal government overburdens healthcare providers with regulation, but it comes from a good place. The problem underlying regulation in healthcare is the lack of evaluation on the complexity and administrative burden it poses, according to Ms. Schlichting. "We also need to focus on evaluating if some of the regulations we deal with actually contribute to improving value and quality and reducing costs." New policies are constantly added and few are rarely terminated, she added.

Mr. Sadvary noted the ceaseless addition of policies and regulations often results in conflicting rules. "On one hand, they're telling us to create integrated networks, and on the other, they're telling us not to integrate with others systems," he said.

While some regulations may seem pointless or poorly executed, Mr. Wiechart his colleagues to put them in perspective. "If you step back and think about it, if there was ever an industry that needed to be regulated, it's an industry designed to take care of human life, wellness and safety."

5. Despite challenges, healthcare leaders are optimistic. As she prepares to cap off more than 35 years in healthcare, Ms. Schlichting said she is optimistic about the future, mostly because of the inspiring people who work in the industry. "We are blessed to be working with people who are energized and motivated to take care of people, whether that's at the bedside or in support roles," she said. "As long as we keep learning and innovating, healthcare will be in a much better spot in five years than it is now."

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