At the Becker's Hospital Review 10th Annual Meeting in Chicago, HEI Health hosted a roundtable to explore how unification delivers the cost structures, quality objectives and brand experiences of tomorrow’s leading integrated delivery networks.
Marj Green, HEI Health's CEO, and Mischa Dick, HEI Health's COO, discussed how and why IDNs are moving from centralization to unification.
The difference between centralization and unification
"It's one thing to centralize everything under one roof, but usually the processes go unchanged. You aren't going to see gains unless you change the fundamental processes," Mr. Dick said. "You have to take the second step and unify what you've centralized."
Re-engineering: The key to unifying a centralized organization
Today, many healthcare organizations function as distinctive departments "glued" together by people, systems, reports, gaps, errors and redundancy — all of which add cost. "Glue deteriorates quality. Anytime you glue a system together, you have gaps and overlaps," Ms. Green said.
Removing the excess organizational glue requires a completely different mindset. Everyone, including the highest levels of leadership, must fundamentally rethink how the health system operates within the new purpose. They must agree on a standardized, unified, consolidated function and common standards that serve the common good.
Fortunately, the science of re-engineering addresses these problems. The journey toward unification has several stages:
- Align value streams across major parts of the organization. A good rule of thumb is value streams should span at least three high-level leaders.
- Begin with the end in mind. When you are finished, what do you want the system to deliver?
- Define how to measure the core purpose. Often, organizations leave the same metrics in place, which no longer align with the new core purpose.
Rethinking revenue cycle and reducing unrecognized revenue
HEI recently worked with a healthcare organization that experienced a challenging Epic conversion and was having a hard time covering expenses. The system had high levels of unrecognized net revenue, a low cash conversion yield and a stagnant culture. The organization has around $1 billion in net revenue, with $43 million written off each year.
A new CFO and a new revenue cycle vice president tried to turn the situation around. They centralized the revenue cycle for two hospitals and planned to do the same for nine more. As part of HEI Health’s redesign of revenue cycle, HEI implemented high-performance work teams.
"This provides a strong base for bringing in the other nine hospitals. Each team acts like a special forces team, and they are aligned all the way to the top," Mr. Dick said. "In 18 months, they have reclaimed $43 million in revenue, and it's a sustainable process."
HEI has found that when organizations redesign their revenue cycle, they often see gains of at least 4 percent.
Achieving care management unification
Ms. Green and Mr. Dick recently worked with a healthcare organization that had a $1.4 billion base of net revenue and a $117 million gains opportunity. The organization had about 200 full-time equivalents spread across four organizations. These individuals were talking with 21 task-based departments. The hospital was capacity constrained and had a high length of stay, and its ACO hadn't achieved its incentives. A primary care redesign was already underway.
HEI gathered a group of employees to baseline the organization's processes. This exercise discovered 130 problems, 40 of which were system-level issues. The team also discovered 95 percent of patients needing support in the ambulatory space didn't get it because employees were busy interacting with other patients.
The team started to define a care management value stream. This had to integrate with the existing primary care redesign. Care management focused around the primary care physician or specialist, depending on whether the patient issue was episodic or chronic. Processes, metrics and technology were configured to match that goal.
Unlocking value through unification gains
"About 30 percent of every healthcare dollar can be attributed to administrative costs that aren't adding value to the customer. This represents a huge opportunity," explained Ms. Green. When organizations implement care management, they experience revenue gains between 5 percent and 9 percent; those that focus on revenue cycle management see gains of 4 percent to 8 percent, according to HEI. "The combined impact of care management and revenue cycle improvements can deliver a 9 percent to 17 percent gain to organizations," said Ms. Green.
To achieve the promise of unification, organizations must align the vision, purpose, process, performance management and organizational development design across the entire system.
"Unification can have a positive impact for healthcare, but organizations must rethink and restructure in dramatic ways to support new purposes and new output," said Mr. Dick.