Norwegian American CEO José R. Sánchez: Providers must go beyond physical care to improve community health

In this special Speaker Series, Becker's Healthcare caught up with José R. Sánchez, president and Chief Executive Officer, Norwegian American Hospital in Chicago.

Mr. Sánchez will speak on two panels on Monday, Nov. 12 at Becker's Hospital Review 7th Annual CEO + CFO Roundtable. The first is titled "The Best Initiative and Change We Made in the Last Year and How We Did It" at 12 p.m. The second is "Key Issues for Critical Access, Rural and Safety Net Hospitals" at 2:15 p.m. Learn more about the event and register to attend in Chicago.

Question: What major challenges, financial or otherwise, are affecting hospitals in the markets you serve? How is your hospital responding?

José R. Sánchez: There are several national and local challenges that are affecting hospitals in our market. Here are a couple of examples:

On a national level, government mandates designed to improve the quality of patient care have added to the reporting burden on hospitals and have increasingly put the spotlight on outcomes, as well as tied those outcomes to financial incentives. We were already along our quality journey when many of these requirements were fully implemented, so we will be well positioned to take advantage of increased emphasis on quality performance and the financial incentives that are tied to them. Currently, we outperform national standards in five out of five mortality and six out of seven patient safety metrics.

Increasing emphasis on population health management and care continuums aligns well with several of our key initiatives, such as developing a model to provide integrated physical and behavioral health services to individuals with mental illness.

Increasing financial pressures, such as the $11 billion, or 1.5 percent decrease in payments in 2017, coupled with a projected increase in healthcare expenditures of 5.6 percent from 2016 through 2026, means hospitals will be continually challenged to provide services as efficiently as possible. We address these pressures by managing our costs as tightly as possible, while strategically investing in opportunities to improve and expand our services to meet the needs of our community. For example, we have instituted a model where we embed a part time primary clinic within the site of one of our community partners — such as a social service provider — to bring health services directly to populations that need these services the most, while avoiding the significant capital outlays associated with building free standing ambulatory sites.

On the local level, one of the greatest challenges we're currently facing is the expiration of the static payment plan associated with the state's hospital assessment program. While a new funding model has been developed and agreed to at the state's legislative and executive levels, this plan has yet to be approved by CMS. In addition, a bridge funding mechanism that would continue to provide payments until such time as the new model is in place has also not been approved. For us, this means that we have approximately $38 million in funding at risk, and this situation affects about 3 in 4 individuals we serve. We are currently working with our elected officials to encourage CMS to continue the current program via a "bridge" funding mechanism that ensures the current fixed-payments remain in place until the new plan receives federal approval, or, preferably, work with CMS to rapidly approve the new model that has been agreed to by all parties and begin payments under this plan as soon as possible after June 30.

Q: If you could pass along one piece of advice to another hospital executive, what would it be?

JS: Manage your resources tightly and stay flexible. There are so many external pressures that are not under our control — such as regulations and economic trends — that we need to be able to adapt quickly. There are a number of steps providers can take to adapt to and even take advantage of change.

First, work with community and government resources. Support the repeal of disproportionate share hospital cuts and other vital supplemental payments. Encourage state flexibility in financing their share of Medicaid costs, and focus Medicaid reforms on improving quality, efficiency and access.

Second, participate in programs that increase enrollment and decrease uncompensated care, for example: 1115 waiver programs and market-based programs.

Third, develop capabilities to adapt to new models of care, such as flexible partnerships, affiliations, mergers and collaborations. Develop growth strategies to increase use of hospital services and decrease outmigration of profitable services, and develop strategic initiatives that focus community attention on quality, health and risk management, service coordination and high value.

Fourth, learn how to manage population health and financial risk.

Fifth, analyze and eliminate non-profitable services.

Lastly, improve the revenue cycle.

Q: What is one of the most interesting healthcare industry changes you've observed in recent years?

JS: The increasing emphasis on continuums of care and managing the health of populations. This is especially true in relation to the renewed interest in integrating physical and behavioral healthcare service to individuals with mental illness and substance use issues through programs such as the 1115 waiver. These individuals are historically high utilizers of healthcare services, but in the past their physical and behavioral health needs were rarely coordinated, which often exacerbated their symptoms and led to not only a very poor prognosis for recovery, but also to a worsening health status, which is evidenced by the fact that their life span can be up to 10 years less than the general population.

We anticipated this trend and are working very closely with five other community-based service providers to establish a model for providing comprehensive, integrated physical and behavioral health services. Our model includes a full continuum of care, including counseling, community-based programs, outpatient services, inpatient care, etc., with an overarching care management model to insure that these services are completely coordinated.

Q: How can hospital executives and physicians ensure they're aligned around the same strategic goals?

JS: There are several opportunities to improve alignment. For example:

  • Co-management arrangements, whereby physicians take a part in leading a service line. The physicians are involved in setting clinical guidelines, as well as provide programmatic input related to patient satisfaction, quality improvements and cost/resource management.
  • Pay-for-performance models that get away from straight salaries in favor of tying a portion of physician compensation to productivity, efficiency and quality expectations. Pay-for-performance models also allow physician to participate in gain sharing efforts that directly result from the service efficiency and quality initiatives they implement, such as reductions in readmission penalties.
  • Re-organizing physician structures to be more aligned with hospital activities, such as moving toward organizational models that are patient and physician centric, embedding physicians in every layer of governance, aligning physician practices into a more clinically integrated network and creating a physician leadership academy — at Norwegian, we recently kicked off our first physician leadership program.

Q: What is one piece of professional advice you would give to your younger self?

JS: Stay relevant. Know what is going on in the market, operational efficiency, technological advancement and political and policy changes.

Q: What do you see as the most vulnerable part of a hospital's business?

JS: In addition to the financial pressures that we all face on a daily basis, there is a significant danger in trying to assume the full risk of providing all services within a single provider. This risk is especially great for community providers such as ourselves. An NAH, we have mitigated our risk and strengthened our ability to function within a continuum of care by establishing an active relationship with an academic medical center, in which they receive very acute or highly specialized referrals from us, and we receive referrals for individuals that are more appropriately cared in a community hospital setting.

Q: What's one conviction in healthcare that needs to be challenged?

JS: That a provider can meet the health needs of its community by focusing solely on the physical health needs of its patient population. There is increasing evidence that social determinants, such as adequate housing, safety, access to health foods, transportation and jobs not only play an important role in the health of a community, but the lack of these factors can put a community at a significant health disadvantage and even risk. We are addressing these concerns by working very closely with individuals and organizations across our community to inform and develop a plan for creating a wellness district around our hospital. This plan will not only inform our strategies for developing and enhancing our services, but also include features that address our community's social needs. In this way, we seek to not only improve the health status of individuals in our community, but also the viability and vitality of the area at large.

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