Strategic Planning for Hospitals During the Transition From Volume-Based to Outcomes-Based Payment: Q&A With Jim Dague, CEO of IU Health Goshen

Jim Dague, CEO of Goshen, Ind., based IU Goshen Health, announced his retirement earlier this month, following a 16-year tenure with the health system. During his time as the health system's top leader, he oversaw the system's recent affiliation with Indiana University Health and the creation of the recognized Indiana University Health Goshen Center for Cancer Care. He helped attract more than 100 physicians to the community, avoided laying off employees — which he refers to as "colleagues" — despite tough economic times and led the system to nationally recognized employee and patient satisfaction scores. As he moves into a transitional role within the system, Mr. Dague reflected upon the importance of forward-thinking strategy within the hospital industry and why hospitals must prepare now for the transition to outcomes-based care.

Q: What are currently your highest priorities as CEO?

Jim Dague: My highest priority is trying to anticipate how our organization will have to change in light of pending regulations, such as those that will move us from a volume-based to outcomes-based system. In talking about change, it's about keeping a balance between the existing system a moving to a new system. I don't believe there's going to be a single cut off date when everything will fall under a new system. It will be phased in, which creates challenges.

Part of my role in a leadership position is catering to different audiences within our organization that are involved with this — the physician audience, board audience, colleague audience. The transition won't work unless we have a vested interest and understanding from all these groups. We're running now in a system that counts volumes, and what we're moving toward is about reducing volume. As a result, we're getting a lot of concern in terms of, "how will this affect me and my job?" Part of my job is to look to the future and relay to our doctors and colleagues how we will maintain balance with the current system and the new system.

Q: What implications do these types of payment reforms have on your health system's strategy?

From a strategy perspective, one of the things we're trying to do is anticipate how to get people proper, high-quality care to maintain their health. The emphasis here is keeping patients out of the hospital, which of course necessitates a lot of communication with physicians and a lot of planning with them. We're looking into employer clinics, medical homes and other types of strategies that take services to the patients and into the community, rather than waiting for them to go to the doctor and eventually hit us.

Q: Many of the regulations around health reform focus on better coordinating and managing a population's overall health. How important will it be for a health system to be able to manage a community's health? Is that something that is aspirational or a reality?

JD: I think the strong and progressive systems will be able to do it and do it well. However, they're going to do it because it's the right thing to do, not because of regulations. The ones that are forced into it because of regulations or financial reasons alone will only do it half-way.

If we can track a patient from when he or she enters the system and all providers can follow that patient and can really communicate to the next doctor in the referral process, better patient care will result. We've had experience within our own system that shows us this is true.

Hospitals that aren't already planning for this are going to be in trouble. If there's not someone in leadership looking ahead or the system hasn't planned for the IT resources needed to better manage care, the hospital could be out of business. You have to implement along the way; waiting to see how it goes will probably mean you're too late.

Q: We've talked a bit about managing this transition from fee-for-service to pay-for-performance. Is there a certain timeframe you envision when the industry will have significantly shifted to the new system?

No, I don't really have a sense of timeframe, but what I'm preparing for is a contingency where we will be ready whenever that occurs. We also already have data to prove we're ready to compete under quality- and outcome-based contracts, which I believe positions us well. 

Q: One major factor that determines a hospital's success under pay-for-performance is the ability to meaningfully align with physicians. What models are you using or exploring to align with physicians?

We treat all members of medical staff as such whether they are owned physician partners or not, and we have just as much cooperation with independent physicians as we do with the employed ones. It is easier to work with the employed physician partners because Stark and other regulations limit what we can do with independents, but that doesn't mean finding ways to align with independents isn't a focus of ours. For example, our biggest joint venture is with a 100-person cancer clinic in a neighboring community. We're experimenting with these types of agreements and plan to do more in the future. For any type of alignment effort, we are careful to measure the effort so we can see what works and what doesn't.

One thing worth noting is the concept of bundling payments does pit the hospital and physician against each other in some respects [as each fights for their share of the pie]. What's critical to success is that doctors and hospitals work together with the goal of improving health — following a mission. It won't work if we come together just for financial reasons.

Q: Does your system have any pay-for-performance or bundled contracts at this time?

The key for us has been to balance the current fee-for-service environment with preparing for the new system dictated by Obamacare. We're not forsaking one or the other, but are looking for balance during the transition. We do have one contract with Anthem Blue Cross and Blue Shield of Indiana that includes the beginning of measured outcomes, and I think we're positioned well overall for these types of contracts. We look at 160 quality measures on a monthly basis and have planned out our IT in anticipation. If systems have not been improving quality and upgrading IT for this type of environment, it will be impossible to catch up. It's not something that happens quickly.

Q: Another trend we're seeing in the hospital industry is consolidation. Given all the demands on hospitals today, is there a certain size a hospital has to be to compete and thrive?

The size issue really only comes up when you think about whether a hospital can be an independent ACO. If you're going to take responsibility for the care of a defined populations size, then size does matter as doing so assumes you have comprehensive services over the continuum of care. If a hospital doesn't have the size needed to be an ACO, community hospitals will probably serve as viable entry points as part of a larger ACO network. The problem with smaller hospitals is that they have limited resources and if they're not already preparing for the new payment environment, they will be in trouble.

Q: There are certainly a lot of uncertainties when it comes to the future business model of hospitals. How do hospital CEOs prepare given all the unknowns?

Hospitals administration in future will probably not be for the weak of heart. The hospital CEO of the future will have to be a consensus builder. Although it's hard to predict what will happen in the future, prepare by knowing your market and the resources in your region and be nimble, flexible and ready to move.

More Articles Featuring Goshen Health:

James Dague to Retire as President, CEO of Indiana University Health Goshen
Rebranding a Hospital: Q&A With Jim Dague, CEO and President of Indiana University Health Goshen

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