The New Competitive Edge for Hospitals and ACOs: Employee Health

It seems like a logical pairing for hospitals to aggressively manage employee health. Hospitals are communities' anchors of well-being, after all. With the rise of value-based care models such as patient-centered medical homes and accountable care organizations, many hospitals have the resources necessary to improve the health of their own workforce, yet this initiative often falls from the top of a healthcare organization's priorities.

This seemingly internal duty has taken on a new meaning for hospitals, and even more so for CEOs. Employee health is extremely telling of how successful a provider may be in broader population health models — in many ways, it is a natural pilot program before organizations can tackle ACOs, PCMHs and other models.

Walking the walk

Employee health management is an opportunity for hospitals to put their money where their mouths are. When a large employer asks how a hospital plans to manage population health, a successful organization should be able to illustrate that answer by referring to its own workforce.

"What's happening is our clients are seeing more interest in health and wellness opportunities," says Andrew Chastain, senior vice president and regional director with Atlanta-based Witt/Kieffer. "This is what employers in big markets want hospitals to be able to do, and [hospitals] want to show they're doing that for their own employees."

Mr. Chastain said more hospitals are seeking CMOs to manage the health of employees in addition to the more traditional duties of overseeing quality initiatives and physician recruitment.

Margaret Sabin, president and CEO of 522-bed Penrose-St. Francis Health Services in Colorado Springs, Colo., has realized how vital the health of the system's employees is to her organization's credibility.

"Before we went out to, not even establish an ACO, but help employers with their health, employers wanted to know what we had done with our own employees. The CEO would say, 'Tell me what you've done with your own,' and if you don't have a good answer, that's a big loss of credibility," says Ms. Sabin.

The hospital industry is playing catch up
Somewhat ironically, some say the hospital industry is a bit behind the curve in its approach to employee health. Other large employers outside of the healthcare industry have aggressively managed the health and wellness of their employees for years. General Mills, Walt Disney Parks & Resorts and Perdue are just a few major corporations with employed CMOs in addition to robust wellness programs including fitness centers, healthy food options, on-site health screenings and annual runs and walks.

"I recently met with the CMO of a Fortune 10 company. His job is about managing the health productivity equation for that company, which has about 250,000 employees worldwide." says Mr. Chastain. "I think hospitals are catching up and viewing [employee health] as an opportunity to increase revenue."

In 2011, Penrose-St. Francis launched its Penrose Pilot Associate Plan, which implemented a program similar to that of a patient-centered medical home. The system's 2,200 employees elected  a primary care physician from the two PCP groups with which the system partnered — called preferred providers — or other contracted providers.

Penrose-St. Francis paid a $4 per member per month management fee to participating providers and employees' deductibles for services provided by the PCP were waived. As the employer, Penrose-St. Francis identified the major health targets of its employee population, and the providers will submit outcomes and metrics to the hospital over the next couple of years. For now, physicians are paid the per-member, per-month fee, but the system hopes to introduce pay-for-performance within the next year.

A director of integrated services oversees the initiative as well as a medical director. The director of integrated services has dual reporting duties to Penrose-St. Francis' human resources department as well as Ms. Sabin. "Because of how important [the program] is, that person has matrix responsibilities directly to me as CEO. Because it's about the culture of the organization, and that's something the CEO must oversee."

Gaining a competitive advantage
So far, Ms. Sabin says Penrose-St. Francis just completed its most successful year yet — in terms of both financial and productivity performance. Johnny Rea, spokesman for Penrose-St. Francis, said in an email that the system's fiscal 2012 year was its fourth consecutive year of double-digit growth in EBIDA and its best year ever. "We did this while maintaining operating costs below what they were in 2009," he wrote.

Ms. Sabin says employee health initiatives are not only predictive of a provider's ability to manage population health, but also serve as a strategy to differentiate the hospital workplace in competitive markets.  

"The way to be competitive in this divergent market is all about the culture of the organization," says Ms. Sabin. "I think CEOs are beginning to realize how human productivity is a differentiating competitive factor. Every hospital is saying the biggest challenge is in reducing costs. We are the lowest-cost network within Centura. [Editor's note: Englewood, Colo.-based Centura Health includes four networks with 13 hospitals.] I believe that performance is strongly attributable to out wellness and productivity focus."

More Articles on Hospitals, Employee Health and ACOs:

6 Tips for Hospitals to Improve Population Health Management
Cutting Out the Middle Man: Opportunities for Hospitals to Partner Directly With Employers
5 Ways Hospitals Can Lower Their Employee Healthcare Costs

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