Hospital and Health System Strategy in 2012: 6 Key Initiatives

To meet goals of improved quality and reduced costs in today's changing healthcare environment, hospitals are being forced to be creative and flexible in their strategies. As part of the transformation to value-based care, many hospitals are beginning to focus strategies on population health management, one of the core goals of healthcare reform. Managing population health will require close relationships with physicians, partnerships with organizations in the community and expansion into preventative and outpatient care. Here are six key strategies forward-thinking hospitals and health systems are using to achieve population health management and other quality and cost goals.

1. Forming relationships with physicians.

Hospital-physician relationships have changed dramatically in recent years, with physicians moving from private practice to hospital employment or partnership in droves. Hospitals are beginning to leverage this relationship for a variety of initiatives.

Larry B. Anderson, CEO of Tri-City Medical Center in Oceanside, Calif., says aligning with physicians has been a key strategy for his facility. "Tri-City Medical Center has pursued a very specific and deliberate strategy of partnering with our physicians and much of our recent success is attributed to that strategy," he says.

Market share

On a basic level, partnering with physicians gives hospitals the opportunity to expand their market share, as physicians are typically the source of patient referrals. "To get patients, you have to have a relationship with physicians," says J.R. Thomas, CEO of physician alignment firm MedSynergies. "It's the most important thing [hospitals] can do today."

Hospital quality

Beyond increasing market share, physicians can also help hospitals increase quality. Engaging physicians is crucial to any quality improvement project because they are the ones delivering care directly to the patient. "There's work that needs to be done around the clinical care delivery model, and physicians need to lead that work," says Bill Woodson, senior vice president at healthcare analytics company Sg2. Involving physicians in leadership of the hospital can ensure everyone's goals are aligned and that the focus stays on quality.

Population health management

Beyond the hospital walls, hospitals' relationships with physicians are also a valuable strategy in improving quality. "Physician employment is not an end in itself," Mr. Thomas says. "It's a vehicle to provide healthcare needed by the marketplace." By partnering with physicians, hospitals gain access to a wider data set of the community, allowing providers to identify and address areas of need in the population. Collaborating with physicians on data collection and analysis can help hospitals manage population health. Furthermore, a crucial part of managing population health is improving access to preventative care, which is largely provided by physicians through yearly checkups and other screenings.

2. Pursuing payor relationships and new revenue models.

Many hospitals seeking to reduce costs and improve quality are seeking new relationships with payors to create payment models that reward value. Hospitals use these new models, such as accountable care organizations and bundled payments, as strategies to align incentives for low cost, high quality care.

Hospitals are partnering with payors such as Blue Cross Blue Shield and others to support quality improvement and reduce costs. For example, in January, Boston Children's Hospital, its affiliate physician organizations and Blue Cross Blue Shield of Massachusetts committed to an Alternative Quality Contract that rewards hospitals and physicians for quality, including the management of chronic illnesses. These types of arrangements help hospitals reach their goal of managing population health by funding quality improvement projects. 

Some payors are aggressively pursuing ACO-type arrangements to lower costs. Health insurer Cigna, for instance, announced it is on pace to create 100 accountable care initiatives by 2014 and bring accountable care to 1 million total customers.

Formalizing coordination of care

ACOs and other collaborative care delivery models are also a useful strategy because they formalize the coordination of care — their definition requires a level of partnership between hospitals, physicians and payors. An ACO can therefore provide an avenue for hospitals to build a relationship with physicians and community organizations to coordinate care and improve population health.

3. Partnering with the community.

In addition to partnering with physicians and payors, hospitals are partnering with other organizations in the community to better coordinate services for patients along the continuum of care.

For example, Stanford Hospitals & Clinics in Palo Alto, Calif., includes these partnership efforts in its strategy. "Stanford has been collaborating with physicians, employers, beneficiaries and payors to deliver its unique blend of leading edge and coordinated care through a number of modalities," says Amir Dan Rubin, Stanford Hospitals & Clinics' president and CEO.

Managing transitions of care

Collaborating with organizations in the community such as nursing homes and long-term care facilities can help hospitals manage transitions of care and improve population health. For example, Grand Rapids, Mich.-based Spectrum Health works closely with post-acute care providers to prevent heart failure patient readmissions. Spectrum Health teaches staff at a local rehabilitation facility how to monitor heart failure patients' salt and fluid intake, weight and other symptoms to ensure patients receive appropriate care after hospital discharge.

Scott Regan, founder and CEO of AchieveIt, a strategic planning company, says many hospitals are working to manage population health, but many "are going back to the old standby strategy of staffing a call center and regularly calling patients with chronic illnesses to ensure they are compliant with their treatment regimen.

"I doubt this is the answer, as behavioral modification is often driven by very complex issues, such as access to healthcare, insurance, ability to afford medication and a good social support network," he says. "Simply calling patients and reminding them to take their blood pressure medication does not [do any] good if the patient[s] cannot afford their blood pressure medication. We need to get at the systemic issues if we really want to see a change in community health."

Sharing data in the community
Some hospitals aim to better manage population health by partnering to share data on patients throughout the community to identify current problems and strategize ways to eliminate them. Health information technology systems such as electronic health records and health information exchange can help hospitals gather more complete data on the population.

"Forward-thinking health systems have realized that we're more dependent on one another than ever before. Hospitals will begin taking risk for 30-day readmissions and diagnostic bundles without the ability to constrain patient choice in service selection. ACOs are in a similar situation, and both cases make having access to patient information from across the community critical," says David Kendrick, MD, CEO of MyHealth Access Network, a group of healthcare organizations that formed a community-wide health information system in Tulsa, Okla.

4. Focusing on the outpatient arena.

Another strategy many hospitals are using to reduce costs is investing in outpatient care, as the goals of healthcare reform — increased quality, decreased cost and improved population health — will shift much of patient care to less expensive outpatient settings.

"In our ever-evolving healthcare landscape, the key issue for Catholic Health Initiatives, and all health systems, is to implement ways to keep people healthy," says Kevin Lofton, president and CEO of the Englewood, Colo.-based system. "We must shift from a hospital-centric to a truly integrated system — essentially, creating clinically integrated networks that provide care across the continuum. It's a transformational change that will help us organize and operate in fundamentally new ways to improve care and make us more efficient at the same time."

Remaining relevant
Hospitals are building facilities such as ambulatory surgery centers, outpatient health centers and urgent care centers to remain relevant in an industry that is beginning to focus on keeping patients out of the hospital. "The center of gravity will start to move away from hospitals and toward ambulatory and physician enterprises, where patients have more frequent experiences," Mr. Woodson says. "Hospitals will remain essential, but will be more on the cost side of the equation, not as much on the profitability side."

Increasing access to care

In addition to investing in outpatient facilities, hospitals are focusing on outpatient care as a core competency, emphasizing the need to make care more accessible to patients. Increased access to care can lead to increased market share and an opportunity to better manage population health.

For example, in early May, Cleveland-based MetroHealth broke ground on the $23 million MetroHealth Middleburg Heights November Family Health Center — the first of four new outpatient suburban health centers. The addition of community-based outpatient centers is part of the health system's strategy to increase access to care, improve quality and reduce cost. Bringing care closer to patients makes services more convenient for patients, which may motivate patients to seek preventative care, one of the key elements of population health.

5. Investing in technology.

Investing in technology is also a key strategy for hospitals, not only to meet meaningful use requirements, but also to more easily connect with physicians, payors and the community — strategies discussed above — and to gather data necessary for improving quality. Health IT systems enable hospitals to capture metrics relating to the practice and outcomes of the delivery of care to identify areas that need improvement and track progress. Furthermore, resources such as decision support tools and computerized provider order entry help physicians improve quality and avoid medical errors.

"The implementation of electronic medical records has changed the way we're able to provide care for our patients," says Charles O'Brien, MD, president of Sanford USD Medical Center in Sioux Falls, S.D. "The implementation of EMR saves time and ensures patients' information is always up to date. It's critical for healthcare providers and staff to find the information they need to provide patient care and perform administrative tasks."

6. Merging with other hospitals and healthcare systems.

Mergers and acquisitions in the healthcare industry have spiked in the last few years as hospitals use consolidation as a strategy to gain capital necessary for health IT investments, outpatient facility construction, physician partnerships and other projects. In fact, the 2011 hospital merger and acquisition market saw the highest level of deal making since 2007, with 90 deals targeting 156 hospitals, according to "The Health Care Services Acquisition Report, 18th Edition" by Irving Levin Associates.

Strategy for survival vs. strategy for continued growth
Some hospitals are merging with larger healthcare systems out of a need for survival, having suffered steep budget cuts and shrinking patient volume. These hospitals may need to close if they don't find a partner, so they pursue a merger as a strategy for gaining capital and continuing to offer care in the community.

For larger hospitals and health systems, mergers and acquisitions are a strategy to increase market share, improve quality, gain efficiencies and reduce costs by eliminating unnecessary duplicated services. For these institutions, a merger or acquisition expands their reach in the community, giving them access to more data on the local population, which can be used to manage population health.

Combining strategies
While each of these strategies implemented alone may achieve some goals, hospitals need to use multiple strategies in tandem to see lasting, meaningful change.

"At Stanford Hospital & Clinics we are focusing on the delivery of leading-edge and coordinated care," Mr. Rubin says. "We seek  to combine cutting edge discoveries and translational medicine with a patient experience that delivers [the] highest levels of quality and service, which leverages the expertise of multidisciplinary teams, which is highly accessible and which supports lifelong health."  

More Articles on Hospital Strategy:

Hospital and Health System Strategy for 2013 and Beyond – Do Your Strategies Match or Beat Your Competitors'?
Ideas Into Action: 3 Hospital CEOs Talk Strategy Going Into 2013

4 Strategies to Boost Hospitals' HCAHPS Scores

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