In a sign of the quickening pace of transformational change in U.S. healthcare, numerous keynote and concurrent sessions at this year’s World Health Care Congress, held last week (April 30-May3) at the Marriott Wardman Park Hotel in Washington, D.C., were crackling with energy and strongly trending developments this year.
I want to comment on the May 2 keynote panel discussion session, “Propel the Shift to Value-Based Care: The Forefront of Financial Sustainability, Cost Reduction, and Outcomes Improvement,” moderated by Robert Pearl, M.D., executive director and CEO of The Permanente Medical Group, the physician organization component of the Oakland, Calif.-based Kaiser Permanente organization; that session offered its audience really enlightening perspectives on the broad dynamics of tension between and among purchasers, health plans, hospitals, and physicians, in the current healthcare market, and the current power struggles around consolidation and contracting. I plan to comment on that session very soon.
Meanwhile, though, I want to say a few things about a fascinating discussion that took place later that day as part of the direct-contracting track at the Congress, a discussion among stakeholder group leaders that took place during the session “Employer and Provider Perspectives: Direct Contracting and Bundled Payment Partnerships to Bend the Cost Curve,” was a fascinating one. Those engaging in that discussion were Bob Ihrie, former senior vice president, compensation and benefits, at the North Wilkesboro, N.C.-based Lowe’s Companies, Inc.; Olivia Ross, associate director, Employers Centers of excellence Network, at the San Francisco-based Pacific Business Group on Health (PBGH); and Mark Shaver, vice president, business development and strategic alliances, Johns Hopkins Medicine (Baltimore).
Having a (recently retired) corporate benefits senior executive, a business alliance senior executive, and a hospital system contracting executive, share blunt perspectives on direct contracting-based partnerships, was truly fascinating. Basically, shorn of a lot of details, what Ihrie, Ross, and Shaver engaged in discussing had to do with a trend that every senior executive of any patient care organization should be following: the trend on the part of mega-corporations like home improvement empire Lowe’s, towards developing and executing on contracts in which they send employees and employee family members to centers of excellence that they’ve officially certified, including Johns Hopkins, Cleveland Clinic, Mayo Clinic, etc., etc., based on very rigorous outcomes measurement, process requirements, and other mandates. Benefits management executives like Ihrie are documenting very significant financial savings from these programs, while the Pacific Business Group on Health is elbow-deep in helping large self-insured corporations like Lowe’s to manage these programs.
Panelists (l. to r.) Shaver, Ihrie, and Ross
As Ihrie noted, for an extremely far-flung self-insured employer like Lowe’s, with its 1,800-plus home improvement stores spread across the U.S., doing what the Chicago-based Boeing Corporation, with its massive plants in Washington state, California, Missouri, and South Carolina, and its ability to build bricks-and-mortar corporate medical clinics in those locations, the options for Lowe’s are rather different. Thus, the desire to create systems to improve their patient outcomes for their covered lives, and improve costs.
Indeed, Ihrie told the audience, “The quality results have been so overwhelming that for Lowe’s for 2017, if you elect not to go to a center of excellence, you need a mandatory second opinion, and if it doesn’t approve, you won’t be covered.” He further noted that “Wal-Mart actually mandates travel to a center of excellence.”
PBGH’s Ross, asked about the value of these large, complex sets of arrangements, said this: “The value of collaboration? The main thing we add is this idea that collaboration has value—it’s about shared learning. We get together and talk about the summary it possible plan language they’re using, etc.—all the employers talking together continuously. Also, they want to make sure there’s a consistent patient experience. All of our centers are required to participate in ongoing continuous quality improvement together, and we’re setting continuous quality requirements. We’re totally outside the normal health plan, so we have a lot of flexibility and can design things. So that quality work is incredibly important,” she added.
Meanwhile, Johns Hopkins Medicine’s Shaver, who noted that his organization is an $8 billion enterprise, which includes “a robust international program with 20-plus partnerships in 17 countries,” nonetheless is deeply interested in PGBH’s program and in being a center of excellence in general. “My role is to lead our national strategy in figuring out how we position our delivery system to partner with large employers like PBGH and Lowe’s,” he noted. And he said that he is “focused on the shared learning we are trying to achieve in understanding the needs of large employers, but also the financial burden on patients. We need to be cost-effective and nimble and focus on value,” he added. “We very early on had a very innovative primary care practice that was part of a large HMO early on, so we’ve been in the business of bundled contracts for a long time, starting with cardiac and moving into solid organs and beyond. They bundled rates allow us to have price control and also predictability. We’re trying to innovate and to continue to propel that forward,” he added.
What’s more, Shaver went on, “In addition to the work we’re doing in positioning the delivery system, we very much understand that working with employers will be huge. We have 65 onsite medical clinics, including at Pepsi—a large executive health program. Also, we have a Grand Rounds Second Opinion and Direct Referrals program to position the delivery system” in the current market. “And we have a new program called Managing Cancer At Work, a navigation tool”—among other initiatives at Hopkins.
Here’s the thing: senior executives at Johns Hopkins Medicine, as well as at Cleveland Clinic, the Mayo Clinic, and other large, resource-powered integrated health systems, have been strategizing now for years, around the potential to grow their presences and brands nationwide, with direct contracting with very large, self-insured corporations. Of course, those corporations represent a numerically limited percentage of the overall healthcare market; but, and this is very important, their involvement in programs like the Pacific Business Group on Health’s, are definitely becoming more and more destabilizing to local community hospitals in their home markets, particularly those that remain unaligned with multi-hospital integrated health systems.
So these partnerships of corporate purchasers and integrated health systems are becoming disruptors in the markets in which the purchasers have employees and employees’ families, but in which they—the health systems—are not native. So the senior executives of unaligned community hospitals need to begin to seriously rethink how they see their local competition—because, increasingly, the competition maybe be coming not from Hospital B down the street, but from Hopkins or Mayo or Cleveland Clinic. It’s as though the chessboard of healthcare market competition is now becoming a 3D chessboard, and freestanding hospitals’ executives need to begin to play on all levels.
What’s more, there are a lot of data and information technology implications here that healthcare IT leaders need to think very carefully and strategically about. Not only will the freestanding community hospitals impacted by these direct contracts need to rev up their core clinical information systems, revenue cycle management systems, and fundamental data analytics capabilities; in order to compete with the Hopkinses, Mayos, and Cleveland Clinics, they will need to become far better at documenting their clinical and financial outcomes, in order to be able to compete on some very core clinical service lines, particularly total hip and knee replacement surgeries and cardiac surgeries—service lines that are bread-and-butter lines for most community hospitals. And, just to note, this is happening at the same time that nationwide retail pharmacy chains, including CVS, Walgreens, and others, as well as Wal-Mart, are creating micro primary care clinics within their retail locations, adding yet another layer of potential disruptors in terms of local-market competition.
Granted, given the fact that numerically, most large U.S. corporations will still work primarily through health plans rather than through direct corporate-provider contracting. But even so, this direct-contracting trend appears to be a game-changer. And, as mentioned above, this will be posing major IT strategic and executional challenges for CIOs, CMIOs, chief data officers, and everyone else in IT, informatics, and data analytics at community hospital systems and large medical groups nationwide.
The U.S. healthcare market, under tremendous cost and clinical and operational performance pressures, is beginning to change rapidly now. It’s absolutely time for healthcare and healthcare IT leaders to focus on the full range of disruptive potentialities (including direct threats) coming at locally based patient care organizations, from many corners within the nationwide healthcare system. Time to move strategic planning and IT strategy up to warp speed!