Market disruption: How 4 healthcare leaders are dealing with it in their own organizations

How are healthcare organizations dealing with new entrants to the market, telehealth and the trend of care shifting to a nonhospital environment?

In this stand-alone roundtable, Nordic, a healthcare consulting company, partnered with HFMA, to learn how some healthcare leaders are dealing with this disruption within their own healthcare systems.

Although the healthcare delivery system, for the past several decades, has been centralized around hospitals or facilities for reasons that make sense for operations, access, capital efficiency and patient experience, recent trends in technology have created the opportunity for disruption by innovators. These new entrants to the market, from both within and outside of healthcare, are redefining how healthcare is delivered. These disruptors may be able to improve access to services, deliver care at a lower cost, improve efficiency, or facilitate access to information and/or data. And, certainly, the pandemic has accelerated the adoption of disruptive technology.

Who are these disruptors? They might be retail clinics, home health, hospital-at-home or new primary care models. Consideration also should be given to the impact of telehealth, concierge care services and ambulatory surgical centers. And there is also the role of wearables or health trackers, which are the types of technology leading the trend to move the centralization of healthcare away from the hospital and into the community. 

The roundtable was moderated by Katie Gilfillan, HFMA’s director of healthcare finance policy, physician and clinical practice, who also asked the initial questions.

As healthcare is becoming more decentralized, what nontraditional entrants are putting pressure on patient acquisition and retention?

Mark Meyer, CFO, UT Southwestern Medical Center, Dallas, Texas: We are concerned about the shift to a nonhospital-based environment. We have a large cancer service, as well as other infusion-type services, and we’re seeing some migration among the managed care, pushing that to a nonhospital-
based environment.

Mike Norman, CFO, Genesis Healthcare System, Zanesville, Ohio: In terms of decentralized care and new entrants, even though it’s in rural Ohio, we have, in about the past 18 months, had a group that is basically sponsored by private equity money. So it’s a primary care group targeting the Medicare Advantage population. Our main concern with these new entrants is, we have a primary care group ourselves.
We have been rapidly moving toward value-based care and toward providing care outside the walls of a hospital, and a lot of that has to do with making sure that we don’t become commoditized by some of these other players. 

Is this having an impact on revenue — or will it in the next three years — and if so, how is your organization adjusting its strategic priorities in response?

Tammy Wallace, CFO of Hospital System, UCLA Health System, Los Angeles, Calif.: We have seen a huge increase in telehealth. Some of the issues we’re working through right now. We’ve had some commercial payers that are denying the technical facility component. We’re a health system with hospital and nonhospital licensed clinics. We’re finding that the commercial payers sometimes disallow the facility fee. Telehealth is a favorable model if you have a patient that [needs] a brief check-in or for lower acuity level-one or level-two visits. For some of the more complicated patients, it’s not as good of an alternative to in-person care.

From a cost perspective, the industry has done some comparisons showing that the cost of care is really not that much lower when you consider that someone has to make sure that everything’s all set up, all the technology is ready, etc. You still really need an equivalent of a medical assistant to “room” the patient, similar to in-person care. I think the advantage is that it is a convenience factor for the patient.

Meyer: Our concern on the telehealth side has been the conversion of telehealth to procedures relative to normal in-person visits. And, certainly, initially we saw a fairly big divergence from the conversion — so we’re worried that telehealth just converts to an in-person visit, then you get the procedure. That differential between the virtual direct to procedure and the in-person to procedure, we’ve seen that narrow as the
percentage of telehealth has come down. So we remain concerned about
investing time in telehealth that’s not really meaningful to the patients. That’s something we’re still looking at, service line by service line, to make sure that there’s a value-add in providing telehealth and all the different services.

Norman: We’ve had similar experiences with virtual visits. We started those in the early stages of the pandemic to keep access going. We had the same success initially, still have a high number of virtual visits; however, they have come down. We, too, have been worried about the patients who, in terms of needing a procedure, is that conversion rate the same as an in-person visit? So we’ve been monitoring that.

Is your organization partnering or collaborating with new entrants?

Meyer: For UT Southwest, we’re a state organization, so we’ve got some complications around joint venturing with third parties that just make that a little more complicated. But, in Dallas-Fort Worth, probably the same way in Houston, we’ve got a joint venture on every street corner. We try to do things internally within our medical staff. We’ve got 2,000 members of our medical staff, so we try to provide incentives to our medical staff by sharing margins with [them] internally and with their departments.

Norman: We do have some concerns, especially when you get into some of these entrants, with whether or not they’re backed with private equity
money. I don’t know if that matters, but they tend to be relatively aggressive in terms of patient attribution and retention. 

Wallace: We have increased our footprint in lower-cost ambulatory service centers throughout the region. We also have transfer agreements with other community hospitals. This helps the continuum of care by transferring some of our lower-acuity patients out and ensuring more complicated tertiary and quaternary (TQ) patients can receive care here at UCLA Health. The goal is that we’re sending our non-TQ patients over to them, and they’re sending the more complicated patients over to us.

And then, specifically, we also have care partners in rehab, home health, as well as a respiratory hospital in order to move some of our longer-stay, ventilator patients to an appropriate long-term care setting.

How has the decentralization of healthcare delivery impacted your organization’s strategy?

Meyer: We’ve also been shifting prices, charges, to the extent they matter, to a more inpatient environment. And [we’re] trying to align our contracts, frankly, to get our margin on the inpatient side, which is where we provide … our value-add at UT Southwest.

We have not historically had a large family practice service across North
Texas. That’s something we’re starting to invest in, but we’ve been more of a niche, high-end service provider. Our case mix is around 2.3 to 2.4 or so. So most of the folks that come to us, certainly on the inpatient side, they’re pretty sick. We’ve been hesitant to compromise our pricing on the inpatient side.

Norman: We’re not in a market where there’s three other hospitals providing similar services, so that’s a little bit of an insulation; but we still haven’t taken our foot off the gas in terms of going down this value-based care model.

We’re in a market that’s about 50% Medicare, so we look at our strategies, depending on the population, a little different. We tend to go after different populations a little differently; but on the commercial side, which is about 25% of our population, we have done virtual visits but also near-site clinics and tried to take the care back to the communities.

We have a home-care business, so we’ve been doing a lot of things in conjunction with home care. We also have our own wholly owned ambulance service. So we’ve been looking into paramedicine or community medicine, where our units are out there anyway, so can they — before a patient gets transferred or transported or brought to the ED — provide some sort of care in the home.

Wallace: With hospital-at-home, we have concerns that the change might dilute our [indirect medical education] IME and [graduate medical education] GME reimbursement ratios that we have for our residents. So, if we were going to explore an arrangement such as this, I think we’d have to figure out how we joint venture or utilize a non-hospital entity for the arrangement, and we haven’t performed a deep-dive analysis yet.

Shannon Yasseri, managing director, performance improvement practice leader at Nordic, Madison, Wisc.: The goal of trying to reduce cost of care might be focused on trying to keep people out of the hospital. What has worked for you all in achieving your strategic goals?

Wallace: There is a fantastic research article on this topic. Basically, it concludes that the discount rate is 3% or 4% for Medicare on home health. The commercial payers may want a significantly larger discount. It breaks down some case studies on several different hospitals that they have looked at in detail. And they also looked at some of the areas where they saved costs. It’s really fantastic at getting the lay of the land with what’s going on with home health. It really needs to be those very low-acuity patients because most of the savings are in the ancillaries. That also means that if they really need ancillary services, they can’t get them unless it’s [a very portable] type of machine [that could be loaded into a] car.

Norman: What’s worked for us has been different for Medicare patients and commercial patients — we focused on the initiatives that really reduce the costs. We were so focused, initially, on implementing what hospitals in Columbus or Cleveland or wherever were implementing that we tended to spend $5 million to achieve either little or no savings. So we now focus on those initiatives that drive down costs.

We really are struggling with readmission rates with home health. We’ve reduced the length of stay, so when you look at one graph, you’ll see our length of stay dropped off tremendously because we’re pushing people out the door and into home health very quickly. …  And then, you know, it’s like the revolving door. We had a relatively good admission rate. Now all of the sudden, of those patients we send out the door, 30% of them are coming back. It way more than doubled our readmission rate. At the end of the day, that doesn’t save too much.

So we’ve really just focused on, how do we take several of the chronic conditions — COPD, heart failure, those types of conditions — and really just build the clinical pathways to either keep them out of the hospital or, if they come to the hospital, make sure that we follow a pathway to get them out as soon as possible. And that’s been very successful. On COPD, we’ve not only reduced a number of hospital admissions related to that, but also reduced the length of stay by about a day-and-a-half.

Meyer: On the readmissions, we had a fascinating debate going on here at UT Southwestern with our quality department about whether or not readmissions are actually good from a quality-of-care standpoint. And this is primarily with heart failure-, CHF-, COPD-diagnosed patients. There’s a robust argument going on with our quality-of-care department doctors as well as some of our heart specialists, in particular, and some of our transplant specialists, that argue that readmissions within 30 days or 60 days are appropriate and are a good thing. They have statistics and data that prove that the quality of care is actually better for patients that come back for legitimate reasons. It’s just an interesting dichotomy versus what I’ve always heard.

To the comment with the rate of ED admissions, that’s another one we’ve been talking about for at least my 25 years in healthcare. It seems like COVID went a long way toward solving that problem. Our admissions, as a percentage of our ED visits, used to be about 25% of our ED visits resulting in an admission. And then during COVID, that went up to 34% to 35%, and it’s been maintained at about 33% to 34%. People are more wary of coming into a hospital ED environment. But part of it may also be the proliferation of the urgent care centers, and people feel safe or would rather go around the corner to an urgent care center rather than going to an ED. Interestingly enough, it seems that some of that excess emergency care has been eliminated over the last 12 to 15 months.  

About Nordic

Nordic is an award-winning strategic partner to health leaders around the world, helping them navigate complexity and harness technology to create healthier systems, businesses and people. Our goal is to empower healthcare systems to leverage the digital transformation seen in other industries. We help our clients envision and connect healthier systems that lead to healthier businesses and healthier people.

Our talented professionals bring deep clinical expertise and extensive technical knowledge, helping you prioritize, refine your strategy and develop a clear roadmap to better quality care while lowering your costs. We bring together leadership, IT and operations, asking the right questions to drive long-term success. Learn more at www.nordicglobal.com.

This published piece is provided solely for informational purposes. HFMA does not endorse the published material or warrant or guarantee its accuracy. The statements and opinions by participants are those of the participants and not those of HFMA. References to commercial manufacturers, vendors, products, or services that may appear do not constitute endorsements by HFMA.