In this episode, Theresa Hush, Co-founder and CEO of Roji Health Intelligence, discusses The Value-Based Care Reckoning – Why Hospital Giants Are the Next Battleground in the War on Costs.
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Learn how to listen to The Hospital Finance Podcast® on your mobile device.Highlights of this episode include:
- What is responsible for rising costs after mergers and acquisitions
- How health systems should participate in ACOs and downside risk payment models
- What health systems need to do to position themselves better in value-based care
- How high physician employment hurts the health system bottom line in value-based care
- The current physician shortage
Kelly Wisness: Hi, this is Kelly Wisness. Welcome back to the award-winning Hospital Finance Podcast. We’re pleased to welcome Theresa Hush. Theresa, who prefers to be called Terry, is a healthcare strategist and change expert with extensive experience across the healthcare spectrum. A dynamic speaker and thought leader, she focuses on value-based healthcare, the latest healthcare trends, consumerism, and transformation, including AI. Terry’s diverse experience spans executive roles in the public, nonprofit, and private sectors, with expertise on both payer and provider sides. With a background in healthcare policy and regulation, she often jokes that she has held every seat in the healthcare ecosystem except in the pharmaceutical industry. Her career highlights include transforming Blue Cross Blue Shield of Illinois, reforming the Illinois Medicaid program to improve access and funding, and leading strategic and contracting initiatives for a large clinically integrated hospital system. As a co-founder and CEO of Roji Health Intelligence, established in 2002, Terry has been instrumental in helping providers prepare for value-based healthcare through innovative technology and consulting services. In this episode, we’re discussing The Value-Based Care Reckoning – Why Hospital Giants Are the Next Battleground in the War on Costs. Welcome. And thank you for joining us, Terry.
Theresa Hush (Terry): Thank you so much. It’s really a pleasure to be here.
Kelly: Well, let’s go ahead and jump in. So how do you see hospital-based systems as targets in a war on cost? What is responsible for rising costs after mergers and acquisitions?
Terry: Well, the hospital scenario is really interesting right now because they’re just coming out of several years of the post-pandemic planning and correction and where sustainability was the big issue. But now they’re a storm creating some other big trends. One of those is consolidation. That has driven up costs. And it has done so largely by improving health systems’ negotiating power because, after mergers, the costs are higher. Most of the studies show this, at this point, whether that is vertical consolidation, horizontal, regional, national, it’s all coming down to the same thing of higher costs. At the same time, you’ve got hospitals as the major employer of physicians. Yet there are physician supply shortages and burnout happening. There’s a demographic that is flipping the payer mix to be higher Medicare in the next 10 years and lower commercial payment. And that is going to have profound effects on the hospital bottom line especially because hospitals have been a lot more risk averse. But their cost is higher than any other sector exerting the influence on the healthcare dollar. On top of all this is layered the politics of the budget and government spending that we’re entering into right now, where there’s a big, deep desire to lower the costs of healthcare, lower the costs overall, return money to the people, be anti-regulatory. And so, where we’re going in value-based care is going to be a really interesting experimental regime in which hospitals are going to have to play a different kind of role than they have up till now and really center on reducing costs.
Kelly: Very interesting. Thank you. And so how should health systems, which have been generally cautious about accepting downside risk, participate in ACOs and downside risk payment models?
Terry: Well, many hospitals and health systems have not really participated in the downside risk phenomenon of ACOs. And I see that changing over time. But on the other hand, the more impactful arena is going to be in the downside payment models, downside risk payment models, which focus on episodic payments. And the reason that is, is that hospitals are the biggest employer of specialists right now. And a lot of those episodic payment models are focused on specialty care. So, you’ve got both the ACO arena – which is mostly about primary care, although 40% to 60% of the costs are specialists – and then you have these separate downside payment models that are going to be leveraging. And some of them are already treading into mandatory models at this point. There’s a new upcoming what’s called TEAM program, which will be mandatory for five classes of procedures that are very expensive, but they’re also very common. And so hospitals that are employing the specialists will be getting that whammy on both ends, the physician fees and on the hospital fees related to those episodic payments. Therefore, they really have to know what they’re getting into and really model these payments. And right now they don’t have the tools to do that.
Kelly: Very interesting. So, what do health systems need to do to position themselves better in value-based care while being financially sustainable?
Terry: Hospitals are just beginning to invest in data in value-based care services. I would not say that they’ve really invested heavily in value-based care technology, which is a different animal than services. So, they’re starting to wake up to the fact that they need to invest in data. And a lot of that is coming out of their enormous investment in EHRs over the last two decades, really. But they have a lot of catching up to do, depending on how they’re using their own resources to do it. Over the long haul, they need to focus on change based on data. And right now, still, what is happening is a typical model where the patients are scheduling visits. It’s not an organized care plan where the physician or a clinical team is really reaching out to patients to be able to do that. Now, this is going to be very interesting because the physician supply is going to make it really hard to cover all of the services that patients need right now. And leaving the patient in charge, currently, is going to ultimately cause frustration of the patients. It will delay services. Things will go downhill. And the costs will be higher. So what hospitals need to do is start looking at their data in a way that focuses on interventions and improvements, identifying their high-risk patients, and then focusing on care plans that are going to improve the patient’s trajectory over care, through episodes of care. It’s not their core strength, however. The clinical part of that is very core, obviously.
But what hospitals are doing right now, and especially larger health systems, is that they’re trying to do it all. Having spent all this money on EHRs, they want to get the most benefit out of those EHRs. And so, they’re building their own data silos, and they’re trying to do AI, and they’re trying to do a lot of things to erect kind of interfaces and applications for services. And over time, that will prove to be a waste of their talent. They need to focus on providing the clinical leadership in that so that they can actually reduce the costs and evaluate costs in the context of what’s best for the patient and what is sustainable care.
Kelly: That makes a lot of sense. So, let’s move on to talking about physicians. So, hospitals employ 55.1% of all physicians. How does high physician employment hurt the health system bottom line in value-based care?
Terry: At this point, the physicians are driving volume because their compensation plans, the hospital incentives are to drive volume of patients into physicians. And so, it’s a lot of churning patients. That’s why you have a high burnout rate among physicians because they feel like they can’t get on top of actual, real care to patients. And they’re just pushing volume. And that is largely an effect of hospitals becoming the engine for the system. The financial engine for the system is fee-for-service in hospital-based care in which the physicians are pushing volume, they’re pushing them into procedures at the hospitals, or diagnostics at the hospitals. And that’s how the costs get out of control unless you have a different kind of mechanism going on for how you look at patients, which is more of a practice transformation. That is the bottom line of healthcare currently. The bottom line of healthcare in the future will be about clinical teams. There won’t be any alternative because there won’t be enough physicians to manage all of this care. And there will need to be designated other clinicians, nurses, social workers, and so on to help manage the patient’s trajectory through chronic disease and high-cost illness into a better path.
Kelly: Very interesting. So, we currently have a physician shortage. It’s currently around 37,000. But how will the increasing shortage of 86,000 physicians predicted in 2036, how will that affect health system’s ability to deliver on value-based care and payment models in cost control?
Terry: Well, obviously, they’re going to have to change. It can’t be only about seeing a physician. It needs to be about a responsibility vested in a team, which is led by the physician but has a range of responsibilities for the patient. For dietary services, for example, in cases of diabetes, or for rehabilitation and PT in the case of orthopedics. And the physician can’t be in control of all of that personally. It has to be designated and agreed on as part of a clinical pathway, and agreed at the point of care during the first few meetings, and then managed by a whole group of professionals involved in the clinical team for every patient, including the patient’s own support system. A lot of times, what happens is that the patient themselves is pretty much overwhelmed with the information that happens at a particular visit. And they really can’t manage that information effectively to embark on any kind of change. So, for example, a patient is diagnosed with diabetes. They don’t really know how to– or pre-diabetes. They don’t really know what is involved in changing the diet and changing their lifestyle factors. They’re just told to eat less sugar and less carbs and exercise more. But that isn’t really a plan. That’s a generalized statement that can’t be implemented without a lot stronger motivation and some kind of system to help the patient get there, into a self-management program or so on.
Very few larger systems are creating…and some are creating that kind of multi-pronged approach to dealing with patients with chronic disease or high-cost illnesses long term. And that’s what needs to happen for them to be able to manage both the shortage of physicians and to have better results in value-based care.
Kelly: Yeah, all that makes a lot of sense, Terry. Thank you for that. So larger health systems have contracted with employers directly for services, developed their own Medicare Advantage Plans in addition to ACOs, and generally tried to create a funnel to their services through all fronts. How does that make sense in an era of strong cost control?
Terry: Well, I personally feel like hospitals and other providers have not really grasped a strategy for market share. And so, what they’re doing is just opening the doors to anyone and seeing what works. But when you own an ACO and you also contract with other entities, like Medicare Advantage Plan, you could well be sabotaging your own ACO into a very high-cost enterprise because it’s well known that healthier patients go to Medicare Advantage plans because they don’t need the specialty services at the time that they enroll. And patients with a lot of health issues tend to stay on traditional Medicare. And so, you’ve got a situation where the ACO becomes extremely high cost by virtue of the patients that are in that ACO. And meanwhile, the hospital is playing on both fronts. So, it’s very difficult for a payer presence to own a Medicare Advantage Plan. I mean, contracting is a different thing. You can contract with any number of Medicare Advantage plans in private because that gives you more patients to work with. But if you own a Medicare Advantage plan, it’s very difficult to also own an ACO, and have both of them be workable enterprises.
Kelly: Wow, thank you for explaining that for us. Well, Terry, thank you so much for joining us today and for sharing your insights on The Value-Based Care Reckoning – Why Hospital Giants Are the Next Battleground in the War on Costs. We really appreciate all of your insights.
Terry: Great. Thank you very much for the opportunity to talk to you.
Kelly: Yes, definitely. And if a listener wants to learn more or contact you to discuss this topic further, how best can they do that?
Terry: The best way to contact me is either through LinkedIn, where I’m Theresa Hush, or they can email me directly, hush at rojihealthintel – with one L – dot com.
Kelly: Great. Thank you for providing that. And thank you all for joining us for this episode of The Hospital Finance Podcast. Until next time…
[music] This concludes today’s episode of The Hospital Finance Podcast. For show notes and additional resources to help you protect and enhance revenue at your hospital, visit besler.com/podcasts. The Hospital Finance Podcast is a production of BESLER | SMART ABOUT REVENUE, TENACIOUS ABOUT RESULTS.
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