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January 2, 2012

ACO Proves Major Political Turning Point For Boston Hospital Chain

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Transforming a hospital system into a fully-functioning ACO is a huge project, and one which requires a big commitment.  It’s hardly surprising that going through the process would change how its leaders think about their business.  But the following is the first case I’ve heard of in which a hospital system made a major break with its peers over its ACO status.

Apparently,  for-profit Steward Health Care System has just resigned from the Massachusetts Hospital Association, bringing its 10 hospitals (and 11 percent of the MHA’s revenues) with it.  Steward, which was created by the acquisition of six-hospital Caritas Christi Health Care Chain a year ago by VCs, has since picked up four hospitals and done a host of doctor deals.

Not surprisingly, Steward seems to have bruised some competitors’ feelings along the path to ACO-hood, which probably has something to do with its MHA departure, but Steward isn’t copping to that of course.

At this point in its evolution, Steward’s leaders say, the MHA’s positions on politics don’t represent its needs anymore. Particularly when it comes to health reform, Steward’s leaders feel it now has a different take than other members of the MHA, which has to advocate for shared positions across almost 100 hospitals with varied approaches.

As for me, I’m not sure what those differences are; in fact, I’d think that a “real” ACO would be an inspiration for, and partner to, other hospitals on the path to health reform.  In fact, this raises some questions as to how the growing ACO trend will affect hospital relationships this year:

* Are IDNs that work hard at building a true ACO going to upset their peers so much that it will create a drag on their business overall?

* Most healthcare business models have some detractors and some fans, but is this one of the few that can actually divide the industry?

*  Are ACOs a direction every IDN can take, or are there resource constraints (such as the size of a local market or number of unaffiliated doctors) that will prevent some from building one? Will the coming rush create ACO “haves” and “have nots”?

What do you think, folks?  Have you seen anything happening in your markets that might answer these questions?

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August 29, 2011

FTC: This Merger Looks So Good, It Has To Be Illegal

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If you’re as cynical as I am, it’s not hard to take a certain amusement in the goings-on in Toledo over the merger between an aggressive for-profit hospital chain and a suburban not-for-profit.

Over the past few months, the Federal Trade Commission seems to have developed a passionate interest in the merger between a formerly Lutheran-owned non-profit, St. Luke’s Hospital of Maumee, OH and ProMedica Health System of Toledo. ProMedica, which owns 11 hospitals in Ohio and Michigan — including four in the Toledo metro — is a swaggering giant with $1.7 billion in annual revenue.

What a sweet deal it was for ProMedica. According to Moody’s, the facility had very little debt ($8.3 million) and 412 percent cash-to-debt coverage as of November 30, 2009 (recently enough to matter).

Sure, as of early 2010 St. Luke’s had an operating cash flow deficiency of -2.0 percent and -9.8 percent operating margin, and at least according to Moody’s, had cut some cut-rate contracts with payors accounting for 22 percent of its operating revenues.

On the other hand, its miserably weak competitive market position which, as Moody’s noted in its downgrade report, included clashes with ProMedica, went away with the stroke of a pen when the two consummated their agreement. ProMedica sweeps in with its Aa3-rated borrowing capacity, invests a relatively slim $35 million and picks up the 10 percent market share SLH held at the time. I don’t know what 10 percent of the market is worth, but that has to be a fire sale.

Dig this if you can, cats and kittens:  According to the FTC,  the deal increases ProMedica’s market share in Toledo to 58 percent of inpatient services and (get this) 80 percent of high-margin inpatient OB services. Wow… Small wonder the FTC smells a rat.

Of course, in the sort of excess of confidence you always see in these deals, ProMedica’s executives are pretending the deal was good for the public and stuff.  I don’t know about you, but I find the following comment (made by ProMedica CEO Randy Oostra to the New York Times) to be preposterous:

“We could coordinate care,” Mr. Oostra said. “We could improve quality at St. Luke’s by adopting electronic health records and using clinical protocols to standardize the delivery of care. But the F.T.C. has stopped us in our tracks.” 

OK, let me get this straight, Mr. Oostra. You could only connect with St. Luke’s by buying it and forcing your EHR down its throat (after all, we know you’re not going to put St. Luke’s on Cerner if you use Epic)? You’re buying a hospital with tremendous upside largely because you think you can standardize care — because that will, of course, increase effectiveness and lower prices?  Oh, and as far as sharing data and coordinating care: have you ever heard of a health information network? Or an Accountable Care Organization?

Really, sir, if you want to impress the FTC with the public benefits of your transaction, you’re going to have to try a little harder. If you’re already phoning it in, to the Times no less, you’re not just arrogant, you’re stupid.

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August 22, 2011

Another safety-net hospital on life support: Miami’s Jackson Memorial on its last legs?

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You know, no matter many how many times  you watch it happen, it’s always an ugly spectacle.

When a safety-net hospital goes under because, well, being a safety net costs a ton, the poor are left with less than nothing. Worse, along the way, the hospital often slips from being an inelegant but functional resource to a nasty, scary place you wouldn’t send your worst enemy.

I was truly sorry to read that Jackson Memorial Hospital of Miami — a sprawling, 1,550-bed campus which still houses outstanding programs like the Bascom Palmer Eye Institute and the Ryder Trauma Center — seems to be moving rapidly from quick to dead.

The giant public entity, which serves as the primary teaching hospital for the University of Miami Miller School of Medicine, has faced plenty of controversy of its time, including accusations that some of its poor clientele were allowed to die for lack of followup care. That, of course, is an extremely serious matter.

But for most of its life, Jackson did at least offer the roughly 650,000 uninsured of Miami-Dade county an alternative to going into hock in the pricey EDs run by its competitors. It went through a colorful string of outspoken leaders, none of which seemed to share the same vision for the place, faced lawsuits and immigration issues and politics galore, but continued to stay afloat.

Those days, it seems, are over. According to a recent Miami Herald article, the Jackson Health System lost $337 million over two years, despite taking in $350 million a year from sales and property tax revenue alone.

This week, the system announced that it was hiring new leaders to step into the top administrative roles at JHS.  But in a system where its own employees refuse to get their care on site, I get the feeling that “changing deck chairs on the Titanic” covers things. What a shame.

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June 4, 2011

Hospital EMR actually works

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As some of you may know — if you read the EMRandEHR.com blog — I recently had an experience which set a fine example as to how much health IT can help hospitals when deployed well and supported by smart training. In short, a family member just had an effective, focused trip through a hugely busy ED, largely due, I believe to the technology it uses.

The hospital has deployed the Picis electronic document management system, along, seemingly, with traffic control modules, to strip much of the fat away from a patient’s trip through the ED.

With staff clicking away happily, patients moving in and out promptly and physicians having easy access to patient histories, med lists test results and more in one easy-to-access place, I saw a pretty neat ballet in place.

The truth is, however, that this seems to be an exception rather than the rule. Far more  hospitals I’ve visited seem to have taken a heavy-handed, training-light approach to introducing their EMR.  (One facility had installed screensavers on staff desktops that read “Cerner is coming.” I can’t imagine this gave any employees a big thrill, or helped them get prepared.)

Actually, when I passed through the same facility later, I saw flustered-looking nurses trying desperately to get simple transactions done, forming an insecure cluster together as they tried to help a colleague enter some observations. Thaaaat didn’t give me a nice, secure feeling about the hospital’s odds of making clinical mistakes.

I hate to say this, but I think the odds of a hospital IT department changing its culture enough to truly support EMR users is pretty darned small. My guess is that it will take several years before hospitals have a clue as to how to handle the big, huge change management process their EMR produces. Good luck, guys.

 

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April 30, 2011

Hospital merger mania on the rise across the U.S.

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As I reported a few days ago, hospital mergers and acquisitions hit a historic high last year.  This is shaping up to be a pretty frenzied year for hospital M&A as well.  In fact, this may be the year that hospitals see a historic change in how they’re managed and they define themselves.

How much merger activity will we see?  At the HIMSS11 event earlier this year, John Reiboldt of Coker Capital Advisers suggested that the single stand-alone hospital may be a “concept of the past.”

While the comment by Reiboldt may have been a bit tongue-in-cheek, it’s clear that many smaller hospitals and health systems are giving up long-held independence in an effort to survive.

What’s more, such deals seem to be getting a friendlier reception from the Department of Justice and the FTC, which revised its Horizontal Merger Guidelines in August of last year.

A few randomly chosen examples of regional mergers underway:

* The merger between Albany-based  St. Peter’s Health Care Services, Northeast Health and Seton Health/St. Mary’s Hospital is should close shortly.  After three years of talks, the three entities have gotten the FTC’s blessing to move ahead.

*Alongside of its massive effort to acquire Tenet, Community Health Systems has signed a definitive agreement to acquire Mercy Health Partners, a three-hospital system based in northern Pennsylvania.

* Peoria, IL-based OSF Healthcare may absorb Rockford (IL)  Healthcare System, despite some degree of public hostility to the proposal (and complaints from rival SwedishAmerican Health System.

I see no reason why this consolidation should slow down this year, particularly as reform deadlines grow closer. And I fully anticipate that hospital mergers will create a ripple effect that tips other industries into new formers of cooperation.  Fasten your seat belts — this year is proving to be a wild ride.

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April 28, 2011

There’s no good excuse for stifling physician-owned hospitals

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When health reform was passed, part of the law forbid physician-owned hospitals from expanding or undertaking new construction.  The rules affected roughly 300 hospitals in 34 states, offering services ranging from acute care, women’s, rehabilitation and psychiatric care.

You won’t be surprised to hear that the trade group representing such hospitals, Physician Hospitals of America, continues to fight for removal of this restriction, found in section 6001 of the Patient Protection and Affordable Care Act.

I’ve got to say I’m with the PHA on this one. Why on earth must we block the development of physician-owned hospitals?  Yes, there have been a couple of horror stories where specialty physician-owned hospitals –lacking an emergency department — failed to address patient needs.

But from where I sit, those stories are no more common, proportionately, than they are amongst traditional acute care hospitals. Besides, if the main concern legislators had was emergency department care, they could have mandated that all physician-owned facilities have one.

No, it’s clear that physician-owned hospitals make traditionally-structured facilities nervous, and that they’ve worked hard to put them in their place.  Other than protecting the profit stream for themselves, however, I don’t think they have a leg to stand on.

 

 

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April 27, 2011

Big hospital chains have outlived their usefulness

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Regardless of what Community Health Systems execs may think, big, massive, overstuffed hospital mergers aren’t going to work in the next decade.  No amount of economies of scale will make up for the dollars health systems will lose if they decide to operate their business if it were Walmart.

Look at the history of the market.   Massive scaling up of hospital infrastructure — remember the grand Medicare-fueled building party in the 1960s? — has always been followed by financial weakness, overbedded markets and vicious regional competitions nobody can win.  Hospitals that try to reproduce this technique in multiple markets are only going to do worse.

In truth, I imagine CHS and other large hospital players are more focused on generating leverage with payers.  (They mostly have to scream “economies of scale” to satisfy Wall Street investors who wouldn’t know an ICU from an inside pitch.) After all, as reform washes over the land, the big health plans are going to see big upward jolts in their covered base.   And since the newly-insured aren’t likely to be cash cows, health plans are going to be more cost-conscious than ever when they negotiate.

“Massive scaling up of hospital infrastructure — remember the grand Medicare-fueled building party in the late 1960s? — has always been followed by financial weakness, overbedded markets and vicious regional competitions nobody can win.”

That being said, I don’t think creating hospital megaliths will tilt the scales back into balance.  Hospitals will always be on defensive when it comes to health plan contracts;  the brutal fact is that health plans have the money, and hospitals don’t. Hey, you can scream, we’re the best in the region, but let’s face it folks, health plans are more in the quantity than quality game.

So, what do hospitals do to cope with their vulnerability?  Careful, gradual acquisitions in key markets, strategically positioned to streamline the way they run key service lines across a region.  And integration, Lord yes,  but I’d argue creating your own health plan is a much better bet than buying medical practices willy-nilly.  (OK, you can do both, but I’d argue that putting a health plan in place should be the priority.)

By the way, I’d argue that the growth of the ACo concept suggests that I’m not alone — that just about every policymaker thinks that managed care-style medicine needs to be nurtured by providers.

Under these circumstances, big hospital mergers look even worse, as it’s pretty hard to build tight collaborative relationships when all orders have to come from the mothership in Nashville or Dubuque.

No, I say, a time comes for all industries when it’s time to think small, and this is it.  Tenet, HCA, Community Health, the big Catholic systems — now is the time to decentralize aggressively or pay the price. You’ve got three and a half years before reform goes full tilt. Tick tock, folks.

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April 18, 2011

Google takes over hospital industry, CMS in private leveraged buyout

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Read the headline?  Those are things that just aren’t going to happen, right?

Well, I’m pretty sure the things that we can expect for the next few years will end up looking just about that strange when we read about them a decade later.

My personal faves are a) Accountable care organizations dominate U.S. healthcare system, b) Most hospitals are connected to doctors via EMR and c)  Emergency departments no longer swamped with uninsured patients.

Anyone else want to volunteer “future headlines” — stuff that might come true but seems impossible at the moment? Or stuff that should happen but just can’t?  Sarcastic or serious, your choice.

So, you got your crystal ball out?  I’ll publish all of your predictions, crazy or not. 🙂

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December 13, 2010

Bigger, better, faster hospitals are a great idea

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Nagoya City University Hospital in Kawasumi

Image via Wikipedia

The other day, I read a tweet from the estimable Matthew Holt in which he summarized what hospitals have been telling him.  In short, they seem to want bigger, badder, newer facilities.  In fact, if I recall correctly, they feel they’re in deep mud if they don’t get these  upgrades and/or new facilities soon.

OK, usually I take such statements with a grain or two of salt. After all, who  — in any industry — doesn’t want the latest and greatest, from the toys we squabble over on up into adulthood?  But in this case, I think we should be taking Holt’s feedback quite seriously.

After all, despite the fact that I’m not an architect, hospital CEO, designer  or any variation on same, I can immediately think of a few very important reasons for a massive buildout of hospitals to improve care and meet today’s process standards:

*  Shared rooms are right out.  There are already a fair number of hospitals (no stats to hand but this IS happening) who are converting all shared rooms to single rooms within their facility.  Their main rationale is infection control, but I think they’re also hoping to streamline the care process by allowing nurses to think rationally, about one patient a time.

*  Older physical plants are a huge liability. When you’ve got a house full of sick people, the last thing you want is a drip from that 20 year old pipe, asbestos to remediate, mold in ancient ducts and so on.  While maintenance will be an issue for any facility, we’ve learned a lot since the first wave of current hospitals were built. Let’s get rid of ’em ASAP.

*  If you’ve ever owned a house from the 70s (and I have) you know that they leak air conditioning and heat out at a ferocious rate.  Sure, you can weatherstrip and insulate and hang curtains to seal out air from the windows, but eventually, it starts to cost so much that it’s a big waste.  A new place — or hospital — is much cheaper over the long run.

*  And while they’re at it, hospitals newly-designed hospitals can be planned with green energy usage in mind — a trick which might not work out in a clumsy plant from decades a ago.  That not only helps to save the earth, it can save big bucks too.  Again, I don’t have a case study handy but Google “green hospitals” and  you’ll find some heartening stories.

* Oh, and I almost forgot…old hospitals can be a nightmare for techs to work around.  Whether you’re talking about simply making sure Wi-Fi gets to every corner of the building or rolling out an EMR, nobody needs to live with design flaws from the 60s.

So, though I’m surprised to say it, it seems to me that bigger, better, faster hospitals are indeed what the doctor ordered.  We’re not talking self-glorifying projects approved by boards to prove they’ve got the juice to make it happen, we’re talking simply about getting with the times.   Let’s hope plenty of hospitals find the means to do so.

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November 19, 2010

Meaningful Use: What is it good for? A lot of smoke and mirrors

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EHR Adoption Framework_AD

Image by andyde via Flickr

Meaningful Use?  Whoa! Good God y’all! What is it good for?  Very, very little. Sing it again…

OK, maybe it’s the greatest idea in the history of health IT, or maybe it’s a good idea gone terribly, terribly wrong (my theory), but it it’s not going to move hospitals along any faster than they are already toward smart, sophisticated IT use that saves lives.  There are efforts out there that do stand a chance of improving IT use (take your pick from dozens, which I’ll get to in another post), but has anyone provided clinical, social science or other data suggesting that going to MU first was the best way to spend all of this time and money?

After my months-long absence from the blog that I love (<grin>) I’m freshly charged up with looks to me like another major distraction from improving quality.

Here’s my logic: check me  out here and see if you agree. The harder the government comes down on hospitals, the more dust will get swept under the rug.  And when that “dust” is inefficient processes that stand a chance of killing people,we’re not talking any kind of joke here.

Want an idea of why I’m so skeptical?  Here’s a few (why not a  couple of bonuses):

*  Just got off the phone this week with a children’s hospital CEO, who’s found that 20 percent or less of his colleagues are ready for meaningful use.   And check out an Information Week article below, which reports that just 40 percent of hospitals  meet 5 MU criteria. Wow.

*  Why has it suddenly become a priority, in recent years, to automate processes at the bedside before the processes themselves have been perfected?  When Your Editor attended a conference this week on healthcare IT topics, the bedside came up a lot, but not much talk on whether we’ll be running into a GIGO problem.

* Medical groups and hospitals are under great pressure to form Accountable Care Organizations, a new entity for which there are some precedents (decades of capitation) but no clear-cut model.  With doctors and hospitals struggling to create the most basic levels of partnerships, is now a good time to pressure them to form their work habits around their IT investments? Yeah, yeah, they’re suppposed to fund and find EMRs and HIEs that meet their needs but really, how often will that happen?

If you’re a big MU fan, well, I’m sorry if I offended you.  But I’d much rather you flame the heck out of me here so we can have a nice dialogue on the subject. This is important stuff, people.

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