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THE ONLY HEALTHCARE BUSINESS NEWS WEEKLY | FEBRUARY 5, 2018 | $5.50

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will be costly docs stay
for providers / independent /
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 There is hope the new
venture will “build
some provider systems
that are not subject
to the current market News Opinions/Ideas
power imbalance.”
2 Late News 26 Editorial 32 Q&A
Suzanne Delbanco CMS proposes modest As similes go, using North Carolina Blues’
Catalyst for Payment Reform rate hike for Medicare the lowly tapeworm to CEO Dr. Patrick Conway
6 Cover story
Advantage plans in 2019. explain healthcare’s discusses the need to use
Healthcare’s tipping point unsustainable costs more outcomes measures
By Shelby Livingston and Alex Kacik misses the mark. Cancer in the drive toward value-
U.S. healthcare has reached a tipping point. Look no further 4 The Week Ahead
is a better comparison. based healthcare.
for proof than the insiders and outsiders who are linking Senate committee aims
up to disrupt the long-stagnant, cost-ridden industry that’s to solidify reforms in
30 Innovations
eating up nearly a fifth of the nation’s GDP. VA Choice program.
By Tara Bannow
After the healthcare bills are paid, firms are helping
Features 5 Regional News providers with their back-end finance processes to
18 To stay independent, docs turning to ACOs CMS approves ensure payments make it to the right place.
Indiana’s Medicaid
By Maria Castellucci
work requirement.
As healthcare turns ever more complex and technology- “Now more than
reliant, independent-practice physicians are turning to
ever, equity and
accountable care organizations to gain access to support 8 Public health
services and resources while maintaining their autonomy. inclusion must
CDC shake-up has public
health officials worried be embedded in
about deep funding cuts. everything we do—
as a system and as
an industry.”
9 Public health
Hospitals face financial 27 Guest Expert
hit as flu season Ascension Healthcare CEO
continues to worsen. Patricia Maryland discusses
how access to care is only
a small component of the
10 Regulation health equation. A holistic
Legal clash over Medicaid approach is essential to our
premiums could derail overall well-being.
GOP rollback of expansion.

11 Finance Data
2017’s wild ride made 31 Data Points
22 Cutting links out of the supply chain
few dents in revenue A growing number of states
By Alex Kacik for four top healthcare are seeking authority to
Tired of paying high markups from supply chain impose work requirements on
companies.
intermediaries, healthcare organizations are forming their own Medicaid beneficiaries. Who
group purchasing organizations or e-commerce platforms to would be affected the most?
trim supply costs, often providers’ second-highest expense. 16 Providers
How one medical school 34 By the Numbers
@ModernHealthcare.com is addressing LGBT The largest accountable care
healthcare disparities. organizations
Education and events
Healthcare Transformation Summit 17 Health IT
Join senior leaders from all sectors of healthcare June 7-8 Dell, VMware deal Diversions
in Austin, Texas, to share ideas on how to survive and thrive would be big, but 36 Outliers
in a rapidly changing industry. /TransformationSummit not necessarily for Researchers have
healthcare. broken a new sound
Eductation and events barrier, leading to
Opioid Crisis Symposium acoustic tractor beams
Our first Critical Connections conference, set for April 25-26 that could have wide-
in Baltimore, will focus on strategies and tactics to combat ranging applications in
the opioid-abuse epidemic. /CCOpioids healthcare.
MODERN HEALTHCARE (ISSN 0160-7480). Vol. 48 No. 6 is published weekly by Crain Communications Inc., (except for combined issues the last week of June and the first week of July, the third week of November and
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February 5, 2018 | Modern Healthcare 1

 Briefs
CMS proposes higher rates for „„
„
After losing its contract with the state of
New Mexico, Molina Healthcare is seeking

Medicare Advantage in 2019 an injunction against the state Human

Services Department and its secretary.
Molina also plans to seek a temporary
The CMS late last week proposed an av- is appropriate to move forward with the restraining order in an effort to continue
erage 1.84% bump in baseline Medicare proposed increased percentage of en- providing Medicaid services in New
Advantage payment rates for 2019, up counter data in the blend,” the agency Mexico. Molina claims the consultant
from the 0.45% plans received for this said in a news release. hired by the state to help evaluate
year. The average payment rate will in- The insurance industry may be dis- Medicaid proposals has a conflict of
crease by 3.1% after taking into account appointed by another proposed change. interest involving one of the successful
the way health plans code their mem- In 2016, the CMS suggested terminat- bidders and that not all stakeholders—
bers’ diagnoses, the CMS ing the bidding process for including state insurance regulators and
said. That’s up from a 2.95% Medicare employers and unions that child welfare officials—were involved in
increase for 2018. offer Medicare Advantage the procurement process. At deadline,
Advantage
The CMS will also move plans to their retirees, also the state had yet to comment on the
ahead with plans to increase enrollment is known as “employer group legal action.
the use of encounter data, projected to waiver plans.” Under the
information about the care grow by 9% to proposal, those plans would „„
„
The American Heart Association issued
an enrollee received from a 20.4 million receive a lump-sum pay- a warning to breast cancer patients that
provider, to determine risk in 2018. ment based on county-level chemotherapy and radiation can cause
scores for health plans. individual bids that would heart failure and other serious cardiac
In the proposed notice, the lower plan revenue. problems, often years after treatment. It’s
agency suggested that 75% of Medicare America’s Health Insurance Plans well-known that some cancer drugs can
Advantage risk scores be based on tradi- had said the policy could disrupt care for damage heart muscle cells, sometimes
tional fee-for-service data and 25% based the more than 3.6 million beneficiaries leading to heart failure. The group did
on encounter data. For 2018, the agency enrolled in these plans. not advise patients and doctors to avoid
used a risk score blend of 85% fee-for-ser- While the move was delayed in the fi- the treatments, but said patients should
vice data and 15% encounter data. nal 2017 and 2018 notices, the CMS now exercise and stick to a healthy diet to
Stakeholders such as the American proposes completing the transition to mitigate cardiac risk. The group suggests
Hospital Association have pushed county benchmark rates for retiree plans that women undergoing chemotherapy
back on using encounter data after a in 2019. For 2017 and 2018, the CMS al- and/or radiation should first have their
January 2017 Government Account- lowed half of employer Advantage plan cardiovascular health evaluated.
ability Office report found such infor- payments to be based on their own bids
mation is often inaccurate. and half on county benchmarks. „„
„
Advocate Health Care is making the
“Since the quality of the encounter The CMS’ annual announcement of move to an Epic electronic health record,
data has improved, the CMS believes it rates kicks off a six-week period where putting all of its facilities and its revenue-
the nation’s largest insurers lobby Wash- cycle management on the system. In
ington to refine the proposal. The agency December, Downers Grove, Ill.-based
will accept comments through March 5 Advocate announced plans to merge with
and release final 2019 rates by April 2. Aurora Health Care, Wisconsin’s largest
Medicare Advantage enrollment is provider, bringing together 27 hospitals in
lead the tranSformation projected to grow by 9% to 20.4 million a $10.7 billion deal. The switch will put the
of health care delivery in 2018. —Virgil Dickson two systems on the same EHR. Advocate
currently uses a combination of Allscripts
and Cerner systems. Cost estimates were
Corrections and clarifications not immediately available. Mayo Clinic,
which has about twice the annual revenue
Online learning at Dartmouth College The Jan. 29 story on hospital as Advocate, is in the middle of a $1.5
mergers (“Record numbers, better billion Epic implementation set to go-live
Master of Health Care credit in 2017 M&A dealmaking,” by the end of 2018. Vanderbilt University
Delivery Science p. 18) should have referred to Medical Center, whose annual revenue is
Advocate Health Care’s pending deal about $2 billion less than Advocate’s, just
mhcds.dartmouth.edu with Aurora Health Care as a merger, finished an Epic EHR installation with a
not an acquisition. $214 million budget.

2 Modern Healthcare | February 5, 2018

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EDITORS
Aurora Aguilar Editor
312-649-5218 aaguilar@modernhealthcare.com

Matthew Weinstock Managing Editor

312-397-7585 mweinstock@modernhealthcare.com

Paul Barr
312-649-5418
Features Editor
pbarr@modernhealthcare.com
Senate committee aims to
Erica Teichert
212-210-0209
News Editor
eteichert@modernhealthcare.com solidify VA Choice reforms
David May Assistant Managing Editor
312-649-5451 dmay@modernhealthcare.com The Senate Veterans Affairs’ Committee
Patricia Fanelli Art Director is slated to have a busy week tackling some
312-649-5318 pfanelli@modernhealthcare.com critical healthcare issues.
Keith Horist Production Manager The committee plans to kick-start stalled
312-649-5467 khorist@modernhealthcare.com negotiations on VA Choice reforms that pe-
Merrill Goozner Editor Emeritus
tered out late last year after Sen. Jerry Moran
mgoozner@modernhealthcare.com (R-Kan.) introduced a counter bill to legisla-
tion that the committee previously approved
DIGITAL
Blair Chavis Web Producer with bipartisan support.
312-649-5225 bchavis@modernhealthcare.com According to a committee aide, senators
Emily Olsen Web Producer hope to hammer out a deal with the White Moran’s VA Choice bill is
312-649-5482 eolsen@modernhealthcare.com House, where officials want something more supported by the White House.
Fan Fei Digital Graphics Producer
in line with the Moran bill.
312-280-3155 ffei@modernhealthcare.com President Donald Trump even spotlighted VA Choice in his State of the
SENIOR REPORTER
Union address last week, shortly after administration officials met with
Harris Meyer Chicago committee members to outline their ideas for a reform package.
312-649-5343 hmeyer@modernhealthcare.com Moran, who sits on the Senate committee and voted against the origi-
REPORTERS nal bill, teamed up with Sen. John McCain (R-Ariz.) to present a different
Rachel Z. Arndt Technology | Chicago version that goes much further to expand private community options
312-649-5314 rarndt@modernhealthcare.com
for veterans.
Tara Bannow Finance | Chicago The Trump administration isn’t the only source of support for the Moran
312-649-5362 tbannow@modernhealthcare.com
bill. His version aligns much more with the vision of the House VA Commit-
Maria Castellucci Safety & Quality | Chicago tee Chairman Dr. Phil Roe (R-Tenn.), who wants to make the VA Choice pro-
312-397-5502 mcastellucci@modernhealthcare.com
gram more like Medicare Advantage.
Virgil Dickson Washington Bureau Chief The reforms passed by Roe and his House committee cost much less
202-434-4552 vdickson@modernhealthcare.com
than the Senate’s version: $39 billion over five years, according to the Con-
Steven Ross Johnson Public Health | Chicago gressional Budget Office, versus $54 billion over five years for the Senate’s
312-649-5230 sjohnson@modernhealthcare.com
original version.
Alex Kacik Operations | Chicago One common element in both bills was eliminating third-party contrac-
312-280-3149 akacik@modernhealthcare.com
tors to reimburse private providers participating in VA Choice. Providers
Shelby Livingston Insurance | Nashville
843-412-6857 slivingston@modernhealthcare.com
have complained about late and deeply reduced payments as intermediaries
try to maximize their margins.
Susannah Luthi Politics | Washington
202-434-8462 sluthi@modernhealthcare.com Both bills also change VA Choice’s funding from a mix of mandatory and
discretionary appropriations to purely discretionary funding, a move that
RESEARCH
Megan Caruso Research Associate
would put the program at the mercy of rare congressional agreements over
312-649-5471 mcaruso@modernhealthcare.com spending and budgets.
COPY DESK
Still, there were enough differences between the House and Senate bills
Julie A. Johnson Copy Desk Chief that it was unclear at the end of 2017 how the two chambers would work out
312-649-5236 jajohnson@modernhealthcare.com a compromise.
CUSTOMER SERVICE Now that the White House is weighing in, however, the Senate committee
877-812-1581 customerservice@modernhealthcare.com hopes the final package of reforms is within easy reach and that Senate lead-
Modern Healthcare editorial offices at: 150 N. Michigan Ave.,
ership will be able to schedule floor time soon.
Chicago, Ill. 60601-7620; 685 Third Ave., New York, N.Y. The Senate VA Committee is scheduled to meet Wednesday to discuss ad-
10017-4036; 104 East Park Drive, Building 300, Brentwood, Tenn. ditional healthcare legislation that includes allowing organ transplants out-
37027; 1200 G St. NW, Suite 859, Washington, D.C. 20005;
1975 W. El Camino Real, Ste. 304, Mountain View, Calif. 94040 side VA facilities as well as expanding emergency transportation of newborn
Member of Business Publications Audit of Circulation. infants of female veterans. —Susannah Luthi

4 Modern Healthcare | February 5, 2018


MIDWEST
CMS approves Indiana’s
Medicaid work requirement
The CMS last week
gave Indiana the power to
impose work requirements
and premiums on Medicaid
beneficiaries.
The waiver continues
the state’s Medicaid
expansion, known as
the Healthy Indiana
2.0 plan. Under the Verma
program, beneficiaries
pay premiums, have health savings
accounts and get incentives for
healthy behaviors. They can be
locked out of benefits if they don’t
pay premiums.
CMS Administrator Seema Verma,
who recused herself from weighing
in on any decisions involving the
waiver, helped draft HIP 2.0 when
she worked as a consultant to then-
Gov. Mike Pence.
The state can now require all able-
bodied HIP participants to either work
20 hours per week on average; be
enrolled in full- or part-time education;
or participate in a job search and
training program. Indiana won’t
require students, pregnant women,
homeless individuals and some other
Medicaid beneficiaries to comply.
Indiana estimates that 30%, or
SOUTH
CHS selling rural Tennessee
hospital to Rennova Health
Community Health Systems will sell
its 85-bed hospital in Jamestown, Tenn.,
to Rennova Health as part of a broad-
er effort to bring down its debt load
through hospital divestitures. Franklin,
Tenn.-based CHS said the transaction is
among the additional planned divesti-
tures the system has announced previ-
ously. CHS reported outstanding debt of
$13.9 billion in the third quarter of 2017.
The system’s net loss from continuing
operations grew 40% to $108 million
130,000 of the 438,604
Medicaid enrollees, will
have to comply with
the new requirement
after factoring in all the
exemptions. However,
as many as 33,000
of those eligible will
choose not to comply,
and thus lose their
benefits. The state
did not clarify in its waiver why
these people would choose not
to comply. Currently, 244,000
Indiana Medicaid beneficiaries
are unemployed and an additional
58,000 members work fewer than
20 hours per week.
The state reported that about
25,000 adults were dropped from the
program between 2015 and October
2017 after not paying their premiums,
according to Kaiser Health News.
State officials claim those people
found insurance through another
source like an employer.
Choice Indiana is the second
state to gain permission for
work requirements on Medicaid
beneficiaries. Kentucky’s waiver was
approved last month.
—Virgil Dickson
for the quarter compared with $77 mil-
lion in the year-ago period. For-profit
CHS expects the divestiture of Tennova
Healthcare–Jamestown and its associ-
ated assets to close in the second quar-
ter pending regulatory approvals and
closing conditions. West Palm Beach,
Fla.-based Rennova opened its first ru-
ral hospital in Tennessee in August 2017.
CHS CEO Wayne Smith told investors
at the J.P. Morgan Healthcare Confer-
ence last month that the company was
looking to add $2 billion in revenue in
the first half of 2018 through the sale of
struggling hospitals. That’s on top of the
$2 billion in revenue CHS said it netted
through the sale of 30 hospitals in 2017.
The system currently owns 125 hospi-
tals, and Smith said he wanted to have
“theoretically around 100 hospitals that
are in significantly improved markets.”
WEST
Idaho to insurers:
Give us plans that don’t
follow Obamacare
Concerned about soaring healthcare
costs, Idaho has revealed a plan that will
allow insurance companies to sell cheap
policies that ditch key provisions of the
Affordable Care Act. It’s believed to be
the first state to take formal steps without
prior federal approval for creating poli-
cies that do not comply with the ACA.
Healthcare experts say the move is le-
gally dubious. But Idaho Department of
Insurance Director Dean Cameron said
he fears the state’s individual insurance
marketplace will eventually collapse
as healthy residents choose to become
uninsured rather than pay for expensive
plans that comply with the ACA. Many
states have seen annual double-digit
increases in health insurance premium
costs. That is expected to continue—and
perhaps get worse—under the recently
enacted Republican tax plan.
NORTHEAST
R.I. lawmaker introduces bills
to limit hospital executive pay
One Rhode Island state lawmaker is
pushing to limit executive pay at hos-
pitals ahead of a Rhode Island health
system’s proposed merger with Massa-
chusetts’ largest hospital group. State
Senate Majority Leader Michael Mc-
Caffrey filed two bills related to hospital
compensation last week. One would cap
executives’ pay at 110% of the average for
their peers in the Northeast. The other
would prevent top hospital leadership
from being awarded financially for sup-
porting a merger.
The Democrat says he is concerned
that leadership at Care New England will
get a “golden parachute” if its planned
merger with Partners HealthCare pro-
ceeds. A spokesman for Care New En-
gland said officials plan to review the
legislation. Both bills are awaiting hear-
ings with the state Senate Health and
Human Services Committee.
February 5, 2018 | Modern Healthcare 5
 Transformation

Tip largest purchasers of healthcare, to- “It’s important

pin gether spend nearly $19,000 on annu-

al premiums per worker for job-based
to keep in mind
that the bulk

g Po
family health coverage, according to a
2017 survey by the Kaiser Family Foun-
dation and Health Research & Educa-
of healthcare
problems—
and costs—

By Shelby Livingston
and Alex Kacik
int tional Trust.
Despite shifting costs to workers
through high-deductible plans, and
stem from
lifestyle
behaviors Michael Dowling
often limiting where they can get and social CEO
American healthcare has reached a care via narrow networks, per-person circumstances.” Northwell Health
tipping point. Look no further for proof employer-sponsored spending in 2016
than the insiders and outsiders who are grew 4.6% to $5,407 over 2015, according
Read more reactions from healthcare
linking up to disrupt the long-stagnant, to the latest annual report by the Health CEOs at ModernHealthcare.com/
cost-ridden industry that’s eating up Care Cost Institute, which did not ac- CEOsOnDisruption
nearly a fifth of the nation’s gross do- count for inflation in its analysis.
mestic product. “Clearly the cost of care has produced
E-commerce giant Amazon is part- a tipping point. It might be just becom- paper medical records. Consumers still
nering with JPMorgan Chase and War- ing too much—costs are so onerous don’t have ready access to their data
ren Buffett’s Berkshire Hathaway to take and unsustainable that they can’t look and doctor’s notes. And despite all the
a bite out of employer healthcare spend- the other way,” Gartner analyst Barry talk about the benefits of paying for val-
ing. CVS Health and Aetna are combin- Runyon said. ue over volume of services, most of the
ing to offer cheaper, more convenient healthcare system is mired in a fee-for-
access to care and services. Apple is Experts agree that the accelerated at- service mode.
working with hospitals and technology tempts to disrupt the industry by slash- Part of this is explained by the heavy
vendors to put medical records in the ing costs are noble and innovative. But regulation surrounding the healthcare
palms of patients’ hands. And four major they disagree as to whether the compa- industry. It’s also because the industry
health systems last month stepped into nies—be it Amazon and friends, or CVS spends a significant amount of time as-
pharma territory with plans to launch a and Aetna—can succeed in influenc- sessing the risk to the patient with each
not-for-profit generic-drug company. ing healthcare pricing. change it makes, said Hal Wolf, CEO of
Each alliance is targeting health- While acknowledging that costs the Healthcare Information and Man-
care costs, claiming that unsustain- need to be reined in, healthcare leaders agement Systems Society.
able growth is hobbling the economy point to larger societal problems that Because of HIPAA, there’s little por-
and U.S. businesses. Large employers, often end up on their front doors and tability and no continuity of data if a
providers and payers are fed up with have a ripple effect across the system. patient switches insurance plans. Hos-
healthcare’s ever-growing price tag. “It’s important to keep in mind that pitals and other providers use different
Key players have started looking for the bulk of healthcare problems—and EHR systems that don’t speak to each
nontraditional partners to help them costs—stem from lifestyle behaviors other; payers use different claims pro-
crack the code. Nearly all healthcare and social circumstances,” said Michael cessing systems; and care is known to
experts agree that the time is ripe for Dowling, CEO of Northwell Health. “I be fragmented, said Joshua Raskin, an-
disruption in an industry characterized would like to see some of these compa- alyst with Nephron Research.
by a pace of innovation that lags behind nies go into poor neighborhoods and “Banking is way ahead of healthcare
other sectors of the economy. try to figure out how to address health and is one of the first industries to be so
“When you have mediocre access issues stemming from poverty, lack of consumerized, bringing services into
and a low level of convenience and jobs and all the negative social circum- your phone,” Wolf said.
high costs, then you have stances that contribute to While there have been endless at-
disruptors that are going to THE TAKEAWAY chronic illness, substance tempts to upend the business model
be all over you,” said Ken- abuse and health dispari- and lower costs, success stories are
neth Kaufman, chairman Disruption is ties in this country. That’s few and far between. The stumbles of-
of management consulting coming from inside the biggest challenge. “ fer cautionary tales for the latest forays
firm Kaufman Hall. and outside the Healthcare innovation aiming to disrupt the system.
Healthcare now ac- industry. But past has moved notoriously In partnering with providers and
efforts have fallen
counts for 18% of the U.S. slowly over the past few EHR vendors to put patient records on
flat when it comes
GDP. Employees and their to lowering costs. decades. To wit, there are the iPhone, Apple was channeling Mi-
employers, who are the still providers that rely on crosoft HealthVault and Google Health,

6 Modern Healthcare | February 5, 2018

which were launched in 2007 and 2008,
respectively. Those companies looked
to give consumers control over their
personal health records and make
them the interoperability agent.
But in the past, consumer appetite
and functionality haven’t been there,
experts said. And neither Microsoft or
Google could muster enough critical
mass to drive change. Google Health
was abandoned in 2011.
Previously, AT&T, HP and IBM Corp.
tried to drive efficiencies through health
information systems dedicated to logis-
tics, materials, billing and revenue cycle
management, but couldn’t pull it off.
Walmart had also been rumored to be
planning a venture that would leverage
its vast distribution network to make a
dent in the healthcare supply chain, but
it never came to fruition.
“My sense is that this can’t just be
done through technology. These com-
panies have to use their influence and
market power to change behavior of
not just employees, but payers and pro-
viders,” Runyon said.
There have been several employer
coalitions that combined to put pres-
sure on providers. The Pacific Business
Group on Health created a narrow net-
work of high-quality providers that its
members contract
Providers are with directly for
trying to upend
the supply chain
certain services,
to reduce costs. such as hip and
See story, p. 22. knee replacements.
Just two years
ago, the Health Transformation Alli-
ance, a coalition of now more than 40
large employers, formed to leverage
members’ combined heft to secure bet-
ter pharmacy contracts. The alliance
this year also began contracting with
healthcare providers in three metro-
politan areas—Phoenix, Chicago and
Dallas-Fort Worth—to care for em-
ployees with diabetes, hip and knee re-
placements and lower back pain.
In several high-profile cases, em-
ployers have leveraged scale to contract
directly with a provider for all of their
employees’ health needs, ultimately
cutting out the insurance company.
“Some of our best breakthrough
solutions over the years have come
from employers who are paying many
of the bills for our current non-system
of care,” said Dr. Mark Keroack, CEO
of Massachusetts-based
Power trio steer patients to proper
Baystate Health. Amazon sites of care in real time,”
With few details said Andreas Mang, chief
available, it’s unclear
just how Amazon and $177.9 BILLION
partners plan to tack- in 2017 revenue
operating and innovation
officer at the Blackstone
Group’s Equity Healthcare,
le healthcare costs, but 566,000 employees which helps companies set
the companies said they (as of Dec. 31, 2017) up custom health benefits.
would initially focus on As more data emerges
technology solutions to about how quality, safety
Berkshire Hathaway
provide employees and and prices vary, employers
their families “simpli-
fied, high-quality and $223.6 BILLION
transparent healthcare in 2016 revenue
should use cost incentives
to deter inappropriate
and unnecessary care,
at a reasonable cost.” 367,000 employees
and eliminate providers
The companies seem (as of Dec. 31, 2016) that are outliers, said Su-
to be focused on lowering zanne Delbanco, execu-
the cost of care primarily tive director at Catalyst for
for their own employees, JPMorgan Chase Payment Reform, a not-
but successful solutions & Co. for-profit group that main-
could be rolled out to
the entire population in $99.6 BILLION
the future. It’s unknown in 2017 revenue
ly represents employers.
But there’s resistance “in
giving up choice involved
if they will simply self- in narrowing provider
241,000 employees
fund employee benefits networks, which you’d do
(as of Dec. 31, 2017)
together, or if they will better with a low-wage
build out their own in- workforce,” said Paul Gins-
surance operation. burg, director of the Center for Health
Still, observers believe this latest coa- Policy at the Brookings Institution.
lition could be successful, if for no oth- With 1.2 million employees scattered
er reason than they have the financial around the nation, the new venture is
resources and technical expertise to unlikely to have enough of a concentra-
make something happen. tion of employees in any one market to
shift the cost paradigm. Still, Delbanco
Any high-cost, high-margin busi- fantasizes that it will “build some pro-
ness has to be worried about the part- vider systems that are not subject to the
nership, said John Driscoll, CEO of current market power imbalance and
health benefit-management company where there can be real accounting for
CareCentrix. Health insurance broker- the actual cost of care and the effi-
ages and the supply chain stand out as ciency of which it is delivered.”
targets. “The excess prices in the U.S. sys- Delbanco noted that her group has
tem are a function of a lack of transpar- 34 large employers working with health
ency and people not getting the care they plans to tie half of their insurance ben-
need in the lowest-cost setting,” Driscoll efit payments to performance metrics.
said. “This ‘dream team’ can immedi- And seven years ago, Catalyst for Pay-
ately bring value in terms of transparen- ment Reform had two employers that
cy, not just with price but availability of wanted to implement reference pricing.
services. Still, they have to partner with Now, the practice is far more common
players in a post-acute world to shift care and is further driving conversations
out of hospitals and nursing homes and around transparency.
empower consumers with data to know “You can’t overestimate the difficulty
what options there are.” of doing this,” Kaufman said of the at-
Raskin said it’s all about benefit de- tempt by Amazon and partners to tack-
sign. “The consortium will find that le growing healthcare costs. “But when
beating up on the health insurers is you put three organizations together,
probably not the answer. Their margins (given) the quality of those organiza-
are at the low end of the healthcare in- tions and, especially with Amazon in
dustry,” he said. the mix, it would be a mistake to under-
Amazon “can use its technology to estimate their abilities.” l
February 5, 2018 | Modern Healthcare 7
Public health
CDC shake-up has public health
officials worried about deep cuts
By Steven Ross Johnson “The agency has not been as visible as
it needs to be,” said Dr. Georges Benja-
Dr. Brenda Fitzgerald’s resignation min, executive director of the American
as director of the Centers for Disease Public Health Association. “They can be
Control and Prevention comes at a pre- most effective playing a leadership role
carious time for the agency. It’s trying in the nation’s health threats. I hope the
to address a flu epidemic while bracing next director will be able to do that.”
for possible deep funding cuts. Benjamin said the next person selected
HHS announced Fitzgerald’s resig- to become permanent director needs to
nation last week following a Politico be “fully vetted” for conflicts.
report that she had invested in shares But some public health advocates
AP PHOTO
of a tobacco company after joining the expressed disappointment over
agency last July. staff to be furloughed, ac- Dr. Brenda Fitzgerald’s resignation and
A CDC spokesperson said Dr. Anne cording to a contingency Fitzgerald’s praised her leadership. “All indi-
Schuchat, CDC principal deputy direc- staffing plan. If a similar resignation cations were that she was doing a
tor, would serve as interim director un- plan is put in place this comes very good job keeping the agency
til a permanent replacement is named. time, the CDC could get hit at a very focused,” said John Auerbach,
Dr. Umair Shah, executive director of badly just as it’s trying to CEO of Trust for America’s Health.
the Harris County (Texas) Public Health track and respond to one
precarious Shah said the past year
Department and president of the Na- of the worst flu seasons time for the demonstrated the importance of
tional Association of County and City in years. Another fund- agency. the public health agency. Aside
Health Officials, said the White House ing crisis could take place from addressing the opioid cri-
should name a permanent director soon in March if lawmakers do not agree to sis, it has responded to a slew of natural
to help advocate against funding cuts. raise the debt ceiling so the U.S. doesn’t disasters, including hurricanes Harvey
The Trump administration’s first budget go into default. and Maria in Texas and Puerto Rico, re-
proposal sought to trim CDC’s budget Michael Fraser, executive director of spectively, as well as a rash of wildfires
by more than $1.2 billion. The presi- the Association of State and Territorial in California.
dent’s fiscal 2019 budget blueprint—due Health Officials, said an agency director “We have gone through an incred-
to Congress Feb. 5—will come at a time has a direct line to the White House to ibly difficult time when it comes to
when the administration and Con- plead its case for funding. He’s not sure emergencies in our nation,” Shah said.
gress are still grappling with short-term whether an interim director would take “It’s always helpful and important to
spending proposals to avoid another on that same advocacy role. have one singular point of contact and
government shutdown. With “a president-approved person leader like the CDC to be able to pro-
The agency last week announced that in that job it can sometimes be a more vide that perspective.”
about $600 million in funding to fight influential voice,” Fraser said. Benjamin felt the CDC’s professional
infectious disease outbreaks such as Fitzgerald had also come under se- workforce was resilient and would not
the 2014 Ebola epidemic will be gone by vere scrutiny over her decision to bypass allow Fitzgerald’s departure or uncer-
September 2019 and that it would be un- testifying at congressional hearings. tainties over funding to distract from
likely to see that funding restored. Sen. Patty Murray (D-Wash.) claimed their mission.
“You cannot rely on an interim di- Fitzgerald was forced to recuse herself This marks the second time Schuchat
rector for an extended period of time because she continued to hold financial will lead the agency. She became acting
without over time having an stakes in companies that CDC director when former CDC Direc-
impact on activities within posed potential conflicts tor Dr. Thomas Frieden resigned after
that organization and out- THE TAKEAWAY of interest. She skipped a Trump’s inauguration. She held the
side of that organization,” Going too long with hearing in October on the post until Fitzgerald took office in July.
Shah said. an interim director opioid crisis and a Senate Shah said Schuchat was a solid
During last month’s would put the CDC health committee hearing choice to lead the agency. “The fact
short-lived government at risk of losing last month on the nation’s that Dr. Schuchat is there really pro-
shutdown, HHS planned influence, public preparedness for public vides some comfort to those in public
for more than 60% of CDC’s health officials warn. health emergencies. health,” he added. l

8 Modern Healthcare | February 5, 2018

Public health

Hospitals facing financial hit

as flu season continues to worsen
By Steven Ross Johnson Rate of flu-related hospitalizations for the third week of
January for years 2010-18 (Per 100,000 people)
One of the most severe flu seasons
over the past decade could result in 45.5
41.9
financial strain rather than a revenue
generator for healthcare providers as
they see an influx of patients. 27.5 27.5
Widespread flu activity occurred in 19.7 20.5
49 states as of Jan. 20, according to the 19.9
Centers for Disease Control and Pre-
vention. And throughout the country, 6
there have been reports of higher than 0.7
normal rates of hospitalizations related
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
to cases of the virus.
There were nearly 42 hospital admis- Source: Centers for Disease Control and Prevention
sions for every 100,000 people in the U.S.
at the end of the third week of 2018, ac-
cording to the most recent CDC figures. crucial toward managing expenses re- caring for older patients is often more
That’s more than double the rate from lated to their treatment. But the severi- resource-intensive. “If they get sick, they
the past two flu seasons and is the sec- ty of this year’s flu season could lead to tend to be in the hospital longer and
ond-highest in the past 10 seasons. As of longer hospital stays. more likely to be in the intensive-care
late Friday afternoon, the flu had killed The financial impact can depend unit,” he said.
53 children in the U.S. this season. heavily on the type of strain most pre- The CDC estimates 5% to 20% of the
The surge has left many hospitals dominant during a flu season. More U.S. population gets the flu each year
overwhelmed, forcing some to set up than 11,000 lab-confirmed influenza-as- at a cost of $10.4 billion a year in direct
triage tents outside of emergency de- sociated hospitalizations were reported medical expenses.
partments. Others have resorted to from Oct. 1 to Jan. 20, according to the Steingart said the costs of treating flu
emergency protocols such as postpon- CDC; more than 88% of those cases in- patients often come from other chal-
ing elective surgeries and limiting the volved the H3N2 strain. H3N2 tends to lenges that go beyond reimbursement.
number of visitors. Such activity is likely affect older adults, who are more likely A surge in such patients requires hos-
to hurt the bottom line, even though vol- than other age groups to have existing pitals to increase overtime pay and can
ume is increasing. health conditions that complicate treat- cause supply shortages. Another prob-
“Medical admissions tend to reim- ment and make it more expensive. lem lies with the inefficiencies a surge
burse at lower rates than surgical ad- “This is the more difficult type of flu in flu patients creates since many first
missions,” said Daniel Steingart, vice season,” said Dr. John Segreti, an infec- visit the emergency department, creat-
president and senior credit officer at tious disease specialist at Rush Univer- ing longer wait times.
Moody’s Investors Service. He recently sity Medical Center in Chicago. Surge capacity was discussed during
co-authored an investment note that Since 2009, Rush has conducted year- a Senate health committee hearing last
found while increased volume usually round planning for every flu season, month, when Dr. Tom Inglesby, direc-
results in a net positive for which has helped mitigate tor of the Center for Health Security at
providers, having an in- its burden, Segreti said. the Johns Hopkins Bloomberg School of
crease of patients with low-
THE TAKEAWAY Still, Rush has experienced Public Health, told lawmakers that the
er-acuity ailments such as In the middle of one increases in flu-related nation’s hospital system doesn’t have the
the flu often results in hos- of the heaviest flu hospital admissions the capacity to handle a large-scale flu epi-
pitals incurring a net loss for seasons in years, past several weeks. Segreti demic. “They are simply not equipped
their treatment. hospitals must was unclear as to the over- for those larger events, and they are
Steingart said minimiz- contend with both all economic burden this living too close to the margins with just-
ing the length of stay of financial and clinical year’s season will put on in-time inventories to be able to surge,”
challenges.
low-acuity care patients is Rush, but acknowledged Inglesby told lawmakers Jan. 23. l

February 5, 2018 | Modern Healthcare 9

Regulation

Legal clash over Medicaid premiums

could derail GOP rollback of expansion
By Harris Meyer Charging Medicaid beneficiaries income and up to $37.50 a
Six states—Arkansas, Arizona, Indiana, Iowa, Michigan and month for people at 138%
Kentucky’s newly OK’d Montana—charge premiums to Medicaid beneficiaries. of poverty. Those above the
Medicaid waiver has gar- Three more states—Maine, New Mexico and Wisconsin— poverty line who fail to pay
nered national attention have waivers pending with the CMS. The map below shows will be locked out of cov-
for its controversial work how many states have separate cost-sharing requirements. erage for six months and
requirement, but the state’s ■ Yes ■ No ■ N/A
must pay past-due premi-
decision to charge all benefi- ums to regain coverage.
ciaries premiums has raised Those below the poverty
serious legal questions that line will have their rewards
could doom the policy. accounts docked.
Under the waiver, Ken- Waiver supporters argue
tucky will have the highest that the CMS can allow
Medicaid premiums and states to charge premiums
copayments in the nation, and cost-sharing, and that
with premiums ranging doing so will push benefi-
up to 4% of income. Three ciaries to take more respon-
states have asked for similar sibility for their health.
permission, and others are “The government has
Source: Kaiser Family Foundation
likely to follow. tremendous discretion in
But a proposed class-ac- designing and funding
tion lawsuit challenges ability to charge Medicaid enrollees waivers,” said James Blum-
whether the CMS has the authority to premiums and hamper conservative stein, a health law professor at Vander-
let states impose any charges on low-in- efforts to scale back the Affordable Care bilt University.
come Medicaid enrollees. Act’s Medicaid expansion through ad- Providers and patient advocates fear
The federal Medicaid statute prohib- ministrative action. those charges will cause low-income
its charging premiums and copays for A spokesman for Kentucky GOP Gov. people to lose Medicaid coverage,
people with incomes under 150% of the Matt Bevin, who pushed hard for the harming their health and driving up
federal poverty level. The Medicaid ex- waiver after first promising to end his uncompensated care.
pansion in Kentucky and other states state’s Medicaid expansion, expressed The Obama administration let three
covers people up to 138% of poverty. “absolute confidence that the waiver will Medicaid expansion states—Indiana,
The suit against HHS, the CMS and prevail against this baseless challenge.” Iowa and Montana—charge premiums.
their top officials over Kentucky’s ap- Under amendments Congress passed Rosenbaum said it may not have been
proved waiver claims the CMS used a in 1982, “the Medicaid statute essen- lawful, but that was a price the admin-
narrow waiver authority to “compre- tially removed premium and cost-shar- istration was willing to pay to encourage
hensively transform Medicaid” and ing experiments from Section 1115, conservative states to expand Medicaid.
effectively rewrite the statute without unless you meet very, very high stan- Nicholas Bagley, a health law expert at
congressional action. dards,” Rosenbaum said. the University of Michigan who supports
“The Kentucky demon- The model must be previ- the ACA, predicted the lawsuit’s out-
stration goes beyond any THE TAKEAWAY ously untested, be limited come will hinge on whether Kentucky’s
ever attempted in Medic- If plaintiffs prevail to two years, provide ben- experiment promotes Medicaid’s objec-
aid,” said Sara Rosenbaum, in challenging efits that are equal to the tive. But, in a JAMA Viewpoint article,
a Medicaid law expert at Kentucky’s Medicaid risks for enrollees, feature he said the language of Section 1115 is
George Washington Univer- waiver, it could a sound experimental de- so broad that courts usually defer to the
sity. “This is the most signifi- hamper conservative sign and be voluntary. CMS’ waiver decision.
cant legal challenge I’ve seen efforts to scale back Under Kentucky’s five- Kentucky projected that 95,000 peo-
to a demonstration.” the ACA’s Medicaid year demo, premiums will ple will leave its Medicaid program over
If the plaintiffs prevail, expansion through range from $1 a month five years as a result of the premiums
administrative action.
that could limit any state’s for people with little or no and other waiver changes. l

10 Modern Healthcare | February 5, 2018

Finance
2017’s wild ride made
few dents in revenue
By Shelby Livingston and Tara Bannow
Earnings season is in full swing. Last week, four
heavyweights held investor calls to share their
fourth-quarter and year-end stories.
Aetna | Hartford, Conn.
THE NUMBERS
$14.9 billion Fourth-quarter revenue
$60.5 billion Total 2017 revenue, down 4.1%
$12.9 billion Fourth-quarter premium revenue
$52 billion Total 2017 premium revenue, down 3.9%
1.47 million Medicare Advantage members, up 8.1%
22.2 million Total membership, down 3.8%
82.2% Full-year medical loss ratio, up from 81.8% in 2016
TAKEAWAY Company officials blamed lower revenue on
decreased premiums and enrollment in ACA-compliant
individual plans, as well as the temporary suspension of the
health insurer fee in 2017 (since premiums were lower without
the fee). Aetna was required to pay a $1 billion fee for ending
merger talks with Humana, coming to about $630 million
after taxes. The insurer is now focused on sealing its
$69 billion deal with pharmacy giant CVS Health, which
company officials hope will close in the second half of 2018.
Anthem | Indianapolis
THE NUMBERS
$1.1 billion One-time tax benefit due to the Tax Cuts and
Jobs Act
$22.7 billion Fourth-quarter revenue
$90 billion Total 2017 revenue, up 6.1%
1.5 million Medicare Advantage membership, up 7.4%
40.2 million Total membership as of Dec. 31, up 0.8%
1.3 million Members enrolled in Affordable Care
Act-compliant individual plans
TAKEAWAY Former UnitedHealthcare executive Gail
Boudreaux took the helm at Anthem in late November
and said the insurer will use its $1.1 billion tax benefit
to invest in modernizing its technology and developing
consumer-facing and mobile applications. Although
Anthem pulled out of several ACA
exchanges, she said the insurer will keep
a footprint in some markets in case it
chooses to re-enter others in 2019.
Cigna Corp. | Bloomfield, Conn.
THE NUMBERS
$10.5 billion Fourth-quarter revenue
$41.6 billion Total 2017 revenue, up 4.9%
$6.2 billion Fourth-quarter premium revenue
$24.5 billion 2017 revenue from premiums, up 5.3%
15.9 million Total membership, up 4.7%
81.4% Full-year medical loss ratio, down from 81.6%
TAKEAWAY Customer growth and higher premiums
and fees helped Cigna boost fourth-quarter and full-
year 2017 revenue. Like rival insurer Anthem, Cigna’s
individual insurance plans “generated a small profit in
2017,” Chief Financial Officer Eric Palmer said. That’s
despite complaints by many insurers last year that the
individual market was unsustainable. The insurer’s
leadership also said that it will benefit from the recent
U.S. tax overhaul that reduced the corporate tax rate
from 35% to 21%. Cigna said it will see a $575 million
boost in 2018 and will spend $150 million of that on
investments in innovation and its employees.
HCA Holdings | Nashville
THE NUMBERS
$11.6 billion Fourth-quarter revenue
$43.6 billion Total 2017 revenue, up 5%
$8.2 billion 2017 adjusted EBITDA
20% Spike in free-standing ED visits
1.6% Rise in hospital-based ED visits
9 New free-standing EDs, which now total 72
TAKEAWAY The nation’s largest investor-owned
hospital company hit revenue expectations in 2017.
Company officials attributed revenue growth to a 2.3%
increase in same-day facility-equivalent admissions
compared with 2016. The company also increased its
revenue per admission by 3.5% year-over-year during
fiscal 2017. On the outpatient side, HCA plans to
add 12 more free-standing EDs in 2018 and 15 to
20 urgent-care centers.
February 5, 2018 | Modern Healthcare 11
 Sponsor Content

NAVIGANT TRANSFORMATION INSTITUTE

2017 CEO FORUM

Meeting Healthcare Headwinds with Innovation

Foreword

Hospitals and health systems faced tremendous uncertainty in 2017, a trend that will continue throughout 2018.
As someone who led nonprofit health systems for two decades, I’ve seen firsthand how uncertainty can affect care
delivery. Instead of waiting or wavering, providers must maintain their focus on efforts that improve safety, quality, and
satisfaction, eliminate disparities of care, and reduce costs.

But achieving these care delivery goals is increasingly proving to be a challenge. According to a Navigant analysis of 2,000
hospitals, from 2015-2017, average operating margins dropped from 5.6 percent to 3.6 percent, a 35 percent decrease.

These trends are forecast to continue, if not worsen. Moody’s downgraded not-for-profit healthcare from stable to negative for
2018, predicting further decline in operating cash flow due in part to further swelling of staffing and technology expenses.

It was against this backdrop that C-suite executives representing more than 200 hospitals nationwide convened in fall 2017 in
Washington, D.C., for the Navigant Transformation Institute’s 2017 CEO Forum. Throughout the session, executives discussed the
key issues impacting providers, and shared examples of how their organizations are working to overcome them. Following are their
collective insights on surviving — and thriving — in these uncertain times.

Rulon F Stacey, Ph.D., FACHE

Managing Director, Navigant
Navigant Transformation Institute

2017’S “WILD HEALTH POLICY RIDE”

Veteran healthcare policy expert Rodney Whitlock, Ph.D., a former health policy advisor to Finance Committee Chairman
Chuck Grassley of Iowa, led off the Forum with a spirted review of 2017’s “wild health policy ride,” and a preview of
2018. Currently a consultant at ML Strategies, Whitlock was blunt in his assessment, channeling his inner Nietzsche in
suggesting, “There are no facts, only interpretations.” Among the highlights:

• Whitlock predicted Medicare for all will be a political platform for the Democratic party in the next presidential election, with insurers
essentially acting as nonprofit public utilities and control cost through government pricing negotiation.

• On Medicare and Medicaid inefficiencies, Whitlock emphasized the need for a combination of patient outcomes and financial
consequence. Medicare and Medicaid were originally designed to operate as separate programs with different purposes. Lack of
coordination between Medicare and Medicaid can result in fragmented care, leading to higher costs and poor outcomes. Additionally,
the two programs have financial incentives to shift costs on to the other. Not only can this structure impoverish the enrollee and their
family, but it requires Medicaid to pick up the tab for the costliest services of the enrollee’s life. In addition, the lack of coordination
between the programs does not predict which Medicare enrollees may become Medicaid eligible, or identify potential preventative
measures to avoid negative outcomes.

• On drug costs, Whitlock acknowledged the extraordinary benefits of certain pharmaceuticals, but suggested the pharmacy industry
is the only stakeholder in healthcare that “gets to write down a price, and get it. “There is no consumer good that goes up in cost
over time when the good has not improved, especially something that has been around for decades. Imagine Apple increasing the
price of its iPhone 1 today!”
CEO Q&A WITH HEALTHCARE FUTURIST
JEFF GOLDSMITH
Renowned healthcare expert Jeff Goldsmith, Ph.D., a Navigant
national advisor, moderated an executive panel focused on
the key issues impacting hospitals and health systems, and
strategies they’re implementing to achieve success. The panel
featured Howard Kern, president & CEO, Sentara Healthcare,
and David Entwistle, president & CEO, Stanford Health Care.
Following are some of their key insights.
Kern, Sentara Healthcare
Goldsmith: Many health systems have struggled
to operate provider-sponsored health
plans (PSHPs), but Sentara has been
very successful with its PSHP, Optima
Health. What’s the PSHP secret sauce?
Kern: We’ve learned that the “secret sauce”
is strong operating discipline that’s
focused on generating value for
employers, not payers. This includes
running the health plan as a business, and not a land
grab intent on growing market share.
To a great extent, it involves getting back to the
basics and not chasing the latest fad or silver
bullet promise to win the “value-based jackpot.”
Starting up a health plan in today’s challenging,
hypercompetitive environment is very difficult. Many
health systems have chased a perception of a big
win from owning a health plan in value-based terms,
and they don’t realize the learning and culture
adjustment curves required. Sentara lost money
in its early years of operation in the PSHP space.
The main difference was we focused on fixing the
business and cultural issues. We were learning and
losing money at a time in the early-to-mid-1980s
when the marketplace was a bit more forgiving,
and our provider business could easily offset those
losses on the plan side.
Integration is also essential. Optima was traditionally
run as a business, separately from the provider
side. But health plan models such as Medicare
Advantage, coupled with the advent of value-based
care, led us to integrate provider elements of the
health system along with the health plan. This has
helped us to create new delivery models, including
a clinically integrated network that has proven to be
a positive way to align employed and non-employed
physicians, our hospitals, and ultimately employers.
2
Goldsmith: Looking back over your career, what do you believe
to be the most poignant changes or evolutions in
care delivery?
Kern: I think it’s the enhanced focus on quality and population
health. As a health system, I believe you’re only as good
as the quality in your weakest hospital. The challenge
is standardizing that high-quality care and delivering it
consistently across the entire system, both horizontally
and vertically — all while driving out unwanted variation
and costs. This is a core strategic focus for Sentara, and
we’re investing in data, analytics, clinical leadership,
process redesign, and more to master this.
Likewise, consumer centricity continues to increase in
importance for us in both the provider and the payer
divisions. This isn’t about just boosting HCAHPS
scores. We’re creating consumer connectivity
strategies and seamless access points to connect
with consumers around wellness and healthcare.
This includes community-based programs and
technology-enabled methods like telemedicine,
e-ICUs, and digital health apps. There’s also a great
deal providers can learn from retailers like Google
and Amazon about meeting consumers where they
are by finding the right partners in the right places,
and leveraging consumer-friendly technologies.
Entwistle, Stanford Health Care
Goldsmith: When it comes to competing with larger systems,
academic medical centers (AMCs) are often at a
disadvantage due to a lack of market share. What
can AMCs do to overcome such a disadvantage?
Entwistle: We’ve learned that, in today’s
environment, it’s difficult for AMCs
to just go it alone. Instead, we must
develop affiliations with larger
providers with more sizable market share to best
care for the communities we serve. AMCs are
known for having high-level specialists, and the
reality is that patients with more basic needs
simply shouldn’t be sent to an AMC, due to cost
concerns. These types of partnerships can help
providers strike the right balance, allowing them
to provide care and treat patients based on their
respective expertise. Furthermore, we continue
to focus on our commitment to quality, care
coordination, and innovation, to include virtual
reality and other offerings.
Goldsmith: Stanford has previously been active on the
physician acquisition front. Do you remain in an
acquisition mode, or are you exploring other means
to engage with physicians?
Entwistle: Our previous philosophy was to purchase and own,
but that’s proven to be a less than optimal approach.
We purchased 100 primary care groups over the
past five years, but we’re struggling to integrate
some of those practices from a financial and referral
standpoint. Thus, our primary focus going forward
will be to develop partnerships across our region.
GENERATING ROI FROM HEALTH SYSTEM
POPULATION HEALTH INVESTMENTS
Forum attendees unanimously agreed that the journey to
value and focus on population health will continue, regardless
of policy-related outcomes. While executives are unwavering
in their commitment to value, they’re equally resolute about
the need to re-evaluate and right-size the investments they’ve
made in information technologies, population health, physician
practices, and more.
“Healthcare has never moved quickly compared to
other industries, but now the game is changing in
real time,” said Laura S. Kaiser, president and CEO,
SSM Health. “We need to approach care delivery
very differently today.”
“Many successful hospitals and health systems have
been following an implicit ‘must-have’ strategy
with regard to population health investments, yet
care delivery improvements have been illusive,”
said David Burik, managing director and leader of Navigant’s
payer/provider consulting division. “Now more than ever, there’s
a minimal margin of error for existing and future IT, physician
practice, and other value-based investments that don’t generate
a positive return.”
IT Investments
While data might be one of healthcare’s most important
currencies, providers certainly aren’t at a loss for it. What many
are missing is the ability to make that data actionable to better
coordinate care. Though electronic health records (EHRs) are an
important foundational element, it’s clear they aren’t the cure-all
— EHRs collect, store, and display data, but they can’t quickly
analyze trends and provide alerts.
According to Intermountain Healthcare Regional
Vice President and Utah Valley Hospital CEO Steve
Smoot, “An industry like banking adds technology
and becomes more efficient, yet healthcare
3
spends billions of dollars on IT and loses efficiency. We need to
further our focus on leveraging these investments to enhance
efficiencies so we can better care for the communities we serve.”
To attain an EHR’s full potential, providers need additional
manpower and add-on technologies that integrate and present
data from disparate sources in real time and trended over time
— across the care continuum. Adding more technology and staff
will just add cost if the underlying clinical integration foundation
isn’t standardized, according to Navigant’s Burik.
“It’s the difference between a connected platform and a bag of
apps,” said Burik.
“Before providers purchase these add-on solutions, leadership
must make sure they have buy-in from clinicians and other
employees on the added value these technologies will generate.”
“Most of us have had issues with our cellphone
coverage, but the answer isn’t to go back to pay
phones,” said Jack Lynch, president and CEO, Main
Line Health. “It’s clear that EHRs are raising the bar.”
Forum attendees were quick to point out that
while there’s progress to be had, EHRs certainly
have their benefits. Furthermore, physicians are
becoming more acclimated to and accepting of
EHR use, according to Barclay E. Berdan, FACHE, CEO of Texas
Health Resources.
“Early on, doctors overwhelmingly disliked the idea of EHRs,”
Berdan said. “Fast-forward to today, and you’d be hard-pressed to
find many physicians who believe they’d be better off without them.
Similar to how people struggle to use their iPhones to the fullest
potential, we also struggle to extract the full potential of EHRs.”
Moreover, enhancing technology’s value extends well beyond
financial aspects, a challenge that executives were quick to point out.
“We talk about an EHR’s ROI, but we can’t lose
focus on the ROH, or return on health,” said
HealthPartners (Minnesota) President and CEO
Andrea Walsh. “We need to work directly with EHR
vendors to ensure quality improvements are a central focus in the
development of their EHR systems and related technologies.”
Physician Investments
The majority of CEO Forum attendees’ health systems are
expanding specialty physician group practices, and some
through acquisition. But integrating acquired physicians has
proven to be an industrywide challenge due to such factors as
cultural alignment, and it’s one that health systems have been
grappling with for decades.

WHAT EXECUTIVES ARE SAYING
On Consumerism and Collaboration
“Collaboration is essential to our ability to
better care for patients. We need to learn
from industries like retail that have a better
understanding of their customers, as well as
work with payers, pharmacies, and others to
develop and scale transformational solutions.”
LAURA S. KAISER, PRESIDENT AND CEO, SSM
HEALTH
On Drug Pricing
“Drug prices are a huge burden
for providers and patients —
and an important problem that
must be tackled in our national
efforts to control healthcare costs.”
REDONDA MILLER, M.D., PRESIDENT,
THE JOHNS HOPKINS HOSPITAL
About Navigant
Navigant Consulting, Inc. (NYSE: NCI) is a
specialized, global professional services firm
that helps clients take control of their future.
Navigant’s professionals apply deep industry
knowledge, substantive technical expertise,
and an enterprising approach to help clients
build, manage, and/or protect their business
interests. With a focus on markets and clients
facing transformational change and significant
regulatory or legal pressures, the firm primarily
serves clients in the healthcare, energy, and
financial services industries. Across a range
of advisory, consulting, outsourcing, and
technology/analytics services, Navigant’s
practitioners bring sharp insight that pinpoints
opportunities and delivers powerful results.
More information about Navigant can be found
at navigant.com.
navigant.com
linkedin.com/company/navigant-healthcare
twitter.com/naviganthealth
Further complicating the situation has been the post-Affordable Care Act
advent of new players on the physician consolidation scene, including
Optum Health and physician-staffing companies like Envision, TeamHealth,
and MedNax. More recently, health systems have faced primary care group
consolidation that’s increasingly backed by private equity-funded joint
ventures, luring specialists with the promise of better means to care for
patients and higher pay.
As a result, the rationale for physician employment has become a moving
target for many health systems. Is it a market share/market growth
strategy? A response to a competitor’s acquisitions? An ACO or “leverage
the payers” strategy? The outcome of this indecision: median loss per
employed physician tripled from 2004 to 2013, and now is approaching
$185,000, according to the Medical Group Management Association.
“Loss per employed physician has become the de facto measure of practice
acquisition success,” Burik said. “I’d say that’s hardly a positive metric of a
sustainable organization.”
According to HealthPartners’ Walsh, “It’s about weighing the total cost of care
and proper balance between employing and not employing free-standing
physicians. Will the cost of employment be of benefit to subsidize the practice?”
To overcome this, health systems need to manage up the return on these
acquisitions, rather than manage down the losses. A large portion of direct
practice losses are a function of “hosting” practices, rather than effectively
managing them. Post-acquisition, health systems often fail to take the steps to
streamline staffing and support functions, leverage office locations, standardize
supply chain purchasing, and optimize scheduling and care coordination.
ACHIEVING A POSITIVE PHYSICIAN ACQUISITION ROI
What hospitals can do:
• Prune back the portfolio of employed doctors to fit the organization’s
chosen strategy
• Evaluate leadership, assigning senior clinical and business
management roles based on qualifications and not “battlefield
promotions” due to availability
• Tailor compensation to the organization’s volume and value
reimbursement mix to ensure physician compensation drives productivity
• Leverage data to engage physicians and standardize use of medical
devices and medications proven to produce clinically equivalent
outcomes at a lower/equal cost.
• Enhance revenue integrity by ensuring patient data is documented
and translated into a fair and timely bill.
©2018 Navigant Consulting, Inc. All rights reserved. W35985B
Navigant Consulting, Inc. (“Navigant”) is not a certified public accounting or audit firm. Navigant does not provide audit, attest,
or public accounting services. See navigant.com/about/legal for a complete listing of private investigator licenses.
This publication is provided by Navigant for informational purposes only and does not constitute consulting services or tax
or legal advice. This publication may be used only as expressly permitted by license from Navigant and may not otherwise be
reproduced, recorded, photocopied, distributed, displayed, modified, extracted, accessed, or used without the express written
permission of Navigant.
Providers

How one medical school is addressing

LGBT healthcare disparities
By Steven Ross Johnson

Adam Neff said a desire

to stay in his hometown led
him to pick the University of
Louisville School of Medi-
cine. But another reason drew
Neff—the school’s program
addressing LGBT healthcare
disparities.
“I am actually part of the
LGBT community,” Neff said.
“So knowing that this kind
of work was going on around
training the next generation of
physicians certainly made me
very confident of my choice.”
In 2014, the school became
the pilot site for the eQuality
project, which incorporates
the Association of American
Medical Colleges’ guidelines
on LGBT health practices within their rest of the population and LGBT youth Medical students at the University of
existing curricula. Louisville is the na- are two to three times more likely to Louisville School of Medicine talk with
local members of the LGBT community as
tion’s first medical school program to attempt suicide and experience home- part of the school’s discussion sessions
address the healthcare needs of lesbi- lessness. Gay men are at higher risk of on issues LGBT patients sometimes face
an, gay, bisexual, transgender and non- infection with HIV and other sexually during their healthcare experiences.
conforming patients, as well as those transmitted diseases while lesbians
with atypical sexual development—a and bisexual women are more likely to individuals as a normal part of their
community that experiences a large be obese and less likely to be screened medical practice, rather than some
healthcare disparity. for cancer. The LGBT population as anomaly that requires specialized ed-
Those patients often avoid seeing doc- a whole has higher rates of smoking, ucation. “We want our patients to get
tors, meaning other diseases that could drinking and substance use than the really good, compassionate care,” Holt-
be prevented are left undiagnosed and general population. houser said. “We want to make sure
untreated, said Dr. Amy Holthouser, The University of Louisville has once the patient comes to you that you
associate dean for medical education at been recognized as one of the most don’t create a healthcare disparity be-
the University of Louisville LGBT-friendly campuses cause you’re just not comfortable.”
medical school. in the nation by the not- Holthouser said clinicians need to
The LGBT community THE TAKEAWAY for-profit organization be taught not to ask offensive questions
as a whole has a higher un- A program at Campus Pride. So it wasn’t and to understand that some protocols
insured rate. But many in- the University of a surprise when its medi- should change.
dividuals also experience Louisville School cal school implemented 50 “You can treat pneumonia the same,
discrimination from pro- of Medicine takes new hours of training spe- you can treat influenza the same, you
viders, Holthouser said. a big step toward cific to LGBT health issues. can treat broken bones the same,” she
That leads LGBT individ- narrowing the The average, according to said. “But there are some things that do
uals to avoid care or delay healthcare gap in the a 2011 study published in change around vaccine recommenda-
it until their health suffers. LGBT community JAMA, is five hours total. tions, cancer screening and sexually
through curriculum
LGBT adults tend to have Holthouser said stu- transmitted infection screening.”
changes, awareness
higher rates of chronic and engagement. dents learn to view de- Other national efforts are addressing
health conditions than the livering care for LGBT those issues.

16 Modern Healthcare | February 5, 2018

Health IT

Dell, VMware deal would be big,

but maybe not for healthcare
By Rachel Z. Arndt going through an IPO. I’m not sure what the reverse merger
That could end up helping Dell does in terms of near-term change in
If VMware’s rumored purchase of eventually pay down some of its the ingredients of what they bring to the
Dell Technologies comes to fruition, $50 billion in debt, some of which market.”
it will be the largest tech deal in histo- came from the company’s 2015 acqui- At the outset, a deal might stymie re-
ry. But its effect on healthcare could sition of EMC—which had a stake in search and development at VMware,
be minimal, despite the fact that both VMware—for $67 billion. Haller said. “They might not be able to
companies have solid footprints in the VMware has moved into scale up certain invest-
industry. healthcare hoping to po- Speculation ments as quickly as they
“I don’t see any obvious threats to the sition cloud and desktop has Dell might be able to do today,”
healthcare industry,” said Brad Haller, a virtualization as a means considering he said, a hindrance that
director in West Monroe Partners’ M&A to improve efficiencies multiple ways would affect all industries,
practice. “I can’t forecast any major and reduce costs. In docu- to make itself not just healthcare.
switching.” ments filed with the state As more companies
Speculation has Dell considering of California, the Palo Al-
available on both inside and outside
multiple ways to make itself available to-based company indicat- public markets. of healthcare move to the
on public markets. One of those options ed that it plans to lay off 159 cloud and virtualized sys-
is a merger of sorts with VMware, which workers this year, as first tems, VMware and similar
had $7.1 billion in revenue reported by the Silicon companies have become essential, said
in 2016, compared with Valley Business Journal. Jeff Sage, a healthcare adviser for PA
Dell’s $61.6 billion in fiscal THE TAKEAWAY “What’s going on here Consulting Group.
2017. Dell already owns is essentially a restructur- “VMware has been perhaps the most
Experts predict
80% of VMware, though, ing of business to morph it valuable asset within the inventory of
that the deal’s
so the merger wouldn’t most immediate into something else,” said brands, products and platforms that
be straightforward. One impact could be on Paul Schrimpf, a partner at Dell has acquired,” Sage said. “Irrespec-
way it could happen is in VMware’s ability to brand and marketing con- tive of what goes down, ultimately the
reverse, with smaller VM- continue investing sultancy Prophet. “Since VMware technology is the primary val-
ware buying larger Dell, in research and there’s already an existing ue, and it is unlikely the VMware plat-
thereby letting Dell be development. relationship of these two form us going to be compromised as a
publicly traded without entities working together, result of any transaction.” l

The year after the AAMC unveiled
its guidelines, the group surveyed 126
medical schools and found more than
60% of them included related courses
and training.
The Obama administration’s efforts
to protect gender identity under federal
anti-discrimination laws have also led
more hospitals to implement policies
and continuing medical education pro-
grams to better serve LGBT patients.
However, the Trump administration
recently stressed that LGBT individu-
als would not be given the same federal
protections when being served by faith-
based providers, potentially making it
easier for providers to refuse treatment.
Still, there are signs of advances in
bridging the healthcare gap. When the
Human Rights Campaign authored its
first annual Health Equity Index in 2007,
it found 73% of the 78 facilities surveyed
offered diversity or cultural competen-
cy training to personnel. Ten years later,
85% of the 590 hospitals surveyed that
year reported similar training.
Even though the University of Louis-
ville is considered a relatively progres-
sive campus, Holthouser admits the
eQuality program has faced hurdles.
“I think in the current national po-
litical climate people are very quick
to politicize this content and to see it
as an option,” Holthouser said, mean-
ing some clinicians might still choose
whether or not to see LGBT patients.
“This issue is not a moral issue or a po-
litical issue; it’s about a population of
patients with healthcare disparities.”
Neff, for one, thinks the eQuality
program has helped give students a
safe place to work out scenarios. More
than 600 students have gone through
eQuality.
“Hopefully students won’t mis-gen-
der someone or won’t use the wrong
pronouns or assume a hetero-norma-
tive type of lifestyle,” Neff said. “We
hope that by making mistakes in the
classroom it leads to better patient care
in the future.” l

February 5, 2018 | Modern Healthcare 17

To stay independent,
physicians turn
to ACOs
GETTY IMAGES

18 Modern Healthcare | February 5, 2018


By Maria Castellucci
or Dr. Pablo Quintela, the decision to join an ac-
F countable care organization was an easy one.
Orange Care Group, formed in 2014 under the
Medicare Shared Savings Program, provides Quin-
tela with support services to manage his small practice in
Hollywood, Fla., through one of its four ACOs. It helps him
correctly bill claims to the CMS, coordinate care for his
Medicare population and prepare for the quality require-
ments of MACRA through educational sessions and tools.
But perhaps the best part of the arrangement is that
Quintela gets to keep his status as an independent-practice
provider. “As a physician, when we partner with hospitals,
they are always trying to lead the charge—they dictate
what we are doing and what we cannot do,” Quintela said.
“It’s better not to be burdened by the hospitals. We are try-
ing to do what is best for the patient—not trying to worry
about what is best for the hospital.”
As the healthcare landscape grows more complex in the
push to value-based care, independent-practice providers
like Quintela are increasingly looking to ACOs as a way to
successfully adapt to payment reform while also keeping
their autonomy.
“It is really hard to stay independent in a world moving
to risk,” said Chris Dawe, vice president of Evolent Health,
a technology firm that helps providers adopt value-based
payment models. “Becoming part of a network of col-
leagues where you have the scale necessary to efficiently
manage a population at risk and to share the expenses …
it’s an appealing pathway.”
For the first time ever, less than half of U.S. physi-
cians—47.1%—are independent doctors, according to a
report last May from the American Medical Association.
A big reason for the shift is the rising costs associated with
maintaining technology and other resources to comply
with quality payment programs.
But ACOs offer a way for independent practices to get
the support they need to succeed in value-based payment
programs like those established under MACRA. Many
ACOs invest in technology, aggregate data and complete
the reporting required for CMS programs on behalf of
their doctors.
“Without health information technology, you can’t do
this kind of collaborative care
and move up in value-based pur-
THE TAKEAWAY chasing, so it becomes critical to
make these investments. That is
As healthcare grows
more complex and
where these large organizations
technology-reliant can come in to help,” said Dr. Mary
in the push toward Tilak, an Indiana-based indepen-
value-based care, dent-practice physician who’s part
independent practice of Community Healthcare Part-
providers are looking ners, a Medicare ACO operated
to ACOs as a way by three-hospital Community
to adapt to changes Healthcare System.
while also keeping Orange Care Group has invested
their autonomy. heavily in IT so its roughly 450 solo
Physician-led ACOs
The shrinking role of doctors as leaders of accountable
care organizations
Total
ACOs
Percentage of ACOs led by physicians
47%
311
44%
462
45%
631
40%
764
39%
872
38%
924
2012 2013 2014 2015 2016 2017
Note: Physician-led is defined as not having a formal affiliation with a hospital.
Source: Leavitt Partners
physicians—many of whom use different electronic health
record systems—can easily understand and compare pa-
tient outcomes data. The ACO has partnered with local
hospitals as well to share data so doctors are notified if their
patients are admitted to the emergency room and likely re-
quire follow-up care.
“We learn how we are performing and where we can do
better,” Quintela said. “That wasn’t available before.”
Physicians in a Medicare Track 1 ACO are even given
a pass on some of the reporting required under the
Merit-based Incentive Payment System. For example, they
don’t have to report costs because the CMS is already eval-
uating this metric as part of the providers’ participation in
the Medicare Shared Savings Program.
“We take care of (the reporting requirements) for them, and
it helps them avoid a penalty,” said Dr. Ronald Kimmel, chief
medical officer of St. Francis Healthcare Partners, a Medi-
care ACO based in Hartford, Conn. Approximately 60% of the
physicians who are part of St. Francis Healthcare Partners
are independent—about 460—while the others are employed
by Trinity Health. Kimmel said the arrangement allows the
ACO to expand its patient base. “The more covered lives you
have and can work with, the better your chances of success.”
Preparing for risk
A large part of the ACO’s work is simply helping the inde-
pendent doctors better understand and prepare for the com-
plexities of such value-based payment programs as MACRA.
“There is a level of sophistication we have to bring provid-
ers up to speed on,” said Dr. Alan Kumar, chief information
officer of Community Healthcare Partners.
Community joined Track 1+ this year after it explained
to its 635 providers, including physicians, nurse practi-
tioners and physician assistants, how they can benefit from
a downside risk contract. Medicare ACOs in downside risk
tracks qualify as an advanced alternative payment model
under MACRA, and therefore are eligible for a 5% bonus for
all their doctors.
“We don’t think we would’ve gotten as much traction
(among doctors for Track 1+) if it hadn’t qualified us as an
advanced APM,” Kumar said.
Its physicians will not be on the hook if the ACO incurs
losses; instead Community Healthcare Partners will take
the hit, he said.
A large focus for ACOs is to prepare physicians to transi-
February 5, 2018 | Modern Healthcare 19
tion to taking on downside risk contracts.
“We know the market is going toward risk,” said Lissette
Exposito, CEO of Orange Care Group. “All of the support we
are giving them is to ready them to take on risk.”
Orange Care Group has one ACO that’s part of Track 3,
a downside risk contract under the Medicare Shared Sav-
ings Program. Orange Care didn’t take its decision lightly to
venture into Track 3. Leaders reviewed performance data
over a four-year period and identified 90 physicians they
thought were ready to join the track last year.
“We had a lot of confidence in those providers to move
into the risk space,” said Frank Exposito, Orange Care
Group’s chief operating officer.
Mutual benefits
Independent doctors aren’t the only ones who benefit
from joining ACOs. Health systems and hospitals find ad-
vantages participating in ACOs with solo doctors.
According to the CMS, 58% of the 2018 Medicare ACOs
include both physicians and hospitals.
In these ACOs, health systems and hospitals are able to
gain a patient population without having to directly employ
physicians in the local community, said Matthew Amodeo,
a partner at law firm Drinker Biddle who works on ACO
contracting. Independent doctors will refer patients to the
local hospital or health system if they are part of the same
ACO because they are working together to care for the same
population. “It’s a strategy play,” Amodeo said.
It’s also simply unrealistic for a hospital or health system
to employ all the doctors in the community, so it’s advanta-
geous to have them as partners.
Brian Tabor, president of the Indiana Hospital Associa-
tion, which represents more than 170 hospitals, said he isn’t
surprised hospitals and health systems are pursuing ACO
arrangements with independent providers. “Scale is an is-
sue; you have MACRA, pressures from commercial payers,
downward pressure on costs—all of those things are mak-
ing it more difficult for everyone involved,” he said. “It can
be really difficult for even a midsized integrated health sys-
tem. You really need to involve others in the continuum of
care to be successful; they can learn from each other.”
Kumar at Community Healthcare Partners echoed that
sentiment, saying a significant amount of the ACO’s suc-
cess is driven by “the hard work of independent practi-
tioners.” About 53%—or 339—of the providers in the ACO
are independent.
“We are not a health system dominated by employed
physicians,” Kumar said. “To engage those providers who
don’t want to become employed and stay autonomous, that
is why we went down this path, to provide an avenue to re-
main independent. They drive a lot of admissions, so we
wanted to make sure to collaborate with them.” l

Q. How can I improve care and better engage

patients?

A. There’s an app for that. Providers are turning

to their phones for clinical-decision support.
Read the full story at ModernHealthcare.com/Hub2. Transformation Hub provides
resources, inspiration and real-life solutions from the cutting edge of healthcare.
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20 Modern Healthcare | February 5, 2018

Introducing

MODERN
HEALTHCARE
METRICS
Powered by Healthcare Management
Partners, using proprietary methodology,
MODERN HEALTHCARE METRICS delivers
thousands of metrics covering financial,
operational and quality measures.

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Cutting links out of
the supply chain
By Alex Kacik
hen Baylor Scott & White realized that it
W was paying more than its peers for certain
equipment and supplies, the numbers just
didn’t add up.
The Dallas-based system relied on data benchmarking
tools to see how much it paid for products used in various
service lines, such as artificial hips and knees. The organi-
zation found that it sometimes paid more than average, and
as a large system—the largest not-for-profit in Texas—that
should not be the case, said Tony Johnson, senior vice presi-
dent and chief supply chain officer.
“The way I would describe us two years ago is a loose
confederation of states when it comes to the supply chain—
every hospital basically made its own decisions,” Johnson
said, adding that the same supplier was charging different
prices at different hospitals. “If you are a large health sys-
tem, why not bring everyone to the table?”
Guided by the benchmarking data, Baylor Scott & White
started systematically picking off different service lines and
negotiating directly with manufacturers to standardize its
purchases, which allowed it to save money and ensure con-
tinuity across its system. In March, the 48-hospital system
bundled total joints and cardiovascular devices and sup-
plies, saving $32 million. In August it launched a new wave
of categories that has saved it $20 million.
“It takes time but I don’t think anyone can argue with
22 Modern Healthcare | February 5, 2018
$32 million,” Johnson said. “On top of that, it is helping to
evolve our health system’s thinking and ‘systemness.’”
Supply chain costs are often providers’ second-highest
expenses behind labor. Hospitals and health systems have a
renewed focus on squeezing every dollar out of the care con-
tinuum as new payment models emerge, reimbursement
from payers shrinks and expenses rise.
Bundling purchases and standardizing equipment are not
new concepts in healthcare. But providers that strike out on
their own to do so represent a growing dissatisfaction with
the status quo.
GPO evolution
Traditionally, group purchasing involved creating net-
works to bundle purchases in seeking the best price. Some
providers, fed up with what they say are inflated GPO prices,
have sought bargains elsewhere. “GPOs are really dinosaurs
in the industry,” said Rob Austin, as-
sociate director at consultancy Nav-
THE TAKEAWAY
igant. “They are working to change,
Tired of paying but the whole model is based on
intermediaries’ aggregated volume—they must
price markups, change to survive.”
some providers are GPOs are working to adapt as
getting better deals they stand to lose purchasing vol-
elsewhere. ume amid increasing competition
Health systems are
reclaiming the procurement
process, often at
the expense
of GPOs
RUSTY SCHRAMM
and shifting preferences. Some large health systems have
created or acquired their own GPOs for their regional mar-
kets-including Intermountain Healthcare (Intalere), UPMC
(Pensiamo) and Mercy (ROi)-and have signed up other hos-
pitals and post-acute providers. Smaller, regional GPOs often
carve out a niche, such as physician preference items or pur-
chased services, to supplement a provider’s national GPO.
Meanwhile, national GPOs are creating consultancies
related to boosting patient-satisfaction scores, eliminating
variation, standardizing utilization and lowering readmis-
sions to capitalize on value-based reimbursement models.
They have also formed private drug labels, where they con-
tract directly with a manufacturing company to make a ge-
neric drug under their own brand name, and have acquired
GPOs that serve providers outside the acute space.
“It’s more than just cost—it’s about how the supply chain
can help reduce readmissions, change utilization patterns
like helping reduce the number of needle sticks to save
money and improve quality,” said Christopher O’Connor,
executive vice president of Acurity, a regional GPO with 300
member hospitals that was founded as GNYHA Services
by the Greater New York Hospital Association. “GPOs are
looking at the supply chain through that lens—they are al-
most unrecognizable from what they once were.”
While national GPO Premier saw slower revenue growth
in group purchasing for its fiscal 2018 first quarter, the com-
Components of an orthopedic implant
Research and development
Net income 7.8%
5.6%
Other 14.5% 40.1% Selling, general
and administrative
Cost of goods 32%
Components of a $6,000 implant
Selling, general and administrative $2,404
Manufacturing $1,923
Net income $466
Research and development $337
Other $870
Source: Orthopedic Network News
A Baylor Scott & pany’s advising services provided a
White logistics boost. Premier—which acquired the
employee retrieves specialty pharmacy business Acro
supplies that will be
shipped to facilities Pharmaceutical Services as well as
throughout the the non-acute GPOs Innovatix and Es-
health system. sensa last year—saw its performance
services segment increase by 7% to
$84.8 million in the first quarter, up from $79.5 million the
year-ago quarter, driven by its cost-management consulting
business as well as growth in software as a service-based in-
formatics subscriptions, applied science services and gov-
ernment services revenue. Premier said that health systems
are relying more on its GPO as provider-supplier contract-
ing costs are high and savings incremental.
But providers worry that an expanding business model
can translate to higher costs for purchasing. About 40% of the
price of an orthopedic implant is tied to sales, general and ad-
ministrative expenses, while the actual cost to manufacture
the device represents only 32% of the total price, according to
data from Orthopedic Network News.
Alternative routes
Maury Regional Health uses its GPO, Vizient, more for
strategic consulting services than purchasing. The inde-
pendent Columbia, Tenn.-based provider saved about
30% off the GPO price when it purchased six CT scanners
through OpenMarkets, a software-driven marketplace for
healthcare equipment used by hundreds of hospitals and
suppliers, said Roger Larkin, Maury Regional’s director of
supply chain. “Capital equipment prices have such a mark-
up and margin” for GPOs, he said. “When we bought six
CTs, we bid it out and brought in the vendor and all of our
key people so we didn’t have people splintering out. We
used the GPO to facilitate this but did not use their pricing.”
Maury Regional also saw significant savings when it
February 5, 2018 | Modern Healthcare 23
 trained engineers to repair its equipment in- “We hope that
house, Larkin said. Baylor Scott & White is also culturally, as an
opening a repair center so it can maintain its organization,
equipment internally. people stop using tion to lowering prices to remain relevant, said
Baylor Scott & White plans to circumvent things that aren’t
traditional middlemen by launching an
e-commerce site this month for its internal
standardized.
supply chain network that looks to replicate There is a lot of
Amazon’s ease of use, prompt delivery and low-hanging fruit
transparency. The site will complement its now that will not
relatively new distribution facility. be there in a year
Amazon announced a partnership last or two, but we
week with Berkshire Hathaway and JPMor- won’t stop.”
gan Chase & Co. to form an independent
healthcare company for their employees. Dennis Mullins
The e-commerce giant continues to snap up Senior vice president of
supply chain operations
healthcare experts to round out its executive IU Health
team and has quietly expanded its medical
supply offerings on its Amazon Business plat-
form as demand from hospitals and health systems grows.
“We have had discussions (with Amazon) and tried to in-
fluence how they approach healthcare and gave them things
to consider as they build their
Entrepreneurs are looking platform out. I do think they will
to cut the middlemen out be a disruptor,” Baylor Scott &
of the supply chain through White’s Johnson said. “Some tra-
an online dental supply
marketplace. Read more ditional businesses are rethink-
in the Modern Healthcare ing their model.”
Transformation Hub story, Indiana University Health
“Med supply distribution
poised for e-migration” at
recently launched an effort to
ModernHealthcare.com/ standardize purchasing of com-
Transformation modity supplies at its 15 hospitals
and ambulatory facilities, with
the help of its GPO, Vizient. The standardization should bring
supply chain savings as IU Health moves into a distribution
center in Plainfield, Ind., said Dennis Mullins, senior vice
president of supply chain operations. “We hope that cultur-
ally, as an organization, people stop using things that aren’t
standardized,” he said. “There is a lot of low-hanging fruit
now that will not be there in a year or two, but we won’t stop.”
Building a better GPO
While the common, simple items are easier to bundle,
providers are challenged by physician-preference products
and more sophisticated items. Some hospitals and health
systems including Baylor Scott & White have hired execu-
tives with experience improving supply chains outside of
healthcare to help.
GPOs are embracing the role of getting physicians, clinical
staff and administrators to agree on supplies to ease these
more complicated purchases, said Rick Conlin, a partner
and supply chain specialist at the Advisory Board Co.
“Physician-preference items rely heavily on consulting en-
gagements and the manpower required for more personal-
ized service instead of offering catalog-like services,” he said.
“GPOs are offering these localized consultant-esque agree-
ments frankly because they are following the money.”
Salt Lake City-based Intermountain’s GPO, Intalere, man-
ages internal as well as other providers’ supply-chain needs.
It also has a distribution center, which has bolstered its sup-
24 Modern Healthcare | February 5, 2018
plier relationships and helped eliminate re-
dundant inventory, the company said. GPOs
need to use data and be transparent in addi-
John Wright, Intermountain’s vice president of
supply chain. Managing purchasing internally
has helped lower costs, he said.
Suppliers have fewer customers as systems
consolidate, so they need to get more creative
with shared-risk models to cut waste from
the supply chain. But they’ve been slow to do
so, Navigant’s Austin said. While there has
been progress in tying food and janitorial ser-
vice contracts to patient-satisfaction scores,
risk-sharing arrangements in the clinical
space with outcome- and readmission-related
metrics are in the very early stages, he said.
Medical-device manufacturer and health
technology company Philips recently extend-
ed a contract with Phoenix-based Banner Health, one of its
roughly 40 strategic provider partners. Philips says its tech-
nology helps monitor patients with multiple chronic condi-
tions at home, cutting hospitalizations in half and reducing
30-day readmission rates by 75%. It collects vital signs and
other data with virtual monitoring and connects Banner
physicians and patients via a video feed.
There is an emerging group of customers that want to
have risk-sharing contracts and closer vendor relationships
to help bend the cost curve and improve outcomes, espe-
cially as more organizations form integrated delivery net-
works, said Joe Robinson, Philips’ senior vice president of
health systems solutions.
Medical-device manufacturer Lisa Laser USA decided to
contract directly with manufacturers after its relationship
with a GPO yielded minimal results. While GPOs provide a
good storefront to browse products, they don’t adequately
convey the uniqueness of the company’s relatively newer
products that fall outside the “mainstream,” said Peter Allen,
CEO of Lisa Laser. There is also a lot of red tape in dealing
with a GPO, he said. “From what we’ve heard, surgeons know
what they want but hospitals have such a tight relationship
with GPOs that they’re almost forced down a different path.”
Broader ambitions
The supply chain is one of many elements in healthcare
delivery that is poised for an overdue transformation. Pro-
viders are looking to upend how decisions are made by
shaking up executive ranks, streamlining clinical opera-
tions and shifting care settings, among other goals.
Theoretically, providers can eliminate some of the fixed
costs along the supply chain and trim fat elsewhere, which
will benefit their bottom lines. But employer-sponsored
healthcare spending per person in 2016 grew 4.6% to
$5,407 over 2015. Spending rose 4.1% in 2015. It has jumped
by 15% from 2012 to 2016, not accounting for inflation, ac-
cording to a report from the Health Care Cost Institute.
But these savings at the provider level won’t necessarily
benefit the consumer, Navigant’s Austin said. “It’s tough
to tie it in a meaningful, direct way to lower costs for
the patient.” l
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 It’s not a tapeworm.
It’s cancer
MERRILL GOOZNER Editor Emeritus

A
s similes go, I have problems with using the lowly
tapeworm, a subspecies of the helminth family, to
understand the impact of rising healthcare costs.
“The ballooning costs of health-
care act as a hungry tapeworm on the
American economy,” said Berkshire
Hathaway’s Warren Buffett. The Oracle
of Omaha, along with Jeff Bezos of Am-
azon and Jamie Dimon of JPMorgan
Chase & Co., set the healthcare policy
world atwitter with their plan to create
a not-for-profit company dedicated to
lowering their organizations’ overall
spend on health.
Let’s explore this simile. The tape-
worm is a parasite, an unwanted crit-
ter that lodges inside its human host. It
robs its victim of the nutrients needed
to thrive and grow. So far, so good.
Treatment is fairly simple, although
hard to achieve in poor countries
where helminth infections are en-
demic. You kill it. To prevent infection,
you stamp out modes of transmission
or develop a vaccine.
Here’s where the simile breaks down.
Are the nearly 16 million people labor-
ing in healthcare parasites? Of course
not. The healthcare system is a vital cog
in our society and a healthy workforce
is crucial to its economy.
That’s why cancer is the better com-
parison for healthcare’s unsustainable
costs. The system is growing too quickly,
like a tumor. To restore health, you have
to eliminate the cancer, not the vital or-
gan on which the tumor grows.
As any oncologist will tell you, such
treatment is long, complex and filled
with difficult choices. And the ultimate
outcome is always in doubt.
The immediate reaction from most
analysts was that healthcare reform by
press release won’t get the triumvirate
very far. The stocks of insurers, phar-
macy benefit managers and for-profit
providers took an immediate hit, but
most recovered quickly when investors
realized, as had another businessman
before them, that controlling health-
care costs is complicated.
Advice for the new joint venture
poured in from all sides, including
from other business groups that have
worked for decades on the vexing
questions behind their rising costs.
Aggregate your buying power; go into
the drug distribution business (al-
ready on Amazon’s radar); promote
price and quality transparency; con-
tract directly with providers; start
your own provider organization.
Each approach has its champions.
And any of those paths, if chosen by the
new joint venture, would represent an
extension of trends already underway
among the thousands of employers
who provide coverage for nearly 160
million Americans.
But the question this new group
needs to ask is why none have gained
traction in the marketplace. None have
succeeded in reducing the healthcare
growth rate, which nearly every econ-
omist agrees is necessary if we’re to
restore rapid wage growth for average
American workers.
The cancer simile is helpful here, too.
The latest advances in oncology use
drugs that target specific mutations.
But those drugs cannot be developed
until the mutations that are respon-
sible for the uncontrolled growth of a
tumor are identified.
Here are just a few of the unresolved
questions about the proper tumor
targets in healthcare. Is more compe-
tition the solution to provider consoli-
dation, high prices and high physician
salaries? Or is fee-for-service medicine
and high variation in quality and utili-
zation the proper target?
Are middlemen-PBMs and group
purchasing organizations-driving
drug and device prices to unsustain-
able heights? Or has a dysfunctional
innovation system turned every new
drug and even decades-old generics
into price-gouging opportunities?
A correct diagnosis is the prereq-
uisite for a proper cure. One place for
this new venture to start is by taking a
strong stand against high-deductible
health plans, which are like opioids.
They merely mask the pain of employ-
ers’ rising costs by shifting them onto
the backs of their employees, while un-
dermining health in the process.
It will be interesting to watch what
approach this new venture takes.
Some fresh thinking from the busi-
ness community on these issues
would be welcome. l

26 Modern Healthcare | February 5, 2018

Access to care is only part of our health;
equity and inclusion must be part of all we do
By Patricia Maryland
T
his is a busy time for healthcare providers. In the midst of one of the worst
flu seasons in years, Americans are focusing on their health and taking
advantage of their health insurance coverage.
Whether they are among the 8.8 mil-
lion people who signed up for coverage
through the Affordable Care Act health
insurance marketplace or are covered
under an employer-sponsored plan, one
thing is clear: Millions more Americans
have the means to take charge of their
health this year, and that’s a step in the
right direction.
Health insurance coupled with
quality, affordable care, should be
vital components of our national
healthcare policy. But access is only
one part of a complex equation that
we—healthcare providers, civic lead-
ers, employers, lawmakers and con-
sumers—must solve to help people
and communities be healthier. In fact,
a recent report from the Institute for
Clinical Systems Improvement found
that healthcare—including a person’s
access to care and the quality of the
care itself—accounts for a mere 20%
of an individual’s overall health.
What influences the other 80%?
Barriers and bridges to better health
are found in the communities where
people live, work, pray and play. This
is where a person’s level of health is
closely linked to their basic needs—
whether it’s adequate public transpor-
tation to the doctor’s office or a nearby
grocery store that is stocked with af-
fordable, nutritious food.
For example, you can’t properly treat
an individual for a stress-related heart
condition when that person doesn’t feel
safe in their home or neighborhood.
The outsize influence of such nonmed-
ical factors on a person’s health should
serve as a wake-up call for those who
Patricia Maryland
is president and
CEO of Ascension
Healthcare and
executive vice
president of
Ascension.
have an interest in making our com-
munities healthier, especially among
the systems that largely influence our
nation’s healthcare.
We can expand our focus to include
the challenges that extend beyond the
walls of our hospitals and other care
facilities by understanding that provid-
ers are just one part of a community’s
health landscape. Further, we can help
more people attain their highest level
of health by considering the context of
an individual’s life—such as the state
of their physical environment, level of
education or relationships with family.
This holistic approach is especially
needed to better serve people who are
struggling—those who are living in pov-
erty or who have historically had trouble
accessing our healthcare system. As the
nation’s largest not-for-profit healthcare
system, we at Ascension know we have
a responsibility to help those who have
been left behind.
The prevention of healthcare ineq-
uities plays an integral role in this new
paradigm. What this means is that
now, more than ever, equity and inclu-
sion must be embedded in everything
we do—as a system and as an industry.
Like most organizations, setting am-
bitious, aggressive goals is a key way
that we focus our attention and hold
ourselves accountable for our progress.
This is why Ascension codified its aim
to eliminate preventable healthcare
disparities—variations in care due to
factors such as poverty, race, ethnicity
and language—by 2022.
Heart failure care is one area where
we are laser-focused on erasing inequi-
ties. It’s well-documented that a person’s
socio-economic status bears a strong
correlation to whether or not they are re-
admitted to a hospital after their initial
treatment. By leveraging our system’s
big data with a person-centered care
model, we are working to anticipate the
conditions and behaviors that cause re-
admission, so that we can do the right
thing the first time for the patient.
Although health often is restored in
a doctor’s office or hospital, it is created
in a culture where social, economic and
environmental factors, as well as human
behaviors, shape a community’s health
landscape. Being “system-centric” is not
sufficient anymore when it comes to im-
proving America’s health. We must go
beyond the doctor’s office or the hospital
campus into the communities we call
home and the neighborhoods where our
patients live, to understand how we can
partner with people to truly improve the
health and well-being of all.  l
Interested in submitting a Guest Expert op-ed?
View guidelines at modernhealthcare.com/op-ed.
Send drafts to Assistant Managing Editor David May
at dmay@modernhealthcare.com.
February 5, 2018 | Modern Healthcare 27
 Announce your Promotions, New Responsibilities, Retirements or New Hires
To place your ad contact Ilana Klein l 312.649.5311 l iklein@modernhealthcare.com

HOSPITAL HOSPITAL PATIENT CARE SERVICES

Dignity Health St. Mary’s Mission Health,
Medical Center, Asheville, NC
San Francisco, CA
Paul McDowell
Dignity Health was named Chief
is pleased to Financial Officer
announce the for Mission Health,
appointment of North Carolina’s
John Allen as sixth largest
President of St. health system and a Top 15
Mary’s Medical Center. Health System for five of the
Allen joined St. Mary’s in past six years. McDowell
December 2016 as the previously held leadership
Chief Financial Officer and positions in Mission Health’s
Chief Operating Officer, and Finance division as VP and
became the hospital’s interim Deputy CFO. Prior to joining
president in Nov. 2017. Mission, he served as SVP
and CFO for A+ rated King’s
Daughters Health System in
Ashland, KY.
Option Care Enterprises Inc.,
Bannockburn, IL
John C. Rademacher
has been named
CEO of Option
Care, the largest
independent
provider of home
and alternate treatment
site infusion services.
Rademacher will lead
the company’s ongoing
success, drawing on years of
healthcare experience and
a keen strategic perspective
to further distinguish the
company’s leadership in
providing quality products
and data-driven, technology-

BIG
enabled clinical services.
Rademacher has over 25
years of experience and
has held various executive-
level positions at leading
healthcare companies.

PROMOTION?
LET US SHARE THE NEWS.

TO SEE OTHER
INDUSTRY MOVES, VISIT
MODERNHEALTHCARE.COM/
PEOPLEMOVES

28 Modern Healthcare | February 5, 2018

 PHYSICIANS
DuPage Medical Group,
Downers Grove, IL
DuPage Medical
Group is pleased
to announce
the addition of
Donna Cooper
to its leadership
team as Chief Operating
Officer. Cooper will focus
on streamlining operations,
mapping out future growth
strategies, optimizing the
operations of DMG’s practice
sites, and collaborating
with DMG’s physicians and
functional leaders.
MARKETING & PR
W2O, Chicago, IL
W2O announced
the appointment
of Rita Glaze
as Practice Leader
of Value, Pricing
and Market Access
to strengthen its healthcare
commercialization
offering. This offering
will build on unrivaled
industry knowledge and
analytical tools to offer
clients the most direct and
effective way to align their
commercial strategy and
communications approach
to the current realities of the
healthcare landscape.
Federal and state mandates
are not created equal
In the Jan. 22 editorial “Personal
responsibility—for some” (Modern
Healthcare, Jan. 22, p. 26), the author
asked why mandatory health insur-
ance remains controversial while
mandatory auto insurance is not. The
answer he gave was “hypocrisy.” Ac-
tually, it’s federalism.
As sovereign entities that both pre-
dated and retained broad powers under
the Constitution, the individual states
are charged with the primary respon-
sibility for protecting their inhabitants’
health, safety and welfare. These state
“police powers” are inherent, where-
as federal powers are constitutionally
enumerated. The Supreme Court has
been loath to establish a federal equiv-
alent of the police power, which is why
Chief Justice John Roberts took such
pains in National Federation of Inde-
pendent Business v. Sebelius in 2012 to
uphold the Affordable Care Act’s indi-
vidual mandate as a tax.
Whatever one’s policy preferences,
there is a big difference between a state
requiring liability insurance as a con-
dition of vehicle registration, and Con-
gress flatly compelling individuals to
purchase a health insurance product.
That distinction cannot be so easily dis-
missed as hypocrisy.
Charles G. Kels
San Antonio
State regulations pose
challenges for direct
contracting by providers
Regarding the Jan. 29 cover story “No
insurer necessary” (p. 22), although di-
rect contracting is attractive on the sur-
face, it is important that providers be
aware of regulatory barriers that may
exist in their state’s insurance code and
proceed with caution. This is particu-
larly true for providers that accept risk
by charging a per-member/per-month
capitation payment. This transfer of
risk from the employer to the provid-
er may result in the provider acting as
an unlicensed health insurer under
its state’s insurance code. The ERISA
pre-emption for a self-insured employ-
er most likely does not protect the pro-
vider group bearing risk.
The Boeing/Providence St. Joseph
ACO mentioned in the article was
required to limit risk transfer after
meeting with the Washington state in-
surance commissioner’s office.
Beth Berendt
Principal consultant
Berendt and Associates
Olympia, Wash.
Quality and safety issues
likely have more impact
than survey shows
Regarding “Community hospital
CEOs continue to fret over finances”
(ModernHealthcare.com, Jan. 26), while
quality and safety matters, per se, were
ranked fourth in the list of concerns in
responses to the survey by the American
College of Healthcare Executives, per-
haps the impact of quality and safety on
reimbursement, on compliance (don’t
forget MIPS is part of MACRA) and on
staffing shortages, particularly as a
function of efficiency, were understated
or masked in the way the questions in
the survey were prepared.
Understandably, the historical ac-
tivities and artifacts of typical quality
and safety efforts may not be seen as
particularly impactful, but a re-engi-
neered focus inside the hospital/sys-
tem on improvement of quality- and
safety-related performance does affect
those other areas of concern.
Don Jarrell
President
Prista Corp.
Austin, Texas
Letters welcome
Write us with your comments.
To send us a letter electronically,
go to modernhealthcare.com/letters;
by fax, 312-280-3183.
February 5, 2018 | Modern Healthcare 29
After bills are paid, firms help providers
direct payments to the right place
By Tara Bannow
Much attention is paid to how health sys-
tems collect bills on the front end, but the
back end is where more of the money comes.
And “it’s an extremely challenging ac-
counting process for hospitals,” said Jona-
than Wiik, principal of healthcare strategy
with TransUnion Healthcare and a former
hospital finance administrator.
Back when most patients paid with cash or
checks, most health systems relied solely on
banks to handle their payment processing.
But as the industry has grown more complex,
online and point-of-sale payments became
necessary, according to some surveys. Those
payments grew from 2% of transactions to
11% from 2011 to 2014. So some systems have
turned to merchant services providers.
Things get especially tricky when health
systems acquire hospitals, physician prac-
tices or other businesses. Suddenly, making
sure payments are applied against the right
bills becomes a challenge. The same hap-
pens during the installation of a new elec-
tronic health record system.
Providers also run into problems when
they try to consolidate patient billing across
their hospitals, physician groups and other
practice areas. If they lack a consistent way
of applying payments, it can result in credit
issues for patients, said Doug Story, director
of revenue management consulting for con-
sulting firm Navigant.
“That’s where you run into this situation
where the patient paid, but then they receive
a statement and the payment hasn’t been ap-
plied appropriately,” he said.
Administrators with Bellin Health, a small
Green Bay, Wis.-based health system with
an acute-care hospital, ambulatory surgery
center, cancer center, primary-care clin-
ics and outpatient imaging, realized about
three years ago that the system needed to
consolidate reporting across its multiple bill-
ing areas. Bellin also needed to accept online
payments through its web portals. Leaders
chose Madison, Wis.-based merchant ser-
30 Modern Healthcare | February 5, 2018
vices firm Wind River Financial for the job.
Wind River has about 500 healthcare cli-
ents, mostly in the Midwest, ranging from
very small clinics with one or two physicians
to large health systems, according to CEO
Mike Carow.
After Wind River implemented a single
payment platform across Beloit (Wis.) Health
System’s more than 10 hospitals, clinics and
hospice locations in the state, the system re-
“If I’ve got all duced its annual credit-card processing costs
these different by more than $40,000. The system’s staff also
places where I’m spent less time on security compliance.
settling money … At Madison-based Dean Medical Group—
how do I reconcile Wind River’s largest client—the firm imple-
that and make sure mented its payment-processing software
it’s getting put in across all of the system’s 400 pay stations in
the right pockets?” about four months. Dean, which joined SSM
MIKE CAROW Health in 2013, operates 60 clinics, has about
500 physicians and serves more than 400,000
health plan members.
Wind River Banks and merchant services firms like
Financial Wind River compete in the payment-pro-
cessing market, said Chuck Alsdurf, director
CEO of healthcare finance policy and opera-
Mike Carow tional initiatives for the Healthcare Finan-
cial Management Association. The best
FOUNDED vendor will depend largely on the system’s
1999 size and how many billing systems it has.
Although he doesn’t have hard data to prove
HEADQUARTERS it, Alsdurf said he thinks banks probably still
Madison, Wis. handle most tranactions in the market.
But really any bank or merchant services
INNOVATION provider can help with the patient experi-
Offers digital tools ence since they have more knowledge on
to streamline when and how to ask for payment.
payment collection Carow said he understands that what
for providers healthcare providers really want to do is care
who often for patients. Focusing on processing pay-
have separate ments just gets in the way, he said.
processes. “We as healthcare providers, we have
enough complexities in our lives dealing
with our day-to-day jobs and caring for the
patients in our communities,” said Kevin
McGurk, Bellin’s senior reimbursement co-
ordinator. “We don’t want to spend a lot of
time on things like revenue cycle and getting
payment from the customer.” l
 Working for Medicaid
Later this year, Kentucky could become the first state to enforce work requirements for
Medicaid beneficiaries. The CMS approved the state’s waiver in January, but it is being
challenged in court by groups representing Medicaid enrollees. Another nine states have
waivers pending with the CMS, which in late January issued new guidance for states seeking
to add work requirements for able-bodied beneficiaries. Here’s a look at who could be affected.

68.2 25%
Top 5 industries with largest number of workers covered
by Medicaid, 2016
NUMBER OF ADULT WORKERS
INDUSTRY COVERED BY MEDICAID

MILLION
Number of
Restaurant and food services

Construction
1,486,000

974,000
Percentage of
the Medicaid
population
Indiana officials
individuals estimate would
enrolled in Elementary and secondary schools 461,000
not participate
Medicaid as of in the work
November 2017 Grocery stores 396,000
requirement and
-CMS therefore lose
Hospitals 354,000
-Kaiser Family Foundation coverage. Indiana
has a 1115 waiver

$565.5
request pending
SHARE OF SHARE OF
ENROLLEES IN A ENROLLEES WORKING with the CMS
WORKING FAMILY (MEDIAN) THEMSELVES (MEDIAN) -Indiana Family and
Social Services
Expansion states 79% 62% Administration

BILLION Non-expansion states

-Kaiser Family Foundation
74% 58%

8 IN 10
Medicaid spending in
2016, which represented
17% of national health
expenditures -CMS

Number of Medicaid beneficiaries nationally who live in working families

96,687
-Kaiser Family Foundation

Projected reduction in
Kentucky’s Medicaid
enrollment over five years
due to the state’s new
work requirement
-Kentucky Center for
Economic Policy

Cara Stewart, left, a legal advocate

opposing Medicaid work requirements
in Kentucky, “pinky-swears” to help
Pauline Creech after they talked about
Creech’s cancer returning. Stewart
worries that many Kentuckians with
Medicaid coverage won’t be able to
meet the work/community service
requirement of 80 hours per month.

GETTY IMAGES

February 5, 2018 | Modern Healthcare 31

 ‘I do believe we
need more outcome-
oriented measures’
During his six years at the CMS, Dr. Patrick Conway oversaw the agency’s big push into had at the Innovation Center—
value-based reimbursement. He was deputy administrator for quality and innovation and ACOs and the Medicare Shared
headed the Center for Medicare and Medicaid Innovation. Late last year, Conway left the Savings Program. How do you
CMS Innovation Center to become CEO of Blue Cross and Blue Shield of North Carolina. see its future?
While he’s now removed from rulemaking, Conway remains passionate about the idea of
linking payment to outcomes. He recently spoke with Modern Healthcare Editor Emeritus Conway: Overall, the
Merrill Goozner. The following is an edited transcript. Medicare ACO program
improved quality and
Modern Healthcare: What’s it MH: To what extent did the orthopedic hip-and-knee improved patient experience
like leaving government and Trump administration taking bundle continues in half of and had modest savings. On
going into the private sector? over and the future of the the markets—the higher- the savings, it’s important
Innovation Center drive the cost markets—which are to note the ACOs that were
Dr. Patrick Conway: It decision? the markets that are most in the program longer saved
was difficult deciding important for that work more money. Physician-led
to leave The CMS, just Conway: I worked on to continue. I’d also say ACOs, on average, saved
because I think we made value-based care in voluntary bundles, both more money. And those
a lot of progress and I was Republican and Democratic in Medicare and in private ACOs at two-sided risk—
connected and tied to the administrations. I believe payers, are a much larger at partially capitated or
people there. I think we did the Innovation Center and portion of the change. In capitated-type payments
work to improve Medicare the work on value-based care the Medicare program, you like Next Generation ACO—
and Medicaid, serving over will continue. It’s driven in literally have thousands of did the best.
100 million people. both the public and private providers, tens to hundreds I think those programs
That being said, I was sectors. Private insurers are of thousands of Medicare will continue in Medicare,
incredibly excited about the driving value-based care beneficiaries and billions but they may be modified
opportunity to be CEO at models like accountable care of dollars in the voluntary in some ways. In the
Blue Cross North Carolina. organizations and bundled bundles program. private market, including
We insure the majority of payments. I think it’s more important in North Carolina, private
people in the commercial that the next iteration payers are putting ACO
market in North Carolina MH: We’ve seen the of voluntary bundles contracts in place with
and many of them for the administration scale back the for Medicare comes independent physicians
majority of their lives. That mandatory bundled payments. out and continues. And and large health systems.
gives us an opportunity They’re pushing for more then, in places like North We have an ACO that
to drive better care, better voluntary programs. What Carolina, we have hip just reported $20 million
outcomes and lower costs. impact do you think it’ll have? and knee bundles that are in savings, but more
That’s been the core of saving about 20% and it is importantly, the patients
my mission for a long Conway: The geographic improving quality. So I think in that system are getting
time. It’s part of me as a bundles from Medicare you’re going to see payers coordinated care. They
practicing physician. So the have had and would continue to push forward on have nurses calling them to
opportunity here to drive have had a larger positive episode-based payment. make sure they get the care
change at a state level and impact on a larger scale. they need.
influence the Blues system I think the geographic MH: Let’s turn to another one My mother is in a
was too great to pass up. bundles made sense. The of the major programs that you Medicare ACO. After a

32 Modern Healthcare | February 5, 2018

“There’s strong evidence that when you put out information on quality and cost,
providers compete to improve, whether it’s hospitals, nursing homes or physicians.”
hospitalization, she had
a care coordinator who
called her and made sure
she had her medicines,
made sure she knew
that she had a doctor’s
appointment and that
she had transportation to
get there. That’s what the
system should look like for
patients, and that’s why I
think the care model
will continue.
MH: To what extent do you see
the private sector becoming
the driver of these? Do you
think that the momentum is
there for them to keep going
and expand it even without a
push from government?
Conway: I do. In North
Carolina, we’re going to
work to move the majority of
our payments to providers
into a partnership model
like ACOs and bundled
payments where the
provider is accountable for
quality and total cost of care
and quality goes up and
costs go down.
I’ve interacted with a lot
of CEOs of systems in North
Carolina; they’re ready.
There’s variability, but we
want to partner with health
systems, with physician
groups and with hospitals
on a model built on quality
and value. We’ve got over
80% of payments tied to
quality and value in some
way in Blue Cross North
Carolina and now it’s taking
it to the next step of really
scaling these ACO models
and bundled payments
across the state.
MH: There are so many
strands of reporting
requirements—quality
indicators, process indicators,
outcomes indicators. What
can be done to lessen
the regulatory burden on
physician offices and on
hospitals?
Conway: At one point in my
career, I led quality reporting
for a large health system,
Cincinnati Children’s
Hospital Medical Center, and
we had over 700 measures
we were reporting to various
entities. You cannot improve
on 700 things.
As a general rule of
thumb, you want to try
to get 30 or fewer quality
measures and 10 or fewer is
even better, for providers to
improve on.
At Medicare, for
example, the number
of hospital measures
went down significantly
during my tenure. We led
work on core measures
for physician specialties
so there was more
standardization. There’s
still more work to do there,
and I think it will continue
to push on what are the
right measures.
Then, to take it to where I
am here at North Carolina,
I do think there’s a state
opportunity that I hope
North Carolina capitalizes
on. How do we as, a
private payer, and the state
governmental programs
here and other payers,
partner to determine
the right set of measures
for North Carolina?
Let’s measure those
key, hopefully outcome-
oriented measures,
and drive better health
outcomes for the people in
North Carolina.
MH: In the context of
transparency, how do you
translate that information into
something that’s useful to
patients and to consumers in
making their decisions?
Conway: There’s strong
evidence that when you put
out information on quality
and cost, providers compete
to improve, whether it’s
hospitals, nursing homes
or physicians. There’s also
good evidence that, when
it’s presented to consumers,
they make choices based on
that information.
MH: One of the critiques of the
measures is that there’s too
much emphasis on process
and not enough on outcomes.
You’re a physician. Do you
think that the measures could
use a good revamping?
Conway: I do believe we need
more outcome-oriented
measures. In the hospital
measure set on Hospital
Compare, during my time in
Medicare we had over 75%
process measures. Now, the
majority of measures are
outcome measures. That’s a
fairly big shift.
At Blue Cross, we will
focus on outcome measures
whenever we can. As a
practicing physician, I take
care of children hospitalized
mainly with multiple
chronic conditions off and
on Medicaid, and I will tell
you what their parents care
about—they care about
getting out of the hospital
as soon as possible, not
having a safety event like
an infection and having the
best well-coordinated care
possible.
Those are outcome-
oriented metrics. If you
tell them, “We’re going to
measure the process of this
minute evidence-based
detail,” they don’t care. They
care about the outcomes for
February 5, 2018 | Modern Healthcare
their child. That is the type of
quality measures we need.
MH: You recently came out
opposed to the UNC Health
Care and Carolinas HealthCare
proposed merger. Why?
Conway: I would go back
to the data and evidence,
but I am not aware of any
combining of large hospitals
and health systems in the
U.S. that has led to lower
costs for consumers. The
question we have asked
and I think should be asked
generally, to take it away
from any specific instance,
is how are these changes
going to drive higher quality
and lower costs?
At Blue Cross North
Carolina, the majority of
our costs are medical costs.
As medical costs go down,
we pass on those savings
to consumers in lower
premiums. Globally, the
question I’d ask is, “How
is any arrangement going
to drive lower costs for
consumers that we can then
pass on in lower premiums?”
We’re a not-for-profit health
plan and our mission is
about higher quality of care
and lower costs.
We have strong
relationships with both
UNC Health and Carolinas.
As I wrote in a letter to the
CEOs of both systems,
after a thorough review of
independent research which
shows that when healthcare
systems combine, costs
for consumers go up,
Blue Cross NC can not
support their proposed
combination. We are open
to continued dialogue if
they can demonstrate how
this combination will lower
costs and improve quality
over the long term. l
33
Largest accountable care organizations
Ranked by estimated Medicare lives
Rank Organization State Estimated Medicare lives
1 Advocate Physician Partners Illinois 139,617
2 Delaware Valley ACO Pennsylvania 123,888
3 Physician Organization of Michigan ACO Michigan 104,559
4 Mercy Health ACO Missouri 82,614
5 Illinois Health Partners ACO Illinois 81,093
6 Health Connect Partners Washington 76,497
7 University of Iowa Health Alliance Iowa 73,192
8 Cleveland Clinic Medicare ACO Ohio 71,113
9 Baylor Scott & White Quality Alliance Texas 69,437
10 Mercy Health Select Ohio 67,250
11 University Hospitals Accountable Care Organization Ohio 64,712
12 Meridian Accountable Care Organization New Jersey 63,249
13 Atlantic ACO New Jersey 62,759
14 Franciscan ACO Indiana 60,203
15 MyHealth First Network South Carolina 58,690
16 Keystone ACO Pennsylvania 56,925
17 MaineHealth Accountable Care Organization Maine 56,844
18 Privia Quality Network Virginia 53,256
19 Memorial Hermann ACO Texas 51,337
20 Palm Beach Accountable Care Organization Florida 51,150
21 Duke Connected Care North Carolina 48,985
22 Mission Health Partners North Carolina 48,801
23 Georgia Physicians for Accountable Care Georgia 47,393
24 NH Accountable Care Partners New Hampshire 46,616
25 Baptist Health Care Partners Kentucky 44,900
26 WellStar Health Network Georgia 44,742
27 BayCare Physician Partners ACO Florida 42,883
28 Rainier Health Network Washington 42,846
29 Mount Sinai Care New York 42,218
30 Fairview Health Services Minnesota 40,774
Note: Numbers are as of year-end 2017. No new Medicare Shared Savings Program (MSSP) or Next Generation ACOs are included. Where possible, covered lives are taken from the
most recent CMS data. For ACOs that entered the programs in 2017, lives are estimated using Leavitt Partners’ estimation algorithm. Estimates were made mid-2017.
Source: Leavitt Partners

For more information on the data used to compile this chart, contact Leavitt Partners
299 South Main St., Suite 2300, Salt Lake City, UT 84111; 801-538-5082, jordana.choucair@leavittpartners.com

Information in this chart may be subsequently revised at the discretion of the editor.
For more information on our research, contact Megan Caruso at 312-649-5471 or mcaruso@modernhealthcare.com.
FOR MORE charts, lists, rankings and surveys, please visit modernhealthcare.com/data.

34 Modern Healthcare | February 5, 2018

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February 5, 2018 | Modern Healthcare 35

Net-connected
glasses help the
visually impaired
navigate the world
hancey Fleet likes learning origami from online videos,
C moving her hands as the hands on screen move. But
Fleet’s never seen a single video in her life. To take in visual
stimuli, Fleet, a technology educator at the New York Public
Library who was born blind, relies not on her own eyes but
someone else’s. Wearing a glasses-mounted camera, an Aira helps the
blind and visually
image of whatever’s in front of her is beamed to someone impaired by giving
on the other end, who narrates what Fleet would be seeing. directions and other
The glasses and the narration are thanks to Aira, audio cues.
a startup Suman Kanuganti and Yuja Chang founded
in 2015.
Aira’s service is available on demand, so Fleet can call
it up whenever she needs it. Most often, that’s not for day- experiences that haven’t explicitly been made accessible.”
to-day mobility, she said, but for web content. Users pay monthly fees. A little under $100 gets a
“There are some things on the web that are chronically person 100 minutes; $329 pays for unlimited use. Though
inaccessible,” Fleet said. “I see Aira as providing the service is currently staffed by real live humans, Aira
immediate access to what most people think of as visual executives plan on shifting that to artificial intelligence. l

Hear that? Tractor beams may give you a lift someday

or the first time, researchers have
F demonstrated it’s possible to levitate
large objects—like people.
so it’s satisfying to find a way to
overcome it. I think it opens the door
to many new applications,” Dr. Asier
Marzo, lead author on the paper, said
in a news release.
Some of those applications could
Engineers at the University of Bristol be big in healthcare. The technique
discovered an acoustic tractor beam, unlocks the possibility of manipulating
which uses sound to hold particles in drug capsules or using microsurgical
the air, could trap matter larger than a tools inside the human body.
wavelength of sound. For now, the largest object
It was previously believed these researchers have been able to hold
tractor beams could only hold small in the tractor beam is a 2-centimeter
objects, because researchers were polystyrene sphere. But they have big
unable to hold anything larger than hopes.
a wavelength without causing the “In the future, with more acoustic
objects to spin uncontrollably. power it will be possible to hold
Their new strategy looks like even larger objects,” said Mihai
“tornadoes of sound,” with loud Caleap, a senior research
sound surrounding a silent core associate who developed
to hold an object steady. the simulations. “This was
The discovery recently was only thought to be possible
published in Physical Review Letters. using lower pitches making the
“Acoustic researchers had been This rendering demonstrates how experiment audible and dangerous
frustrated by the size limit for years, acoustic tractor beams works. for humans.” l

36 Modern Healthcare | February 5, 2018

WHEN
INNOVATION
WINS , WE
ALL WIN.
THE SANFORD LORRAINE CROSS AWARD
will honor a researcher or innovator pioneering
the next breakthrough medical innovation.

For the winner, it means a $1 million prize. For the world, it means
a medical cure, treatment or invention that will impact lives today.

So we need you to keep finding answers. Because when

you win the Sanford Lorraine Cross Award, we all win.

SanfordLorraineCross.com