The game is changing in the business of health care. Idaho’s two medical giants — the Saint Alphonsus and St. Luke’s health systems — will feel the impact. Rules from the Patient Protection and Affordable Care Act that will steer hospital budgets in less than three years are still being drafted, and hospitals nationwide are trying to decipher what’s already been written.
The bete noire that underlies most discussions about health reform: How much will it cost? Hospitals such as Saint Al’s and St. Luke’s are searching for a Rosetta stone to help them figure out the new financial structures they’ll be facing, where giving patients aspirin can make the difference between docked Medicare payments or a bonus.
The larger medical providers are paying close attention to the “accountable care organization” model being rolled out by the federal government. An ACO is a group of health providers that enters into a three-year agreement with the Centers for Medicare and Medicaid Services to meet certain quality, cost and accountability standards.
One of the selling points is that under proposed federal rules, individual providers would get Medicare payments as usual, and ACOs would get “shared savings” from Medicare for meeting or exceeding goals.
The CEOs of Saint Al’s and St. Luke’s, Sally Jeffcoat and Dr. David Pate, respectively, shared their thoughts on the industry and health reform in an email interview with Business Insider. Jeffcoat and Pate are both relatively new to their organizations, having taken over as CEOs in 2009.
Their answers have been edited for clarity and length.
WHAT ARE SOME UNCERTAINTIES THAT HEALTH CARE REFORM INTRODUCED?
A: Jeffcoat: The new Medicare Shared Savings Program is a large-scale trial project with a large number of unknowns and a significant degree of financial and potential antitrust risks. Centers for Medicare and Medicaid Services estimated startup costs and one-year operating costs (per hospital] at $1.755 million. [But] the American Hospital Association calculated these costs ... between $11.6 million and $26.1 million.
In addition, providers are concerned whether there is enough shared savings to cover these development and operating expenses. In the CMS Physician Group Practice Project — launched in 2005, the precursor demonstration to the Medicare Shared Savings Program — only 60 percent of participants received shared savings gains in any year, and only 20 percent of participants received gains in every year.
Our relationship with insurance providers and others will change.
A: Pate What will employers do? We’re concerned more employers may drop health insurance coverage because the penalty for not providing coverage may be less than the cost of coverage. That will drive more employees to health insurance exchanges to find coverage, which could drive up costs by shifting volumes away from employer plans where incentives to reduce costs can be applied.
How can Idaho afford a 50 percent increase in Medicaid enrollment? It’s estimated that half of the uninsured will be covered through state Medicaid programs, yet in nearly every state these programs are running significant deficits, and lawmakers are continuing to cut Medicaid services. It is uncertain how states, including Idaho, will absorb the cost of administering a Medicaid program that will need to accommodate a 50 percent growth in eligible participants. The federal reform will pay for the health care claims — not administrative costs — but only for a defined period of time.
WHAT ARE SOME THINGS YOU'RE DOING TO GEAR UP FOR REGULATORY AND INSURANCE/FUNDING CHANGES ON THE HORIZON?
A: Jeffcoat 1. Acquiring [and using] the advanced technology and communication tools necessary to thrive under value-based care and be fully accountable. Information technology will be the key to connectivity between providers and shared decision-making with patients. Saint Alphonsus ... completed implementation [of electronic health records] at our flagship hospital in Boise in October 2010, and will be fully installed in all hospitals and physician clinics in 2013. The system has proven results [in reducing hospital accidents and acquired conditions]. Our IT system benefits patients because they no longer have to answer repetitive questions regarding their medical history, and it will eliminate medication-order entry errors associated with poor or illegible handwriting.
2. Efforts are under way to implement the patient-centered medical home model (wherein) patients receive comprehensive care for both acute and chronic medical conditions. [That] may include after-hours or before-hours appointments, e-visits, telephone consultations and nontraditional office visits.
A: Pate 1. Soon, all St. Luke’s caregivers will have access to a patient’s health-care information from throughout the delivery system to ensure that we eliminate duplication of tests and imaging and assure consistency among a patient’s health-care providers.
2. Through St. Luke’s Humphreys Diabetes Center, St. Luke’s Heart and St. Luke’s Children’s Hospital, we will be implementing robust new programs to better manage chronic diseases.
3. Engaging our communities. As Idaho’s only local community-owned health care system, it’s vital that we engage the community in our efforts to increase patient awareness, continue planning for the future and promoting philanthropic initiatives.
ARE YOU DOING ANYTHING NEW/DIFFERENT TO KEEP THE HEALTH SYSTEM'S FINANCES IN GOOD HEALTH?
A: Jeffcoat We have hired more finance and billing staff to manage the increased complexity and federal requirements for billing. Our debt is well-structured, so we have no changes, but we constantly work to continue to have funds to reinvest in our health systems. We will continue to seek grant funds to support innovation [like] our Telemedicine Service.
A: Pate We will need to pursue new reimbursement methodologies with payers and employers ... to continue investing part of the savings from our efforts into technology, facilities, equipment and people. We are working hard to reduce costs by driving waste, duplication and unnecessary utilization out of our operations. We are also re-examining all of our population and bed-capacity projections, as well as the types of services needed in the future.
AS A MAJOR EMPLOYER IN THE TREASURE VALLEY AND THE STATE, WHAT WOULD YOU LIKE TO SEE MORE OF IN OUR WORKFORCE?
A: Jeffcoat Saint Alphonsus would be encouraged to see more specialty programs available to students at institutions of higher learning. Those include [occupational and physical] therapy services and [echocardiogram] tech programs. We have outstanding clinical programs for many areas like nursing and radiology, but are lacking in [those] critical areas. Recruiting highly experienced nurses, specifically in critical care or specialty areas, can be challenging as well.
A: Pate Studies show a significant correlation between education and health status, particularly education post-high school. Therefore, as both an employer and a provider of health care, St. Luke’s is committed to promoting education and encouraging more Idaho students to go on to college. We continue to need well-trained physicians, nurses, technologists and other caregivers. But in the future, there will be new and increased needs for [many providers such as] physician assistants, nurse practitioners and information technology specialists.
CONSTRUCTION CAPITAL MARKETS HAVE BEEN TIGHT. HOW ARE YOU WORKING AROUND THESE CONSTRAINTS AND OPENING NEW HOSPITALS AND OUTPATIENT FACILITIES?
A: Jeffcoat One of our strengths is our relationship with Trinity [Health, a Catholic hospital system and Saint Alphonsus’ parent]. As a large national health-care system, it has access to capital that would be unavailable to a small local system. Even with our relationship with Trinity, capital is limited, so we are prioritizing items that maintain or improve ... services to our patients, and to maintain leading-edge medical technology in the community. Less-vital items are being deferred to future years.
A: Pate Growth in the communities we serve has led St. Luke’s to invest more in our people, facilities, technology and communities than we have been earning. Obviously, this level of investment cannot continue indefinitely. We have to find more and better ways to cut unnecessary costs, refine our operations and increase philanthropic giving in order to meet the communities’ needs.
ANY ADVICE FOR OTHER LOCAL BUSINESS LEADERS?
A: Jeffcoat Health reform will impact every employer. Whether the employer provides health benefits or not, there will be a financial and administrative impact on their operations and their employees. Employers need to be knowledgeable and be ready for the changes. A leading indicator to business fitness is the [physical, mental and emotional] fitness of your employees. The return on investment for training and development, as well as wellness programs, is measurable and cannot be overstated.
A: Pate Provide incentives so employees stay healthy. Understand the complexities and economic realities of the health-care system. Work with providers. We need to continue to support our local charities. We need to continue to be role models and to encourage our local youth to pursue education.
I want local business leaders to know that ... (though) we did not support the health care reform bill as passed, we nevertheless intend to lead the way to transforming the health care delivery system [and ensuring] that businesses can afford to provide health care benefits for their workers.
Audrey Dutton: 377-6448
