Rowan says the thinking behind this reorganization will be replicated when possible with other CHI hospitals.
“All of a sudden there’s a world of difference in their market influence when they speak as one,” he says. “They have better negotiations with payers, suppliers, and physicians. For instance, you can go to a radiology group, ask them to cover all nine, and set expectations about their performance
That shift in focus and organizational hierarchy is coupled with another major initiative that started six months ago, a $1.5 billion information technology project rolling out over the next five years. Under that plan, the Kentucky region is one of eight regions within CHI. The system is busily hiring individuals to be local CMOs who will organize the medical staff around those regions. CHI recently hired Cliff Deveny, MD, as senior vice president of physician practice management, and a veteran of integrating employed and affiliated physicians into treatment protocols, to oversee that transition. It’s necessary, Rowan says, not only because it’s better medicine, but because the payment incentives are changing so dramatically.
Historically, a lot of hospitals and health systems have paid physicians at least partially on volume because that’s how the systems were paid, too. ”In the new world,” Rowan says, “that productivity-based incentive system is not the best idea.
“In that world, the best care often is no care, because we’ve kept you healthy,” he adds. “Physicians—even office-based guys—have to understand it’s not about volume; it’s about outcomes.”
That’s why the implementation or the clinical IT system at CHI is so important, and so expensive. It will gather information about individual patients and the health of populations so that interventions can be tailored to keep people healthy. Given the price tag, CHI probably won’t get a second chance to do this right, he says.
In the new era, Deveny says, “you have two paths as a provider organization. You can take death by a thousand cuts, which means you’ll take reductions in payment for Medicare and reduced payments for readmissions. You’ll see private payers follow that. That road requires extreme efficiency in operations, and if you don’t have good operating history that will put you in financial strain or a death sentence. The other path is the value proposition path or accountable path, and evolving the business model to always question why we do things and looking at best quality regardless of who the provider is. That’s the path we’re taking.”
That requires a major shift in how physicians, whether employed (CHI has 1,500 of those, and Rowan predicts it will have 750 more by 2015) or affiliated, are incentivized and inspired, says Deveny.
“In the past, physicians were brought in to maintain market share and volume, not for accountability, transparency, and measuring profit and loss in their practices.”
Now, as hospitals, health systems, and physicians are being judged by payers at least partially on total premium spend, the focus must be on putting out a better, more coordinated, non-wasteful product, he says.
As a result, “many physicians are feeling commoditized and are looking for a meaningful relationship
with their provider instead of selling themselves to the highest bidder,” Deveny says. “They’re looking at whether the health system sees them as a partner.”