How Hospitals Can Shape Sustainable Cost Control

Karen Minich-Pourshadi, for HealthLeaders Media , June 13, 2012

She says the organization expects to start reaping the benefit of population health as early as 2013.

Blue Cross Blue Shield of Michigan is providing a significant contribution to building the infrastructure for population health management for all of St. John Providence patients. Under the agreement, BCBSM will support the funding of infrastructure improvements necessary to better integrate care services between the Physician Alliance and the five hospitals under Partners in Care. Milestones have been established jointly between St. John Providence and BCBSM to ensure infrastructure work continues along with funding until 2013, when St. John Providence will include a performance-based reimbursement model into its next contract with BCBSM, explains Maryland.

In addition to changing its provider agreements, St. John Providence also examined how the community was using and benefiting from its assets—and how those assets supported the larger vision of the future. Michigan has excess capacity issues, Maryland says, so the organization needed to assess how many inpatient beds the community actually needed. The analysis of hospital use data led to the closing of one hospital—St. John North Shores Hospital, which was replaced with a new outpatient facility.

"The data trend demonstrated that the facility was dying on the vine and the alternative choice of an outpatient facility was better. At St. John North Shores, the only thing surviving was physical therapy and rehab; the medical and surgical beds weren't being used. It didn't make sense to continue on. But it was having the courage to say that this facility no longer meets the needs of this community," she says.

The system used a discernment process that included input from the legislators, physicians, administrators, and the community, along with occupancy statistics, to arrive at the decision to close the nearly 100-year-old facility. Inpatient service moved to another hospital and the replacement of the inpatient facility with an outpatient one caused a drop in cost for the system.

Maryland notes the most significant benefit of reconfiguring St. John North Shores came from relocating the inpatient rehabilitation unit to St. John Hospital and Medical Center, which allowed St. John Providence to open the new, state-of-the-art Cracchiolo Inpatient Physical Rehabilitation Center. A new outpatient facility in Harrison Township (the community that housed St. John North Shores Hospital) opened shortly after, which includes the outpatient physical rehabilitation services program relocated from North Shores, plus lab services, physician offices, and urgent care services.

"Asset reconfiguration is so important for sustainable cost reduction. Part of our transformational journey is a shift from inpatient care to population health management and to reduce the need for hospital beds except where appropriate," she says. That goal also led the organization to sell two nursing care facilities and then partner with those same facilities now under new ownership.

Maryland explains that while the nursing homes were not losing significant amounts from operations, they were capital intensive and the system felt the capital could be better deployed elsewhere within the system.

"The work is never done; transformation is ongoing and continuous. I think organizations that get stuck and never want to move forward and evolve are the ones that will face many challenges going forward," says Maryland.

Creating collaborative care teams
While St. John Providence was able to reduce patient care costs through comanagement agreements and asset reconfiguration, Dean Gruner, MD, president and CEO at Wisconsin-based ThedaCare found a way to reduce total inpatient costs by 25% over three years through the redesign of inpatient care.

"When we did this work we didn't start off with the primary purpose of reducing costs. We set out to improve safety, quality, customer satisfaction, employee satisfaction, and cost," says Gruner. "So we took metrics from all five of those categories. Then we tried to balance the focus across all areas, because if we just look at financial improvements, we have unanticipated consequences in other areas."

The five-hospital system spans nine rural counties serving about 250,000 patients and has more than 6,200 employees. Considered to be a leader in the application of Lean management in healthcare, ThedaCare adopted the methodology in 2003, but it wasn't until 2006 that the organization began value-mapping inpatient care.

Part of the reason ThedaCare opted to change its patient care approach was the decision to participate in the Institute for Healthcare Improvement's Transforming Care at the Bedside initiative. ThedaCare teams looked at value streams of patient care and discussed the attributes that an ideal hospital room and patient care model would contain. The discussion resulted in what the organization calls collaborative care, or a customer-driven, interdisciplinary collaborative care model.

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