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The Hospital of the Future

Philip Betbeze, for HealthLeaders Media, May 13, 2014
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But Grady, in large part because it serves a population that consists of a larger share of uninsured patients and patients covered by Medicare or Medicaid, is molding the way it delivers care slightly differently. For example, Haupert says inpatient admissions are growing at Grady as people who previously had been uninsured obtain coverage through the health insurance exchanges. That means significant inpatient bed expansion into "shell space," but that requires no new inpatient construction. The bulk of investment, even at Grady, is going into partnerships that expand its presence outside the inpatient setting.

"We're building more primary care medical homes with help from the federally qualified health centers, but it's the same premise [as WellStar's strategy]: The more we can be out in the community, be preventive, and get in front of chronic disease, the better."

Playing the other side

Memorial Hermann's heavy investment in an outpatient-based effort is only a part of its strategic plan to control more of the continuum. It's actually purchased an insurance company, obtained a state license, and hired a former Cigna executive as CEO for that unit.

"We've had to purchase claims processing software and significant information systems," says Alexander, in order to effectively partner with private insurers such as Aetna and Blue Cross Blue Shield of Texas. Those partnerships help all entities better analyze and respond to real-time claims data so that they can more effectively intervene with patients and tailor their care. The ultimate goal being to obtain lower-cost and higher-quality outcomes.

"We can see utilization rates of members because of these systems, so our ACO can more effectively be positioned for fixed payment," he says.

It's growing quickly. The ACO launched in January 2012 with fewer than 40,000 lives. Now, it has more than 300,000, which makes it the fourth largest ACO in the country, Alexander says. Even so, "we're just starting to turn the ship toward fixed payment," he says. "A high majority of patients are still fee-for-service, but we're building and investing substantial sums in our internal infrastructure to manage a per-member, per-month premium."

Alexander says the turn toward fixed payment is slow but inexorable.

"Our measures of success or market share for the past 50 years have always been things like admissions or births or surgeries or ER visits, but our mind-set is shifting now. Over time, our number of covered lives will become our most commonly used measure of market share."

And Memorial Hermann's goals are nothing if not ambitious there. The current market share leader in admissions, at 25%–28% of the Houston market, wants the equivalent of that in covered lives. "Houston is about 6 million people so you can quickly translate that to about 1.5 million covered lives," Alexander says, but ultimately being successful at managing that many people means Memorial Hermann's focus will shift dramatically to keeping those patients out of its own hospitals.

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