Archive for the ‘Hospital Systems’ Category

D-Day For Obamacare Means Big Changes For Healthcare

Tuesday, May 27th, 2014

MOBs are getting ready to take center stage as healthcare moves into more of a localized, outpatient setting.

By John Driscoll, President, Alter+Care

The first of this year was to be Obamacare’s D-Day. Though some changes kicked in earlier — the right to keep kids on your health plan until they turn 26, for example — the big provisions like the individual mandate became law this year. The ramifications from a medical and economic standpoint have been written about amply. In regards to the healthcare real estate industry, there are two very large trends: the consolidation of providers and the move to outpatient as the new center of healthcare delivery.

THE CONSOLIDATION WAVE
Part of the Obamacare plan to improve outcomes is the concept of the Accountable Care Organization. ACOs are essentially consortiums promoted as bigger, better models that manage health at the population level across a broader swathe of the healthcare specialties.  An ACO might include a hospital, various specialty groups, a  surgery center, imaging, emergency department and even nursing homes, with all payments made to the head of the ACO – usually the hospital – and then distributed to the rest of the group.

It’s now all about the team. As a result, the ACO has caused the biggest wave of consolidation I’ve ever seen in the sector. Consider that a quarter of specialty physicians and 40 percent of primary care physicians are already employed by hospitals. This number is up from 5 percent and 20 percent, respectively, in 2000. Some larger specialty practices are combatting this trend by merging with other practices to avoid being purchased by healthcare systems or hospitals.

Some independent practices are moving out of condominium office buildings and joining together to acquire office buildings. The costs of maintaining small independent space can become burdensome, especially as the technological pressures on integration and connectivity are imposed. Chances are, information technology financing will become an ever-increasing part of medical office loan commitments. Some IT expenditures are in the $30,000 to $50,000 range, while multi-specialty groups have larger expenditures to fund.

THE NEW CENTER OF HEALTHCARE
In order to lower costs and operate more efficiently, hospitals have migrated services from expensive acute-care environments to technologically enabled outpatient facilities. The hospital-centric model of the past has already given way to a hub-and-spoke network in most markets, where outpatient centers provide convenient and accessible care to patients and refer volumes to affiliated inpatient facilities. So what’s next? As it develops, hub and spoke will become a distributed model of care. It will result in providers who are physically dispersed, yet highly integrated through technology. Electronic medical records and advances in medical information technology will allow discrete providers to operate as a team. Primary care doctors will act as gatekeepers, coordinating and overseeing care regimens across this broad network.

The presence of this “patient-centered medical home” model means large MOBs (rather than hospitals) will become the hubs, while smaller specialty sites have become the spokes.  Think of the last time you visited a hospital for a procedure as opposed to a medical office building located in your community. Some systems are even leasing space in retail malls. As a result, the MOB is the definitive center not only of care, but also of healthcare real estate.

Last year was a banner year for outpatient services, and the investment community jockeyed to scoop up prized MOBs. There was a total of $4.98 billion-worth of MOB sales through the third quarter of 2013. This is compared to MOB sales of $5.21 billion for all of 2012. This has resulted in an average sales price of $231 per square foot, which is very strong with cap rates in the 6 percent range. If you extend the numbers out to sales of all buildings leased by healthcare providers, including doctors’ offices, urgent care clinics, diagnostic labs, imaging centers, the total reached $6.67 billion last year.  This was the second-highest number we’ve experienced in 13 years with a sales price of $270 per square foot. When you consider that 90 percent of the $1 trillion of healthcare property overall is still owned by hospitals, it is certain we are only at the beginning of this shift toward third-party real estate ownership.

To meet the challenges of distributed care and cost reduction, developers and operators of healthcare assets will need to think about the particular mix of services and programming in every building. This will result in the consolidation of redundant and inefficient facilities, while in other cases it will mean extending into preventive health and wellness to achieve population health management goals.

This article first appeared in Western Real Estate Business.

Dr. Ari Robicsek on Big Data & Healthcare

Wednesday, August 14th, 2013

Dr. Ari Robiszek podcast iconBig Data have become ubiquitous buzz words for the aggregation of information in data sets and the use of algorithms to define patterns. Overall, the growth of the sector is being driven by the trend towards backing up data in the proverbial cloud, online shopping (which grew 14% between 2011 and 2012 to $42.3b in sales), and all the time we spend posting content on social media. McKinsey & Company predicts a 40 percent growth annually in the data being generated. American healthcare providers currently have $300 billion invested in data, including GPS and mobile apps. With the adoption of Electronic Health Records (EHR), it is estimated that data could save providers between $300 billion and $450 billion annually (we spend about $2.6 trillion overall on healthcare).

There is no question that Big Data is a heuristic change in medicine. Through the data compiled in EHRs, it allows use of predictive modeling in order to address health issues at a population level.   For example, we are able to find out if patients are doing preventive care, taking their medication, and whether they might be at risk for chronic conditions. Population health management is a new, more proactive way to segment patients by need (both financial and clinical) and to target them for outreach. It provides a powerful tool to address hospital readmissions and hospital-based infections. For example, NorthShore University HealthSystem (NorthShore) in Evanston, Ill., aggregated 40,000 patients into a data set and analyzed 50 different pieces of data to build a predictive model. This allowed NorthShore to evaluate whether patients might be at a high risk for being carriers of particular bacteria like MRSA, a highly antibiotic-resistant strain.

There are issues going forward such as the barrier that EHRs put between the patient and the physician; in the new tech-enabled world, the doctor might spend the visit staring at the computer rather than the patient. This is a real concern. Doctors have also noted that it is harder to retrieve information in EHRs than from a paper chart. On the flip side, EHRs do provide patients with more transparency, including a portal to their lab tests, billing, scheduling, doctor notes as well as email contact with their physicians.

To listen to Dr. Ari Robicsek’s full interview on Big Data and Population Health Management, click here for the podcast.

Healthcare’s Early Hope?

Tuesday, June 25th, 2013

We have a couple of promising trends emerging from the recent reports. Consumers saved $3.9 billion in premiums last year, according to an analysis released today from the CMS. Why? Because Obamacare stipulates that insurers must spend at least 80% of their premium dollars on medical expenses.

Called the MLR provision or the “80/20” rule, it forces insurers to lower their rates or improve coverage to meet the standard.  And, if they don’t comply, a rebate is issued to the patients. This year, 8.5 million Americans will receive $500 million in rebates. On top of this, they saved more than $3.4 billion from lower premiums in 2012.

All of this comes a t a time when spending in general is trending down. PricewaterhouseCoopers’ Healthcare Research Institute (HRI) now predicts that U.S. medical costs in 2014 will spike by 6.5 percent, a full percentage point lower than the organization’s estimate of 7.5 percent for 2013. The net growth rate in healthcare costs, after accounting for benefit design changes such as higher deductibles, will be about 4.5 percent. The truth is that this is part of a longer-term trend. Between 2009 and 2011, total health spending grew at the lowest annual pace in the last five decades, at just 3.9 percent a year. In contrast, between 2000 and 2007, those annual growth figures ranged between 6.2 and 9.7 percent.

The reasons are familiar: the move to less costly outpatient settings to deliver care; the sluggish recovery which has tempered healthcare spending (the Kaiser Family Foundation thinks this is three-quarters of the reason for lower spending); new models for delivering care; and aspects of Obamacare (like the 80/20 rule for example). Then there’s all the waste that reform has gone after.  According to government data, hospital readmissions dropped by nearly 70,000 in 2012, and this trend is expected to accelerate through 2014.

Still, we have a long way to go and a few years of bending the cost curve don’t make up for decades of exorbitant increases. According to the Kaiser Family Foundation, the average American’s cost of care has gone up 140 percent over the past 10 years, while wages only went up 40 percent.  Still, the numbers offers hope that we are starting to gain some ground.

ObamaCare: Shambolic or Shining?

Thursday, May 2nd, 2013

The word of the week, courtesy of NY Times columnist, David Brooks, is "shambolic" which he uses to describe ObamaCare as it becomes implemented. As the overhaul of the US health system becomes a reality, the critics on both sides of the political aisle are joining Brooks to carp on what seems like a bureaucratic nightmare.

Even Max Baucaus, Democrat from Montana, has called the rollout of the healthcare exchanges a potential “train wreck” (the Obama team expects to spend $4 billion this year on setting up the 50 state-based exchanges and $1.5 billion next year running several of them).

Then there’s the application to apply for insurance from an exchange which started out as a 21 page booklet.  Following criticism, the Health and Human Services Department announced that they’ve cut the application from 21 pages down to three pages.

The issue seems to be that ObamaCare is creeping along without many of its details worked out or workable. While any sweeping institutional reform will have its shambolic elements, it’s useful to realize that Medicare did not arrive in 1965 as a fait accompli; It’s actually been a 48-year work in progress.  Today, beneficiaries get coverage through Original Medicare and the newer model, Medicare Advantage (also known as Parts A and B); then we had Disability and end-stage renal benefits in 1972; then the Medicare and Medicaid Program Protection Act of 1987 to fight all the fraud; then the prescription drug benefits for the Medicare population, which went into effect in 2006 (maybe the Bush Administration’s singular achievement if you listen to former administration official like Karen Hughes).

Lastly, people say that the administration is force feeding us a rewriting of healthcare law that the country doesn’t want. According to the Kaiser Health Tracking Poll for March 2013, only 37 percent of Americans like Obamacare. Looking at Medicare, we see the same parallels. In July of 1962 when President Kennedy first proposed it, a Gallup poll found 28% in favor, 24% viewing it unfavorably, and 33% with no opinion. A month later, 54% said it was a serious problem that “government medical insurance for the aged would be a big step toward socialized medicine.” After Lyndon Johnson was elected, a Harris poll found only a minority, 46%, supported a Federal plan to extend health care to the aged. Today, of course, Medicare is overwhelmingly popular.

Perhaps, the experience of Medicare counsels us to be aware that history has a way of confounding growing pains and poll numbers.

2012 Election To Be Pivotal for Healthcare

Thursday, November 15th, 2012

The 2012 presidential election will impact healthcare delivery in the United States. The question boils down to whether the electorate believes that the free market will control the cost of healthcare while delivering quality care.

According to The New Yorker’s James Surowiecki, “In most areas of the economy, free-market principles insure that products and services keep improving, and that consumers get better and better deals.”  Although the free market may be the optimal way to sell cars and refrigerators, it may not provide the same impetus for medical care.  Nearly half a century ago, Stanford economist Kenneth Arrow, in an article entitled “Uncertainty and the Welfare Economics of Medical Care”, suggested that healthcare is an outlier that limits the power of the marketplace.  Paraphrasing Arrow, Surowiecki writes that “Because people don’t have the expertise to evaluate doctors, hospitals or treatments, it’s hard for them to comparison shop.  Because they can’t pay for major care out of pocket, they must rely on insurance, often losing the final say in what to buy or how much to spend.  More fundamentally, markets work only when consumers have the power to say no if the price isn’t right.  Yet it’s very hard for people to say no in the case of things like end-of-life care or brain surgery.”

Surowiecki points out that, over the past four decades, Medicare has done a better job at holding down healthcare costs than the overall market.  He also notes that most developed nations – which have government-controlled healthcare –succeed at reining in costs while delivering first-rate outcomes.

Non-Profit Hospital Fundraising Soars in 2011

Monday, October 29th, 2012

More than $8.9 billion was donated to non-profit hospitals and healthcare systems in 2011 — an all-time high.   According to a report from the Association for Healthcare Philanthropy (AHP), that is an 8.2 percent increase over the previous year.  The recent numbers continue a trend that started in 2010 when non-profit hospitals saw an eight percent rise in donations compared with 2009 to more than $8 billion.  Individual donations totaled nearly 60 percent of that amount, according to the AHP.  That was a significant increase over 2009, when donations fell 11 percent or $944 million.

During 2011, the cost of fundraising rose to 31 cents per dollar collected, a two percent rise over the previous year.  Healthcare systems raised $3.24 for every dollar they spent.  University-connected hospitals were the most prolific, with $7.58 raised for each dollar spent.   Approximately 19 percent of donated funds supported community benefits and charity care; an additional 8.6 percent funded training and research.

Annual giving was the primary fundraising source, followed by capital campaigns and special events.  Approximately 70 percent of money raised was in the form of cash contributions, while the remainder was pledges primarily in the form of bequests and planned gifts.

Susan J. Doliner, chair of the AHP board of directors, notes that “It’s interesting to see that the funds raised continue to be predominantly in support of construction and renovations, equipment and program operations.  Stay tuned, as this finding shines a light on the future gap in resources healthcare organizations will face as we begin the implementation of new healthcare financing models.”  The uptick in donations is good news for hospitals and healthcare systems working to accommodate millions of new patients when the Patient Protection and Affordable Care Act (ACA) becomes fully effective in 2014.  At present, healthcare systems are relying on capital campaigns to finance new construction rather than bank loans or other debt.   Only 17 percent are using debt, a decline from the 20 percent reported in 2010.  Another 42 percent are financing new facilities with cash reserves.  The use of tax-free bonds is at its lowest level in six years, comprising just 21 percent of new construction financing.

Craig Wortmann on Creating Your Business Story

Monday, October 15th, 2012

According to Craig Wortmann, Clinical Associate Professor of Entrepreneurship at the University of Chicago Booth School of Business, people today tend to collect too much information – via Facebook, blogging, tweeting, reading other people’s blogs – information overload typically becomes a problem shared by humanity.  In a recent interview for the Alter+Care Inspire Podcasts, Wortmann said that while the technique of telling stories is the oldest form of communication — it’s also the one form that rises above the din of our information-saturated environment and delivers messages that connect with people, bringing ideas to life.

Wortmann is founder and CEO of The Sales Engine and the author of the book “What’s Your Story?”, which discusses how to use stories to ignite performance and be more successful.

Wortmann believes that we are reaching back to our earliest human ancestors whose cave drawings created a narrative structure – stories that remain compelling through the ages.  We still create stories to make daily experiences meaningful for people, to differentiate them from what Wortmann calls facts or data.  Stories do two things:  they create context and provide an emotional connection.  By “emotional”, Wortmann doesn’t mean fluffy or characterized by high drama.  Rather, it is emotional because we are all human beings who thrive on creating emotional connections.  This is why stories – when told persuasively – can be so powerful.

According to Wortmann, “One of the things we say in business school that drives our students crazy is that people will not work to understand your message.”  Instead, you have to work to be understood.  For example, a sales trailer is to a business as a movie trailer is to a feature film.  In both cases, we struggle to have our message understood because people have accumulated knowledge.

Wortmann helps entrepreneurs create their sales trailer, which acts as a hook that prompts the potential client to ask questions.  Whatever way you send the message – whether spoken, written, e-mailed, tweeted or otherwise transmitted – always err on the side of conciseness.  An e-mail, for example, should be three or four lines — maximum.

The same philosophy of brevity should apply to any presentation, which Wortmann believes in limiting to a single word per slide.  He shares that same affinity with Silicon Valley venture capitalist Guy Kawasaki and the late Steve Jobs.

To listen to Craig Wortmann’s full interview on the art of the sale, click here.

Is It Time to Reform the Fee-for-Service Model?

Tuesday, September 25th, 2012

Despite the healthcare industry’s attempts to alter the way in which physician reimbursements are determined,  fee-for-service is still the accepted basis for payment.  Typically, physicians are reimbursed according to the number of patients they see and how many procedures and tests they order.  Policymakers have concluded that the “do more, earn more” business model is deeply flawed and one reason why Americans pay so much for healthcare.  In 2012, Americans will pay more than $8,000 per individual on healthcare.  That’s more than double the $3,400 average spent for each person in other industrialized nations.  What’s more, all that spending has not made Americans healthier.

The time may have come to find a new reimbursement model that places less of a financial burden on patients while still rewarding physicians.  An August article in the Journal of the American Medical Association notes that the fee-for-service payment is the foundation of even some emerging accountable-care organizations, including Medicare’s popular shared-savings program, say Drs. Allan Goroll of Harvard University Medical School and Stephen Schoenbaum of the Josiah Macy, Jr., Foundation.  The shared-savings program “Promotes accountability for a patient population and coordinates items and services under (Medicare) Part A and B, and encourages investment in infrastructure and redesigned care processes for high quality and efficient service delivery.”

Goroll and Schoenbaum isolate a number of reasons for why fee-for-service endures:  many physicians are risk-averse and so resist change; additionally, skepticism is a “major barrier” to reforming the payment model.  “Transitioning to a new payment system will require new modes of practice, and many physicians feel ill equipped to assume financial or performance risks individually or even collectively,” Goroll and Schoenbaum write.  “The concern is that continued reliance on fee-for-service payment for primary care as well as for specialists, with its emphasis on volume of services, threatens meaningful practice transformation and the very goals of delivery system reform.” The bottom line is that the healthcare industry must develop “robust, scientifically validated risk-adjustment models,” according to Goroll and Schoenbaum.  Payment reform could blend capitation and fee-for-service with a plan to revise the payments over time.

Change must be forced on the medical community, whether or not they are ready for it.  One provision of the Patient Protection and Affordable Care Act (ACA) requires alterations to payment and delivery systems to control costs and enhance the quality of care.  Rather than basing payment solely on the number of patients a physician sees and tests ordered, these methods promote preventive care and maintain open lines of communication between a patient’s multiple physicians.

The potential alternative reimbursement models presently being considered include:

•       Bundled payments or fixed amounts paid to healthcare providers for related services a patient needs within a given timeframe.

•       Patient-centered medical homes.  This model would restructure primary-care practices so that their focus is on preventive medicine, patient education and healthcare coordination.

•       Accountable care organizations, in which physicians and other providers share responsibility for providing cost-effective, quality care for patient groups.

Big Medicine Is Watching You

Monday, September 24th, 2012

Big Medicine is on the way, according to celebrated author and Harvard professor, Atul Gawande, In a major article in the New Yorker, Gawande describes the new frontier of ICUs as ones where patients may be monitored not from a telemetry station within the hospital but from a remote command center filled with high-tech screens and armies of highly-trained technicians that could be miles away and serve multiple hospitals.

Gawande cites the example of Dr. Armin Ernst, who is responsible for Steward Health Care’s ICU operations at the system’s 10 hospitals, serving approximately 8,000 patients annually.  “He sees it (the ICU) as the temporary home of the sickest, most fragile people, Gawande writes.  ”Nowhere in healthcare do we expend more resources.  Although fewer than one in 4,000 Americans are in intensive care at any given time, they account for four percent of healthcare costs.  Ernst believes that his job is to make sure that everyone is collaborating to provide the most effective and least wasteful care possible.”

Ernst’s ICU command center is a one-story building that contains millions worth of technology, banks of computer screens carrying cardiac-monitor readings, imaging scans, and lab results.  Special software sends an alert when it detects patterns that raise concerns.  Doctors and nurses operate consoles where high-definition video cameras zoom into any ICU room and talk directly to the staff or to the patients themselves.  Soon, the tele-ICU team will monitor the care for every ICU patient in the Steward system.

The experience was eye-opening for Gawande.  After five minutes of observation, I realized that the remote ICU team wasn’t exactly in command; it was in negotiation, Gawande writes.  Sometimes the bedside staff resist resolving problems that the E-ICU staff identify.  You have got to be careful from patient to patient, Gerard Hayes, a tele-ICU doctor, explained.  Pushing hard has ramifications for how it goes with a lot of patients. You don’t want to sour whole teams on the tele-ICU.  Several hospitals have decommissioned their systems; clinicians have placed gowns over the camera, or torn the camera out of the wall.

Despite some opposition, there is good reason why hospitals are adopting the E-ICU model.  Remote monitoring is a high-tech solution to a sticky problem facing hospitals: how to care for the sickest patients amid a worsening shortage of intensive-care physicians.  Currently, only one third of ICU patients receive care from an intensivist.  The Department of Health and Human Services believes that demand for intensivists will outstrip supply over the next 30 years.  Initial results from the E-ICUs have been dramatic: Mortality rates are 30 to 40 percent lower when physicians provide 24/7 care to prevent complications and minimize errors. A University of Massachusetts Medical Center study of 6,400 patients in seven adult intensive-care units monitored by E-ICU showed substantial benefits in reducing both costs and mortality, according to the hospital’s director, Craig Lilly.  The hospital saved $5,000 per case, mostly because the system lets intensivists in the remote-command center “detect instability and bring new treatment to the patient before they would have received it in a typical ICU.”

GOP VP Candidate Paul Ryan Advocates “Medicare Premium Support”

Wednesday, September 5th, 2012

Now that Representative Paul Ryan (R-WI) has been selected by former Governor Mitt Romney (R-MA) as his vice presidential running mate, the debate is focusing on the Wisconsin representative’s plan to reform Medicare.  Known as Medicare Premium Support, it “refers to a system under which Medicare enrollees would pick from a menu of competing plans with a fixed government payment to help defray premium costs.  Enrollees would be on the hook for any charges above the government contribution.  But they could save money by selecting a plan with a premium below the federal subsidy.”

Ryan says that under his plan, the government’s contribution toward premiums will equal the cost of the second least expensive plan in any market — or traditional Medicare — whichever costs less.  Ryan believes that his plan is politically feasible because it doesn’t begin until 2022 with the result that it retains traditional Medicare for Americans who were 55 and older in 2011 — meaning that baby boomers are exempt from the changes.  Democrats who oppose the plan contend that Ryan’s Medicare overhaul would subject seniors to the vagaries of the private market, leaving them with little protection against rising premiums and negligible benefits.

So what is the difference between the Democratic and Republican cuts to Medicare?  The ACA stresses government control and central planning. The law creates a panel of 15 unelected government officials, called the Independent Payment Advisory Board (IPAB) to direct changes that will shrink spending by cutting physician and hospital reimbursement.  The Wyden-Ryan plan preserves the ACA’s targets for future Medicare spending, but uses competitive bidding.  Seniors would have the same benefits that they do now, and would have the option of choosing from several government-approved private insurance plans.

The Republican budget targets Medicare growth of GDP plus 0.5 percent, just as the 2013 Obama budget does. The difference lies in the fact that the GOP budget repeals the ACA, while maintaining that law’s Medicare cuts.  The Democratic budget leaves the ACA in place.

Writing in the Washington Post, Ezra Klein puts the difference in a nutshell:  “The difference between the two campaigns is not in how much they cut Medicare, but in how they cut Medicare.”

In an exclusive interview with Modern Healthcare magazine, Ryan says that “This is an idea whose time has come.  And it’s a bipartisan idea.  What Representative Ron Wyden (D-OR) and I tried to do was to plant the seeds of a bipartisan consensus.  We knew we weren’t going to pass it because of the politics.  We did this together to get the consensus-building started.”  Ryan believes that the plan’s chances for approval will greatly improve in 2013 — especially if the Romney/Ryan team wins the November 6 presidential election.  “I’m actually pretty optimistic,” he said, noting that the United States should reform healthcare on its own terms and “fix this on our terms” instead of borrowing European ideas.  “We believe there are far superior ways to get back to a patient-centered healthcare system, the nucleus of which is the patient and doctor — and not the government,” Ryan said.  “We believe consumer-driven, market-based reforms do more to alter the cost curve of healthcare inflation.”

If Ryan’s plan is enacted into law, people 55 and younger would see a change from one in which everyone gets the same set of government-paid benefits to one in which the government gives all senior citizens a fixed amount of money.  They could use this to purchase private insurance or pay a portion of the cost of enrolling in traditional Medicare.  Ryan has not said how much the premium support payment would be.  But he would limit the annual growth rate to no more than one-half percent more than the economy’s overall growth rate, even though healthcare costs are rising at a significantly faster pace.  Ryan’s plan would also raise the Medicare eligibility age to 67 from 65 by 2034.

Not so fast,” Democrats warn as partisans from both parties accuse the other side of throwing senior citizens under the bus.  “Make no mistake about it — these Republicans don’t believe in Medicare,” Obama campaign senior adviser David Axelrod said.  “They want to turn it into a voucher program.  And slowly, all the burden is going to shift to seniors themselves.  And that is not an answer to entitlement reform.”

Republicans counter that $716 billion in cuts to Medicare are already a part of the Patient Protection and Affordable Care Act (ACA).  An online video created by the Republican National Committee features Ryan saying that Democrats “have refused to make difficult decision because they are more worried about their next election than they are about the next generation.”  According to Ryan, “We won’t duck the tough issues; we will lead.”

Uwe Reinhardt, a healthcare economist at Princeton University disagrees, saying that rather than motivating insurers to control their costs, the Ryan plan will not benefit seniors.  “You’re essentially shoving these guys out on a boat, saying, ‘We’ll give you a push, but if the waves are rough, you’re on your own,” he said.  “It would really worry me if I were a middle-class American.”