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Presentation Materials
In Partnership with: IFMA Health Care Council
www.ifma-hc.org
Seattle, WA - October 12, 2011
A Program of
Guest Presenter
James Leonard
Healthcare Consultant
(Prior CEO, St. Peter’s Providence)
Corporate Realty, Design & Management Institute 503-274-7162
www.SquareFootage.net
"Healthcare
Reform's Effects on
Capital Investments"
Jim Leonard, MHA IFMA 10/12/11
Providence St. Peter Hospital, Olympia
Providence Sacred Heart Medical Center, Spokane
Saint Agnes Medical Center
1. The Old Paradigm… Do More & Get Paid More… Is it still in play?
2. The revelations of a New Paradigm and the Need for Change
3. Some Translations of “Health Care Reform” and the reactions to date
4. Where are the capital dollars going?
"Healthcare Reform's Effects on Capital Investments"
Jim Leonard, MHA IFMA 10/12/11
Consistent patient volume, full beds, growth in key units of service (especially high tech and high net $/”click”) are all good things to pursue!
Happy & involved physicians and staff create momentum
There’s never quite enough capital for all the new toys & the brick and mortar we need since they too help define our future success
Investing in clinical quality and improved patient service simply makes sense
Net Margin targets of 3-4% were attainable, and some could achieve much more (6-9%)!
Inflation of 3-4% in labor & supply expense was the common enemy and Purchased Services could be volatile
We thought we did “about all we could” with labor efficiencies by simply reducing FTEs; so we had to “work smarter”
Features:
1. Fee-for-service reimbursement
rewards volume of services; high
occupancy, hospital admissions,
specialized (high tech) services for in-
& out-patients
2. “Siloed” provision of services meant
independence of hospitals from
physicians and others in the care
continuum (SNF, Nursing Homes,
Home Health, MD practices)
Features:
3. Transparency is here! Clinical quality
outcomes and service scores are all
available for the public to see…
(www.hospitalcompare.gov)
4. Financial solvency requires all
providers to understand and make
efforts to limit provision of uninsured or
uncompensated services (within the
boundaries set by their unique
organizational missions).
2009 Data from 30 Industrialized
Nations
Yes… the top, Magenta colored
line is the U.S.
1.Stronger Primary Care and Care Coordination through Medical Homes and ACOs … with fewer “under- and uninsured” patients
2.Better access to Community Health Centers for low-income patients
3.Improved efficiency through health information technology (EHR as well as State and National Health Information Exchanges)
TEN WAYS OUR HEALTH SYSTEM IS EXPECTED TO CHANGE UNDER THE “AFFORDABLE CARE ACT”
4. “Proper” alignment of financial incentives to promote some defined quality outcomes
5. More support and information during hospital discharges to reduce readmissions
6. Fewer hospital-acquired infections (due to penalties in the form of reduced M’Care inflation)
TEN WAYS OUR HEALTH SYSTEM IS EXPECTED TO CHANGE UNDER THE “AFFORDABLE CARE ACT”
7. Additional information available about the quality of MDs, hospitals, nursing homes, and health plans
8. Increased choice of insurance plans, including non-profit plans
9. Rewards for private insurance plans that provide high quality care
10.Lower Health Insurance premiums (compared to the trajectory otherwise)
TEN WAYS OUR HEALTH SYSTEM IS EXPECTED TO CHANGE UNDER THE “AFFORDABLE CARE ACT”
“Hey, They’re lighting their arrows! … Can they DO that?”
1. Like it or hate it… label it… wish it away? For now, it’s the new reality!
2. Launched an entirely new era for U.S. healthcare
3. The detail will continue to need to be defined during this decade
4. The big focus is on the uninsured and the big constitutional challenge – whether the Federal Government can force a citizen to purchase health insurance
The 2010 Affordable Care Act:
Will ↑ access to insurance = ↑ access to care?
“New Paradigm” characteristics will have to become
second nature:
1. No longer will “more care = best care”… now Value-
based purchasing and bundled payments will reward
quality; reduced hospitalization and readmissions…
embrace evidence-based care!
2. Accountability for patient outcomes requires
coordination of care across settings and types of
providers; hospitals and MDs interdependent
3. Reaching out to serve low-income and uninsured
communities is where the new market growth is
4. Learning to live with less inflation means more
attention to standardization and waste removal
Some Translations from all that….
• Patient-centered Medical Homes:
• Capital $ being spent to acquire and/or consolidate
medical practices, and on out-pt construction
• New designs for those practices… different flow, more
attention to match scale (MD #s) with on-site ancillary
services, different hours, often very different appointing
methodologies for MD visits
• FP, IM, and Mid-Level Practitioners are in demand!
• Integrated acute and post-acute care under global fees:
• Transitions without “drops” or readmissions
• Much greater attention on care coordination (ALOS, sub-
acute beds with lower staffing standards, continuum
partnerships)
• Expect decreased hospital days/1,000 population
More Translations from all that….
• Leaner & Safer Care
• The East Coast and Midwest will learn a lot from the
West Coast generally and the NW in particular about
ALOS
• All hospitals will focus like never before on standardizing
care and knowing why any patient or MD deviates from
patterns
• Attention to Infection Control and avoiding HAI
• Right care instead of More Care…
• Do we really need that next wing or tower?
• Have we truly optimized the scheduled use of our
assets and staffing?
• Is the care delivered as efficiently as it can be?
Decreased hospital admissions for the same population served = need for allies/partners
Decreased length of stay for each admission
Readmissions w/i set time frames = penalty $
Real attention to hand-offs across continuum
Decreased capital spend on traditional Hospital brick and mortar projects... w/ some exceptions
Big spending shift to practice acquisitions, re-design of out-pt spaces, EHR, and anything that promotes efficiency and cost reduction
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
--I-------I-------I-------I-------I-------I-------I-------I-------I-------I------I--
Value Based
Purchasing
30 Day Re-
Admissions
Hospital Acquired
Conditions
========================================================
Total
1% 2%
1% 2% 3%
1%
2% 3% 5% 6%
Employed & Independent Physicians work together provide system-wide clinical leadership to manage care
Healthcare will have to be delivered differently
A Strategy is needed for the Post-Acute (care) Provide coordinated clinical care in locations other than
hospitals for patients in various disease states
Primary Care Expansion and Unscheduled Visit Strategies are necessary to meet demand Ensure same-day access for primary care visits
Expand the base of Employed Primary Care MDs in Secondary Service Areas Accelerate referral stream development to ensure growth
and sustain the core specialty physician strategy
Access to capital and credit worthiness is driving further market & provider consolidation
Facilities solutions will need to promote innovation and operational efficiency
More sophisticated planning is needed – use of Lean, operational process re-design and IPD techniques – to ensure collaboration and right solutions right from the start
More sophisticated financial modeling and subsequent performance monitoring
We are still very much living in the “Old Paradigm” (volume is good, high tech is good, more care is better…)
After all… medical necessity isn’t always clear!
But… Only so many dollars to go around, and…
We now have to resource the “New Paradigm”
We have to educate ourselves and our partners about the cultural and motivational changes
We have to embrace the tools/techniques that will sustain us during and after this paradigm shift
Where did all the capital go?
What will be funded going forward?
What can I do (now) to help?
For my organization to succeed…
Do I need to change how I think?
Brick & Mortar projects already in motion… and already 2nd-Guessed and Value-Engineered to death
Information Systems – EHR !! HITECH promised ROI is irresistable
How much is that EPIC installation?
Diminished bond ratings (AA to A++) raise interest levels
Negative margins ≠ capital generation
Mergers & Acquisitions – especially MD Practices
Otherwise, typically only to those select projects with very high ROI (and woe be unto them who promise and then fail to deliver that ROI) Ancillary equipment where demand
exceeds current supply ($/”click”)
Re-purposing space for a needed OR, etc
“Dear Henry, Where were you? We waited and waited but finally decided that…”
What other Capital projects still stand a chance? Life / Safety still gets acknowledged!
Lighting retrofits (flourescent or LED)
Recommissioning plant infrastructure
HVAC heat recovery to ↓ utility costs
What else can you do to help? Learn and use LEAN fundamentals
In-source building service agreements
Minimize single use medical devices by reprocessing
Claim the ↓ paper/toner spend w/ EHR
Questions?
Jim Leonard, MHA IFMA 10/12/11
“Discovery consists in seeing what everyone
else has seen, and thinking what no one
else has thought.”
This could have been today’s title:
“What keeps a Hospital CEO awake at
night (besides finding a new job)….
…. and what might Hospital Facility,
Architects, and Engineers want to anticipate as a result?”
Jim Leonard, MHA IFMA 10/12/11
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