Glenn Steele, president and CEO of the Geisinger Health System in Danville, Pa., will deliver a keynote address on the subject of physician integration at the Healthcare Financial Management Association’s 2010 ANI conference. He spoke recently with Healthcare Finance News Editor Richard Pizzi about some of the factors involved in achieving true integration.
What are some of the structural delivery system changes that need to be made to achieve physician integration?
We currently have a series of very polar interactions between payers and providers. We’re seeing some evidence of that now in Massachusetts, which is a great example of what might happen in the rest of the country. As they have increased access in the state, they have had huge increases in demand, and the cost trajectories are greater than predicted. Without the structural re-engineering that we’re talking about, you can’t pull out the 30 percent to 40 percent of the things we now do that doesn’t directly help people.
The way to do that is to improve the interaction between physicians and hospitals and, even more important, to partner with payers to substantially change how we care for patients, whether they are hospital-based high-severity intervention patients or chronic disease patients that cost so much of our healthcare resources.
There are two possible ways to go. One is to maintain the focus on piece-rate payment, but decrease the amount we get per piece. That will lead to more “pieces” being produced, but not necessarily increasing value for patients. And ultimately that leads to unsustainable cost trajectories. If that happens, you will likely see price controls. This will not solve the basic fundamental problems that we have. That’s the bad part of the algorithm.
The good part of the algorithm is fundamental change in the way we care for patients and fundamental change in what we get paid for. The predicate for that is an organizational structure that allows us to do the kind of reengineering that we think has got remarkable results and sustainability.
What does integration mean for quality of care?
The easiest example is probably the re-engineering of our heart surgery – the so-called “warranty.” All of our hospital leaders applied best practices across all platforms with our heart specialists. We created accountability from the point of diagnosis, to the hospital episode, to rehabilitation. Every patient was expected to hit each of the best practice marks throughout an entire episode. We couldn’t have come to that consensus without having a continuum of care that included cardiologists, cardiac surgeons, nurses, the administrators, the rehab people and, of course, the insurance companies. The deal that we made with the insurance companies came after the re-engineering. We increased the quality of patient outcomes from what was already a very good starting point and we decreased costs. We knew then that decreasing costs and increasing quality could cohabitate.
Will healthcare reform have to be addressed again, perhaps in the near future, even given the recent federal legislation?
Absolutely. I guarantee you that we will have patient demand beyond what has been in the various models for the legislation. Not that I disagree with what happened. I think it’s good that we have 32 million people insured who were previously uninsured, but there is going to be a huge amount to do. If we don’t innovate dramatically, if we don’t create real or virtual integrated delivery systems, then we’re going to end up with price controls and rationing in a much more unpalatable way.
Do you take a different approach when you address an audience of finance executives on the subject of integration than those on the clinical side?
In general, I have two kinds of reservoirs of knowledge. I am privileged to be on the advisory committee for the HFMA board. I find that to be an extremely interesting and valuable exercise. I have been saying that the finance task must be an integral part of the re-engineering of care at the level of the actual service lines, or the units of service, whether they are discipline-based or interdisciplinary service lines. When you re-engineer care, you need to know the real cost of each component of that care over the episode, before and after you re-engineer it. If we can attack unjustified variation, and if it’s like any other complex logistics task, in general you find that you have decreased cost and increased quality. Why shouldn’t that be true in our very complex healthcare task? But in order to verify that, you must have the cost accounting down to every aspect of what you do. You must know the actual cost of everything you do. That puts the CFO as a partner to the administrative clinical leader who is in charge of the re-engineering. That’s pretty energizing.
As we try to create this change in how we get reimbursed, there will be a lot of difficult challenges. Here at Geisinger we’re in the same boat. About 75 percent of what we’re paid is in the old piece-rate way. It’s only 25 percent of our business that we’re really committing to innovation, because that’s the amount of business that we’re insuring with our own insurance company. We have our own hybrid model here. We need the CFO to ensure that between those two very different reimbursement models we’re creating the bottom line operating margin that will allow us to capitalize our depreciation, to build our new programs, etc. It’s walking and chewing gum at the same time, which is always difficult.